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As filed with the Securities and Exchange Commission on July 21, 2009.

Registration No. 333-153127

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

AMENDMENT NO. 4

TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

AVAGO TECHNOLOGIES LIMITED

(Exact name of registrant as specified in its charter)

 

Singapore		3674		Not Applicable
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

1 Yishun Avenue 7

Singapore 768923

(65) 6755-7888

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Corporation Service Company

1090 Vermont Avenue NW

Washington, D.C. 20005

Tel: (800) 222-2122

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Christopher L. Kaufman Anthony J. Richmond Latham & Watkins LLP 140 Scott Drive Menlo Park, California 94025 Telephone: (650) 328-4600 Facsimile: (650) 463-2600		William H. Hinman, Jr. Simpson Thacher & Bartlett LLP 2550 Hanover Street Palo Alto, California 94304 Telephone: (650) 251-5000 Facsimile: (650) 251-5002

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act :

 

Large accelerated filer  ¨		Accelerated filer  ¨
Non-accelerated filer  x		Smaller reporting company  ¨
(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to Be Registered		Proposed Maximum Aggregate Offering Price(1)		Amount of Registration Fee
Ordinary Shares, no par value		$400,000,000		$15,720.00(2)

(1)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended (“Securities Act”).

(2)	Previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

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The information contained in this prospectus is not complete and may be changed. We and the selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we and the selling shareholders are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated July 21, 2009.

 

PROSPECTUS

             Shares

Ordinary Shares

This is the initial public offering of the ordinary shares of Avago Technologies Limited, a public limited company incorporated under the laws of the Republic of Singapore. We are offering              of the ordinary shares to be sold in this offering and the selling shareholders identified in this prospectus, including members of our senior management and entities affiliated with directors of our company, are offering an additional              ordinary shares. We will not receive any proceeds from the sale of the shares to be offered by the selling shareholders. Prior to this offering, there has been no public market for our ordinary shares.

We have applied for listing of our ordinary shares on the Nasdaq Global Select Market under the symbol “AVGO.”

We anticipate that the initial public offering price will be between $             and $             per share.

See “Risk Factors” on page 13 of this prospectus to read about factors you should consider before buying our ordinary shares.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities nor passed upon the accuracy or adequacy of the disclosures in the prospectus. Any representation to the contrary is a criminal offense.

 

 

 

		Per Share			Total
Initial public offering price		$			$
Underwriting discounts and commissions		$			$
Proceeds, before expenses, to Avago Technologies Limited		$			$
Proceeds, before expenses, to the selling shareholders		$			$

To the extent that the underwriters sell more than              ordinary shares, the underwriters have a 30-day option to purchase up to an additional              ordinary shares from the selling shareholders at the public offering price, less the underwriting discounts and commissions.

The underwriters expect to deliver the ordinary shares against payment on or about             , 2009.

 

 

 

Deutsche Bank Securities		Barclays Capital		Morgan Stanley		Citi

 

 

 

Credit Suisse		Goldman, Sachs & Co.		J.P. Morgan		UBS Investment Bank		KKR

ABN AMRO Incorporated		FTN Equity Capital Markets

 

 

The date of this prospectus is             , 2009.

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You should rely only on the information contained in this prospectus, any free writing prospectus prepared by or on behalf of us or any information to which we have referred you. Neither we, the selling shareholders nor the underwriters have authorized anyone to provide you with information different from that contained in this prospectus. We and the selling shareholders are offering to sell, and seeking offers to buy, ordinary shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front cover of this prospectus, or other date stated in this prospectus, regardless of the time of delivery of this prospectus or of any sale of our ordinary shares.

Until                     , 2009 (25 days after commencement of this offering), all dealers that buy, sell, or trade our ordinary shares, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States:    Neither we, the selling shareholders nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

 

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RISK FACTORS

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding whether to invest in our ordinary shares. The occurrence of any of the following risks could harm our business, financial condition, results of operations or growth prospects. In that case, the trading price of our ordinary shares could decline, and you may lose all or part of your investment.

Risks Related to Our Business

The recent economic downturn and financial crisis has negatively affected and will continue to negatively affect our business, results of operations, and financial condition.

The current global recession and financial crisis has led to slower economic activity, increased unemployment, concerns about inflation and energy costs, decreased business and consumer confidence, reduced corporate profits and capital spending, adverse business conditions and lower levels of liquidity in many financial markets. Consumers and businesses have deferred purchases in response to tighter credit and negative financial news, which has in turn negatively affected product demand and other related matters. The global recession has led to reduced customer spending in the semiconductor market and in our target markets, made it difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and has caused U.S. and foreign businesses to slow spending on our products. The continuation of this global recession and financial crisis will likely exacerbate these events and could lead to the insolvency of key suppliers resulting in product delays, limit the ability of customers to obtain credit to finance purchases of our products, lead to customer insolvencies, and also result in counterparty failures that may negatively impact our treasury operations. As a result, our business, financial condition and result of operations have been negatively affected and, if the downturn continues, could be materially adversely affected.

We operate in the highly cyclical semiconductor industry, which is subject to significant downturns.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change and price erosion, evolving technical standards, short product life cycles (for semiconductors and for the end-user products in which they are used) and wide fluctuations in product supply and demand. From time to time, these and other factors, together with changes in general economic conditions, cause significant upturns and downturns in the industry in general and in our business in particular. For example, according to the World Semiconductor Trade Statistics, in 2001, the global semiconductor market experienced a 32% decline and is expected to experience a 21.3% decline in 2009 due to the current economic downturn. Periods of industry downturns, including the current economic downturn, have been characterized by diminished demand for end-user products, high inventory levels, underutilization of manufacturing capacity, changes in revenue mix and accelerated erosion of average selling prices. In the current economic downturn, we have not been able to grow our revenues or reduce our costs quickly enough to maintain our operating profitability. The current economic downturn has had, and any future economic downturns could have, an adverse effect on our business, financial condition and results of operations.

If we do not adapt to technological changes in the semiconductor industry, we could lose customers or market share.

The semiconductor industry is subject to constant and rapid changes in technology, frequent new product introductions, short product life cycles, rapid product obsolescence and

 

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evolving technical standards. Technological developments may reduce the competitiveness of our products and require unbudgeted upgrades that could be expensive and time consuming to implement. Our products could become obsolete sooner than we expect because of faster than anticipated, or unanticipated, changes in one or more of the technologies related to our products. Furthermore, we continually evaluate expenditures for research and development and must choose among alternative technologies based on our expectations of future market growth and other factors. We may be unable to develop and introduce new or enhanced products that satisfy customer requirements and achieve market acceptance in a timely manner or at all, the technologies where we have focused our research and development expenditures may not become commercially successful, and we may be unable to anticipate new industry standards and technological changes. We also may not be able to respond successfully to new product announcements and introductions by competitors. If we fail to adapt successfully to technological changes or fail to obtain access to important new technologies, we may be unable to retain customers, attract new customers or sell new products to our existing customers.

Dependence on contract manufacturing and outsourcing other portions of our supply chain may adversely affect our ability to bring products to market and damage our reputation.

We operate a primarily outsourced manufacturing business model that principally utilizes third-party foundry and assembly and test capabilities. As a result, we are highly reliant on third-party foundry wafer fabrication and assembly and test capacity, including sole sourcing for many components or products. For certain of our product families, substantially all of our revenue is derived from semiconductors fabricated by external foundries such as Chartered Semiconductor Manufacturing Ltd. and Taiwan Semiconductor Manufacturing Company Ltd., or TSMC. We also use third-party contract manufacturers for a significant majority of our assembly and test operations, including Amertron Incorporated, Amkor Technology, and the Hana Microelectronics Public Company Ltd. group of companies. The ability and willingness of our contract manufacturers to perform is largely outside of our control. If one or more of our contract manufacturers or other outsourcers fails to perform its obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputation could suffer. For example, in the event that manufacturing capacity is reduced or eliminated at one or more facilities, including as a response by contract manufacturers to the recent worldwide decline in the semiconductor industry, manufacturing could be disrupted, we could have difficulties fulfilling our customer orders and our net revenue could decline. In addition, if these third parties on whom we are highly reliant fail to deliver quality products and components on time and at reasonable prices, we could have difficulties fulfilling our customer orders and our net revenue could decline. In such events, our business, financial condition and results of operations would be adversely affected.

To the extent we rely on third-party manufacturing relationships, we face the following risks:

 

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inability of our manufacturers to develop manufacturing methods appropriate for our products and their unwillingness to devote adequate capacity to produce our products;

 

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manufacturing costs that are higher than anticipated;

 

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reduced control over product reliability;

 

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more complicated supply chains;

 

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inability to maintain continuing relationships with our suppliers;

 

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time, expense and uncertainty in identifying and qualifying additional suppliers; and

 

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reduced control over delivery schedules and products costs.

 

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Much of our outsourcing takes place in developing countries, and as a result may additionally be subject to geopolitical uncertainty. See “—Our business, financial condition and results of operations could be adversely affected by the political and economic conditions of the countries in which we conduct business and other factors related to our international operations.”

A prolonged disruption of our manufacturing facilities could have a material adverse effect on our business, financial condition and results of operations.

Although we operate using a primarily outsourced manufacturing business model, we do rely on the manufacturing facilities we own, in particular our fabrication facilities in Fort Collins, Colorado and Singapore. We maintain our internal fabrication facilities for products utilizing our innovative materials and processes to protect our intellectual property and to develop the technology for manufacturing. A prolonged disruption or material malfunction of, interruption in or the loss of operations at one or more of our production facilities, especially our Fort Collins and Singapore facilities, or the failure to maintain our labor force at one or more of these facilities, would limit our capacity to meet customer demands and delay new product development until a replacement facility and equipment, if necessary, was found. The replacement of the manufacturing facility could take an extended amount of time before manufacturing operations could restart. The potential delays and costs resulting from these steps could have a material adverse effect on our business, financial condition and results of operations.

Unless we and our suppliers continuously improve manufacturing efficiency and quality, our financial performance could be adversely affected.

Manufacturing semiconductors involves highly complex processes that require advanced equipment. We and our suppliers, as well as our competitors, continuously modify these processes in an effort to improve yields and product performance. Defects or other difficulties in the manufacturing process can reduce yields and increase costs. Our manufacturing efficiency will be an important factor in our future financial performance, and we may be unable to maintain or increase our manufacturing efficiency to the same extent as our competitors. For products that we outsource manufacturing, our product yields and performance will be subject to the manufacturing efficiencies of our third-party suppliers.

From time to time, we and our suppliers have experienced difficulty in beginning production at new facilities, transferring production to other facilities, achieving and maintaining a high level of process quality and effecting transitions to new manufacturing processes, all of which have caused us to suffer delays in product deliveries or reduced yields. We and our suppliers may experience manufacturing problems in achieving acceptable yields or experience product delivery delays in the future as a result of, among other things, capacity constraints, construction delays, transferring production to other facilities, upgrading or expanding existing facilities or changing our process technologies, any of which could result in a loss of future revenues. Our results of operations could be adversely affected by any increase in costs related to increases in production capacity if revenues do not increase proportionately.

Winning business is subject to lengthy competitive selection processes that require us to incur significant expense. Even if we begin a product design, a customer may decide to cancel or change its product plans, which could cause us to generate no revenues from a product and adversely affect our results of operations.

We are focused on winning competitive bid selection processes, known as “design wins,” to develop semiconductors for use in our customers’ products. These selection processes are

 

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typically lengthy and can require us to incur significant design and development expenditures and dedicate scarce engineering resources in pursuit of a single customer opportunity. We may not win the competitive selection process and may never generate any revenue despite incurring significant design and development expenditures. These risks are exacerbated by the fact that many of our products will likely have very short life cycles. Failure to obtain a design win sometimes prevents us from offering an entire generation of a product. This can result in lost revenues and could weaken our position in future competitive selection processes.

After winning a product design, we may experience delays in generating revenue from our products as a result of the lengthy development cycle typically required. In addition, a delay or cancellation of a customer’s plans could materially and adversely affect our financial results, as we may have incurred significant expense and generated no revenue. Finally, our customers’ failure to successfully market and sell their products could reduce demand for our products and materially adversely affect our business, financial condition and results of operations.

Competition in our industry could prevent us from growing our revenue and from raising prices to offset increases in costs.

The global semiconductor market is highly competitive. We compete in different target markets to various degrees on the basis of quality, technical performance, price, product features, product system compatibility, system-level design capability, engineering expertise, responsiveness to customers, new product innovation, product availability, delivery timing and reliability, and customer sales and technical support. Current and prospective customers for our products evaluate our capabilities against the merits of our direct competitors. Some of our competitors are well established, have a more extensive product portfolio, have substantially greater market share and manufacturing, financial, research and development and marketing resources to pursue development, engineering, manufacturing, marketing and distribution of their products. In addition, many of our competitors have longer independent operating histories, greater presence in key markets, more comprehensive patent protection and greater name recognition. We compete with integrated device manufacturers, or IDMs, and fabless semiconductor companies as well as the internal resources of large, integrated OEMs. Our competitors range from large, international companies offering a wide range of semiconductor products to smaller companies specializing in narrow markets. We expect competition in the markets in which we participate to continue to increase as existing competitors improve or expand their product offerings. In addition, companies not currently in direct competition with us may introduce competing products in the future. Because our products are often building block semiconductors providing functions that in some cases can be integrated into more complex integrated circuits, or ICs, we also face competition from manufacturers of ICs, as well as customers that develop their own IC products. The competitive landscape is changing as a result of an increasing trend of consolidation within the industry, as some of our competitors have merged with or been acquired by other competitors while others have begun collaborating with each other. We expect this consolidation trend to continue.

Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends. During past periods of downturns in our industry, competition in the markets in which we operate intensified as manufacturers of semiconductors reduced prices in order to combat production overcapacity and high inventory levels. Many of our competitors have substantially greater financial and other resources with which to withstand similar adverse economic or market conditions in the future.

 

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Our operating results are subject to substantial quarterly and annual fluctuations.

Our revenues and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations may occur on a quarterly and annual basis and are due to a number of factors, many of which are beyond our control. These factors include, among others:

 

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changes in end-user demand for the products manufactured and sold by our customers;

 

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the timing of receipt, reduction or cancellation of significant orders by customers;

 

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fluctuations in the levels of component inventories held by our customers;

 

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the gain or loss of significant customers;

 

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market acceptance of our products and our customers’ products;

 

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our ability to develop, introduce and market new products and technologies on a timely basis;

 

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the timing and extent of product development costs;

 

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new product announcements and introductions by us or our competitors;

 

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incurrence of research and development and related new product expenditures;

 

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seasonality or cyclical fluctuations in our markets;

 

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currency fluctuations;

 

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utilization of our internal manufacturing facilities;

 

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fluctuations in manufacturing yields;

 

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significant warranty claims, including those not covered by our suppliers;

 

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availability and cost of raw materials from our suppliers;

 

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changes in our product mix or customer mix;

 

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intellectual property disputes;

 

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loss of key personnel or the shortage of available skilled workers; and

 

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the effects of competitive pricing pressures, including decreases in average selling prices of our products.

The foregoing factors are difficult to forecast, and these, as well as other factors, could materially adversely affect our quarterly or annual operating results. In addition, a significant amount of our operating expenses are relatively fixed in nature due to our significant sales, research and development and internal manufacturing overhead costs. Any failure to adjust spending quickly enough to compensate for a revenue shortfall could magnify the adverse impact of such revenue shortfall on our results of operations.

We may be unable to make the substantial and productive research and development investments which are required to remain competitive in our business.

The semiconductor industry requires substantial investment in research and development in order to develop and bring to market new and enhanced technologies and products. Many of our products originated with our research and development efforts and have provided us with a significant competitive advantage. During fiscal year 2008, we increased our research and development expenditures as compared to prior periods as part of our strategy of devoting

 

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focused research and development efforts on the development of innovative and sustainable product platforms. Although we have reduced research and development spending in connection with the current economic downturn, we are committed to investing in new product development in order to stay competitive in our markets and plan to invest in process development and maintain research and development fabrication capabilities in order to develop manufacturing processes for devices that are invented internally. We do not know whether we will have sufficient resources to maintain the level of investment in research and development required to remain competitive. In addition, we cannot assure you that the technologies where we have focused our research and development expenditures will become commercially successful.

Our business would be adversely affected by the departure of existing members of our senior management team or if our senior management team is unable to effectively implement our strategy.

Our success depends, in large part, on the continued contributions of our senior management team, in particular, the services of Mr. Hock E. Tan, our President and Chief Executive Officer. None of our senior management is bound by written employment contracts to remain with us for a specified period. In addition, we do not currently maintain key person life insurance covering our senior management. The loss of any of our senior management could harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate.

If we are unable to attract, train and retain qualified personnel, especially our design and technical personnel, we may not be able to execute our business strategy effectively.

Our future success depends on our ability to retain, attract and motivate qualified personnel, including our management, sales and marketing, legal and finance, and especially our design and technical personnel. We do not know whether we will be able to retain all of these employees as we continue to pursue our business strategy. We and our Predecessor have historically encountered difficulties in hiring and retaining qualified engineers because there is a limited pool of engineers with expertise in analog and optoelectronic semiconductor design. Competition for such personnel is intense in the semiconductor industry. As the source of our technological and product innovations, our design and technical personnel represent a significant asset. The loss of the services of one or more of our key employees, especially our key design and technical personnel, or our inability to retain, attract and motivate qualified design and technical personnel, could have a material adverse effect on our business, financial condition and results of operations.

The enactment of legislation implementing changes in U.S. taxation of international business activities or the adoption of other tax reform policies could materially impact our financial position and results of operations.

Recently several tax bills have been introduced to reform U.S. taxation of international business activities. The current Administration has made public statements indicating that it has made the issue a priority and key members of the U.S. Congress have conducted hearings and proposed legislation. Accordingly, depending on the final form of legislation enacted, if any, these consequences may be significant for us due to the large scale of our international business activities. If any of these proposals are enacted into legislation, they could have material adverse consequences on the amount of tax we pay and thereby on our financial position and results of operations.

 

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We are subject to warranty claims, product recalls and product liability.

From time to time, we are subject to warranty or product liability claims that may lead to significant expenses as we defend such claims or pay damage awards. In the event of a warranty claim, we may also incur costs if we compensate the affected customer. We maintain product liability insurance, but such insurance is subject to significant deductibles and there is no guarantee that such insurance will be available or adequate to protect against all such claims. We may incur costs and expenses relating to a recall of one of our customers’ products containing one of our devices. The process of identifying a recalled product in devices that have been widely distributed may be lengthy and require significant resources, and we may incur significant replacement costs, contract damage claims from our customers and reputational harm. Costs or payments made in connection with warranty and product liability claims and product recalls could materially affect our financial condition and results of operations.

The complexity of our products could result in unforeseen delays or expenses or undetected defects or bugs, which could adversely affect the market acceptance of new products, damage our reputation with current or prospective customers, and materially and adversely affect our operating costs.

Highly complex products such as the products that we offer, may contain defects and bugs when they are first introduced or as new versions are released. We have in the past experienced, and may in the future experience, these defects and bugs. If any of our products contain defects or bugs, or have reliability, quality or compatibility problems, we may not be able to successfully design workarounds. Consequently, our reputation may be damaged and customers may be reluctant to buy our products, which could materially and adversely affect our ability to retain existing customers, attract new customers, and our financial results. In addition, these defects or bugs could interrupt or delay sales to our customers. To resolve these problems, we may have to invest significant capital and other resources. Although our products are tested by our suppliers, our customers and ourselves, it is possible that our new products will contain defects or bugs. If any of these problems are not found until after we have commenced commercial production of a new product, we may be required to incur additional development costs and product recall, repair or replacement costs. These problems may also result in claims against us by our customers or others. In addition, these problems may divert our technical and other resources from other development efforts, we would likely lose, or experience a delay in, market acceptance of the affected product or products, and we could lose credibility with our current and prospective customers. As a result, our financial results could be materially and adversely affected.

Failure to adjust our supply chain volume due to changing market conditions or failure to estimate our customers’ demand could adversely affect our results of operations.

We make significant decisions, including determining the levels of business that we will seek and accept, production schedules, levels of reliance on contract manufacturing and outsourcing, personnel needs and other resource requirements, based on our estimates of customer requirements. The short-term nature of commitments by many of our customers and the possibility of rapid changes in demand for their products reduces our ability to accurately estimate future customer requirements. Our results of operations could be harmed if we are unable to adjust our supply chain volume to address market fluctuations, including those caused by the seasonal or cyclical nature of the markets in which we operate. The sale of our products is dependent, to a large degree, on customers whose industries are subject to seasonal or cyclical trends in the demand for their products. For example, the consumer electronics market is particularly volatile and is subject to seasonality related to the holiday selling season,

 

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making demand difficult to anticipate. On occasion, customers may require rapid increases in production, which can challenge our resources and reduce margins. During a market upturn, we may not be able to purchase sufficient supplies or components, or secure sufficient contract manufacturing capacity, to meet increasing product demand, which could harm our reputation, prevent us from taking advantage of opportunities and reduce revenue growth. In addition, some parts are not readily available from alternate suppliers due to their unique design or the length of time necessary for design work. If one of our suppliers ceases to, or is unable to, manufacture such a component or supply is otherwise constrained, we may be forced to re-engineer a product or may fail to meet customer demand. In addition to discontinuing parts, suppliers may also extend lead times, limit supplies or increase prices due to capacity constraints or other factors.

In order to secure components for the production of products, we may continue to enter into non-cancelable purchase commitments with vendors or make advance payments to suppliers, which could reduce our ability to adjust our inventory or expense levels to declining market demands. Prior commitments of this type have resulted in an excess of parts when demand for our products has decreased. Downturns in the semiconductor industry have in the past caused, and may in the future cause, our customers to reduce significantly the amount of products ordered from us. If demand for our products is less than we expect, we may experience excess and obsolete inventories and be forced to incur additional charges. Because certain of our sales, research and development and internal manufacturing overhead expenses are relatively fixed, a reduction in customer demand may decrease our gross margins and operating income.

Our operating results and financial condition could be harmed if the markets into which we sell our products decline.

Visibility into our markets is limited. Just as we are experiencing in the current economic downturn, any decline in our customers’ markets would likely result in a reduction in demand for our products and make it more difficult to collect on outstanding amounts due us. For example, if the Asian market does not grow as anticipated or if the semiconductor market continues to decline, our results of operations will likely continue to suffer. In such an environment, pricing pressures could intensify and, if we were unable to respond quickly, could significantly reduce our gross margins. To the extent we cannot offset recessionary periods or periods of reduced growth that may occur in these markets through increased market share or otherwise, our net revenue may decline and our business, financial condition and results of operations may suffer. Pricing pressures and competition are especially intense in semiconductor-related industries, which could prevent achievement of our long-term financial goals and could require us to implement additional cost-cutting measures. Furthermore, projected industry growth rates may not be as forecasted, which could result in spending on process and product development well ahead of market requirements, which could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to claims of infringement of third-party intellectual property rights or demands that we license third-party technology, which could result in significant expense and loss of our intellectual property rights.

The semiconductor industry is characterized by companies holding large numbers of patents, copyrights, trademarks and trade secrets and by the vigorous pursuit, protection and enforcement of intellectual property rights. From time to time, third parties assert against us and our customers and distributors their patent, copyright, trademark, trade secret and other intellectual property rights to technologies that are important to our business. Claims that our products or processes

 

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infringe or misappropriate these rights, regardless of their merit or resolution, are frequently costly and divert the efforts and attention of our management and technical personnel. In addition, many of our customer agreements and in some cases our asset sale agreements require us to indemnify our customers or purchasers for third-party intellectual property infringement claims, which have in the past and may in the future require that we defend those claims and might require that we pay damages in the case of adverse rulings. Claims of this sort could also harm our relationships with our customers and might deter future customers from doing business with us. We do not know whether we will prevail in such proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation. If any pending or future proceedings result in an adverse outcome, we could be required to:

 

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cease the manufacture, use or sale of the infringing products, processes or technology;

 

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pay substantial damages for past, present and future use of the infringing technology;

 

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expend significant resources to develop non-infringing technology;

 

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license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;

 

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enter into cross-licenses with our competitors, which could weaken our overall intellectual property portfolio;

 

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lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others;

 

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indemnify customer or distributors;

 

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pay substantial damages to our customers or end users to discontinue use or replace infringing technology with non-infringing technology; or

 

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relinquish intellectual property rights associated with one or more of our patent claims, if such claims are held invalid or otherwise unenforceable.

Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations.

We utilize a significant amount of intellectual property in our business. If we are unable to protect our intellectual property, our business could be adversely affected.

Our success depends in part upon our ability to protect our intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including patents, mask works, copyrights, trademarks, service marks, trade secrets and similar intellectual property, as well as customary contractual protections with our customers, suppliers, employees and consultants, and through security measures to protect our trade secrets. We are unable to predict that:

 

•

any of the patents and pending patent applications that we presently employ in our business will not lapse or be invalidated, circumvented, challenged, abandoned or, in the case of third-party patents licensed or sub-licensed to us, be licensed to others;

 

•

our intellectual property rights will provide competitive advantages to us;

 

•

rights previously granted by third parties to intellectual property rights licensed or assigned to us, including portfolio cross-licenses, will not hamper our ability to assert our intellectual property rights against potential competitors or hinder the settlement of currently pending or future disputes;

 

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•

any of our pending or future patent applications will be issued or have the coverage originally sought;

 

•

our intellectual property rights will be enforced in certain jurisdictions where competition may be intense or where legal protection may be weak;

 

•

any of the trademarks, copyrights, mask work rights, trade secrets, know-how or other intellectual property rights that we presently employ in our business will not lapse or be invalidated, circumvented, challenged, abandoned or licensed to others; or

 

•

any of our pending or future trademark or copyright applications will be issued or have the coverage originally sought.

In addition, our competitors or others may develop products or technologies that are similar or superior to our products or technologies, duplicate our products or technologies or design around our protected technologies. Effective patent, trademark, copyright and trade secret protection may be unavailable or more limited in one or more relevant jurisdictions relative to those protections available in the United States, or may not be applied for in one or more relevant jurisdictions. Moreover, from time to time we pursue litigation to assert our intellectual property rights. An adverse decision in any of these legal actions could limit our ability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact our business, financial condition and results of operations.

We have a number of patent and intellectual property license agreements. Some of these license agreements require us to make one-time or periodic payments. We may need to obtain additional patent licenses or renew existing license agreements in the future. We are unable to predict whether these license agreements can be obtained or renewed on acceptable terms.

The demands or loss of one or more of our significant customers may adversely affect our business.

Some of our customers are material to our business and results of operations. In the six months ended May 3, 2009, no single customer accounted for 10% or more of our net revenue from continuing operations, and our top 10 customers, which included four distributors, collectively accounted for 59% of our net revenue from operations. During the fiscal year ended November 2, 2008, Avnet, Inc. accounted for 11% of our net revenue from continuing operations, and our top 10 customers, which included five distributors, collectively accounted for 54% of our net revenue from continuing operations. In addition, we believe that direct sales to Cisco Systems, Inc., when combined with indirect sales to Cisco through the contract manufacturers that Cisco utilizes, accounted for approximately 10% and 12% of our net revenues from continuing operations for the six months ended May 3, 2009 and the fiscal year ended November 2, 2008, respectively. We believe our top customers’ purchasing power has given them the ability to make greater demands on their suppliers, including us. We expect this trend to continue, which we expect will result in our results of operations becoming increasingly sensitive to deterioration in the financial condition of, or other adverse developments related to, one or more of our significant customers. Although we believe that our relationships with our major customers are good, we generally do not have long-term contracts with any of them, which is typical of our industry. As a result, although our customers provide indications of their product needs and purchases on an annual basis, they generally purchase our products on a weekly or daily basis and the relationship, as well as particular orders, can be terminated at any time. The loss of any of our major customers, or any substantial reduction in sales to any of these customers, could have a material adverse effect on our business, financial condition and results of operations.

 

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We generally do not have any long-term supply contracts with our contract manufacturers or materials suppliers and may not be able to obtain the products or raw materials required for our business, which could have a material adverse affect on our business.

We either obtain the products we need for our business from third-party contract manufacturers or we obtain the materials we need for our products from suppliers. We purchase a significant portion of our semiconductor materials from a few suppliers. For the six months ended May 3, 2009, we purchased 52% of the materials for our manufacturing processes from eight suppliers. For the fiscal year ended November 2, 2008, we purchased 53% of the materials for our manufacturing processes from eleven suppliers. Substantially all of our purchases are on a purchase order basis, and we have not generally entered into long-term contracts with our contract manufacturers or suppliers. In the event that these purchase orders are terminated, we cannot obtain sufficient quantities of raw materials at reasonable prices, the quality of the material deteriorates, we fail to satisfy our customers’ requirements or we are not able to pass on higher materials costs to our customers, our business, financial condition and results of operations could be adversely impacted. For example, during fiscal year 2008, we have experienced an increase in our cost of products sold as a result of higher energy costs.

Our manufacturing processes rely on many materials, including silicon and GaAs wafers, copper lead frames, mold compound, ceramic packages and various chemicals and gases. From time to time, suppliers may extend lead times, limit supplies or increase prices due to capacity constraints or other factors. Although we believe that our current supplies of materials are adequate, shortages could occur in various essential materials due to interruption of supply or increased demand in the industry.

We use third-party contractor manufacturers for most of our manufacturing activities, primarily for wafer fabrication and module assembly and test services. Our agreements with these manufacturers typically require us to forecast product needs, commit to purchase services consistent with these forecasts and may require other commitments in the early stages of the relationship. Our operations could be adversely affected in the event that these contractual relationships were disrupted or terminated, the cost of such services increased significantly, the quality of the services provided deteriorated, our forecasts proved to be materially incorrect or capacity is consumed by our competitors.

We rely on third parties to provide services necessary for the operation of our business. Any failure of one or more of our vendors to provide these services could have a material adverse effect on our business.

We rely on third-party vendors to provide critical services, including, among other things, certain services related to accounting, billing, human resources, information technology, or IT, network development and network monitoring. We depend on these vendors to ensure that our corporate infrastructure will consistently meet our business requirements. The ability of these third-party vendors to successfully provide reliable, high quality services is subject to technical and operational uncertainties that are beyond our control. While we may be entitled to damages if our vendors fail to perform under their agreements with us, our agreements with these vendors limit the amount of damages we may receive. In addition, we do not know whether we will be able to collect on any award of damages or that any such damages would be sufficient to cover the actual costs we would incur as a result of any vendor’s failure to perform under its agreement with us. Any failure of our corporate infrastructure could have a material adverse effect on our business, financial condition and results of operations. Upon expiration or termination of any of our agreements with third-party vendors, we may not be

 

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able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete.

Our gross margin is dependent on a number of factors, including our level of capacity utilization.

Semiconductor manufacturing requires significant capital investment, leading to high fixed costs, including depreciation expense. Although we outsource a significant portion of our manufacturing activities, we do retain some semiconductor fabrication and assembly and test facilities. If we are unable to utilize our owned fabrication and assembly and test facilities at a high level, the fixed costs associated with these facilities will not be fully absorbed, resulting in higher average unit costs and lower gross margins. In the past, we and our Predecessor have experienced periods where our gross margins declined due to, among other things, reduced factory utilization resulting from reduced customer demand, reduced selling prices and a change in product mix towards lower margin devices. Increased competition and the existence of product alternatives, more complex engineering requirements, lower demand and other factors may lead to further price erosion, lower revenues and lower margins for us in the future.

Our business, financial condition and results of operations could be adversely affected by the political and economic conditions of the countries in which we conduct business and other factors related to our international operations.

We sell our products throughout the world. In addition, approximately 67% of our employees are located outside of the United States. Multiple factors relating to our international operations and to particular countries in which we operate could have a material adverse effect on our business, financial condition and results of operations. These factors include:

 

•

changes in political, regulatory, legal or economic conditions;

 

•

restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments and trade protection measures, including export duties and quotas and customs duties and tariffs;

 

•

disruptions of capital and trading markets;

 

•

changes in import or export licensing requirements;

 

•

transportation delays;

 

•

civil disturbances or political instability;

 

•

geopolitical turmoil, including terrorism, war or political or military coups;

 

•

changes in labor standards;

 

•

limitations on our ability under local laws to protect our intellectual property;

 

•

nationalization and expropriation;

 

•

changes in tax laws;

 

•

currency fluctuations, which may result in our products becoming too expensive for foreign customers; and

 

•

difficulty in obtaining distribution and support.

 

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International conflicts are creating many economic and political uncertainties that are impacting the global economy. A continued escalation of international conflicts could severely impact our operations and demand for our products.

A majority of our products are produced and sourced in Asia, primarily in Singapore, Malaysia and Taiwan. Any conflict or uncertainty in these countries, including due to public health or safety concerns could have a material adverse effect on our business, financial condition and results of operations. In addition, if the government of any country in which our products are manufactured or sold sets technical standards for products manufactured in or imported into their country that are not widely shared, it may lead certain of our customers to suspend imports of their products into that country, require manufacturers in that country to manufacture products with different technical standards and disrupt cross-border manufacturing relationships which, in each case, could have a material adverse effect on our business, financial condition and results of operations.

In addition, our subsidiaries may require future equity-related financing, and any capital contributions to certain of our subsidiaries may require the approval of the relevant authorities in the jurisdiction in which the subsidiary is incorporated. The approvals are required from the investment commissions or similar agency of the particular jurisdiction and relate to any initial or additional equity investment by foreign entities in local corporations. Our failure to obtain the required approvals could have an adverse effect on our business, financial condition and results of operations.

We are subject to currency exchange risks that could adversely affect our operations.

Although a majority of our revenue and operating expenses is denominated in U.S. dollars, and we prepare our financial statements in U.S. dollars in accordance with GAAP, a portion of our revenue and operating expenses is in foreign currencies. As a result, we are subject to currency risks that could adversely affect our operations, including:

 

•

risks resulting from changes in currency exchange rates and the implementation of exchange controls; and

 

•

limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries.

Changes in exchange rates will result in increases or decreases in our costs and earnings, and may also affect the book value of our assets located outside the United States and the amount of our equity. Although we seek to minimize our currency exposure by engaging in hedging transactions where we deem it appropriate, we do not know whether our efforts will be successful.

If we suffer loss to our factories, facilities or distribution system due to catastrophe, our operations could be seriously harmed.

Our factories, facilities and distribution system, and those of our contract manufacturers, are subject to risk of catastrophic loss due to fire, flood, or other natural or man-made disasters. A number of our facilities and those of our contract manufacturers are located in areas with above average seismic activity. Any catastrophic loss to any of these facilities would likely disrupt our operations, delay production, shipments and revenue and result in significant expenses to repair or replace the facility. In particular, any catastrophic loss at our Fort Collins, Colorado and Singapore facilities would materially and adversely affect our business.

 

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We may pursue acquisitions, dispositions, investments and joint ventures, which could affect our results of operations.

We have disposed of significant portions of the business originally acquired from Agilent through the sale of our Storage Business to PMC-Sierra, Inc. in February 2006, the sale of our Printer ASICs Business to Marvell Technology Group Ltd. in May 2006, the sale of our Image Sensor operations to Micron Technology, Inc. in December 2006, and the sale of our Infra-red operations to Lite-On Technology Corporation in January 2008. We may seek additional opportunities to maximize efficiency and value through various transactions, including purchases or sales of assets, businesses, investments or contractual arrangements. These transactions may be intended to result in the reduction of our indebtedness, the realization of cost savings, the generation of cash or income or the reduction of risk. These transactions may also affect our consolidated results of operations.

In 2007, we acquired the Polymer Optical Fiber, or POF, business from Infineon Technologies AG. In the first and second quarter of 2008, we completed acquisitions of a manufacturer of motion control encoders and a developer of low-power wireless devices, respectively. In August 2008, we acquired the Bulk Acoustic Wave Filter business of Infineon. In the second quarter of 2009, we acquired a manufacturer of motion control encoders. We expect to continue to make acquisitions of, and investments in, businesses that offer complementary products, services and technologies, augment our market coverage, or enhance our technological capabilities. We may also enter into strategic alliances or joint ventures to achieve these goals. We cannot assure you that we will be able to identify suitable acquisition, investment, alliance, or joint venture opportunities or that we will be able to consummate any such transactions or relationships on terms and conditions acceptable to us, or that such transactions or relationships will be successful.

These transactions or any other acquisitions or dispositions involve risks and uncertainties which may have a material adverse effect on our business. The integration of acquired businesses may not be successful and could result in disruption to other parts of our business. In addition, the integration may require that we incur significant restructuring charges. To integrate acquired businesses, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the acquired operations. The difficulties of the integrations may be further complicated by such factors as geographic distances, lack of experience operating in the geographic market or industry sector of the acquired business, delays and challenges associated with integrating the business with our existing businesses, diversion of management’s attention from daily operations of the business, potential loss of key employees and customers of the acquired business, the potential for deficiencies in internal controls at the acquired business, performance problems with the acquired business’ technology, difficulties in entering markets in which we have no or limited direct prior experience, exposure to unanticipated liabilities of the acquired business, insufficient revenues to offset increased expenses associated with the acquisition, and our ability to achieve the growth prospects and synergies expected from any such acquisition. Even when an acquired business has already developed and marketed products, there can be no assurance that product enhancements will be made in a timely fashion or that all pre-acquisition due diligence will have identified all possible issues that might arise with respect to such acquired assets.

Any acquisition may also cause us to assume liabilities, acquire goodwill and non-amortizable intangible assets that will be subject to impairment testing and potential impairment charges, incur amortization expense related to certain intangible assets, increase our expenses and working capital requirements, and subject us to litigation, which would

 

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reduce our return on invested capital. Failure to manage and successfully integrate the acquisitions we make could materially harm our business and operating results.

Any future acquisitions may require additional debt or equity financing, which in the case of debt financing, will increase our exposures to risk related to our substantial indebtedness, increase our leverage and potentially affect our credit ratings, and in the case of equity financing, would be dilutive to our existing shareholders. Any downgrades in our credit ratings associated with an acquisition could adversely affect our ability to borrow by resulting in more restrictive borrowing terms. As a result of the foregoing, we also may not be able to complete acquisitions or strategic customer transactions in the future to the same extent as in the past, or at all. These and other factors could harm our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely affect our business, financial condition and results of operations.

Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expenses. If we fail to maintain compliance with applicable regulations, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties.

Our business is subject to various significant international and U.S. laws and other legal requirements, including packaging, product content, labor and import/export regulations. These regulations are complex, change frequently and have generally become more stringent over time. We may be required to incur significant expenses to comply with these regulations or to remedy violations of these regulations. Any failure by us to comply with applicable government regulations could result in cessation of our operations or portions of our operations, product recalls or impositions of fines and restrictions on our ability to conduct our operations. In addition, because many of our products are regulated or sold into regulated industries, we must comply with additional regulations in marketing our products.

Our products and operations are also subject to the rules of industrial standards bodies, like the International Standards Organization, as well as regulation by other agencies, such as the U.S. Federal Communications Commission. If we fail to adequately address any of these rules or regulations, our business could be harmed.

We must conform the manufacture and distribution of our semiconductors to various laws and adapt to regulatory requirements in all countries as these requirements change. If we fail to comply with these requirements in the manufacture or distribution of our products, we could be required to pay civil penalties, face criminal prosecution and, in some cases, be prohibited from distributing our products in commerce until the products or component substances are brought into compliance.

We are subject to environmental, health and safety laws, which could increase our costs, restrict our operations and require expenditures that could have a material adverse affect on our results of operations and financial condition.

We are subject to a variety of international and U.S. laws and other legal requirements relating to the use, disposal, clean-up of and human exposure to, hazardous materials. Any failure by us to comply with environmental, health and safety requirements could result in the limitation or suspension of production or subject us to future liabilities in excess of our reserves. In addition, compliance with environmental, health and safety requirements could restrict our ability to expand our facilities or require us to acquire costly pollution control equipment, incur other significant expenses or modify our manufacturing processes. In the

 

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event of the discovery of new contamination, additional requirements with respect to existing contamination, or the imposition of other cleanup obligations for which we are responsible, we may be required to take remedial or other measures which could have a material adverse effect on our business, financial condition and results of operations.

We also face increasing complexity in our product design and procurement operations as we adjust to new requirements relating to the materials composition of our products, including the restrictions on lead and certain other substances in electronics that apply to specified electronics products sold in the European Union as of July 1, 2006 under the Restriction of Hazardous Substances in Electrical and Electronic Equipment Directive. Other countries, such as the United States, China and Japan, have enacted or may enact laws or regulations similar to the EU legislation. Other environmental regulations may require us to reengineer our products to utilize components which are more environmentally compatible. Such reengineering and component substitution may result in excess inventory or other additional costs and could have a material adverse effect on our results of operations.

In addition to the costs of complying with environmental, health and safety requirements, we may in the future incur costs defending against environmental litigation brought by government agencies and private parties. We may be defendants in lawsuits brought by parties in the future alleging environmental damage, personal injury or property damage. A significant judgment against us could harm our business, financial condition and results of operations.

In the last few years, there has been increased media scrutiny and associated reports focusing on a potential link between working in semiconductor manufacturing clean room environments and certain illnesses, primarily different types of cancers. Regulatory agencies and industry associations have begun to study the issue to see if any actual correlation exists. Because we utilize clean rooms, we may become subject to liability claims. In addition, these reports may also affect our ability to recruit and retain employees.

We cannot predict:

 

•

changes in environmental or health and safety laws or regulations;

 

•

the manner in which environmental or health and safety laws or regulations will be enforced, administered or interpreted;

 

•

our ability to enforce and collect under indemnity agreements and insurance policies relating to environmental liabilities; or

 

•

the cost of compliance with future environmental or health and safety laws or regulations or the costs associated with any future environmental claims, including the cost of clean-up of currently unknown environmental conditions.

We may not realize the expected benefits of our recent restructuring activities and other initiatives designed to reduce costs and increase revenue across our operations.

We recently have pursued a number of restructuring initiatives designed to reduce costs and increase revenue across our operations. These initiatives included significant workforce reductions in certain areas as we realigned our business. Additional initiatives included establishing certain operations closer in location to our global customers, evaluating functions more efficiently performed through partnerships or other outside relationships and steps to attempt to further reduce our overhead costs. We are also exploring opportunities to leverage our technology and diversified product portfolio to increase revenue. These initiatives have been substantial in scope and disruptive to some of our historical operations. We may not

 

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realize the expected benefits of these new initiatives. As a result of these initiatives, we have incurred restructuring or other infrequent charges and we may in the future experience disruptions in our operations, loss of key personnel and difficulties in delivering products timely. In the six months ended May 3, 2009 and the year ended November 2, 2008, we incurred restructuring charges of $17 million and $12 million, respectively, consisting primarily of employee severance and related costs resulting from a reduction in our workforce.

We are subject to risks associated with our distributors’ product inventories and product sell-through.

We sell many of our products to customers through distributors who maintain their own inventory of our products for sale to dealers and end users. We recognize revenues for sales to distributors upon delivery to the distributor. We limit distributor return rights and we allow limited price adjustments on sales to distributors. We provide reserves for distributor rights related to these limited stock returns and price adjustments. Sales to distributors accounted for 38% and 35% of our net revenue from continuing operations for the six months ended May 4, 2008 and May 3, 2009, respectively.

If these distributors are unable to sell an adequate amount of their inventory of our products in a given quarter to dealers and end users or if they decide to decrease their inventories for any reason, such as due to the current global recession or due to any downturn in technology spending, our sales to these distributors and our revenues may decline. In addition, if distributors decide to purchase more inventory in any particular quarter, due to product availability or other reasons, than is required to satisfy end customer demand, inventory at our distributors may grow in such quarter, which could adversely affect our product revenues in a subsequent quarter as such distributors will likely reduce future orders until their inventory levels realign with end customer demand. For example, during the six months ended May 3, 2009, the semiconductor industry experienced a significant decline in demand. Consequently, our distributors experienced declines in their resales of our products and were carrying a higher level of inventories of our products than historical levels at the end of the first fiscal quarter of 2009. As a result, our distributors decided to reduce their inventory of our products during the second fiscal quarter of 2009 and we also reduced our own inventory by $27 million or 15%.

We also face the risk that our distributors may for other reasons have inventory levels in excess of future anticipated sales. If such sales do not occur in the time frame anticipated by these distributors for any reason, these distributors may substantially decrease the amount of product they order from us in subsequent periods, which would harm our business.

Our reserve estimates associated with products stocked by our distributors are based largely on reports that our distributors provide to us on a monthly basis. To date, we believe this data has been generally accurate. To the extent that this resale and channel inventory data is inaccurate or not received in a timely manner, we may not be able to make reserve estimates for future periods accurately or at all.

We rely on third-party distributors and manufacturers’ representatives and the failure of these distributors and manufacturers’ representatives to perform as expected could reduce our future sales.

We sell many of our products to customers through distributors and manufacturers’ representatives. We are unable to predict the extent to which our distributors and manufacturers’ representatives will be successful in marketing and selling our products.

 

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Moreover, many of our distributors and manufacturers’ representatives and distributors also market and sell competing products. Our representatives and distributors may terminate their relationships with us at any time. Our future performance will also depend, in part, on our ability to attract additional distributors or manufacturers’ representatives that will be able to market and support our products effectively, especially in markets in which we have not previously distributed our products. If we cannot retain our current distributors or manufacturers’ representatives or recruit additional or replacement distributors or manufacturers’ representatives, our sales and operating results will be harmed.

The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenues and gross profits.

The products we develop and sell are used for high volume applications. As a result, the prices of those products have historically decreased rapidly. We expect that our gross profits on our products are likely to decrease over the next fiscal year below levels we have historically experienced due to pricing pressures from our customers, and an increase in sales of wireless and other products into consumer application markets, which are highly competitive and cost sensitive. In the past, we have reduced the average selling prices of our products in anticipation of future competitive pricing pressures, new product introductions by us or our competitors and other factors. Our gross profits and financial results will suffer if we are unable to offset any reductions in our average selling prices by increasing our sales volumes, reducing manufacturing costs, or developing new and higher value-added products on a timely basis.

We will be required to assess our internal control over financial reporting on an annual basis and any future adverse findings from such assessment could result in a loss of investor confidence in our financial reports, significant expenses to remediate any internal control deficiencies and ultimately have an adverse effect on our share price.

We will comply with Section 404(a) (management’s report on financial reporting) under the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, for the fiscal year ending November 1, 2009, and will comply with Section 404(b) (auditor’s attestation) no later than the fiscal year ending October 31, 2010. We cannot assure you that our compliance with Section 404 will not result in significant additional expenditures. We will be required to disclose, among other things, control deficiencies that constitute a “material weakness.” A “material weakness” is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. If we fail to implement the requirements of Section 404 in a timely manner, we might be subject to sanctions or investigation by regulatory agencies such as the SEC. In addition, failure to comply with Section 404 or the disclosure by us of a material weakness may cause investors to lose confidence in our financial statements and the trading price of our ordinary shares may decline.

If we fail to remedy any material weakness, our financial statements may be inaccurate, our ability to report our financial results on a timely and accurate basis may be adversely affected, our access to the capital markets may be restricted, the trading price of our ordinary shares may decline, and we may be subject to sanctions or investigation by regulatory authorities, including the SEC or the Nasdaq Stock Market. We may also be required to restate our financial statements from prior periods.

 

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Our substantial indebtedness could adversely affect our financial health and our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate indebtedness and prevent us from fulfilling our obligations under our indebtedness.

The following table presents our long-term indebtedness and capital lease obligations as of May 3, 2009:

 

		As of May 3, 2009
		(in millions)
10 1/8% senior notes due 2013			403
Senior floating rate notes due 2013			50
11 7/8% senior subordinated notes due 2015			247
Long-term obligation for capital leases			4
Total long-term indebtedness and capital lease obligations		$	704

In addition, we had $17 million of letters of credit outstanding under our revolving credit facility.

Subject to restrictions in the indentures governing our 10 ¹/8% senior notes, senior floating rate notes and 11 ⁷/8% senior subordinated notes, generally referred to in this prospectus collectively as our outstanding notes, and our senior credit agreement, we may incur additional indebtedness. Furthermore, borrowings under our senior credit agreement are secured by substantially all of our assets. For more information on our outstanding indebtedness, see “Description of Indebtedness” elsewhere in this prospectus.

Our substantial indebtedness could have important consequences including:

 

•

making it more difficult for us to satisfy our obligations with respect to our outstanding notes, including our repurchase obligations;

 

•

increasing our vulnerability to adverse general economic and industry conditions;

 

•

requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts, execution of our business strategy and other general corporate purposes;

 

•

limiting our flexibility in planning for, or reacting to, changes in the economy and the semiconductor industry;

 

•

placing us at a competitive disadvantage compared to our competitors with less indebtedness;

 

•

exposing us to interest rate risk to the extent of our variable rate indebtedness;

 

•

limiting our ability to, or increasing the costs to, refinance indebtedness; and

 

•

making it more difficult to borrow additional funds in the future to fund working capital, capital expenditures and other purposes.

Any of the foregoing could materially and adversely affect our business, financial conditions and results of operations.

 

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The indentures governing our outstanding notes and our senior credit agreement impose significant restrictions on our business.

The indentures governing our outstanding notes and the senior credit agreement contain a number of covenants imposing significant restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. The restrictions placed on us include limitations on our ability and the ability of our subsidiaries to:

 

•

incur additional indebtedness and issue ordinary or preferred shares;

 

•

pay dividends or make other distributions on, redeem or repurchase our shares or make other restricted payments;

 

•

make investments, acquisitions, loans or advances;

 

•

incur or create liens;

 

•

transfer or sell certain assets;

 

•

engage in sale and lease back transactions;

 

•

declare dividends or make other payments to us;

 

•

guarantee indebtedness;

 

•

engage in transactions with affiliates; and

 

•

consolidate, merge or transfer all or substantially all of our assets.

In addition, over a specified limit, our senior credit agreement requires us to meet a financial ratio test and restricts our ability to make capital expenditures or prepay certain other indebtedness. Our ability to meet the financial ratio test may be affected by events beyond our control, and we do not know whether we will be able to maintain this ratio.

The foregoing restrictions could limit our ability to plan for, or react to, changes in market conditions or our capital needs. We do not know whether we will be granted waivers under, or amendments to, our senior credit agreement or the indentures if for any reason we are unable to meet these requirements, or whether we will be able to refinance our indebtedness on terms acceptable to us, or at all.

The breach of any of these covenants or restrictions could result in a default under the indentures governing our outstanding notes or our senior credit agreement. In addition, our senior credit agreement and our indentures contain cross-default provisions which could thereby result in an acceleration of amounts outstanding under all those debt instruments if certain events of default occur under any of them. If we are unable to repay these amounts, lenders having secured obligations, including the lenders under our senior credit agreement, could proceed against the collateral securing that debt. Any of the foregoing would have a material adverse effect on our business, financial condition and results of operations. For more information on our outstanding indebtedness, see “Description of Indebtedness” elsewhere in this prospectus.

 

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Risks Relating to Investments in Singapore Companies

It may be difficult to enforce a judgment of U.S. courts for civil liabilities under U.S. federal securities laws against us, our directors or officers in Singapore.

We are incorporated under the laws of the Republic of Singapore, and certain of our officers and directors are or will be residents outside the United States. Moreover, a majority of our consolidated assets are located outside the United States. Although we are incorporated outside the United States, we have agreed to accept service of process in the United States through our agent designated for that purpose. Nevertheless, since a majority of the consolidated assets owned by us are located outside the United States, any judgment obtained in the United States against us may not be collectible within the United States.

There is no treaty between the United States and Singapore providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters and a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the federal securities laws, would, therefore, not be automatically enforceable in Singapore. There is doubt whether a Singapore court may impose civil liability on us or our directors and officers who reside in Singapore in a suit brought in the Singapore courts against us or such persons with respect to a violation solely of the federal securities laws of the United States, unless the facts surrounding such a violation would constitute or give rise to a cause of action under Singapore law. Consequently, it may be difficult for investors to enforce against us, our directors or our officers in Singapore judgments obtained in the United States which are predicated upon the civil liability provisions of the federal securities laws of the United States.

We are incorporated in Singapore and our shareholders may have more difficulty in protecting their interest than they would as shareholders of a corporation incorporated in the United States.

Our corporate affairs are governed by our memorandum and articles of association and by the laws governing corporations incorporated in Singapore. The rights of our shareholders and the responsibilities of the members of our board of directors under Singapore law are different from those applicable to a corporation incorporated in the United States. Therefore, our public shareholders may have more difficulty in protecting their interest in connection with actions taken by our management, members of our board of directors or our controlling shareholder than they would as shareholders of a corporation incorporated in the United States. For example, controlling shareholders in U.S. corporations are subject to fiduciary duties while controlling shareholders in Singapore corporations are not subject to such duties. Please see “Comparison of Shareholder Rights” for a discussion of differences between Singapore and Delaware corporation law.

For a limited period of time, our directors have general authority to allot and issue new shares on terms and conditions and with any preferences, rights or restrictions as may be determined by our board of directors in its sole discretion.

Under Singapore law, we may only allot and issue new shares with the prior approval of our shareholders in a general meeting. At our 2009 annual general meeting of shareholders, our shareholders provided our directors with the general authority to allot and issue any number of new shares (whether as ordinary shares or preference shares) until the earlier of (i) the conclusion of our 2010 annual general meeting, (ii) the expiration of the period within which the next annual general meeting is required to be held (i.e., within 15 months from the conclusion of the last general meeting) or (iii) the subsequent revocation or modification of such general authority by

 

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our shareholders acting at a duly noticed and convened meeting. Subject to the general authority to allot and issue new shares provided by our shareholders, the provisions of the Singapore Companies Act and our memorandum and articles of association, our board of directors may allot and issue new shares on terms and conditions and with the rights (including preferential voting rights) and restrictions as they may think fit to impose. Any additional issuances of new shares by our directors may adversely impact the market price of our ordinary shares.

Risks Relating to Owning Our Ordinary Shares

Control by principal shareholders could adversely affect our other shareholders.

When this offering is completed, our executive officers, directors and greater than 5% shareholders, collectively, will beneficially own approximately     % of our ordinary shares (excluding shares issuable upon exercise of outstanding options), assuming no exercise of the underwriters’ option to purchase additional shares. In addition, pursuant to the terms of our Second Amended and Restated Shareholder Agreement, which we refer to in this prospectus as the Shareholder Agreement, investment funds affiliated with Kohlberg Kravis Roberts & Co., or KKR, and investment funds affiliated with Silver Lake Partners, or Silver Lake, and together with KKR, the Sponsors, or their respective affiliates, and Seletar Investments Pte Ltd, or Seletar, can elect their respective designees to serve as members of our board of directors. These shareholders will have a continuing ability to control our board of directors and will continue to have significant influence over our affairs for the foreseeable future, including controlling the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets. In addition, under the “controlled company” exception to the independence requirements of the Nasdaq Stock Market, we will be exempt from the rules of the Nasdaq Stock Market that require that our board of directors be comprised of a majority of independent directors, that our compensation committee be comprised solely of independent directors and that our nominating and governance committee be comprised solely of independent directors. This concentrated control will limit the ability of other shareholders to influence corporate matters and, as a result, we may take actions that our non-Sponsor shareholders do not view as beneficial. For example, this concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could cause the market price of our ordinary shares to decline or prevent our shareholders from realizing a premium over the market price for their ordinary shares.

Our share price may be volatile and you may be unable to sell your shares at or above the offering price.

The initial public offering price for our shares will be determined by negotiations between us and representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. The market price of our ordinary shares could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:

 

•

actual or anticipated fluctuations in our financial condition and operating results;

 

•

overall conditions in the semiconductor market;

 

•

addition or loss of significant customers;

 

•

changes in laws or regulations applicable to our products;

 

•

actual or anticipated changes in our growth rate relative to our competitors;

 

•

announcements of technological innovations by us or our competitors;

 

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•

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 

•

additions or departures of key personnel;

 

•

competition from existing products or new products that may emerge;

 

•

issuance of new or updated research or reports by securities analysts;

 

•

fluctuations in the valuation of companies perceived by investors to be comparable to us;

 

•

disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain intellectual property protection for our technologies;

 

•

announcement of, or expectation of additional financing efforts;

 

•

sales of our ordinary shares by us or our shareholders;

 

•

share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

 

•

the expiration of contractual lock-up agreements with our executive officers, directors and greater than 5% shareholders; and

 

•

general economic and market conditions.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our ordinary shares. If the market price of our ordinary shares after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

No public market for our ordinary shares currently exists and an active trading market may not develop or be sustained following this offering.

Prior to this offering, there has been no public market for our ordinary shares. An active trading market may not develop following the completion of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.

The trading market for our ordinary shares will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or

 

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change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Future sales of our ordinary shares in the public market could cause our share price to fall.

Sales of a substantial number of our ordinary shares in the public market after this offering, or the perception that these sales might occur, could depress the market price of our ordinary shares and could impair our ability to raise capital through the sale of additional equity securities. Based on the number of ordinary shares outstanding as of May 3, 2009, upon completion of this offering, we will have              ordinary shares outstanding, assuming no exercise of our outstanding options.

All of the ordinary shares sold in this offering will be freely tradable without restrictions or further registration under the Securities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act. The remaining              ordinary shares outstanding after this offering, based on shares outstanding as of May 3, 2009, will be restricted as a result of securities laws, lock-up agreements or other contractual restrictions that restrict transfers for at least 180 days after the date of this prospectus, subject to certain extensions. In addition, shares acquired upon exercise of options and share purchase rights granted pursuant to our Senior Management Plan are subject to a restriction on transfer, subject to certain exceptions, until the later of the fifth anniversary of the date of grant or date of this prospectus. These remaining shares will generally become available for sale subject to compliance with applicable securities laws or upon expiration of these lock-up agreements or other contractual restrictions.

The underwriters may, in their sole discretion, release all or some portion of the shares subject to lock-up agreements prior to expiration of the lock-up period. See “Shares Eligible for Future Sale” elsewhere in this prospectus.

After this offering, the holders of approximately              ordinary shares, or     % based on shares outstanding as of May 3, 2009, will be entitled to rights with respect to registration of such shares under the Securities Act pursuant to a registration rights agreement. See “Certain Relationships and Related Party Transactions—Registration Rights Agreement” elsewhere in this prospectus. In addition, upon exercise of outstanding options by our executive officers and certain other employees, our executive officers and those other employees will be entitled to rights with respect to registration of the ordinary shares acquired on exercise. If such holders, by exercising their registration rights, sell a large number of shares, they could adversely affect the market price for our ordinary shares. If we file a registration statement for the purposes of selling additional shares to raise capital, and are required to include shares held by these holders pursuant to the exercise of their registration rights, our ability to raise capital may be impaired. We intend to file a registration statement on Form S-8 under Securities Act to register             shares for issuance under our Amended and Restated Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries, Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries and 2009 Equity Incentive Award Plan. Once we register these shares, they can be freely sold in the public market upon issuance and once vested, subject to a 180-day lock-up period and other restrictions provided under the terms of the Management Shareholders Agreement, the applicable plan and/or the option agreements entered into with option holders.

 

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The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, listing requirements of the Nasdaq Stock Market and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. Although we have already hired additional staff to comply with these requirements, we may need to hire more employees in the future, which will increase our costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

Singapore corporate law may impede a takeover of our company by a third-party, which could adversely affect the value of our ordinary shares.

The Singapore Code on Take-overs and Mergers contains provisions that may delay, deter or prevent a future takeover or change in control of our company for so long as we remain a public company with more than 50 shareholders and net tangible assets of S$5 million or more. Any person acquiring an interest, whether by a series of transactions over a period of time or not, either on their own or together with parties acting in concert with such person, in 30% or more of our voting shares, or, if such person holds, either on their own or together with parties acting in concert with such person, between 30% and 50% (both inclusive) of our voting shares, and such person (or parties acting in concert with such person) acquires additional voting

 

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shares representing more than 1% of our voting shares in any six-month period, must, except with the consent of the Securities Industry Council in Singapore, extend a mandatory takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Code on Take-overs and Mergers. While the Singapore Code on Take-overs and Mergers seeks to ensure equality of treatment among shareholders, its provisions may discourage or prevent certain types of transactions involving an actual or threatened change of control of our company. These legal requirements may impede or delay a takeover of our company by a third-party, which could adversely affect the value of our ordinary shares.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid any cash dividends on our ordinary shares and do not intend to pay any cash dividends in the foreseeable future. The payment of cash dividends on ordinary shares is restricted under the terms of the agreements governing our indebtedness. In addition, because we are a holding company, our ability to pay cash dividends on our ordinary shares may be limited by restrictions on our ability to obtain sufficient funds through dividends from subsidiaries, including restrictions under the terms of the agreements governing our indebtedness. We anticipate that we will retain all of our future earnings for use in the development of our business, in reducing our indebtedness and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their ordinary shares after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believe,” “expect,” “may,” “will,” “should,” “seek,” “approximately,” “intend,” “plan,” “estimate,” or “anticipate” or similar expressions that concern our strategy, plans or intentions. All statements we make relating to estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. All of these forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those we expected. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations are disclosed under “Risk Factors” and elsewhere in this prospectus, including, without limitation, in conjunction with the forward-looking statements included in this prospectus. Some of the factors that we believe could affect our results include:

 

•

the overall condition of the highly cyclical semiconductor industry, including the impact of the current significant economic downturn;

 

•

adaptation to technological changes in the semiconductor industry;

 

•

dependence on contract manufacturing and outsourced supply chain;

 

•

prolonged disruptions of our manufacturing facilities;

 

•

manufacturing efficiency and product quality, including potential warranty claims and product recalls;

 

•

competition in the markets in which we serve;

 

•

quarterly and annual fluctuations;

 

•

investments in research and development;

 

•

departure of key senior managers and the ability to retain and attract key personnel;

 

•

changes in tax laws;

 

•

protection and enforcement of our intellectual property rights;

 

•

loss of one or more of our significant customers;

 

•

our reliance on third parties to provide services for the operation of our business;

 

•

risks relating to the transaction of business internationally;

 

•

the effects of war, terrorism, natural disasters or other catastrophic events;

 

•

the integration of acquired businesses, the performance of acquired businesses and the prospects for future acquisitions;

 

•

our substantial indebtedness;

 

•

currency fluctuations;

 

•

certain covenants in our debt documents; and

 

•

the other factors set forth under “Risk Factors.”

 

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We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this prospectus may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

ENFORCEMENT OF CIVIL LIABILITIES UNDER

UNITED STATES FEDERAL SECURITIES LAWS

We are incorporated under the laws of the Republic of Singapore, and certain of our officers and directors are or will be residents outside the United States. Moreover, a majority of our consolidated assets are located outside the United States. Although we are incorporated outside the United States, we have agreed to accept service of process in the United States through our agent designated for that purpose. Nevertheless, since a majority of the consolidated assets owned by us are located outside the United States, any judgment obtained in the United States against us may not be collectible within the United States. There is no treaty between the United States and Singapore providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters and a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the federal securities laws, would, therefore, not be automatically enforceable in Singapore. There is doubt whether a Singapore court may impose civil liability on us or our directors and officers who reside in Singapore in a suit brought in the Singapore courts against us or such persons with respect to a violation solely of the federal securities laws of the United States, unless the facts surrounding such a violation would constitute or give rise to a cause of action under Singapore law. Consequently, it may be difficult for investors to enforce against us, our directors or our officers in Singapore judgments obtained in the United States which are predicated upon the civil liability provisions of the federal securities laws of the United States.

INDUSTRY AND MARKET DATA

We obtained the industry, market and competitive position data used throughout this prospectus from our own internal estimates and research as well as from industry publications and research, surveys and studies conducted by third parties. Industry publications, research, surveys and studies generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that such publications, research, surveys and studies are reliable, we have not independently verified industry, market and competitive position data from third-party sources. While we believe our internal business research is reliable and market definitions are appropriate, neither such research nor these definitions have been verified by any independent source.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $         million from the sale of the ordinary shares offered in this offering, based on an assumed initial public offering price of $             per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) the net proceeds to us from this offering by $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the ordinary shares to be offered by the selling shareholders, although we will pay the expenses, other than underwriting discounts and commissions, associated with the sale of those ordinary shares pursuant to the Registration Rights Agreement described under “Certain Relationships and Related Party Transactions—Registration Rights Agreement.” The selling shareholders include members of our senior management and entities affiliated with directors of our company. Bali Investments S.àr.l, an entity controlled by KKR and Silver Lake, is our controlling shareholder and is a selling shareholder in this offering. See “Principal and Selling Shareholders.”

As described in more detail below, we currently intend to use the net proceeds of this offering for the following purposes and in the following amounts:

 

•

approximately $57 million will be paid to our equity sponsors (Kohlberg Kravis Roberts & Co., L.P. and Silver Lake Management Company, L.L.C.) in connection with the termination of our advisory agreement pursuant to its terms (with one-half payable to each equity sponsor); and

 

•

approximately $         million will be used to repay a portion of our long-term indebtedness, which consists of our senior floating rate notes due 2013 (of which, as of May 3, 2009, there was approximately $50 million principal amount outstanding), our 10 1/8% senior notes due 2013 (of which, as of May 3, 2009, there was approximately $403 million principal amount outstanding), and our 11 7/8% senior subordinated notes due 2015 (of which, as of May 3, 2009, there was approximately $247 million principal amount outstanding). The selection of which series of notes, the amounts to be repaid within a particular series, the timing of repayment and the particular method by which we effect repayment, which could include redemption calls, open market purchases, privately negotiated transactions or tender offers, or some combination thereof, have not yet been determined and will depend, among other things, on market conditions.

Interest on our senior floating rate notes due 2013 is calculated at a rate of three-month London Interbank Offered Rate, or LIBOR, plus 5.5%. As of May 3, 2009, the interest rate on such notes was 6.76%.

KKR Capital Markets LLC, one of the underwriters for this offering, is an affiliate of:

 

•

Kohlberg Kravis & Roberts & Co., L.P., one of our equity sponsors, which will receive approximately $28.5 million of the proceeds from this offering in connection with the termination of our advisory agreement pursuant to its terms (see “Certain Relationships and Related Party Transactions—Advisory Agreement”), and

 

•

an investment advisor that manages certain funds and accounts, which hold $10 million principal amount of our senior floating rate notes, $20 million principal amount of our

 

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senior notes and $52 million principal amount of our senior subordinated notes, some or all of which may be retired with a portion of the net proceeds from this offering (see “Underwriting—Relationships/FINRA Rules”).

Until we use the net proceeds of this offering, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities. We cannot predict whether the proceeds invested will yield a favorable return.

 

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DIVIDEND POLICY

We currently do not plan to declare dividends on our ordinary shares in the foreseeable future. The payment of cash dividends on ordinary shares is restricted under the terms of the agreements governing our indebtedness. In addition, because we are a holding company, our ability to pay cash dividends on our ordinary shares may be limited by restrictions on our ability to obtain sufficient funds through dividends from subsidiaries, including restrictions under the terms of the agreements governing our indebtedness. Subject to the foregoing, the payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, contractual restrictions, our overall financial condition and any other factors deemed relevant by our board of directors. In addition, pursuant to Singapore law and our articles of association, no dividends may be paid except out of our profits.

 

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CAPITALIZATION

The following table sets forth our capitalization as of May 3, 2009:

 

•

on an actual basis; and

 

•

on an as adjusted basis to reflect our receipt of the estimated net proceeds from this offering, based on an assumed initial public offering price of $             per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and the application of such net proceeds as described under “Use of Proceeds.”

The information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.

 

		As of May 3, 2009
		Actual				As Adjusted
		(unaudited) (in millions, except share data)
Total long-term debt and capital lease obligations		$	704			$
Shareholders’ equity:
Ordinary shares, no par value, 213,935,874 issued and outstanding, actual;              shares issued and outstanding, as adjusted			1,086
Accumulated deficit			(337	)
Accumulated other comprehensive income			9
Total shareholders’ equity			758
Total capitalization		$	1,462			$

The number of as adjusted ordinary shares shown as issued and outstanding in the table is based on the number of our ordinary shares outstanding as of May 3, 2009 and excludes:

 

•

21,767,164 ordinary shares issuable upon the exercise of options outstanding under our Executive Plan and Senior Management Plan as of May 3, 2009 at a weighted average exercise price of $7.49 per share, including the shares which will be issued upon the exercise of options by selling shareholders and sold by them in connection with this offering;

 

•

ordinary shares reserved for future issuance under our 2009 Equity Incentive Award Plan, of which options to purchase approximately 2,600,000 ordinary shares at an exercise price equal to the initial public offering price set forth on the cover of this prospectus will be granted immediately prior to this offering; and

 

•

800,000 ordinary shares issuable upon the exercise of an option granted to Capstone Equity Investors LLC at an exercise price of $5.00 per share.

 

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DILUTION

If you invest in our ordinary shares in this offering, your interest will be diluted to the extent of the difference between the public offering price per share of our ordinary shares and the as adjusted net tangible book value per share of our ordinary shares after this offering. Net tangible book value per share represents our total tangible assets (total assets less intangible assets) less total liabilities divided by the number of outstanding ordinary shares. Our net tangible book value at May 3, 2009 was $(98) million, and our net tangible book value per share was $(0.46) per ordinary share.

Our as adjusted net tangible book value at May 3, 2009, after giving effect to the sale of              ordinary shares at an assumed initial public offering price of $             per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses, would have been approximately $             million, or $             per share. This represents an immediate increase in as adjusted net tangible book value of $             per share to existing shareholders and an immediate dilution of $             per share to new investors, or approximately         % of the assumed initial public offering price of $             per share. The following table illustrates this per share dilution:

 

Assumed initial public offering price per share		$
Net tangible book value per share as of May 3, 2009, before giving effect to this offering
Increase in net tangible book value per share attributable to investors purchasing shares in this offering
As adjusted net tangible book value per share, after giving effect to this offering

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) our as adjusted net tangible book value by $             million, the as adjusted net tangible book value per share after this offering by $             per share and the dilution in as adjusted net tangible book value per share to investors in this offering by $             per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, as of May 3, 2009, the number of ordinary shares purchased from us since inception, the total consideration paid to us and the average price per share paid by existing shareholders and by new investors purchasing ordinary shares in this offering at an assumed initial public offering price of $             per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

Shares Purchased

Total Consideration

Average Price Per Share

Number

Percent

Amount

Percent

(amount in thousands, except percentages and share amounts)

Existing shareholders

213,935,874

$

1,069,876

$

5.00

New investors

Total

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) total consideration paid by existing shareholders, total consideration

 

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paid by new investors, total consideration paid by all shareholders and the average price per share paid by existing shareholders by $             million, $             million, $             million and $             per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The above discussion and table are based on 213,935,874 ordinary shares outstanding as of May 3, 2009 and excludes:

 

•

21,767,164 ordinary shares issuable upon the exercise of options outstanding under our Executive Plan and Senior Management Plan as of May 3, 2009 at a weighted average exercise price of $7.49 per share; and

 

•

800,000 ordinary shares issuable upon the exercise of an option granted to Capstone Equity Investors LLC at an exercise price of $5.00 per share.

Sales by the selling shareholders in this offering will cause the number of shares beneficially owned by existing shareholders to be reduced to              shares or         % of the total number of shares of our ordinary shares outstanding after this offering.

If the underwriters exercise their option to purchase additional shares in full, the following will occur:

 

•

the number of our ordinary shares beneficially owned by existing shareholders would decrease to approximately     % of the total number of ordinary shares outstanding after this offering; and

 

•

the number of our ordinary shares held by new investors would increase to approximately    % of the total number ordinary shares outstanding after this offering.

In addition,              ordinary shares are reserved for future issuance under our equity-based compensation plans, of which options to purchase approximately 2,600,000 ordinary shares at an exercise price equal to the initial public offering price set forth on the cover of this prospectus will be granted immediately prior to this offering. The table and calculations above exclude such shares. To the extent the options are exercised and awards are granted under these plans, there may be dilution to our shareholders. We may also choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.

 

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SELECTED FINANCIAL DATA

Set forth below is selected financial data of our business as of and for the periods presented. You should read this data together with the information included under the headings “Risk Factors,” “Summary Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial statements and related notes included elsewhere in this prospectus. The selected statements of operations data for the one month ended November 30, 2005 and the years ended October 31, 2006, October 31, 2007 and November 2, 2008 and the selected balance sheet data as of October 31, 2007 and November 2, 2008 have been derived from audited historical financial statements and related notes included elsewhere in this prospectus. The selected statements of operations data for the years ended October 31, 2004 and 2005 and the selected balance sheet data as of October 31, 2004, 2005 and 2006 have been derived from audited historical financial statements and related notes not included in this prospectus. The selected statements of operations data for the six months ended May 4, 2008 and May 3, 2009 and the selected balance sheet data as of May 3, 2009 have been derived from unaudited historical financial statements and related notes included elsewhere in this prospectus. The balance sheet data as of May 4, 2008 has been derived from unaudited historical financial statements and related notes not included in this prospectus. We have prepared the unaudited historical financial statements on the same basis as the audited historical financial statements and, in the opinion of our management, the statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial information set forth in these statements. The historical financial data may not be indicative of our future performance and does not reflect what our financial position and results of operations would have been if we had operated as a fully stand-alone entity during all of the periods presented. We adopted a 52-or 53-week fiscal year beginning with our fiscal year 2008. Our fiscal year ends on the Sunday closest to October 31.

 

		Predecessor(1)												Company
		Year Ended						One Month Ended November 30, 2005						Year Ended												Six Months Ended
		October 31, 2004			October 31, 2005									October 31, 2006(2)				October 31, 2007				November 2, 2008				May 4, 2008				May 3, 2009
								(in millions, except per share data)
Statement of Operations Data:
Net revenue(3)		$	1,714		$	1,410		$	114					$	1,399			$	1,527			$	1,699			$	813			$	693
Costs and expenses:
Cost of products sold:
Cost of products sold			1,202			935			87						926				936				981				467				414
Amortization of intangible assets			—			—			—						55				60				57				28				29
Asset impairment charges(4)			—			2			—						—				140				—				—				—
Restructuring charges(5)			—			2			—						2				29				6				2				9
Total costs of products sold			1,202			939			87						983				1,165				1,044				497				452
Research and development			205			203			22						187				205				265				128				121
Selling, general and administrative			249			245			27						243				193				196				98				82
Amortization of intangible assets			—			—			—						56				28				28				14				11
Asset impairment charges(4)			—			1			—						—				18				—				—				—
Restructuring charges(5)			—			15			1						3				22				6				3				8
Litigation settlement(6)			—			—			—						21				—				—				—				—
Acquired in-process research and development			—			—			—						—				1				—				—				—
Total costs and expenses			1,656			1,403			137						1,493				1,632				1,539				740				674
Income (loss) from operations(3)(7)(8)			58			7			(23	)					(94	)			(105	)			160				73				19
Interest expense(9)			—			—			—						(143	)			(109	)			(86	)			(45	)			(38	)
Gain (loss) on extinguishment of debt			—			—			—						—				(12	)			(10	)			(10	)			1
Other income (expense), net(3)			4			7			—						12				14				(4	)			2				(4	)
Income (loss) from continuing operations before income taxes			62			14			(23	)					(225	)			(212	)			60				20				(22	)
Provision for income taxes			19			5			2						3				8				3				7				3
Income (loss) from continuing operations			43			9			(25	)					(228	)			(220	)			57				13				(25	)
Income from and gain on discontinued operations, net of income taxes(10)			30			22			1						1				61				26				8				—
Net income (loss)		$	73		$	31		$	(24	)				$	(227	)		$	(159	)		$	83			$	21			$	(25	)

 

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		Predecessor(1)										Company
		Year Ended						One Month Ended November 30, 2005				Year Ended											Six Months Ended
		October 31, 2004			October 31, 2005							October 31, 2006(2)				October 31, 2007				November 2, 2008			May 4, 2008			May 3, 2009
								(in millions, except per share data)
Net income (loss) per share:
Basic:
Income (loss) from continuing operations												$	(1.07	)		$	(1.03	)		$	0.27		$	0.06		$	(0.12	)
Income from and gain on discontinued operations, net of income taxes													—				0.29				0.12			0.04			—
Net income (loss)												$	(1.07	)		$	(0.74	)		$	0.39		$	0.10		$	(0.12	)
Diluted:
Income (loss) from continuing operations												$	(1.07	)		$	(1.03	)		$	0.26		$	0.06		$	(0.12	)
Income from and gain on discontinued operations, net of income taxes													—				0.29				0.12			0.04			—
Net income (loss)												$	(1.07	)		$	(0.74	)		$	0.38		$	0.10		$	(0.12	)
Weighted average shares:
Basic													213				214				214			214			214
Diluted													213				214				219			219			214
Balance Sheet Data (at end of period):
Cash and cash equivalents		$	—		$	—						$	272			$	309			$	213		$	83		$	241
Total assets			921			840							2,217				1,951				1,871			1,741			1,805
Total long-term debt and capital lease obligations			—			—							1,004				907				708			710			704
Total shareholders’ equity			650			529							842				693				780			709			758

 

(1)	Predecessor refers to the Semiconductor Products Group business segment of Agilent.

 

(2)

We completed the SPG Acquisition on December 1, 2005. The SPG Acquisition was accounted for as a purchase business combination under GAAP and thus the financial results for all periods from and after December 1, 2005 are not necessarily comparable to the prior results of Predecessor. We did not have any significant operating activity prior to December 1, 2005. Accordingly, our results for the year ended October 31, 2006 represent only the eleven months of our operations after the completion of the SPG Acquisition.

 

(3)

The divestiture of the Camera Module Business by Agilent on February 3, 2005 did not meet the criteria for discontinued operations treatment under GAAP and, as such, its historical results remain included in the results from continuing operations as presented in this prospectus until the first quarter of fiscal year 2005. The following table presents the operating results of the Camera Module Business:

 

		Predecessor
		Year Ended October 31,
		2004				2005
		(in millions)
Statement of Operations Data:
Net revenue		$	296			$	69
Loss from operations			(63	)			(7	)

On February 3, 2005, Predecessor completed the sale of the Camera Module Business to Flextronics International Ltd. pursuant to an Asset Purchase Agreement dated October 27, 2004, as amended. Flextronics agreed to purchase the fixed assets, inventory and intellectual property and assume operating liabilities. Flextronics paid approximately $13 million upon closing and paid an additional $12 million (in twelve equal quarterly installments each fiscal quarter following the sale closing date), which was recorded as receivable by us as part of purchase accounting. For the year ended October 31, 2005, Predecessor recognized a gain of $12 million related to this sale which was recorded in other income (expense), net.

 

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(4)

During the year ended October 31, 2007, we recorded a $158 million write-down of certain long-lived assets following a review of the recoverability of the carrying value of certain manufacturing facilities, of which $18 million was recorded as part of operating expenses and the remainder was recorded as part of cost of products sold.

 

(5)

Our restructuring charges predominantly represent one-time employee termination benefits. During the year ended October 31, 2005, we incurred $17 million in restructuring charges for certain restructuring actions initiated by Agilent. We incurred total restructuring charges of $5 million during the year ended October 31, 2006 ($6 million on a combined basis including the one month period ended November 30, 2005) related to our effort to rationalize our product lines. During the year ended October 31, 2007, we incurred restructuring charges of $51 million, of which $22 million was recorded as part of operating expenses and the remainder was recorded as part of cost of products sold. During the year ended November 2, 2008, we incurred restructuring charges of $12 million, of which $6 million was recorded as part of operating expenses and the remainder was recorded as part of cost of products sold. During the six months ended May 4, 2008 and May 3, 2009, we incurred restructuring charges of $5 million and $17 million, respectively, of which $3 million and $8 million, respectively, were recorded as part of operating expenses and the remainder were recorded as part of cost of products sold.

 

(6)

In November 2006, we agreed to settle a trade secret lawsuit filed by Sputtered Films Inc., a subsidiary of Tegal Corporation, against Agilent, Advanced Modular Sputtering Inc. and our company. We assumed responsibility for this litigation in connection with the SPG Acquisition and accrued this liability in the fourth quarter of fiscal year 2006.

 

(7)

Includes share-based compensation expense recorded by Predecessor of $4 million for the one month ended November 30, 2005, and for the Company, $3 million for the year ended October 31, 2006, $12 million for the year ended October 31, 2007, $15 million for the year ended November 2, 2008, $9 million for the six months ended May 4, 2008 and $4 million for the six months ended May 3, 2009.

 

(8)

Includes expense recorded in connection with the advisory agreement with our equity sponsors of $5 million for the year ended October 31, 2006, $5 million for the year ended October 31, 2007, $6 million for the year ended November 2, 2008, $3 million for the six months ended May 4, 2008 and $3 million for the six months ended May 3, 2009. The advisory fees under the advisory agreement are payable on a quarterly basis. Upon completion of this offering, the advisory agreement will be terminated pursuant to its terms and no further payments will be made following such termination. See also “Use of Proceeds.”

 

(9)

Interest expense for the year ended October 31, 2006 includes an aggregate of $30 million of amortization of debt issuance costs and commitment fees for expired credit facilities, including $19 million of unamortized debt issuance costs that were written off in conjunction with the repayment of our term loan facility during this period. As of October 31, 2006, we had permanently repaid all outstanding amounts under our term loan facility.

 

(10)	In October 2005, we sold our Storage Business to PMC-Sierra Inc. This transaction closed on February 28, 2006, resulting in $420 million of net cash proceeds. No gain or loss was recorded on the sale.

In February 2006, we sold our Printer ASICs Business to Marvell Technology Group Ltd. for $245 million in cash. Our agreement with Marvell also provides for up to $35 million in additional earn-out payments by Marvell to us based solely on the achievement by Marvell of certain revenue targets in respect of the acquired business subsequent to the acquisition. This transaction closed on May 1, 2006 and no gain or loss was recorded on the initial sale. In April 2007, we received $10 million of the earn-out payment from Marvell and recorded it as a gain on discontinued operations. In May 2008, we received $25 million of the earn-out payment from Marvell and recorded it as a gain on discontinued operations. In November 2006, we sold our Image Sensor operations to Micron Technology, Inc. for $53 million. Our agreement with Micron also provides for up to $17 million in additional earn-out payments by Micron to us upon the achievement of certain milestones. This transaction closed on December 8, 2006, resulting in $57 million of net proceeds, including $4 million of earn-out payments during the year ended October 31, 2007. In addition to this transaction, we also sold intellectual property rights related to the Image Sensor operations to another party for $12 million. We recorded a gain on discontinued operations of approximately $50 million for both of these transactions.

In October 2007, we sold our Infra-red operations to Lite-On Technology Corporation for $19 million in cash and the right to receive guaranteed cost reductions or rebates based on our future purchases of non infra-red products from Lite-On. Under the agreement, we also agreed to a minimum purchase commitment of non infra-red products over the next three years. This transaction closed in January 2008 resulting in a gain on discontinued operations of $3 million for the first fiscal quarter of 2008. The transaction was subject to certain post-closing adjustments in accordance with the agreement. During the third fiscal quarter of 2008, we notified Lite-On that the first phase of planned cost reductions had not been achieved and requested that they issue a rebate of $4.9 million. Subsequently, we entered into settlement discussions with Lite-On regarding the remaining sales price receivable and the cost reductions, and, based on the progress of those discussions, determined that certain amounts due would likely not be received. As such, we recorded an overall loss from disposal of Infra-red operations of $5 million for fiscal year 2008. During the quarter ended February 1, 2009, we finalized a settlement agreement with Lite-On regarding the remaining sales price receivable and the cost reductions, resulting in no additional gain or loss.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with “Selected Financial Data” and our consolidated financial statements and notes thereto which appear elsewhere in this prospectus. This discussion and analysis of our financial condition and results of operations includes periods prior to the SPG Acquisition and related financings, which we collectively refer to as the Transactions. Accordingly, the discussion and analysis of the Predecessor period does not reflect the significant impact of the Transactions. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” or in other parts of this prospectus.

Overview

We are a leading designer, developer and global supplier of a broad range of analog semiconductor devices with a focus on III-V based products. III-V semiconductor materials have higher electrical conductivity and thus tend to have better performance characteristics in radio frequency, or RF, and optoelectronic applications than silicon. We differentiate ourselves through our high performance design and integration capabilities. Our product portfolio is extensive and includes approximately 6,500 products in four primary target markets: wireless communications, wired infrastructure, industrial and automotive electronics, and consumer and computing peripherals. Applications for our products in these target markets include cellular phones, consumer appliances, data networking and telecommunications equipment, enterprise storage and servers, factory automation, displays, optical mice and printers.

We have a 40-year history of innovation dating back to our origins within Hewlett-Packard Company. Over the years, we have assembled a team of approximately 1,000 analog design engineers, and we maintain highly collaborative design and product development engineering resources around the world. Our locations include two design centers in the United States, four in Asia and three in Europe. We have developed an extensive portfolio of intellectual property that currently includes more than 5,000 U.S. and foreign patents and patent applications.

We have a diversified and well-established customer base of approximately 40,000 end customers which we serve through our multi-channel sales and fulfillment system. We distribute most of our products through our broad distribution network, and we are a significant supplier to two of the largest global electronic components distributors, Avnet, Inc. and Arrow Electronics, Inc. We also have a direct sales force focused on supporting large original equipment manufacturers, or OEMs, such as Brocade Communications Systems, Inc., Cisco Systems, Inc., Hewlett-Packard Company, International Business Machines Corp., LG Electronics Inc., Logitech International S.A. and Samsung Electronics Co., Ltd.

We operate a primarily outsourced manufacturing business model that principally utilizes third-party foundry and assembly and test capabilities. We maintain our internal fabrication facilities for products utilizing our innovative materials and processes to protect our intellectual property and to develop the technology for manufacturing, and we outsource standard complementary metal-oxide semiconductor, or CMOS, processes and most of our assembly and test operations. We differentiate our business through effective supply chain management, strong distribution channels and a highly variable, low-cost operating model. We have over 35 years of operating history in Asia, where approximately 57% of our employees are located and

 

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where we produce a significant portion of our products. Our presence in Asia places us in close proximity to many of our customers and at the center of worldwide electronics manufacturing.

Our business is impacted by general conditions of the semiconductor industry and seasonal demand patterns in our target markets. We believe that our focus on multiple target markets and geographies helps mitigate our exposure to volatility in any single target market.

Sales to distributors accounted for 38% and 35% of our net revenue from continuing operations in the six months ended May 4, 2008 and May 3, 2009, respectively. During the six months ended May 3, 2009, the semiconductor industry experienced a significant decline in demand. Consequently, our distributors experienced declines in their resales of our products and were carrying a higher level of inventories of our products than historical levels at the end of the first fiscal quarter of 2009. As a result, our distributors decided to reduce their inventory of our products during the second fiscal quarter of 2009 and we also reduced our own inventory by $27 million or 15%.

Erosion of average selling prices of established products is typical of the semiconductor industry. Consistent with trends in the industry, we anticipate that average selling prices will continue to decline in the future. However, as part of our normal course of business, we plan to offset declining average selling prices with efforts to reduce manufacturing costs of existing products and the introduction of new and higher value-added products.

Historically, a relatively small number of customers have accounted for a significant portion of our net revenue. In the six months ended May 3, 2009, our top 10 customers, which included four distributors, collectively accounted for 59% of our net revenue from continuing operations. During the fiscal year ended November 2, 2008, Avnet, Inc., a distributor, accounted for 11% of our net revenue from continuing operations, and our top 10 customers, which included five distributors, collectively accounted for 54% of our net revenue from continuing operations. In addition, we believe that direct sales to Cisco Systems, Inc., when combined with indirect sales to Cisco through the contract manufacturers that Cisco utilizes, accounted for approximately 10% and 12% of our net revenues from continuing operations for the six months ended May 3, 2009 and the fiscal year ended November 2, 2008, respectively. We expect to continue to experience significant customer concentration in future periods.

The demand for our products has been affected in the past, and is likely to continue to be affected in the future, by various factors, including the following:

 

•

general economic and market conditions in the semiconductor industry and in our target markets;

 

•

our ability to specify, develop or acquire, complete, introduce and market new products and technologies in a cost-effective and timely manner;

 

•

the timing, rescheduling or cancellation of expected customer orders and our ability to manage inventory;

 

•

the rate at which our present and future customers and end-users adopt our products and technologies in our target markets; and

 

•

the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products.

The recent financial crisis affecting the banking system and financial markets has resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in credit and equity markets. There could be a number of follow-on effects from the

 

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credit crisis on our business, including insolvency of key suppliers impacting our product shipment schedules, inability of customers to obtain credit to finance purchases of our products and customer insolvencies.

Current uncertainty in global economic conditions poses several risks to our business, as customers may continue to defer purchases in response to tighter credit and negative financial news, which would in turn negatively affect product demand and our results of operations.

Net Revenue

Substantially all of our net revenue is derived from sales of semiconductor devices which our customers incorporate into electronic products. We serve four primary target markets: wireless communications, wired infrastructure, industrial and automotive electronics, and consumer and computing peripherals. We sell our products primarily through our direct sales force. We also use distributors for a portion of our business and recognize revenue upon delivery of product to the distributors. Such revenue is reduced for estimated returns and distributor allowances.

Costs and Expenses

Total cost of products sold.    Cost of products sold consists primarily of the cost of semiconductor wafers and other materials, and the cost of assembly and test. Cost of products sold also includes personnel costs and overhead related to our manufacturing operations, including share-based compensation, and related occupancy, computer services and equipment costs, manufacturing quality, order fulfillment, warranty and inventory adjustments, including write-downs for inventory obsolescence, energy costs and other manufacturing expenses. Total cost of products sold also includes amortization of intangible assets and restructuring charges.

Although we outsource a significant portion of our manufacturing activities, we do retain some semiconductor fabrication and assembly and test facilities. If we are unable to utilize our owned fabrication and assembly and test facilities at a desired level, the fixed costs associated with these facilities will not be fully absorbed, resulting in higher average unit costs and lower gross margins.

Research and development.    Research and development expense consists primarily of personnel costs for our engineers engaged in the design and development of our products and technologies, including share-based compensation. These expenses also include project material costs, third-party fees paid to consultants, prototype development expenses, allocated facilities costs and other corporate expenses and computer services costs related to supporting computer tools used in the engineering and design process.

Selling, general and administrative.    Selling expense consists primarily of compensation and associated costs for sales and marketing personnel, including share-based compensation, sales commissions paid to our independent sales representatives, costs of advertising, trade shows, corporate marketing, promotion, travel related to our sales and marketing operations, related occupancy and equipment costs and other marketing costs. General and administrative expense consists primarily of compensation and associated costs for executive management, finance, human resources and other administrative personnel, outside professional fees, allocated facilities costs and other corporate expenses. During the quarter that this offering is completed, we will expense approximately $57 million related to the termination of the advisory agreement.

 

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Amortization of intangible assets.    In connection with the SPG Acquisition, we recorded intangible assets of $1,233 million, net of assets of the Storage Business held for sale. In connection with the acquisitions we completed in 2007, 2008 and the six months ended May 3, 2009, we recorded intangible assets of $17 million, $23 million and $4 million, respectively. These intangible assets are being amortized over their estimated useful lives of six months to 25 years. In connection with these acquisitions, we also recorded goodwill of $171 million which is not being amortized.

Interest expense.    Interest expense is associated with our borrowings incurred in connection with the SPG Acquisition. Our debt has been substantially reduced over the past three and a half fiscal years, principally through net proceeds derived from the divestiture of our Storage and Printer ASICs businesses as well as cash flows from operations, and will be further reduced through the use of a portion of the net proceeds from this offering.

Gain (loss) on extinguishment of debt.    In connection with the repurchase or redemption of our outstanding indebtedness, we incur a gain (loss) on the extinguishment of debt.

Other income (expense), net.    Other income (expense) includes interest income, currency gains (losses) on balance sheet remeasurement and other miscellaneous items.

Provision for income taxes.    We have structured our operations to maximize the benefit from various tax incentives extended to us to encourage investment or employment, and to reduce our overall effective tax rate. We have obtained several tax incentives from the Singapore Economic Development Board, an agency of the Government of Singapore, which provide that certain classes of income we earn in Singapore are subject to tax holidays or reduced rates of Singapore income tax. Each tax incentive is separate and distinct from the others, and may be granted, withheld, extended, modified, truncated, complied with or terminated independently without any effect on the other incentives. In order to retain these tax benefits, we must meet certain operating conditions specific to each incentive relating to, among other things, maintenance of a treasury function, a corporate headquarters function, specified intellectual property activities and specified manufacturing activities in Singapore. Some of these operating conditions are subject to phase-in periods through 2015. The tax incentives are presently scheduled to expire at various dates generally between 2012 and 2015, subject in certain cases to potential extensions. Absent such tax incentives, the corporate income tax rate in Singapore is presently 17% commencing from the 2010 year of assessment. For the fiscal years ended October 31, 2006, October 31, 2007 and November 2, 2008, the effect of all these tax incentives, in the aggregate, was to reduce the overall provision for income taxes from what it otherwise would have been in such year by approximately $19 million, $19 million and $24 million, respectively. If we cannot or elect not to comply with the operating conditions included in any particular tax incentive, we will lose the related tax benefits and could be required to refund material tax benefits previously realized by us with respect to that incentive and, depending on the incentive at issue, could likely be required to modify our operational structure and tax strategy. Any such modified structure may not be as beneficial to us from an income tax expense or operational perspective as the benefits provided under the present tax concession arrangements. As a result of the tax incentives, if we continue to comply with the operating conditions, we expect the income from our operations to be subject to relatively lower income taxes than would otherwise be the case under ordinary income tax rules.

Our interpretations and conclusions regarding the tax incentives are not binding on any taxing authority, and if our assumptions about tax and other laws are incorrect or if these tax incentives are substantially modified or rescinded we could suffer material adverse tax and other financial consequences, which would increase our expenses, reduce our profitability and

 

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adversely affect our cash flows. In addition, taxable income in any jurisdiction is dependent upon acceptance of our operational practices and intercompany transfer pricing by local tax authorities as being on an arm’s length basis. Due to inconsistencies in application of the arm’s length standard among taxing authorities, as well as lack of adequate treaty-based protection, transfer pricing challenges by tax authorities could, if successful, substantially increase our income tax expense.

Going forward, our effective tax rate will vary based on a variety of factors, including overall profitability, the geographical mix of income before taxes and the related tax rates in the jurisdictions where we operate, as well as discrete events, such as settlements of future audits. In particular, we may owe significant taxes in jurisdictions outside Singapore during periods when we are profitable in those jurisdictions even though we may be experiencing low operating profit or operating losses on a consolidated basis, potentially resulting in significant tax liabilities on a consolidated basis during those periods. Conversely, we expect to realize more favorable effective tax rates as our profitability increases. Our historical income tax provisions are not necessarily reflective of our future results of operations.

History

SPG Acquisition

On December 1, 2005, we completed the acquisition of the Semiconductor Products Group of Agilent for approximately $2.7 billion. The SPG Acquisition was accounted for by the purchase method of accounting for business combinations and, accordingly, the purchase price was allocated to the net assets acquired based on their estimated fair values. Among other things, the purchase accounting adjustments increased the carrying value of our inventory and property, plant and equipment, and established intangible assets for our developed technology, customer and distributorship relationships, order backlog, and in-process research and development, or IPRD. As a result of the SPG Acquisition and related borrowings, interest expense and non-cash depreciation and amortization charges have significantly increased.

Acquisitions

In fiscal years 2007 and 2008 and through May 3, 2009 we completed five acquisitions for cash consideration of $110 million:

 

•

During fiscal year 2007, we acquired the Polymer Optical Fiber, or POF, business from Infineon Technologies AG for $27 million in cash.

 

•

During the first quarter of fiscal year 2008, we completed the acquisition of a privately-held manufacturer of motion control encoders for $29 million (net of cash acquired of $2 million) plus $9 million repayment of existing debt.

 

•

During the second quarter of fiscal year 2008, we completed the acquisition of a privately-held developer of low-power wireless devices for $6 million, plus potential earn-out payments.

 

•

During the fourth quarter of fiscal year 2008, we completed the acquisition of the Bulk Acoustic Wave Filter business of Infineon Technologies AG for $32 million in cash.

 

•

During the second quarter of fiscal year 2009, we completed the acquisition of a manufacturer of motion control encoders for $7 million in cash plus $3 million of contingent consideration.

Because each of these acquisitions was accounted for as a purchase transaction, the accompanying consolidated financial statements include the results of operations of the

 

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acquired companies and businesses commencing on their respective acquisition dates. See Note 3 to the Consolidated Financial Statements for information related to these acquisitions.

Dispositions

Since the SPG Acquisition, we have disposed of significant portions of the business we originally acquired from Agilent:

 

•

In fiscal year 2006, we sold our Storage Business to PMC-Sierra, Inc. We received $420 million in net cash proceeds from the sale of our Storage Business. These net proceeds were used to permanently repay borrowings under our term loan facility. The assets and liabilities of the Storage Business were classified as held for sale in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” in the purchase price allocation for the SPG Acquisition and no gain or loss was recorded on the sale.

 

•

In fiscal year 2006, we sold our Printer ASICs Business to Marvell Technology Group Ltd. for net proceeds of $245 million in cash plus potential earn-out payments of up to $35 million. We used the $245 million of net cash proceeds from the sale of our Printer ASICs Business received at closing to permanently repay borrowings under our term loan facility. There was no gain or loss on the sale as the fair value of the assets and liabilities were reflected in the purchase price allocation for the SPG Acquisition. During fiscal years 2007 and 2008, we received the full $35 million of earn-out payments from Marvell.

 

•

In fiscal year 2007, we sold our Image Sensor operations to Micron Technology, Inc. for net proceeds of $53 million in cash plus potential earn-out payments. In addition to this transaction, we also sold intellectual property rights related to the Image Sensor operations to another party for $12 million. We recorded an aggregate gain on the sale of $50 million for both of these transactions, which was reported as income and gain from discontinued operations. During fiscal years 2007 and 2008, we received payments of $4 million and $6 million, respectively, from Micron in satisfaction of its earn-out obligations.

 

•

In the first quarter of fiscal year 2008, we sold our Infra-red operations to Lite-On Technology Corporation for $19 million in cash, plus $2 million payable upon receipt of local regulatory approvals, and the right to receive guaranteed cost reductions or rebates based on our future purchases of non-infra-red products from Lite-On. This transaction resulted in a gain of $3 million in the first quarter of fiscal year 2008, which was reported within income from and gain on discontinued operations in the consolidated statement of operations. During the quarter ended February 1, 2009, we finalized a settlement agreement with Lite-On regarding the remaining sales price receivable and the cost reductions resulting in an overall loss from the disposal of Infra-red operations of $5 million during fiscal year 2008, which was reported in income from and gain on discontinued operations in the consolidated statement of operations.

In addition, in February 2005, Agilent sold its Camera Module Business to Flextronics International Ltd. The assets sold did not include the Image Sensor operations, which was retained and subsequently sold by us to Micron. Flextronics paid us $13 million upon closing and paid an additional $12 million (in twelve equal quarterly installments) following the February 2005 closing date. These payments were not recognized as income, but reduced a receivable established at the time of the SPG Acquisition.

Except for the Camera Module Business, all of the above divestitures are treated as sale of discontinued operations in our consolidated financial statements. The divestiture of the Camera

 

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Module Business by Agilent did not meet the criteria for discontinued operations treatment under GAAP and historical results of the Camera Module Business are included in Predecessor’s financial results from continuing operations until February 3, 2005.

See Notes 16 and 17 to the Consolidated Financial Statements for additional information related to these dispositions.

Restructuring and Impairment Charges

In the first quarter of fiscal year 2007, we began to increase the use of outsourced service providers in our manufacturing operations, particularly our assembly and test operations, to lower our costs and reduce the capital deployed in these activities. In connection with this strategy, we introduced a largely voluntary severance program intended to reduce our workforce and resulting in an approximately 40% decline in our employment, primarily in our major locations in Asia. Consequently, during the years ended October 31, 2007 and November 2, 2008, we incurred total restructuring charges of $51 million and $12 million, respectively, predominantly representing associated one-time employee termination costs.

In the first quarter of fiscal year 2009, we initiated restructuring plans intended to realign our cost structure with the current macroeconomic business conditions as well as our continued outsourcing of manufacturing facilities. During the six months ended May 3, 2009, we recorded restructuring charges of $16 million in connection with these plans, predominantly representing one-time employee termination costs.

In the first quarter of fiscal year 2009, we also recorded $1 million of estimated one-time employee termination costs in connection with the departure of our Chief Operating Officer in January 2009. We recognized $2 million as share-based compensation expense in connection with the employee separation agreement with our former Chief Operating Officer during the second quarter of fiscal year 2009.

In the third quarter of fiscal year 2009, we announced a plan to further reduce our worldwide workforce by up to 200 employees and expect to record charges of $8 million to $10 million over the third and fourth fiscal quarters of 2009 in connection with this plan relating to one-time employee termination costs.

See Note 12 to the Consolidated Financial Statements for further information.

During the year ended October 31, 2007, we recorded a $158 million write-down of certain long-lived assets following a review performed in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” or SFAS No. 144, of the recoverability of the carrying value of certain manufacturing facilities.

SFAS No. 144 requires us to evaluate the recoverability of certain long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We continue to evaluate alternatives in support of increasing the use of outsource providers for our manufacturing operations. As part of this ongoing process and based on our review of internal and external factors, during the third quarter of fiscal year 2007 we assessed whether there had been a material impairment in certain long-lived assets, or the asset group, pursuant to SFAS No. 144. Based on that assessment, we recorded impairment charges of $70 million primarily related to equipment and buildings at certain manufacturing facilities and $88 million for intangible assets related to those manufacturing operations. The net book value of the asset group before the impairment charges was $415 million.

 

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The impairment charge was measured as the excess of the carrying value of the asset group over its fair value. The fair value of the asset group was estimated using a present value technique, where expected future cash flows from the use and eventual disposal of the asset group were discounted by an interest rate commensurate with the risk of the cash flows.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. Our critical accounting policies are those that affect our historical financial statements materially and involve difficult, subjective or complex judgments by management. Those policies include revenue recognition, valuation of long-lived assets, intangible assets and goodwill, inventory valuation and warranty reserves and accounting for income taxes.

Revenue recognition.    We recognize revenue, net of sales returns and allowances, provided that (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable and (iv) collectibility is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. We consider the price to be fixed or determinable when the price is not subject to refund or adjustments or when any such adjustments are accounted for. We evaluate the creditworthiness of our customers to determine that appropriate credit limits are established prior to the acceptance of an order. Revenue, including sales to resellers and distributors, is reduced for estimated returns and distributor allowances. We recognize revenue from sales of our products to distributors upon delivery of product to the distributors. An allowance for distributor credits covering price adjustments and scrap allowances is made based on our estimate of historical experience rates as well as considering economic conditions and contractual terms. To date, actual distributor claims activity has been materially consistent with the provisions we have made based on our historical estimates. However, because of the inherent nature of estimates, there is always a risk that there could be significant differences between actual amounts and our estimates. Different judgments or estimates could result in variances that might be significant to reported operating results.

Valuation of long-lived assets, intangible assets and goodwill. We assess the impairment

of long-lived assets, intangible assets and goodwill whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Factors we consider important which could trigger an impairment review of our long-lived and intangible assets include significant underperformance relative to historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, and significant negative industry or economic trends. An impairment loss must be measured if the sum of the expected future cash flows (undiscounted and before interest) from the use of the asset is less than the net book value of the asset. The amount of the impairment loss will generally be measured as the difference between the net book values of the asset (or asset group) and its (their) estimated fair value.

 

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We perform an annual impairment review of our goodwill during the fourth fiscal quarter of each year, or more frequently if we believe indicators of impairment exist and we follow the two-step approach in performing the impairment test in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” The first step of the goodwill impairment test compares the estimated fair value of the reporting unit with the related carrying amount. If the fair value of the reporting unit exceeds its carrying amount, the reporting unit’s goodwill is not considered to be impaired and the second step of the impairment test is unnecessary. If the reporting unit’s carrying amount exceeds its estimated fair value, the second step of the test must be performed to measure the amount of the goodwill impairment loss, if any. The second step of the test compares the implied fair value of the reporting unit’s goodwill, determined in the same manner as the amount of goodwill recognized in a business combination, with the carrying amount of such goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess.

The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment. We have one reporting unit for goodwill impairment testing purposes which is based on the manner in which we operate our business and the nature of those operations, including consideration of how the Chief Operating Decision Maker, as defined in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” manages the business as a whole. We operate as one semiconductor company with sales of semiconductors representing the only material source of revenue. Substantially all products offered incorporate analog functionality and are manufactured under similar manufacturing processes.

In determining the fair value of the reporting unit (i.e., the fair value of the Company as a whole), management utilized the calculations of enterprise value used for purposes of valuing our ordinary shares as the measure of fair value as of the valuation date nearest to our annual impairment assessment date. Such fair value determination used a weighted approach of both the income approach and market-comparable approach which, as of the date of our annual assessment during the fourth quarter of fiscal 2008, resulted in a significant excess of the fair value over the net book value of the Company and accordingly, a conclusion that no impairment indicator existed. A 10% decline in the enterprise value would not impact the result of our goodwill impairment assessment.

The market-comparable valuation approach was based on a selection of comparable companies based on factors such as industry similarity, financial risk, company size, geographic diversification, and profitability. The income approach valuation included projections based on our internal strategic plan and projections for the remainder of fiscal year 2008 and fiscal years 2009 to 2015. The material assumptions used for the income approach were 7 years of projected net cash flows, a discount rate of 12% and a long-term growth rate of 3%. We considered historical rates and current market conditions when determining the discount and growth rates to use in its analysis.

A weighting of approximately 75% to the market-comparable approach and 25% to the income approach was utilized in determining the enterprise value. In determining the weighting between the two approaches, we considered various elements of the valuation inputs with regards to our forecasted performance, as well as the comparable companies analyzed. Further, considering the fact that we had restructured significantly at the time of its spin-off from Agilent, a greater weighting towards the market-approach was deemed reasonable.

 

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We intend to rely on enterprise value determined for valuing our ordinary shares for goodwill impairment assessment purposes unless changes in the future warrant a change in methodology. Upon completion of this offering, management may elect to use our public trading value for purposes of determining the fair value of its reporting unit, but will not make such determination until the time of the next annual goodwill impairment test based on all available information.

The process of evaluating the potential impairment of long-lived assets under SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” such as our property, plant and equipment and other intangible assets is also highly subjective and requires significant judgment. In order to estimate the fair value of long-lived assets, we typically make various assumptions about the future prospects about our business or the part of our business that the long-lived asset relates to, consider market factors specific to the business and estimate future cash flows to be generated by the business, which requires significant judgment as it is based on assumptions about market demand for our products over a number of future years. Based on these assumptions and estimates, we determine whether we need to take an impairment charge to reduce the value of the long-lived asset stated on our balance sheet to reflect its estimated fair value. Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors such as the real estate market, industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, changes in assumptions and estimates could materially impact our reported financial results.

Inventory valuation and warranty reserves.    We value our inventory at the lower of the actual cost of the inventory or the current estimated market value of the inventory, cost being determined under the first-in, first-out method. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and production requirements. Demand for our products can fluctuate significantly from period to period. A significant decrease in demand could result in an increase in the amount of excess inventory quantities on hand. In addition, our industry is characterized by rapid technological change, frequent new product development and rapid product obsolescence that could result in an increase in the amount of obsolete inventory quantities on hand. Additionally, our estimates of future product demand may prove to be inaccurate, which may cause us to understate or overstate both the provision required for excess and obsolete inventory and cost of products sold. Therefore, although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our results of operations. We establish reserves for estimated product warranty costs at the time revenue is recognized. Although we engage in extensive product quality programs and processes, our warranty obligation has been and may in the future be affected by product failure rates, product recalls, repair or field replacement costs and additional development costs incurred in correcting any product failure, as well as possible claims for consequential costs. Should actual product failure rates, use of materials or service delivery costs differ from our estimates, additional warranty reserves could be required. In that event, our gross profit and gross margins would be reduced.

Accounting for income taxes.    We record a tax provision for the anticipated tax consequences of the reported results of operations. In accordance with SFAS No. 109, “Accounting for Income Taxes,” or SFAS No. 109, the provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the

 

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financial reporting and tax basis of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. Significant management judgment is required in developing our provision for income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for valuation allowances. If we determine, in the future, a valuation allowance is required, such adjustment to the deferred tax assets would increase tax expense in the period in which such determination is made. Conversely, if we determine, in the future, a valuation allowance exceeds our requirement, such adjustment to the deferred tax assets would decrease tax expense in the period in which such determination is made. In evaluating the exposure associated with various tax filing positions, we accrue an income tax liability when such positions do not meet the more-likely than not threshold for recognition.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. We recognize potential liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes and interest will be due. If our estimate of income tax liabilities proves to be less than the ultimate assessment, a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary.

We adopted the provisions of Financial Accounting Standard Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” or FIN No. 48, on November 1, 2007. As a result of the implementation of FIN No. 48, our total unrecognized tax benefit was $20 million at the date of adoption. At the date of adoption, the consolidated balance sheet also reflected an increase in other long-term liabilities, accumulated deficit, and deferred tax assets of $10 million, $9 million and $1 million, respectively.

We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the consolidated statement of operations. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet.

During the years ended October 31, 2007 and 2006, we did not recognize an accrual for penalties and interest. Upon adoption of FIN No. 48 on November 1, 2007, we increased our accrual for interest and penalties to $1 million, which was also accounted for as an increase to the November 1, 2007 balance of accumulated deficit. During the fiscal year ended November 2, 2008, we provided for additional interest that increased our accrual of interest and penalties to $3 million, which is included in the balance sheet at November 2, 2008.

Share-based compensation.    Effective November 1, 2006, or fiscal year 2007, we adopted the provisions of SFAS No. 123R, “Share-Based Payment,” or SFAS No. 123R. SFAS No. 123R establishes GAAP for share-based awards issued for employee services. Under SFAS No. 123R, share-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We previously applied Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” or APB No. 25, and related interpretations and provided the required pro forma disclosures of SFAS No. 123, “Accounting for Stock-Based Compensation,” or SFAS No. 123.

 

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We adopted SFAS No. 123R using the prospective transition method. Under this method, the provisions of SFAS No. 123R apply to all awards granted or modified after the date of adoption. For share-based awards granted after November 1, 2006, we recognized compensation expense based on the estimated grant date fair value method required under SFAS No. 123R, using Black-Scholes valuation with straight-line amortization method. Since SFAS No. 123R requires that share-based compensation expense be based on awards that are ultimately expected to vest, estimated share-based compensation for such awards has been reduced for estimated forfeitures. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from the estimate. For outstanding share-based awards granted before November 1, 2006, which were originally accounted under the provisions of APB No. 25 and the minimum value method for pro forma disclosures of SFAS No. 123, we continued to account for any portion of such awards under the originally applied accounting principles through August 28, 2008. As a result, performance-based awards granted before November 1, 2006 were subject to variable accounting until such options are vested, forfeited or cancelled. Variable accounting requires us to value the variable options at the end of each accounting period based upon the then current fair value of the underlying ordinary shares. Accordingly, our share-based compensation was subject to significant fluctuation based on changes in the fair value of our ordinary shares and our estimate of vesting probability of unvested options.

On August 28, 2008, our Compensation Committee approved a change in the financial performance vesting targets applicable to options to purchase 3.8 million ordinary shares outstanding under our equity incentive plans including 2.7 million options originally granted prior to the adoption of SFAS No. 123R, impacting 43 employees. This change was accounted for as a modification under SFAS No. 123R. As a result of this modification, all variable accounting on outstanding employee options ceased and instead, pursuant to SFAS No. 123R, we will recognize a combination of unamortized intrinsic value of these modified options and the incremental fair value over the remaining service period. Based on the full achievement of performance targets as of the modification date, $6 million is subject to amortization over the remaining service period of approximately three years.

For the years ended October 31, 2007 and November 2, 2008, we recorded $12 million and $15 million, respectively, of employee and non-employee share-based compensation, recorded as cost of products sold, research and development and sales, general and administrative expenses, as appropriate. For the six months ended May 4, 2008 and May 3, 2009, we recorded $9 million and $4 million, respectively, of employee and non-employee share-based compensation, recorded as cost of products sold, research and development and sales, general and administrative expenses, as appropriate.

The weighted-average assumptions utilized for our Black-Scholes valuation model for the years ended October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 are as follows:

 

		Year Ended						Six Months Ended
		October 31, 2007			November 2, 2008			May 4, 2008			May 3, 2009
								(unaudited)
Risk-free interest rate		4.6	%		3.4	%		3.2	%		2.2	%
Dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Volatility		47.0	%		44.0	%		44.0	%		57.0	%
Expected term (in years)		6.5			6.5			6.5			6.5

 

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The dividend yield of zero is based on the fact that we have no present intention to pay cash dividends. Expected volatility is based on the combination of historical volatility of guideline publicly traded companies over the period commensurate with the expected term of the options and the implied volatility of guideline publicly traded companies from traded options with a term of 180 days or greater measured over the last three months. The risk-free interest rate is derived from the average U.S. Treasury Strips rate during the period, which approximates the rate in effect at the time of grant. The expected term calculation is based on the simplified method of estimating expected term outlined by the SEC in the Staff Accounting Bulletin No. 107. This method was allowed until December 31, 2007. However, on December 21, 2007, the SEC issued Staff Accounting Bulletin No. 110, “Year-End Help For Expensing Employee Stock Options,” or SAB No. 110, which allows continued use of the simplified method under certain circumstances. As a result, we will continue to use the simplified method until we have sufficient historical data to provide a reasonable basis to estimate the expected term. For a portion of the option grants issued during the quarter ended May 3, 2009, which did not meet the criteria of “plain vanilla” options under SAB No. 110, our computation of expected life was based on other data, such as the data of peer companies and company-specific attributes that management believed could affect employees’ exercise behavior. Determining the input factors such as expected volatility and estimated forfeiture rates requires significant judgment based on subjective future expectations.

Given the absence of an active market for our ordinary shares, our board of directors estimated the fair value of our ordinary shares for purposes of determining share-based compensation expense for the periods presented. Through May 3, 2009, our board of directors determined the estimated fair value of our ordinary shares, based in part on an analysis of relevant metrics, including the following:

 

•

the level of operational risk and uncertainty surrounding our stand-alone cost structure;

 

•

the range of market multiples of comparable companies;

 

•

our financial position, historical operating results and expected growth in operations;

 

•

the fact that the option grants involve illiquid securities in a private company; and

 

•

the likelihood of achieving a liquidity event, such as an initial public offering or sale of our company given prevailing market conditions.

We performed a contemporaneous valuation of our ordinary shares as of July 1, 2008, August 28, 2008, December 3, 2008 and March 3, 2009 to determine the fair value for option grants made in July 2008 and through April 2009. These valuations were prepared using the market-comparable approach and income approach to estimate the aggregate enterprise value. We also performed contemporaneous valuations in fiscal year 2007 and through April 2008 using the market-comparable approach.

The market-comparable approach indicates the fair value of a business based on a comparison of the subject company to comparable firms in similar lines of business that are publicly traded or which are part of a public or private transaction, as well as prior subject company transactions. Each comparable company was selected based on various factors, including, but not limited to, industry similarity, financial risk, company size, geographic diversification, profitability, adequate financial data and an actively traded stock price.

The income approach is a valuation technique that provides an estimation of the fair value of a business based on the cash flows that a business can be expected to generate over its remaining life. This approach begins with an estimation of the annual cash flows an investor would expect the subject business to generate over a discrete projection period. The estimated

 

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cash flows for each of the years in the discrete projection periods are then converted to their present value equivalent using a rate of return appropriate for the risk of achieving the business’ projected cash flows. The present value of the estimated cash flows are then added to the present value equivalent of the residual value of the business at the end of the discrete projection period to arrive at an estimate of the fair value of the business enterprise.

We prepared a financial forecast for each valuation to be used in the computation of the enterprise value for both the market-comparable approach and the income approach. The financial forecasts took into account past experience and future expectations. There is inherent uncertainty in these estimates.

We also considered the fact that our shareholders cannot presently transfer ordinary shares in the public markets or otherwise, except for highly limited transfers among family members. The estimated fair value of our ordinary shares at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event. In the determination of fair value of the ordinary shares, the non-marketability discount was 25% in October 2007 and April 2008, and decreased to 10.5% in July 2008 and 10.4% in August 2008. The discount was increased to 11.8% in December 2008 and 15.7% as of March 3, 2009. In April 2008, we were not contemplating an initial public offering and hence a discount of 25% was considered appropriate. The discount was decreased in July and August 2008 and then increased through March 2009 based on the then-applicable expectation of a liquidity event within the next 12 months.

The valuations as of July 1, 2008, August 28, 2008, December 3, 2008 and March 3, 2009 resulted in a value of our ordinary shares of $10.68, $10.68, $8.12 and $6.76, respectively. The principal reasons for the significant decrease in the estimated value of the Company’s ordinary shares from August 28, 2008 through March 3, 2009 were as follows:

 

•

A significant decrease in semiconductor industry valuations overall, including those companies in our peer group used in the market comparable approach. For example, the Philadelphia Semiconductor Index on August 28, 2008 was 363. That index declined by 34% to 239 on October 31, 2008 (the date nearest to the end of our 2008 fiscal year), declined an additional 17% to 198 on December 3, 2008 and declined further to 191 on March 3, 2009, for a cumulative decline of 47% from August 28, 2008. These declines severely and adversely affected the results from our use of the market comparable approach, one of the two approaches used by us to value our ordinary shares.

 

•

Our own internal forecasts also declined during this period. These changes adversely affected our calculation of enterprise values from the use of the income approach, the other approach used by us to value our ordinary shares. Using these forecasts and the income approach, our enterprise value decreased 15% from August 28, 2008 to December 3, 2008 and further decreased 14% from December 3, 2008 to March 3, 2009, for a cumulative decrease of 27% from August 28, 2008 to March 3, 2009.

 

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The following table shows the share option activity over the past four quarters, including weighted average exercise price per share, weighted average fair market value of the ordinary shares for financial reporting purposes:

 

Date of Grant		Number of options granted		Weighted average exercise price per share			Weighted average fair value of ordinary shares per share
Three Months Ended
August 3, 2008		1,633,400		$	10.62		$	10.62
November 2, 2008		620,000			10.68			10.68
February 1, 2009		676,000			8.32			8.32
May 3, 2009		2,269,250			9.63			6.76

We believe that we have used reasonable methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Practice Guide, “Valuation of Privately-Held-Company Equity Securities Issued as Compensation,” to determine the fair value of our ordinary shares. If we had made different assumptions and estimates than those described above, the amount of our recognized and to be recognized share-based compensation expense and net income (loss) amounts could have been materially different.

Based upon an initial public offering price of $             per share, the aggregate intrinsic values of vested and unvested options to purchase our ordinary shares outstanding as of May 3, 2009 were $             million and $             million, respectively.

On July 20, 2009, our Compensation Committee approved a change in the vesting schedules associated with performance-based options to purchase 2.3 million ordinary shares outstanding under our equity incentive plans. The Compensation Committee approved the amendment of performance-based options held by our named executive officers to provide that such options will no longer vest based on the attainment of performance targets but instead each portion of such options shall vest two years following the first date such portion could have vested had the performance goals for such portion been achieved, subject to the named executive officer’s continued service with us through such vesting date. The performance-based options held by employees who are not named executive officers were amended to provide that any portion of such options that fail to vest based upon the attainment of a performance goal shall vest on the date two years following the first date such portion could have vested had such performance goal been attained, subject to the employee’s continued service with us through such vesting date. The Compensation Committee made these changes to performance-based options in light of our current financial projections, which are lower than when the performance goals for such options were last determined, the uncertainty present in the current global economy and the importance of retaining key employees to continue in our employment following this offering. This change will be accounted for as a modification under SFAS No. 123R and as a result, we expect to record approximately $17 million to $20 million in additional share-based compensation expense, over the remaining service period of 4 to 6 years, of which $4.1 million to $4.9 million will be recognized in each of fiscal year 2010 and fiscal year 2011 and lower amounts thereafter.

Fiscal Year Presentation

We adopted a 52- or 53-week fiscal year beginning with our fiscal year 2008. Our fiscal year ends on the Sunday closest to October 31.

 

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The accompanying consolidated financial statements are presented for two periods: Predecessor and Successor, which relate to the period preceding the SPG Acquisition and the period after the SPG Acquisition, respectively. The Successor did not have any significant operating activity prior to December 1, 2005, and accordingly all references to the year ended October 31, 2006 represent only the eleven months of our operations since completion of the SPG Acquisition. The one month period ended November 30, 2005 represents solely the activities of the Predecessor. As such, the Predecessor’s combined financial statements were prepared using Agilent’s historical cost basis for the assets and liabilities. The Predecessor financial statements include allocations of certain Agilent corporate expenses, including centralized research and development, legal, accounting, employee benefits, real estate, insurance services, information technology services, treasury and other Agilent corporate and infrastructure costs. The expense allocations were determined on bases that Agilent considered to be a reasonable reflection of the utilization of services provided to or the benefit received by Predecessor. These internal allocations by Agilent ended on November 30, 2005. From and after December 1, 2005, we acquired select services on a transitional basis from Agilent under a Master Separation Agreement, or the MSA. Over the course of the fiscal year ended October 31, 2006, we progressively reduced the services provided by Agilent under the MSA and transitioned to substitute services either provided internally or through outsourcing service providers. Agilent’s obligations under the MSA terminated on August 31, 2006. Therefore, the financial information presented in the Predecessor’s financial statements is not necessarily indicative of what our consolidated financial position, results of operations or cash flows would have been had we been a separate, stand-alone entity. Further, our results in fiscal year 2006 reflect a changing combination of Agilent-sourced and internally-sourced services and do not necessarily represent our cost structure applicable to periods after fiscal year 2006. All references herein to the year ended October 31, 2006 represent the operations since the SPG Acquisition (eleven months).

The financial statements included in this prospectus are presented in accordance with GAAP and expressed in U.S. dollars.

 

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Results from Continuing Operations

Six Months Ended May 3, 2009 Compared to Six Months Ended May 4, 2008

The following tables set forth our results of operations for the six months ended May 3, 2009 and May 4, 2008.

 

		Six Months Ended								Six Months Ended
		May 4, 2008				May 3, 2009				May 4, 2008			May 3, 2009
		(in millions)								(as a percentage of net revenue)
						(unaudited)
Statement of Operations Data:
Net revenue		$	813			$	693			100	%		100	%
Costs and expenses:
Cost of products sold:
Cost of products sold			467				414			58			60
Amortization of intangible assets			28				29			3			4
Restructuring charges			2				9			—			1
Total cost of products sold			497				452			61			65
Research and development			128				121			16			17
Selling, general and administrative			98				82			12			12
Amortization of intangible assets			14				11			2			2
Restructuring charges			3				8			—			1
Total costs and expenses			740				674			91			97
Income from operations			73				19			9			3
Interest expense			(45	)			(38	)		(6	)		(5	)
Gain (Loss) on extinguishment of debt			(10	)			1			(1	)		—
Other income (expense), net			2				(4	)		—			(1	)
Income (loss) from continuing operations before taxes			20				(22	)		2			(3	)
Provision for income taxes			7				3			1			1
Income (loss) from continuing operations			13				(25	)		1			(4	)
Income from and gain on discontinued operations, net of income taxes			8				—			1			—
Net income (loss)		$	21			$	(25	)		2	%		(4	)%

During the quarter ended May 3, 2009, we recorded an accrual of $4 million for indirect taxes on certain prior years’ purchase and sale transactions. This accrual increased cost of products sold and research and development expenses for the second quarter by $2 million each and increased net loss for the period by $4 million. We determined that the impact of the adjustment was not material to prior periods or to the expected results for the year ending November 1, 2009, and as such the adjustment was recorded in the second quarter of fiscal year 2009 under the provisions of Accounting Principles Board Opinion No. 28, “Interim Financial Reporting.”

Net revenue.    Net revenue was $693 million for the six months ended May 3, 2009, compared to $813 million for the six months ended May 4, 2008, a decrease of $120 million or 15%. The global recession, continuing financial and credit crisis and deteriorating economic conditions continue to result in more cautious customer spending and generally lower demand for our products.

 

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Net revenue by target market data are derived from our understanding of our end customers’ primary markets and were as follows:

 

		Six Months Ended
% of net revenue from continuing operations		May 4, 2008			May 3, 2009
Wireless communications		29	%		38	%
Wired infrastructure		29			28
Industrial and automotive electronics		31			25
Consumer and computing peripherals		11			9
Total net revenue from continuing operations		100	%		100	%

 

		Six Months Ended
Net revenue from continuing operations ($ in millions)		May 4, 2008			May 3, 2009			% Change in Dollars
Wireless communications		$	234		$	265		13	%
Wired infrastructure			240			193		(20	)%
Industrial and automotive electronics			248			170		(31	)%
Consumer and computing peripherals			91			65		(29	)%
Total net revenue from continuing operations		$	813		$	693		(15	)%

Net revenue from wireless communications products increased in the first six months of fiscal year 2009 compared with the corresponding prior year period primarily due to market share gains driven by increasing demand for next-generation handsets.

Net revenue from wired infrastructure products decreased in the first six months of fiscal year 2009 compared with the corresponding prior year period primarily due to reduced sales of wired infrastructure products by OEMs, which led to reduced shipments to the contract manufacturers supporting the OEMs. The contract manufacturers constitute our principal direct customers for wired infrastructure products.

Net revenue from the industrial and automotive electronics products decreased in the first six months of fiscal year 2009 compared with the corresponding prior period primarily due to reduced sales by OEMs as well as reductions in sales to our distributors due to a reduction in channel inventory.

Net revenue from consumer and computer peripheral products decreased in the first six months of fiscal year 2009 compared with the corresponding prior year period reflecting decreased shipments of personal computers and related peripherals due to lower consumer spending caused by the overall economic downturn.

Cost of products sold.    Total cost of products sold (which includes amortization of manufacturing-related intangible assets and restructuring charges) was $452 million for the six months ended May 3, 2009, compared to $497 million for the six months ended May 4, 2008, a decrease of $45 million or 9%. As a percentage of net revenue, total cost of products sold increased to 65% for the six months ended May 3, 2009 from 61% for the six months ended May 4, 2008. The decrease in absolute dollars was primarily attributable to decrease in revenue of 15% during the six months ended May 3, 2009 compared to the prior year period. During the six months ended May 3, 2009, we recorded write-downs to inventories of $19 million associated with reduced demand assumptions compared to $6 million during the corresponding prior year period. In addition, the six months ended May 3, 2009 included $2 million of indirect taxes

 

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relating to prior periods and payments of $3 million in connection with terminating our relationship with a contract manufacturer as part of a transition to another supplier, which primarily related to production equipment procured by the contract manufacturer for which we agreed to compensate the contract manufacturer.

Cost of products sold (which excludes amortization of manufacturing-related intangible assets and restructuring) was $414 million for the six months ended May 3, 2009, compared to $467 million for the six months ended May 4, 2008, a decrease of $53 million or 11%. As a percentage of net revenue, cost of products sold increased to 60% for the six months ended May 3, 2009 from 58% for the six months ended May 4, 2008.

Research and development.    Research and development expense was $121 million for the six months ended May 3, 2009, compared to $128 million for the six months ended May 4, 2008, a decrease of $7 million or 5%. Research and development expense in the second quarter of fiscal year 2009 was adversely impacted by accruals of $2 million for indirect taxes relating to prior periods. As a percentage of net revenue, research and development expenses increased from 16% for the six months ended May 4, 2008 to 17% for the six months ended May 3, 2009.

Selling, general and administrative.    Selling, general and administrative expense was $82 million for the six months ended May 3, 2009 compared to $98 million for the six months ended May 4, 2008, a decrease of $16 million or 16%. As a percentage of net revenue, selling, general and administrative remained flat at 12% for both periods. Selling, general and administrative expense for the six months ended May 3, 2009 includes $4 million of legal costs incurred in connection with intellectual property litigation, of which a substantial majority related to actions in which we were the plaintiff, compared to an insignificant amount in the prior period. This increase was offset by our concerted efforts to control discretionary costs in the current environment as well as the impact of our previously announced headcount reductions.

Amortization of intangible assets.    Amortization of intangible assets charged to operating expenses was $11 million and $14 million, respectively, for the six months ended May 3, 2009 and May 4, 2008. The decrease is attributable to certain intangible assets becoming fully amortized during the quarter ended February 1, 2009.

Restructuring charges.    During the six months ended May 3, 2009, we incurred total restructuring charges of $17 million, compared to $5 million for the six months ended May 4, 2008, both predominantly representing employee termination costs. See Note 12 to the Consolidated Financial Statements.

Interest expense.    Interest expense was $38 million for the six months ended May 3, 2009, compared to $45 million for the six months ended May 4, 2008, which represents a decrease of $7 million or 16%. The decrease is primarily due to the redemption and repurchases of our outstanding notes of $203 million made since the beginning of fiscal year 2008. We presently estimate that the cash portion of our interest expense for the year ending November 1, 2009 will be $76 million, subject to possible increase or decrease due to changes in interest rates applicable to our variable rate indebtedness and the timing of the use of proceeds from this offering.

Gain (loss) on extinguishment of debt.    During the six months ended May 3, 2009, we purchased $3 million in principal amount of senior subordinated notes in the open market, resulting in a gain on extinguishment of debt of $1 million. During the six months ended May 4, 2008, we redeemed $200 million principal amount of our senior floating rate notes. The redemption of the senior floating rate notes resulted in a loss on extinguishment of debt of $10 million. See Note 9 to the Consolidated Financial Statements.

 

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Other income (expense), net.    Other income (expense), net includes interest income, foreign currency gain (loss), loss on other-than-temporary impairment of investment and other miscellaneous items. Other expense, net was $4 million for the six months ended May 3, 2009 compared to other income, net of $2 million for the six months ended May 4, 2008. During the six months ended May 3, 2009, we recorded a $2 million other-than-temporary impairment charge related to an investment accounted for under the cost method. The decrease is also attributable to a decline in interest income due to lower interest rates as well as exchange losses arising from foreign currency fluctuations relative to the corresponding prior year period.

Provision for income taxes.    We recorded income tax expense of $3 million for the six months ended May 3, 2009 compared to an income tax expense of $7 million for the six months ended May 4, 2008. The decrease is attributable to lower taxable income during the six months ended May 3, 2009.

Year Ended November 2, 2008 Compared to Year Ended October 31, 2007

The following tables set forth the results of operations for the years ended November 2, 2008 and October 31, 2007.

 

		Year Ended
		October 31, 2007				November 2, 2008				October 31, 2007			November 2, 2008
		(in millions)								(as a percentage of net revenue)
Statement of Operations Data:
Net revenue		$	1,527			$	1,699			100	%		100	%
Costs and expenses:
Cost of products sold:
Cost of products sold			936				981			61			58
Amortization of intangible assets			60				57			4			3
Asset impairment charges			140				—			9			—
Restructuring charges			29				6			2			—
Total cost of products sold			1,165				1,044			76			61
Research and development			205				265			14			16
Selling, general and administrative			193				196			13			12
Amortization of intangible assets			28				28			2			2
Asset impairment charges			18				—			1			—
Restructuring charges			22				6			1			—
Acquired in-process research and development			1				—			—			—
Total costs and expenses			1,632				1,539			107			91
Income (loss) from operations			(105	)			160			(7	)		9
Interest expense			(109	)			(86	)		(7	)		(5	)
Loss on extinguishment of debt			(12	)			(10	)		(1	)		(1	)
Other income (expense), net			14				(4	)		1			—
Income (loss) from continuing operations before taxes			(212	)			60			(14	)		3
Provision for income taxes			8				3			—			—
Income (loss) from continuing operations			(220	)			57			(14	)		3
Income from and gain on discontinued operations, net of income taxes			61				26			4			2
Net income (loss)		$	(159	)		$	83			(10	)%		5	%

Net revenue.    Net revenue was $1,699 million for the year ended November 2, 2008, as compared to $1,527 million for the year ended October 31, 2007, an increase of $172 million or 11%.

 

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Net revenue by target market data is derived from our understanding of our end customers’ primary markets and were as follows:

 

		Year Ended
% of net revenue from continuing operations		October 31, 2007			November 2, 2008
Wireless communications		26	%		31	%
Wired infrastructure		28			28
Industrial and automotive electronics		32			30
Consumer and computing peripherals		14			11
Total net revenue from continuing operations		100	%		100	%

 

		Year Ended						% Change in Dollars
Net revenue from continuing operations ($ in millions)		October 31, 2007			November 2, 2008
Wireless communications		$	393		$	524		33	%
Wired infrastructure			423			470		11	%
Industrial and automotive electronics			500			513		3	%
Consumer and computing peripherals			211			192		(9	)%
Total net revenue from continuing operations		$	1,527		$	1,699		11	%

As a percentage of net revenue, net revenue from wireless communications products increased in fiscal year 2008 compared with fiscal year 2007. Net revenue from wireless communications products also increased in the same periods primarily due to a favorable mix of products in the next generation handset market.

As a percentage of net revenue, net revenue from wired infrastructure products was flat in fiscal year 2008 compared with fiscal year 2007. The increase in net revenue from wired infrastructure products was driven mainly by strong growth in fiber optics.

As a percentage of net revenue, net revenue from industrial and automotive electronics products decreased in fiscal year 2008 compared with fiscal year 2007 due to our channel partners reducing their inventories. Net revenue from industrial and automotive products increased moderately in the same periods.

As a percentage of net revenue, net revenue in consumer and computing peripherals products decreased in fiscal year 2008 compared with fiscal year 2007. Net revenue from consumer and computer peripherals products also decreased in the same periods, reflecting an increasingly competitive environment in printer encoders and low-end navigation sensors.

Cost of products sold.    Total cost of products sold (which includes amortization of manufacturing-related intangible assets, asset impairment and restructuring charges) was $1,044 million for the year ended November 2, 2008, as compared to $1,165 million for the combined year ended October 31, 2007, a decrease of $121 million or 10%. As a percentage of net revenue, cost of products sold decreased from 76% to 61%, primarily due to the asset impairment charge of $140 million recorded in the third quarter of fiscal year 2007.

Cost of products sold (which excludes amortization of manufacturing-related intangible assets, asset impairment and restructuring charges) was $981 million for the year ended November 2, 2008, as compared to $936 million for the year ended October 31, 2007, an increase of $45 million or 5%. As a percentage of net revenue, cost of products sold decreased

 

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to 58% for the year ended November 2, 2008 from 61% for the year ended October 31, 2007. This decrease was attributable to the increase in revenue, favorable product mix and improved operational efficiency arising from our restructuring actions taken in fiscal year 2007 and fiscal year 2008.

Research and development.    Research and development expense was $265 million for the year ended November 2, 2008, as compared to $205 million for the year ended October 31, 2007, an increase of $60 million or 29%. As a percentage of net revenue, research and development expenses increased from 14% for the year ended October 31, 2007 to 16% for the year ended November 2, 2008. Higher research and development expense for the year ended November 2, 2008 was due to redeployment of technical resources to focus on product development, as well as higher project material expenditures.

Selling, general and administrative.    Selling, general and administrative expense was $196 million for the year ended November 2, 2008, as compared to $193 million for the year ended October 31, 2007, an increase of $3 million or 2%. As a percentage of net revenue, selling, general and administrative expense decreased from 13% to 12%, reflecting the cost reduction actions taken since the beginning of fiscal year 2008.

Amortization of intangible assets.    Amortization of intangible assets was $28 million for each of the years ended November 2, 2008 and October 31, 2007.

Asset impairment charges.    During the year ended October 31, 2007, we recorded a $158 million write-down of certain long-lived assets following a review of the recoverability of the carrying value of certain manufacturing facilities in accordance with SFAS No. 144. See Note 12 to the Consolidated Financial Statements.

Restructuring charges.    During the year ended November 2, 2008, we incurred restructuring charges of $12 million, compared to $51 million during the year ended October 31, 2007, both predominantly representing one-time employee termination costs. See Note 12 to the Consolidated Financial Statements.

Acquired in-process research and development (IPRD).    IPRD was $1 million for the year ended October 31, 2007 related to completion of the acquisition of the POF business. The amounts allocated to IPRD were determined based on our estimates of the fair value of assets acquired using valuation techniques used in the semiconductor industry and were charged to expense in the third quarter of fiscal year 2007. The projects that qualify for IPRD had not reached technical feasibility and no future use existed in Avago. In accordance with Statement of Financial Accounting Standard, or SFAS No. 2, “Accounting for Research and Development Costs,” as clarified by FIN No. 4, “Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method—an Interpretation of FASB Statement No. 2,” amounts assigned to IPRD meeting the above stated criteria were charged to expense as part of the allocation of the purchase price.

Interest expense.    Interest expense was $86 million for the year ended November 2, 2008, as compared to $109 million for the year ended October 31, 2007, which represents a decrease of $23 million or 21%. The decrease is primarily due to the redemption and repurchases of $297 million in principal amount of our outstanding notes in fiscal years 2007 and 2008.

Loss on extinguishment of debt.    During the year ended November 2, 2008, we redeemed $200 million in principal amount of our senior floating rate notes. The redemption of the senior floating rate notes resulted in a loss on extinguishment of debt of $10 million. Additionally,

 

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during the year ended October 31, 2007, we repurchased $97 million in principal amount of our 10 ¹/8% senior notes due 2013. The repurchase of the senior notes resulted in a loss on extinguishment of debt of $12 million. See Note 9 to the Consolidated Financial Statements.

Other income (expense), net.    Other income (expense), net was $(4) million for the year ended November 2, 2008 compared to $14 million for the year ended October 31, 2007, a decrease of $18 million. The decrease was primarily attributable to exchange losses arising from foreign currency fluctuations relative to the prior year, as well as a decline in interest income due to lower interest rates.

Provision for income taxes.    We recorded an income tax expense of $3 million and $8 million for the years ended November 2, 2008 and October 31, 2007, respectively. The decrease was primarily attributable to a release of valuation allowances of $9 million. We continuously monitor the circumstances impacting the expected realization of our deferred tax assets. In the fourth quarter of fiscal year 2008, we reduced the valuation allowance after determining that certain deferred tax assets are more likely than not to be realizable due to expectations of future taxable income, carryforward periods available to us, and other factors.

Year Ended October 31, 2007 Compared to Combined Year Ended October 31, 2006

The following tables set forth the results of operations for the years ended October 31, 2007 and 2006. The combined results of operations for the year ended October 31, 2006 include the operations of our business for the eleven months, from and after the closing of the SPG Acquisition on December 1, 2005, and the results of operations of Predecessor for the month of November 2005. From our inception in August 2005 through November 30, 2005, we had no revenues, cost of products sold, research and development expense or significant operating activities. During this period, our sole activities were those undertaken in connection with the preparation for the consummation of the SPG Acquisition on, and in anticipation of the commencement of operating activities following, December 1, 2005. For these reasons, management believes that combining the one month Predecessor results with the eleven months post-acquisition results is the most meaningful presentation. The combined operating results have not been prepared as pro forma results under applicable regulations, may not reflect the actual results we would have achieved absent the SPG Acquisition and may not be predictive of future results of operations. In addition, despite the combined presentation not being in accordance with GAAP because of, among other things, the change in the historical carrying value or basis of assets and liabilities that resulted from the SPG Acquisition and our transition to a stand-alone entity, we believe that for comparison purposes, such a presentation is most meaningful to an understanding of the results of the business. Additionally, the historic periods do not reflect the impact the SPG Acquisition had on us, most notably significant non-cash amortization charges and interest expense, and may not be predictive of future results of operations.

 

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		Predecessor One Month Ended November 30, 2005								Company Year Ended October 31, 2006				Combined Year Ended October 31, 2006				Company Year Ended October 31, 2007				Combined Year Ended October 31, 2006			Company Year Ended October 31, 2007
										(in millions)												(as a percentage of net revenue)
Statement of Operations Data:
Net revenue		$	114							$	1,399			$	1,513			$	1,527			100	%		100	%
Costs and expenses:
Cost of products sold:
Cost of products sold			87								926				1,013				936			67			61
Amortization of intangible assets			—								55				55				60			4			4
Asset impairment charges			—								—				—				140			—			9
Restructuring charges			—								2				2				29			—			2
Total cost of products sold			87								983				1,070				1,165			71			76
Research and development			22								187				209				205			14			14
Selling, general and administrative			27								243				270				193			18			13
Amortization of intangible assets			—								56				56				28			4			2
Asset impairment charges			—								—				—				18			—			1
Restructuring charges			1								3				4				22			—			1
Litigation settlement			—								21				21				—			1			—
Acquired in-process research and development			—								—				—				1			—			—
Total costs and expenses			137								1,493				1,630				1,632			108			107
Loss from operations			(23	)							(94	)			(117	)			(105	)		(8	)		(7	)
Interest expense			—								(143	)			(143	)			(109	)		(9	)		(7	)
Loss on extinguishment of debt			—								—				—				(12	)		—			(1	)
Other income, net			—								12				12				14			1			1
Loss from continuing operations before taxes			(23	)							(225	)			(248	)			(212	)		(16	)		(14	)
Provision for income taxes			2								3				5				8			1			—
Loss from continuing operations			(25	)							(228	)			(253	)			(220	)		(17	)		(14	)
Income from and gain on discontinued operations, net of income taxes			1								1				2				61			—			4
Net loss		$	(24	)						$	(227	)		$	(251	)		$	(159	)		(17	)%		(10	)%

 

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Net revenue.    Net revenue was $1,527 million for the year ended October 31, 2007, as compared to $1,513 million for the combined year ended October 31, 2006, an increase of $14 million or 1%. Net revenue from wireless communications products increased in the year ended October 31, 2007 as we focused on changing our product mix towards more proprietary products. Net revenue from industrial and automotive electronics products experienced moderate increase driven by growth in fiber optics in the automotive market offset by weaker optocoupler and LED sales.

Total cost of products sold.    Total cost of products sold, which includes amortization of manufacturing-related intangible assets purchased from Agilent, was $1,165 million for the year ended October 31, 2007, as compared to $1,070 million for the combined year ended October 31, 2006, an increase of $95 million or 9%. As a percentage of net revenue, cost of products sold increased from 71% to 76%, primarily due to the asset impairment charge of $140 million recorded in the third quarter of fiscal year 2007.

Research and development.    Research and development expense was $205 million for the year ended October 31, 2007, as compared to $209 million for the combined year ended October 31, 2006, a decrease of $4 million, or 2%. As a percentage of net revenue, research and development expenses remained flat at 14% in both periods.

Selling, general and administrative.    Selling, general and administrative expense was $193 million for the year ended October 31, 2007, as compared to $270 million for the combined year ended October 31, 2006, a decrease of $77 million, or 29%. As a percentage of net revenue, selling, general and administrative expense decreased 5%, from 18% to 13%. Selling, general and administrative expense for the combined year ended October 31, 2006 included one-time transition costs in connection with establishing the corporate infrastructure required to operate as a stand-alone entity. Excluding transition expenses, selling, general and administrative expenses decreased over the period as we reduced the services provided by Agilent under the MSA and transitioned to our stand-alone corporate infrastructure.

Amortization of intangible assets.    Amortization of intangible assets was $28 million for the year ended October 31, 2007 compared to $56 million for the combined year ended October 31, 2006, a decrease of $28 million or 50%. Amortization of intangible assets decreased as order backlog was fully amortized during fiscal year 2006.

Restructuring charges.    During the year ended October 31, 2007, we incurred restructuring charges of $51 million, $22 million of which was recorded as part of the operating expenses and the remainder was recorded as part of cost of products sold. Our restructuring charges predominantly represent one-time employee termination costs. See Note 12 to the Consolidated Financial Statements.

Litigation settlement.    In November 2006, we agreed to settle a trade secret lawsuit filed by Sputtered Films Inc., a subsidiary of Tegal Corporation, against Agilent, Advanced Modular Sputtering Inc. and our company. We assumed responsibility for this litigation in connection with our SPG Acquisition and accrued a liability for $21 million, including costs, in the fourth quarter of fiscal year 2006.

Interest expense.    Interest expense was $109 million for the year ended October 31, 2007, as compared to $143 million for the combined year ended October 31, 2006. Interest expense for the combined year ended October 31, 2006 includes an aggregate of amortization of debt issuance costs and commitment fees for expired facilities, including $19 million of unamortized debt issuance costs that were written off in conjunction with the repayment of the term loan facility during this period.

 

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Loss on extinguishment of debt.    During fiscal year 2007, we repurchased $97 million in principal amount of the senior fixed rate notes and paid $7 million in early tender premium in the tender offer, plus accrued interest, resulting in a loss on extinguishment of debt of $12 million, which consisted of $7 million early tender premium, $4 million write-off of debt issuance costs and less than $1 million of legal fees and other related expenses. See Note 9 to the Consolidated Financial Statements.

Other income, net.    Other income, net was $14 million for the year ended October 31, 2007, as compared to $12 million for the combined year ended October 31, 2006, an increase of $2 million.

Provision for income taxes.    Our income tax provision was $8 million for the year ended October 31, 2007, as compared to $5 million for the combined year ended October 31, 2006. The increase was primarily driven by an increase in Singapore and US operating profits.

Backlog

Our sales are generally made pursuant to short-term purchase orders. These purchase orders are made without deposits and may be rescheduled, canceled or modified on relatively short notice, and in most cases without substantial penalty. Therefore, we believe that purchase orders or backlog are not a reliable indicator of future sales.

Seasonality

Sales of consumer electronics are higher during the calendar year end period, and as a result, we typically experience higher revenues during our fourth fiscal quarter while sales typically decline in our first fiscal quarter.

 

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Quarterly Results (Unaudited)

The following tables present unaudited quarterly consolidated statement of operations data for the eight quarters ended May 3, 2009, and such data expressed as a percentage of net revenues. We have prepared the unaudited quarterly financial information on a consistent basis with the audited consolidated financial statements included in this prospectus, and the financial information reflects all normal, recurring adjustments that we consider necessary for a fair statement of such information in accordance with GAAP for the quarters presented. The results for any quarter are not necessarily indicative of results that may be expected for any future period.

 

		Three Months Ended
		July 31, 2007				October 31, 2007				February 3, 2008				May 4, 2008				August 3, 2008				November 2, 2008				February 1, 2009				May 3, 2009
		(in millions, except per share data)
Net revenue		$	381			$	391			$	402			$	411			$	439			$	447			$	368			$	325
Costs and expenses:
Cost of products sold:
Cost of products sold			231				241				230				237				251				263				204				210
Amortization of intangible assets			15				15				14				14				14				15				15				14
Asset impairment charges			140				—				—				—				—				—				—				—
Restructuring charges			8				6				1				1				3				1				6				3
Total cost of products sold			394				262				245				252				268				279				225				227
Research and development			53				51				66				62				68				69				62				59
Selling, general and administrative			44				45				50				48				50				48				40				42
Amortization of intangible assets			7				7				7				7				7				7				6				5
Asset impairment charges			18				—				—				—				—				—				—				—
Restructuring charges			3				8				2				1				2				1				5				3
Acquired in-process research and development			1				—				—				—				—				—				—				—
Total costs and expenses			520				373				370				370				395				404				338				336
Income (loss) from operations			(139	)			18				32				41				44				43				30				(11	)
Interest expense			(26	)			(26	)			(25	)			(20	)			(20	)			(21	)			(18	)			(20	)
Gain (loss) on extinguishment of debt			(1	)			(1	)			(10	)			—				—				—				1				—
Other income (expense), net			2				6				1				1				—				(6	)			(2	)			(2	)
Income (loss) from continuing operations before income taxes			(164	)			(3	)			(2	)			22				24				16				11				(33	)
Provision for (benefit from) income taxes			3				2				3				4				5				(9	)			5				(2	)
Income (loss) from continuing operations			(167	)			(5	)			(5	)			18				19				25				6				(31	)
Income (loss) from and gain on discontinued operations, net of income taxes			—				3				9				(1	)			25				(7	)			—				—
Net income (loss)		$	(167	)		$	(2	)		$	4			$	17			$	44			$	18			$	6			$	(31	)
Net income (loss) per share:
Basic:
Income (loss) from continuing operations		$	(0.78	)		$	(0.02	)		$	(0.02	)		$	0.08			$	0.09			$	0.12			$	0.03			$	(0.15	)
Income (loss) from and gain on discontinued operations, net of income taxes			—				0.01				0.04				—				0.12				(0.04	)			—				—
Net Income (loss)		$	(0.78	)		$	(0.01	)		$	0.02			$	0.08			$	0.21			$	0.08			$	0.03			$	(0.15	)
Diluted:
Income (loss) from continuing operations		$	(0.78	)		$	(0.02	)		$	(0.02	)		$	0.08			$	0.09			$	0.11			$	0.03			$	(0.15	)
Income (loss) from and gain on discontinued operations, net of income taxes			—				0.01				0.04				—				0.11				(0.03	)			—				—
Net Income (loss)		$	(0.78	)		$	(0.01	)		$	0.02			$	0.08			$	0.20			$	0.08			$	0.03			$	(0.15	)

 

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		Three Months Ended
		July 31, 2007			October 31, 2007			February 3, 2008			May 4, 2008			August 3, 2008			November 2, 2008			February 1, 2009			May 3, 2009
		(as a percentage of net revenue)
Net revenue		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%
Costs and expenses:
Cost of products sold:
Cost of products sold		60			62			57			58			57			59			55			65
Amortization of intangible assets		4			4			4			3			3			3			4			4
Asset impairment charges		37			—			—			—			—			—			—			—
Restructuring charges		2			1			—			—			1			—			2			1
Total cost of products sold		103			67			61			61			61			62			61			70
Research and development		14			13			16			15			15			15			17			18
Selling, general and administrative		11			11			13			12			11			11			11			13
Amortization of intangible assets		2			2			2			2			2			2			2			1
Asset impairment charges		5			—			—			—			—			—			—			—
Restructuring charges		1			2			—			—			1			—			1			1
Acquired in-process research and development		—			—			—			—			—			—			—			—
Total costs and expenses		136			95			92			90			90			90			92			103
Income (loss) from operations		(36	)		5			8			10			10			10			8			(3	)
Interest expense		(7	)		(7	)		(6	)		(5	)		(5	)		(5	)		(5	)		(6	)
Gain (loss) on extinguishment of debt		—			—			(2	)		—			—			—			—			—
Other income (expense), net		—			1			—			—			—			(1	)		—			(1	)
Income (loss) from continuing operations before income taxes		(43	)		(1	)		—			5			5			4			3			(10	)
Provision for income taxes		1			—			1			1			1			(2	)		1			—
Income (loss) from continuing operations		(44	)		(1	)		(1	)		4			4			6			2			(10	)
Income (loss) from and gain on discontinued operations, net of income taxes		—			—			2			—			6			(2	)		—			—
Net income (loss)		(44	)%		(1	)%		1	%		4	%		10	%		4	%		2	%		(10	)%

Net revenue increased sequentially from the third fiscal quarter of 2007 to the fourth fiscal quarter of 2008 as we focused on changing our product mix towards more proprietary products with higher average selling prices in the wireless communications market. Although net revenue in the first two fiscal quarters of 2009 was lower due to the global recession, continuing financial and credit crisis and deteriorating economic conditions, our net revenue from the wireless communications market increased sequentially, driven by increasing demand for next-generation handsets.

 

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Cost of products sold increased as a percentage of net revenue in the second fiscal quarter of 2009 as we recorded write-downs to inventories of $16 million associated with reduced demand assumptions. In addition, the second fiscal quarter of 2009 included $2 million of indirect taxes relating to prior periods and payments of $3 million in connection with terminating our relationship with a contract manufacturer as part of a transition to another supplier, which primarily related to production equipment procured by the contract manufacturer for which we agreed to compensate the contract manufacturer. Cost of products sold decreased as a percentage of net revenue in the first three fiscal quarters of 2008 compared to fiscal year 2007 driven primarily by a favorable product mix.

As a percentage of net revenue, research and development expenses stayed constant at 15% for the last three fiscal quarters of 2008 and then increased to 18% for the second fiscal quarter of 2009 as we continued to invest in research and development despite the lower revenue resulting from the current economic downturn.

As a percentage of net revenue, selling, general and administrative expense decreased from 13% in the first fiscal quarter of 2008 to 11% in the first fiscal quarter of 2009. Selling, general and administrative expense for the second fiscal quarter of 2009 includes $4 million of legal costs incurred in connection with intellectual property litigation, of which a substantial majority are related to actions in which we were the plaintiff. This increase was offset by our concerted efforts to control discretionary costs in the current environment as well as the impact of our previously-announced headcount reductions.

The decrease in interest expense is primarily due to the redemption and repurchases of our outstanding notes made in the past 25 months.

Liquidity and Capital Resources

We began operating as an independent company on December 1, 2005. Prior to that date, Predecessor operated as the Semiconductor Products Group of Agilent, which funded all of our cash requirements, and received all of the cash our operations generated, through a centralized cash management system.

Our short-term and long-term liquidity requirements primarily arise from: (i) interest and principal payments related to our debt obligations, (ii) working capital requirements and (iii) capital expenditures, including acquisitions from time to time.

The volatility in the credit markets has generally diminished liquidity and capital availability in worldwide markets. We are unable to predict the likely duration and severity of the current disruptions in the credit and financial markets or the adverse global economic conditions. However, we believe that our cash on hand, cash flows from operations, combined with availability under our revolving credit facility, will provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital spending for at least the next 12 months.

Our ability to service our indebtedness will depend on our ability to generate cash in the future. Given our high level of debt and related debt service requirements, we may not have significant cash available to meet any large unanticipated liquidity requirements, other than from available borrowings, if any, under our revolving credit facility. As a result, we may not retain a sufficient amount of cash to finance growth opportunities, including acquisitions, or unanticipated capital expenditures or to fund our operations. If we do not have sufficient cash for these purposes, our financial condition and our business could suffer.

 

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In summary, our cash flows were as follows (in millions):

 

		Year Ended												Six Months Ended
		October 31, 2006				October 31, 2007				November 2, 2008				May 4, 2008				May 3, 2009
														(unaudited)
Net cash provided by operating activities		$	370			$	146			$	208			$	34			$	62
Net cash (used in) provided by investing activities			(2,100	)			5				(94	)			(55	)			(30	)
Net cash (used in) provided by financing activities			2,002				(114	)			(210	)			(205	)			(4	)
Net increase (decrease) in cash and cash equivalents		$	272			$	37			$	(96	)		$	(226	)		$	28

 

*	The period ended October 31, 2006 includes the operations of our business only for the eleven months from and after the closing of the SPG Acquisition on December 1, 2005.

Cash Flows for the Six Months Ended May 3, 2009 and May 4, 2008

We generated cash from operations of $62 million and $34 million during the six months ended May 3, 2009 and May 4, 2008, respectively.

Net cash provided by operations during the six months ended May 3, 2009 was $62 million. The net cash provided by operations was primarily due to depreciation and amortization of $80 million offset by a net loss of $25 million. Significant changes in operating assets and liabilities from November 2, 2008 include a decrease in inventory and employee compensation and benefits accruals of $38 million and $34 million, respectively. Inventory days on hand was 65 days on November 2, 2008 and on May 3, 2009.

Net cash provided by operations during the six months ended May 4, 2008 was $34 million. The net cash provided by operations was primarily due to net income of $21 million and non-cash charges of $85 million, offset by changes in operating assets and liabilities of $72 million. Non-cash charges for the six months ended May 4, 2008 include $77 million for depreciation and amortization, $9 million in share-based compensation and a $6 million loss on extinguishment of debt, offset by a $9 million gain on discontinued operations. Significant changes in operating assets and liabilities from October 31, 2007 included an increase in inventory of $25 million, due to increased demand for our products, as well as a decrease in accounts payable and other current assets and current liabilities of $41 million and $29 million, respectively, as a result of the timing of disbursements. Inventory days on hand increased from 53 days at the end of October 31, 2007 to 64 days at May 4, 2008 reflecting the increase in business activity during the period.

Net cash used in investing activities for the six months ended May 3, 2009 was $30 million. The net cash used in investing activities was primarily due to purchases of property, plant and equipment of $25 million and $7 million related to a business acquisition.

Net cash used in investing activities for the six months ended May 4, 2008 was $55 million. The net cash used in investing activities included $46 million related to acquisitions and an investment and purchases of property, plant and equipment of $28 million, offset by net proceeds received from the sale of the Infra-red operations and the contingent payment received from the sale of the Image Sensor operations which totaled $25 million.

 

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Net cash was not affected significantly by financing activities for the six months ended May 3, 2009. Net cash used in financing activities for the six months ended May 4, 2008 was $205 million, comprised mainly of the redemption of $200 million in the principal amount of the senior floating rate notes.

Cash Flows for the Years Ended November 2, 2008 and October 31, 2007

We generated cash from operations of $208 million and $146 million during the years ended November 2, 2008 and October 31, 2007, respectively.

Net cash provided by operations during the year ended November 2, 2008 was $208 million. The net cash provided by operations was primarily due to net income of $83 million and non-cash charges of $159 million, offset by increases in operating assets and liabilities of $34 million. Non-cash charges for the year ended November 2, 2008 include $159 million for depreciation and amortization, $15 million in share-based compensation, a $6 million loss on extinguishment of debt and a $2 million loss on disposal of property, plant and equipment, offset by a $27 million gain on discontinued operations. Accounts receivable days sales outstanding declined from 51 days at October 31, 2007 to 37 days at November 2, 2008 primarily due to an improvement in collections as well as better linearity of shipments in the last quarter of fiscal year 2008 as compared to the last quarter of fiscal year 2007. Inventory increased from $140 million at the end of fiscal year 2007 to $188 million on November 2, 2008. Inventory days on hand increased from 53 days at October 31, 2007 to 65 days at November 2, 2008. The increase in inventory days on hand is primarily due to increase in net revenue of 10% in fiscal year 2008 as compared to fiscal year 2007, strategic, end-of-life purchases, as well as a relatively lower inventory days on hand at the end of fiscal year 2007.

Net cash provided by operations during the year ended October 31, 2007 was $146 million. The net cash provided by operations was primarily due to non-cash charges of $308 million, offset by a net loss of $159 million and by changes in operating assets and liabilities of $3 million. Non-cash charges for the year ended October 31, 2007 include $176 million for depreciation and amortization, $162 million of non-cash restructuring and asset impairment charges, $12 million in share-based compensation and $12 million loss on extinguishment of debt, offset by a $61 million gain on discontinued operations. Significant changes in operating assets and liabilities from October 31, 2006 include an increase in accounts receivable and other current assets and current liabilities of $31 million and $26 million, respectively, a decrease in employee compensation and benefits accruals of $12 million as the result of disbursements related to our employee benefit programs. These uses of cash are partially offset by an increase in accounts payable of $29 million, a decrease in inventory of $28 million, and an increase in other long-term assets and liabilities of $9 million from October 31, 2006.

Net cash used in investing activities for the year ended November 2, 2008 was $94 million. The net cash used in investing activities principally related to acquisitions and investments of $78 million, and purchases of property, plant and equipment of $65 million, offset by earn-out payments of $50 million related to the divestiture of the Printer ASICs Business and the Image Sensor operations. Net cash provided by investing activities for the year ended October 31, 2007 was $5 million. The net cash provided by investing activities was principally due to net proceeds received from the sale of the Image Sensor operations of $57 million and an earn-out payment in connection with the sale of our Printer ASICs Business of $10 million, offset by the acquisition of the POF business for $27 million and purchases of property, plant and equipment of $37 million.

Net cash used in financing activities for the year ended November 2, 2008 was $210 million, comprised mainly of the redemption of senior floating rate notes of $200 million.

 

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Cash Flows for the Years Ended October 31, 2007 and October 31, 2006

We generated cash from operations of $146 million and $370 million during the years ended October 31, 2007 and 2006, respectively.

For the year ended October 31, 2007, we incurred a net loss of $159 million, which included non-cash items of $308 million. Non-cash charges for the year ended October 31, 2007 include $176 million for depreciation and amortization, an asset impairment charge of $158 million and a gain on discontinued operations of $61 million. The net change in operating assets and liabilities was $3 million.

Net cash provided by operations for the year ended October 31, 2006 was primarily due to changes in operating assets and liabilities of $355 million and non-cash charges of $242 million, offset by a net loss of $227 million. Non-cash charges for the year ended October 31, 2006 include $210 million for depreciation and amortization and $22 million for amortization of debt issuance costs. Significant operating assets and liabilities changes contributing to cash provided by operations include a decrease in accounts receivable of $136 million due to improved collections, an increase in accounts payable and other current assets and current liabilities of $32 million and $84 million, respectively, due primarily to the timing of payments and an increase in employee compensation and benefits accruals of $53 million as the result of the implementation of our employee benefit programs, transactional receivables and liabilities relating to VAT, sales tax and similar transactional taxes. Our reported cash flow from operations for the year ended October 31, 2006 reflects in part the initial build-up of current assets and liabilities not acquired or assumed from Agilent relating to taxes and employee obligations, and is not necessarily indicative of future cash flow.

Net cash provided by investing activities for the year ended October 31, 2007 was $5 million. The net cash provided by investing activities related to purchases of property, plant and equipment of $37 million, acquisition of the POF business for $27 million, offset by net proceeds received from the sales of the Image Sensor operations of $57 million as well as earn-out payments received from disposition of the Printer ASICs Business in 2006 of $10 million.

Net cash used in investing activities for the year ended October 31, 2006 was $2,100 million. The net cash used in investing activities was principally due to the SPG Acquisition for $2,707 million and purchases of property, plant and equipment of $59 million, offset by net proceeds received from the sales of the Printer ASICs Business and Storage Business of $245 million and $420 million, respectively.

Net cash used by financing activities for the year ended October 31, 2007 was $114 million and primarily related to payments made to retire our senior fixed rate notes for $107 million, which includes the premium on the redemption.

Net cash provided by financing activities for the year ended October 31, 2006 was $2,002 million. The net cash provided by financing activities was principally from proceeds of $1,666 million from debt borrowings and the issuance of ordinary and redeemable convertible preference shares of approximately $1,062 million and $250 million, respectively, less $725 million of debt repayments and $249 million associated with the redemption of all of the redeemable convertible preference shares.

Indebtedness

We have a substantial amount of indebtedness. As of November 2, 2008, we had $710 million outstanding in aggregate indebtedness and capital lease obligations, with an

 

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additional $315 million of borrowing capacity available under our revolving credit facility (including outstanding letters of credit of $17 million at November 2, 2008, which reduce the amount available under our revolving credit facility on a dollar-for-dollar basis).

In 2006, we used $420 million of net proceeds from the sale of our Storage Business and $245 million of net proceeds from the sale of our Printer ASICs Business to permanently repay borrowings under our term loan facility, significantly reducing our indebtedness.

Contractual Commitments

Our cash flows from operations are dependent on a number of factors, including fluctuations in our operating results, accounts receivable collections, inventory management, and the timing of payments. As a result, the impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction with such factors.

The following table sets forth our long-term debt, operating and capital lease and purchase obligations as of November 2, 2008 for the fiscal periods noted (in millions).

 

		Total			2009			2010 to 2011			2012 to 2013			Thereafter
Short-term and long-term debt(1)		$	703		$	—		$	—		$	50		$	653
Estimated future interest expense payments(2)			437			75			150			147			65
Operating leases(3)			30			8			10			4			8
Capital leases(4)			7			2			3			1			1
Commitments to contract manufacturers and other purchase obligations(5)			21			21			—			—			—
Additional contractual commitments(6)			153			37			44			31			41

 

(1)	Represents our outstanding notes as of November 2, 2008.

 

(2)

Represents interest payments on our outstanding notes assuming the same rate on the senior floating rate notes as was in effect on November 2, 2008, commitment fees and letter of credit fees, and taking into account the redemption of $200 million principal amount of senior floating rates notes on December 18, 2007. See Note 9 to the Consolidated Financial Statements.

 

(3)	Includes operating lease commitments for facilities and equipment that we have entered into with Agilent and other third parties.

 

(4)	Includes capital lease commitments for equipment that we have entered into with third parties.

 

(5)

We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates. However, our agreements with these suppliers usually allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed. Typically purchase orders outstanding with delivery dates within 30 days are non-cancelable. In addition to the above, we record a liability for firm, non-cancelable, and unconditional purchase commitments for quantities in excess of our future demand forecasts in conjunction with our write-down of inventory. As of November 2, 2008, the liability for our firm, non-cancelable and unconditional purchase commitments was $3 million. These amounts are included in other liabilities in our balance sheets at November 2, 2008, and are also included in the preceding table.

 

(6)	We have entered into several agreements related to IT, human resources, financial advisory services and other services agreements.

We adopted the provisions of Financial Accounting Standards Board, or FASB, Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” or FIN No. 48, on November 1, 2007. Due to the inherent uncertainty with respect to the timing of future cash outflows associated with our unrecognized tax benefits at November 2, 2008, we are unable to reliably estimate the timing of cash settlement with the respective taxing authority. Therefore, $16 million of unrecognized tax benefits classified as long-term income taxes payable in the

 

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consolidated balance sheet as of November 2, 2008 have been excluded from the contractual obligations table above.

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements at May 3, 2009 as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

New Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” or SFAS No. 167. SFAS No. 167 eliminates Interpretation No. 46(R)’s exceptions to consolidating qualifying special-purpose entities, contains new criteria for determining the primary beneficiary, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. SFAS No. 167 also contains a new requirement that any term, transaction, or arrangement that does not have a substantive effect on an entity’s status as a variable interest entity, a company’s power over a variable interest entity, or a company’s obligation to absorb losses or its right to receive benefits of an entity must be disregarded in applying Interpretation No. 46(R)’s provisions. The elimination of the qualifying special-purpose entity concept and its consolidation exceptions means more entities will be subject to consolidation assessments and reassessments. SFAS No. 167 will be effective for our fiscal year beginning November 1, 2010. We are currently assessing the impact that this standard will have on our results of operations and financial position.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” or SFAS No. 165. SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It should not result in significant changes in the subsequent events that an entity reports, either through recognition or disclosure in its financial statements. SFAS No. 165 introduces the concept of financial statements being available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. SFAS No. 165 will apply to both interim financial statements and annual financial statements after June 15, 2009 and will be effective for us beginning with the third quarter of fiscal year 2009. We do not anticipate that the adoption of SFAS No. 165 will have a significant impact on our results of operations and financial position.

In April 2009, the FASB issued FASB Staff Position, or FSP, No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” or FSP No. FAS 107-1 and APB 28-1. This FSP requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. FSP No. FAS 107-1 and APB 28-1 is effective for interim and annual periods ending after June 15, 2009 and will be effective for us beginning with the third quarter of fiscal year 2009. We do not expect the adoption of this FSP will have a material impact on our results of operations, financial position or our financial statement disclosures as applicable.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” or FSP No. FAS 132(R)-1. This FSP amends Statement of Financial Accounting Standards No. 132(R), or SFAS No. 132(R), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement

 

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plan. FSP No. FAS 132(R)-1 requires disclosures surrounding how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies. Additional disclosures include (a) the major categories of plan assets, (b) the inputs and valuation techniques used to measure the fair value of plan assets, (c) the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period and (d) the significant concentrations of risk within plan assets. FSP No. 132(R)-1 does not change the accounting treatment for postretirement benefit plans. FSP No. 132(R)-1 will be effective for us in fiscal year 2010. We are currently assessing the impact that this FSP will have on our financial statement disclosures.

In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets,” or FSP No. FAS 142-3. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142. This FSP is intended to improve the consistency between the useful life of an intangible asset determined under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007), “Business Combinations,” and other principles under GAAP. FSP No. FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. FSP No. FAS 142-3 will be effective for us in fiscal year 2010. We are currently assessing the impact that this FSP will have on our results of operations and financial position.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133,” or SFAS No. 161, which requires additional disclosures about the objectives of using derivative instruments, the method by which the derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instrument and Hedging Activities,” and its related interpretations, and the effect of derivative instruments and related hedged items on financial position, financial performance, and cash flows. SFAS No. 161 also requires disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. We adopted SFAS No. 161 in February 2009 but have not presented separate disclosures required by SFAS No. 161 and SFAS No. 133 because the impact of derivative instruments is immaterial to our results of operations and financial position.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” or SFAS No. 157. SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also provides for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever other standards require or permit assets or liabilities to be measured at fair value. This standard does not expand the use of fair value in any new circumstances. In February 2008, the FASB issued FSP No. FAS 157-1 and FSP No. FAS 157-2. FSP No. FAS 157-1 amends SFAS No. 157 to exclude SFAS No. 13, “Accounting for Leases,” and its related interpretive accounting pronouncements that address leasing transactions. FSP No. FAS 157-2 delays the effective date of SFAS No. 157 by one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. For items covered by FSP No. FAS 157-2, SFAS No. 157 will not go into effect until fiscal years beginning after November 15, 2008 and interim periods within those fiscal years.

In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active,” or FSP No. FAS 157-3, to clarify

 

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the application of the provisions of SFAS No. 157 in an inactive market and how an entity would determine fair value in an inactive market. FSP No. FAS 157-3 is effective immediately. We adopted SFAS No. 157 at the beginning of fiscal year 2009. SFAS No. 157 is effective for nonfinancial assets and liabilities in financial statements issued for fiscal years beginning after November 15, 2008, which is our fiscal year 2010. The adoption of SFAS No. 157 did not impact our consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” or SFAS No. 141(R). SFAS No. 141(R) will significantly change current practices regarding business combinations. Among the more significant changes, SFAS No. 141(R) expands the definition of a business and a business combination; requires the acquirer to recognize the assets acquired, liabilities assumed and noncontrolling interests (including goodwill), measured at fair value at the acquisition date; requires acquisition-related expenses and restructuring costs to be recognized separately from the business combination; requires assets acquired and liabilities assumed to be recognized at their acquisition-date fair values with subsequent changes recognized in earnings; and requires in-process research and development to be capitalized at fair value as an indefinite-lived intangible asset. In April 2009, the FASB issued FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies,” or FSP No. FAS 141(R)-1. FSP No. FAS 141(R)-1 amends and clarifies SFAS No. 141(R) to address application issues on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. SFAS No. 141(R) and FSP No. FAS 141(R)-1 are effective for us beginning in fiscal year 2010. We are currently assessing the impact that SFAS No. 141(R) and FSP No. FAS 141(R)-1 will have on our results of operations and financial position. The adoption of SFAS 141(R) and FSP No. FAS 141(R)-1 will change our accounting treatment for business combinations on a prospective basis beginning in the first quarter of fiscal year 2010.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51,” or SFAS No. 160. SFAS No. 160 will change the accounting and reporting for minority interests, reporting them as equity separate from the parent entity’s equity, as well as requiring expanded disclosures. SFAS No. 160 is effective for us for fiscal year 2010. We are currently assessing the impact that SFAS No. 160 will have on our results of operations and financial position.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R),” or SFAS No. 158. SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit post-retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. We have adopted this provision of SFAS No. 158, along with disclosure requirements, at the end of fiscal year 2007, and the effects are reflected in the consolidated financial statements as of October 31, 2007. SFAS No. 158 also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. This additional provision is effective for us in fiscal year 2009. We do not expect the change in measurement date to have a material impact on our financial statements.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

At May 3, 2009, we had $50 million of debt outstanding under our senior floating rate notes which is based on a floating rate index. A 1.0% increase in interest rates would increase the annual interest expense on our senior floating rate notes by $0.5 million.

 

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Currency Exchange Rates

Although a majority of our revenue and operating expenses is denominated in U.S. dollars, and we prepare our financial statements in U.S. dollars in accordance with GAAP, a portion of our revenue and operating expenses is in foreign currencies. Our revenues, costs and expenses and monetary assets and liabilities are exposed to changes in currency exchange rates as a result of our global operating and financing activities. To mitigate the exposures resulting from the changes in the exchange rates of these currencies, we enter into foreign exchange forward contracts. These contracts are designated at inception as hedges of the related foreign currency exposures, which include committed and anticipated transactions that are denominated in currencies other than the U.S. dollar. Our hedging contracts generally mature within three to six months. We do not use derivative financial instruments for speculative or trading purposes. As of May 3, 2009, the fair value of all our outstanding foreign exchange forward contracts was immaterial.

 

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INDUSTRY OVERVIEW

Semiconductors are electronic devices that perform a variety of functions, such as converting or controlling signals, processing data and storing information. With advances in semiconductor technology, the functionality and performance of semiconductors have increased over time, while size and cost have generally decreased. These advances have led to a proliferation of more complex semiconductors being used in a wide variety of consumer, computing, communications, industrial, aerospace and defense markets. Applications in these markets include personal computers and peripherals, communications infrastructure, automobiles, consumer electronics, mobile handsets and other wireless devices, digital cameras, manufacturing and assembly systems, aviation and aerospace and complex robotic applications. This proliferation of semiconductors across a wide range of applications has contributed to the growth of the semiconductor industry. According to the World Semiconductor Trade Statistics, or WSTS, the global semiconductor market grew from $125.6 billion in 1998 to $248.6 billion in 2008, and after a decline during the current global recession, during which the global semiconductor market is expected to contract to $195.6 billion, the semiconductor market is expected to grow moderately from 2010 through 2011.

Analog Semiconductors

Semiconductor characteristics vary depending upon the type of semiconductor as well as the complexity of function or application of the end product in which the semiconductor is used. Analog semiconductors convert real-world phenomena, such as temperature, pressure, light, sound, speed and motion, into and from electrical signals. As a result of this functionality, analog semiconductors require a high level of performance that corresponds with the speed and high variation of signal intensity in order to accurately convert these signals. Analog signals can be converted to digital form for further manipulation and storage. Digital semiconductors then process a simplified version of the data represented by 1s and 0s and memory devices store the digital data. Digital signals are frequently converted back to analog form to enable a wide variety of real-world experiences such as voice communications, video display and audio output. Optoelectronic devices, such as light-emitting diodes, or LEDs, and optocouplers, are often deployed with analog and mixed-signal (which combines analog and digital capabilities) devices because optoelectronic devices convert light to analog signals (or convert an analog voltage to light). In this way, analog semiconductors and mixed-signal semiconductors play a critical role in illuminating displays and automotive interiors, sensing motion in advanced machinery and connecting enterprise networks. According to WSTS, sales of analog semiconductors, including mixed-signal and optoelectronic devices, represented approximately 30%, or $75.6 billion, of global semiconductor industry sales in 2008 and, after a decline during the current global recession, during which sales are expected to decline to $60.4 billion, sales are projected to grow moderately from 2010 through 2011. We compete in only a portion of the analog semiconductor market and, accordingly, statistics regarding the entire market are not necessarily indicative of the growth characteristics of the sub-markets for analog products in which we compete. We believe certain sub-markets, such as next generation wireless devices, high performance computing and industrial applications will continue to grow faster than the overall analog market.

Historically, sales of analog semiconductors have been less volatile than those of other semiconductor categories on a year-over-year basis due to their broad base of applications and their complexity of design. Analog semiconductors typically have longer product life cycles and more stable average selling prices compared to digital semiconductors. In addition, the design of an analog semiconductor generally involves greater variety and less repetition of circuit elements than digital semiconductor design. The interaction of analog circuit elements is

 

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complex, and their exact placement is critical to the accuracy and performance of the overall device. Electronics manufacturers often incorporate a given analog, mixed-signal or optoelectronics device into their electronics for a significant period of time due to the high switching costs of developing and qualifying a new solution.

The analog sector, including optoelectronics devices, is differentiated from other semiconductor sectors by complex technical characteristics including:

 

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Materials and Process Technologies.    Semiconductors are manufactured using different materials and process technologies. Digital semiconductors are fabricated with silicon-based wafers and the most common process technology is complementary metal-oxide semiconductor, or CMOS. These materials and process technologies do not have the performance capabilities commonly required in high performance analog applications. III-V semiconductor materials are used in the fabrication of radio frequency, or RF, and optoelectronic devices, including lasers, LEDs, semiconductor optical amplifiers, modulators and photo-detectors. These materials have higher electrical conductivity and thus enable faster connectivity and tend to have better performance characteristics than silicon. III-V circuits can be designed to consume less power, amplify with more linearity and operate more efficiently than silicon circuits with similar process resolution.

 

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Integration.    Advances in semiconductor technology in recent years have enabled higher degrees of integration in the design and manufacture of semiconductor devices. Integration can be achieved by combining two or more analog features on a single chip or by combining different elements, such as analog, digital and memory, on a single chip. In addition to device-level integration, semiconductors increasingly must be designed with system-level integration considerations, including die size and packaging requirements. System-level designs may use module-based techniques to reduce size, weight and power requirements. This approach ensures each component’s functional compatibility, provides upgrade flexibility and takes advantage of the design simplicity of separate semiconductors to minimize cost and design and test times. Higher degrees of integration can also be attained through the assembly of a number of multi-chip modules into subsystems that provide greater functionality and can be more easily incorporated into an OEM’s product.

 

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Packaging.    Interaction between an analog device and its package can significantly affect product performance, particularly at high frequencies. Characteristics such as the ability of the package to dissipate heat produced by the semiconductor, or to withstand vibration, shock, high temperature, humidity and other environmental conditions, are also critical in certain applications. Packaging technologies must mirror the specific needs of the circuit design to ensure proper performance under specified conditions. In addition, module packaging is more complex than device packaging as this process integrates multiple, separate devices and often needs to conform to size requirements specific to the end application.

Significant Semiconductor Industry Trends

There are a number of trends currently affecting the semiconductor industry. We believe that the following are the six most significant trends:

 

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Growth in Semiconductor Components for Consumer Electronics.    Historically, growth in the semiconductor industry has been driven by demand in the computing, networking and wireless markets and from a broad set of industrial and military applications. In recent years, demand for semiconductors has been increasingly driven

 

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by the growth in demand for consumer electronics, such as media players, game consoles and cellular phones. As long as uses for consumer electronics devices expand and demand for additional features, functionality and performance requirements in consumer electronics devices grows, we expect demand for semiconductors for consumer electronics devices to continue to grow faster than the overall semiconductor market. For example, the emergence of the new worldwide 3G standard for cell phones requires a higher level of semiconductor performance than previous standards.

 

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Growth in High-Performance Computing to Support Enterprise Data Processing.    Over the past two decades, communications technologies have evolved dramatically in response to the proliferation of the Internet, ubiquitous wireless and mobile networks, and the emergence of new data-intensive computing and communications applications. These applications include, among others, video-on-demand, other video-based applications and higher speed storage networks. Enterprises are faced with an increasing need for computing power and storage capacity to support more complex traffic over enterprise networks at an ever increasing pace. As processor technology continues to advance, one of the limiting factors in system performance becomes the speed at which data can be moved between microprocessors, from computer to computer, and from one network to another. The speed and power management requirements are beginning to exceed the performance capabilities of the previously used interconnect technology. For example, interconnects that previously used copper are being replaced with higher speed fiber optic cable.

 

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Growth of Semiconductors in Industrial and Automotive Applications.    The increased precision requirements of many industrial applications have resulted in the proliferation of semiconductors capable of more accurately sensing the environment and communicating data for processing information. For example, the automation of factories with robotics requires very precise motion sensing enabled by industrial encoders. Within the automobile industry, semiconductors are enabling greater passenger comfort, safety and fuel efficiency. For example, hybrid engines, which combine battery technology with the more efficient use of combustion engines, are enabled by optocouplers which provide the isolation necessary to accurately monitor hybrid engine performance.

 

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Outsourcing.    Historically, the semiconductor industry was primarily comprised of integrated device manufacturers, or IDMs, that designed, manufactured, assembled and tested semiconductors at their own facilities. There has been a trend to outsource various stages of the manufacturing process to reduce the high fixed costs and capital requirements associated with these processes. As a result, new types of semiconductor companies have emerged, including fabless semiconductor companies, independent foundries and semiconductor assembly and test service providers. Fabless semiconductor suppliers design semiconductors but use independent foundries or third-party IDMs for manufacturing. Independent foundries produce semiconductor components for third parties on a contract, outsourced manufacturing basis. Assembly and test service providers assemble, test and package semiconductors to fit efficiently into electronic devices.

 

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Shift of Manufacturing Centers to the Asia/Pacific Region.    Semiconductor manufacturers and assembly and test service providers have shifted a significant portion of their operations to low cost locations, such as Malaysia, Singapore, Taiwan and China. We expect that semiconductor production will increasingly be located in the Asia/Pacific region. Production of consumer electronics has undergone a similar migration to the Asia/Pacific region, driven by low cost manufacturing and engineering

 

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resources. As a result, the global shift of semiconductor manufacturers to the Asia/ Pacific region not only offers substantial manufacturing cost savings benefits, but also provides close proximity to a large and growing customer base.

 

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Globalization of Customers and Reliance on Global Semiconductor Suppliers.    Historically, OEMs relied on multiple suppliers to support their semiconductor needs. Recently, however, the customer base for semiconductor suppliers has become more concentrated and global. These global customers require their semiconductor suppliers to demonstrate financial stability and maintain global supply chain management capabilities. These customers also demand a deep understanding of their increasingly complex technical requirements, which requires semiconductor suppliers to maintain design centers near the customers. As a result, semiconductor customers are relying on fewer suppliers to support their needs. We believe that semiconductor suppliers with design centers near customers, the ability to service a global supply chain, and a broad product portfolio are best positioned to capitalize on this trend.

 

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BUSINESS

Overview

We are a leading designer, developer and global supplier of a broad range of analog semiconductor devices with a focus on III-V based products. We differentiate ourselves through our high performance design and integration capabilities. III-V semiconductor materials have higher electrical conductivity, enabling faster speeds and tend to have better performance characteristics than conventional silicon in applications such as RF and optoelectronics. Our product portfolio is extensive and includes approximately 6,500 products in four primary target markets: wireless communications, wired infrastructure, industrial and automotive electronics, and consumer and computing peripherals. Applications for our products in these target markets include cellular phones, consumer appliances, data networking and telecommunications equipment, enterprise storage and servers, factory automation, displays, optical mice and printers.

We have a 40-year history of innovation dating back to our origins within Hewlett-Packard Company. Over the years, we have assembled a team of approximately 1,000 analog design engineers, and we maintain highly collaborative design and product development engineering resources around the world. Our locations include two design centers in the United States, four in Asia and three in Europe. We have developed an extensive portfolio of intellectual property that currently includes more than 5,000 U.S. and foreign patents and patent applications.

We have a diversified and well-established customer base of approximately 40,000 end customers which we serve through our multi-channel sales and fulfillment system. We distribute most of our products through our broad distribution network, and we are a significant supplier to two of the largest global electronic components distributors, Avnet, Inc. and Arrow Electronics, Inc. We also have a direct sales force focused on supporting large original equipment manufacturers, or OEMs, such as Brocade Communications Systems, Inc., Cisco Systems, Inc., Hewlett-Packard Company, International Business Machines Corp., LG Electronics Inc., Logitech International S.A. and Samsung Electronics Co., Ltd. For the six months ended May 3, 2009, our top 10 customers, which included four distributors, collectively accounted for 59% of our net revenue from continuing operations.

We focus on maintaining an efficient global supply chain and a variable, low-cost operating model. Accordingly, we have outsourced a majority of our manufacturing operations. We have over 35 years of operating history in Asia, where approximately 57% of our employees are located and where we produce and source the majority of our products. Our presence in Asia places us in close proximity to many of our customers and at the center of worldwide electronics manufacturing. For the fiscal year ended November 2, 2008 and the six months ended May 3, 2009, we generated net revenues from continuing operations of $1.699 billion and $693 million, respectively, and net income (loss) of $83 million and $(25) million, respectively.

Our Competitive Strengths

Our leadership in the design, development and supply of III-V analog semiconductor devices in our target markets is based on the following competitive strengths:

Leading designer and manufacturer of III-V analog semiconductor devices.    RF and optoelectronic design requires a deep understanding of complex material interactions, device structures, and the operation of associated manufacturing processes. Our engineering expertise includes combining III-V semiconductors with many other components into application specific products that enable entire electronic systems or sub-systems. In addition, our differentiated multi-chip packaging expertise improves the integration of our products into customer systems

 

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as well as the performance of those systems. Our expertise in these areas allows us to effectively design and manufacture our products using specialized, highly conductive materials that are especially suited for RF and optoelectronics products. We design products that deliver high-performance and provide mission-critical functionality. In particular, we were a pioneer in commercializing vertical-cavity surface emitting laser, or VCSEL, fiber optic products and our VCSEL-based products have been widely adopted throughout the wired infrastructure industry. In addition, we were the first to deliver commercial film bulk acoustic resonator, or FBAR, filters for code division multiple access, or CDMA, technology and we believe we maintain a significant market share of PCS duplexers within the CDMA market. In optoelectronics, we are a market leader in submarkets such as optocouplers, fiber optic transceivers and optical computer mouse sensors.

Significant intellectual property portfolio and research and development targeting key growth markets.    We are a technology leader in our industry, with over 40 years of operating history and innovation dating back to our origins within Hewlett-Packard Company. Our reputation for product quality and our strong foundation of intellectual property are supported by a portfolio of more than 5,000 U.S. and foreign patents and patent applications. Our history and market position enable us to strategically focus our research and development resources to address attractive target markets. We leverage our significant intellectual property portfolio to integrate multiple technologies and create component solutions that target growth opportunities. We have also developed specialty process technologies with respect to our RF and optoelectronic products that provide differentiated product performance, are difficult to replicate and create barriers to entry for potential competitors. For example, we have recently launched a high data rate fiber optic transceiver with a much smaller footprint than the previous generation and also developed 65nm high speed serializers/deserializers, or SerDes. Our product development efforts are supported by a team of approximately 1,000 design engineers, many of whom have over 20 years of experience in analog design.

Large and broadly diversified business provides multiple growth opportunities.    Our sales are broadly diversified across products, customers, sales channels, geographies and target markets. We offer more than 6,500 products to approximately 40,000 end customers in our four primary target markets. We have generated substantial sales in key markets across the globe including the Americas, Europe, Asia/Pacific and Japan. For the six months ended May 3, 2009, wireless communications contributed 38%, wired infrastructure contributed 28%, industrial and automotive electronics contributed 25%, and consumer and computer peripherals contributed 9%, of our net revenue from continuing operations, respectively. The diversity of our customers, target markets and applications provides us with multiple growth opportunities.

Established, collaborative customer relationships with leading OEMs.    We have established strong relationships with leading global customers across multiple target markets. Typically, our major customer relationships have been in place multiple years and we have supplied multiple products during that time period. Our close customer relationships have often been built as a result of years of collaborative product development which has enabled us to build our intellectual property portfolio and develop critical expertise regarding our customers’ requirements, including substantial system-level knowledge. This collaboration has provided us with key insights into our customers and has enabled us to be more efficient and productive and to better serve our target markets and customers. As a result, we believe we also have early insight into new technology trends and developments. Additionally, our extensive network of field applications engineers, or FAEs, enhances our customer reach and our visibility into new product opportunities.

Highly efficient operating model.    We operate a primarily outsourced manufacturing business model that principally utilizes third-party foundry and assembly and test capabilities.

 

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We maintain our internal fabrication facilities for products utilizing our innovative materials and processes to protect our intellectual property and to develop the technology for manufacturing. We outsource standard CMOS processes. Our primarily outsourced manufacturing business model provides the flexibility to respond to market opportunities, simplifies our operations and reduces our capital requirements. In addition, by outsourcing production rather than making substantial investments in production facilities, we have been able to generate attractive returns on invested capital, while remaining responsive to the rapidly evolving requirements of our customers. Moreover, approximately 57% of our employees are located in Asia which enables us to reduce our manufacturing and operating costs. We were one of the first semiconductor companies to establish a presence in Asia over 35 years ago, and we believe we have developed significant manufacturing and operating efficiencies in the region. We also benefit from a relatively low effective tax rate because we have structured our operations to maximize income in countries where income tax rates are low or where tax incentives have been extended to us to encourage investment.

Strategy

Our goal is to continue to be a global market leader in the design, development and supply of III-V analog semiconductor devices in our target markets. Key elements of our strategy include:

Rapidly introduce proprietary products.    We believe our current product expertise, key engineering talent and intellectual property portfolio provide us with a strong platform from which to develop application specific products in key target markets. We focus our research and development efforts on the development of innovative, sustainable and higher value product platforms. We leverage our design capabilities in markets where we believe our innovation and reputation will allow us to earn attractive margins by developing high value-add products. For example, we are using our expertise in VCSEL technology and parallel optics to develop high bandwidth fiber optic transceiver products that enable data center and storage network virtualization.

Extend our design expertise, intellectual property and technology capabilities.    We continue to build on our history of innovation, intellectual property portfolio, design expertise and system-level knowledge to create more integrated solutions. We intend to continue to invest in the development of future generations of our products to meet the increasingly higher performance and lower cost requirements of our customers. We intend to leverage our engineering capabilities in III-V semiconductor devices and continue to invest resources in recruiting and developing additional expertise in the areas of radio frequency microelectromechanical systems, or RF MEMs, filters and front end modules, high speed SerDes that enable high bandwidth switch and router connectivity, and a wide range of optoelectronics technologies.

Focus on large, attractive markets where our expertise provides significant opportunities.    We intend to expand our product offerings to address existing and adjacent market opportunities, and plan to selectively target attractive segments within large established markets. We target markets that require high quality and the integrated performance characteristics of our products. For example, we are applying our RF expertise to develop front-end modules for 3G wireless handsets. Our development of the FBAR MEMs filter product family and its adoption in the marketplace has provided us a leadership position in the CDMA cellular phone market and we expect to be a significant contributor to front end modules in the next generation 3G cellular phones.

 

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Increase breadth and depth of our customer relationships.    We continue to expand our customer relationships through collaboration on critical design and product development activities. Customers can rely on our system-level expertise to improve the quality and cost-effectiveness of their products, accelerate time-to-market and improve overall product performance. Our FAEs and design engineers are located near our customers around the world, which enables us to support our customers in each stage of the product development cycle, from early stages of product design through volume manufacturing and future growth. By collaborating with our customers, we have opportunities to develop high value-added, customized products for them that leverage our existing technologies. We can then market variations of these products to other customers. We believe our collaborative relationships enhance our ability to anticipate customer needs and industry trends and will allow us to gain market share and penetrate new markets.

Continue to pursue a flexible and cost-effective manufacturing strategy.    We believe that utilizing outsourced service providers for our standard CMOS manufacturing and a significant majority of assembly and test activities enables us to respond faster to rapidly changing market conditions. We aim to minimize capital expenditures by focusing our internal manufacturing capacity on products utilizing our innovative materials and processes to protect our intellectual property and to develop the technology for manufacturing. We have outsourced a majority of our manufacturing operations and we maintain significant focus on managing an efficient global supply chain and a variable, low-cost operating model.

Markets and Products

In each of our target markets, we have multiple product families that primarily provide OEMs with component or subsystem products. Our product portfolio ranges from simple discrete devices to complex sub-systems that include multiple device types and incorporate firmware for interface with digital systems. In some cases, our products include mechanical hardware that interfaces with optoelectronic or capacitive sensors.

Wireless Communications.    We support the wireless industry with a broad variety of RF semiconductor devices, including monolithic microwave integrated circuits filters and duplexers using our proprietary FBAR technology, front end modules that incorporate multiple die into multi-function RF devices, diodes and discrete transistors. Our expertise in amplifier design, FBAR technology and module integration capability enables us to offer industry-leading efficiency in RF transmitter applications. Our proprietary GaAs processes are critical to the production of power amplifier and low noise amplifier products. In addition to RF devices, we provide a variety of optoelectronic sensors for mobile handset applications. We also supply LEDs for camera-phone flashes and for backlighting applications in mobile handset keypads, as well as sensors for backlighting control.

Wired Infrastructure.    In the storage and Ethernet networking markets, we supply transceivers that receive and transmit information along optical fibers. We provide a range of product bandwidth options for customers, including options ranging from 125 MBd Fast Ethernet transmitters and receivers to 10 Gigabit transceivers. We supply parallel optic transceivers with as many as 12 parallel channels for high performance core routing and server applications. For enterprise networking and server I/O applications, we also supply high speed SerDes products integrated into application specific integrated circuits, or ASICs.

Industrial and Automotive Electronics.    We provide a broad variety of products for the general industrial, automotive and consumer appliance markets. We offer optical isolators, or optocouplers, which provide electrical insulation and signal isolation for systems that are susceptible to electrical noise caused by crosstalk, power glitches or electrical interference.

 

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Optocouplers are used in a diverse set of applications, including industrial motors, automotive systems including those used in hybrid engines, power generation and distribution systems, switching power supplies, telecommunications equipment, consumer appliances, computers and office equipment, plasma displays, and military electronics. For industrial motors and robotic motion control, we supply optical encoders in module form and housed in ingress-protected enclosures, as well as integrated circuits, or ICs, for the controller and decoder functions to accompany the motion sensors themselves. For electronic signs and signals, we supply LED assemblies that offer high brightness and stable light output over thousands of hours, enabling us to support traffic signals, large commercial signs and other displays. For industrial networking, we provide Fast Ethernet transceivers using plastic optical fiber that enable quick and interoperable networking in industrial control links and factory automation.

Consumer and Computing Peripherals.    We manufacture motion control encoders that control the paper feed and print head movement in printers and other office automation products. In addition, we were an early developer of image sensors for optical mouse applications, using LEDs and CMOS image sensors to create a subsystem that can detect motion over an arbitrary desktop surface. We are a leading supplier of image sensors for optical mice today, and have launched a new line of laser-based mouse products with improved precision. Displays, especially in notebook computer applications, use our products for LED backlighting and sensors to control display brightness based on ambient light conditions.

The table below presents the major product families, major applications and major end customers in our four primary target markets.

 

Target Market		Major Product Families		Major Applications		Major End Customers
Wireless Communications		•    RF amplifiers •    RF filters •    RF front end modules (FEMs) •    Ambient light sensors •    LEDs •    Low noise amplifiers •    mm-wave mixers •    Diodes		•    Voice and data communications •    Camera phone •    Keypad and display backlighting •    Backlighting control •    Base stations		•    LG Electronics Inc. •    Samsung Electronics Co., Ltd.
Wired Infrastructure		•    Fiber optic transceivers •    Serializer/deserializer (SerDes) ASICs		•    Data communications •    Storage area networking •    Servers		•    Brocade Communications Systems, Inc. •    Cisco Systems Inc. •    Hewlett-Packard Company •    International Business Machines Corp. •    Juniper Networks Inc.
Industrial and Automotive Electronics		•    Fiber optic transceivers •    LEDs •    Motion control encoders and subsystems •    Optocouplers		•    In-car infotainment •    Displays •    Lighting •    Factory automation •    Motor controls •    Power supplies		•    ABB Ltd. •    Siemens AG
Consumer and Computing Peripherals		•    Optical mouse sensors •    Motion control encoders and subsystems		•    Optical mice •    Printers •    Optical disk drives		•    Hewlett-Packard Company •    Logitech International S.A. •    Primax Electronics Ltd.

 

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Research and Development

We are committed to continuous investment in product development. Our products grew out of our own research and development efforts, and have given us competitive advantages in certain target markets due to performance differentiations. In recent years, we have launched a new line of RF components, a variety of fiber optic transceivers, 65nm high speed SerDes integrated circuits, updated optocoupler products, optical encoders, as well as new ambient light photo sensor and proximity sensor products. In addition, our team of engineers works closely with many of our customers to develop and introduce products that address the specific requirements of those customers.

We plan to continue investing in product development to drive growth in our business. We also invest in process development and maintain fabrication capabilities in order to optimize processes for devices that are manufactured internally. Research and development expenses were $121 million for the six months ended May 3, 2009, and $265 million, $205 million and $187 million for the years ended November 2, 2008, October 31, 2007 and October 31, 2006, respectively. We anticipate that we will continue to make significant research and development expenditures in order to maintain our competitive position with a continuous flow of innovative and sustainable product platforms. As of May 3, 2009, we had approximately 1,300 employees dedicated to research and development at multiple locations around the world.

We also have research and development alliances with partners and ongoing technology sharing relationships with our principal contract manufacturers. We anticipate that we will continue to employ research and development alliances to maximize the impact of our internal research and development investment.

Customers, Sales, Marketing and Distribution

We have a diversified and historically stable customer base. In the six months ended May 3, 2009, no single customer accounted for 10% or more of our net revenue from continuing operations, and our top 10 customers, which included four distributors, collectively accounted for 59% of our net revenue from continuing operations. In addition, in the six months ended May 3, 2009, we believe that direct sales to Cisco Systems, Inc. when combined with indirect sales to Cisco through the contract manufacturers that Cisco utilizes, accounted for approximately 10% of our net revenues from continuing operations.

We sell our products through a network of distributors and our direct sales force globally. We have strategically developed distributor relationships to serve tens of thousands of customers, and we are a leading supplier to two of the largest global electronics components distributors, Arrow Electronics, Inc. and Avnet, Inc. Our direct sales force is focused on supporting our large OEM customers. Within North America, we also complement our direct sales force with a network of manufacturing sales representative companies to cover our emerging OEM customers in order to ensure these customers receive the proper level of attention and support.

As of May 3, 2009, our sales and marketing organization consisted of approximately 500 employees, many of whom have responsibility for emerging accounts, for large, global accounts, or for our distributors. Our sales force has specialized product and service knowledge that enables us to sell specific offerings at key levels throughout a customer’s organization. Our main global distributors are Arrow Electronics, Inc. and Avnet, Inc., complemented by a number of specialty regional distributors with customer relationships based on their respective product ranges. We also provide a broad range of products and applications-related information to customers and channel partners via the Internet.

 

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Our customers require timely delivery often to multiple locations around the world. As part of our global reach, we have 11 sales offices located in nine countries, with a significant presence in Asia, which is a key center of the worldwide electronics supply chain. Many of our customers design products in North America or Europe that are then manufactured in Asia. We maintain dedicated regional customer support call centers, where we address customer issues and handle logistics and other order fulfillment requirements. We are well-positioned to support our customers throughout the design, technology transfer and manufacturing stages across all geographies.

Operations

A majority of our manufacturing operations are outsourced, and we utilize external foundries, including Chartered Semiconductor Manufacturing Ltd. and Taiwan Semiconductor Manufacturing Company Ltd., or TSMC. For certain of our product families, substantially all of our revenue is derived from semiconductors fabricated by external foundries, including our high speed SerDes ICs, LEDs, and LED-based displays. We also use third-party contract manufacturers for a significant majority of our assembly and test operations, including Amertron Incorporated, Amkor Technology, and the Hana Microelectronics Public Company Ltd. group of companies. We maintain our internal fabrication facilities for products utilizing our innovative materials and processes to protect our intellectual property and to develop the technology for manufacturing, and we outsource standard CMOS processes. Examples of internally fabricated semiconductors include RF GaAs amplifiers and VCSEL-based lasers for fiber optic communications. The majority of our internal III-V semiconductor wafer fabrication is done in the United States and Singapore. As of May 3, 2009, approximately 1,300 manufacturing employees are devoted to internal fabrication operations as well as outsourced activities. For selected customers, we maintain finished goods inventory near or at customer manufacturing sites to support their just-in-time production.

Materials and Suppliers

Our manufacturing operations employ a wide variety of semiconductors, electromechanical components and assemblies and raw materials. We purchase materials from hundreds of suppliers on a global basis. These supply relationships are generally conducted on a purchase order basis. While we have not experienced any difficulty in obtaining the materials used in the conduct of our business and we believe that no single supplier is material, some of the parts are not readily available from alternate suppliers due to their unique design or the length of time necessary for re-design or qualification. Our long-term relationships with our suppliers allow us to proactively manage our technology development and product discontinuance plans, and to monitor our suppliers’ financial health. Some suppliers may nonetheless extend their lead times, limit supplies, increase prices or cease to produce necessary parts for our products. If these are unique components, we may not be able to find a substitute quickly, or at all. To address the potential disruption in our supply chain, we use a number of techniques, including qualifying multiple sources of supply, redesign of products for alternative components and purchase of incremental inventory for supply buffer.

Competition

The global semiconductor market is highly competitive. While no company competes with us in all of our target markets, our competitors range from large, international companies offering a wide range of products to smaller companies specializing in narrow markets. We compete with IDMs and fabless semiconductor companies as well as the internal resources of large, integrated OEMs. The competitive landscape is changing as a result of an increasing trend

 

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of consolidation within the industry, as some of our competitors have merged with or been acquired by other competitors while others have begun collaborating with each other. We expect this consolidation trend to continue. We expect competition in the markets in which we participate to continue to increase as existing competitors improve or expand their product offerings and as new companies enter the market. Additionally, our ability to compete effectively depends on a number of factors, including: quality, technical performance, price, product features, product system compatibility, system-level design capability, engineering expertise, responsiveness to customers, new product innovation, product availability, delivery timing and reliability, and customer sales and technical support.

In the wireless communications target market, we provide RF amplifiers, filters, modules and LEDs for mobile phones. Our primary competitors for this target market are Hittite Microwave Corporation, RF Micro Devices, Inc., Skyworks Solutions, Inc. and TriQuint Semiconductor, Inc. We compete based on our expertise in amplifier design, FBAR technology and module integration. We also compete against a number of smaller, niche wireless players based on our proprietary design expertise, broad product portfolio, proprietary material processes and integration expertise.

In the wired infrastructure target market, we provide fiber optic transceivers and SerDes ASICs for high-speed data communications and server applications. Our primary competitors for this target market are Finisar Corporation, International Business Machines Corp. Microelectronics Division, ST Microelectronics N.V. and Texas Instruments Incorporated. We compete based on the strength of our high speed proprietary design expertise, our deep customer relationships, proprietary process technology and broad product portfolio.

In the industrial and automotive electronics target market, we provide fiber optic transceivers for communication networks, LEDs for displays, motion control encoders and subsystems and optocouplers for factory automation and motor controls. Our primary competitors for this target market are Analog Devices, Inc., Heidenhain Corporation, NEC Electronics Corporation and Toshiba Corporation. We compete based on our design expertise, broad product portfolio, reputation for quality products and large customer base.

In the consumer and computing peripherals target market, we provide optical mouse image sensors for optical mice and motion control encoders and subsystems for printers and optical disk drives. Our primary competitors for this target market are Pixart Imaging Inc. and Sharp Corporation. In these applications, we compete based on our long history of innovation and market leadership, along with our design expertise.

Intellectual Property

Our success depends in part upon our ability to protect our intellectual property. To accomplish this, we rely on a combination of intellectual property rights, including patents, mask works, copyrights, trademarks, service marks, trade secrets and similar intellectual property, as well as customary contractual protections with our customers, suppliers, employees and consultants, and through security measures to protect our trade secrets.

We acquired ownership and license rights to a portfolio of patents and patent applications, as well as certain registered trademarks and service marks for discrete product offerings, from Agilent in the SPG Acquisition. We have continued to have issued to us, and to file for, additional United States and foreign patents since the SPG Acquisition. As of May 3, 2009, we had approximately 2,000 U.S. and 900 foreign patents and approximately 800 U.S. and 1,500 foreign pending patent applications. Our research and development efforts are presently resulting in

 

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approximately 150 to 200 new patent applications per year relating to a wide range of RF and optoelectronic components and associated applications. The expiration dates of our patents range from 2009 to 2026, with a small number of patents expiring in the near future, none of which are expected to be material to our intellectual property portfolio.

We do not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims. Since the SPG Acquisition, we have focused our patent application program to a greater extent on those inventions and improvements that we believe are likely to be incorporated into our products as contrasted with more basic research.

Much of our intellectual property is the subject of cross-licenses to other companies that have been granted by Agilent, or if originally derived from Hewlett-Packard Company, by Hewlett-Packard Company. In addition, we license third-party technologies that are incorporated into some elements of our design activities, products and manufacturing processes. Historically, licenses of the third-party technologies used by us have been available to us on acceptable terms.

The semiconductor industry is characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by the vigorous pursuit, protection and enforcement of intellectual property rights. Many of our customer agreements require us to indemnify our customers for third-party intellectual property infringement claims, which has in the past and may in the future require that we defend those claims and might require that we pay damages in the case of adverse rulings. Claims of this sort could harm our relationships with our customers and might deter future customers from doing business with us. With respect to any intellectual property rights claims against us or our customers or distributors, we may be required to cease manufacture of the infringing product, pay damages, expend resources to develop non-infringing technology, seek a license, which may not be available on commercially reasonable terms or at all, or relinquish patents or other intellectual property rights.

Employees

As of May 3, 2009, we had approximately 3,400 employees worldwide, after implementing a consolidation of our worldwide workforce in the first quarter of fiscal year 2009. Approximately 1,300 were dedicated to research and development, 1,300 to manufacturing, 500 to sales and marketing and 300 to general and administrative functions. By geography, approximately 57% of our employees are located in Asia, 33% in the United States and 10% in Europe. The substantial majority of our employees are not party to a collective bargaining agreement. However, approximately 350 of our 1,000 employees in Singapore, none of which are in management or supervisory positions, are subject to a collective bargaining agreement with United Workers of Electronic and Electrical Industries that expires on June 30, 2010. In addition, all of our employees in Italy and some employees in Japan are subject to a collective bargaining agreement. In Germany we are subject to collective agreements with the works councils at our sites, which apply to German employees other than managing directors and managers with similar authority. In Italy we are subject to national collective agreements between unions and employer associations. Such Italian national collective agreements are compulsory for both the employees and the employer. We believe we have a good working relationship with our employees and we have never experienced an interruption of business as a result of labor disputes.

 

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Facilities

Our principal executive offices are located in Yishun, Singapore, and the headquarters for our U.S. subsidiaries is located in San Jose, California. We conduct our administration, manufacturing, research and development and sales and marketing in both owned and leased facilities. We believe that our owned and leased facilities are adequate for our present operations. The following is a list of our principal facilities and their primary functions.

 

Site		Major Activity		Owned/Leased		Square Footage		Lease Expiration
Yishun, Singapore		Administration, Manufacturing, Research and Development and Sales and Marketing		Leased		144,000		November 2010
Depot Road, Singapore		Manufacturing		Leased		50,000		October 2010
Senoko, Singapore		Manufacturing		Leased		72,000		September 2029
Seoul, Korea		Research and Development and Sales and Marketing		Leased		36,000		October 2010
Penang, Malaysia		Manufacturing, Research and Development, and Administration		Owned—Building Leased—Land		318,000		June 2045
San Jose, CA, United States		Administration, Research and Development and Sales and Marketing		Leased		148,000		November 2015
Fort Collins, CO, United States		Manufacturing and Research and Development		Owned		883,000
Boeblingen, Germany		Administration, Research and Development and Sales and Marketing		Leased		19,000		May 2012
Regensburg, Germany		Manufacturing, Research and Development and Marketing		Leased		21,000		June 2010
Samorin, Slovakia		Manufacturing		Leased		31,000		March 2018
Turin, Italy		Manufacturing and Research and Development		Leased		39,000		April 2012

Environmental and Other Regulation

Our research and development, and manufacturing operations involve the use of hazardous substances and are regulated under international, federal, state and local laws governing health and safety and the environment. These regulations include limitations on discharge of pollutants to air, water, and soil; remediation requirements; product chemical content limitations; manufacturing chemical use and handling restrictions; pollution control requirements; waste minimization considerations; and treatment, transport, storage and disposal of solid and hazardous wastes. We are also subject to regulation by the United States Occupational Safety and Health Administration and similar health and safety laws in other jurisdictions.

We believe that our properties and operations at our facilities comply in all material respects with applicable environmental laws and worker health and safety laws; however, the

 

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risk of environmental liabilities cannot be completely eliminated and there can be no assurance that the application of environmental and health and safety laws to our business will not require us to incur significant expenditures.

We are also regulated under a number of international, federal, state and local laws regarding recycling, product packaging and product content requirements, including legislation enacted in the European Union and China, among a growing number of jurisdictions, that have placed greater restrictions on the use of lead, among other chemicals, in electronic products, which affects materials composition and semiconductor packaging. These laws are becoming more stringent and may in the future cause us to incur significant expenditures.

Legal Proceedings

From time to time, we are involved in litigation that we believe is of the type common to companies engaged in our line of business, including commercial disputes and employment issues. As of the date of this filing, we are not involved in any pending legal proceedings that we believe would likely have a material adverse effect on our financial condition, results of operations or cash flows. However, certain pending disputes involve claims by third parties that our activities infringe their patent, copyright, trademark or other intellectual property rights. These claims generally involve the demand by a third-party that we cease the manufacture, use or sale of the allegedly infringing products, processes or technologies and/or pay substantial damages or royalties for past, present and future use of the allegedly infringing intellectual property. Such claims that our products or processes infringe or misappropriate any such third-party intellectual property rights (including claims arising through our contractual indemnification of our customers) often involve highly complex, technical issues, the outcome of which is inherently uncertain. Moreover, from time to time we pursue litigation to assert our intellectual property rights. Regardless of the merit or resolution of any such litigation, complex intellectual property litigation is generally costly and diverts the efforts and attention of our management and technical personnel.

 

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MANAGEMENT

Executive Officers and Directors

The following table sets forth certain information about our executive officers and directors as of June 30, 2009.

 

Name		Age		Position
Hock E. Tan		57		President, Chief Executive Officer and Director
Douglas R. Bettinger		42		Senior Vice President and Chief Financial Officer
Bryan Ingram		45		Senior Vice President and General Manager, Wireless Semiconductor Division
Fariba Danesh		51		Senior Vice President and General Manager, Fiber Optics Products Division
Jeffrey S. Henderson		50		Senior Vice President, Strategy & Business Development
B.C. Ooi		55		Senior Vice President, Global Operations
Patricia H. McCall		54		Vice President, General Counsel
Dick M. Chang		69		Chairman of the Board of Directors
Adam H. Clammer		38		Director
James A. Davidson(2)		49		Director
James Diller(1)		73		Director
James H. Greene, Jr.(2)		58		Director
Kenneth Y. Hao		40		Director
John R. Joyce		55		Director
David Kerko		36		Director
Justine Lien(1)		46		Director
Donald Macleod(1)(2)		60		Director
Bock Seng Tan		66		Director

 

(1)	Member of the Audit Committee

 

(2)	Member of the Compensation Committee

Hock E. Tan has served as our President, Chief Executive Officer and a director since March 2006. From September 2005 to January 2008, he served as chairman of the board of Integrated Device Technology, Inc., or IDT. Prior to becoming chairman of IDT, Mr. Tan was the President and Chief Executive Officer of Integrated Circuit Systems, Inc., or ICS, from June 1999 to September 2005. Prior to ICS, Mr. Tan was Vice President of Finance with Commodore International, Ltd. from 1992 to 1994, and previously held senior management positions with PepsiCo, Inc. and General Motors Corporation. Mr. Tan served as managing director of Pacven Investment, Ltd., a venture capital fund in Singapore from 1988 to 1992, and served as managing director for Hume Industries Ltd. in Malaysia from 1983 to 1988.

Douglas R. Bettinger has served as our Senior Vice President and Chief Financial Officer since August 2008. From 2007 to 2008, Mr. Bettinger served as Vice President of Finance and Corporate Controller at Xilinx, Inc. From 2004 to 2007, he was Chief Financial Officer at 24/7 Customer, a privately-held company. Mr. Bettinger was at Intel Corporation from 1993 to 2004, where he served in several senior-level finance and manufacturing operations positions, including Corporate Planning and Reporting Controller, and Malaysia Site Operations Controller.

Bryan Ingram has served as our Senior Vice President and General Manager, Wireless Semiconductor Division since November 2007 and prior to that as Vice President of that division since December 2005. Prior to the closing of the SPG Acquisition, Mr. Ingram was the Vice

 

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President and General Manager, Wireless Semiconductor Division of SPG. He has held various other positions with Hewlett-Packard Company and Agilent. Mr. Ingram joined Hewlett-Packard Company in 1990.

Fariba Danesh has served as our Senior Vice President and General Manager, Fiber Optics Products Division since November 2007, and prior to that as Vice President of that division since June 2006. From September 2004 to June 2006, Ms. Danesh served as Executive Vice President of Operations at Maxtor Corporation, and from April 2003 to September 2004 as Chief Operating Officer and Senior Vice President of Operations at Finisar Corporation. Ms. Danesh was with Genoa Corporation from 2000 to April 2003, initially as Senior Vice President, Operations and then as President and Chief Executive Officer, and prior to this held senior positions at Sanmina Corporation, Seagate Technology and Conner Peripherals Disk Division.

Jeffrey S. Henderson has served as our Senior Vice President, Strategy & Business Development since December 2006, and served as our Senior Vice President, Sales and Marketing from December 2005 to December 2006. Prior to the closing of the SPG Acquisition, Mr. Henderson was the Vice President, Sales and Marketing of SPG. He has held various other executive management positions with Hewlett-Packard Company and Agilent, including Personal Systems Business Unit Manager and ASIC Division General Manager. Mr. Henderson began his career with Hewlett-Packard Company in 1991.

B.C. Ooi has served as our Senior Vice President, Global Operations since January 2009. From November 2003 until 2008, Mr. Ooi was at Xilinx, Inc., where he was responsible for all worldwide manufacturing operations, most recently as Senior Vice President of Worldwide Operations. Prior to Xilinx, Mr. Ooi spent 25 years at Intel Corporation, where he served in a variety of positions.

Patricia H. McCall has served as our Vice President, General Counsel since March 2007. She served as Director of Litigation at Adobe Systems from 2006 to 2007. Prior to this, Ms. McCall served as Senior Vice President, General Counsel and Secretary of ChipPAC Inc. from January 2003 to August 2004, when ChipPAC Inc. merged with ST Assembly Test Services Ltd. in August 2004. Ms. McCall served as the Senior Vice President Administration, General Counsel and Secretary of ChipPAC Inc. from November 2000 to January 2003. From November 1995 to November 2000, Ms. McCall was at National Semiconductor Corporation, most recently as Associate General Counsel, and prior to that was a partner at the law firm of Pillsbury, Madison & Sutro, and a Barrister in England.

Dick M. Chang has been a director since December 2005, and served as our Chief Executive Officer from December 2005 until March 2006. He has served as our Chairman of the Board of Directors since March 2006. Prior to the closing of the SPG Acquisition, Mr. Chang was President of SPG. He has held various other positions with Hewlett-Packard Company and Agilent, including Operations Manager for the Components organization, Manufacturing Manager for the Integrated Circuits Business division, Manufacturing and Marketing Manager for the Communications Semiconductor Solutions Division, or CSSD, General Manager of CSSD, General Manager for the Integrated Circuits Business division and Vice President of the Networking Solutions division. Mr. Chang began his career with Hewlett-Packard Company in 1967.

Adam H. Clammer has been a director since September 2005. Since January 2006, Mr. Clammer has been a Member of KKR & Co. L.L.C., which is the general partner of Kohlberg Kravis Roberts & Co. L.P. He was a Director of Kohlberg Kravis Roberts & Co. L.P. from December 2003 to December 2005. Prior to that he was a Principal of Kohlberg Kravis Roberts & Co. L.P. between 1998 and 2003, having begun his career at Kohlberg Kravis Roberts & Co. in

 

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1995. From 1992 to 1995, Mr. Clammer was in the Mergers and Acquisitions Department at Morgan Stanley & Co. Mr. Clammer also serves as a director of Aricent Inc. and NXP B.V.

James A. Davidson has been a director since December 2005. Mr. Davidson is a Managing Director of Silver Lake, a private investment firm that he co-founded in 1999. From June 1990 to November 1998, he was an investment banker with Hambrecht & Quist LLC, most recently serving as a Managing Director and Head of Technology Investment Banking. From 1984 to 1990, Mr. Davidson was an attorney in private practice with Pillsbury, Madison & Sutro. Mr. Davidson also serves as a director of Flextronics International Ltd.

James Diller has been a director since April 2006. Mr. Diller was a founder of PMC-Sierra, Inc., serving as PMC’s Chief Executive Officer from 1983 to July 1997 and President from 1983 to July 1993. Mr. Diller has been a director of PMC since its formation in 1983. Mr. Diller was Chairman of PMC’s board of directors from July 1993 until February 2000, when he became Vice Chairman. Mr. Diller also serves as a director of Intersil Corporation, and is the chairman of the board of Summit Microelectronics.

James H. Greene, Jr. has been a director since December 2005. Mr. Greene joined Kohlberg Kravis Roberts & Co. L.P. in 1986 and was General Partner of Kohlberg Kravis Roberts & Co. L.P. from 1993 until 1996, when he became a Member of KKR & Co. L.L.C., which is the General Partner of Kohlberg Kravis Roberts & Co. L.P. Mr. Greene also serves as a director of Aricent Inc., SunGard Data Systems, Inc., Zhone Technologies, Inc. and Sun Microsystems, Inc.

Kenneth Y. Hao has been a director since September 2005. Mr. Hao is a Managing Director of Silver Lake. Prior to joining Silver Lake in 2000, Mr. Hao was an investment banker with Hambrecht & Quist for 10 years, most recently serving as a Managing Director in the Technology Investment Banking group.

John R. Joyce has been a director since December 2005. Mr. Joyce is a Managing Director of Silver Lake. Prior to joining Silver Lake in 2006, he was the Senior Vice President and Group Executive of the IBM Global Services division. From 1999 to 2004, he was IBM’s Chief Financial Officer. Prior to that, he served in a variety of positions, including President of IBM Asia Pacific and Vice President and Controller of IBM’s global operations. Mr. Joyce also serves as a director of Gartner, Inc., Hewlett-Packard Company, Intelsat, Ltd., Sabre, Inc. and Serena Software, Inc.

David Kerko has been a director since March 2008. Since December 2006, Mr. Kerko has been a Director of Kohlberg Kravis Roberts & Co. L.P. He was a Principal of Kohlberg Kravis Roberts & Co. L.P. between 2002 and 2006, having begun his career at Kohlberg Kravis Roberts & Co. in 1998. Prior to joining KKR, Mr. Kerko was with Gleacher NatWest Inc.

Justine Lien has been a director since June 2008. Ms. Lien was initially appointed to our board of directors in November 2007 and resigned in January 2008 for personal reasons. Ms. Lien served as the Chief Financial Officer, Vice President of Finance, Treasurer, and Secretary of Integrated Circuit Systems, Inc., or ICS, after the company’s recapitalization on May 11, 1999 and served in these capacities through September 2005 when ICS merged with Integrated Device Technologies, Inc. She joined ICS in 1993 holding titles including Director of Finance and Administration and Assistant Treasurer. Ms. Lien also serves as a director of Techwell, Inc.

Donald Macleod has been a director since November 2007. Mr. Macleod joined National Semiconductor Corporation in February 1978 and has served as its President and Chief Operating Officer since the beginning of 2005. Prior to that, he held various other executive and

 

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senior management positions at National Semiconductor Corporation including Executive Vice President and Chief Operating Officer and Executive Vice President, Finance and Chief Financial Officer.

Bock Seng Tan has been a director since April 2006. Mr. Tan was the Chairman of ST Assembly and Test Services Ltd. (STATS) from 1998 until his retirement in 2003. Previously, Mr. Tan was the President and Chief Executive Officer of Chartered Semiconductor Manufacturing, Ltd. from 1993 to 1997. Mr. Tan was the Managing Director for Fairchild Semiconductor International, Inc. in Singapore from 1986 to 1988, and served as the Managing Director of National Semiconductor Corporation’s Singapore operations until 1992 after Fairchild’s merger with National Semiconductor. Mr. Tan started his career at Texas Instruments in Singapore in 1969.

Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships between our directors and executive officers.

Board Composition

The persons serving on our board of directors are designated pursuant to the terms of the Shareholder Agreement entered into between certain investors (other than management) and us in connection with the closing of the SPG Acquisition, as amended. Directors must be elected by our shareholders at each annual general meeting. Pursuant to the Shareholder Agreement, Messrs. Clammer, Greene and Kerko serve on our board as designees of investment funds affiliated with Kohlberg Kravis Roberts & Co., or KKR; Messrs. Davidson, Hao and Joyce serve on our board as designees of investment funds affiliated with Silver Lake Partners, or Silver Lake; and Mr. Bock Seng Tan serves on our board as the designee of Seletar. Please see “Certain Relationships and Related Party Transactions—Amended and Restated Shareholder Agreement” elsewhere in this prospectus.

Bali Investments S.àr.l. owns more than 50% of our outstanding voting securities and we are therefore considered a “controlled company” within the meaning of the Nasdaq Stock Market rules. Following the consummation of this offering, we expect to remain a “controlled company” and we intend to rely upon the “controlled company” exception to the board of directors and committee independence requirements under the Nasdaq Stock Market rules. Pursuant to this exception, we will be exempt from the rules that would otherwise require that our board of directors be comprised of a majority of independent directors and that our compensation committee and nominating and corporate governance committee be composed entirely of independent directors. The “controlled company” exception does not modify the independence requirements for the audit committee, and we already comply with the requirements of the Sarbanes-Oxley Act and the Nasdaq Stock Market rules, requiring that our audit committee be comprised exclusively of independent directors. Our board of directors has undertaken a review of the independence of each director and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors determined that Messrs. Diller, Macleod and Bock Seng Tan and Ms. Lien, representing four of our twelve directors, are “independent directors” as defined under the applicable rules and regulations of the SEC and the Nasdaq Stock Market.

Board Committees

Our board of directors has an Audit Committee, a Compensation Committee and a Treasury Strategy Committee. The Audit Committee is currently comprised of Messrs. Diller and Macleod and Ms. Lien. The Compensation Committee is currently comprised of Messrs. Davidson,

 

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Greene and Macleod. The Treasury Strategy Committee is currently comprised of Messrs. Clammer and Hao. Our board of directors may also establish from time to time any other committees that it deems necessary or advisable. Pursuant to the Shareholder Agreement, for as long as KKR or Silver Lake owns at least 5% of our outstanding ordinary shares, investment funds affiliated with KKR or Silver Lake, as applicable, shall have the right to designate a director to serve on any committee. Please see “Certain Relationships and Related Party Transactions—Amended and Restated Shareholder Agreement” elsewhere in this prospectus.

Audit Committee

The Audit Committee is currently comprised of Messrs. Diller and Macleod and Ms. Lien. The Audit Committee is responsible for assisting our board of directors with its oversight responsibilities regarding the following:

 

•

the integrity of our financial statements;

 

•

our compliance with legal and regulatory requirements;

 

•

independent registered public accounting firm’s qualifications and independence; and

 

•

the performance of our internal audit function and independent registered public accounting firm.

The members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq Stock Market. Our board has determined that Mr. Macleod is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of the Nasdaq Stock Market. Messrs. Diller and Macleod and Ms. Lien are independent directors as defined under the applicable rules and regulations of the SEC and the Nasdaq Stock Market. The audit committee operates under a written charter that satisfies the applicable standards of the SEC and the Nasdaq Stock Market.

Compensation Committee

The Compensation Committee is currently comprised of Messrs. Davidson, Greene and Macleod. The Compensation Committee is responsible for determining executive base compensation and incentive compensation and approving the terms of stock option grants pursuant to our equity incentive plans. The Compensation Committee has the full authority to determine and approve the compensation of our chief executive officer in light of relevant corporate performance goals and objectives. We rely on the “controlled company” exemption from the requirement of having a fully independent Compensation Committee pursuant to the Nasdaq Stock Market rules. The Compensation Committee operates under a written charter that satisfies the applicable standards of the SEC and the Nasdaq Stock Market.

Nominating and Corporate Governance Committee

On or before the completion of this offering, our board intends to form a Nominating and Corporate Governance Committee. The nominating and corporate governance committee will be responsible for evaluating and making recommendations to our board of directors regarding candidates for directorships and the size and composition of our board of directors. In addition, the nominating and corporate governance committee will be responsible for overseeing our corporate governance guidelines and reporting and making recommendations to our board of directors concerning governance matters. We rely on the “controlled company” exemption from the requirement of having a fully independent Nominating and Corporate Governance Committee pursuant to the Nasdaq Stock Market rules.

 

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Treasury Strategy Committee

Our Treasury Strategy Committee is currently comprised of Messrs. Clammer and Hao. The Treasury Strategy Committee is responsible for the oversight of treasury strategy and operations, reporting to our board of directors on an as needed basis.

Code of Ethics and Business Conduct

Our board of directors has adopted a Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct is applicable to all members of the board, executive officers and employees, including our chief executive officer, chief financial officer and principal accounting officer. The Code of Ethics and Business Conduct is available on our Investor Relations website (www.avagotech.com/pages/about/investor_communications) under “Code of Ethics.” The Code of Ethics and Business Conduct addresses, among other things, issues relating to conflicts of interests, including internal reporting of violations and disclosures, and compliance with applicable laws, rules and regulations. The purpose of the Code of Ethics and Business Conduct is to deter wrongdoing and to promote, among other things, honest and ethical conduct and to ensure to the greatest possible extent that our business is conducted in a legal and ethical manner. We intend to promptly disclose (1) the nature of any amendment to our code of ethics that applies to executive officers and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of the waiver on our website in the future.

Director Compensation

We do not compensate our management directors for their service on the board of directors or any committee of the board of directors. Non-management directors (which are those directors not employed by us or any subsidiary) receive an annual fee of $50,000, with the exception of the chairman of the board who receives $75,000. Independent non-management directors (directors not associated with any institutional investor and otherwise considered independent) receive an additional annual fee of $25,000 for serving as the chair of the Audit Committee and an additional $10,000 for serving on each additional committee of the board of directors (other than as the chair of the Audit Committee). Non-management directors also receive a grant of options to purchase 50,000 ordinary shares upon election to the board of directors. The exercise price per share of director options is equal to the fair market value of an ordinary share on the grant date, and director options expire five years from the date of grant, or earlier if optionee ceases to be a director. Generally, director options become vested and exercisable with respect to 20% of the shares subject to the options nine months following the date the director commences service on the board of directors and on each anniversary of that date so that the options are completely vested and exercisable four years and nine months following the date the director commences service on the board of directors subject to continued service on the board of directors through each vesting date; however, options granted to our directors in April 2006 vest at a rate of 20% on each anniversary of December 1, 2005. Members of our board of directors are also reimbursed for travel and other out-of-pocket expenses. Option grants are made to members of our board of directors under the Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries, to which we refer in this prospectus as the Senior Management Plan, and are subject to its terms and conditions as described below under the caption “Employee Benefit and Stock Plans—Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries.”

 

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The following table sets forth information regarding compensation earned by our non-employee directors during the fiscal year ended November 2, 2008.

 

Name(a)(1)		Fees Earned or Paid in Cash ($)(b)		Option Awards ($)(3)(d)			Total ($)(h)
Dick M. Chang		75,000		820,340	(4)		895,340
Adam H. Clammer		50,000		0			50,000
James A. Davidson		50,000		0			50,000
James Diller		50,000		0			50,000
James H. Greene, Jr.		50,000		0			50,000
Kenneth Y. Hao		50,000		0			50,000
John R. Joyce		50,000		0			50,000
David Kerko(2)		37,500		10,935			48,435
Justine Lien(2)		47,760		10,453			58,213
Donald Macleod(2)		60,000		26,883			86,883
Bock Seng Tan		50,000		0			50,000

 

(1)	Mr. Macleod and Ms. Lien were appointed to our board of directors in November 2007. Ms. Lien resigned in January 2008 for personal reasons and rejoined the board in June 2008. Mr. Kerko was appointed to our board of directors in March 2008.

 

(2)

In February 2008, Mr. Macleod was granted an option to purchase 50,000 ordinary shares for $10.22 per share with a grant date fair value of $215,785. In July 2008, Mr. Kerko and Ms. Lien were each granted an option to purchase 50,000 ordinary shares for $10.68 per share with a grant date fair value of $231,300. Each of the options granted vests with respect to 20% of the shares subject thereto on each anniversary of November 20, 2007 for Mr. Macleod, March 17, 2008 for Mr. Kerko and June 3, 2008 for Ms. Lien. These options expire five years after the date of grant. All of these options remained outstanding as of November 2, 2008. Grant date fair market values were determined in accordance with Statement of Financial Accounting Standards No. 123(R), “Share Based Payment”, or SFAS No. 123R. Please see Note 11 to the Consolidated Financial Statements included elsewhere in this prospectus for the valuation assumptions used in determining such amounts.

 

(3)

Represents expense recognized by us in fiscal year 2008 related to options determined in accordance with SFAS No. 123R. Please see Note 11 to the Consolidated Financial Statements included elsewhere in this prospectus for the valuation assumptions used in determining such amounts. As of November 2, 2008 each of Messrs. Clammer, Davidson, Diller, Greene, Hao, Joyce and Tan had options to purchase an aggregate of 50,000 ordinary shares for $5.00 per share outstanding that were granted in April 2006 and vest with respect to 20% of the shares subject thereto on each anniversary of December 1, 2005. These options expire in April 2011.

 

(4)

As of November 2, 2008, Mr. Chang had outstanding options to purchase 266,666 ordinary shares with an exercise price of $1.25 per share and options to purchase 766,666 ordinary shares with an exercise price of $5.00 per share. Options to purchase 483,332 ordinary shares vested on January 31, 2007; the balance, all of which have an exercise price of $5.00 per share, vest pro-rata annually over four years from January 2007, subject to Mr. Chang’s continued service on the board of directors. The options automatically exercise upon the earliest of the termination of Mr. Chang’s service on the board of directors, a change in control or the fifth anniversary of the date of grant.

Executive Compensation

Compensation Discussion and Analysis

Executive Summary

Our Compensation Committee reviews and approves compensation for all our executives.

We have in place a compensation strategy for our executives which focuses on both individual and company performance. Compensation of our executives is structured around the achievement of near-term corporate targets (fiscal year metrics) as well as long-term business objectives and strategies. The Compensation Committee is responsible for evaluating and administering all compensation programs and practices to ensure that they properly

 

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compensate and reward and that they appropriately drive corporate performance while remaining competitive with comparable semiconductor companies competing in the same or similar markets. The Compensation Committee reviews and approves all compensation policies, including executive base salaries, bonuses and equity incentive compensation.

Our named executive officers, or NEOs, for fiscal year 2008 were Hock E. Tan, President and Chief Executive Officer, Douglas R. Bettinger, Senior Vice President and Chief Financial Officer, Bian-Ee Tan, former Chief Operating Officer, Bryan Ingram, Senior Vice President and General Manager, Wireless Semiconductor Division, Fariba Danesh, Senior Vice President and General Manager, Fiber Optics Product Division, Mercedes Johnson, former Senior Vice President, Finance and Chief Financial Officer and James Stewart, former Vice President and General Manager ASIC Product Division. Mr. Stewart resigned from our company for personal reasons in December 2007. Effective August 1, 2008, Ms. Johnson resigned from our company for personal reasons. Douglas R. Bettinger joined our company as Senior Vice President and Chief Financial Officer in August 2008. Effective December 31, 2008, Mr. Bian-Ee Tan resigned from our company for personal reasons.

Objectives and Philosophy of Our Executive Compensation Program

Our Compensation Committee has adopted a compensation philosophy which is intended to keep total cash compensation (base salary plus cash incentive reward) of our executives between the fiftieth and sixtieth percentile of compensation at companies within our peer group. The Compensation Committee believes that setting cash compensation at the mid point of the market is a sufficient competitive position for attracting and retaining executives; provided, however, that our Compensation Committee will make exceptions to this philosophy when it determines it is necessary to attract or retain an executive with the experience and skill the Compensation Committee determines is desirable for a particular position, to provide additional incentive to an executive to achieve the Company’s goals or to maintain internal parity among executives with similar levels of responsibilities. When reviewing and setting compensation against market practices, the Compensation Committee uses industry based market compensation survey data, to which we refer in this prospectus as Market Salary Surveys, from the following data sources:

 

•

Radford Executive Technology Survey (U.S);

 

•

Radford Benchmark Technology Survey (U.S);

 

•

Radford International Technology Survey;

 

•

Radford International Technology Survey (Germany);

 

•

Radford International Technology Survey (Italy); and

 

•

Mercer High Tech Salary Survey (Asia).

The companies the Compensation Committee used as a benchmark for reviewing and setting executive compensation, to which we refer in this prospectus as our Peer Group Companies, and those that participate in the Market Salary Surveys, are:

 

•

Altera Corporation;

 

•

Atmel Corporation;

 

•

Cypress Semiconductor Corporation;

 

•

Fairchild Semiconductor;

 

•

International Rectifier Corporation;

 

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•

Intersil Corporation;

 

•

LSI Logic Corporation;

 

•

Marvell Semiconductor, Inc.;

 

•

Maxim Integrated Products Inc.;

 

•

Microchip Technology Inc.;

 

•

National Semiconductor Corporation;

 

•

ON Semiconductor Corporation;

 

•

Qimonda North America;

 

•

Sharp Microelectronics of the Americas;

 

•

Spansion Inc.;

 

•

STMicroelectronics; and

 

•

Xilinx Inc.

Allocation of equity to executives in the form of the opportunity to purchase ordinary shares is not currently based strictly on the practice at Peer Group Companies. At the time of the SPG Acquisition, we granted significant equity awards to executives in order to attract and retain them. We have from time to time made additional grants of options to our executive officers, typically in connection with their commencement of employment with us, in connection with a promotion or in connection with the assignment of increased responsibilities. When allocating equity, the Compensation Committee looks at each executive, his or her level of experience and expertise and overall value to the company. Equity is a long term retention plan for key executives understanding their level of value and contribution to the company. Generally, vesting of options granted under the Executive Plan are both time and performance based (with equal weighting of fifty percent). The vesting of options granted under the Executive Plan generally occurs in equal annual installments over a period of five years. The Compensation Committee approves all grants made to executives.

Our compensation program for executives is designed to achieve the following:

 

•

attract and retain qualified, experienced and talented executives, understanding competitive pressures from our Peer Group Companies;

 

•

motivate and reward executives whose skills, knowledge and performance are critical to the on-going success of our company;

 

•

encourage executives to focus on the achievement of corporate and financial performance goals and metrics by aligning the incentive reward program to the achievement of both functional/divisional goals and corporate goals; and

 

•

aligning the interests of our executives with those of our shareholders. A significant portion of total compensation paid to our executives is in the form of equity. As such, this serves both as a long term retention strategy and aims to align the interests of our executives with shareholders by tying a significant portion of each executive’s compensation to returns realizable by our shareholders.

Our Compensation Committee did not retain a compensation consultant, either directly or through management, to advise on the compensation of our executive officers for fiscal year 2008.

 

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Components of Our Executive Compensation Program

The components of our executive compensation program are:

 

•

annual base salary;

 

•

annual (fiscal year) cash incentive program;

 

•

equity incentive (opportunities to purchase ordinary shares); and

 

•

perquisites.

Annual Cash Compensation

Base Salary

Our Compensation Committee believes that a competitive base salary is a necessary element of any compensation program designed to attract, engage and retain key executives. Base salaries provide fixed, baseline compensation and are set at levels which are intended to be within a competitive range with similar positions at our Peer Group Companies. The base salaries of all our executives are reviewed annually by the Compensation Committee against positions of similar size and scope in our Peer Group Companies. Annual adjustments to an executive’s base salary take into account:

 

(i)

individual performance throughout the prior fiscal year (based on the achievement of divisional goals used in the annual cash incentive bonus plan, fiscal responsibility and senior leadership ability);

 

(ii)

compa–ratio, which is the actual pay rate of our executives divided by market pay rates from the Market Salary Surveys;

 

(iii)

our ability to pay salary increases; and

 

(iv)

internal equity.

The set targets against which individual performance is measured for the purposes of adjusting base salaries include such measures as unit or division performance against budget, achievement of unit or division sales goals, new product introductions and corporate strategy implementation. The process for internal equity involves comparing executives in peer roles to ensure that base salaries are comparable based on function, scope and responsibilities of the role and taking into account the executive’s experience, technical knowledge and expertise.

In February 2008, our chief executive officer, or CEO, proposed annual merit salary increases for each of our NEOs, except for the CEO, for the approval of the Compensation Committee. The Compensation Committee considered our CEO’s salary increase without any input from the CEO. All increases were implemented February 1, 2008 following full review and approval by the Compensation Committee.

 

Name		Percentage Increase		Base Salary Effective February 1, 2008
Hock E. Tan, President and Chief Executive Officer		4		$	625,000
Bian-Ee Tan, Former Chief Operating Officer		2		$	509,965	(1)
Bryan Ingram, Senior Vice President and General Manager, Wireless Semiconductor Division		4		$	334,608
Fariba Danesh, Senior Vice President and General Manager, Fiber Optic Products Division		2		$	364,164
Mercedes Johnson, Former Senior Vice President, Finance and Chief Financial Officer		4		$	416,008

 

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(1)	The Compensation Committee sets Mr. Bian-Ee Tan’s base salary in U.S. dollars; however, Mr. Bian-Ee Tan is paid in Malaysian Ringgits.

In determining base salary increases for February 1, 2008, the Compensation Committee set the average base salary increase for our company, including executives, at 4% based on its assessment of market trends, the level of prior salary increases and our ability to pay salary increases. The Compensation Committee’s assessment of market trends indicated that the average base salary increase among our Peer Group Companies at the 50^th percentile was approximately 3.5%, and the Compensation Committee adjusted the average base salary increase for our company to 4% because prior base salary increases had been lower than our peer group of companies in such years based on our inability to pay such increases in prior years. Except for our CEO, individual base salary increases were then determined using individual performance throughout the prior fiscal year, individual compa-ratios and the Compensation Committee’s desire for internal parity. Our CEO’s individual base salary increase was determined by our corporate performance for fiscal year 2007 using the same goals as used in our annual cash incentive bonus plan, which were free cash flow and earnings before interest, taxes, depreciation and amortization. The target for free cash flow was $276 million, which was achieved at 112.7% and the target for earnings before interest, taxes, depreciation and amortization was $376 million, which was achieved at 83.7%. The specific divisional goals evaluated and the achievement of the goals for fiscal year 2007 with respect to each executive, other than our CEO, were as set forth in the table below.

 

Name		2007 Divisional Goal		2007 Achievement
Bian-Ee Tan, Former Chief Operating Officer		Revenue		92.5	%
		Direct Contribution Profit		89.9	%
Bryan Ingram, Senior Vice President and General Manager, Wireless Semiconductor Division
		Secure Design Win Targets		150.0	%
		Achieve Direct Gross Margin Budget		105.6	%
Fariba Danesh, Senior Vice President and General Manager, Fiber Optic Products Division		Revenue		86.3	%
		Direct Contribution Profit		65.7	%
		Design Wins		99.3	%
Mercedes Johnson, Former Senior Vice President, Finance and Chief Financial Officer		Expense Budget		114.3	%
		Financial Systems and Controls		100.0	%

The Compensation Committee gave Mr. Hock E. Tan the average base salary increase of 4% based on our achievement of the free cash flow goal and the Compensation Committee’s assessment of his leadership abilities. In setting the base salary increases of Mr. Ingram and Ms. Johnson at the average base salary increase of 4%, the Compensation Committee determined that each had achieved his or her divisional goals and each had strong leadership skills. In setting these base salary increases, the Compensation Committee was also influenced by its desire to promote internal parity among its senior executives.

Mr. Bian-Ee Tan and Ms. Danesh received a lower than average salary increase because each had a relatively high compa-ratio, not all of their divisional goals were met and each executive’s base salary is greater than his or her nearest peer group of executives within our company.

On July 4, 2008, in connection with Mr. Bettinger’s commencement of employment with us, our Compensation Committee set Mr. Bettinger’s initial base salary at $350,000 based on its

 

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review of average market data for CFO positions at our Peer Group Companies, which indicated an average of $400,000 for CFO base salary, and taking into consideration Mr. Bettinger's experience along with the level and responsibility of the position. These factors were not separately analyzed by our Compensation Committee. Instead, our Compensation Committee used the experience and judgment of its members after reviewing these factors and engaging in arms’ length negotiations with Mr. Bettinger in setting Mr. Bettinger’s base salary.

Our CEO may recommend increasing the base salary of an executive at any time throughout the course of the year if a change in the scope of the executive’s role and responsibilities warrants an increase. In limited circumstances, our CEO may propose that an executive’s base salary be adjusted in response to a competitive threat or competitive labor market practice. We will revert to market data using the Market Salary Surveys to help determine the new base salary. The Compensation Committee approves any salary adjustments that are done throughout the fiscal year for executive officers.

As a result of current economic conditions, our Compensation Committee determined not to implement annual merit based base salary increases in fiscal year 2009.

Annual Cash Incentive Program

We have in place a performance based annual cash incentive bonus plan for all of our executive management. The plan is reviewed and approved on a year-to-year basis by our Compensation Committee. Company goals and business metrics are also reviewed and approved by the Compensation Committee prior to allocation. Our performance based annual cash incentive plan is designed to encourage and motivate the CEO to achieve corporate level goals and other executives to achieve both corporate level and functional/divisional level goals, thereby positively contributing to the growth and performance of the company. In fiscal year 2008, the plan was structured to include a target bonus amount expressed as a percentage of base salary which can be achieved by meeting corporate and divisional goals and may be increased or decreased based on individual performance. The formula used to calculate an executive’s performance based bonus is as follows:

Bonus Amount = Target Bonus Amount x Group Performance Factor x Individual Performance Factor

Target Bonus Amounts

Each of our executive officers participates in our performance based annual cash incentive bonus plan. Rates at which our executive officers participate in the performance based annual cash incentive bonus plan are expressed as a percent of base salary. Employees at the level of Vice President and below participate at rates set by a formula adopted by the Compensation Committee based on Market Salary Survey data for our Peer Group Companies, the levels and rates of participation used by Agilent and the Compensation Committee’s experience with similar programs. Our Compensation Committee did not follow a formula or otherwise weigh any of these factors but rather used the factors as general background information prior to determining the participation rates of our named executive officers. For executives at the level of Senior Vice President and above, the Compensation Committee sets the rate of participation based on its assessment of the executive’s experience, ability to influence corporate results and the competitive market data from the Market Salary Surveys for our Peer Group Companies. In particular, the Compensation Committee set the participation rates based on each executive’s experience in her or his role with the company, the level of responsibility held by each executive, which the Compensation Committee believes directly correlates to her or his ability to influence corporate results, and the target bonuses utilized by our Peer Group Companies for senior

 

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executive officers. Each named executive officer’s target bonus amount can be calculated by multiplying his or her participation rate times his or her base salary and is included in the table set forth in the section below entitled “Annual Cash Incentive Program—Summary Bonus Table.”

Group Performance

Group performance for each executive, other than our CEO, consists of corporate performance and division performance, with each component equally weighted at 50%. Our CEO’s group performance is measured solely using corporate performance since our CEO has overall responsibility for our company. A component of performance must be achieved at 50% before it is taken into account in calculating an executive’s bonus amount and cannot exceed 150% of the target for such component.

The Compensation Committee determines corporate performance based on our achievement of corporate goals. The corporate goals for 2008 were revenue growth as compared to fiscal year 2007 and non-GAAP operating margin as a percentage of revenue, and each carried an equal weighting of 50%. The targets for revenue growth and non-GAAP operating margin as a percentage of revenue for fiscal year 2008 were 8.2% and 15.9%, respectively. In December 2008, the Compensation Committee determined that our fiscal year 2008 achievement of revenue growth was 11.3%, or 136% of target, and non-GAAP operating margin as a percentage of revenue was 16%, or 107% of target for aggregate corporate performance of 122% and a contribution rate of 61% to aggregate group performance.

For the purposes of our annual cash incentive bonus plan, non-GAAP operating margin is calculated using the Company’s operating margin for the applicable fiscal year without taking into account amortization of acquisition-related intangibles, share-based compensation, restructuring and asset impairment charges, acquired in-process research and development, loss on extinguishment of debt, and income (loss) from and gain (loss) on discontinued operations.

The Compensation Committee determines an executive’s division performance based on the achievement of goals by the division which the executive oversees. The Compensation Committee sets divisional goals and their weightings based on its assessment of the business requirements of the particular division to which the goals relate and the relative importance of the goals to the division. Each of the divisional goals, and its respective weighting, for our named executive officers is described in the table set forth in the section below entitled “Annual Cash Incentive Program—Summary Bonus Table”. Each divisional goal is set by the Compensation Committee to be difficult to attain and to require substantial effort on behalf of the division and the executive in charge of the division. Divisional goals are not expected to be attained based on average or below average performance. In December 2008, the Compensation Committee determined that divisional goals had been achieved at the levels set forth in the section below entitled “Annual Cash Incentive Program—Summary Bonus Table”.

Individual Performance

Individual performance is applied as a multiplier to the bonus amount calculated based on group performance. Individual performance is determined by the Compensation Committee with input from the CEO for each executive other than the CEO. In determining individual performance the Compensation Committee considers the requirements of the executive’s position including the achievement of the divisional goals set forth in the section below entitled “Annual Cash Incentive Program—Summary Bonus Table”, fiscal responsibility as determined by the Compensation Committee with input from the CEO, other than with respect to himself,

 

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such executive’s senior leadership capability and how each of these factors impacts the overall performance of the executive’s division and/or function. Executives who consistently meet or exceed the requirements of the position, as determined by the Compensation Committee, will receive a bonus multiplier of 150% of the bonus amount calculated using group performance. Executives who meet, and sometimes exceed, the key requirements of their position, as determined by the Compensation Committee, receive the bonus amount calculated using group performance. Executives who meet some, but not all, of the requirements of the position or for whom the Compensation Committee believes that improvement is needed will receive a bonus that is 50% of the bonus amount calculated using group performance. The Compensation Committee may adjust our CEO’s individual performance factor upwards or downwards in its sole discretion based on any additional criteria it determines appropriate.

For fiscal year 2008, the Compensation Committee determined that each of our named executive officers, other than Mr. Ingram, met, and sometimes exceeded, the key requirements of his or her position so that each named executive officer, other than Mr. Ingram, received an individual performance factor of 100%. The Compensation Committee has determined that Mr. Ingram met or exceeded each of the requirements of his position based on the overall performance of his division, the over achievement of the divisional goals for him set forth in the section below entitled “Annual Cash Incentive Program—Summary Bonus Table”, his overall leadership capability and the Compensation Committee’s assessment of his ongoing value to us so that his individual performance factor was set at 150%.

Discretionary Bonuses

Our Compensation Committee supplements the performance based cash incentive plan awards of our NEOs from time to time based on our CEO’s recommendations, other than with respect to himself, and its assessment of individual contributions.

In 2008, Mr. Ingram was paid a discretionary bonus in lieu of a mortgage subsidy to which he was entitled under an Agilent bonus program. The amount of Mr. Ingram’s mortgage subsidy substitute for fiscal year 2008 was determined based on the mortgage subsidy Mr. Ingram would have been entitled to had he remained employed by Agilent. Agilent’s obligation with respect to Mr. Ingram’s mortgage subsidy would have run through July 31, 2010, with decreasing amounts becoming payable each year. We are under no obligation to make the payment to Mr. Ingram and may increase or decrease it at any time, at our discretion.

 

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Summary Bonus Table

With respect to each NEO, divisional and corporate goals were set and achieved, and bonuses were paid, as follows:

 

Name		Partici- pation Rate as a Percentage of Base Salary		Bonus Metric		2008 Weighting as a Percentage of Bonus Target		2008 Achieve- ment		2008 Payout
Hock E. Tan		120%		Corporate Performance		100%		122%
President and Chief Executive Officer				Total Performance-Based Bonus		100%		122%		$	915,000
Douglas R. Bettinger		75%		Direct Expenses		20%		150%
Senior Vice President and Chief Financial Officer				Service Level Agreements		20%		129%
				Asset Management		10%		150%
				Corporate Performance		50%		122%
				Total Performance-Based Bonus		100%		131.2%		$	86,121
Bian-Ee Tan		75%		Sales Revenue		10%		133%
Former Chief Operating Officer				Sales Design Wins		10%		150%
				Sales Direct Expenses		2.5%		0%
				Sales Asset Management		2.5%		150%
				Operations Gross Margin Percentage		15%		147%
				Operations Direct Expenses		5%		0%
				Operations Product Return Tags		5%		125%
				Corporate Performance		50%		122%
				Total Performance-Based Bonus		100%		121.0%		$	462,946
Bryan Ingram		50%		Design Wins		16.7%		150%
Senior Vice President and General Manager, Wireless Semiconductor Division				New Product Revenue		16.7%		150%
				Contribution Profit		16.7%		150%
				Corporate Performance		50%		122%
				Individual Performance Factor				150%
				Total Performance-Based Bonus		100%		203.6%		$	340,654
Fariba Danesh		75%		Design Wins		16.7%		150%
Senior Vice President and General Manager, Fiber Optics Products Division				New Product Revenue		16.7%		89%
				Contribution Profit		16.7%		150%
				Corporate Performance		50%		122%
				Total Performance-Based Bonus		100%		125.6%		$	343,040

In February 2008, the Compensation Committee increased Mr. Hock E. Tan’s participation rate in the annual cash incentive bonus plan from 100% to 120% effective in fiscal year 2008 based on its assessment of Market Salary Surveys, Mr. Hock E. Tan’s experience, overall leadership and management of us and our subsidiaries, our corporate performance for fiscal year 2007 using the same goals as used in our annual cash incentive bonus plan, which were free cash flow and earnings before interest, taxes, depreciation and amortization, and its desire to tie additional compensation for Mr. Tan to our corporate performance. The target for free cash flow was $276 million, which was achieved at 112.7% and the target for earnings before interest, taxes, depreciation and amortization was $376 million, which was achieved at 83.7%.

 

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In August 2008, the Compensation Committee increased Mr. Ingram’s participation rate in the performance based annual compensation program to 75% of his base salary, effective in fiscal year 2009, after determining that Mr. Ingram’s experience and responsibilities compared favorably with that of other Senior Vice Presidents who participate in the program at 75% of base salary.

Using market data from the Market Salary Surveys, our Compensation Committee has determined that our cash bonus plan for executives is competitive as a percentage of base salary, meaning that the percentage of base salary targets for our cash bonus plan fall within the 50th to 60th percentile of our Peer Group Companies, except for the percentage of base salary targets for Mr. Hock E. Tan, Ms. Danesh and Mr. Ingram which exceed the 60th percentile of our Peer Group Companies. Mr. Hock E. Tan’s target annual bonus opportunity was set above the average 100% of base salary at our Peer Group Companies in order to tie additional compensation for Mr. Tan to the achievement of corporate goals. Ms. Danesh’s target annual bonus opportunity was set at the time of her hiring and is higher than the average 50% of base salary at our Peer Group Companies for her position based on the Compensation Committee’s determination that such a target annual bonus opportunity was appropriate in light of Ms. Danesh’s experience and target annual bonus opportunity of 75% of base salary Ms. Danesh had with her prior employer. Mr. Ingram’s target annual bonus opportunity is higher than the average 50% of base salary for his position at our Peer Group Companies based on the Compensation Committee’s determination that a higher target annual bonus opportunity was appropriate in light of Mr. Ingram’s experience and the target annual bonus opportunity for executives with similar levels of responsibility at our company.

The total cash compensation paid to Mr. Hock E. Tan, Ms. Johnson and Mr. Bettinger, excluding his sign-on bonus, was between the 50th and 60th percentile of the average total cash compensation paid at our Peer Group Companies. The total cash compensation paid to each of our named executive officers, other than Mr. Hock E. Tan, Ms. Johnson and Mr. Bettinger, exceeded the 60th percentile of our Peer Group Companies because each such named executive officer achieved the majority of his or her divisional goals above the target set for such named executive officer, each such named executive officer has a base salary that is higher than the average at the 60th percentile of our Peer Group Companies and, with respect to Mr. Ingram and Ms. Danesh, such named executive officers have a higher target annual bonus opportunity as a percentage of base salary. The base salary of Ms. Danesh is higher than the 60th percentile of our Peer Group Companies for her position as the result of arm’s-length negotiation when she was hired by us and our determination that her base salary was appropriate in light of her experience and base salary with her prior employer. The base salaries of Messrs. Bian-Ee Tan and Ingram are higher than the 60th percentile of our Peer Group Companies for such positions based on each executive’s prior experience and base salary with our predecessor. The reasons Ms. Danesh’s and Mr. Ingram’s target annual bonus opportunities are higher than the 60th percentile are discussed in the preceding paragraph.

Equity Incentive Compensation

Our Compensation Committee believes that long term, sustainable growth and performance will be best facilitated through a culture of executive ownership that encourages long term investment and engagement by our executive management. The aim is also to align executive performance and behaviors to create a culture conducive to shareholder investment.

Our Compensation Committee approves options to purchase ordinary shares granted to executive officers. The size of initial (and any subsequent) grants for executives takes into account past equity grants, the executive’s position (level), compensation and the value the

 

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executive brings to the company based on their technical experience, expertise and leadership capabilities. The philosophy behind option grants is to provide the executive with a strong incentive to build value in the company over an extended period of time. While subsequent options may be proposed by our CEO and granted by the Compensation Committee, we do not have a set annual option grant program for executives.

Options to purchase ordinary shares are governed by the Executive Plan, which is administered by the Compensation Committee. Generally, options granted under the Executive Plan vest in equal annual installments over five years based 50% upon the passage of time and 50% on our financial performance, as measured using operating income, subject in each case to continued employment with Avago. The operating income target used for performance-vested options is income (loss) from operations calculated in accordance with GAAP but adjusted to exclude amortization of acquisition-related intangibles, share-based compensation, restructuring and asset impairment charges, acquired in-process research and development, (gain)/loss on extinguishment of debt, and (income) loss from and (gain) loss on discontinued operations. The Compensation Committee determined that non-GAAP operating income provides a better overall measure of our financial performance among periods than operating income calculated in accordance with GAAP would otherwise provide because the amounts not included in the non-GAAP operating income target are either non-recurring, in which case such amounts do not reflect the results of continuing operations for which our Compensation Committee wants our named executive officers to be accountable, or, if recurring, are not related to our operating performance or are amounts over which our Compensation Committee believes our named executive officers do not have control. For example, the Compensation Committee excludes share-based compensation from the operating income target because these expenses are not reflective of our operating performance, our share options typically do not require cash settlement by us and the share-based compensation expenses are often the result of complex calculations using an option pricing model that estimates share-based awards’ fair value based on factors such as volatility and risk-free interest rates that are beyond the control of our named executive officers. In August 2008, our Compensation Committee revised the future operating income targets for our performance-vested options. The operating income targets for fiscal years 2008, 2009 and 2010 were adjusted downward because the Compensation Committee determined that the business model used in setting the targets was no longer consistent with the then-current economic conditions. In establishing the revised operating income target, the Compensation Committee used our financial forecast for fiscal year 2008 and projected compounded growth of 20% for each of fiscal years 2009 and 2010. The revised operating income targets have been set at levels our Compensation Committee has determined are challenging and will require substantial effort on the part of our executives and the company in order to be attained. Our Compensation Committee does not believe that future operating income targets will be achieved if our executives perform at an average or below average level. The performance vesting aims to ensure that the executive has a vested interest in driving positive and sustainable corporate financial results. Pursuant to their initial terms, performance-vested options that do not become exercisable in a given year may be earned in future years, up to the fifth year following the date of grant, if performance in any future year exceeds the target for such year. Generally, the exercise price of options granted under the Executive Plan is equal to the fair market value of our ordinary shares on the date of grant as determined by our Compensation Committee or board of directors.

The operating income target for fiscal year 2008 for the vesting of our performance-vesting options was $272.3 million. In December 2008, our Compensation Committee determined that we had achieved our performance-vesting target at 100% based on operating income of $272.3 million. To calculate the fiscal year 2008 operating income results used for our performance-vested options of $272.3 million from the audited financial statements included in

 

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this prospectus, add $85 million related to the amortization or acquisition-related intangibles ($57 million reported as amortization of intangible assets as part of costs of good sold and $28 million reported in amortization of intangible assets as part of operating expenses), $15 million related to share-based compensation expense and $12 million related to restructuring charges ($6 million related to costs of good sold and $6 million related to operating expenses) to the $160 million reported as income (loss) from operations.

In March 2009, our Compensation Committee made a special broad-based option grant in order to provide incentive to our employees, including certain of our named executive officers, in light of then current economic conditions, our Compensation Committee’s decision not to provide merit-based salary increases for fiscal year 2009 and the delay of our initial public offering. The per share exercise price of the options was set at $10.00, which was higher than the fair market value of our ordinary shares, as determined by our board of directors. Because of the higher exercise price and in light of the factors discussed above, our Compensation Committee established a vesting schedule of 20% per year based on each optionee’s continued employment through the vesting date, and no portion of the special grant vests based upon the performance of our company. The number of our ordinary shares subject to each option grant generally correlated with the level of responsibility of the employees within our company. As part of this broad-based grant, Mr. Hock E. Tan, Ms. Fariba Danesh and Mr. Bryan Ingram were granted options to purchase 300,000, 50,000 and 60,000 of our ordinary shares, respectively.

On July 20, 2009, the Compensation Committee approved the amendment of the performance-based options held by named executive officers to remove the operating income targets and extend the vesting period. The amended options will vest two years after the date such options could first have vested had the performance targets for such options been achieved, provided that the named executive officer remains employed by us through the applicable vesting date. The Compensation Committee determined that the removal of performance targets was appropriate in light of our current financial projections, which are lower than when the revised performance targets were set, and the uncertainty present in the current global economy. In making its determination, the Compensation Committee heavily weighted the importance of providing our named executive officers significant incentives to continue with us for a substantial period following this offering.

Termination-Based Compensation

Separation compensation is determined by company policy and any specific arrangements detailed in the executive’s employment agreement. Severance payments are typically comprised of a cash payment in lieu of salary, bonuses and/or coverage of health benefits for a limited period of time and, in some cases, option vesting acceleration. In addition to employment agreement provisions, the vesting of options granted under the Executive Plan accelerate with respect to 10% of the shares subject to the options if an executive is terminated in connection with the sale of his or her division. Our Compensation Committee must approve any exceptions to severance payments including any additional cash payments and any variance from the Executive Plan regarding the treatment of options. Executives who are terminated from Avago are required to sign a general release of all claims against Avago to receive any severance benefits.

Each of our named executive officers, other than Messrs. Bian-Ee Tan and Stewart, is eligible for severance benefits under his or her respective employment agreement with Avago. The Compensation Committee provides termination benefits to our named executive officers, other than Messrs. Bian-Ee Tan and Stewart, based on its review of severance practices at our Peer Group Companies and as the result of arms’ length negotiations at the time our executives

 

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enter into employment with us or at the time they are requested to take on additional responsibilities. The level of benefits varies from executive to executive based on the level of responsibility of the executive and accommodations made through arms’ length negotiations.

On April 7, 2009, we entered into an Employment Separation Agreement with Mr. Bian-Ee Tan. Pursuant to the agreement, we paid Mr. Tan an aggregate separation payment of $1,229,421 in exchange for his general release of all claims against us and our affiliates and his agreement to abide by the non-competition and non-solicitation provisions of his Employment Separation Agreement for the eighteen month period commencing on December 31, 2008. In addition, we exercised our call right to purchase ordinary shares held by Mr. Tan for $3,248,000, which represented the fair market value of such shares, as determined by our board of directors. The circumstances of Mr. Tan’s termination were such that he was not entitled to severance under our policies for executives in Malaysia.

In connection with Ms. Johnson’s resignation, we entered into a separation agreement with her effective August 1, 2008, or the Termination Date. Under the terms of the separation agreement, we accelerated the vesting of options to purchase 83,000 ordinary shares held by Ms. Johnson. In addition, we agreed to pay $1,819,400, less any applicable withholding, to Ms. Johnson to exercise our call right with respect to all ordinary shares and all vested and exercisable options held by Ms. Johnson as of the Termination Date. The separation agreement further provides that in the event that the remaining 41,500 shares subject to Ms. Johnson’s options for which vesting was accelerated are unexercised as of December 1, 2010, Ms. Johnson will be deemed to automatically exercise such options, and we will be obligated to make a cash payment to Ms. Johnson in an amount equal to the aggregate fair market value of the underlying shares at that time, less the aggregate exercise price for such options. The circumstances of Ms. Johnson’s termination were such that she was not entitled to severance under her severance benefit agreement with us.

In connection with Mr. Stewart’s resignation, we entered into a separation agreement with Mr. Stewart on August 16, 2007. The separation agreement provides that Mr. Stewart’s employment with us would terminate on December 1, 2007. In connection with the separation agreement, Mr. Stewart received a lump sum cash payment equal to his target bonus for fiscal year 2007. In addition, as of the date of Mr. Stewart’s termination of employment, he held options to purchase 133,333 ordinary shares for an exercise price of $1.25, which were fully vested and exercisable, and 366,667 ordinary shares for an exercise price of $5.00 per share, 146,665 of which were vested and exercisable. Of these 146,665 shares, Mr. Stewart was granted 100% vesting on the 36,667 performance options that vested on December 1, 2007. In exchange for the cancellation of all of Mr. Stewart’s options, and pursuant to the terms of the Executive Plan, we made a lump sum cash payment to Mr. Stewart in an amount equal to $1,961,588, which represents the aggregate fair market value of the ordinary shares subject to the options as of the date of Mr. Stewart’s termination of employment, as determined by our board, less the aggregate exercise price of Mr. Stewart’s options. As a condition to us making these payments, Mr. Stewart executed a general release of all claims against us and our affiliates on December 2, 2007. The circumstances of Mr. Stewart’s termination were such that he was not entitled to severance under our policies for employees in the United States.

 

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The table below sets forth the severance benefits payable to each named executive officer, other than Mr. Bian-Ee Tan, whose benefits are described in the preceding paragraph, upon a termination of employment without cause, for good reason, because of death or because of disability occurring, in each case, apart from a change in control:

 

		Continued Base Salary		Bonus(1)			Health Benefits Continuation Coverage		Option Vesting Acceleration(2)
Hock E. Tan		12 months		100	%		—		—
Douglas R. Bettinger		9 months		50	%		6 months		—
Bryan Ingram		12 months		—			—		12 months
Fariba Danesh		12 months		—			—		12 months

 

(1)	Bonus payments are calculated using the lesser of the executive’s prior year’s bonus or prior year’s target bonus.

 

(2)	Option vesting acceleration is limited to that number of shares subject to time-based options which otherwise would have vested if the executive had continued employment with us through November 1, 2009.

The table below sets forth the severance benefits payable to each named executive officer, other than Mr. Bian-Ee Tan, whose termination benefits are described above, upon a termination of employment without cause, for good reason, because of death or because of disability occurring, in each case, in connection with a change in control. Each executive must provide a full release of claims in order to be eligible for his or her full severance payment.

 

		Continued Base Salary		Bonus(1)			Health Benefits Continuation Coverage		Option Vesting Acceleration
Hock E. Tan		24 months		200	%		—		12 months	(2)
Douglas R. Bettinger		12 months		100	%		12 months		12 months	(2)
Bryan Ingram		12 months		—			—		12 months	(3)
Fariba Danesh		12 months		—			—		12 months	(3)

 

(1)	Bonus payments are calculated using the lesser of the executive’s prior year’s bonus or prior year’s target bonus.

 

(2)	Accelerated vesting is limited to time-based options which would otherwise vest solely upon the executive’s continued employment.

 

(3)	Option vesting acceleration is limited to that number of shares subject to time-based options which otherwise would have vested if the executive had continued employment with us through November 1, 2009.

For more detailed descriptions of the benefits provided to our named executive officers upon a termination of employment, please see “Employment, Severance and Change of Control Agreements with Named Executive Officers” below.

Other Compensation

All of our executive officers are eligible to participate in certain benefits plans and arrangements offered to employees generally. Such benefits include health, dental, life and disability insurance and in the case of U.S. based executives, the 401(k) plan. We pay the full-monthly premium for each U.S. based employee, including each executive, for basic medical coverage. For other medical, dental and vision coverage, we pay a portion of the cost and the employees, including executives, pay a portion of the cost. We pay 100% of the premium for all employees, including executives, for Basic Life Insurance, Accidental Death and Dismemberment, Business Travel Accident Insurance and the Employee and Family Assistance Plan. We pay 100% of the premiums for all Colorado employees, including executives, for Short Term and Long Term Disability. Employees in California, including executives, contribute .08% of the first $86,698 in annual earnings to the California Voluntary Disability Plan for Short Term

 

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Disability and we pay 100% of the premium for Long Term Disability. We provide access to a Group Universal Life and Long-Term Care coverage but the entire cost is paid by the employee, including executives.

Consistent with our overall compensation philosophy, we intend to continue to maintain our current benefits plan for executives as well as other employees. Our Compensation Committee in its discretion may revise, amend or add to any executive’s benefits and perquisites if it deems necessary.

U.S. based executives may also participate in the Avago Technologies U.S. Inc. Deferred Compensation Plan. For a description of the Deferred Compensation Plan, see footnote 1 of the 2008 Non-Qualified Deferred Compensation Table.

We determine perquisites on a case by case basis and will provide a perquisite to a named executive officer when we believe it is necessary to attract or retain the executive officer. In fiscal year 2008, the following executives received the following perquisites:

 

Name		Perquisites
Hock E. Tan, President and Chief Executive Officer		Reimbursement for travel to a residence in Pennsylvania
Bian-Ee Tan, Former Chief Operating Officer		Housing allowance, club memberships, private health insurance, medical reimbursement, tax preparation service reimbursement and reimbursement of taxes in Malaysia as a result of services performed there
James Stewart, Former Vice President and General Manager, ASIC Products Division		Use of company car and car allowance

Tax and Accounting Considerations

While the Compensation Committee and our board of directors generally considers the financial accounting and tax implications of its executive compensation decisions, neither element has been a material consideration in the compensation awarded to our named executive officers historically. In addition, the compensation committee and our board of directors has considered the potential future effects of Section 162(m) of the Internal Revenue Code on the compensation paid to our executive officers. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for our Chief Executive Officer and each of the other named executive officers (other than our Chief Financial Officer), unless compensation is performance-based. As we are not currently publicly-traded, our board of directors has not previously taken the deductibility limit imposed by Section 162(m) into consideration in setting compensation. Our compensation committee, however, intends to adopt a policy that, where reasonably practicable, we will seek to qualify the variable compensation paid to our executive officers for an exemption from the deductibility limitations of Section 162(m).

 

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Fiscal Year 2008 Summary Compensation Table

The following table sets forth information about compensation earned by our CEO, our CFO, and each of our three other most highly compensated executive officers for the fiscal year ended November 2, 2008. We refer to these officers in this prospectus as our named executive officers or NEOs.

 

Name and Principal Position (a)		Year (b)		Salary  ($) (c)		Bonus ($) (d)			Option Awards ($)(2) (f)			Non-Equity Incentive Plan Compensation ($)(3) (g)			All Other Compensation ($) (h)			Total ($) (i)
Hock E. Tan President and Chief Executive Officer		2008		623,468		0			2,276,807			915,000			34,269	(4)		3,849,544
		2007		600,000		600,000			2,039,654			0			47,642			3,287,296
Douglas R. Bettinger Senior Vice President and Chief Financial Officer		2008		87,500		165,593	(1)		67,529			86,121			0			406,743
Bian-Ee Tan(5) Former Chief Operating Officer		2008		494,712		0			1,437,983			0	(5)		544,147	(6)		2,476,842
		2007		488,899		220,221			1,288,203			291,500			341,008			2,629,831
Bryan Ingram Senior Vice President and General Manager, Wireless Semiconductor Division		2008 2007		333,913 320,154		24,730 158,267	(7)		408,908 229,611			340,654 127,662			9,000 36,400	(8)		1,117,205 872,094
Fariba Danesh Senior Vice President and General Manager, Fiber Optics Product Division		2008		365,150		0			390,501			343,040			9,000	(8)		1,107,691
Mercedes Johnson Former Senior Vice President, Finance and Chief Financial Officer		2008 2007		311,149 387,506		0 0			243,071 329,890			0 260,405			1,178,600 0	(9)		1,732,820 977,801
James Stewart Former Vice President and General Manager, ASIC Products Division		2008 2007		24,289 280,526		0 15,157			(66,403 262,413	)(10)		0 99,664			2,077,209 30,040	(11)		2,035,095 687,800

 

(1)	Represents a $100,000 sign on bonus paid to Mr. Bettinger and a gross up on the taxes associated with such bonus.

 

(2)

Represents expense recognized by us in fiscal year 2008 related to options determined in accordance with SFAS No. 123R. Please see Note 11 in the Consolidated Financial Statements included elsewhere in this prospectus for the valuation assumptions used in determining such amounts. The performance-based options granted prior to our adoption of SFAS No. 123R on November 1, 2006 were subject to variable accounting under APB No. 25. The expense reported in the table reflects the amount we accrued in fiscal year 2008. For all options granted on or subsequent to our adoption of SFAS No. 123R, we recorded expense under the fair value method for both time and performance vesting portions.

 

(3)	Represents amounts paid for fiscal year 2008 under our annual cash incentive program. Please see plan description in “—Compensation Discussion and Analysis—Annual Cash Compensation—Annual Cash Incentive Program” above.

 

(4)	Represents $9,000 401(k) employer match; and $25,269 reimbursement for travel to a residence in Pennsylvania.

 

(5)

Mr. Bian-Ee Tan terminated employment with us on December 31, 2008. In connection with his termination of employment, we paid Mr. Tan severance in the amount of $1,229,421, $766,475 of which was related to his base salary and $462,946 of which was related to the target bonus that he would have earned based on performance had he remained employed with us through the date of payment. All sums presented for Mr. Bian-Ee Tan for 2008 are converted from Malaysian Ringgits using the November 2, 2008 exchange ratio of 3.5295 Ringgits per U.S. Dollar as reported by x-rates.com., except as indicated in footnote 6 below. All sums presented for Mr. Bian-Ee Tan for 2007 are converted from Malaysian Ringgits using the January 2008 accounting ratio of 3.3402 Ringgits per U.S. Dollar as reported by Bloomberg L.P., except $838 of all other income which was converted from Singapore dollars using the January 2008 accounting ratio of 1.4541 Singapore Dollars per U.S. Dollar as reported by Bloomberg L.P.

 

(6)

Represents $439,365 estimated Malaysian tax reimbursement, $5,476 tax preparation service reimbursement, $14,960 housing allowance, $76,279 Malaysian Provident Fund contributions, $4,082 private health insurance, $3,547 medical reimbursement and $438 club memberships. The tax preparation service reimbursement is converted from Singapore dollars using the November 2, 2008 exchange ratio of 1.4732 Singapore Dollars per U.S. Dollar as reported by x-rates.com.

 

(7)	Represents a cash bonus paid to Mr. Ingram in lieu of a mortgage subsidy that Mr. Ingram was entitled to under an Agilent benefit program.

 

(8)	Represents $9,000 401(k) employer match.

 

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(9)	Represents amounts paid to Ms. Johnson in exchange for the cancellation of vested options.

 

(10)	Pursuant to the terms of the Separation Agreement entered into with Mr. Stewart on August 16, 2007, Mr. Stewart was granted 100% vesting on the 36,667 performance options which vested on December 1, 2007. Mr. Stewart forfeited the remainder of his unvested options.

 

(11)

Represents $1,961,588 paid to Mr. Stewart in exchange for the cancellation of vested options, $114,821 paid to Mr. Stewart which represented the target bonus Mr. Stewart would have been entitled to receive based on performance had he remained employed with us through the date of payment and $800 for car allowance.

Grant of Plan-Based Awards in Fiscal Year 2008

The following table sets forth information regarding grants of incentive awards during the fiscal year ended November 2, 2008 to each of our NEOs.

 

Name (a)		Grant Date (b)			Estimated Future Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under Equity Incentive Plan Awards						All Other Option Awards: Number of Securities Underlying		Exercise or Base Price of Option Awards ($/Sh) (k)		Grant Date Fair Value of Stock and Option Awards ($) (3)(1)
					Thres- hold ($)(1) (c)		Target ($) (2)(d)		Maximum ($) (e)		Treshold (#) (f)		Target (#) (g)		Maximum (#) (h)		Options (#) (j)
Hock E. Tan					93,750		750,000		1,687,000
Douglas R. Bettinger					1,641		65,625		147,656
		8/4/2008	(4)										150,000				150,000		10.68		1,611,870
Bian-Ee Tan					4,781		382,474		860,566
Bryan Ingram					7,027		167,304		376,434
Fariba Danesh					11,471		273,123		614,527
Mercedes Johnson(5)					7,800		312,006		702,014
James Stewart(6)

 

(1)

Threshold amount for Mr. Hock E. Tan is 12.5% of his target bonus amount, calculated based on the achievement of a single corporate goal at 50% of the target for such goal and using the minimum individual performance factor. Threshold amount for Mr. Bettinger is 2.5% of his target bonus amounts, for Mr. Bian-Ee Tan is 1.25% of his target bonus amount, and for Mr. Ingram and Ms. Danesh is 4.2% of their target bonus amounts, in each case, calculated based on the achievement of a single divisional goal at 50% of the target for such goal and using the minimum individual performance factor. Maximum threshold is 225% of the target bonus amount, which assumes maximum (150%) performance for each corporate and divisional goal and uses the maximum individual performance factor (150%). The target bonus amount can also be calculated by multiplying the base salary of each named executive officer times the participation rate of such executive as set forth in the “Annual Cash Incentive Program—Summary Bonus Table” above. For example, Mr. Bettinger’s target amount of $65,625 can be calculated by multiplying 75% times his 2008 base salary of $87,500.

 

(2)

Mr. Hock E. Tan’s bonus participation rate is 120%, Messrs. Bettinger and Bian-Ee Tan and Ms. Danesh’s bonus participation rate is 75% of base salary and Mr. Ingram’s bonus participation rate is 50% of base salary. For fiscal year 2009, Mr. Ingram’s bonus participation rate has been increased to 75%.

 

(3)	The grant date fair value of these options was determined in accordance with SFAS No. 123R. Please see Note 11 to the Consolidated Financial Statements included elsewhere in this prospectus for the valuation assumptions used in determining such amounts.

 

(4)

Mr. Bettinger’s options were granted pursuant to the terms of the Executive Plan. The options covered an aggregate of 300,000 ordinary shares and vest 50% based upon the passage of time and the optionee’s continued employment with us or our subsidiaries and 50% based upon achieving specified financial targets, in each case, at a rate of 20% per year over five years on each anniversary of the grant date. The term of the options is 10 years.

 

(5)	Ms. Johnson resigned her employment with us in August 2008 and forfeited her 2008 bonus opportunity.

 

(6)	Mr. Stewart resigned his employment with us effective December 1, 2007. He did not have the opportunity to earn a bonus in fiscal year 2008.

 

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Outstanding Equity Awards at 2008 Fiscal Year-End

The following table sets forth grants of stock options outstanding on November 2, 2008, the last day of the fiscal year, to each of our named executive officers.

 

		Option Awards
Name (a)		Vesting Reference Date		Number of Securities Underlying Unexercised Options (#) Exercisable (b)		Number of Securities Underlying Unexercised Options (#) Unexercisable (c)		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d)		Option Exercise Price ($) (e)		Option Expiration Date (f)
Hock E. Tan		Dec. 1, 2005(1)		940,000		555,000		855,000		5.00		4/12/2016
Douglas R. Bettinger		Aug. 4, 2008(2)		0		150,000		150,000		10.68		8/3/2018
Bian-Ee Tan(3)		Dec. 1, 2005(2)		720,000		540,000		540,000		5.00		11/30/2015
Bryan Ingram		Dec. 1, 2005(4)		66,666		0		0		1.25		1/23/2015
		Dec. 1, 2005(2)		103,332		77,501		77,501		5.00		11/30/2015
		Dec. 1, 2005(2)		25,000		18,750		18,750		5.00		4/23/2016
		Nov. 1, 2007(2)		35,832		71,667		71,667		10.22		10/31/2017
Fariba Danesh		Jun. 16, 2006(2)		130,000		97,500		97,500		6.48		8/21/2016
		Nov. 1, 2007(2)		35,000		70,000		70,000		10.22		10/31/2017
Mercedes Johnson		Dec. 1, 2005(5)		41,500		0		0		5.00		11/30/2015
James Stewart(6)

 

(1)

Options to purchase 925,000 shares vest based upon the passage of time and Mr. Tan’s continued employment with Avago, and options to purchase 1,425,000 shares vest based upon achieving specified financial targets, in each case, at a rate of 20% per year over five years on each anniversary of the Vesting Reference Date.

 

(2)	Options vest 50% based upon the passage of time and the optionee’s continued employment with Avago and 50% based upon achieving specified financial targets, in each case, at a rate of 20% per year over five years on each anniversary of the Vesting Reference Date.

 

(3)

Mr. Bian-Ee Tan terminated employment with us on December 31, 2008. In connection with his termination of employment, Mr. Tan exercised vested options to purchase 1,080,000 ordinary shares using a cashless exercise pursuant to which 574,382 ordinary shares were issued to Mr. Tan and 505,618 ordinary shares were withheld by us in satisfaction of the exercise price for such options.

 

(4)	Fully vested as of the date of grant.

 

(5)

Ms. Johnson resigned from our company effective August 1, 2008. Pursuant to the terms of Ms. Johnson’s separation agreement, on December 1, 2010, Ms. Johnson’s options will be deemed automatically exercised, and we will be obligated to make a cash payment to Ms. Johnson in December 2010 in an amount equal to the aggregate fair market value of the shares underlying any options that remain unexercised as of December 1, 2010, less the aggregate exercise price of such options.

 

(6)	Mr. Stewart resigned his employment with us effective December 1, 2007.

 

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2008 Non-Qualified Deferred Compensation

The following table sets forth information regarding contributions and earnings under the Avago Technologies U.S. Inc. Deferred Compensation Plan during fiscal year 2008.

 

Name (a)		Registrant Contributions in Fiscal Year 2008 ($)(1) (c)		Aggregate Earnings in Fiscal Year 2008 ($)(2) (d)			Aggregate Withdrawals/ Distribution ($) (e)		Aggregate Balance at November 2, 2008 ($) (f)
Bryan Ingram		0		(6,564	)		0		11,764
James Stewart		0		(177	)		3,539		0

 

(1)

The Avago Technologies U.S. Inc. Deferred Compensation Plan is an unfunded and unsecured deferred compensation arrangement that is designed to allow the participants to defer a specified percentage of their base salary, commissions and/or bonuses in a manner similar to the way in which the Avago Technologies U.S. Inc. 401(k) plan operates, but without regard to the maximum deferral limitations imposed on 401(k) plans by the Internal Revenue Code. In addition, we may make discretionary contributions to participant accounts. As required by applicable law, participation in the Deferred Compensation Plan is limited to a group of our management employees who have an annual base salary plus targeted commissions of at least $175,000, which group includes each of our U.S. based named executive officers.

 

Amounts deferred by each participant pursuant to the Deferred Compensation Plan are credited to a bookkeeping account maintained on behalf of that participant. Amounts credited to each participant under the Deferred Compensation Plan are periodically adjusted for earnings and/or losses at a rate that is equal to one or more of the measurement funds elected by a participant. Currently, the measurement funds consist of the following: Fidelity Retirement Government Money Market Portfolio, PIMCO Total Return Fund Institutional Class, Mainstay ICAP Equity Fund - Class I, Goldman Sachs Small Cap Value Fund Institutional Class, MainStay Large Cap Growth Fund - Class I, Spartan® U.S. Equity Index Fund Investor Class, Fidelity Contrafund®, Wells Fargo Advantage Discovery Fund – Institutional, Templeton Foreign Fund Class A, Fidelity Freedom Funds®, Fidelity Freedom Income Fund®, Fidelity Freedom 2000 Fund®, Fidelity Freedom 2005 Fund®, Fidelity Freedom 2010 Fund®, Fidelity Freedom 2015 Fund®, Fidelity Freedom 2020 Fund®, Fidelity Freedom 2025 Fund®, Fidelity Freedom 2030 Fund®, Fidelity Freedom 2035 Fund®, Fidelity Freedom 2040 Fund®, Fidelity Freedom 2045 Fund® and Fidelity Freedom 2050 Fund®.

 

Distributions are made in accordance with elections filed by participants at the time of their initial deferrals and distributions occur in a lump sum upon death or total disability and in a lump sum or installments upon a participant’s separation of service. Distributions are also made in the event of a change in control of our company.

 

(2)	Amounts reflected are not included in the “Fiscal Year 2008 Summary Compensation Table” because the earnings and losses are not “above-market.” These amounts include dividends, interest and change in market value.

Employment, Severance and Change of Control Agreements with Named Executive Officers

Hock E. Tan

We entered into an offer letter with Hock E. Tan on March 28, 2006 which was amended and restated in July 2009. Mr. Tan’s offer letter provides that Mr. Tan will be our President and Chief Executive Officer commencing March 31, 2006 and that he will be a member of our board of directors. Mr. Tan’s offer letter entitles him to a base salary of $625,000 per year with a target bonus opportunity of 120% of his base salary. Mr. Tan’s offer letter also provides for the grant of an option to purchase 950,000 ordinary shares with 225,000 shares subject to the option vesting 20% per year based upon Mr. Tan’s continued employment and 725,000 shares subject to the option vesting 20% per year based upon us attaining specified performance targets. In accordance with his offer letter, Mr. Tan purchased $2 million in ordinary shares and was granted additional non-qualified options to purchase 1,400,000 ordinary shares. Mr. Tan’s offer letter agreement provides that he will be eligible to participate in all employee benefit plans made available to executive officers, is entitled to enter into an indemnification agreement and must enter into our standard agreement regarding confidential information and proprietary developments. Mr. Tan’s offer letter agreement entitled him to the payment of

 

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a relocation bonus in the amount of one month’s base salary which was paid in a single lump sum following his commencement of employment.

Mr. Tan’s offer letter provides Mr. Tan with severance in the event of the termination of his employment without cause, because of death or disability or a resignation by him for good reason, provided that, in each case, Mr. Tan executes and does not revoke a general release of all claims against us and our affiliates within 60 days following his termination of employment. If the termination of employment without cause, because of death or disability or resignation for good reason takes place within the three months prior to or the 12 months following a change in control, we must provide Mr. Tan with (a) continued salary payments for 24 months following his termination or resignation, (b) an amount equal to 200% of the lesser of Mr. Tan’s prior year’s bonus or target bonus, in both (a) and (b), payable in 24 monthly installments, and (c) 12 months accelerated vesting for those options held by Mr. Tan which would otherwise vest based upon the passage of time and his continued employment. If the termination of employment without cause or resignation for good reason takes place more than three months prior to or more than 12 months following a change in control, Mr. Tan is entitled to (a) continued salary payments for 12 months following his termination or resignation and (b) an amount equal to the lesser of his prior year’s bonus or target bonus, in both (a) and (b), payable in 12 monthly installments.

Douglas R. Bettinger

We entered into an offer letter with Douglas R. Bettinger on July 4, 2008. Mr. Bettinger’s offer letter provides that Mr. Bettinger will be our Senior Vice President and Chief Financial Officer. Mr. Bettinger’s offer letter entitles him to a base salary of $350,000 per year and a target bonus opportunity of 75% of his base salary. Mr. Bettinger’s offer letter also provides for the grant of an option to purchase 300,000 of our ordinary shares with 150,000 of the shares subject to the option vesting at a rate of 20% per year based upon Mr. Bettinger’s continued employment and 150,000 of the shares subject to the option vesting at a rate of 20% per year based upon us attaining specified performance targets and Mr. Bettinger’s continued employment. The offer letter also provides that Mr. Bettinger will be eligible for a $100,000 bonus, for which we will pay all income and employment taxes, provided that he invests at least $175,000 in our ordinary shares prior to October 4, 2008. Mr. Bettinger’s offer letter agreement provides that he will be eligible to participate in all employee benefit plans made available to executive officers, is entitled to enter into an indemnification agreement and must enter into the standard agreement regarding confidential information and proprietary developments.

Mr. Bettinger’s offer letter provides him with severance in the event of the termination of his employment without cause, because of death or disability or a resignation by him for good reason, provided that, in each case, Mr. Bettinger executes and does not revoke a general release of all claims against us and our affiliates within 60 days of any such termination. If the termination of employment without cause, because of death or disability or resignation for good reason takes place within 12 months following a change in control, we must provide Mr. Bettinger with (a) 12 months of continued salary payments commencing on the sixtieth day following his separation from us, (b) an amount equal to 100% of the lesser of Mr. Bettinger’s prior year’s bonus or target bonus payable in 12 monthly installments commencing on the sixtieth day following his separation from us, (c) 12 months accelerated vesting for those options held by Mr. Bettinger which would otherwise vest based upon the passage of time and his continued employment, and (d) the payment of continued health, dental and vision insurance premiums for Mr. Bettinger and any covered dependents for 12 months, or, if earlier, until Mr. Bettinger is covered under similar plans of a new employer. If Mr. Bettinger’s termination of employment without cause or resignation for good reason takes place prior to or

 

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more than 12 months following a change in control, Mr. Bettinger is entitled to (a) nine months of continued salary payments commencing on the sixtieth day following his separation from us, (b) an amount equal to the lesser of 50% of his prior year’s bonus or target bonus payable in nine monthly installments commencing on the sixtieth day following his separation from us, and (c) the payment of continued health, dental and vision insurance premiums for Mr. Bettinger and any covered dependents for six months, or, if earlier, until Mr. Bettinger is covered under similar plans of a new employer.

Mercedes Johnson

We entered into a Severance Benefits Agreement with Mercedes Johnson effective June 14, 2006. Ms. Johnson’s Severance Benefits Agreement provides Ms. Johnson with severance in the event of her termination of employment without cause or a resignation by her for good reason, provided that, in each case, Ms. Johnson executes and does not revoke a general release of all claims against us and our affiliates. If Ms. Johnson’s termination of employment without cause or resignation for good reason takes place within the three months prior to or the 12 months following a change in control, we must provide Ms. Johnson with (a) continued salary payments for 12 months following her termination or resignation, (b) an amount equal to the lesser of Ms. Johnson’s prior year’s bonus or target bonus, in both (a) and (b), payable in 12 monthly installments, (c) 12 months accelerated vesting for those options held by Ms. Johnson which would otherwise vest based upon the passage of time and her continued employment, and (d) the payment of continued health, dental and vision insurance premiums for Ms. Johnson and any covered dependents for 12 months, or, if earlier, until Ms. Johnson and any covered dependents are covered under similar plans of a new employer. If Ms. Johnson’s termination of employment without cause or resignation for good reason takes place more than three months prior to or more than 12 months following a change in control, Ms. Johnson is entitled to (a) continued salary payments for six months following her termination or resignation, (b) an amount equal to 50% of the lesser of her prior year’s bonus or target bonus, in both (a) and (b), payable in six monthly installments, and (c) the payment of continued health, dental and vision insurance premiums for Ms. Johnson and any covered dependents for six months, or, if earlier, until Ms. Johnson and any covered dependents are covered under similar plans of a new employer.

Effective August 1, 2008, Ms. Johnson resigned as our Senior Vice President, Finance and Chief Financial Officer. In connection with Ms. Johnson’s resignation, we entered into a separation agreement with her effective August 1, 2008, or the Termination Date. Under the terms of the separation agreement, we accelerated the vesting of options to purchase 83,000 ordinary shares held by Ms. Johnson. In addition, we agreed to pay $1,819,400, less any applicable withholding, to Ms. Johnson to exercise our call right with respect to all ordinary shares and all vested and exercisable options held by Ms. Johnson as of the Termination Date.

The separation agreement further provides that in the event that the remaining 41,500 shares subject to Ms. Johnson’s options for which vesting was accelerated are unexercised as of December 1, 2010, Ms. Johnson will be deemed to automatically exercise such options, and we will be obligated to make a cash payment to Ms. Johnson in an amount equal to the aggregate fair market value of the underlying shares at that time, less the aggregate exercise price for such options.

Bian-Ee Tan

In November 2005, in anticipation of the SPG Acquisition, Avago Technologies (Malaysia) Sdn. Bhd. entered into an employment agreement with Mr. Bian-Ee Tan typical of those entered

 

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into with other management employees who would be joining Avago. Mr. Tan’s annual base salary was set at approximately $371,597 (using the November 2, 2008 exchange ratio of 3.5295 Malaysian Ringgits per U.S. Dollar as reported by x-rates.com). The agreement gave either party the right to terminate employment on one month’s written notice or payment in lieu of notice. Benefits, tax and payroll conditions were determined at the close of the SPG Acquisition. In October 2006, because he would otherwise have had to retire pursuant to company practice, Mr. Tan’s employment was extended through December 2011 on the same terms and conditions.

On April 7, 2009, we entered into an Employment Separation Agreement with Mr. Tan. Pursuant to the agreement, we paid Mr. Tan an aggregate separation payment of $1,229,421 in exchange for a general release of all claims against us and our affiliates and his agreement to abide by the non-competition and non-solicitation provisions of the Employment Separation Agreement for the eighteen-month period commencing on December 31, 2008. In connection with his termination of employment, Mr. Tan exercised vested options to purchase 1,080,000 ordinary shares using a cashless exercise pursuant to which 574,382 ordinary shares were issued to Mr. Tan and 505,618 ordinary shares were withheld by us in satisfaction of the exercise price for such options. In addition, we exercised our call right to purchase ordinary shares held by Mr. Tan for $3,248,000, which represented the fair market value of the shares as determined by our board of directors.

Bryan Ingram

Avago Technologies U.S. Inc., our wholly owned subsidiary, entered into an employment agreement with Bryan Ingram on October 30, 2007, effective as of November 1, 2007, which was amended and restated in July 2009. Mr. Ingram’s employment agreement provides that Mr. Ingram will be our Senior Vice President and General Manager, Wireless Semiconductor Division. Mr. Ingram’s employment agreement entitles him to a base salary of $334,608 per year (as adjusted from time to time) with a target bonus opportunity of 75% of his base salary. Mr. Ingram’s employment agreement provides that he will be eligible for equity incentive awards and to participate in all employee benefit plans made available to similarly situated employees.

Mr. Ingram’s employment agreement provides that in the event of the termination of his employment with us by us without cause, his death or disability, or a resignation by him for good reason prior to November 1, 2009, we must provide him with 12 months continued salary payments following such termination or resignation, and the accelerated vesting of options to purchase ordinary shares held by Mr. Ingram which would otherwise have vested had he continued his employment with us through November 1, 2009. If Mr. Ingram’s employment is terminated by us without cause, because of his death or disability, or he resigns for good reason after November 1, 2009 and within the three months prior to or 12 months following a change in control, Mr. Ingram is entitled to (a) 12 months continued salary payments, (b) an amount equal to the lesser of his prior year’s bonus or target bonus for the fiscal year in which the termination occurs, and (c) 12 months of accelerated vesting for those options to purchase ordinary shares held by Mr. Ingram which would otherwise vest based solely upon the passage of time and his continued employment. Under the employment agreement, Mr. Ingram must execute, and not revoke, a general release of all claims against us and our affiliates within 60 days of his termination of employment, and any continued salary payments are subject to Mr. Ingram continuing to abide by the noncompetition and nonsolicitation provisions of his employment agreement.

 

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Fariba Danesh

Avago Technologies U.S. Inc., our wholly owned subsidiary, entered into an employment agreement with Fariba Danesh on October 30, 2007, effective as of November 1, 2007 which was amended and restated in July 2009. Ms. Danesh’s employment agreement provides that Ms. Danesh will be Avago’s Senior Vice President and General Manager, Fiber Optics Products Division. Ms. Danesh’s employment agreement entitles her to a base salary of $364,164 per year (as adjusted from time to time) with a target bonus opportunity of 75% of her base salary. Ms. Danesh’s employment agreement provides that she will be eligible for equity incentive awards and to participate in all employee benefit plans made available to similarly situated employees.

Ms. Danesh’s employment agreement provides that in the event of the termination of her employment with Avago by Avago without cause, her death or disability, or a resignation by her for good reason prior to November 1, 2009, we must provide her with 12 months continued salary payments following such termination or resignation, and the accelerated vesting of options to purchase ordinary shares held by Ms. Danesh which would otherwise have vested had she continued her employment with Avago through November 1, 2009. If Ms. Danesh’s employment is terminated by Avago without cause, because of her death or disability, or she resigns for good reason after November 1, 2009 and within the three months prior to or 12 months following our change in control, Ms. Danesh is entitled to (a) 12 months continued salary payments, (b) an amount equal to the lesser of her prior year’s bonus or target bonus for the fiscal year in which the termination occurs, and (c) 12 months of accelerated vesting for those options to purchase ordinary shares held by Ms. Danesh which would otherwise vest based solely upon the passage of time and her continued employment. Under the employment agreement, Ms. Danesh must execute, and not revoke, a general release of all claims against us and our affiliates within 60 days of her termination of employment, and any continued salary payments are subject to Ms. Danesh continuing to abide by the noncompetition and nonsolicitation provisions of her employment agreement.

James Stewart

We entered into a Separation Agreement with James Stewart on August 16, 2007. The separation agreement provides that Mr. Stewart’s employment with us would terminate on December 1, 2007. In connection with the separation agreement, Mr. Stewart received a lump sum cash payment equal to his target bonus for fiscal year 2007. In addition, as of the date of Mr. Stewart’s termination of employment, he held options to purchase 133,333 ordinary shares for an exercise price of $1.25, which were fully vested and exercisable, and 366,667 ordinary shares for an exercise price of $5.00 per share, 146,665 of which were vested and exercisable. Of these 146,665 shares, Mr. Stewart was granted 100% vesting on the 36,667 performance options that vested on December 1, 2007. In exchange for the cancellation of all of Mr. Stewart’s options, and pursuant to the terms of the Executive Plan, we made a lump sum cash payment to Mr. Stewart in an amount equal to $1,961,588, which represents the aggregate fair market value of the ordinary shares subject to the options as of the date of Mr. Stewart’s termination of employment, as determined by our board, less the aggregate exercise price of Mr. Stewart’s options. As a condition to us making these payments, Mr. Stewart executed a general release of all claims against us and our affiliates on December 2, 2007.

 

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Potential Severance Payments and Benefits Upon Certain Terminations

The following table reflects the potential payments and benefits to which the NEOs would be entitled under their agreements as described under “Termination-Based Compensation” above in the event of a termination of employment without cause, because of death or disability or a resignation with good reason taking place not in connection with a change in control. The amounts presented in the table assume a termination date of November 2, 2008 and that all eligibility requirements contemplated by the NEO’s respective agreements or our company’s policies and practices, as applicable, were met.

 

		Cash Severance Base Salary ($)			Cash Severance Bonus ($)			Health Benefits Continuation Coverage ($)		Unexercisable Options that Vest (#)		Unexercisable Options that Vest ($)(1)		Total ($)
Hock E. Tan		625,000			750,000			0		0		0		1,375,000
Douglas R. Bettinger		262,500			131,250			8,174		0		0		401,924
Bian-Ee Tan		766,475	(2)		462,946	(3)		0		0		0		1,229,421
Bryan Ingram		334,608			0			0		49,999		190,473		525,081
Fariba Danesh		364,164			0			0		50,000		144,550		508,714
Mercedes Johnson(4)		0			0			0		83,000		471,440		471,440
James Stewart(5)		0			114,821			0		36,667		208,269		323,090

 

(1)	Represents the difference between the exercise price of each unvested option that is accelerated and $10.68, which the Compensation Committee has determined equals the per share fair market value of our ordinary shares as of November 2, 2008.

 

(2)	Mr. Bian-Ee Tan terminated employment with us on December 31, 2008. Represents amount actually paid to Mr. Bian-Ee Tan pursuant to his Employment Separation Agreement. Termination benefits for senior executives in Malaysia are decided on a case by case basis.

 

(3)

Mr. Bian-Ee Tan terminated employment with us on December 31, 2008. Represents amount actually paid to Mr. Bian-Ee Tan pursuant to his Employment Separation Agreement. Such amount otherwise would have been paid based on his continued employment through the date of payment in fiscal year 2009. We also repurchased ordinary shares held by Mr. Tan for an aggregate of $3,248,000 pursuant to our call right under the management shareholders agreement we entered into with Mr. Tan.

 

(4)

Ms. Johnson resigned from our company effective August 1, 2008. Represents options for which vesting was accelerated in connection with the separation agreement entered into with Ms. Johnson. We also repurchased ordinary shares held by Ms. Johnson for $640,800 pursuant to our call right under the management shareholders agreement we entered into with Ms. Johnson. Pursuant to our call right we also paid Ms. Johnson $1,178,600 in exchange for the cancellation of all of her vested options other than an option to purchase 41,500 of our ordinary shares, which remains outstanding.

 

(5)

Mr. Stewart resigned effective December 1, 2007. In connection with Mr. Stewart’s resignation, we paid Mr. Stewart $114,821, which represented his target bonus for fiscal year 2007 and provided him with 100% vesting on 36,667 performance options, as further described under “Employment, Severance and Change of Control Agreements with Named Executive Officers – James Stewart.” Pursuant to our call right under the management shareholders agreement we entered into with Mr. Stewart, we paid Mr. Stewart $1,961,588 in exchange for the cancellation of all of his vested options.

 

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Potential Severance Payments and Benefits Upon Certain Terminations in Connection with Change in Control

The following table reflects the potential payments and benefits to which the NEOs would be entitled under their employment agreements or our company’s policies and practices as described under “Termination-Based Compensation” above in the event of a termination of employment without cause, because of death or disability or a resignation for good reason taking place in connection with a change in control. The amounts presented in the table assume a termination date of November 2, 2008 and that all eligibility requirements contemplated by the NEO’s respective agreements and our company’s policies and practices, as applicable, were met.

 

		Cash Severance Base Salary ($)		Cash Severance Bonus ($)		Health Benefits Continuation Coverage ($)		Unexercisable Options that Vest (#)		Unexercisable Options that Vest ($)(1)		Total ($)
Hock E. Tan		1,250,000		1,500,000		0		185,000		1,050,800		3,800,800
Douglas R. Bettinger		350,000		260,392		16,347		35,000		0		626,739
Bryan Ingram		334,608		0		0		49,999		190,473		525,081
Fariba Danesh		364,164		0		0		50,000		144,550		508,714

 

(1)	Represents the difference between the exercise price of each unvested option that is accelerated and $10.68, which the Compensation Committee has determined equals the per share fair market value of our ordinary shares as of November 2, 2008.

Employee Benefit and Stock Plans

2009 Equity Incentive Award Plan

We intend to adopt a 2009 Equity Incentive Award Plan, or the 2009 Plan. The principal purpose of the 2009 Plan is to attract, retain and motivate selected employees, consultants and directors through the granting of share-based compensation awards and cash-based performance bonus awards. The 2009 Plan is also designed to permit us to make cash-based awards and equity-based awards intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code.

The principal features of the 2009 Plan are summarized below. This summary is qualified in its entirety by reference to the text of the 2009 Plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

Share Reserve.    Under the 2009 Plan,                      of our ordinary shares will be initially reserved for issuance pursuant to a variety of share-based compensation awards, including options, share appreciation rights, or SARs, restricted share awards, restricted share unit awards, deferred share awards, dividend equivalent awards, performance share awards, performance share unit awards, share payment awards, performance-based awards and other share-based awards, plus the number of ordinary shares remaining available for future awards under our Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries, or the Executive Plan, and our Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries, or the Senior Management Plan, as of the completion of this offering, which will also be the effective date of the 2009 Plan. The number of shares initially reserved for issuance or transfer pursuant to awards under the 2009 Plan will be increased by (i) the number of shares represented by awards outstanding under our Executive Plan and our Senior Management Plan that are forfeited or lapse unexercised and (ii) an annual increase on the first day of each calendar year beginning in              and ending in 2018, equal to the least of (A)                      shares, (B)     % of the ordinary shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (C) such smaller number of ordinary shares as determined by the board; provided, however, no more than                      ordinary shares may be issued upon the exercise of incentive stock options.

 

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The following counting provisions will be in effect for the share reserve under the 2009 Plan:

 

•

to the extent that an award terminates, expires or lapses for any reason, any shares subject to the award at such time will be available for future grants under the 2009 Plan;

 

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to the extent shares are tendered or withheld to satisfy the grant, exercise price or tax withholding obligation with respect to any award under the 2009 Plan, such tendered or withheld shares will be available for future grants under the 2009 Plan;

 

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to the extent any restricted shares are forfeited by the holder, such shares will be available for future grants under the 2009 Plan;

 

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the payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2009 Plan; and

 

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to the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us or any of our subsidiaries will not be counted against the shares available for issuance under the 2009 Plan.

Initially, there will be no limit on the number of shares that may be covered by share-based awards or the maximum aggregate dollar amount subject to cash-based performance awards granted to any individual during any calendar year. However, after a limited transition period, no individual may be granted share-based awards under the 2009 Plan covering more than              shares or more than $             in cash in any calendar year. The limited transition period will expire on the earliest of:

 

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the first material modification of the 2009 Plan;

 

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the issuance of all of our ordinary shares reserved for issuance under the 2009 Plan;

 

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the expiration of the 2009 Plan;

 

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the first meeting of our shareholders at which members of our board of directors are to be elected that occurs after the close of the third calendar year following the calendar year in which our initial public offering occurs; or

 

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such earlier date as may be required by Section 162(m) of the Code.

Administration.    The compensation committee of our board of directors will administer the 2009 Plan unless our board of directors assumes authority for administration. The compensation committee must consist of at least two members of our board of directors, each of whom is intended to qualify as an “outside director,” within the meaning of Section 162(m) of the Code, and a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act. The 2009 Plan provides that the compensation committee may delegate its authority to grant awards to employees other than executive officers and certain senior executives of the company, to a committee consisting of one or more members of our board of directors or one or more of our officers, but our compensation committee charter prohibits such delegation in the case of awards to our named executive officers and the equity awards policy we intend to adopt calls for the compensation committee to approve all equity awards, other than awards made to our non-employee directors, which must be approved by the full board.

Subject to the terms and conditions of the 2009 Plan, the administrator has the exclusive authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the

 

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2009 Plan. The administrator is also authorized to adopt, amend or rescind rules relating to administration of the 2009 Plan. Our board of directors may at any time remove the compensation committee as the administrator and revest in itself the authority to administer the 2009 Plan. The full board of directors will administer the 2009 Plan with respect to awards to non-employee directors.

Eligibility.    Options, SARs, restricted shares and all other share-based and cash-based awards under the 2009 Plan may be granted to individuals who are then our officers, employees or consultants or are the officers, employees or consultants of certain of our subsidiaries. Such awards also may be granted to our directors. Only employees may be granted incentive stock options, or ISOs.

Awards.    The 2009 Plan provides that the administrator may grant or issue options, SARs, restricted shares, restricted share units, deferred shares, dividend equivalents, performance awards, share payments and other share-based and cash-based awards, or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.

 

•

Nonqualified Options, or NQOs, will provide for the right to purchase our ordinary shares at a specified price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NQOs may be granted for any term specified by the administrator, but may not exceed ten years.

 

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Incentive Stock Options will be designed in a manner intended to comply with the provisions of Section 422 of the Code and will be subject to specified restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of an ordinary share on the date of grant, may only be granted to employees, and must not be exercisable after a period of ten years measured from the date of grant. To the extent ISOs having an aggregate exercise price in an amount greater than $100,000 become exercisable by an individual in any calendar year, the options in excess of $100,000 will be treated as NQOs. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our shares, the 2009 Plan provides that the exercise price must be at least 110% of the fair market value of an ordinary share on the date of grant and the ISO must not be exercisable after a period of five years measured from the date of grant.

 

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Restricted Shares may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted shares, typically, may be forfeited for no consideration if the conditions or restrictions on vesting are not met. In general, restricted shares may not be sold, or otherwise transferred, until restrictions are removed or expire. Purchasers of restricted shares, unlike recipients of options, generally will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse.

 

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Restricted Share Units may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on performance criteria established by the administrator. Like restricted shares, restricted share units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted shares,

 

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shares underlying restricted share units will not be issued until the restricted share units have vested, and recipients of restricted share units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

 

•

Deferred Share Awards represent the right to receive our ordinary shares on a future date. Deferred shares may not be sold or otherwise hypothecated or transferred until issued. Deferred shares will not be issued until the deferred share award has vested, and recipients of deferred shares generally will have no voting or dividend rights prior to the time when the vesting conditions are satisfied and the shares are issued. Deferred share awards generally will be forfeited, and the underlying shares will not be issued, if the applicable vesting conditions and other restrictions are not met.

 

•

Share Appreciation Rights may be granted in connection with options or other awards, or separately. SARs granted in connection with options or other awards typically will provide for payments to the holder based upon increases in the price of our ordinary shares over a set exercise price. The exercise price of any SAR granted under the 2009 Plan must be at least 100% of the fair market value of an ordinary share on the date of grant. Except as required by Section 162(m) of the Code with respect to a SAR intended to qualify as performance-based compensation as described in Section 162(m) of the Code, there are no restrictions specified in the 2009 Plan on the exercise of SARs or the amount of gain realizable therefrom, although restrictions may be imposed by the administrator in the SAR agreements. SARs under the 2009 Plan will be settled in cash or ordinary shares, or in a combination of both, at the election of the administrator.

 

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Dividend Equivalents represent the value of the dividends, if any, per share paid by us, calculated with reference to the number of shares covered by the options, SARs or other awards held by the participant. Dividend equivalents may be settled in cash or shares and at such times as determined by the compensation committee or board of directors, as applicable.

 

•

Performance Awards may be granted by the administrator on an individual or group basis. Generally, these awards will be based upon specific performance targets and may be paid in cash or in ordinary shares or in a combination of both. Performance awards may include “phantom” share awards that provide for payments based upon the value of our ordinary shares. Performance awards may also include bonuses that may be granted by the administrator on an individual or group basis and which may be payable in cash or in ordinary shares or in a combination of both.

 

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Share Payments may be authorized by the administrator in the form of ordinary shares or an option or other right to purchase ordinary shares as part of a deferred compensation arrangement in lieu of all or any part of compensation, including bonuses, that would otherwise be payable in cash to the employee, consultant or non-employee director.

Change in Control.    In the event of a change in control where the acquirer does not assume or replace awards granted under the 2009 Plan, awards issued under the 2009 Plan will be subject to accelerated vesting such that 100% of such award will become vested and exercisable or payable, as applicable. In addition, the administrator will also have complete discretion to structure one or more awards under the 2009 Plan to provide that such awards will become vested and exercisable or payable on an accelerated basis in the event such awards are assumed or replaced with equivalent awards but the individual’s service with us or the acquiring entity is subsequently terminated within a designated period following the change in control event. The administrator may also make appropriate adjustments to awards under the 2009 Plan and is authorized to provide for the acceleration, cash-out, termination, assumption,

 

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substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions. Under the 2009 Plan, a change in control is generally defined as:

 

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the transfer or exchange in a single or series of related transactions by our shareholders of more than 50% of our voting shares to a person or group;

 

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a change in the composition of our board over a two-year period such that fifty percent or more of the members of the board were elected through one or more contested elections;

 

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a merger, consolidation, reorganization or business combination in which we are involved, directly or indirectly, other than a merger, consolidation, reorganization or business combination which results in our outstanding voting securities immediately before the transaction continuing to represent a majority of the voting power of the acquiring company’s outstanding voting securities and after which no person or group beneficially owns 50% or more of the outstanding voting securities of the surviving entity immediately after the transaction;

 

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the sale, exchange, or transfer of all or substantially all of our assets; or

 

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shareholder approval of our liquidation or dissolution.

Non-Employee Director Awards.    The 2009 Plan permits our board to grant awards to our non-employee directors pursuant to a written non-discretionary formula established by the plan administrator. Pursuant to this authority, the compensation committee of our board has adopted a non-employee director equity award policy. For a further description of Non-Employee Director Awards see “Director Compensation.”

Adjustments of Awards.    In the event of any share dividend, share split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization, distribution of our assets to shareholders (other than normal cash dividends) or any other corporate event affecting the number of our outstanding ordinary shares or the price of our ordinary shares that would require adjustments to the 2009 Plan or any awards under the 2009 Plan in order to prevent the dilution or enlargement of the potential benefits intended to be made available thereunder, the committee will make appropriate, proportionate adjustments to:

 

•

the aggregate number and type of shares subject to the 2009 Plan and any other plan terms denominated in shares;

 

•

the terms and conditions of outstanding awards (including, without limitation, any applicable performance targets or criteria with respect to such awards); and

 

•

the grant or exercise price per share of any outstanding awards under the 2009 Plan.

Amendment and Termination.    Our board of directors or the committee (with board approval) may terminate, amend, or modify the 2009 Plan at any time and from time to time. However, we must generally obtain shareholder approval:

 

•

to increase the number of shares available under the 2009 Plan (other than in connection with certain corporate events, as described above);

 

•

to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule).

Options may be amended to reduce the per share exercise price below the per share exercise price of such option on the grant date without shareholder approval.

 

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Expiration Date.    The 2009 Plan will expire on, and no option or other award may be granted pursuant to the 2009 Plan after ten years following the effective date of the 2009 Plan. Any award that is outstanding on the expiration date of the 2009 Plan will remain in force according to the terms of the 2009 Plan and the applicable award agreement.

Securities Laws and Federal Income Taxes.    The 2009 Plan is designed to comply with various securities and federal tax laws as follows:

 

•

Securities Laws.    The 2009 Plan is intended to conform to all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the SEC thereunder, including without limitation, Rule 16b-3. The 2009 Plan will be administered, and options will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations.

 

•

Section 409A of the Code.    Certain awards under the 2009 Plan may be considered “nonqualified deferred compensation” for purposes of Section 409A of the Code, which imposes certain additional requirements regarding the payment of deferred compensation. Generally, if at any time during a taxable year a nonqualified deferred compensation plan fails to meet the requirements of Section 409A, or is not operated in accordance with those requirements, all amounts deferred under the 2009 Plan and all other equity incentive plans for the taxable year and all preceding taxable years, by any participant with respect to whom the failure relates, are includible in gross income for the taxable year to the extent not subject to a substantial risk of forfeiture and not previously included in gross income. If a deferred amount is required to be included in income under Section 409A, the amount also is subject to interest and an additional income tax. The interest imposed is equal to the interest at the underpayment rate plus one percentage point, imposed on the underpayments that would have occurred had the compensation been includible in income for the taxable year when first deferred, or if later, when not subject to a substantial risk of forfeiture. The additional federal income tax is equal to 20% of the compensation required to be included in gross income. In addition, certain states, including California, have laws similar to Section 409A, which impose additional state penalty taxes on such compensation.

 

•

Section 162(m) of the Code.    In general, under Section 162(m) of the Code, income tax deductions of publicly held corporations may be limited to the extent total compensation (including, but not limited to, base salary, annual bonus, and income attributable to option exercises and other non-qualified benefits) for certain executive officers exceeds $1,000,000 (less the amount of any “excess parachute payments” as defined in Section 280G of the Code) in any taxable year of the corporation. However, under Section 162(m), the deduction limit does not apply to certain “performance-based compensation” established by an independent compensation committee that is adequately disclosed to, and approved by, shareholders. In particular, options and SARs will satisfy the “performance-based compensation” exception if the awards are made by a qualifying compensation committee, the 2009 Plan sets the maximum number of shares that can be granted to any person within a specified period and the compensation is based solely on an increase in the share price after the grant date. Specifically, the option exercise price must be equal to or greater than the fair market value of the shares subject to the award on the grant date. Under a Section 162(m) transition rule for compensation plans of corporations which are privately held and which become publicly held in an initial public offering, the 2009 Plan will not be subject to Section 162(m) until a specified transition date, which is the earlier of:

 

•

the material modification of the 2009 Plan;

 

•

the issuance of all of the ordinary shares reserved for issuance under the 2009 Plan;

 

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•

the expiration of the 2009 Plan; or

 

•

the first meeting of our shareholders at which members of our board of directors are to be elected that occurs after the close of the third calendar year following the calendar year in which our initial public offering occurs.

After the transition date, rights or awards granted under the 2009 Plan, other than options and SARs, will not qualify as “performance-based compensation” for purposes of Section 162(m) unless such rights or awards are granted or vest upon pre-established objective performance goals, the material terms of which are disclosed to and approved by our shareholders. Thus, we expect that such other rights or awards under the plan will not constitute performance-based compensation for purposes of Section 162(m).

We have attempted to structure the 2009 Plan in such a manner that, after the transition date the compensation attributable to options, SARs and other performance-based awards which meet the other requirements of Section 162(m) will not be subject to the $1,000,000 limitation. We have not, however, requested a ruling from the IRS or an opinion of counsel regarding this issue.

We intend to file with the SEC a registration statement on Form S-8 covering our ordinary shares issuable under the 2009 Plan. See “Shares Eligible for Future Sale—Stock Plans.”

Amended and Restated Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries

Our board of directors initially adopted and our shareholders initially approved the Executive Plan on November 23, 2005. The Executive Plan was amended and restated by our board of directors on April 14, 2006 and January 25, 2007 and was approved by our shareholders on April 11, 2007. The Executive Plan was also amended and restated by our board of directors on February 25, 2008.

Following the completion of this offering, we will not make any further grants under the Executive Plan. As discussed above, upon the completion of this offering, any ordinary shares that are available for issuance immediately prior to the completion of this offering under the Executive Plan and the Senior Management Plan will become available for issuance under the 2009 Plan.

Types of Awards.    The Executive Plan provides for the grant of non-qualified options and share purchase rights to employees, consultants and other persons having a unique relationship with us or our subsidiaries.

Share Reserve.    We have reserved an aggregate of 30,000,000 ordinary shares for issuance under the Executive Plan and the Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries, or the Senior Management Plan.

Administration.    Our Compensation Committee administers the Executive Plan. The Compensation Committee has the authority to select the employees to whom options and/or share purchase rights will be granted under the Executive Plan, the number of shares to be subject to those options or share purchase rights, and the terms and conditions of the options and share purchase rights. In addition, the Compensation Committee has the authority to construe and interpret the Executive Plan and to adopt rules for the administration, interpretation and application of the Executive Plan that are consistent with the terms of the Executive Plan.

 

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Shareholder Agreements.    The options and shares acquired upon exercise of options and share purchase rights granted pursuant to the Executive Plan are subject to the terms and conditions of shareholder agreements entered into by the option and share purchase right holders. Please see “—Employee Benefit and Stock Plans—Management Shareholders Agreement.”

Amendment.    The Executive Plan may be amended or modified by the Compensation Committee, and may be terminated by our board of directors.

Exercise.    The exercise price of options and share purchase rights granted under the Executive Plan may be paid for in cash, or, with the consent of the Compensation Committee, with the ordinary shares, including ordinary shares acquired contemporaneously upon exercise.

Certain Events.    Under the Executive Plan, the Compensation Committee may, in its sole discretion, provide that options granted under the plan cannot be exercised after the consummation of the merger or consolidation into another corporation, the exchange of all or substantially all of the assets for the securities of another corporation, the acquisition by another corporation of 80% or more of our then outstanding voting shares or our recapitalization, reclassification, liquidation or dissolution, or other adjustment or event which results in our ordinary shares being exchanged for or converted into cash, securities or other property, in which case the Compensation Committee may further provide that the options will become fully vested and exercisable prior to the completion of the change of control. The Compensation Committee may also provide that options remaining exercisable after such an event may only be exercised for the consideration received by shareholders in such event, or its cash equivalent. We shall in our discretion appropriately and equitably adjust the exercise price of an option in the event of a spin off or other substantial distribution of our assets.

We intend to file with the SEC a registration statement on Form S-8 covering our ordinary shares issuable under the Executive Plan. See “Shares Eligible for Future Sale—Stock Plans.”

Management Shareholders Agreement

Each participant in the Executive Plan, including each executive officer, as well as certain participants in our Senior Management Plan, has entered into a Management Shareholders Agreement with us and our controlling shareholder, Bali Investments S.àr.l., in connection with the executive’s purchase of shares pursuant to the Executive Plan. Each Management Shareholders Agreement provides the company with certain rights that effectively restrict the transfer of ordinary shares until a change of control transaction or the later of five years from the date of purchase, or in the case of options, the date of grant, absent our prior written consent. The restrictive rights provided to us include a right of first refusal whereby we may purchase any shares offered to a third-party, a call right whereby we may repurchase shares upon a termination of employment or upon certain other events and a bring along right whereby Bali Investments S.àr.l. can require participants to sell shares along side Bali Investments. Each executive holds a put right whereby the executive can require us to repurchase shares upon the executive’s death or permanent disability, a tag-along right whereby each executive may require Bali Investments S.àr.l. or its successor to allow the executive to sell along side Bali Investments in certain sales, and “piggyback” registration rights allowing the executive to sell along side Bali Investments in a public offering.

 

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Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries

Our board of directors initially adopted and our shareholders initially approved the Senior Management Plan on November 23, 2005. The Senior Management Plan was amended and restated by our board of directors on April 14, 2006 and was approved by our shareholders on April 11, 2007. The Senior Management Plan was also amended and restated by our board of directors on February 25, 2008.

Following the completion of this offering, we will not make any further grants under the Senior Management Plan. As discussed above, upon the completion of this offering, any ordinary shares that are available for issuance immediately prior to the completion of this offering under the Executive Plan and the Senior Management Plan will become available for issuance under the 2009 Plan.

Types of Awards.    The Senior Management Plan provides for the grant of non-qualified options and share purchase rights to employees, consultants, other persons having a unique relationship with us or our subsidiaries and non-employee members of our board of directors.

Share Reserve.    We have reserved an aggregate of 30,000,000 ordinary shares for issuance under the Senior Management Plan and the Executive Plan.

Administration.    Our Compensation Committee administers the Senior Management Plan. The Compensation Committee has the authority to select the employees to whom options and/or share purchase rights will be granted under the Senior Management Plan, the number of shares to be subject to those options or share purchase rights, and the terms and conditions of the options and share purchase rights. In addition, the Compensation Committee has the authority to construe and interpret the Senior Management Plan and to adopt rules for the administration, interpretation and application of the Senior Management Plan that are consistent with the terms of the Senior Management Plan.

Amendment.    The Senior Management Plan may be amended or modified by the Compensation Committee, and may be terminated by our board of directors.

Exercise.    The exercise price of options and share purchase rights granted under the Senior Management Plan may be paid for in cash, or, with the consent of the Compensation Committee, with the ordinary shares, including ordinary shares acquired contemporaneously upon exercise.

Certain Events.    Under the Senior Management Plan, the Compensation Committee may, in its sole discretion, provide that options granted under the plan cannot be exercised after the consummation of the merger or consolidation into another corporation, the exchange of all or substantially all of the assets for the securities of another corporation, the acquisition by another corporation of 80% or more of our then outstanding voting shares or our recapitalization, reclassification, liquidation or dissolution, or other adjustment or event which results in our ordinary shares being exchanged for or converted into cash, securities or other property, in which case the Compensation Committee may further provide that the options will become fully vested and exercisable prior to the completion of the change of control. The Compensation Committee may also provide that options remaining exercisable after such an event may only be exercised for the consideration received by shareholders in such event, or its cash equivalent. We shall in our discretion appropriately and equitably adjust the exercise price of an option in the event of a spin off or other substantial distribution of assets.

 

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We intend to file with the SEC a registration statement on Form S-8 covering our ordinary shares issuable under the Senior Management Plan. See “Shares Eligible for Future Sale—Stock Plans.”

Compensation Committee Interlocks and Insider Participation

Messrs. Davidson, Greene and Macleod are not, and have never been, officers or employees of our company. None of our executive officers served on the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our board of directors or our Compensation Committee. Messrs. Davidson and Greene have been designated by Silver Lake and KKR, respectively, to serve on our Compensation Committee. Messrs. Davidson and Greene are also affiliated with the Silver Lake and KKR entities, respectively, that are parties to our advisory agreement. Please see “Certain Relationships and Related Party Transactions—Amended and Restated Shareholder Agreement” elsewhere in this prospectus.

Limitations of Liability and Indemnification Matters

Our articles of association provide that, subject to the provisions of the Singapore Companies Act in effect from time to time, every director, managing director, secretary or other officer of our company or our subsidiaries and affiliates shall be entitled to be indemnified by our company against all costs, charges, losses, expenses and liabilities incurred by him or her in the execution and discharge of his or her duties or in relation thereto and in particular and without prejudice to the generality of the foregoing, no director, managing director, secretary or other officer of our company or our subsidiaries and affiliates shall be liable for the acts, receipts, neglects or defaults of any other director or officer or for joining in any receipt or other act for conformity or for any loss or expense happening to our company through the insufficiency or deficiency of title to any property acquired by order of the directors for or on behalf of our company or for the insufficiency or deficiency of any security in or upon which any of the moneys of our company shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person with whom any moneys, securities or effects shall be deposited or left or for any other loss, damage or misfortune whatever which shall happen in the execution of the duties of his or her office or in relation thereto unless the same happen through his or her own negligence, default, breach of duty or breach of trust.

We have entered into indemnity agreements with all directors and executive officers of the Company. The indemnity agreement provides, among other things, that we will indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company, subject to and to the fullest extent permitted under the Singapore Companies Act, as amended, and our articles of association. We believe that these provisions and agreements are necessary to attract and retain qualified persons as our directors and executive officers. Furthermore, we have obtained director and officer liability insurance to cover liabilities our directors and officers may incur in connection with their services to us.

The limitation of liability and indemnification provisions in our articles of association may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our shareholders. A shareholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as

 

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indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.

As of the date of this prospectus, we are not aware of any pending litigation or proceeding involving any director, officer, employee or agent of our company where indemnification will be required or permitted, nor are we aware of any threatened litigation or proceeding that might result in a claim for indemnification.

401(k) Plan

Our U.S. eligible employees participate in the Avago Technologies U.S. Inc. 401(k) Plan, or the 401(k) Plan. Enrollment in the 401(k) Plan is automatic for employees who meet eligibility requirements unless they decline participation. Under the 401(k) Plan, we provide matching contributions to employees up to a maximum of 4% of an employee’s annual eligible compensation. The maximum contribution to the 401(k) Plan is 50% of an employee’s annual eligible compensation, subject to regulatory and plan limitations.

Rule 10b5-1 Sales Plans

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell our ordinary shares on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend or terminate the plan in some circumstances. Our directors and executive officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Since inception, there has not been, nor is there any proposed transaction where the Company was or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any director, executive officer, holder of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than as set forth below and the compensation, employment and other agreements and transactions which are described in “Management” elsewhere in this prospectus.

Share Issuances

In connection with the SPG Acquisition, on December 1, 2005 we issued and sold an aggregate of 209,840,063 ordinary shares to certain investors at a per share price of $5.00 for an aggregate consideration of $1,049 million, and 250,000 redeemable convertible preference shares at a per share price of $1,000 for an aggregate consideration of $250 million. The table below sets forth the shares purchased by these investors on December 1, 2005:

 

Name		Number of Ordinary Shares		Number of Redeemable Convertible Preference Shares		Aggregate Purchase Price ($ million)
5% Shareholders(1):
Bali Investments S.àr.l(2)		172,096,872		205,033		1,066
Seletar Investments Pte Ltd		22,645,955		26,980		140
Geyser Investment Pte. Ltd.		15,097,236		17,987		94

 

(1)

Certain of our directors are associated with our shareholders or has been designated as a director by the shareholders pursuant to the Shareholder Agreement, as described in “Certain Relationships and Related Party Transactions—Amended and Restated Shareholder Agreement” elsewhere in this prospectus, as follows:

 

Director		Equity Investor
Adam H. Clammer		Entities affiliated with KKR
James A. Davidson		Entities affiliated with Silver Lake
James H. Greene, Jr.		Entities affiliated with KKR
Kenneth Y. Hao		Entities affiliated with Silver Lake
John R. Joyce		Entities affiliated with Silver Lake
David Kerko		Entities affiliated with KKR
Bock Seng Tan		Seletar Investments Pte Ltd

 

(2)

Bali Investments S.àr.l. is a Luxembourg corporation, the shareholders of which include overseas investment funds affiliated with KKR and Silver Lake. See “Principal and Selling Shareholders” elsewhere in this prospectus for shares deemed indirectly held by funds affiliated with KKR and funds affiliated with Silver Lake.

 

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In January 2006, we drew the full $250 million under the delayed-draw portion of our term loan facility. These funds were used to redeem the redeemable convertible preference shares at a per share price of $1,000 plus accrued dividends at 3% per year payable up to the redemption date. 248,848 redeemable convertible preference shares were redeemed for cash and 1,152 redeemable convertible preference shares were exchanged for 230,400 ordinary shares (each redeemable convertible preference share was valued at $1,000 and each ordinary share was valued at $5.00). In addition, the investors subscribed for an additional 1,500 ordinary shares at a per share price of $5.00 for an aggregate consideration of $7,500. The table below sets forth the aggregate number of shares redeemed, exchanged and issued in January 2006:

 

Name		Number of Ordinary Shares Purchased		Aggregate Purchase Price		Number of Redeemable Convertible Preference Shares Redeemed		Aggregate Redemption Amount		Number of Redeemable Convertible Preference Shares Exchanged for Ordinary Shares		Number of Ordinary Shares Issued in the Exchange
				($million)				($million)
5% Shareholders:
Bali Investments S.àr.l		1,230		0		204,088		205		945		189,000
Seletar Investments Pte Ltd		162		0		26,856		27		124		24,800
Geyser Investment Pte. Ltd.		108		0		17,904		18		83		16,600

In connection with the SPG Acquisition, we entered into a management consulting agreement with KKR Capstone, or Capstone, a consulting company that works exclusively with KKR and its portfolio companies. On February 3, 2006, Bali Investments S.àr.l subscribed for an additional 389,300 ordinary shares at a per share price of $5.00 for an aggregate consideration of $2 million in connection with the simultaneous investment by an affiliate of Capstone in Bali Investments.

The table below sets forth ordinary shares purchased by all of our former and current executive officers under the Executive Plan for an aggregate consideration of $10,800,000 (which includes $5,400,000 which represents the value attributed to the 505,618 ordinary shares that were surrendered by Mr. Bian-Ee Tan when he exercised his option to purchase 1,080,000 ordinary shares in March 2009), and by our directors under the Senior Management Plan for an aggregate consideration of $750,000.

 

Date of Purchase		Name		Number of Ordinary Shares		Per Share Purchase Price ($)		Aggregate Purchase Price ($)
Executive Officers:
1/17/06		Mercedes Johnson		60,000		5.00		300,000
1/18/06		Bian-Ee Tan		400,000		5.00		2,000,000
4/26/06		Rex Jackson		100,000		5.00		500,000
4/29/06		Bryan Ingram		25,000		5.00		125,000
4/29/06		Hock E. Tan		200,000		5.00		1,000,000
5/2/06		Hock E. Tan		200,000		5.00		1,000,000
9/28/06		Fariba Danesh		46,296		6.48		299,998
8/18/08		Douglas R. Bettinger		18,726		10.68		199,994
3/31/09		Bian-Ee Tan		1,080,000		5.00		5,400,000	(1)
Directors:
5/10/06		James Diller		150,000		5.00		750,000
		TOTAL		2,280,022				11,574,992

 

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(1)	Mr. Bian-Ee Tan exercised an option to purchase 1,080,000 ordinary shares but surrendered 505,618 of the ordinary shares issuable upon such exercise in satisfaction of the exercise price. Aggregate purchase price represents the value attributed to the ordinary shares that were surrendered.

Each participant in the Executive Plan must enter into a Management Shareholders Agreement, which provides us with a call right whereby we may repurchase shares upon a termination of employment or upon certain other events. Mr. Jackson, our former Senior Vice President, General Counsel, left Avago in February 2007. In connection with his departure, we exercised our right to repurchase the full amount of shares owned by Mr. Jackson at a per share price of $10.22, or the fair market value of the ordinary shares at the time, for an aggregate consideration of $1,022,000. Ms. Johnson, our former Senior Vice President, Finance and Chief Financial Officer, left Avago in August 2008. In connection with her departure, we exercised our right to repurchase 60,000 shares owned by Ms. Johnson at a per share price of $10.68, or the fair market value of the ordinary shares at the time, for an aggregate consideration of $640,800. Mr. Bian-Ee Tan, our former Chief Operating Officer, left Avago in December 2008. In connection with his departure, we exercised our right to repurchase 400,000 shares owned by Mr. Bian-Ee Tan at a per share price of $8.12, as determined by the Management Shareholders Agreement, for an aggregate consideration of $3,248,000.

Amended and Restated Shareholder Agreement

Investors, to which we refer in this prospectus as the Equity Investors, invested approximately $1,300 million in our business as part of the SPG Acquisition. In connection with the closing of the SPG Acquisition, we entered into a shareholder agreement with the Equity Investors, other than members of management, who are party to separate agreements. In anticipation of this offering, the Equity Investors have agreed to amend and restate the shareholder agreement, which will become effective upon the closing of this offering, to delete or curtail provisions that will be inoperative or unnecessary upon us becoming a public company. Set forth below is a description of the Second Amended and Restated Shareholder Agreement, which we refer to in this prospectus as the Shareholder Agreement.

Board Composition.    The Shareholder Agreement provides that, subject to election by our shareholders at each annual general meeting, certain of our shareholders have the right to designate director nominees to our board of directors as follows:

 

•

three designees of KKR for so long as KKR and its affiliates either continue to own, directly or indirectly, at least 24% of our outstanding ordinary shares or have not transferred any shares to an unaffiliated third-party, provided that KKR has the right to designate two directors for so long as KKR and its affiliates continue to own, directly or indirectly, at least 15% of our outstanding ordinary shares and one director for so long as KKR and its affiliates continue to own, directly or indirectly, at least 5% of our outstanding ordinary shares;

 

•

three designees of Silver Lake for so long as Silver Lake and its affiliates either continue to own, directly or indirectly, at least 24% of our outstanding ordinary shares or have not transferred any shares to an unaffiliated third-party, provided that Silver Lake has the right to designate two directors for so long as Silver Lake and its affiliates continue to own, directly or indirectly, at least 15% of our outstanding ordinary shares and one director for so long as Silver Lake and its affiliates continue to own, directly or indirectly, at least 5% of our outstanding ordinary shares;

 

•

one designee of Seletar, an affiliate of Temasek Capital (Private) Limited, so long as it either continues to own, directly or indirectly, 2.5% of our outstanding shares and has

 

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not sold any of its shares, or continues to own, directly or indirectly, 5% of our outstanding shares;

 

•

our Chief Executive Officer; and

 

•

three other directors mutually agreeable to KKR and Silver Lake, to which we refer collectively in this prospectus as the Sponsors.

The three other directors may be increased from time to time with the Sponsors’ prior approval, however the Sponsors may revoke such approval at any time and immediately remove the excess director from the board of directors. The Sponsors have currently provided approval to permit the number of other directors to be four.

Each of KKR, Silver Lake and Seletar has the right to remove and replace its director-designees at any time and for any reason and to fill any vacancies otherwise resulting in such director positions. If the number of directors that an Equity Investor is entitled to designate is reduced, any vacant seats on our board of directors will be filled by the board of directors acting in accordance with its nomination and governance procedures.

One designee of Geyser Investment Pte. Ltd., so long as Geyser either continues to own, directly or indirectly, 2.5% of our outstanding shares and has not sold any of its shares, or continues to own, directly or indirectly, 5% of our outstanding shares, has the right to attend all meetings of the board of directors, and such designee will be provided with copies of all materials provided to the board members.

Each of KKR and Silver Lake has the right to designate one member to each committee of the board of directors, so long as such Sponsor has the right to designate one or more director nominees to the board of directors and subject to compliance with applicable federal securities laws and the requirements of the U.S. exchange on which our ordinary shares are traded.

The rights with respect to board composition described here will terminate upon a change in control transaction.

Sponsor Approval.    The Shareholder Agreement provides that the following actions by us or any of our subsidiaries require approval of the Sponsors for so long as the Sponsors own 50% or more of our outstanding ordinary shares:

 

•

changing the size or composition of our board of directors;

 

•

entering into a change of control transaction;

 

•

acquiring or disposing of assets or entering into joint ventures with a value in excess of $300 million;

 

•

incurring indebtedness in excess of $300 million;

 

•

filing for voluntary liquidation, dissolution, receivership, bankruptcy or similar insolvency proceeding;

 

•

entering into certain transactions with the Sponsors or any of their affiliates;

 

•

making material changes in the nature of the our business or our subsidiaries’ business; and

 

•

amending, waiving or otherwise modifying certain shareholder agreements.

The Sponsors consented to the board of directors’ appointment of Mr. Macleod and Ms. Lien to the board in November 2007. Ms. Lien resigned in January 2008 for personal reasons and rejoined the board in June 2008.

 

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Co-Investor Protections.    The Shareholder Agreement provides that, other than actions specifically set forth therein, we will not take any action in respect of any class of our shares that has a materially disproportionate effect on the specified Co-Investors, as compared to the Sponsors, in their capacity as shareholders of such class of shares, without first obtaining the prior written consent of the Co-Investors holding a majority of such class of shares then held by the Co-Investors.

Transfer Restrictions.    Neither KKR nor Silver Lake may transfer its shares prior to an initial public offering, or within two years after our initial public offering, without the approval of the other Sponsor, subject to certain permitted transfers. No Co-Investor may transfer its shares without the approval of the Sponsors, except (i) to permitted transferees, (ii) in a transfer in connection with a sale pursuant to the Registration Rights Agreement described under “—Registration Rights Agreement,” or (iii) if either Sponsor has reduced the number of shares it holds relative to the number of shares initially held by it, each Co-Investor may sell up to the number of shares as would cause such Co-Investor to reduce the number of shares it holds in the same proportion as that of such Sponsor. These transfer restrictions will terminate upon a change of control transaction unless terminated earlier by the Sponsors.

Tag Along Right.    Prior to making any transfer of shares (other than certain customary permitted transfers, transfers in connection with sales pursuant to the Registration Rights Agreement, transfers pursuant to Rule 144 and certain distributions and charitable contributions), any prospective selling Sponsor must provide written notice to each Co-Investor setting forth the terms of such proposed transfer. Each Co-Investor may elect to sell up to its pro rata portion of the shares (based upon the ownership of such shares by the transferring Sponsor and all persons entitled to participate in such transfer) to be sold in such transfer. This tag along right will terminate upon a change of control transaction unless terminated earlier by the Sponsors.

Drag Along Right.    If the Sponsors approve a change of control transaction, each Co-Investor will be required to vote in favor of and not oppose such transaction and, if structured as a sale of shares, sell its shares to a prospective buyer on the same terms that are applicable to the Sponsors. This drag along right will terminate upon a change of control transaction unless terminated earlier by the Sponsors.

Information Rights.    We have agreed to provide to the Equity Investors, so long as the applicable Equity Investor owns at least 2.5% of our outstanding ordinary shares, monthly financial information. We have agreed to provide to each shareholder party to the Shareholder Agreement the necessary information for the preparation of such shareholder’s income tax returns. So long as the applicable Equity Investor owns at least 5% of our outstanding ordinary shares, we have granted such Equity Investor rights to inspect our facilities, records, files and other information, and to meet with our management and outside accountants. Each shareholder party to the Shareholder Agreement agrees to keep confidential the confidential information obtained from us. The information rights will expire upon a change in control transaction.

Termination.    The Shareholder Agreement may be amended or terminated, and the provisions thereof waived, by an agreement in writing signed by us and the Equity Investors holding not less than 70% of our outstanding ordinary shares held by all Equity Investors. If any amendment would adversely affect the rights of a particular Equity Investor or adversely impose additional material obligations on a particular Equity Investor, then the consent of such particular Equity Investor is required for the amendment.

 

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Advisory Agreement

In December 2005, in connection with the closing of the SPG Acquisition, we and our indirect subsidiary Avago Technologies International Sales Pte. Limited, a Singapore private limited company, entered into an advisory agreement, or Advisory Agreement, with Kohlberg Kravis Roberts & Co. L.P. and Silver Lake Management Company, L.L.C., pursuant to which we retained KKR and Silver Lake to provide general executive, management and other services as mutually agreed by us and KKR and Silver Lake, for which we pay each of them advisory fees of $625,000 per quarter, which is subject to a 5% increase each fiscal year during the agreement’s term (beginning in December 2005) and reimburse them for their out-of-pocket expenses. For the years ended October 31, 2006, October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009, we recorded $5 million, $5 million, $6 million, $3 million and $3 million of expenses, respectively, in connection with the Advisory Agreement.

In connection with the closing of the SPG Acquisition, we paid each of KKR and Silver Lake an advisory fee of $18 million for services provided to us in evaluating, negotiating, documenting, financing and closing the SPG Acquisition. In connection with the closing of any subsequent change of control transaction, acquisition, disposition or divestiture, spin-off, split-off or financing completed during the term of the Advisory Agreement (or after if contemplated during the term) in each case with an aggregate value in excess of $25 million, we will pay each of KKR and Silver Lake a fee of 0.5% based on the aggregate value of such transaction. In connection with the closing of the sale of our Storage Business and the Printer ASICs Business, we paid each of KKR and Silver Lake $3 million and $3 million, respectively. For the sale of our Image Sensor operations, we paid less than $1 million to KKR and Silver Lake. Pursuant to the Advisory Agreement, we also recorded less than $1 million of advisory fees payable to KKR and Silver Lake during each of the six months ended May 4, 2008 and May 3, 2009 in connection with qualifying acquisitions.

The Advisory Agreement has a 12-year term that is thereafter automatically extended on an annual basis subject to our right to terminate the agreement in connection with a change of control transaction or an initial public offering. The Advisory Agreement specifies that the termination payment equals the present value of unpaid advisory fees over the remaining term of the agreement, plus any fee due in respect of the transaction that gave rise to our right to terminate the Advisory Agreement. We intend to terminate the Advisory Agreement upon the completion of this offering and to make the required termination payment of approximately $57 million in accordance with the termination provisions of the agreement (including an amount equal to 1.0% of this offering as specified in the Advisory Agreement). See “Use of Proceeds” elsewhere in this prospectus.

Indemnification; Costs and Fees

We provide customary indemnification to the Equity Investors for liabilities arising from their ownership of our ordinary shares and from the SPG Acquisition. We will pay all reasonable fees and expenses incurred by the Equity Investors from and after the closing of the SPG Acquisition in connection with the Equity Investors’ enforcement of their rights under the Shareholder Agreement, Registration Rights Agreement and our articles of association.

We have entered into indemnity agreements with all our directors and executive officers and intend to continue doing so in the future. The indemnity agreement provides, among other things, that we will indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by

 

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reason of his or her position as a director, officer or other agent of the Company, subject to and to the fullest extent permitted under the Singapore Companies Act, as amended, and our articles of association.

Registration Rights Agreement

We are party to a registration rights agreement, or Registration Rights Agreement, which provides the Sponsors the right to demand that we file a registration statement and the Sponsors and the Co-Investors the right to request that their shares be covered by a registration statement that we are otherwise filing, subject to certain limitations. During the first two years after an initial public offering, upon the request of both Sponsors, we may be required to initiate an unlimited number of registrations under the Securities Act in order to register the resale of their ordinary shares with an anticipated aggregate offering price of at least $50 million in the case of a “long-form registration” and $20 million in the case of a “short-form registration.” After the second anniversary of an initial public offering, each Sponsor may require us to initiate three “long-form registrations,” provided that each has an aggregate offering price of at least $50 million, and an unlimited number of “short-form registrations,” provided that each has an aggregate offering price of at least $20 million, under the Securities Act in order to register the resale of their ordinary shares. The minimum offering amounts may be reduced with the approval of the Sponsors. In the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders, the Sponsors and Co-Investors are entitled to notice of such registration and are entitled to certain “piggyback” registration rights allowing them to include their ordinary shares in such registration, subject to certain marketing and other limitations. We may, in certain circumstances, defer such registrations. In an initial public offering, we and the Sponsor may agree to limit the number of registrable securities that may be included by the Sponsors and Co-Investors. In addition, in an underwritten offering, including an underwritten initial public offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of registrable securities such holders may include. Any such limitations on the number of registrable securities that may be included by such holders must be on a pro rata basis. The Registration Rights Agreement also contains customary cross-indemnification provisions.

Participants in our Executive Plan are party to a Management Shareholder Agreement that provides them “piggyback” registration rights alongside with the Sponsors and Co-Investors. For more information, see “Management—Employee Benefit and Stock Plans—Management Shareholders Agreement.”

Other Relationships

In connection with the SPG Acquisition, we entered into a one year management consulting agreement with KKR Capstone, a consulting company that works exclusively with KKR and its portfolio companies. Under this agreement, KKR Capstone assisted us with the transition of Avago from a division of Agilent into a stand-alone company, including building and designing our information technology, human resources, procurement and workplace service organizations, selecting outsource vendors and the overall implementation of our corporate infrastructure. For services provided, we paid $1 million to Capstone during the year ended October 31, 2006.

An affiliate of Capstone was granted an option to purchase 800,000 ordinary shares with an exercise price of $5.00 per share on February 3, 2006. One half of these options vests over four years, and the other half vests upon the achievement of certain company financial performance metrics. These options are subject to variable accounting and we recorded a charge of

 

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$2 million, $1 million, $2 million, $1 million for the years ended October 31, 2006, October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008, respectively, related to the issuance of these options. We recorded a credit of $1 million for the six months ended May 3, 2009 related to the issuance of these options.

Investment funds affiliated with Silver Lake are investors in Flextronics International Ltd. and Mr. James A. Davidson, a director, also serves as a director of Flextronics. Agilent sold its Camera Module Business to Flextronics in February 2005. In the ordinary course of business, we continue to sell to Flextronics, which during the six months ended May 3, 2009 accounted for $47 million of revenue from continuing operations. Trade accounts receivable due from Flextronics as of May 3, 2009 was $15 million. In the years ended October 31, 2006, October 31, 2007 and November 2, 2008, sales to Flextronics accounted for $191 million, $144 million and $155 million of net revenue from continuing operations, respectively, and the trade accounts receivable due from Flextronics as of October 31, 2007 and November 2, 2008 was $23 million and $17 million, respectively. Flextronics continued to pay the deferred purchase price in connection with its acquisition of the Camera Module Business at the rate of $1 million per quarter, which payment was completed in the first quarter of fiscal year 2008.

Mr. John R. Joyce, a director, also serves as a director of Hewlett-Packard Company effective July 2007. In the ordinary course of business, we continue to sell to Hewlett-Packard Company, which in the year ended November 2, 2008 and six months ended May 3, 2009 accounted for $30 million and $21 million of net revenue from continuing operations, respectively, and trade accounts receivable due from Hewlett-Packard Company as of November 2, 2008 and May 3, 2009, was $7 million and $8 million, respectively. We also use Hewlett-Packard Company as a service provider for information technology services. For the year ended November 2, 2008 and the six months ended May 3, 2009, operating expenses include $32 million and $14 million, respectively, for services provided by Hewlett-Packard Company.

Ms. Mercedes Johnson, our former Senior Vice President, Finance and Chief Financial Officer, is a director of Micron Technology, Inc. In December 2006, we completed the sale of our Image Sensor operations to Micron. Ms. Johnson recused herself from all deliberations of the board of directors of Micron concerning this transaction.

Mr. James Diller, a director, is also a director of PMC-Sierra, Inc. In February 2006, prior to Mr. Diller becoming a director of Avago, we completed the sale of our Storage Business to PMC for net proceeds of $420 million. In the ordinary course of business, we continue to sell to PMC-Sierra, which in the years ended October 31, 2006, October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 accounted for $2 million, $1 million, $3 million, $1 million and $1 million of net revenue from continuing operations, respectively, and trade accounts receivable due from PMC-Sierra as of November 2, 2008 and May 3, 2009 were less than $1 million and zero, respectively.

All executive officers and certain key employees have executed a Management Shareholders Agreement with us and Bali Investments S.àr.l. Please see “Management—Employee Benefit and Stock Plans—Management Shareholders Agreement” elsewhere in this prospectus.

Procedures for Approval of Related Person Transactions

As provided by the written Audit Committee Charter, the Audit Committee must review all related party transactions required to be disclosed in our financial statements, and approve any such related party transaction, unless the transaction is approved by another independent committee of our board. In approving or rejecting the proposed agreement, our Audit

 

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Committee shall consider the relevant facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products, and, if applicable, the impact on a director’s independence. Our written Code of Ethics and Business Conduct requires that directors, officers and employees make appropriate disclosure of potential conflicts of interest situations to the Audit Committee, in the case of directors and officers, and the supervisor who will then seek authorization from the compliance officer, in the case of employees.

 

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PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information about the beneficial ownership of our ordinary shares at May 3, 2009 as adjusted to reflect the sale of the ordinary shares in this offering for:

 

•

each named executive officer;

 

•

each of our directors;

 

•

each person known to us to be the beneficial owner of more than 5% of our ordinary shares;

 

•

all of our executive officers and directors as a group; and

 

•

each of the selling shareholders.

We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the tables below have sole voting and investment power with respect to all ordinary shares that they beneficially own, subject to applicable community property laws.

Ordinary shares subject to options that are currently exercisable or exercisable within 60 days of May 3, 2009 are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Percentage ownership is based on 213,935,874 ordinary shares outstanding on May 3, 2009.

We have based our calculation of the percentage of beneficial ownership after the offering on ordinary shares outstanding immediately after the completion of this offering (assuming no exercise of the underwriters’ option to purchase additional shares).

 

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		Ordinary Shares Beneficially Owned(1)		Shares Being Offered		Ordinary Shares Beneficially Owned(1)		Percentage of Shares Beneficially Owned
Name and Address of Beneficial Owner		Prior to the Offering				After the Offering		Prior to the Offering			After the Offering
5% Shareholders:
Bali Investments S.àr.l(2) 59, rue de Rollingergrund L-2440 Luxembourg		172,676,402						80.7	%
Funds affiliated with KKR(3) Suite 500, 603 - 7th Avenue S.W. Calgary, Canada		172,676,402						80.7	%
Funds affiliated with Silver Lake(4) Walker House, PO Box 908GT Mary Street, George Town Grand Cayman, Cayman Islands		172,676,402						80.7	%
Seletar Investments Pte Ltd(5) 60B Orchard Road #06-18, Tower 2 The Atrium @ Orchard Singapore 238891		22,670,917						10.6	%
Geyser Investment Pte. Ltd.(6) c/o GIC 168 Robinson Road #37-01 Capital Tower Singapore 068912		15,113,944						7.1	%
Directors and Named Executive Officers:
Hock E. Tan(7)		1,710,000							*
Douglas R. Bettinger		18,726							*
Mercedes Johnson(8)		41,500							*
Bian-Ee Tan(9)		574,382							*
Bryan Ingram(10)		319,996							*
Fariba Danesh(11)		276,296							*
James Stewart(12)		—						—
Dick M. Chang(13)		758,332							*
Adam H. Clammer(14)		30,000							*
James A. Davidson(15)		172,706,402						80.7	%
James Diller(16)		180,000							*
James H. Greene, Jr.(17)		172,706,402						80.7	%
Kenneth Y. Hao(18)		172,706,402						80.7	%
John R. Joyce(19)		172,706,402						80.7	%
David Kerko(20)		10,000							*
Justine Lien(21)		10,000							*
Donald Macleod(22)		10,000							*
Bock Seng Tan(23)		30,000							*
All 18 directors and executive officers as a group(24)		176,460,084						82.5	%
Other Selling Shareholders:

 

*	Represents beneficial ownership of less than 1%.

 

(1)	Shares shown in the table above include shares held in the beneficial owner’s name or jointly with others, or in the name of a bank, nominee or trustee for the beneficial owner’s account.

 

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(2)

Bali Investments S.àr.l. is a Luxembourg corporation, the shareholders of which include overseas investment funds affiliated with KKR (such funds, as more specifically defined below, the KKR Funds) and funds affiliated with Silver Lake (such funds, as more specifically defined below, the Silver Lake Funds). Messrs. Adam H. Clammer, James A. Davidson, Kenneth Y. Hao, John R. Joyce and William J. Janetschek and Dr. Wolfgang Zettel, in their capacities as directors of Bali, may be deemed to have shared voting or dispositive power over these shares. Each of them, however, disclaims this beneficial ownership.

 

(3)

Shares shown in the table above consist of 172,676,402 shares beneficially owned by Bali Investments S.àr.l., over which the KKR Funds may be deemed, as a result of their ownership of 46.4% of Bali’s outstanding shares, to have shared voting or dispositive power. The KKR Funds disclaim this beneficial ownership except for the shares that are deemed to be held indirectly by the KKR Funds in which such funds have a pecuniary interest, which consist of their 46.4% ownership of Bali, which is equivalent to an indirect ownership of 80,083,035 ordinary shares.

 

The 80,083,035 ordinary shares deemed held indirectly by the KKR Funds are comprised of (a) 17,782,701 shares held by KKR Millennium Fund (Overseas), Limited Partnership, or KKR Millennium Overseas Fund, the general partner of which is KKR Associates Millennium (Overseas), Limited Partnership, the general partner of which is KKR Millennium Limited, (b) 35,407,740 shares held by KKR European Fund, Limited Partnership, or KKR Europe, the general partner of which is KKR Associates Europe, Limited Partnership, the general partner of which is KKR Europe Limited, (c) 23,748,545 shares held by KKR European Fund II, Limited Partnership, or KKR Europe II, the general partner of which is KKR Associates Europe II, Limited Partnership, the general partner of which is KKR Europe II Limited, and (d) 3,144,049 shares held by KKR Partners (International), Limited Partnership, or KKR International, the general partner of which is KKR 1996 Overseas, Limited. We refer to KKR Millennium Overseas Fund, KKR Europe, KKR Europe II and KKR International collectively as the KKR Funds. Messrs. Henry R. Kravis, George R. Roberts, James H. Greene, Jr., Paul E. Raether, Michael W. Michelson, Perry Golkin, Johannes P. Huth, Todd A. Fisher, Alexander Navab, Marc S. Lipschultz, Jacques Garaialde, Reinhard Gorenflos, Joseph Y. Bae, Brian F. Carroll, John K. Saer, Jr., Scott C. Nuttall, Michael M. Calbert and William J. Janetschek as directors of one or more of KKR Millennium Limited, KKR Europe Limited, KKR Europe II Limited, and KKR 1996 Overseas Limited, may be deemed to share beneficial ownership of any shares beneficially owned by the KKR Funds, respectively, but disclaim such beneficial ownership. Mr Greene is a member of our board of directors. The above referenced shares are indirectly owned through the KKR Funds’ investments in Bali Investments S.àr.l., which directly holds shares in Avago Technologies Limited.

 

(4)

Shares shown in the table above consist of 172,676,402 shares beneficially owned by Bali Investments S.àr.l., over which the Silver Lake Funds may be deemed, as a result of their ownership of 45.6% of Bali’s outstanding shares, to have shared voting or dispositive power. The Silver Lake Funds disclaim this beneficial ownership except for the shares that are deemed to be held indirectly by the Silver Lake Funds in which such funds have a pecuniary interest, which consist of their 45.6% ownership of Bali, which is equivalent to an indirect ownership of 78,733,338 ordinary shares.

 

The 78,733,338 ordinary shares deemed held indirectly by the Silver Lake Funds are comprised of (a) 78,510,144 shares held by Silver Lake Partners II Cayman, L.P., or Silver Lake II, the general partner of which is Silver Lake Technology Associate II Cayman, L.P., the general partner of which is Silver Lake (Offshore) AIV GP II, Ltd., and (b) 223,194 shares held by Silver Lake Technology Investors II Cayman, L.P., or Silver Lake Technology II, the general partner of which is Silver Lake (Offshore) AIV GP II, Ltd. We refer to Silver Lake II and Silver Lake Technology II collectively as the Silver Lake Funds. Messrs. James A. Davidson, Glenn H. Hutchins, David J. Roux, Alan K. Austin, John R. Joyce, Michael J. Bingle, Egon Durban, Greg Mondre and Kenneth Y. Hao, as Directors of Silver Lake (Offshore) AIV GP II, Ltd., may be deemed to share beneficial ownership of any shares beneficially owned by the Silver Lake Funds, but disclaim such beneficial ownership. Messrs. Davidson, Hao and Joyce are members of our board of directors. The above referenced shares are indirectly owned through the Silver Lake Funds’ investments in Bali Investments S.àr.l., which directly holds shares in Avago Technologies Limited.

 

(5)

Seletar Investments Pte Ltd (“Seletar”) is 100% indirectly owned by Temasek Holdings (Private) Limited. Both Seletar and Temasek are Singapore companies. The directors of Seletar are Mr. Syn Yi Ming and Ms. Michelle Git. As directors of Seletar, they have shared power in respect of voting or disposing of the shares held by Seletar. They may be deemed to share beneficial ownership of any shares beneficially owned by Seletar but disclaim such beneficial ownership.

 

(6)

Geyser Investment Pte. Ltd. shares the power to vote and power to dispose of these securities with each of GIC Special Investments Pte. Ltd. and the Government of Singapore Investment Corporation Pte. Ltd., each of which is a Singapore private limited company. No individual has beneficial ownership over these securities. Voting and investment decisions relating to these securities are made by the GIC Special Investments Pte. Ltd. investment committee, which is currently comprised of eight members: Teh Kok Peng, Ng Kin Sze, Ang Eng Seng, Kunna Chinniah, Tay Lim Hock, Eugene Wong, John Tang and Mayukh Mitter. The investment committee acts by majority vote and no member may act individually to vote or sell these securities. Beneficial ownership is disclaimed by the investment committee and its members.

 

(7)	Shares shown in the table above include 1,410,000 shares that Mr. Hock E. Tan has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

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(8)

Effective August 1, 2008, Ms. Johnson resigned from the Company. Shares shown in the table above consist of 41,500 shares that, pursuant to her termination agreement, effective August 1, 2008, Ms. Johnson has a right to acquire within 60 days after May 3, 2009 upon the exercise of share options. Under the terms of her separation agreement, all ordinary shares and all vested and exercisable options held by Ms. Johnson are subject to the exercise of Avago’s call right.

 

(9)	Mr. Bian-Ee Tan resigned from the Company in December 2008.

 

(10)	Shares shown in the table above include 294,996 shares that Mr. Ingram has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(11)	Shares shown in the table above include 230,000 shares that Ms. Danesh has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(12)	Mr. Stewart resigned from the Company in December 2007.

 

(13)	Shares shown in the table above consist of 758,332 shares that Mr. Chang has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(14)

Mr. Clammer is a member of KKR & Co. L.L.C. which is the general partner of Kohlberg Kravis Roberts & Co. L.P., which is an affiliate of the KKR Funds. Shares shown in the table above consist of 30,000 shares that Mr. Clammer has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(15)

Mr. Davidson is a Director of Silver Lake (Offshore) AIV GP II, Ltd. Amounts disclosed for Mr. Davidson include shares beneficially owned by Bali Investments S.àr.l., over which the Silver Lake Funds may be deemed, as a result of their ownership of 45.6% of Bali’s outstanding shares, to have shared voting or dispositive power. Mr. Davidson disclaims beneficial ownership of any shares owned directly or indirectly by the Silver Lake Funds. See notes (2) and (4) above. Shares shown in the table above include 30,000 shares that Mr. Davidson has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(16)	Shares shown in the table above include 30,000 shares that Mr. Diller has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(17)

Mr. Greene is a director of each of KKR Millennium Limited, KKR Europe Limited, KKR Europe II Limited and KKR 1996 Overseas Limited, and in such capacities may be deemed to share beneficial ownership of any shares beneficially owned by the KKR Funds, respectively. Mr. Greene disclaims beneficial ownership of any shares owned directly or indirectly by the KKR Funds. See notes (2) and (3) above. Shares shown in the table above include 30,000 shares that Mr. Greene has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(18)

Mr. Hao is a Director of Silver Lake (Offshore) AIV GP II, Ltd. Amounts disclosed for Mr. Hao include shares beneficially owned by Bali Investments S.àr.l., over which the Silver Lake Funds may be deemed, as a result of their ownership of 45.6% of Bali’s outstanding shares, to have shared voting or dispositive power. Mr. Hao disclaims beneficial ownership of any shares owned directly or indirectly by the Silver Lake Funds. See notes (2) and (4) above. Shares shown in the table above include 30,000 shares that Mr. Hao has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(19)

Mr. Joyce is a Director of Silver Lake (Offshore) AIV GP II, Ltd. Amounts disclosed for Mr. Joyce include shares beneficially owned by Bali Investments S.àr.l., over which the Silver Lake Funds may be deemed, as a result of their ownership of 45.6% of Bali’s outstanding shares, to have shared voting or dispositive power. Mr. Joyce disclaims beneficial ownership of any shares owned directly or indirectly by the Silver Lake Funds. See notes (2) and (4) above. Shares shown in the table above include 30,000 shares that Mr. Joyce has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(20)	Mr. Kerko is an executive of Kohlberg Kravis Roberts & Co. L.P. Shares shown in the table above consist of 10,000 shares that Mr. Kerko has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(21)	Shares shown in the table above consist of 10,000 shares that Ms. Lien has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(22)	Shares shown in the table above consist of 10,000 shares that Mr. Macleod has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(23)	Shares shown in the table above consist of 30,000 shares that Mr. Tan has the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

(24)	Shares shown in the table above include 3,243,660 shares that directors and executive officers have the right to acquire within 60 days after May 3, 2009 upon the exercise of share options.

 

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DESCRIPTION OF INDEBTEDNESS

We have a substantial amount of indebtedness. As of May 3, 2009, we had $704 million outstanding in aggregate long-term indebtedness and capital lease obligations, with an additional $315 million of borrowing capacity available under our revolving credit facility (including outstanding letters of credit of $17 million at May 3, 2009, which reduce the amount available under our revolving credit facility on a dollar-for-dollar basis). Our liquidity requirements are significant, primarily due to debt service requirements.

Our senior credit facilities and other borrowings as of November 2, 2008 and May 3, 2009 consist of the following (in millions):

 

		November 2, 2008			May 3, 2009
Senior credit facilities:
Revolving credit facility ($298 million available)		$	—		$	—
Notes:
10 1/8% senior notes due 2013		$	403		$	403
Senior floating rate notes due 2013			50			50
11 7/8% senior subordinated notes due 2015			250			247
		$	703		$	700

In fiscal year 2006, we used $420 million of net proceeds from the sale of our Storage Business and $245 million of net proceeds from the sale of our Printer ASICs Business to permanently repay borrowings under our $725 million term loan facility.

During the year ended October 31, 2007, we repurchased $97 million in principal amount of our 10 ¹/ 8% senior notes, or senior fixed rate notes, and paid $7 million in early tender premium in a tender offer, plus accrued interest, resulting in a loss on extinguishment of debt of $12 million, which consisted of $7 million early tender premium, $4 million write-off of debt issuance costs and less than $1 million legal fees and other related expenses.

During the year ended November 2, 2008, we redeemed $200 million in principal amount of our senior floating rate notes due 2013, or senior floating rate notes. We redeemed the senior floating rate notes at 2% premium to the principal amount, plus accrued interest, resulting in a loss on extinguishment of debt of $10 million, which consisted of the $4 million premium and a $6 million write-off of debt issuance costs and other related expenses.

During the six months ended May 3, 2009, we repurchased $3 million in principal amount of senior subordinated notes in the open market, resulting in a gain on extinguishment of debt of $1 million.

Senior Credit Facilities

In connection with the SPG Acquisition, we entered into a senior credit agreement with a syndicate of financial institutions. The senior secured credit facilities initially consisted of (i) a seven-year $725 million term loan facility and (ii) a six-year, $250 million revolving credit facility for general corporate purposes. As of October 31, 2006, the term loan facility had been permanently repaid in full and may not be redrawn. The revolving credit facility was increased to $375 million in the fourth quarter of fiscal year 2007. During the fourth quarter of fiscal year 2008, our revolving credit facility was impacted by the bankruptcy of Lehman Brothers Holdings Inc., or Lehman. As a result of the bankruptcy, we can no longer utilize Lehman’s credit commitment of $60 million, thus reducing total availability under our revolving credit facility to $315 million. In July 2009, Lehman assigned $35 million of its credit commitment to Barclays Bank PLC, which resulted in total availability under our revolving credit facility increasing to $350 million.

 

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The revolving credit facility includes borrowing capacity available for letters of credit and for borrowings on same-day or one-day notice referred to as swingline loans and is available to us and certain of our subsidiaries in U.S. dollars and other currencies. As of May 3, 2009, we had no borrowings outstanding under the revolving credit facility, although we had $17 million of letters of credits outstanding under the facility. We drew $475 million under our term loan facility to finance a portion of the SPG Acquisition. On January 26, 2006, we drew the full $250 million under the delayed-draw portion of our term loan facility to retire all of our redeemable convertible preference shares. We used the net proceeds from the sale of our Storage Business and Printer ASICs Business to permanently repay borrowings under our term loan facility. Costs of approximately $19 million incurred in relation to the term loan facility were initially capitalized as debt issuance costs, amortized over the expected term as additional interest expense and unamortized costs were written off in conjunction with the repayment of the term loan facility.

Interest Rate and Fees:    Borrowings under the senior credit agreement bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the United States prime rate and (2) the federal funds rate plus 0.5% (or an equivalent base rate for loans originating outside the United States, to the extent available) or (b) a LIBOR rate (or the equivalent thereof in the relevant jurisdiction) determined by reference to the costs of funds for deposits in the currency of such borrowing for the interest period relevant to such borrowing adjusted for certain additional costs. At November 2, 2008, the lender’s base rate was 4.00% and the one-month LIBOR rate was 2.58%. At May 3, 2009, the lender’s base rate was 3.25% and the one-month LIBOR rate was 0.41%. The applicable margin for borrowings under the revolving credit facility is 0.75% with respect to base rate borrowings and 1.75% with respect to LIBOR borrowings.

We are required to pay a commitment fee to the lenders under the revolving credit facility with respect to any unutilized commitments thereunder. At November 2, 2008 and May 3, 2009, the commitment fee on the revolving credit facility was 0.375% per annum. We must also pay customary letter of credit fees. The commitment fee is expensed as additional interest expense.

Maturity:    Principal amounts outstanding under the revolving credit facility are due and payable in full on December 1, 2011. As of November 2, 2008 and May 3, 2009, we had no borrowings outstanding under the revolving credit facility, although we had $17 million and $17 million, respectively, of letters of credit outstanding under the facility, which reduce the amount available on a dollar-for-dollar basis.

Certain Covenants and Events of Default:    The senior credit agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our and our subsidiaries’ ability to:

 

•

incur additional debt or issue certain preferred shares;

 

•

create liens on assets;

 

•

enter into sale-leaseback transactions;

 

•

engage in mergers or consolidations;

 

•

sell assets;

 

•

pay dividends and distributions, repurchase our share capital or make other restricted payments;

 

•

make investments, loans or advances;

 

•

make capital expenditures;

 

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•

repay subordinated indebtedness (including the 11 7/8% senior subordinated notes, or senior subordinated notes);

 

•

make certain acquisitions;

 

•

amend material agreements governing our subordinated indebtedness (including the senior subordinated notes);

 

•

change our lines of business; and

 

•

change the status of our direct wholly owned subsidiary, Avago Technologies Holdings Pte. Ltd., as a passive holding company.

All obligations under the senior credit facilities, and the guarantees of those obligations, are secured by substantially all of our assets and that of each guarantor subsidiary, subject to certain exceptions.

In addition, the senior credit agreement requires us to maintain senior secured leverage ratios not exceeding levels set forth in the senior credit agreement. The senior credit agreement also contains certain customary affirmative covenants and events of default including a cross-default triggered by certain events of default under our other material debt instruments. We were in compliance with all our covenants under the senior credit agreement at May 3, 2009.

Senior Notes and Senior Subordinated Notes

In connection with the SPG Acquisition, we completed a private placement of $1,000 million principal amount of unsecured debt consisting of (i) $500 million principal amount of 10 ¹/8% senior notes due December 1, 2013, or senior fixed rate notes, (ii) $250 million principal amount of senior floating rate notes due June 1, 2013, or senior floating rate notes and, together with the senior fixed rate notes, the senior notes, and (iii) $250 million principal amount of 11 ⁷/8% senior subordinated notes due December 1, 2015, or senior subordinated notes. The senior notes and the senior subordinated notes are collectively referred to in this prospectus as our outstanding notes. We received proceeds of $966 million, net of $34 million of related transaction expenses. Such transaction expenses are deferred as debt issuance costs and are being amortized over the life of the loans as incremental interest expense.

Interest is payable on the senior fixed rate notes and the senior subordinated notes on a semi-annual basis at a fixed rate of 10.125% and 11.875%, respectively, per annum. Interest is payable on the senior floating rate notes on a quarterly basis at a rate of three-month LIBOR plus 5.5%. The rate for the senior floating rate notes was 8.31% and 6.76% at November 2, 2008 and May 3, 2009, respectively.

We may redeem all or any part of the senior fixed rate notes at any time prior to December 1, 2009 at a redemption price equal to 100% of the principal amount of the notes redeemed plus a defined premium and accrued but unpaid interest through the redemption date. We can redeem the senior floating rate notes on or after December 1, 2007 and the senior fixed rate notes on or after December 1, 2009 at fixed redemption prices set forth in the indenture governing the senior notes plus accrued but unpaid interest through the redemption date. The redemption prices for the senior floating rate notes and the senior fixed rate notes beginning December 1, 2009 are 100.000% and 105.063%, respectively, and the redemption price for the senior fixed rate notes steps down over time. In addition, upon a change of control of our company, we generally will be required to make an offer to redeem the senior notes from the holders at 101% of the principal amount plus accrued but unpaid interest through the redemption date.

 

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We may redeem all or any part of the senior subordinated notes (i) at any time prior to December 1, 2010 at a redemption price equal to 100% of the principal amount of the notes redeemed plus a defined premium and accrued but unpaid interest through the redemption date, and (ii) on or after December 1, 2010 at fixed redemption prices set forth in the indenture governing the senior subordinated notes plus accrued but unpaid interest through the redemption date. The redemption price for the senior subordinated notes beginning December 1, 2010 is 105.938%, and steps down over time. In addition, upon a change of control of our company, we generally will be required to make an offer to redeem the senior subordinated notes from the holders at 101% of the principal amount plus accrued but unpaid interest through the redemption date.

The senior notes are unsecured and effectively subordinated to all of our existing and future secured debt (including obligations under our senior credit agreement), to the extent of the value of the assets securing such debt. The senior subordinated notes are unsecured and subordinated to all of our existing and future senior indebtedness, including our senior credit agreement and the senior notes.

Certain of our subsidiaries have guaranteed the obligations under the senior credit agreement, have guaranteed the obligations under the senior notes on a senior unsecured basis, and have guaranteed the obligations under the senior subordinated notes on a senior subordinated unsecured basis.

The indentures governing our outstanding notes limit our and our subsidiaries’ ability to:

 

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incur additional indebtedness and issue disqualified stock or preferred shares;

 

•

pay dividends or make other distributions on, redeem or repurchase our share capital or make other restricted payments;

 

•

make investments, acquisitions, loans or advances;

 

•

incur or create liens;

 

•

transfer or sell certain assets;

 

•

engage in sale and lease back transactions;

 

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declare dividends or make other payments to us;

 

•

guarantee indebtedness;

 

•

engage in transactions with affiliates; and

 

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consolidate, merge or transfer all or substantially all of our assets.

Subject to certain exceptions, the indentures governing our outstanding notes permit us and our restricted subsidiaries to incur additional indebtedness, including secured indebtedness. In addition, the indentures contain customary events of default provisions, including a cross-default provision triggered by certain events of default under our senior credit agreement. We were in compliance with all our covenants under the indentures at May 3, 2009.

 

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DESCRIPTION OF SHARE CAPITAL

General

As of May 3, 2009, there were outstanding:

 

•

213,935,874 ordinary shares held by approximately 115 shareholders; and

 

•

21,767,164 ordinary shares issuable upon exercise of outstanding stock options;

The following description of our share capital and provisions of our memorandum and articles of association are summaries and are qualified by reference to the memorandum and articles of association that will be in effect on or before the closing of this offering. Copies of these documents have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of the ordinary shares reflect changes to our capital structure that will occur upon the closing of this offering.

Ordinary Shares

As of the date of this prospectus, prior to the completion of this offering, our issued share capital consists of                      ordinary shares. We currently have only one class of issued shares, which have identical rights in all respects and rank equally with one another. Our ordinary shares have no par value and there is no authorized share capital under Singapore law. There is a provision in our articles of association to enable us in specified circumstances to issue shares with preferential, deferred or other special rights or restrictions as our directors may determine, subject to the provisions of the Singapore Companies Act and our articles of association. All shares presently issued are fully paid and existing shareholders are not subject to any calls on shares. Although Singapore law does not recognize the concept of “non-assessability” with respect to newly-issued shares, we note that any purchaser of our shares who has fully paid up all amounts due with respect to such shares will not be subject under Singapore law to any personal liability to contribute to the assets or liabilities of our company in such purchaser’s capacity solely as a holder of such shares. We believe that this interpretation is substantively consistent with the concept of “non-assessability” under most, if not all, U.S. state corporations laws. All shares are in registered form. We cannot, except in the circumstances permitted by the Singapore Companies Act, grant any financial assistance for the acquisition or proposed acquisition of our own shares.

New Shares

Under Singapore law, new shares may be issued only with the prior approval of our shareholders in a general meeting. General approval may be sought from our shareholders in a general meeting for the issue of shares. Approval, if granted, will lapse at the earlier of:

 

•

the conclusion of the next annual general meeting;

 

•

the expiration of the period within which the next annual general meeting is required by law to be held (i.e., within 15 months from the last annual general meeting); or

 

•

the subsequent revocation or modification of approval by our shareholders acting at a duly noticed and convened meeting.

Our shareholders have provided such general authority to issue new shares until the conclusion of our 2010 annual general meeting. Subject to this and the provisions of the Singapore Companies Act and our articles of association, all new shares are under the control of the directors who may allot and issue new shares to such persons on such terms and conditions and with the rights and restrictions as they may think fit to impose.

 

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Preference Shares

Our articles of association provide that we may issue shares of a different class with preferential, deferred, qualified or other special rights, privileges or conditions as our board of directors may determine. Under Singapore law, our preference shareholders will have the right to attend any general meeting and in a poll at such general meeting, to have at least one vote for every preference share held:

 

•

upon any resolution concerning the winding-up of our company;

 

•

upon any resolution which varies the rights attached to such preference shares; or

 

•

when the dividends to be paid on our preference shares are more than twelve months in arrears, for the period they remain unpaid.

We may, subject to the prior approval in a general meeting of our shareholders, issue preference shares which are, or at our option, subject to redemption provided that such preference shares may not be redeemed out of capital unless:

 

•

all the directors have made a solvency statement in relation to such redemption; and

 

•

we have lodged a copy of the statement with the Singapore Registrar of Companies.

Further, the shares must be fully paid-up before they are redeemed.

Transfer of Ordinary Shares

Subject to applicable securities laws in relevant jurisdictions and our articles of association, our ordinary shares are freely transferable. Shares may be transferred by a duly signed instrument of transfer in any usual or common form or in a form approved by the directors. The directors may decline to register any transfer unless, among other things, evidence of payment of any stamp duty payable with respect to the transfer is provided together with other evidence of ownership and title as the directors may require. We will replace lost or destroyed certificates for shares upon notice to us and upon, among other things, the applicant furnishing evidence and indemnity as the directors may require and the payment of all applicable fees.

Election and Re-election of Directors

Under our articles of association, our board of directors may appoint any person to be a director as an additional director or to fill a casual vacancy, provided that any person so appointed shall hold office only until the next annual general meeting, and shall then be eligible for re-election.

Under our articles of association, no person other than a director retiring at a general meeting is eligible for appointment as a director at any general meeting, without the recommendation of the Board for election, unless (a) in the case of a member or members who in aggregate hold(s) more than fifty percent of the total number of our issued and paid-up shares (excluding treasury shares), not less than ten days, or (b) in the case of a member or members who in aggregate hold(s) more than five percent of the total number of our issued and paid-up shares (excluding treasury shares), not less than 120 days, before the date of the notice provided to members in connection with the general meeting, a written notice signed by such member or members (other than the person to be proposed for appointment) who (i) are qualified to attend and vote at the meeting for which such notice is given, and (ii) have held shares representing the prescribed threshold in (a) or (b) above, for a continuous period of at least one year prior to the date on which such notice is given, is lodged at our registered office. Such a notice must also include the consent of the person nominated.

 

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Shareholders’ Meetings

We are required to hold an annual general meeting each year and not more than 15 months after the holding of the last preceding annual general meeting. The directors may convene an extraordinary general meeting whenever they think fit and they must do so upon the written request of shareholders representing not less than one-tenth of the total voting rights of all shareholders. In addition, two or more shareholders holding not less than one-tenth of our total number of issued shares (excluding our treasury shares) may call a meeting of our shareholders.

Unless otherwise required by law or by our articles of association, voting at general meetings is by ordinary resolution, requiring the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the resolution. An ordinary resolution suffices, for example, for appointments of directors. A special resolution, requiring an affirmative vote of not less than three-fourths of the shares present in person or represented by proxy at the meeting and entitled to vote on the resolution, is necessary for certain matters under Singapore law, such as an alteration of our articles of association.

Voting Rights

Voting at any meeting of shareholders is by poll. On a poll every shareholder who is present in person or by proxy or by attorney, or in the case of a corporation, by a representative, has one vote for every share held by such shareholder.

Dividends

The directors may declare a dividend. No dividend may be paid except out of our profits. To date, we have not declared any cash dividends on our ordinary shares and have no current plans to pay cash dividends in the foreseeable future. See “Dividend Policy” elsewhere in this prospectus.

Bonus and Rights Issues

In a general meeting, our shareholders may, upon the recommendation of the directors, capitalize any reserves or profits and distribute them as bonus shares to the shareholders in proportion to their shareholdings.

Takeovers

The Singapore Code on Take-overs and Mergers regulates, among other things, the acquisition of ordinary shares of Singapore-incorporated public companies. Any person acquiring an interest, whether by a series of transactions over a period of time or not, either on their own or together with parties acting in concert with such person, in 30% or more of our voting shares, or, if such person holds, either on their own or together with parties acting in concert with such person, between 30% and 50% (both amounts inclusive) of our voting shares, and if such person (or parties acting in concert with such person) acquires additional voting shares representing more than 1% of our voting shares in any six-month period, must, except with the consent of the Securities Industry Council in Singapore, extend a mandatory takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Code on Take-overs and Mergers.

 

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“Parties acting in concert” comprise individuals or companies who, pursuant to an agreement or understanding (whether formal or informal), cooperate, through the acquisition by any of them of shares in a company, to obtain or consolidate effective control of that company. Certain persons are presumed (unless the presumption is rebutted) to be acting in concert with each other. They are as follows:

 

•

a company and its related companies, the associated companies of any of the company and its related companies, companies whose associated companies include any of these companies and any person who has provided financial assistance (other than a bank in the ordinary course of business) to any of the foregoing for the purchase of voting rights;

 

•

a company and its directors (including their close relatives, related trusts and companies controlled by any of the directors, their close relatives and related trusts);

 

•

a company and its pension funds and employee share schemes;

 

•

a person with any investment company, unit trust or other fund whose investment such person manages on a discretionary basis;

 

•

a financial or other professional adviser, including a stockbroker, and its clients in respect of shares held by the adviser and persons controlling, controlled by or under the same control as the adviser and all the funds managed by the adviser on a discretionary basis, where the shareholdings of the adviser and any of those funds in the client total 10% or more of the client’s equity share capital;

 

•

directors of a company (including their close relatives, related trusts and companies controlled by any of such directors, their close relatives and related trusts) which is subject to an offer or where the directors have reason to believe a bona fide offer for the company may be imminent;

 

•

partners; and

 

•

an individual and such person’s close relatives, related trusts, any person who is accustomed to act in accordance with such person’s instructions and companies controlled by the individual, such person’s close relatives, related trusts or any person who is accustomed to act in accordance with such person’s instructions and any person who has provided financial assistance (other than a bank in the ordinary course of business) to any of the foregoing for the purchase of voting rights.

A mandatory offer must be in cash or be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror during the offer period and within the six months preceding the acquisition of shares that triggered the mandatory offer obligation.

Under the Singapore Code on Take-overs and Mergers, where effective control of a company is acquired or consolidated by a person, or persons acting in concert, a general offer to all other shareholders is normally required. An offeror must treat all shareholders of the same class in an offeree company equally. A fundamental requirement is that shareholders in the company subject to the takeover offer must be given sufficient information, advice and time to consider and decide on the offer. These legal requirements may impede or delay a takeover of our company by a third-party.

We may submit an application to the Securities Industry Council of Singapore for a waiver from the Singapore Code on Take-overs and Mergers so that the Singapore Code on Take-overs and Mergers will not apply to our company for so long as we are not listed on a securities

 

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exchange in Singapore. We will make an appropriate announcement if we submit the application and when the result of the application is known.

Liquidation or Other Return of Capital

On a winding-up or other return of capital, subject to any special rights attaching to any other class of shares, holders of ordinary shares will be entitled to participate in any surplus assets in proportion to their shareholdings.

Limitations on Rights to Hold or Vote Ordinary Shares

Except as discussed above under “—Takeovers,” there are no limitations imposed by the laws of Singapore or by our articles of association on the right of non-resident shareholders to hold or vote ordinary shares.

Shareholder Agreement

Pursuant to our Shareholder Agreement, we will not take certain actions specified in the Shareholder Agreement without the consent of our Sponsors. In addition, KKR, Silver Lake and Seletar will have the right to designate members of our board of directors so long as they continue to own certain percentages of our outstanding ordinary shares. Please see “Certain Relationships and Related Party Transactions—Amended and Restated Shareholder Agreement” elsewhere in this prospectus.

Limitations of Liability and Indemnification Matters

Our articles of association provide that, subject to the provisions of the Singapore Companies Act, every director, managing director, secretary or other officer of our company or our subsidiaries and affiliates shall be entitled to be indemnified by our company against all costs, charges, losses, expenses and liabilities incurred by him or her in the execution and discharge of his or her duties or in relation thereto and in particular and without prejudice to the generality of the foregoing, no director, managing director, secretary or other officer of our company or our subsidiaries and affiliates shall be liable for the acts, receipts, neglects or defaults of any other director or officer or for joining in any receipt or other act for conformity or for any loss or expense happening to our company through the insufficiency or deficiency of title to any property acquired by order of the directors for or on behalf of our company or for the insufficiency or deficiency of any security in or upon which any of the moneys of our company shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortuous act of any person with whom any moneys, securities or effects shall be deposited or left or for any other loss, damage or misfortune whatever which shall happen in the execution of the duties of his or her office or in relation thereto unless the same happen through his or her own negligence, default, breach of duty or breach of trust.

The limitation of liability and indemnification provisions in our articles of association may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our shareholders. A shareholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.

 

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The Nasdaq Global Select Market Listing

We have applied to have our ordinary shares approved for listing on the Nasdaq Global Select Market under the symbol “AVGO.”

Transfer Agent and Registrar

The transfer agent and registrar for our ordinary shares is Computershare Inc.

 

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COMPARISON OF SHAREHOLDER RIGHTS

We are incorporated under the laws of Singapore. The following discussion summarizes material differences between the rights of holders of our ordinary shares and the rights of holders of the common stock of a typical corporation incorporated under the laws of the state of Delaware which result from differences in governing documents and the laws of Singapore and Delaware.

This discussion does not purport to be a complete statement of the rights of holders of our ordinary shares under applicable law in Singapore and our articles of association or the rights of holders of the common stock of a typical corporation under applicable Delaware law and a typical certificate of incorporation and bylaws.

The Singapore Companies Act contains the default articles that apply to a Singapore-incorporated company to the extent they are not excluded or modified by a company’s articles of association. They provide examples of the common provisions adopted by companies in their memorandum and articles of association. However, as is the usual practice for companies incorporated in Singapore, we have specifically excluded the application of these provisions in our articles of association, which we refer to below as our articles.

 

Delaware				Singapore—Avago Technologies Limited
Board of Directors
A typical certificate of incorporation and bylaws would provide that the number of directors on the board of directors will be fixed from time to time by a vote of the majority of the authorized directors. Under Delaware law, a board of directors can be divided into classes and cumulative voting in the election of directors is only permitted if expressly authorized in a corporation’s certificate of incorporation.				Typically under Singapore law, the memorandum and articles of association of companies will state the minimum and maximum number of directors as well as provide that the number of directors may be increased or reduced by shareholders via ordinary resolution passed at a general meeting, provided that the number of directors following such increase or reduction is within the maximum and minimum number of directors provided in our articles and the Singapore Companies Act, respectively. Our articles provide that the maximum number of directors will be 13.
Limitation on Personal Liability of Directors
A typical certificate of incorporation provides for the elimination of personal monetary liability of directors for breach of fiduciary duties as directors to the fullest extent permissible under the laws of Delaware, except for liability (i) for any breach of a director’s loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law (relating to the liability of				Pursuant to the Singapore Companies Act, any provision (whether in the articles of association, contract or otherwise) exempting or indemnifying a director against any liability for negligence, default, breach of duty or breach of trust will be void. Nevertheless, a director can be released by the shareholders of a company for breaches of duty to a company except in the case of fraud, illegality, insolvency and oppression or disregard of minority interests.

 

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Delaware				Singapore—Avago Technologies Limited
directors for unlawful payment of a dividend or an unlawful stock purchase or redemption) or (iv) for any transaction from which the director derived an improper personal benefit. A typical certificate of incorporation would also provide that if the Delaware General Corporation Law is amended so as to allow further elimination of, or limitations on, director liability, then the liability of directors will be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended.				Our articles provide that subject to the provisions of the Singapore Companies Act, every director, managing director, secretary and other officer of the Company and its subsidiaries and affiliates, will be indemnified against any liability incurred by such person in defending any proceedings, whether civil or criminal, which relate to anything done or omitted or alleged to be done or omitted by such person as an officer or employee of the company and in which judgment is given in their favor or in which such person is acquitted or in connection with any application under the Singapore Companies Act or any other Singapore statute in which relief is granted to such person by the court unless the same should happen through their own negligence, default, breach of duty or breach of trust.
Interested Shareholders
Section 203 of the Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in specified corporate transactions (such as mergers, stock and asset sales, and loans) with an “interested stockholder” for three years following the time that the stockholder becomes an interested stockholder. Subject to specified exceptions, an “interested stockholder” is a person or group that owns 15% or more of the corporation’s outstanding voting stock (including any rights to acquire stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has voting rights only), or is an affiliate or associate of the corporation and was the owner of 15% or more of the voting stock at any time within the previous three years.   A Delaware corporation may elect to “opt out” of, and not be governed by, Section 203 through a provision in either its original certificate of incorporation, or an amendment to its original certificate or bylaws that was approved by majority stockholder vote. With a limited exception, this amendment would not become effective until 12 months following its adoption.				There are no comparable provisions in Singapore with respect to public companies which are not listed on the Singapore Exchange Securities Trading Limited.

 

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Delaware				Singapore—Avago Technologies Limited
Removal of Directors
A typical certificate of incorporation and bylaws provide that, subject to the rights of holders of any preferred stock, directors may be removed at any time by the affirmative vote of the holders of at least a majority, or in some instances a supermajority, of the voting power of all of the then outstanding shares entitled to vote generally in the election of directors, voting together as a single class. A certificate of incorporation could also provide that such a right is only exercisable when a director is being removed for cause (removal of a director only for cause is the default rule in the case of a classified board).				According to the Singapore Companies Act, directors of a public company may be removed before expiration of their term of office with or without cause by ordinary resolution (i.e., a resolution which is passed by a simple majority of those shareholders present and voting in person or by proxy). Notice of the intention to move such a resolution has to be given to the company not less than 28 days before the meeting at which it is moved. The company shall then give notice of such resolution to its shareholders not less than 14 days before the meeting. Where any director removed in this manner was appointed to represent the interests of any particular class of shareholders or debenture holders, the resolution to remove such director will not take effect until such director’s successor has been appointed.
Filling Vacancies on the Board of Directors
A typical certificate of incorporation and bylaws provide that, subject to the rights of the holders of any preferred stock, any vacancy, whether arising through death, resignation, retirement, disqualification, removal, an increase in the number of directors or any other reason, may be filled by a majority vote of the remaining directors, even if such directors remaining in office constitute less than a quorum, or by the sole remaining director. Any newly elected director usually holds office for the remainder of the full term expiring at the annual meeting of stockholders at which the term of the class of directors to which the newly elected director has been elected expires.				The articles of a Singapore company typically provide that the directors have the power to appoint any person to be a director, either to fill a vacancy or as an addition to the existing directors, but so that the total number of directors will not at any time exceed the maximum number fixed in the articles. Any newly elected director shall hold office until the next following annual general meeting, where such director will then be eligible for re-election. Our articles provide that the directors may appoint any person to be a director as an additional director or to fill a vacancy provided that any person so appointed will only hold office until the next annual general meeting, and will then be eligible for re-election.
Amendment of Governing Documents
Under the Delaware General Corporation Law, amendments to a corporation’s certificate of incorporation require the approval of stockholders holding a majority of the outstanding shares entitled to vote on the amendment. If a class vote on the amendment is required by the Delaware General				Alteration to memorandum and articles of association   Our memorandum and articles may be altered by special resolution (i.e., a resolution passed by at least a three-fourths majority of the shares entitled to vote,

 

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Delaware				Singapore—Avago Technologies Limited
Corporation Law, a majority of the outstanding stock of the class is required, unless a greater proportion is specified in the certificate of incorporation or by other provisions of the Delaware General Corporation Law. Under the Delaware General Corporation Law, the board of directors may amend bylaws if so authorized in the charter. The stockholders of a Delaware corporation also have the power to amend bylaws.				present in person or by proxy at a meeting for which not less than 21 days written notice is given). The board of directors has no right to amend the memorandum or articles.
Meetings of Shareholders
Annual and Special Meetings   Typical bylaws provide that annual meetings of stockholders are to be held on a date and at a time fixed by the board of directors. Under the Delaware General Corporation Law, a special meeting of stockholders may be called by the board of directors or by any other person authorized to do so in the certificate of incorporation or the bylaws.				Annual General Meetings   All companies are required to hold an annual general meeting once every calendar year. The first annual general meeting must be held within 18 months of the company’s incorporation and subsequently, not more than 15 months may elapse between annual general meetings.
				Extraordinary General Meetings   Any general meeting other than the annual general meeting is called an “extraordinary general meeting”. Two or more shareholders holding not less than 10% of the total number of issued shares (excluding treasury shares) may call a general meeting. In addition, the articles usually also provide that general meetings may be convened in accordance with the Singapore Companies Act by the directors.   Notwithstanding anything in the articles, the directors are required to convene a general meeting if required to do so by requisition (i.e., written notice to directors requiring that a meeting be called) by shareholder(s) holding not less than 10% of the paid-up capital of the company carrying voting rights.   Our articles provide that the directors may, whenever they think fit, convene an extraordinary general meeting.
Quorum Requirements   Under the Delaware General Corporation Law, a corporation’s certificate of incorporation or bylaws can specify the number of shares				Quorum Requirements   Our articles provide that shareholders entitled to vote holding a majority of the number of our issued and paid-up shares,

 

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which constitute the quorum required to conduct business at a meeting, provided that in no event shall a quorum consist of less than one-third of the shares entitled to vote at a meeting.				present in person or by proxy at a meeting, shall be a quorum. In the event a quorum is not present, the meeting may be adjourned for one week. When reconvened, the quorum for the meeting will be shareholders entitled to vote holding between them a majority of the number of our issued and paid-up shares, present in person or by proxy at such meeting.
Indemnification of Officers, Directors and Employees.
Under the Delaware General Corporation Law, subject to specified limitations in the case of derivative suits brought by a corporation’s stockholders in its name, a corporation may indemnify any person who is made a party to any third-party action, suit or proceeding on account of being a director, officer, employee or agent of the corporation (or was serving at the request of the corporation in such capacity for another corporation, partnership, joint venture, trust or other enterprise) against expenses, including attorney’s fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding through, among other things, a majority vote of a quorum consisting of directors who were not parties to the suit or proceeding, if the person:   •        acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation or, in some circumstances, at least not opposed to its best interests; and   •        in a criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.   Delaware corporate law permits indemnification by a corporation under similar circumstances for expenses (including attorneys’ fees) actually and reasonably incurred by such persons in connection with the defense or settlement of a derivative action or suit, except that no indemnification may be made in respect of any claim, issue or matter as to which the person is adjudged to be liable to the corporation unless the Delaware Court of Chancery or the court in which the action or				The Singapore Companies Act specifically provides that a company is allowed to:   •        purchase and maintain for any officer insurance against any liability which by law would otherwise attach to such officer in respect of any negligence, default, breach of duty or breach of trust of which such officer may be guilty in relation to the company; or   •        indemnify such officer or auditor against any liability incurred by such officer or auditor in defending any proceedings (whether civil or criminal) in which judgment is given in such officer’s favor or in which such officer is acquitted; or   •        indemnify such officer or auditor against any liability incurred by such officer or auditor in connection with any application under specified portions of the Singapore Companies Act in which relief is granted to such officer or auditor by a court.   In cases where a director is sued by the company, the Singapore Companies Act gives the court the power to relieve directors from the consequences of their negligence, default, breach of duty or breach of trust. However, Singapore case law has indicated that such relief will not be granted to a director who has benefited as a result of his or her breach of trust. In order for relief to be obtained, it must be shown that (i) the director acted reasonably and honestly; and (ii) it is fair, having regard to all the circumstances of the case including those connected with such director’s appointment, to excuse the director.

 

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suit was brought determines upon application that the person is fairly and reasonably entitled to indemnity for the expenses which the court deems to be proper.   To the extent a director, officer, employee or agent is successful in the defense of such an action, suit or proceeding, the corporation is required by Delaware corporate law to indemnify such person for reasonable expenses incurred thereby. Expenses (including attorneys’ fees) incurred by such persons in defending any action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of that person to repay the amount if it is ultimately determined that that person is not entitled to be so indemnified.				Our articles provide that subject to the provisions of the Singapore Companies Act, every director, managing director, secretary and other officer for the time being of our company and our subsidiaries and affiliates, will be indemnified by the company against any liability incurred by such person in defending any proceedings, whether civil or criminal, which relates to anything done or omitted or alleged to be done or omitted by such person as an officer or employee of the company and in which judgment is given in their favor or in which such person is acquitted or in connection with any application under the Singapore Companies Act or any other Singapore statute in which relief is granted to such person by the court unless the same shall happen through their own negligence, default, breach of duty or breach of trust.
Shareholder Approval of Business Combinations
Generally, under the Delaware General Corporation Law, completion of a merger, consolidation, or the sale, lease or exchange of substantially all of a corporation’s assets or dissolution requires approval by the board of directors and by a majority (unless the certificate of incorporation requires a higher percentage) of outstanding stock of the corporation entitled to vote.   The Delaware General Corporation Law also requires a special vote of stockholders in connection with a business combination with an “interested stockholder” as defined in section 203 of the Delaware General Corporation Law. See “— Interested Shareholders” above.				The Singapore Companies Act mandates that specified corporate actions require approval by the shareholders in a general meeting, notably:   •       notwithstanding anything in the company’s memorandum or articles, directors are not permitted to carry into effect any proposals for disposing of the whole or substantially the whole of the company’s undertaking or property unless those proposals have been approved by shareholders in a general meeting;   •       subject to the memorandum of each amalgamating company, an amalgamation proposal must be approved by the shareholders of each amalgamating company via special resolution at a general meeting; and   •       notwithstanding anything in the company’s memorandum or articles, the directors may not, without the prior approval of shareholders, issue shares, including shares being issued in connection with corporate actions.

 

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Shareholder Action Without A Meeting
Under the Delaware General Corporation Law, unless otherwise provided in a corporation’s certificate of incorporation, any action that may be taken at a meeting of stockholders may be taken without a meeting, without prior notice and without a vote if the holders of outstanding stock, having not less than the minimum number of votes that would be necessary to authorize such action, consent in writing. It is not uncommon for a corporation’s certificate of incorporation to prohibit such action.				There are no equivalent provisions in respect of public companies which are not listed in Singapore.
Shareholder Suits
Under the Delaware General Corporation Law, a stockholder may bring a derivative action on behalf of the corporation to enforce the rights of the corporation. An individual also may commence a class action suit on behalf of himself or herself and other similarly situated stockholders where the requirements for maintaining a class action under the Delaware General Corporation Law have been met. A person may institute and maintain such a suit only if such person was a stockholder at the time of the transaction which is the subject of the suit or his or her shares thereafter devolved upon him or her by operation of law. Additionally, under Delaware case law, the plaintiff generally must be a stockholder not only at the time of the transaction which is the subject of the suit, but also through the duration of the derivative suit. The Delaware General Corporation Law also requires that the derivative plaintiff make a demand on the directors of the corporation to assert the corporate claim before the suit may be prosecuted by the derivative plaintiff, unless such demand would be futile.				Derivative actions   The Singapore Companies Act has a provision, which is limited in its scope to companies that are not listed on the securities exchange in Singapore, which provides a mechanism enabling shareholders to apply to the court for leave to bring a derivative action on behalf of the company.   Applications are generally made by shareholders of the company or individual directors, but courts are given the discretion to allow such persons as they deem proper to apply (e.g., beneficial owner of shares).   It should be noted that this provision of the Singapore Companies Act is primarily used by minority shareholders to bring an action in the name and on behalf of the company or intervene in an action to which the company is a party for the purpose of prosecuting, defending or discontinuing the action on behalf of the company.   Class actions   The concept of class action suits, which allows individual shareholders to bring an action qua shareholders, does not exist in Singapore.

 

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Distributions and Dividends; Repurchases and Redemptions
The Delaware General Corporation Law permits a corporation to declare and pay dividends out of statutory surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year as long as the amount of capital of the corporation following the declaration and payment of the dividend is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets.   Under the Delaware General Corporation Law, any corporation may purchase or redeem its own shares, except that generally it may not purchase or redeem these shares if the capital of the corporation is impaired at the time or would become impaired as a result of the redemption. A corporation may, however, purchase or redeem out of capital shares that are entitled upon any distribution of its assets to a preference over another class or series of its shares if the shares are to be retired and the capital reduced.				The Singapore Companies Act provides that no dividends can be paid to shareholders except out of profits.   The Singapore Companies Act does not provide a definition on when profits are deemed to be available for the purpose of paying dividends and this is accordingly governed by case law.   Our articles provide that no dividend can be paid otherwise than out of profits.   Acquisition of a company’s own shares   The Singapore Companies Act generally prohibits a company from acquiring its own shares subject to certain exceptions. Any contract or transaction by which a company acquires or transfers its own shares is void. However, provided that it is expressly permitted to do so by its articles and subject to the special conditions of each permitted acquisition contained in the Singapore Companies Act, a company may:   •        redeem redeemable preference shares (the redemption of these shares will not reduce the capital of the company). Preference shares may be redeemed out of capital if all the directors make a solvency statement in relation to such redemption in accordance with the Singapore Companies Act;   •        whether listed on a securities exchange or not, make an off-market purchase of its own shares in accordance with an equal access scheme authorized in advance at a general meeting;   •        if it is not listed on a securities exchange, make a selective off-market purchase of its own shares in accordance with an agreement authorized in advance at a general meeting by a special resolution where persons whose shares are to be acquired and their associated persons have abstained from voting; and

 

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				•        whether listed on a securities exchange or not, make an acquisition of its own shares under a contingent purchase contract which has been authorized in advance at a general meeting by a special resolution.   A company may also purchase its own shares by an order of a Singapore court.   The total number of ordinary shares that may be acquired by a company in a relevant period may not exceed 10% of the total number of ordinary shares in that class as of the date of the last annual general meeting of the company or as of the date of the resolution to acquire the shares, whichever is higher. Where, however, a company has reduced its share capital by a special resolution or a Singapore court made an order to such effect, the total number of ordinary shares in any class shall be taken to be the total number of ordinary shares in that class as altered by the special resolution or the order of the court. Payment must be made out of the company’s distributable profits or capital, provided that the company is solvent.   Financial assistance for the acquisition of shares   A company may not give financial assistance to any person whether directly or indirectly for the purpose of:   •        the acquisition or proposed acquisition of shares in the company or units of such shares; or   •        the acquisition or proposed acquisition of shares in its holding company or units of such shares.   Financial assistance may take the form of a loan, the giving of a guarantee, the provision of security, the release of an obligation, the release of a debt or otherwise.   However, it should be noted that a company may provide financial assistance for the acquisition of its shares or shares in its

 

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				holding company if it complies with the requirements (including approval by special resolution) set out in the Singapore Companies Act.   Our articles provide that subject to the provisions of the Singapore Companies Act, we may purchase or otherwise acquire our own shares upon such terms and subject to such conditions as we may deem fit. These shares may be held as treasury shares or cancelled as provided in the Singapore Companies Act or dealt with in such manner as may be permitted under the Singapore Companies Act. On cancellation of the shares, the rights and privileges attached to those shares will expire.
Transactions with Officers or Directors
Under the Delaware General Corporation Law, some contracts or transactions in which one or more of a corporation’s directors has an interest are not void or voidable because of such interest provided that some conditions, such as obtaining the required approval and fulfilling the requirements of good faith and full disclosure, are met. Under the Delaware General Corporation Law, either (a) the stockholders or the board of directors must approve in good faith any such contract or transaction after full disclosure of the material facts or (b) the contract or transaction must have been “fair” as to the corporation at the time it was approved. If board approval is sought, the contract or transaction must be approved in good faith by a majority of disinterested directors after full disclosure of material facts, even though less than a majority of a quorum.				Under the Singapore Companies Act, directors are not prohibited from dealing with the company, but where they have an interest in a transaction with the company, that interest must be disclosed to the board of directors. In particular, every director who is in any way, whether directly or indirectly, interested in a transaction or proposed transaction with the company must, as soon practicable after the relevant facts have come to such director’s knowledge, declare the nature of such director’s interest at a board of directors’ meeting.   In addition, a director who holds any office or possesses any property which directly or indirectly might create interests in conflict with such director’s duties as director is required to declare the fact and the nature, character and extent of the conflict at a meeting of directors.   The Singapore Companies Act extends the scope of this statutory duty of a director to disclose any interests by pronouncing that an interest of a member of a director’s family (including spouse, son, adopted son, step-son, daughter, adopted daughter and step-daughter) will be treated as an interest of the director.

 

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				There is however no requirement for disclosure where the interest of the director consists only of being a member or creditor of a corporation which is interested in the proposed transaction with the company if the interest may properly be regarded as immaterial. Where the proposed transaction relates to any loan to the company, no disclosure need be made where the director has only guaranteed the repayment of such loan, unless the articles of association provide otherwise.   Further, where the proposed transaction is to be made with or for the benefit of a related corporation (i.e. the holding company, subsidiary or subsidiary of a common holding company) no disclosure need be made of the fact that the director is also a director of that corporation, unless the articles of association provide otherwise.
				Subject to specified exceptions, the Singapore Companies Act prohibits a company from making a loan to its directors or to directors of a related corporation, or giving a guarantee or security in connection with such a loan. Companies are also prohibited from making loans to its directors’ spouse or children (whether adopted or naturally or step-children), or giving a guarantee or security in connection with such a loan.
Dissenters’ Rights
Under the Delaware General Corporation Law, a stockholder of a corporation participating in some types of major corporate transactions may, under varying circumstances, be entitled to appraisal rights pursuant to which the stockholder may receive cash in the amount of the fair market value of his or her shares in lieu of the consideration he or she would otherwise receive in the transaction.				There are no equivalent provisions in Singapore under the Singapore Companies Act.

 

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Cumulative Voting
Under the Delaware General Corporation Law, a corporation may adopt in its bylaws that its directors shall be elected by cumulative voting. When directors are elected by cumulative voting, a stockholder has the number of votes equal to the number of shares held by such stockholder times the number of directors nominated for election. The stockholder may cast all of such votes for one director or among the directors in any proportion.				There is no equivalent provision in respect of companies incorporated in Singapore.
Anti-Takeover Measures
Under the Delaware General Corporation Law, the certificate of incorporation of a corporation may give the board the right to issue new classes of preferred stock with voting, conversion, dividend distribution, and other rights to be determined by the board at the time of issuance, which could prevent a takeover attempt and thereby preclude shareholders from realizing a potential premium over the market value of their shares.				The articles of a Singapore company typically provide that the company may allot and issue new shares of a different class with preferential, deferred, qualified or other special rights as its board of directors may determine with the prior approval of the company’s shareholders in a general meeting. Our articles provide that our shareholders may grant to our board the general authority to issue such preference shares until the next general meeting. See “Risk Factors—Risks Relating to Investments in Singapore Companies—For a limited period of time, our directors have general authority to allot and issue new shares on terms and conditions and with any preferences, rights or restrictions as may be determined by our board of directors in its sole discretion,” and “Description of Share Capital—Preference Shares” elsewhere in this prospectus.
In addition, Delaware law does not prohibit a corporation from adopting a stockholder rights plan, or “poison pill,” which could prevent a takeover attempt and also preclude shareholders from realizing a potential premium over the market value of their shares.				Singapore law does not generally prohibit a corporation from adopting “poison pill” arrangements which could prevent a takeover attempt and also preclude shareholders from realizing a potential premium over the market value of their shares.

 

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				However, under the Singapore Code on Take-overs and Mergers, if, in the course of an offer, or even before the date of the offer, the board of the offeree company has reason to believe that a bona fide offer is imminent, the board must not, except pursuant to a contract entered into earlier, take any action, without the approval of shareholders at a general meeting, on the affairs of the offeree company that could effectively result in any bona fide offer being frustrated or the shareholders being denied an opportunity to decide on its merits.
				See “Description of Share Capital—Takeovers” elsewhere in this prospectus for a description of the Singapore Code on Take-overs and Mergers.

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our ordinary shares. Future sales of our ordinary shares in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our ordinary shares in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.

Based on the number of shares of ordinary shares outstanding as of                     , 2009, upon completion of this offering,              ordinary shares will be outstanding, assuming no exercise of options. All of the ordinary shares sold in this offering will be freely tradable unless purchased by our affiliates. The remaining              ordinary shares outstanding after this offering, based on shares outstanding as of                     , 2009, will be restricted as a result of securities laws, lock-up agreements or other contractual restrictions. These remaining shares will generally become available for sale in the public market subject to compliance with applicable securities laws or upon expiration of these lock-up agreements or other contractual restrictions.

Following the expiration of these lock-up periods, all shares will be eligible for resale in compliance with Rule 144 or Rule 701 of the Securities Act. “Restricted securities” as defined under Rule 144 were issued and sold by us in reliance on exemptions from the registration requirements of the Securities Act. These shares may be sold in the public market only if registered pursuant to an exemption from registration, such as Rule 144 or Rule 701 under the Securities Act.

Rule 144

In general, a person who has beneficially owned restricted shares of ordinary shares for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Persons who have beneficially owned restricted shares of our ordinary shares for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

 

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1% of the number of ordinary shares then outstanding (             shares immediately after this offering); or

 

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the average weekly trading volume of our ordinary shares on the Nasdaq Global Select Market during the four calendar weeks immediately preceding the date on which the notice of sale is filed with the SEC.

provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

 

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Rule 701

Rule 701 under the Securities Act permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and under “Underwriting” included elsewhere in this prospectus and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.

Lock-up Agreements

We, along with our directors, executive officers, the selling shareholders and substantially all of our other securityholders have agreed with the underwriters that for a period of 180 days following the date of this prospectus, subject to certain extensions, we or they will not directly or indirectly, offer for sale, sell, contract to sell, transfer the economic risk of ownership in, grant any option for the sale of (including without limitation any short sale), pledge, transfer, establish an open “put equivalent position” within the meaning of Rule 16a-1(h) of the Exchange Act, or otherwise dispose of any ordinary shares or options to acquire ordinary shares or any security or instrument related to such ordinary shares or options, whether now owned or hereafter acquired, or publicly announce the holder’s intention to do any of the foregoing, subject to specified exceptions. The underwriters may, in their sole discretion, at any time without prior notice, release all or any portion of the shares from the restrictions in any such agreement.

The 180-day restricted period described in the preceding paragraph will be extended if:

 

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during the last 17 days of the 180-day restricted period we issue an earnings release or material news or a material event relating to us occurs; or

 

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prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,

in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the release or the occurrence of the material news or material event, unless such extension is waived, in writing, by Deutsche Bank Securities Inc. and Barclays Capital Inc. on behalf of the underwriters.

Registration Rights

We are party to a Registration Rights Agreement that provides the Sponsors the right to demand that we file a registration statement and the Sponsors and the Co-Investors the right to request that their shares be covered by a registration statement that we are otherwise filing, subject to certain limitations. See “Certain Relationships and Related Party Transactions—Registration Rights Agreement” elsewhere in this prospectus. In addition, each participant in our Executive Plan, including each executive officer, must enter into a Management Shareholders Agreement with us and our controlling shareholder, Bali Investments S.àr.l., in connection with the executive’s purchase of shares pursuant to the Executive Plan. The Management Shareholders Agreement grants “piggyback” registration rights allowing the executive to sell along side Bali Investments S.àr.l. or its successor in a public offering.

 

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After this offering, the holders of approximately              ordinary shares, or     % based on shares outstanding as of                     , 2009 assuming no exercise of the underwriters’ option to purchase additional shares and no exercise of our options, will be entitled to rights with respect to registration of such shares under the Securities Act. Except for shares purchased by affiliates, registration of their shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon effectiveness of the registration, subject to the expiration of the lock-up period.

Stock Plans

As soon as practicable after the completion of this offering, we intend to file a Form S-8 registration statement under the Securities Act to register our ordinary shares subject to options outstanding or reserved for issuance under our Amended and Restated Equity Incentive Plan for Executive Employees for Avago Technologies Limited and Subsidiaries, Amended and Restated Equity Incentive Plan for Senior Management Employees for Avago Technologies Limited and Subsidiaries, and 2009 Equity Incentive Award Plan. This registration statement will become effective immediately upon filing, and shares covered by this registration statement will thereupon be eligible for sale in the public markets, subject to Rule 144 limitations applicable to affiliates and any lock-up agreements. For a more complete discussion of our stock plans, see “Management—Employee Benefit and Stock Plans.”

Shareholder Agreement

The Shareholder Agreement among us and certain of our investors also provides for certain transfer restrictions which survive after the initial public offering. See “Certain Relationships and Related Party Transactions—Amended and Restated Shareholder Agreement” elsewhere in this prospectus.

 

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TAX CONSIDERATIONS

The following discussion of the material U.S. federal income tax and Singapore tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. This discussion does not address all possible tax consequences relating to an investment in the ordinary shares, such as the tax consequences under state, local and other tax laws. To the extent that the discussion relates to matters of Singapore tax law, it represents the opinion of WongPartnership LLP, our Singapore counsel. Based on the facts and subject to the limitations set forth herein, the statements of law or legal conclusions under the caption“—U.S. Federal Income Taxation” constitute the opinion of Latham & Watkins LLP, our special U.S. counsel, as to the material U.S. federal income tax consequences to U.S. Holders (as defined below) under current law of an investment in the ordinary shares.

U.S. Federal Income Taxation

The following discussion describes certain material U.S. federal income tax consequences to U.S. Holders (as defined below) under current law of an investment in our ordinary shares. This discussion applies only to U.S. Holders that hold our ordinary shares as capital assets (generally, property held for investment) and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States in effect as of the date of this prospectus and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this prospectus, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which could apply retroactively and could affect the tax consequences described below.

The following discussion does not address the tax consequences to any particular investor or to persons in special tax situations such as:

 

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banks;

 

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certain financial institutions;

 

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insurance companies;

 

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regulated investment companies;

 

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real estate investment trusts;

 

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broker-dealers;

 

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traders that elect to mark to market;

 

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U.S. expatriates;

 

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tax-exempt entities;

 

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persons liable for alternative minimum tax;

 

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persons holding our ordinary shares as part of a straddle, hedging, constructive sale, conversion or integrated transaction;

 

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persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock;

 

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persons who acquired our ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation; or

 

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persons holding our ordinary shares through partnerships or other pass-through entities.

 

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PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES.

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of our ordinary shares and you are for U.S. federal income tax purposes:

 

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an individual who is a citizen or resident of the United States;

 

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a corporation (or other entity taxable as a corporation) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia;

 

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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

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a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If a partnership holds our ordinary shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our ordinary shares, you should consult your tax advisor.

Taxation of Dividends and Other Distributions on the Ordinary Shares

Subject to the passive foreign investment company rules discussed below, the U.S. dollar amount of the gross amount of any distribution we make to you with respect to our ordinary shares will generally be includible in your gross income, in the year actually or constructively received, as dividend income, but only to the extent that such distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess will be treated first as a tax-free return of your tax basis in the ordinary shares you hold, and then, to the extent such excess exceeds your tax basis in the ordinary shares, as capital gain. If we do not calculate our earnings and profits under U.S. federal income tax principles, you should expect that any distribution we make to you will be treated as a dividend even if such distribution would otherwise be treated as a tax-free return of capital or as capital gain under the rules described above. Any dividends we pay will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.

With respect to non-corporate U.S. Holders, including individual U.S. Holders, for taxable years beginning before January 1, 2011, dividends will be taxed at the lower capital gains rate applicable to “qualified dividend income,” provided that (1) our ordinary shares are readily tradable on an established securities market in the United States, (2) we are not a passive foreign investment company (as discussed below) for our taxable year in which the dividend is paid and the preceding taxable year, and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, common or ordinary shares are considered for the purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq Global Select Market, as the ordinary shares

 

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are expected to be. You should consult your tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for any dividends we pay with respect to the ordinary shares.

For foreign tax credit purposes, the limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, any dividends we pay with respect to our ordinary shares will generally constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.” Any dividends we pay to you will generally constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced tax rate and divided by the highest tax rate normally applicable to dividends. The rules relating to the determination of the foreign tax credit are complex and you should consult your tax advisors regarding the availability of a foreign tax credit in your particular circumstances.

Taxation of Dispositions of the Ordinary Shares

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of an ordinary share equal to the difference between the amount realized (in U.S. dollars) for the ordinary share and your tax basis (in U.S. dollars) in the ordinary share. The gain or loss will generally be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, that has held the ordinary share for more than one year, you will be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any gain or loss that you recognize on a disposition of our ordinary shares will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes. You should consult your tax advisors regarding the proper treatment of gain or loss in your particular circumstances.

Passive Foreign Investment Company

Based on the current and anticipated valuation of our assets, including goodwill, and composition of our income and assets, we do not expect to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our 2009 taxable year or any future taxable year. However, the application of the PFIC rules is subject to ambiguity in several respects. In addition, our actual PFIC status for the current taxable year or any future taxable year will not be determinable until after the close of each such year. Accordingly, we cannot assure you that we will not be a PFIC for our current taxable year or any future taxable year. Because PFIC status is a factual determination for each taxable year that cannot be made until after the close of each such year, Latham & Watkins LLP, our special U.S. counsel, expresses no opinion with respect to our PFIC status and also expresses no opinion with respect to our expectations set forth in this paragraph.

A non-U.S. corporation will be a PFIC for any taxable year if, applying certain look-through rules, either:

 

•

at least 75% of its gross income for such year is passive income, or

 

•

at least 50% of the value of its assets (based on an average of the quarterly values of the assets during such year) is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”).

We must make a separate determination each taxable year as to whether we are a PFIC. As a result, our PFIC status may change. In particular, because the value of our assets for purposes

 

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of the asset test will generally be determined by reference to the market price of our ordinary shares, our PFIC status will depend in large part on the market price of the ordinary shares. Accordingly, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addition, the composition of our income and assets will be affected by how, and how quickly, we use the cash raised in this and any future offering. If we are a PFIC for any taxable year during which you hold ordinary shares, we will continue to be treated as a PFIC with respect to you for all succeeding years during which you hold the ordinary shares. However, if we cease to be a PFIC during such holding period, you could avoid some of the adverse effects of the PFIC regime by making a “deemed sale” election with respect to the ordinary shares.

For each taxable year that we are treated as a PFIC with respect to you, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the ordinary shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ordinary shares will be treated as an excess distribution. Under these special tax rules:

 

•

the excess distribution or gain will be allocated ratably over your holding period for the ordinary shares,

 

•

the amount allocated to the current taxable year, and any period in your holding period prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

 

•

the amount allocated to each other taxable year will be subject to the highest tax rate in effect for each such year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for our ordinary shares, you will include in income for each year that we are treated as a PFIC with respect to you an amount equal to the excess, if any, of the fair market value of the ordinary shares you hold as of the close of your taxable year over your adjusted basis in such ordinary shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the ordinary shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the ordinary shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as any gain on the actual sale or other disposition of the ordinary shares, are treated as ordinary income. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations that are not PFICs would apply to any distributions we make, except that the lower capital gains rate applicable to qualified dividend income (discussed above under “—Taxation of Dividends and Other Distributions on the Ordinary Shares”) generally would not apply.

The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. We expect that the ordinary shares will be listed on the Nasdaq Global Select Market. Consequently, we expect that, provided the ordinary shares are regularly traded and you are a holder of the ordinary shares, the mark-to-market election would be available to you if we are or we become a PFIC. You should consult your tax advisors as to the availability and desirability of a mark-to-market election.

 

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Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder that makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. However, the qualified electing fund election is available only if the PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We currently do not intend to prepare or provide the information that would enable you to make a qualified electing fund election.

You should consult your tax advisors regarding the application of the PFIC rules to your investment in our ordinary shares and the elections discussed above or any other elections that may be available to you.

Information Reporting and Backup Withholding

Dividend payments with respect to ordinary shares and proceeds from the sale, exchange or redemption of ordinary shares will generally be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S. Holder that furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or that is otherwise exempt from backup withholding. U.S. Holders that are exempt from backup withholding should still complete U.S. Internal Revenue Service Form W-9 to avoid possible erroneous backup withholding. You should consult your tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing an appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information in a timely manner.

Singapore Tax Considerations

The following discussion is a summary of Singapore tax, stamp duty and estate duty considerations relevant to the purchase, ownership and disposition of our ordinary shares by an investor who is not tax resident or domiciled in Singapore and who does not carry on business or otherwise have a presence in Singapore. The statements made herein regarding taxation are based on certain aspects of the tax laws of Singapore and administrative guidelines issued by the relevant authorities in force as of the date hereof and are subject to any changes in such laws or administrative guidelines, or in the interpretation of those laws or guidelines, occurring after such date, which changes could be made on a retroactive basis. The statements made herein do not describe all of the tax considerations that may be relevant to all Avago shareholders, some of which (such as dealers in securities) may be subject to different rules. Each prospective investor should consult an independent tax advisor regarding all Singapore income and other tax consequences applicable to them from owning or disposing of our ordinary shares in light of the investor’s particular circumstances.

Income Taxation Under Singapore Law

Distributions with Respect to Ordinary Shares.    Singapore does not impose withholding tax on dividends. Under the one-tier corporate tax system which currently applies to all Singapore tax resident companies, tax on corporate profits is final, and dividends paid by a

 

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Singapore tax resident company will be tax exempt in the hands of a shareholder, whether or not the shareholder is a company or an individual and whether or not the shareholder is a Singapore tax resident.

Capital Gains upon Disposition of Ordinary Shares.    Under current Singapore tax laws, there is no tax on capital gains. As such, any profits from the disposal of our ordinary shares would not ordinarily be taxable in Singapore. However, if the gains from the disposal of ordinary shares are construed to be of an income nature (which could be the case if, for instance, the gains arise from the carrying on of a trade or business in Singapore), the disposal profits would be taxable as income rather than capital gains.

Stamp Duty

There is no Singapore stamp duty payable in respect of the issuance or holding of our ordinary shares. Singapore stamp duty will be payable if there is an instrument of transfer executed in Singapore or if there is an instrument of transfer executed outside of Singapore which is received in Singapore. Under Singapore law, stamp duty is not applicable to electronic transfers of our shares effected on a book entry basis. We therefore expect that no Singapore stamp duty will be payable in respect of ordinary shares purchased by U.S. holders in this offering assuming that they are acquired in book entry form through the facility established by our transfer agent and registrar. Where shares evidenced in certificated form are transferred and an instrument of transfer is executed between the parties, Singapore stamp duty is payable on an instrument of transfer of the shares at the rate of S$0.20 for every S$100 or part thereof of the consideration for, or market value of, the shares, whichever is higher. The Singapore stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where the instrument of transfer is executed outside of Singapore, Singapore stamp duty must be paid within 30 days of receipt in Singapore if the instrument of transfer is received in Singapore.

Estate Duty

Singapore estate duty has been abolished with effect from February 15, 2008 in relation to the estate of any person whose death has occurred on or after February 15, 2008.

Tax Treaties Regarding Withholding Taxes

There is no comprehensive avoidance of double taxation agreement between the United States and Singapore which applies to withholding taxes on dividends or capital gains.

 

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UNDERWRITING

Subject to the terms and conditions of an underwriting agreement dated the date hereof, the underwriters named below, through Deutsche Bank Securities Inc., Barclays Capital Inc., Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc., the representatives and the joint book-running managers for this offering, have severally agreed to purchase from us and the selling shareholders the following respective number of ordinary shares at a public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus:

 

Underwriters		Number of Shares
Deutsche Bank Securities Inc.
Barclays Capital Inc.
Morgan Stanley & Co. Incorporated
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
UBS Securities LLC
KKR Capital Markets LLC
ABN AMRO Incorporated
FTN Equity Capital Markets Corp.
Total

The underwriting agreement provides that the obligations of the several underwriters to purchase the ordinary shares offered hereby are subject to certain conditions precedent and that the underwriters will purchase all of the ordinary shares offered by this prospectus, other than those covered by the underwriters’ option to purchase additional shares described below, if any of these shares are purchased.

We and the selling shareholders have been advised by the representatives of the underwriters that the underwriters propose to offer the ordinary shares to the public at the public offering price set forth on the cover of this prospectus and to dealers at a price that represents a concession not in excess of $             per share under the public offering price. After the initial public offering, representatives of the underwriters may change the offering price and other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

The selling shareholders have granted to the underwriters an option, exercisable not later than 30 days after the date of this prospectus, to purchase in whole or in part up to                      additional ordinary shares from the selling shareholders to cover over-allotments at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus. The underwriters may exercise this option only to the extent the underwriters sell more than                      ordinary shares in this offering. To the extent that the underwriters exercise this option, each of the underwriters will become obligated, subject to conditions, to purchase approximately the same percentage of these additional ordinary shares as the number of ordinary shares to be purchased by it in the above table bears to the total number of ordinary shares offered by this prospectus. The selling shareholders will be obligated, pursuant to the option, to sell these additional ordinary shares to the underwriters to the extent the

 

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option is exercised. If any additional ordinary shares are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriting discounts and commissions per share are equal to the public offering price per ordinary share less the amount paid by the underwriters to us or the selling shareholders per ordinary share. We and the selling shareholders have agreed to pay the underwriters the following discounts and commissions, assuming either no exercise or full exercise by the underwriters of the underwriters’ option to purchase additional shares:

 

		Fee per share			Total Fees
					Without Exercise of Underwriters’ Option			With Full Exercise of Underwriters’ Option
Discounts and commissions paid by us		$			$			$
Discounts and commissions paid by the selling shareholders		$			$			$

In addition, we and the selling shareholders estimate that the total expenses of this offering, excluding underwriting discounts and commissions, payable by us will be approximately $            . We will pay all expenses of this offering, including expenses of the selling shareholders pursuant to the Registration Rights Agreement under “Certain Relationships and Related Party Transactions—Registration Rights Agreement,” other than the underwriting discounts and commissions attributable to shares sold by the selling shareholders.

We and the selling shareholders have agreed to indemnify the underwriters against some specified types of liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of any of these liabilities.

Each of our officers and directors, the selling shareholders and substantially all of our other securityholders have agreed that, without the prior written consent of each of Deutsche Bank Securities Inc. and Barclays Capital Inc., they will not directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any ordinary shares (including, without limitation, ordinary shares that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the Securities and Exchange Commission and ordinary shares that may be issued upon exercise of any options) or securities convertible into or exercisable or exchangeable for ordinary shares, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic consequences of ownership of the ordinary shares, (3) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any ordinary shares or securities convertible, exercisable or exchangeable into ordinary shares or any of our other securities, or (4) publicly disclose the intention to do any of the foregoing for a period of 180 days after the date of this prospectus, subject to certain exceptions. The consent of Deutsche Bank Securities Inc. and Barclays Capital Inc. may be given at any time without public notice. We and the selling shareholders have entered into a similar agreement with the representatives of the underwriters. There are no agreements between the representatives and any of our securityholders or affiliates releasing them from these lock-up agreements prior to the expiration of the 180-day period. Subject to the occurrence of certain events as more fully described herein under the heading “Shares Eligible for Future Sale—Lock-up Agreements,” the lock-up period under these agreements may be extended beyond 180 days.

 

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The underwriters have informed us that they do not intend to confirm sales to accounts over which they exercise discretionary authority in excess of 5% of the total number of shares offered by them and that they will not confirm sales to such accounts without prior written approval of the customer.

In connection with the offering, the underwriters may purchase and sell our ordinary shares in the open market, in accordance with Regulation M under the Exchange Act where applicable. These transactions may include short sales, purchases to cover positions created by short sales and stabilizing transactions. If the underwriters commence these activities, they may discontinue them at any time.

Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. Covered short sales are sales made in an amount not greater than the underwriters’ option to purchase additional ordinary shares from us in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the underwriters’ option to purchase additional shares.

Naked short sales are any sales in excess of the option to purchase additional shares. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if underwriters are concerned that there may be downward pressure on the price of the shares in the open market prior to the completion of the offering.

Stabilizing transactions consist of various bids for or purchases of our ordinary shares made by the underwriters in the open market prior to the completion of the offering.

The underwriters may impose a penalty bid. This occurs when a particular underwriter repays to the other underwriters a portion of the underwriting discount received by it because the representatives of the underwriters have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or slowing a decline in the market price of our ordinary shares. Additionally, these purchases, along with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our ordinary shares. As a result, the price of our ordinary shares may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the Nasdaq Global Select Market, in the over-the-counter market or otherwise.

A prospectus in electronic format is being made available on Internet web sites maintained by one or more of the lead underwriters of this offering and may be made available on web sites maintained by other underwriters. Other than the prospectus in electronic format, the information on any underwriter’s web site and any information contained in any other web site maintained by an underwriter is not part of the prospectus or the registration statement of which the prospectus forms a part.

 

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Pricing of this Offering

Prior to this offering, there has been no public market for our ordinary shares. Consequently, the initial public offering price of our ordinary shares will be determined by negotiation among us, the selling shareholders and the representatives of the underwriters. Among the primary factors that will be considered in determining the public offering price are:

 

•

prevailing market conditions;

 

•

our results of operations in recent periods;

 

•

the present stage of our development;

 

•

the market capitalizations and stages of development of other companies that we, the selling shareholders and the representatives of the underwriters believe to be comparable to our business; and

 

•

estimates of our business potential.

Relationships/FINRA Rules

Under Rule 2720 of the NASD Conduct Rules of the Financial Industry Regulatory Authority, Inc. (FINRA, the successor to the National Association of Securities Dealers, Inc., or NASD), when a member of FINRA participates in the distribution of an affiliated company’s equity securities for which a bona fide independent market does not exist, the price at which equity securities are distributed to the public can be no higher than that recommended by a “qualified independent underwriter” within the meaning of Rule 2720. KKR Capital Markets LLC, an affiliate of ours and a member of FINRA, will participate in the underwriting of shares of our ordinary shares offered pursuant to this prospectus. KKR, which is one of our principal shareholders and has appointed three members of our board of directors, has a 98% economic interest in KKR Capital Markets Holdings L.P., which owns 100% of the equity interests of KKR Capital Markets LLC. Because of our relationship with KKR Capital Markets LLC, the offering of the securities will be conducted in accordance with NASD Conduct Rule 2720. Deutsche Bank Securities Inc. has agreed to act as a “qualified independent underwriter” within the meaning of Rule 2720 with respect to this offering. Accordingly, the price per share of our ordinary shares set forth on the cover page of this prospectus is not higher than that recommended by Deutsche Bank Securities Inc. in its capacity as a “qualified independent underwriter.” We have agreed to indemnify Deutsche Bank Securities Inc. for liabilities incurred as a result of its participation as a “qualified independent underwriter.”

KKR Capital Markets LLC was registered as a broker-dealer in September 2007. Since September 2007, KKR Capital Markets LLC has acted as an underwriter in two public equity offerings.

Pursuant to the terms of the Shareholder Agreement, KKR has designated Adam H. Clammer, James H. Greene, Jr. and David Kerko as members of our board of directors.

Pursuant to the terms of the Advisory Agreement, upon the closing of this offering, KKR and Silver Lake are each entitled to a fee equal to 0.5% of the aggregate value of this offering. KKR is an affiliate of KKR Capital Markets LLC.

In addition, an affiliate of KKR Capital Markets LLC is an investment advisor that manages certain funds and accounts, which hold $10 million principal amount of our senior floating rate notes, $20 million principal amount of our senior notes and $52 million principal amount of our senior subordinated notes, some or all of which may be retired with a portion of the net proceeds from this offering.

 

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Citigroup Global Markets Inc. is a joint lead arranger and joint lead bookrunner under our senior credit agreement. Citicorp International Limited (Hong Kong), an affiliate of Citigroup Global Markets Inc., is the Asian administrative agent under our senior credit agreement. Citicorp North America, Inc., an affiliate of Citigroup Global Markets Inc., is the administrative agent for our Tranche B-1 term loan and the collateral agent under our senior credit agreement. Citibank N.A., Singapore Branch and Citibank N.A., Berhad, both affiliates of Citigroup Global Markets Inc., are lenders under our senior credit agreement. Citigroup Global Markets Inc. advised us in connection with the sales of our Storage Business and our Printer ASICs Business.

Affiliates of Deutsche Bank Securities Inc., Barclays Capital Inc. and ABN AMRO Incorporated are lenders under our senior credit agreement. Credit Suisse, an affiliate of Credit Suisse Securities (USA) LLC is the documentation agent and a lender under our senior credit agreement.

Citigroup Global Markets Singapore Pte. Ltd., an affiliate of Citigroup Global Markets Inc., and Credit Suisse First Boston (Singapore) Limited, an affiliate of Credit Suisse Securities (USA) LLC, acted as the initial purchasers of our 10 ¹/8% senior notes due 2013, senior floating rate notes due 2013 and 11 ⁷/8% senior subordinated notes due 2015 and, in connection with those purchases received compensation in the form of a discount on the purchase price, below the face value of the notes.

Some of the underwriters or their affiliates have received customary fees and commissions for the foregoing services and have provided financing and strategic advice and commercial banking services from time to time, and may continue to provide services to us in the future.

Stamp Taxes

Stamp taxes will not be imposed by the United States on investors in connection with the purchase of ordinary shares in this offering.

There is no Singapore stamp duty payable in respect of the issuance or holding of our ordinary shares. Singapore stamp duty will be payable if there is an instrument of transfer executed in Singapore or if there is an instrument of transfer executed outside of Singapore which is received in Singapore. Under Singapore law, stamp duty is not applicable to electronic transfers of our shares effected on a book entry basis. We therefore expect that no Singapore stamp duty will be payable in respect of ordinary shares purchased by U.S. holders in this offering assuming that they are acquired in book entry form through the facility established by our transfer agent and registrar. Where shares evidenced in certificated form are transferred and an instrument of transfer is executed between the parties, Singapore stamp duty is payable on an instrument of transfer of the shares at the rate of S$0.20 for every S$100 or part thereof of the consideration for, or market value of, the shares, whichever is higher. The Singapore stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where the instrument of transfer is executed outside of Singapore, Singapore stamp duty must be paid within 30 days of receipt in Singapore if the instrument of transfer is received in Singapore.

Selling Restrictions

European Economic Area

In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a “relevant member state”), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the “relevant

 

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implementation date”), an offer of securities described in this prospectus may not be made to the public in that relevant member state other than:

 

•

to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

 

•

to any legal entity that has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

 

•

to fewer than 100 natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives; or

 

•

in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive,

provided that no such offer of securities shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For purposes of this provision, the expression an “offer of securities to the public” in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression “Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each relevant member state.

We have not authorized and do not authorize the making of any offer of securities through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the securities as contemplated in this prospectus. Accordingly, no purchaser of the securities, other than the underwriters, is authorized to make any further offer of the securities on behalf of us, or the underwriters.

United Kingdom

This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive (“Qualified Investors”) that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant persons should not act or rely on this document or any of its contents.

Australia

No prospectus or other disclosure document (as defined in the Corporations Act 2001 (Cth) of Australia (“Corporations Act”)) in relation to the ordinary shares has been or will be lodged with the Australian Securities & Investments Commission (“ASIC”). This document has not

 

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been lodged with ASIC and is only directed to certain categories of exempt persons. Accordingly, if you receive this document in Australia:

(a) you confirm and warrant that you are either:

 

(i)

a “sophisticated investor” under section 708(8)(a) or (b) of the Corporations Act;

 

(ii)

a “sophisticated investor” under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant’s certificate to us which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;

 

(iii)

a person associated with the company under section 708(12) of the Corporations Act; or

 

(iv)

a “professional investor” within the meaning of section 708(11)(a) or (b) of the Corporations Act,

and to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act any offer made to you under this document is void and incapable of acceptance; and

(b) you warrant and agree that you will not offer any of the ordinary shares for resale in Australia within 12 months of those ordinary shares being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.

Hong Kong

The ordinary shares may not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made under that Ordinance or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32, Laws of Hong Kong) or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the ordinary shares may be issued or may be in the possession of any person for the purpose of the issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to the ordinary shares which are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) or any rules made under that Ordinance.

India

This prospectus has not been and will not be registered as a prospectus with the Registrar of Companies in India or with the Securities and Exchange Board of India. This prospectus or any other material relating to these securities is for information purposes only and may not be circulated or distributed, directly or indirectly, to the public or any members of the public in India and in any event to not more than 50 persons in India. Further, persons into whose possession this prospectus comes are required to inform themselves about and to observe any such restrictions. Each prospective investor is advised to consult its advisors about the particular consequences to it of an investment in these securities. Each prospective investor is also advised that any investment in these securities by it is subject to the regulations prescribed by the Reserve Bank of India and the Foreign Exchange Management Act and any regulations framed thereunder.

 

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Japan

No registration has been made under Article 4, Paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) (“FIEL”) in relation to the offering of the shares. The shares are being offered in a private placement to up to 49 investors under Article 2, Paragraph 3, Item 2 iii of the FIEL.

Korea

The ordinary shares may not be offered, sold and delivered directly or indirectly, or offered or sold to any person for reoffering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the Korea Securities and Exchange Act and the Foreign Exchange Transaction Law and the decrees and regulations thereunder. The ordinary shares have not been registered with the Financial Services Commission of Korea for public offering in Korea. Furthermore, the ordinary shares may not be resold to Korean residents unless the purchaser of the ordinary shares complies with all applicable regulatory requirements (including but not limited to government approval requirements under the Foreign Exchange Transaction Law and its subordinate decrees and regulations) in connection with the purchase of the ordinary shares.

Singapore

This prospectus has not been and will not be lodged with or registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the ordinary shares may not be issued, circulated or distributed, nor may the ordinary shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor, as defined in Section 4A(1)(c) of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), under Section 274 of the SFA, (ii) to a relevant person, as defined in Section 275(2), pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the ordinary shares are initially subscribed or purchased pursuant to an offer made in reliance of the exemptions under Sections 274 and 275 of the SFA, within the period of six months from the date of the initial subscription or purchase, these ordinary shares should only be sold in Singapore to institutional investors (as defined in Section 4A(1)(c) of the SFA), relevant persons (as defined in Section 275(2) of the SFA) or any person pursuant to Section 275 (1A) of the SFA.

Where the ordinary shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

(a)

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

 

(b)

a trust (where the trustee is not an accredited investor) the sole purpose of which is to hold investments and each beneficiary of whom is an individual who is an accredited investor,

“securities” (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months

 

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after that corporation or that trust has acquired the ordinary shares pursuant to an offer made under Section 275 of the SFA except:

 

(i)

to an institutional investor (as defined in Section 4A(1)(c) of the SFA) under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), or to any person pursuant to an offer that is made on terms that such securities of that corporation or such rights or interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further, for corporations, in accordance with the conditions specified in Section 275 of the SFA;

 

(ii)

where no consideration is or will be given for the transfer; or

 

(iii)

where the transfer is by operation of law.

By accepting this prospectus, the recipient hereof represents and warrants that he is entitled to receive it in accordance with the restrictions set forth above and agrees to be bound by the limitations contained herein. Any failure to comply with these limitations may constitute a violation of law.

 

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LEGAL MATTERS

The validity of the ordinary shares offered by this prospectus will be passed upon for us and the selling shareholders by WongPartnership LLP, Singapore with respect to Singapore law. Selected legal matters as to U.S. law in connection with this offering will be passed upon for us by Latham & Watkins LLP, Menlo Park, California. Certain legal matters in connection with this offering will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP, Palo Alto, California, and Allen & Gledhill LLP, Singapore with respect to Singapore Law. Certain partners of Simpson Thacher & Bartlett LLP, members of their respective families, related persons and others have an indirect interest, through limited partnerships that are investors in funds affiliated with KKR and Silver Lake, in less than 1% of our ordinary shares. Certain partners of Latham & Watkins LLP, members of their respective families, related persons and others have an indirect interest, through limited partnerships that are investors in funds affiliated with KKR, in less than 1% of our ordinary shares.

EXPERTS

The consolidated financial statements of Avago Technologies Limited as of November 2, 2008 (Successor) and October 31, 2007 (Successor) and for each of the three years in the period ended November 2, 2008 (Successor) and the combined financial statements of the Semiconductor Products Business, a business segment of Agilent Technologies, Inc., for the one month period ended November 30, 2005 (Predecessor), included in this prospectus have been so included in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the ordinary shares offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Some items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and the ordinary shares offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract, agreement or any other document referred to are summaries of the material terms of the respective contract, agreement or other document. With respect to each of these contracts, agreements or other documents filed as an exhibit to the registration statement, reference is made to the exhibits for a more complete description of the matter involved. A copy of the registration statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of these materials may be obtained by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the SEC’s website is http://www.sec.gov.

 

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Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at www.avagotech.com. You may access our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on our website.

 

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AVAGO TECHNOLOGIES LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

		Page
Reports of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets		F-4
Consolidated Statements of Operations		F-5
Consolidated Statements of Cash Flows		F-6
Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss)		F-7
Consolidated Statements of Invested Equity—Predecessor		F-8
Notes to Consolidated Financial Statements		F-9

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Avago Technologies Limited:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Avago Technologies Limited, and its subsidiaries at November 2, 2008 and October 31, 2007, and the results of their operations and their cash flows for each of the three years in the period ended November 2, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule appearing on page F-68 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in fiscal year 2007. As discussed in Note 8 to the consolidated financial statements, the Company changed the manner in which it accounts for retirement plans and post retirement benefits. As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for uncertainty in income taxes in fiscal year 2008.

/s/ PricewaterhouseCoopers LLP

San Jose, California

December 16, 2008

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Agilent Technologies, Inc.:

In our opinion, the accompanying combined statements of operations, of invested equity and cash flows of the Semiconductor Products Business (SPG or the Business), a business segment of Agilent Technologies, Inc., present fairly, in all material respects, the results of its operations and its cash flows for the period November 1, 2005 to November 30, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Business management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Note 4, the Business and its parent, Agilent Technologies, Inc., engage in extensive intercompany transactions, and the Business relies on its parent for substantially all of its operational and administrative support for which it is allocated costs on a basis that management believes is appropriate in the circumstances. The amounts recorded for these transactions and allocations are not necessarily representative of the amounts that would have been reflected in the financial statements had the Business been an entity operated independently of the parent.

As discussed in Note 3, on December 1, 2005 Agilent Technologies, Inc. sold substantially all of the assets and transferred certain liabilities of the Business to Avago Technologies Limited (formerly known as Argos Acquisition Pte. Ltd.) pursuant to an Asset Purchase Agreement dated August 14, 2005.

As discussed in Note 21, the Business changed its method of accounting for share-based payments as of November 1, 2005.

/s/ PricewaterhouseCoopers LLP

San Jose, California

June 5, 2006, except for the effects of discontinued operations discussed in Note 17,

as to which the date is December 16, 2008

 

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AVAGO TECHNOLOGIES LIMITED

CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts)

 

		October 31, 2007				November 2, 2008				May 3, 2009
										(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	309			$	213			$	241
Trade accounts receivable, net			218				184				185
Inventory			140				188				151
Assets of discontinued operation			25				—				—
Other current assets			25				34				38
Total current assets			717				619				615
Property, plant and equipment, net			292				299				276
Goodwill			122				169				171
Intangible assets, net			777				721				685
Other long-term assets			43				63				58
Total assets		$	1,951			$	1,871			$	1,805
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	194			$	174			$	167
Employee compensation and benefits			56				74				40
Accrued interest			34				32				30
Capital lease obligations—current			2				2				2
Other current liabilities			35				46				43
Total current liabilities			321				328				282
Long-term liabilities:
Long-term debt			903				703				700
Capital lease obligations—non-current			4				5				4
Other long-term liabilities			30				55				61
Total liabilities			1,258				1,091				1,047
Commitments and contingencies (Note 20)
Shareholders’ equity:
Redeemable convertible preference shares, no par value; none issued and outstanding on October 31, 2007, November 2, 2008 and May 3, 2009			—				—				—
Ordinary shares, no par value; 213,959,783 and 213,517,292 and 213,935,874 (unaudited) shares issued and outstanding on October 31, 2007, November 2, 2008 and May 3, 2009, respectively			1,075				1,084				1,086
Accumulated deficit			(386	)			(312	)			(337	)
Accumulated other comprehensive income			4				8				9
Total shareholders’ equity			693				780				758
Total liabilities and shareholders’ equity		$	1,951			$	1,871			$	1,805

The accompanying notes are an integral part of these consolidated financial statements.

 

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AVAGO TECHNOLOGIES LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

 

		Predecessor						Company
		One Month Ended November 30, 2005						Year Ended												Six Months Ended
								October 31, 2006				October 31, 2007				November 2, 2008				May 4, 2008				May 3, 2009
																					(unaudited)
Net revenue		$	114					$	1,399			$	1,527			$	1,699			$	813			$	693
Costs and expenses:
Cost of products sold:
Cost of products sold			87						926				936				981				467				414
Amortization of intangible assets			—						55				60				57				28				29
Asset impairment charges			—						—				140				—				—				—
Restructuring charges			—						2				29				6				2				9
Total cost of products sold			87						983				1,165				1,044				497				452
Research and development			22						187				205				265				128				121
Selling, general and administrative			27						243				193				196				98				82
Amortization of intangible assets			—						56				28				28				14				11
Asset impairment charges			—						—				18				—				—				—
Restructuring charges			1						3				22				6				3				8
Litigation settlement			—						21				—				—				—				—
Acquired in-process research and development			—						—				1				—				—				—
Total costs and expenses			137						1,493				1,632				1,539				740				674
Income (loss) from operations			(23	)					(94	)			(105	)			160				73				19
Interest expense			—						(143	)			(109	)			(86	)			(45	)			(38	)
Gain (loss) on extinguishment of debt			—						—				(12)				(10)				(10)				1
Other income (expense), net			—						12				14				(4)				2				(4)
Income (loss) from continuing operations before income taxes			(23	)					(225	)			(212	)			60				20				(22	)
Provision for income taxes			2						3				8				3				7				3
Income (loss) from continuing operations			(25	)					(228	)			(220	)			57				13				(25	)
Income from and gain on discontinued operations, net of income taxes			1						1				61				26				8				—
Net income (loss)		$	(24	)				$	(227	)		$	(159	)		$	83			$	21			$	(25	)
Net income (loss) per share:
Basic:
Income (loss) from continuing operations								$	(1.07	)		$	(1.03	)		$	0.27			$	0.06			$	(0.12	)
Income from and gain on discontinued operations, net of income taxes									—				0.29				0.12				0.04				—
Net income (loss)								$	(1.07	)		$	(0.74	)		$	0.39			$	0.10			$	(0.12	)
Diluted:
Income (loss) from continuing operations								$	(1.07	)		$	(1.03	)		$	0.26			$	0.06			$	(0.12	)
Income from and gain on discontinued operations, net of income taxes									—				0.29				0.12				0.04				—
Net income (loss)								$	(1.07	)		$	(0.74	)		$	0.38			$	0.10			$	(0.12	)
Weighted average shares :
Basic									213				214				214				214				214
Diluted									213				214				219				219				214

The accompanying notes are an integral part of these consolidated financial statements.

 

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AVAGO TECHNOLOGIES LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

		Predecessor						Company
		One Month Ended						Year Ended												Six Months Ended
		November 30, 2005						October 31, 2006				October 31, 2007				November 2, 2008				May 4, 2008				May 3, 2009
																				(unaudited)
Cash flows from operating activities:
Net income (loss)		$	(24	)				$	(227	)		$	(159	)		$	83			$	21			$	(25	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization			6						210				176				159				77				80
Amortization of debt issuance costs			—						22				4				4				2				2
Asset impairment charges			—						—				158				—				—				—
Gain on discontinued operations			—						—				(61	)			(27	)			(9	)			—
(Gain) loss on extinguishment of debt			—						—				12				6				6				(1	)
Loss on sale of property, plant and equipment			—						5				2				2				—				—
Non-cash portion of restructuring charges			—						—				4				—				—				1
Impairment of investment			—						—				—				—				—				2
Acquired in-process research and development			—						2				1				—				—				—
Share-based compensation			4						3				12				15				9				4
Changes in assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable			1						136				(31	)			38				9				1
Inventory			(3	)					28				28				(45	)			(25	)			38
Accounts payable			(6	)					32				29				(29	)			(41	)			(4	)
Employee compensation and benefits			—						53				(12	)			18				(2	)			(34	)
Other current assets and current liabilities			(19	)					84				(26	)			(13	)			(29	)			(9	)
Other long-term assets and long-term liabilities			2						22				9				(3	)			16				7
Net cash (used in) provided by operating activities			(39	)					370				146				208				34				62
Cash flows from investing activities:
Purchase of property, plant and equipment			(6	)					(59	)			(37	)			(65	)			(28	)			(25	)
Acquisitions and investment, net of cash acquired			—						(2,707	)			(27	)			(78	)			(46	)			(7	)
Purchase of intangible assets			—						—				—				(6	)			(6	)			—
Proceeds from sale of property, plant and equipment			—						1				—				5				—				—
Proceeds from sale of discontinued operations			—						665				69				50				25				2
Net cash (used in) provided by investing activities			(6	)					(2,100	)			5				(94	)			(55	)			(30	)
Cash flows from financing activities:
Proceeds from borrowings, net of financing costs			—						1,666				—				—				—				—
Debt repayments			—						(725	)			(107	)			(202	)			(200	)			(2	)
Issuance of ordinary shares, net of issuance costs			—						1,062				—				—				—				—
Repurchase of ordinary shares			—						—				(2	)			(5	)			(4	)			(1	)
Excess tax benefits of share-based compensation			—						—				1				1				—				—
Cash settlement of equity awards			—						—				(5	)			(2	)			(1	)			(1	)
Issuance of redeemable convertible preference shares, net of issuance cost			—						250				—				—				—				—
Redemption of redeemable convertible preference shares, net			—						(249	)			—				—				—				—
Dividend paid on redeemable convertible preference shares			—						(1	)			—				—				—				—
Payment on capital lease obligation			—						(1	)			(1	)			—				—				—
Payments of equity issuance costs			—						—				—				(2	)			—				—
Net invested equity—Predecessor			45						—				—				—				—				—
Net cash (used in) provided by financing activities			45						2,002				(114	)			(210	)			(205	)			(4	)
Net increase (decrease) in cash and cash equivalents			—						272				37				(96	)			(226	)			28
Cash and cash equivalents at the beginning of period			—						—				272				309				309				213
Cash and cash equivalents at end of period		$	—					$	272			$	309			$	213			$	83			$	241
Supplemental schedule of non-cash investing and financing activities:
Cash paid for interest		$	—					$	83			$	109			$	85
Cash paid for income taxes		$	—					$	1			$	23			$	8
Acquisition of property, plant and equipment under capital leases		$	—					$	8			$	—			$	—
Issuance of share options in connection with the Acquisition		$	—					$	4			$	—			$	—

The accompanying notes are an integral part of these consolidated financial statements.

 

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AVAGO TECHNOLOGIES LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

(in millions, except share amounts)

 

		Redeemable Convertible Cumulative Preference Shares							Ordinary Shares							Accumu- lated Deficit				Accumu- lated Other Compre- hensive Income				Total Share- holders’ Equity				Compre- hensive Income (Loss)
		Shares			Amount				Shares			Amount
Balance as of November 1, 2005		—			$	—			—			$	—			$	—			$	—			$	—			$	—
Issuance of ordinary shares		—				—			2				—				—				—				—
Issuance of redeemable convertible cumulative preference shares		250,000				250			—				—				—				—				250
Issuance of ordinary shares, net of issuance costs		—				—			210,229,361				1,043				—				—				1,043
Redemption of redeemable convertible cumulative preference shares and issuance of ordinary shares		(248,848	)			(249	)		1,500				—				—				—				(249	)
Dividend on redeemable convertible cumulative preference shares		—				—			—				(1	)			—				—				(1	)
Conversion of redeemable convertible cumulative preference shares to ordinary shares		(1,152	)			(1	)		230,400				1				—				—				—
Issuance of options in connection with the Acquisition		—				—			—				4				—				—				4
Issuance of ordinary shares to employees		—				—			3,810,854				19				—				—				19
Repurchase of ordinary shares		—				—			(29,000	)			—				—				—				—
Exercise of options		—				—			26,666				—				—				—				—
Share-based compensation		—				—			—				3				—				—				3
Net loss		—				—			—				—				(227	)			—				(227	)			(227	)
Balance as of October 31, 2006		—				—			214,269,783				1,069				(227	)			—				842			$	(227	)
Repurchase of ordinary shares		—				—			(310,000	)			(2	)			—				—				(2	)
Cash settlement of equity awards		—				—			—				(5	)			—				—				(5	)
Share-based compensation		—				—			—				12				—				—				12
Excess tax benefits of share-based compensation		—				—			—				1				—				—				1
Accumulated other comprehensive income on pension liability, net of taxes		—				—			—				—				—				4				4
Net loss		—				—			—				—				(159	)			—				(159	)			(159	)
Balance as of October 31, 2007		—				—			213,959,783				1,075				(386	)			4				693			$	(159	)
Cumulative effect of adopting FIN 48		—				—			—				—				(9	)			—				(9	)
Issuance of ordinary shares to employees		—				—			28,509				—				—				—				—
Repurchase of ordinary shares		—				—			(471,000	)			(5	)			—				—				(5	)
Cash settlement of equity awards		—				—			—				(2	)			—				—				(2	)
Excess tax benefits of share-based compensation		—				—			—				1				—				—				1
Share-based compensation		—				—			—				15				—				—				15
Changes in accumulated other comprehensive income:
Actuarial gains and prior service costs associated with post-retirement benefit and defined benefit pension plans, net of taxes		—				—			—				—				—				5				5
Unrealized net loss on derivative instruments		—				—			—				—				—				(1	)			(1	)
Net income		—				—			—				—				83				—				83				83
Balance as of November 2, 2008		—				—			213,517,292				1,084				(312	)			8				780			$	83
Exercise of options (unaudited)		—				—			574,382				—				—				—				—
Repurchase of ordinary shares (unaudited)		—				—			(155,800	)			(1	)			—				—				(1	)
Cash settlement of equity awards (unaudited)		—				—			—				(1	)			—				—				(1	)
Share-based compensation (unaudited)		—				—			—				4				—				—				4
Changes in accumulated other comprehensive income:
Unrealized net gain on derivative instruments (unaudited)		—				—			—				—				—				1				1
Net loss (unaudited)		—				—			—				—				(25	)			—				(25	)			(25	)
Balance as of May 3, 2009 (unaudited)		—			$	—			213,935,874			$	1,086			$	(337	)		$	9			$	758			$	(25	)

The accompanying notes are an integral part of these consolidated financial statements.

 

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AVAGO TECHNOLOGIES LIMITED

CONSOLIDATED STATEMENTS OF INVESTED EQUITY—PREDECESSOR

(in millions)

 

		Agilent’s Net Investment				Accumulated Other Comprehensive Loss				Total
Invested equity as of October 31, 2005		$	518			$	11			$	529
Components of comprehensive income:
Net loss			(24	)			—				(24	)
Foreign currency translation, net of taxes			—				(2	)			(2	)
Total comprehensive loss											(26	)
Stock-based compensation, net of taxes			4				—				4
Net return of investment of Agilent			45				—				45
Invested equity as of November 30, 2005		$	543			$	9			$	552

The accompanying notes are an integral part of these consolidated financial statements.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

1.	Overview and Basis of Presentation

Overview

Avago Technologies Limited, or the Company, Avago, we or Successor, was organized under the laws of the Republic of Singapore in August 2005. We are the successor to the Semiconductor Products Group, or SPG or Predecessor, of Agilent Technologies, Inc., or Agilent. On December 1, 2005, we acquired substantially all of the assets of SPG from Agilent for $2.7 billion, or the SPG Acquisition. See Note 3 “Acquisitions.”

We are a designer, developer and global supplier of analog semiconductor devices with a focus on III-V based products. We offer products in four primary target markets: wireless communications, wired infrastructure, industrial and automotive electronics, and consumer and computing peripherals. Applications for our products in these target markets include cellular phones, consumer appliances, data networking and telecommunications equipment, enterprise storage and servers, factory automation, displays, optical mice and printers.

Basis of Presentation

The Company

The accompanying financial statements are presented as Predecessor and Company, which relate to the period preceding the SPG Acquisition and the period after the SPG Acquisition, respectively.

We did not have any significant operating activity prior to December 1, 2005. The one month period ended November 30, 2005 represents solely the activities of the Predecessor. As such, the Predecessor’s combined financial statements were prepared using Agilent’s historical cost bases for the assets and liabilities. The Predecessor financial statements include allocations of certain Agilent corporate expenses, including centralized research and development, legal, accounting, employee benefits, real estate, insurance services, information technology services, treasury and other Agilent corporate and infrastructure costs. The expense allocations were determined on bases that Agilent considered to be a reasonable reflection of the utilization of services provided to or the benefit received by Predecessor. These internal allocations by Agilent ended on November 30, 2005. From and after December 1, 2005, we acquired select services on a transitional basis from Agilent under a Master Separation Agreement, or the MSA. Over the course of the fiscal year ended October 31, 2006, we progressively reduced the services provided by Agilent under the MSA and transitioned to substitute services either provided internally or through outsourcing service providers. Agilent’s obligations under the MSA terminated on August 31, 2006. Therefore, the financial information presented in the Predecessor’s financial statements is not necessarily indicative of what our consolidated financial position, results of operations or cash flows would have been had we been a separate, stand-alone entity. Further, our results in fiscal year 2006 reflect a changing combination of Agilent-sourced and internally-sourced services and do not necessarily represent our cost structure applicable to periods after fiscal year 2006. All references herein to the year ended October 31, 2006 represent the operations since the SPG Acquisition (eleven months).

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

The Predecessor financial information is presented on the historical basis of accounting compared to the Successor financial information, which reflects the fair value of the net assets acquired on the acquisition date rather than their historical cost. See Note 3. “Acquisitions.”

Fiscal Periods

Agilent operated with a fiscal year ending on each October 31, and we retained that annual fiscal period for fiscal year 2006 and fiscal year 2007. We adopted a 52- or 53-week fiscal year beginning with our fiscal year 2008. Our fiscal year ends on the Sunday closest to October 31.

Principles of Consolidation—Successor

Our consolidated financial statements include the accounts of Avago and our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Principles of Combination—Predecessor

Predecessor’s financial statements include the global historical results of operations for which Predecessor management was responsible. All intra-company transactions within Predecessor have been eliminated in preparing and reporting the combined results.

For presentation purposes, the Predecessor’s combined financial statements are referred to as consolidated financial statements.

Unaudited Financial Information

The accompanying consolidated balance sheet as of May 3, 2009, the consolidated statements of operations and cash flows for the six months ended May 4, 2008 and May 3, 2009 are unaudited. Interim information presented in the unaudited consolidated financial statements has been prepared by management and, in the opinion of management, includes all adjustments of a normal recurring nature that are necessary for the fair statement of the financial position, results of operations and cash flows for the periods shown, and is in accordance with generally accepted accounting principles in the United States, or GAAP.

The operating results for the six months ended May 3, 2009 are not necessarily indicative of the results that may be expected for the year ending November 1, 2009 or for any other future period.

 

2.	Summary of Significant Accounting Policies

Use of estimates.    The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could affect the results of operations reported in future periods.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Out-of-period Adjustment.    During the quarter ended May 3, 2009, we recorded an accrual of $4 million (unaudited) for indirect taxes on certain prior years’ purchases and sales transactions. This accrual increased each of cost of products sold and research and development expenses for the second quarter of fiscal year 2009 by $2 million (unaudited) and increased net loss for the period by $4 million (unaudited). We determined that the impact of the adjustment was not material to prior periods or to the expected results for the year ending November 1, 2009, and the adjustment was therefore recorded in the second quarter of fiscal year 2009 under the provisions of Accounting Principles Board Opinion No. 28, “Interim Financial Reporting.”

Revenue recognition.    We recognize revenue, net of trade discounts and allowances, provided that (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable and (iv) collectibility is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. We consider the price to be fixed or determinable when the price is not subject to refund or adjustments or when any such adjustments are accounted for. We evaluate the creditworthiness of our customers to determine that appropriate credit limits are established prior to the acceptance of an order. Revenue, including sales to resellers and distributors, is reduced for estimated returns and distributor allowances. We recognize revenue from sales of our products to distributors upon delivery of products to the distributors. An allowance for distributor credits covering price adjustments and scrap allowances is made based on our estimate of historical experience rates as well as considering economic conditions and contractual terms. To date, actual distributor claim activity has been materially consistent with the provisions we have made based on our historical estimates.

Cash and cash equivalents.    We consider all highly liquid investment securities with original or remaining maturities of three months or less at the date of purchase to be cash equivalents. We determine the appropriate classification of our cash and cash equivalents at the time of purchase. As of October 31, 2007, November 2, 2008 and May 3, 2009, $2 million, $2 million and $2 million (unaudited), respectively, of our cash and cash equivalents were restricted, primarily for collateral under certain of our letter of credit arrangements.

Trade accounts receivable, net.    Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Such accounts receivable have been reduced by an allowance for doubtful accounts, which is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on customer specific experience and the aging of such receivables, among other factors. We do not have any off-balance-sheet credit exposure related to our customers. Accounts receivable are also recorded net of sales returns and distributor allowances. These amounts are recorded when it is both probable and estimable that discounts will be granted or products will be returned. Aggregate accounts receivable allowances at October 31, 2007, November 2, 2008 and May 3, 2009 were $20 million, $19 million and $16 million (unaudited), respectively.

Share-based compensation.    Effective November 1, 2006, or fiscal year 2007, we adopted the provisions of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment,” or SFAS No. 123R. SFAS No. 123R establishes GAAP for share-based awards issued for employee services. Under SFAS No. 123R, share-based compensation cost is measured at

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We previously applied Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” or APB No. 25, and related interpretations and provided the required pro forma disclosures of SFAS No. 123, “Accounting for Stock-Based Compensation,” or SFAS No. 123.

We adopted SFAS No. 123R using the prospective transition method. Under this method, the provisions of SFAS No. 123R apply to all awards granted or modified after the date of adoption. For share-based awards granted after November 1, 2006, we recognized compensation expense based on the estimated grant date fair value method required under SFAS No. 123R, using the Black-Scholes valuation model with a straight-line amortization method. Since SFAS No. 123R requires that share-based compensation expense be based on awards that are ultimately expected to vest, estimated share-based compensation for such awards has been reduced for estimated forfeitures. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from the estimate. For outstanding share-based awards granted before November 1, 2006, which were originally accounted under the provisions of APB No. 25 and the minimum value method for pro forma disclosures of SFAS No. 123, we continue to account for any portion of such awards under the originally applied accounting principles. As a result, performance-based awards granted before November 1, 2006 are subject to variable accounting until such options are vested, forfeited or cancelled. Variable accounting requires us to value the variable options at the end of each accounting period based upon the then current fair value of the underlying ordinary shares.

For the years ended October 31, 2007 and November 2, 2008, we recorded $12 million and $15 million, respectively, of compensation expense resulting from the application of SFAS No. 123R, compared to $3 million during the fiscal year ended October 31, 2006 resulting from the application of APB No. 25. We also recorded $9 million (unaudited) and $4 million (unaudited) of compensation expense, respectively, resulting from the application of SFAS No. 123R during the six months ended May 4, 2008 and May 3, 2009.

Had we recognized compensation expense using the fair value method (i.e. the minimum value method as noted above) as prescribed under the provisions of SFAS No. 123, our net loss for the year ended October 31, 2006 would have been adjusted to the pro forma amounts below (in millions, except per share data):

 

		Company Year Ended October 31, 2006
Net loss—as reported		$	(227	)
APB 25 share-based compensation, net of tax			2
SFAS 123 compensation expense, net of tax			(2	)
Net loss—pro forma		$	(227	)
Net loss per share—basic and diluted
As reported		$	(1.07	)
Pro forma		$	(1.07	)

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

See Note 21. “Predecessor Change in Accounting Policies” of accounting for share-based compensation by Predecessor.

Shipping and handling costs.    Our shipping and handling costs charged to customers are included in net revenue and the associated expense is recorded in cost of products sold in the statements of operations for all periods presented.

Goodwill and purchased intangible assets.    Our accounting complies with SFAS No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142. Goodwill is not amortized but is reviewed annually (or more frequently if impairment indicators arise) for impairment. Purchased intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the useful lives of the respective assets, generally six months to 25 years for the Company and generally 5 to 20 years for Predecessor. On a quarterly basis, we monitor factors and changes in circumstances that could indicate carrying amounts of long-lived assets, including goodwill and intangible assets, may not be recoverable. Factors we consider important which could trigger an impairment review include (i) significant underperformance relative to historical or projected future operating results, (ii) significant changes in the manner of our use of the acquired assets or the strategy for our overall business, and (iii) significant negative industry or economic trends. An impairment loss must be measured if the sum of the expected future cash flows (undiscounted and before interest) from the use and eventual disposition of the asset (or asset group) is less than the net book value of the asset (or asset group). The amount of the impairment loss will generally be measured as the difference between the net book value of the asset (or asset group) and their estimated fair value. We perform an annual impairment review of goodwill during the fourth fiscal quarter of each year, or more frequently if we believe indicators of impairment exist. No impairment of goodwill resulted from our most recent evaluation of goodwill for impairment, which occurred in the fourth quarter of fiscal year 2008. No impairment of goodwill resulted in any of the periods presented.

Advertising.    Business specific advertising costs are expensed as incurred and amounted to less than $1 million, $2 million, $1 million, $3 million, $1 million (unaudited) and $1 million (unaudited) for the one month ended November 30, 2005, the years ended October 31, 2006, October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009, respectively. Some corporate advertising expenses were allocated to Predecessor by Agilent as part of corporate allocations described in Note 4. “Transactions with Agilent” but are not separately identifiable.

Research and development.    Costs related to research, design and development of our products are charged to research and development expense as they are incurred.

Taxes on income.    We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax assets, an adjustment would be charged to earnings in the period such determination is made.

In July 2006, the Financial Accounting Standards Board, or FASB, issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” or FIN No. 48, which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN No. 48 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN No. 48 and in subsequent periods. This interpretation also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006 and as a result, was effective for us on November 1, 2007. See Note 13. “Income Taxes” for additional information, including the effects of adoption on our consolidated financial statements.

Concentrations of credit risk and significant customers.    We sell our products through our direct sales force and distributors. Two customers accounted for 15% and 11%, respectively, of the net accounts receivable balance at October 31, 2007, and one customer accounted for 12% of the net accounts receivable balance at November 2, 2008. One customer accounted for 11% (unaudited) of our net accounts receivable balance at May 3, 2009.

Credit risk with respect to accounts receivable is generally diversified due to the large number of entities comprising our customer base and their dispersion across many different industries and geographies. We perform ongoing credit evaluations of our customers’ financial conditions, and require collateral, such as letters of credit and bank guarantees, in certain circumstances.

For the one month ended November 30, 2005, two customers represented 12% and 10%, respectively, of net revenue from continuing operations. For the year ended October 31, 2006, two customers represented 14% each of our net revenue from continuing operations. For the year ended October 31, 2007, one customer represented 13% of net revenue from continuing operations. For the year ended November 2, 2008, one customer represented 11% of net revenue from continuing operations. For the six months ended May 4, 2008, two customers each represented 10% (unaudited) of net revenue from continuing operations. For the six months ended May 3, 2009, no single customer represented 10% or more (unaudited) of our net revenue from continuing operations.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Concentration of other risks. The semiconductor industry is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. Our financial results are affected by a wide variety of factors, including general economic conditions worldwide, economic conditions specific to the semiconductor industry, the timely implementation of new manufacturing technologies, the ability to safeguard patents and intellectual property in a rapidly evolving market and reliance on assembly and test subcontractors, third-party wafer fabricators and independent distributors. In addition, the semiconductor market has historically been cyclical and subject to significant economic downturns at various times. We are exposed to the risk of obsolescence of our inventory depending on the mix of future business.

Derivative instruments.    We are subject to foreign currency risks for transactions denominated in foreign currencies, primarily Singapore Dollar, Malaysian Ringgit, Euro and Japanese Yen. Therefore, we enter into foreign exchange forward contracts to manage financial exposures resulting from the changes in the exchange rates of these foreign currencies. These contracts are designated at inception as hedges of the related foreign currency exposures, which include committed and anticipated transactions that are denominated in currencies other than the functional currency of the subsidiary which has the exposure. We exclude time value from the measurement of effectiveness. To achieve hedge accounting, contracts must reduce the foreign currency exchange rate risk otherwise inherent in the amount and duration of the hedged exposures and comply with established risk management policies; hedging contracts generally mature within three to six months. We do not use derivative financial instruments for speculative or trading purposes.

We designate our forward contracts as either cash flow or fair value hedges. All derivatives are recognized on the balance sheet at their fair values. For derivative instruments that are designated and qualify as a fair value hedge, changes in value of the derivative are recognized in income in the current period. Such hedges are recorded in net income (loss) and are offset by the changes in fair value of the underlying assets or liabilities being hedged. For derivative instruments that are designated and qualify as a cash flow hedge, changes in the value of the effective portion of the derivative instrument are recognized in accumulated comprehensive income (loss), a component of shareholders’ equity. These amounts are then reclassified and recognized in income when either the forecasted transaction occurs or it becomes probable the forecasted transaction will not occur. Changes in the fair value of the ineffective portion of derivative instruments are recognized in earnings in the current period, which have not been significant to date.

Inventory.    We value our inventory at the lower of the actual cost of the inventory or the current estimated market value of the inventory, with cost being determined under the first-in, first-out method. We record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and production requirements. The excess balance determined by this analysis becomes the basis for our excess inventory charge and the written-down value of the inventory becomes its cost. Written-down inventory is not written up if market conditions improve.

Investments.    Investments consist of non-marketable equity securities accounted for using the cost method. Investments are evaluated for impairment quarterly. Such analysis requires

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

significant judgment to identify events or circumstances that would likely have a significant other than temporary adverse effect on the carrying value of the investment.

Property, plant and equipment.    Property, plant and equipment are stated at cost less accumulated depreciation. Additions, improvements and major renewals are capitalized, and maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation and amortization are removed from our records and the resulting gain or loss is reflected in the statement of operations. Buildings and leasehold improvements are generally depreciated over 15 to 40 years, or over the lease period, whichever is shorter, and machinery and equipment are generally depreciated over 3 to 10 years. We use the straight-line method of depreciation for all property, plant and equipment.

Net income (loss) per share.    Basic net income (loss) per share is computed by dividing net income (loss)—the numerator—by the weighted average number of shares outstanding—the denominator—during the period excluding the dilutive effect of options and other employee plans. Diluted net income (loss) per share gives effect to all potentially dilutive ordinary share equivalents outstanding during the period. In computing diluted net income (loss) per share under the treasury stock method, the average share price for the period is used in determining the number of shares assumed to be purchased from the proceeds of option exercises.

For the fiscal years 2006, 2007 and 2008 and the six months ended May 4, 2008 and May 3, 2009, the number of shares assumed to be purchased also considered the amount of unrecognized compensation cost for future service as required under APB No. 25 for fiscal year 2006 and SFAS No. 123R subsequent to fiscal year 2006. Diluted net income per share for fiscal years 2006, 2007 and 2008 and the six months ended May 4, 2008 and May 3, 2009 excluded the potentially dilutive effect of weighted average options to purchase 14 million, 18 million, 5 million, 5 million (unaudited) and 20 million (unaudited) ordinary shares, respectively, as their effect was antidilutive.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

The following is a reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computations for the periods presented (in millions, except per share data):

 

		Company
		Year Ended											Six Months Ended
		October 31, 2006				October 31, 2007				November 2, 2008			May 4, 2008			May 3, 2009
													(unaudited)
Net income (loss) (Numerator):
Income (loss) from continuing operations		$	(228	)		$	(220	)		$	57		$	13		$	(25	)
Income from and gain on discontinued operations, net of income taxes			1				61				26			8			—
Net income (loss)		$	(227	)		$	(159	)		$	83		$	21		$	(25	)
Shares (Denominator):
Basic weighted average ordinary shares outstanding			213				214				214			214			214
Add: Incremental shares for:
Dilutive effect of share options			—				—				5			5			—
Shares used in diluted computation			213				214				219			219			214
Net income (loss) per share:
Basic:
Income (loss) from continuing operations		$	(1.07	)		$	(1.03	)		$	0.27		$	0.06		$	(0.12	)
Income from and gain on discontinued operations, net of income taxes			—				0.29				0.12			0.04			—
Net income (loss)		$	(1.07	)		$	(0.74	)		$	0.39		$	0.10		$	(0.12	)
Diluted:
Income (loss) from continuing operations		$	(1.07	)		$	(1.03	)		$	0.26		$	0.06		$	(0.12	)
Income from and gain on discontinued operations, net of income taxes			—				0.29				0.12			0.04			—
Net income (loss)		$	(1.07	)		$	(0.74	)		$	0.38		$	0.10		$	(0.12	)

Foreign currency translation.    We operate in a U.S. dollar functional currency environment. As such, foreign currency assets and liabilities are remeasured into U.S. dollars at current exchange rates except for non-monetary items such as inventory and property, plant and equipment, which are remeasured at historical exchange rates.

Capitalized software development costs.    We capitalize eligible costs related to the application development phase of software developed internally or obtained for internal use in accordance with Statement of Position No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” During the year ended October 31, 2006, we capitalized $22 million, including $6 million of qualifying employee payroll and related benefits

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

costs, in connection with the implementation of an enterprise resource planning system which is included in property, plant and equipment. The capitalization of software development costs during the years ended October 31, 2007 and November 2, 2008 and the six months ended May 3, 2009 was not material. We begin amortizing the costs associated with software developed for internal use at the time the software is ready for its intended use over its estimated useful life of three to five years.

Warranty.    We accrue for the estimated costs of product warranties at the time revenue is recognized. Product warranty costs are estimated based upon our historical experience and specific identification of the products requirements, which may fluctuate based on product mix.

The following table summarizes the changes in accrued warranty (in millions):

 

Balance as of October 31, 2007		$	—
Charged to cost of products sold			4
Utilized			(3	)
Balance as of November 2, 2008—included in other current liabilities		$	1

The changes to accrued warranty for the years ended October 31, 2006 and October 31, 2007 and six months ended May 3, 2009 were not significant.

Accumulated other comprehensive income.    Other comprehensive income includes certain transactions that have generally been reported in the consolidated statements of shareholders’ equity and comprehensive income (loss). The components of accumulated other comprehensive income at October 31, 2007, November 2, 2008 and May 3, 2009 consisted of net unrecognized prior service credit and actuarial gain on retirement plans and post-retirement medical benefit plans.

Recent Accounting Pronouncements

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” or SFAS No. 167. SFAS No. 167 eliminates Interpretation No. 46(R)’s exceptions to consolidating qualifying special-purpose entities, contains new criteria for determining the primary beneficiary, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. SFAS No. 167 also contains a new requirement that any term, transaction, or arrangement that does not have a substantive effect on an entity’s status as a variable interest entity, a company’s power over a variable interest entity, or a company’s obligation to absorb losses or its right to receive benefits of an entity must be disregarded in applying Interpretation No. 46(R)’s provisions. The elimination of the qualifying special-purpose entity concept and its consolidation exceptions means more entities will be subject to consolidation assessments and reassessments. SFAS No. 167 will be effective for our fiscal year beginning November 1, 2010. We are currently assessing the impact that this standard will have on our results of operations and financial position.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” or SFAS No. 165. SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

should not result in significant changes in the subsequent events that an entity reports, either through recognition or disclosure in its financial statements. SFAS No. 165 introduces the concept of financial statements being available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. SFAS No. 165 will apply to both interim financial statements and annual financial statements after June 15, 2009 and will be effective for us beginning with the third quarter of fiscal year 2009. We do not anticipate that the adoption of SFAS No. 165 will have a significant impact on our results of operations and financial position.

In April 2009, the FASB issued FASB Staff Position, or FSP, No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” or FSP No. FAS 107-1 and APB 28-1. This FSP requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. FSP No. FAS 107-1 and APB 28-1 is effective for interim and annual periods ending after June 15, 2009 and will be effective for us beginning with the third quarter of fiscal year 2009. We do not expect the adoption of this FSP will have a material impact on our results of operations, financial position or our financial statement disclosures as applicable.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” or FSP No. FAS 132(R)-1. This FSP amends Statement of Financial Accounting Standards No. 132(R), or SFAS No. 132(R), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP No. FAS 132(R)-1 requires disclosures surrounding how investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies. Additional disclosures include (a) the major categories of plan assets, (b) the inputs and valuation techniques used to measure the fair value of plan assets, (c) the effect of fair value measurements using significant unobservable inputs (Level 3) on changes in plan assets for the period and (d) the significant concentrations of risk within plan assets. FSP No. 132(R)-1 does not change the accounting treatment for postretirement benefit plans. FSP No. 132(R)-1 will be effective for us in fiscal year 2010. We are currently assessing the impact that this FSP will have on our financial statement disclosures.

In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets,” or FSP No. FAS 142-3. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142. This FSP is intended to improve the consistency between the useful life of an intangible asset determined under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007), “Business Combinations,” and other principles under GAAP. FSP No. FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. FSP No. FAS 142-3 will be effective for us in fiscal year 2010. We are currently assessing the impact that this FSP will have on our results of operations and financial position.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133,” or SFAS No. 161, which requires additional disclosures about the objectives of using derivative instruments, the method by which the derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instrument and Hedging Activities,” and its related interpretations, and the effect of derivative instruments and related hedged items on financial position, financial performance, and cash flows. SFAS No. 161 also requires disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. We adopted SFAS No. 161 in February 2009 but have not presented separate disclosures required by SFAS No. 161 and SFAS No. 133 because the impact of derivative instruments is immaterial to our results of operations and financial position.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” or SFAS No. 141(R). SFAS No. 141(R) will significantly change current practices regarding business combinations. Among the more significant changes, SFAS No. 141(R) expands the definition of a business and a business combination; requires the acquirer to recognize the assets acquired, liabilities assumed and noncontrolling interests (including goodwill), measured at fair value at the acquisition date; requires acquisition-related expenses and restructuring costs to be recognized separately from the business combination; requires assets acquired and liabilities assumed to be recognized at their acquisition-date fair values with subsequent changes recognized in earnings; and requires in-process research and development to be capitalized at fair value as an indefinite-lived intangible asset. In April 2009, the FASB issued FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies,” or FSP No. FAS 141(R)-1. FSP No. FAS 141(R)-1 amends and clarifies SFAS No. 141(R) to address application issues on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. SFAS No. 141(R) and FSP No. FAS 141(R)-1 are effective for us beginning in fiscal year 2010. We are currently assessing the impact that SFAS No. 141(R) and FSP No. FAS 141(R)-1 will have on our results of operations and financial position. The adoption of SFAS 141(R) and FSP No. FAS 141(R)-1 will change our accounting treatment for business combinations on a prospective basis beginning in the first quarter of fiscal year 2010.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51,” or SFAS No. 160. SFAS No. 160 will change the accounting and reporting for minority interests, reporting them as equity separate from the parent entity’s equity, as well as requiring expanded disclosures. SFAS No. 160 is effective for us for fiscal year 2010. We are currently assessing the impact that SFAS No. 160 will have on our results of operations and financial position.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R),” or SFAS No. 158. SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit post-retirement plan (other than a multi-employer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

income. We have adopted this provision of SFAS No. 158, along with disclosure requirements, at the end of fiscal year 2007, and the effects are reflected in the consolidated financial statements as of October 31, 2007. SFAS No. 158 also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. This additional provision is effective for us in fiscal year 2009. We do not expect the change in measurement date to have a material impact on our financial statements.

 

3.	Acquisitions

SPG Acquisition

On August 14, 2005, we entered into an Asset Purchase Agreement with Agilent, providing for the purchase of substantially all of the assets and certain liabilities of SPG. The SPG Acquisition closed on December 1, 2005. The purchase price was $2,715 million and was determined as follows (in millions):

 

Cash		$	2,660
Transaction costs			51
Options assumed			4
		$	2,715

The SPG Acquisition was accounted for by the purchase method of accounting for business combinations. Under the purchase method of accounting, the acquisition cost of $2,715 million was allocated to the net assets acquired based on estimates of their respective fair values as of the date of acquisition as follows (in millions):

 

Current and other tangible assets:
Cash		$	4
Trade accounts receivable, net			323
Inventory			214
Property, plant and equipment, net			452
Other assets			72
Goodwill			193
Assets held for sale—Storage Business, including purchased intangibles and goodwill of $404 million			421
Amortizable intangible assets:
Purchased technology			843
Customer relationships			323
Distributor relationships			24
Order Backlog			43
Total assets acquired			2,912
Liabilities assumed			(196	)
Liabilities held for sale			(1	)
Net assets acquired		$	2,715

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill.

The identified intangible assets acquired were assigned fair values in accordance with the guidelines established in SFAS No. 141, “Business Combinations,” FIN No. 4, “Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method,” and other relevant guidance.

Amortizable Acquired Intangible Assets

Purchased Technology:    Existing technology comprises core and developed technology. This represents technical processes, intellectual property and products that have been completed and that will aid in the development of future products as well as the technology that currently exists in our current product offering. We valued the technology assets utilizing a discounted cash flow, or DCF, model, which uses forecasts of future revenues and expenses related to the intangible asset. We utilized a discount rate ranging from 14% to 20% for technology. We are amortizing these intangible assets on a straight-line basis over their estimated useful lives of 5 to 20 years.

Customer Relationships:    The customer relationships asset relates to the ability to sell existing and future versions of products to existing customers and has been estimated using the income method. We valued customer relationships utilizing a DCF model and discount rates ranging from 14% to 20%. We are amortizing these intangible assets on a straight-line basis over their estimated useful lives of 3 to 15 years.

Distributor Relationships:    The distributor relationships asset relates to the ability to sell existing and future versions of products to existing distributors and has been estimated using the income method. We valued customer relationships utilizing a DCF model and discount rates ranging from 14% to 20%. We are amortizing these intangible assets on a straight-line basis over their estimated useful life of three years.

Order Backlog:    The order backlog asset represents the value of the sales and marketing costs required to establish the order backlog and was valued using the income method. We valued order backlog utilizing the DCF model and discount rates ranging from 11% to 15%. These orders were delivered and billed within three to six months of the SPG Acquisition. Consequently, the order backlog was fully amortized as of October 31, 2006.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. In accordance with SFAS No. 142, goodwill resulting from business combinations is not amortized but instead is tested for impairment at least annually (more frequently if certain indicators are present). In the event that management determines that the value of goodwill has become impaired, we will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made. See Note 6. “Goodwill.”

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Pro Forma Financial Information

The following table summarizes the unaudited pro forma financial information, assuming the SPG Acquisition had occurred at the beginning of the period presented, after giving effect to certain purchase accounting adjustments (in millions):

 

		Year Ended October 31,
		2006
Pro forma net revenue		$	1,513
Pro forma loss from continuing operations			(153	)

These results are presented for illustrative purposes only and are not necessarily indicative of the actual operating results that would have occurred if the transactions had been consummated on November 1, 2004.

Other Acquisitions

During fiscal year 2007, we acquired the Polymer Optical Fiber, or POF, business from Infineon Technologies AG for $27 million in cash, or the POF Acquisition. The purchase price was allocated to the acquired net assets based on estimated fair values as follows: total assets of $30 million, including intangible assets of $17 million and goodwill of $6 million, and total liabilities of $3 million.

During the first quarter of fiscal year 2008, we completed the acquisition of a privately-held manufacturer of motion control encoders for $29 million (net of cash acquired of $2 million) plus $9 million repayment of existing debt. The purchase price was allocated to the acquired net assets based on estimated of fair values as follows: total assets of $51 million, including intangible assets of $11 million, goodwill of $27 million, and total liabilities of $11 million (which includes a $2 million loan secured by land and building in Italy). The intangible assets are being amortized over their useful lives ranging from 1 to 7 years.

During the second quarter of fiscal year 2008, we completed the acquisition of a privately-held developer of low-power wireless devices for $6 million. The initial purchase consideration of $6 million was allocated to the acquired net assets based on estimated of fair values as follows: total assets of $7 million (primarily goodwill), and total liabilities of $1 million. In connection with the acquisition, we agreed to pay certain additional amounts in cash contingent upon the achievement of certain development, product, or other milestones, and upon the continued employment with the Company of certain employees of the acquired entity. As of the closing of the acquisition in April 2008, we may be required to recognize future compensation expense pursuant to these agreements of up to $2 million relating to this acquisition. During the year ended November 2, 2008, we recognized $1 million in compensation expense related to the continued employment of certain employees. During the six months ended May 3, 2009, we recorded and paid $1 million (unaudited) in compensation expense related to the continued employment of certain employees. As of May 3, 2009, we may also be required to recognize and pay $1 million (unaudited) in future compensation expense related to the continued employment of certain employees. We recognized less than $1 million cash contingent payment to the founders of the acquired entity upon the achievement of the first milestone as a purchase

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

price adjustment during the year ended November 2, 2008. During the six months ended May 3, 2009, we paid less than $1 million (unaudited) in cash to shareholders of one of the acquired entities, based on the achievement of certain defined milestones, which was recorded to goodwill as additional purchase consideration.

During the fourth quarter of fiscal year 2008, we acquired the Bulk Acoustic Wave Filter, or BAW, business of Infineon Technologies AG for $32 million in cash. The purchase price was allocated to the acquired net assets based on estimated fair values as follows: total assets of $33 million, including intangible assets of $12 million and goodwill of $13 million, and total liabilities of $1 million. The intangible assets are being amortized over their useful lives ranging from 8 to 15 years. In addition, during the six months ended May 3, 2009, we recorded less than $1 million of additional transaction costs to goodwill related to the BAW acquisition.

During the second quarter of fiscal year 2009, we completed the acquisition of a manufacturer of motion control encoders from a Japan-based company for $7 million (unaudited) in cash, net of cash acquired, plus $3 million (unaudited) payable by us upon the collection of a specific trade receivable within six months of the closing of such acquisition. The preliminary purchase price was allocated to the acquired net assets based on preliminary estimates of fair values as follows: total assets of $11 million (unaudited), including intangible assets of $4 million (unaudited), goodwill of $1 million (unaudited), and total liabilities of $4 million (unaudited).

Because each of these acquisitions was accounted for as a purchase transaction, the consolidated financial statements include the results of operations of the acquired companies commencing on their respective acquisition dates. Pro forma results of operations for the acquisitions completed in the fiscal years ended October 31, 2007 and November 2, 2008 and during the six months ended May 3, 2009 have not been presented because the effects of the acquisitions, individually or in the aggregate, were not material to our financial results.

During the second quarter of fiscal year 2008, we made an investment of $2 million in a privately-held company. This investment is accounted for under the cost method and is included on the balance sheet in other long-term assets. We record at cost non-marketable investments where we do not have the ability to exercise significant influence or control and periodically review them for impairment. This investment was impaired during the six months ended May 3, 2009. See Note. 10 “Fair Value.”

 

4.	Transactions with Agilent

As a business segment within Agilent, Predecessor shared and operated under numerous agreements executed by Agilent with third parties, including but not limited to purchasing, manufacturing, supply, and distribution agreements; use of facilities owned, leased, and managed by Agilent; and software, technology and other intellectual property agreements. In conjunction with the SPG Acquisition, Agilent cooperated with us to novate, convey, transfer, assign or sublease certain specific agreements to us.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Allocated costs included in the accompanying Predecessor statement of operations are as follows (in millions):

 

		One Month Ended November 30, 2005
Cost of products sold		$	8
Research and development			8
Selling, general and administrative			15
Other income, net			—
Total allocated costs		$	31

Predecessor Accounting

Predecessor derived revenue from the sales of products to other Agilent businesses of $1 million for the one month ended November 30, 2005. The revenue was recorded using a cost-plus methodology and may not necessarily represent a price an unrelated third-party would pay.

Predecessor purchased materials from other Agilent businesses of $1 million for the one month ended November 30, 2005. All purchases were at cost and were recorded in cost of products sold or inventory for the respective periods.

Allocated Costs

The Predecessor statement of operations includes direct expenses for cost of products sold, research and development, sales and marketing, distribution, and administration as well as allocations of expenses arising from shared services and infrastructure provided by Agilent. These allocated expenses include costs of centralized research and development, legal and accounting services, employee benefits, real estate and facilities, corporate advertising, insurance services, information technology, treasury and other corporate and infrastructure services. These expenses were allocated using estimates that Predecessor considered to be a reasonable reflection of the utilization of services provided to or benefits received by Predecessor relative to Agilent’s total costs. The allocation methods included headcount, square footage, actual consumption and usage of services, adjusted invested capital and others.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

5.	Balance Sheet Components

Inventory

Inventory consists of the following (in millions):

 

		Company
		October 31, 2007			November 2, 2008			May 3, 2009
								(unaudited)
Finished goods		$	44		$	80		$	52
Work-in-process			78			87			70
Raw materials			18			21			29
Total inventory		$	140		$	188		$	151

During the six months ended May 3, 2009, we recorded write-downs to inventories of $19 million, associated with reduced demand assumptions, compared to write-downs to inventories of $6 million recorded during the six months ended May 4, 2008.

Other Current Assets

Other current assets consist of the following (in millions):

 

		Company
		October 31, 2007			November 2, 2008
Prepayments		$	10		$	13
Non-U.S. transaction tax receivable			6			7
Other			9			14
Total other current assets		$	25		$	34

Property, Plant and Equipment, Net

Property, plant and equipment, net consist of the following (in millions):

 

		Company
		October 31, 2007				November 2, 2008
Land		$	11			$	11
Buildings and leasehold improvements			123				129
Machinery and equipment			320				375
Total property, plant and equipment			454				515
Accumulated depreciation and amortization			(162	)			(216	)
Total property, plant and equipment, net		$	292			$	299

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Depreciation expense was $5 million, $81 million, $85 million, and $74 million, for the one month ended November 30, 2005, the years ended October 31, 2006, October 31, 2007, and November 2, 2008, respectively.

At October 31, 2007 and November 2, 2008, we had $22 million and $39 million of unamortized software costs, respectively, net of accumulated amortization of $16 million and $22 million, respectively.

At October 31, 2007 and November 2, 2008, we had $6 million and $9 million of assets under capital leases, respectively, net of accumulated amortization of $2 million and $4 million, respectively.

At October 31, 2007, property, plant and equipment with the gross carrying amount of $1 million and accumulated depreciation of less than $1 million were classified as assets of discontinued operation.

At November 2, 2008, property, plant and equipment held for sale with the gross carrying amount of $5 million and accumulated depreciation of $1 million were included in property, plant and equipment.

Other Current Liabilities

Other current liabilities consist of the following (in millions):

 

		Company
		October 31, 2007			November 2, 2008
Income taxes payable		$	9		$	21
Deferred revenue			7			11
Supplier liabilities			3			3
Customer deposit			1			—
Restructuring charges			5			1
Other			10			10
Total other current liabilities		$	35		$	46

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

6.

Goodwill

The following table summarizes changes in goodwill (in millions):

 

Company
Balance as of October 31, 2005		$	—
2006 acquisitions:
Semiconductor Products Group (Note 3. “Acquisitions”)			348
2006 divestitures:
Storage Business			(155	)
Printer ASICs Business			(77	)
Balance as of October 31, 2006		$	116
2007 acquisition (Note 3. “Acquisitions”)			6
Balance as of October 31, 2007		$	122
2008 acquisitions (Note 3. “Acquisitions”)			47
Balance as of November 2, 2008		$	169
2009 acquisition (unaudited) (Note 3. “Acquisitions”)			2
Balance as of May 3, 2009 (unaudited)		$	171

 

7.	Intangible Assets

Amortizable purchased intangibles consist of the following (in millions):

 

		Gross Carrying Amount			Accumulated Amortization				Net Book Value
As of October 31, 2007:
Purchased technology		$	714		$	(117	)		$	597
Customer and distributor relationships			230			(50	)			180
Other			2			(2	)			—
Total		$	946		$	(169	)		$	777
As of November 2, 2008:
Purchased technology		$	726		$	(174	)		$	552
Customer and distributor relationships			246			(77	)			169
Other			2			(2	)			—
Total		$	974		$	(253	)		$	721
As of May 3, 2009 (unaudited):
Purchased technology		$	726		$	(203	)		$	523
Customer and distributor relationships			249			(88	)			161
Other			3			(2	)			1
Total		$	978		$	(293	)		$	685

Amortization of intangible assets included in continuing operations was zero, $111 million, $88 million, $85 million, $42 million (unaudited) and $40 million (unaudited) for the one month ended November 30, 2005, the years ended October 31, 2006, October 31, 2007, November 2,

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

2008, and the six months ended May 4, 2008 and May 3, 2009, respectively. At October 31, 2007, intangible assets with the gross carrying amount of $28 million and accumulated amortization of $7 million were classified as assets of discontinued operation related to the pending sale of our Infra-red operation. See Note 17. “Discontinued Operations.”

During the year ended October 31, 2007, in connection with the POF Acquisition we recorded $17 million of intangible assets with weighted-average amortization period of 14 years. During the year ended November 2, 2008, we recorded $11 million and $12 million of intangible assets with weighted average amortization period of 7 years and 12 years, respectively, in connection with acquisitions in 2008. During the same period, we also acquired $6 million of intangible assets from a third-party with weighted-average amortization period of 18 years. During the quarter ended May 3, 2009, we recorded $4 million (unaudited) in intangible assets in conjunction with an acquisition based on a preliminary valuation. See Note 3. “Acquisitions.”

During the year ended October 31, 2007, intangible assets with a gross carrying amount of $21 million were sold as part of the Image Sensor operations, net of accumulated amortization of $8 million. See Note 17. “Discontinued Operations.”

As discussed in Note 12. “Restructuring and Asset Impairment Charges,” during the year ended October 31, 2007 we recorded an impairment charge pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets” of $88 million for intangible assets (purchased technology and customer and distributor relationships), $72 million of which was recorded in cost of products sold and the remaining $16 million was recorded in operating expenses in the consolidated statement of operations.

Based on the amount of intangible assets subject to amortization at November 2, 2008, the expected amortization expense for each of the next five fiscal years and thereafter is as follows (in millions):

 

Fiscal Year		Amount
2009		$	79
2010			79
2011			76
2012			76
2013			76
Thereafter			335
		$	721

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Based on the amount of intangible assets subject to amortization at May 3, 2009, the expected amortization expense for each of the next five fiscal years and thereafter is as follows (in millions):

 

Fiscal Year		Amount
		(unaudited)
2009 (remaining)		$	39
2010			79
2011			77
2012			76
2013			76
2014			76
Thereafter			262
		$	685

The weighted average amortization periods remaining by intangible asset category at November 2, 2008 and May 3, 2009 were as follows (in years):

 

		November 2, 2008		May 3, 2009
				(unaudited)
Amortizable intangible assets:
Purchased technology		11		10
Customer and distributor relationships		9		9
Other		—		25

 

8.	Retirement Plans and Post-Retirement Benefits

Company

Effective October 31, 2007, we adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” or SFAS No. 158, which requires an employer to record non-cash adjustments to recognize the funded status of each of its defined benefit and postretirement benefit plans as a net asset or liability in its statement of financial position with an offsetting amount in accumulated other comprehensive income, and to recognize changes in that funded status in the year in which changes occur through comprehensive income. Additionally, SFAS No. 158 requires an employer to measure the funded status of each of its plans as of the date of its year-end statement of financial position. This additional provision becomes effective for us in fiscal year 2009. The incremental effect of applying SFAS No. 158 on individual line items on the consolidated balance sheet as of October 31, 2007 was as follows (in millions):

 

		Before application of SFAS No. 158			Adjustments			After application of SFAS No. 158
Non-current deferred income tax liability		$	2		$	3		$	5
Accumulated other comprehensive income		$	—		$	4		$	4

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Assumed Plans.    Under the Asset Purchase Agreement with Agilent, the only defined benefit plans we were required to assume were for certain employees located in Taiwan, Korea, Germany, Italy and France. Generally, for each defined benefit plan we assumed, Agilent was required to transfer assets equal to the aggregate Accumulated Benefit Obligation, or ABO, of such plan on the acquisition date. We did not assume any other Agilent plans. These plans covered approximately 23% of our total employees as of November 2, 2008.

401(k) Defined Contribution Plan.    Our U.S. eligible employees participate in the Avago Technologies U.S. Inc. 401(k) Plan, or the 401(k) Plan. Enrollment in the 401(k) Plan is automatic for employees who meet eligibility requirements unless they decline participation. Under the 401(k) Plan, we provide matching contributions to employees up to a maximum of 4% of an employee’s annual eligible compensation. The maximum contribution to the 401(k) Plan is 50% of an employee’s annual eligible compensation, subject to regulatory and plan limitations. The 401(k) Plan expense is included in the corporate employee overhead rate allocation.

U.S. Post-Retirement Medical Benefit Plans.    Substantially all U.S. employees who meet retirement eligibility requirements as of their termination dates and who did not elect to receive retiree medical benefits from Agilent may receive post-retirement medical benefits under our retiree medical account program. Under our retiree medical account program, eligible retirees are allocated a spending account of either $40,000 or $55,000, depending on the retiree’s age at January 1, 2005, from which the retiree can receive reimbursement for premiums paid for medical coverage to age 65. U.S. employees who were age 50 or over on January 1, 2005 but did not satisfy Agilent’s eligibility requirements for its traditional retiree medical plan when they terminated employment with Agilent pursuant to the SPG Acquisition may be eligible for our traditional retiree medical plan upon meeting certain eligibility requirements and completing at least 2 years of Avago service. Once participating in the traditional retiree medical plan, retirees are provided with access to both pre-65 medical coverage and supplemental Medicare coverage with medical premiums based on the type of coverage chosen and the retiree’s combined length of service with us, Agilent and Hewlett-Packard Company. Retirees in this group are also given the option to choose the $55,000 retiree medical account program instead of the traditional retiree medical plan. The actuarial obligation for retiree medical benefits of $20 million was recorded as part of the SPG Acquisition.

Non-U.S Retirement Benefit Plans.    In addition to the defined benefit plan for certain employees in Taiwan, Korea, Japan, France, Italy and Germany, other eligible employees outside of the U.S. receive retirement benefits under various defined contribution retirement plans. Eligibility is generally determined based on the terms of our plans and local statutory requirements.

The net pension plan costs of our non-U.S defined benefit plans for the years ended October 31, 2006, October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 were $2 million, $2 million, $3 million, $1 million (unaudited) and $1 million (unaudited), respectively. The net pension plan costs of our post-retirement medical plan for the years ended October 31, 2006, October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 were $1 million, $1 million, $1 million, $1 million (unaudited) and less than $1 million (unaudited), respectively.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

For the year ended November 2, 2008, we recognized $3 million in accumulated other comprehensive loss (net of tax of $1 million), related to our non U.S. defined benefit plans, which consists of unrealized net actuarial losses, of which we expect to recognize less than $1 million as components of net periodic benefit costs over fiscal year ending November 1, 2009. We also recognized $2 million in accumulated other comprehensive loss (net of tax of $1 million) for the year ended November 2, 2008, related to our U.S. post-retirement benefit plans, which consists of unrealized net actuarial losses, of which we expect to recognize $1 million as components of net periodic benefit costs over fiscal year ending 2009. Other long-term assets include deferred tax assets relating to pension liabilities and post-retirement medical benefit plan liabilities.

Funded Status.    The funded status of the U.S. post-retirement medical benefit plans and non-U.S. defined benefit plans was as follows (in millions):

 

		Company
		Non-U.S. Defined Benefit Plans								U.S. Post-Retirement Medical Benefit Plans
		October 31, 2007				November 2, 2008				October 31, 2007				November 2, 2008
Change in plan assets:
Fair value—beginning of period		$	9			$	11			$	—			$	—
Currency impact			1				—				—				—
Employer contributions			1				—				—				—
Fair value of plan assets—end of period		$	11			$	11			$	—			$	—
Change in benefit obligation:
Benefit obligation—beginning of period		$	16			$	19			$	17			$	16
Addition to Plan			1				1				—				—
Service cost			2				2				1				1
Interest cost			1				1				1				1
Amendment			—				—				(1	)			—
Actuarial (gain)/loss			(2	)			(4	)			(2	)			(4	)
Currency impact			1				—				—				—
Benefit obligation—end of period		$	19			$	19			$	16			$	14
Net accrued costs:
Plan assets less than benefit obligation		$	(8	)		$	(8	)		$	(16	)		$	(14	)
Unrecognized net actuarial (gain)/loss and net prior service credit			—				(4	)			(7	)			(3	)
Accumulated other comprehensive income			—				4				7				3
		$	(8	)		$	(8	)		$	(16	)		$	(14	)

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

As of October 31, 2007 and November 2, 2008, the amounts of the obligations for our non-U.S. defined benefit plans were as follows (in millions):

 

		Company
		Non-U.S. Defined Benefit Plans
		October 31, 2007			November 2, 2008
Aggregate projected benefit obligation (“PBO”)		$	19		$	19
Aggregate accumulated benefit obligation (“ABO”)		$	15		$	16

It is expected that as of November 2, 2008 various benefit plans will make payments over the next ten years as follows (in millions):

 

		Non-U.S. Defined Benefit Plans			U.S. Post Retirement Medical Plans
2009		$	—		$	1
2010			1			1
2011			1			1
2012			1			1
2013			1			1
2014-2018			7			7

Assumptions.    The assumptions used to determine the benefit obligations and expense for our defined benefit and post-retirement benefit plans are presented in the table below. The expected long-term return on assets below represents an estimate of long-term returns on investment portfolios primarily consisting of fixed income investments. We consider long-term rates of return, which are weighted, based on the asset classes (both historical and forecasted) in which we expect our pension and post-retirement funds to be invested. Discount rates reflect the current rate at which pension and post-retirement obligations could be settled based on the measurement dates of the plans, which is September 30 and October 31 for the defined benefit and post retirement plans, respectively. The range of assumptions that are used for non-U.S. defined benefit plans reflects the different economic environments within various countries.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

		Assumptions for Benefit Obligation Company As of				Assumptions for Expense Company Year Ended
		October 31, 2007		November 2, 2008		October 31, 2006		October 31, 2007		November 2, 2008
Non-U.S. Defined Benefit Plans:
Discount rate		2.25%-5.25%		2.25%-6.50%		2.00%-4.25%		2.25%-5.25%		2.25%-5.25%
Average increase in compensation levels		3.00%-5.00%		2.50%-5.00%		2.50%-4.50%		3.00%-4.00%		3.00%-5.00%
Expected long-term return on assets		2.75%-5.60%		3.00%-5.25%		3.50%-6.75%		2.75%-5.60%		2.75%-5.60%
		Assumptions for Benefit Obligation Company As of				Assumptions for Expense Company Year Ended
		October 31, 2007		November 2, 2008		October 31, 2006		October 31, 2007		November 2, 2008
U.S. Post-Retirement Medical Benefit Plans:
Discount rate		6.250%		8.500%		5.250%		6.000%		6.000%
Current medical cost trend rate		9.000%		9.000%		9.000%		9.000%		9.000%
Ultimate medical cost trend rate		5.000%		5.000%		5.000%		5.000%		5.000%
Medical cost trend rate decreases to ultimate trend rate in year		2012		2013		2010		2011		2012

Assumed healthcare trend rates could have a significant effect on the amounts reported for the post-retirement medical plans. A one percentage point change in the assumed health care cost trend rates for the year ended November 2, 2008 would have the following effects:

 

		1% Increase				1% Decrease
Effect on post-retirement benefit obligation (in millions)		$	1			$	(1	)
Percentage effect on post-retirement benefit obligation			6.9	%			(5.9	)%

A one percentage point increase or decrease in our healthcare cost trend rates would have increased or decreased the service and interest cost components of the net periodic benefit cost by less than $1 million.

Predecessor

General.    Substantially all of Predecessor’s employees were covered under various defined benefit and/or defined contribution plans. Additionally, the Predecessor sponsored post-retirement health care benefit plans for Predecessor’s eligible U.S. employees.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

U.S. Retirement-Related Plans.    Predecessor provided U.S. employees who met eligibility criteria under the retirement and deferred profit-sharing plans, which were generally based on an employee’s highest five consecutive years’ average pay during the years of employment and on length of service.

401(k) Defined Contribution Plan.    Predecessor’s U.S. eligible employees participated in Agilent’s 401(k) Plan, or the Predecessor’s 401(k) Plan. Under the Predecessor’s 401(k) Plan, Predecessor provided matching contributions to employees up to a maximum of 4% of an employee’s annual eligible compensation. The Predecessor’s 401(k) Plan expense is included in the corporate employee overhead rate allocation for Predecessor and not separately identifiable.

Post-Retirement Benefit Plans.    U.S. employees who met retirement eligibility requirements as of their termination dates may have participated in Agilent’s Non-Medicare Medical or Medicare Medical Plans under Agilent’s traditional retiree medical plan.

Medicare Prescription Drug, Improvement and Modernization Act of 2003.     In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003, or the Act, was passed which expands Medicare to include an outpatient prescription drug benefit beginning in 2006. In May 2004, the FASB issued FSP 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which provides guidance on how companies should account for the impact of the Act on its postretirement healthcare plans. Beginning in 2006, the federal government provided a non-taxable subsidy to employers that sponsor prescription drug benefits to retirees that are “actuarially equivalent” to Medicare Part D benefits. Agilent determined that the prescription drug benefits offered under the plans qualify for this subsidy. Effective in fourth quarter 2004, assuming that Agilent would continue to offer these benefits, Agilent reflected the expected subsidy according to the guidance in FSP 106-2 prospectively in Agilent’s financial statements. The adoption of FSP 106-2 had no material impact on accumulated post-retirement benefit obligation of net plan costs.

Non-U.S. Retirement Benefit Plans.     Eligible Predecessor employees outside the U.S. generally received retirement benefits under various retirement plans based upon factors such as years of service and employee compensation levels. Eligibility was generally determined in accordance with local statutory requirements.

For the one month ended November 30, 2005, the net pension costs of non-U.S. defined benefit plans transferred to Avago was zero.

Assumptions.    The assumptions used to determine the expense for Predecessor’s defined benefit and post-retirement benefit plans are presented in the table below. The expected long- term return on assets below represents an estimate of long-term returns on investment portfolios consisting of a mixture of equities, fixed income and alternative investments in proportion to the asset allocations of each of the plans. Predecessor considered long-term rates of return, which are weighted based, on the asset classes (both historical and forecasted) in which Predecessor expected its pension and post-retirement funds to be invested. Discount rates reflect the current rate at which pension and post-retirement obligations could be settled based on the measurement dates of the plans (October 31). Both U.S. and non-U.S. rates are

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

generally based on published rates for high-quality corporate bonds. The range of assumptions that are used for non-U.S. defined benefit plans reflects the different economic environments within various countries.

 

		Predecessor Year Ended October 31, 2005
Non-U.S. defined benefit plans:
Discount rate		2.25-6.0	%
Average increase in compensation levels		0-5.0	%
Expected long-term return on assets		4.75-7.0	%
U.S. post-retirement benefits plans:
Discount rate		5.75	%
Expected long-term return on assets		8.50	%
Current medical cost trend rate		10.00	%
Ultimate medical cost trend rate		5.00	%
Medical cost trend rate decrease to ultimate rate in year		2010

 

9.	Senior Credit Facilities and Borrowings

Our senior credit facilities and borrowings as of October 31, 2007, November 2, 2008 and May 3, 2009 consist of the following (in millions):

 

		October 31, 2007			November 2, 2008			May 3, 2009
								(unaudited)
Senior credit facilities:
Term loan facility		$	—		$	—		$	—
Revolving credit facility			—			—			—
Notes:
10 1/8% senior notes due 2013		$	403		$	403		$	403
Senior floating rate notes due 2013			250			50			50
11 7/8% senior subordinated notes due 2015			250			250			247
		$	903		$	703		$	700

Senior Credit Facilities

In connection with the SPG Acquisition, we entered into a senior credit agreement with a syndicate of financial institutions. The senior secured credit facilities initially consisted of (i) a seven-year $725 million term loan facility and (ii) a six-year, $250 million revolving credit facility for general corporate purposes. As of October 31, 2006, the term loan facility had been permanently repaid in full and may not be redrawn. The revolving credit facility was increased to $375 million in the fourth quarter of fiscal year 2007. During the fourth quarter of fiscal year 2008, our revolving credit facility was impacted by the bankruptcy of Lehman Brothers Holdings Inc., or Lehman. As a result of the bankruptcy, we can no longer utilize Lehman’s credit commitment of $60 million, thus reducing total availability under our revolving credit facility to $315 million. In July 2009, Lehman assigned $35 million (unaudited) of its credit commitment to Barclays Bank PLC, which resulted in total availability under our revolving credit facility increasing to $350 million (unaudited).

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

The revolving credit facility includes borrowing capacity available for letters of credit and for borrowings on same-day or one-day notice referred to as swingline loans and is available to us and certain of our subsidiaries in U.S. dollars and other currencies. As of May 3, 2009, we had no borrowings outstanding under the revolving credit facility, although we had $17 million (unaudited) of letters of credits outstanding under the facility. We drew $475 million under our term loan facility to finance a portion of the SPG Acquisition. On January 26, 2006, we drew the full $250 million under the delayed-draw portion of our term loan facility to retire all of our redeemable convertible preference shares. We used the net proceeds from the sale of our Storage Business and Printer ASICs Business to permanently repay borrowings under our term loan facility. Costs of approximately $19 million incurred in relation to the term loan facility were initially capitalized as debt issuance costs, amortized over the expected term as additional interest expense and unamortized costs were written off in conjunction with the repayment of the term loan facility.

Interest Rate and Fees:    Borrowings under the senior credit agreement bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the United States prime rate and (2) the federal funds rate plus 0.5% (or an equivalent base rate for loans originating outside the United States, to the extent available) or (b) a LIBOR rate (or the equivalent thereof in the relevant jurisdiction) determined by reference to the costs of funds for deposits in the currency of such borrowing for the interest period relevant to such borrowing adjusted for certain additional costs. At November 2, 2008, the lender’s base rate was 4.00% and the one-month LIBOR rate was 2.58%. At May 3, 2009, the lender’s base rate was 3.25% and the one-month LIBOR rate was 0.41%. The applicable margin for borrowings under the revolving credit facility is 0.75% with respect to base rate borrowings and 1.75% with respect to LIBOR borrowings.

We are required to pay a commitment fee to the lenders under the revolving credit facility with respect to any unutilized commitments thereunder. At November 2, 2008 and May 3, 2009, the commitment fee on the revolving credit facility was 0.375% per annum. We must also pay customary letter of credit fees. The commitment fee is expensed as additional interest expense.

Maturity:    Principal amounts outstanding under the revolving credit facility are due and payable in full on December 1, 2011. As of November 2, 2008 and May 3, 2009, we had no borrowings outstanding under the revolving credit facility, although we had $17 million of letters of credit each outstanding under the facility, which reduce the amount available on a dollar-for-dollar basis.

Certain Covenants and Events of Default:    The senior credit agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our and our subsidiaries’ ability to:

 

•

incur additional debt or issue certain preferred shares;

 

•

create liens on assets;

 

•

enter into sale-leaseback transactions;

 

•

engage in mergers or consolidations;

 

•

sell assets;

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

•

pay dividends and distributions, repurchase our capital stock or make other restricted payments;

 

•

make investments, loans or advances;

 

•

make capital expenditures;

 

•

repay subordinated indebtedness (including the 11 7/8% senior subordinated notes);

 

•

make certain acquisitions;

 

•

amend material agreements governing our subordinated indebtedness (including the senior subordinated notes);

 

•

change our lines of business; and

 

•

change the status of our direct wholly owned subsidiary, Avago Technologies Holdings Pte. Ltd., as a passive holding company.

All obligations under the senior credit facilities, and the guarantees of those obligations, are secured by substantially all of our assets and that of each guarantor subsidiary, subject to certain exceptions.

In addition, the senior credit agreement requires us to maintain senior secured leverage ratios not exceeding levels set forth in the senior credit agreement. The senior credit agreement also contains certain customary affirmative covenants and events of default, including a cross-default triggered by certain events of default under our other material debt instruments.

Senior Notes and Senior Subordinated Notes

In connection with the SPG Acquisition, we completed a private placement of $1,000 million principal amount of unsecured debt consisting of (i) $500 million principal amount of 10 ¹/8% senior notes due December 1, 2013, or senior fixed rate notes, (ii) $250 million principal amount of senior floating rate notes due June 1, 2013, or senior floating rate notes and, together with the senior fixed rate notes, the senior notes, and (iii) $250 million principal amount of 11 ⁷/8% senior subordinated notes due December 1, 2015, or senior subordinated notes. The senior notes and the senior subordinated notes are collectively referred to as our outstanding notes. We received proceeds of $966 million, net of $34 million of related transaction expenses. Such transaction expenses are deferred as debt issuance costs and are being amortized over the life of the loans as incremental interest expense.

Interest is payable on the senior fixed rate notes and the senior subordinated notes on a semi-annual basis at a fixed rate of 10.125% and 11.875%, respectively, per annum. Interest is payable on the senior floating rate notes on a quarterly basis at a rate of three-month LIBOR plus 5.5%. The rate for the senior floating rate notes was 8.31% and 6.76% at November 2, 2008 and May 3, 2009, respectively.

We may redeem all or any part of the senior fixed rate notes at any time prior to December 1, 2009 at a redemption price equal to 100% of the principal amount of the notes redeemed plus a defined premium and accrued but unpaid interest through the redemption date. We can redeem the senior floating rate notes on or after December 1, 2007 and the senior fixed rate notes on or

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

after December 1, 2009 at fixed redemption prices set forth in the indenture governing the senior notes plus accrued but unpaid interest through the redemption date. In addition, upon a change of control of our company, we generally will be required to make an offer to redeem the senior notes from the holders at 101% of the principal amount plus accrued but unpaid interest through the redemption date.

We may redeem all or any part of the senior subordinated notes (i) at any time prior to December 1, 2010 at a redemption price equal to 100% of the principal amount of the notes redeemed plus a defined premium and accrued but unpaid interest through the redemption date, and (ii) on or after December 1, 2010 at fixed redemption prices set forth in the indenture governing the senior subordinated notes plus accrued but unpaid interest through the redemption date. In addition, upon a change of control of our company, we generally will be required to make an offer to redeem the senior subordinated notes from the holders at 101% of the principal amount plus accrued but unpaid interest through the redemption date.

The senior notes are unsecured and effectively subordinated to all of our existing and future secured debt (including obligations under our senior credit agreement), to the extent of the value of the assets securing such debt. The senior subordinated notes are unsecured and subordinated to all of our existing and future senior indebtedness, including our senior credit agreement and the senior notes.

Certain of our subsidiaries have guaranteed the obligations under the senior credit agreement, have guaranteed the obligations under the senior notes on a senior unsecured basis, and have guaranteed the obligations under the senior subordinated notes on a senior subordinated unsecured basis.

The indentures governing our outstanding notes limit our and our subsidiaries’ ability to:

 

•

incur additional indebtedness and issue disqualified stock or preferred shares;

 

•

pay dividends or make other distributions on, redeem or repurchase our capital stock or make other restricted payments;

 

•

make investments, acquisitions, loans or advances;

 

•

incur or create liens;

 

•

transfer or sell certain assets;

 

•

engage in sale and lease back transactions;

 

•

declare dividends or make other payments to us;

 

•

guarantee indebtedness;

 

•

engage in transactions with affiliates; and

 

•

consolidate, merge or transfer all or substantially all of our assets.

Subject to certain exceptions, the indentures governing our outstanding notes permit us and our restricted subsidiaries to incur additional indebtedness, including secured

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

indebtedness. In addition, the indentures contain customary events of default provisions, including a cross-default provision triggered by certain events of default under our senior credit agreement.

Debt Repayments

During fiscal year 2007, we repurchased $97 million in principal amount of the senior fixed rate notes and paid $7 million in early tender premium in the tender offer, plus accrued interest, resulting in a loss on extinguishment of debt of $12 million, which consisted of $7 million early tender premium, $4 million write-off of debt issuance costs and less than $1 million legal fees and other related expenses.

During fiscal year 2008, we redeemed $200 million in principal amount of the senior floating rate notes. We redeemed the senior floating rate notes at 2% premium of the principal amount, plus accrued interest, resulting in a loss on extinguishment of debt of $10 million, which consisted of the $4 million premium and a $6 million write-off of debt issuance costs and other related expenses.

During the six months ended May 3, 2009, we repurchased $3 million (unaudited) in principal amount of senior subordinated notes from the open market, resulting in a gain on extinguishment of debt of $1 million (unaudited).

Debt Issuance Costs

Unamortized debt issuance costs associated with the notes and the secured senior credit facility were $22 million and $20 million (unaudited) at November 2, 2008 and May 3, 2009, respectively, and are included in other current assets and other long-term assets on the balance sheet. Amortization of debt issuance costs is classified as interest expense in the consolidated statement of operations.

Other Borrowing

In connection with an acquisition in the first quarter of fiscal 2008, we assumed a $2 million loan secured by land and building which was repaid during the quarter ended August 3, 2008. See also Note 3. “Acquisitions.”

Predecessor

The Predecessor had no borrowings during any period presented.

 

10.	Fair Value

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” or SFAS No. 157. SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities. The standard also provides for expanded information about the extent to which

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever other standards require or permit assets or liabilities to be measured at fair value. This standard does not expand the use of fair value in any new circumstances. In February 2008, the FASB issued FSP No. FAS 157-1 and FSP No. FAS 157-2. FSP No. FAS 157-1 amends SFAS No. 157 to exclude SFAS No. 13, “Accounting for Leases,” and its related interpretive accounting pronouncements that address leasing transactions. FSP No. FAS 157-2 delays the effective date of SFAS No. 157 by one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. For items covered by FSP No. FAS 157-2, SFAS No. 157 will not go into effect until fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active,” or FSP No. FAS 157-3, to clarify the application of the provisions of SFAS No. 157 in an inactive market and how an entity would determine fair value in an inactive market. FSP No. FAS 157-3 is effective immediately.

We adopted SFAS No. 157 at the beginning of fiscal year 2009. SFAS No. 157 is effective for nonfinancial assets and liabilities in financial statements issued for fiscal years beginning after November 15, 2008, which is our fiscal year 2010. The adoption of SFAS No. 157 did not impact our consolidated financial position or results of operations.

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

SFAS No. 157 establishes a three level hierarchy to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy under SFAS No. 157 are described below:

Level 1—Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. As of May 3, 2009, we held no Level 1 assets or liabilities.

Level 2—Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3—Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any market activity for the asset or liability at the measurement date.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Assets Measured at Fair Value on a Recurring Basis

The table below sets forth by level our financial assets that were accounted for at fair value as of May 3, 2009. The table does not include cash on hand and also does not include assets that are measured at historical cost or any basis other than fair value (unaudited) (in millions).

 

		Portion of Carrying Value Measured at Fair Value as of May 3, 2009			Fair Value Measurement at Reporting Date using Significant Other Observable Inputs (Level 2)
Time deposits(1)		$	225		$	225
Total assets measured at fair value		$	225		$	225

 

(1)	Included in cash and cash equivalents in our consolidated balance sheet

We measure time deposits at fair value quoted by the banks which do not materially differ from the carrying values of these instruments in the financial statements.

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents our assets that are measured at fair value on a nonrecurring basis at least annually or on a quarterly basis, if impairment is indicated (unaudited) (in millions):

 

		Fair Value as of May 3, 2009			Fair Value Measurement at Reporting Date using Significant Other Unobservable Inputs (Level 3)			Impairment Charges for the Six Months Ended May 3, 2009
Investment in a Privately-Held Company		$	—		$	—		$	(2	)

The following table presents our Level 3 asset activities during the six months ended May 3, 2009 (unaudited) (in millions):

 

		Beginning Balance			Transfer Into Level 3			Loss Recognized in Statements of Operations				Ending Balance
Investment in a Privately-Held Company		$	—		$	2		$	(2	)		$	—

Our investments in privately-held companies are accounted for using the cost method as we have no significant influence over the investee. The investments are recorded in other long-term assets. The investments are subject to periodic impairment review, which requires significant judgment to identify events or circumstances that would likely have a significant adverse effect on the future value of the investment. One of our investments was measured at

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

fair value during the first six months of fiscal year 2009 due to events or circumstances identified that significantly impacted the fair value of this investment. We measured fair value using analysis of the financial condition and near-term prospect of the investee, including recent liquidity issues as well as other economic variables. As a result, for the six months ended May 3, 2009, we recorded a $2 million (unaudited) other-than-temporary impairment charge related to this investment. The impairment charge was included in other income (expense), net in the consolidated statements of operations. No impairment charges were recorded during the six months ended May 4, 2008. The investment was classified as a Level 3 asset because we used unobservable inputs to value it, reflecting our assumptions about the assumptions market participants would use in pricing this investment due to the absence of quoted market prices and inherent lack of liquidity.

Fair Value of Other Financial Assets

The following table presents the carrying amounts and fair values of financial instruments as of October 31, 2007 and November 2, 2008 (in millions):

 

		Company
		October 31, 2007						November 2, 2008
		Carrying Value			Fair Value			Carrying Value			Fair Value
Variable rate debt		$	250		$	257		$	50		$	42
Fixed rate debt			653			722			653			541

The fair values of cash and cash equivalents, trade accounts receivable, accounts payable and accrued liabilities, to the extent the underlying liability will be settled in cash, approximate carrying values because of the short-term nature of these instruments. The fair value of our long-term debt is based on quoted market rates.

 

11.	Shareholders’ Equity

Company

Effective January 30, 2006, the Singapore Companies Act was amended to, among other things, eliminate the concepts of par value, share premium and authorized share capital. As a result of the Singapore Companies Act amendments, effective January 30, 2006, our outstanding shares have no par value, and any amount standing to the credit of our share premium account or capital redemption reserve are part of our share capital for all periods presented.

Ordinary and Redeemable Convertible Preference Shares

In December 2005, we issued 210,229,361 ordinary shares for proceeds of $1,043 million and 250,000 shares of redeemable convertible cumulative preference shares, or preference shares, for $250 million. In January 2006, we redeemed 248,848 shares of preference shares for cash and the remaining balance was converted into 230,400 ordinary shares. A pro-rata dividend at a rate of 3% per annum was paid on the shares redeemed in accordance with the

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

terms of the preference shares. During fiscal 2006, we issued 3,810,854 ordinary shares for proceeds of $19 million to employees of the Company and repurchased 29,000 ordinary shares for less than $1 million cash. During fiscal years 2007 and 2008, we repurchased a total of 781,000 ordinary shares from terminated employees for $7 million cash and issued 28,509 ordinary shares for less than $1 million. During the six months ended May 3, 2009, we issued 574,382 ordinary shares and repurchased 155,800 (unaudited) ordinary shares from terminated employees for $1 million (unaudited) cash.

At October 31, 2006, October 31, 2007, November 2, 2008 and May 3, 2009, 3,808,520, 3,498,520, 3,056,029 and 3,474,611 (unaudited) ordinary shares issued to employees, respectively, are considered temporary equity under the provisions of SEC Accounting Series Release No. 268, “Presentation in Financial Statements of ‘Redeemable Preferred Stocks‘,” due to having a contingent cash-settlement feature upon the death or disability of the shareholder for a period of five years from the issuance of such shares. As such, approximately $19 million, $17 million, $12 million and $11 million (unaudited) recognized in ordinary shares should be considered temporary equity of the Company at October 31, 2006, October 31, 2007, November 2, 2008 and May 3, 2009, respectively.

Share Option Plans

Effective December 1, 2005, we adopted two equity-based compensation plans, the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries, or the Executive Plan, and the Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries, or the Senior Management Plan and, together with the Executive Plan, the Equity Incentive Plans, which have been amended, to authorize the grant of options and share purchase rights covering up to 30 million ordinary shares.

Under the Executive Plan, options generally vest at a rate of 20% per year based on the passage of time, and the passage of time and attaining certain performance criteria, in each case subject to continued employment. Those options subject to vesting based on the passage of time may accelerate by one year upon certain terminations of employment. Under the Senior Management Plan, options generally vest at a rate of 20% per year based on the passage of time and continued employment.

Under the Equity Incentive Plans, awards generally expire ten years following the date of grant unless granted to a non-employee, in which case the awards generally expire five years following the date of grant and are granted at a price equal to the fair market value.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

A summary of award activity follows (in millions, except years and per share amounts).

 

		Awards Outstanding
		Awards Available for Grant			Number Outstanding			Weighted- Average Exercise Price Per Share			Weighted- Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding as of October 31, 2005		—			—			$	—
Shares authorized		30			—			$	—
Issued as part of the SPG Acquisition (see Note 3. “Acquisitions”)		(1	)		1			$	1.25
Granted		(24	)		24			$	5.06
Exercised		—			(4	)		$	5.01
Cancelled		3			(3	)		$	4.87
Outstanding as of October 31, 2006		8			18			$	4.87
Granted		(6	)		6			$	8.98
Cancelled		4			(4	)		$	4.91
Outstanding as of October 31, 2007		6			20			$	6.07
Granted		(5	)		5			$	10.42
Cancelled		4			(4	)		$	6.10
Balance as of November 2, 2008		5			21			$	7.03		7.57		$	78
Granted (unaudited)		(3	)		3			$	9.33
Exercised (unaudited)		—			(1	)		$	5.00
Cancelled (unaudited)		1			(1	)		$	6.24
Balance as of May 3, 2009 (unaudited)		3			22			$	7.49		7.43		$	20
Vested as of November 2, 2008					7			$	5.41		6.73		$	34
Vested and expected to vest as of November 2, 2008					18			$	6.75		7.44		$	71
Vested as of May 3, 2009 (unaudited)					8			$	5.88		6.36		$	13
Vested and expected to vest as of May 3, 2009 (unaudited)					18			$	7.21		7.24		$	19

The following table summarizes significant ranges of outstanding and exercisable awards as of May 3, 2009 (unaudited) (in millions, except years and per share amounts):

 

		Awards Outstanding							Awards Exercisable
Exercise Prices		Number Outstanding		Weighted- Average Remaining Contractual Life (in years)		Weighted- Average Exercise Price Per Share			Number Exercisable		Weighted- Average Exercise Price Per Share
$  0.00-4.00		1		3.57		$	1.25		1		$	1.25
4.01-8.00		10		6.34		$	5.17		6		$	5.09
8.01-12.00		11		8.72		$	10.14		1		$	10.22
Total		22		7.43		$	7.49		8		$	5.88

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Share-Based Compensation

Effective November 1, 2006, or fiscal year 2007, we adopted the provisions of SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R establishes GAAP for share-based awards issued for employee services. Under SFAS No. 123R, share-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We previously applied APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations and provided the required pro forma disclosures of SFAS No. 123, “Accounting for Stock-Based Compensation.”

We adopted SFAS No. 123R using the prospective transition method. Under this method, the provisions of SFAS No. 123R apply to all awards granted or modified after the date of adoption. For share-based awards granted after November 1, 2006, we recognized compensation expense based on the estimated grant date fair value method required under SFAS No. 123R, using Black-Scholes valuation model with a straight-line amortization method. Since SFAS No. 123R requires that share-based compensation expense be based on awards that are ultimately expected to vest, estimated share-based compensation for such awards has been reduced for estimated forfeitures. For outstanding share-based awards granted before November 1, 2006, which were originally accounted under the provisions of APB No. 25 and the minimum value method for pro forma disclosures of SFAS No. 123, we continue to account for any portion of such awards under the originally applied accounting principles. As a result, performance-based awards granted before November 1, 2006 are subject to variable accounting until such options are vested, forfeited or cancelled. Variable accounting requires us to value the variable options at the end of each accounting period based upon the then current fair value of the underlying ordinary shares. Accordingly, our share-based compensation is subject to significant fluctuation based on changes in the fair value of our ordinary shares.

On August 28, 2008, our Compensation Committee approved a change in the financial performance vesting targets applicable to options to purchase 3.8 million ordinary shares outstanding under our equity incentive plans, including 2.7 million options originally granted prior to the adoption of SFAS No. 123R, impacting 43 employees. This change was accounted for as a modification under SFAS No. 123R. As a result of this modification, all variable accounting on outstanding employee options ceased, and instead, pursuant to SFAS No. 123R, we will recognize unamortized intrinsic value of these modified options over the remaining service period. Based on the full achievement of performance of targets, as of the modification date, $6 million is subject to amortization of the remaining service period of approximately three years.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

The impact on our results for both employee and non-employee share-based compensation for the years ended October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 was as follows (in millions):

 

		Company
		Year Ended						Six Months Ended
		October 31, 2007			November 2, 2008			May 4, 2008			May 3, 2009
								(unaudited)
Cost of products sold		$	1		$	—		$	—		$	—
Research and development			—			3			1			2
Selling, general and administrative			11			12			8			2
Total share-based compensation expense		$	12		$	15		$	9		$	4

The weighted-average assumptions utilized for our Black-Scholes valuation model for options granted during the years ended October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 are as follows:

 

		Company
		Year Ended						Six Months Ended
		October 31, 2007			November 2, 2008			May 4, 2008			May 3, 2009
								(unaudited)
Risk-free interest rate		4.6	%		3.4	%		3.2	%		2.2	%
Dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Volatility		47.0	%		44.0	%		44.0	%		57.0	%
Expected term (in years)		6.5			6.5			6.5			6.5

The dividend yield of zero is based on the fact that we have no present intention to pay cash dividends. Expected volatility is based on the combination of historical volatility of guideline publicly traded companies over the period commensurate with the expected life of the options and the implied volatility of guideline publicly traded companies from traded options with a term of 180 days or greater measured over the last three months. The risk-free interest rate is derived from the average U.S. Treasury Strips rate during the period, which approximates the rate in effect at the time of grant. The expected life calculation is based on the simplified method of estimating expected life outlined by the SEC in the Staff Accounting Bulletin No. 107, This method was allowed until December 31, 2007. However, on December 21, 2007, the SEC issued Staff Accounting Bulletin No. 110, “Year-End Help For Expensing Employee Stock Options,” or SAB No. 110, which will allow continued use of the simplified method under certain circumstances. As a result, we will continue to use the simplified method until we have sufficient historical data to provide a reasonable basis to estimate the expected term. For a portion of the option grants issued during the quarter ended May 3, 2009, which did not meet the criteria of “plain vanilla” options under SAB No. 110, our computation of expected life was based on other data, such as the data of peer companies and company-specific attributes which management believed could affect employees’ exercise behavior.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Based on the above assumptions, the weighted-average fair values of the options granted under the share option plans for the years ended October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 was $5.07, $5.08, $4.91 (unaudited) and $3.60 (unaudited), respectively.

Based on our historical experience of pre-vesting option cancellations, we have assumed an annualized forfeiture rate of 15% for our options. Under the true-up provisions of SFAS No. 123R, we will record additional expense if actual forfeitures are lower than we estimated, and will record a recovery of prior expense if actual forfeitures are higher than we estimated.

Total compensation cost of options granted but not yet vested as of May 3, 2009 was $22 million (unaudited), which is expected to be recognized over the weighted average period of 3 years.

For the year ended October 31, 2006, total employee and non-employee share-based compensation expense was $3 million, which was recorded in accordance with APB No. 25.

During the second quarter of fiscal year 2009, we recorded $2 million (unaudited) as share-based compensation expense in connection with the employee separation agreement entered into with our former Chief Operating Officer. See Note 12. “Restructuring and Asset Impairment Charges.”

 

12.	Restructuring and Asset Impairment Charges

Company

During the year ended October 31, 2006, we initiated new restructuring plans to reduce our workforce by approximately 80 employees related to certain product line rationalizations. In addition, we continued to incur charges related to the Predecessor restructuring plans assumed by us as part of the SPG Acquisition. Total charges incurred during this period were $5 million, $2 million of which were recorded under cost of products sold and the remainder of which were recorded under research and development. As of October 31, 2006, we had paid $5 million in cash in conjunction with the new restructuring plans, and substantially completed the Predecessor restructuring plan.

In the first quarter of fiscal year 2007, we began to increase the use of outsourced service providers in our manufacturing operations, particularly our assembly and test operations, to lower our costs and reduce the capital deployed in these activities. In connection with this strategy, we introduced a largely voluntary severance program intended to reduce our workforce and resulting in an approximately 40% decline in our employment, primarily in our major locations in Asia. The increased use of outsource providers combined with other factors including real estate appraisals also led us to evaluate the recoverability of certain long-lived assets to determine whether there had been a material impairment pursuant to SFAS No. 144. Consequently, during the year ended October 31, 2007, we incurred asset impairment charges and restructuring charges of $158 million and $51 million, respectively. The asset impairment charges included $70 million mostly related to equipment and buildings at certain manufacturing facilities and $88 million for intangible assets related to those manufacturing operations. The net book value of the asset group before the impairment charges was $415

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

million. The impairment charge was measured as an excess of the carrying value of the asset group over its fair value. The fair value of the asset group was estimated using a present value technique, where expected future cash flows from the use of the asset group were discounted by an interest rate commensurate with the risk of the cash flows. The restructuring charges predominantly represented associated one-time employee termination costs.

During the fiscal year ended November 2, 2008, we continued to expand our outsourcing strategy and initiated restructuring plans in connection with product line rationalizations. As a result we recorded $12 million of restructuring charges predominantly representing associated one-time employee termination costs.

In January 2009, we committed to a restructuring plan intended to realign our cost structure with the current macroeconomic business conditions. The plan eliminates approximately 230 positions or 6% of our global workforce and was substantially completed in the second quarter of fiscal year 2009. These employment terminations occurred in various geographies and functions worldwide. In connection with this plan, we recorded $10 million (unaudited) in one-time employee termination costs during the six months ended May 3, 2009. As of May 3, 2009, $9 million (unaudited) of this charge has been paid and the remaining balance will be paid in the third quarter of fiscal year 2009.

In January 2009, we committed to a plan to outsource certain manufacturing facilities in Germany relating to an acquisition completed in fiscal year 2007. This outsourcing is expected to be completed by the third quarter of fiscal year 2009. During the six months ended May 3, 2009, we recorded $5 million (unaudited) of one-time employee termination costs and $1 million (unaudited) related to asset abandonment and other exit costs in connection with this plan. We expect to incur approximately $1 million (unaudited) related to excess lease costs through the third quarter of fiscal year 2009 related to this plan. As of May 3, 2009, $1 million (unaudited) of this charge has been paid and the remaining balance will be paid in the third quarter of fiscal year 2009.

During the quarter ended February 1, 2009, we recorded $1 million (unaudited) of estimated one-time employee termination costs in connection with the departure of our Chief Operating Officer in January 2009. Subsequent to the quarter ended May 3, 2009, this amount has been paid in full. In addition, we recognized $2 million (unaudited) as share-based compensation expense in connection with the employee separation agreement with our former Chief Operating Officer.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

The significant activity within and components of the restructuring charges during the years ended October 31, 2007 and November 2, 2008 and the six months ended May 3, 2009 are as follows (in millions):

 

		Employee Termination Costs				Asset Abandonment Costs				Excess Lease				Total
Beginning balance as of October 31, 2006		$	—			$	—			$	—			$	—
Charges to cost of products sold			28				1				—				29
Charges to operating expenses			18				3				1				22
Cash payments			(41	)			—				(1	)			(42	)
Non-cash portion			—				(4	)			—				(4	)
Accrued restructuring as of October 31, 2007 — included in other current liabilities			5				—				—				5
Charges to cost of products sold			6				—				—				6
Charges to operating expenses			5				—				1				6
Cash payments			(15	)			—				(1	)			(16	)
Accrued restructuring as of November 2, 2008 — included in other current liabilities			1				—				—				1
Charges to cost of products sold (unaudited)			8				1				—				9
Charges to operating expenses (unaudited)			8				—				—				8
Non-cash portion (unaudited)			—				(1	)			—				(1	)
Cash payments (unaudited)			(11	)			—				—				(11	)
Accrued restructuring as of May 3, 2009 (unaudited) — included in other current liabilities		$	6			$	—			$	—			$	6

Predecessor

During the one month ended November 30, 2005, Predecessor incurred $1 million of one-time employee termination costs related to restructuring activities which were charged to selling, general and administrative expenses.

 

13.	Income Taxes

Company

Consequent to the incorporation of Avago in Singapore, domestic operations reflect the results of operations based in Singapore.

Predecessor

Predecessor operating results were historically included in Agilent’s consolidated U.S. federal and state income tax returns and non-U.S. jurisdiction tax returns. Provision for income taxes in the financial statements has been determined on a separate return basis. Predecessor is required to assess the realization of its net deferred tax assets and the need for a valuation allowance on a separate return basis, and exclude from that assessment any utilization of those losses by Agilent. This assessment requires that Predecessor’s management make judgments

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

about benefits that could be realized from future taxable income, as well as other positive and negative factors influencing the realization of deferred tax assets. Due to the cumulative losses incurred in the U.S. and certain non-U.S. locations, Predecessor recorded a valuation allowance against any deferred assets in these jurisdictions as of October 31, 2005. All tax return attributes Predecessor generated, as calculated on a separate return methodology not used by Agilent historically, were retained by Agilent.

Components of Income Before Taxes from Continuing Operations

For financial reporting purposes, “Income (loss) from continuing operations before income taxes” included the following components (in millions):

 

		Predecessor						Company
		One Month Ended						Year Ended
		November 30, 2005						October 31, 2006				October 31, 2007				November 2, 2008
Company
Domestic loss								$	(249	)		$	(125	)		$	26
Foreign income (loss)									24				(87	)			34
Predecessor
Domestic loss		$	(17	)
Foreign income (loss)			(6	)
Income (loss) from continuing operations before income taxes		$	(23	)				$	(225	)		$	(212	)		$	60

Components of Provision for Income Taxes

Company

We have obtained several tax incentives from the Singapore Economic Development Board, an agency of the Government of Singapore, which provide that certain classes of income we earn in Singapore are subject to tax holidays or reduced rates of Singapore income tax. Each tax incentive is separate and distinct from the others, and may be granted, withheld, extended, modified, truncated, complied with or terminated independently without any effect on the other incentives. In order to retain these tax benefits, we must meet certain operating conditions specific to each incentive relating to, among other things, maintenance of a treasury function, a corporate headquarters function, specified intellectual property activities and specified manufacturing activities in Singapore. Some of these operating conditions are subject to phase-in periods through 2015. The tax incentives are presently scheduled to expire at various dates generally between 2012 and 2015, subject in certain cases to potential extensions. For the fiscal years ended October 31, 2006, 2007, and November 2, 2008, the effect of all these tax incentives, in the aggregate, was to reduce the overall provision for income taxes and reduce net loss from what it otherwise would have been in such year by $19 million, $19 million and $24 million, respectively, and reduce diluted net loss per share for the years ended October 31, 2006 and 2007 by $0.09 and $0.09, respectively, and increase diluted net income per share for the fiscal year ended November 2, 2008 by $0.11 per share.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Significant components of the provision for income taxes from continuing operations are as follows (in millions):

 

		Predecessor					Company
		One Month Ended					Year Ended
		November 30, 2005					October 31,				October 31,				November 2,
							2006				2007				2008
Current tax expense:
Domestic		$	—				$	2			$	2			$	4
Foreign			2					6				9				8
		$	2				$	8			$	11			$	12
Deferred tax expense (benefit)
Domestic		$	—				$	(1	)		$	3			$	—
Foreign			—					(4	)			(6	)			(9	)
		$	—				$	(5	)		$	(3	)		$	(9	)
Total provision for income taxes		$	2				$	3			$	8			$	3

Predecessor

Agilent had negotiated tax holidays on earnings in certain foreign jurisdictions in which Predecessor operated which expire in various fiscal years beginning in 2008. The tax holidays provide lower rates of taxation on certain classes of income and were conditional upon Agilent meeting certain employment and investment thresholds.

Rate Reconciliation

A reconciliation of the expected statutory tax rate (computed at the Predecessor’s U.S. statutory income tax rate of 35% and the Company’s Singapore then prevailing statutory tax rate of 20% or 18%) to the actual tax rate on income from continuing operations is as follows:

 

		Predecessor					Company
		One Month Ended November 30, 2005					Year Ended
							October 31, 2006			October 31, 2007			November 2, 2008
Expected statutory tax rate		(35.0	)%				(20.0	)%		(18.0	)%		18.0	%
Homeland Investment Act Dividend Repatriation		0.0	%				0.0	%		0.0	%		0.0	%
Foreign income taxed at different rates		14.9	%				(0.2	)%		8.0	%		1.9	%
Nondeductible goodwill		0.3	%				0.0	%		0.0	%		0.0	%
U.S. R&D credits		(1.3	)%				0.0	%		(0.3	)%		0.0	%
Tax Holidays and Concessions		0.0	%				21.5	%		11.5	%		(0.1	)%
Other, net		(0.4	)%				0.0	%		2.6	%		0.2	%
Valuation Allowance		30.2	%				0.0	%		0.0	%		(15.0	)%
Actual tax rate on income from continuing operations		8.7	%				1.3	%		3.8	%		5.0	%

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Summary of Deferred Income Taxes

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their basis for income tax purposes and the tax effects of net operating losses and tax credit carryforwards. The significant components of deferred tax assets and deferred tax liabilities included on the balance sheets were as follows (in millions):

 

				October 31,				November 2,
				2007				2008
Deferred income tax assets:
Depreciation and amortization				$	22			$	23
Inventory					1				2
Receivables					2				2
Employee benefits					2				6
Stock options					4				6
Net operating loss carryovers and credit carryovers					30				29
Other deferred income tax assets					4				2
Gross deferred tax assets				$	65			$	70
Less valuation allowance					(51	)			(31	)
Deferred income tax assets				$	14			$	39
Deferred income tax liabilities
Depreciation and amortization				$	—			$	8
Inventory					1				1
Employee benefits					3				—
Other deferred income tax liabilities					2				20
Foreign earnings not permanently reinvested					2				2
Deferred income tax liabilities				$	8			$	31
Net deferred income tax asset (liability)				$	6			$	8

The above net deferred income tax asset has been reflected in the accompanying balance sheets as follows (in millions):

 

		October 31,				November 2,
		2007				2008
Current asset		$	2			$	5
Current liability			(3	)			(18	)
Net current income tax asset (liability)		$	(1	)		$	(13	)
Non-current asset		$	12			$	33
Non-current liability			(5	)			(13	)
Net non-current income tax asset (liability)		$	7			$	20

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

As of November 2, 2008, we had Singapore net operating loss carryforwards of $40 million, foreign net operating loss carryforwards of $47 million, and U.S. net operating loss carryforwards of $30 million. The Singapore net operating losses have no limitation on utilization. For foreign net operating losses, $41 million of the losses have no limitation on utilization and the remaining balance of the losses expire in various fiscal years beginning 2008. U.S. federal net operating loss carryforwards expire beginning in fiscal year 2016.

We consider all operating income of foreign subsidiaries not to be permanently reinvested outside Singapore. We have provided $2 million for foreign taxes that may result from future remittances of undistributed earnings of foreign subsidiaries, the cumulative amount of which is estimated to be $85 million and $128 million as of October 31, 2007 and November 2, 2008, respectively.

We adopted the provisions of FIN No. 48 on November 1, 2007. As a result of the implementation of FIN No. 48, our total unrecognized tax benefit was approximately $20 million at the date of adoption, for which we recognized approximately a $10 million increase in the liability for unrecognized tax benefits. At the adoption, our balance sheet also reflected an increase in other long-term liabilities, accumulated deficit and deferred tax assets of approximately $10 million, $9 million and $1 million, respectively.

We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes line in the accompanying consolidated statement of operations. Accrued interest and penalties are included within the other long-term liabilities line in the consolidated balance sheet.

The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):

 

Beginning balance as of November 1, 2007 (date of adoption)		$	20
Settlements and effective settlements with tax authorities and related remeasurements			—
Lapse of statute of limitations			—
Increases in balances related to tax positions taken during prior periods			2
Decreases in balances related to tax positions taken during prior periods			(7	)
Increases in balances related to tax positions taken during current period			3
Ending balance as of November 2, 2008		$	18

Prior to the adoption of FIN No. 48, we did not recognize an accrual for penalties and interest. Upon adoption of FIN No. 48 on November 1, 2007, we increased our accrual for interest and penalties to approximately $1 million, which was also accounted for as an increase to the November 1, 2007 balance of accumulated deficit. During the year ended November 2, 2008 we provided for additional interest that increased our accrual of interest and penalties to approximately $3 million, which is included in the consolidated balance sheet at November 2, 2008. The accrual for interest and penalties did not materially change during the six months ended May 3, 2009.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Included in the balance of unrecognized tax benefits at November 2, 2008 are approximately $16 million of tax benefits that, if recognized, would affect the effective tax rate. There were no significant changes to the unrecognized tax benefits during the six months ended May 3, 2009.

Although the timing of the resolution and/or closure on audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to examination, we are unable to estimate the range of possible adjustments to the balance of gross unrecognized tax benefits.

We are subject to examination by the tax authorities with respect to the periods subsequent to the SPG Acquisition. We are not under Singapore income tax examination at this time. The Company is subject to Singapore income tax examinations for all years from the year ended October 31, 2006. The Company is also subject to examinations in major foreign jurisdictions, including the United States, for all years from the year ended October 31, 2006.

For the six months ended May 4, 2008, we recorded an estimated income tax provision of $7 million (unaudited) in continuing operations compared to $3 million (unaudited) for the six months ended May 3, 2009.

 

14.	Interest Expense

Interest expense of $143 million, $109 million, $86 million, $45 million (unaudited) and $38 million (unaudited) for the years ended October 31, 2006, October 31, 2007 and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009, respectively, consisted primarily of (i) interest expense of $121 million, $105 million, $82 million, $43 million (unaudited) and $36 million (unaudited), respectively, with respect to the senior notes, senior subordinated notes, and previously outstanding debt under the senior secured credit facilities, all issued or incurred in connection with the SPG Acquisition, including commitment fees for expired credit facilities; and (ii) amortization of debt issuance costs of $22 million, $4 million, $4 million, $2 million (unaudited) and $2 million (unaudited), respectively.

 

15.	Other Income (Expense), net

The following table presents the detail of other income, net (in millions):

 

 

		Predecessor					Company
		One Month Ended					Year Ended										Six Months Ended
		November 30, 2005					October 31,     2006			October 31,     2007			November 2,     2008				May 4, 2008				May 3, 2009
																	(unaudited)
Other income		$	—				$	6		$	4		$	—			$	1			$	1
Interest income			—					6			10			4				2				1
Other expense			—					—			—			(8	)			(1	)			(6	)
Other income (expense), net		$	—				$	12		$	14		$	(4	)		$	2			$	(4	)

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

16.	Sale of the Camera Module Business

On February 3, 2005, Predecessor completed the sale of the Camera Module Business to Flextronics International Ltd. pursuant to an Asset Purchase Agreement dated October 27, 2004 as amended. Flextronics agreed to purchase the fixed assets, inventory and intellectual property and assume operating liabilities. Flextronics paid approximately $13 million upon closing and paid an additional $12 million (in twelve equal quarterly installments) each fiscal quarter following the sale closing date, which was recorded as receivable by us as part of purchase accounting. Based on SFAS No. 144 and FASB Emerging Issues Task Force No. 03-13, “Applying the Conditions in Paragraph 42 of FAS 144 in Determining Whether to Report Discontinued Operation,” Predecessor concluded that it had continuing involvement with the disposed business as it would continue to be the primary supplier to the buyer (Flextronics International Ltd.) for a key component for Camera Module products, and thus the divestiture did not meet the criteria for discontinued operations.

 

17.	Discontinued Operations

Storage Business

In October 2005, we entered into a definitive agreement to sell our Storage Business to PMC-Sierra Inc. subject to certain conditions, including our completion of the SPG Acquisition from Agilent. This transaction closed on February 28, 2006, resulting in $420 million of net proceeds to us. The assets and liabilities of the Storage Business were classified as held for sale in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” in the purchase price allocation and no gain or loss was recorded on the sale. In March 2006, we used the net proceeds from this sale to permanently repay a portion of the term loan facility described in Note 9. “Senior Credit Facilities and Borrowings.”

The following table summarizes the results of operations of the Storage Business, included in discontinued operations in our consolidated statements of operations for the one month ended November 30, 2005, the years ended October 31, 2006, October 31, 2007, November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 respectively (in millions):

 

		Predecessor						Company
		One Month Ended						Year Ended										Six Months Ended
		November 30, 2005						October 31, 2006				October 31, 2007			November 2, 2008			May 4, 2008			May 3, 2009
																		(unaudited)
Net revenue		$	8					$	28			$	—		$	—		$	—		$	—
Costs, expenses and other income, net			(6	)					(26	)			1			—			—			—
Income from and gain on discontinued operations, net of taxes		$	2					$	2			$	1		$	—		$	—		$	—

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

The following table presents the Storage Business’ assets and liabilities that were sold (in millions):

 

		Company
Assets:
Inventory		$	5
Other current assets			4
Property, plant and equipment, net			8
Goodwill and intangible assets, net			404
Total assets of discontinued operation			421
Liabilities:
Current liabilities
Net assets of discontinued operation			1
		$	420

Printer ASICs Business

In February, 2006, we entered into a definitive agreement to sell our Printer ASICs Business to Marvell Technology Group Ltd, or Marvell. Our agreement with Marvell also provided for up to $35 million in additional earn-out payments by Marvell to us based solely on the achievement of certain revenue targets in respect of the acquired business subsequent to the acquisition. This transaction closed on May 1, 2006 resulting in $245 million of net proceeds to us. There was no gain or loss on the sale as the fair value of the assets and liabilities were reflected in the purchase price allocation for the SPG Acquisition. In May 2006, we used the net proceeds, together with other available cash, to permanently repay a portion of the term loan facility described in Note 9. “Senior Credit Facilities and Borrowings.”

The following table summarizes the results of operations of the Printer ASICs Business, included in discontinued operations in our consolidated statements of operations for the one month ended November 30, 2005, the years ended October 31, 2006, October 31, 2007, November 2, 2008, and the six months ended May 4, 2008 and May 3, 2009, respectively (in millions):

 

		Predecessor						Company
		One Month Ended						Year Ended										Six Months Ended
		November 30, 2005						October 31, 2006				October 31, 2007			November 2, 2008			May 4, 2008			May 3, 2009
																		(unaudited)
Net revenue		$	10					$	71			$	—		$	—		$	—		$	—
Costs, expenses and other income, net			(11	)					(70	)			—			—			—			—
Gain on sale of business			—						—				10			25			—			—
Income (loss) from and gain on discontinued operations, net of taxes		$	(1	)				$	1			$	10		$	25		$	—		$	—

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

During fiscal year 2007, we received $10 million of the earn-out payment from Marvell and recorded it as a gain on discontinued operations. During fiscal year 2008, we received $25 million of the earn-out payment from Marvell and recorded it as a gain on discontinued operations.

The following table presents the Printer ASICs Business’ assets and liabilities that were sold (in millions):

 

		Company
Assets:
Inventory		$	17
Other current assets			10
Property, plant and equipment, net			15
Goodwill and intangible assets, net			207
Total assets of discontinued operation			249
Liabilities:
Current liabilities			4
Net assets of discontinued operation		$	245

Image Sensor Operations

In November 2006, we entered into a definitive agreement to sell our Image Sensor operations to Micron Technology, Inc. for $53 million. Our agreement with Micron also provides for up to $17 million in additional earn-out payments by Micron to us upon the achievement of certain milestones. Micron purchased certain assets, including intellectual property rights and fixed assets, and assumed certain liabilities. This transaction closed on December 8, 2006, resulting in $57 million of net proceeds, including $4 million of earn-out payments during the year ended October 31, 2007. In addition to this transaction, we also sold intellectual property rights related to the Image Sensor operations to another party for $12 million. We recorded a gain on the sale of approximately $50 million for both of these transactions, which was reported as income and gain from discontinued operations.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

The following table summarizes the results of operations of the Image Sensor operations, included in discontinued operations in our consolidated statements of operations for the one month ended November 30, 2005, the years ended October 31, 2006, October 31, 2007, November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 respectively (in millions):

 

		Predecessor						Company
		One Month Ended						Year Ended											Six Months Ended
		November 30, 2005						October 31, 2006				October 31, 2007				November 2, 2008			May 4, 2008			May 3, 2009
																			(unaudited)
Net revenue		$	6					$	41			$	9			$	—		$	—		$	—
Costs, expenses and other income, net			(7	)					(50	)			(8	)			—			—			—
Gain on sale of business			—						—				50				6			6			—
Income (loss) from and gain on discontinued operations, net of taxes		$	(1	)				$	(9	)		$	51			$	6		$	6		$	—

During fiscal years 2007 and 2008, we received earn-out payments of $4 million and $6 million, respectively, from Micron.

The following table presents the Image Sensor operations’ assets and liabilities that were sold (in millions):

 

		Company
Assets:
Property, plant and equipment, net		$	4
Intangible assets, net			13
Total assets of discontinued operation			17
Liabilities:
Current liabilities			1
Net assets of discontinued operation		$	16

Infra-red Operations

In October 2007, we entered into a definitive agreement to sell our Infra-red operations to Lite-On Technology Corporation for $19 million in cash, $2 million payable upon receipt of local regulatory approvals, and the right to receive guaranteed cost reductions or rebates of $10 million based on our future purchases of non infra-red products from Lite-On (which we recorded as an asset based on the estimated fair values of the future cost reductions or rebates). During the quarter ended August 3, 2008, we formally notified Lite-On that the first phase of planned cost reductions had not been achieved and requested that they issue a rebate of $4.9 million. Under the agreement, we also agreed to a minimum purchase commitment of non

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

infra-red products over the next three years. This transaction closed in January 2008 and we recorded a gain of $3 million in the first quarter, which was reported within income from and gain on discontinued operations in the consolidated statement of operations. The transaction was subject to certain post closing adjustments in accordance with the agreement. During fiscal year 2008, we entered into settlement discussions with Lite-On regarding the remaining sales price receivable and the cost reductions and based on those discussions, determined that certain amounts due would likely not be received. As such, we recorded an overall loss from disposal of Infra-red operations of $5 million during fiscal year 2008. During fiscal year 2009, we received the remaining $2 million (unaudited) receivable from Lite-On in accordance with the finalized settlement agreement.

The following table summarizes the results of operations of the Infra-red operations, included in discontinued operations in our consolidated statements of operations for the one month ended November 30, 2005, the years ended October 31, 2006, October 31, 2007, November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 respectively (in millions):

 

		Predecessor						Company
		One Month Ended						Year Ended												Six Months Ended
		November 30, 2005						October 31, 2006				October 31, 2007				November 2, 2008				May 4, 2008				May 3, 2009
																				(unaudited)
Net revenue		$	5					$	38			$	27			$	4			$	4			$	—
Costs, expenses and other income, net			(4	)					(29	)			(26	)			(4	)			(5	)			—
Gain (loss) on sale of operation			—						—				—				(5	)			3				—
Income (loss) and gain (loss) from discontinued operations, net of taxes		$	1					$	9			$	1			$	(5	)		$	2			$	—

SFAS No. 144 provides that a long-lived asset classified as held for sale should be measured at the lower of its carrying amount or fair value less cost to sell. We believe that the carrying value of the Infra-red operations at October 31, 2007 was less than the estimated fair value less cost to sell, and no adjustment to the carrying value of this long-lived asset was necessary during the year ended October 31, 2007. In accordance with the provisions of SFAS No. 144, we ceased the amortization of the Infra-red operations’ intangible assets and the depreciation of the property and equipment in the fourth quarter of fiscal year 2007. Also, in accordance with the provisions of SFAS No. 144, we determined that the Infra-red operations became a discontinued operation in the fourth quarter of fiscal year 2007. Accordingly, its assets and liabilities and operating results have been segregated from the consolidated balance sheets and continuing operations in the consolidated statements of income for all periods presented.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

The following table presents the Infra-red operations’ assets and liabilities that were sold as of the closing date of the transaction (in millions):

 

		Company
Assets:
Inventory		$	4
Property, plant and equipment, net			1
Intangible assets, net			21
Total assets of discontinued operation		$	26

 

18.	Segment Information

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” or SFAS No. 131, establishes standards for the way public business enterprises report information about operating segments in annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS No. 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. We have concluded that we have one reportable segment based on the following factors: sales of semiconductors represents our only material source of revenue; substantially all products offered incorporate analog functionality and are manufactured under similar manufacturing processes; we use an integrated approach in developing our products in that discrete technologies developed are frequently integrated across many of our products; we use a common order fulfillment process and similar distribution approach for our products; and broad distributor networks are typically utilized while large accounts are serviced by a direct sales force. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by SFAS No. 131.

The following table presents net revenue and long-lived asset information based on geographic region. Net revenue is based on the geographic location of the distributors or OEMs who purchased the Company’s products, which may differ from the geographic location of the end customers. Long-lived assets include property, plant and equipment and are based on the physical location of the assets (in millions):

 

		Malaysia and Singapore			United States			Rest of the World			Total
Predecessor
Net revenue:
One month ended November 30, 2005		$	7		$	41		$	66		$	114
Company
Net revenue:
Year ended October 31, 2006			146			467			786			1,399
Year ended October 31, 2007			308			274			945			1,527
Year ended November 2, 2008			340			326			1,033			1,699
Long-lived assets:
As of October 31, 2007		$	140		$	135		$	17		$	292
As of November 2, 2008			93			134			72			299

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

 

19.	Related Party Transactions

In connection with the SPG Acquisition, we entered into an Advisory Agreement with affiliates of Kohlberg Kravis Roberts & Co., or KKR, and Silver Lake Partners, or Silver Lake and, together with KKR, the Sponsors, for ongoing consulting and management advisory services. Affiliates of the Sponsors, through their investments in Bali Investments S.à.r.l., indirectly own over eighty percent of our shares. The Advisory Agreement requires us to pay each of the Sponsors a quarterly fee of $625,000, which is subject to a 5% increase each fiscal year during the agreement’s term. The Advisory Agreement has a 12-year term. See Note 20, “Commitments and Contingencies.” For the years ended October 31, 2006, October 31, 2007, November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 we recorded $5 million, $5 million, $6 million, $3 million (unaudited) and $3 million (unaudited) of expenses, respectively, in connection with the Advisory Agreement.

In connection with the closing of the SPG Acquisition and the related financings, collectively known as the Transactions, we paid to each of the Sponsors an advisory fee of $18 million for services provided to us in evaluating, negotiating, documenting, financing and closing the Transactions. In addition, in connection with the closing of any subsequent change of control transaction, acquisition, disposition or divestiture, spin-off, split-off or financing completed during the term of the Advisory Agreement (or after, if contemplated during the term) in each case with an aggregate value in excess of $25 million, we will pay each of the Sponsors a fee of 0.5% based on the aggregate value of such transaction. For the Storage and Printer ASICs dispositions (discussed in Note 17, “Discontinued Operations”), we paid the Sponsors each $3 million in advisory fees, which were charged to expense. For the Image Sensor operations disposition (discussed in Note 17, “Discontinued Operations”), we paid less than $1 million to the Sponsors. Pursuant to the advisory agreement, we also recorded less than $1 million (unaudited) of advisory fees payable to KKR and Silver Lake during each of the six months ended May 4, 2008 and May 3, 2009 in connection with qualifying acquisitions.

In connection with the SPG Acquisition, we entered into a management consulting agreement for post-acquisition support activities with KKR Capstone, or Capstone, a consulting company that works exclusively with KKR and its portfolio companies. Under this agreement, we paid $1 million to Capstone during the year ended October 31, 2006. An affiliate of Capstone was granted options to purchase 800,000 ordinary shares with an exercise price of $5.00 per share on February 3, 2006. One half of these options vest over four years, and the other half vests upon the achievement of certain company financial performance metrics defined in the Share Option Agreement, dated February 3, 2006. These options are subject to variable accounting and we recorded a charge of $2 million, $1 million, $2 million and $1 million (unaudited) for the years ended October 31, 2006, October 31, 2007, November 2, 2008, and the six months ended May 4, 2008, respectively, related to the issuance of these options. We recorded a credit of $1 million (unaudited) for the six months ended May 3, 2009 related to the issuance of these options.

Funds affiliated with Silver Lake are investors in Flextronics International Ltd., and Mr. James A. Davidson, a director, also serves as a director of Flextronics. Agilent sold its Camera Module Business to Flextronics in February 2005. In the ordinary course of business, we continue to sell to Flextronics, which in the years ended October 31, 2006, October 31, 2007, and

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

November 2, 2008 accounted for $191 million, $144 million, and $155 million of net revenue from continuing operations, respectively. During the six months ended May 4, 2008 and May 3, 2009, we recorded $80 million (unaudited) and $47 million (unaudited) of net revenue from continuing operations, respectively, to Flextronics. Trade accounts receivable due from Flextronics as of October 31, 2007, November 2, 2008 and May 3, 2009 were $23 million, $17 million, and $15 million (unaudited), respectively. Flextronics continued to pay the deferred purchase price in connection with its acquisition of the Camera Module Business at the rate of $1 million per quarter, which payment was completed in the first quarter of fiscal year 2008.

Mr. John R. Joyce, a director, also serves as a director of Hewlett-Packard Company effective July 2007. In the ordinary course of business, we continue to sell to Hewlett-Packard Company, which in the years ended October 31, 2007 and November 2, 2008 and six months ended May 4, 2008 and May 3, 2009 accounted for $20 million, $30 million, $14 million (unaudited) and $21 million (unaudited) of net revenue from continuing operations, respectively, and trade accounts receivable due from Hewlett-Packard Company as of October 31, 2007, November 2, 2008 and May 3, 2009, was $7 million, $7 million and $8 million (unaudited), respectively. We also use Hewlett-Packard Company as a service provider for information technology services. For the years ended October 31, 2007 and November 2, 2008, and the six months ended May 4, 2008 and May 3, 2009, operating expenses include $35 million, $32 million, $17 million (unaudited) and $14 million (unaudited), respectively, for services provided by Hewlett-Packard Company.

Mr. James Diller, a director, also serves on the board of directors PMC Sierra, Inc. as vice-chairman. In the ordinary course of business, we continue to sell to PMC Sierra, which in the years ended October 31, 2006, October 31, 2007, and November 2, 2008 and the six months ended May 4, 2008 and May 3, 2009 accounted for $2 million, $1 million, $3 million, $1 million (unaudited) and $1 million (unaudited) of net revenue from continuing operations, respectively. Trade accounts receivable due from PMC Sierra as of October 31, 2007, November 2, 2008 and May 3, 2009 were less than $1 million, less than $1 million, and zero (unaudited), respectively.

Ms. Mercedes Johnson, our former Senior Vice President, Finance and Chief Financial Officer, served as a director of Micron Technology, Inc. In December 2006, we completed the sale of our Image Sensor operations to Micron. Ms. Johnson recused herself from all deliberations of the board of directors of Micron concerning that transaction.

Pursuant to an Amended and Restated Shareholder Agreement dated as of February 3, 2006 among Avago Technologies and participants in our investor group and certain other persons, three representatives of each Sponsor serve on Avago’s board of directors. In April 2006, Avago granted each member of its board of directors, including these individuals, an option to purchase 50,000 ordinary shares of Avago Technologies, with an exercise price of $5.00 per share (the fair market value on the date of the grant as determined by Avago’s board of directors), a term of 5 years and vesting at a rate of 20% per year from December 1, 2005. In addition, we will pay these individuals $50,000 per year for service on Avago’s board of directors, quarterly in arrears and prorated for any partial quarter.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

20.	Commitments and Contingencies

Commitments

Operating Lease Commitments.    We lease certain real property and equipment from Agilent and unrelated third parties under non-cancelable operating leases. Our future minimum lease payments under these leases at November 2, 2008 were $8 million for 2009, $7 million for 2010, $3 million for 2011, $2 million for 2012, $2 million for 2013, and $8 million thereafter.

Rent expense was $2 million, $13 million, $12 million and $13 million for the one month ended November 30, 2005, the years ended October 31, 2006, October 31, 2007, and November 2, 2008, respectively.

Capital Lease Commitments.    We lease a portion of our equipment from unrelated third parties under non-cancelable capital leases. Our future minimum lease payments under these leases at November 2, 2008 were $2 million for 2009, $2 million for 2010, $1 million for 2011, and $1 million for 2012, less than $1 million for 2013 and $1 million thereafter.

Related Party Commitments.    In the event that the advisory agreement described in Note 19. “Related Party Transactions” is terminated, KKR and Silver Lake will receive a lump sum payment equal to the present value of the annual advisory fees that would have been payable for the remainder of the term of the advisory agreement. The initial term of the advisory agreement is 12 years, and it extends annually thereafter for one year unless the advisory agreement is terminated through written notice by either party. Our future minimum advisory fees under the agreement are $6 million for 2009, $6 million for 2010, $6 million for 2011, $7 million for 2012, $7 million for 2013, and $32 million thereafter.

We use Hewlett-Packard Company as a service provider for information technology services. At November 2, 2008, our commitments under the information technology outsourcing agreement were $15 million for 2009, $9 million for 2010, $4 million for 2011, $4 million for 2012, $4 million for 2013, and $8 million thereafter.

Purchase Commitments.    At November 2, 2008, we had unconditional purchase obligations of $18 million for fiscal year 2009 and none thereafter. These unconditional purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty.

Other Contractual Commitments.    We entered into several agreements related to IT, human resources and financial infrastructure outsourcing and other services agreements. At November 2, 2008, our commitments under these agreements were $16 million for 2009, $11 million for 2010, $8 million for 2011, $5 million for 2012, $4 million for 2013, and $1 million thereafter.

Long-Term Debt.    At November 2, 2008, we had debt obligations of $703 million. None of these debt obligations are due before fiscal year 2013. Estimated future interest expense

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

payments related to debt obligations at November 2, 2008 were $75 million for 2009, $75 million for 2010, $75 million for 2011, $75 million for 2012, $72 million for 2013 and $65 million thereafter. Estimated future interest expense payments include interest payments on our outstanding notes, assuming the same rate on the senior floating rate notes as was in effect on November 2, 2008, commitment fees, and letter of credit fees. See Note 9, “Senior Credit Facilities and Borrowings”.

Contingencies

We are subject to certain routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business, including assertions that we may be infringing patents or other intellectual property rights of others. We currently believe the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined) will not materially affect our financial position, results of operations or cash flows. We also believe we would be able to obtain any necessary licenses or other rights to disputed intellectual property rights on commercially reasonable terms. However, the ultimate outcome of any litigation is uncertain and, regardless of outcome, litigation can have an adverse impact on us because of defense costs, negative publicity, timing of adverse resolutions, diversion of management resources and other factors. Our failure to obtain necessary license or other rights, or litigation arising out of intellectual property claims, could adversely affect our business.

Warranty

Commencing in the second quarter of fiscal year 2008, we notified certain customers of a product quality issue and began taking additional steps to correct the quality issue and work with affected customers to determine potential costs covered by our warranty obligations. We maintain insurance coverage for product liability and have been working with our insurance carrier to determine the extent of covered losses in this situation. Discussions are occurring with several customers, and one settlement occurred in the fourth quarter of fiscal year 2008 which was covered by insurance. We presently believe that amounts we have recorded in our financial statements along with expected insurance coverage proceeds will be adequate to resolve these claims, although this assessment is subject to change based on the ultimate resolution of this matter with customers and the insurance carrier. In addition, if the timing of settlement of claims with customers and the timing of determination of insurance recoveries do not occur in the same reporting periods, there could be material increases in charges to statement of operations in a future period and decreases in a subsequent period once insurance recoveries are deemed probable of realization.

Indemnifications to Hewlett-Packard

Agilent has given multiple indemnities to Hewlett-Packard Company in connection with its activities prior to its spin-off from Hewlett-Packard Company in June 1999 for the businesses that constituted Agilent prior to the spin-off. As the successor to the SPG business, we may acquire responsibility for indemnifications related to assigned intellectual property agreements. In our opinion, the fair value of these indemnifications is not material.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

Other Indemnifications

As is customary in our industry and as provided for in local law in the United States and other jurisdictions, many of our standard contracts provide remedies to our customers and others with whom we enter into contracts, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of our products. From time to time, we indemnify customers, as well as our suppliers, contractors, lessors, lessees, companies that purchase our businesses or assets and others with whom we enter into contracts, against combinations of loss, expense, or liability arising from various triggering events related to the sale and the use of our products, the use of their goods and services, the use of facilities and state of our owned facilities, the state of the assets and businesses that we sell and other matters covered by such contracts, usually up to a specified maximum amount. In addition, from time to time we also provide protection to these parties against claims related to undiscovered liabilities, additional product liability or environmental obligations. In our experience, claims made under such indemnifications are rare and the associated estimated fair value of the liability is not material.

 

21.	Predecessor Change in Accounting Policies

Stock-Based Compensation

Predecessor’s employees participated in Agilent’s stock-based compensation plans. Prior to November 1, 2005, Predecessor accounted for stock-based awards (based on Agilent’s stock) to employees using the intrinsic value method of accounting in accordance with APB No. 25 and related interpretations.

On November 1, 2005, Predecessor adopted the provisions of SFAS No. 123R using the modified prospective transition method. As a result, stock based compensation of $4 million was recorded in Predecessor statement of operations for the one month ended November 30, 2005.

The fair value of options granted prior to and post adoption of SFAS No. 123R was estimated at grant date using a Black-Scholes option-pricing model with the following weighted-average assumptions:

 

		Predecessor
		One Month Ended November 30, 2005
Risk-free interest rate for options		4.3	%
Risk-free interest rate for the 432(b) Plan		4.3	%
Dividend yield		0.0	%
Volatility for options(1)		29.0	%
Volatility for the 423(b) Plan(1)		30.0	%
Expected term for options (in years)(2)		4.25
Expected term for the 423(b) Plan (in years)(2)		0.5 to 1

 

(1)	During 2005, for Predecessor’s employee stock options, Predecessor used a 4-year period, of equally weighted historical volatility and market-based implied volatility for the computation of stock-based compensation.

 

(2)

In 2005, Predecessor refined the assumption for expected option life to 4 years, from Predecessor’s previous estimate of 5.5 years. In determining the estimate, Predecessor considered several factors, including the expected lives used by a peer group of companies and the historical option exercise behavior of Predecessor’s employees.

 

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AVAGO TECHNOLOGIES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Information as of May 3, 2009 and for the six months ended

May 4, 2008 and May 3, 2009 is unaudited)

 

SFAS No. 123 requires the use of highly subjective assumptions within option pricing models to determine the value of employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense based upon the accelerated vesting of the stock plans.

 

22.	Subsequent Events (unaudited)

On May 14, 2009, we announced a plan to further reduce our worldwide workforce by up to 200 employees and expect to record charges of $8 million to $10 million over the third and fourth fiscal quarters of 2009 in connection with this plan.

On July 20, 2009, our Compensation Committee approved a change in the vesting schedules associated with performance-based options to purchase 2.3 million ordinary shares outstanding under our equity incentive plans. This change will be accounted for as a modification under SFAS No. 123R and as a result, we expect to record approximately $17 million to $20 million in additional share-based compensation expense over the remaining service period.

 

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Financial Statement Schedule

 

		Balance at Beginning of Period			Charged/ Credited to Net Income/(Loss)			Charges Utilized/ Write-offs				Balance at End of Period
		(in millions)
Accounts receivable allowances (1)
Year ended October 31, 2006		$	—		$	116		$	(93	)		$	23
Year ended October 31, 2007			23			120			(123	)			20
Year ended November 2, 2008			20			124			(125	)			19
Tax valuation allowance
Year ended October 31, 2006		$	—		$	16		$	—			$	16
Year ended October 31, 2007			16			37			(2	)			51
Year ended November 2, 2008			51			5			(25	)			31

 

(1)	Accounts receivable allowances include allowance for doubtful accounts, sales returns and distributor credits.

 

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            Shares

Ordinary Shares

 

 

Prospectus

                    , 2009

 

 

 

Deutsche Bank Securities		Barclays Capital		Morgan Stanley		Citi

 

 

 

Credit Suisse		Goldman, Sachs & Co.		J.P. Morgan		UBS Investment Bank		KKR

ABN AMRO Incorporated		FTN Equity Capital Markets

 

 

 

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13.

Other Expenses of Issuance and Distribution

The following table sets forth the fees and expenses, other than the underwriting discounts and commissions, payable in connection with the registration of the ordinary shares hereunder. All amounts are estimates except the Securities and Exchange Commission registration fee, the FINRA filing fee and the Nasdaq Stock Market listing fee.

 

Securities and Exchange Commission registration fee		$	15,720
FINRA filing fee			40,500
Nasdaq Stock Market listing fee			*
Blue Sky fees and expenses			*
Printing and engraving expenses			*
Legal fees and expenses			*
Accounting fees and expenses			*
Transfer Agent and Registrar fees			*
Miscellaneous expenses			*
Total		$

 

*	To be provided by amendment

 

Item 14.

Indemnification of Directors and Officers

Subject to the Singapore Companies Act and every other Act for the time being in force concerning companies and affecting the Registrant, the Registrant’s articles of association provides that, subject to the Singapore Companies Act and every other Act for the time being in force concerning companies and affecting the Registrant, every director, managing director, secretary or other officer of the Registrant and its subsidiaries and affiliates shall be entitled to be indemnified by the Registrant against any liability incurred by him in defending any proceedings, civil or criminal, in which judgment is given in his favor; or in which he is acquitted; or in connection with any application under the Singapore Companies Act in which relief is granted to him by the Court.

In addition, no director, managing director, secretary or other officer shall be liable for the acts, receipts, neglects or defaults of any other director or officer, or for joining in any receipt or other act for conformity, or for any loss or expense incurred by the Registrant, through the insufficiency or deficiency of title to any property acquired by order of the directors for the Registrant or for the insufficiency or deficiency of any security upon which any of the moneys of the Registrant are invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person with whom any moneys, securities or effects are deposited, or any other loss, damage or misfortune which happens in the execution of his duties, unless the same happens through his own negligence, default, breach of duty or breach of trust.

 

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Section 172 of the Singapore Companies Act prohibits a company from indemnifying its directors or officers against liability, which by law would otherwise attach to them for any negligence, default, breach of duty or breach of trust of which they may be guilty relating to the Registrant. However, a company is not prohibited from (a) purchasing and maintaining for any such officer insurance against any such liability, or (b) indemnifying such officer against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favor or in which he is acquitted, or in connection with any application under Section 76A(13) or 391 or any other provision of the Singapore Companies Act in which relief is granted to him by the court.

The Registrant will enter into indemnification agreements with its officers and directors. These indemnification agreements provide the Registrant’s officers and directors with indemnification to the maximum extent permitted by the Singapore Companies Act. The Registrant has also obtained a policy of directors’ and officers’ liability insurance that will insure directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances which are permitted under the Singapore Companies Act.

 

Item 15.

Recent Sales of Unregistered Securities

Since inception, the Registrant has issued and sold the following unregistered securities:

1. In connection with the SPG Acquisition, on December 1, 2005 the Registrant issued and sold 209,840,063 ordinary shares at a per share price of $5.00 for an aggregate consideration of $1,049 million as follows: 172,096,872 shares to Bali Investments S.àr.l; 22,645,955 shares to Seletar Investments Pte Ltd; and 15,097,236 shares to Geyser Investment Pte. Ltd.

2. In connection with the SPG Acquisition, on December 1, 2005 the Registrant issued and sold 250,000 redeemable convertible preference shares at a per share price of $1,000 for an aggregate consideration of $250 million as follows: 205,033 shares to Bali Investments S.àr.l; 26,980 shares to Seletar Investments Pte Ltd; and 17,987 shares to Geyser Investment Pte. Ltd.

3. In January 2006, the Registrant redeemed 248,848 of the redeemable convertible preference shares held by the investors for $250 million at a per share price of $1,000 plus dividends at 3% per year payable up to the redemption date. The investors holding the remaining 1,152 redeemable convertible preference shares exchanged them for 230,400 ordinary shares (each redeemable convertible preference share was valued at $1,000 and each ordinary share was valued at $5.00) as follows: 189,000 ordinary shares issued to Bali Investments S.àr.l; 24,800 ordinary shares issued to Seletar Investments Pte Ltd; and 16,600 ordinary shares issued to Geyser Investment Pte. Ltd. In addition, the Registrant issued and sold an additional 1,500 ordinary shares at a per share price of $5.00 for an aggregate consideration of $7,500 as follows: 1,230 shares to Bali Investments S.àr.l; 162 shares to Seletar Investments Pte Ltd; and 108 shares to Geyser Investment Pte. Ltd.

4. Bali Investments S.àr.l subscribed for an additional 389,300 ordinary shares on February 3, 2006, at a per share price of $5.00 for an aggregate consideration of $2 million.

5. On February 3, 2006, the Registrant granted Capstone Equity Investors LLC an option to purchase 800,000 ordinary shares with an exercise price of $5.00 per share.

6. Since the Registrant’s inception through May 3, 2009, the Registrant has granted non-qualified stock options and rights to purchase an aggregate of 38,690,593 ordinary shares of Registrant at exercise prices ranging from $1.25 to $10.68 per share to 2,151 employees, consultants and directors of the Registrant and its subsidiaries under the Registrant’s Amended

 

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and Restated Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries and Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries. Since the Registrant’s inception through May 3, 2009, the Registrant had issued and sold an aggregate of 4,946,029 ordinary shares to the officers, employees and directors of the Registrant and its subsidiaries at prices ranging from $1.25 to $10.68 per share, including 1,106,666 ordinary shares pursuant to the exercise of non-qualified stock options and 3,839,363 ordinary shares pursuant to exercises of share purchase rights granted under the Registrant’s equity plans referenced above.

The issuance of securities described above in paragraphs (1) through (5) were exempt from registration under the Securities Act of 1933, as amended, or the Securities Act, in reliance on Section 4(2) of the Securities Act and Regulation D promulgated thereunder, since they were transactions by an issuer not involving any public offering. The issuance of securities described above in paragraph (6) was exempt from registration under the Securities Act, in reliance on Rule 701 and Regulation S of the Securities Act, pursuant to compensatory benefit plans or agreements approved by the Registrant’s board of directors and shareholders.

 

Item 16.

Exhibits and Financial Statement Schedules

 

(a)

Exhibits

 

Exhibit No.		Description
1.1*		Form of Underwriting Agreement.
2.1#		Asset Purchase Agreement, dated August 14, 2005, between Agilent Technologies, Inc. and Argos Acquisition Pte. Ltd. (incorporated herein by reference to the Exhibits filed with Agilent Technologies, Inc. Current Report on Form 8-K dated August 12, 2005 and filed August 15, 2005 (Commission File No. 001-15405)).
2.2#		Amendment No. 1 to the Asset Purchase Agreement, dated November 30, 2005, between Agilent Technologies, Inc. and Avago Technologies Limited.
2.3#		Amendment No. 2 to the Asset Purchase Agreement, dated December 29, 2006, between Agilent Technologies, Inc. and Avago Technologies Limited (previously filed as Exhibit 10.58 to Avago Technologies Limited Amendment No. 1 to Registration Statement on Form S-1 filed October 1, 2008 (Commission File No. 333-153127)).
2.4#		Purchase and Sale Agreement, dated October 28, 2005, among Avago Technologies Pte. Limited, Avago Technologies Storage Holding (Labuan) Corporation, other sellers, PMC-Sierra, Inc. and Palau Acquisition Corporation (“PMC Purchase and Sale Agreement”) (previously filed as Exhibit 10.43 to Avago Technologies Limited Amendment No. 1 to Registration Statement on Form S-1 filed October 1, 2008 (Commission File No. 333-153127)).
2.5		Amendment to PMC Purchase and Sale Agreement, dated March 1, 2006.(1)
2.6#		Purchase and Sale Agreement, dated February 17, 2006, among Avago Technologies Limited, Avago Technologies Imaging Holding (Labuan) Corporation, other sellers, Marvell Technology Group Ltd. and Marvell International Technology Ltd. (“Marvell Purchase and Sale Agreement”) (previously filed as Exhibit 10.45 to Avago Technologies Limited Amendment No. 1 to Registration Statement on Form S-1 filed October 1, 2008 (Commission File No. 333-153127)).
2.7		Amendment No. 1 to Marvell Purchase and Sale Agreement, dated April 11, 2006 (previously filed as Exhibit 10.46 to Avago Technologies Limited Amendment No. 1 to Registration Statement on Form S-1 filed October 1, 2008 (Commission File No. 333-153127)).

 

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Exhibit No.		Description
2.8#		Purchase and Sale Agreement, dated November 17, 2006, by and among Avago Technologies Limited, Avago Technologies Imaging Holding (Labuan) Corporation, Avago Technologies Sensor (U.S.A.) Inc., other sellers and Micron Technology, Inc.
2.9#		Asset Purchase Agreement, dated October 31, 2007, by and among Avago Technologies Limited, Avago Technologies General IP (Singapore) Pte. Ltd., other sellers and Lite-On Technology Corporation (“Lite-On Asset Purchase Agreement”).
2.10#		Amendment No. 1 to Lite-On Asset Purchase Agreement and Non-Competition Agreement, dated January 8, 2008.
2.11		Amendment No. 2 to Lite-On Asset Purchase Agreement, dated January 21, 2009.
2.12#		Asset Purchase Agreement, dated June 25, 2008, by and among Avago Technologies GmbH, Avago Technologies International Sales Pte. Ltd., Avago Technologies Wireless IP (Singapore) Pte. Ltd., Avago Technologies Finance Pte. Ltd. and Infineon Technologies AG.
3.1†		Memorandum and Articles of Association.
3.2†		Form of Memorandum and Articles of Association to be in effect on or before the closing of this offering.
4.1†		Form of Specimen Share Certificate for Registrant’s Ordinary Shares.
4.2		Amended and Restated Shareholder Agreement, dated February 3, 2006, Avago Technologies Limited, Silver Lake Partners II Cayman, L.P., Silver Lake Technology Investors II Cayman, L.P., Integral Capital Partners VII, L.P., KKR Millennium Fund (Overseas), Limited Partnership, KKR European Fund, Limited Partnership, KKR European Fund II, Limited Partnership, KKR Partners (International), Limited Partnership, Capstone Equity Investors LLC, Avago Investment Partners, Limited Partnership, Bali Investments S.àr.l., Seletar Investments Pte Ltd, Geyser Investment Pte. Ltd. and certain other Persons.(1)
4.3		Form of Second Amended and Restated Shareholder Agreement.
4.4		Registration Rights Agreement, dated December 1, 2005, among Avago Technologies Limited, Silver Lake Partners II Cayman, L.P., Silver Lake Technology Investors II Cayman, L.P., Integral Capital Partners VII, L.P., KKR Millennium Fund (Overseas), Limited Partnership, KKR European Fund, Limited Partnership, KKR European Fund II, Limited Partnership, KKR Partners (International), Limited Partnership, Capstone Equity Investors LLC, Avago Investment Partners, Limited Partnership, Bali Investments S.àr.l., Seletar Investments Pte Ltd, Geyser Investment Pte. Ltd. and certain other Persons.(1)
4.5†		Amendment to Registration Rights Agreement, dated August 21, 2008.
4.6†		Share Option Agreement, dated February 3, 2006, between Avago Technologies Limited and Capstone Equity Investors LLC.
5.1		Form of opinion of WongPartnership LLP.
8.1†		Form of tax opinion of Latham & Watkins LLP.
8.2†		Form of tax opinion of WongPartnership LLP.

 

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Exhibit No.		Description
10.1†		Indenture, dated December 1, 2005, among Avago Technologies Finance Pte. Ltd., Avago Technologies U.S. Inc., Avago Technologies Wireless (U.S.A.) Manufacturing Inc., Guarantors named therein and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.
10.2†		Indenture, dated December 1, 2005, among Avago Technologies Finance Pte. Ltd., Avago Technologies U.S. Inc., Avago Technologies Wireless (U.S.A.) Manufacturing Inc., Guarantors named therein and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.
10.3†		Sublease Agreement, dated December 1, 2005, between Agilent Technologies Singapore Pte. Ltd. and Avago Technologies Manufacturing (Singapore) Pte. Ltd., relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.
10.4		Lease No. I/33183P issued by Singapore Housing and Development Board to Compaq Asia Pte Ltd in respect of the land and structures comprised in Lot 1935X of Mukim 19, dated September 26, 2000, and includes the Variation of Lease I/49501Q registered January 15, 2002, relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.(2)
10.5		Lease No. I/31607P issued by Singapore Housing and Development Board to Compaq Asia Pte Ltd in respect of the land and structures comprised in Lot 1937C of Mukim 19, dated September 26, 2000, and includes the Variation of Lease I/49499Q registered January 15, 2002, relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.(2)
10.6		Lease No. I/33182P issued by Singapore Housing and Development Board to Compaq Asia Pte Ltd in respect of the land and structures comprised in Lot 2134N of Mukim 19, dated September 26, 2000, and includes the Variation of Lease I/49500Q registered January 15, 2002, relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.(2)
10.7		Lease No. I/33160P issued by Singapore Housing and Development Board to Compaq Asia Pte Ltd in respect of the land and structures comprised in Lot 1975P of Mukim 19, dated September 26, 2000, and includes the Variation of Lease I/49502Q registered January 15, 2002, relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.(2)
10.8†		Tenancy Agreement, dated October 24, 2005, between Agilent Technologies (Malaysia) Sdn. Bhd. and Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), relating to Avago’s facility at Bayan Lepas Free Industrial Zone, 11900 Penang, Malaysia.
10.9†		Supplemental Agreement to Tenancy Agreement, dated December 1, 2005, between Agilent Technologies (Malaysia) Sdn. Bhd. and Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), relating to Avago’s facility at Bayan Lepas Free Industrial Zone, 11900 Penang, Malaysia.
10.10†		Subdivision and Use Agreement, dated December 1, 2005, between Agilent Technologies (Malaysia) Sdn. Bhd. and Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), relating to Avago’s facility at Bayan Lepas Free Industrial Zone, 11900 Penang, Malaysia.
10.11†		Sale and Purchase Agreement, dated December 1, 2005, between Agilent Technologies (Malaysia) Sdn. Bhd. and Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), relating to Avago’s facility at Bayan Lepas Free Industrial Zone, 11900 Penang, Malaysia.

 

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Exhibit No.		Description
10.12†		Lease Agreement, dated December 1, 2005, between Agilent Technologies, Inc. and Avago Technologies U.S. Inc., relating to Avago’s facility at 350 West Trimble Road, San Jose, California 95131.
10.13†		First Amendment to Lease Agreement (Building 90) and Service Level Agreement, dated January 10, 2007, between Avago Technologies U.S. Inc. and Lumileds Lighting B.V. relating to Avago’s facilities at 350 West Trimble Road, San Jose, California 95131.
10.14†		Credit Agreement, dated December 1, 2005, among Avago Technologies Finance Pte. Ltd., Avago Technologies Finance S.àr.l., Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), Avago Technologies Wireless (U.S.A.) Manufacturing Inc. and Avago Technologies U.S. Inc., as borrowers, Avago Technologies Holding Pte. Ltd., each lender from time to time parties thereto, Citicorp International Limited (Hong Kong), as Asian Administrative Agent, Citicorp North America, Inc., as Tranche B-1 Term Loan Administrative Agent and as Collateral Agent, Citigroup Global Markets Inc., as Joint Lead Arranger and Joint Lead Bookrunner, Lehman Brothers Inc., as Joint Lead Arranger, Joint Lead Bookrunner and Syndication Agent, and Credit Suisse, as Documentation Agent (“Credit Agreement”).
10.15†		Amendment No. 1 to Credit Agreement, dated December 23, 2005.
10.16†		Amendment No. 2, Consent and Waiver under Credit Agreement, dated April 16, 2006.
10.17†		Amendment No. 3 to Credit Agreement, dated October 8, 2007.
10.18+†		Form of 2009 Equity Incentive Award Plan.
10.19+†		Avago Performance Bonus Plan.
10.20+		Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries (Amended and Restated Effective as of February 25, 2008).(5)
10.21+		Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries (Amended and Restated Effective as of February 25, 2008).(5)
10.22+†		Form of Management Shareholders Agreement.
10.23+†		Form of Nonqualified Share Option Agreement Under the Amended and Restated Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries for U.S. employees.
10.24+†		Form of Nonqualified Share Option Agreement Under the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries for employees in Singapore.
10.25+†		Form of Nonqualified Share Option Agreement Under the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries for U.S. employees granted rollover options.
10.26+†		Form of Nonqualified Share Option Agreement Under the Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries for U.S. non-employee directors.
10.27+		Form of Nonqualified Share Option Agreement Under the Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries for non-employee directors in Singapore.(1)

 

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Exhibit No.		Description
10.28+		Amended and Restated Offer Letter Agreement, dated July 17, 2009, between Avago Technologies Limited and Hock E. Tan.
10.29+		Severance Benefits Agreement, dated June 14, 2006, between Avago Technologies Limited and Mercedes Johnson.(1)
10.30+		Separation Agreement, dated as of January 31, 2007, between Avago Technologies Limited and Dick M. Chang.(4)
10.31+		Separation Agreement, dated August 16, 2007, between Avago Technologies Limited and James Stewart.(5)
10.32+		Amended and Restated Employment Agreement, dated July 17, 2009, between Avago Technologies U.S. Inc. and Fariba Danesh.
10.33+		Amended and Restated Employment Agreement, dated July 17, 2009, between Avago Technologies U.S. Inc. and Bryan Ingram.
10.34+		Offer Letter Agreement, dated March 20, 2007, between Avago Technologies and Patricia H. McCall.(5)
10.35+		Offer Letter Agreement, dated November 7, 2005, between Avago Technologies (Malaysia) Sdn. Bhd. and Bian-Ee Tan, and Extension of Employment Letter Agreement, dated October 10, 2006, between Avago Technologies (Malaysia) Sdn. Bhd. and Bian-Ee Tan.(5)
10.36+		Offer Letter Agreement, dated July 4, 2008, between Avago Technologies and Douglas R. Bettinger.(6)
10.37+†		Separation Agreement, dated August 11, 2008, between Avago Technologies Limited and Mercedes Johnson.
10.38+		Form of indemnification agreement between Avago and each of its directors.(5)
10.39+		Form of indemnification agreement between Avago and each of its officers.(5)
10.40		Advisory Agreement, dated December 1, 2005, among Avago Technologies Limited, Avago Technologies International Sales Pte. Limited, Kohlberg Kravis Roberts & Co., L.P. and Silver Lake Management Company, LLC.(1)
10.41†		Form of Termination Notice for the Advisory Agreement.
10.42		Ft. Collins Supply Agreement, dated October 28, 2005 between Avago Technologies Wireless (U.S.A.) Manufacturing, Inc. and Palau Acquisition Corporation.(9)
10.43†		Statement of Work, dated January 27, 2006, between KKR Capstone and Avago Technologies.
10.44		Supplemental Indenture No. 1, dated April 11, 2006, among Avago Technologies Sensor IP Pte. Ltd., Avago Technologies Sensor (U.S.A.) Inc. and The Bank of New York, as Trustee, relating to the 10 1/8% Senior Notes and Senior Floating Rate Notes.(1)
10.45		Supplemental Indenture No. 1, dated April 11, 2006, among Avago Technologies Sensor IP Pte. Ltd., Avago Technologies Sensor (U.S.A.) Inc. and The Bank of New York, as Trustee, relating to the 11 7/8% Senior Subordinated Notes.(1)

 

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Exhibit No.		Description
10.46		Supplemental Indenture No. 2, dated January 3, 2007, among Avago Technologies Finance Pte. Ltd., Avago Technologies U.S. Inc., Avago Technologies Wireless (U.S.A.) Manufacturing Inc., Guarantors signatory thereto and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.(3)
10.47		Supplemental Indenture No. 2, dated January 3, 2007, among Avago Technologies Finance Pte. Ltd., Avago Technologies U.S. Inc., Avago Technologies Wireless (U.S.A.) Manufacturing Inc., Guarantors signatory thereto and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.(3)
10.48†		Supplemental Indenture No. 3, dated June 15, 2007, between Einhundertsechsundneunzigste Verwaltungsgesellschaft Dammtor mbH (renamed Avago Technologies Fiber GmbH) and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.
10.49†		Supplemental Indenture No. 3, dated June 15, 2007, between Einhundertsechsundneunzigste Verwaltungsgesellschaft Dammtor mbH (renamed Avago Technologies Fiber GmbH) and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.
10.50†		Supplemental Indenture No. 4, dated December 13, 2007, among Avago Technologies General Hungary Vagyonkezelö Kft, Avago Technologies Wireless Hungary Vagyonkezelö Kft and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.
10.51†		Supplemental Indenture No. 4, dated December 13, 2007, among Avago Technologies General Hungary Vagyonkezelö Kft, Avago Technologies Wireless Hungary Vagyonkezelö Kft and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.
10.52†		Supplemental Indenture No. 5, dated February 28, 2008, between Avago Technologies Trading Ltd and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.
10.53†		Supplemental Indenture No. 5, dated February 28, 2008, between Avago Technologies Trading Ltd and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.
10.54^		Distribution Agreement, dated March 26, 2008, between Avago Technologies International Sales Pte. Limited and Arrow Electronics, Inc.
10.55†		Collective Agreement, dated November 2, 2007, between Avago Technologies Limited (and its Singapore subsidiaries) and United Workers of Electronic & Electrical Industries.
10.56+		Severance Benefits Agreement, dated December 3, 2008, between Avago Technologies Limited and Patricia H. McCall.(7)
10.57+		Offer Letter Agreement, dated December 5, 2008, between Avago Technologies Limited and B.C. Ooi.(7)
10.58+		Employment Separation Agreement, dated April 7, 2009, between Avago Technologies Limited and Bian-Ee Tan.(8)
10.59+†		Deferred Compensation Plan.
10.60+†		Avago Performance Bonus Plan, effective November 1, 2008.

 

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Exhibit No.		Description
21.1†		List of Subsidiaries.
23.1		Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
23.2		Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
23.3		Consent of WongPartnership LLP (included in Exhibit 5.1 and Exhibit 8.2).
23.4†		Consent of Latham & Watkins LLP (included in Exhibit 8.1).
24.1†		Power of Attorney (see page II-9 of the original filing of this Form S-1).
24.2†		Power of Attorney (see page II-11 of Amendment No. 2 to this Form S-1).

 

Notes:

 

(1)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Registration Statement on Form F-4 (File No. 333-137664) filed on September 29, 2006 and incorporated herein by reference.

 

(2)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Registration Statement on Form F-4 (File No. 333-137664) filed on November 15, 2006 and incorporated herein by reference.

 

(3)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Registration Statement on Form F-4 (File No. 333-137664) filed on January 8, 2007 and incorporated herein by reference.

 

(4)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Current Report on Form 6-K (File No. 333-137664) filed on February 6, 2007 and incorporated herein by reference.

 

(5)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Amendment No. 1 to Annual Report on Form 20-F/A (File No. 333-137664) filed on February 27, 2008 and incorporated herein by reference.

 

(6)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Current Report on Form 6-K (File No. 333-137664) filed on July 16, 2008 and incorporated herein by reference.

 

(7)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Current Report on Form 6-K (File No. 333-137664) filed on March 5, 2009 and incorporated herein by reference.

 

(8)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Current Report on Form 6-K (File No. 333-137664) filed on April 10, 2009 and incorporated herein by reference.

 

(9)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Amendment No. 1 to Annual Report on Form 20-F/A (File No. 333-137664) filed on June 16, 2009 and incorporated herein by reference.

 

*	To be filed by amendment.

 

+	Indicates a management contract or compensatory plan or arrangement.

 

†	Previously filed.

 

#	Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Avago Technologies hereby undertakes to furnish supplementally copies of any omitted schedules upon request by the SEC.

 

^	Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the SEC.

 

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(b)	Financial Statement Schedule

 

		Balance at Beginning of Period			Charged/ Credited to Net Income/(Loss)			Charges Utilized/ Write-offs				Balance at End of Period
		(in millions)
Accounts receivable allowances(1)
Year ended October 31, 2006		$	—		$	116		$	(93	)		$	23
Year ended October 31, 2007			23			120			(123	)			20
Year ended November 2, 2008			20			124			(125	)			19
Tax valuation allowance
Year ended October 31, 2006		$	—		$	16		$	—			$	16
Year ended October 31, 2007			16			37			(2	)			51
Year ended November 2, 2008			51			5			(25	)			31

 

(1)	Accounts receivable allowances include allowance for doubtful accounts, sales returns and distributor credits.

 

Item 17.

Undertakings

The undersigned Registrant hereby undertakes that:

If the Registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

For the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distribution of the securities:

The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(a) Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;

(b) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;

(c) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and

(d) Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant

 

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pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act, and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(a) The Registrant will provide to the underwriters at the closing as specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(b) For purposes of determining any liability under the Securities Act, the information omitted from a form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(c) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Amendment No. 4 to the Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 20th day of July, 2009.

 

Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 4 to the Registration Statement on Form S-1 has been signed by the following persons in the capacities and dates indicated.

 

Signature		Title		Date
* Hock E. Tan		President and Chief Executive Officer and Director (Principal Executive Officer)		July 20, 2009
/S/  DOUGLAS R. BETTINGER       Douglas R. Bettinger		Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)		July 20, 2009
* Dick M. Chang		Chairman of the Board of Directors		July 20, 2009
Adam H. Clammer		Director
* James A. Davidson		Director		July 20, 2009
* James Diller		Director		July 20, 2009
* James H. Greene, Jr.		Director		July 20, 2009
* Kenneth Y. Hao		Director		July 20, 2009
* John R. Joyce		Director		July 20, 2009
* David M. Kerko		Director		July 20, 2009
* Justine Lien		Director		July 20, 2009

 

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Signature		Title		Date
* Donald Macleod		Director		July 20, 2009
* Bock Seng Tan		Director		July 20, 2009
/S/    DOUGLAS R. BETTINGER         Douglas R. Bettinger		Authorized Representative in the United States		July 20, 2009

 

* By:		/S/    DOUGLAS R. BETTINGER
		Douglas R. Bettinger Attorney-in-Fact

 

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EXHIBIT INDEX

 

Exhibit No.		Description
1.1*		Form of Underwriting Agreement.
2.1#		Asset Purchase Agreement, dated August 14, 2005, between Agilent Technologies, Inc. and Argos Acquisition Pte. Ltd. (incorporated herein by reference to the Exhibits filed with Agilent Technologies, Inc. Current Report on Form 8-K dated August 12, 2005 and filed August 15, 2005 (Commission File No. 001-15405)).
2.2#		Amendment No. 1 to the Asset Purchase Agreement, dated November 30, 2005, between Agilent Technologies, Inc. and Avago Technologies Limited.
2.3#		Amendment No. 2 to the Asset Purchase Agreement, dated December 29, 2006, between Agilent Technologies, Inc. and Avago Technologies Limited (previously filed as Exhibit 10.58 to Avago Technologies Limited Amendment No. 1 to Registration Statement on Form S-1 filed October 1, 2008 (Commission File No. 333-153127)).
2.4#		Purchase and Sale Agreement, dated October 28, 2005, among Avago Technologies Pte. Limited, Avago Technologies Storage Holding (Labuan) Corporation, other sellers, PMC-Sierra, Inc. and Palau Acquisition Corporation (“PMC Purchase and Sale Agreement”) (previously filed as Exhibit 10.43 to Avago Technologies Limited Amendment No. 1 to Registration Statement on Form S-1 filed October 1, 2008 (Commission File No. 333-153127)).
2.5		Amendment to PMC Purchase and Sale Agreement, dated March 1, 2006.(1)
2.6#		Purchase and Sale Agreement, dated February 17, 2006, among Avago Technologies Limited, Avago Technologies Imaging Holding (Labuan) Corporation, other sellers, Marvell Technology Group Ltd. and Marvell International Technology Ltd. (“Marvell Purchase and Sale Agreement”) (previously filed as Exhibit 10.45 to Avago Technologies Limited Amendment No. 1 to Registration Statement on Form S-1 filed October 1, 2008 (Commission File No. 333-153127)).
2.7		Amendment No. 1 to Marvell Purchase and Sale Agreement, dated April 11, 2006 (previously filed as Exhibit 10.46 to Avago Technologies Limited Amendment No. 1 to Registration Statement on Form S-1 filed October 1, 2008 (Commission File No. 333-153127)).
2.8#		Purchase and Sale Agreement, dated November 17, 2006, by and among Avago Technologies Limited, Avago Technologies Imaging Holding (Labuan) Corporation, Avago Technologies Sensor (U.S.A.) Inc., other sellers and Micron Technology, Inc.
2.9#		Asset Purchase Agreement, dated October 31, 2007, by and among Avago Technologies Limited, Avago Technologies General IP (Singapore) Pte. Ltd., other sellers and Lite-On Technology Corporation (“Lite-On Asset Purchase Agreement”).
2.10#		Amendment No. 1 to Lite-On Asset Purchase Agreement and Non-Competition Agreement, dated January 8, 2008.
2.11		Amendment No. 2 to Lite-On Asset Purchase Agreement, dated January 21, 2009.
2.12#		Asset Purchase Agreement, dated June 25, 2008, by and among Avago Technologies GmbH, Avago Technologies International Sales Pte. Ltd., Avago Technologies Wireless IP (Singapore) Pte. Ltd., Avago Technologies Finance Pte. Ltd. and Infineon Technologies AG.
3.1†		Memorandum and Articles of Association.
3.2†		Form of Memorandum and Articles of Association to be in effect on or before the closing of this offering.

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Exhibit No.		Description
4.1†		Form of Specimen Share Certificate for Registrant’s Ordinary Shares.
4.2		Amended and Restated Shareholder Agreement, dated February 3, 2006, Avago Technologies Limited, Silver Lake Partners II Cayman, L.P., Silver Lake Technology Investors II Cayman, L.P., Integral Capital Partners VII, L.P., KKR Millennium Fund (Overseas), Limited Partnership, KKR European Fund, Limited Partnership, KKR European Fund II, Limited Partnership, KKR Partners (International), Limited Partnership, Capstone Equity Investors LLC, Avago Investment Partners, Limited Partnership, Bali Investments S.àr.l., Seletar Investments Pte Ltd, Geyser Investment Pte. Ltd. and certain other Persons.(1)
4.3		Form of Second Amended and Restated Shareholder Agreement.
4.4		Registration Rights Agreement, dated December 1, 2005, among Avago Technologies Limited, Silver Lake Partners II Cayman, L.P., Silver Lake Technology Investors II Cayman, L.P., Integral Capital Partners VII, L.P., KKR Millennium Fund (Overseas), Limited Partnership, KKR European Fund, Limited Partnership, KKR European Fund II, Limited Partnership, KKR Partners (International), Limited Partnership, Capstone Equity Investors LLC, Avago Investment Partners, Limited Partnership, Bali Investments S.àr.l., Seletar Investments Pte Ltd, Geyser Investment Pte. Ltd. and certain other Persons.(1)
4.5†		Amendment to Registration Rights Agreement, dated August 21, 2008.
4.6†		Share Option Agreement, dated February 3, 2006, between Avago Technologies Limited and Capstone Equity Investors LLC.
5.1		Form of opinion of WongPartnership LLP.
8.1†		Form of tax opinion of Latham & Watkins LLP.
8.2†		Form of tax opinion of WongPartnership LLP.
10.1†		Indenture, dated December 1, 2005, among Avago Technologies Finance Pte. Ltd., Avago Technologies U.S. Inc., Avago Technologies Wireless (U.S.A.) Manufacturing Inc., Guarantors named therein and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.
10.2†		Indenture, dated December 1, 2005, among Avago Technologies Finance Pte. Ltd., Avago Technologies U.S. Inc., Avago Technologies Wireless (U.S.A.) Manufacturing Inc., Guarantors named therein and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.
10.3†		Sublease Agreement, dated December 1, 2005, between Agilent Technologies Singapore Pte. Ltd. and Avago Technologies Manufacturing (Singapore) Pte. Ltd., relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.
10.4		Lease No. I/33183P issued by Singapore Housing and Development Board to Compaq Asia Pte Ltd in respect of the land and structures comprised in Lot 1935X of Mukim 19, dated September 26, 2000, and includes the Variation of Lease I/49501Q registered January 15, 2002, relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.(2)
10.5		Lease No. I/31607P issued by Singapore Housing and Development Board to Compaq Asia Pte Ltd in respect of the land and structures comprised in Lot 1937C of Mukim 19, dated September 26, 2000, and includes the Variation of Lease I/49499Q registered January 15, 2002, relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.(2)

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Exhibit No.		Description
10.6		Lease No. I/33182P issued by Singapore Housing and Development Board to Compaq Asia Pte Ltd in respect of the land and structures comprised in Lot 2134N of Mukim 19, dated September 26, 2000, and includes the Variation of Lease I/49500Q registered January 15, 2002, relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.(2)
10.7		Lease No. I/33160P issued by Singapore Housing and Development Board to Compaq Asia Pte Ltd in respect of the land and structures comprised in Lot 1975P of Mukim 19, dated September 26, 2000, and includes the Variation of Lease I/49502Q registered January 15, 2002, relating to Avago’s facility at 1 Yishun Avenue 7, Singapore 768923.(2)
10.8†		Tenancy Agreement, dated October 24, 2005, between Agilent Technologies (Malaysia) Sdn. Bhd. and Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), relating to Avago’s facility at Bayan Lepas Free Industrial Zone, 11900 Penang, Malaysia.
10.9†		Supplemental Agreement to Tenancy Agreement, dated December 1, 2005, between Agilent Technologies (Malaysia) Sdn. Bhd. and Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), relating to Avago’s facility at Bayan Lepas Free Industrial Zone, 11900 Penang, Malaysia.
10.10†		Subdivision and Use Agreement, dated December 1, 2005, between Agilent Technologies (Malaysia) Sdn. Bhd. and Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), relating to Avago’s facility at Bayan Lepas Free Industrial Zone, 11900 Penang, Malaysia.
10.11†		Sale and Purchase Agreement, dated December 1, 2005, between Agilent Technologies (Malaysia) Sdn. Bhd. and Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), relating to Avago’s facility at Bayan Lepas Free Industrial Zone, 11900 Penang, Malaysia.
10.12†		Lease Agreement, dated December 1, 2005, between Agilent Technologies, Inc. and Avago Technologies U.S. Inc., relating to Avago’s facility at 350 West Trimble Road, San Jose, California 95131.
10.13†		First Amendment to Lease Agreement (Building 90) and Service Level Agreement, dated January 10, 2007, between Avago Technologies U.S. Inc. and Lumileds Lighting B.V. relating to Avago’s facilities at 350 West Trimble Road, San Jose, California 95131.
10.14†		Credit Agreement, dated December 1, 2005, among Avago Technologies Finance Pte. Ltd., Avago Technologies Finance S.àr.l., Avago Technologies (Malaysia) Sdn. Bhd. (f/k/a Jumbo Portfolio Sdn. Bhd.), Avago Technologies Wireless (U.S.A.) Manufacturing Inc. and Avago Technologies U.S. Inc., as borrowers, Avago Technologies Holding Pte. Ltd., each lender from time to time parties thereto, Citicorp International Limited (Hong Kong), as Asian Administrative Agent, Citicorp North America, Inc., as Tranche B-1 Term Loan Administrative Agent and as Collateral Agent, Citigroup Global Markets Inc., as Joint Lead Arranger and Joint Lead Bookrunner, Lehman Brothers Inc., as Joint Lead Arranger, Joint Lead Bookrunner and Syndication Agent, and Credit Suisse, as Documentation Agent (“Credit Agreement”).
10.15†		Amendment No. 1 to Credit Agreement, dated December 23, 2005.
10.16†		Amendment No. 2, Consent and Waiver under Credit Agreement, dated April 16, 2006.
10.17†		Amendment No. 3 to Credit Agreement, dated October 8, 2007.

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Exhibit No.		Description
10.18+†		Form of 2009 Equity Incentive Award Plan.
10.19+†		Avago Performance Bonus Plan.
10.20+		Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries (Amended and Restated Effective as of February 25, 2008).(5)
10.21+		Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries (Amended and Restated Effective as of February 25, 2008).(5)
10.22+†		Form of Management Shareholders Agreement.
10.23+†		Form of Nonqualified Share Option Agreement Under the Amended and Restated Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries for U.S. employees.
10.24+†		Form of Nonqualified Share Option Agreement Under the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries for employees in Singapore.
10.25+†		Form of Nonqualified Share Option Agreement Under the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries for U.S. employees granted rollover options.
10.26+†		Form of Nonqualified Share Option Agreement Under the Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries for U.S. non-employee directors.
10.27+		Form of Nonqualified Share Option Agreement Under the Amended and Restated Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and Subsidiaries for non-employee directors in Singapore.(1)
10.28+		Amended and Restated Offer Letter Agreement, dated July 17, 2009, between Avago Technologies Limited and Hock E. Tan.
10.29+		Severance Benefits Agreement, dated June 14, 2006, between Avago Technologies Limited and Mercedes Johnson.(1)
10.30+		Separation Agreement, dated as of January 31, 2007, between Avago Technologies Limited and Dick M. Chang.(4)
10.31+		Separation Agreement, dated August 16, 2007, between Avago Technologies Limited and James Stewart.(5)
10.32+		Amended and Restated Employment Agreement, dated July 17, 2009, between Avago Technologies U.S. Inc. and Fariba Danesh.
10.33+		Amended and Restated Employment Agreement, dated July 17, 2009, between Avago Technologies U.S. Inc. and Bryan Ingram.
10.34+		Offer Letter Agreement, dated March 20, 2007, between Avago Technologies and Patricia H. McCall.(5)
10.35+		Offer Letter Agreement, dated November 7, 2005, between Avago Technologies (Malaysia) Sdn. Bhd. and Bian-Ee Tan, and Extension of Employment Letter Agreement, dated October 10, 2006, between Avago Technologies (Malaysia) Sdn. Bhd. and Bian-Ee Tan.(5)

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Exhibit No.		Description
10.36+		Offer Letter Agreement, dated July 4, 2008, between Avago Technologies and Douglas R. Bettinger.(6)
10.37+†		Separation Agreement, dated August 11, 2008, between Avago Technologies Limited and Mercedes Johnson.
10.38+		Form of indemnification agreement between Avago and each of its directors.(5)
10.39+		Form of indemnification agreement between Avago and each of its officers.(5)
10.40		Advisory Agreement, dated December 1, 2005, among Avago Technologies Limited, Avago Technologies International Sales Pte. Limited, Kohlberg Kravis Roberts & Co., L.P. and Silver Lake Management Company, LLC.(1)
10.41†		Form of Termination Notice for the Advisory Agreement.
10.42		Ft. Collins Supply Agreement, dated October 28, 2005 between Avago Technologies Wireless (U.S.A.) Manufacturing, Inc. and Palau Acquisition Corporation.(9)
10.43†		Statement of Work, dated January 27, 2006, between KKR Capstone and Avago Technologies.
10.44		Supplemental Indenture No. 1, dated April 11, 2006, among Avago Technologies Sensor IP Pte. Ltd., Avago Technologies Sensor (U.S.A.) Inc. and The Bank of New York, as Trustee, relating to the 10 1/8% Senior Notes and Senior Floating Rate Notes.(1)
10.45		Supplemental Indenture No. 1, dated April 11, 2006, among Avago Technologies Sensor IP Pte. Ltd., Avago Technologies Sensor (U.S.A.) Inc. and The Bank of New York, as Trustee, relating to the 11 7/8% Senior Subordinated Notes.(1)
10.46		Supplemental Indenture No. 2, dated January 3, 2007, among Avago Technologies Finance Pte. Ltd., Avago Technologies U.S. Inc., Avago Technologies Wireless (U.S.A.) Manufacturing Inc., Guarantors signatory thereto and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.(3)
10.47		Supplemental Indenture No. 2, dated January 3, 2007, among Avago Technologies Finance Pte. Ltd., Avago Technologies U.S. Inc., Avago Technologies Wireless (U.S.A.) Manufacturing Inc., Guarantors signatory thereto and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.(3)
10.48†		Supplemental Indenture No. 3, dated June 15, 2007, between Einhundertsechsundneunzigste Verwaltungsgesellschaft Dammtor mbH (renamed Avago Technologies Fiber GmbH) and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.
10.49†		Supplemental Indenture No. 3, dated June 15, 2007, between Einhundertsechsundneunzigste Verwaltungsgesellschaft Dammtor mbH (renamed Avago Technologies Fiber GmbH) and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.
10.50†		Supplemental Indenture No. 4, dated December 13, 2007, among Avago Technologies General Hungary Vagyonkezelö Kft, Avago Technologies Wireless Hungary Vagyonkezelö Kft and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.
10.51†		Supplemental Indenture No. 4, dated December 13, 2007, among Avago Technologies General Hungary Vagyonkezelö Kft, Avago Technologies Wireless Hungary Vagyonkezelö Kft and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.

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Exhibit No.		Description
10.52†		Supplemental Indenture No. 5, dated February 28, 2008, between Avago Technologies Trading Ltd and The Bank of New York, as Trustee, governing the 10 1/8% Senior Notes and Senior Floating Rate Notes.
10.53†		Supplemental Indenture No. 5, dated February 28, 2008, between Avago Technologies Trading Ltd and The Bank of New York, as Trustee, governing the 11 7/8% Senior Subordinated Notes.
10.54^		Distribution Agreement, dated March 26, 2008, between Avago Technologies International Sales Pte. Limited and Arrow Electronics, Inc.
10.55†		Collective Agreement, dated November 2, 2007, between Avago Technologies Limited (and its Singapore subsidiaries) and United Workers of Electronic & Electrical Industries.
10.56+		Severance Benefits Agreement, dated December 3, 2008, between Avago Technologies Limited and Patricia H. McCall.(7)
10.57+		Offer Letter Agreement, dated December 5, 2008, between Avago Technologies Limited and B.C. Ooi.(7)
10.58+		Employment Separation Agreement, dated April 7, 2009, between Avago Technologies Limited and Bian-Ee Tan.(8)
10.59+†		Deferred Compensation Plan.
10.60+†		Avago Performance Bonus Plan, effective November 1, 2008.
21.1†		List of Subsidiaries.
23.1		Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
23.2		Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
23.3		Consent of WongPartnership LLP (included in Exhibit 5.1 and Exhibit 8.2).
23.4†		Consent of Latham & Watkins LLP (included in Exhibit 8.1).
24.1†		Power of Attorney (see page II-9 of the original filing of this Form S-1).
24.2†		Power of Attorney (see page II-11 of Amendment No. 2 to this Form S-1).

 

Notes:

 

(1)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Registration Statement on Form F-4 (File No. 333-137664) filed on September 29, 2006 and incorporated herein by reference.

 

(2)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Registration Statement on Form F-4 (File No. 333-137664) filed on November 15, 2006 and incorporated herein by reference.

 

(3)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Registration Statement on Form F-4 (File No. 333-137664) filed on January 8, 2007 and incorporated herein by reference.

 

(4)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Current Report on Form 6-K (File No. 333-137664) filed on February 6, 2007 and incorporated herein by reference.

 

(5)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Amendment No. 1 to Annual Report on Form 20-F/A (File No. 333-137664) filed on February 27, 2008 and incorporated herein by reference.

 

(6)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Current Report on Form 6-K (File No. 333-137664) filed on July 16, 2008 and incorporated herein by reference.

 

(7)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Current Report on Form 6-K (File No. 333-137664) filed on March 5, 2009 and incorporated herein by reference.

 

(8)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Current Report on Form 6-K (File No. 333-137664) filed on April 10, 2009 and incorporated herein by reference.

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(9)	Previously filed as an exhibit to the Avago Technologies Finance Pte. Ltd. Amendment No. 1 to Annual Report on Form 20-F/A (File No. 333-137664) filed on June 16, 2009 and incorporated herein by reference.

 

*	To be filed by amendment.

 

+	Indicates a management contract or compensatory plan or arrangement.

 

†	Previously filed.

 

#	Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Avago Technologies hereby undertakes to furnish supplementally copies of any omitted schedules upon request by the SEC.

 

^	Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the SEC.

Exhibit 2.2

AMENDMENT NO. 1 TO

ASSET PURCHASE AGREEMENT

This Amendment No. 1 to Asset Purchase Agreement is dated as of November 30, 2005 (this “Amendment”), between Agilent Technologies, Inc., a Delaware corporation, and Avago Technologies Limited (f/k/a Argos Acquisition Pte. Ltd.), a company organized under the laws of Singapore (each, a “Party” and collectively, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Parties have previously entered into an asset purchase agreement dated as of August 14, 2005 (the “Signing Date” and such asset purchase agreement, the “Purchase Agreement”);

WHEREAS, the Purchase Agreement provides that the parties thereto may amend such agreement at any time by written agreement of each party thereto;

WHEREAS, capitalized terms not defined in this Amendment have the respective meanings ascribed to such terms in the Purchase Agreement; and

WHEREAS, the Parties now mutually desire to amend the Purchase Agreement as set forth herein to, among other things, reflect certain agreements of the Parties with respect to the determination of the Purchase Price, certain real estate matters, certain exhibits, definitions and other matters, and relating to matters set forth in the letter agreement between the Parties dated November 18, 2005 (the “Letter Agreement”).

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

1.1 Exhibit J to the Purchase Agreement

Exhibit J to the Purchase Agreement is hereby amended and restated in its entirety to read as set forth in Schedule 1 hereto.

1.2 Schedule 1 to the Purchase Agreement

Schedule 1 to the Purchase Agreement referred to in the definition of Transferred Business Intellectual Property is hereby amended and restated in its entirety to read as set forth in Schedule 2 hereto. The Parties hereby acknowledge and agree that the Parties anticipate additional Patents will be added to such Schedule 1 after the Closing Date in accordance with the same allocation principles agreed upon for the Patents currently listed on Schedule 1. The Parties agree to work together in good faith in order to finalize the list of Patents set forth on such Schedule 1 as promptly as practicable, including transferring all applicable invention disclosures and any Patents that have been left off Schedule 1 while title and other issues are resolved. Any Patents remaining in dispute after good faith expedited negotiations will be resolved in accordance with Section 11.1 of the Purchase Agreement.

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1.3 Schedule 4 to the Purchase Agreement

Schedule 4 to the Purchase Agreement, referred to in the definition of Labs Employees and Project Specific Labs Technology, among others, is hereby amended and restated in its entirety to read as set forth in Schedule 3 hereto. Seller agrees that it will pay all reasonable fees and expenses incurred in connection with the relocation and set-up of assets described therein and located at the site known to the parties as “Deer Creek” up to a maximum amount of $850,000. Purchaser agrees that it will be responsible for any other such fees and expenses in excess of such amount incurred in connection therewith. The Parties agree that Purchaser shall manage the relocation and set-up of such assets.

1.4 Exhibit L to the Purchase Agreement

Exhibit L to the Purchase Agreement is hereby amended and restated in its entirety to read as set forth in Schedule 4 hereto.

1.5 Delayed Closing in Specified Country

(a) The Parties acknowledge and agree that notwithstanding the provisions of the Purchase Agreement, including without limitation Sections 2.1, 6.6 and 6.7, the transfer and conveyance to Purchaser’s Affiliate in India of the Purchased Assets, Transferred Intellectual Property and Transferred Intellectual Property Rights located in India (the “Delayed Closing”) and the employment by Purchaser’s Affiliate of Transferred Employees in India, Japan and China will not occur on the Closing Date and will instead be consummated as soon as practicable thereafter (the dates of such consummation, a “Delayed Closing Date”), and no breach or default of the Purchase Agreement will be deemed to have occurred as a result of not transferring such assets or employing such Transferred Employees at the Closing. In addition, the transfer and conveyance to Purchaser’s Affiliate in China of the Purchased Assets located in China shall not take place except to the extent Purchaser notifies Seller in writing, and no breach or default of the Purchase Agreement will be deemed to have occurred as a result of any failure to occur of such transfer and conveyance except to the extent Purchaser has so notified Seller.

(b) In connection therewith, the Parties will enter into, or will cause their respective applicable Subsidiaries to enter into the following agreements on or prior to the Closing, in addition to such other agreements or other instruments as the parties may agree: (i) with respect to China, a separation agreement pursuant to the MSA (the “China Separation Agreement”); (ii) with respect to India, a separation agreement pursuant to the MSA (the “India Separation Agreement”); and (iii) with respect to Japan, (A) a separation agreement pursuant to the MSA (the “Japan Separation Agreement”), (B) a shukko agreement relating to the employees in Japan, and (C) a local asset transfer agreement. In addition, promptly after the Closing Date, the Parties will enter into, or will cause their respective applicable Subsidiaries to enter into: (i) a labor contract amendment agreement relating to the employees in China; and (ii) a local asset transfer agreement with respect to India pursuant to the India Separation Agreement. After the Closing Date and prior to the Delayed Closing, Seller and its Subsidiaries will hold and operate the Purchased Assets, Transferred Intellectual Property and Transferred Intellectual Property Rights in India, and all income, proceeds and other monies received by Seller or its Subsidiaries related to such Purchased Assets, Transferred Intellectual Property and Transferred Intellectual Property

 

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Rights, solely for the benefit of Purchaser and in all respects at the direction of Purchaser (subject to the India Separation Agreement), and the Seller and Purchaser shall otherwise act in respect of such Purchased Assets, Transferred Intellectual Property and Transferred Intellectual Property Rights in accordance with Section 2.4 of the Purchase Agreement. All costs, expenses and Liabilities incurred in holding and operating such Purchased Assets after the Closing Date will be for the account of Seller, as further provided in the India Separation Agreement.

(c) To the extent permitted by Law, Purchaser shall assume the Assumed Liabilities with respect to India and China as of the Closing Date, and to the extent any such Assumed Liabilities are not assumed as of such Closing Date, shall indemnify each Seller Indemnified Party with respect thereto pursuant to Section 9.1(b)(iii) of the Purchase Agreement. After the Closing, there will be no conditions to closing with respect to the Delayed Closing on the Delayed Closing Date.

1.6 Annex A to the Purchase Agreement.

(a) The definition of “Business” is hereby amended by (i) inserting in the first sentence, “and including the existing project currently known as Lateral Flow Assay (LFA)” immediately prior to the period and (ii) replacing in the second sentence “Lateral Flow Assay (LFA)” with “[intentionally omitted]”.

(b) The definition of “Retained Business” is hereby amended by (i) deleting “Lateral Flow Assay” from the first paragraph and (ii) deleting the phrase, “and specifically including Lateral Flow Assay (LFA)” in clause (iii) of that definition.

(c) Notwithstanding the amendments effected by the foregoing provisions of this Section 1.6, the Parties agree that (i) each of the representations and warranties of Seller contained in the Purchase Agreement shall be deemed to be made on and as of the Signing Date as such Purchase Agreement was in effect as of such Signing Date prior to this Amendment and not as amended by this Amendment and (ii) for purposes of Sections 7.3(a) and 9.1(a) of the Purchase Agreement, the failure of any representation of Seller to be true and correct shall be determined in all cases with respect to the representations and warranties contained in the Purchase Agreement and Transaction Documents as in effect as of the Signing Date prior to this Amendment and not as amended by this Amendment. The Parties agree and acknowledge that Purchaser is reserving all rights that it may have arising out of the representations and warranties of the Seller contained in the Purchase Agreement as in effect prior to this Amendment, including rights pursuant to Sections 7.3(a) and 9.1(a), and is not waiving any such rights by entering into this Amendment, consummating the Closing or otherwise, without regard to information furnished to or investigation made by or to the knowledge of, Purchaser and its representatives, including, without limitation, rights arising as a result of a breach, if any, of Seller’s representations and warranties based upon the litigation described in Schedule 5 hereto.

1.7 Section 2.2 of the Purchase Agreement.

(a) A new Section 2.2(a)(v) is hereby added to the Disclosure Letter, reading in its entirety as set forth on Schedule 6 hereto.

 

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(b) Section 2.2(a)(v) of the Purchase Agreement is hereby amended by adding “and the Liabilities of Seller and its Subsidiaries set forth in Section 2.2(a)(v) of the Disclosure Letter (“Section 2.2(a)(v) Liabilities”)” immediately prior to the semicolon.

(c) Section 2.2(b)(iv) of the Purchase Agreement is hereby amended by adding “excluding any Section 2.2(a)(v) Liability, which shall be an Assumed Liability” immediately prior to the semicolon.

(d) Clause (A) of Section 2.2(b)(v) of the Purchase Agreement is hereby amended by adding “excluding any Section 2.2(a)(v) Liability, which shall be an Assumed Liability” immediately prior to the comma at the end of such clause (A). Clause (B) of Section 2.2(b)(v) of the Purchase Agreement is hereby amended by adding “under any Seller Plans” immediately after “all Liabilities”.

1.8 Provisions Relating to Accrued Vacation

(a) Purchaser and Seller have agreed that Seller will pay (subject to any applicable withholding taxes) (i) each Transferred Employee residing in Arizona, California, Illinois, Massachusetts or Maryland (a “U.S. FTO Transferred Employee”), and (ii) each Transferred Employee residing in Malaysia (a “Malaysian FTO Transferred Employee” and together with any U.S. Transferred Employee, a “FTO Transferred Employee”), an amount in cash equal to all of such FTO Transferred Employee’s accrued but unused vacation time (including flexible time off and sick pay), unless such Transferred Employee elects to have Purchaser or its Subsidiaries assume the liability associated with such accrued but unused vacation time. Seller shall provide each U.S. FTO Transferred Employee with an opportunity to elect to have Purchaser or its Subsidiaries assume the liability associated with his or her accrued but unused vacation time (such election being referred to as the “FTO Waiver”). Each FTO Transferred Employee will only be given the option to have all, but not less than all, of their accrued and unused vacation time (such option referred to as the “Assumption Option”) assumed by Purchaser or its Subsidiaries. The Assumption Option shall be made pursuant to a form of Notice mutually agreed to by Purchaser and Seller.

(b) Pursuant to Section 1.8(a) above, to the extent an FTO Transferred Employee does not elect the Assumption Option prior to the Closing Date, Seller shall pay to such FTO Transferred Employee on or prior to the Closing Date an amount in cash equal to such FTO Transferred Employee’s vacation time that is accrued and unused (including flexible time off and sick pay) as of the Closing Date, subject to any applicable withholding taxes. Purchaser agrees that it shall reimburse Seller in cash for the aggregate amount of all such payments (the “Cash-Out Amount”). Any amount to be paid by Purchaser pursuant to this Section 1.8(b) shall be paid when the Working Capital Excess Amount or Working Capital Deficiency Amount is paid, provided that if the Final Working Capital has not been determined in accordance with Section 3.3 by March 31, 2006, or such Working Capital Excess Amount or Working Capital Deficiency Amount has not been paid by March 31, 2006, such Cash-Out Amount shall be paid on March 31, 2006. If any amounts are paid pursuant to this Section 1.8(b) (including any applicable withholding taxes), the Allocation Schedule shall be adjusted in accordance with Section 1060 of the Code and as mutually agreed by Purchaser and Seller.

 

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(c) Purchaser agrees to promptly, following the Closing, reimburse Seller for all reasonable expenses and costs incurred by Seller in administering the Assumption Option, such as the development and delivery of notices to FTO Transferred Employees and fees paid to third party administrators in administering the Assumption Option.

(d) Purchaser agrees to indemnify, defend and hold harmless each Seller Indemnified Party from and against, and shall compensate and reimburse each Seller Indemnified Party for, all Losses imposed upon or incurred by such Seller Indemnified Party with respect to any claims with respect to any FTO Transferred Employee that the FTO Waiver was inadequate, insufficient or otherwise not binding and enforceable on such FTO Transferred Employee, but only to the extent such Losses do not arise from the gross negligence or willful misconduct of such Seller Indemnified Party.

(e) Section 6.6(g) of the Purchase Agreement is hereby amended by deleting, “provided that such vacation time is included in the accrual for FTO recorded in the Final Working Capital” at the end of the last sentence of Section 6.6(g).

(f) The provisions of this Section 1.8 shall supersede Section 6.6(g) in the Purchase Agreement addressing the transfer of, or payment of, accrued and unpaid vacation time with respect to FTO Transferred Employees. Notwithstanding the forgoing, the provisions of Section 6.6(g) (as amended pursuant to Section 1.8(e) hereof) shall continue to apply to the transfer of, or payment of, accrued and unpaid vacation time with respect to any Transferred Employee, other than an FTO Transferred Employee.

1.9 Determination of Rollover Option Amount

(a) Section 3.2(a) of the Purchase Agreement is hereby amended by replacing in the first sentence “(iv) minus, the Rollover Option Amount (as defined below), if any” with “(iv) [intentionally omitted],”.

(b) Purchaser and Seller agree that Seller shall pay to Purchaser the Rollover Option Amount, if any, in cash when the Working Capital Excess Amount or Working Capital Deficiency Amount is paid, provided that if the Final Working Capital has not been determined in accordance with Section 3.3 by March 31, 2006 or such Working Capital Excess Amount or Working Capital Deficiency Amount has not been paid by March 31, 2006, such Rollover Option Amount shall be paid on March 31, 2006. If any amounts are paid pursuant to Section this Section 1.9(b), the Allocation Schedule shall be adjusted in accordance with Section 1060 of the Code and as mutually agreed by Purchaser and Seller.

1.10 Section 3.3(a) of the Purchase Agreement

Section 3.3(a) of the Purchase Agreement is hereby amended by inserting “and any Section 2.2(a)(v) Liabilities” in clause (ii) immediately after “post-retirement healthcare benefits and pension liabilities.”

 

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1.11 Section 6.1 of the Purchase Agreement

Section 6.1 of the Purchase Agreement is hereby amended by adding “and to settle, cancel or terminate all intercompany receivables and payables with respect to Wavics Co., Ltd. as of or prior to the Closing Date” at the end of the first sentence thereof.

1.12 Section 6.13(a)(i) of the Purchase Agreement

Section 6.13(a)(i) of the Purchase Agreement is hereby amended by adding “consumption, goods and services” immediately prior to “license” in the first sentence thereof.

1.13 Additional Agreements Relating to Malaysia

(a) Section 6.8(e) of the Purchase Agreement is amended by adding the following additional sentence at the end thereof: “In the event that Avago Technologies (Malaysia) SDN. BHD. (together with its successors and assigns, the “Penang Tenant”) exercises its rights under Section 11.2 of the Tenancy Agreement between the Penang Tenant and Agilent Technologies (Malaysia) SDN. BHD. (together with its successors and assigns, the “Penang Landlord”), dated October 24, 2005, as amended from time to time, related to the Primary Penang Parcel (the “Primary Parcel Tenancy Agreement”) to have the Primary Parcel Tenancy Agreement converted into a registerable lease and to have the Penang Landlord take the actions set forth in such Section 11.2 in each case in accordance with the provisions thereof, Seller shall cause the Penang Landlord to take such actions as are required by the Primary Parcel Tenancy Agreement.”

(b) Section 9.1(a) of the Purchase Agreement is amended by (x) replacing the word “or” with “,” immediately preceding “(iii) any”, and (y) adding “and (iv) a Penang Event,” immediately after the phrase “Excluded Liabilities,” in the first sentence of such Section.

(c) The following definition shall be added in Annex A of the Purchase Agreement:

“Penang Event” shall mean (x) the Penang Tenant is temporarily or permanently denied the legal right to occupy or use any or all of the Premises (as defined in the Primary Parcel Tenancy Agreement) in accordance with the terms of the Primary Parcel Tenancy Agreement prior to the Final Expiration Date (as defined in the Primary Parcel Tenancy Agreement), due to (i) the Primary Parcel Tenancy Agreement being unenforceable, in violation or inconsistent with the NLC (as defined in the Primary Parcel Tenancy Agreement) as interpreted by the Appropriate Authorities (as defined in the Primary Parcel Tenancy Agreement), or otherwise in violation of Law (as defined in the Primary Parcel Tenancy Agreement), or (ii) the Penang Landlord, through its willful misconduct or negligence, has lost the right to possess the Land (as defined in the Primary Parcel Tenancy Agreement) or ceases to be able to enter into a sublease or tenancy with respect to the Land with the Penang Tenant, or (y) any Proceeding related to the matters set forth in clauses (x)(i) or (ii) above.

(d) (i) The definition of “Business Environmental Liabilities” in Annex A of the Purchase Agreement is hereby amended by inserting “the Primary Penang Parcel” after each reference to “Transferred Real Property” therein.

 

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(ii) The definition of “Primary Penang Parcel” in Annex A of the Purchase Agreement is amended by adding the following at the end thereof: “and as such land, buildings and rights appurtenant thereto are further defined and elaborated upon in the Primary Parcel Tenancy Agreement”

(e) In the event that Purchaser and its Subsidiaries determine to vacate the Primary Penang Parcel prior to the Penang Transfer and prior to such date Purchaser has demolished or altered any of Buildings #1, 2 or 3 located thereon (unless Seller or any of its Subsidiaries consented to such demolition or alteration prior to same being undertaken), at Purchaser’s option, Purchaser shall either restore to the previously existing condition any such demolished or materially altered building or reimburse Seller for the costs incurred by Seller to perform same.

(f) Notwithstanding Section 16.3.2 of the Sublease Agreement, dated December 1, 2005, (the “Yishun Lease”) by and between Agilent Technologies Singapore Pte. Ltd., a company organized under the laws of Singapore (the “Yishun Landlord”) and Avago Technologies Manufacturing (Singapore) Pte. Ltd., (the “Yishun Tenant”) with respect to the property located at No. 1 Yishun Avenue 7, Singapore 768923 relating to the Yishun Tenant’s rights of indemnification by the Yishun Landlord with respect to any Losses arising under applicable Environmental Laws based upon events or conditions which arose prior to the Closing Date, the Parties expressly acknowledge and agree that for as long as the landlord under the Yishun Lease is the Yishun Landlord or another Subsidiary of Seller, the exclusive remedy of the Yishun Tenant and any other Subsidiary of the Purchaser who becomes the tenant under the Yishun Lease with respect to any such Losses, shall be as set forth in Article 9 of the Purchase Agreement.

1.14 Delayed Transfer of Certain Licenses

Section 6.18 of the Purchase Agreement is hereby amended by adding the following at the end thereof:

“(c) Seller and Purchaser acknowledge and agree that to enable Seller to perform and Purchaser to receive the Services (as such term is defined in the Master Separation Agreement), the transfer to Purchaser of certain Contracts mutually agreed upon by the Parties that are (i) included in the Purchased Assets, (ii) necessary for Seller to provide certain of the Services and (iii) used exclusively by the Business in connection with such Services and not otherwise used in the operation of the Business (the “Delayed Contracts”) will need to be delayed until after the Closing Date as provided in this Section 6.18(c). Seller and Purchaser acknowledge and agree that notwithstanding the provisions of this Agreement, including without limitation Section 2.1, the transfer and conveyance to Purchaser of the Delayed Contracts will not occur on the Closing Date and the transfer of each such Delayed Contract will instead be consummated in accordance with the terms hereof at such time as the Services for which such Delayed Contract is required are terminated pursuant to the terms of the Master Separation Agreement. No breach or default hereunder will be deemed to have occurred as a result of the delayed transfer and conveyance of the Delayed Contracts in accordance with the terms of this Section 6.18(c). After the Closing Date and prior to the date of such transfer and conveyance, Seller and its Subsidiaries will hold and use the Delayed Contracts solely for the benefit of Purchaser and for the performance of the Services.”

 

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1.15 Disclosure Letter Section 7.1(b)

Section 7.1(b) of the Disclosure Letter is hereby amended and restated in its entirety to read as set forth in Schedule 7 hereto.

1.16 Section 8.1 of the Purchase Agreement

Section 8.1 of the Purchase Agreement is hereby amended by adding the following at the end thereof:

“The Parties acknowledge and agree that in the event actions are taken by Seller in jurisdictions outside the United States on a particular date in reliance on the Closing occurring in the United States on that same date, and the Closing does not in fact occur in the United States on such date, the Parties will work together in good faith to reverse such actions, to the extent a reversal is necessary, and will share equally the out-of-pocket expenses reasonably incurred by Seller with respect to such a reversal.”

1.17 Section 9.1 of the Purchase Agreement

(a) Section 9.1(a) of the Purchase Agreement is hereby amended by replacing the reference to “Section 7.2(a)” therein to “Section 7.3(a).”

(b) Section 9.1(b) of the Purchase Agreement is hereby amended by replacing the reference to “Section 7.3(a)” therein to “Section 7.2(a).”

1.18 Miscellaneous

(a) Except as specifically provided for in this Amendment, the terms of the Purchase Agreement shall be unmodified and shall remain in full force and effect.

(b) This Amendment may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Amendment.

(c) This Amendment shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns, except that neither this Amendment nor any rights or obligations hereunder shall be assigned or delegated by either Party; provided, however, Purchaser may assign any or all of its rights and obligations under this Amendment to any wholly-owned (other than director qualifying shares) direct or indirect Subsidiary of Purchaser (provided that no such assignment shall release Purchaser from any obligation under this Amendment) or to a lender of Purchaser as collateral for bona fide indebtedness for money borrowed in connection with a merger, consolidation, conversion or sale of assets of Purchaser. This Amendment is not intended to confer upon any person or entity other than the Parties and their permitted assigns any rights or remedies.

 

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(d) This Amendment may be amended only by a written instrument signed by each of the Parties. No provision of this Amendment may be extended or waived orally, but only by a written instrument signed by the Party against whom enforcement of such extension or waiver is sought. All notices and other communications provided for herein shall be dated and in writing.

(e) This Amendment and all claims arising out of this Amendment shall be governed by, and construed in accordance with, the Laws of the State of California, without regard to any conflicts of law principles that would result in the application of any law other than the law of the State of California.

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the Parties have caused this Amendment No. 1 to Asset Purchase Agreement to be duly executed as of the date first above written.

 

[Signature Page to Amendment No. 1 to Asset Purchase Agreement]

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SCHEDULE 1

INTELLECTUAL PROPERTY LICENSE AGREEMENT

This INTELLECTUAL PROPERTY LICENSE AGREEMENT (the “Agreement”) is effective as of the Closing Date (as defined herein), between SELLER., a Delaware corporation (“Seller”), and (“Purchaser”).

WHEREAS, Seller and certain direct and indirect Subsidiaries of Seller are engaged in, among other things, the Business (as defined below);

WHEREAS, Seller and Purchaser have entered into an Asset Purchase Agreement, dated as of August 14, 2005 (“Asset Purchase Agreement”), pursuant to which Purchaser, through one or more of its direct or indirect Subsidiaries, shall purchase and assume, and Seller, through itself and one or more of its direct or indirect Subsidiaries, shall sell, transfer and assign substantially all of the assets and liabilities of the Business to Purchaser; and

WHEREAS, as part of the foregoing, Seller desires to license to Purchaser certain of its intellectual property rights that have not been assigned to Purchaser under the Asset Purchase Agreement and Purchaser desires to license to Seller certain intellectual property rights assigned to Purchaser under the Asset Purchase Agreement.

NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and between the parties as follows:

ARTICLE I

DEFINITIONS

For the purpose of this Agreement the following capitalized terms are defined in this Article I and shall have the meaning specified herein: Other terms that are capitalized but not specifically defined below shall have the meaning set forth in the Asset Purchase Agreement.

1.1 CONFIDENTIAL INFORMATION. “Confidential Information” has the meaning set forth in Article VI.

1.2 FIRST EFFECTIVE FILING DATE. “First Effective Filing Date” means the earliest effective filing date in the particular country for any Patent or any application for any Patent. By way of example, it is understood that the First Effective Filing Date for a United States Patent is the earlier of (i) the actual filing date of the United States Patent application which issued into such Patent, (ii) the priority date under 35 U.S.C. § 119 for such Patent, or (iii) the priority date under 35 U.S.C. § 120 for such Patent.

1.3 IMPROVEMENTS. “Improvements” to Technology means (i) with respect to Copyrights, any modifications, derivative works, and translations of works of authorship, (ii) with respect to Database Rights, any database that is created by extraction or re-utilization of another database, and (iii) with respect to Mask Work Rights, trade secrets and other intellectual property rights included within the definition of Technology and not covered by Section 1.3(i) – (ii) above, any improvements of Technology. For the purposes of clarification, an item of Technology will be deemed to be an Improvement of another item of Technology only if it is actually derived from such other item of Technology and not merely because it may have the same or similar functionality or use as such other item of Technology.

 

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1.4 LICENSED BUSINESS PATENTS. “Licensed Business Patents” means:

(a) every Patent other than design patents to the extent entitled to a First Effective Filing Date prior to the Closing Date, provided that Seller (or any Subsidiary of Seller):

(i) has ownership or control of such Patent, or

(ii) otherwise has the right under such Patent to grant licenses of the type and on the terms herein granted by Seller without the obligation to pay royalties or other consideration to Third Parties; and

(iii) is not restricted from granting a license under such Patents by any other agreements; and

(b) applications for the foregoing Patents described in Section 1.4, including without limitation any continuations, continuations-in-part, divisions and substitutions.

1.5 LICENSED BUSINESS TOOLS. “Licensed Business Tools” means all business tools, internal training courses, internal guidelines and tools, internal documentation, internal proprietary software, photos, videos, Internet site content and other documents and materials that are (i) not Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, Licensed Business Intellectual Property Rights, Licensed Business Patents or Licensed Business Technology, and (ii) are shared with, shown to or otherwise provided to Purchaser or its Subsidiaries with Seller’s consent, including, without limitation, those materials set forth on Schedule 1 to this Agreement. For the avoidance of doubt, Seller is under no obligation to provide any such materials to Purchaser without Seller’s consent. “Licensed Business Tools” does not include Intellectual Property Rights, including any Intellectual Property Rights in any of the foregoing.

1.6 PURCHASER’S FIELD OF USE. “Purchaser’s Field of Use” means the field of the Business as currently or hereafter conducted, including the design, manufacture, supply, distribution, sale, support and maintenance of Purchaser Products.

1.7 PURCHASER PRODUCTS. “Purchaser Products” means Semiconductor Products sold by Seller and its Subsidiaries, or after the Closing, by the Purchaser or any of its Affiliates, and all modified versions thereof, any reasonably foreseeable extensions or improvements thereto, or any new Semiconductor Products that are developed to replace products existing as of the Closing, that are sold by Purchaser or its Subsidiaries after the Closing as Semiconductor Products.

1.8 SELLER’S FIELD OF USE. “Seller’s Field of Use” means the business of Seller, as currently or hereafter conducted, other than Semiconductor Products. Notwithstanding the foregoing, Seller’s Field of Use shall include products, services and other activities related to Semiconductor Products, but only to the extent that such products, services and activities are components of products of the Retained Business, are incidental to the development or sale of products and services of the Retained Business, or are specifically included in the definition of the Retained Business.

 

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1.9 SELLER PRODUCTS. “Seller Products” means any and all products and services of the businesses in which Seller or any of its Subsidiaries is now or hereafter engaged (including the business of making (but not having made) Third Party products for Third Parties when Seller or any of its Subsidiaries is acting as a contract manufacturer or foundry for such Third Parties), other than Semiconductor Products. Notwithstanding the foregoing, Seller’s Products shall include products and services related to Semiconductor Products, but only to the extent that such products and services are components of products of the Retained Business, are incidental to the development and sale of products and services of the Retained Business, or are specifically included in the definition of the Retained Business.

1.10 THIRD PARTY. “Third Party” means a Person other than Seller and its Subsidiaries or Purchaser and its Subsidiaries.

ARTICLE II

PATENT LICENSE GRANTS

2.1 LICENSE GRANTS TO PURCHASER. Seller grants (and agrees to cause its appropriate Subsidiaries to grant effective as of the Closing Date) to Purchaser, under the Licensed Business Patents, an irrevocable, non-exclusive, worldwide, fully-paid, royalty-free and non-transferable (except as set forth in Section 9.12 hereof) license, with right of sublicense as set forth below, to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import Purchaser Products solely within the Purchaser’s Field of Use. With respect to those Licensed Business Patents owned by a Third Party, (a) the license shall be non-exclusive, and (b) the license grant set forth in this Section shall be subject to the limitations set forth in the relevant license agreement between Seller and such Third Party.

2.2 SUBLICENSE RIGHTS OF PURCHASER. (a) Subject to Sections 2.2(a) and (b) below and to Section 2.3, Purchaser may grant sublicenses to its respective Subsidiaries within the scope of its respective license hereunder (with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary, to another Subsidiary of Purchaser).

(b) Any sublicense under Section 2.2(a) may be made effective retroactively, but not prior to the sublicensee’s becoming a Subsidiary of Purchaser.

(c) Any licenses granted by Purchaser to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers with respect to any Purchaser Product in the form of software may include a sublicense under the Licensed Business Patents within the scope of Purchaser’s license hereunder, provided that the scope of such sublicense is limited to the exercise of the rights granted by Purchaser with respect to such Purchaser Product.

2.3 HAVE MADE RIGHTS OF PURCHASER. Purchaser understands and acknowledges that the “have made” rights granted to it in Section 2.1, and the sublicenses of such “have made” rights granted pursuant to Section 2.2, are intended to cover only the products of Purchaser and its Subsidiaries (including private label or OEM versions of such products), and are not intended to cover foundry or contract manufacturing activities that Purchaser may undertake through Third Parties for Third Parties.

 

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2.4 LICENSE GRANTS BACK TO SELLER. Purchaser grants back (and agrees to cause its appropriate Subsidiaries to grant back) to Seller, under the Patents included in the Transferred Business Intellectual Property (excluding all design patents included therein), an irrevocable, non-exclusive, worldwide, fully-paid, royalty-free and non-transferable (except as set forth in Section 9.12 hereof) license, with right of sublicense as set forth below, solely within the Seller’s Field of Use, to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import Seller Products.

2.5 SUBLICENSE RIGHTS OF SELLER. (a) Subject to Sections 2.5(a) and (b) below and to Section 2.6, Seller may grant sublicenses to its respective Subsidiaries within the scope of its respective license hereunder (with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary, to another Subsidiary of Seller).

(b) Any sublicense under Section 2.5(a) may be made effective retroactively, but not prior to the sublicensee’s becoming a Subsidiary of Seller.

(c) Any licenses granted by Seller to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers with respect to any Seller Product in the form of software may include a sublicense under the Patents included in the Transferred Business Intellectual Property within the scope of Seller’s license hereunder, provided that the scope of such sublicense is limited to the exercise of the rights granted by Purchaser with respect to such Seller Product.

2.6 HAVE MADE RIGHTS OF SELLER. Seller understands and acknowledges that the “have made” rights granted to it in Section 2.4, and the sublicenses of such “have made” rights granted pursuant to Section 2.5, are intended to cover only the products of Seller and its Subsidiaries (including private label or OEM versions of such products), and are not intended to cover foundry or contract manufacturing activities that Seller may undertake through Third Parties for Third Parties.

2.7 DURATION. (a) All licenses granted herein with respect to each Patent shall expire upon the expiration of the term of such Patent; provided, however, that licenses for those Licensed Business Patents owned by a Third Party shall expire on the expiration of the term of the relevant license agreement between Seller and such Third Party.

(b) All sublicenses granted pursuant to this Agreement to a particular Subsidiary of a party shall terminate the date that the Subsidiary ceases to be a Subsidiary of that party.

2.8 SALE OF PART OF A BUSINESS. (a) If either party (the “Transferring Party”), after the Closing Date, transfers a going business (but not all or substantially all of its business or assets), and such transfer includes at least one marketable product and tangible assets having a net value of at least ten million U.S. dollars ($10,000,000.00), regardless of whether such transfer is part of (i) an asset sale to any Third Party, (ii) a sale of shares or securities in a

 

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Subsidiary to a Third Party such that (A) the Subsidiary ceases to be a Subsidiary and (B) the Third Party owns at least eighty percent (80%) of the outstanding shares or securities representing the right to vote for the election of directors or other managing authority, or (iii) a sale of shares or securities in a Subsidiary such that (A) the Subsidiary ceases to be a Subsidiary and (B) no single Third Party owns at least eighty percent (80%) of the outstanding shares or securities representing the right to vote for the election of directors or other managing authority of such ex-Subsidiary;

(b) then, upon written request to the other party (the “Non-Transferring Party”) jointly by the Transferring Party and the Transferee (as defined below) at the closing of the transfer or as soon as practicable thereafter, but not later than sixty (60) days following the transfer, the Non-Transferring Party shall grant a royalty-free license to the Transferee under the same terms as the license granted to the Transferring Party under this Agreement subject to the following:

(i) the effective date of such license shall be the effective date of such transfer,

(ii) the products, services and processes of the Transferee that are subject to such license shall be limited to the products, services and processes of the Subsidiary or the products, services and processes in the transferred business that are commercially released or for which substantial steps have been taken to commercialization as of the date of the transfer by the Transferring Party, and for new versions of such products, services and processes,

(iii) the Patents of the Non-Transferring Party that are subject to such license shall be limited to Licensed Business Patents or Patents included in the Transferred Business Intellectual Property, as the case may be,

(iv) the Transferee shall have no right to grant sublicenses except that the Transferee shall have the right to grant sublicenses to any Person at least eighty percent (80%) of whose outstanding shares or securities representing the right to vote for the election of directors or other managing authority are, directly or indirectly, owned by the Transferee (“Transferee Subsidiaries”), only for so long as such ownership exists, and the license to be granted by the Non-Transferring Party to the Transferee pursuant to this Section 2.8 shall not contain this provision or a provision containing terms comparable to this Section 2.8; and

(v) the Transferee shall grant to the Non-Transferring Party a royalty-free license under the same terms as the license granted to the Non-Transferring Party by the Transferring Party under this agreement, such license (A) to be effective as of the effective date of the transfer, (B) to apply to all the products, services and processes of the Non-Transferring Party that are subject to the license from the Transferring Party to the Non-Transferring Party as of the effective date of the transfer, and (C) to include all Patents of the Transferee (other than design patents) that are entitled to a First Effective Filing Date on or before the date of such transfer and under which, at any time commencing with the date of the transfer, the Transferee or any of the Transferee Subsidiaries has ownership or control or otherwise has the right to grant such license without the obligation to pay royalties or other consideration to third parties;

 

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(c) provided, further, that in the event that the Non-Transferring Party and the Transferee are engaged in litigation, arbitration or other formal dispute resolution proceedings covering Patent infringement (pending in any court, tribunal, or administrative agency or before any appointed or agreed upon arbitrator in any jurisdiction worldwide), then the Non-Transferring Party shall have no obligation to enter into a license with the Transferee under this Section 2.8.

(d) Each party may exercise its rights as the Transferring Party under this Section 2.8 no more than eight (8) times unless otherwise agreed to in writing by the Non-Transferring Party. Notwithstanding the foregoing limitation, however, in any license granted by a Non-Transferring Party to a Transferee under this Section 2.8, the Transferring Party may elect to relinquish its license under this Agreement in the field of use covered by the license granted to the Transferee, and such license shall not count toward the limit. In making such election, the Transferring Party shall promptly notify the Non-Transferring Party.

(e) As used above in this Section 2.8, “Transferee” in the case of Sections 2.8(a)(i) and (ii) means the Third Party acquiring the going business or eighty percent (80%) of the Subsidiary and in the case of Section 2.8(a)(iii) means the ex-Subsidiary only.

ARTICLE III

OTHER LICENSE GRANTS

3.1 LICENSE TO PURCHASER. (a) Seller grants (and agrees to cause its appropriate Subsidiaries to grant effective as of the Closing Date) to Purchaser and its Subsidiaries the following irrevocable, non-exclusive, worldwide, fully paid, royalty-free and non-transferable (except as specified in Section 9.12 below) licenses, with right of sublicense as set forth below, under its and their applicable Intellectual Property Rights as well as sublicensable Third Party Intellectual Property Rights, solely within the Purchaser’s Field of Use:

(i) under its and their Copyrights and sublicensable Third Party Copyrights in and to the Licensed Business Technology, (A) to reproduce and have reproduced the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Purchaser, in whole or in part, in order to create or as part of Purchaser Products, (B) to prepare Improvements or have Improvements prepared for it based upon the works of authorship included in such Licensed Business Technology in order to create Purchaser Products, (C) to distribute (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) copies of the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Purchaser as part of Purchaser Products, and (D) to perform (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) and display the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Purchaser, as part of Purchaser Products;

 

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(ii) under its and their Database Rights and sublicensable Third Party Database Rights in and to the Licensed Business Technology, to develop or have developed Improvements and to extract data from the databases included in such Licensed Business Technology and such Improvements and to re-utilize such data to design, develop, manufacture and have manufactured Purchaser Products and to sell such Purchaser Products that incorporate such data, databases and Improvements thereof prepared by or for Purchaser;

(iii) under its and their Mask Works and sublicensable Third Party Mask Works in and to the Licensed Business Technology, (A) to develop or have developed Improvements and to reproduce and have reproduced mask works and semiconductor topologies included in such Licensed Business Technology and embodied in Purchaser Products by optical, electronic or any other means, (B) to import or distribute a product in which any such mask work or semiconductor topology is embodied, and (C) to induce or knowingly to cause a Third Party to do any of the acts described in Sections 3.1(a)(iii)(A) and (B) above; and

(iv) under its and their Trade Secrets and Industrial Designs and sublicensable Third Party Trade Secrets and Industrial Designs in and to the Licensed Business Technology, to develop or have developed Improvements and to use such Licensed Business Technology and Improvements thereof prepared by or for Purchaser to design, develop, manufacture and have manufactured, offer to sell, sell, support, and maintain Purchaser Products and make Improvements to Purchaser Products.

(v) under its and their Copyrights, Database Rights, Trade Secrets and sublicensable Third Party Copyrights, Database Rights and Trade Secrets in and to the Licensed Business Tools, to develop or have developed Improvements and to use such Licensed Business Tools and Improvements thereof for internal business purposes. For the avoidance of doubt, Purchaser and its Subsidiaries may not market, license, or bundle the Licensed Business Tools with any content, documents, tools, presentations, processes or products to be shared with, sold, or shown to any Third Party.

(b) With respect to Licensed Business Technology or Licensed Business Tools owned by a Third Party, the license grant set forth in this Section shall be subject to the limitations set forth in the relevant license agreement between Seller and such Third Party. With respect to Licensed Business Tools owned by a Third Party, Purchaser and its Subsidiaries shall be solely responsible for paying any fee, obtaining any consent or giving any notice required by such Third Party for the exercise of the rights granted to Purchaser and its Subsidiaries under Section 3.1(a)(v) of this Agreement. With respect to Licensed Business Technology that is owned by Hewlett-Packard Company, Seller grants to Purchaser and its Subsidiaries a sublicense to use such Licensed Business Technology solely in the Purchaser’s Field of Use, in connection with Purchaser Products, and solely to the extent of Seller’s right to grant any such sublicense to Purchaser under the relevant provisions of the Master Separation Agreement between Hewlett-Packard Company and Seller, dated as of November 1, 1999, or any agreement ancillary thereto.

(c) Without limiting the generality of the foregoing licenses granted in Section 3.1(a) above, with respect to software included within the Licensed Business Technology (but not Licensed Business Tools), such licenses include the right to use, modify, and reproduce

 

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such software and Improvements thereof made by or for Purchaser or its Subsidiaries to create Purchaser Products, in source code and object code form, and to sell and maintain such software and Improvements thereof made by or for Purchaser or its Subsidiaries, in source code and object code form, as part of Purchaser Products; provided, however, that with respect to Seller’s software products that are commercially released as of the Closing Date, Purchaser shall be limited to using no more than ten percent (10%) of the lines of code of any such commercially released software product in any Purchaser Product sold or maintained by Purchaser or its Subsidiaries to a Third Party after the Closing Date (it being understood that such restriction shall not apply, however, to Purchaser’s or its Subsidiaries’ use of any code contained in any Purchaser Product that was commercially released by Seller as of or prior to the Closing Date, to the extent that Purchaser desires to continue to sell such Purchaser Product in a form containing such code or Improvements thereto). For purposes of this Section 3.1(c), a “commercially released” product shall mean a product that has been placed on a corporate price list by Seller or any of its Subsidiaries, or (if applicable) that has been released by Seller or any of its Subsidiaries to Third Parties for beta testing.

(d) The foregoing licenses in this Section 3.1 include the right to have contract manufacturers and foundries manufacture Purchaser Products for Purchaser.

(e) Purchaser may grant sublicenses within the scope of the licenses granted under Sections 3.1(a) and (b) above as follows:

(i) Purchaser may grant sublicenses to its Subsidiaries for so long as they remain its Subsidiaries, with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary, to another Subsidiary of such party; provided that any such sublicense may be made effective retroactively but not prior to the sublicensee’s becoming a Subsidiary; and

(ii) Purchaser may grant sublicenses with respect to Purchaser Products in the form of software, in object code and source code form, to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers.

3.2 LICENSE BACK TO SELLER. (a) Purchaser grants back (and agrees to cause its appropriate Subsidiaries to grant back) to Seller and its Subsidiaries the following personal, irrevocable, non-exclusive, worldwide, fully paid, royalty-free and non-transferable (except as specified in Section 9.12 below) licenses under its and their applicable Intellectual Property Rights, together with the right to sublicense to Third Parties subject to the terms of this agreement, solely within the Seller’s Field of Use:

(i) under its and their Copyrights in and to the Transferred Business Technology, (A) to reproduce and have reproduced the works of authorship included in the Transferred Business Technology and Improvements thereof prepared by or for Seller, in whole or in part, in order to create or as part of Seller Products, (B) to prepare Improvements or have Improvements prepared for it based upon the works of authorship included in the Transferred Business Technology in order to create Seller Products, (C) to distribute (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) copies of the works of

 

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authorship included in the Transferred Business Technology and Improvements thereof prepared by or for Seller as part of Seller Products, and (D) to perform (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) and display the works of authorship included in the Transferred Business Technology and Improvements thereof prepared by or for Seller, as part of Seller Products;

(ii) under its and their Database Rights in and to the Transferred Business Technology, to develop or have developed Improvements and to extract data from the databases included in the Transferred Business Technology and such Improvements and to re-utilize such data to design, develop, manufacture and have manufactured Seller Products and to sell such Seller Products that incorporate such data, databases and Improvements thereof prepared by or for Seller;

(iii) under its and their Mask Works in and to the Transferred Business Technology, (A) to develop or have developed Improvements and to reproduce and have reproduced mask works and semiconductor topologies included in the Transferred Business Technology and embodied in Seller Products by optical, electronic or any other means, (B) to import or distribute a product in which any such mask work or semiconductor topology is embodied, and (C) to induce or knowingly to cause a Third Party to do any of the acts described in Sections 3.2(a)(iii)(A) and (B) above; and

(iv) under its and their Trade Secrets, Industrial Designs and other intellectual property rights in and to the Transferred Business Technology, to use the Transferred Business Technology and Improvements thereof prepared by or for Seller to design, develop, to manufacture and have manufactured, offer to sell, sell, support and maintain Seller Products and make Improvements to such Seller Products.

For the purpose of this Section 3.2, Transferred Business Technology shall include, without limitation, the software items listed on Schedule 2 to this Agreement.

(b) Without limiting the generality of the foregoing licenses granted in Section 3.2(a) above, with respect to software included within the Transferred Business Technology, such licenses include the right to use, modify, and reproduce such software and Improvements thereof made by or for Seller or its Subsidiaries to create Seller Products, in source code and object code form, and to sell and maintain such software and Improvements thereof made by or for Seller or its Subsidiaries, in source code and object code form, as part of Seller Products; provided, however, that, with respect to Purchaser’s software products that were commercially released by Seller as of the Closing Date, Seller shall be limited to using no more than ten percent (10%) of the lines of code of any such commercially released software product in any Seller Product sold or maintained by Seller or its Subsidiaries to a Third Party after the Closing Date (it being understood that such restriction shall not apply, however, to Seller’s or its Subsidiaries’ use of any code contained in any Seller Product that was commercially released by Seller as of or prior to the Closing Date, to the extent that Seller desires to continue to sell such Seller Products in a form containing such code or Improvements thereto). For purposes of this Section 3.2(b), a “commercially released” product shall mean a product that has been placed on a Purchaser corporate price list or (if applicable) released by Purchaser to Third Parties for beta testing.

 

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(c) The foregoing licenses in this Section 3.2 include the right to have contract manufacturers and foundries manufacture Seller Products for Seller.

(d) Seller may grant sublicenses within the scope of the licenses granted under Sections 3.2(a) and (b) above as follows:

(i) Seller may grant sublicenses to its Subsidiaries for so long as they remain its Subsidiaries, with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary, to another Subsidiary of such party; provided that any such sublicense may be made effective retroactively but not prior to the sublicensee’s becoming a Subsidiary; and

(ii) Seller may grant sublicenses with respect to Seller Products in the form of software, in object code and source code form, to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers.

3.3 IMPROVEMENTS. As between the parties, after the Closing Date: (a) Seller hereby retains all right, title and interest, including all Intellectual Property Rights, in and to any Improvements to Transferred Business Technology made by or for Seller in the exercise of the licenses granted to it hereunder, subject only to the ownership of Purchaser in the underlying Transferred Business Technology and the non-competition terms agreed to by Seller pursuant to the Asset Purchase Agreement. Seller shall not have any obligation under this Agreement to notify Purchaser of any Improvements made by or for it or to disclose or license any such Improvements to Purchaser; and

(b) Purchaser hereby retains all right, title and interest, including all Intellectual Property Rights, in and to any Improvements to Licensed Business Technology made by or for Purchaser in the exercise of the licenses granted to it hereunder, subject only to the ownership of Seller in the underlying Licensed Business Technology. Purchaser shall not have any obligation under this Agreement to notify Seller of any Improvements made by or for it or to disclose or license any such Improvements to Seller.

3.4 DURATION OF SUBLICENSES TO SUBSIDIARIES. Any sublicenses granted to a particular Subsidiary by a party shall terminate upon the date that such Subsidiary ceases to be a Subsidiary of that party.

3.5 NO PATENT LICENSES. Nothing contained in this Article 3 shall be construed as conferring to either party by implication, estoppel or otherwise any license or right under any Patent or applications therefor, whether or not the exercise of any right herein granted necessarily employs an invention of any existing or later issued Patent. The applicable licenses granted by Seller to Purchaser and by Purchaser to Seller with respect to Patents are set forth in Article II above.

 

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3.6 NO TRADEMARK LICENSES. Nothing contained in this Article 3 shall be construed as conferring to either party by implication, estoppel or otherwise any license or right under any Trademark contained in the Licensed Business Tools. Purchaser shall not make any use whatsoever, in whole or in part, of any Trademarks contained or referenced in the Licensed Business Tools in connection with the exercise of any right herein granted, except as such Trademarks may be licensed under the Manufacturing Trademark License Agreement and subject to the terms and conditions set forth therein. Notwithstanding the foregoing, Purchaser agrees to remove any Trademarks owned by Seller from Purchaser’s copies of the Licensed Business Tools within three (3) months of the Closing Date, unless the parties agree that any such copy is to be returned to Seller.

ARTICLE IV

ADDITIONAL OBLIGATIONS

4.1 ADDITIONAL OBLIGATIONS WITH REGARD TO PATENTS. Purchaser acknowledges that its employees and contractors who are former Seller employees and contractors have a continuing duty to assist Seller with the prosecution of Licensed Business Patent applications and other Patent applications owned by Seller and, accordingly, Purchaser agrees to make available, to Seller or its counsel, on reasonable advance written notice, inventors and other persons employed by Purchaser for interviews and/or testimony to assist in good faith in further prosecution, maintenance or litigation of such Patent applications, including the signing of documents related thereto. Any actual and reasonable out-of-pocket expenses associated with such assistance shall be borne by Seller, expressly excluding the value of the time of such Purchaser personnel; provided, however, that in the case of assistance with litigation, the parties shall agree on a case by case basis on compensation, if any, of Purchaser for the value of the time of Purchaser’s employees as reasonably required in connection with such litigation.

4.2 ASSIGNMENT OF PATENTS. Neither party shall assign or grant any rights under any of the Licensed Business Patents unless such assignment or grant is made subject to the licenses granted in this Agreement.

4.3 RESPONSE TO REQUESTS. Seller shall, upon a request from Purchaser sufficiently identifying any Patent or Patent application, inform Purchaser as to the extent to which said Patent or Patent application is subject to the licenses and other rights granted hereunder.

ARTICLE V

CONFIDENTIALITY

5.1 CONFIDENTIAL INFORMATION. The parties hereto expressly acknowledge and agree that all information, whether written or oral, furnished by either party to the other party or any Subsidiary of such other party pursuant to this Agreement (“Confidential Information”) shall be deemed to be confidential and shall be maintained by each party and their respective Subsidiaries in confidence, using the same degree of care to preserve the confidentiality of such Confidential Information that the party to whom such Confidential Information is disclosed

 

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would use to preserve the confidentiality of its own information of a similar nature and in no event less than a reasonable degree of care. Notwithstanding the foregoing, after the Closing Date all Transferred Business Technology shall be deemed the Confidential Information of Purchaser, not of Seller. Except as authorized in writing by the other party, neither party shall at any time use or disclose or permit to be disclosed any such Confidential Information to any person, firm, corporation or entity, (i) except as may reasonably be required in connection with the performance of this Agreement by Purchaser, Seller or its respective Subsidiaries, as the case may be, and (ii) except as may reasonably be required after the Closing Date (A) by Purchaser or its Subsidiaries in connection with the use of the Licensed Business Technology and the operation of the Business or (B) by Seller or its Subsidiaries in connection with the licensed use of the Transferred Business Technology and the operation of its business, and (iii) except to the parties’ agents or representatives who are informed by the parties of the confidential nature of the information and are bound to maintain its confidentiality, and (iv) in the course of due diligence in connection with the sale of all or a portion of either party’s business provided the disclosure is pursuant to a nondisclosure agreement having terms comparable to Sections 5.1 and 5.2 hereof.

5.2 EXCEPTIONS. The obligation not to disclose information under Section 5.1 hereof shall not apply to information that, as of the Closing Date or thereafter, (i) is or becomes generally available to the public other than as a result of disclosure made after the execution of the Asset Purchase Agreement by the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof, (ii) was or becomes readily available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis, (iii) is or becomes available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis from a source other than its own files or personnel or the other party or its Subsidiaries, provided that such source is not known by the party desiring to treat such information as non-confidential to be bound by confidentiality agreements with the other party or its Subsidiaries or by legal, fiduciary or ethical constraints on disclosure of such information, or (iv) is required to be disclosed pursuant to a governmental order or decree or other legal requirement (including the requirements of the U.S. Securities and Exchange Commission and the listing rules of any applicable securities exchange), provided that the party required to disclose such information shall give the other party prompt notice thereof prior to such disclosure and, at the request of the other party, shall cooperate in all reasonable respects in maintaining the confidentiality of such information, including obtaining a protective order or other similar order. Nothing in this Section 5.2 shall limit in any respect either party’s ability to disclose information in connection with the enforcement by such party of its rights under this Agreement; provided that the proviso of clause (v) in the immediately preceding sentence shall apply to the party desiring to disclose such information.

5.3 DURATION. The obligations of the parties set forth in this Article V with respect to the protection of Confidential Information shall remain in effect until five years after (i) the Closing Date, with respect to Confidential Information of one party that is known to or in the possession of the other party as of the Closing Date, or (ii) the date of disclosure, with respect to Confidential Information that is disclosed by the one party to the other party after the Closing Date.

 

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ARTICLE VI

TERMINATION

6.1 VOLUNTARY TERMINATION. By written notice to the other party, either party may voluntarily terminate all or a specified portion of the license and rights granted to it hereunder by such other party. Such notice shall specify the effective date of such termination and shall clearly specify any affected Intellectual Property Rights, Technology, product or service.

6.2 SURVIVAL. Any voluntary termination by either party of the license and rights granted to it by the other party under Section 6.1 hereof shall not affect such party’s license and rights with respect to any licensed product made or service furnished prior to such termination.

6.3 NO OTHER TERMINATION. Each party acknowledges and agrees that its remedy for breach by the other party of the licenses granted to it hereunder during the applicable term of such licenses, or of any other provision hereof, shall be, subject to the requirements of Article VII, to bring a claim to recover damages subject to the limits set forth in this Agreement and to seek any other appropriate equitable relief, other than termination of the licenses granted by it in this Agreement.

ARTICLE VII

DISPUTE RESOLUTION

Except as otherwise set forth herein, resolution of any and all disputes arising from or in connection with this Agreement, whether based on contract, tort, or otherwise (collectively, “Disputes”), shall be exclusively governed by and settled in accordance with the provisions of this Article 7.

7.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through negotiation. Within 30 days after notice of a Dispute is given by either party to the other party, each party shall select a first tier negotiating team comprised of director or general manager level employees of such party and shall meet and make a good faith attempt to resolve such Dispute and shall continue to negotiate in good faith in an effort to resolve the Dispute or renegotiate the applicable Section or provision without the necessity of any formal proceedings. If the first tier negotiating teams are unable to agree within 30 days of their first meeting, then each party shall select a second tier negotiating team comprised of vice president level employees of such party and shall meet within 30 days after the end of the first 30 day negotiating period to attempt to resolve the matter. During the course of negotiations under this Section 7.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating teams but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. All negotiations between the parties pursuant to this Section 7.1 shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future litigation.

 

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7.2 FAILURE TO RESOLVE DISPUTES. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within 15 days after the first meeting of the second tier negotiating teams under Section 7.1, the parties may seek any remedies to which they may be entitled in accordance with the terms of this Agreement.

7.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party from initiating litigation or other judicial or administrative proceedings if such party would be substantially harmed by a failure to act during the time that such good faith efforts are being made to resolve the dispute or claim through negotiation or mediation. In the event that litigation is commenced under this Section 7.3, the parties agree to continue to attempt to resolve any Dispute according to the terms of Sections 7.1 and 7.2 hereof during the course of such litigation proceedings under this Section 7.3.

7.4 PAY AND DISPUTE. Except as provided herein, in the event of any dispute regarding payment of a third-party invoice (subject to standard verification of receipt of products or services), the party named in a third party’s invoice must make timely payment to such third party, even if the party named in the invoice desires to pursue the dispute resolution procedures outlined in this Article 7. If the party that paid the invoice is found pursuant to this Article 7 to not be responsible for such payment, such paying party shall be entitled to reimbursement, with interest accrued at an annual rate of the rate of interest as announced from time to time by JPMorgan Chase at its principal office in New York City as its prime lending rate, the Prime Rate to change when and if such prime lending rate changes, from the party found responsible for such payment.

ARTICLE VIII

LIMITATION OF LIABILITY

IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING SHALL NOT, HOWEVER, LIMIT THE AMOUNT OR TYPES OF DAMAGES AVAILABLE TO EITHER PARTY FOR INFRINGEMENT OR MISAPPROPRIATION OF ITS OR ITS SUBSIDIARIES’ INTELLECTUAL PROPERTY RIGHTS BY THE OTHER PARTY OR SUCH OTHER PARTY’S SUBSIDIARIES, OR FOR ANY DISCLOSURE OF CONFIDENTIAL INFORMATION.

ARTICLE IX

MISCELLANEOUS PROVISIONS

9.1 DISCLAIMER. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE ASSET PURCHASE AGREEMENT, EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL (A) TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS LICENSED HEREUNDER, ARE LICENSED WITHOUT ANY WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO,

 

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INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Except as otherwise set forth herein or in the Asset Purchase Agreement, neither party nor any of its Subsidiaries makes any warranty or representation that any manufacture, use, importation, offer for sale or sale of any product or service will be free from infringement of any patent or other intellectual property right of any Third Party. Except as otherwise set forth herein or in the Asset Purchase Agreement, neither Seller nor any of its Subsidiaries makes any warranty or representation as to the validity and/or scope of any Patent licensed by it to Purchaser hereunder or any warranty or representation that any manufacture, use, importation, offer for sale or sale of any product or service will be free from infringement of any Patent or other Intellectual Property Right of any Third Party.

9.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be construed as conferring any rights by implication, estoppel or otherwise, under any Intellectual Property Right, other than the rights expressly granted in this Agreement. Neither party is required hereunder to furnish or disclose to the other any technical or other information (including copies of the Licensed Business Technology or Transferred Business Technology), except as specifically provided herein or in the Asset Purchase Agreement.

9.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder to institute or maintain any action or suit against Third Parties for infringement or misappropriation of any Intellectual Property Right in or to any Technology licensed to the other party hereunder, or to defend any action or suit brought by a Third Party which challenges or concerns the validity of any of such rights or which claims that any Technology licensed to the other party hereunder infringes or constitutes a misappropriation of any Intellectual Property Right of any Third Party. Seller shall not have any right to institute any action or suit against Third Parties for infringement of any of the Transferred Business Intellectual Property Rights. Purchaser shall not have any right to institute any action or suit against Third Parties for infringement of any of the Licensed Business Intellectual Property Rights.

9.4 NO OBLIGATION TO OBTAIN OR MAINTAIN RIGHTS IN TECHNOLOGY. Except as otherwise set forth herein or in the Asset Purchase Agreement, neither party, nor any of its Subsidiaries, shall be obligated to provide the other party with any technical assistance or to furnish the other party with, or obtain, any documents, materials or other information or Technology.

9.5 NO OBLIGATION TO OBTAIN OR MAINTAIN PATENTS OR TRADEMARKS. Neither Seller, nor any of its Subsidiaries is obligated to (i) file any Patent application, or to secure any Patent or Patent rights or (ii) to maintain any Patent in force. Neither Seller, nor any of its Subsidiaries is obligated to (i) file any Trademark application, or to secure any Trademark rights or (ii) to maintain any Trademark registration in force.

9.6 RECONCILIATION. The parties acknowledge that, as part of the transfer of Transferred Business Intellectual Property, Transferred Business Technology, and Transferred Business Intellectual Property Rights, Seller may inadvertently retain Technology or Intellectual Property that should have been transferred to Purchaser as part of the contemplated transfer of assets, and Purchaser may inadvertently acquire Technology or Intellectual Property that should

 

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not have been thereby transferred. Each party agrees to transfer to the other any such later discovered Technology or Intellectual Property, subject to the licenses set forth above, at the reasonable request of the appropriate owner of such Technology or Intellectual Property.

9.7 ENTIRE AGREEMENT. This Agreement and the Asset Purchase Agreement constitute the entire understanding between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.

9.8 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, without regard to any conflicts of laws principles.

9.9 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. Each party hereto irrevocably submits to the exclusive jurisdiction of the United States District Court located in Santa Clara County, California, or if such court does not have jurisdiction, the superior courts of the State of California located in Santa Clara County, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties, further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth in Section 9.11 shall be effective service of process for any action, suit or proceeding in California with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the parties, irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding set forth above arising out of this Agreement or the transactions contemplated hereby, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The parties hereby irrevocably and unconditionally waive trial by jury in any legal action or proceeding relating to this Agreement or any other agreement entered into in connection therewith and for any counterclaim with respect thereto.

9.10 SECTION HEADINGS. The section headings contained in this Agreement are inserted for reference purposes only and are not intended to be a part, nor should they affect the meaning or interpretation, of this Agreement.

9.11 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by telecopy with answer back, by express or overnight mail delivered by an internationally recognized air courier (delivery charges prepaid), by registered or certified mail (postage prepaid, return receipt requested) or by e-mail with receipt confirmed by return e-mail to the respective parties as follows:

or to such other address as the party to whom notice is given may have previously furnished to the other in writing in the manner set forth above. Any notice or communication delivered in person shall be deemed effective on delivery. Any notice or communication sent by e-mail, telecopy or by air courier shall be deemed effective on the first Business Day following the day

 

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on which such notice or communication was sent. Any notice or communication sent by registered or certified mail shall be deemed effective on the third Business Day following the day on which such notice or communication was mailed. As used in this Section 9.11, “Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions located in the jurisdiction in which the person to whom notice is to be provided is located are authorized or obligated by law or executive order to close.

9.12 NONASSIGNABILITY. (a) Neither party may, directly or indirectly, in whole or in part, assign or transfer this Agreement, without the other party’s prior written consent, and any attempted assignment, transfer or delegation without such prior written consent shall be voidable at the sole option of such other party; provided, however, that either party may assign this Agreement without such consent to an entity that succeeds to all or substantially all of its business or assets to which this Agreement relates, subject to the terms of Section 9.12(c) below.

(b) In addition, each party (including its respective Subsidiaries or its permitted successive assignees or transferees hereunder) may assign or transfer this Agreement as a whole, without consent, in connection with a corporate reorganization that leaves such party substantially equivalent in terms of business, assets or ownership as before the reorganization (e.g., a reorganization in another state).

(c) In the event of any assignment or transfer under this Section 9.12 that is not covered by Section 9.12(b) above, Purchaser promptly shall give notice of such acquisition to Seller. The Patent license granted to Purchaser by the Seller pursuant to Article II of this Agreement, and any sublicenses granted by Purchaser to its Subsidiaries, shall automatically become limited to the products, processes and services of Purchaser or its Subsidiaries that are commercially released or for which substantial steps have been taken to commercialization as of the effective date of the acquisition and for new versions that have merely minor incremental differences from such products, processes and services and shall not in any event include any products, processes or services of the acquiring party; provided, however, that in any event such license shall be terminable at will by the Seller if the Seller and the acquiring party are engaged in litigation, arbitration or other formal dispute resolution proceedings covering Patent infringement (pending in any court, tribunal, or administrative agency or before any appointed or agreed upon arbitrator in any jurisdiction worldwide) at the time that the acquisition agreement is entered into, or if such proceedings are initiated by the acquiring party within one hundred twenty-one days (121) days after the date that the acquisition agreement is entered into.

(d) No assignment or transfer made pursuant to Section 9.12 shall release the transferring or assigning party from any of its liabilities or obligations hereunder. Without limiting the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns.

9.13 SEVERABILITY. If any provision of this Agreement shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement shall not be affected and shall remain in full force and effect, and Seller and Purchaser shall negotiate in good faith to replace such illegal, void or unenforceable provision with a provision that corresponds as closely as possible to the intentions of the parties as expressed by such illegal, void or unenforceable provision.

 

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9.14 AMENDMENT; WAIVER; REMEDIES CUMULATIVE. This Agreement, including this provision of this Agreement, may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. No waiver by either party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any party or a failure or delay by any party in exercising any power, right or privilege under this Agreement, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with the Closing hereunder. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

9.15 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 9.15, provided that receipt of copies of such counterparts is confirmed.

[SIGNATURE PAGE FOLLOWS]

 

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WHEREFORE, the parties have signed this Intellectual Property License Agreement effective as of the Closing Date.

 

By:						By:
Name:						Name:
Title:						Title:

[SELLER’S AND PURCHASER’S SIGNATURE PAGE TO THE

INTELLECTUAL PROPERTY AGREEMENT]

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SCHEDULE 4

MANUFACTURING TRADEMARK

LICENSE AGREEMENT

between

AGILENT TECHNOLOGIES, INC.

and

PURCHASER

Effective as of December 1, 2005

 

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MANUFACTURING TRADEMARK LICENSE AGREEMENT

This Manufacturing Trademark License Agreement (“License”) is effective as of the Closing Date (as defined in the APA), between Agilent Technologies, Inc., a Delaware corporation (“Seller”), and Avago Technologies General IP (Singapore) Pte. Ltd. (Company Registration No. 200512340D), a Singapore private limited company (“Purchaser”). Purchaser is a Subsidiary of Avago Technologies Limited, a Singapore public limited company (f/k/a Argos Acquisition Pte. Ltd., a Singapore corporation) (“Avago”).

WHEREAS, Seller and certain direct and indirect Subsidiaries of Seller are engaged in, among other things, the manufacturing and distribution of Licensed Products;

WHEREAS, Seller and Purchaser have entered into an Asset Purchase Agreement, dated as of August 14, 2005 (“APA”), pursuant to which Purchaser shall purchase and assume, and Seller, through itself and one or more of its direct or indirect Subsidiaries, shall sell, transfer and assign substantially all of the assets and liabilities of the Business (as defined in the APA) to Purchaser;

WHEREAS, in connection with the foregoing, Seller desires to grant to Purchaser a license to use certain other Trademarks (as defined in the APA); and

NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and between the parties as follows:

ARTICLE I

DEFINITIONS

For the purpose of this License, unless specifically defined otherwise in this License, all defined terms will have the meanings set forth in the APA:

1.1 AUTHORIZED DEALERS. “Authorized Dealers” means any distributor, dealer, OEM customer, VAR customer, VAD customer, systems integrator or other agent that on or after the Closing Date is authorized by Purchaser or any of its Subsidiaries to market, advertise, sell, lease, rent, service or otherwise offer Licensed Products.

1.2 BUSINESS. “Business” shall have the meaning set forth in the APA.

1.3 COLLATERAL MATERIALS. “Collateral Materials” means all packaging, tags, labels, instructions, warranties, Licensed Product data sheets, descriptions and specifications (including online versions thereof), and other materials of any similar type associated with the Licensed Products that are marked with at least one of the Licensed Marks.

1.4 CORPORATE IDENTITY MATERIALS. “Corporate Identity Materials” means materials that are not Licensed Products or Licensed Product-related and that Purchaser may now or hereafter use to communicate its identity, including, by way of example and without limitation, business cards, letterhead, stationery, paper stock and other supplies, signage on real property, buildings, fleet and uniforms.

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1.5 CLOSING DATE. “Closing Date” means the Closing Date as defined in the APA.

1.6 FAMILY. “Family” means Semiconductor Products with similar specifications and functions to a Licensed Product, which are intentionally associated with one or more other Licensed Products and which are intended to perform similar functions. Members of the same Family of Licensed Products communicate this connection to customers by using sequential or related part numbers, similar or related product names or descriptions, and the like.

1.7 LICENSED MARKS. “Licensed Marks” means the Seller Trademarks listed on Attachment 1 to this License.

1.8 LICENSED PRODUCTS. “Licensed Products” means any Semiconductor Product that was commercially sold or offered for sale by Seller immediately prior to the Closing Date and rights to which have been transferred to Purchaser under the APA, and new versions thereof that have merely minor incremental differences from any such Semiconductor Product. Licensed Products shall also include maintenance (whether diagnostic, preventive, remedial, warranty or non-warranty), support and similar services associated with Licensed Products, pursuant to maintenance contracts or otherwise.

1.9 MARKETING MATERIALS. “Marketing Materials” means advertising, promotions, display fixtures or any of any similar type of literature or things, in any medium, for the marketing, promotion or advertising of the Licensed Products or parts therefor that are marked with at least one of the Licensed Marks.

1.10 PERSON. “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

1.11 QUALITY STANDARDS. “Quality Standards” means written standards of quality applicable to the Licensed Products, as in use immediately prior to the Closing Date, unless otherwise modified in writing by Seller from time to time during the Term and communicated to Purchaser; such modified standards to be reasonably acceptable to Purchaser.

1.12 SELL. To “Sell” a product means to sell, transfer, lease or otherwise dispose of a product. “Sale” and “Sold” have the corollary meanings ascribed thereto.

1.13 SEMICONDUCTOR PRODUCT. “Semiconductor Product” has the same meaning set forth in the APA.

1.14 SUBSIDIARY. “Subsidiary” means Subsidiary as defined in the APA.

1.15 TERM. “Term” means the term defined in Article X of this License.

 

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1.16 THIRD PARTY. “Third Party” means a Person other than Seller and its Subsidiaries or Purchaser and its Subsidiaries.

1.17 TRADEMARK USAGE GUIDELINES. “Trademark Usage Guidelines” means the written guidelines for proper usage of the Licensed Marks, as in use immediately prior to the Closing Date and located at: http://www.agilent.com/secure/agilentbrand/

User Name: brandid

Password: spark

for literature, packaging, exhibit standards, emarketing, learning products, web; and third party trademark use standards located at: http://www.agilent.com/secure/trademark/

User Name: trademark

Password: ez4u

and product labeling standards attached hereto as Attachment 2. All such guidelines may be revised and updated in writing at the sites listed above by Seller from time to time during the Term; or by written communication to the Purchaser with regard to the product labeling standards. For avoidance of confusion with regard to product labeling embedded into the manufacturing process, any such labeling that was created by Seller and on Seller’s corporate price list as of the Closing Date, will be deemed to be in compliance with any product labeling standards, provided the embedded product labeling has not been altered by Purchaser.

ARTICLE II

LICENSES

2.1 LICENSE GRANT.

(a) Seller grants to Purchaser a personal, non-exclusive, worldwide and non-transferable (except as set forth in Section 15.8 hereof) license during the Term to use: (1) the Licensed Marks on or in connection with the Licensed Products and Collateral Materials in connection with the Sale and offer for Sale of such Licensed Products (or, in the case of Licensed Products in the form of software, in connection with licensing of such Licensed Products); the Licensed Marks in Marketing Materials for the Licensed Products; the Licensed Marks in connection with Corporate Identity Materials; and Seller Part Numbers (as that term is defined in Section 10.5(i)) in connection with Licensed Products and any other Purchaser-manufactured Semiconductor Product in the same Family. Seller covenants not to grant any licenses to any Third Party under the Licensed Marks in connection with the Sale or offer for Sale of Semiconductor Products for use of the Licensed Marks within a period of twenty-four (24) months following the Closing Date.

2.2 LICENSE RESTRICTIONS.

(a) Once Purchaser abandons the use of all of the Licensed Marks on a particular Licensed Product, then Purchaser agrees that its license granted hereunder with respect to that Licensed Product shall thereupon terminate.

 

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(b) Purchaser may not make any use whatsoever, in whole or in part, of the Licensed Marks, or any other Trademarks owned by Seller, in connection with Purchaser’s corporate, doing business as, or fictitious name, or on Corporate Identity Materials, except as set forth in this License.

(c) Purchaser may not use any Licensed Mark in direct association with another Trademark such that the two Trademark appear to be a single Trademark or in any other composite manner with any Trademarks of Purchaser or any Third Party.

(d) In all respects, Purchaser’s usage of the Licensed Marks during the Term pursuant to the license granted hereunder shall be in a manner consistent with the high standards, reputation and prestige of the Seller as represented by its use of the Licensed Marks, and any usage by Purchaser that is inconsistent with the foregoing shall be deemed to be outside the scope of the license granted hereunder. As a condition to the license granted hereunder, Purchaser shall at all times present, position and promote the Licensed Products marked with one or more of the Licensed Marks in a manner consistent with the high standards and prestige of the Seller.

2.3 LICENSEE UNDERTAKINGS. As a condition to the licenses granted hereunder, Purchaser undertakes to Seller that:

(a) Purchaser shall not use the Licensed Marks (or any other Trademark of Seller) in any manner contrary to public morals, in any manner which is deceptive or misleading, which ridicules or is derogatory to the Licensed Marks, or which compromises or reflects unfavorably upon the goodwill, good name, reputation or image of Seller or the Licensed Marks, or which might jeopardize or limit Seller’s proprietary interest therein.

(b) Purchaser shall not use the Licensed Marks in connection with any products other than the Licensed Products, including without limitation any other products sold and/or manufactured by Purchaser. Notwithstanding the foregoing, Purchaser may use Seller Part Numbers in connection with Semiconductor Products in a Family associated with a Licensed Product.

(c) Purchaser shall not: (i) misrepresent to any Person the scope of its authority under this License, (ii) incur or authorize any expenses or liabilities chargeable to Seller, or (iii) take any actions that would impose upon Seller any obligation or liability to a Third Party other than obligations under this License, or other obligations which Seller expressly approves in writing for Purchaser to incur on its behalf.

(d) Purchaser shall have adopted a customer facing corporate identity of its own by the Closing Date.

(e) In all external communications involving any use of the Licensed Marks on Corporate Identity Materials, Purchaser shall use reasonable best efforts to avoid confusion regarding the source of the communications.

 

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ARTICLE III

PERMITTED SUBLICENSES

3.1 SUBLICENSES TO SUBSIDIARIES

(a) Subject to the terms and conditions of this License, including all applicable Quality Standards and Trademark Usage Guidelines and other restrictions in this License, Purchaser may grant sublicenses to its Subsidiaries to use the Licensed Marks in accordance with the license grant in Section 2.1 above; provided, that: (a) Purchaser enters into a written sublicense agreement with each such Subsidiary sublicensee, and (b) such agreement does not include the right to grant further sublicenses except to other Subsidiaries of Purchaser pursuant to written sublicense agreements. If Purchaser or one of Purchaser’s Subsidiaries grants any sublicense rights pursuant to this Section 3.1 and any such sublicensed Subsidiary ceases to be a Subsidiary, then the sublicense granted to such Subsidiary pursuant to this Section 3.1 shall terminate immediately upon the date of such cessation.

(b) Notwithstanding the foregoing, subject to the terms and conditions of this License, including all applicable Quality Standards and Trademark Usage Guidelines and other restrictions in this License, and subject to the closing of a contemplated transaction between Avago Technologies Limited, Purchaser’s parent company (“Avago”), and Palau Acquisition Corporation for purchase of Avago’s storage business, Purchaser may grant a sublicense to Palau Acquisition Corporation (“Palau”) for the Licensed Marks as described in and pursuant to a Trademark License Agreement (“Trademark Sublicense”) between Palau and Purchaser, which is attached in its entirety as Exhibit A hereto.

(c) Seller acknowledges that Avago may enter into similar transactions to sell business lines of Avago in future. Associated with such sales and effective only upon the closing of such sales, and subject to the terms and conditions of this License, including all applicable Quality Standards and Trademark Usage Guidelines and other restrictions in this License, Seller agrees that upon reasonable advance written notice, and subject to Seller’s consent (such consent not to be unreasonably conditioned, delayed or withheld), Purchaser may grant further Trademark Sublicenses to any such acquirors pursuant to written agreements substantially in the form of, and no less protective of Seller’s interests than, the Trademark Sublicense set forth in Exhibit A; provided that the calculation of the license periods in any such Trademark Sublicenses cannot extend beyond the license periods for Purchaser’s licenses under Section 10.5 of the License.

3.2 AUTHORIZED DEALERS’ USE OF MARKS. Subject to the terms and conditions of this License, including all applicable Quality Standards and Trademark Usage Guidelines and other restrictions in this License, Purchaser (and those Subsidiaries sublicensed to use the Licensed Marks pursuant to Section 3.1) may allow Authorized Dealers, and may allow such Authorized Dealers to allow other Authorized Dealers, to Sell or otherwise distribute Collateral Materials and Licensed Products bearing the Licensed Marks, provided that such Authorized Dealers execute written agreements with Purchaser (or its Subsidiaries) that impose upon such Authorized Dealers an obligation of full compliance with all relevant provisions of this License.

3.3 ENFORCEMENT OF AGREEMENTS. Purchaser shall take all reasonably appropriate measures at Purchaser’s expense promptly and diligently to enforce the terms of any sublicense agreement or other agreement with any Subsidiary or Authorized Dealer and shall

 

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restrain any such Subsidiary or Authorized Dealer from violating such terms, including without limitation: (a) monitoring the Subsidiaries’ and Authorized Dealers’ compliance with the relevant Trademark Usage Guidelines and Quality Standards and causing any non-complying Subsidiary or Authorized Dealer promptly to remedy any failure, (b) if need be, terminating such agreement, and/or (c) if need be, commencing legal action. In each case, Purchaser shall use a standard of care consistent with Seller’s practices as of the Closing Date, but in no case using a standard of care less than what is reasonable in the industry.

ARTICLE IV

TRADEMARK USAGE GUIDELINES

4.1 TRADEMARK USAGE GUIDELINES. Purchaser, its Subsidiaries and Authorized Dealers shall use the Licensed Marks during the Term only in a manner that is consistent with the Trademark Usage Guidelines.

4.2 TRADEMARK REVIEWS. At Seller’s reasonable request, Purchaser agrees to furnish or make available for inspection to Seller samples of all Licensed Products, Collateral Materials and Marketing Materials of Purchaser and its Subsidiaries that are marked with one or more of the Licensed Marks. Purchaser further agrees to take reasonably appropriate measures to require its Authorized Dealers to furnish or make available for inspection to Purchaser samples of all Marketing Materials and Collateral Materials of its Authorized Dealers. If Purchaser is notified or reasonably determines that it or any of its Subsidiaries or Authorized Dealers is not complying with any Trademark Usage Guidelines, it shall notify Seller and the provisions of Article V and Section 3.3 hereof shall apply to such noncompliance.

ARTICLE V

TRADEMARK USAGE GUIDELINES ENFORCEMENT

5.1 INITIAL CURE PERIOD. If Seller becomes aware that Purchaser or any Subsidiary is not complying with any Trademark Usage Guidelines, Seller shall notify Purchaser in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Purchaser shall then have thirty (30) days after receipt of such notice (“Guideline Initial Cure Period”) to correct such noncompliance or submit to Seller a written plan to correct such noncompliance, which written plan is reasonably acceptable to Seller, unless Seller previously affirmatively concurs in writing, in its sole discretion, that Purchaser or its Subsidiary is not in noncompliance. If Seller or Purchaser becomes aware that an Authorized Dealer is not complying with any Trademark Usage Guidelines, Purchaser (but not Seller) shall promptly notify such Authorized Dealer in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Such Authorized Dealer shall then have the Guideline Initial Cure Period to correct such noncompliance or submit to Purchaser a written plan to correct such noncompliance, which written plan is reasonably acceptable to Purchaser and Seller.

5.2 SECOND CURE PERIOD. If the noncompliance with the Trademark Usage Guidelines continues beyond the Guideline Initial Cure Period, Purchaser and Seller shall each promptly appoint a representative to negotiate in good faith actions that may be necessary to correct such noncompliance. The parties shall have fifteen (15) days following the expiration of

 

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the Guideline Initial Cure Period to agree on corrective actions, and Purchaser shall have fifteen (15) days from the date of an agreement of corrective actions to implement such corrective actions and cure or cause the cure of such noncompliance (“Second Guideline Cure Period”).

5.3 FINAL CURE PERIOD. If the noncompliance with the Trademark Usage Guidelines by Purchaser or any Subsidiary (as the case may be) remains uncured after the expiration of the Second Guideline Cure Period, then at Seller’s election, Purchaser or the non-complying Subsidiary (as the case may be) promptly shall cease using the non-complying Collateral Materials until Seller reasonably determines that Purchaser or the non-complying Subsidiary (as the case may be) has demonstrated its ability and commitment to comply with the Trademark Usage Guidelines. If the noncompliance with the Trademark Usage Guidelines by an Authorized Dealer remains uncured after the expiration of the Second Guideline Cure Period, then at Purchaser’s election, such Authorized Dealer promptly shall cease using the non-complying Collateral Materials and/or Marketing Materials until Purchaser determines that such Authorized Dealer has demonstrated its ability and commitment to comply with the Trademark Usage Guidelines. Nothing in this Article V shall be deemed to limit Purchaser’s obligations under Section 3.3 above or to preclude Seller from exercising any rights or remedies under Section 3.3 above.

ARTICLE VI

QUALITY STANDARDS

6.1 GENERAL. Purchaser acknowledges that the Licensed Products permitted by this License to be marked with one or more of the Licensed Marks must continue to be of sufficiently high quality as to provide protection of the Licensed Marks and the goodwill they symbolize.

6.2 QUALITY STANDARDS. Purchaser and its Subsidiaries shall use the Licensed Marks only on and in connection with Licensed Products that meet or exceed in all respects the Quality Standards.

6.3 QUALITY CONTROL REVIEWS. At Seller’s reasonable request, Purchaser agrees to furnish or make available to Seller for inspection sample Licensed Products marked with one or more of the Licensed Marks. If Purchaser is notified or reasonably determines that it or any of its Subsidiaries is not complying with any Quality Standards, it shall notify Seller and the provisions of Article VII and Section 2.3 shall apply to such noncompliance.

ARTICLE VII

QUALITY STANDARD ENFORCEMENT

7.1 INITIAL CURE PERIOD. If Seller becomes aware that Purchaser or any Subsidiary is not complying with any Quality Standard, Seller shall notify Purchaser in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Following receipt of such notice, Purchaser shall make an inquiry promptly and in good faith concerning each instance of noncompliance described in the notice. Purchaser shall then have thirty (30) days after receipt of such notice (“Initial Cure Period”) to correct such noncompliance or submit to Seller a written plan to correct such

 

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noncompliance, which written plan is reasonably acceptable to Seller, unless Seller previously affirmatively concurs in writing, in its sole discretion, that Purchaser or its Subsidiaries is not in noncompliance.

7.2 SECOND CURE PERIOD. If the said noncompliance with the Quality Standards continues beyond the Initial Cure Period, Purchaser and Seller shall each promptly appoint a representative to negotiate in good faith actions that may be necessary to correct such noncompliance. The parties shall have fifteen (15) days following the expiration of the Initial Cure Period to agree on corrective actions, and Purchaser shall have fifteen (15) days from the date of an agreement of corrective actions to implement such corrective actions and cure or cause the cure of such noncompliance (“Second Cure Period”).

7.3 FINAL CURE PERIOD. If the said noncompliance with the Quality Standards by Purchaser or any Subsidiary (as the case may be) remains uncured after the expiration of the Second Cure Period, then at Seller’s election, Purchaser or the non-complying Subsidiary (as the case may be) promptly shall cease offering the non-complying Licensed Products under the Licensed Marks until Seller reasonably determines that Purchaser, or the non-complying Subsidiary (as the case may be) has reasonably demonstrated its ability and commitment to comply with the Quality Standards. Nothing in this Article VII shall be deemed to limit Purchaser’s obligations under Section 3.3 above.

ARTICLE VIII

PROTECTION OF LICENSED MARKS

8.1 OWNERSHIP AND RIGHTS. Purchaser agrees not to challenge the ownership or validity of the Licensed Marks. Purchaser shall not disparage, dilute or adversely affect the validity of the Licensed Marks. Purchaser’s use of the Licensed Marks shall inure exclusively to the benefit of Seller and Purchaser shall not acquire or assert any rights therein. Purchaser recognizes the value of the goodwill associated with the Licensed Marks, and that the Licensed Marks may have acquired secondary meaning in the minds of the public.

8.2 PROTECTION OF MARKS. Purchaser shall assist Seller, at Seller’s request and expense, in the procurement and maintenance of Seller’s respective intellectual property rights in the Licensed Marks. Purchaser will not grant or attempt to grant a security interest in the Licensed Marks or record any such security interest in the United States Patent and Trademark Office or elsewhere against any Trademark application or registration belonging to Seller. Purchaser agrees to, and to cause its Subsidiaries to, execute all documents reasonably requested by Seller to effect further registration of, maintenance and renewal of the Licensed Marks, recordation of the license relationship between Seller and Purchaser, and recordation of Purchaser as a registered user. Seller makes no warranty or representation that Trademark registrations have been or will be applied for, secured or maintained in the Licensed Marks throughout, or anywhere within, the world. Purchaser shall cause to appear on all Licensed Products, all Marketing Materials and all Collateral Materials, such legends, markings and notices as may be required by applicable law or reasonably requested by Seller.

 

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8.3 SIMILAR MARKS. Purchaser agrees not to use or register in any country any Trademark that infringes on the rights of Seller in the Licensed Marks, or any element thereof. If any application for registration is, or has been, filed in any country by Purchaser which relates to any Trademark that infringes the rights of Seller in the Licensed Marks, Purchaser shall immediately abandon any such application or registration or assign it to Seller. Purchaser may not adopt any trademarks incorporating the root “Agil” or any other trademark similar to the Licensed Trademarks. Purchaser shall not challenge Seller’s ownership of or the validity of the Licensed Marks or any application for registration thereof throughout the world. Purchaser shall not use or register in any country or jurisdiction, or permit others to use or register on its behalf in any country or jurisdiction, any copyright, domain name, telephone number, keyword, metatag, other electronic identifier or any other intellectual property right, whether recognized currently or in the future, or any other designation which would affect the ownership or rights of Seller in and to the Licensed Marks, or otherwise take any action which would adversely affect any of such ownership rights, or assist anyone else in doing so. Purchaser shall cause its Subsidiaries and Authorized Dealers to comply with the provisions of this Section 8.3.

8.4 INFRINGEMENT PROCEEDINGS. In the event that the Purchaser learns, during the Term of this License, of any infringement or threatened infringement of the Licensed Marks, or any unfair competition, passing-off or dilution with respect to the Licensed Marks, Purchaser shall immediately notify Seller or its authorized representative giving particulars thereof, and Purchaser shall provide necessary information and assistance to Seller or its authorized representatives at Seller’s expense in the event that Seller decides that proceedings should be commenced. Notwithstanding the foregoing, Purchaser is not obligated to monitor or police use of the Licensed Marks by Third Parties other than as specifically set forth in Section 3.3 hereof. Except for those actions initiated by Purchaser pursuant to Section 3.3 hereof to enforce any sublicense or other agreement with any Subsidiary or Authorized Dealer, Seller shall have exclusive control of any litigation, opposition, cancellation or related legal proceedings. The decision whether to bring, maintain or settle any such proceedings shall be at the exclusive option and expense of Seller, and all recoveries shall belong exclusively to Seller. Purchaser shall not and shall have no right to initiate any litigation, opposition, cancellation or related legal proceedings with respect to the Licensed Marks in its own name (except for those actions initiated by Purchaser pursuant to Section 3.3 hereof), but, at Seller’s request, agrees to cooperate with Seller at Seller’s expense to enforce its rights in the Licensed Marks, including to join or be joined as a party in any action taken by Seller against a third party for infringement or threatened infringement of the Licensed Marks, to the extent such joinder is required under mandatory local law for the prosecution of such an action. Seller shall incur no liability to Purchaser or any other Person under any legal theory by reason of Seller’s failure or refusal to prosecute or by Seller’s refusal to permit Purchaser to prosecute, any alleged infringement by Third Parties, nor by reason of any settlement to which Seller may agree.

ARTICLE IX

CONFIDENTIALITY

9.1 CONFIDENTIAL INFORMATION. The parties hereto expressly acknowledge and agree that all information, whether written or oral, furnished by either party to the other party or any Subsidiary of such other party pursuant to this License (“Confidential Information”) shall be deemed to be confidential and shall be maintained by each party and their respective Subsidiaries in confidence, using the same degree of care to preserve the confidentiality of such Confidential Information that the party to whom such Confidential Information is disclosed

 

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would use to preserve the confidentiality of its own information of a similar nature and in no event less than a reasonable degree of care. Except as authorized in writing by the other party, neither party shall at any time disclose or permit to be disclosed any such Confidential Information to any person, firm, corporation or entity: (a) except as may reasonably be required in connection with the performance of this License by Purchaser, Seller or its respective Subsidiaries, as the case may be, and (b) except as may reasonably be required after the Closing Date by Purchaser or its Subsidiaries in connection with the use of the Licensed Marks or operation of the Business, and (c) except to the parties’ agents or representatives who are informed by the parties of the confidential nature of the information and are bound to maintain its confidentiality, and (d) in the course of due diligence in connection with the sale of all or a portion of either party’s business provided the disclosure is pursuant to a nondisclosure agreement having terms comparable to Sections 9.1 and 9.2 hereof.

9.2 EXCEPTIONS. The obligation not to disclose information under Section 9.1 hereof shall not apply to information that, as of the Closing Date or thereafter: (a) is or becomes generally available to the public other than as a result of disclosure made after the execution of the APA by the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof, (b) was or becomes readily available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis, (c) is or becomes available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis from a source other than its own files or personnel or the other party or its Subsidiaries, provided that such source is not known by the party desiring to treat such information as non-confidential to be bound by confidentiality agreements with the other party or its Subsidiaries or by legal, fiduciary or ethical constraints on disclosure of such information, or (d) is required to be disclosed pursuant to a governmental order or decree or other legal requirement (including the requirements of the U.S. Securities and Exchange Commission and the listing rules of any applicable securities exchange), provided that the party required to disclose such information shall give the other party prompt notice thereof prior to such disclosure and, at the request of the other party, shall cooperate in all reasonable respects in maintaining the confidentiality of such information, including obtaining a protective order or other similar order. Nothing in Section 9.1 shall limit in any respect either party’s ability to disclose information in connection with the enforcement by such party of its rights under this License; provided that the proviso of clause (d) in the immediately preceding sentence shall apply to the party desiring to disclose such information.

9.3 DURATION. The obligations of the parties set forth in this Article IX, with respect to the protection of Confidential Information, shall remain in effect until five years after: (a) the Closing Date, with respect to Confidential Information of one party that is known to or in the possession of the other party as of the Closing Date, or (ii) the date of disclosure, with respect to Confidential Information that is disclosed by the one party to the other party after the Closing Date.

 

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ARTICLE X

TERM OF LICENSE

10.1 The term of the license granted pursuant to Section 2.1 hereof shall begin on the Closing Date and, unless terminated sooner pursuant to the provisions of Article XII hereof, shall last for the periods set forth in Section 10.5 below.

10.2 “Term” as used herein means the foregoing periods of permissible use for the Licensed Marks.

10.3 “Non-Customer-Facing Parts” means tangible parts whose branding is not visible to end consumers in the ordinary course of use. For the avoidance of doubt, “ordinary course of business” includes normal inspection, use, calibration, maintenance, service, repair and/or failure analysis.

10.4 “Seller Branded Products” means Licensed Products on or in connection with which the Licensed Marks are used, unless such use is solely on Non-Customer-Facing Parts. Trademarks are in use “on or in connection with” a given Licensed Product if they are used on the Licensed Product itself or on Collateral Materials associated with such Licensed Product.

10.5 Purchaser agrees to discontinue all use of the Licensed Marks as quickly as is commercially reasonable. Without limiting the foregoing, Purchaser shall have the right to use said Trademarks according to the following conditions and schedule, with which Purchaser shall comply strictly:

(a) For the thirty (30) days following the Closing Date, Purchaser may use the Licensed Marks in connection with Corporate Identity Materials used for external communication which are maintained in digital format and/or as published on any website maintained by the Purchaser in connection with the conduct of the Business, on a royalty free basis;

(b) For the three (3) months following the Closing Date, Purchaser may use up any tangible stock of Corporate Identity Materials such as business cards, letterhead, stationery, paper stock and other supplies, in connection with the conduct of the Business on a royalty free basis, but only with respect to such items that, as of the Closing Date, are in hand or on order, and in all cases subject to Purchaser’s compliance with Section 2.3(e) above;

(c) For the six (6) months following the Closing Date, Purchaser may use the Licensed Marks in any external signage on a royalty free basis, provided such signage was in use as of the Closing Date;

(d) As of the dates set forth in Section 10.5(a)-(c), Purchaser must cease all use of the Licensed Marks in connection with Corporate Identity Materials;

(e) For the six (6) months following the Closing Date, Purchaser may use the Licensed Marks in Marketing Materials on a royalty free basis;

(f) As of six (6) months from the Closing Date, Purchaser must cease all use of Licensed Marks in Marketing Materials;

 

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(g) For the twenty-four (24) months following the Closing Date, Purchaser may use the Licensed Marks on a royalty free basis on or in connection with the Seller Branded Products manufactured by Seller prior to the Closing Date or manufactured by Purchaser within the eighteen (18) months following the Closing Date;

(h) As of thirty-six (36) months following the Closing Date, Purchaser must cease all use of Licensed Marks on or in connection with all Seller Branded Products. Except as would be a violation of law, any Non-Customer-Facing Parts bearing the Licensed Marks manufactured more than thirty-six (36) months after the Closing Date shall bear a prominent label indicating that they are manufactured by Purchaser and, unless commercially unreasonable, such label shall cover the Licensed Marks on such part.

(i) Notwithstanding Section 10.5(f)-(h), Purchaser may continue to use the Seller part number alphanumerics beginning with the letter “A” (“Seller Part Numbers”) on or in connection with any Licensed Product or Semiconductor Products within the same Family as a Licensed Product until that Family is discontinued or obsoleted. For the avoidance of doubt, it is understood and agreed that this License does not purport to restrict Purchaser’s use of any part number that does not begin with the letter “A”.

10.6 Purchaser agrees to provide written confirmation of compliance with the License Term at thirty (30) days, three (3) months, six (6), eighteen (18), and thirty-six (36) months. Purchaser shall also advise Seller when it has discontinued use of all remaining Non-Customer-Facing Parts bearing the Licensed Marks and discontinued or obsoleted all Families of Licensed Products.

10.7 Except as would be a violation of Law, Purchaser agrees to notify all consumers receiving parts and materials bearing the Licensed Marks that Purchaser is the source of and is the proper contact for such Licensed Products, Collateral Materials, parts and materials.

10.8 It is understood and agreed that it shall not be a violation of this License for Purchaser, its Subsidiaries or Authorized Dealers, at any time after the Term, to make accurate references to the fact that Purchaser has succeeded to the business of Seller with respect to the Licensed Products, or to advertise or promote its or their provision of maintenance services or supply of spare parts for Licensed Products previously sold under any of the Licensed Marks, provided that Purchaser, its Subsidiaries and Authorized Dealers do not in connection therewith suggest any affiliation with Seller, do not claim to be authorized by Seller in any manner with respect to such activities, and do not brand any Semiconductor Products, Marketing Materials, Collateral Materials or parts Sold after the Term with any of the Licensed Marks in a manner that is inconsistent with this ARTICLE X.

ARTICLE XI

ROYALTIES

11.1 ROYALTIES.

(a) Upon any Sale occurring: (i) less than thirty-six (36) months after the Closing Date by Purchaser or its Subsidiaries of Seller Branded Products manufactured by Purchaser more than eighteen (18) months after the Closing Date, or (ii) more than twenty-four

 

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months and less than thirty-six (36) months after the Closing Date by Purchaser or its Subsidiaries of Seller Branded Products (other than repaired, refurbished or reconstructed Seller Branded Products or repair parts) manufactured by Seller prior to the Closing Date or by Purchaser less than eighteen (18) months after the Closing Date, Purchaser shall pay to Seller a five (5)% royalty on the Net Sales earned by Purchaser in each Seller fiscal quarter as a result of such Sale.

(b) As used in this Article XI, “Net Sales” means the gross invoice price from: (i) royalty-bearing Sales under Section 11.1(a) above, in any case less: (1) charges for handling, freight, sales taxes, insurance costs and import duties where such items are included in the invoiced price, (2) point-of-sale credits (or other similar adjustments to price) granted to independent distributors, and (3) credits actually granted or refunds actually given for returns during such Seller fiscal quarter. In the event that the foregoing Seller Branded Products are Sold for no or nominal consideration or to a Subsidiary, Authorized Dealer, affiliated company or in any other circumstances in which the selling price is established on other than an arms-length basis, the Net Sales on such Sales shall be determined on the average selling price earned by Seller during the preceding Seller fiscal quarter on Sales of like volumes of the applicable Seller Branded Products to unaffiliated customers in arms-length sales. However, in the event that the foregoing Seller Branded Products are Sold to Seller’s Subsidiaries, Authorized Dealers or affiliated companies for resale to Third Parties, then the royalties will be based on Net Sales from the Subsidiaries, Authorized Dealers or affiliated companies to the Third Parties and no royalties will be due on the Sales to the Subsidiaries, Authorized Dealers or affiliated companies.

(c) For the purposes of clarification, no royalty is due under this Article XI for uses of the Licensed Marks that are covered by Section 10.8. Also, no royalties will accrue at any time for the use of Seller Part Numbers.

11.2 PAYMENTS AND ACCOUNTING.

(a) With respect to the royalties set forth herein, Seller shall keep full, clear and accurate records until otherwise provided in Section 11.2(b). These records shall be retained for a period of three (3) years from the date of payment notwithstanding the expiration or other termination of this License. Purchaser shall have the right, through a mutually agreed upon independent certified public accountant (consent to which shall not be unreasonably withheld or delayed by Purchaser), and at Seller’s expense, to examine and audit, not more than once a year, and during normal business hours, all such records and such other records and accounts as may under recognized accounting practices contain information bearing upon the amount of royalty payable to Seller under this License. Prompt adjustment shall be made by either party to compensate for any errors and/or omissions disclosed by such examination or audit. Should any such error and/or omission result in an underpayment of more than five percent (5%) of the total royalties due for the period under audit, Purchaser shall, upon Seller’s request, pay for the cost of the audit and pay Seller an additional fee equal to a compound annual interest rate of ten percent (10%) of such error and/or omission.

(b) Within forty-five (45) days after the end of each Purchaser fiscal quarter, Purchaser shall furnish to Seller a statement in suitable form showing all Seller Branded Products subject to royalties that were sold, during such quarter, and the amount of royalty payable

 

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thereon. If no Licensed Products or services subject to royalty have been sold, that fact shall be shown on such statement. Also, within such forty-five (45) days, Purchaser shall pay to Seller the royalties payable hereunder for such quarter. Purchaser and Seller will determine the form of the statement prior to submission of the first such statement. All royalty and other payments to Seller hereunder shall be in United States dollars. Royalties based on sales in other currencies shall be converted to United States dollars according to the official rate of exchange for that currency, as published in the Wall Street Journal on the last day of the calendar month in which the royalty accrued (or, if not published on that day, the last publication day for the Wall Street Journal during that month). If two consecutive Purchaser fiscal quarters pass in which no royalties are due under this License and Purchaser reasonably believes no royalties will be due, the obligations pursuant to this Article XI shall terminate. If Purchaser resumes sale of Seller Branded Products that are subject to royalties, the obligations of this Article XI shall automatically resume.

ARTICLE XII

TERMINATION

12.1 VOLUNTARY TERMINATION. By written notice to Seller, Purchaser may voluntarily terminate all or a specified portion of the licenses and rights granted to it hereunder by Seller. Such notice shall specify the effective date of such termination and shall clearly specify any affected Licensed Marks and Licensed Products.

12.2 SURVIVAL. Any voluntary termination of licenses and rights of Purchaser under Section 12.1 hereof shall not affect Purchaser’s licenses and rights with respect to any Licensed Products made or furnished prior to such termination.

ARTICLE XIII

DISPUTE RESOLUTION

13.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any dispute or claim arising out of or related to this License through negotiation. Within thirty (30) days after notice of a dispute or claim is given by either party to the other party, the parties’ first tier negotiating teams (as determined by each party’s Director of Intellectual Property (or person holding a similar position or title) or his or her delegate) shall meet and make a good faith attempt to resolve such dispute or claim and shall continue to negotiate in good faith in an effort to resolve the dispute or claim or renegotiate the applicable section or provision without the necessity of any formal proceedings. If the first tier negotiating teams are unable to agree within thirty (30) days of their first meeting, then the parties’ second tier negotiating teams (as determined by each party’s Director of Intellectual Property or his or her delegate) shall meet within thirty (30) days after the end of the first thirty (30) day negotiating period to attempt to resolve the matter. During the course of negotiations under this Section 13.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating teams but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. All negotiations between the parties pursuant to this Section 13.1 shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future litigation.

 

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13.2 NONBINDING MEDIATION. In the event that any dispute or claim arising out of or related to this License is not settled by the parties within fifteen (15) days after the first meeting of the second tier negotiating teams under Section 13.1 hereof, the parties will attempt in good faith to resolve such dispute or claim by nonbinding mediation in accordance with the American Arbitration Association Commercial Mediation Rules. The mediation shall be held within thirty (30) days of the end of such fifteen (15) day negotiation period of the second tier negotiating teams. Except as provided below in Section 13.3, no litigation for the resolution of such dispute may be commenced until the parties try in good faith to settle the dispute by such mediation in accordance with such rules, and either party has concluded in good faith that amicable resolution through continued mediation of the matter does not appear likely. The costs of mediation shall be shared equally by the parties to the mediation. Any settlement reached by mediation shall be recorded in writing, signed by the parties, and shall be binding on them.

13.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party from initiating litigation or other judicial or administrative proceedings if such party would be substantially harmed by a failure to act during the time that such good faith efforts are being made to resolve the dispute or claim through negotiation or mediation. In the event that litigation is commenced under this Section 13.3, the parties agree to continue to attempt to resolve any dispute or claim according to the terms of Sections 13.1 and 13.2 hereof during the course of such litigation proceedings under this Section 13.3.

ARTICLE XIV

LIMITATION OF LIABILITY

IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES FOR ANY DAMAGES, INCLUDING WITHOUT LIMITATION SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS OR ANY OTHER DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

ARTICLE XV

MISCELLANEOUS PROVISIONS

15.1 DISCLAIMER. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE APA, EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL LICENSED MARKS AND ANY OTHER INFORMATION OR MATERIALS LICENSED OR FURNISHED HEREUNDER ARE LICENSED OR FURNISHED WITHOUT ANY WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Except as otherwise set forth herein or in the APA, neither Seller nor any of its Subsidiaries makes any warranty or representation as to the validity of any Trademark licensed by it to Purchaser or any warranty or representation that any use of any Trademark with respect to any Licensed Product or service will be free from infringement of any rights of any Third Party.

 

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15.2 NO IMPLIED LICENSES. Nothing contained in this License shall be construed as conferring any rights by implication, estoppel or otherwise, under any intellectual property right, other than the rights expressly granted in this License with respect to the Licensed Marks. Neither party is required hereunder to furnish or disclose to the other any information (including copies of registrations of the Trademarks), except as specifically provided herein or in the APA.

15.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder to institute any action or suit against Third Parties for infringement of any of the Licensed Marks or to defend any action or suit brought by a Third Party which challenges or concerns the validity of any of the Licensed Marks. Purchaser shall not have any right to institute any action or suit against Third Parties for infringement of any of the Licensed Marks.

15.4 NO OBLIGATION TO OBTAIN OR MAINTAIN MARKS. Neither party, nor any of its Subsidiaries, is obligated to: (a) file any application for registration of any Trademark, or to secure any rights in any Trademarks, (b) maintain any Trademark registration, or (c) provide any assistance, except for the obligations expressly assumed in this License.

15.5 ENTIRE AGREEMENT. This License and the APA constitute the entire understanding between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. To the extent there is a conflict between this License and the APA between the parties, the terms of the APA shall govern, provided, however, that the terms of this License shall govern with respect to: (a) Article IX with respect to Confidential Information transferred or disclosed pursuant to this License, (b) Article XI concerning royalties and audits due under this license, (c) Article XII with respect to termination of the licenses granted hereunder, (d) Article XIII concerning dispute resolution, (e) Article XIV solely with respect to intellectual property that is licensed by one party to another party pursuant to this License, (f) Section 15.7 concerning notice, and (g) Section 15.8 concerning assignment or transfer of rights or obligations arising under this License. In addition, in the event of a conflict between this License and the Trademark Usage Guidelines or the Quality Standards, this License shall prevail.

15.6 SECTION HEADINGS; TABLE OF CONTENTS. The section headings contained in this License and the Table of Contents to this License are inserted for reference purposes only and are not intended to be a part, nor should they affect the meaning or interpretation, of this License.

 

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15.7 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by telecopy with answer back, by express or overnight mail delivered by an internationally recognized air courier (delivery charges prepaid), by registered or certified mail (postage prepaid, return receipt requested) or by

e-mail with receipt confirmed by return e-mail to the respective parties as follows:

If to Seller:

Agilent Technologies, Inc.

395 Page Mill Road, MS A3-10

P.O. Box 10395

Palo Alto, California 94303-0870

Attention:		Vice President, Associate General Counsel and
		Director of Intellectual Property

Telecopy: +1 (650) 752-5742

If to Purchaser:

Avago Technologies General IP (Singapore) Pte. Ltd.

c/o Silver Lake Partners

2725 Sand Hill Road, Suite 150

Menlo Park, CA 94025

Attention: Kenneth Y. Hao

Fax: (650) 234-2593

with copies to:

Kohlberg Kravis Roberts & Co.

2800 Sand Hill Road, Suite 200

Menlo Park, CA 94025

Attention: Adam H. Clammer

Fax: (650) 233-6548

Latham & Watkins LLP

135 Commonwealth Drive

Menlo Park, CA 94025

Attention: Peter F. Kerman, Esq.

Anthony J. Richmond, Esq.

Fax: (650) 463-2600

or to such other address as the party to whom notice is given may have previously furnished to the other in writing in the manner set forth above. Any notice or communication delivered in person shall be deemed effective on delivery. Any notice or communication sent by e-mail, telecopy or by air courier shall be deemed effective on the first Business Day (as defined in the APA) following the day on which such notice or communication was sent. Any notice or communication sent by registered or certified mail shall be deemed effective on the third Business Day following the day on which such notice or communication was mailed.

15.8 NONASSIGNABILITY. Neither party may, directly or indirectly, in whole or in part, whether by operation of law or otherwise, assign or transfer this License, without the other party’s prior written consent, and any attempted assignment, transfer or delegation without such prior written consent shall be voidable at the sole option of such other party. Notwithstanding

 

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the foregoing, each party (or its permitted successive assignees or transferees hereunder) may assign or transfer any or all of its rights or obligations under this License to one or more Subsidiaries of such party; provided, however, that no such assignment or transfer shall release the assigning party from any of its liabilities or obligations hereunder. Without limiting the foregoing, this License will be binding upon and inure to the benefit of the parties and their permitted successors and assigns. Notwithstanding any other provision in this License to the contrary, Purchaser may transfer its rights under this License to use Seller Part Numbers for Semiconductor Products or Families to an acquirer of all or part of the Business, with reasonable written notice to Seller, provided that the transfer is explicitly made subject to the same terms and conditions regarding the use of Seller Part Numbers as set forth herein, and provided that the transferee agrees to be bound by the choice of law and consent to jurisdiction provisions applicable to this License.

15.9 SEVERABILITY. If any provision of this License shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this License shall not be affected and shall remain in full force and effect, and Seller and Purchaser shall negotiate in good faith to replace such illegal, void or unenforceable provision with a provision that corresponds as closely as possible to the intentions of the parties as expressed by such illegal, void or unenforceable provision.

15.10 AMENDMENT; WAIVER; REMEDIES CUMULATIVE. This License, including this provision of this License, may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. No waiver by either party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this License, including any investigation by or on behalf of any party or a failure or delay by any party in exercising any power, right or privilege under this License, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this License and the APA. The waiver by any party hereto of a breach of any provision of this License shall not operate or be construed as a waiver of any subsequent breach. All rights and remedies existing under this License are cumulative to, and not exclusive of, any rights or remedies otherwise available.

15.11 COUNTERPARTS. This License may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 15.11, provided that receipt of copies of such counterparts is confirmed.

[SIGNATURE PAGE FOLLOWS]

 

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WHEREFORE, the parties have signed this Manufacturing Trademark License Agreement effective as of the Closing Date first set forth above.

 

AGILENT TECHNOLOGIES, INC.						AVAGO TECHNOLOGIES GENERAL IP (SINGAPORE) PTE. LTD.
By:						By:
Name:						Name:
Title:						Title:

[SIGNATURE PAGE TO THE MANUFACTURING TRADEMARK LICENSE AGREEMENT]

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Attachment 3

TRADEMARK LICENSE AGREEMENT

This Trademark License Agreement (“License”) is effective as of the Closing Date (as defined in the PSA), between Avago Technologies General IP (Singapore) Pte. Ltd., a Singapore corporation (“Seller”), and Palau Acquisition Corporation, a corporation incorporated under the laws of Delaware (“Purchaser”).

WHEREAS, Seller and certain Affiliates of Seller are engaged in, among other things, the manufacturing and distribution of Licensed Products;

WHEREAS, Seller and Purchaser have entered into a Purchase and Sale Agreement, dated as of October 28, 2005 (“PSA”), pursuant to which Purchaser shall purchase and assume, and Seller, through itself and one or more of its Affiliates, shall sell, transfer and assign substantially all of the assets and liabilities of the Business (as defined in the PSA) to Purchaser; and

WHEREAS, in connection with the foregoing, Seller desires to grant to Purchaser a license to use certain other Trademarks (as defined in the PSA) pursuant to rights granted to Seller by Agilent Technologies, Inc.;

NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and between the parties as follows:

ARTICLE I

DEFINITIONS

For the purpose of this License, unless specifically defined otherwise in this License, all defined terms will have the meanings set forth in the PSA:

1.1 AGILENT. “Agilent” means Agilent Technologies, Inc. and/or any of its subsidiaries.

1.2 AUTHORIZED DEALERS. “Authorized Dealers” means any distributor, dealer, OEM customer, VAR customer, VAD customer, systems integrator or other agent that on or after the Closing Date is authorized by Purchaser or any of its Subsidiaries to market, advertise, sell, lease, rent, service or otherwise offer Licensed Products.

1.3 COLLATERAL MATERIALS. “Collateral Materials” means all packaging, tags, labels, instructions, warranties, Licensed Product data sheets, descriptions and specifications (including online versions thereof), and other materials of any similar type associated with the Licensed Products that are marked with at least one of the Licensed Marks.

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CORPORATE IDENTITY MATERIALS. “Corporate Identity Materials” means materials that are not Licensed Products or Licensed Product-related and that Purchaser may now or hereafter use to communicate its identity, including, by way of example and without limitation, business cards, letterhead, stationery, paper stock and other supplies, signage on real property, buildings, fleet and uniforms.

1.4 FAMILY. “Family” means Storage Products with similar specifications and functions to a Licensed Product, which are intentionally associated with one or more other Licensed Products and which are intended to perform similar functions. Members of the same Family of Licensed Products communicate this connection to customers by using sequential or related part numbers, similar or related product names or descriptions, and the like.

1.5 LICENSED MARKS. “Licensed Marks” means the Trademarks listed on Attachment 1 to this License.

1.6 LICENSED PRODUCTS. “Licensed Products” means any Storage Product that was commercially sold or offered for sale by Seller immediately prior to the Closing Date and rights to which have been transferred to Purchaser under the PSA, and new versions thereof that have merely minor incremental differences from any such Storage Product. Licensed Products shall also include maintenance (whether diagnostic, preventive, remedial, warranty or non-warranty), support and similar services associated with Licensed Products, pursuant to maintenance contracts or otherwise.

1.7 MARKETING MATERIALS. “Marketing Materials” means advertising, promotions, display fixtures or any of any similar type of literature or things, in any medium, for the marketing, promotion or advertising of the Licensed Products or parts therefore that are marked with at least one of the Licensed Marks.

1.8 PERSON. “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

1.9 QUALITY STANDARDS. “Quality Standards” means written standards of quality applicable to the Licensed Products, as in use by Agilent immediately prior November 30, 2005, unless otherwise modified in writing by Agilent from time to time during the Term and communicated to Purchaser; such modified standards to be reasonably acceptable to Purchaser.

1.10 SELL. To “Sell” a product means to sell, transfer, lease or otherwise dispose of a product. “Sale” and “Sold” have the corollary meanings ascribed thereto.

1.11 TERM. “Term” means the term defined in Article X of this License.

 

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1.12 THIRD PARTY. “Third Party” means a Person other than Agilent, Seller and its Subsidiaries and Affiliates or Purchaser and its Subsidiaries.

1.13 TRADEMARK USAGE GUIDELINES. “Trademark Usage Guidelines” means the written guidelines for proper usage of the Licensed Marks, as in use immediately prior to the Closing Date and located at: http://www.agilent.com/secure/agilentbrand/

User Name: brandid

Password: spark

for literature, packaging, exhibit standards, emarketing, learning products, web; and third party trademark use standards located at: http://www.agilent.com/secure/trademark/

User Name: trademark

Password: ez4u

and product labeling standards attached hereto as Attachment 2. All such guidelines may be revised and updated in writing at the sites listed above by Agilent from time to time during the Term; or by written communication to the Purchaser with regard to the product labeling standards. For avoidance of confusion with regard to product labeling embedded into the manufacturing process, any such labeling that was created by Agilent will be deemed to be in compliance with any product labeling standards, provided the embedded product labeling has not been altered by Seller or Purchaser.

ARTICLE II

LICENSES

2.1 LICENSE GRANT. Seller grants to Purchaser a personal, non-exclusive, worldwide and non-transferable (except as set forth in Section 15.8 hereof) license during the Term to use: (a) the Licensed Marks on or in connection with the Licensed Products and Collateral Materials in connection with the Sale and offer for Sale of such Licensed Products (or, in the case of Licensed Products in the form of software, in connection with licensing of such Licensed Products); (b) the Licensed Marks in Marketing Materials for the Licensed Products; (c) the Licensed Marks in connection with Corporate Identity Materials; and (d) Seller Part Numbers (as that term is defined in Section 10.5(g)) in connection with Licensed Products and any other Purchaser-manufactured Storage Product in the same Family. Seller covenants not to grant any licenses to any Third Party under the Licensed Marks in connection with the Sale or offer for Sale of Storage Products for use of the Licensed Marks within a period of twenty-four (24) months following the Closing Date.

 

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2.2 LICENSE RESTRICTIONS.

(a) Once Purchaser abandons the use of all of the Licensed Marks on a particular Licensed Product, then Purchaser agrees that its license granted hereunder with respect to that Licensed Product shall thereupon terminate.

(b) Purchaser may not make any use whatsoever, in whole or in part, of the Licensed Marks, or any other Trademarks owned by Seller or Agilent, in connection with Purchaser’s corporate, doing business as, or fictitious name, or on Corporate Identity Materials, except as set forth in this License.

(c) Purchaser may not use any Licensed Mark in direct association with another Trademark such that the two Trademarks appear to be a single Trademark or in any other composite manner with any Trademarks of Purchaser or any Third Party.

(d) In all respects, Purchaser’s usage of the Licensed Marks during the Term pursuant to the license granted hereunder shall be in a manner consistent with the high standards, reputation and prestige of Agilent as represented by its use of the Licensed Marks, and any usage by Purchaser that is inconsistent with the foregoing shall be deemed to be outside the scope of the license granted hereunder. As a condition to the license granted hereunder, Purchaser shall at all times present, position and promote the Licensed Products marked with one or more of the Licensed Marks in a manner consistent with the high standards and prestige of Agilent.

2.3 LICENSEE UNDERTAKINGS. As a condition to the licenses granted hereunder, Purchaser undertakes to Seller that:

(a) Purchaser shall not use the Licensed Marks (or any other Trademark of Seller or Agilent) in any manner contrary to public morals, in any manner which is deceptive or misleading, which ridicules or is derogatory to the Licensed Marks, or which compromises or reflects unfavorably upon the goodwill, good name, reputation or image of Seller, Agilent or the Licensed Marks, or which might jeopardize or limit Seller’s or Agilent’s proprietary interest therein.

(b) Purchaser shall not use the Licensed Marks in connection with any products other than the Licensed Products, including without limitation any other products sold and/or manufactured by Purchaser. Notwithstanding the foregoing, Purchaser may use Seller Part Numbers in connection with Storage Products in a Family associated with a Licensed Product.

(c) Purchaser shall not: (i) misrepresent to any Person the scope of its authority under this License, or (ii) incur or authorize any expenses or liabilities chargeable to Seller or Agilent.

(d) Purchaser shall have adopted a customer facing corporate identity of its own by the Closing Date.

 

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(e) In all external communications involving any use of the Licensed Marks on Corporate Identity Materials, Purchaser shall use reasonable best efforts to avoid confusion regarding the source of the communications.

ARTICLE III

PERMITTED SUBLICENSES

3.1 SUBLICENSES TO SUBSIDIARIES. Subject to the terms and conditions of this License, including all applicable Quality Standards and Trademark Usage Guidelines and other restrictions in this License, Purchaser may grant sublicenses to its Subsidiaries to use the Licensed Marks in accordance with the license grant in Section 2.1 above; provided, that: (a) Purchaser enters into a written sublicense agreement with each such Subsidiary sublicensee, and (b) such agreement does not include the right to grant further sublicenses, except as set forth in Section 3.2 below. If Purchaser grants any sublicense rights pursuant to this Section 3.1 and any such sublicensed Subsidiary ceases to be a Subsidiary, then the sublicense granted to such Subsidiary pursuant to this Section 3.1 shall terminate immediately upon the date of such cessation.

3.2 AUTHORIZED DEALERS’ USE OF MARKS. Subject to the terms and conditions of this License, including all applicable Quality Standards and Trademark Usage Guidelines and other restrictions in this License, Purchaser (and those Subsidiaries sublicensed to use the Licensed Marks pursuant to Section 3.1) may allow Authorized Dealers, and may allow such Authorized Dealers to allow other Authorized Dealers, to Sell or otherwise distribute Collateral Materials and Licensed Products bearing the Licensed Marks, provided that such Authorized Dealers execute written agreements with Purchaser (or its Subsidiaries) that impose upon such Authorized Dealers an obligation of full compliance with all relevant provisions of this License.

3.3 ENFORCEMENT OF AGREEMENTS. Purchaser shall take all reasonably appropriate measures at Purchaser’s expense promptly and diligently to enforce the terms of any sublicense agreement or other agreement with any Subsidiary or Authorized Dealer and shall restrain any such Subsidiary or Authorized Dealer from violating such terms, including without limitation: (a) monitoring the Subsidiaries’ and Authorized Dealers’ compliance with the relevant Trademark Usage Guidelines and Quality Standards and causing any non-complying Subsidiary or Authorized Dealer promptly to remedy any failure, (b) if need be, terminating such agreement, and/or (c) if need be, commencing legal action. In each case, Purchaser shall use a standard of care consistent with Seller’s practices as of the Closing Date, but in no case using a standard of care less than what is reasonable in the industry.

 

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ARTICLE IV

TRADEMARK USAGE GUIDELINES

4.1 TRADEMARK USAGE GUIDELINES. Purchaser, its Subsidiaries and Authorized Dealers shall use the Licensed Marks during the Term only in a manner that is consistent with the Trademark Usage Guidelines.

4.2 TRADEMARK REVIEWS. At Seller’s reasonable request, Purchaser agrees to furnish or make available for inspection to Seller samples of all Licensed Products, Collateral Materials and Marketing Materials of Purchaser and its Subsidiaries that are marked with one or more of the Licensed Marks. Purchaser further agrees to take reasonably appropriate measures to require its Authorized Dealers to furnish or make available for inspection to Purchaser samples of all Marketing Materials and Collateral Materials of its Authorized Dealers. If Purchaser is notified or reasonably determines that it or any of its Subsidiaries or Authorized Dealers is not complying with any Trademark Usage Guidelines, it shall notify Seller and the provisions of Article V and Section 3.3 hereof shall apply to such noncompliance.

ARTICLE V

TRADEMARK USAGE GUIDELINES ENFORCEMENT

5.1 INITIAL CURE PERIOD. If Seller becomes aware that Purchaser or any Subsidiary is not complying with any Trademark Usage Guidelines, Seller shall notify Purchaser in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Purchaser shall then have thirty (30) days after receipt of such notice (“Guideline Initial Cure Period”) to correct such noncompliance or submit to Seller a written plan to correct such noncompliance, which written plan is reasonably acceptable to Seller, unless Seller previously affirmatively concurs in writing, in its sole discretion, that Purchaser or its Subsidiary is not in noncompliance. If Seller or Purchaser becomes aware that an Authorized Dealer is not complying with any Trademark Usage Guidelines, Purchaser (but not Seller) shall promptly notify such Authorized Dealer in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Such Authorized Dealer shall then have the Guideline Initial Cure Period to correct such noncompliance or submit to Purchaser a written plan to correct such noncompliance, which written plan is reasonably acceptable to Purchaser and Seller.

5.2 SECOND CURE PERIOD. If the noncompliance with the Trademark Usage Guidelines continues beyond the Guideline Initial Cure Period, Purchaser and Seller shall each promptly appoint a representative to negotiate in good faith actions that may be necessary to correct such noncompliance. The parties shall have fifteen (15) days following the expiration of the Guideline Initial Cure Period to agree on corrective actions, and Purchaser shall have fifteen (15) days from the date of an agreement of corrective actions to implement such corrective actions and cure or cause the cure of such noncompliance (“Second Guideline Cure Period”).

 

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5.3 FINAL CURE PERIOD. If the noncompliance with the Trademark Usage Guidelines by Purchaser or any Subsidiary (as the case may be) remains uncured after the expiration of the Second Guideline Cure Period, then at Seller’s election, Purchaser or the non-complying Subsidiary (as the case may be) promptly shall cease using the non-complying Collateral Materials until Seller reasonably determines that Purchaser or the non-complying Subsidiary (as the case may be) has demonstrated its ability and commitment to comply with the Trademark Usage Guidelines. If the noncompliance with the Trademark Usage Guidelines by an Authorized Dealer remains uncured after the expiration of the Second Guideline Cure Period, then at Purchaser’s election, such Authorized Dealer promptly shall cease using the non-complying Collateral Materials and/or Marketing Materials until Purchaser determines that such Authorized Dealer has demonstrated its ability and commitment to comply with the Trademark Usage Guidelines. Nothing in this Article V shall be deemed to limit Purchaser’s obligations under Section 3.3 above or to preclude Seller from exercising any rights or remedies under Section 3.3 above.

ARTICLE VI

QUALITY STANDARDS

6.1 GENERAL. Purchaser acknowledges that the Licensed Products permitted by this License to be marked with one or more of the Licensed Marks must continue to be of sufficiently high quality as to provide protection of the Licensed Marks and the goodwill they symbolize.

6.2 QUALITY STANDARDS. Purchaser and its Subsidiaries shall use the Licensed Marks only on and in connection with Licensed Products that meet or exceed in all respects the Quality Standards.

6.3 QUALITY CONTROL REVIEWS. At Seller’s reasonable request, Purchaser agrees to furnish or make available to Seller for inspection sample Licensed Products marked with one or more of the Licensed Marks. If Purchaser is notified or reasonably determines that it or any of its Subsidiaries is not complying with any Quality Standards, it shall notify Seller and the provisions of Article VII and Section 2.3 shall apply to such noncompliance. Notwithstanding the foregoing, Seller agrees and acknowledges that all Agilent Branded Products that were acquired by Purchaser from Seller at Closing shall, without further investigation, be deemed to be of sufficient quality under this Article VI.

ARTICLE VII

QUALITY STANDARD ENFORCEMENT

7.1 INITIAL CURE PERIOD. If Seller becomes aware that Purchaser or any Subsidiary is not complying with any Quality Standard, Seller shall notify Purchaser in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Following receipt of such notice, Purchaser shall make an inquiry promptly and in good faith concerning each instance of noncompliance described in the notice. Purchaser shall then have thirty (30) days after receipt of such notice (“Initial Cure Period”) to correct such noncompliance or submit to Seller a written plan to correct such noncompliance, which written plan is reasonably acceptable to Seller, unless Seller previously affirmatively concurs in writing, in its sole discretion, that Purchaser or its Subsidiaries is not in noncompliance.

 

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7.2 SECOND CURE PERIOD. If the said noncompliance with the Quality Standards continues beyond the Initial Cure Period, Purchaser and Seller shall each promptly appoint a representative to negotiate in good faith actions that may be necessary to correct such noncompliance. The parties shall have fifteen (15) days following the expiration of the Initial Cure Period to agree on corrective actions, and Purchaser shall have fifteen (15) days from the date of an agreement of corrective actions to implement such corrective actions and cure or cause the cure of such noncompliance (“Second Cure Period”).

7.3 FINAL CURE PERIOD. If the said noncompliance with the Quality Standards by Purchaser or any Subsidiary (as the case may be) remains uncured after the expiration of the Second Cure Period, then at Seller’s election, Purchaser or the non-complying Subsidiary (as the case may be) promptly shall cease offering the non-complying Licensed Products under the Licensed Marks until Seller reasonably determines that Purchaser, or the non-complying Subsidiary (as the case may be) has reasonably demonstrated its ability and commitment to comply with the Quality Standards. Nothing in this Article VII shall be deemed to limit Purchaser’s obligations under Section 3.3 above.

ARTICLE VIII

PROTECTION OF LICENSED MARKS

8.1 OWNERSHIP AND RIGHTS. Purchaser agrees not to challenge the ownership or validity of the Licensed Marks. Purchaser shall not disparage, dilute or adversely affect the validity of the Licensed Marks. Purchaser’s use of the Licensed Marks shall inure exclusively to the benefit of Agilent and Purchaser shall not acquire or assert any rights therein. Purchaser recognizes the value of the goodwill associated with the Licensed Marks, and that the Licensed Marks may have acquired secondary meaning in the minds of the public.

8.2 PROTECTION OF MARKS. Purchaser shall assist Seller, at Seller’s request and expense, in the procurement and maintenance of Seller’s or Agilent’s respective intellectual property rights in the Licensed Marks. Purchaser will not grant or attempt to grant a security interest in the Licensed Marks or record any such security interest in the United States Patent and Trademark Office or elsewhere against any Trademark application or registration belonging to Seller or Agilent. Purchaser agrees to, and to cause its Subsidiaries to, execute all documents reasonably requested by Seller to effect further registration of, maintenance and renewal of the Licensed Marks, recordation of the license relationship between Seller and Purchaser, and recordation of Purchaser as a registered user. Neither Seller nor Agilent makes any warranty or representation that Trademark registrations have been or will be applied for, secured or maintained in the Licensed Marks throughout, or anywhere within, the world. Purchaser shall cause to appear on all Licensed Products, all Marketing Materials and all Collateral Materials, such legends, markings and notices as may be required by applicable law or reasonably requested by Seller.

 

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8.3 SIMILAR MARKS. Purchaser agrees not to use or register in any country any Trademark that infringes on the rights of Seller or Agilent in the Licensed Marks, or any element thereof. If any application for registration is, or has been, filed in any country by Purchaser which relates to any Trademark that infringes the rights of Seller or Agilent in the Licensed Marks, Purchaser shall immediately abandon any such application or registration or assign it to Agilent. Purchaser may not adopt any trademarks incorporating the root “Agil” or any other trademark similar to the Licensed Trademarks. Purchaser shall not challenge Agilent’s ownership of or the validity of the Licensed Marks or any application for registration thereof throughout the world. Purchaser shall not use or register in any country or jurisdiction, or permit others to use or register on its behalf in any country or jurisdiction, any copyright, domain name, telephone number, keyword, metatag, other electronic identifier or any other intellectual property right, whether recognized currently or in the future, or any other designation which would affect the ownership or rights of Agilent and Seller in and to the Licensed Marks, or otherwise take any action which would adversely affect any of such ownership rights, or assist anyone else in doing so. Purchaser shall cause its Subsidiaries and Authorized Dealers to comply with the provisions of this Section 8.3.

8.4 INFRINGEMENT PROCEEDINGS. In the event that the Purchaser learns, during the Term of this License, of any infringement or threatened infringement of the Licensed Marks, or any unfair competition, passing-off or dilution with respect to the Licensed Marks, Purchaser shall immediately notify Seller or its authorized representative giving particulars thereof, and Purchaser shall provide necessary information and assistance to Seller or its authorized representatives at Seller’s expense in the event that Seller decides that proceedings should be commenced. Notwithstanding the foregoing, Purchaser is not obligated to monitor or police use of the Licensed Marks by Third Parties other than as specifically set forth in Section 3.3 hereof. Except for those actions initiated by Purchaser pursuant to Section 3.3 hereof to enforce any sublicense or other agreement with any Subsidiary or Authorized Dealer, Seller shall have exclusive control of any litigation, opposition, cancellation or related legal proceedings. The decision whether to bring, maintain or settle any such proceedings shall be at the exclusive option and expense of Seller, and all recoveries shall belong exclusively to Seller. Purchaser shall not and shall have no right to initiate any litigation, opposition, cancellation or related legal proceedings with respect to the Licensed Marks in its own name (except for those actions initiated by Purchaser pursuant to Section 3.3 hereof), but, at Seller’s request, agrees to cooperate with Seller and Agilent at Seller’s or Agilent’s expense to enforce its rights in the Licensed Marks, including to join or be joined as a party in any action taken by Seller or Agilent against a third party for infringement or threatened infringement of the Licensed Marks, to the extent such joinder is required under mandatory local law for the prosecution of such an action. Neither Agilent nor Seller shall incur any liability to Purchaser or any other Person under any legal theory by reason of Seller’s or Agilent’s failure or refusal to prosecute or by Seller’s or Agilent’s refusal to permit Purchaser to prosecute, any alleged infringement by Third Parties, nor by reason of any settlement to which Seller or Agilent may agree.

 

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ARTICLE IX

CONFIDENTIALITY

9.1 CONFIDENTIAL INFORMATION. The parties hereto expressly acknowledge and agree that all information, whether written or oral, furnished by either party to the other party or any Subsidiary of such other party pursuant to this License (“Confidential Information”) shall be deemed to be confidential and shall be maintained by each party and their respective Subsidiaries in confidence, using the same degree of care to preserve the confidentiality of such Confidential Information that the party to whom such Confidential Information is disclosed would use to preserve the confidentiality of its own information of a similar nature and in no event less than a reasonable degree of care. Except as authorized in writing by the other party, neither party shall at any time disclose or permit to be disclosed any such Confidential Information to any person, firm, corporation or entity: (a) except as may reasonably be required in connection with the performance of this License by Purchaser, Seller or its respective Subsidiaries, as the case may be, (b) except as may reasonably be required after the Closing Date by Purchaser or its Subsidiaries in connection with the use of the Licensed Marks or operation of the Business, (c) except to the parties’ agents or representatives who are informed by the parties of the confidential nature of the information and are bound to maintain its confidentiality, and (d) in the course of due diligence in connection with the sale of all or a portion of either party’s business, provided the disclosure is pursuant to a nondisclosure agreement having terms comparable to Sections 9.1 and 9.2 hereof.

9.2 EXCEPTIONS. The obligation not to disclose information under Section 9.1 hereof shall not apply to information that, as of the Closing Date or thereafter: (a) is or becomes generally available to the public other than as a result of disclosure made after the execution of the PSA by the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof, (b) was or becomes readily available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis, (c) is or becomes available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis from a source other than its own files or personnel or the other party or its Subsidiaries, provided that such source is not known by the party desiring to treat such information as non-confidential to be bound by confidentiality agreements with the other party or its Subsidiaries or by legal, fiduciary or ethical constraints on disclosure of such information, or (d) is required to be disclosed pursuant to a governmental order or decree or other legal requirement (including the requirements of the U.S. Securities and Exchange Commission and the listing rules of any applicable securities exchange), provided that the party required to disclose such information shall give the other party prompt notice thereof prior to such disclosure and, at the request of the other party, shall cooperate in all reasonable respects in maintaining the confidentiality of such information, including obtaining a protective order or other similar order. Nothing in Section 9.1 shall limit in any respect either party’s ability to disclose information in connection with the enforcement by such party of its rights under this License; provided that the proviso of clause (d) in the immediately preceding sentence shall apply to the party desiring to disclose such information.

 

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9.3 DURATION. The obligations of the parties set forth in this Article IX, with respect to the protection of Confidential Information, shall remain in effect until five (5) years after: (a) the Closing Date, with respect to Confidential Information of one party that is known to or in the possession of the other party as of the Closing Date, or (b) the date of disclosure, with respect to Confidential Information that is disclosed by the one party to the other party after the Closing Date.

ARTICLE X

TERM OF LICENSE

10.1 The term of the license granted pursuant to Section 2.1 hereof shall begin on the Closing Date and, unless terminated sooner pursuant to the provisions of Article XII hereof, shall last for the periods set forth in Section 10.5 below.

10.2 “Term” as used herein means the foregoing periods of permissible use for the Licensed Marks.

10.3 “Non-Customer-Facing Parts” means tangible parts whose branding is not visible to end consumers in the ordinary course of use. For the avoidance of doubt, “ordinary course of business” includes normal inspection, use, calibration, maintenance, service, repair and/or failure analysis.

10.4 “Agilent Branded Products” means Licensed Products on or in connection with which the Licensed Marks are used, unless such use is solely on Non-Customer-Facing Parts. Trademarks are in use “on or in connection with” a given Licensed Product if they are used on the Licensed Product itself or on Collateral Materials associated with such Licensed Product.

10.5 Purchaser agrees to discontinue all use of the Licensed Marks as quickly as is commercially reasonable. Without limiting the foregoing, Purchaser shall have the right to use said Trademarks according to the following conditions and schedule, with which Purchaser shall comply strictly:

(a) Until May 31, 2006, Purchaser may use the Licensed Marks in any external signage on a royalty free basis; provided such signage was in use as of the Closing Date.

(b) As of the dates set forth in Section 10.5(a), Purchaser must cease all use of the Licensed Marks in connection with Corporate Identity Materials;

(c) Until May 30, 2006, Purchaser may use the Licensed Marks in Marketing Materials on a royalty free basis;

(d) As of May 30, 2006, Purchaser must cease all use of Licensed Marks in Marketing Materials;

 

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(e) Until November 30, 2007, Purchaser may use the Licensed Marks on a royalty free basis on or in connection with the Agilent Branded Products manufactured by Seller or Agilent prior to the Closing Date or manufactured by Purchaser after the Closing Date and on or before May 31, 2007;

(f) As of November 30, 2008, Purchaser must cease all use of Licensed Marks on or in connection with all Agilent Branded Products. Except as would be a violation of law, any Non-Customer-Facing Parts bearing the Licensed Marks manufactured after November 30, 2008, shall bear a prominent label indicating that they are manufactured by Purchaser and, unless commercially unreasonable, such label shall cover the Licensed Marks on such part.

(g) Notwithstanding Section 10.5(e)-(f), Purchaser may continue to use the Seller part number alphanumerics beginning with the letter “A” (“Seller Part Numbers”) on or in connection with any Licensed Product or Storage Products within the same Family as a Licensed Product until that Family is discontinued or obsoleted. For the avoidance of doubt, it is understood and agreed that this License does not purport to restrict Purchaser’s use of any part number that does not begin with the letter “A”.

10.6 Purchaser agrees to provide written confirmation of compliance with the License Term on the dates specified above. Purchaser shall also advise Seller when it has discontinued use of all remaining Non-Customer-Facing Parts bearing the Licensed Marks and discontinued or obsoleted all Families of Licensed Products.

10.7 Except as would be a violation of Law, Purchaser agrees to notify all consumers receiving parts and materials bearing the Licensed Marks that Purchaser is the source of and is the proper contact for such Licensed Products, Collateral Materials, parts and materials.

10.8 It is understood and agreed that it shall not be a violation of this License for Purchaser, its Subsidiaries or Authorized Dealers, at any time after the Term, to make accurate references to the fact that Purchaser has succeeded to the business of Seller and Agilent with respect to the Licensed Products, or to advertise or promote its or their provision of maintenance services or supply of spare parts for Licensed Products previously sold under any of the Licensed Marks, provided that Purchaser, its Subsidiaries and Authorized Dealers do not in connection therewith suggest any affiliation with Seller or Agilent, do not claim to be authorized by Seller or Agilent in any manner with respect to such activities, and do not brand any Storage Products, Marketing Materials, Collateral Materials or parts Sold after the Term with any of the Licensed Marks in a manner that is inconsistent with this Article X.

 

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ARTICLE XI

ROYALTIES

11.1 ROYALTIES.

(a) Upon any Sale occurring: (i) prior to the expiration of the license grant, by Purchaser or its Subsidiaries, of Agilent Branded Products manufactured by Purchaser more than eighteen (18) months after the Closing Date, or (ii) after November 30, 2007, and prior to the expiration of the license grant, by Purchaser or its Subsidiaries of Agilent Branded Products (other than repaired, refurbished or reconstructed Agilent Branded Products or repair parts) manufactured by Agilent or Seller prior to the Closing Date or by Purchaser on or before May 31, 2007, Purchaser shall pay to Seller a five percent (5%) royalty on the Net Sales earned by Purchaser in each Seller fiscal quarter as a result of such Sale.

(b) As used in this Article XI, “Net Sales” means the gross invoice price from: (i) royalty-bearing Sales under Section 11.1(a) above, in any case less: (i) charges for handling, freight, sales taxes, insurance costs and import duties where such items are included in the invoiced price, (ii) point-of-sale credits (or other similar adjustments to price) granted to independent distributors, and (iii) credits actually granted or refunds actually given for returns during such Seller fiscal quarter. In the event that the foregoing Agilent Branded Products are Sold for no or nominal consideration or to a Subsidiary, Authorized Dealer, affiliated company or in any other circumstances in which the selling price is established on other than an arms-length basis, the Net Sales on such Sales shall be determined on the average selling price earned by Seller during the preceding Seller fiscal quarter on Sales of like volumes of the applicable Agilent Branded Products to unaffiliated customers in arms-length sales. However, in the event that the foregoing Agilent Branded Products are Sold to Seller’s Subsidiaries, Authorized Dealers or affiliated companies for resale to Third Parties, then the royalties will be based on Net Sales from the Subsidiaries, Authorized Dealers or affiliated companies to the Third Parties and no royalties will be due on the Sales to the Subsidiaries, Authorized Dealers or affiliated companies.

(c) For the purposes of clarification, no royalty is due under this Article XI for uses of the Licensed Marks that are covered by Section 10.8. Also, no royalties will accrue at any time for the use of Seller Part Numbers.

11.2 PAYMENTS AND ACCOUNTING

(a) With respect to the royalties set forth herein, Purchaser shall keep full, clear and accurate records until otherwise provided in Section 11.2(b). These records shall be retained for a period of three (3) years from the date of payment notwithstanding the expiration or other termination of this License. Seller shall have the right, through a mutually agreed upon independent certified public accountant (consent to which shall not be unreasonably withheld or delayed by Purchaser), and at Seller’s expense, to examine and audit, not more than once a year, and during normal business hours, all such records and such other records and accounts as may under recognized accounting practices contain information bearing upon the amount of royalty payable to Seller under this License. Prompt adjustment shall be made by either party to compensate for any errors and/or omissions disclosed by such examination or audit. Should any such error and/or omission result in an underpayment of more than five percent (5%) of the total royalties due for the period under audit, Purchaser shall, upon Seller’s request, pay for the cost of the audit and pay Seller an additional fee equal to a compound annual interest rate of ten percent (10%) of such error and/or omission.

 

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(b) Within forty-five (45) days after the end of each Purchaser fiscal quarter, Purchaser shall furnish to Seller a statement in suitable form showing all Agilent Branded Products subject to royalties that were sold, during such quarter, and the amount of royalty payable thereon. If no Licensed Products or services subject to royalty have been sold, that fact shall be shown on such statement. Also, within such forty-five (45) days, Purchaser shall pay to Seller the royalties payable hereunder for such quarter. Purchaser and Seller will determine the form of the statement prior to submission of the first such statement. All royalty and other payments to Seller hereunder shall be in United States dollars. Royalties based on sales in other currencies shall be converted to United States dollars according to the official rate of exchange for that currency, as published in the Wall Street Journal on the last day of the calendar month in which the royalty accrued (or, if not published on that day, the last publication day for the Wall Street Journal during that month). If two consecutive Purchaser fiscal quarters pass in which no royalties are due under this License and Purchaser reasonably believes no royalties will be due, the obligations pursuant to this Article XI shall terminate. If Purchaser resumes sale of Agilent Branded Products that are subject to royalties, the obligations of this Article XI shall automatically resume.

ARTICLE XII

TERMINATION

12.1 VOLUNTARY TERMINATION. By written notice to Seller, Purchaser may voluntarily terminate all or a specified portion of the licenses and rights granted to it hereunder by Seller. Such notice shall specify the effective date of such termination and shall clearly specify any affected Licensed Marks and Licensed Products.

12.2 SURVIVAL. Any voluntary termination of licenses and rights of Purchaser under Section 12.1 hereof shall not affect Purchaser’s licenses and rights with respect to any Licensed Products made or furnished prior to such termination.

ARTICLE XIII

DISPUTE RESOLUTION

13.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any dispute or claim arising out of or related to this License through negotiation. Within thirty (30) days after notice of a dispute or claim is given by either party to the other party, the parties’ first tier negotiating teams (as determined by each party’s Director of Intellectual Property (or person holding a similar position or title) or his or her delegate) shall meet and make a good faith attempt to resolve such dispute or claim and shall continue to negotiate in good faith in an effort to resolve the dispute or claim or renegotiate the applicable section or provision without the necessity of any formal proceedings. If the first tier negotiating teams are unable to agree within thirty (30) days of their first meeting, then the parties’ second tier negotiating teams (as determined by each party’s Director of Intellectual Property or his or her delegate) shall meet

 

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within thirty (30) days after the end of the first thirty (30) day negotiating period to attempt to resolve the matter. During the course of negotiations under this Section 13.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating teams but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. All negotiations between the parties pursuant to this Section 13.1 shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future litigation.

13.2 NONBINDING MEDIATION. In the event that any dispute or claim arising out of or related to this License is not settled by the parties within fifteen (15) days after the first meeting of the second tier negotiating teams under Section 13.1 hereof, the parties will attempt in good faith to resolve such dispute or claim by nonbinding mediation in accordance with the American Arbitration Association Commercial Mediation Rules. The mediation shall be held within thirty (30) days of the end of such fifteen (15) day negotiation period of the second tier negotiating teams. Except as provided below in Section 13.3, no litigation for the resolution of such dispute may be commenced until the parties try in good faith to settle the dispute by such mediation in accordance with such rules, and either party has concluded in good faith that amicable resolution through continued mediation of the matter does not appear likely. The costs of mediation shall be shared equally by the parties to the mediation. Any settlement reached by mediation shall be recorded in writing, signed by the parties, and shall be binding on them.

13.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party from initiating litigation or other judicial or administrative proceedings if such party would be substantially harmed by a failure to act during the time that such good faith efforts are being made to resolve the dispute or claim through negotiation or mediation. In the event that litigation is commenced under this Section 13.3, the parties agree to continue to attempt to resolve any dispute or claim according to the terms of Sections 13.1 and 13.2 hereof during the course of such litigation proceedings under this Section 13.3.

ARTICLE XIV

LIMITATION OF LIABILITY

IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES FOR ANY DAMAGES, INCLUDING WITHOUT LIMITATION SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS OR ANY OTHER DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

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ARTICLE XV

MISCELLANEOUS PROVISIONS

15.1 DISCLAIMER. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE PSA, EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL LICENSED MARKS AND ANY OTHER INFORMATION OR MATERIALS LICENSED OR FURNISHED HEREUNDER ARE LICENSED OR FURNISHED WITHOUT ANY WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Except as otherwise set forth herein or in the PSA, neither Seller, Agilent, nor any of their Affiliates or Subsidiaries, makes any warranty or representation as to the validity of any Trademark licensed by it to Purchaser or any warranty or representation that any use of any Trademark with respect to any Licensed Product or service will be free from infringement of any rights of any Third Party. Notwithstanding the foregoing, Seller represents that it has the right to grant the licenses to Purchaser herein pursuant to rights granted to Seller by Agilent.

15.2 NO IMPLIED LICENSES. Nothing contained in this License shall be construed as conferring any rights by implication, estoppel or otherwise, under any intellectual property right, other than the rights expressly granted in this License with respect to the Licensed Marks. Neither party is required hereunder to furnish or disclose to the other any information (including copies of registrations of the Trademarks), except as specifically provided herein or in the PSA.

15.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder to institute any action or suit against Third Parties for infringement of any of the Licensed Marks or to defend any action or suit brought by a Third Party which challenges or concerns the validity of any of the Licensed Marks. Purchaser shall not have any right to institute any action or suit against Third Parties for infringement of any of the Licensed Marks.

15.4 NO OBLIGATION TO OBTAIN OR MAINTAIN MARKS. Neither party, nor any of its Subsidiaries or Affiliates, or Agilent, is obligated to: (a) file any application for registration of any Trademark, or to secure any rights in any Trademarks, (b) maintain any Trademark registration, or (c) provide any assistance, except for the obligations expressly assumed in this License.

15.5 ENTIRE AGREEMENT. This License and the PSA constitute the entire understanding between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. To the extent there is a conflict between this License and the PSA between the parties, the terms of the PSA shall govern, provided, however, that the terms of this License shall govern with respect to: (a) Article IX with respect to Confidential Information transferred or disclosed pursuant to this License, (b) Article XI concerning royalties and audits due under this license, (c) Article XII with respect to termination of the licenses granted hereunder, (d) Article XIII concerning dispute resolution, (e) Article XIV solely with respect to intellectual property that is licensed by one party to another party pursuant to this

 

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License, (f) Section 15.7 concerning notice, and (g) Section 15.8 concerning assignment or transfer of rights or obligations arising under this License. In addition, in the event of a conflict between this License and the Trademark Usage Guidelines or the Quality Standards, this License shall prevail.

15.6 SECTION HEADINGS; TABLE OF CONTENTS. The section headings contained in this License are inserted for reference purposes only and are not intended to be a part, nor should they affect the meaning or interpretation, of this License.

15.7 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by telecopy with answer back, by express or overnight mail delivered by an internationally recognized air courier (delivery charges prepaid), by registered or certified mail (postage prepaid, return receipt requested) or by e-mail with receipt confirmed by return e-mail to the respective parties as follows:

if to Seller:

Argos Acquisition Pte. Ltd.

c/o Silver Lake Partners

2725 Sand Hill Road, Suite 150

Menlo Park, CA 94025

Attention: Kenneth Y. Hao

Fax: (650) 234-2593

with copies to:

Kohlberg Kravis Roberts & Co.

2800 Sand Hill Road, Suite 200

Menlo Park, CA 94025

Attention: Adam H. Clammer

Fax: (650) 233-6548

Latham & Watkins LLP

135 Commonwealth Drive

Menlo Park, CA 94025

Attention: Peter F. Kerman, Esq.

Anthony J. Richmond, Esq.

Fax: (650) 463-2600

if to Purchaser:

Palau Acquisition Corporation

3975 Freedom Circle

Santa Clara, CA 95054

Attention: Chief Financial Officer

Fax: (604) 415-6240

 

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With copies to:

Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA 94304

Attention:		Neil Wolff, Esq.
		Michael Okada, Esq.

Fax: (650) 493-6811

or to such other address as the party to whom notice is given may have previously furnished to the other in writing in the manner set forth above. Any notice or communication delivered in person shall be deemed effective on delivery. Any notice or communication sent by e-mail, telecopy or by air courier shall be deemed effective on the first Business Day (as defined in the PSA) following the day on which such notice or communication was sent. Any notice or communication sent by registered or certified mail shall be deemed effective on the third Business Day following the day on which such notice or communication was mailed.

15.8 NON-ASSIGNABILITY. Neither party may, directly or indirectly, in whole or in part, whether by operation of law or otherwise, assign or transfer this License, without the other party’s prior written consent, and any attempted assignment, transfer or delegation without such prior written consent shall be voidable at the sole option of such other party. Notwithstanding the foregoing, each party (or its permitted successive assignees or transferees hereunder) may assign or transfer any or all of its rights or obligations under this License to one or more Subsidiaries of such party; provided, however, that no such assignment or transfer shall release the assigning party from any of its liabilities or obligations hereunder. Without limiting the foregoing, this License will be binding upon and inure to the benefit of the parties and their permitted successors and assigns.

15.9 SEVERABILITY. If any provision of this License shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this License shall not be affected and shall remain in full force and effect, and Seller and Purchaser shall negotiate in good faith to replace such illegal, void or unenforceable provision with a provision that corresponds as closely as possible to the intentions of the parties as expressed by such illegal, void or unenforceable provision.

15.10 AMENDMENT; WAIVER; REMEDIES CUMULATIVE. This License, including this provision of this License, may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. No waiver by either party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this License, including any investigation by or on behalf of any party or a failure or delay by any party in exercising any power, right or privilege under this License, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties,

 

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covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this License and the PSA. The waiver by any party hereto of a breach of any provision of this License shall not operate or be construed as a waiver of any subsequent breach. All rights and remedies existing under this License are cumulative to, and not exclusive of, any rights or remedies otherwise available.

15.11 COUNTERPARTS. This License may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 15.11, provided that receipt of copies of such counterparts is confirmed.

15.12 THIRD PARTY BENEFICIARY. Agilent is an intended third party beneficiary of the terms that reference Agilent hereunder for the protection of Agilent’s interests in the Licensed Marks.

 

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WHEREFORE, the parties have signed this Trademark License Agreement effective as of the Closing Date first set forth above.

 

AVAGO TECHNOLOGIES GENERAL IP (SINGAPORE) PTE. LTD.						PALAU ACQUISITION CORPORATION
By:						By:
Name:						Name:
Title:						Title:

 

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Exhibit 2.8

PURCHASE AND SALE AGREEMENT

by and among

AVAGO TECHNOLOGIES LIMITED,

AVAGO TECHNOLOGIES IMAGING HOLDING (LABUAN) CORPORATION,

AVAGO TECHNOLOGIES SENSOR (U.S.A.) INC.,

OTHER SELLERS

and

MICRON TECHNOLOGY, INC.

Dated as of November 17, 2006

 

 

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TABLE OF CONTENTS

 

				Page
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION				1
1.1		Definitions		1
1.2		Rules of Construction		1
ARTICLE II PURCHASE, SALE AND ASSUMPTION				2
2.1		Purchase and Sale of Purchased Assets		2
2.2		Assumption by Purchaser of Certain Liabilities; Retention by the Seller Parties of Remaining Liabilities		2
2.3		Transfer of Purchased Assets; Assumed Liabilities		4
2.4		Approvals and Consents		5
2.5		Estoppel Certificate in Respect of Assigned Real Property		6
2.6		Missing Consents		7
2.7		Sensor IP Closing.		7
2.8		Malaysia Closing.		7
ARTICLE III PURCHASE PRICE AND ADJUSTMENTS				8
3.1		Purchase Price		8
3.2		Closing Date Payment		8
3.3		Contingent Payments		8
3.4		Allocation of Purchase Price		12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER AND THE OTHER SELLERS				12
4.1		Corporate Existence		13
4.2		Corporate Authority		13
4.3		Ownership of Purchased Assets		14
4.4		Governmental Approvals and Consents		14
4.5		Title to Purchased Assets		14
4.6		Contracts		15
4.7		Litigation		16
4.8		Business Intellectual Property Rights		17
4.9		Finders; Brokers		19
4.10		Tax Matters		19
4.11		Employment and Benefits		19
4.12		Non U.S. Benefit Plans		21
4.13		Compliance With Laws		22
4.14		Labor Matters		22
4.15		Environmental Matters		22
4.16		Equity Interests		23
4.17		Sufficiency of Assets		23
4.18		Location of Assets		23
4.19		Restrictions on Business Activities		24

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4.20		Design Qualifications.		24
4.21		Suppliers		24
4.22		Products		24
4.23		Diligence Requests		24
4.24		No Other Representations or Warranties		24
ARTICLE V REPRESENTATIONS OF PURCHASER				25
5.1		Corporate Existence		25
5.2		Corporate Authority		25
5.3		Governmental Approvals, Orders and Consents		26
5.4		Financial Capacity		26
5.5		Finders; Brokers		26
5.6		No Other Representations or Warranties		26
ARTICLE VI AGREEMENTS OF PURCHASER AND SELLER				26
6.1		Operation of the Business		26
6.2		Investigation of Business; Confidentiality		28
6.3		Necessary Efforts; No Inconsistent Action		29
6.4		Public Disclosures		31
6.5		Access to Records, Personnel and the Assigned Real Property		32
6.6		Employee Relations and Benefits		35
6.7		Non U.S. Employees		39
6.8		Other Arrangements		40
6.9		Non Competition		40
6.10		Non Solicitation		41
6.11		Avago IP License Agreements and IP Side Letter		42
6.12		[Reserved]		43
6.13		Insurance Matters		43
6.14		Tax Matters		44
6.15		Mail Handling		48
6.16		[Reserved]		48
6.17		Shared Contracts Other Than Software Licenses		48
6.18		Software Licenses		48
6.19		NDAs and CAs		49
6.20		Patents Licensed Non Exclusively to the Purchaser		49
6.21		No Solicitation of Acquisition Proposals; Inconsistent Activities		49
6.22		Expiring Transferred Contracts		50
6.23		Contract Terminations		50
ARTICLE VII CONDITIONS TO CLOSING				50
7.1		Conditions Precedent to Obligations of Purchaser and the Seller Parties		50
7.2		Conditions Precedent to Obligation of the Seller Parties		50
7.3		Conditions Precedent to Obligation of Purchaser		51
ARTICLE VIII CLOSING				52
8.1		Closings		52
8.2		Purchaser Obligations		53
8.3		Seller Party Obligations		53

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ARTICLE IX INDEMNIFICATION				54
9.1		Indemnification		54
9.2		Certain Limitations		55
9.3		Procedures for Third Party Claims and Excluded Liabilities		56
9.4		Certain Procedures		58
9.5		Remedies Exclusive		59
ARTICLE X TERMINATION				60
10.1		Termination Events		60
10.2		Effect of Termination		61
ARTICLE XI MISCELLANEOUS AGREEMENTS OF THE PARTIES				61
11.1		Dispute Resolution		61
11.2		Notices		62
11.3		Bulk Transfers		63
11.4		Severability		63
11.5		Further Assurances; Further Cooperation		63
11.6		Counterparts		63
11.7		Expenses		64
11.8		Assignment		64
11.9		Amendment; Waiver		64
11.10		Specific Performance		64
11.11		Third Parties		64
11.12		Governing Law		64
11.13		Consent to Jurisdiction; Waiver of Jury Trial		65
11.14		Disclosure Letter		65
11.15		Entire Agreement		65
11.16		Time is of the Essence		65
11.17		Section Headings; Table of Contents		65

 

EXHIBIT A		Form of Bill of Sale
EXHIBIT B		Form of Assignment and Assumption Agreement
EXHIBIT C		Form of Local Asset Transfer Agreement
EXHIBIT D		Form of Patent Assignment
EXHIBIT E		Retention Summary
EXHIBIT F		Purchaser Benefits Summary
EXHIBIT G		Excluded Assets
EXHIBIT H		Form of Master Separation Agreement
EXHIBIT I		Form of Joinder
EXHIBIT J		Form of Avago General IP License Agreement
EXHIBIT K		Form of Avago Sensor IPCo License Agreement
EXHIBIT L		Form of IP Side Letter
EXHIBIT M		Purchased Assets
EXHIBIT M-1		Transferred Contracts
EXHIBIT M-2		Vehicles

 

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PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement is dated as of November 17, 2006 (the “Agreement”), by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies Imaging Holding (Labuan) Corporation, a company organized under the laws of Labuan (“Seller”), Avago Technologies Sensor (U.S.A.) Inc., a Delaware corporation (“U.S. R&D”), each Subsidiary of Seller Parent that executes a joinder to this Agreement pursuant to Section 6.8(b) hereof (together with Seller, Seller Parent and U.S. R&D, the “Seller Parties”), and Micron Technology, Inc., a Delaware corporation (“Purchaser”) (each, a “Party” and collectively, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Seller Parties are engaged in, among other things, the Business (as defined below);

WHEREAS, the Seller Parties desire to sell, transfer and assign, and Purchaser desires to purchase and assume, the Purchased Assets and Assumed Liabilities upon the terms and subject to the conditions specified in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

1.1 Definitions. Unless otherwise provided herein, capitalized terms used in this Agreement have the meanings ascribed to them by definition in this Agreement or in Annex A.

1.2 Rules of Construction.

(a) This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.

(b) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole (including any annexes, exhibits and schedules to this Agreement) and not to any particular provision of this Agreement, and section and subsection references are to this Agreement unless otherwise specified. The words “include,” “including,” or “includes” when used herein shall be deemed in each case to be followed by the words “without limitation” or words having similar import. The headings and table of contents in this Agreement are included for convenience of reference only and will not limit or otherwise affect the meaning or interpretation of this Agreement. The meanings given to terms defined herein will be equally applicable to both the singular and plural forms of such terms.

 

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ARTICLE II

PURCHASE, SALE AND ASSUMPTION

2.1 Purchase and Sale of Purchased Assets. Upon the terms and subject to the conditions set forth in this Agreement, the Purchased Assets shall be sold, assigned, transferred, conveyed and delivered (“Transferred”) to Purchaser as follows:

(a) at the Closing the Seller Parties shall, and shall cause their Subsidiaries to, Transfer to Purchaser or, if instructed by Purchaser in writing prior to the Closing Date, to one of Purchaser’s Affiliates, and Purchaser shall, or shall cause one of its Affiliates to, purchase, acquire and accept from the Seller Parties, all of the Seller Parties’ respective right, title and interest in and to the Purchased Assets other than the Sensor IP and the Malaysia Purchased Assets, free and clear of all Liens other than Permitted Liens;

(b) at the Sensor IP Closing the Seller Parties shall, and shall cause their Subsidiaries to, Transfer to Purchaser or, if instructed by Purchaser in writing prior to the Sensor IP Closing Date, to one of Purchaser’s Affiliates, and Purchaser shall, or shall cause one of its Affiliates to, purchase, acquire and accept from the Seller Parties, all of the Seller Parties’ respective right, title and interest in and to the Sensor IP, free and clear of all Liens other than Permitted Liens; and

(c) at the Malaysia Closing the Seller Parties shall, and shall cause their Subsidiaries to, Transfer to Purchaser or, if instructed by Purchaser in writing prior to the Malaysia Closing Date, to one of Purchaser’s Affiliates, and Purchaser shall, or shall cause one of its Affiliates to, purchase, acquire and accept from the Seller Parties, all of the Seller Parties’ respective right, title and interest in and to the Malaysia Purchased Assets, free and clear of all Liens other than Permitted Liens.

2.2 Assumption by Purchaser of Certain Liabilities; Retention by the Seller Parties of Remaining Liabilities.

(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Applicable Closing, Purchaser shall assume and thereafter pay, perform and discharge when due the following liabilities and obligations of the Seller Parties (the “Assumed Liabilities”):

(i) any and all Liabilities under the executory portions of the Transferred Contracts and the Assigned Lease as such Transferred Contracts and Assigned Lease exist and are constituted as of the Applicable Closing, but only to the extent such Liabilities thereunder first arise or accrue after, or are otherwise attributable to periods commencing after, the Applicable Closing under the terms of such Transferred Contracts or the Assigned Lease, excluding any Liabilities that arise as a result of any breach or default by any Person other than Purchaser, including any Seller Party, any of their respective Affiliates or their respective predecessors in interest under any Transferred Contract or the Assigned Lease;

 

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(ii) any and all Liabilities that are to be assumed by Purchaser in respect of any Transferred Employees pursuant to Section 6.6 and 6.7; and

(iii) any and all Liabilities in respect of Taxes that are to be assumed by Purchaser pursuant to Section 6.14.

Notwithstanding anything to the contrary contained in this Agreement or any documents delivered in connection herewith, Purchaser’s obligations in respect of the Assumed Liabilities will be subject to Purchaser’s right to contest against third parties in good faith the nature and extent of any Assumed Liabilities.

(b) Any other provision of this Agreement notwithstanding, Purchaser shall not be obligated to assume, pay, perform, discharge or be responsible for any Liabilities of the Seller Parties or any of their Affiliates other than the Assumed Liabilities (collectively, the “Excluded Liabilities”), including:

(i) any and all Liabilities in respect of monies owed or accounts payable due to third parties incurred in connection with the operation of the Business prior to the Closing Date;

(ii) any and all Liabilities to the extent arising out of or relating to the operation or conduct by the Seller Parties or any of their respective Affiliates of any Retained Business;

(iii) subject to the provisions of Sections 2.4 and 2.5, any and all Liabilities to the extent arising out of or relating to any Excluded Asset;

(iv) any and all Liabilities in respect of Taxes that are to be borne by the Seller Parties or any of their Affiliates pursuant to Section 6.14, and any Liability in respect of deferred Taxes (from an accounting perspective);

(v) except as provided for in Section 6.6 or 6.7, any and all Liabilities to or in respect of any current or former employees of the Seller Parties or any of their respective Affiliates;

(vi) except as provided for in Section 6.6 and 6.7, any and all Liabilities under or relating to any Seller Plans, and any expenses and benefits incurred or claimed under any Seller Plans in respect of any Transferred Employee or other current or former employee of any Seller Party or any of their respective Affiliates, and any claims under any Seller Plans by such Transferred Employees, their covered dependents, or any other current or former employees of any Seller Party or any of their respective Affiliates;

(vii) any and all Liabilities in respect of any Indebtedness;

(viii) any and all Liabilities arising out of any Environmental Claim;

 

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(ix) any and all Liabilities that arise as a result of any breach or default by any Seller Party or any of their respective Affiliates or predecessors in interest under any Transferred Contract or the Assigned Lease;

(x) any and all Liabilities in respect of Leases other than the Assigned Lease;

(xi) any and all Liabilities to any broker, finder or agent for any investment banking or brokerage fees, finder’s fees or commission and any other fees and expenses payable by any Seller Party or any of their respective Affiliates pursuant to Section 11.7 with respect to the transactions contemplated by this Agreement;

(xii) any and all Liabilities to any Seller Party or any of their respective Affiliates other than pursuant to this Agreement or the other Transaction Documents;

(xiii) except as provided in Sections 2.4, 2.5, 6.6 or 6.7, any and all Liabilities with respect to Contracts other than Transferred Contracts;

(xiv) any and all Liabilities in respect of any Proceedings commenced, pending or threatened prior to or as of the Closing or arising out of any act, omission, occurrence, event or circumstances occurring or existing prior to or as of the Closing; and

(xv) any and all Liabilities of any kind, fixed or contingent, known or unknown, resulting from or arising out of the conduct of the Business (including the design, manufacturing, marketing, distribution or sale of any Product) or the use, non-use or ownership (whether by leasehold or fee) of the Purchased Assets (including the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights), the Excluded Assets or any other assets, properties or rights (including assets, properties or rights belonging to, or alleged to belong to, third parties) prior to the Closing.

2.3 Transfer of Purchased Assets; Assumed Liabilities.

(a) The Purchased Assets shall be sold, conveyed, transferred, assigned and delivered, and the Assumed Liabilities shall be assumed, pursuant to transfer and assumption agreements and such other instruments in such form as may be necessary or appropriate to effect a conveyance of the Purchased Assets and an assumption of the Assumed Liabilities in the jurisdictions in which such transfers are to be made. In addition, Intellectual Property Rights, other than Licensed Business Intellectual Property Rights, under software licenses used in the Business (“Software Licenses”) will be assigned or sublicensed to Purchaser to the extent provided in Section 6.18 hereof. Such transfer and assumption agreements shall be jointly prepared by the Parties and shall include: (i) a bill of sale in substantially the form attached hereto as Exhibit A (the “Bill of Sale”), (ii) an assignment and assumption agreement in substantially the form attached hereto as Exhibit B (the “Assignment and Assumption Agreement”), (iii) local asset transfer agreements for each jurisdiction other than the United States in which Purchased Assets or Assumed Liabilities are located in substantially the form attached hereto as Exhibit C with only such deviations therefrom as are required by local Law (the “Local Asset Transfer Agreements”), (iv) a patent assignment in substantially the form

 

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attached hereto Exhibit D (“Patent Assignment”) and (v) such other agreements as may reasonably be required to effect the purchase and assignment of the Purchased Assets and the Assumed Liabilities (collectively, clauses (i)–(v), the “Ancillary Agreements”) and shall be executed no later than at or as of the Applicable Closing by the Seller Parties, as appropriate, and Purchaser.

(b) Notwithstanding the foregoing and unless otherwise stated in the Master Separation Agreement, promptly following the Applicable Closing Date: (i) the Seller Parties shall prepare such Purchased Assets located at any facilities currently occupied by any Seller Party which facilities are not to be purchased, assigned, subleased, transferred to or otherwise occupied by Purchaser pursuant to this Agreement or the Master Separation Agreement (each such facility, a “Seller Facility”) for relocation (it being understood that Purchaser shall reimburse the Seller Parties for their reasonable out-of-pocket expenses incurred with respect to such preparation); and (ii) Purchaser shall (A) relocate such Purchased Assets from the relevant Seller Facility; (B) be responsible for all data transfer, delivery, transmission and reformatting costs and expenses related to the acquisition of assets, and (C) indemnify, defend and reimburse the respective Seller Party for all Seller Losses arising out of any physical damage to any Seller Facility or Excluded Assets arising out of or related to Purchaser’s removal, detachment, disconnection or transportation of the Purchased Assets, provided such damage was not the result of gross negligence or willful misconduct by the Seller Parties or their agents. Subject to the terms of this Section 2.3(b), each Seller Party agrees to cooperate with Purchaser and provide Purchaser all assistance reasonably requested by Purchaser in connection with the planning and implementation of the transfer of Purchased Assets, whether located at any Seller Facility or a third party’s facility, or any portion of any of them to such location as Purchaser shall designate. Purchased Assets shall be transported by or on behalf of Purchaser, and until all of the Purchased Assets are removed from a Seller Facility, the applicable Seller Party will permit Purchaser and its authorized agents or representatives, upon prior notice, to have reasonable access to the Seller Facility to the extent necessary to remove the Purchased Assets. Purchaser shall be responsible for the reasonable out-of-pocket costs of the Seller Parties incurred in disconnecting and detaching all fixtures and equipment that are Purchased Assets from the floor, ceiling and walls of a Seller Facility so as to be freely removed from a Seller Facility by Purchaser. Purchaser shall be responsible for the reasonable out-of-pocket costs of the Seller Parties incurred in packaging and loading the Purchased Assets for transporting to and reinstalling the Purchased Assets at such location(s) as Purchaser shall determine. Risk of loss as to any Purchased Asset shall be borne by, and shall pass to, the Purchaser as of the applicable Effective Time.

2.4 Approvals and Consents.

(a) Notwithstanding anything to the contrary contained in this Agreement, and subject to the provisions of Section 2.5, to the extent that the assignment or attempted assignment to Purchaser of any Transferred Contract would result in a violation of any applicable Law, or would require any Consent or waiver of any Governmental Authority or third party and such Consent or waiver shall not have been obtained prior to the Applicable Closing, this Agreement shall not constitute an assignment, or an attempted assignment thereof if any of the foregoing would constitute a breach of applicable Law, any Contract or the rights of any third party; provided, however, that, subject to the satisfaction or waiver of the conditions contained in

 

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Article VII, the Applicable Closing shall occur notwithstanding the foregoing without any adjustment to the Purchase Price on account of such required authorization. Following the Applicable Closing, the Parties shall use commercially reasonable efforts, and shall cooperate with each other, to obtain promptly such Consent or waiver; provided, further, however, that neither Party nor any of its Affiliates shall be obligated to pay any money or other consideration or grant forbearances to any third party therefor.

(b) Once such Consent or waiver is obtained, each Seller Party shall, and shall cause its Affiliates to assign such Transferred Contract to Purchaser for no additional consideration.

(c) If such Consent is not obtained, or if an attempted assignment of such Transferred Contract would be ineffective or would adversely affect the rights of any Seller Party thereunder so that Purchaser would not in fact receive all such rights, Purchaser and the Seller Parties, as applicable, shall or shall cause their respective Subsidiaries to enter into a mutually agreeable arrangement under which Purchaser would obtain the benefits and perform and discharge the obligations thereunder in accordance with this Agreement, or under which such Seller Party would enforce for the benefit of Purchaser at Purchaser’s sole cost and expense, with Purchaser being responsible for the performance and discharge of such Seller Party’s obligations, any and all rights of the Seller Parties against a third party. Nothing in this Section 2.4 applies (i) to any Consent or waiver required under any Antitrust Regulations, which Consents and waivers shall be governed by Section 6.3 or (ii) to Consents or releases with respect to the Assigned Real Property, such Consents and releases to be obtained pursuant to the provisions of Section 2.5.

2.5 Estoppel Certificate in Respect of Assigned Real Property.

(a) Promptly following the execution of this Agreement, with respect to the Assigned Real Property, the Seller Parties shall use commercially reasonable efforts to obtain an estoppel certificate from the Landlord pursuant to the terms of the Assigned Lease, but shall not be required to (i) commence judicial proceedings to compel the delivery of such certificate or establish that the withholding of such certificate has been unreasonably withheld, conditioned or delayed, (ii) pay any consent fees or agree to any change in the Assigned Lease (other than those conditioned upon the consummation of the transactions contemplated hereby), or (iii) provide or maintain any security or guaranty to the Landlord following the Closing.

(b) Purchaser shall cooperate with the Seller Parties in attempting to obtain the above-referenced certificate.

(c) Purchaser shall not communicate directly with the Landlord without the prior written consent of Seller, such consent not to be unreasonably withheld.

 

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2.6 Missing Consents. Not less than three (3) Business Days prior to the Closing, Seller shall deliver a supplement to the Disclosure Letter, which supplement shall identify the Consents with respect to the Transferred Contracts, or the estoppel certificate with respect to the Assigned Real Property, that have not been obtained and are subject to the provisions of Sections 2.4 and 2.5; provided, that such supplement will have no effect on any representation or warranty or the exceptions thereto.

2.7 Sensor IP Closing. The Parties acknowledge and agree that notwithstanding any other provisions of this Agreement, the consummation of the Transfer to Purchaser or one or more of its Affiliate of the Sensor IP (as defined below) (such consummation, the “Sensor IP Closing”) will not occur on the Closing Date and will instead be consummated in accordance with this Section 2.7, and the failure to so Transfer the Sensor IP to Purchaser as of the Closing Date shall not be a breach or default of this Agreement. Prior to the date hereof, the Seller Parties shall have commenced the liquidation of Sensor IPCo and the resulting distribution of Sensor IPCo’s assets and liabilities to Seller (the “Liquidation”). On the later of (a) the Closing Date or (b) the earlier of (i) the date that is five Business Days after the date of an interim distribution of all of the Sensor IP (as defined below) to Seller and (ii) the date that is five Business Days after the date on which the Liquidation is completed, Seller will Transfer any assets constituting Purchased Assets which were held by Sensor IPCo immediately prior to the Liquidation (the “Sensor IP”) to Purchaser. In the event that the Liquidation is abandoned or otherwise terminated, then the Seller Parties shall cause Sensor IPCo to Transfer the Sensor IP directly to Purchaser at the Closing (if the Liquidation is abandoned or otherwise terminated prior to the Closing) or within five Business Days following the abandonment or termination of the Liquidation (if the Liquidation is abandoned or otherwise terminated on or after the Closing). The date of the consummation of the Transfer of the Sensor IP to Purchaser by Seller or Sensor IPCo, as applicable, as contemplated by this Section 2.7 is referred to herein as the “Sensor IP Closing Date.” On the Sensor IP Closing Date, the Parties shall enter into Patent Assignments and other appropriate Ancillary Agreements in order to provide for the Transfer of the Sensor IP to Purchaser or one or more it its Affiliates. Purchaser shall assume title and risk of loss to the Sensor IP as of the Sensor IP Closing Date.

2.8 Malaysia Closing. The Parties acknowledge and agree that notwithstanding any other provisions of this Agreement, the consummation of the Transfer to Purchaser or one or more of its Affiliates of the Purchased Assets consisting of tangible personal property located in Malaysia (collectively the “Malaysia Purchased Assets”) will not occur on the Closing Date and will instead be consummated on a date following the Closing Date to be mutually agreed upon by the Parties (the date of such Transfer, the “Malaysia Closing Date”), and the failure to so Transfer the Malaysia Purchased Assets as of the Closing Date shall not be a breach or default of this Agreement. On the Malaysia Closing Date, the Parties will enter into, or will cause their respective applicable Subsidiaries to enter into a Local Asset Transfer Agreement providing for the Transfer of the Malaysia Purchased Assets to Purchaser or one or more of its Affiliates. To the extent permitted by Law and to the extent not recovered by Seller or one of its Affiliates under the Master Separation Agreement, as such agreement may be amended from time to time, or any Separation Agreements entered into in connection therewith, Purchaser (a) shall assume the Assumed Liabilities associated with the Malaysia Purchased Assets and the Malaysia Employees as of the Malaysia Closing Date, and (b) shall assume title and risk of loss to the Malaysia Purchased Assets as of the Malaysia Closing Date.

 

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ARTICLE III

PURCHASE PRICE AND ADJUSTMENTS

3.1 Purchase Price. The purchase price in respect of the purchase and sale transactions hereunder (the “Purchase Price”) shall be (a) the sum of (i) an amount in cash equal to Fifty-Two Million, Two Hundred Ninety Thousand Dollars and no cents ($52,290,000), which comprises the aggregate of the respective purchase prices to be paid for the Purchased Assets and the covenant not to compete contained in Section 6.9 in each jurisdiction, plus (ii) any payments required to be made by Purchaser pursuant to Section 3.3, and (b) the assumption of the Assumed Liabilities.

3.2 Closing Date Payment. On the Closing Date, Purchaser shall, or shall cause one of its Affiliates to, pay to the Seller Parties an aggregate amount equal to Fifty-Two Million, Two Hundred Ninety Thousand Dollars and no cents ($52,290,000). Such amount provided for in the immediately preceding sentence shall be payable in United States dollars in immediately available federal funds to such bank account or accounts as shall be designated in writing by Seller no later than the second Business Day prior to the Closing, and includes any amounts paid or to be paid under any Local Asset Transfer Agreements (including those contemplated under Section 2.8).

3.3 Contingent Payments.

(a) Product Document Delivery.

(i) Seller shall deliver or cause to be delivered to Purchaser the micro architecture and algorithm documents and associated design reviews specified on Schedule 3.3(a) for each of the Avago Sensor Products identified on Schedule 3.3(a) (the “Product Documents”) no later than the Closing Date. Seller shall use commercially reasonable efforts to identify, deliver and transfer, or cause to be identified, delivered and transferred to Purchaser, no later than 90 days after the Closing Date (the “Document Delivery Date”) any remaining micro architecture and algorithm documents and associated design reviews that were not identified on Schedule 3.3(a) but otherwise relate to the Avago Sensor Products identified on Schedule 3.3(a) (the “Supplemental Product Documents”). The Supplemental Product Documents shall be Purchased Assets for all purposes under this Agreement (except with respect to the obligation of the Seller Parties to deliver the Purchased Assets at Closing). Subject to Section 3.3(a)(ii) and (iii), if all of the Supplemental Product Documents shall have been delivered to Purchaser no later than the Document Delivery Date, then the Purchaser shall pay Seller an additional $2,000,0000 (the “Document Delivery Payment”).

(ii) For purposes of evidencing Seller’s complete delivery of the Supplemental Product Documents, Seller shall deliver a written notice to Purchaser (the “Document Delivery Notice”) on or before the Document Delivery Date stating that Seller has

 

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completed delivery of the Supplemental Product Documents to Purchaser as of the Document Delivery Date. The Document Delivery Notice, if any, shall be deemed a final and binding confirmation that Purchaser must make the Document Delivery Payment to Seller unless Purchaser delivers a written notice (the “Document Delivery Objection Notice”) to Seller on or prior to the fifth Business Day after receipt of the Document Delivery Notice (y) stating that Purchaser disputes Seller’s assertion that Seller has completed delivery of the Supplemental Product Documents, and (z) setting forth in reasonable detail the specific Supplemental Product Documents that Purchaser believes have not been provided by Seller prior to the Document Delivery Date.

(iii) If Seller agrees with the objections made in the Document Delivery Objection Notice, then Seller shall have an additional five Business Days to deliver the remaining Supplemental Product Documents identified in the Document Delivery Objection Notice from the date of Seller’s receipt thereof (it being understood that if Seller delivers the remaining Supplemental Product Documents within such additional time period, Purchaser shall deliver the Document Delivery Payment no later than the third Business Day after the final delivery of the remaining Supplemental Product Documents).

(iv) If Seller disagrees with the statements made in the Document Delivery Objection Notice, then Seller and Purchaser shall resolve any dispute related thereto pursuant to Section 11.1, and upon the final resolution of any such dispute, (y) if Seller is determined to have not delivered all Supplemental Product Documents by the Document Delivery Date, then Seller shall have an additional five Business Days to deliver the remaining Supplemental Product Documents from the date of such final resolution (it being understood that if Seller delivers the remaining Supplemental Product Documents within such additional time period, Purchaser shall deliver the Document Delivery Payment no later than the third Business Day after the final delivery of the remaining Supplemental Product Documents identified in the final resolution of such dispute), and (z) if Seller is determined to have delivered all Supplemental Product Documents by the Document Delivery Date, then Purchaser shall deliver the Document Delivery Payment no later than the third Business Day following the final resolution of such dispute.

(b) Patent Prosecution.

(i) Following the Closing Date, to the extent reasonably required in order to perfect Purchaser’s or its Affiliates’ chain of title to the Transferred Business Intellectual Property as recorded at the United States Patent and Trademark Office (“USPTO”), or a corresponding office in a foreign country, (y) the Seller Parties shall use (and cause each of their respective applicable Subsidiaries to use) commercially reasonable efforts (which shall not include the payment or the transfer of other consideration to any third party) to provide, obtain, or cause to be obtained, documents sufficient to evidence the chain of title conferring ownership of such Transferred Business Intellectual Property in Purchaser in a form suitable for recordation with the USPTO, or a corresponding office in a foreign country, and to provide such documents to the Purchaser for filing and recordation by it, or, in the sole discretion of the Seller, to record, or to cause to be recorded, such documents (the “Title Documents”), and (z) each Seller Party shall deliver (and cause

 

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each of their respective applicable Subsidiaries to deliver) to Purchaser each file in such Seller Party’s (or such Subsidiary’s) possession relating to the prosecution and maintenance of the Transferred Business Intellectual Property listed on Schedules 1, 2, 3 or 4 (the “IP Files,” and together with the Title Documents, the “IP Transfer Documents”), in each case as promptly as reasonably possible after the Closing Date. If the Seller Parties deliver all of the IP Transfer Documents on or prior to the Document Delivery Date, then Purchaser shall pay Seller an additional $2,000,000 (the “Patent Assistance Payment”).

(ii) For purposes of evidencing the Seller Parties’ satisfaction of the condition set forth in Section 3.3(b)(i), Seller shall deliver a written notice to Purchaser (the “Patent Assistance Notice”) on the Document Delivery Date stating that Seller has satisfied the condition set forth in Section 3.3(b)(i). The Patent Assistance Notice shall be deemed a final and binding confirmation that Purchaser must make the Patent Assistance Payment to Seller unless Purchaser delivers a written notice (the “Patent Assistance Objection Notice”) to Seller on or prior to the fifth Business Day after receipt of the Patent Assistance Notice (y) stating that Purchaser disputes Seller’s assertion that the Seller Parties have satisfied the condition set forth in Section 3.3(b)(i), and (z) setting forth in reasonable detail the specific basis upon which Purchaser believes that the Seller Parties have failed to satisfy the condition set forth in Section 3.3(b)(i).

(iii) If Seller agrees with the statements made in the Patent Assistance Objection Notice, then Seller shall have an additional five Business Days to cure any failure to satisfy the condition set forth in Section 3.3(b)(i) from the date of Seller’s receipt of the Patent Assistance Objection Notice (it being understood that if Seller cures any such failure within such additional time period, Purchaser shall deliver the Patent Assistance Payment no later than the third Business Day after the satisfaction of such condition).

(iv) If Seller disagrees with the statements made in the Patent Assistance Objection Notice, then Seller and Purchaser shall resolve any dispute related thereto pursuant to Section 11.1, and upon the final resolution of any such dispute, (y) if Seller is determined to have not satisfied the condition set forth in Section 3.3(b)(i), then Seller shall have an additional five Business Days to satisfy such condition from the date of such final resolution (it being understood that if Seller satisfies such condition within such additional time period, Purchaser shall deliver the Patent Assistance Payment no later than the third Business Day after the satisfaction of such condition), and (z) if Seller is determined to have satisfied such condition, then Purchaser shall deliver the Patent Assistance Payment no later than the third Business Day following the final resolution of such dispute.

(v) If requested by Purchaser, the Seller Parties shall each use commercially reasonable efforts to assist Purchaser (at Purchaser’s expense) in prosecuting and maintaining any Patents included in the Transferred Business Intellectual Property during the 90-day period following the Closing Date. Subject to the Avago Sensor IPCo License Agreement, and except for the provision of the assistance to Purchaser required under the immediately preceding sentence, the Seller Parties and their respective Subsidiaries shall

 

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have no obligation to prosecute any Patents included in the Transferred Business Intellectual Property after the Closing Date, even if such Patents are the subject of any pending litigation relating to such Patents, and their obligations with respect to transfer of all such Patents shall be limited to the delivery of complete files relating thereto and the delivery of assignment agreements suitable for the assignment of the Transferred Business Intellectual Property Rights to Purchaser pursuant to Section 2.3(a).

(c) Employee Retention. Purchaser shall pay to Seller, no later than the third Business Day following the first anniversary of the Closing Date, (i) an additional $1,000,000 (up to a maximum of $9,000,000) for each ten percent increment (up to a maximum of 90%) of the Transferred Employees identified on Schedule 3.3(c) (collectively, the “Key Employees”) who remain employed by Purchaser or one of its Affiliates on the first anniversary of the Closing Date, and (ii) an additional $1,000,000 if more than 90% of the Key Employees remain employed by Purchaser or one of its Affiliates on the first anniversary of the Closing Date. No Key Employee whose employment has been terminated either (i) by Purchaser or one of its Affiliates for any reason other than Cause or (ii) by such Key Employee with Good Reason, shall constitute a Key Employee for purposes of calculating the percentage of Key Employees who remain employed by Purchaser or one of its Affiliates on or prior to the Closing Date.

(d) Design Wins.

(i) Purchaser shall pay to Seller $300,000 (up to a maximum aggregate amount of $3,000,000) for each design win achieved by Purchaser during the period beginning on the Closing Date and ending on the second anniversary thereof (the “Design Win Period”) for any C-4050 Avago Sensor Product incorporating any Transferred Business Intellectual Property, Licensed Business Intellectual Property Rights or Licensed Business Technology (each, a “Covered Product”). Purchaser shall make each payment no later than three Business Days after the achievement of each applicable design win for a Covered Product.

(ii) For purposes of this Agreement, a design win will be deemed to have been achieved for a given Covered Product the first time that Purchaser or one of its Affiliates receives from a third party a purchase order to purchase such Covered Product (it being understood that a separate design win shall be deemed to have been achieved (y) each time such Covered Product is purchased for incorporation into a product of a given handset manufacturer or a different product of a different handset manufacturer, even if each such purchase order or other commitment is received from the same third party module manufacturer, and (z) each time Purchaser or one of its Affiliates records a new SKU for a Covered Product in its product catalog).

(iii) If during the Design Win Period Purchaser fails to use commercially reasonable efforts to continue to support (including the allocation of reasonable research and development resources) any Covered Product that on the Closing Date is in the process of undergoing qualification with a third party and regarding which such third party has not made a decision to incorporate such Covered Product into its products, then Purchaser shall pay Seller $300,000 for such Covered Product as if a design win had been achieved. If Purchaser continues to use commercially reasonable efforts to support a

 

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Covered Product through the date of such decision and the design win is not achieved, then Purchaser may thereafter discontinue further support on such Covered Product without liability to Seller.

(e) Sensor IP Closing Payment. Concurrent with the Sensor IP Closing, Purchaser shall, or shall cause one of its Affiliates to, pay to Seller (for its own account and as agent for all other Seller Parties) an amount equal to $1,000,000.

(f) Delivery of Purchased Assets. Notwithstanding any other provision of this Section 3.3, but subject to the occurrence of the Closing, the obligations of the Seller Parties to convey and to transfer the Product Documents to Purchaser at the Closing and the IP Transfer Documents as promptly as reasonably possible after the Closing Date (but in no event later than the 90^th day after the Closing Date) are absolute and unconditional. The failure of the Seller Parties to be entitled to any payment contemplated by Section 3.3(a) or Section 3.3(b) shall not affect any right or remedy otherwise available to Purchaser in respect of any breach by any Seller Party of this Agreement.

3.4 Allocation of Purchase Price.

(a) The Seller Parties and Purchaser agree to use commercially reasonable efforts to: (i) reach agreement no later than 120 days after the Closing Date on the allocation of the Purchase Price (and all other capitalizable costs) among the Purchased Assets, the covenant not to compete contained in Section 6.9, and the rights granted under the Avago General IP License Agreement and the Avago Sensor IPCo License Agreement for all Tax purposes and to set forth such allocation on a schedule (the “Allocation Schedule”) to be prepared jointly by Seller, on behalf of itself and as agent to the Seller Parties, and Purchaser; (ii) revise the Allocation Schedule no later than 30 days after each payment is made pursuant to Section 3.3 to reflect any adjustment to the Purchase Price pursuant to Section 3.3; and (iii) negotiate in good faith to resolve any dispute with respect to the Allocation Schedule and any revisions thereto.

(b) In the event that the Parties reach agreement on the Allocation Schedule, Purchaser and the Seller Parties shall be bound by such Allocation Schedule and shall file all Tax Returns and reports with respect to the transactions contemplated by this Agreement (including, all federal, state and local Tax Returns) on the basis of such allocation. In addition, Purchaser and the Seller Parties shall act in accordance with the Allocation Schedule in the course of any Tax audit, Tax review or Tax litigation relating thereto, and take no position and cause their affiliates to take no position inconsistent with the Allocation Schedule for income Tax purposes, including United States federal and state income Tax and foreign income Tax, unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER AND THE OTHER SELLERS

The Seller Parties hereby jointly and severally represent and warrant to Purchaser, subject to the exceptions set forth in the disclosure letter delivered by the Seller Parties to Purchaser on the date hereof and attached hereto (the “Disclosure Letter”), each of which exceptions in order

 

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to be effective shall indicate the Section and, if applicable, subsection of this Article IV to which it relates (except to the extent that the applicability of such exception to such Section or subsection is otherwise readily apparent), as follows:

4.1 Corporate Existence. Each Seller Party is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Seller Party has the requisite corporate, partnership or similar power and authority to execute and deliver this Agreement and each of the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby and to carry on the Business as the same is now being conducted.

4.2 Corporate Authority.

(a) This Agreement, the Ancillary Agreements, the Master Separation Agreement, the Avago General IP License Agreement, the Avago Sensor IPCo License Agreement, and the other agreements, instruments and documents to be executed and delivered in connection herewith, (collectively, the “Transaction Documents”) to which any Seller Party or its Affiliate is (or becomes) a party and the consummation of the transactions contemplated hereby and thereby involving such Persons have been duly authorized by such Seller Party or its Affiliate, as applicable, by all requisite corporate, partnership or other action, and no other proceedings on the part of such Seller Party or its Affiliate or its stockholders, partners or members are necessary for any Seller Party or its Affiliate to authorize the execution or delivery of this Agreement or any of the other Transaction Documents or to perform any of their obligations hereunder or thereunder. Each Seller Party or its Affiliate that is a party to any Transaction Document has full corporate or other organizational (as applicable) power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder. This Agreement has been duly executed and delivered by each Seller Party, and the other Transaction Documents will be duly executed and delivered by each Seller Party or Affiliate of a Seller Party which is a party thereto. This Agreement constitutes, and the other Transaction Documents when so executed and delivered will constitute, valid and legally binding obligations of each Seller Party or its Affiliate which is a party thereto, enforceable against it or them, as the case may be, in accordance with its terms, except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at law).

(b) The execution and delivery of this Agreement and the other Transaction Documents by the applicable Seller Parties or their Affiliates, the performance by the applicable Seller Parties or their Affiliates of their respective obligations hereunder and thereunder and the consummation by the Seller Parties or their Affiliates of the transactions contemplated hereby and thereby do not and will not (A) violate or conflict with any provision of the respective certificates of incorporation or by laws or similar organizational documents of any Seller Party or of any Affiliate of a Seller Party which is a party to any Transaction Document, (B) result in any material violation or material breach of, or constitute any material default (with or without notice or lapse of time, or both) under, or give rise to a right of recapture, termination, cancellation or acceleration of any material obligation or a loss of a material benefit under, require that any Consent be obtained or result in the creation of any Lien under, any material Transferred

 

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Contract, including Transferred Material Contracts, to which any Seller Party (or any Affiliate of a Seller Party which is a party to any Transaction Document) is a party or to which any assets of any Seller Party (or any Affiliate of a Seller Party which is a party to any Transaction Document) is subject, or (C) materially violate, conflict with or result in any breach under any provision of any Law applicable to any Seller Party (or any Affiliate of a Seller Party which is a party to any Transaction Document) or any of its respective properties or assets.

4.3 Ownership of Purchased Assets. All of the Purchased Assets, including those acquired by the Seller Parties from Angel, are held by Seller Parent directly and/or by its direct and indirect Subsidiaries

4.4 Governmental Approvals and Consents. Except as set forth in Section 4.4 of the Disclosure Letter, no Consent, order, or license from, notice to or registration, declaration or filing with, any United States, supranational or foreign, federal, state, provincial, municipal or local government, government agency, court of competent jurisdiction, administrative agency or commission or other governmental or regulatory authority or instrumentality (“Governmental Authority”) is required on the part of any Seller Party in connection with the execution, delivery or performance of this Agreement or any of the other Transaction Documents or the consummation of the transactions contemplated hereby and thereby, other than (i) required filings under the HSR Act, and any other applicable laws or regulations relating to antitrust or competition (collectively, “Antitrust Regulations”) and (ii) if determined to be necessary by Seller Parent, the filing of this Agreement with the Securities and Exchange Commission (the “SEC”).

4.5 Title to Purchased Assets.

(a) The Seller Parties have, or at the Applicable Closing will have, and Purchaser will at the Applicable Closing acquire, good and valid title to the Purchased Assets, free and clear of all Liens, except Permitted Liens and Liens arising out of any actions of Purchaser and its Affiliates.

(b) The only real property interest to be transferred to Purchaser is U.S. R&D’s leasehold estate in certain real property located at 4238 SW Research Way, Corvallis, OR 97333 pursuant to that certain Lease Agreement dated April 21, 2000 by and between Owyhee River LLC, as landlord, and Angel, as predecessor in interest to U.S. R&D, as tenant (the “Assigned Lease”). A true, complete and correct copy of the Assigned Lease has been delivered, or made available, to Purchaser or its counsel. For purposes of this Agreement, the premises subject to the Assigned Leases is herein referred to as the “Assigned Real Property.” No Seller Party has received a written notice from the Landlord of any default (or condition or event which, after the notice or lapse of time or both, would constitute a default) under the Assigned Lease.

(c) The Assigned Lease is in full force and effect without modification or amendment from the form delivered, or made available, to Purchaser or its counsel and is valid, binding and enforceable in accordance with its terms except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at law). U.S. R&D has performed all material obligations required to

 

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be performed by it to date under such Lease, and is not (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder and, to the knowledge of Seller, no other party to the Assigned Lease is (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder. Except pursuant to documentation delivered, or made available, to Purchaser or its counsel, no Seller Party party to the Assigned Lease has assigned its interest under the Assigned Lease, or entered into any subleases for all or a part of the Assigned Real Property, to any third party.

4.6 Contracts.

(a) Except as set forth on Section 4.6(a) of the Disclosure Letter, no Transferred Contract in effect as of the date of this Agreement constitutes (any Contract specified in Section 4.6(a) of the Disclosure Letter is referred to as a “Transferred Material Contract”):

(i) any Contract to which any Seller Party or any of their respective Affiliates is a party limiting in any material respect the right of any Seller Party to engage in any material line of business or to compete with any Person, in each case which would apply to the activities of Purchaser after the Closing with respect to the Purchased Assets;

(ii) a lease, sublease or similar Contract with any Person under which (A) any Seller Party is lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by any Person or (B) any Seller Party is a lessor or sublessor of, or makes available for use by any Person, any machinery, equipment, vehicle or other tangible personal property owned or leased by any Seller Party in any such case that has an aggregate future liability or receivable, as the case may be, in any fiscal year in excess of $100,000 and is not terminable by the applicable Seller Party by notice of not more than 60 days for a cost of less than $100,000;

(iii) (A) a continuing Contract for the future purchase by any Seller Party of materials, supplies, equipment or services in the ordinary course of business, (B) a management, consulting or other similar Contract for services to be provided to any Seller Party or (C) an advertising agreement or arrangement, in any such case that has an aggregate future liability in any fiscal year to any Person in excess of $100,000 and is not terminable by the applicable Seller Party by notice of not more than 60 days for a cost of less than $100,000;

(iv) a Contract (including any take or pay or keepwell agreement) under which (A) any Person has guaranteed indebtedness, liabilities or obligations of any Seller Party or (B) any Seller Party has guaranteed indebtedness, liabilities or obligations of any other Person (in each case other than endorsements for the purpose of collection in the ordinary course of business), in each case in excess of $100,000 individually or $500,000 in the aggregate;

(v) a Contract under which any Seller Party has, directly or indirectly, made any advance, loan, extension of credit or capital contribution to, or other investment in, any Person (other than extensions of trade credit in the ordinary course of business and loans made pursuant to the salary advance program to employees located in Malaysia in

 

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the ordinary course of business consistent with past practice not in excess of $10,000 per employee or $100,000 in the aggregate) in excess of $100,000 individually or $500,000 in the aggregate;

(vi) a Contract granting a Lien upon any property (tangible or intangible) used in connection with the Business or any other Purchased Asset which Lien secures an obligation in excess of $100,000, other than Permitted Liens;

(vii) a Contract with (A) any Seller Party or (B) any shareholder, officer, director, employee or Affiliate of any Seller Party;

(viii) a Contract providing for the services of any dealer, distributor, sales representative, franchise or similar representative that involved the payment or receipt in the eight months ended July 31, 2006 in excess of $100,000 by any Seller Party, other than such contracts (including with original equipment manufacturers) entered into in the ordinary course of business;

(ix) a Contract to which any Seller Party is a party pertaining to the Business that is material to the Business and not made in the ordinary course of business; or

(x) a Business Intellectual Property License that is material to the Business.

(b) All Transferred Material Contracts are valid, binding and in full force and effect with respect to the Seller Parties party thereto, and have not been amended or modified in any material respect except as set forth therein. Seller has made available to Purchaser or its counsel true, complete and correct copies of all Transferred Material Contracts (and true, correct and complete copies of all Business Intellectual Property Licenses that are not material to the Business but of which the Seller has knowledge) as in effect on the date hereof. Each Seller Party party thereto has performed all material obligations required to be performed by it under the Transferred Material Contracts, and it is not (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder and, to the knowledge of Seller, no other party to any Transferred Material Contract is (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder.

(c) Notwithstanding the foregoing, the provisions of this Section 4.6 shall not apply to Seller Plans (which are addressed in Section 4.11) and Non U.S. Benefit Plans (which are addressed in Section 4.12).

4.7 Litigation. No Seller Party is subject to any order, judgment, stipulation, injunction, decree or agreement with any Governmental Authority, which would reasonably be expected to prevent or materially interfere with or delay the consummation of any of the transactions contemplated by the Transaction Documents or would reasonably be expected to have a Seller Material Adverse Effect. No Proceeding is pending or, to the knowledge of Seller, threatened against any Seller Party or any of their respective Affiliates (i) with respect to any Business Employee or (ii) that would reasonably be expected to prevent or materially interfere with or delay the consummation of the transactions contemplated hereby or by any of the other Transaction Documents. Except as set forth on Section 4.7 of the Disclosure Letter, there are no

 

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Proceedings pending or, to the knowledge of Seller, threatened against any Seller Party or any of their respective Affiliates in respect of the Business, the Purchased Assets, the Assumed Liabilities, the Business Intellectual Property Rights or the Seller Plans, except for any pending or threatened Proceeding that (i) seeks less than $500,000 in damages (excluding any class or similar representative actions or any instance in which a Proceeding involving the same or similar allegations represent aggregate damages in excess of such amount) and (ii) does not seek injunctive or other similar relief.

4.8 Business Intellectual Property Rights.

(a) Section 4.8(a) of the Disclosure Letter sets forth a list of all material Contracts relating to Business Intellectual Property Rights entered into by any Seller Party or any of their respective Subsidiaries other than Business Intellectual Property Licenses and licenses to off-the-shelf office productivity software that is generally commercially available pursuant to shrink-wrap, click-wrap or similar license agreements. All software used in the Business is commercially available.

(b) The Seller Parties own the Transferred Business Intellectual Property free and clear of any Liens.

(c) No Proceedings have been instituted, pending or, to the knowledge of Seller, threatened against any Seller Party or any of their respective Subsidiaries or, to the knowledge (without due inquiry) of Seller as of the date of this Agreement, against Angel or HP, which materially and negatively affects the rights of any Seller Party or any of their respective Subsidiaries with respect to the Transferred Business Technology, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights.

(d) None of the Transferred Business Technology, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, or to the knowledge of Seller, any Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights is subject to any outstanding judgment, decree, order, writ, award, injunction or determination of an arbitrator or court or other Governmental Authority materially and negatively affecting the rights of any Seller Party or any of their respective Subsidiaries with respect thereto.

(e) To the knowledge of Seller, no Seller Party has, and the use by the Seller Parties or any of their respective Subsidiaries of the Transferred Business Technology, Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights, Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights has not, infringed, otherwise violated or conflicted with the valid Intellectual Property Rights of any other Person. No other term of this Agreement shall be interpreted to be inconsistent with the foregoing.

(f) As of the date hereof, no Seller Party or any of their respective Subsidiaries has received any written notice, and there is no pending Proceeding to which any Seller Party or any

 

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of their respective Subsidiaries is a party, alleging (i) that any use of the Transferred Business Technology, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights by any Seller Party or any of their respective Subsidiaries infringes, otherwise violates or conflicts with any Intellectual Property Right of any other Person, (ii) invalidity or unenforceability of the Transferred Business Technology, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights, or (iii) ownership, solely or jointly, of the Transferred Business Technology, Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights or any portion thereof by any other Person.

(g) To the knowledge of Seller, there is no unauthorized use, misappropriation or infringement of any Transferred Business Technology, Transferred Business Intellectual Property or Transferred Intellectual Property Rights including by any employee or former employee of any Seller Party.

(h) The Seller Parties and their respective Subsidiaries have taken commercially reasonable steps to preserve the confidentiality of their Trade Secrets that relate to the Business and the Purchased Assets. Neither the Seller Parties nor any of their respective Subsidiaries are under any obligation to disclose their respective material proprietary software of the Business in source code form, except to parties that have agreed to preserve the confidentiality of such source code. Neither the Seller Parties nor any of their respective Subsidiaries have intentionally incorporated any disabling device or mechanism in the Avago Sensor Products.

(i) None of the Seller Parties or any of their respective Subsidiaries has received any notice nor is there any pending Proceeding alleging that any Seller Party or any of their respective Subsidiaries is obligated to indemnify any Person for alleged infringements or violations of Intellectual Property Rights of any other Person.

(j) Schedules 1, 2, 3 and 4 hereto, respectively, set forth a true, correct and complete list of all of the Transferred Business Intellectual Property Rights that constitutes a Patent, Trademark, Internet Property, registered Copyright or registered MaskWork. Except as set forth on Schedules 1, 2, 3 and 4, each such item of Transferred Business Intellectual Property as of the date hereof is solely owned and recorded solely in the name of a Seller Party. All maintenance fees, annuities and other fees and payments to any Governmental Authority required to keep any item listed on Schedules 1, 2, 3 and 4 active during the 90-day period following the Closing Date have been paid in full in a timely manner, except for those items on Schedules 1, 2, 3 and 4 indicated as “abandoned,” expired,” “dead” or “unfiled.”

(k) As of the Closing Date, except for the Transferred Business Intellectual Property Rights assigned to Purchaser as Purchased Assets, U.S. R&D does not own, is not licensed, and does not otherwise possess or control any right, title or interest under any Intellectual Property Right.

(l) Neither the Seller Parties nor any of their respective Subsidiaries are a party to, and Seller has no knowledge (without due inquiry) of the existence as of the date of this

 

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Agreement of, any Contract pursuant to which a Seller Party or any of their respective Subsidiaries is restricted from granting a license to Purchaser under the Avago General IP License Agreement to any Patent, other than design patents owned by a Seller Party or any of their respective Subsidiaries other than U.S. R&D or Sensor IPCo and that has a First Effective Filing Date prior to the Closing Date.

4.9 Finders; Brokers. None of the Seller Parties has employed any finder or broker in connection with the Purchase who would have a valid claim for a fee or commission from Purchaser in connection with the negotiation, execution or delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby.

4.10 Tax Matters.

(a) (i) None of the Seller Parties is currently engaged, or has been engaged during the three year period ending on the Closing Date, in any material disputes with any Governmental Authority with respect to Taxes attributable to the Business, and (ii) no Governmental Authority has proposed to make or has made any material adjustment with respect to Taxes attributable to the Purchased Assets.

(b) There is no Liability in excess of $10,000 for any unpaid Taxes in respect of the Purchased Assets.

(c) None of the Purchased Assets (i) is property that is required to be treated for Tax purposes as being owned by any Person other than the Seller Parties; (ii) is “tax exempt bond financed property” or “tax-exempt use property,” each within the meaning of Section 168 of the Code; or (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code.

4.11 Employment and Benefits.

(a) Section 4.11(a) of the Disclosure Letter sets forth a true, complete and correct list of each Seller Plan.

(b) With respect to each material Seller Plan, the Seller Parties have provided or made available to Purchaser or its counsel (i) a true, complete and correct copy of such Seller Plan (including all amendments thereto), (ii) a current summary plan description with respect to any such plan subject to ERISA, (iii) a current summary description or plan document with respect to any such plans not subject to ERISA, and (iv) a copy of each determination or opinion letter described in Section 4.11(g).

(c) The Seller Plans are in compliance in all respects with all applicable requirements of ERISA, the Code, and other applicable Laws and have been administered in material accordance with their terms and such Laws.

 

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(d) There are no pending or, to the knowledge of Seller, threatened claims or litigation with respect to any Seller Plans, other than ordinary and usual claims for benefits by participants and beneficiaries.

(e) No Seller Party, or any ERISA Affiliate of a Seller Party, contributes to, or has in the past contributed to, any multiemployer plan, as defined in Section 3(37) of ERISA, or any plan subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code.

(f) No unsatisfied liability or withdrawal liability under Title IV of ERISA has been or is expected to be incurred by any Seller Party with respect to any “single employer plan,” within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any Seller Party or any of their respective Affiliates or any entity which is considered one employer with Seller under Section 414 of the Code (an “ERISA Affiliate”).

(g) Each Seller Plan or trust that is intended to be qualified or exempt from taxation under Section 401(k) or 501(a) of the Code has either applied for, prior to the expiration of the requisite period under applicable Treasury Regulations or Internal Revenue Service pronouncements, or obtained a favorable determination or opinion letter, as applicable, as to its qualified status from the Internal Revenue Service, or still has a remaining period of time under applicable Treasury Regulations or Internal Revenue Service pronouncements in which to apply for such letter and to make any amendments necessary to obtain a favorable determination, and each such Seller Plan or trust has been so qualified during the period from its adoption to the date of this Agreement.

(h) The consummation of the transactions described in this Agreement will not (A) accelerate the time of payment or vesting or trigger any payment or funding (through a trust or otherwise) of compensation or benefits under, or materially increase the amount payable or create any other material obligation pursuant to, any of the Seller Plans or (B) result in payments which would not be deductible under Section 280G of the Code.

(i) Each individual falling within the definition of Business Employee performs all or substantially all of his or her services for Seller and its Subsidiaries for or on behalf of the Business.

(j) Section 4.11(j) of the Disclosure Letter sets forth a true, complete and correct list of every Business Employee, including columns for: (i) the Seller Party or Subsidiary thereof employing such Business Employee; (ii) indication of exempt or non-exempt status; (iii) current base salary or wage; (iv) year to date bonus and other incentive or commission compensation, if any, paid or earned but not yet paid; (v) unpaid bonus and other incentive or commission compensation, if any, amounts earnable for 2006; (vi) target bonus; (vii) any equity compensation, including any stock option, stock purchase and restricted stock; (viii) any outstanding loan amount (other than a 401(k) plan loan); (ix) indication of Key Employee or expatriate status; (x) job title; and (xi) city and state (or nation if a Non U.S. Employee) of employment. Section 4.11(j) of the Disclosure Letter separately identifies U.S. Employees, Germany Employees and Malaysia Employees. There are no Non U.S. Employees other than the Germany Employees and the Malaysia Employees.

 

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(k) There has been no amendment to, written interpretation of or announcement by Seller or any Subsidiary or ERISA Affiliate of Seller relating to any Seller Plan that would materially increase the expense of maintaining such Seller Plan above the level of expense incurred in respect thereto for the most recent fiscal year ended prior to the date of this Agreement. None of Seller, any Affiliate of Seller, or any ERISA Affiliate of Seller has taken any action directly or indirectly to obligate such Person to create, incur liability with respect to or cause to exist any employee benefit plan, program, arrangement, contract or scheme or to modify any Seller Plan.

(l) The Key Employees and the Business Employees identified on Section 4.11(l) of the Disclosure Letter comprise all of the employees of the Seller Parties or any of their respective Subsidiaries who are engaged in providing design services with respect to the Business.

(m) The Seller Parties and their Subsidiaries have no employees as of the date hereof who were primarily engaged in providing design services with respect to the Business at any time during the six month period prior to the date hereof which are no longer primarily engaged in providing services with respect to the Business as of the date hereof.

(n) As of the date hereof, no Key Employee or Business Employee has notified any Seller Party of his or her intent to resign or of any significant grievance about his or her terms or conditions of employment and no Seller Party has any reason to believe that Chuck McCord or Yuen-Shung Chieh, less than 85% of the Key Employees and less than 80% of the Business Employees will continue their current employment until the Closing (and the Malaysia Closing with respect to the Malaysia Employees) and, subject to Purchaser’s compliance with Section 6.6 and Section 6.7 of this Agreement, accept employment with Purchaser or an Affiliate of Purchaser from and after the Applicable Closing on the terms and conditions contemplated by Section 6.6 and Section 6.7 of this Agreement.

(o) Each Seller Party has complied with all applicable laws related to the employment of Business Employees, including provisions related to wages, hours, leaves of absence, equal opportunity, occupational health and safety, workers’ compensation, severance, employee handbooks or manuals, collective bargaining and the payment of social security and other taxes. No Seller Party has any Liability under any applicable law related to the employment of Business Employees.

(p) Except as set forth on Section 4.11(p) of the Disclosure Letter, there is not pending against any Seller Party with respect to any Business Employee (i) any workers’ compensation claim, (ii) any complaint of workers’ compensation discrimination or retaliation, or (iii) any complaint of serious and willful misconduct, and there are no facts that would give rise to such a claim or complaint.

4.12 Non U.S. Benefit Plans.

(a) With respect to each Non U.S. Benefit Plan, the Seller Parties have provided to Purchaser or its counsel a current summary description thereof and copies of all documents governing the material Non U.S. Benefit Plans with respect to which Purchaser shall incur or have a reasonable likelihood of incurring any Liability after the Closing and copies of all

 

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material documents governing the other Non U.S. Benefit Plans with respect to which Purchaser shall incur or have a reasonable likelihood of incurring any Liability after the Closing, including a true, complete and correct copy thereof, a copy of any financing vehicles underlying the Non U.S. Benefit Plans, and a list of each material insurance policy with respect to any of such Non U.S. Benefit Plans.

(b) Each of the Non U.S. Benefit Plans has been maintained, operated and administered in material compliance with its terms and the provisions of applicable Law.

(c) Each Non U.S. Benefit Plan which must be registered or qualified in the country in which it is maintained has received or timely applied for such registration or qualification and such Non U.S. Benefit Plan has not been amended since the date of its most recent registration or qualification (or application therefor) in a manner that would require a new registration or qualification.

(d) There are no pending or, to the knowledge of Seller, threatened claims, litigation or arbitration proceedings with respect to any Non U.S. Benefit Plans, other than ordinary and usual claims for benefits by participants and beneficiaries. All contributions, premiums, expenses and other payments required to be made by any Seller Party or any of their respective Affiliates in connection with the Non U.S. Benefit Plans by the Closing Date have been made.

(e) The consummation of the transactions described in this Agreement will not, other than as provided by Law, accelerate the time of payment or vesting or trigger any payment or funding (through a trust or otherwise) of compensation or benefits under, or materially increase the amount payable or create any other material obligation pursuant to, any of the Non U.S. Benefit Plans or any other of the Seller Parties’ employee benefit plans that provide benefits to the Non U.S. Employees.

4.13 Compliance With Laws. The Business is being conducted by the Seller Parties in material compliance with the Laws applicable thereto. The Seller Parties each have all material permits, licenses, registrations, certificates, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals (collectively, “Permits”) necessary to conduct the Business as presently conducted by them.

4.14 Labor Matters. No labor organization has been certified by the National Labor Relations Board or recognized by any Seller Party as representing any of the Business Employees; (ii) there is no labor strike, slowdown, work stoppage or lockout pending or, to the knowledge of Seller, threatened against or affecting any Seller Party and, since December 1, 2005, there has not been any such action; (iii) there are no union claims to represent any Business Employees; and (iv) no Seller Party is a party to or bound by any collective bargaining or similar agreement with any labor organization.

4.15 Environmental Matters. In respect of the Business, Assigned Real Property, the Purchased Assets and the Hazardous Materials Activities relating to the Assigned Real Property (a) the Seller Parties and their Subsidiaries are and have been in material compliance with all Environmental Laws, including the possession of, and the compliance with, all Permits required under Environmental Laws; (b) there has not been any Release of Hazardous Materials by any

 

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Seller Party or any of their Affiliates or, to the knowledge of Seller, by any other Person, at or from the Assigned Real Property in violation of Environmental Laws or in a manner that would reasonably be expected to give rise to material Loss of claim under any Environmental Laws or otherwise; (c) no Seller Party has received any Environmental Claim relating to the Purchased Assets and Assumed Liabilities or the Assigned Real Property, and to the knowledge of Seller, there are no Environmental Claims threatened which relate to the Purchased Assets and Assumed Liabilities; (d) each Seller Party has delivered to Purchaser, or has otherwise made available to Purchaser or its counsel, true, complete and correct copies of all environmental reports, studies, assessments, audits, sampling data, correspondence alleging any violation of Environmental Laws and other Environmental Claims in their possession relating to the Purchased Assets and the Assigned Real Property; and (e) no Person with an indemnity or contribution obligation to a Seller Party relating to compliance with or liability under Environmental Law is in material default with respect to any such material obligation relating to the Purchased Assets and Assumed Liabilities or the Assigned Real Property.

4.16 Equity Interests. The Purchased Assets do not include any capital stock or other equity interests or convertible notes in any corporation, partnership or other entity.

4.17 Sufficiency of Assets. The Purchased Assets together with the Intellectual Property Rights and Technology licensed to Purchaser pursuant to the Avago General IP License Agreement, the Avago Sensor IPCo License Agreement and the other rights, licenses, services and benefits to be provided pursuant to this Agreement and the other Transaction Documents, constitute all of the assets, properties and rights that are (i) owned by any of the Seller Parties or any of their respective Subsidiaries or (ii) leased or licensed to any of the Seller Parties or any of their respective Subsidiaries and in the case of clauses “(i)” and “(ii)” that are (x) used by any Seller Party or any of their respective Subsidiaries or (y) are necessary to conduct the Business in all material respects as currently conducted other than (A) the Excluded Assets described in Exhibit G (it being understood that the Intellectual Property Rights and Technology licensed to any Seller Party or any of their respective Subsidiaries are not considered Excluded Assets for purposes of this Section 4.17 only, notwithstanding any language to the contrary contained in Section (e)(1) of Exhibit G), (B) any Contracts or other assets or rights that pursuant to Section 2.4 are not transferred to Purchaser, (C) the assets, properties and rights used by the Seller Parties to perform the services that are the subject of the Master Separation Agreement, (D) additional real property and tangible personal property that would be required to support an increased level of business after the Closing Date resulting from design wins attributable to products current undergoing design qualification with potential customers, and (E) as provided in Section 4.17 of the Disclosure Letter. The parties acknowledge and agree that the foregoing statement does not constitute a representation or warranty as to any potential, actual or suspected infringement, other violation of or conflict with any Intellectual Property Rights of any other Person by any of the Seller Parties or any of their respective Subsidiaries.

4.18 Location of Assets. Section 4.18 of the Disclosure Letter lists all of the Tangible Personal Property and Personal Property, other than Tangible Personal Property and Personal Property having a book value of less than $5,000. Prior to the Closing, the Seller Parties will deliver a list of the locations of the Purchased Assets in the possession of the Seller Parties and the locations of any material tangible assets in the possession of any third party that are included in the Purchased Assets.

 

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4.19 Restrictions on Business Activities. There is no Contract to which any Seller Party or any of their respective Subsidiaries is a party or is otherwise subject limiting in any material respect the right of any Seller Party or any of their respective Subsidiaries to engage in any line of business or to compete with any Person, in each case which would apply to the activities of Purchaser after the Closing.

4.20 Design Qualifications. Section 4.20 of the Disclosure Letter sets forth a true, correct and complete list of each Person, and the applicable Avago Sensor Product, with whom any of the Seller Parties is currently undergoing a design qualification process as of the date hereof with respect to any Avago Sensor Product design.

4.21 Suppliers. Section 4.21 of the Disclosure Letter sets forth the name of each of the top ten (measured by accounts payable incurred on behalf of the Business) suppliers of goods and services to the Business for the eight months ended July 31, 2006. As of the date hereof, no Seller Party or any of their respective Affiliates has received written notification that any such supplier intends to terminate or materially adversely change its relationship with the Business.

4.22 Products. The Avago Sensor Products constitute all of the products currently manufactured, sold or being developed by the Business.

4.23 Diligence Requests. To the knowledge of Seller, the documents provided to Purchaser by or on behalf of the Seller Parties in response to the due diligence request delivered by Purchaser to Seller on October 5, 2006 were true, complete and accurate in all material respects (it being understood that the Seller Parties are not making any representations or warranties with respect to any projections or other forward-looking statements set forth in any of such documents).

4.24 No Other Representations or Warranties. Except for the representations and warranties contained in this Article IV or in the other Transaction Documents (or any certificates delivered by any Seller Party to Purchaser in accordance with this Agreement), Purchaser acknowledges and agrees that none of the Seller Parties or any other Person makes any other express, implied or statutory representation or warranty with respect to the Business, the Purchased Assets, the Assumed Liabilities or otherwise, including any implied warranties of merchantability, fitness for a particular purpose, title, enforceability or non infringement, including as to (a) the physical condition or usefulness for a particular purpose of the real or tangible personal property included in the Purchased Assets, (b) the use of the Purchased Assets and the operation of the Business by Purchaser after the Applicable Closing, in any manner other than as used and operated by the Seller Parties, or (c) the probable success or profitability of the ownership, use or operation of the Purchased Assets by Purchaser after the Applicable Closing. Except for the representations and warranties contained in this Article IV or in the other Transaction Documents (or any certificate delivered by any Seller Party to Purchaser in accordance with this Agreement), all Purchased Assets are conveyed on an “AS IS” and “WHERE IS” basis. Except for Liabilities in respect of the representations and warranties contained in this Article IV or in the other Transaction Documents (or any certificates delivered by any Seller Party to Purchaser in accordance with this Agreement), and the indemnification obligations set forth herein, no Seller Party or any other Person will have or be subject to any liability or

 

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indemnification obligation to Purchaser or any other Person for any information provided to the Purchaser or its representatives relating to the Business, the Purchased Assets, or otherwise in expectation of the transactions contemplated by this Agreement and any information, document, or material made available to Purchaser or its counsel or other representatives in Purchaser’s due diligence review, including in certain “data rooms” (electronic or otherwise) or management presentations. The representations, warranties, covenants and obligations of Purchaser, and the rights and remedies that may be exercised by Purchaser shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, Purchaser or any of its representatives.

ARTICLE V

REPRESENTATIONS OF PURCHASER

Purchaser hereby represents and warrants to the Seller Parties, subject to the exceptions set forth in the disclosure letter delivered by Purchaser to the Seller Parties on the date hereof and attached hereto (the “Purchaser Disclosure Letter”), each of which exceptions in order to be effective shall indicate the Section and, if applicable, subsection of this Article V to which it relates (except to the extent that the applicability of such exception to such Section or subsection is otherwise readily apparent), as follows:

5.1 Corporate Existence. Purchaser is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

5.2 Corporate Authority.

(a) This Agreement, the Ancillary Agreements and the other Transaction Documents to which Purchaser is a party, and the consummation of the transactions contemplated hereby and thereby involving Purchaser have been duly authorized by Purchaser by all requisite corporate, partnership or other action. Purchaser has full power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder. This Agreement has been duly executed and delivered by Purchaser, and the other Transaction Documents will be duly executed and delivered by Purchaser. This Agreement constitutes, and the other Transaction Documents when so executed and delivered will constitute, valid and legally binding obligations of Purchaser, enforceable against it in accordance with their terms except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at Law).

(b) The execution and delivery of this Agreement and the other Transaction Documents by Purchaser, the performance by Purchaser of its obligations hereunder and thereunder and the consummation by Purchaser of the transactions contemplated hereby and thereby, do not and will not (A) violate or conflict with any provision of the certificate of incorporation or by laws or similar organizational documents of Purchaser, (B) result in any violation or breach of, or constitute any default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to

 

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the loss of a material benefit under, or result in the creation of any Lien under any contract, indenture, mortgage, lease, note or other agreement or instrument to which Purchaser is subject or is a party, or (C) violate, conflict with or result in any breach under any provision of any Law applicable to Purchaser or any of its properties or assets, except, in the case of clauses (B) and (C), to the extent that any such default, violation, conflict, breach or loss would not reasonably be expected to have a Purchaser Material Adverse Effect.

5.3 Governmental Approvals, Orders and Consents. Purchaser is not subject to any order, judgment, decree, stipulation, injunction or agreement with any Governmental Authority which would prevent or materially interfere with or delay the consummation of this Agreement or would be reasonably likely to have a Purchaser Material Adverse Effect. No Proceeding is pending or, to the knowledge of Purchaser, threatened against Purchaser which would prevent or materially interfere with or delay the consummation of this Agreement. Except for (i) required filings under applicable Antitrust Regulations and (ii) if determined to be necessary by Purchaser, the filing of this Agreement with the SEC, no Consent, order, or license from, notice to or registration, declaration or filing with, any Governmental Authority, is required on the part of Purchaser in connection with the execution, delivery or performance of this Agreement or any of the other Transaction Documents or the consummation of the transactions contemplated hereby and thereby except for such Consents, orders, or licenses from, notices to or registrations, declarations or filings which have been made or obtained and remain in full force and effect and those with respect to which the failure to have made or obtained or to remain in full force and effect would not have a Purchaser Material Adverse Effect.

5.4 Financial Capacity. Purchaser has possession of sufficient funds to consummate the transactions contemplated by this Agreement and each Ancillary Agreement.

5.5 Finders; Brokers. None of Purchaser nor any of its Affiliates has employed any finder or broker in connection with this Agreement who would have a valid claim for a fee or commission from any Seller Party or any of their respective Affiliates in connection with the negotiation, execution or delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby.

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

ARTICLE VI

AGREEMENTS OF PURCHASER AND SELLER

6.1 Operation of the Business. Except as otherwise contemplated by this Agreement, each Seller Party covenants that, in respect of the Business (it being understood that nothing in this Section 6.1 shall in any way limit any Seller Party’s or any of their Subsidiaries’ operation of the Retained Business), from the date of this Agreement until the Closing they will, and will cause their Affiliates to, use commercially reasonable efforts, to maintain and preserve intact the Business in all material respects and to maintain in all material respects the ordinary and customary relationships of the Business with their suppliers, customers and others having

 

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business relationships with them with a view toward preserving for Purchaser after the Closing Date the Purchased Assets and the goodwill associated therewith. Subject to applicable Law and except as otherwise provided in this Agreement or as expressly provided in Section 6.1 of the Disclosure Letter, from the date of this Agreement until the Closing, without the prior written approval of Purchaser (which approval shall not be unreasonably withheld, conditioned or delayed), the Seller Parties shall, and shall cause their Subsidiaries in respect of the Business to, continue to operate and conduct the Business in the ordinary course of business consistent with past practice. Without limiting the generality of the foregoing, except as otherwise contemplated by this Agreement and subject to applicable Law, the Seller Parties, from the date of this Agreement until the Applicable Closing, shall not and shall cause their Subsidiaries not to, without the prior written approval of Purchaser (which approval shall not be unreasonably withheld, conditioned or delayed), take any of the following actions with respect to the Purchased Assets:

(a) transfer, sell, lease, license or otherwise convey or dispose of, or suffer to exist any Lien (other than Permitted Liens) on, any of the Purchased Assets or the Assigned Real Property, other than (i) sales of inventory in the ordinary course of business, or (ii) Permitted Liens;

(b) terminate any Business Employee, grant any leave of absence greater than two weeks (other than as required by applicable Law in which case Purchaser need only be notified of the reason for such leave and the approved length), transfer any Business Employee, hire any new employees, or grant any increase in the compensation or benefits arrangements of a Business Employee or under any Seller Plan, except for increases in the compensation or benefits of such employees: (A) in the ordinary course of business consistent with past practices (excluding severance or bonuses, in either case payable by any Seller Party upon consummation of the transactions contemplated by this Agreement, for Business Employees covered by parts (i) and (iii), but not part (ii) of such definition), or (B) as required by applicable Law from time to time in effect or by any employee benefit plan, program or arrangement sponsored by any Seller Party or one of their Affiliates in effect on the date hereof;

(c) cancel, compromise, release or assign any Indebtedness owed to the Business or any claims held by the Business, in each case that would otherwise constitute Purchased Assets, other than in the ordinary course of business consistent with past practice and in any event not in excess of $100,000 in the aggregate;

(d) enter into any Contract that would be deemed to be a Transferred Material Contract if it were in existence as of the date of this Agreement or terminate (other than by expiration) or amend or modify (other than by automatic extension or renewal if deemed an amendment or modification of any such contract) in any material respect the terms of any Transferred Material Contract or the Assigned Lease;

(e) enter into any Contract containing a covenant not to compete or any other covenant restricting the development, manufacture, marketing or distribution of the products and services of the Business or that would adversely affect Purchaser’s ability to use, deploy, exploit, market, distribute, sell or otherwise develop the Purchased Assets or amend or extend in a manner adverse to the Business any such covenant in any existing Transferred Contract;

 

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(f) acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets (other than inventory sold to Flextronics) that are material, individually or in the aggregate, to the Business;

(g) (i) institute, settle or agree to settle any Proceeding relating to or affecting the Purchased Assets or Assumed Liabilities before any court or other Governmental Authority (other than settlements of Proceedings (1) not involving Intellectual Property or Tax matters, (2) involving solely the payment of money damages and (3) not involving an admission of liability) or (ii) waive or surrender any rights related to any pending or threatened litigation to the extent relating to or affecting the Purchased Assets or Assumed Liabilities;

(h) enter into any material financing or guarantee arrangement, agreement or undertaking with any customer of the Business or any financial institution, leasing company or similar business that permits recourse to Purchaser or any of its Affiliates which would constitute an Assumed Liability;

(i) grant any allowances or discounts outside the ordinary course of business or sell inventory materially in excess of reasonably anticipated consumption for the near term outside the ordinary course of business;

(j) fail to maintain its books and records with respect to the Purchased Assets, the Assumed Liabilities and the Assigned Real Property in accordance with past practice;

(k) make or change any material election in respect of Taxes, enter into any closing agreement in respect of Taxes, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; or

(l) agree or commit to do any of the foregoing.

Not less than five (5) Business Days prior to the Closing, Seller shall deliver to Purchaser a supplement to Section 4.6(a) of the Disclosure Letter, which shall identify those Contracts with respect to the Business entered into by any Seller Party or any of their respective Affiliates after the date of this Agreement not in violation of the terms hereof which would have constituted “Transferred Material Contracts” if such Contracts had been in effect as of the date hereof, and such Contracts identified on such supplement to Section 4.6(a) of the Disclosure Letter shall be deemed “Transferred Material Contracts” for all purposes hereof so long as such Contracts were entered into in accordance with the terms hereof. Seller shall also deliver to Purchaser a true, complete and correct copy of each such Contract no later than the time at which Seller delivers such supplement to Section 4.6(a) of the Disclosure Letter.

6.2 Investigation of Business; Confidentiality.

(a) From the date of this Agreement until the Closing, the Seller Parties shall, and shall cause their Affiliates to, permit Purchaser and its authorized agents or representatives and financing sources to have reasonable access to the properties, books, records, Contracts and such

 

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financial (including working papers) and operating data of the Business and the Business Employees as Purchaser may reasonably request, at reasonable hours to review information and documentation, and the opportunity to ask questions relative to the properties, books, contracts, commitments and other records of the Business and to conduct any other reasonable investigations; provided, that such investigation shall only be upon reasonable notice and shall not unreasonably disrupt the personnel and operations of the Seller Parties, shall comply with the reasonable security and insurance requirements of the Seller Parties and shall be at Purchaser’s sole risk and expense. Notwithstanding the foregoing, the Seller Parties shall have no obligation to disclose any information the disclosure of which is subject to a confidentiality obligation in favor of any third party; provided that the Seller Parties shall use their commercially reasonable efforts to obtain waivers under such agreements or implement requisite procedures to enable the provision of reasonable access to such information without violating such obligations. All requests for access to the offices, properties, books and records of the Business shall be made to such representatives of the Seller Parties as such party shall designate, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. It is further agreed that neither Purchaser nor any of its Affiliates, agents or representatives shall contact any of the employees, customers (including dealers and distributors), suppliers, joint venture partners or other Affiliates of the Seller Parties in connection with the transactions contemplated hereby, whether in person or by telephone, electronic or other mail or other means of communication, without the specific prior authorization of such representatives of the Seller Parties, which shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, no Seller Party shall be required to provide access to or disclose information where such access or disclosure would waive the attorney client privilege of the Seller Parties or contravene any Law or binding agreement entered into prior to the date of this Agreement. The relevant parties shall make appropriate substitute disclosure arrangements under the circumstances in which the restrictions of the preceding sentence apply.

(b) The Parties expressly acknowledge and agree that this Agreement and its terms and all information, whether written or oral, furnished by either Party to the other Party or any Affiliate of such other Party in connection with the negotiation of this Agreement or pursuant to Section 6.5 (“Confidential Information”) shall be treated as “confidential information” under the Confidentiality Agreement.

(c) Upon reasonable request and during normal business hours, Purchaser and the Seller Parties shall cooperate with each other, and shall cause their respective representatives and Affiliates to cooperate with each other, after the Closing to ensure the orderly transition of the Purchased Assets and Assumed Liabilities from the Seller Parties to Purchaser and its Affiliates and to minimize any disruption to the businesses of Seller Parent and its Affiliates and Purchaser and its Affiliates that might result from the transactions contemplated hereby.

6.3 Necessary Efforts; No Inconsistent Action.

(a) Subject to Section 6.3(b) and the other terms and conditions of this Agreement, including the conditions set forth in Article VII, the Seller Parties and Purchaser agree, and each of the Seller Parties agree to cause their Affiliates, to use their respective commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Law to consummate and make effective

 

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the transactions contemplated by the Transaction Documents and to use their respective commercially reasonable efforts to cause, with respect to the Seller Parties, the conditions set forth in Sections 7.1 and 7.3, and with respect to Purchaser, the conditions set forth in Sections 7.1 and 7.2, to be satisfied, including all actions necessary to obtain (i) all licenses, certificates, permits, approvals, clearances, expirations, waivers or terminations of applicable waiting periods, authorizations, qualifications and orders (each a “Consent”) of any Governmental Authority required for the satisfaction of the conditions set forth in Section 7.1(b), and (ii) all other Consents (it being understood that the failure to obtain any such Consents contemplated by this clause (ii) shall not, by itself, cause the condition set forth in Section 7.3(b) to be deemed not to be satisfied and it being further understood that neither Party nor any of their respective Affiliates shall be required to expend any money other than for filing fees or expenses or de minimus costs or expenses or agree to any restrictions in order to obtain any Consents) necessary in connection with the consummation of the transactions contemplated by the Transaction Documents; provided, however, that the foregoing provisions of this Section 6.3(a) shall not require any Party to perform, satisfy or discharge any obligations of any other Party under this Agreement or otherwise. The Seller, as agent for the Seller Parties, on the one hand, and Purchaser, on the other hand, agree that each will be given prior notice of and a reasonable opportunity to consult with the other Party regarding contacts with Governmental Authorities regarding Antitrust Regulations or related matters. Without limiting the foregoing, as promptly as practicable on or after the date of this Agreement, the Seller Parties shall give any notices required to be given under any Transferred Contract or Seller Plan, shall use their commercially reasonable efforts to obtain prior to Closing any consent required under any Transferred Contract or Seller Plan and shall promptly deliver to Purchaser a copy of each such notice delivered and each such consent received. The Parties shall cooperate fully with each other to the extent necessary in connection with the foregoing.

(b) In connection with the efforts referenced in Section 6.3(a), Purchaser and the Seller Parties shall timely and promptly make all filings which may be required for the satisfaction of the condition set forth in Section 7.1(b) by each of them in connection with the consummation of the transactions contemplated hereby. In furtherance and not in limitation of the foregoing, each of Seller and Purchaser shall have filed, or caused to be filed, Notification and Report Forms under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) prior to the date of this Agreement, and shall file, or cause to be filed, any other similar filings under Antitrust Regulations in the United States, any state thereof, any foreign country or the European Union as promptly as practicable following the date of this Agreement and in any event no later than the time prescribed by applicable law in the case of requirements under other applicable Antitrust Regulations to the extent a time is prescribed and, if no time is prescribed, as promptly as reasonably practicable. In addition, Purchaser and the Seller Parties agree, and each Seller Party shall cause its Subsidiaries, to cooperate and to use their commercially reasonable efforts and take all actions necessary to obtain as soon as reasonably possible after the execution and delivery of this Agreement any Consents from Governmental Authorities required for the Applicable Closing, contemplated by Section 6.3(a)(i) above (including through compliance with the HSR Act and any applicable foreign governmental reports, applications or notifications required by the Antitrust Regulations), to respond as promptly as practicable to any requests for information from any Governmental Authority, and to avoid and/or overcome any action, including any legislative, administrative or judicial action,

 

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and to have vacated, lifted, reversed or overturned any judgment, injunction or other order (whether temporary, preliminary or permanent) that restricts, prevents or prohibits, or could restrict, prevent or prohibit, the consummation of the transactions contemplated by this Agreement; provided, however, that in no event shall Purchaser or any of its Affiliates be required to agree or commit to divest, hold separate, offer for sale, abandon, limit its operation of or take similar action with respect to any assets (tangible or intangible) or any business interest of it or any of its Affiliates (including with respect to any Purchased Assets after consummation of the transaction contemplated by this Agreement), in order to comply with its obligations in respect of the foregoing. Each Party shall furnish to the other such necessary information and assistance as the other Party may reasonably request in connection with the preparation of any necessary filings or submissions by it to any Governmental Authority. Except as prohibited or restricted by Law or any Antitrust Regulations, each Party or its attorneys shall provide the other Party or its attorneys the opportunity to make copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between such Party or its representatives, on the one hand, and any Governmental Authority, on the other hand, with respect to this Agreement, the Transaction Documents or the transactions contemplated hereby or thereby, subject to redaction as reasonably necessary of documents filed pursuant to Item 4(c) of the Hart Scott Rodino Notification and Report Form. Without in any way limiting the foregoing, the Parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any Party in connection with proceedings under or relating to the HSR Act or any other Antitrust Regulation.

(c) Subject to applicable Laws relating to the exchange of information and the direction of any Governmental Authority, each of Purchaser, on the one hand, and the Seller Parties, on the other hand, shall notify and keep the other advised as to (i) any material communication from the Federal Trade Commission (the “FTC”), the Antitrust Division of the United States Department of Justice (the “DOJ”) or any other Governmental Authority regarding any of the transactions contemplated hereby, (ii) any litigation or administrative proceeding pending and known to such Party, or to its knowledge threatened, which challenges, or would reasonably be expected to challenge, the transactions contemplated hereby and (iii) any event or circumstance which, to its knowledge, would constitute a breach of its respective representations and warranties in this Agreement or, with respect to Seller Parent, in the Semiconductor Business Purchase Agreement; provided, however, that the failure of Seller, Seller Parent or Purchaser to comply with Section 6.3(c)(iii) shall not subject Seller, Seller Parent or Purchaser to any liability hereunder in respect of any claim asserted after the relevant expiration date for the relevant representation or warranty; and provided further, that Purchaser may not separately recover pursuant to Article IX or otherwise for both a breach of Section 6.3(c)(iii) and any related breach of the relevant representation or warranty. Subject to the provisions of Article X hereof, the Seller Parties and Purchaser shall not take any action inconsistent with their obligations under this Agreement or, without prejudice to Purchaser’s rights under this Agreement, which would materially hinder or delay the consummation of the transactions contemplated by this Agreement.

6.4 Public Disclosures. Unless otherwise required by Law, the rules and regulations of any stock exchange or quotation services on which such Party’s stock is traded or quoted or pursuant

 

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to scheduled earnings releases and scheduled analyst conference calls, prior to the Closing Date, no news release or other public announcement pertaining to the transactions contemplated by this Agreement will be made by or on behalf of any Party or its Affiliates without the prior written approval of the other Party (which approval shall not be unreasonably withheld, conditioned or delayed). If in the judgment of either Party such a news release or public announcement is required prior to the Closing Date by Law or the rules or regulations of any stock exchange on which such Party’s stock is traded, the Party intending to make such release or announcement shall to the extent practicable use commercially reasonable efforts to provide prior written notice to the other Party of the contents of such release or announcement and to allow the other Party reasonable time to comment on such release or announcement in advance of such issuance.

6.5 Access to Records, Personnel and the Assigned Real Property.

(a) Exchange of Information. After the execution of this Agreement through the Applicable Closing Date, to the extent permissible under applicable Law, the Seller Parties agree to provide, or cause to be provided, to Purchaser, as soon as reasonably practicable after written request therefor and at Purchaser’s sole expense, (x) reasonable access (including using commercially reasonable efforts to give access to third parties possessing information), during normal business hours, to the Seller Parties’ employees and (y) such information that Purchaser reasonably needs to comply with its obligations under Section 6.6 of this Agreement. From the Closing until the fifth anniversary of the Closing, each Party agrees to provide, or cause to be provided, to each other, as soon as reasonably practicable after written request therefor and at the requesting Party’s sole expense, reasonable access (including using commercially reasonable efforts to give access to third parties possessing information), during normal business hours, to the other Party’s employees and to any books, records, documents, files and correspondence in the possession or under the control of the other Party that the requesting Party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting Party (including under applicable securities Laws) by a Governmental Authority having jurisdiction over the requesting Party, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy Tax, audit, accounting, claims, regulatory, litigation or other similar requirements or (iii) to comply with its obligations under this Agreement; provided, however, that no Party shall be required to provide access to or disclose information where such access or disclosure would violate any Law or agreement, or waive any attorney client or other similar privilege, and each Party may redact information regarding itself or its Affiliates or otherwise not relating to the other Party and its Affiliates, and, in the event such provision of information could reasonably be expected to violate any Law or agreement or waive any attorney client or other similar privilege, the Parties shall take all commercially reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.

(b) Financial and Other Information. After the Closing, each Party shall provide, or cause to be provided, as soon as reasonably practicable after written request therefor, to the other Party such financial and other data and information (except for information and data with respect to Taxes and Tax Returns which is addressed in Section 6.14) reasonably available and in its possession (in such form as is reasonably available to it) as is reasonably requested by the other Party and reasonably necessary in order for such other Party to prepare required financial

 

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statements and reports or filings to be provided to any third party or filed with any Governmental Authority; provided that the out-of-pocket cost to prepare any financial statements after the Closing shall be borne solely by Purchaser.

(c) Ownership of Information. Any information owned by a party that is provided to a requesting party pursuant to this Section 6.5 shall be deemed to remain the property of the providing party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information.

(d) Record Retention. Except as otherwise provided herein, each Party agrees to use its commercially reasonable efforts to retain the books, records, documents, instruments, accounts, correspondence, writings, evidences of title and other papers relating to the Business, and the Purchased Assets (the “Books and Records”) in their respective possession or control for a commercially reasonable period of time, as set forth in their regular document retention policies, following the Closing Date or for such longer period as may be required by Law or as may be reasonably requested in writing by any Party, or until the expiration of the relevant representation or warranty under any of the Transaction Documents and any related claim of indemnification related thereto. Notwithstanding the foregoing, any Party may destroy or otherwise dispose of any Books and Records not in accordance with its retention policy, provided that, prior to such destruction or disposal (i) such Party shall provide no less than 90 nor more than 120 days’ prior written notice to the other Party of any such proposed destruction or disposal (which notice shall specify in detail which of the Books and Records is proposed to be so destroyed or disposed of), and (ii) if a recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the information proposed to be destroyed or disposed of be delivered to such recipient, such Party proposing the destruction or disposal shall, as promptly as practicable, arrange for the delivery of such of the Books and Records as was requested by the recipient (it being understood that all reasonable out of pocket costs associated with the delivery of the requested Books and Records shall be paid by such recipient).

(e) Limitation of Liability. Except in the event of fraud, willful misconduct or gross negligence, no Party shall have any liability to any other Party in the event that any information exchanged or provided pursuant to this Section 6.5 is found to be inaccurate. No Party shall have any liability to any other Party if any information is destroyed or lost after commercially reasonable efforts by such Party to comply with the provisions of Section 6.5(d).

(f) Other Agreements Providing For Exchange of Information. Except with respect to information that is generally available to the public, the Party requesting such information shall (i) hold all such information in the strictest confidence, except as required by applicable Law or which must be disclosed in connection with any audit or taxing authority inquiry, (ii) shall disseminate such information only to its officers, directors, employees and representatives who have been advised of the confidential nature of such information, and only on an as-needed basis, (iii) shall return promptly, upon request of the other party, all copies of the information received by it, and (iv) shall take all steps necessary to cause its officers, directors, employees and representatives to comply with the terms and conditions of this Section 6.5. Notwithstanding the foregoing, any information relating primarily to the Purchased Assets may be disclosed by Purchaser at its discretion following Closing.

 

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(g) Production of Witnesses; Records; Cooperation. In the case of a legal or other proceeding between one Party and a third party relating to the Business, Purchased Assets, Licensed Business Intellectual Property Rights, Licensed Business Technology, Assumed Liabilities, Excluded Liabilities, this Agreement (including any matters subject to indemnification hereunder) or the transactions contemplated hereby, or any other Transaction Documents, each Party shall use its commercially reasonable efforts to make available to the other Party (and the Seller Parties shall use their commercially reasonable efforts to cause Angel to make available to Purchaser), upon written request, the former (to the extent practicable), current (to the extent practicable) and future officers, employees, other personnel and agents of such Party (or Angel) as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available (other than materials covered by the attorney-client privilege), to the extent that any such Person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any legal, administrative or other proceeding in which the requesting Party may from time to time be involved, regardless of whether such legal, administrative or other proceeding is a matter with respect to which indemnification may be sought hereunder. The requesting Party shall bear all out-of-pocket costs and expenses in connection with the foregoing. The foregoing shall not limit any of rights of the Parties in respect of the foregoing under Section 9.4.

(h) Confidential Information. Nothing in this Section 6.5 shall require either Party to violate any agreement with any third parties regarding the confidentiality of confidential and proprietary information; provided, however, that in the event that either Party is required under this Section 6.5 to disclose any such information, that Party shall use all commercially reasonable efforts to seek to obtain such third party’s consent to the disclosure of such information and implement requisite procedures to enable the disclosure of such information.

(i) Access to Assigned Real Property. During the period preceding the Closing Date, the Seller Parties shall permit Purchaser access to the Assigned Real Property after normal business hours (unless other times are permitted by the Seller Parties) in order to install wiring for communication devices and other store systems (including servers, computers and other systems) and take other similar action at the Assigned Real Property, all at Purchaser’s cost and without causing damage to the Assigned Real Property; provided that Purchaser shall not be permitted to install any equipment at the Assigned Real Property until immediately following the Effective Time and Purchaser shall comply with any provisions of the Assigned Lease applicable to Purchaser’s activities on the Assigned Real Property. Purchaser agrees to repair any damage which may be caused due to the exercise of its rights pursuant to this Section 6.5(i) and to indemnify, defend and hold harmless the Seller Indemnified Parties from any and all Losses arising out of or in any way connected with Purchaser’s exercise of its rights pursuant to this Section 6.5(i). The Seller Parties’ obligation to provide the foregoing access shall be conditioned on the requirement that Purchaser shall not unreasonably interfere with the Seller Parties’ business.

 

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6.6 Employee Relations and Benefits.

(a) Except as set forth on Section 6.6(a) of the Disclosure Letter, Purchaser or one of its Affiliates shall offer employment to each U.S. Employee effective on the Closing Date and to each Malaysia Employee effective on the Malaysia Closing Date. Each such offer shall include substantially the same or superior base salary or base wage rate provided to such employee by Seller or its Affiliates as of the date hereof and a position within the Purchaser or an Affiliate of Purchaser that is consistent with Purchaser’s job classification system for employees with duties similar to those duties it is expected that the Business Employee will undertake for Purchaser or its Affiliates. With respect to each U.S. Employee employed in Corvallis, Oregon or San Jose, California and each Malaysia Employee, such offers shall be at the same general location as such employee is currently employed by Seller and its Affiliates as of the date hereof, and with respect to each U.S. Employee employed in Fort Collins, Colorado, such offer shall include an offer to relocate to an employment location of Purchaser and its Affiliates. Purchaser or one of its Affiliates may offer employment to each Germany Employee or may enter into an arrangement with Seller Parent or its Affiliates whereby any such Germany Employee would remain employed by Seller Parent or its Subsidiaries for a period of up to 18 months and would during such period provide services for the benefit of Purchaser or its Affiliates (a “Leased Employee”). Those employees who accept an offer of employment from Purchaser or one of its Affiliates and who commence employment with Purchaser or one of its Affiliates shall be referred to herein as “Transferred Employees.” Any Germany Employee who becomes a Leased Employee shall not be a Transferred Employee.

(b) Seller Parent shall not, and shall cause its Affiliates not to, engage in any activity intended to discourage any Business Employee from accepting an offer of employment from Purchaser and/or one of its Affiliates, and Seller Parent shall not, and shall cause its Affiliates not to, offer employment with any business of Seller Parent or any of its Affiliates (other than the Business) after the date hereof and prior to the Closing Date or, with respect to the Malaysia Employees, prior to the Malaysia Closing Date (other than Business Employees who have applied for a position with Seller Parent or one of its Affiliates outside the Business prior to the date hereof); provided, however, that Seller Parent and its Affiliates shall be permitted to take any action they are legally required to take in order to comply with local Laws.

(c) Effective as of the Closing Date with respect to those Transferred Employees who are U.S. Employees or Germany Employees, Purchaser shall, or shall cause one of its Affiliates to, provide employee benefits to such Transferred Employees on terms and conditions that are at least as favorable to such employees as the terms and conditions of such benefits offered to similarly situated (after reflecting such Transferred Employees’ positions within Purchaser’s job classification system) employees of Purchaser and its Affiliates employed in the United States and Germany, respectively. Effective as of the Malaysia Closing Date with respect to those Transferred Employees who are Malaysia Employees, Purchaser shall, or shall cause one of its Affiliates to, provide employee benefits to such Transferred Employees on terms and conditions that are substantially similar in the aggregate to the terms and conditions of the benefits provided to such employees by the Seller or its Affiliates as of immediately prior to the Malaysia Closing Date; provided, however, that nothing herein shall require Purchaser or its Affiliates to offer to Malaysia Employees (i) anything inconsistent with the provisions of Section 6.6(a), including

 

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any guaranteed program to determine or increase base pay or any form of commission, bonus or other extraordinary compensation (except for the retention bonus program described in Exhibit E), (ii) any form of stock option, restricted stock, employee stock purchase or other equity compensation program or (iii) any form of benefit for which the approval of any Malaysian governmental agency is required. Notwithstanding anything herein to the contrary, the employee benefits to be provided to Transferred Employees effective as of the Applicable Closing Date pursuant to this Section 6.6(c) shall be consistent with those benefits described in Exhibit F of this Agreement. In no event will Purchaser and/or its Affiliates be obligated to provide post-retirement benefits to Transferred Employees.

(d) Purchaser shall assume and shall indemnify Seller Parent and its Subsidiaries against all liabilities and obligations to provide any payments, including, without limitation, severance and payment-in-lieu of notice, to (i) any Non U.S. Employees who are entitled to severance or similar payments under applicable local Laws due to Purchaser’s noncompliance with Sections 6.6 or 6.7, and (ii) except as otherwise provided in this Section 6.6 or with respect to any payments under a Seller Plan, any Transferred Employee whose employment is terminated by Purchaser or its Affiliates following the Closing Date or, with respect to Malaysia Employees, following the Malaysia Closing Date. Purchaser shall reimburse Seller Parent or its Subsidiaries for severance or similar payments under applicable local Laws, including any payment-in-lieu of notice, made by Seller Parent and its Subsidiaries, to (i) any Business Employee described on Section 6.6(a) of the Disclosure Letter whose employment with Seller Parent and its Subsidiaries is terminated on the Closing Date (or with respect to a Business Employee on a leave of absence under which reemployment rights are protected by applicable Laws, the date such protection ends), (ii) any Business Employee (A) whose offer of employment from Purchaser and its Affiliates pursuant to Section 6.6(a) includes an offer of relocation, (B) who refuses such offer of employment and relocation and (c) whose employment with Seller Parent and its Subsidiaries is terminated on the Closing Date (or with respect to a Business Employee on a leave of absence under which reemployment rights are protected by applicable Laws, the date such protection ends), and (iii) any Germany Employee who becomes neither a Transferred Employee nor a Leased Employee. The Purchaser’s liability under this Section 6.6(d) shall be limited to the greater of (X) the amount payable pursuant to the provisions of the severance plans, policies and programs of Seller Parent and its Subsidiaries, including any payment-in-lieu of notice policies, as in effect as of the date hereof, and (Y) in the case of any German Employee, the amount required to be paid pursuant to local Laws, including any payment-in-lieu of notice. Section 6.6(d) of the Disclosure Letter describes in summary form the amounts payable under such plans, policies or programs.

(e) Seller and its Affiliates shall retain responsibility for and continue to pay all medical, life insurance, disability and other welfare plan expenses and benefits for each Business Employee with respect to claims incurred by such Business Employees or their covered dependents under any Seller Plan.

(f) Section 6.6(f) of the Disclosure Letter lists each Business Employee who is eligible for a bonus pursuant to this Section 6.6(f). On the first anniversary of the Closing Date, Seller shall pay or shall cause one of its Affiliates to pay to each such Business Employee who remains employed by Purchaser or one of its Affiliates on such date the amount specified for such Business Employee in Section 6.6(f) of the Disclosure Letter.

 

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(g) With respect to any plan that is a “welfare benefit plan” (as defined in Section 3(1) of ERISA), or any plan that would be a “welfare benefit plan” (as defined in Section 3(1) of ERISA) if it were subject to ERISA, maintained by Purchaser and provided to Transferred Employees, Purchaser shall, with respect to such Transferred Employees, (i) cause to be waived any pre existing condition and waiting periods, except to the extent such provisions were applicable under the similar Seller Plan as of the Applicable Closing Date, and (ii) give effect, in determining any deductible and maximum out of pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, such Transferred Employees during the plan year of the applicable plan sponsored by Seller or one of its Affiliates during which the Applicable Closing occurs with respect to similar plans maintained by Seller and its Affiliates immediately prior to the Applicable Closing Date.

(h) For purposes of eligibility and vesting and for purposes of determining the amount of any benefits under any applicable sick leave, vacation or severance plan, Transferred Employees shall be given credit for all service with Seller, any of its Subsidiaries, and any predecessor employer for which Seller credited such service, including without limitation, Angel, Hewlett Packard or their Subsidiaries under each plan of Purchaser or its Affiliates in which such Transferred Employees are eligible to participate.

(i) The Seller Parties shall take all necessary actions to (i) allow Transferred Employees to rollover any associated loan notes to the extent permitted under the 401(k) plan maintained by Seller Parent or a Subsidiary of Seller Parent (the “Seller 401(k) Plan”) and (ii) permit Transferred Employees to continue to make loan repayments to the Seller 401(k) Plan following the Closing Date. Purchaser shall take all steps necessary to permit each such Transferred Employee who has received an eligible rollover distribution (as defined in Section 402(c)(4) of the Code) from the Seller 401(k) Plan to roll such eligible rollover distribution (including within a reasonable period of time following the Closing Date an opportunity to roll over any associated loans, if applicable), into an account under a 401(k) plan maintained by Purchaser or its Affiliates.

(j) If the Malaysia Closing shall not have occurred prior to January 1, 2007, then Seller Parent or its Subsidiaries shall pay the Malaysia Employees the bonuses due to such employees on such date under the “Angel 3-2-1 Retention Arrangement” described in Section 4.11(a) of the Disclosure Letter. If the Malaysia Closing shall have occurred prior to January 1, 2007, then Purchaser or its Affiliates shall pay or otherwise make arrangements for the payment to Malaysia Employees of the bonuses due to such employees on such date under the “Angel 3-2-1 Retention Arrangement” described in Section 4.11(a) of the Disclosure Letter, and Seller Parent or its Subsidiaries shall reimburse Purchaser or its Affiliates an amount equal to the aggregate of such bonuses paid, along with any employment taxes payable to a Governmental Authority that are related thereto, in cash within thirty (30) days of Seller Parent’s receipt of Purchaser’s written request for reimbursement thereof. Purchaser or its Affiliates shall pay or otherwise make arrangements for the payment to Malaysia Employees of the bonuses due to such employees on January 1, 2008 under the “Angel 3-2-1 Retention Arrangement” described in Section 4.11(a) of the Disclosure Letter.

 

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(k) (i) With respect to any accrued but unused vacation time as of the Closing Date to which any Transferred Employee is entitled pursuant to Seller Parent or its Subsidiaries’ vacation time policy immediately prior to the Closing Date, to the extent permitted by Law, Purchaser shall assume the liability for such accrued but unused vacation time and allow such Transferred Employee to use such accrued vacation time in accordance with the terms of the applicable Purchaser vacation plan, including without limitation the required approval of management to take time off. Purchaser shall convert such accrued but unused vacation time to hours under Purchaser’s Time Off Plan (for U.S. Employees), to days in accordance with Purchaser’s holiday practices for employees of Purchaser and its Affiliates employed in Germany (for Germany Employees) and to a vacation program comparable to the applicable vacation program of Seller Parent or its Subsidiaries as of the date immediately prior to the Malaysia Closing Date (for Malaysia Employees).

(ii) Notwithstanding anything in Section 6.6(k)(i) to the contrary, Purchaser shall reimburse Seller or its Subsidiaries an amount equal to the accrued but unused vacation time paid by Seller to any Transferred Employee in lieu of the assumption of such accrued but unused vacation time by Purchaser, along with any employment taxes payable to a Governmental Authority that are related thereto, in cash within thirty (30) days of Purchaser’s receipt of Seller’s written request for reimbursement thereof.

(iii) For the purposes of this Section 6.6(k), “vacation time” shall include vacation time, sick time, Seller Parent and its Subsidiaries’ Flexible Time Off program, floating holidays and similar arrangements.

(l) The Seller Parties shall retain full responsibility for compliance with those provisions of the Worker’s Adjustment and Retraining Notification Act of 1988, as amended (“WARN Act”) or any comparable provision of state or local law that is binding upon the Seller Parties under any such law and shall indemnify Purchaser for any Liabilities and Losses related thereto.

(m) Purchaser shall indemnify and hold harmless Seller and its Subsidiaries with respect to any liability under COBRA or similar applicable Laws in the United States arising from the actions (or inactions) of Purchaser or its Subsidiaries after the Closing Date. The Seller Parties shall retain all liabilities, including with respect to any “qualifying event” (as defined under COBRA), and liabilities under similar applicable Laws incurred on or prior to the Closing Date or arising as a result of the transactions described herein.

(n) Purchaser shall have no liabilities associated with any retention or severance plans entered into by Seller or its Affiliates with regard to any Designated Employee. “Designated Employees” are Business Employees who have been chosen by any Seller Party for retention or dismissal under any current retention or severance plan of Seller prior to the Closing Date, but either whose period of retention has not been completed prior to the Closing Date or whose dismissal has not been carried out prior to the Closing Date; provided, however, that Designated Employees shall not include any employee chosen by Seller, after consultation with Purchaser, as a result of the transactions contemplated by this Agreement. Section 6.6(n) of the Disclosure Letter lists each Designated Employee. The Seller Parties’ liability with regard to Designated Employees is subject to the rules of the retention and severance plans of Seller as in force prior to or on the Closing Date (or the Malaysia Closing Date, with respect to any Designated Employee who is a Malaysia Employee).

 

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(o) The Parties acknowledge and agree that all provisions contained in this Section 6.6 with respect to employees are included for the sole benefit of the respective Parties and shall not create any right in any other Person, including, without limitation, any employees, former employees, any participant in any Seller Plan or any beneficiary thereof or any right to continued employment with Seller or Purchaser, nor shall require Purchaser or any Affiliate of Purchaser to continue or amend any particular benefit plan after the Closing Date for Transferred Employees, and any such plan may be amended or terminated in accordance with its terms and applicable law.

(p) No later than five Business Days following the Closing Date, Purchaser shall implement, and provide a copy to Seller of, a retention bonus plan for the benefit of the Transferred Employees who remain employed by Purchaser or its Affiliates until at least the first anniversary of the Closing Date (the “Retention Bonus Plan”). The Retention Bonus Plan shall list each Transferred Employee and the cash and equity awards allocated to such Transferred Employee, which cash amount shall in the aggregate total the amount set forth in Exhibit E under “Avago costs – Milestone bonus.” Seller shall reimburse Purchaser for the cash amounts paid under the Retention Bonus Plan to each Transferred Employee up to the cash amount specified for such Transferred Employee in the Retention Bonus Plan (it being understood that (i) in the event a Transferred Employee’s employment with Purchaser or any of its Affiliates is terminated prior to such Transferred Employee’s receipt of any cash amount or equity award allocated to such Transferred Employee in the Retention Bonus Plan, such cash amount or equity award shall not be reallocated to any other Transferred Employee, and (ii) the treatment of the amounts specified on Exhibit E related to the “3-2-1 payment” is set forth in Section 6.6(j)).

6.7 Non U.S. Employees.

(a) The Seller Parties and Purchaser and their respective Affiliates shall comply with all obligations under applicable Laws to notify and/or consult with Non U.S. Employees or employee representatives, unions, works councils or other employee representative bodies, if any, and shall provide such information to the other Party as is required by that Party to comply with its notification and/or consultation obligations. The Seller Parties and Purchaser shall indemnify each other against all Losses resulting from any failure of the other to notify and/or consult or to provide such information in a timely manner.

(b) The Parties acknowledge and agree that all provisions contained in this Section 6.7 with respect to employees are included for the sole benefit of the respective Parties and shall not create any right (i) in any other Person, including, without limitation, any employees, former employees, any participant in any Seller Plan or any beneficiary thereof or any right to continued employment with Seller or Purchaser, nor shall require Purchaser or any Affiliate of Purchaser to continue or amend any particular benefit plan after the Closing Date for Transferred Employees, and any such plan may be amended or terminated in accordance with its terms and applicable law.

 

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6.8 Other Arrangements.

(a) At the Closing, Seller or an Affiliate of Seller and Purchaser shall execute and deliver a transition services agreement (the “Master Separation Agreement”) in substantially the form attached hereto as Exhibit H.

(b) As soon as is reasonably practicable after the date hereof, Seller will identify which Purchased Assets are not owned by Seller Parent, Seller, Sensor IPCo or U.S. R&D and which Affiliate of Seller Parent or Seller owns such Purchased Assets. Seller Parent and Seller will cause each such Affiliate, to the extent not a signatory to this agreement, to execute a joinder to this Agreement in the form attached hereto as Exhibit I (the “Joinder”).

6.9 Non Competition.

(a) In order that Purchaser may have and enjoy the full benefit of the Business, the Seller Parties agree that for a period of four (4) years commencing on the Closing Date, the Seller Parties will not, and will cause their Subsidiaries not to and any other Seller Party not to, without the express written approval of Purchaser, engage, directly or indirectly, in a Competing Business or acquire more than ten percent (10%) of the outstanding equity interest in any Business Competitor. Without limiting the foregoing provisions, the Seller Parties agree, upon the reasonable request of Purchaser, to use their respective commercially reasonable efforts to cause their Subsidiaries to enforce their rights for the benefit of Purchaser under the non-competition provisions of the Asset Purchase Agreement between Angel and an Affiliate of Seller, dated as of August 14, 2005, as amended (the “Semiconductor Business Purchase Agreement”); provided that all costs and expenses incurred in connection with the enforcement of such rights under the Semiconductor Business Purchase Agreement shall be borne exclusively by Purchaser. For purposes of this Section 6.9: (i) “Competing Business” shall mean designing, developing, researching, manufacturing, supplying, distributing, marketing, selling or servicing any Image Sensor Products and (ii) “Business Competitor” shall mean any Person that derived more than 10% of its consolidated gross revenues from Competing Businesses during the four fiscal quarters prior to the Seller Parties or any of their Subsidiaries’ entering into an agreement providing for the investment in or acquisition of such Person, for which financial statements are available. Notwithstanding the foregoing, the provisions of this Section 6.9 shall not restrict the Seller Parties or any of their Subsidiaries from acquiring and operating any Business Competitor so long as (i) the Seller Parties or such Subsidiary divests all or a portion of the Competing Business conducted by such Business Competitor within one year of such transaction such that an acquisition by the Seller Party or such Subsidiary of the retained portion of the Competing Business would be permissible under the terms of the foregoing clause (b); and (ii) while owned, the Seller Parties and their Subsidiaries do not provide such Business Competitor with any Licensed Business Technology or Licensed Business Intellectual Property Rights held by the Seller Parties or their Subsidiaries prior to the date of such acquisition.

(b) If the Seller Parties or any of their Subsidiaries is acquired by a Competing Business, or transfers or sells any or all of the Retained Businesses to a third party, including an Affiliate (such acquiring or third party buyer, the “Successor”) during the four-year term commencing on the Closing Date, then none of the Seller Parties or any of their Subsidiaries will grant the Successor a Patent license to make, have made, import, offer to sell or sell Image

 

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Sensor Products for the remainder of the four-year non-competition period and will only transfer Licensed Business Patents to a Successor subject to the license granted under the Avago General IP License Agreement and subject to a contractual restriction preventing the Successor from exercising its rights under the transferred Licensed Business Patents for the remainder of the four-year non-competition period.

(c) During the four-year non-competition term, the Seller Parties shall not, and shall not permit their Subsidiaries to, grant any license to make, have made, import, offer to sell or sell Image Sensor Products, and the Seller Parties shall not, and shall cause their Subsidiaries not to, provide the Licensed Business Technology to any third party during such four-year non-competition period; provided that the foregoing shall not apply to licenses or disclosures that are incidental to the development or the sale of products and services of the Retained Business or are specifically included in the definition of Retained Business.

(d) Notwithstanding anything else set forth in this Agreement to the contrary, during the period beginning on the Closing Date and ending on the first anniversary thereof, the Seller Parties may continue to perform their obligations under that certain Die Sales Agreement, dated February 3, 2005, between Flextronics Sales and Marketing (A-P) Ltd. and Agilent Technologies, Inc., including the manufacture of C2700 and C3860 Avago Sensor Products for, and the sale of such Avago Sensor Products to, Flextronics International, Ltd. (“Flextronics”) and its subsidiaries thereunder, it being understood that (i) the Seller Parties shall pay to Purchaser seven and one-half percent of the aggregate revenue in excess of $10,000,000 earned by the Seller Parties on the sale of Avago Sensor Products to Flextronics during such period, such payment to be made no later than the 30th day after the first anniversary of the Closing Date, and (ii) the Seller Parties may continue to use the reticles and Mask Works constituting Purchased Assets related to the production of Avago Sensor Products pursuant to this Section 6.9(c) and to meet warranty obligations arising in connection with the sale of such Products or Avago Sensor Products prior to the Closing Date.

(e) For purposes of this Agreement, “Image Sensor Product” means a CMOS photosensitive silicon array for capturing images primarily for human viewing, having an analog or digital output configured and intended for use in applications including, but not limited to, security/surveillance cameras, medical diagnostic cameras, cellular telephone handset cameras (a personal, handheld device for human voice communication over a cellular network), digital SLRs, camcorder devices, machine vision cameras, and video cameras for personal computers. An Image Sensor Product may also include an on-board A/D converter and an image processor that is either on-board or separate, wherein the image process corrects the output signal, for example, to demosaic, color balance, gamma correct or otherwise compensate such output signal. Notwithstanding the foregoing, Image Sensor Products shall not be construed to include an Optical Mouse Sensor, Miniature Surface Mount Ambient Light Photo Sensor, a Miniature Surface Mount Proximity Sensor, or any other sensor device designed to capture light or images at less than VGA resolution and which are not intended primarily for human viewing.

6.10 Non Solicitation.

(a) Each of the Seller Parties agrees that for a period of two (2) years from and after the Closing Date it shall not, and it shall cause each of its Subsidiaries not to (and shall not

 

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encourage or assist any of its Affiliates to), without the prior written consent of Purchaser, directly or indirectly, solicit to hire (or cause or seek to cause to leave the employ of Purchaser or any of its Affiliates) (i) any Transferred Employee or (ii) any other Person employed by Purchaser who became known to or was identified to the Seller Parties or any of their Affiliates prior to the Closing in connection with the transactions contemplated by this Agreement, unless in each case such Person ceased to be an employee of Purchaser or its Affiliates prior to such action by the Seller Parties or any of their Affiliates, or, in the case of such Person’s voluntary termination of employment with Purchaser or any of its Affiliates, at least three (3) months prior to such action by the Seller Parties or any of their Affiliates. Seller Parent and Seller agree to use their commercially reasonable efforts to cause their Affiliates to enforce their rights for the benefit of Purchaser under the non-solicitation provisions of the Semiconductor Business Purchase Agreement; provided that all costs and expenses incurred in connection with the enforcement of such rights shall be borne exclusively by Seller Parent.

(b) Purchaser agrees that for a period of two (2) years from and after the Closing Date it shall not, and it shall cause its Subsidiaries not to (and shall not encourage or assist any of its Affiliates to), without the prior written consent of Seller, directly or indirectly, solicit to hire (or cause or seek to cause to leave the employ of the Seller Parties or any of their Subsidiaries) any Person employed by the Seller Parties or any of their Subsidiaries who became known to or was identified to Purchaser in connection with the transactions contemplated by this Agreement prior to the Closing unless such Person ceased to be an employee of the Seller Parties or any of their Subsidiaries prior to such action by Purchaser or any of its Subsidiaries, or, in the case of such Person’s voluntary termination of employment with the Seller parties or any of their Subsidiaries, at least three (3) months prior to such action by Purchaser or any of its Subsidiaries.

(c) Notwithstanding the foregoing, the restrictions set forth in Sections 6.10(a) and 6.10(b) shall not apply to bona fide public advertisements for employment placed by any Party and not specifically targeted at the employees of any other Party.

(d) If any Seller Party or any of their respective Subsidiaries hire any Key Employee within two years following the Closing Date, whether or not in breach of this Section 6.10, Seller shall pay to Purchaser, with respect to each such Key Employee, an amount equal to (i) $500,000 plus (ii) three times the then-current annual base salary of such Key Employee. Any payment or payments required to be made by Seller pursuant to this Section 6.10(d) shall be made within 15 days following the date upon which such Key Employee is hired by the applicable Seller Party or Subsidiary thereof. Section 6.10(a) and this Section 6.10(d) shall not apply to any Non U.S. Employee who is required to be hired by any Seller Party or any of their Affiliates (A) in the case of any Germany Employee, pursuant to any existing agreement with employee representatives (such as a works council agreement) by which any Seller Party or any of their Affiliates is bound or (B) as a result of any actions required to be taken by any Seller Party or any of their Affiliates in order to comply with local Laws.

6.11 Avago IP License Agreements and IP Side Letter. At the Closing, (a) Seller Parent shall cause its Subsidiary, Avago Technologies General IP (Singapore) Pte. Ltd. (“General IPCo”), to execute and deliver to Purchaser, and Purchaser shall execute and deliver to General IPCo, (i) a license agreement (the “Avago General IP License Agreement”) in the form of the agreement attached hereto as Exhibit J; and (ii) in the event the Sensor IP Closing does not occur concurrent

 

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with the Closing, a license agreement (the “Avago Sensor IPCo License Agreement”) in the form of the agreement attached hereto as Exhibit K, and (b) Seller Parent and Purchaser shall execute and deliver to one another a side letter (the “IP Side Letter”) in the form of the letter attached hereto as Exhibit L.

6.12 [Reserved]

6.13 Insurance Matters.

(a) Other than with respect to matters for which a Seller Party has retained liability pursuant to this Agreement, to the extent any Seller Party or any of their respective Affiliates has an insurance policy (a “Seller Corporate Policy”) providing for insurance coverage with respect to the Purchased Assets or Transferred Employees prior to the Applicable Closing Date, the Seller Parties shall, and shall cause their respective Affiliates to, take all commercially reasonable steps (in consultation with Purchaser) to recover any Insurance Proceeds actually payable with respect to a loss or liability of, or damage to, the Purchased Assets, or claims by Transferred Employees, relating to or arising out of occurrences prior to the Applicable Closing Date.

(b) In the event that, after the execution of this Agreement, but prior to the Applicable Closing Date, any Purchased Asset is subject to loss, destruction or damage (a “Casualty”), at the Applicable Closing the Seller Parties shall or shall cause their appropriate Affiliate to assign to Purchaser or its designee all Insurance Proceeds relating to such Casualty to the extent such Insurance Proceeds are received by a Seller Party but have not already been used by a Seller Party to repair any such Casualty. To the extent any Insurance Proceeds are actually received by any Seller Party or any of their respective Subsidiaries after the Applicable Closing Date with respect to a loss or liability of, or damage to, the Purchased Assets prior to the Applicable Closing Date, such Seller Party shall or shall cause its appropriate Affiliate to remit such Insurance Proceeds (less (i) any Taxes incurred on the excess of the Insurance Proceeds over the Tax deduction, if any, in respect of the loss or damage resulting in the receipt of such Insurance Proceeds and (ii) any expenses incurred by such Seller Party or its applicable Affiliate thereof to obtain such Insurance Proceeds, to the extent not reimbursed by the appropriate insurance carrier) to Purchaser or its designee. To the extent any Seller Party or any of their respective Affiliates receive Insurance Proceeds with respect to loss of, or damage to, assets of both a Seller Party or any of their respective Affiliates, on the one hand, and the Purchased Assets, on the other hand, and the allocation thereof is not identified by the insurance carrier, the applicable Seller Party or Affiliate thereof, on the one hand, and Purchaser (or its designee), on the other hand, shall share such Insurance Proceeds in proportion to the relative value of the lost or damaged assets (taking into account the business interruption resulting from such loss or damage).

(c) Purchaser agrees not to bring any claim for recovery under any of the Seller Corporate Policies, whether or not Purchaser may be so entitled in accordance with the terms of such Seller Corporate Policies.

 

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6.14 Tax Matters.

(a) Transfer Taxes.

(i) For purposes of this Agreement, the term “Transfer Taxes” shall mean all transfer, filing, recordation, ad valorem, value added, sales and use, bulk sales, stamp duties, excise, GST, license or similar fees or taxes (excluding income Taxes). The liability for Transfer Taxes attributable to the transactions occurring pursuant to this Agreement shall be borne one-half by Purchaser and one-half by Seller; provided, however, that Purchaser shall diligently pursue the recovery of any recoverable Transfer Taxes, and if Purchaser actually receives any recoverable Transfer Taxes, Purchaser shall promptly, but in no case later than twenty (20) days after such recovery, pay to Seller an amount equal to one-half of such recovered Transfer Taxes; and provided further, that the liability for any Transfer Taxes attributable to the Transfer of the Singapore IP to Purchaser as contemplated by Section 2.7 shall be borne 100% by Seller. Seller and Purchaser shall cooperate with each other in the provision of any information or preparation of any documentation that may be necessary or useful for obtaining any available mitigation, reduction or exemption from any Transfer Taxes. For the avoidance of doubt, Purchaser shall have no Liability of any kind and shall be indemnified against Transfer Taxes arising out of or attributable to the acquisition of the Business from Angel.

(ii) Unless the Parties mutually agree otherwise, any Tax Returns that must be filed in connection with any Transfer Taxes shall be prepared by the Party that bears the responsibility for such Transfer Taxes, as required by applicable Law. For any Tax Return required by law to be filed by a Party (the “Filing Party”) other than the Party that is responsible for preparing such Tax Return pursuant to this Section 6.14 (the “Preparing Party”), the Filing Party shall pay the Transfer Taxes shown on such Tax Return and shall collect the Preparing Party’s applicable share of the Transfer Tax from Preparing Party determined in accordance with Section 6.14(a)(i) hereof. The Preparing Party shall use its commercially reasonable efforts to provide to the Filing Party any Tax Returns which it is required to file at least ten days before such Tax Returns are due to be filed. The Preparing Party shall make such changes to the applicable Tax Return as reasonably requested by the Filing Party. Such Tax Returns shall be consistent with any allocation of the Purchase Price that may be agreed to by the Parties pursuant to Section 3.4.

(b) Other Tax Returns and Payment of Taxes.

(i) Except as provided in Section 6.14(a), the Seller Parties shall be liable for and shall remit when due or cause to be remitted when due any amount of Taxes owed by or attributable to the Purchased Assets for any taxable period ending on or before the Applicable Closing Date. The Seller Parties shall duly file or cause to be duly filed any Tax Return required to be filed in respect of any Tax which it is required to pay pursuant to the immediately preceding sentence. Such Tax Returns shall be subject to the review and approval of Purchaser, which approval shall not be unreasonably withheld or delayed.

 

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(ii) Purchaser shall be liable for and shall remit when due or cause to be remitted when due any amount of Taxes due in connection with the Purchased Assets for any taxable period beginning after the Applicable Closing Date. Purchaser shall duly file or cause to be duly filed any Tax Return required to be filed in respect of any Tax which it is required to pay pursuant to the immediately preceding sentence.

(iii) Purchaser shall prepare or cause to be prepared and file or cause to be filed any Tax Returns with respect to the Purchased Assets for taxable periods that begin before the Applicable Closing Date and end after the Applicable Closing Date (a “Straddle Period”). The relevant Seller Party shall pay to Purchaser with respect to a Straddle Period an amount equal to the portion of such Taxes which relates to the portion of such Straddle Period ending on the Applicable Closing Date. For purposes of this Section 6.14(b)(iii), in the case of any Taxes that are imposed on a periodic basis and are payable for a Straddle Period, the portion of such Tax that relates to the portion of such taxable period ending on the Applicable Closing Date shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on and including the Applicable Closing Date and the denominator of which is the number of days in the entire taxable period, and (y) in the case of any Tax based upon or related to income or receipts be deemed to be equal to the amount which would be payable if the relevant taxable period ended on and included the Applicable Closing Date. Any credits relating to a Straddle Period shall be taken into account as though the relevant taxable period ended on the Applicable Closing Date.

(iv) If, after the Applicable Closing, Purchaser or any of its Affiliates receives any refund that relates to a Tax Period prior to such Applicable Closing that is an Excluded Asset, Purchaser shall, or shall cause such Affiliate to, promptly remit or cause to be remitted to the relevant Seller Party the entire amount of the refund or overpayment (including any interest paid by the Governmental Authority paying the refund or the overpayment, but net of any Taxes that may be due on such refund or interest amount after giving effect to any deductions directly relating to the payment of such amounts to the relevant Seller Party) received or utilized by Purchaser or such Affiliate. If any such refund or benefit is subsequently reduced as a result of an adjustment required by any Governmental Authority, this Section 6.14(b) shall take such adjusted refund or benefit into account. If Purchaser or any of its Affiliates pays any amount to any Seller Party pursuant to this Section 6.14(b) prior to such adjustment, the relevant Seller Party shall repay the difference between the amount paid and the adjusted amount of the refund or benefit, as the case may be, to Purchaser, if the adjusted amount is less than the amount paid by Purchaser or such Affiliate to such Seller Party pursuant to this Section 6.14(b), and Purchaser shall pay the difference between the adjusted amount of the refund or benefit and the amount paid by Purchaser or such Affiliate to the relevant Seller Party if the amount paid by Purchaser or such Affiliate to such Seller Party is less than the adjusted amount.

 

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(c) Cooperation and Assistance.

(i) The Parties shall cooperate with each other in the filing of any Tax Returns and the conduct of any audit or other proceeding. They each shall execute and deliver such powers of attorney and make available such other documents as are reasonably necessary to carry out the intent of this Section 6.14.

(ii) If (A) any Party is liable under this Section 6.14, including amounts due to Section 6.14(b), for any portion of a Tax shown due on any Tax Return required to be filed by the other Party pursuant to this Section 6.14, subject to Section 6.14(a)(ii), the Party obligated to file such Tax Return pursuant to this Section 6.14 shall deliver a copy of the relevant portions of such Tax Return to the liable Party for such Party’s review and comment within 20 days prior to the due date for filing such Tax Return (taking into account any extensions, if applicable). Subject to Section 6.14(a)(ii), the Party who is required to file such Tax Return will make such changes to the Applicable Tax Return as reasonably requested by the other Party. If the Parties disagree as to the treatment of any item shown on such Tax Return or with respect to any calculation with respect to any Tax Return to be filed pursuant to this Section 6.14, an internationally recognized accounting firm mutually agreed upon by Purchaser and the relevant Seller Party, as the case may be, shall determine how the disputed item is to be treated on such Tax Return. Any payments made by a Party to another Party pursuant to this Section 6.14 shall be made no later than the later of 10 days prior to the due date of the applicable Tax Return and 5 business days after the receipt of the applicable Tax Return by the Party from whom payment is required.

(iii) Upon request or upon payment, each Party shall deliver to the tax director of the other Party certified copies of all receipts for any foreign Tax with respect to which such other Party or any of its Affiliates could claim a foreign tax credit and any supporting documents required in connection with claiming or supporting a claim for such a foreign tax credit.

(iv) The Parties shall retain records, documents, accounting data and other information in whatever form that are necessary for the preparation and filing, or for any Tax audit, of any and all Tax Returns with respect to any Taxes that relate to taxable periods that do not begin after the Applicable Closing Date. Such retention shall be in accordance with the record retention policy of the respective Party, but in no event shall any Party destroy or otherwise dispose of such records, documents, accounting data and other information prior to the expiration of the applicable statute of limitations (including extensions) and without first providing the other Party with a reasonable opportunity to review and copy the same. Each Party shall give any other Party reasonable access to all such records, documents, accounting data and other information as well as to its personnel and premises to the extent necessary for a reasonable review or a Tax audit of such Tax Returns and relevant to an obligation under this Section 6.14.

(v) The Seller Parties shall use their commercially reasonable efforts to provide Purchaser with a clearance certificate or similar document(s) which may be required by any taxing authority to relieve Purchaser of any obligation to withhold any

 

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portion of the payments to any Seller Party pursuant to this Agreement, the Ancillary Agreements, the Avago General IP License Agreement or the Avago Sensor IPCo License Agreement.

(d) Tax Controversies. A Party shall promptly notify the other Party in writing promptly upon (but in no event later than 30 days after) (a “Notification”) receipt of notice of any pending or threatened audits or assessments with respect to Taxes for which such other Party (or any of its Affiliates) is liable under Section 6.14. Failure to give such Notification shall not relieve the indemnifying party from liability under Section 6.14, except if and to the extent that the indemnifying party is actually prejudiced thereby. Each Party shall be entitled to take control of the complete defense of any issue directly relating to Taxes for which it may be liable hereunder that arises in any tax audit or administrative or court proceeding (a “Tax Claim”), and to employ counsel of its choice at its expense; provided, that the relevant Seller Party and Purchaser shall jointly control the defense of any Tax Claim relating to Taxes with respect to a Straddle Period for which Taxes are allocated to both the relevant Seller Party, as the case may be, and Purchaser under Section 6.14(b)(iii) of this Agreement. Notwithstanding the immediately preceding sentence, each Party shall be entitled to take control of the complete defense of any Tax Claim relating to Taxes for which it is obligated to file a Tax Return (but does not have any indemnification obligation hereunder) under this Section 6.14 (or by Law), and to employ counsel of its choice at its expense; provided, that such Party unconditionally releases in writing the other Party from its indemnification obligation hereunder with respect to such Tax Claim; provided further, that such Party shall take control of such Tax Claim within 60 days of the earlier of (x) the date on which such Notification is provided or (y) the date such Notification is due pursuant to the first sentence of this Section 6.14(d). If one Party takes control of any such audit or proceeding, the other Party shall be entitled to participate, at its expense, in the defense of such audit or proceeding, and the Party controlling such audit or proceeding shall consider in good faith any suggestions made or points raised by the other Party. The Parties may not agree to settle any claim for Taxes for which the other may be liable without the prior written consent of such other Party, which consent shall not be unreasonably withheld. This Section 6.14(d) shall govern to the extent it would otherwise be inconsistent with Section 9.3(a).

(e) Indemnification. The Seller Parties shall indemnify, save and hold the Purchaser Indemnified Parties harmless from and against any and all Purchaser Losses incurred in connection with, arising out of, resulting from or incident to (i) any Taxes with respect to the Purchased Assets for any Tax year or portion thereof ending on or before the Applicable Closing Date (or for any Straddle Period, to the extent allocable to the portion of such period beginning before and ending on the Applicable Closing Date, determined accordance with 6.14(b)(iii)), (ii) any failure of any representation or warranty of the Seller Parties set forth in Section 4.10 to be true and correct; (iii) any Taxes arising out of or attributable to the acquisition of the Business from Angel; (iv) any withholding Taxes (whenever arising) attributable to the payment of the Purchase Price; and (v) the unpaid Taxes of any Person under Treasury regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise.

 

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6.15 Mail Handling.

(a) To the extent that Purchaser and/or any of its Affiliates receives any mail or packages addressed to any Seller Party or its Affiliates and delivered to Purchaser not relating to the Purchased Assets or the Assumed Liabilities, Purchaser shall promptly deliver such mail or packages to Seller. After the Applicable Closing Date, Purchaser may deliver to Seller any checks or drafts made payable to any Seller Party or its Affiliates that constitutes a Purchased Asset, and Seller shall promptly deposit such checks or drafts, and, upon receipt of funds, reimburse Purchaser within five Business Days for the amounts of all such checks or drafts, or, if so requested by Purchaser, endorse such checks or drafts to Purchaser for collection. To the extent any Seller Party or its Affiliates receives any mail or packages addressed and delivered to any Seller Party or its Affiliates but relating to the Purchased Assets or the Assumed Liabilities, Seller shall promptly deliver such mail or packages to Purchaser. After the Applicable Closing Date, to the extent that Purchaser receives cash or checks or drafts made payable to Purchaser that constitutes an Excluded Asset, Purchaser shall promptly use such cash to, or deposit such checks or drafts and upon receipt of funds from such checks or drafts, reimburse Seller within five Business Days for such amount received, or, if so requested by Seller, endorse such checks or drafts to Seller for collection. The Parties may not assert any set off, hold back, escrow or other restriction against any payment described in this Section 6.15.

6.16 [Reserved].

6.17 Shared Contracts Other Than Software Licenses. The Seller Parties shall use their commercially reasonable efforts to seek the consent, if requested by Purchaser, of the counterparty to any Contract which is used primarily with respect to the Purchased Assets but is not included within the Transferred Contracts to partially assign or otherwise separate for the benefit of Purchaser the portion of such Contract relating to the Purchased Assets. The Seller Parties shall use their commercially reasonable efforts to identify such Contracts to Purchaser as soon as practicable following the execution of this Agreement. This Section 6.17 is not applicable to Software Licenses, which are covered by Section 6.18.

6.18 Software Licenses.

With respect to the Software Licenses (including CAD licenses) that prior to the Closing Date are used in the Business, but that are not used exclusively in the Business, Seller and Purchaser shall cooperate diligently prior to the Closing Date to obtain the consent of the respective licensors of such Software Licenses (the “Software Licensors”) to a partial assignment, or grant of a sublicense by Seller or of a new license to Purchaser by the Software Licensor, as the case may be, of Seller’s rights thereunder applicable to the Business. Purchaser acknowledges that any rights to be sublicensed to it may be limited as set forth in such Software Licenses; that the terms of any new license to be granted to it by the Software Licensors may be different from the terms of Seller’s existing licenses; and that Seller cannot control and is not responsible for the actions of any of the Software Licensors. Seller and Purchaser further agree that any division of rights, responsibilities and credits (including credits for pre paid fees) between them under the existing Software Licenses or any successors thereto shall be in proportion to the actual usage of such licenses by the Business during the first three quarters of Seller Parent’s 2006 fiscal year compared to the average usage of such licenses by the Retained

 

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Business during such period (it being understood that for purposes of determining actual usage, CAD license usage shall be as set forth on Schedule 6.18, and for all Software licenses other than CAD licenses, usage will be based on seat count). No later than five Business Days after the date of this Agreement, Seller shall provide Purchaser with a list of all software programs used in connection with the operation of the Business on the date of this Agreement.

6.19 NDAs and CAs. The Parties agree that with respect to the confidentiality and proprietary development agreements to which any Seller Party or any of their Subsidiaries is a party with any of the Business Employees (the “NDAs”), such Seller Party or Subsidiary, as applicable, will enter into a partial assignment with respect to such NDAs, assigning that portion of the NDAs relating to the Business to Purchaser. No later than five Business Days after the date of this Agreement, Seller Parent shall provide Purchaser with a list of each Person who, to the knowledge of Seller, is a party to any confidentiality agreement to which any Seller Party or any of their respective Subsidiaries is a party which relates to the Business or the Purchased Assets. Following the date of this Agreement, Seller Parent shall use commercially reasonable efforts to assist Purchaser in having such Persons execute a new confidentiality agreement with Purchaser prior to the Closing and effective as of the Closing with respect to the Business and the Purchased Assets.

6.20 Patents Licensed Non Exclusively to the Purchaser. In the event that a Seller Party or any of their respective Subsidiaries transfers any Patent that is owned by a Seller Party or any of their respective Subsidiaries and licensed on a non-exclusive basis to Purchaser pursuant to the Avago General IP License Agreement, a Seller Party shall upon execution of a definitive agreement for transfer of such Patent, give notice of such transfer to Purchaser and shall, upon request by Purchaser within ten (10) days after the giving of notice, use its commercially reasonable efforts to obtain access for Purchaser to the Seller Party’s or their respective Subsidiaries’ patent files pertaining to the Patent to be transferred.

6.21 No Solicitation of Acquisition Proposals; Inconsistent Activities.

(a) No Seller Party shall, and the Seller Parties shall cause their respective Subsidiaries, directors, employees, agents and representatives (including any investment banker, financial advisor, attorney or accountant retained by any Seller Party or any of their respective Affiliates) not to, directly or indirectly, initiate, solicit or encourage any Acquisition Proposal, or furnish any information to any other Person with respect to, or agree to, any Acquisition Proposal. Seller shall promptly notify Purchaser after receipt of any Acquisition Proposal or any request for information relating to the Purchased Assets or the Business by any Person who has informed any Seller Party that such Person is considering making, or has made, an Acquisition Proposal (which notice shall identify the Person making, or considering making, such Acquisition Proposal and shall set forth the material terms of any Acquisition Proposal received), and Seller shall keep Purchaser informed in reasonable detail of the terms, status and other pertinent details of any such Acquisition Proposal or request.

(b) To the extent that it has not done so already, each Seller Party shall, and shall cause its respective Subsidiaries, directors, employees, agents and representatives to discontinue and desist from any solicitation efforts or negotiations with respect to or in furtherance of any Acquisition Proposal.

 

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6.22 Expiring Transferred Contracts. The Seller Parties shall provide notice to the Purchaser of any Transferred Contract which is to expire in accordance with its terms prior to the Applicable Closing, and shall consult with Purchaser regarding the potential renewal or renegotiation of any such Transferred Contract.

6.23 Contract Terminations. The Seller Parties shall no later than five days after the date of this Agreement deliver a notice of termination to the California Institute of Technology in respect of the License Agreement, dated October 7, 2003, between the California Institute of Technology and Agilent Technologies, Inc., and shall cause such License Agreement to be terminated effective as of the Closing or as soon as practicable thereafter (it being understood that no Seller Party shall be required to pay any money or other consideration or grant forbearance to any Person in order to secure the termination of such License Agreement effective as of any date prior to the expiration of the 60-day notice period required for termination under such License Agreement).

ARTICLE VII

CONDITIONS TO CLOSING

7.1 Conditions Precedent to Obligations of Purchaser and the Seller Parties. The respective obligations of the Parties to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by the Party for whose benefit such condition exists) on or prior to the Closing Date of each of the following conditions:

(a) No Injunction, etc. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law which is in effect on the Closing Date which has or would, and no Proceeding by any Governmental Authority shall have been threatened against any of the parties hereto or any of the officers or directors of any of them seeking to, prohibit, enjoin or restrain the consummation of the transactions contemplated by this Agreement to occur on the Applicable Closing Date or otherwise making such transactions illegal.

(b) Regulatory Authorizations. (i) All material Consents of any Governmental Authorities shall have been obtained and shall be in full force and effect, and (ii) the applicable waiting period under the HSR Act shall have expired or been terminated.

7.2 Conditions Precedent to Obligation of the Seller Parties. The obligation of the Seller Parties to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by the Seller Parties) on or prior to the Closing Date of each of the following conditions:

(a) Accuracy of Purchaser’s Representations and Warranties. Each of the representations and warranties of Purchaser contained in this Agreement and the other Transaction Documents (which representations and warranties shall be deemed for purposes of this Section 7.2(a) not to include any qualification or limitation with respect to materiality) shall be true and correct as of the Closing Date with the same effect as though those representations

 

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and warranties had been made on and as of the Closing Date (except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall be true and correct as of such date), except where the matters in respect of which such representations and warranties are not true and correct, in the aggregate, have not materially prevented, materially delayed or materially impaired, and would not reasonably be expected to prevent, materially delay or materially impair, the ability of Purchaser to perform and comply with its obligations under this Agreement, and Seller shall have received a certificate signed by an authorized officer of Purchaser to such effect.

(b) Covenants of Purchaser. Purchaser shall have performed and complied in all material respects with all covenants contained in this Agreement and the other Transaction Documents that are required to be performed or complied with by it on or prior to the Closing; and Seller shall have received a certificate dated as of the Closing Date and signed by an authorized officer of Purchaser to such effect.

(c) Closing Documents. Purchaser shall have executed and delivered to Seller the documents set forth in Section 8.2, and each such agreement and document shall be in full force and effect.

7.3 Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of each of the following conditions:

(a) Accuracy of Representations and Warranties of the Seller Parties. Each of the representations and warranties of the Seller Parties contained in this Agreement and the other Transaction Documents (which representations and warranties shall be deemed for purposes of this Section 7.3(a) not to include any qualification or limitation with respect to materiality, whether by reference to “Seller Material Adverse Effect” or otherwise) shall be true and correct as of the Closing Date with the same effect as though those representations and warranties had been made on and as of the Closing Date (except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall be true and correct as of such date) except where the matters in respect of which such representations and warranties are not true and correct, in the aggregate, have not had or resulted in and would not reasonably be expected to have or result in a Seller Material Adverse Effect, and Purchaser shall have received a certificate signed by an authorized officer of each Seller Party to such effect.

(b) Covenants of the Seller. Each Seller Party shall have performed and complied in all material respects with all covenants contained in this Agreement and the other Transaction Documents that are required to be performed or complied with by it on or prior to the Closing; and Purchaser shall have received a certificate dated as of the Closing Date and signed by an authorized officer of each Seller Party to such effect.

(c) Closing Documents. Purchaser shall have received the documents set forth in Section 8.3, such documents shall have been executed by the parties thereto and shall be in full force and effect.

 

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(d) Consents. (i) Each of the Consents set forth on Section 7.3(d) of the Disclosure Letter shall have been obtained in a form reasonably acceptable to Purchaser and shall be in full force and effect, and (ii) all other Consents required to be obtained in connection with the transactions contemplated by this Agreement shall have been obtained and shall be in full force and effect, except in the case of clause “(ii)” where the failure to obtain any such Consents has not had and could not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

(e) Business Employees. On the Closing Date, (i) each of Chuck McCord and Yuen-Shung Chieh; (ii) at least 80% of the Business Employees (other than Key Employees) as of the date of this Agreement, and at least 85% of the Key Employees as of the date of this Agreement, shall have continued to be employed by the Seller Party or their respective Subsidiaries and, other than Malaysia Employees, shall have accepted offers of employment with Purchaser or one of its Affiliates or become Leased Employees (it being understood that Business Employees employed in Fort Collins, Colorado and individuals that Purchaser has informed Seller Parent that Purchaser does not intend to retain post Closing shall not be taken into account for purposes of this Section 7.3(e)).

(f) No Seller Material Adverse Effect. Since the date of this Agreement there shall have been no event, condition, change or development, or worsening of any existing event, condition, change or development that, individually or in the aggregate, has had or resulted in, or would reasonably be expected to result in a Seller Material Adverse Effect; and Purchaser shall have received a certificate dated as of the Closing Date and signed by an authorized officer of each Seller Party to such effect.

ARTICLE VIII

CLOSING

8.1 Closings.

(a) Unless this Agreement shall have been terminated pursuant to Article X hereof, the closing (the “Closing”) of the sale and transfer of the Purchased Assets (other than the Sensor IP and the Malaysia Purchased Assets) and the other transactions hereunder (other than the transactions which are to occur at the Sensor IP Closing and the Malaysia Closing) shall take place at the offices of Latham & Watkins LLP, 140 Scott Drive, Menlo Park, CA 94025 at 7:00 a.m., local time, and in such other places as are necessary to effect the transactions to be consummated at the Closing, on the second Business Day immediately following the satisfaction or, to the extent permitted, waiver of all of the conditions in Article VII (other than those conditions which by their nature are to be satisfied or, to the extent permitted, waived at the Closing but subject to the satisfaction or, to the extent permitted, waiver of such conditions; provided, however, that the Closing shall take place no earlier than December 1, 2006), or at such other time, date and place as shall be fixed by mutual agreement of the Parties (such date of the Closing being herein referred to as the “Closing Date”).

(b) The Sensor IP Closing shall take place at the offices of Latham & Watkins LLP, 140 Scott Drive, Menlo Park, CA 94025 at 7:00 a.m., local time, and in such other places as are necessary to effect the transactions to be consummated at the Sensor IP Closing, on the Sensor IP Closing Date.

 

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(c) The Malaysia Closing shall take place at the offices of Latham & Watkins LLP, 140 Scott Drive, Menlo Park, CA 94025 at 7:00 a.m., local time, and in such other places as are necessary to effect the transactions to be consummated at the Malaysia Closing, on the Malaysia Closing Date.

(d) The effective time (“Effective Time”) of each Applicable Closing for tax, operational and all other matters shall be deemed to be 12:01 a.m., local time in each jurisdiction in which the Purchased Assets transferred at such Applicable Closing are located on the Applicable Closing Date.

8.2 Purchaser Obligations. At the Closing, Purchaser shall deliver to Seller the payments required to be made on the Closing Date, as provided in Section 3.2(a), and execute and deliver to Seller the following in such form and substance as are reasonably acceptable to the Seller Parties:

(a) the Bill of Sale;

(b) the Assignment and Assumption Agreement;

(c) the Local Asset Transfer Agreements;

(d) the Avago General IP License Agreement;

(e) the Avago Sensor IPCo License Agreement;

(f) the Master Separation Agreement;

(g) the IP Side Letter;

(h) such instruments of conveyance with respect to the Purchased Assets and Assumed Liabilities as are referred to in Section 2.3(a) and such other assignment and conveyance documents as shall be necessary to convey the Purchased Assets and consummate the other transactions contemplated hereby in each jurisdiction; and

(i) such other documents and instruments as counsel for Purchaser and the Seller Parties mutually agree to be reasonably necessary to consummate the transactions described herein.

8.3 Seller Party Obligations. At the Closing, the Seller Parties shall execute and deliver to Purchaser, and Seller Parent and Seller shall cause such of its Affiliates as are party thereto or such other parties as are indicated below to execute and deliver to Purchaser, the following in such form and substance as are reasonably acceptable to Purchaser:

(a) the Bill of Sale;

 

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(b) the Assignment and Assumption Agreement;

(c) the Local Asset Transfer Agreements;

(d) the Avago General IP License Agreement;

(e) the Avago Sensor IPCo License Agreement;

(f) the Master Separation Agreement;

(g) the IP Side Letter;

(h) certifications certifying that the transactions contemplated hereunder are exempt from withholding under Section 1445 of the Code;

(i) such instruments of conveyance with respect to the Purchased Assets and Assumed Liabilities as are referred to in Section 2.3(a) and such other assignment and conveyance documents as shall be necessary to convey the Purchased Assets and consummate the other transactions contemplated hereby including the sublicense, transfer or acquisition of the sublicense of Software Licenses as and to the extent provided in Section 6.18;

(j) an amendment to the Asset Transfer and License Agreement, dated June 26, 2003, between Fairchild Imaging, Inc. and Agilent Technologies, Inc. (the “Fairchild Agreement”), that (1) modifies the Fairchild Agreement to provide for a non-exclusive (rather than exclusive) license, (2) provides for no minimum royalties, (3) reduces the royalty rate by 50%, (4) attaches an exhibit that lists in as much detail as is reasonably possible the “Licensed Materials” that were actually provided by Agilent Technologies in connection with the agreement, (5) contains a representation from Fairchild Imaging, Inc. that to the knowledge of Fairchild Imaging, Inc. (after reasonable inquiry) such exhibit is true, correct and complete, and (6) grants consent to Seller Parent to assign the Fairchild Agreement, as amended, to Purchaser; and

(k) such other documents and instruments as counsel for Purchaser and the Seller Parties mutually agree to be reasonably necessary to consummate the transactions described herein.

ARTICLE IX

INDEMNIFICATION

9.1 Indemnification.

(a) Following the Closing and subject to the terms and conditions of this Article IX, the Seller Parties shall indemnify, defend and hold harmless Purchaser, its Affiliates, and their respective officers, directors, employees, stockholders, assigns and successors (each, a “Purchaser Indemnified Party”) from and against, and shall compensate and reimburse each Purchaser Indemnified Party for, all Losses imposed upon or incurred by such Purchaser Indemnified Party (“Purchaser Losses”), with respect to (i) any failure of any representation or

 

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warranty of any Seller Party set forth in this Agreement (other than Section 4.10, indemnification for the breach of which is covered by Section 6.14(e)) or in the certificate delivered pursuant to Section 7.2(a) to be true and correct as of the date of this Agreement or as of, and as if made at, the Effective Time on the Closing Date, (ii) any breach of any covenant or agreement of any Seller Party herein, or (iii) any Excluded Liabilities. Seller shall act as agent for all Seller Parties in connection with this Article IX. Purchaser shall not be entitled to recover more than once for the same Purchaser Loss.

(b) Following the Closing and subject to the terms and conditions provided in this Article IX, Purchaser shall indemnify, defend and hold harmless each of the Seller Parties and their Affiliates and their respective officers, directors, employees, stockholders, assigns and successors (each, a “Seller Indemnified Party”) from and against, and shall compensate and reimburse each Seller Indemnified Party for, all Losses imposed upon or incurred by such Seller Indemnified Party (“Seller Losses”), with respect to (i) the failure of any representation or warranty of Purchaser set forth in this Agreement or in the certificate delivered pursuant to Section 7.3(a) to be true and correct as of the date of this Agreement or as of, and as if made at, the Effective Time on the Closing Date, (ii) any breach of any covenant or agreement of Purchaser herein, (iii) any of the Assumed Liabilities or (iv) the performance and satisfaction of the Assumed Liabilities from and after the Applicable Closing and the ownership, use and operation of the Purchased Assets by Purchaser and its Affiliates from and after the Applicable Closing. The Seller Parties shall not be entitled to recover more than once for the same Seller Loss.

(c) For purposes of the foregoing Sections 9.1(a)(i) and 9.1(b)(i), in determining whether any representation or warranty shall have been true and correct as of the date of this Agreement or as of, and as if made at, the applicable Effective Time, and in determining the amount of any related Purchaser Losses or Seller Losses, as the case may be, no effect shall be given to any qualification in the relevant representations and warranties as to materiality or Seller Material Adverse Effect.

(d) Notwithstanding the foregoing, Purchaser Losses and Seller Losses shall not include, and in no event shall any Purchaser Loss or Seller Loss be recoverable under the terms of this Agreement to the extent it consists of, punitive, special or exemplary damages, except to the extent such punitive, special or exemplary damages are awarded against any Purchaser Indemnified Party or Seller Indemnified Party, as the case may be, in a third party claim.

9.2 Certain Limitations.

(a) Notwithstanding anything contained herein to the contrary, the Seller Parties shall not be obligated to indemnify Purchaser Indemnified Parties for aggregate Purchaser Losses under this Agreement pursuant to Section 9.1(a)(i) in excess of $15,000,000; provided, however, that such limitation shall not apply with respect to a breach of a representation or warranty made by any Seller Party in Section 4.1, 4.2(a), 4.3, 4.5, 4.9 or 4.10.

(b) Notwithstanding anything contained herein to the contrary, the Seller Parties shall not be obligated to indemnify Purchaser Indemnified Parties under this Agreement pursuant to Section 9.1(a)(i), (x) with respect to any individual Purchaser Loss or series of related Purchaser

 

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Losses of less than twenty-five thousand dollars ($25,000) (the “Minimum Amount”) and (y) unless and until the aggregate Purchaser Losses (excluding individual Purchaser Losses or related Purchaser Losses less than the Minimum Amount) subject to such indemnification collectively exceed five hundred thousand dollars ($500,000) (the “Threshold”), whereupon such indemnification shall be made by the Seller Parties only with respect to the amount of such Purchaser Losses (excluding individual Purchaser Losses or related Purchaser Losses less than the Minimum Amount) in excess of the Threshold; provided, however, that the Threshold shall not apply to any breach of a representation or warranty made by any Seller Party or any Affiliate thereof in Sections 4.1, 4.2(a), 4.3, 4.5, 4.9 or 4.10.

(c) The representations and warranties of the Seller Parties and Purchaser contained in Article IV and Article V, respectively, of this Agreement shall survive the Closing until the eighteen month anniversary of the Closing Date; provided that the representations and warranties set forth in Sections 4.1, 4.2(a), 4.3, 4.5, 4.9, 5.1, 5.2(a) and 5.5 shall survive indefinitely and the representations and warranties set forth in Section 4.10 and 4.15 shall survive until the expiration of the applicable statute of limitations. The covenants and agreements contained in this Agreement shall survive the Closing until the date or dates explicitly specified therein or, if not so specified, until the expiration of the applicable statute of limitations with respect to the matters contained therein.

(d) The obligations to indemnify and hold harmless a Party pursuant to Sections 6.14(e), 9.1(a)(i), 9.1(a)(ii), 9.1(b)(i) or 9.1(b)(ii) shall terminate when the applicable representation, warranty or covenant terminates pursuant to Section 9.2(c); provided, however, that such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the Seller Indemnified Party or Purchaser Indemnified Party, as the case may be, to be indemnified (each, an “Indemnified Party”) shall have, before the expiration of the applicable survival period, previously made a claim by delivering a written notice (stating in reasonable detail the basis of such claim) to the Indemnifying Party.

9.3 Procedures for Third Party Claims and Excluded Liabilities.

(a) General Procedures. Promptly (but in no event later than ten (10) days) after the receipt by any Indemnified Party of a notice of any Proceeding by any third party that may be subject to indemnification under this Article IX, including any Proceeding relating to any Excluded Liability or Assumed Liability, such Indemnified Party shall give written notice of such Proceeding to the indemnifying Party hereunder (the “Indemnifying Party”), stating in reasonable detail the nature and basis of each claim made in the Proceeding and the amount thereof, to the extent known, along with copies of the relevant documents received by the Indemnified Party evidencing the Proceeding and the basis for indemnification sought. Failure of the Indemnified Party to give such notice shall not relieve the Indemnifying Party from liability on account of this indemnification, except if and only to the extent that the Indemnifying Party is actually prejudiced thereby. Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, promptly after the Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Proceeding. Upon written notice to an Indemnifying Party from an Indemnified Party of any third party claim, the Indemnifying Party shall promptly, but in no event later than thirty (30) days after receipt of the particular notice of such third party claim from such Indemnified Party,

 

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assume the defense of the Indemnified Party against such third party claim. After an Indemnified Party provides written notice of any third party claim, and upon the Indemnifying Party assuming the defense thereof, for so long as the Indemnifying Party continues to assume the defense of the third party claim in accordance herewith, (i) the Indemnified Party may retain separate co counsel at its sole cost and expense and participate in the defense of the third party claim, it being understood that the Indemnifying Party shall pay all reasonable costs and expenses of counsel for the Indemnified Party after such time as the Indemnified Party has notified the Indemnifying Party of such third party claim and prior to such time as the Indemnifying Party has assumed the defense of such third party claim, (ii) the Indemnified Party shall not file any papers or consent to the entry of any judgment or enter into any settlement with respect to the third party claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed), unless the Indemnified Party first waives its claim to indemnification hereunder, and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the third party claim (other than a judgment or settlement that is solely for money damages in an amount less than the remaining balance of the limitations on indemnity set forth in Section 9.2 and is accompanied by a release of all indemnifiable claims against the Indemnified Party) without the prior written consent of the Indemnified Party (not to be unreasonably withheld, conditioned or delayed). No Indemnifying Party shall be obligated to indemnify and hold harmless the Indemnified Party hereunder for any settlement entered into without the Indemnifying Party’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, the provisions of this Section 9.3(a) shall not apply to any claim with respect to Taxes, which shall be governed solely by Section 6.14.

(b) Equitable Remedies. In the case of any third party claims where the Indemnifying Party reasonably believes that it would be appropriate to settle such claim using equitable remedies (i.e., remedies involving the future use of the Purchased Assets), the Indemnifying Party and the Indemnified Party shall work together in good faith to agree to a settlement; provided, however, that no Party shall be under any obligation to agree to any such settlement.

(c) Treatment of Indemnification Payments; Insurance Recoveries. Any payment made pursuant to the indemnification obligations arising under this Agreement shall be treated as an adjustment to the Purchase Price to the extent allowable under applicable Law. Any indemnity payment under this Agreement shall be decreased by any amounts actually received by the Indemnified Party under third party insurance policies with respect to such Loss prior to the time payment by the Indemnifying Party is due and payable under this Agreement (net of any premiums paid by such Indemnified Party under the relevant insurance policy and any costs incurred by such Indemnified Party in procuring such payment under such policy), each Party agreeing (i) to use commercially reasonable efforts to recover all available insurance proceeds and (ii) to the extent that any indemnity payment under this Agreement has been paid by the Indemnifying Party to or on behalf of the Indemnified Party prior to the receipt, directly or indirectly, by the Indemnified Party of any net insurance proceeds under third party insurance policies on account of such Loss which duplicate, in whole or in part, the payment made by the Indemnifying Party to or on behalf of the Indemnified Party, the Indemnified Party shall remit to the Indemnifying Party an amount equal to the amount of the net insurance proceeds actually received by the Indemnified Party on account of such Loss which duplicate, in whole or in part,

 

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the payment made by the Indemnifying Party to or on behalf of the Indemnified Party. If the amount of any Loss for which indemnification is provided under this Agreement (an “Indemnity Claim”) gives rise to a current deduction to the Indemnified Party making the claim, the indemnity payment shall be reduced by the amount of the Tax Benefit of such current deduction actually realized by the Indemnified Party on account of such Loss prior to the time payment by the Indemnifying Party is due and payable under this Agreement. In the event that the Indemnifying Party pays to or on behalf of an Indemnified Party any amount in respect of a Loss subject to indemnification under this Article IX and, subsequent to such payment the Indemnified Party actually realizes a Tax Benefit on account of such Loss, the Indemnified Party shall remit to the Indemnifying Party an amount equal to the amount of such Tax Benefit actually realized on account of such Loss. “Tax Benefit” means, with respect to any indemnity payment, the excess, if any, of (i) the Indemnified Party’s pro forma tax Liability for the taxable year in which it accrues the indemnity payment, calculated on the basis of the facts and circumstances actually pertaining to the Indemnified Party, but assuming for purposes of this calculation that the Indemnified Party had not suffered the loss giving rise to the Indemnification Claim or accrued the indemnity payment, over (ii) the Indemnified Party’s Adjusted Actual Tax Liability for such taxable year in each case as calculated in good faith by the Indemnified Party. The “Adjusted Actual Tax Liability” is the actual Tax Liability of the Indemnified Party, taking into account the items excluded from the calculation in clause (i).

9.4 Certain Procedures.

(a) The Indemnified Party shall notify the Indemnifying Party promptly of its discovery of any matter that may give rise to a claim for indemnification pursuant hereto. The Indemnified Party shall cooperate and assist the Indemnifying Party in determining the validity of any claim for indemnity by the Indemnified Party and in otherwise resolving such matters. Subject to the provisions of Section 9.3, in connection with any actual or threatened claims by, or actual or threatened litigation or other disputes with, third parties relating to Assumed Liabilities or Excluded Liabilities, any such claims, litigation and disputes being referred to as “claims” for purposes of this Section 9.4, the Indemnified Party shall cooperate in the defense by the Indemnifying Party of such claim (and the Indemnified Party and the Indemnifying Party agree with respect to all such claims that a common interest privilege agreement exists between them), including, (i) permitting the Indemnifying Party to discuss the claim with such officers, employees, consultants and representatives of the Indemnified Party as the Indemnifying Party reasonably requests, (ii) permitting the Indemnifying Party to have reasonable access to the properties, books, records, papers, documents, plans, drawings, electronic mail, databases and computers of the Indemnified Party at reasonable hours to review information and documentation relative to the claim, (iii) providing to the Indemnifying Party copies of documents and samples of Avago Sensor Products as the Indemnifying Party reasonably requests in connection with defending such claim, (iv) permitting the Indemnifying Party to conduct privileged interviews and witness preparation of officers, employees and representatives of the Indemnified Party as the Indemnifying Party reasonably requests, (v) preserving all properties, books, records, papers, documents, plans, drawings, electronic mail and databases of the Business or included in the Purchased Assets relating to matters relating to Excluded Liabilities (in the case of the Purchaser) and Assumed Liabilities (in the case of the Seller Parties) in accordance with such Party’s corporate documents retention policies, or longer to the extent

 

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reasonably requested by the other Party in connection with any actual or threatened action that would reasonably be expected to result in a claim for indemnification hereunder, (vi) promptly collecting documents and extracting information from documents for the Indemnifying Party’s review and use, as the Indemnifying Party reasonably requests, or allowing the Indemnifying Party’s representatives to do the same, (vii) notifying the Indemnifying Party promptly of receipt by the Indemnified Party of any subpoena or other third party request for documents or interviews and testimony, (viii) providing to the Indemnifying Party copies of any documents produced by the Indemnified Party in response to or compliance with any subpoena or other third party request for documents, and (ix) permitting the Indemnifying Party to conduct such other reasonable investigations and studies, and take such other actions, as are reasonably necessary in connection with the Indemnifying Party’s defense or investigation of such claim. In connection with any claims, except to the extent inconsistent with the Indemnified Party’s obligations under applicable Law and except to the extent that to do so would subject the Indemnified Party or its employees, agents or representatives to criminal or civil sanctions, (1) unless ordered by a court to do otherwise, the Indemnified Party shall not produce documents to a third party until the Indemnifying Party has been provided a reasonable opportunity to review, copy and assert privileges covering such documents, (2) the transfer to the Indemnified Party by the Indemnifying Party of documents covered by the Indemnifying Party’s attorney/client or work product privileges shall not constitute a waiver of such privileges, (3) unless otherwise ordered by a court, the Indemnified Party shall withhold from production to any third party any documents as to which the Indemnifying Party asserts a privilege, (4) the Indemnified Party shall defend in court any such privilege asserted by the Indemnifying Party and (5) the Indemnified Party shall permit the Indemnifying Party to prepare any employees of the Indemnified Party required or requested to testify or otherwise be deposed or interviewed in connection with any claim and to be present during any such testimony or interviews.

(b) Notwithstanding anything in this Agreement or in any Local Asset Transfer Agreement to the contrary, Purchaser shall not make any claim for indemnification or otherwise in any circumstances whatsoever against any Seller Party other than by means of a claim against Seller as agent for such other Seller Party pursuant to the terms of this Agreement unless Seller fails to satisfy its obligations under this Article IX, and Purchaser shall indemnify Seller on its own behalf and as agent for all other Seller Parties against any claim for indemnification made against the Seller Parties contrary to this Section 9.4(b).

9.5 Remedies Exclusive. Following the Closing, with the exception of remedies based on fraud, Section 6.14(e), and the indemnification obligations under the IP Side Letter, the remedies set forth in this Article IX shall constitute the sole and exclusive remedy for money damages and shall be in lieu of any other remedies for money damages that may be available to the Indemnified Parties under any other agreement or pursuant to any statutory or common law (including Environmental Law) with respect to any Losses of any kind or nature incurred directly or indirectly resulting from or arising out of any of this Agreement, the Business, the Purchased Assets, the Assumed Liabilities or the Excluded Liabilities (it being understood that nothing in this Section 9.5 or elsewhere in this Agreement shall affect the Parties’ rights to specific performance or other similar non monetary equitable remedies with respect to the covenants referred to in this Agreement to be performed after the Closing). The Seller Parties and Purchaser each hereby waive any provision of any applicable Law to the extent that it would limit or restrict the agreement contained in this Section 9.5.

 

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ARTICLE X

TERMINATION

10.1 Termination Events. Without prejudice to other remedies which may be available to the Parties by Law or this Agreement, this Agreement may be terminated and the transactions contemplated herein may be abandoned:

(a) by mutual consent of the Parties;

(b) after December 31, 2006 (the “Outer Date,” which term shall include the date of any extension under this Section 10.1(b)), by any Party by notice to the other Party if the Closing shall not have been consummated on or prior to the Outer Date; provided, however, that the right to terminate this Agreement under this Section 10.1(b) shall not be available to any Party whose failure or whose Affiliate’s failure to perform in all material respects any of its obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date; and provided further, that if on December 31, 2006 the condition to Closing set forth in Section 7.1(b)(ii) shall not have been satisfied but all other conditions to Closing set forth in Article VII shall have been satisfied (or shall be capable of being satisfied on such date), then the Outer Date shall automatically be extended to April 15, 2007;

(c) by any Party by notice to the other Party, if (i) a final, non-appealable order, decree or ruling enjoining or otherwise prohibiting consummation of the transactions contemplated by this Agreement to occur on the Closing Date has been issued by any federal or state court in the United States having jurisdiction (unless such order, decree or ruling has been withdrawn, reversed or otherwise made inapplicable) or any U.S. federal or state Law has been enacted that would make the consummation of the transactions contemplated by this Agreement to occur on the Closing Date illegal.

 

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10.2 Effect of Termination. In the event of any termination of this Agreement as provided in Section 10.1, this Agreement shall forthwith become wholly void and of no further force and effect, all further obligations of the parties under this Agreement shall terminate and there shall be no liability on the part of any Party (or any stockholder, director, officer, employee, agent, consultant or representative of such Party) to any other Party (or such other persons or entities), except that the provisions of Sections 6.2(b), 6.4 and Article XI of this Agreement shall remain in full force and effect and the Parties shall remain bound by and continue to be subject to the provisions thereof. Notwithstanding the foregoing, the provisions of this Section 10.2 shall not relieve any Party of any liability for any willful or intentional breach of this Agreement.

ARTICLE XI

MISCELLANEOUS AGREEMENTS OF THE PARTIES

11.1 Dispute Resolution. Except as otherwise set forth herein, resolution of any and all disputes arising from or in connection with this Agreement, whether based on contract, tort, or otherwise (collectively, “Disputes”), shall be exclusively governed by and settled in accordance with the provisions of this Section 11.1.

(a) Negotiation. The Parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through negotiation. Within 30 days after notice of a Dispute is given by either Party to the other Party, each Party shall select a first tier negotiating team comprised of supervisor, manager or area director level employees of such Party and shall meet and make a good faith attempt to resolve such Dispute and shall continue to negotiate in good faith in an effort to resolve the Dispute or renegotiate the applicable Section or provision without the necessity of any formal proceedings. If the first tier negotiating teams are unable to agree within 30 days of their first meeting, then each Party shall select a second tier negotiating team comprised of vice president level employees of such Party and shall meet within 30 days after the end of the first 30 day negotiating period to attempt to resolve the matter. During the course of negotiations under this Section 11.1, all reasonable requests made by one Party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating teams but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other Party. All negotiations between the Parties pursuant to this Section 11.1(a) shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future litigation.

(b) Failure to Resolve Disputes. In the event that any Dispute arising out of or related to this Agreement is not settled by the Parties within 15 days after the first meeting of the second tier negotiating teams under Section 11.1(a), the Parties may seek any remedies to which they may be entitled in accordance with the terms of this Agreement.

(c) Proceedings. Nothing herein, however, shall prohibit either Party from initiating litigation or other judicial or administrative proceedings if such Party would be substantially harmed by a failure to act during the time that such good faith efforts are being made to resolve

 

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the Dispute through negotiation. In the event that litigation is commenced under this Section 11.1(c), the Parties agree to continue to attempt to resolve any Dispute according to the terms of Section 11.1(a) during the course of such litigation proceedings under this Section 11.1(c).

(d) Pay and Dispute. Except as provided herein, in the event of any dispute regarding payment of a third party invoice (subject to standard verification of receipt of products or services), the Party named in a third party’s invoice must make timely payment to such third party, even if the Party named in the invoice desires to pursue the dispute resolution procedures outlined in this Section 11.1. If the Party that paid the invoice is found pursuant to this Section 11.1 to not be responsible for such payment, such paying Party shall be entitled to reimbursement, with interest accrued at an annual rate of the Prime Rate, from the Party found responsible for such payment.

(e) Election to Bypass. In the event that the Parties attempt to resolve any Dispute through good-faith negotiation between personnel of a position higher than the second tier employees referenced in Section 11.1(a), regardless of whether the Parties have previously commenced the dispute resolution process referenced in Section 11.1(a), then the Parties shall be deemed to have satisfied the process required by Section 11.1(a) and may at any time invoke their respective rights under Section 11.1(b).

11.2 Notices. All communications provided for hereunder shall be in writing and shall be deemed to be given when delivered in person, upon receipt by the sender of answer back confirmation when telefaxed, or on the next Business Day when sent by overnight courier, and

 

If to Purchaser:
		Micron Technology, Inc. 8000 South Federal Way Boise, Idaho 83707 Attention: General Counsel Fax: (208) 368-4540
with a copy to:		Jones Day 2727 North Harwood Street Dallas, Texas 75201 Attention: Mark E. Betzen                  Mark T. Goglia Fax: (214) 969-5100
If to any Seller Party:
		Avago Technologies Limited c/o Avago Technologies US Inc. 350 West Trimble Road Building 90 San Jose, CA 95131 Attention: General Counsel

 

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		Fax: (408) 435-4172
with a copy to:		Latham & Watkins LLP
		140 Scott Drive Menlo Park, CA 94025 Attention: Peter F. Kerman, Esq.                  Luke J. Bergstrom, Esq. Fax: (650) 463-2600

or to such other address as any such Party shall designate by written notice to the other Party.

11.3 Bulk Transfers. Purchaser waives compliance with the provisions of all applicable Laws relating to bulk transfers in connection with the transfer of the Purchased Assets, and the Seller Parties jointly and severally agree to pay and discharge when due all claims of creditors that could be asserted against Purchaser by reason of such waiver to the extent such Liability is not specifically assumed by Purchaser herein and to indemnify Purchaser for any Liabilities and Losses related thereto.

11.4 Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction in such manner as will effect as nearly as lawfully possible the purpose and intent of such invalid, illegal or unenforceable provision.

11.5 Further Assurances; Further Cooperation. Subject to the terms and conditions hereof (including Section 6.3), each of the Parties agrees to use commercially reasonable efforts to execute and deliver, or cause to be executed and delivered, all documents and to take, or cause to be taken, all actions that may be reasonably necessary or appropriate, in the reasonable opinion of counsel for Seller and Purchaser, to effectuate the provisions of this Agreement, provided that all such actions are in accordance with applicable Law. From time to time, whether at or after the Applicable Closing, the Seller Parties (as appropriate) will execute and deliver such further instruments of conveyance, transfer and assignment and take such other action, at Purchaser’s sole expense, as Purchaser may reasonably require to more effectively convey and transfer to Purchaser any of the Purchased Assets, including documentation necessary to permit Purchaser to file for Patents on or record the transfer of the Transferred Business Intellectual Property to Purchaser with the United States Patent and Trademark Office or a corresponding office in a foreign country, and Purchaser will execute and deliver such further instruments and take such other action, at the Seller Parties’ sole expense, as the Seller Parties may reasonably require to more effectively assume the Assumed Liabilities.

11.6 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 11.6.

 

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11.7 Expenses. Except as otherwise expressly provided herein, whether or not the Closing, the Sensor IP Closing or the Malaysia Closing occur, the Parties shall each pay their respective expenses (such as legal, investment banker and accounting fees) incurred in connection with the negotiation and execution of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby.

11.8 Assignment. This Agreement shall not be assigned by either Party without the prior written consent of the other Party, and any attempted assignment, without such consent, shall be null and void; provided, however, Purchaser may assign any or all of its rights and obligations under this Agreement to any wholly owned (other than director qualifying shares) direct or indirect Subsidiary of Purchaser (provided that no such assignment shall release Purchaser from any obligation under this Agreement) or to a lender of Purchaser as collateral for bona fide indebtedness for money borrowed or in connection with a merger, consolidation, conversion or sale of assets of Purchaser. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by the Parties and their respective successors and permitted assigns.

11.9 Amendment; Waiver. This Agreement may be amended, supplemented or otherwise modified only by a written instrument executed by both Parties. No waiver by either Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the Party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, or a failure or delay by any Party in exercising any power, right or privilege under this Agreement shall be deemed to constitute a waiver by the Party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with the Closing, the Sensor IP Closing and the Malaysia Closing hereunder. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

11.10 Specific Performance. The Parties agree that irreparable damage would occur if any provision of this Agreement was not performed in accordance with the terms hereof and thereof and that the Parties shall be entitled (without the requirement to post a bond or other security) to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in addition to any other remedy to which they are entitled at law or in equity. The rights and remedies of the Parties shall be cumulative (and not alternative).

11.11 Third Parties. This Agreement does not create any rights, claims or benefits inuring to any Person that is not a Party nor create or establish any third party beneficiary hereto (including with respect to any Business Employee) other than the provisions of Article IX hereof with respect to indemnification.

11.12 Governing Law. This Agreement and all claims arising out of this Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to any conflicts of law principles that would result in the application of any law other than the law of the State of Delaware.

 

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11.13 Consent to Jurisdiction; Waiver of Jury Trial. Each Party irrevocably submits to the exclusive jurisdiction of any federal, state or local court located in the State of Delaware for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the Parties, further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth in Section 11.2 shall be effective service of process for any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the Parties, irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding set forth above arising out of this Agreement or the transactions contemplated hereby, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The Parties hereby irrevocably and unconditionally waive trial by jury in any legal action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby and for any counterclaim with respect thereto.

11.14 Disclosure Letter. Inclusion of any matter or item in the Disclosure Letter or Purchaser Disclosure Letter does not imply that such matter or item would, under the provisions of this Agreement, have to be included in the Disclosure Letter or Purchaser Disclosure Letter or that such matter or item is otherwise material.

11.15 Entire Agreement. The Confidentiality Agreement, the Transaction Documents, Annex A, the Disclosure Letter, the Purchaser Disclosure Letter, the IP Side Letter and the other Exhibits hereto and any other agreements between Purchaser and the Seller Parties entered into on the date hereof set forth the entire understanding of the Parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the Parties or their respective Affiliates other than those set forth or referred to herein or therein. In the event of any inconsistency between the provisions of this Agreement and any other Transaction Document, the provisions of this Agreement shall prevail.

11.16 Time is of the Essence. Time is of the essence with respect to the performance of this Agreement.

11.17 Section Headings; Table of Contents. The section headings contained in this Agreement and the Table of Contents to this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the Parties have caused this Purchase and Sale Agreement to be duly executed as of the date first above written.

 

 

 

[SIGNATURE PAGE OF SELLER PARTIES TO PURCHASE AND SALE AGREEMENT –

PURCHASER’S SIGNATURE PAGE FOLLOWS]

 

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[SIGNATURE PAGE OF PURCHASER TO PURCHASE AND SALE AGREEMENT]

 

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ANNEX A

“Acquisition Proposal” shall mean an inquiry or the making of an offer or proposal regarding any sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or any substantial portion of the Purchased Assets in a single transaction or series of related transactions (other than the transactions provided for in this Agreement).

“Adjusted Actual Tax Liability” shall have the meaning set forth in Section 9.3(c).

“Affiliate” of a Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned Person. For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through ownership of voting securities or by contract or otherwise, and the terms “controlling” and “controlled by” have meanings correlative to the foregoing.

“Agreement” shall have the meaning set forth in the Recitals to the Agreement.

“Ancillary Agreements” shall have the meaning as set forth in Section 2.3.

“Angel” shall mean Agilent Technologies, Inc., a Delaware corporation.

“Antitrust Regulations” shall have the meaning set forth in Section 4.4.

“Applicable Closing” shall mean (i) with respect to the Transfer of the Purchased Assets (other than the Sensor IP and the Malaysia Purchased Assets), the Closing, (ii) with respect to the Transfer of the Sensor IP, the Sensor IP Closing, and (iii) with respect to the Transfer of the Malaysia Purchased Assets, the Malaysia Closing, in each case as the context requires.

“Applicable Closing Date” shall mean either the Closing Date, the Sensor IP Closing Date or the Malaysia Closing Date, as the context requires.

“Assigned Lease” shall have the meaning set forth in Section 4.5(b).

“Assigned Real Property” shall have the meaning set forth in Section 4.5(b).

“Assignment and Assumption Agreement” shall have the meaning set forth in Section 2.3(a).

“Assumed Liabilities” shall have the meaning set forth in Section 2.2(a).

“Audited Semiconductor Business Financial Statements” shall mean the audited consolidated balance sheet of Avago Technologies Finance Pte. Ltd. as of July 31, 2006, the related audited consolidated statements of operations and cash flows for the eight-month period ended July 31, 2006, and the related audited consolidated statement of shareholders equity as of July 31, 2006.

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“Avago General IP License Agreement” shall have the meaning set forth in Section 6.11.

“Avago Sensor IPCo License Agreement” shall have the meaning set forth in Section 6.11.

“Avago Sensor Product” means a CMOS photosensitive silicon arrays for capturing images for human viewing, having an analog or digital output configured and intended for use in cellular telephone handset cameras (a personal, handheld device for human voice communication over a cellular network). An Avago Sensor Product may also include an on-board A/D converter and an image processor that is either on-board or separate, wherein the image process corrects the output signal, for example, to demosaic, color balance, gamma correct or otherwise compensate such output signal.

“Bill of Sale” shall have the meaning set forth in Section 2.3(a).

“Books and Records” shall have the meaning set forth in Section 6.5(d).

“Business” means the business of the design, development, research, manufacture, supply, distribution, sale, support, maintenance and service of Avago Sensor Products.

“Business Competitor” shall have the meaning set forth in Section 6.9.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New York City are permitted or required by Law to close.

“Business Employee” shall mean (i) the employees of the Seller Parties and their respective Subsidiaries set forth in Section 4.11(j) of the Disclosure Letter, including (A) any such employees on temporary leave for purposes of jury or annual two week national service/military duty, employees on vacation and employees on a regularly scheduled day off from work and (B) any such employees who on the Closing Date are on maternity or paternity leave, education leave, military leave with veteran’s re employment rights under federal Law, leave under the Family Medical Leave Act of 1993 or equivalent provisions in other jurisdictions, approved personal leave, short term disability leave or medical leave (provided that the employees referenced in this subsection (B) shall be offered employment by Purchaser as of the date they return to active employment but only if such employee returns to active service within 180 days after the applicable Effective Time or such later time as their reemployment rights are protected by applicable Laws), but, unless otherwise required under local employment Laws, excluding any such employees on long term disability or whose employment with Seller Parent and its Subsidiaries has terminated prior to the Closing; (ii) each additional employee of the Seller Parties and their Subsidiaries hired by the Business between the date hereof and the Closing Date in the ordinary course of business or hired by the Seller Parties and their respective Subsidiaries in the ordinary course of business to replace employees identified in Section 4.11(j) of the Disclosure Letter who have terminated employment or taken leave between the date hereof and the Closing Date, all in accordance with Section 6.1; and (iii) each other employee of the Seller Parties and their Subsidiaries that Seller and Purchaser have mutually agreed to prior to the Closing Date, who is primarily engaged in work for the Business prior to the Closing Date. With respect to Business Employees employed in Malaysia, the foregoing provision shall be applied by substituting “Malaysia Closing” and “Malaysia Closing Date” for the terms “Closing” and “Closing Date”, respectively.

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“Business Intellectual Property Licenses” shall mean any Contract under which (i) a third party has licensed to a Seller Party or any of its Subsidiaries any Business Intellectual Property Rights that is used exclusively in the Business, or (ii) a Seller Party or any of its Subsidiaries has licensed to or agreed to restrict its exercise of rights under any Business Intellectual Property Rights, other than Customer Contracts and Supplier Contracts.

“Business Intellectual Property Rights” means Intellectual Property Rights in and to Business Technology and Intellectual Property Rights owned by a Seller Party, any of its Subsidiaries or any other Person and used in or relating to the Business, and all other Intellectual Property Rights owned by U.S. R&D or Sensor IPCo.

“Business Technology” means any Technology that is used in the conduct of the Business as of the Closing.

“Cause” shall mean (A) the Business Employee’s neglect, failure or refusal to perform in any material respect the Business Employee’s duties or responsibilities for Purchaser or one of its Affiliates; or (B) the Business Employee’s material breach of the terms of any employment agreement (if any) with Purchaser or its Affiliates that, if curable, is not cured upon ten (10) days notice thereof; or (C) the engaging by the Business Employee in conduct that causes demonstrable injury in excess of $10,000, to the Purchaser or any of its Affiliates; (D) the Business Employee’s engagement in an act of moral turpitude or conviction of or entry of a plea of nolo contendere to a felony; or (E) the willful violation of a material published policy of the Purchaser or one of its Affiliates governing the conduct of such Business Employee. For purposes of this definition, an act or failure to act shall not be considered “willful” unless it is done, or omitted to be done, by the Business Employee in bad faith or without reasonable belief that the action or omission was in the best interests of Purchaser and its Affiliates.

“Closing” shall have the meaning set forth in Section 8.1(a).

“Closing Date” shall have the meaning set forth in Section 8.1(a).

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

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

“Competing Business” shall have the meaning set forth in Section 6.9.

“Confidential Information” shall have the meaning set forth in Section 6.2(b).

“Confidentiality Agreement” shall mean that certain letter agreement dated January 30, 2006 by and between Seller Parent and Purchaser.

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“Contract” means any written or oral commitment, contract, subcontract, license, sublicense, lease, understanding, instrument, indenture, note or legally binding commitment or undertaking of any nature.

“Copyright” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Customer Contract” means any Contract between any Seller Party or any of their respective Subsidiaries, on the one hand, and a customer, distributor or dealer of any Seller Party or any of their respective Affiliates, on the other hand, for the purchase, sale, distribution, marketing, servicing, support or manufacturing (or similar matters) of Avago Sensor Products.

“Database Rights” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Designated Employees” shall have the meaning set forth in Section 6.6(n).

“Disclosure Letter” shall have the meaning set forth in the first sentence of Article IV.

“Disputes” shall have the meaning set forth in Section 11.1.

“DOJ” shall have the meaning set forth in Section 6.3(c).

“Dollars” or “$,” when used in this Agreement or any other Transaction Document, shall mean United States dollars unless otherwise stated.

“Effective Time” shall have the meaning set forth in Section 8.1(d).

“Environmental Claim” shall mean any written claim, proceeding, suit, complaint, notice of potential violation or notice of violation alleging violation of, or liability under, any Environmental Laws.

“Environmental Laws” shall mean any applicable foreign, federal, state or local Laws, statutes, regulations, codes, ordinances, permits, decrees, orders or common law relating to, or imposing standards regarding the protection or cleanup of the environment, any Hazardous Material Activity, the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources, or the exposure of any individual to Hazardous Materials, including without limitation protection of health and safety of employees. Environmental Laws shall include, without limitation, the Federal Insecticide, Fungicide Rodenticide Act, Resource Conservation & Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and Health Act, Toxic Substance Control Act, Clean Air Act, Comprehensive Environmental Response, Compensation and Liability Act, Emergency Planning and Community Right to Know Act, Hazardous Materials Transportation Act and all analogous or related foreign, federal state or local law, each as amended.

“ERISA Affiliate” shall have the meaning set forth in Section 4.11(f).

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“Excluded Assets” shall mean the assets of the Seller Parties and their respective Affiliates other than the Purchased Assets, including those assets identified on Exhibit G.

“Excluded IT Infrastructure” means all IT systems; network or telecommunications equipment and software; desktop computer software; accounting, finance and database software; general software development and control systems; and tools, environments and other general IT functionality used in the operation of both the Retained Business and the Business but excluding Transferred IT Infrastructure. For the avoidance of doubt, “Excluded IT Infrastructure” does not include any data or other information with respect to the Business contained in such software, systems, tools, or environments.

“Excluded Liabilities” shall have the meaning set forth in Section 2.2(b).

“Filing Party” shall have the meaning set forth in Section 6.14(a)(ii).

“First Effective Filing Date” means the earliest effective filing date in the particular country for any Patent or any application for any Patent. By way of example, it is understood that the First Effective Filing Date for a United States Patent is the earlier of (a) the actual filing date of the United States Patent application which issued into such Patent, (b) the priority date under 35 U.S.C. § 119 for such Patent, or (c) the priority date under 35 U.S.C. § 120 for such Patent.

“Flextronics” shall have the meaning set forth in Section 6.9(d).

“FTC” shall have the meaning set forth in Section 6.3(c).

“GAAP” means United States generally accepted accounting principles as in effect from time to time, applied consistently with the principles used in preparing the Audited Semiconductor Business Financial Statements.

“General IP” means Avago Technologies General IP (Singapore) Pte. Ltd.

“Germany Employee” shall mean each Business Employee employed in Germany by any Seller Party or any of their respective Subsidiaries other than a Business Employee considered by Seller to be a U.S. expatriate.

“Good Reason” means (i) a relocation of a Key Employee’s principal place of work to a new location more than 20 miles from such Key Employee’s present principal place of work; (ii) a material negative change from the compensation or duties a Key Employee had immediately prior to the Closing (or if the change is not at the direction of Purchaser or any of its Affiliates, the Malaysia Closing, with respect to a Malaysia Employee); (iii) a material negative change from the job title a Key Employee had 60 days after the Closing (or if the change is not at the direction of Purchaser or any of its Affiliates, the Malaysia Closing, with respect to a Malaysia Employee); or (iv) working conditions that are so intolerable that a reasonable person would be compelled to resign; excluding, however, for purposes of clauses (i) and (ii) any relocation or change contemplated by this Agreement.

“Governmental Authority” shall have the meaning set forth in Section 4.4.

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“Hazardous Materials” shall mean any infectious, carcinogenic, radioactive, toxic or hazardous chemical or chemical compound, or any pollutant, contaminant or hazardous substance, material or waste, in each case, whether solid, liquid or gas, including, without limitation, petroleum, petroleum products, by-products or derivatives and asbestos and any other substance, material or waste that is subject to regulation, control or remediation under any Environmental Law.

“Hazardous Materials Activity” means the transportation, transfer, recycling, storage, use, disposal, arranging for disposal, treatment, manufacture, removal, remediation, release, exposure of others to, sale, or distribution of any Hazardous Material or any product or waste containing a Hazardous Material, or product manufactured with Ozone depleting substances, including, without limitation, any required labeling, payment of waste fees or charges (including so called e waste fees) and compliance with any product take back or product content requirements.

“HSR Act” shall have the meaning set forth in Section 6.3(b).

“Image Sensor Product” shall have the meaning set forth in Section 6.9(e).

“Indebtedness” means (i) all outstanding obligations for senior debt and subordinated debt and any other outstanding obligation for borrowed money, (ii) obligations evidenced by notes, bonds, debentures or other instruments, (iii) any outstanding obligations under capital leases and purchase money obligations (other than as included in Accounts Payable), (iv) any reimbursement obligations under letters of credit, whether or not at the time drawn, and (v) any outstanding guarantees of obligations of the type described in clauses (i) through (iv) above (including in each case all outstanding principal, prepayment premiums, if any, and accrued interest, fees and expenses related thereto).

“Indemnified Party” shall mean a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.

“Indemnifying Party” shall have the meaning set forth in Section 9.3(a).

“Indemnity Claim” shall have the meaning set forth in Section 9.3(c).

“IP Side Letter” shall have the meaning set forth in Section 6.11.

“Industrial Designs” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Insurance Proceeds” means those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of any insured, in either case net of any applicable premium adjustment, retrospectively-rated premium, deductible, retention, or cost of reserve paid or held by or for the benefit of such insured.

“Intellectual Property Rights” means the rights associated with the following: (a) United States and foreign patents and applications therefor (including any continuations, continuations in part, divisionals, reissues, renewals, extensions or modifications for any of the foregoing)

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(“Patents”); (b) trade secret rights and all other rights in or to confidential business or technical information (“Trade Secrets”); (c) copyrights, copyright registrations and applications therefor and all other rights corresponding thereto (“Copyrights”); (d) trademarks, trade names, service marks, service names, trade dress rights and similar designation of origin and rights therein, and all goodwill symbolized thereby and associated therewith (“Trademarks”); (e) Uniform Resource Locators, Web site addresses and domain names (“Internet Properties”); (f) industrial design rights and any registrations and applications therefore (“Industrial Designs”); (g) rights in databases and data collections (including knowledge databases, customer lists and customer databases) under the laws of the United States or any other jurisdiction, whether registered or unregistered, and any applications for registration thereof (“Database Rights”); (h) mask works, and mask work registrations and applications therefor (“Mask Works”); and (i) any similar, corresponding or equivalent rights to any of the foregoing any where in the world. Intellectual Property Rights specifically excludes contractual rights (including license grants) and also excludes the tangible embodiment of any of the foregoing.

“Internet Properties” shall have the meaning set forth in the definition of Intellectual Property Rights.

“IRS” shall mean the United States Internal Revenue Service.

“Joinder” shall have the meaning set forth in Section 6.8(b).

“Key Employees” shall have the meaning set forth in Section 3.3(c).

To “the knowledge of” a Party shall mean, with respect to Seller, actual knowledge of James Stewart, Todd Metcalf, Kathy Breidenbach, Floyd Anderson and Rex Jackson, in each case after due inquiry, and with respect to Purchaser, the actual knowledge of Gorden Gates, John Stukel and Ben Schwartz, in each case after due inquiry. For purposes of this Agreement, “due inquiry” means the knowledge each of the above-referenced individuals would reasonably be expected to obtain by reviewing such representations and warranties set forth in this Agreement applicable to the duties performed by such individual on behalf of the Seller Parties or Purchaser, as applicable, with each employee of the Party by whom such individual is employed (other than secretarial and other clerical personnel) who reports directly to such individual.

“Landlord” shall mean the landlord for the Assigned Real Property under the Assigned Lease.

“Law” means any law, treaty, statute, ordinance, rule, principle of common law or equity, code or regulation of a Governmental Authority or judgment, decree, order, writ, award, injunction or determination of an arbitrator or court or other Governmental Authority.

“Lease” shall mean a lease, sublease, license or other agreement permitting the use or occupancy of real property, including any amendments, modifications, supplements, renewals, extensions and guaranties related thereto.

“Leased Employee” shall have the meaning set forth in Section 6.6(a).

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“Liabilities” shall mean liabilities, obligations, guarantees (including lease guarantees), commitments, damages, losses, debts, claims, demands, judgments or settlements of any nature or kind, whether known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, matured or unmatured.

“Licensed Business Intellectual Property Rights” means Business Intellectual Property Rights which as of the Closing Date are owned by any Seller Party or any of their respective Subsidiaries, or to which any Seller Party or any of their respective Subsidiaries has the right to grant licenses to Purchaser of the scope granted in the Avago General IP License Agreement without the payment of royalties or other consideration to third parties, in each case other than Transferred Business Intellectual Property Rights and Software Licenses.

“Licensed Business Technology” means Business Technology that as of the Closing Date is owned by any Seller Party or any of their respective Subsidiaries, or to which any Seller Party or any of their respective Subsidiaries has the right to grant licenses to Purchaser of the scope granted in the Avago General IP License Agreement without the payment of royalties or other consideration to third parties, in each case other than Transferred Business Technology.

“Liens” shall mean any mortgage, easement, lease, sublease, right of way, trust or title retention agreement, pledge, lien (including any lien for unpaid Taxes), Liability, charge, security interest, option or any restriction or other encumbrance of any kind.

“Liquidation” shall have the meaning set forth in Section 2.7.

“Local Asset Transfer Agreement” shall have the meaning set forth in Section 2.3.

“Losses” means any and all losses, damages, Liabilities, deficiencies, claims, proceedings, causes of action, costs (including reasonable out of pocket costs of investigation) and expenses, including interest, diminution in value, penalties, settlement costs, judgments, awards, fines, costs of mitigation, losses in connection with any Environmental Law (including any clean up or remedial action), court costs and fees (including reasonable attorneys’ fees and expenses).

“Malaysia Closing” means the consummation of the Transfer to Purchaser or one or more of its Affiliate of the Malaysia Purchased Assets, the assumption by Purchaser of the Assumed Liabilities associated with the Malaysia Purchased Assets and Malaysia Employees, and the employment by Purchaser or one or more of its Affiliates of Malaysia Employees.

“Malaysia Closing Date” shall have the meaning set forth in Section 2.8.

“Malaysia Employee” shall mean each Business Employee employed in Malaysia by any Seller Party or any of their respective Subsidiaries other than a Business Employee considered by Seller to be a U.S. expatriate.

“Malaysia Purchased Assets” shall have the meaning set forth in Section 2.8.

“Mask Works” shall have the meaning set forth in the definition of Intellectual Property Rights.

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“Master Separation Agreement” shall have the meaning set forth in Section 6.8(a).

“Miniature Surface Mount Ambient Light Photo Sensor” means an ambient light sensor that is mounted on, and is integrally and operationally connected to, a host product and that is used to measure the amount of ambient light and that activates and controls display back-lighting in lighting management applications.

“Miniature Surface Mount Proximity Sensor” means an analog-output reflective sensor that is mounted on, and is integrally and operationally connected to, a host product and that has an integrated, high-efficiency infrared emitter and photodiode for determining an object’s proximity to the sensor.

“Minimum Amount” shall have the meaning set forth in Section 9.2(b).

“NDAs” shall have the meaning set forth in Section 6.19.

“Non U.S. Benefit Plans” means each plan, scheme, fund or arrangement of any Seller Party or any of their respective Affiliates within the Business operated outside the United States which provides compensation or benefits to or in respect of Non U.S. Employees, but not including any mandatory government or social security pension arrangements, or any other plans, funds or arrangements operated entirely within the United States.

“Non U.S. Employees” means the Germany Employees and the Malaysia Employees.

“Notification” shall have the meaning set forth in Section 6.14(d).

“Optical Mouse” means a position control device for inputting position or data information to computer, gaming or other electronic system, comprising a light source system for providing illumination, an imaging lens to channel a reflected light from the light source onto an image sensor, and an image processor to track changes in the surface feature images captured by the image sensor to determine movement of a mouse.

“ordinary course of business” means in the ordinary course of the operation of the Business, consistent with past practices of the Business.

“Outer Date” shall have the meaning set forth in Section 10.1(b).

“Patent Assignment” shall have the meaning set forth in Section 2.3.

“Party” and “Parties” shall have the respective meanings set forth in the Recitals to this Agreement.

“Patent” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Permits” shall have the meaning set forth in Section 4.13.

“Permitted Liens” shall mean (i) Liens for Taxes, assessments and other governmental charges not yet due and payable or, if due, either (A) not delinquent or (B) being contested in good faith by appropriate proceedings, (ii) mechanics’, workmen’s, repairmen’s,

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warehousemen’s, carriers’ or other similar Liens, including all statutory Liens, arising or incurred in the ordinary course of business, (iii) protective filings related to operating leases with third parties entered into in the ordinary course of business, and (iv) Liens that do not materially affect the ownership, value or use of the underlying Purchased Asset for the purpose it is being utilized by the Seller Parties or their respective Affiliates on the Applicable Closing.

“Person” means an individual, corporation, partnership, limited liability company, association, trust, incorporated organization, other entity or group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934).

“Personal Property” shall have the meaning set forth in Exhibit M.

“Preparing Party” shall have the meaning set forth in Section 6.14(a).

“Prime Rate” shall mean the rate of interest as announced from time to time by JPMorgan Chase at its principal office in New York City as its prime lending rate, the Prime Rate to change when and if such prime lending rate changes.

“Proceeding” means any claim, action, arbitration, audit, hearing, inquiry, examination, proceeding, investigation, litigation or suit (whether civil, criminal, administrative or investigative) commenced, brought, conducted, or heard by or before, or otherwise involving any Governmental Authority or arbitrator.

“Purchase Price” shall have the meaning set forth in Section 3.1.

“Purchased Assets” shall mean the assets set forth in Exhibit M and all of the goodwill associated therewith.

“Purchaser” shall have the meaning set forth in the Recitals to the Agreement.

“Purchaser Disclosure Letter” shall have the meaning set forth in Article V.

“Purchaser Indemnified Party” shall have the meaning set forth in Section 9.1(a).

“Purchaser Losses” shall have the meaning set forth in Section 9.1(a).

“Purchaser Material Adverse Effect” means a material adverse effect on the ability of Purchaser to consummate the transactions contemplated hereby and any documents delivered or entered into in connection herewith.

“Release” shall be defined as that term is defined in 42 U.S.C. § 9601 (22).

“Retained Business” means the design, manufacture and sale of semi-conductor products by Seller and its Affiliates other than the Business.

“SEC” shall have the meaning set forth in Section 5.2(b).

“Securities Act” shall mean the Securities Act of 1933, as amended.

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“Seller” shall have the meaning set forth in the Recitals to this Agreement.

“Seller Corporate Policies” shall have the meaning set forth in Section 6.13.

“Seller Facility” shall have the meaning set forth in Section 2.3(b).

“Seller Indemnified Party” shall have the meaning set forth in Section 9.1(a).

“Seller Losses” shall have the meaning set forth in Section 9.1(a).

“Seller Material Adverse Effect” means any change, circumstance, event or effect that is materially adverse to the Purchased Assets (or the ownership, use or operation thereof) or the Assumed Liabilities, in each case taken as a whole, provided that none of the following shall be deemed, either alone, or in combination, to constitute a Seller Material Adverse Effect: any change, circumstance, event or effect resulting from or arising out of (a) the public announcement of the entering into of this Agreement or the other Transaction Documents or the pendency of the transactions contemplated hereby or thereby, (b) except for the transactions contemplated by Sections 2.1, 2.2 and 2.3, the performance by any Seller Party of its obligations under this Agreement or the other Transaction Documents, (c) general economic conditions, including prevailing interest rates, (d) general conditions in the industry in which the Business is conducted, (e) any change related to the Excluded Assets or Excluded Liabilities that does not materially adversely affect the Purchased Assets (or the ownership, use or operation thereof) or the Assumed Liabilities, or (f) any change in the relationship between any of the Seller Parties and any customer or potential customer of the Business (including any failure to achieve any design win for Avago Sensor Product undergoing a product qualification process with any third party prior to the termination of this Agreement), unless, in the case of the foregoing clauses (c) and (d), such changes, circumstances, events or effects referred to therein materially disproportionately impact the Business relative to the industry in which the Business competes as a whole; provided that in determining whether a Seller Material Adverse Effect has occurred with respect to changes, circumstances, events or effects resulting from or arising out of one or more Contracts, it shall be taken into consideration whether such alternatives or replacements to such Contracts are commercially available on comparable terms without material disruption to the ownership, use or operation of the Purchased Assets following the Applicable Closing.

“Seller Parent” shall have the meaning set forth in the Recitals to this Agreement.

“Seller Parties” shall have the meaning set forth in the Recitals to this Agreement.

“Seller Plan” shall mean each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), and each plan, program or agreement, written or oral, statutory or contractual, that provides for compensation or benefits, including but not limited to, any deferred compensation, pension or retirement, workers compensation, medical, life insurance, disability or other welfare plan, educational assistance, loan, expatriate relocation or assistance, unfulfilled relocation obligations, severance, change in control, retention, employment, holiday, cafeteria, vacation, incentive, bonus, stock option, stock purchase, and restricted stock plan, program or policy and any other form of benefit described in any applicable offer letter or employment agreement under which any Business Employee has any present or future right to benefits and under which any Seller Party or any of their Subsidiaries or ERISA Affiliates has had or has any present or future liability.

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“Semiconductor Business Purchase Agreement” shall have the meaning set forth in Section 6.9(a).

“Sensor IPCo” shall mean Avago Technologies Sensor IP Pte. Ltd., a company organized under the laws of Singapore.

“Sensor IP” shall have the meaning set forth in Section 2.7.

“Sensor IP Closing” shall have the meaning set forth in Section 2.7.

“Sensor IP Closing Date” shall have the meaning set forth in Section 2.7.

“Software Licenses” shall have the meaning set forth in Section 2.3(a).

“Software Licensor” shall have the meaning set forth in Section 6.18.

“Straddle Period” shall have the meaning set forth in Section 6.14(b)(iii).

“Subsidiary” or “Subsidiaries” of Purchaser, Seller or any other Person means any corporation, partnership or other legal entity of which Purchaser, Seller or such other Person, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

“Supplier Contract” means any Contract between any Seller Party or any of their respective Affiliates on the one hand and a supplier of any Seller Party or any of their respective Affiliates on the other hand for the purchase or sale of components, subsystems, complete systems or other materials used in the manufacture of the Avago Sensor Products or to the extent relating to the Business, and agreements or arrangements with regard to purchase or return of inventory of such components, subsystems, complete systems, materials or Avago Sensor Products.

“Tangible Personal Property” shall have the meaning set forth in Exhibit M.

“Tax” or “Taxes” shall mean any and all U.S. federal, state, local and non-U.S. taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, GST, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts.

“Tax Benefit” shall have the meaning set forth in Section 9.3(c).

“Tax Claim” shall have the meaning set forth in Section 6.14(d).

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“Tax Return” shall mean any return, declaration, report, election, disclosure, form, estimated return and information statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Technology” means tangible embodiments, whether in electronic, written or other media, of technology, including designs, design and manufacturing documentation (such as bill of materials, build instructions and test reports), schematics, algorithms, routines, formulae, software, databases, lab notebooks, specifications, development and lab equipment, processes, prototypes, know-how and devices. “Technology” does not include Intellectual Property Rights, including any Intellectual Property Rights in any of the foregoing.

“Threshold” shall have the meaning set forth in Section 9.2(b).

“Trademark” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Trade Secrets” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Transaction Documents” shall have the meaning set forth in Section 4.2(a).

“Transfer” shall have the meaning set forth in Section 2.1.

“Transfer Regulations” means the Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses (and its amendments) (collectively referred to as “Acquired Rights Directive”) and the legislation and regulations of any EU Member State implementing such Acquired Rights Directive.

“Transfer Taxes” shall have the meaning set forth in Section 6.14(a)(i).

“Transferred Business Intellectual Property” means (i) the Patents listed on Schedule 1 hereto with such changes as may be further agreed to in writing prior to the Closing Date, the Trademarks listed on Schedule 2 hereto, the Internet Properties listed on Schedule 3 hereto and the Copyright registrations and MaskWorks registrations listed on Schedule 4 hereto, and (ii) those Trade Secrets, Copyrights, Industrial Designs, Database Rights and Mask Works in the Transferred Business Technology that are owned by any one or more of the Seller Parties or any of their respective Subsidiaries, solely or jointly, as of the Closing Date.

“Transferred Business Intellectual Property Rights” means all rights relating to the Transferred Business Intellectual Property, all other Intellectual Property Rights owned, in whole or in part, by a Seller Party or any of their respective Subsidiaries and, as of the Closing Date, pertaining exclusively to, or used exclusively in, the Business, and all Intellectual Property Rights (other than Patents, Trademarks, Internet Properties and Copyright registrations and MaskWorks registrations) incorporated in the Transferred Business Technology and in the tangible embodiments thereof, and all other Intellectual Property Rights owned by Sensor IPCo or U.S. R&D.

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“Transferred Business Technology” means the Business Technology, as of the Closing Date, pertaining exclusively to, or used exclusively in, the Business.

“Transferred Contracts” shall have the meaning set forth in Exhibit M.

“Transferred Employees” shall have the meaning set forth in Section 6.6(a)(i).

“Transferred IT Infrastructure” means:

(a) at the Assigned Real Property, all desktop computers and or laptops used by Transferred Employees and all servers, printers and other such hardware for which 80% or more of their usage is for the benefit of Transferred Employees; and

(b) to the extent not included in (a) above, all IT systems; network or telecommunications equipment and software; desktop computer software; accounting, finance and database software; general software development and control systems; and tools, environments and other general IT functionality; in each case which is used exclusively in the operation of the Business;

in each case, to the extent such Transferred IT Infrastructure is transferable (including upon receipt of a third party consent to such transfer) and, with respect to any Transferred IT Infrastructure that is leased or licensed from a third party, subject to the terms of such lease or license and the inclusion in the Assumed Liabilities of the obligations of Seller and its Affiliates under such lease or license to the extent (but only to the extent) related to such Transferred IT Infrastructure.

“Transferred Material Contracts” shall have the meaning set forth in Section 4.6(a).

“U.S. R&D” shall have the meaning set forth in the Recitals to the Agreement.

“U.S. Employee” shall mean each Business Employee employed in the United States by any Seller Party or any of their respective Subsidiaries and each Business Employee considered by Seller to be a U.S. expatriate.

“WARN Act” shall have the meaning set forth in Section 6.6(l).

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EXHIBIT A

FORM OF BILL OF SALE

THIS BILL OF SALE (this “Agreement”) is made, executed and delivered as of this [    ] day of [            ], 2006, by and among Avago Technologies U.S. Inc., a Delaware corporation (“U.S. OpCo”), Avago Technologies U.S. R&D Inc., a Delaware corporation (“ATUS”), and Avago Technologies Sensor (U.S.A.) Inc., a Delaware corporation (“U.S. R&D,” together with U.S. OpCo and ATUS, the “Seller Entities”), and Micron Technology, Inc., a Delaware corporation (“Purchaser”).

 

I.

RECITALS

WHEREAS, the Seller Entities are party to that certain Purchase and Sale Agreement, dated as of November 17, 2006 (the “Purchase Agreement”), by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies Imaging Holding (Labuan) Corporation, a company organized under the laws of Labuan (“Seller”), U.S. R&D, each Subsidiary of Seller Parent that executes a joinder to the Purchase Agreement pursuant to Section 6.8(b) thereof, and Purchaser.

WHEREAS, pursuant to the terms of the Purchase Agreement, the Seller Entities have agreed to sell, assign, transfer, convey, and deliver (“Transfer”) to Purchaser all of their right, title and interest in and to the Purchased Assets.

WHEREAS, pursuant to the terms of the Purchase Agreement, Purchaser has agreed to purchase, acquire and accept each of such Seller Entity’s right, title and interest in and to the Purchased Assets.

 

II.

AGREEMENT

NOW, THEREFORE, for and in consideration of the agreements and covenants contained in the Purchase Agreement, and the agreements and covenants contained herein, and for the other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

1. Defined Terms. Capitalized terms used but not otherwise defined herein (including in the recitals above) have the meanings ascribed to such terms in the Purchase Agreement.

2. Transfer of Purchased Assets. Each Seller Entity hereby Transfers unto Purchaser, its successors and assigns, forever, all of such Seller Entity’s right, title and interest in and to the Purchased Assets (excluding those Purchased Assets that are conveyed pursuant to other instruments of transfer executed pursuant to the Purchase Agreement), free and clear of all Liens except Permitted Liens.

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3. Purchase Agreement Controls. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms hereof, the terms of the Purchase Agreement shall govern.

4. Authorization. Purchaser and each Seller Entity does hereby represent that it has due authorization and authority to bind such party to this Agreement.

5. Title to Assets. At any time and from time to time after the date hereof, at a party’s request and without further consideration, the other will execute and deliver such other instruments of sale, transfer, conveyance, assignment, and delivery and confirmation and take such action as a party may reasonably deem necessary or desirable to effectively Transfer to, and vest in, Purchaser, its successors and assigns, the Purchased Assets.

6. No Additional Remedies. Nothing in this instrument, express or implied, is intended or shall be construed to confer upon, or give to, any person, firm or corporation other than Purchaser and its successors and assigns, any remedy or claim under or by reason of this instrument or any terms, covenants or conditions hereof, and all the terms, covenants and conditions, promises and agreements contained in this instrument shall be for the sole and exclusive benefit of Purchaser and its successors and assigns.

7. Power of Attorney. Each Seller Entity hereby constitutes and appoints Purchaser, its successors and assigns, such Seller Entity’s true and lawful attorney and attorneys, with full power of substitution and resubstitution, in such Seller Entity’s name and stead, but on behalf and for the benefit of Purchaser, its successors and assigns, to demand, receive and collect any and all of the Purchased Assets, and to give receipts and releases for and in respect of the same, and any part thereof, and from time to time to institute and prosecute in such Seller Entity’s name, or otherwise for the benefit of Purchaser, its successors and assigns, any and all proceedings at law, in equity or otherwise, which Purchaser, its successors or assigns, may deem proper for the collection or recovery of any of the Purchased Assets or for the collection and enforcement of any claim or right of any kind hereby sold, conveyed, transferred and assigned, or intended so to be, and to do all acts and things in relation to the Purchased Assets which Purchaser, its successors or assigns, shall deem desirable, such Seller Entity hereby declaring that the foregoing powers are coupled with an interest and are and shall be irrevocable by such Seller Entity or by its dissolution or in any manner or for any reason whatsoever.

8. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

9. Governing Law. This Agreement and all claims arising out of this Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to any conflicts of law principles that would result in the application of any law other than the law of the State of Delaware.

10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 10.

 

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[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written.

 

 

 

Signature Page to Bill of Sale

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Signature Page to Bill of Sale

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EXHIBIT B

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement (this “Agreement”) is made and entered into as of [            ], 2006 by and among Avago Technologies U.S. Inc., a Delaware corporation (“ATUS”), Avago Technologies Wireless (U.S.A.) Manufacturing Inc., a Delaware corporation (“U.S. Wireless”), and Avago Technologies Sensor (U.S.A.) Inc., a Delaware corporation (“U.S. R&D,” together with ATUS and U.S. Wireless, the “Assignors”), and Micron Technology, Inc., a Delaware corporation (“Assignee”).

 

I.

RECITALS

WHEREAS, the Assignors are party to that certain Purchase and Sale Agreement, dated as of November 17, 2006 (the “Purchase Agreement”), by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies Imaging Holding (Labuan) Corporation, a company organized under the laws of Labuan (“Seller”), U.S. R&D, each Subsidiary of Seller Parent that executes a joinder to the Purchase Agreement pursuant to Section 6.8(b) thereof (together with Seller Parent, Seller and U.S. R&D, the “Seller Parties”), and Assignee.

WHEREAS, pursuant to the Purchase Agreement, the Assignors have agreed to assign and Assignee has agreed to assume all of such Assignor’s right, title and interest in and to, and obligations under, the Assumed Liabilities.

 

II.

AGREEMENT

NOW, THEREFORE, for and in consideration of the agreements and covenants contained in the Purchase Agreement, and the agreements and covenants contained herein, and for the other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

1. Capitalized Terms. Capitalized terms used but not defined herein (including in the recitals above) shall have the meanings ascribed to such terms in the Purchase Agreement.

2. Assignment. Each Assignor does hereby sell, assign, transfer, convey and deliver to Assignee, forever, all of such Assignor’s right, title and interest in and to, and obligations under, the Assumed Liabilities (excluding those Assumed Liabilities that are conveyed pursuant to the other instruments of transfer executed pursuant to the Purchase Agreement) (the “Assignment”).

3. Acceptance and Assumption. Assignee hereby accepts the Assignment and assumes and agrees to observe and perform all of the duties, obligations, terms, provisions and covenants of, and to pay and discharge when due, all of such Assignor’s right, title and interest in and to the Assumed Liabilities (other than those Assumed Liabilities that are conveyed

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pursuant to the other instruments of transfer executed pursuant to the Purchase Agreement). For the avoidance of doubt, Assignee assumes no Excluded Liabilities, and the parties hereto agree that all such Excluded Liabilities shall remain the sole responsibility of such Assignor.

4. Purchase Agreement Controls. Each Assignor acknowledges and agrees that the representations, warranties, covenants, agreements and indemnities contained in the Purchase Agreement shall not be superseded hereby but shall remain in full force and effect to the full extent provided therein. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms hereof, the terms of the Purchase Agreement shall govern.

5. Further Actions. Each of the parties hereto covenants and agrees, at its own expense, to execute and deliver, at the request of the other party hereto, such further instruments of transfer and assignment and to take such other action as such other party may reasonably request to more effectively consummate the assignments and assumptions contemplated by this Agreement.

6. No Additional Remedies. Nothing in this instrument, express or implied, is intended or shall be construed to confer upon, or give to, any Person other than Assignee and its successors and assigns, any remedy or claim under or by reason of this instrument or any terms, covenants or conditions hereof, and all the terms, covenants and conditions, promises and agreements contained in this instrument shall be for the sole and exclusive benefit of Assignee and its successors and assigns.

7. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

8. Governing Law. This Agreement and all claims arising out of this Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to any conflicts of law principles that would result in the application of any law other than the law of the State of Delaware.

9. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 10.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written.

 

 

 

Signature Page to Assignment and Assumption Agreement

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Signature Page to Assignment and Assumption Agreement

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EXHIBIT C

FORM OF LOCAL ASSET TRANSFER AGREEMENT

[Note: Additional provisions may be added to this form of local asset transfer agreement (or a substitute form of equivalent substance may be used) depending on local requirements.]

THIS SALE AND PURCHASE AGREEMENT is made on [            ], [    ]

BETWEEN:

[—], a company incorporated under the laws of Malaysia whose registered office is at [—] (the “Selling Entity”); and

[—], a company incorporated under the laws of Singapore whose registered office is at [—] (the “Buying Entity”).

WHEREAS,

(A) This Agreement is entered into pursuant to and in connection with the Purchase and Sale Agreement (the “Purchase Agreement”) entered into on November 17, 2006, by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies Imaging Holding (Labuan) Corporation, a company organized under the laws of Labuan (“Seller”), as Seller on its own behalf and, to the extent therein provided, as agent for the Selling Entity, Avago Technologies Sensor (U.S.A.) Inc., a Delaware corporation (“U.S. R&D”), each Subsidiary of Seller Parent that executes a joinder to the Purchase Agreement pursuant to Section 6.8(b) thereof (together with Seller Parent, Seller and U.S. R&D, the “Seller Parties”), and Micron Technology, Inc., a Delaware corporation (“Purchaser”), as Purchaser on its own behalf and, to the extent therein provided, as agent for the Buying Entity for the sale and purchase of the Purchased Assets and the assumption by Purchaser of the Assumed Liabilities;

(B) In the Purchase Agreement, the Seller Parties have agreed to cause the Selling Entity to sell, and Purchaser has agreed to cause the Buying Entity to purchase, the Local Assets (as defined below);

(C) The Selling Entity has agreed to sell and the Buying Entity has agreed to purchase the Local Assets for the consideration and upon the terms and subject to the conditions of this Agreement.

IT IS AGREED as follows:

APPLICATION OF TERMS OF PURCHASE AGREEMENT AND INTERPRETATION

1.1 This Agreement is being entered into pursuant to and in connection with the Purchase Agreement and references in this Agreement to the Purchase Agreement are to the Purchase Agreement as amended, modified, waived or extended from time to time in accordance with the terms thereof.

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1.2 Unless expressly provided otherwise in this Agreement, capitalized terms used but not defined herein (including in the recitals above) shall have the meanings ascribed to such terms in the Purchase Agreement.

1.3 If any provision of this Agreement is in conflict with or inconsistent with any provision of the Purchase Agreement, the provisions of the Purchase Agreement shall control.

COMPLIANCE

2.1 The Selling Entity agrees to comply with, perform and observe the obligations and undertakings under the Purchase Agreement that Seller has agreed to procure from such Selling Entity, for as long as and to the extent that Seller has agreed under the Purchase Agreement to procure such compliance, performance or observance.

2.2 The Buying Entity agrees to comply with, perform and observe the obligations and undertakings under the Purchase Agreement that Purchaser has agreed to procure from such Buying Entity, for as long as and to the extent that Purchaser has agreed under the Purchase Agreement to procure such compliance, performance or observance.

SALE AND ASSUMPTION OF ASSETS AND LIABILITIES AND CONSIDERATION

3.1 Subject to and in accordance with the terms of this Agreement, the Selling Entity shall sell, assign, transfer, convey and deliver and the Buying Entity shall purchase at the Local Closing (as defined below) all of the Selling Entity’s right, title and interest in and to the Purchased Assets (the “Local Assets”), free and clear of all Liens other than Permitted Liens, other than those Purchased Assets that are conveyed pursuant to other instruments of transfer executed pursuant to the Purchase Agreement.

3.2 Subject to and in accordance with the terms of this Agreement, the Buying Entity shall assume as of and following the Local Closing, or as of such other date as provided in the Purchase Agreement, the Assumed Liabilities of the Selling Entity (the “Local Assumed Liabilities”), other than those Local Assumed Liabilities that are conveyed pursuant to other instruments of transfer executed pursuant to the Purchase Agreement.

3.3 The consideration payable by the Buying Entity to the Selling Entity for the Local Assets (the “Local Purchase Price”) shall be that portion of (and deemed to be a part and paid by the delivery of) the Purchase Price as allocated by the parties to the Local Assets based upon the Allocation Schedule. The Local Purchase Price does not, for the avoidance of doubt, include any applicable Transfer Taxes, which shall be payable by Purchaser and Seller in accordance with Section 6.14 of the Purchase Agreement.

3.4 In relation to itself, any of the Business conducted by the Selling Entity and the sale of the Local Assets pursuant to this Agreement, (a) the Selling Entity does not give any representations and warranties other than those given by Seller as agent on its behalf in Article IV of the Purchase Agreement on the terms set out therein, and (b) EXCEPT AS EXPRESSLY STATED IN ARTICLE IV OF THE PURCHASE AGREEMENT, ALL SUCH ASSETS ARE HEREBY SOLD ON AN “AS IS,” “WHERE IS” BASIS.

 

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APPOINTMENT OF AGENTS

4.1 The Selling Entity hereby irrevocably appoints and instructs Seller as its sole agent (to the exclusion of itself) to do such acts and things, make such representations, warranties and indemnities, give such undertakings and covenants, undertake such obligations, make or be subject to any such claims as the Purchase Agreement expressly provides are done, given, undertaken, received or made by or to be conducted through Seller as agent for the Selling Entity and, without prejudice to the generality of the foregoing, the Selling Entity hereby irrevocably appoints and instructs Seller as its sole agent to receive or pay, as the case may be, any amounts owed to or by the Selling Entity pursuant to any of the provisions of the Purchase Agreement, and the Selling Entity hereby acknowledges and confirms to the Buying Entity that any payment made by Purchaser on behalf of the Buying Entity to Seller as agent for the Selling Entity shall be deemed to be and considered by the Selling Entity to satisfy the Buying Entity’s obligation(s) to pay any of the same to the Selling Entity and any such obligations shall be discharged thereby.

4.2 The Buying Entity hereby irrevocably appoints and instructs Purchaser as its sole agent (to the exclusion of itself) to do such acts and things, make such representations, warranties and indemnities, give such undertakings and covenants, undertake such obligations, make or be subject to any such claims as the Purchase Agreement expressly provides are done, given, undertaken, received or made by or to be conducted through Purchaser as agent for the Buying Entity and, without prejudice to the generality of the foregoing, the Buying Entity hereby irrevocably appoints and instructs Purchaser as its sole agent to receive or pay, as the case may be, any amounts owed to or by the Buying Entity pursuant to any of the provisions of the Purchase Agreement, and the Buying Entity hereby acknowledges and confirms to the Selling Entity that any payment made by Seller on behalf of the Selling Entity to Purchaser as agent for the Buying Entity shall be deemed to be and considered by the Buying Entity to satisfy the Selling Entity’s obligation(s) to pay any of the same to the Buying Entity and any such obligations shall be discharged thereby.

LOCAL CLOSING

5.1 The closing of the transactions contemplated by this Agreement (the “Local Closing”) is subject to the satisfaction or waiver by the appropriate party of the conditions to Closing set forth in Article VII of the Purchase Agreement and is interdependent with the Closing as provided in the Purchase Agreement and the steps taken at, or in contemplation of, the Local Closing shall have no effect unless the Closing as provided for in the Purchase Agreement (except insofar as it includes the Local Closing) shall have taken place in accordance with the Purchase Agreement.

5.2 Subject to clause 5.1, the Local Closing shall take place simultaneously with the Closing as provided for in the Purchase Agreement at the offices of [—] in [—], or at such other time and such other venue as may be agreed pursuant to Section 8.1 of the Purchase Agreement.

5.3 At the Local Closing, the Selling Entity shall deliver or make available (or cause to be delivered or made available) to the Buying Entity such transfer documents as are necessary to complete the sale, assignment, transfer, conveyance, delivery and purchase of the Local Assets and Local Liabilities. In addition the Selling Entity shall execute, and shall procure to be executed, all such deeds, documents and other instruments as the Buying Entity may reasonably require for vesting in the Buying Entity the Local Assets.

5.4 As of and at the Local Closing, all risk of loss as to the Local Assets shall pass to the Buying Entity. The Buying Entity shall execute, and shall procure to be executed, all such documents and other instruments as the Selling Entity may reasonably require for the assumption of the Local Assumed Liabilities.

 

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APPROVALS AND CONSENTS

6. The provisions of Sections 2.3, 2.4 and 2.5 of the Purchase Agreement shall apply to the parties to this Agreement as if such provisions were fully set forth in this Section 6 on the date hereof.

OTHER MATTERS

7. [Intentionally Omitted]

EMPLOYEE RELATIONS AND BENEFITS

8. [Such Provisions of Section 6.6 and 6.7 of the Purchase Agreement to be repeated as shall apply to the parties to this Agreement. Insert country-specific employee transfer terms and conditions. To the extent required under local law, attach a schedule of employees to be transferred.]

FURTHER ASSURANCE

9. From time to time, whether at or after the Local Closing, the Selling Entity and the Buying Entity shall execute and deliver such further instruments of conveyance, transfer and assignment and take such other action, at the reasonable request of the other party, complete the sale and purchase of the Local Assets in accordance with the terms of the Purchase Agreement and this Agreement and otherwise to give effect to the terms of this Agreement.

VARIATION

10. No variation of this Agreement shall be valid unless it is in writing and signed by both the Purchaser and the Seller as agent on behalf of the Buying Entity and the Selling Entity, as appropriate. The expression “variation” shall include any amendment, modification, variation, supplement, deletion or replacement however effected.

ENTIRE AGREEMENT

11. This Agreement and the schedules hereto, the Purchase Agreement, the other Transaction Documents (including the exhibits, schedules and appendices thereto), the Disclosure Letter, the Purchaser Disclosure Letter set forth the entire understanding of the parties hereto with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the parties or their respective Affiliates other than those set forth or referred to herein.

ANNOUNCEMENTS

12. News releases or other public announcements pertaining to the transaction contemplated in this Agreement or the Purchase Agreement shall not be made by the Selling Entity and shall only be made by Purchaser and Seller in accordance with the provisions of Section 6.4 of the Purchase Agreement.

NOTICES

13. The provisions of Section 11.2 of the Purchase Agreement shall apply to the parties to this Agreement. A copy of all communications will be sent to the other party to this Agreement in accordance with the procedures set forth in Section 11.2 of the Purchase Agreement to:

 

If to the Buying Entity:		[—]

 

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If to the Selling Entity:		[—]

or to such other address as any such party shall designate by written notice to the other party hereto.

SEVERABILITY

14. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction in such manner as will effect as nearly as lawfully possible the purpose and intent of such invalid, illegal or unenforceable provision.

COUNTERPARTS

15. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 15.

GOVERNING LAW, JURISDICTION AND CLAIMS

16.1 This Agreement and all claims arising out of this Agreement shall be governed by, and construed in accordance with, local law.

16.2 In the event of any dispute arising out of or relating to this Agreement the provisions of Section 11.1 of the Purchase Agreement shall apply.

16.3 Any claim of whatsoever nature arising out of or in connection with this Agreement or the Purchase Agreement shall only be enforceable by the parties to this Agreement through the agency of the Seller and the Purchaser respectively upon the terms of the Purchase Agreement. The Buying Entity shall not make any claim for indemnification arising out of or in connection

 

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with this Agreement or the Purchase Agreement in any circumstances whatsoever against the Selling Entity other than through the agency of the Purchaser against the Seller as agent for the Selling Entity pursuant to the terms of the Purchase Agreement. The Selling Entity shall not make any claim for indemnification arising out of or in connection with this Agreement or the Purchase Agreement in any circumstances whatsoever against the Buying Entity other than through the agency of the Seller against the Purchaser as agent for the Buying Entity pursuant to the terms of the Purchase Agreement. Liability in respect of any claim for indemnification arising out of or in connection with this Agreement or the Purchase Agreement shall be determined solely in accordance with the terms of the Purchase Agreement.

[SIGNATURE PAGES TO FOLLOW]

 

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AS WITNESS this Agreement has been signed on behalf of the parties the day and year first before written.

 

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Agency Acceptance:

Agreed and Accepted

(Solely as it relates to accepting the agency appointment set forth in Section 4.1)

 

Agreed and Accepted

(Solely as it relates to accepting the agency appointment set forth in Section 4.2)

 

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EXHIBIT D

FORM OF PATENT ASSIGNMENT

ASSIGNMENT OF INTELLECTUAL PROPERTY

This ASSIGNMENT OF INTELLECTUAL PROPERTY (this “Assignment”), effective as of [            ], 2006, by Avago Technologies Imaging Holding (Labuan) Corporation, a company organized under the laws of Labuan (“Assignor”), is in favor of Micron Technology, Inc., a Delaware corporation (“Assignee”).

RECITALS

WHEREAS, the Assignor and Assignee are parties to that certain Purchase and Sale Agreement, dated as of November 17, 2006 (the “Purchase Agreement”), pursuant to which the Assignor has agreed to sell, assign, convey, transfer and deliver the Purchased Assets and transfer certain liabilities to Assignee, and Assignee has agreed to purchase and acquire the Purchased Assets and to assume those certain liabilities, in each case upon the terms and subject to the conditions of the Purchase Agreement; and

WHEREAS, capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Purchase Agreement.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Assignment of Intellectual Property. The Assignor does hereby sell, assign, transfer, convey and deliver to Assignee and its successors and assigns, all of the right, title, and interest of the Assignor in and to all of the issued patents and pending patent applications set forth in Attachment I hereto, including but not limited to renewal rights therein and the right to obtain patent or equivalent protection therein in the United States and throughout the world, as well as all related foreign patents and patent applications that are counterparts to such patents and patent applications (collectively, the “Assigned IP”). The foregoing includes the assignment, transfer and conveyance of all causes of actions, claims and demands or other rights for, or arising from, any infringement, including past infringement, all rights of priority under any international conventions and any other international agreements to which the United States adheres, all income, royalties, damages, claims, and payments now or hereafter due or payable with respect to the Assigned IP, and all rights corresponding thereto throughout the world.

2. Assistance and Cooperation. The Assignor further agrees, without further consideration, to cause to be performed such lawful acts and to execute such further assignments and other lawful documents as Assignee may reasonably request to effectuate fully this Assignment.

3. Perfection and Recordation. Assignee shall prepare all paperwork that is necessary to perfect and record the assignments of the Assigned IP in the various jurisdictions and shall be responsible for all expenses, including recordation expenses, associated therewith.

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4. Conflicts. Notwithstanding any other provisions of this Assignment to the contrary, nothing contained herein shall in any way supersede, modify, replace, amend, change, rescind, waive or in any way affect the provisions, including warranties, covenants, agreements, conditions, representations or, in general, any of the rights and remedies and any of the obligations of either Assignee or the Assignor set forth in the Purchase Agreement. This Assignment is subject to and controlled by the terms of the Purchase Agreement.

5. Entire Agreement. This Assignment and the Purchase Agreement contain the entire agreement of the parties with respect to the subject matter of this Assignment. No prior agreement or understanding pertaining to any such matter shall be effective. This Assignment may only be modified in a written instrument executed by the parties.

6. Binding Assignment. This Assignment shall be binding upon and inure to the benefit of each of the parties hereto, their successors and permitted assigns.

7. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, without regard to any conflicts of laws principles.

8. Severability. If any provision of this Assignment shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Assignment shall not be affected and shall remain in full force and effect, and the Assignor and Assignee shall negotiate in good faith to replace such illegal, void or unenforceable provision with a provision that corresponds as closely as possible to the intentions of the parties as expressed by such illegal, void or unenforceable provision.

9. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by telecopy with answer back, by express or overnight mail delivered by an internationally recognized air courier (delivery charges prepaid), by registered or certified mail (postage prepaid, return receipt requested) or by e-mail with receipt confirmed by return e-mail to the respective parties as follows:

if to Seller or Sensor USA:

Avago Technologies Imaging Holding (Labuan) Corporation

(or to Avago Technologies Sensor (U.S.A.) Inc.)

c/o Avago Technologies US Inc.

350 West Trimble Road

Building 90

San Jose, CA 95131

Attention: Rex S. Jackson, Esq.

Fax:    (408) 435-4172

with copies to:

Latham & Watkins LLP

140 Scott Drive

Menlo Park, CA 94025

Attention: Peter F. Kerman, Esq.

  Anthony Klein, Esq.

Fax:    (650) 463-2600

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if to Assignee:

Micron Technology, Inc.

8000 S. Federal Way

Mail Stop 1-507

Boise, ID 83716

Attention:    General Counsel

Facsimile:    (208) 368-4537

with copies to:

Thomas A. Briggs, Esq.

Jones Day

North Point

901 Lakeside Avenue

Cleveland, OH 44114

Fax:    (216) 579-0212

or to such other place and with such other copies as either party may designate as to itself by written notice to the others. Any notice or communication delivered in person shall be deemed effective on delivery. Any notice or communication sent by e-mail, telecopy or by air courier shall be deemed effective on the first Business Day following the day on which such notice or communication was sent. Any notice or communication sent by registered or certified mail shall be deemed effective on the third Business Day following the day on which such notice or communication was mailed. As used in this Section, “Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions located in the jurisdiction in which the person to whom notice is to be provided is located are authorized or obligated by law or executive order to close.

10. Counterparts. This Assignment may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 10, provided that receipt of copies of such counterparts is confirmed.

11. Headings. The section headings contained in this Assignment are inserted for reference purposes only and are not intended to be a part, nor should they affect the meaning or interpretation, of this Assignment.

[Signature Page Follows]

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IN WITNESS WHEREOF, the undersigned has caused this Assignment to be executed by the signature of its duly authorized officer as of the date above first written.

 

[Signature Page to Assignment of Intellectual Property]

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COUNTY OF		STATE OF ) SS. )		)

I, a notary public, in and for the county and state aforesaid, do hereby certify that                                                   personally known to me to be the                                          of Avago Technologies Sensor IP (Singapore) Pte. Ltd., a Singapore Corporation, appeared before me this day in person and acknowledged that (s)he signed the above and foregoing instrument as his/her free and voluntary act and as the free and voluntary act of said corporation pursuant to authority granted to him/her by the board of directors of said corporation for the uses and purposes therein set forth.

IN WITNESS WHEREOF, I have hereunto set my hand and notarial seal this      day of                     , 2006.

 

My commission expires:                                 

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COUNTY OF		STATE OF ) SS. )		)

I, a notary public, in and for the county and state aforesaid, do hereby certify that                                                   personally known to me to be the                                          of Avago Technologies Sensor (U.S.A.), Inc., a Delaware corporation, appeared before me this day in person and acknowledged that (s)he signed the above and foregoing instrument as his/her free and voluntary act and as the free and voluntary act of said corporation pursuant to authority granted to him/her by the board of directors of said corporation for the uses and purposes therein set forth.

IN WITNESS WHEREOF, I have hereunto set my hand and notarial seal this      day of                     , 2006.

 

My commission expires:                                 

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ATTACHMENT I

LIST OF ASSIGNED IP

Patents and Applications

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EXHIBIT G

Excluded Assets

The Excluded Assets include the following:

(a) cash, bank accounts, certificates of deposit and other cash equivalents;

(b) any and all accounts receivable with third parties due in connection with the Business;

(c) except as provided for in Section 6.13, all insurance policies and any rights, claims or chooses in action under such insurance policies;

(d) all rights to refunds of any Tax payments, or prepayments or overpayments of any Tax, with respect to periods prior to the Closing, including recoverable payments of VAT or similar Taxes;

(e) (i) all Intellectual Property Rights other than the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights and such rights transferred in the Transferred Contracts and (ii) any Business Technology that is owned by a third party that Seller and its Affiliates do not have the right to provide to Purchaser hereunder;

(f) enterprise deployed, centrally managed computer software and hardware used by Seller or its Subsidiaries prior to the Closing, including any such computer software or hardware that is used by or for the Business prior to or as of the Closing, and all licenses or other agreements with third parties concerning the use thereof other than the hardware and software included in the Transferred IT Infrastructure and other than Software Licenses to the extent provided in Section 6.18;

(g) all of Seller’s enterprise wide procurement contracts;

(h) fixtures and leasehold improvements at all locations; and office furniture and office equipment at all locations other than the Assigned Real Property;

(i) all Excluded IT Infrastructure;

(j) all interests in real property other than the Assigned Real Property;

(k) assets and Contracts relating to any Seller Plan or Non U.S. Benefits Plan, except as expressly provided in Sections 6.6 and 6.7;

(l) all equity or other ownership interests in any Person;

(m) all assets and other rights sold or otherwise transferred or disposed of between the date of this Agreement and the Closing not in violation of the terms of this Agreement;

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(n) all rights of Seller and its Affiliates under this Agreement and the Transaction Documents;

(o) all books, records and other information prepared by Seller and its Subsidiaries in connection with the transactions contemplated hereby;

(p) all inventories to the extent used or held primarily for use in the Business (including raw materials, purchased goods, parts, containers, recycled materials, work in process, supplies, finished goods and demo and consignment inventory) of the Seller Parties or their Subsidiaries, held by vendors or which otherwise are used or primarily held for use in the Business; and

(q) all rights arising from Excluded Liabilities.

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EXHIBIT H

FORM OF MASTER SEPARATION AGREEMENT

This Master Separation Agreement (together with Annex A hereto and any Separation Agreements (as defined herein), collectively, this “Agreement”) is entered into as of the [    ]th day of [            ], 2006 (the “Effective Date”), by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies (Malaysia) Sdn. Bhd., a company organized under the laws of Malaysia (“Avago Malaysia”, and, together with Seller Parent and its Subsidiaries, the “Seller Parties”), and Micron Technology, Inc., a Delaware corporation (“Purchaser”).

WITNESSETH:

WHEREAS, Seller Parent and Purchaser are among the parties to a Purchase and Sale Agreement (the “Purchase Agreement”) dated as of November 17, 2006, pursuant to which, among other things, Purchaser will acquire from the Seller Parties (as defined in the Purchase Agreement) the Purchased Assets (as defined in the Purchase Agreement), all on the terms and conditions set forth in the Purchase Agreement;

WHEREAS, capitalized terms used in this Agreement but not defined herein shall have the meanings ascribed to such terms in the Purchase Agreement;

WHEREAS, pursuant to the terms of the Purchase Agreement, Seller Parent has agreed to provide to Purchaser and its Subsidiaries certain services as described herein; and

NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.	Services Provided.

 

1.1

During the period commencing as of the Closing Date and ending on the Termination Date (as defined below), subject to the terms hereof, the Seller Parties shall provide to Purchaser and/or Purchaser’s Subsidiaries (collectively, the “Recipients”), or at Seller Parent’s option Seller Parent shall cause one or more of its Subsidiaries or one or more third parties to provide to the Recipients, the services and functions described in Annex A to this Agreement (the “Services”).

 

1.2

To the extent necessary, Seller Parent and Purchaser shall negotiate in good faith more detailed descriptions of the Services specified in Annex A and any additional Services agreed upon by the parties in respect of the Malaysia Employees or Malaysia Purchased Assets (“Additional Services”), in separation agreements (“Separation Agreements” or “SAs”), and any services jointly agreed to by Seller Parent and Purchaser in such Separation Agreements will be deemed part of the Services. Notwithstanding anything to the contrary contained herein, the Services (i) shall be no more extensive in scope and content than the services and functions provided by the Seller Parties or their respective Subsidiaries, as

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applicable, to the Business as conducted in Malaysia immediately prior to the Effective Date, except as necessary to implement any Separation Agreements, (ii) shall not include any Services that would be unlawful for the Seller Parties to provide, and (iii) shall not include the exercise of business judgment or general management for the Recipients. To the extent that pursuant to Section 3.2.1, the Seller Parties are unable to provide a Service, Seller Parent will provide written notice to Purchaser as promptly as practicable, but in any event no less than sixty (60) days prior to discontinuation of such Service by the Seller Parties (if such Service was being provided previously), and the parties will work together in good faith and use all reasonable efforts to arrange a substitute means of obtaining such Service as expeditiously as possible.

 

1.3

Separation Agreements.

 

1.3.1

In the event the parties agree (which agreement shall not be unreasonably withheld, conditioned or delayed by the Seller Parties) that Additional Services are necessary for the Seller Parties to provide to Purchaser in respect of the Malaysia Employees or Malaysia Purchased Assets, subject to the other terms and conditions hereof, the parties will enter additional SAs for the provision of such Additional Services. Any requests by Purchaser for Additional Services pursuant to this Section 1.3.1 must be made by Purchaser within forty-five (45) days after the Closing Date.

 

1.3.2

Any SAs executed hereunder, including any SAs that may need to be executed at a local level between Seller Parent’s Subsidiaries and Purchaser’s Subsidiaries in order to provide services under this Agreement, will incorporate the terms and conditions of this Agreement by reference, will not deviate from such terms, except as may be expressly set forth in each such SA or as required by local law, and shall be considered a supplement to this Agreement and not a standalone agreement. Unless otherwise agreed by the parties, all invoices for such Services will be paid by Purchaser in accordance with Section 3 below.

 

1.4

Transition Management.

 

1.4.1

To facilitate the efficient delivery of the Services, Seller Parent and Purchaser each agree to (i) designate one individual to serve as the principal point of contact for all questions and issues relating to the Services during the term of this Agreement (a “Transition Manager”) and (ii) make available the services of appropriate qualified employees and resources to allow for the provision of the Services and to allow each party to perform its duties, responsibilities and obligations related to the Services. Seller Parent’s initial Transition Manager will be Balakrishnan Subramanian, and Purchaser’s initial Transition Manager will be Debbie Mrongowius. Seller Parent or Purchaser may replace its Transition Manager by the delivery of a written notice setting forth

 

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such replacement to the other party hereto. Except in the case of death, disability, termination or resignation, prior to replacing its Transition Manager Seller Parent will secure a replacement and use reasonable efforts to ensure such replacement works with the departing Transition Manager for a reasonable period of time to ensure an adequate knowledge transfer. Seller Parent will use reasonable efforts to ensure any replacement Seller Parent Transition Manager shall have a comparable title, level of authority and responsibility and experience relating to the Services as the Transition Manager being replaced.

 

1.4.2

In addition, Seller Parent’s primary contact for information technology related services (“IT Services”) will be Mark Rankin and Alan Khoh, and Purchaser’s primary contact for IT Services will be Casey Fisher. Each such individual may be replaced in the same manner described above in Section 1.4.1.

 

1.4.3

If necessary, Seller Parent and Purchaser may designate additional Transition Managers for each of the Separation Agreements, and if applicable such Transition Managers will be specified in the SAs.

 

1.5

Purchaser shall make a commercially reasonable and good faith effort to assume performance of all of the Services as soon as is practicable after the Effective Date. In furtherance of the foregoing, but subject to the obligations of each party to obtain consents and waivers under the Purchase Agreement, Purchaser shall use commercially reasonable efforts to make or obtain any approvals, permits and licenses and implement any systems as may be necessary for it to provide the Services independently in each pertinent country as soon as practicable following the Closing.

 

1.6

Purchaser shall provide the Seller Parties with such information and documentation as is reasonably necessary for the Seller Parties to perform the Services and perform such other duties and tasks as may be reasonably required to permit the Seller Parties to perform the Services.

 

2.	Malaysia Employees.

 

2.1

Malaysia Employee Services. Upon the terms and subject to the conditions contained herein, the Seller Parties and Purchaser agree that from the Closing until the Malaysia Closing Date the Seller Parties shall provide to Purchaser the services of each of the Malaysia Employees, as listed in Annex B hereto, subject to such Malaysia Employee’s continued employment with Seller Parties.

 

2.2

Status of Malaysia Employees. From the Closing until the Malaysia Closing Date, the Malaysia Employees shall be employees of the Seller Parties or a Subsidiary thereof and shall remain on the payroll of the Seller Parties or the applicable Subsidiary. The Seller Parties shall determine the scope, manner and method of services to be performed by the Malaysia Employees, consistent with Seller Parties’ business practices in effect immediately prior to Closing; provided,

 

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however, that the Seller Parties will take into consideration any requests or input supplied by Purchaser with respect to making such determinations regarding the Malaysia Employees and, to the extent that such requests are consistent with the general scope of the Malaysia Employees’ duties prior to Close, Seller Parties shall implement such requests or input. Notwithstanding the foregoing, the Seller Parties will not permit the Malaysia Employees to engage in any joint development work of any kind or the performance of any Services together with any employees of a Seller Party. The parties acknowledge and agree that, prior to any Malaysia Employees and any employees of a Seller Party engaging in any joint development work of any kind or in the performance of any Services together, Purchaser and Seller Parent must agree in writing as to the specific scope and nature of such work to be performed and the parties’ respective ownership interests in and to any Work Product (as defined below) and any Intellectual Property Rights which may be developed by the respective employees in connection therewith.

 

2.3

Seller Parties’ Obligation to Provide Compensation. In its capacity as employer of the Malaysia Employees from the Closing until the Malaysia Closing Date, the Seller Parties shall continue to pay to the Malaysia Employees the compensation that such Malaysia Employees received pursuant to the business practices of the Seller Parties in effect immediately prior to the Closing, including, without limitation, any previously scheduled pay increases and bonus payments, and to withhold and pay taxes and other deductions in a timely manner and consistent with the Seller Parties’ business practices in effect immediately prior to the Closing.

 

2.4

Seller Parties’ Obligation to Provide Benefits. In their capacity as employers of the Malaysia Employees from the Closing until the Malaysia Closing Date, the Seller Parties shall provide to the Malaysia Employees the health, welfare and retirement benefits that similarly situated employees of the Seller Parties enjoy during such time period.

 

2.5

Additional Services and Covenants. From the Closing until the Malaysia Closing Date, the Seller Parties shall, consistent with Seller Parties’ business practices in effect immediately prior to Closing, supply, whether directly or by arms’ length contract with other parties, personnel, payroll, human resources, insurance and workers’ compensation and all other ordinary course support services related to the continuing employment of the Malaysia Employees and the provision of services by the Malaysia Employees. The Seller Parties shall at all times from the Closing until the Malaysia Closing Date, either maintain employer’s liability insurance policies with respect to the Malaysia Employees or self-insure those risks in accordance with applicable laws, in any event, consistent with the Seller Parties’ business practices in effect immediately prior to the Closing.

 

2.6

Termination of Malaysia Employees.

 

2.6.1

From the Closing until the Malaysia Closing Date, unless otherwise directed or agreed by Purchaser, the Seller Parties shall not terminate

 

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the services of any Malaysia Employee other than for Cause (as defined below) without Purchaser’s prior written consent. The Seller Parties shall terminate the services of any Malaysia Employee with respect to the Business (as defined in the Purchase Agreement) to the extent directed to do so by Purchaser, subject to applicable Laws (as defined in the Purchase Agreement). Purchaser shall reimburse the Seller Parties the cost of any and all severance benefits, including, without limitation, any payment-in-lieu of notice, to which any Malaysia Employee is entitled under applicable severance plans, programs or practices of the Seller Parties or under applicable Laws. Notwithstanding the foregoing, the Seller Parties shall be liable for the cost of any and all severance benefits for any Malaysia Employees who are terminated by the Seller Parties if such Malaysia Employees are terminated without Cause and not at the direction or with the consent of Purchaser.

 

2.6.2

For the purposes of this Agreement, “Cause” shall mean (i) the Malaysia Employee’s neglect, failure or refusal to perform in any material respect the Malaysia Employee’s duties or responsibilities for the Seller Parties or a Subsidiary thereof; or (ii) the Malaysia Employee’s material breach of the terms of any employment agreement with the Seller Parties or a Subsidiary thereof that, if curable, is not cured upon ten (10) days notice thereof; or (iii) the engaging by the Malaysia Employee in conduct that causes demonstrable injury in excess of $10,000, to the Seller Parties or any Subsidiary thereof; or (iv) the Malaysia Employee’s engagement in an act of moral turpitude or conviction of or entry of a plea of nolo contendere to a felony; or (v) the willful violation of a material published policy of the Seller Parties or a Subsidiary thereof governing the conduct of such Malaysia Employee. For the purposes of this definition, an act or failure to act shall not be considered “willful” unless it is done, or omitted to be done, by the Malaysia Employee in bad faith or without reasonable belief that the action or omission was in the best interests of the Seller Parties and the Subsidiaries thereof.

 

2.7

Records. From the Closing until the Malaysia Closing Date, the Seller Parties shall maintain, or cause to be maintained, books and records relating to the Malaysia Employees in a manner consistent with the business practices of the Seller Parties in effect immediately prior to Closing.

 

3.	Performance Standard.

 

3.1

The Seller Parties shall maintain directly or through third parties sufficient resources to perform their obligations hereunder. In performing the Services, the Seller Parties and each of their Subsidiaries, as applicable, shall provide, or ensure that any such third party will provide, a similar level of service and use the same degree of care, skill and diligence as it exercises in providing similar services for itself, and in substantially the same manner as corresponding services were

 

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provided on behalf of the Business immediately prior to the Effective Date. All Services shall be performed in compliance with applicable Law. The foregoing is subject to Section 3.2 below.

 

3.2

Limitations.

 

3.2.1

Seller Parent has disclosed to Purchaser and Purchaser hereby acknowledges that Seller Parent has many outsourcing relationships with, and uses software of, third parties (“Service Providers”) who may, through Seller Parent’s obligations under this Agreement, be delivering Services to Purchaser or whose software may be used by Seller Parent to provide Services to Purchaser. Purchaser further acknowledges that Seller Parent’s provision of such Services or use of such software may be subject to the terms and conditions of agreements between Seller Parent and such Service Providers. To the extent required under any such Service Provider agreements governing such Services or software, Purchaser agrees to cooperate with Seller Parent and will assist Seller Parent in obtaining third party consents, licenses, sublicenses, or approvals necessary to permit Seller Parent or the applicable Service Provider to perform, or otherwise make available to Purchaser, the Services set forth in this Agreement or to permit Seller Parent to use the applicable software to provide the Services set forth in this Agreement (provided that no such cooperation or assistance by Purchaser shall require Purchaser to pay any money or other consideration or grant forbearances to any third party).

 

3.2.2

Nothing in this Agreement will require the Seller Parties to favor the businesses of Purchaser over their own businesses or those of any of their Subsidiaries or divisions.

 

3.3

EXCEPT AS PROVIDED IN SECTION 3.1 ABOVE, THE SELLER PARTIES MAKE NO OTHER WARRANTIES OR REPRESENTATIONS OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ANY SERVICES OR ADDITIONAL SERVICES PROVIDED HEREUNDER. IN THE EVENT OF A BREACH OF THE SELLER PARTIES’ WARRANTY IN SECTION 3.1, PROVIDED THE SELLER PARTIES HAVE RECEIVED NOTICE WITHIN THIRTY (30) DAYS OF PERFORMANCE, SELLER PARENT SHALL, OR SHALL CAUSE ONE OF ITS SUBSIDIARIES TO, USE REASONABLE EFFORTS TO RE-PERFORM OR PERFORM THE SERVICES. IF SELLER PARENT OR ONE OF ITS SUBSIDIARIES DOES NOT RE-PERFORM OR PERFORM SUCH SERVICES WITHIN THIRTY (30) DAYS OF SUCH NOTICE, THEN PURCHASER’S SOLE AND EXCLUSIVE REMEDY FOR BREACH OF THE SELLER PARTIES’ WARRANTY IN SECTION 3.1 FOR SERVICES OTHER THAN THE MALAYSIA EMPLOYEE SERVICES DESCRIBED IN SECTION 2 SHALL BE LIMITED TO A PRO-RATA REFUND OF THE FEES PAID BY THE RECIPIENTS UNDER THIS

 

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AGREEMENT OR ANY SEPARATION AGREEMENTS DIRECTLY ATTRIBUTABLE TO SUCH SERVICES OR ADDITIONAL SERVICES, OR PORTION(S) THEREOF, NOT PERFORMED IN ACCORDANCE WITH SUCH WARRANTY. NOTHING HEREIN SHALL LIMIT PURCHASER’S RIGHTS UNDER THE PURCHASE AGREEMENT (IT BEING UNDERSTOOD THAT PURCHASER IS NOT ENTITLED TO ANY RECOVERY UNDER ARTICLE IX OF THE PURCHASE AGREEMENT FOR ANY BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT SET FORTH IN THIS AGREEMENT).

 

4.

Fees.

 

4.1

Annex A attached hereto sets forth the amount to be charged on a monthly basis for each individual Service (for any Service, the “Monthly Charge”). Purchaser shall pay to Seller Parent on a monthly basis, in accordance with Section 4.5, the Monthly Charge for any Service provided by the Seller Parties or their Subsidiaries or Service Providers pursuant to the terms of this Agreement during such month. The Monthly Charge for each Service will begin to be payable on the Closing Date or the inception of the Service, as applicable, and shall cease to be payable on the Termination Date or on such earlier date that such Service is completed or terminated pursuant to Section 1.2 or 9.3 or the terms of the applicable SA. If the Closing Date does not occur at the beginning of a calendar month, the Monthly Charge will be pro-rated.

 

4.2

Purchaser shall reimburse Seller for such Services, including any setup costs related to provision of such Services in an manner compliant with the Sarbanes-Oxley Act, on a time and materials basis, where the time charge for any Seller personnel will be derived from Seller’s fully burdened cost for such personnel. Without limiting the generality of the foregoing, Purchaser shall reimburse Seller for: (i) any amounts paid to third parties in connection with providing such Services, including amounts paid to Service Providers, (ii) shipping and transportation costs, duties, taxes, (iii) costs or expenses incurred by Seller, its Subsidiaries or Service Providers for the extraction, conversion and transfer of data, and (iv) other fees or expenses as set forth in the SAs.

 

4.3

The Monthly Charge for any Additional Services shall be set forth in the SA pertaining to such Additional Service.

 

4.4

If the scope of any Service is changed, the applicable Monthly Charge will be adjusted to reflect any additional costs or expenses incurred by the Seller Parties in connection with such change.

 

4.5

Seller Parent shall invoice Purchaser for the Services (including any Additional Services) provided hereunder in arrears on a monthly basis within twenty (20) days after the end of the month in which the charges accrued. Purchaser shall pay any invoice for Services promptly but in no event later than thirty (30) days after the date of invoice. Late payments shall bear interest at the Prime Rate plus 5% per annum, or the maximum amount allowed by law, whichever is less. Purchaser

 

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shall notify Seller Parent immediately, and in no event later than sixty (60) days following receipt of Seller Parent’s invoice, of any disputed charges. After such sixty (60) day time period, Purchaser will be deemed to have accepted Seller Parent’s invoice. Seller Parent shall provide supporting information and documentation as reasonably requested by Purchaser to validate any amounts payable by Purchaser pursuant to this Section 4.

 

4.6

Within fourteen (14) days after the Effective Date, and thereafter no later than five (5) business days prior to the beginning of each calendar quarter during the term of this Agreement (including any Extension Periods), the Seller Parties shall deliver to Purchaser in writing the Seller Parties’ good faith three (3) month rolling forecast of the estimated Monthly Charges (the “Estimated Malaysia Charges”) for the Penang Site Support Services set forth in Annex A (the “Malaysia Services”) which are to be provided by the Seller Parties during the three (3) full calendar months following the delivery of the forecast. Each forecast shall set forth in reasonable detail the Malaysia Services to be provided during the applicable time period, broken down by month and by the categories specified on Annex A.

 

5.

Security

 

5.1

In addition to the parties’ obligations under the Confidentiality Agreement, each party will and shall cause its Subsidiaries to keep in strict confidence and protect from disclosure all proprietary and confidential information and systems (including Purchaser Data, as defined below, in the case of Purchaser proprietary and confidential information, and any information received with respect to the products of Seller Parent or its Subsidiaries or Purchaser or its Subsidiaries) disclosed to it by the other party, or accessible within Seller Parent’s information technology infrastructure, including the handling of such information in substantial compliance with applicable legal and regulatory requirements, including any privacy regulations, and in the same general manner as it handles and protects its own information that it considers proprietary and confidential.

 

5.2

During the term of this Agreement or any Separation Agreements, Purchaser’s access to the Seller Parties’ information technology infrastructure for applications and other data processing activities shall be through secured controlled processes determined by Seller Parent in its sole discretion, and shall be in accordance with Seller Parent’s and its Subsidiaries’ business control and information protection policies, standards and guidelines as may be modified from time to time. Except as set forth above and except to the extent otherwise provided for in the Purchase Agreement or in connection with third party agreements assigned to Purchaser pursuant to the Purchase Agreement, the Seller Parties shall not transfer to Purchaser, and Purchaser shall have no rights in or access to, application software/systems source code associated with shared systems through which the Seller Parties are providing Services to Purchaser hereunder. Purchaser shall not, through reverse engineering or any other technique or means, attempt to access such source code and will use the application software/systems only for their intended use. Any use of software applications as set forth herein will be subject to Seller Parent’s standard software license terms in accordance with the Purchase Agreement or any additional terms that may be referenced in an SA.

 

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5.3

Notwithstanding the foregoing, neither party will be prevented from disclosing information which is owned by such party or is (i) already known by the recipient party without an obligation of confidentiality; (ii) publicly known or becomes publicly known through no unauthorized act of the recipient party; (iii) rightfully received from a third party without an obligation of confidentiality; (iv) independently developed without use of the other party’s confidential information; (v) disclosed without similar restrictions to a third party by the party owning the confidential information; (vi) approved in writing by the other party for disclosure; or (vii) required to be disclosed pursuant to a requirement of a governmental agency or law, if the disclosing party provides the other party with notice of this requirement prior to disclosure.

 

6.	Ownership of Work Product, Intellectual Property and Data.

 

6.1

This Agreement and the performance of the Services hereunder will not affect the ownership of any assets (including Purchased Assets or Intellectual Property Rights) allocated in the Purchase Agreement. Except as provided herein, no party will gain, by virtue of the Services provided hereunder, by implication or otherwise, any rights of ownership of any property or Intellectual Property Rights owned by the other party as of the Effective Date. Unless otherwise specified herein or in an SA, Purchaser will own all of the Technology and other tangible work product, if any, delivered to any Recipient in connection with the Seller Parties’ performance of the Services (collectively, “Work Product”). Seller Parent will own any and all Intellectual Property Rights in and to such Work Product; provided, however, that Purchaser will own solely all Intellectual Property Rights in all Work Product created or made solely by any Malaysia Employees in the course of their performance of any Services. In the absence of any prior agreement in accordance with Section 2.2 setting forth the parties’ respective ownership rights in any such joint developments, Purchaser and Seller Parent will own jointly all Intellectual Property Rights in all Work Product created or made jointly by any Malaysia Employee, on the one hand, and any employee of a Seller Party or a Service Provider, on the other hand, in the performance of any Services. Except as otherwise agreed, each of Purchaser and Seller Parent may independently exploit any Intellectual Property Rights jointly owned pursuant to this provision independently of, and without accounting to, the other joint owner.

 

6.2

During and after the term of this Agreement, and upon the request of Purchaser, Seller Parties shall take such further actions, including execution and delivery of instruments of conveyance and the securing of all waivers of any moral (or equivalent) rights, as may be appropriate to give full and proper effect to Purchaser’s ownership of any Intellectual Property rights in any Work Product created or made by the Malaysia Employees.

 

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6.3

Notwithstanding any statement to the contrary contained in Section 6.1, Purchaser shall own all data assigned to Purchaser pursuant to the Purchase Agreement as well as any changes or additions thereto made on behalf of Purchaser in the performance of the Services. In addition, Purchaser will own any other data with respect to Purchaser, Purchaser’s Subsidiaries or the Purchased Assets to the extent (and only to the extent) such data is developed, processed, stored, used or generated by the Seller Parties (including the Malaysia Employees) on behalf of Purchaser, Purchaser’s Subsidiaries or the Purchased Assets, in the performance of the Services, or by the Malaysia Employees following the Closing (whether or not in the performance of the Services). All such data will collectively be referred to herein as “Purchaser Data.” The provisions of this Section 6.2 do not grant Purchaser any rights to any data that is not Purchaser Data concerning the Seller Parties, Seller Parent’s Subsidiaries or the Retained Business.

 

6.4

Subject to the terms and conditions of this Agreement, each of the Seller Parties, on behalf of itself and any Service Providers, grants to Purchaser and its Subsidiaries and Affiliates, under all of the Seller Parties’ Intellectual Property Rights in such Work Product, a fully paid-up, non-exclusive, worldwide license to use the Work Product solely for Purchaser’s internal business purposes, including the right to make a reasonable number of copies of the Work Product and to distribute such copies to its Subsidiaries and Affiliates as necessary to exercise the license rights granted herein, provided that Purchaser shall not remove, obscure, or alter any Seller Party or other proprietary rights notice affixed to or contained within the Work Product. The foregoing license is transferable by Purchaser only to an entity that succeeds to all or substantially all of the business or assets of Purchaser to which this Agreement relates. All rights not expressly granted herein by the Seller Parties with respect to its Intellectual Property Rights in and to the Work Product are hereby reserved.

 

7.	Indemnification; Limitation of Liabilities.

 

7.1

Indemnification by the Seller Parties. The Seller Parties, jointly and severally, shall defend and hold harmless each of the Purchaser Indemnified Parties from and against any and all claims, proceedings, suits or actions (each one, a “Claim”) brought by a third party against the Purchaser Indemnified Parties, and will indemnify them for all Purchaser Losses suffered or incurred by any Purchaser Indemnified Party arising from or in connection with such a Claim to the extent such a Claim is based on or alleges (i) gross negligence or willful misconduct on the part of the Seller Parties or any of their Subsidiaries or Service Providers; or (ii) any violation by the Seller Parties of wage and hour laws or other employment laws with respect to the Malaysia Employees.

 

7.2

Indemnification by Purchaser. Purchaser shall indemnify, defend and hold harmless each of the Seller Indemnified Parties from and against any and all Seller Losses suffered or incurred by any Seller Indemnified Party arising from or in connection with the provision of Services by the Seller Parties or any of their Subsidiaries or Service Providers pursuant to this Agreement; provided that the Seller Indemnified Parties shall not be entitled to indemnification for any Seller

 

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Losses pursuant to this Section 7.2 to the extent such Seller Losses resulted from the gross negligence or willful misconduct of the Seller Parties or any of their Subsidiaries or Service Providers.

 

7.3

Limitation of Liabilities. Except for a breach by either party of their confidentiality obligations, or a willful and material breach by the Seller Parties of their obligations under Section 2, in no event shall the Seller Parties’ or their Subsidiaries’ or Service Providers’ total liability to the Purchaser Indemnified Parties or any other Person under this Agreement, or Purchaser’s and its Subsidiaries’ total liability to the Seller Indemnified Parties or any other Person under this Agreement, for any action, regardless of the form of action, whether in tort or contract, arising under this Agreement exceed One Million Five Hundred Thousand Dollars ($1,500,000). Except for a breach by either party of their confidentiality obligations, in no event shall the Seller Parties, their Subsidiaries or Service Providers, or Purchaser or its Subsidiaries, be liable for any lost profits or consequential, punitive, special or indirect damages, except to the extent awarded to a third party by a court of competent jurisdiction with respect to a third party claim, regardless of the cause of action, even if a party has been advised of the possibility thereof.

 

8.	Dispute Resolution.

 

8.1

Dispute Resolution. In the event of any dispute between the Seller Parties and Purchaser with respect to this Agreement, each of Seller Parent and Purchaser shall designate an employee or other representative as its representative to attempt to resolve the dispute and each such representative will use reasonable commercial efforts to resolve the dispute promptly. If the individuals designated by Seller Parent and Purchaser are unable to resolve the dispute promptly, the dispute will be submitted to a member of senior management of each party. Such members of senior management will meet in person or by telephone conference at least once in the ten (10) business day period following the submission of the dispute to them and will use commercially reasonable efforts to resolve the dispute promptly. If such members of senior management are unable to resolve the dispute within fifteen (15) business days of the submission of the dispute to them, such dispute will be resolved in accordance with the procedures set forth in Section 11.1 of the Purchase Agreement with respect to disputes arising out the Purchase Agreement.

 

8.2

Audits. Seller Parent shall invoice Purchaser for the Services provided hereunder in accordance with the terms of this Agreement and shall provide reasonable documentation supporting the amounts owed. Purchaser shall have the right, upon reasonable advance notice, to audit of the books and records and systems of the Seller Parties (excluding systems of Service Providers) solely for the purpose of verifying the accuracy of the fees and costs relating to the Services and any Additional Services and to ensure compliance with this Agreement, provided, however, Purchaser may only conduct one discretionary audit, plus one additional audit if the initial discretionary audit reveals discrepancies between the terms of this Agreement and the fees and costs invoiced to Purchaser, or to the extent

 

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necessary to enable Purchaser to comply with Laws applicable to Purchaser (but in no event more than two audits in total during the term of this Agreement). Any such audit may be performed by the employees, independent accounting firm or other designated representative of Purchaser (including internal auditing personnel) at its sole cost and expense. Purchaser and its auditors may have access to any such books or records with respect to the Services and Additional Services, including process documentation and reports, and modifications thereto, in connection with developing, documenting and testing Purchaser processes and controls relating to the Services and Additional Services, including those related to the Sarbanes-Oxley Act, and in satisfying legal requirements relating to securities or debt issued by Purchaser and its affiliates. For the avoidance of doubt, each party is solely responsible for its own compliance with the Sarbanes-Oxley Act. The Seller Parties shall, at Purchaser’s expense, fully cooperate with the auditing party’s representatives to accomplish the audit as expeditiously as possible. The Seller Parties shall maintain all relevant books and records in accordance with their document retention policies, but in any event no less than three (3) years after the Termination Date.

 

9.	Term, Extension and Termination.

 

9.1

Term. This Agreement shall become effective on the Effective Date and, unless sooner terminated in accordance with the terms hereof, including Sections 1.2 and 9.3, shall continue in effect until the six (6) month anniversary of the Closing Date (the “Initial Termination Date”) except as otherwise provided in this Section 9. All Services will be terminated on the Initial Termination Date or as specified in the applicable Separation Agreement or as otherwise provided for herein (including in Sections 1.2 and 9.3), unless the term of this Agreement is extended for an additional Extension Period as provided in Section 9.2 below.

 

9.2

Extension of SAs and the Agreement. Subject to Purchaser’s payment of the increased fees associated with each Extension Period as set forth in Annex A, Purchaser shall have the right to extend the term of this Agreement for three (3) additional one-month periods (each such extension, an “Extension Period”) by delivery of a written notice to Seller Parent at least thirty (30) days prior to the Initial Termination Date or the expiration of the applicable Extension Period. For purposes hereof, the “Termination Date” shall be the Initial Termination Date or, if there is one or more Extension Period, the last day of the final Extension Period.

 

9.3

Termination. This Agreement, any individual SA or any individual Service under this Agreement or any SA may be terminated prior to the Termination Date in accordance with any of the following provisions:

 

9.3.1

By mutual written consent of the Seller Parties and Purchaser;

 

9.3.2

By Purchaser upon at least thirty (30) days prior written notice (which notice shall specify the date such Service or agreement is to terminate);

 

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9.3.3

By either party entitled to the benefit of the performance of any of the obligations under this Agreement (the “Non Defaulting Party”), if the other party (the “Defaulting Party”) shall fail to perform or default in such performance in any material respect, subject to compliance with the remainder of this paragraph. The Non Defaulting Party shall give written notice to the Defaulting Party specifying the nature of such failure or default and stating that the Non Defaulting Party intends to terminate this Agreement or the applicable SA or Service with respect to the Defaulting Party if such failure or default is not cured within thirty (30) days after receipt of such written notice. If any failure or default so specified is not cured within such period, the Non Defaulting Party may elect to immediately terminate this Agreement or the applicable SA or Service with respect to the Defaulting Party; provided, however, that if the failure or default relates to a dispute contested in good faith by the Defaulting Party, the Non Defaulting Party may not terminate this Agreement or the applicable SA or Service pending the resolution of such dispute in accordance with Section 8 hereof. Such termination shall be effective upon giving a written notice of termination from the Non Defaulting Party to the Defaulting Party and shall be without prejudice to any other remedy which may be available to the Non Defaulting Party against the Defaulting Party;

 

9.3.4

Automatically, without notice by or to either party, if: (i) Purchaser shall (1) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its properties, (2) make a general assignment for the benefit of its creditors, (3) commence a voluntary case under the United States Bankruptcy Code, as now or hereafter in effect (the “Bankruptcy Code”), (4) file a petition seeking to take advantage of any law (the “Bankruptcy Laws”) relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (5) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in any involuntary case under the Bankruptcy Code, or (6) take any corporate action for the purpose of effecting any of the foregoing; or (ii) a proceeding or case shall be commenced against Purchaser in any court of competent jurisdiction, seeking (1) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (2) the appointment of a trustee, receiver, custodian, liquidator or the like of Purchaser or of all or any substantial part of its assets, or (3) similar relief under any Bankruptcy Laws, or an order, judgment or decree approving any of the foregoing shall be entered and continue unstayed for a period of ninety (90) days, or an order for relief against Purchaser shall be entered in an involuntary case under the Bankruptcy Code;

 

9.3.5

By Seller Parent, effective immediately upon notice to Purchaser, if any of the following shall occur: (i) the sale, transfer or other

 

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disposition of all or substantially all of the assets of Purchaser on a consolidated basis to any competitor of Seller Parent or (ii) any competitor of Seller Parent acquires beneficial ownership of a majority of the outstanding shares of common stock of Purchaser; or

 

9.4

Effect of Termination. The parties specifically agree and acknowledge that (i) all obligations of the Seller Parties to provide each Service hereunder, and all obligations of Purchaser to pay any Monthly Fees or other fees associated with each Service hereunder (other than any accrued and unpaid Monthly Fees or other fees), shall immediately cease upon the earlier of the Termination Date or the date of termination of such Service pursuant to Section 1.2 or 9.3 or the terms of the applicable SA, and (ii) the Seller Parties’ obligations to provide all of the Services for which the Seller Parties are responsible hereunder, and Purchaser’s obligations to pay any Monthly Fees or other fees associated with such Services (other than any accrued and unpaid Monthly Fees or other fees), shall immediately cease upon the termination of this Agreement.

 

9.5

Survival. Notwithstanding the expiration or early termination of this Agreement or any Services hereunder, Sections 3.3, 5 through 8, 9.4, this Section 9.5, and Sections 11 through 29 will survive.

 

10.	Personnel Matters.

 

10.1

Access to the Seller Parties’ Facilities. The Seller Parties and Purchaser agree that the Malaysia Employees may remain at the Seller Parties’ facilities until the Malaysia Closing. Purchaser will not permit any of its employees, agents or subcontractors to perform any activities at the Seller Parties’ facilities without Seller Parent’s prior written approval (which approval shall not be unreasonably withheld, conditioned or delayed). Purchaser will ensure that all obligations imposed upon Purchaser pursuant to this Agreement are similarly imposed upon any authorized agent of Purchaser. Purchaser’s execution of any subcontracts or other agreements with any agents, subcontractors or other third Parties will not relieve, waive or diminish any obligation that Purchaser may have to the Seller Parties under this Agreement.

 

10.2

Access to Computer Systems. During the term of this Agreement, the Transferred Employees and any other employees, agents or subcontractors of Purchaser who are authorized by Seller Parent (collectively, “On-Site Personnel”) may have such access to the computer systems and related equipment of the Seller Parties as is necessary to fulfill the activities directly related to this Agreement; provided, however, that the Seller Parties may restrict such access to protect commercially sensitive resources and maintain the confidentiality of their other businesses.

 

10.3

Wages, Payroll Taxes, Benefits and Services. From and after the Closing Date, Purchaser will be solely responsible for the payment of all wages, benefits, social security, unemployment or similar expenses and taxes for all On-Site Personnel.

 

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10.4

Identification and Activities of On-Site Personnel. The Seller Parties will provide identification badges to On-Site Personnel that identify the On-Site Personnel as non-employees of the Seller Parties. Purchaser will use commercially reasonable efforts to ensure that such On-Site Personnel conspicuously display such badges at all times when present at the Seller Parties’ facility. In addition, to the extent provided by the Seller Parties to Purchaser in writing, Purchaser will use commercially reasonable efforts to ensure that On-Site Personnel are informed of and comply with all written restrictions and prohibitions associated with Purchaser’s use of the Seller Parties’ facilities, including without limitation the restriction that such On-Site Personnel may not participate in any activity reserved for the Seller Parties’ employees (e.g., use of exercise and sport facilities; participation in sponsored network groups, athletic leagues or teams; attendance at social events reserved for the Seller Parties’ employees; participation in staff meetings led by the Seller Parties), and the restrictions provided by the Confidentiality Agreement.

 

10.5

Conduct. Purchaser will be solely responsible for the proper conduct of all On-Site Personnel. Upon the written request from an authorized representative of the Seller Parties that any On-Site Personnel be removed for misconduct, Purchaser will remove such On-Site Personnel as soon as practicable from the Seller Parties’ facilities, and will provide written confirmation of such removal. Purchaser will also take possession and return such On-Site personnel’s badge identification to Seller Parent as soon as practicable. Seller Parent will not be notified of or participate in any disciplinary action regarding any On-Site Personnel.

 

11.

Independent Contractor. The parties hereto understand and agree that this Agreement does not make either of them an agent or legal representative of the other for any purpose whatsoever. No party is granted, by this Agreement or otherwise, any right or authority to assume or create any obligation or responsibilities, express or implied, on behalf of or in the name of any other party, or to bind any other party in any manner whatsoever. The parties expressly acknowledge (i) that each Seller Party is an independent contractor with respect to Purchaser in all respects, including, without limitation, the provision of the Services, and (ii) that the parties are not partners, joint venturers, employees or agents of or with each other.

 

12.

Beneficiary of Services; No Third Party Beneficiaries. No provision of this Agreement shall give or be construed to give any person other than the parties hereto, the Recipients, the Purchaser Indemnified Parties and the Seller Indemnified Parties any legal or equitable rights hereunder, whether as a third party beneficiary or otherwise. The Seller Parties and Purchaser agree that the Services will be provided solely to, and will be used solely by, the Recipients and, to the extent reasonably necessary and appropriate with respect to particular Services, Purchaser’s suppliers. Except as set forth in Section 17, the Recipients shall not resell or provide the Services to any other Person, or permit the use of the Services by any Person other than the Recipients.

 

13.	Force Majeure. Neither party will be held liable to the other for any delay or failure of performance to the extent such delay or failure results from events beyond that party’s

 

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control, including without limitation acts of God, earthquakes, fires, floods, civil disturbance, and lawful governmental action (a “Force Majeure Event”). The party claiming suspension due to a Force Majeure Event shall give prompt notice to the other party hereto of the occurrence of the Force Majeure Event giving rise to the delay or failure to perform under this Agreement and of its nature and anticipated duration, and such party will use its reasonable efforts to cure the cause of the delay or failure to perform promptly and shall resume performance as soon as the Force Majeure Event has ended. The Seller Parties will make available to the Recipients during the continuance of any Force Majeure Event, at cost if the Force Majeure occurs prior to the Initial Termination Date and at cost plus ten percent (10%) if the Force Majeure occurs during any Extension Period, the remedies and relief for the affected Services that the Seller Parties would have made available to the Business prior to Closing; provided, however, that the Seller Parties will not be required to give priority to or favor the businesses of the Recipients over their own businesses or those of any of their Subsidiaries or divisions in the course of making any of the aforementioned remedies or relief available to the Recipients.

 

14.

Entire Agreement. This Agreement (including the Annexes hereto), any SAs entered into in connection with this Agreement, and the Purchase Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof.

 

15.

Amendment; Waiver. This Agreement may be amended, and any provision of this Agreement may be waived, if but only if such amendment or waiver is in writing and signed, in the case of an amendment, by the Seller Parties and Purchaser, or in the case of a waiver, by the party against whom the waiver is effective. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

16.

Notices. All communications provided for hereunder shall be in writing and shall be deemed to be given when delivered in person or by private courier with receipt, when telefaxed and received, or three (3) days after being deposited in the United States mail, first-class, registered or certified, return receipt requested, with postage paid. Such communications will be given to the persons identified in Section 11.2 of the Purchase Agreement, or to such other address as any such party shall designate by written notice to the other party hereto.

 

17.	Non Assignability.

 

17.1

Except as provided in Section 17.2 below, neither party may, directly or indirectly, in whole or in part, neither by operation of law or otherwise, assign or transfer this Agreement without the other party’s prior written consent. Any (i) consolidation, merger, recapitalization or liquidation involving a party hereto pursuant to which such party’s stockholders immediately prior to such consolidation, merger, recapitalization or liquidation own, immediately after such consolidation, merger, recapitalization or liquidation securities representing less

 

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than 50% of the combined voting power of all voting securities of the surviving entity; (ii) transaction or series of related transactions as a result of which securities representing 50% or more of the combined voting power of all voting securities of a party hereto are sold, conveyed, transferred, assigned or pledged, either directly or indirectly, to persons other than such party’s stockholders immediately prior to such transaction or series of transactions; or (iii) sale, conveyance, transfer or assignment, either directly or indirectly, of all or substantially all of the assets of a party hereto, in one transaction or a series of related transactions, to a person that does not control, is not controlled by and is not under common control with such party, will be considered an assignment for the purposes of this Agreement. Any attempted assignment, transfer or delegation without such prior written consent will be void.

 

17.2

This Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns.

 

18.	Definitions and Rules of Construction.

 

18.1

This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

 

18.2

Whenever the words “include,” “including,” or “includes” appear in this Agreement, they shall be read to be followed by the words “without limitation” or words having similar import.

 

18.3

As used in this Agreement, the plural shall include the singular and the singular shall include the plural.

 

19.

Counterparts; Effectiveness. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes hereof, provided that receipt of copies of such counterparts is confirmed. This Agreement shall become effective when each party has received a counterpart hereof signed by the other party hereto.

 

20.	Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

 

21.	No Publication. Neither party may publicize or disclose to any third party, without the written consent of the other party, the terms of this Agreement. Without limiting the generality of the foregoing sentence, no press releases may be made without the mutual written consent of each party.

 

22.

Annexes and SAs. The Annexes and SAs shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. In the event of any inconsistency between the terms of any Annex or SA and the terms set forth in the main body of this Agreement, the terms of this Agreement shall govern unless expressly stated otherwise in an SA.

 

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23.

Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction in such manner as will effect as nearly as lawfully possible the purpose and intent of such invalid, illegal or unenforceable provision.

 

24.	Subcontractors and Outsourcing. Notwithstanding anything to the contrary herein subject to Section 3, the Seller Parties shall have the right to subcontract or outsource any of its obligations hereunder upon written notice to Purchaser.

 

25.	Other Agreements. This Agreement is not intended to amend or modify, and should not be interpreted to amend or modify in any respect the rights and obligations of Seller Parent and Purchaser under the Purchase Agreement and any other Transaction Documents.

 

26.

Taxes. All amounts expressed herein and in any SA are exclusive of value added taxes, sales taxes and any other similar taxes. Purchaser will be responsible for all taxes (other than taxes based on net income or net profits of the Seller Parties or their employees) imposed by applicable taxing authorities on the procurement of Services hereunder. If Seller or any of its Subsidiaries are required to pay such taxes, Purchaser shall promptly reimburse the Seller therefore.

 

27.

Governing Law. This Agreement and all claims arising out of this Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to any conflicts of law principles that would result in the application of any law other than the law of the State of Delaware.

 

28.	Time is of the Essence. Time is of the essence under this Agreement.

 

29.

Specific Performance. The parties hereto hereby acknowledge, recognize and agree that (i) the Services are unique services that cannot be duplicated because of the Seller Parties’ unique know how and knowledge of the operations of the Business and (ii) irreparable injury may result to the non-breaching party and its business if the other party breaches any provision of this Agreement such that money damages alone would not be a sufficient remedy for any such breach. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement.

 

30.

Continuity of Services. In the event of a dispute between the Seller Parties and Purchaser (other than a dispute initiated by a Seller Party as a result of Purchaser’s non-payment of any fees, costs or other charges referenced in Section 4), the Seller Parties will continue to perform the Services under this Agreement in good faith, subject to Purchaser’s pre-

 

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payment of the likely fees associated with such Services, for a period of thirty (30) days following the beginning of such dispute, unless this Agreement expires or is terminated in accordance with its terms prior to the expiration of such thirty (30) day period.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

[SELLER PARTIES’ SIGNATURE PAGE TO MSA – PURCHASER’S SIGNATURE PAGE FOLLOWS]

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[PURCHASER’S SIGNATURE PAGE TO MSA]

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EXHIBIT I

FORM OF JOINDER TO PURCHASE AND SALE AGREEMENT

THIS JOINDER TO THE PURCHASE AND SALE AGREEMENT (this “Joinder”) effecting a joinder to the Purchase and Sale Agreement, dated as of November 17, 2006 (the “Purchase Agreement”), by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies Imaging Holding (Labuan) Corporation, a company organized under the laws of Labuan (“Seller”), Avago Technologies Sensor (U.S.A.) Inc., a Delaware corporation (“U.S. R&D”), each Subsidiary of Seller Parent that executes a joinder to the Purchase Agreement pursuant to Section 6.8(b) thereof, and Micron Technology, Inc., a Delaware corporation (“Purchaser”), is entered into as of                     , 2006, by and among Seller Parent, Seller, U.S. R&D, Purchaser and                                 , a Subsidiary of Seller Parent (the “Other Seller”).

1. Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement.

2. Joinder. The Other Seller hereby joins in and becomes a party to the Purchase Agreement as if it were an original party thereto and becomes jointly and severally bound with the other Seller Parties for all terms, conditions, representations, warranties, covenants, and agreements applicable to the Seller Parties, as more fully set forth in the Purchase Agreement, a copy of which is attached hereto as Exhibit A.

3. Representations and Warranties. The Other Seller represents to the Purchaser that the representations and warranties set forth in Article IV of the Purchase Agreement are true and correct as to the Other Seller as if such representations and warranties were fully set forth in this Section 3 as of the date hereof.

4. Counterparts. This Joinder may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 7.

5. Governing Law. This Joinder and all claims arising out of this Joinder shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to any conflicts of law principles that would result in the application of any law other than the law of the State of Delaware.

6. Purchase Agreement Controls. If any provision of this Joinder is in conflict with or inconsistent with any provision of the Purchase Agreement, the provisions of the Purchase Agreement shall control.

7. Binding Effect. This Joinder shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

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[Signature Page Follows]

 

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IN WITNESS WHEREOF, this Joinder to Purchase Agreement has been duly executed and delivered by the parties as of the date first above written.

 

 

 

 

 

[SIGNATURE PAGE TO JOINDER]

 

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EXHIBIT A

PURCHASE AND SALE AGREEMENT

The Purchase and Sale Agreement is attached hereto.

 

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EXHIBIT J

FORM OF AVAGO GENERAL IP LICENSE AGREEMENT

This AVAGO GENERAL IP LICENSE AGREEMENT (the “Agreement”) between AVAGO TECHNOLOGIES GENERAL IP (SINGAPORE) PTE. LTD., a Singapore corporation (“General IP”), and MICRON TECHNOLOGY, INC., a Delaware corporation (“Purchaser”), is effective as of the Closing Date (as defined in the Purchase Agreement).

WHEREAS, General IP and certain Affiliates (as defined in the Purchase Agreement) of General IP are engaged in, among other things, the Business (as defined in the Purchase Agreement);

WHEREAS, certain of the Affiliates of General IP (the “Seller Parties”), including Avago Technologies Sensor IP PTE, Ltd. (“Sensor IP”) and Avago Technologies Sensor (U.S.A.), Inc. (“Sensor USA”), and Purchaser have entered into a Purchase and Sale Agreement, dated as of November 17, 2006 (“Purchase Agreement”), pursuant to which Purchaser shall purchase and assume, and the Seller Parties shall sell, transfer and assign certain equity, assets and liabilities of the Business to Purchaser; and

WHEREAS, as part of the foregoing, General IP desires to license to Purchaser certain of its and its Affiliates’ Intellectual Property Rights that have not been or will not be assigned to Purchaser under the Purchase Agreement.

NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and between the parties as follows:

ARTICLE I

DEFINITIONS

For the purpose of this Agreement the following capitalized terms are defined in this Article I and shall have the meaning specified in this Article I. Other terms that are capitalized but not specifically defined in this Agreement shall have the meaning set forth in the Purchase Agreement.

1.1 CONFIDENTIAL INFORMATION. “Confidential Information” has the meaning set forth in Article V.

1.2 FIRST EFFECTIVE FILING DATE. “First Effective Filing Date” means the earliest effective filing date in the particular country for any Patent or any application for any Patent. By way of example, it is understood that the First Effective Filing Date for a United States Patent is the earlier of (a) the actual filing date of the United States Patent application which issued into such Patent, (b) the priority date under 35 U.S.C. § 119 for such Patent, or (c) the priority date under 35 U.S.C. § 120 for such Patent.

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1.3 IMPROVEMENTS. “Improvements” to Technology means (a) with respect to Copyrights, any modifications, derivative works, and translations of works of authorship; (b) with respect to Database Rights, any database that is created by extraction or re-utilization of another database; and (c) with respect to Mask Works, Trade Secrets and other Intellectual Property Rights included within the definition of Technology and not covered by Section 1.3(a) – (b) above, any improvements of Technology. For the purposes of clarification, an item of Technology will be deemed to be an Improvement of another item of Technology only if it is actually derived from such other item of Technology and not merely because it may have the same or similar functionality or use as such other item of Technology.

1.4 LICENSED BUSINESS PATENTS. “Licensed Business Patents” means:

(a) every Patent other than design patents to the extent entitled to a First Effective Filing Date prior to the Closing Date, provided that General IP (or any Subsidiary or Affiliate of General IP):

(i) has ownership or control of such Patent; or

(ii) otherwise has the right under such Patent to grant licenses of the type and on the terms herein granted by General IP without the obligation to pay royalties or other consideration to Third Parties; and

(iii) is not restricted from granting a license under such Patents by any other agreements; and

(b) applications for the foregoing Patents described in Section 1.4, including without limitation any continuations, continuations-in-part, divisions and substitutions.

1.5 LICENSED IMAGE SENSOR PRODUCTS. “Licensed Image Sensor Products” means a CMOS photosensitive silicon array for capturing images, having an analog or digital output. A Licensed Image Sensor Product may also include an on-board/on-chip A/D converter and an image processor that is either on-board/on-chip or separate, wherein the image process corrects the output signal, for example, to demosaic, color balance, gamma correct or otherwise compensate such output signal. Notwithstanding the foregoing, Licensed Image Sensor Products shall not be construed to include Optical Mouse Sensors, Miniature Surface Mount Ambient Light Photo Sensors, Miniature Surface Mount Proximity Sensors, or any other sensor device designed to capture light or images at less than VGA resolution and which are not intended primarily for human viewing.

1.6 PURCHASER’S FIELD OF USE. “Purchaser’s Field of Use” means the field of the Business as currently or hereafter conducted, including the design, manufacture, supply, distribution, sale, support, and maintenance of Purchaser Products.

1.7 PURCHASER PRODUCTS. “Purchaser Products” means Avago Sensor Products (as defined in the Purchase Agreement) sold by General IP and its Subsidiaries, or after the Closing, Licensed Image Sensor Products made by or for the Purchaser or any of its Affiliates, and all modified versions of any of the foregoing, any reasonably foreseeable extensions or improvements to any of the foregoing, or any new Licensed Image Sensor Products that are developed after the Closing, that are made or sold by or for Purchaser or its Subsidiaries or Affiliates after the Closing as Licensed Image Sensor Products.

 

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1.8 GENERAL IP’S FIELD OF USE. “General IP’s Field of Use” means the business of General IP and its Subsidiaries and Affiliates, as currently or hereafter conducted, other than Licensed Image Sensor Products. Notwithstanding the foregoing, and subject to Section 6.9(d) of the Purchase Agreement, General IP’s Field of Use shall include the design, manufacture, supply, distribution, sale, support and maintenance of products which provide the functionality of Licensed Image Sensor Products but only to the extent that such functionality is designed into the products of the Retained Business, is incidental to the design, manufacture or sale of the products of the Retained Business, or is necessary to achieve the functionality inherent in the products of the Retained Business.

1.9 GENERAL IP PRODUCTS. “General IP Products” means any and all products and services of the businesses in which General IP or any of its Subsidiaries or Affiliates is now or hereafter engaged (including the business of making (but not having made) Third Party products for Third Parties when General IP or any of its Subsidiaries or Affiliates is acting as a contract manufacturer or foundry for such Third Parties), other than Licensed Image Sensor Products. Notwithstanding the foregoing, General IP’s Products shall include products providing the functionality of Licensed Image Sensor Products but only to the extent that such functionality is designed into products of the Retained Business, is incidental to the design, manufacture or sale of products of the Retained Business, or is necessary to achieve the functionality inherent in products of the Retained Business.

1.10 RETAINED BUSINESS. “Retained Business” means the design, manufacture, supply, distribution, sale, support and maintenance by General IP or its Subsidiaries and Affiliates of sensor products that are designed to capture light or images at less than VGA resolution, including without limitation Optical Mouse Sensors, Miniature Surface Mount Ambient Light Photo Sensors and Miniature Surface Mount Proximity Sensors. In addition, Retained Business includes the manufacture of the C2700 and C3860 Avago Sensor Products and the sale of such products to Flextronics International, Ltd. by General IP or its Subsidiaries and Affiliates as contemplated by Section 6.9(d) of the Purchase Agreement.

1.11 THIRD PARTY. “Third Party” means a Person other than General IP and its Subsidiaries and Affiliates or Purchaser and its Subsidiaries and Affiliates.

1.12 THIRD PARTY INTELLECTUAL PROPERTY RIGHTS. “Third Party Intellectual Property Rights” means any Intellectual Property Right owned by or licensed through a Third Party other than Patents, and includes Copyrights, Trademarks, Trade Secrets, Internet Properties, Industrial Designs, Database Rights, Mask Works, and any similar, corresponding or equivalent rights to any of the foregoing any where in the world that are owned by or licensed from a Third Party. For example, a Third Party Copyright is a Copyright owned by or licensed from a Third Party.

 

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ARTICLE II

PATENT LICENSE GRANTS

2.1 LICENSE GRANTS TO PURCHASER. General IP grants, on behalf of itself and its appropriate Subsidiaries and Affiliates, effective as of the Closing Date to Purchaser, under the Licensed Business Patents, an irrevocable, non-exclusive, worldwide, fully-paid, royalty-free and non-transferable (except as set forth in Section 9.12 hereof) license, with right of sublicense as set forth below, to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import Purchaser Products solely within the Purchaser’s Field of Use. With respect to those Licensed Business Patents owned by a Third Party, the license grant set forth in this Section shall be subject to the limitations set forth in the relevant license agreement between General IP and such Third Party.

2.2 SUBLICENSE RIGHTS OF PURCHASER.

(a) Subject to Sections 2.2(b) and (c) below and to Section 2.3, Purchaser may grant sublicenses to its respective Subsidiaries and Affiliates within the scope of its respective license granted in Section 2.1 (with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary or Affiliates, to another Subsidiary or Affiliate of Purchaser).

(b) Any sublicense under Section 2.2(a) may be made effective retroactively, but not prior to the sublicensee becoming a Subsidiary or Affiliate of Purchaser.

(c) The right of sublicense granted in this Section 2.2 shall not apply to any entity which was not a Subsidiary or Affiliate of Purchaser as of the Effective Date, but which later so qualifies if, at the time of such qualification, such entity is then engaged in litigation with General IP.

2.3 HAVE MADE RIGHTS OF PURCHASER. Purchaser understands and acknowledges that the “have made” rights granted to it in Section 2.1, and the sublicenses of such “have made” rights granted pursuant to Section 2.2, are intended to cover only the products of Purchaser and its Subsidiaries and Affiliates (including private label or OEM versions of such products), and are not intended to cover foundry or contract manufacturing activities that Purchaser may undertake through Third Parties for Third Parties.

2.4 LICENSE GRANTS BACK TO GENERAL IP. Purchaser, on behalf of itself and its appropriate Subsidiaries and Affiliates, grants back to General IP, under the Patents included in the Transferred Business Intellectual Property (excluding all design patents included therein), an irrevocable, non-exclusive, worldwide, fully-paid, royalty-free, and non-transferable (except as set forth in Section 9.12 hereof) license, with right of sublicense as set forth below, solely within General IP’s Field of Use, to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import General IP Products.

2.5 SUBLICENSE RIGHTS OF GENERAL IP.

(a) Subject to Sections 2.5(b) and (c) below and to Section 2.6, General IP may grant sublicenses to its respective Subsidiaries and Affiliates within the scope of its respective license hereunder (with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary or Affiliate, to another Subsidiary or Affiliate of General IP).

 

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(b) Any sublicense under Section 2.5(a) may be made effective retroactively, but not prior to the sublicensee becoming a Subsidiary or Affiliate of General IP.

(c) The right of sublicense granted in this Section 2.5 shall not apply to any entity which was not a Subsidiary or Affiliate of General IP as of the Effective Date, but which later so qualifies if, at the time of such qualification, such entity is then engaged in litigation with Purchaser.

2.6 HAVE MADE RIGHTS OF GENERAL IP. General IP understands and acknowledges that the “have made” rights granted to it in Section 2.4, and the sublicenses of such “have made” rights granted pursuant to Section 2.5, are intended to cover only the products of General IP and its Subsidiaries and Affiliates, and are not intended to cover foundry or contract manufacturing activities that General IP may undertake through Third Parties for Third Parties.

2.7 DURATION.

(a) All licenses granted herein with respect to each Patent shall expire upon the expiration of the term of such Patent; provided, however, that licenses for those Licensed Business Patents owned by a Third Party shall expire on the expiration of the term of the relevant license agreement between General IP and such Third Party.

(b) All sublicenses granted pursuant to this Agreement to a particular Subsidiary or Affiliate of a party shall terminate the date that the Subsidiary or Affiliate ceases to be a Subsidiary or Affiliate of that party.

2.8 RELEASE. General IP and Purchaser, on behalf of themselves and their past, present and future Subsidiaries and Affiliates, hereby forever release and discharge the other party, and its Subsidiaries and Affiliates existing as such as of the Effective Date, from and against any all causes of action, claims, demands, liabilities and damages that could have been alleged (a) by General IP on or before the Effective Date based upon any alleged or actual infringement, misappropriation or other violation by Purchaser, or its Subsidiaries or Affiliates existing as such as of the Effective Date, of any Licensed Business Technology or Licensed Business Patents arising from their respective activities relating to the manufacture, sale or use of Licensed Image Sensor Products prior to the Effective Date, or (b) by Purchaser on or before the Effective date based upon any alleged or actual infringement, misappropriation or other violation by General IP, or its Subsidiaries or Affiliates existing as such as of the Effective Date, of any Intellectual Property Rights of Purchaser, its Subsidiaries or Affiliates arising from their respective activities relating to the manufacture, sale or use of Licensed Image Sensor Products prior to the Effective Date.

 

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ARTICLE III

OTHER LICENSE GRANTS

3.1 LICENSE TO PURCHASER.

(a) General IP grants, on behalf of itself and its appropriate Subsidiaries and Affiliates, effective as of the Closing Date to Purchaser and its Subsidiaries the following irrevocable, non-exclusive, worldwide, fully paid, royalty-free and non-transferable (except as specified in Section 9.12 below) licenses, with right of sublicense as set forth below, under its and their applicable Intellectual Property Rights as well as sublicensable Third Party Intellectual Property Rights, solely within the Purchaser’s Field of Use:

(i) under its and their Copyrights and sublicensable Third Party Copyrights in and to the Licensed Business Technology, (A) to reproduce and have reproduced the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Purchaser, in whole or in part, in order to create or as part of Purchaser Products, (B) to prepare Improvements or have Improvements prepared for it based upon the works of authorship included in such Licensed Business Technology in order to create Purchaser Products, (C) to distribute (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) copies of the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Purchaser as part of Purchaser Products, and (D) to perform (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) and display the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Purchaser, as part of Purchaser Products;

(ii) under its and their Database Rights and sublicensable Third Party Database Rights in and to the Licensed Business Technology, to develop or have developed Improvements and to extract data from the databases included in such Licensed Business Technology and such Improvements and to re-utilize such data to design, develop, manufacture and have manufactured Purchaser Products and to sell such Purchaser Products that incorporate such data, databases and Improvements thereof prepared by or for Purchaser;

(iii) under its and their Mask Works and sublicensable Third Party Mask Works in and to the Licensed Business Technology, (A) to develop or have developed Improvements and to reproduce and have reproduced mask works and semiconductor topologies included in such Licensed Business Technology and embodied in Purchaser Products by optical, electronic or any other means, (B) to import or distribute a product in which any such mask work or semiconductor topology is embodied, and (C) to induce or knowingly to cause a Third Party to do any of the acts described in Sections 3.1(a)(iii)(A) and (B) above; and

(iv) under its and their Trade Secrets and Industrial Designs and sublicensable Third Party Trade Secrets and Industrial Designs in and to the Licensed

 

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Business Technology, to develop or have developed Improvements and to use such Licensed Business Technology and Improvements thereof prepared by or for Purchaser to design, develop, manufacture and have manufactured, offer to sell, sell, support, and maintain Purchaser Products and make Improvements to Purchaser Products.

(b) With respect to Licensed Business Technology owned by a Third Party, the license grant set forth in this Section 3.1 shall be subject to the limitations set forth in the relevant license agreement between General IP and such Third Party.

(c) Without limiting the generality of the foregoing licenses granted in Section 3.1(a) above, with respect to software included within the Licensed Business Technology, such licenses include the right to use, modify, and reproduce such software and Improvements thereof made by or for Purchaser or its Subsidiaries or Affiliates to create Purchaser Products, in source code and object code form, and to sell and maintain such software and Improvements thereof made by or for Purchaser or its Subsidiaries, in source code and object code form, as part of Purchaser Products.

(d) The foregoing licenses in this Section 3.1 include the right to have contract manufacturers and foundries manufacture Purchaser Products for Purchaser.

(e) Purchaser may grant sublicenses within the scope of the licenses granted under Sections 3.1(a) and (b) above as follows:

(i) Purchaser may grant sublicenses to its Subsidiaries and Affiliates for so long as they remain its Subsidiaries or Affiliates, with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary or Affiliate, to another Subsidiary or Affiliates of such party; provided that any such sublicense may be made effective retroactively but not prior to the sublicensee becoming a Subsidiary or Affiliate, and provided further that the right of sublicense granted in this Section 3.1 shall not apply to any entity which was not a Subsidiary or Affiliate of Purchaser as of the Effective Date, but which later so qualifies if, at the time of such qualification, such entity is then engaged in litigation with General IP; and

(ii) Purchaser and its Subsidiaries and Affiliates may grant sublicenses with respect to Purchaser Products in the form of software, in object code and source code form, to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers.

 

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3.2 LICENSE BACK TO GENERAL IP.

(a) Purchaser, on behalf of itself and its appropriate Subsidiaries and Affiliates, grants to General IP and its Subsidiaries and Affiliates the following personal, irrevocable, non-exclusive, worldwide, fully paid, royalty-free and non-transferable (except as specified in Section 9.12 below) licenses, under its and their rights in Copyrights, Database Rights, Trade Secrets and Industrial Designs in and to the Transferred Business Technology, as applicable, together with the right to sublicense to Third Parties subject to the terms of this agreement, solely within General IP’s Field of Use:

(i) under its and their Copyrights in and to the Transferred Business Technology, (A) to reproduce and have reproduced the works of authorship included in the Transferred Business Technology and Improvements thereof prepared by or for General IP, in whole or in part, in order to create or as part of General IP Products, (B) to prepare Improvements or have Improvements prepared for it based upon the works of authorship included in the Transferred Business Technology in order to create General IP Products, (C) to distribute (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) copies of the works of authorship included in the Transferred Business Technology and Improvements thereof prepared by or for General IP as part of General IP Products, and (D) to perform (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) and display the works of authorship included in the Transferred Business Technology and Improvements thereof prepared by or for General IP, as part of General IP Products;

(ii) under its and their Database Rights in and to the Transferred Business Technology, to develop or have developed Improvements and to extract data from the databases included in the Transferred Business Technology and such Improvements and to re-utilize such data to design, develop, manufacture and have manufactured General IP Products and to sell such General IP Products that incorporate such data, databases and Improvements thereof prepared by or for General IP;

(iii) under its and their Trade Secrets and Industrial Designs in and to the Transferred Business Technology, to use the Transferred Business Technology and Improvements thereof prepared by or for General IP to design, develop, to manufacture and have manufactured, offer to sell, sell, support and maintain General IP Products and make Improvements to such General IP Products.

(b) Without limiting the generality of the foregoing licenses granted in Section 3.2(a) above, with respect to software included within the Transferred Business Technology, such licenses include the right to use, modify, and reproduce such software and Improvements thereof made by or for General IP or its Subsidiaries and Affiliates to General IP Products, in source code and object code form, and to sell and maintain such software and Improvements thereof made by or for General IP or its Subsidiaries and Affiliates, in source code and object code form, as part of General IP Products.

(c) The foregoing licenses in this Section 3.2 include the right to have contract manufacturers and foundries manufacture General IP Products for General IP and its Subsidiaries and Affiliates.

(d) General IP may grant sublicenses within the scope of the licenses granted under Sections 3.2(a) and (b) above as follows:

(i) General IP may grant sublicenses to its Subsidiaries and Affiliates for so long as they remain its Subsidiaries and Affiliates, with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary or Affiliate, to another Subsidiary or Affiliate of such party; provided that any such sublicense may be made

 

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effective retroactively but not prior to the sublicensee becoming a Subsidiary or Affiliate, and provided further that the right of sublicense granted in this Section 3.2 shall not apply to any entity which was not a Subsidiary or Affiliate of General IP as of the Effective Date, but which later so qualifies if, at the time of such qualification, such entity is then engaged in litigation with Purchaser; and

(ii) General IP or its Subsidiaries or Affiliates may grant sublicenses with respect to General IP Products in the form of software, in object code and source code form, to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers.

3.3 IMPROVEMENTS. As between the parties, after the Closing Date:

(a) General IP hereby retains all right, title and interest, including all Intellectual Property Rights, in and to any Improvements to Transferred Business Technology made by or for General IP in the exercise of the licenses granted to it hereunder, subject only to the ownership of Purchaser in the underlying Transferred Business Technology and the non-competition terms agreed to by General IP pursuant to the Purchase Agreement. General IP shall not have any obligation under this Agreement to notify Purchaser of any Improvements made by or for it or to disclose or license any such Improvements to Purchaser; and

(b) As between the parties, after the Closing Date, Purchaser hereby retains all right, title and interest, including all Intellectual Property Rights, in and to any Improvements to Licensed Business Technology made by or for Purchaser in the exercise of the licenses granted to it hereunder, subject only to the ownership of General IP in the underlying Licensed Business Technology. Purchaser shall not have any obligation under this Agreement to notify General IP of any Improvements made by or for it or to disclose or license any such Improvements to General IP.

3.4 DURATION OF SUBLICENSES TO SUBSIDIARIES AND AFFILIATES. Any sublicenses granted to a particular Subsidiary or Affiliate by a party shall terminate upon the date that such Subsidiary or Affiliate ceases to be a Subsidiary or Affiliate of that party.

3.5 NO PATENT LICENSES. Nothing contained in this Article III shall be construed as conferring to either party by implication, estoppel or otherwise any license or right under any Patent or applications therefor, whether or not the exercise of any right herein granted necessarily employs an invention of any existing or later issued Patent, or, in the case of General IP, under any Mask Works. The applicable licenses granted by General IP to Purchaser and by Purchaser to General IP with respect to Patents are set forth in Article II above.

ARTICLE IV

ADDITIONAL OBLIGATIONS

4.1 ADDITIONAL OBLIGATIONS WITH REGARD TO PATENTS. Purchaser acknowledges that its employees and contractors who are former General IP or General IP Affiliate employees and contractors have a continuing duty to assist General IP with the

 

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prosecution of Licensed Business Patent applications and other Patent applications owned by General IP and, accordingly, Purchaser agrees to make available, to General IP or its counsel, on reasonable advance written notice, inventors and other persons employed by Purchaser for interviews and/or testimony to assist in good faith in further prosecution, maintenance or litigation of such Patent applications, including the signing of documents related thereto. Any actual and reasonable out-of-pocket expenses associated with such assistance shall be borne by General IP, expressly excluding the value of the time of such Purchaser personnel; provided, however, that in the case of assistance with litigation, the parties shall agree on a case by case basis on compensation, if any, of Purchaser for the value of the time of Purchaser’s employees as reasonably required.

4.2 ASSIGNMENT OF PATENTS. Neither party shall assign or grant any rights under any of the Licensed Business Patents unless such assignment or grant is made subject to the licenses granted in this Agreement.

4.3 RESPONSE TO REQUESTS. General IP shall, upon a request from Purchaser sufficiently identifying any Patent or Patent application, inform Purchaser as to the extent to which said Patent or Patent application is subject to the licenses and other rights granted hereunder.

ARTICLE V

CONFIDENTIALITY

5.1 CONFIDENTIAL INFORMATION. The parties hereto expressly acknowledge and agree that all information, whether written or oral, furnished by either party to the other party or any Subsidiary of such other party pursuant to this Agreement (“Confidential Information”) shall be deemed to be confidential and shall be maintained by each party and their respective Subsidiaries in confidence, using the same degree of care to preserve the confidentiality of such Confidential Information that the party to whom such Confidential Information is disclosed would use to preserve the confidentiality of its own information of a similar nature and in no event less than a reasonable degree of care. Notwithstanding the foregoing, after the Closing Date all Transferred Business Technology shall be deemed the Confidential Information of Purchaser, not of General IP, and Purchaser shall be deemed to have disclosed it to General IP. Except as authorized in writing by the other party, neither party shall at any time use or disclose or permit to be disclosed any such Confidential Information to any person, firm, corporation or entity, (a) except as may reasonably be required in connection with the performance of this Agreement by Purchaser, General IP or its respective Subsidiaries, as the case may be, and (b) except as may reasonably be required after the Closing Date (i) by Purchaser or its Subsidiaries in connection with the use of the Licensed Business Technology and the operation of the Business or (ii) by General IP or its Subsidiaries in connection with the licensed use of the Transferred Business Technology and the operation of its business, and (c) except to the parties’ agents or representatives who are informed by the parties of the confidential nature of the information and are bound to maintain its confidentiality, and (d) in the course of due diligence in connection with the sale of all or a portion of either party’s business provided the disclosure is pursuant to a nondisclosure agreement having terms comparable to Sections 5.1 and 5.2 hereof.

 

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5.2 EXCEPTIONS. The obligation not to disclose information under Section 5.1 hereof shall not apply to information that, as of the Closing Date or thereafter, (a) is or becomes generally available to the public other than as a result of disclosure made after the execution of the Purchase Agreement by the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof, (b) was or becomes readily available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis, (c) is or becomes available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis from a source other than its own files or personnel or the other party or its Subsidiaries, provided that such source is not known by the party desiring to treat such information as non-confidential to be bound by confidentiality agreements with the other party or its Subsidiaries or by legal, fiduciary or ethical constraints on disclosure of such information, or (d) is required to be disclosed pursuant to a governmental order or decree or other legal requirement (including the requirements of the U.S. Securities and Exchange Commission and the listing rules of any applicable securities exchange), provided that the party required to disclose such information shall give the other party prompt notice thereof prior to such disclosure and, at the request of the other party, shall cooperate in all reasonable respects in maintaining the confidentiality of such information, including obtaining a protective order or other similar order. Nothing in this Section 5.2 shall limit in any respect either party’s ability to disclose information in connection with the enforcement by such party of its rights under this Agreement; provided that the proviso of clause (d) in the immediately preceding sentence shall apply to the party desiring to disclose such information.

5.3 DURATION. The obligations of the parties set forth in this Article V with respect to the protection of Confidential Information, shall remain in effect until five years after (a) the Closing Date, with respect to Confidential Information of one party that is known to or in the possession of the other party as of the Closing Date, or (b) the date of disclosure, with respect to Confidential Information that is disclosed by the one party to the other party after the Closing Date.

ARTICLE VI

TERMINATION

6.1 VOLUNTARY TERMINATION. By written notice to the other party, either party may voluntarily terminate all or a specified portion of the license and rights granted to it hereunder by such other party. Such notice shall specify the effective date of such termination and shall clearly specify any affected Intellectual Property Rights, Technology, product or service.

6.2 SURVIVAL. Any voluntary termination by either party of the license and rights granted to it by the other party under Section 6.1 hereof shall not affect such party’s license and rights with respect to any licensed product made or service furnished prior to such termination.

6.3 NO OTHER TERMINATION. Each party acknowledges and agrees that its remedy for breach by the other party of the licenses granted to it hereunder during the applicable term of such licenses, or of any other provision hereof, shall be, subject to the requirements of

 

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Article VII, to bring a claim to recover damages subject to the limits set forth in this Agreement and to seek any other appropriate equitable relief, other than termination of the licenses granted by it in this Agreement. For the avoidance of doubt, the parties acknowledge and agree that this Agreement and the licenses granted hereunder may not be terminated by a party for any reason whatsoever, including for breach by the other party of this Agreement or that party’s exercise of the Intellectual Property Rights of a party beyond the scope of the license granted to them hereunder.

ARTICLE VII

DISPUTE RESOLUTION

Except as otherwise set forth herein, resolution of any and all disputes arising from or in connection with this Agreement, whether based on contract, tort, or otherwise (collectively, “Disputes”), shall be exclusively governed by and settled in accordance with the provisions of this Article VII.

7.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through negotiation. Within thirty (30) days after notice of a Dispute is given by either party to the other party, each party shall select a first tier negotiating team comprised of supervisor, manager or area director level employees of such party and shall meet and make a good faith attempt to resolve such Dispute and shall continue to negotiate in good faith in an effort to resolve the Dispute or renegotiate the applicable Section or provision without the necessity of any formal proceedings. If the first tier negotiating teams are unable to agree within thirty (30) days of their first meeting, then each party shall select a second tier negotiating team comprised of vice president level employees of such party and shall meet within thirty (30) days after the end of the first thirty (30) day negotiating period to attempt to resolve the matter. During the course of negotiations under this Article VII, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating teams but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. All negotiations between the parties pursuant to this Section 7.1 shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future litigation.

7.2 FAILURE TO RESOLVE DISPUTES. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within fifteen (15) days after the first meeting of the second tier negotiating teams under Section 7.1, the parties may seek any remedies to which they may be entitled in accordance with the terms of this Agreement.

7.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party from initiating litigation or other judicial or administrative proceedings if such party would be substantially harmed by a failure to act during the time that such good faith efforts are being made to resolve the Dispute through negotiation. In the event that litigation is commenced under this Section 7.3 the parties agree to continue to attempt to resolve any Dispute according to the terms of Section 7.1 during the course of such litigation proceedings under this Section 7.3.

 

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7.4 PAY AND DISPUTE. Except as provided herein, in the event of any dispute regarding payment of a third party invoice (subject to standard verification of receipt of products or services), the party named in a third party’s invoice must make timely payment to such third party, even if the party named in the invoice desires to pursue the dispute resolution procedures outlined in this Article VII. If the party that paid the invoice is found pursuant to this Article VII to not be responsible for such payment, such paying party shall be entitled to reimbursement, with interest accrued at an annual rate of the Prime Rate, from the party found responsible for such payment.

7.5 ELECTION TO BYPASS. In the event that the parties attempt to resolve any Dispute through good-faith negotiation between personnel of a position higher than the second tier employees referenced in Section 7.1, regardless of whether the parties have previously commenced the dispute resolution process referenced in Section 7.1, then the parties shall be deemed to have satisfied the process required by Section 7.1 and may at any time invoke their respective rights under Section 7.2.

ARTICLE VIII

LIMITATION OF LIABILITY

IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES OR AFFILIATES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING SHALL NOT, HOWEVER, LIMIT THE AMOUNT OR TYPES OF DAMAGES AVAILABLE TO EITHER PARTY FOR INFRINGEMENT OR MISAPPROPRIATION OF ITS OR ITS SUBSIDIARIES’ OR AFFILIATES’ INTELLECTUAL PROPERTY RIGHTS BY THE OTHER PARTY OR SUCH OTHER PARTY’S SUBSIDIARIES OR AFFILIATES, OR FOR ANY DISCLOSURE OF CONFIDENTIAL INFORMATION.

ARTICLE IX

DISCLAIMERS

9.1 DISCLAIMER. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE PURCHASE AGREEMENT, EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL (A) TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS LICENSED HEREUNDER, ARE LICENSED WITHOUT ANY WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE,

 

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ENFORCEABILITY OR NON-INFRINGEMENT. Except as otherwise set forth herein or in the Purchase Agreement, neither party nor any of its Subsidiaries or Affiliates makes any warranty or representation that any manufacture, use, importation, offer for sale or sale of any product or service will be free from infringement of any patent or other Intellectual Property Right of any Third Party. Except as otherwise set forth herein or in the Purchase Agreement, neither party nor any of its Subsidiaries or Affiliates makes any warranty or representation as to the validity and/or scope of any Patent licensed by it to the other party hereunder or any warranty or representation that any manufacture, use, importation, offer for sale or sale of any product or service will be free from infringement of any Patent or other Intellectual Property Right of any Third Party.

9.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be construed as conferring any rights by implication, estoppel or otherwise, under any Intellectual Property Right, other than the rights expressly granted in this Agreement. Neither party is required hereunder to furnish or disclose to the other any technical or other information (including copies of the Licensed Business Technology or Transferred Business Technology), except as specifically provided herein or in the Purchase Agreement.

9.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder to institute or maintain any action or suit against Third Parties for infringement or misappropriation of any Intellectual Property Right in or to any Technology licensed to the other party hereunder, or to defend any action or suit brought by a Third Party which challenges or concerns the validity of any of such rights or which claims that any Technology licensed to the other party hereunder infringes or constitutes a misappropriation of any Intellectual Property Right of any Third Party. General IP shall not have any right to institute any action or suit against Third Parties for infringement of any of the Transferred Business Intellectual Property Rights. Purchaser shall not have any right to institute any action or suit against Third Parties for infringement of any of the Licensed Business Intellectual Property Rights.

9.4 NO OBLIGATION TO OBTAIN OR MAINTAIN RIGHTS IN TECHNOLOGY. Except as otherwise set forth herein or in the Purchase Agreement, neither party, nor any of its Subsidiaries, shall be obligated to provide the other party with any technical assistance or to furnish the other party with, or obtain, any documents, materials or other information or Technology.

9.5 NO OBLIGATION TO OBTAIN OR MAINTAIN PATENTS OR TRADEMARKS. Neither General IP, nor any of its Subsidiaries or Affiliates is obligated to (a) file any Patent application, or to secure any Patent or Patent rights or (b) to maintain any Patent in force. Neither General IP, nor any of its Subsidiaries is obligated to (i) file any Trademark application, or to secure any Trademark rights or (ii) to maintain any Trademark registration in force.

 

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ARTICLE X

MISCELLANEOUS

10.1 RECONCILIATION. The parties acknowledge that, as part of the transfer of Transferred Business Intellectual Property, Transferred Business Technology, and Transferred Business Intellectual Property Rights, General IP may inadvertently retain Technology or Intellectual Property that should have been transferred to Purchaser as part of the contemplated transfer of assets, and Purchaser may inadvertently acquire Technology or Intellectual Property that should not have been thereby transferred. Each party agrees to transfer to the other any such later discovered Technology or Intellectual Property, subject to the licenses set forth above, at the reasonable request of the appropriate owner of such Technology or Intellectual Property.

10.2 ENTIRE AGREEMENT. This Agreement and the Purchase Agreement constitute the entire understanding between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.

10.3 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, without regard to any conflicts of laws principles.

10.4 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. Each party hereto irrevocably submits to the exclusive jurisdiction of the United States District Court located in Santa Clara County, California, or if such court does not have jurisdiction, the superior courts of the State of California located in Santa Clara County, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties, further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth in Section 10.6 shall be effective service of process for any action, suit or proceeding in California with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the parties, irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding set forth above arising out of this Agreement or the transactions contemplated hereby, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The parties hereby irrevocably and unconditionally waive trial by jury in any legal action or proceeding relating to this Agreement or any other agreement entered into in connection therewith and for any counterclaim with respect thereto.

10.5 SECTION HEADINGS. The section headings contained in this Agreement are inserted for reference purposes only and are not intended to be a part, nor should they affect the meaning or interpretation, of this Agreement.

10.6 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by telecopy with answer back, by express or overnight mail delivered by an internationally recognized air courier

 

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(delivery charges prepaid), by registered or certified mail (postage prepaid, return receipt requested) or by e-mail with receipt confirmed by return e-mail to the respective parties as follows:

if to General IP:

Avago Technologies General IP (Singapore) Pte. Ltd.

c/o Avago Technologies US Inc.

350 West Trimble Road

Building 90

San Jose, CA 95131

Attention: Rex S. Jackson, Esq.

Fax: (408) 435-4172

with copies to:

Latham & Watkins LLP

135 Commonwealth Drive

Menlo Park, CA 94025

Attention: Peter F. Kerman, Esq.

                Anthony Klein, Esq.

Fax: (650) 463-2600

if to Purchaser:

Micron Technology, Inc.

8000 S. Federal Way

Mail Stop 1-507

Boise, ID 83716

Attention: General Counsel

Facsimile: (208) 368-4537

with copies to:

Thomas A. Briggs, Esq.

Jones Day

North Point

901 Lakeside Avenue

Cleveland, OH 44114

Fax: (216) 579-0212

or to such other address as the party to whom notice is given may have previously furnished to the other in writing in the manner set forth above. Any notice or communication delivered in person shall be deemed effective on delivery. Any notice or communication sent by e-mail, telecopy or by air courier shall be deemed effective on the first Business Day following the day

 

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on which such notice or communication was sent. Any notice or communication sent by registered or certified mail shall be deemed effective on the third Business Day following the day on which such notice or communication was mailed. As used in this Section 10.6, “Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions located in the jurisdiction in which the person to whom notice is to be provided is located are authorized or obligated by law or executive order to close.

10.7 ASSIGNABILITY.

(a) Neither party may, directly or indirectly, in whole or in part, assign or transfer this Agreement, without the other party’s prior written consent, and any attempted assignment, transfer or delegation without such prior written consent shall be voidable at the sole option of such other party; provided, however, that either party may assign or otherwise transfer this Agreement in its entirety without such consent to an entity that succeeds to all or substantially all of its business or assets to which this Agreement relates. For purposes of clarity, the parties acknowledge and agree that the business or assets to which this Agreement relates (i) with respect to Purchaser, is Purchaser’s business and assets pertaining to Licensed Image Sensor Products and (ii) with respect to General IP, is the business and assets of General IP, taken as a whole, or of any of the following business divisions of Avago Technologies Limited in existence as of the Effective Date: Wireless Semiconductor Division, Fiber Optic Products Division, ASICs Products Division, Solid-State Illumination Division, Optoelectronic Products Division, Isolation Products Division, Infrared Products Division, Motion Control Products Division, Navigation Products Division, and Mobile Input Device Operation, including any reorganized or renamed versions thereof (each, an “Avago Division”); provided, however, that in the event of an assignment or transfer of this Agreement by General IP to a third party in connection with a sale or other disposition of an Avago Division, then for purposes of the licenses granted by Micron upon closing of such disposition or sale only, (a) “General IP’s Field of Use” means the business of General IP and its Subsidiaries and Affiliates, as currently or hereafter conducted, other than Licensed Image Sensor Products and (b) “General IP Products” means any and all products and services of the businesses in which General IP or any of its Subsidiaries or Affiliates is now or hereafter engaged (including the business of making (but not having made) Third Party products for Third Parties when General IP or any of its Subsidiaries or Affiliates is acting as a contract manufacturer or foundry for such Third Parties), other than Licensed Image Sensor Products.

(b) In addition, each party (including its respective Subsidiaries or Affiliates or its permitted successive assignees or transferees hereunder) may assign or transfer this Agreement as a whole, without consent, in connection with a corporate reorganization that places such party in a substantially equivalent position in terms of business, assets or ownership of such party as before the reorganization (e.g., a reorganization in another jurisdiction).

(c) No assignment or transfer made pursuant to this Section shall release the transferring or assigning party from any of its liabilities or obligations hereunder. Without limiting the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns.

 

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10.8 SEVERABILITY. If any provision of this Agreement shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement shall not be affected and shall remain in full force and effect, and General IP and Purchaser shall negotiate in good faith to replace such illegal, void or unenforceable provision with a provision that corresponds as closely as possible to the intentions of the parties as expressed by such illegal, void or unenforceable provision.

10.9 AMENDMENT; WAIVER; REMEDIES CUMULATIVE. This Agreement, including this provision of this Agreement, may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. No waiver by either party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any party or a failure or delay by any party in exercising any power, right or privilege under this Agreement, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with the Closing hereunder. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

10.10 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 10.10, provided that receipt of copies of such counterparts is confirmed.

[SIGNATURE PAGE FOLLOWS]

 

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WHEREFORE, the parties have signed this Intellectual Property License Agreement effective as of the Closing Date.

 

 

[SIGNATURE PAGE TO AVAGO GENERAL IP LICENSE AGREEMENT]

 

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EXHIBIT K

FORM OF AVAGO SENSOR IP LICENSE AGREEMENT

This AVAGO SENSOR IP LICENSE AGREEMENT (the “Agreement”) between AVAGO TECHNOLOGIES SENSOR IP PTE. LTD., a Singapore corporation (“Sensor IP”), and AVAGO TECHNOLOGIES SENSOR (U.S.A.), INC., a Delaware corporation (“Sensor USA”), (each a “Licensor” and collectively, the “Licensors”) and MICRON TECHNOLOGY, INC., a Delaware corporation (“Purchaser”), is effective as of the Closing Date (as defined in the Purchase Agreement).

WHEREAS, Licensors and certain of their Affiliates (the “Seller Parties”), and Purchaser have entered into a Purchase and Sale Agreement, dated as of November 17, 2006 (“Purchase Agreement”), pursuant to which Purchaser shall purchase and assume, and the Seller Parties shall sell, transfer and assign certain equity, assets and liabilities of the Business to Purchaser;

WHEREAS, as part of the transactions contemplated by the Purchase Agreement, contemporaneously herewith an Affiliate of the Seller Parties, Avago Technologies General IP (Singapore) Pte. Ltd., a Singapore corporation (“General IP”), and Purchaser are entering into the Avago General IP License Agreement (“Avago General IP License Agreement”), which licenses to Purchaser certain Intellectual Property Rights that have not been and will not be assigned to Purchaser under the Purchase Agreement; and

WHEREAS, all of the Intellectual Property Rights of the Licensors constitute Purchased Assets to be assigned to Purchaser after the Closing Date, either directly or indirectly through another Seller Party, and until such assignment is complete, Licensors desire to license to Purchaser all of Licensors’ respective Intellectual Property Rights.

NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and between the parties as follows:

ARTICLE I

DEFINITIONS

For the purpose of this Agreement the following capitalized terms are defined in this Article I and shall have the meaning specified in this Article I. Other terms that are capitalized but not specifically defined in this Agreement shall have the meaning set forth in the Purchase Agreement.

1.1 CONFIDENTIAL INFORMATION. “Confidential Information” has the meaning set forth in Article V.

1.2 IMPROVEMENTS. “Improvements” means (a) with respect to Copyrights, any modifications, derivative works, and translations of works of authorship; (b) with respect to Database Rights, any database that is created by extraction or re-utilization of another database;

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and (c) with respect to Mask Works, Trade Secrets and other Intellectual Property Rights included within the definition of Technology and not covered by Section 1.2(a) – (b) above, any improvements of Technology. For the purposes of clarification, an item of Technology will be deemed to be an Improvement of another item of Technology only if it is actually derived from such other item of Technology and not merely because it may have the same or similar functionality or use as such other item of Technology.

1.3 LICENSOR PATENTS. “Licensor Patents” means every Patent anywhere in the world owned, in whole or in part, by a Licensor, including those set forth on Schedule 1 hereto.

1.4 LICENSOR INTELLECTUAL PROPERTY RIGHTS. “Licensor IP Intellectual Property Rights” means any and all Intellectual Property Rights anywhere in the world owned, in whole or in part, by a Licensor other than Licensor Patents, including such Intellectual Property Rights that constitute (a) a Trademark, including those set forth on Schedule 2 hereto; (b) Internet Property, including those set forth on Schedule 3 hereto; and (c) a registered Copyright or registered Mask Work, including those set forth on Schedule 4 hereto.

ARTICLE II

LICENSE GRANT

2.1 LICENSE GRANT TO PURCHASER. Licensors grant to Purchaser an irrevocable, worldwide, fully-paid, royalty-free, fully transferable, exclusive license, including the right to sublicense (through multiple tiers), under each and every right of Licensors in the Licensor Patents and Licensor Intellectual Property Rights for any and all products, purposes and applications in any and all fields of use.

2.2 IMPROVEMENTS. As between the parties, after the Closing Date, Purchaser hereby retains all right, title and interest, including all Intellectual Property Rights, in and to any Improvements made by or for Purchaser in the exercise of the licenses granted to it hereunder, subject only to the ownership of Licensors in the underlying Licensor Patents or Licensor Intellectual Property Rights. Purchaser shall not have any obligation under this Agreement to notify Licensors of any Improvements made by or for Purchaser or to disclose or license any such Improvements to Licensors.

ARTICLE III

ADDITIONAL OBLIGATIONS

3.1 PROSECUTION.

(a) As between Purchaser and Licensors, Purchaser shall have the right to direct and control prosecution and maintenance of the Licensor Patents and Licensor Intellectual Property Rights.

(b) Licensors shall deliver to Purchaser all of the IP Files in the possession of Licensors, any of the other Seller Parties and their respective Affiliates for the Licensor Patents and Licensor Intellectual Property Rights on or as promptly as reasonably possible after, but in

 

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no event later than 90 days after, the effective date of this Agreement. Until such time as Licensors, the other Seller Parties and their respective Affiliates transfer to Purchaser the IP File for any particular Licensor Patent or Licensor Intellectual Property Right, a Licensor shall continue to prosecute and maintain such Licensor Patent or Licensor Intellectual Property Right, at Purchaser’s expense, including by payment of all maintenance fees, annuities and other fees required to maintain the active status of such Licensor Patent or Licensor Intellectual Property Right. Subject to the foregoing sentence, Licensors shall not commit any act or fail to commit any act, and shall cause the other Seller Parties and their respective Affiliates not to commit any act or fail to commit any act that would cause any of the Licensor Patents or Licensor Intellectual Property Rights to become abandoned, expired, invalid or otherwise unenforceable. Licensors shall promptly forward to Purchaser all correspondence received by Licensor, any other Seller Party or their respective Affiliates regarding any Licensor Patent or Licensor Intellectual Property Right. Except as may be necessary to fulfill their express obligations under this Section 3.1 or to carry out the Liquidation of Sensor IP contemplated in Section 2.7 of the Purchase Agreement, Licensors shall not communicate with any Governmental Authority regarding any Licensor Patent or Licensor Intellectual Property Right without the prior consent of Purchaser, and Licensors shall communicate with any Governmental Authority regarding any Licensor Patent or Licensor Intellectual Property Right as reasonably requested by Purchaser from time to time.

3.2 ASSIGNMENT. Except in connection with an assignment of the Licensor Patents and Licensor Intellectual Property Rights to Purchaser in connection with the Purchase Agreement, Licensors shall not, and shall cause the other Seller Parties and their respective Affiliates not to, assign, license, encumber or otherwise grant any rights under any of the Licensor Patents or Licensor Intellectual Property Rights. Any such purported action shall be void and of no effect. As between Licensors and Purchaser, Licensors shall be responsible for all transfers of title of the Licensor Patents and Licensor Intellectual Property Rights, recording thereof and the costs and expenses associated therewith other than the recording of such transfer to Purchaser. As between Licensors and Purchaser, Purchaser shall be responsible for the recording of such transfer to Purchaser and the costs and expenses associated therewith.

3.3 LITIGATION.

(a) Neither party shall have any obligation hereunder to institute any action or suit against Third Parties for infringement, misappropriation or other violation of the Licensor Patents or Licensor Intellectual Property Rights. As between Licensors and Purchaser, Purchaser shall have, and Licensors shall not have, the sole right to institute any such action, and neither Licensor shall institute any such action.

(b) If any Third Party institutes any action or suit that challenges the validity or enforceability of any of the Licensor Patents or Licensor Intellectual Property Rights, as between Licensors and Purchaser, Purchaser shall have the sole right to control the defense of such action or suit. Licensors shall forward to Purchaser promptly upon receipt any correspondence from any Third Party received by either Licensor, any other Seller Party or any of their respective Affiliates challenging the validity or enforceability of any of the Licensor Patents or Licensor Intellectual Property Rights or requesting a license thereto.

 

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(c) Each Licensor shall, and shall cause the Seller Parties and their respective Affiliate(s) to, join as a party to any suit instituted by Purchaser to enforce any of the Licensor Patents or Licensor Intellectual Property Rights, if requested by Purchaser and necessary to effect standing to sue under the applicable rules of procedure.

3.4 FURTHER ASSURANCES.

(a) Licensors shall, and shall cause the other Seller Parties and their respective Affiliates, to execute and deliver, or cause to be executed and delivered, all documents, including powers of attorney appointing Purchaser the right to control prosecution and maintenance of the Licensor Patents and Licensor Intellectual Property Rights, and to take, or cause to be taken, all actions that may be reasonably necessary or appropriate, in the reasonable opinion of counsel for Purchaser, to effectuate the provisions of this Agreement, provided that all such actions are in accordance with applicable Law.

(b) Licensors have, and shall ensure that their and their respective Affiliates’ employees and contractors have, a continuing duty to assist Purchaser with the prosecution, maintenance and enforcement of any Licensor Patents or Licensor Intellectual Property Rights and, accordingly, Licensors agree to make available, to Purchaser or its counsel, on reasonable advance written notice, inventors and other such employees and contractors for interviews and/or testimony to assist in good faith in prosecution, maintenance or enforcement of Licensor Patents or Licensor Intellectual Property Rights. Any actual and reasonable out-of-pocket expenses associated with such assistance shall be borne by Purchaser, excluding the value of the time of such personnel.

ARTICLE IV

CONFIDENTIALITY

4.1 CONFIDENTIAL INFORMATION. All information, whether written or oral, relating to the Licensor Patents (other than the content of published and issued Patents) and Licensor Intellectual Property Rights and the communications between the parties under this Agreement relating thereto (“Confidential Information”) shall be deemed to be confidential and shall be maintained by Licensors using the same degree of care to preserve the confidentiality of such Confidential Information that Licensors used to preserve the confidentiality thereof prior to the effective date of this Agreement, but in no event less than a reasonable degree of care. Except as authorized in writing by the Purchaser, neither Licensor shall at any time use or disclose or permit to be disclosed any such Confidential Information to any person, firm, corporation or entity, except as may reasonably be required in connection with the performance of this Agreement or the Purchase Agreement by Licensors or their respective Affiliates or Subsidiaries, as the case may be.

4.2 EXCEPTIONS. The obligation not to disclose information under Section 3.1 hereof shall not apply to information that, as of the effective date of this Agreement, (a) is or becomes generally available to the public other than as a result of disclosure by Licensor in violation hereof, (b) is or becomes available to a Licensors on a non-confidential basis from a source other than its own files or personnel or any of the other Seller Parties or their Affiliates,

 

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provided that such source is not known by Licensors to be bound by confidentiality agreements with Purchaser or any of its Affiliates, or (c) is required to be disclosed pursuant to a governmental order or decree or other legal requirement (including the requirements of the U.S. Securities and Exchange Commission and the listing rules of any applicable securities exchange), provided that Licensors shall give Purchaser prompt notice thereof prior to such disclosure and, at the request of Purchaser, shall cooperate in all reasonable respects in maintaining the confidentiality of such information, including obtaining a protective order or other similar order.

ARTICLE V

TERMINATION

5.1 TERMINATION. This Agreement shall terminate automatically upon assignment of all of the Licensor Patents and Licensor Intellectual Property Rights to Purchaser.

5.2 SURVIVAL. Upon termination of this Agreement, the provisions of Articles III and VI, and this Section 4.2, shall survive.

5.3 NO OTHER TERMINATION. Licensors remedy for breach by Purchaser of any provision of this Agreement shall be to bring a claim to recover damages and to seek any other appropriate equitable relief, other than termination of this Agreement or the licenses granted by it in this Agreement. This Agreement and the licenses granted hereunder may not be terminated by Licensors for any reason whatsoever, including breach of this Agreement by Purchaser.

ARTICLE VI

DISCLAIMER

6.1 DISCLAIMER. EXCEPT AS OTHERWISE SET FORTH IN THE PURCHASE AGREEMENT, EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL LICENSOR PATENTS AND LICENSOR INTELLECTUAL PROPERTY RIGHTS ARE LICENSED WITHOUT ANY WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Except as otherwise set forth herein or in the Purchase Agreement, neither party nor any of its Subsidiaries or Affiliates makes any warranty or representation that any manufacture, use, importation, offer for sale or sale of any product or service will be free from infringement of any patent or other Intellectual Property Right of any Third Party. Except as otherwise set forth herein or in the Purchase Agreement, Licensors make no any warranty or representation as to the validity and/or scope of any Patent or Intellectual Property Right licensed by them hereunder.

 

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ARTICLE VII

MISCELLANEOUS

7.1 ENTIRE AGREEMENT. This Agreement and the Purchase Agreement constitute the entire understanding between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.

7.2 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, without regard to any conflicts of laws principles.

7.3 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. Each party hereto irrevocably submits to the exclusive jurisdiction of the United States District Court located in Santa Clara County, California, or if such court does not have jurisdiction, the superior courts of the State of California located in Santa Clara County, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties, further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth in Section 6.5 shall be effective service of process for any action, suit or proceeding in California with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the parties, irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding set forth above arising out of this Agreement or the transactions contemplated hereby, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The parties hereby irrevocably and unconditionally waive trial by jury in any legal action or proceeding relating to this Agreement or any other agreement entered into in connection therewith and for any counterclaim with respect thereto.

7.4 SECTION HEADINGS. The section headings contained in this Agreement are inserted for reference purposes only and are not intended to be a part, nor should they affect the meaning or interpretation, of this Agreement.

7.5 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by telecopy with answer back, by express or overnight mail delivered by an internationally recognized air courier (delivery charges prepaid), by registered or certified mail (postage prepaid, return receipt requested) or by e-mail with receipt confirmed by return e-mail to the respective parties as follows:

if to Sensor IP or Sensor USA:

Avago Technologies Sensor IP (Singapore) Pte. Ltd.

(or to Avago Technologies Sensor (U.S.A.), Inc.)

c/o Avago Technologies US Inc.

350 West Trimble Road

Building 90

San Jose, CA 95131

Attention:  Rex S. Jackson, Esq.

Fax:                                    

 

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with copies to:

Latham & Watkins LLP

140 Scott Drive

Menlo Park, CA 94025

Attention:  Peter F. Kerman, Esq.

                   Anthony Klein, Esq.

Fax: (650) 463-2600

if to Purchaser:

Micron Technology, Inc.

8000 S. Federal Way

Mail Stop 1-507

Boise, ID 83716

Attention:        General Counsel

Facsimile:        (208) 368-4537

with copies to:

Thomas A. Briggs, Esq.

Jones Day

North Point

901 Lakeside Avenue

Cleveland, OH 44114

Fax:  (216) 579-0212

or to such other address as the party to whom notice is given may have previously furnished to the other in writing in the manner set forth above. Any notice or communication delivered in person shall be deemed effective on delivery. Any notice or communication sent by e-mail, telecopy or by air courier shall be deemed effective on the first Business Day following the day on which such notice or communication was sent. Any notice or communication sent by registered or certified mail shall be deemed effective on the third Business Day following the day on which such notice or communication was mailed. As used in this Section, “Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions located in the jurisdiction in which the person to whom notice is to be provided is located are authorized or obligated by law or executive order to close.

 

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7.6 ASSIGNABILITY. Purchaser may assign or transfer this Agreement, directly or indirectly, in whole or in part, without the prior written consent of the other parties hereto. Neither Licensor may assign or otherwise transfer this Agreement other than pursuant to those transactions contemplated by the Purchase Agreement. No assignment or transfer made pursuant to this Section shall release the transferring or assigning party from any of its liabilities or obligations hereunder. Without limiting the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns.

7.7 SEVERABILITY. If any provision of this Agreement shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement shall not be affected and shall remain in full force and effect, and Licensors and Purchaser shall negotiate in good faith to replace such illegal, void or unenforceable provision with a provision that corresponds as closely as possible to the intentions of the parties as expressed by such illegal, void or unenforceable provision.

7.8 AMENDMENT; WAIVER; REMEDIES CUMULATIVE. This Agreement, including this provision of this Agreement, may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. No waiver by either party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any party or a failure or delay by any party in exercising any power, right or privilege under this Agreement, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with the Closing hereunder. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

7.9 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 7.9, provided that receipt of copies of such counterparts is confirmed.

[SIGNATURE PAGE FOLLOWS]

 

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WHEREFORE, the parties have signed this Avago Sensor IP License Agreement effective as of the Closing Date.

 

[SIGNATURE PAGE TO AVAGO SENSOR IP LICENSE AGREEMENT]

 

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EXHIBIT L

FORM OF IP SIDE LETTER

[            ], 2006

Micron Technology, Inc.

8000 South Federal Way

Boise, Idaho 83707

Re: Matters Related to HP and Agilent IP

Ladies and Gentlemen:

Reference is hereby made to that certain Purchase and Sale Agreement, dated as November 17, 2006 (the “Purchase Agreement”), by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies Imaging Holding (Labuan) Corporation, a company organized under the laws of Labuan (“Seller”), Avago Technologies (Sensor) U.S.A. Inc., a Delaware corporation (“U.S. R&D”), each Subsidiary of Seller Parent that executes a joinder to this Agreement pursuant to Section 6.8(c) of the Purchase Agreement (together with Seller, Seller Parent and U.S. R&D, the “Seller Parties”), and Micron Technology, Inc., a Delaware corporation (“Purchaser”). Capitalized terms not otherwise defined herein shall have the respective meaning assigned to them in the Purchase Agreement.

1. Following the Closing and in addition to the indemnification obligations set forth in the Purchase Agreement, the Seller Parties shall indemnify, defend and hold harmless each Purchaser Indemnified Party from and against, and shall compensate and reimburse each Purchaser Indemnified Party for, those Purchaser Losses (but only such Purchaser Losses) that would not have been suffered or otherwise incurred by such Purchaser Indemnified Party had Purchaser entered into the license agreements attached hereto as Attachment A and Attachment B on the Closing Date.

2. Each Purchaser Indemnified Party shall notify Seller Parent promptly of such Purchaser Indemnified Party’s discovery of any matter and of any actual or threatened claims by, or actual or threatened litigation or other disputes with, third parties that may give rise to a claim for indemnification pursuant to this letter agreement (any such claims, litigation and disputes being referred to as “Claims” for purposes of this letter agreement).

3. Promptly (but in no event later than ten days) after the receipt by any Purchaser Indemnified Party of a notice of any Claim, such Purchaser Indemnified Party shall give written notice of such Claim to Seller Parent, stating in reasonable detail the nature and basis of each Claim and the amount thereof, to the extent known, along with copies of the relevant documents received by such Purchaser Indemnified Party evidencing the Proceeding, if any, in which each such Claim is made, and the basis for indemnification sought. Failure of such Purchaser Indemnified Party to give such notice shall not relieve the Seller Parties from liability on account of this indemnification, except if and only to the extent that the Seller Parties are actually

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prejudiced thereby. Thereafter, such Purchaser Indemnified Party shall deliver to Seller Parent, promptly after such Purchaser Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by such Purchaser Indemnified Party relating to any Claim. Each Indemnified Party shall cooperate and assist the Seller Parties in determining the validity of any claim for indemnity by such Purchaser Indemnified Party and in otherwise resolving such matters.

4. Upon written notice to Seller Parent from a Purchaser Indemnified Party of any Claim, the Seller Parties shall, promptly but in no event later than 30 days after receipt of the particular notice of such Claim from such Purchaser Indemnified Party, assume the defense of the Purchaser Indemnified Party against such Claim.

5. After a Purchaser Indemnified Party provides written notice of any Claim, and upon the Seller Parties assuming the defense thereof, for so long as the Seller Parties continue to assume the defense of the Claim in accordance herewith, (i) such Purchaser Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Claim, it being understood that the Seller Parties shall pay all reasonable costs and expenses of counsel for such Purchaser Indemnified Party after such time as such Purchaser Indemnified Party has notified the Indemnifying Party of such Claim and prior to such time as the Seller Parties have assumed the defense of such Claim, (ii) such Purchaser Indemnified Party shall not file any papers or consent to the entry of any judgment in connection with any Proceeding or enter into any settlement with respect to the Claim without the prior written consent of Seller Parent, on behalf of the Seller Parties (such consent not to be unreasonably withheld, conditioned or delayed), unless Purchaser Indemnified Party first waives its claim to indemnification hereunder, and (iii) no Seller Party will consent to the entry of any judgment in connection with any Proceeding or enter into any settlement with respect to the Claim (other than a judgment or settlement that is solely for money damages and is accompanied by a release of all indemnifiable claims against such Purchaser Indemnified Party) without the prior written consent of such Purchaser Indemnified Party (not to be unreasonably withheld, conditioned or delayed). No Seller Party shall be obligated to indemnify and hold harmless any Purchaser Indemnified Party hereunder for any settlement entered into without the prior written consent of Seller Parent on behalf of all Seller Parties, which consent shall not be unreasonably withheld, conditioned or delayed.

6. In connection with each Claim, each Purchaser Indemnified Party shall cooperate in the defense by the Seller Parties of such Claim (and the Parties agree with respect to all such Claims that a common interest privilege agreement exists between the Purchaser Indemnified Parties and the Seller Parties), including:

(i) permitting the Seller Parties to discuss the Claim with such officers, employees, consultants and representatives of such Purchaser Indemnified Party as the Seller Parties reasonably request;

(ii) permitting the Seller Parties to have reasonable access to the properties, books, records, papers, documents, plans, drawings, electronic mail, databases and computers of such Purchaser Indemnified Party at reasonable hours to review information and documentation relative to the Claim;

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(iii) providing to the Seller Parties copies of documents and samples of Avago Sensor Products as the Seller Parties reasonably request in connection with defending such Claim;

(iv) permitting the Seller Parties to conduct privileged interviews and witness preparation of officers, employees and representatives of such Purchaser Indemnified Party as the Seller Parties reasonably request;

(v) promptly collecting documents and extracting information from documents for the Seller Parties’ review and use, as the Seller Parties reasonably request, or allowing the respective representatives of the Seller Parties to do the same;

(vi) notifying the Seller Parties promptly of receipt by such Purchaser Indemnified Party of any subpoena or other third-party request for documents or interviews and testimony;

(vii) providing to the Seller Parties copies of any documents produced by such Purchaser Indemnified Party in response to or compliance with any subpoena or other third-party request for documents; and

(viii) permitting the Seller Parties to conduct such other reasonable investigations and studies, and take such other actions, as are reasonably necessary in connection with their defense or investigation of such Claim.

7. In connection with each Claim, except to the extent inconsistent with a Purchaser Indemnified Party’s obligations under applicable Law and except to the extent that to do so would subject such Purchaser Indemnified Party or its employees, agents or representatives to criminal or civil sanctions:

(i) unless ordered by a court to do otherwise, such Purchaser Indemnified Party shall not produce documents to a third party until the Seller Parties have been provided a reasonable opportunity to review, copy and assert privileges covering such documents;

(ii) the transfer to such Purchaser Indemnified Party by the Seller Parties of documents covered by the Seller Parties’ attorney-client or work-product privileges shall not constitute a waiver of such privileges;

(iii) unless otherwise ordered by a court, such Purchaser Indemnified Party shall withhold from production to any third party any documents as to which the Seller Parties assert a privilege;

(iv) such Purchaser Indemnified Party shall defend in court any such privilege asserted by the Seller Parties; and

(v) such Purchaser Indemnified Party shall permit the Seller Parties to prepare any employees of such Purchaser Indemnified Party required or requested to testify or otherwise be deposed or interviewed in connection with any Claim and to be present during any such testimony or interviews.

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8. Any payment made pursuant to the indemnification obligations arising under this letter agreement shall be treated as an adjustment to the Purchase Price to the extent allowable under applicable Law. Any indemnity payment under this letter agreement shall be decreased by any amounts actually received by any Purchaser Indemnified Party under third-party insurance policies with respect to such Loss prior to the time payment by the Seller Parties is due and payable under this Agreement (net of any premiums paid by such Purchaser Indemnified Party under the relevant insurance policy and any costs incurred by such Purchaser Indemnified Party in procuring such payment under such policy). Purchaser shall, and shall cause each Purchaser Indemnified Party (i) to use commercially reasonable efforts to recover all available insurance proceeds and (ii) to the extent that any indemnity payment under this letter agreement has been paid by any Seller Party to or on behalf of such Purchaser Indemnified Party prior to the receipt, directly or indirectly, by such Purchaser Indemnified Party of any net insurance proceeds under third-party insurance policies on account of such Purchaser Loss which duplicate, in whole or in part, the payment made by such Seller Party to or on behalf of such Purchaser Indemnified Party, such Purchaser Indemnified Party shall remit to such Seller Party an amount equal to the amount of the net insurance proceeds actually received by such Purchaser Indemnified Party on account of such Purchaser Loss which duplicate, in whole or in part, the payment made by such Seller Party to or on behalf of such Purchaser Indemnified Party.

9. If the amount of any Indemnity Claim gives rise to a current deduction to the Purchaser Indemnified Party making the Indemnity Claim, the indemnity payment shall be reduced by the amount of the Tax Benefit of such current deduction actually realized by such Purchaser Indemnified Party on account of such Purchaser Loss prior to the time payment by the Seller Parties is due and payable under this letter agreement. In the event that any Seller Party pays to or on behalf of a Purchaser Indemnified Party any amount in respect of a Purchaser Loss subject to indemnification under this letter agreement and, subsequent to such payment such Purchaser Indemnified Party actually realizes a Tax Benefit on account of such Purchaser Loss, such Purchaser Indemnified Party shall remit to the Seller Parties an amount equal to the amount of such Tax Benefit actually realized on account of such Purchaser Loss.

10. Notwithstanding anything in this letter agreement or in any Local Asset Transfer Agreement to the contrary, Purchaser shall not make any claim for indemnification or otherwise in any circumstances whatsoever against any Seller Party other than by means of a claim against Seller as agent for such other Seller Party pursuant to the terms of this letter agreement unless Seller fails to satisfy its obligations under this letter agreement, and Purchaser shall indemnify Seller on its own behalf and as agent for all other Seller Parties against any claim for indemnification made against the Seller Parties contrary to this sentence.

11. Following the Closing, with the exception of remedies based on fraud, the remedies set forth in this letter agreement shall constitute the sole and exclusive remedy for money damages and shall be in lieu of any other remedies for money damages that may be available to the Purchaser Indemnified Parties under any other agreement or pursuant to any statutory or common law with respect to any Purchaser Losses of any kind or nature incurred directly or indirectly resulting from or arising out of the matters for which indemnification may be sought by the Purchaser Indemnified Parties under this letter agreement. The Seller Parties and Purchaser each hereby waive any provision of any applicable Law to the extent that it would limit or restrict the agreement contained in this paragraph.

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12. The provisions hereof shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns. This letter agreement and all claims arising out of this letter agreement shall be governed by, and construed in accordance with the Laws of the State of Delaware, without regard to any conflicts of law principles that would result in the application of any law other than the law of the State of Delaware.

[signature page follows]

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Acknowledged and agreed to,
As of the date first written above
MICRON TECHNOLOGY, INC.
By:
Printed Name:
Title:

[Signature Page to IP Side Letter]

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EXHIBIT M

Purchased Assets

Purchased Assets consist of the following assets related to the Business:

 

(a)

Any fixtures, leasehold improvements, machinery, equipment and tangible personal property attached to or located on the Assigned Real Property that (i) relate primarily to or are used or held for use primarily in connection with the Business, or (ii) that relate exclusively to or are held for use exclusively by the Business and are located in those portions of the Assigned Real Property that are occupied by or shared with the Retained Business and excluding any facility equipment shared by the Business and the Retained Business such as air handling units, chillers and similar items (collectively, the “Tangible Personal Property”), including the Tangible Personal Property identified or that should have been identified in Section 4.18 of the Disclosure Letter;

 

(b)

to the extent not of a category or type described in clause (a) above, all machinery, equipment, vehicles, furniture, fixtures, tools, instruments, spare parts, supplies (including storeroom supplies), pallets, office and laboratory equipment, testing facilities, materials, fuel and other personal property, owned or leased, not normally included in inventory, that are used or held primarily for use in connection with the Business (collectively, the “Personal Property”), but excluding Personal Property that is part of the Seller Parties’ centralized services for information technology or other matters, which shall be Excluded Assets;

 

(c)

except as otherwise specifically provided in the Agreement, all transferable warranties, guarantees, claims, rights, credits, causes of action, or rights of setoff, against third parties to the extent relating to or arising from any of the Business, the Purchased Assets, the Transferred Business Intellectual Property or the Transferred Business Intellectual Property Rights;

 

(d)

all transferable Permits, certificates, licenses (excluding licenses relating to Intellectual Property Rights), orders, franchises, registrations, variances, Tax abatements, approvals and other similar rights or authorizations of any Governmental Authority exclusively related to the ownership, maintenance and operation of the Business;

 

(e)

all customers’ files, credit information, supplier lists, parts lists, vendor lists, business correspondence, business lists, sales literature, promotional literature and other selling and advertising materials and all other assets and rights primarily related to the distribution, sale or marketing of the Avago Sensor Products; provided, however, that to the extent any such materials also relate to or arise from or are used in connection with the Retained Business, or any such information is commingled with information used in the Retained Business, Seller shall have the right to use and license others to use such materials and information (provided such use and licenses to use are not in violation of or otherwise inconsistent with the terms of Section 6.9 of this Agreement, the Avago General IP License Agreement or the Master Separation Agreement), and the original version of all such materials and of all tangible embodiments of such information shall

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not be a Purchased Asset and shall be retained by the Seller Parties with true, complete and correct copies of all such originals and tangible embodiments to be provided to Purchaser at Closing;

 

(f)

to the extent transferable (assuming receipt of any required third party consent to such transfer), all right, title or interest of the Seller Parties and their Affiliates in or to: (A) the Business Intellectual Property Licenses identified on Exhibit M-1, (B) the Supplier Contracts, maintenance or service agreements, purchase orders for materials and other services, dealer and distributorship agreements, advertising and promotional agreements, equipment leases, licenses (but excluding licenses relating to Intellectual Property Rights other than Business Intellectual Property Licenses), joint ventures, partnership agreements or other Contracts (including any agreements of the Seller Parties or their Affiliates with suppliers, sales representatives, distributors, agents, lessees of Personal Property, licensors, licensees, consignors and consignees specified therein (but excluding licenses related to Intellectual Property Rights other than Business Intellectual Property Licenses)), in each case in this clause “(B)” that are exclusively related to the Business and are identified on Exhibit M-1, and (C) any utility, electricity, gas, water, sanitary, sewer and similar property specific Contracts exclusively related to the Assigned Real Property (collectively, the “Transferred Contracts”), and with respect to any of the foregoing types or categories of Contracts in clause “(B)” that are primarily but not exclusively related to the Business, the portion thereof relating to the Business to the extent the Seller Parties obtain the consent of the counterparty thereto to assign in part or otherwise divide such Contracts between Purchaser and the applicable Seller Party or its Affiliates in accordance with Section 6.17 hereof and upon receipt of such consent such portion thereof shall become a Transferred Contract;

 

(g)	all Transferred Business Technology and all Transferred IT Infrastructure;

 

(h)

all marketing, personnel, financial and other books and all other documents, microfilm and business records and correspondence wherever located, primarily related to the Business; provided, however, that to the extent any such documents also relate to or arise from or are used in connection with the Retained Business, or any such information is commingled with information used in the Retained Business, the original version of such information shall not be a Purchased Asset (and Seller shall have the right to use such information, provided such use and licenses to use are not in violation of or otherwise inconsistent with the terms of Sections 6.9 or 6.10 of this Agreement, the Avago General IP License Agreement or the Master Separation Agreement) and shall be retained by Seller with true, complete and correct copies thereof to be provided to Purchaser at Closing; provided, however, upon reasonable request, the Seller Parties will provide the Purchaser with reasonable access to the foregoing information that relates to the Business but does not primarily relate to the Business;

 

(i)

all automobiles and other vehicles owned by the Seller Parties and their Affiliates and used exclusively by Transferred Employees, and, to the extent transferable, leasehold interests in all leases of automobiles and other vehicles leased by the Seller Parties or their Affiliates and used exclusively by Transferred Employees, a list of which automobiles and other vehicles and leasehold interests therein is set forth in Exhibit M-2.

 

M-2

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(j)	any and all assets associated with or allocated to Transferred Employees in accordance with Section 6.6 or 6.7;

 

(k)

the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights, including the right to sue for past, present and future infringement or other violation thereof, and also including the goodwill of the Business appurtenant to trademarks included in the Transferred Business Intellectual Property, but subject to the terms of any licenses granted to third parties listed on Section 4.6(a)(x) of the Disclosure Letter; and

 

(l)	all other assets and rights of the Seller Parties and their respective Affiliates to the extent such assets are used primarily in the Business, are not Excluded Assets identified on Exhibit G and are not of a category or type described in the foregoing clauses (a) through (k).

With respect to the Purchased Assets identified in foregoing clauses (a) and (b), to the extent such Purchased Assets are leased or licensed from a third party, the transfer to Purchaser shall only be to the extent of such lease or license.

The Seller Parties shall use commercially reasonable efforts to identify prior to the Closing any Contracts of a type required to be listed on Exhibit M-1 that are not so listed as of the date of this Agreement and to promptly deliver true, correct and complete copies of such contracts to Purchaser. In the event Purchaser elects prior to the Effective Date to treat any of such Contracts as a Transferred Contract under this Agreement, then the Parties shall amend Exhibit M-1 to add such Contract.

For an asset to be deemed to be “primarily” used or held for use by the Business, 80% or more of its usage must be for the benefit of the Business.

Notwithstanding the foregoing, the Purchased Assets will not include any Excluded Assets.

 

M-3

Exhibit 2.9

ASSET PURCHASE AGREEMENT

by and among

AVAGO TECHNOLOGIES LIMITED,

AVAGO TECHNOLOGIES GENERAL IP (SINGAPORE) PTE. LTD.,

OTHER SELLERS

and

LITE-ON TECHNOLOGY CORPORATION

Dated as of October 31, 2007

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TABLE OF CONTENTS

 

				Page
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION				1
1.1		Definitions		1
1.2		Rules of Construction		1
ARTICLE II PURCHASE, SALE AND ASSUMPTION				2
2.1		Purchase and Sale of Purchased Assets		2
2.2		Assumption by Purchaser of Certain Liabilities		2
2.3		Transfer of Purchased Assets		2
2.4		Approvals and Consents		3
ARTICLE III PURCHASE PRICE AND ADJUSTMENTS				4
3.1		Purchase Price		4
3.2		Closing Date Payment		4
3.3		Allocation of Purchase Price		6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER AND THE OTHER SELLERS				6
4.1		Corporate Existence		6
4.2		Corporate Authority		7
4.3		Governmental Approvals and Consents		8
4.4		Title to Purchased Assets		8
4.5		Condition of Purchased Assets		8
4.6		Contracts		8
4.7		Litigation		10
4.8		Business Intellectual Property Rights		10
4.9		Finders; Brokers		12
4.10		Tax Matters		12
4.11		Employment and Benefits		12
4.12		Labor Matters		14
4.13		Sufficiency of Assets		14
4.14		Suppliers		14
4.15		Customers		14
4.16		No Other Representations or Warranties		14
ARTICLE V REPRESENTATIONS OF PURCHASER				15
5.1		Corporate Existence		15
5.2		Corporate Authority		15
5.3		Governmental Approvals, Orders and Consents		16
5.4		Financial Capacity		16
5.5		Finders; Brokers		16
5.6		No Other Representations or Warranties		16

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ARTICLE VI COVENANTS AND AGREEMENTS				17
6.1		Operation of the Business		17
6.2		Investigation of Business; Confidentiality		18
6.3		Necessary Efforts; No Inconsistent Action		19
6.4		Public Disclosures		20
6.5		Access to Records, Personnel, the Owned Real Property and the Assigned Real Property		20
6.6		Employee Relations and Benefits		21
6.7		Joinder		23
6.8		Insurance Matters		23
6.9		Tax Matters		24
6.10		Mail Handling		27
6.11		Shared Contracts Other Than Software Licenses		28
6.12		Shared Software Licenses		28
6.13		NDAs		28
6.14		No Solicitation of Acquisition Proposals; Inconsistent Activities		28
ARTICLE VII CONDITIONS TO CLOSING				29
7.1		Conditions Precedent to Obligations of Purchaser and the Seller Parties		29
7.2		Conditions Precedent to Obligation of the Seller Parties		29
7.3		Conditions Precedent to Obligation of Purchaser		30
ARTICLE VIII CLOSING				31
8.1		Closing		31
8.2		Purchaser Obligations		31
8.3		Seller Party Obligations		32
ARTICLE IX INDEMNIFICATION				32
9.1		Indemnification		32
9.2		Certain Limitations		33
9.3		Procedures for Third Party Claims and Excluded Liabilities		34
9.4		Certain Procedures		35
9.5		Remedies Exclusive		37
ARTICLE X TERMINATION				37
10.1		Termination Events		37
10.2		Effect of Termination		38
ARTICLE XI MISCELLANEOUS AGREEMENTS OF THE PARTIES				38
11.1		Notices		38
11.2		Bulk Transfers		39
11.3		Severability		39
11.4		Further Assurances; Further Cooperation		39
11.5		Counterparts		39
11.6		Expenses		40
11.7		Assignment		40
11.8		Amendment; Waiver		40

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11.9		Specific Performance		40
11.10		Third Parties		40
11.11		Governing Law		40
11.12		Consent to Arbitration in Singapore		41
11.13		Disclosure Letter		41
11.14		Entire Agreement		41
11.15		Time is of the Essence		41
11.16		Section Headings; Table of Contents		41

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EXHIBITS:
EXHIBIT A		Form of Joinder
EXHIBIT B		Form of Avago General IP License Agreement
EXHIBIT C		Form of Master Separation Agreement
EXHIBIT D		Form of Noncompetition Agreement
EXHIBIT E		Form of Supply Agreement – Malaysia
EXHIBIT F		Form of Supply Agreement – Singapore
EXHIBIT G		Form of Trademark License Agreement
EXHIBIT H		Form of Sales Agreement
ANNEXES:
ANNEX A		Definitions
ANNEX B		Excluded Assets
ANNEX C		Purchased Assets
SCHEDULES:
SCHEDULE 1		Patents
SCHEDULE 2		Trademarks
SCHEDULE 3		Internet Properties
SCHEDULE 4		Copyrights and MaskWorks Registrations

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ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement is dated as of October 31, 2007 (the “Agreement”), by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies General IP (Singapore) Pte. Ltd., a company organized under the laws of Singapore (“Seller”), each Subsidiary of Seller Parent that executes a joinder to this Agreement pursuant to Section 6.7 hereof (together with Seller and Seller Parent, the “Seller Parties”), and Lite-On Technology Corporation, a Taiwan corporation (“Purchaser”) (each, a “Party” and collectively, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Seller Parties are engaged in, among other things, the Business (as defined below); and

WHEREAS, the Seller Parties desire to sell, transfer and assign, and Purchaser desires to purchase and assume, the Purchased Assets and Assumed Liabilities upon the terms and subject to the conditions specified in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

1.1 Definitions. Unless otherwise provided herein, capitalized terms used in this Agreement have the meanings ascribed to them by definition in this Agreement or in Annex A.

1.2 Rules of Construction.

(a) This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.

(b) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole (including any annexes, exhibits and schedules to this Agreement) and not to any particular provision of this Agreement, and section and subsection references are to this Agreement unless otherwise specified. The words “include,” “including,” or “includes” when used herein shall be deemed in each case to be followed by the words “without limitation” or words having similar import. The headings and table of contents in this Agreement are included for convenience of reference only and will not limit or otherwise affect the meaning or interpretation of this Agreement. The meanings given to terms defined herein will be equally applicable to both the singular and plural forms of such terms.

 

1

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ARTICLE II

PURCHASE, SALE AND ASSUMPTION

2.1 Purchase and Sale of Purchased Assets. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing the Seller Parties shall, and shall cause their Subsidiaries to, Transfer to Purchaser or, if instructed by Purchaser in writing prior to the Closing Date, to one of Purchaser’s Affiliates, and Purchaser shall, or shall cause one of its Affiliates to, purchase, acquire and accept from the Seller Parties, all of the Seller Parties’ respective right, title and interest in and to the Purchased Assets, free and clear of all Liens other than Permitted Liens, but in all cases subject to the terms of any licenses granted to third parties existing as of the date of this Agreement or any licenses granted after the date hereof not in violation of this Agreement with respect to such Transferred Business Intellectual Property and Transferred Business Intellectual Property Rights, and subject to the rights granted to Seller in the Avago General IP License Agreement.

2.2 Assumption by Purchaser of Certain Liabilities. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Purchaser shall assume and thereafter pay, perform and discharge when due only the Assumed Liabilities.

2.3 Transfer of Purchased Assets. Unless otherwise stated in the Master Separation Agreement, promptly following the Closing Date: (i) the Seller Parties shall prepare such Purchased Assets located at any facilities currently occupied by any Seller Party that are not to be purchased, assigned, subleased, transferred to or otherwise occupied by Purchaser pursuant to this Agreement or the Master Separation Agreement (each such facility, a “Seller Facility”) for relocation (it being understood that Purchaser shall reimburse the Seller Parties for their reasonable out-of-pocket expenses incurred with respect to such preparation); and (ii) Purchaser shall (A) relocate such Purchased Assets from the relevant Seller Facility; (B) be responsible for all data transfer, delivery, transmission and reformatting costs and expenses related to the acquisition of assets, and (C) indemnify, defend and reimburse the respective Seller Party for all Seller Losses arising out of any physical damage to any Seller Facility or Excluded Assets arising out of or related to Purchaser’s removal, detachment, disconnection or transportation of the Purchased Assets, provided such damage was not the result of gross negligence or willful misconduct by the Seller Parties or their agents. Subject to the terms of this Section 2.3, each Seller Party agrees to cooperate with Purchaser and provide Purchaser all assistance reasonably requested by Purchaser in connection with the planning and implementation of the transfer of Purchased Assets, whether located at any Seller Facility or a third party’s facility, or any portion of any of them to such location as Purchaser shall designate. Purchased Assets shall be transported by or on behalf of Purchaser, and until all of the Purchased Assets are removed from a Seller Facility, the applicable Seller Party will permit Purchaser and its authorized agents or representatives, upon prior notice, to have reasonable access to the Seller Facility to the extent necessary to remove the Purchased Assets. Purchaser shall be responsible for the reasonable out-of-pocket costs of the Seller Parties incurred in disconnecting and detaching all fixtures and equipment that are Purchased Assets from the floor, ceiling and walls of a Seller Facility so as to be freely removed from a Seller Facility by Purchaser. Purchaser shall be responsible for the reasonable out-of-pocket costs of the Seller Parties incurred in packaging and loading the

 

2

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Purchased Assets for transporting to and reinstalling the Purchased Assets at such location(s) as Purchaser shall determine. Risk of loss as to any Purchased Asset shall be borne by, and shall pass to, the Purchaser as of the applicable Effective Time, including with respect to any Purchased Assets located at any contract manufacturer or other third party (it being understood that the Seller Parties shall have no obligation to transfer physically any of such Purchased Assets to Purchaser).

2.4 Approvals and Consents.

(a) Notwithstanding anything to the contrary contained in this Agreement, to the extent that the assignment or attempted assignment to Purchaser of any Transferred Contract or transfer of any Purchased Assets would result in a violation of any applicable Law, or would require any Consent or waiver of any Governmental Authority or third party and such Consent or waiver shall not have been obtained prior to the Closing, this Agreement shall not constitute an assignment, attempted assignment or transfer thereof if any of the foregoing would constitute a breach of applicable Law, any Contract or the rights of any third party; provided, however, that, subject to the satisfaction or waiver of the conditions contained in Article VII, the Closing shall occur notwithstanding the foregoing without any adjustment to the Purchase Price on account of such required authorization. Following the Closing, the Parties shall use commercially reasonable efforts, and shall cooperate with each other, to obtain promptly such Consent or waiver; provided, further, however, that neither Party nor any of its Affiliates shall be obligated to grant forbearances to any third party or pay any money or other consideration therefore, except for government filing, recordation or similar fees.

(b) Once such Consent or waiver is obtained, each Seller Party shall, and shall cause its Affiliates to assign such Transferred Contract or transfer such Purchased Assets to Purchaser for no additional consideration.

(c) Until such Consent is obtained, if such Consent is not obtained, or if an attempted assignment of such Transferred Contract or transfer of such Purchased Assets would be ineffective or would adversely affect the rights of any Seller Party thereunder so that Purchaser would not in fact receive all such rights, Purchaser and the Seller Parties, as applicable, shall or shall cause their respective Subsidiaries to enter into a mutually agreeable, reasonable and lawful arrangement under which Purchaser would obtain the benefits and perform and discharge the obligations thereunder in accordance with this Agreement, or under which such Seller Party would enforce for the benefit of Purchaser at Purchaser’s sole cost and expense, with Purchaser being responsible for the performance and discharge of such Seller Party’s obligations, any and all rights of the Seller Parties against a third party, to provide to the Parties the economic (taking into account Tax costs and benefits) and operational equivalent, to the extent permitted, of obtaining such authorization, approval, consent or waiver and the performance by Purchaser of the obligations thereunder, and to the extent that is not permitted the Parties shall negotiate in good faith with the intention of reaching a reasonable resolution. Nothing in this Section 2.4 applies to any Consent or waiver required under any Antitrust Regulations, which Consents and waivers shall be governed by Section 6.3.

 

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ARTICLE III

PURCHASE PRICE AND ADJUSTMENTS

3.1 Purchase Price. The purchase price in respect of the purchase and sale transactions hereunder (the “Purchase Price”) shall be (a) an amount in cash equal to $20,000,000, as adjusted pursuant to Section 3.2, and (b) the assumption of the Assumed Liabilities, which comprises the aggregate of the respective purchase prices to be paid for the Purchased Assets.

3.2 Closing Date Payment.

(a) On the Closing Date, Purchaser shall, or shall cause one of its Affiliates to, pay to Seller (for its own account and as agent for any other Seller Party unless otherwise provided in any Local Asset Transfer Agreement) an amount equal to (i) $20,000,000, and (ii) plus or minus, as applicable, the difference between the Estimated Inventory (as defined in Section 3.2(b)) at the opening of business on the Closing Date (without giving effect to the Closing) and the Base Inventory. Such amount provided for in the immediately preceding sentence shall be payable in United States dollars in immediately available federal funds to such bank account or accounts as shall be designated in writing by Seller no later than the second Business Day prior to the Closing.

(b) For purposes of this Agreement, “Estimated Inventory” shall be an amount based on Seller’s estimate of projected Final Inventory (as defined in Section 3.2(c)) as of the opening of business on the Closing Date prepared on a basis consistent with past accounting practice of the Business in connection with Seller’s regular audited financial statements, as estimated in good faith by Seller and set forth in a certificate delivered by Seller to Purchaser, together with reasonable supporting documentation for the calculation thereof, not less than five (5) Business Days prior to the Closing Date, it being agreed that at the time of the delivery of such certificate and continuing thereafter Seller shall provide a reasonable opportunity for Purchaser to review such supporting documentation and discuss it in good faith with responsible representatives of Seller.

(c) Purchaser and Seller agree that to the extent that the Final Inventory exceeds the Estimated Inventory, Purchaser shall pay to Seller (on behalf of itself and as agent for any other Seller Party) such excess (the “Inventory Excess Amount”), and to the extent that the Final Inventory is less than the Estimated Inventory , Seller (on behalf of itself and as agent for any other Seller Party) shall pay to Purchaser such shortfall (the “Inventory Deficiency Amount”), in each case pursuant to the terms of this Section 3.2. For purposes of this Agreement, “Final Inventory” shall mean Inventory as of the opening of business on the Closing Date prepared on a basis consistent with past accounting practice of the Business as determined pursuant to this Section 3.2. As used herein, “Inventory” means all inventory of the Business as calculated and prepared in accordance with the past accounting practices of the Business in connection with Seller’s regular audited financial statements.

(d) As promptly as practicable following the Closing, but in no event later than 45 days following the Closing Date, Seller shall: (i) prepare, consistent with past accounting practice of the Business in connection with Seller’s regular audited financial statements, and deliver to Purchaser (A) a calculation of Final Inventory (the “Final Closing Statement of Inventory”) and

 

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(B) a calculation of the Inventory Excess Amount or the Inventory Deficiency Amount, if any, and (ii) make available to Purchaser all relevant books and records relating to the Final Closing Statement of Inventory. Purchaser shall cooperate with Seller, as needed, in the preparation of the Final Closing Statement of Inventory and the calculation of the Inventory Excess Amount or the Inventory Deficiency Amount, if any, as the case may be. Without limiting the generality of the foregoing, Purchaser shall provide Seller, its accountants and other representatives with reasonable access, during normal business hours, to the facilities, personnel and accounting records of the Business acquired by Purchaser, to the extent reasonably necessary to permit Seller to prepare the Final Closing Statement of Inventory.

(e) During the 30-day period following Purchaser’s receipt of the Final Closing Statement of Inventory (the “Inventory Review Period”), Purchaser and its representatives, including its independent auditors, shall be afforded the opportunity to review the Final Closing Statement of Inventory and related supporting documentation.

(f) If Purchaser does not agree with the Final Closing Statement of Inventory, Purchaser shall deliver to Seller, prior to the expiration of the Inventory Review Period, a proposed adjustment notice (“Inventory Proposed Adjustment Notice”) which shall contain, in reasonable detail, the alleged error and support for such belief and the adjustment thereof. If the Inventory Proposed Adjustment Notice is not delivered to Seller prior to the expiration of the Inventory Review Period, the Final Closing Statement of Inventory shall become final, binding and conclusive on all Parties.

(g) If an Inventory Proposed Adjustment Notice is delivered within the period set forth in Section 3.2(e), Purchaser and Seller shall negotiate in good faith to resolve such dispute for a 30-day period (the “Inventory Discussion Period”), commencing on the date Seller receives the Inventory Proposed Adjustment Notice, to resolve such dispute. If Purchaser and Seller cannot resolve such dispute within such 30-day period, Purchaser and Seller shall retain a mutually acceptable accounting firm to act as the arbitrator (the “Inventory Arbitrator”) of such dispute. The Parties shall retain the Inventory Arbitrator no later than five (5) Business Days following the expiration of the Inventory Discussion Period. In the event of a failure to retain the Inventory Arbitrator during such time period, either Party, acting individually, shall have the right to retain an internationally recognized firm of independent public accountants reasonably agreeable to Purchaser and Seller to act as the Inventory Arbitrator on behalf of both Parties. Any arbitration shall be conducted in Singapore and such proceedings shall be in English. The Inventory Arbitrator shall act promptly to resolve any dispute in accordance with the terms of this Agreement, it being understood that the sole issues for the Inventory Arbitrator shall be whether the Final Closing Inventory Statement is correct. The Inventory Arbitrator shall issue its written decision as promptly as practicable and in any event within 45 days after the appointment of such Inventory Arbitrator, which decision shall be final, binding and conclusive on both Purchaser and Seller. Purchaser and Seller shall cooperate with the Inventory Arbitrator in connection with this Section 3.2(g). Without limiting the generality of the foregoing, Purchaser and Seller shall each promptly provide, or cause to be provided, to the Inventory Arbitrator all information, and to make available at the arbitration proceeding all personnel, as are reasonably necessary to permit the Inventory Arbitrator to resolve any disputes pursuant to this Section 3.2(g). The expenses of the Inventory Arbitrator in resolving any disputes under this Section 3.2(g) shall be borne equally by Purchaser and Seller.

 

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(h) If the Final Closing Statement of Inventory, as may be adjusted pursuant to Section 3.2(g), results in a Inventory Deficiency Amount, then Seller shall pay to an account designated by Purchaser in immediately available funds an amount equal to the Inventory Deficiency Amount. If the Final Closing Statement of Inventory, as may be adjusted pursuant to Section 3.2(g), results in an Inventory Excess Amount, then Purchaser shall pay to an account designated by Seller in immediately available funds an amount equal to the Inventory Excess Amount. All payments under this Section 3.2(h) shall be made no later than the latter of (i) five (5) Business Days of the Final Closing Statement of Inventory becoming final and binding in accordance with Section 3.2(g), or (ii) two (2) Business Days after Seller or Purchaser, as the case may be, has provided the necessary account details and wire transfer instructions to the other Party. The payment of any amounts pursuant to this Section 3.2(h) shall not be subject to any set-offs, hold-backs, escrows or other reductions or restrictions.

3.3 Allocation of Purchase Price.

(a) No later than one hundred twenty (120) days after the Closing Date Seller shall provide Purchaser with its proposed allocation of the Purchase Price (and all other capitalizable costs) among the Purchased Assets and the rights granted under the Avago General IP License Agreement for all Tax purposes (the “Allocation Schedule”). Purchaser shall be given twenty (20) Business Days to review and comment upon the Allocation Schedule, and the Parties shall thereafter negotiate in good faith to resolve any disputes concerning the Allocation Schedule.

(b) Purchaser and the Seller Parties shall be bound by the Allocation Schedule and shall file all Tax Returns and reports with respect to the transactions contemplated by this Agreement (including, all federal, state and local Tax Returns) on the basis of such allocation. In addition, Purchaser and the Seller Parties shall act in accordance with the Allocation Schedule in the course of any Tax audit, Tax review or Tax litigation relating thereto, and take no position and cause their affiliates to take no position inconsistent with the Allocation Schedule for income Tax purposes, including United States federal and state income Tax and foreign income Tax, unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER AND THE OTHER SELLERS

The Seller Parties hereby jointly and severally represent and warrant to Purchaser, subject to the exceptions expressly set forth in the disclosure letter delivered by the Seller Parties to Purchaser on the date hereof and attached hereto (the “Disclosure Letter”), each of which exceptions in order to be effective shall indicate the Section and, if applicable, subsection of this Article IV to which it relates (except to the extent that the applicability of such exception to such Section or subsection is otherwise readily apparent), as follows:

4.1 Corporate Existence. Each Seller Party is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Seller Party has the requisite corporate, partnership or similar power and authority to execute and deliver this Agreement and each of the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby and to carry on the Business as the same is now being conducted.

 

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4.2 Corporate Authority.

(a) This Agreement, the Conveyance Documents, the Master Separation Agreement, the Avago General IP License Agreement, Supply Agreement – Malaysia, the Supply Agreement – Singapore, the Sales Agreement, and the other agreements, instruments and documents to be executed and delivered in connection herewith, (collectively, the “Transaction Documents”) to which any Seller Party or its Affiliate is (or becomes) a party and the consummation of the transactions contemplated hereby and thereby involving such Persons have been duly authorized by such Seller Party or its Affiliate, as applicable, by all requisite corporate, partnership or other action, and no other proceedings, consents or approvals on the part of such Seller Party or its Affiliate or its stockholders, partners or members are necessary for any Seller Party or its Affiliate to authorize the execution or delivery of this Agreement or any of the other Transaction Documents or to perform any of their obligations hereunder or thereunder. Each Seller Party or its Affiliate that is a party to any Transaction Document has full corporate or other organizational (as applicable) power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder. This Agreement has been duly executed and delivered by each Seller Party, and the other Transaction Documents will be duly executed and delivered by each Seller Party or Affiliate of a Seller Party which is a party thereto. This Agreement constitutes, and the other Transaction Documents when so executed and delivered will constitute, valid and legally binding obligations of each Seller Party or its Affiliate which is a party thereto, enforceable against it or them, as the case may be, in accordance with its terms, except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at law).

(b) The execution and delivery of this Agreement and the other Transaction Documents by the applicable Seller Parties or their Affiliates, the performance by the applicable Seller Parties or their Affiliates of their respective obligations hereunder and thereunder and the consummation by the Seller Parties or their Affiliates of the transactions contemplated hereby and thereby do not and will not (A) violate or conflict with any provision of the respective certificates of incorporation or by laws or similar organizational documents of any Seller Party or of any Affiliate of a Seller Party which is a party to any Transaction Document, (B) result in any material violation or material breach of, or constitute any material default (with or without notice or lapse of time, or both) under, or give rise to a right of recapture, termination, cancellation or acceleration of any material obligation or a loss of a material benefit under, require that any Consent be obtained or result in the creation of any Lien under, any material Transferred Contract, including Transferred Material Contracts, to which any Seller Party (or any Affiliate of a Seller Party which is a party to any Transaction Document) is a party or to which any assets of any

 

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Seller Party (or any Affiliate of a Seller Party which is a party to any Transaction Document) is subject, or (C) materially violate, conflict with or result in any breach under any provision of any Law applicable to any Seller Party (or any Affiliate of a Seller Party which is a party to any Transaction Document) or any of its respective properties or assets.

4.3 Governmental Approvals and Consents. Seller is not subject to any order, judgment, decree, stipulation, injunction or agreement with any United States, supranational or foreign, federal, state, provincial, municipal or local government, government agency, court of competent jurisdiction, administrative agency or commission or other governmental or regulatory authority or instrumentality (“Governmental Authority”) which would prevent or materially interfere with or delay the consummation of this Agreement or would be reasonably likely to have a Seller Material Adverse Effect. No Proceeding is pending or, to the knowledge of Seller, threatened against Seller which would prevent or materially interfere with or delay the consummation of this Agreement. Except as set forth in Section 4.3 of the Disclosure Letter and except for (i) required filings under applicable Antitrust Regulations and (ii) if determined to be necessary by Seller, the filing of this Agreement with the SEC, no Consent, order, or license from, notice to or registration, declaration or filing with, any Governmental Authority, is required on the part of Seller in connection with the execution, delivery or performance of this Agreement or any of the other Transaction Documents or the consummation of the transactions contemplated hereby and thereby except for such Consents, orders, or licenses from, notices to or registrations, declarations or filings which have been made or obtained and remain in full force and effect and those with respect to which the failure to have made or obtained or to remain in full force and effect would not have a Seller Material Adverse Effect.

4.4 Title to Purchased Assets. The Seller Parties have, or at the Closing will have, and Purchaser will at the Closing acquire, good and valid title to the Purchased Assets, free and clear of all Liens, except Permitted Liens and Liens arising out of any actions of Purchaser and its Affiliates.

4.5 Condition of Purchased Assets. Except as set forth at Section 4.5 of the Disclosure Letter and notwithstanding anything to the contrary, express or implied (including the language contained at Section 4.16 of this Agreement), all of the properties and assets, owned, leased or utilized exclusively in connection with the operation of the Business, whether real, personal or mixed, including without limitation the Purchased Assets, are in good operating order, ordinary wear and tear excepted.

4.6 Contracts.

(a) Except as set forth on Section 4.6(a) of the Disclosure Letter (any Contract specified in Section 4.6(a) of the Disclosure Letter is referred to as a “Transferred Material Contract”), no Transferred Contract in effect as of the date of this Agreement constitutes:

(i) any Contract to which any Seller Party or any of their respective Affiliates is a party limiting in any material respect the right of any Seller Party to engage in any material line of business or to compete with any Person, in each case which would apply to the activities of Purchaser after the Closing with respect to the Purchased Assets;

 

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(ii) a lease, sublease or similar Contract with any Person under which (A) any Seller Party is lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by any Person or (B) any Seller Party is a lessor or sublessor of, or makes available for use by any Person, any machinery, equipment, vehicle or other tangible personal property owned or leased by any Seller Party in any such case that has an aggregate future liability or receivable, as the case may be, in any fiscal year in excess of $150,000 and is not terminable by the applicable Seller Party, as the case may be, by notice of not more than 45 days for a cost of less than $150,000;

(iii) (A) a Contract for the purchase or sale by any Seller Party of materials, supplies, equipment, services, inventory, or Purchased Assets, (B) a management, consulting or other Contract for services to be provided to or by any Seller Party, or (C) an advertising agreement or arrangement, in any such case that has an aggregate future liability in any fiscal year to any Person in excess of $150,000 and is not terminable by the applicable Seller Party, as the case may be, by notice of not more than 30 days;

(iv) a Contract (including any take or pay or keepwell agreement) under which (A) any Person has guaranteed indebtedness, liabilities or obligations of any Seller Party or (B) any Seller Party has guaranteed indebtedness, liabilities or obligations of any other Person (in each case other than endorsements for the purpose of collection in the ordinary course of business), in each case in excess of $100,000 individually or $300,000 in the aggregate;

(v) a Contract between any Seller Party and any other Person, regarding an advance, loan, extension of credit, capital contribution, or other investment (other than extensions of trade credit in the ordinary course of business and loans to employees in the ordinary course of business consistent with past practice not in excess of $100,000 per employee) in excess of $100,000 individually or $300,000 in the aggregate;

(vi) a Contract granting a Lien upon any property (tangible or intangible) used in connection with the Business or any other Purchased Asset which Lien secures an obligation in excess of $150,000, other than Permitted Liens;

(vii) a Contract with (A) any Seller Party or (B) any shareholder, officer, director, employee or Affiliate of any Seller Party;

(viii) a Contract providing for the services of any broker, dealer, distributor, sales representative, franchise, agency or similar representative, the terms of which provide for financial commitments in excess of $150,000 by any Seller Party;

(ix) a Contract to which any Seller Party is a party pertaining to the Business that is material to the Business and not made in the ordinary course of business; or

(x) a Business Intellectual Property License that is material to the Business.

 

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(b) All Transferred Material Contracts are valid, binding and in full force and effect with respect to the Seller Parties party thereto, as the case may be, and have not been amended or modified in any material respect except as set forth therein. Seller has made available to Purchaser or its counsel true, complete and correct copies of all Transferred Material Contracts as in effect on the date hereof. Each Seller Party party thereto has performed all material obligations required to be performed by it under the Transferred Material Contracts, and it is not (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder and, to the knowledge of Seller, no other party to any Transferred Material Contract is (with or without the lapse of time or the giving of notice, or both) in material breach or material default thereunder.

(c) Notwithstanding the foregoing, the provisions of this Section 4.6 shall not apply to Seller Plans (which are addressed in Section 4.11).

4.7 Litigation. No Seller Party is subject to any order, judgment, stipulation, injunction, decree or agreement which would reasonably be expected to prevent or materially interfere with or delay the consummation of any of the transactions contemplated by the Transaction Documents or would reasonably be expected to have a Seller Material Adverse Effect. No Proceeding is pending or, to the knowledge of Seller, threatened against any Seller Party or any of their respective Affiliates (i) with respect to any Business Employee or (ii) that would reasonably be expected to prevent or materially interfere with or delay the consummation of the transactions contemplated hereby or by any of the other Transaction Documents. Except as set forth on Section 4.7 of the Disclosure Letter, there are no Proceedings pending or, to the knowledge of Seller, threatened against any Seller Party or any of their respective Affiliates in respect of the Business, the Purchased Assets, the Assumed Liabilities, the Business Intellectual Property Rights or the Seller Plans, except for (a) any pending or threatened Proceeding that (i) seeks less than $150,000 in damages and (ii) does not seek injunctive or other similar relief, or (b) Proceedings commenced following the date hereof which would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.

4.8 Business Intellectual Property Rights.

(a) Section 4.8(a) of the Disclosure Letter sets forth a list of all material Contracts relating to Business Intellectual Property Rights entered into by any Seller Party or any of their respective Subsidiaries other than Business Intellectual Property Licenses and licenses to off-the-shelf office productivity software that is generally commercially available pursuant to shrink-wrap, click-wrap or similar license agreements.

(b) The Seller Parties own the Transferred Business Intellectual Property free and clear of any Liens.

(c) To the knowledge of Seller, no Proceedings have been instituted, pending or threatened against any Seller Party or any of their respective Subsidiaries or, to the knowledge (without due inquiry) of Seller as of the date of this Agreement, against Agilent or HP, which materially and negatively affects the rights of any Seller Party or any of their respective Subsidiaries with respect to the Transferred Business Technology, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights.

 

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(d) None of the Transferred Business Technology, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, or to the knowledge of Seller, any Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights is subject to any outstanding judgment, decree, order, writ, award, injunction or determination of an arbitrator or court or other Governmental Authority materially and negatively affecting the rights of any Seller Party or any of their respective Subsidiaries with respect thereto.

(e) To the knowledge of Seller, no Seller Party has, and the use by the Seller Parties or any of their respective Subsidiaries of the Transferred Business Technology, Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights, Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights has not, infringed, otherwise violated or conflicted with the Intellectual Property Rights of any other Person. No other term of this Agreement shall be interpreted to be inconsistent with the foregoing.

(f) As of the date hereof, no Seller Party or any of their respective Subsidiaries has received any written notice, and there is no pending Proceeding to which any Seller Party or any of their respective Subsidiaries is a party, alleging (i) that any use of the Transferred Business Technology, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights by any Seller Party or any of their respective Subsidiaries infringes, otherwise violates or conflicts with any Intellectual Property Right of any other Person, (ii) invalidity or unenforceability of the Transferred Business Technology, Transferred Business Intellectual Property, Transferred Business Intellectual Property Rights, Licensed Business Technology, Licensed Business Intellectual Property or Licensed Business Intellectual Property Rights, or (iii) ownership, solely or jointly, of the Transferred Business Technology, Transferred Business Intellectual Property or Transferred Business Intellectual Property Rights or any portion thereof by any other Person.

(g) To the knowledge of Seller, there is no unauthorized use, misappropriation or infringement of any Transferred Business Technology, Transferred Business Intellectual Property or Transferred Intellectual Property Rights including by any employee or former employee of any Seller Party.

(h) The Seller Parties and their respective Subsidiaries have taken commercially reasonable steps to preserve the confidentiality of their Trade Secrets that relate to the Business and the Purchased Assets. Neither the Seller Parties nor any of their respective Subsidiaries are under any obligation to disclose their respective material proprietary software of the Business in source code form, except to parties that have agreed to preserve the confidentiality of such source code. Neither the Seller Parties nor any of their respective Subsidiaries have intentionally incorporated any disabling device or mechanism in the IR Products.

(i) None of the Seller Parties or any of their respective Subsidiaries has received any notice nor is there any pending Proceeding alleging that any Seller Party or any of their respective Subsidiaries is obligated to indemnify any Person for alleged infringements or violations of Intellectual Property Rights of any other Person.

 

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(j) Schedules 1, 2, 3 and 4 hereto, respectively, set forth a true, correct and complete list of all of the Transferred Business Intellectual Property Rights that constitutes a Patent, Trademark, Internet Property, registered Copyright or registered MaskWork. Except as set forth on Schedules 1, 2, 3 and 4, each such item of Transferred Business Intellectual Property as of the date hereof is solely owned and recorded solely in the name of a Seller Party. All maintenance fees, annuities and other fees and payments to any Governmental Authority required to keep any item listed on Schedules 1, 2, 3 and 4 active during the 90-day period following the Closing Date have been paid in full in a timely manner, except for those items on Schedules 1, 2, 3 and 4 indicated as “abandoned,” expired,” “dead” or “unfiled.”

(k) Neither the Seller Parties nor any of their respective Subsidiaries are a party to, and Seller has no knowledge (without due inquiry) of the existence as of the date of this Agreement of, any Contract pursuant to which a Seller Party or any of their respective Subsidiaries is restricted from assigning, transferring, or granting a license to Purchaser under the Avago General IP License Agreement to any Patent, other than design patents owned by a Seller Party or any of their respective Subsidiaries and that has a First Effective Filing Date prior to the Closing Date.

4.9 Finders; Brokers. None of the Seller Parties nor any of their Affiliates has employed any finder or broker in connection with the Purchase who would have a valid claim for a fee or commission from Purchaser or any of its Affiliates in connection with the negotiation, execution or delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby.

4.10 Tax Matters.

(a) (i) None of the Seller Parties is currently engaged, or has been engaged during the three year period ending on the Closing Date, in any material disputes with any Governmental Authority with respect to Taxes attributable to the Business, and (ii) no Governmental Authority has proposed to make or has made any material adjustment with respect to Taxes attributable to the Purchased Assets.

(b) There is no material Liability for any unpaid Taxes in respect of the Purchased Assets.

(c) None of the Purchased Assets (i) is property that is required to be treated for Tax purposes as being owned by any Person other than the Seller Parties; (ii) is “tax exempt bond financed property” or “tax-exempt use property,” each within the meaning of Section 168 of the Code; or (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code.

4.11 Employment and Benefits.

(a) Each individual falling within the definition of Business Employee performs all or substantially all of his or her services for Seller and its Subsidiaries for or on behalf of the Business.

 

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(b) Section 4.11(b) of the Disclosure Letter sets forth a true, complete and correct list of every Business Employee, including columns for: (i) the Seller Party or Subsidiary thereof employing such Business Employee; (ii) indication of exempt or non-exempt status; (iii) current base salary or wage; (iv) prior year bonus and other incentive or commission compensation, if any, paid or earned but not yet paid; (v) target bonus; (vi) any equity compensation, including any share options or share purchase rights; (vii) any outstanding loan amount; (viii) indication of expatriate status; (ix) job title; and (x) city and nation of employment.

(c) As of the date hereof, no Business Employee has notified any Seller Party in writing of his or her intent to resign or of any significant grievance about his or her terms or conditions of employment.

(d) Each Seller Party has materially complied with all applicable laws related to the employment of Business Employees, including provisions related to wages, hours, leaves of absence, severance, collective bargaining and the payment of central provident fund and other taxes. No Seller Party has knowledge of any Liability under any applicable law related to the employment of Business Employees other than ordinary and usual Liabilities incurred in the ordinary course of business.

(e) With respect to each Seller Plan, the Seller Parties have provided to Purchaser or its counsel a current summary description thereof and copies of all documents governing the Seller Plans with respect to which Purchaser shall incur or have a reasonable likelihood of incurring any material Liability after the Closing, including a true, complete and correct copy thereof, a copy of any financing vehicles underlying the Seller Plans, and a list of each material insurance policy with respect to any of such Seller Plans.

(f) Each of the Seller Plans has been maintained, operated and administered in material compliance with its terms and the provisions of applicable Law.

(g) Each Seller Plan which must be registered or qualified in the country in which it is maintained has received or timely applied for such registration or qualification and such Seller Plan has not been amended since the date of its most recent registration or qualification (or application therefor) in a manner that would require a new registration or qualification.

(h) There are no pending or, to the knowledge of Seller, claims, threatened claims, litigation or arbitration proceedings with respect to any Seller Plans, other than ordinary and usual claims for benefits by participants and beneficiaries. All contributions, premiums, expenses and other payments required to be made by any Seller Party or any of their respective Affiliates in connection with the Seller Plans by the Closing Date have been made.

(i) The consummation of the transactions described in this Agreement will not to the knowledge of Seller accelerate the time of payment or vesting or trigger any payment or funding (through a trust or otherwise) of compensation or benefits under, or increase the amount payable or create any other material obligation pursuant to, any of the Seller Plans.

 

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4.12 Labor Matters. (i) There is no labor strike, slowdown, work stoppage or lockout pending or, to the knowledge of Seller, threatened against or affecting any Seller Party and, since December 1, 2005, there has not been any such action; (ii) there are no union claims to represent any Business Employees; and (iii) no Seller Party is a party to or bound by any collective bargaining or similar agreement with any labor organization.

4.13 Sufficiency of Assets. The Purchased Assets together with the Intellectual Property Rights and Technology licensed to Purchaser pursuant to the Avago General IP License Agreement, and the other rights, licenses, services and benefits to be provided pursuant to this Agreement and the other Transaction Documents, constitute all of the assets, properties and rights that are (i) owned by any of the Seller Parties or any of their respective Subsidiaries or (ii) leased or licensed to any of the Seller Parties or any of their respective Subsidiaries and in the case of clauses “(i)” and “(ii)” that are used by any Seller Party or any of their respective Subsidiaries to conduct the Business in all material respects as currently conducted other than (A) the Excluded Assets described in Annex B (it being understood that the Intellectual Property Rights and Technology licensed to any Seller Party or any of their respective Subsidiaries are not considered Excluded Assets for purposes of this Section 4.13 only, notwithstanding any language to the contrary contained in Section (e)(1) of Annex B), (B) any Contracts or other assets or rights that pursuant to Section 2.4 are not transferred to Purchaser, (C) the assets, properties and rights used by the Seller Parties to perform the services that are the subject of the Master Separation Agreement, (D) additional real property and tangible personal property that would be required to support an increased level of business after the Closing Date resulting from design wins attributable to products currently undergoing design qualification with potential customers, and (E) as provided in Section 4.13 of the Disclosure Letter. The parties acknowledge and agree that the foregoing statement does not constitute a representation or warranty as to any potential, actual or suspected infringement, other violation of or conflict with any Intellectual Property Rights of any other Person by any of the Seller Parties or any of their respective Subsidiaries.

4.14 Suppliers. Section 4.14 of the Disclosure Letter sets forth the name of each of the top ten (measured by accounts payable incurred on behalf of the Business) suppliers of goods and services to the Business for the eight months ended July 31, 2007. As of the date hereof, no Seller Party or any of their respective Affiliates has received written notification that any such supplier intends to terminate or materially adversely change its relationship with the Business.

4.15 Customers. Section 4.15 of the Disclosure Letter sets forth the name of each end-user customer (meaning original equipment manufacturers) accounting for at least 10% of the revenue of the Business for the eleven months ended July 31, 2007. As of the date hereof, no Seller Party or any of their respective Affiliates has received written notification that any such customer of the Business intends to terminate or materially adversely change its relationship with the Business.

4.16 No Other Representations or Warranties. Except for the representations and warranties contained in this Article IV or in the other Transaction Documents (or any certificates delivered by any Seller Party to Purchaser in accordance with this Agreement), Purchaser acknowledges and agrees that none of the Seller Parties or any other Person makes any other express, implied or statutory representation or warranty with respect to the Business, the Purchased Assets, the Assumed Liabilities or otherwise, including any implied warranties of merchantability, fitness for a particular purpose, title, enforceability or non infringement, including as to (a) the physical condition or usefulness for a particular purpose of the real or tangible personal property included

 

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in the Purchased Assets, (b) the use of the Purchased Assets and the operation of the Business by Purchaser after the Closing, in any manner other than as used and operated by the Seller Parties, or (c) the probable success or profitability of the ownership, use or operation of the Purchased Assets by Purchaser after the Closing. Except for the representations and warranties contained in this Article IV or in the other Transaction Documents (or any certificate delivered by any Seller Party to Purchaser in accordance with this Agreement), all Purchased Assets are conveyed on an “AS IS” and “WHERE IS” basis. Except for Liabilities in respect of the representations and warranties contained in this Article IV or in the other Transaction Documents (or any certificates delivered by any Seller Party to Purchaser in accordance with this Agreement), and the indemnification obligations set forth herein, no Seller Party or any other Person will have or be subject to any liability or indemnification obligation to Purchaser or any other Person for any information provided to the Purchaser or its representatives relating to the Business, the Purchased Assets, or otherwise in expectation of the transactions contemplated by this Agreement and any information, document, or material made available to Purchaser or its counsel or other representatives in Purchaser’s due diligence review, including in certain “data rooms” (electronic or otherwise) or management presentations. The representations, warranties, covenants and obligations of Purchaser, and the rights and remedies that may be exercised by Purchaser shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, Purchaser or any of its representatives.

ARTICLE V

REPRESENTATIONS OF PURCHASER

Purchaser hereby represents and warrants to the Seller Parties, subject to the exceptions set forth in the disclosure letter delivered by Purchaser to the Seller Parties on the date hereof and attached hereto (the “Purchaser Disclosure Letter”), each of which exceptions in order to be effective shall indicate the Section and, if applicable, subsection of this Article V to which it relates (except to the extent that the applicability of such exception to such Section or subsection is otherwise readily apparent), as follows:

5.1 Corporate Existence. Purchaser is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

5.2 Corporate Authority.

(a) This Agreement, the Conveyance Documents and the other Transaction Documents to which Purchaser is a party, and the consummation of the transactions contemplated hereby and thereby involving Purchaser have been duly authorized by Purchaser by all requisite corporate, partnership or other action. Purchaser has full power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder. This Agreement has been duly executed and delivered by Purchaser, and the other Transaction Documents will be duly executed and delivered by Purchaser. This Agreement constitutes, and the other Transaction Documents when so executed and delivered will constitute, valid and legally binding obligations of Purchaser, enforceable against it in accordance with their terms except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at Law).

 

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(b) The execution and delivery of this Agreement and the other Transaction Documents by Purchaser, the performance by Purchaser of its obligations hereunder and thereunder and the consummation by Purchaser of the transactions contemplated hereby and thereby, do not and will not (A) violate or conflict with any provision of the certificate of incorporation or by laws or similar organizational documents of Purchaser, (B) result in any violation or breach of, or constitute any default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a material benefit under, or result in the creation of any Lien under any contract, indenture, mortgage, lease, note or other agreement or instrument to which Purchaser is subject or is a party, or (C) violate, conflict with or result in any breach under any provision of any Law applicable to Purchaser or any of its properties or assets, except, in the case of clauses (B) and (C), to the extent that any such default, violation, conflict, breach or loss would not reasonably be expected to have a Purchaser Material Adverse Effect.

5.3 Governmental Approvals, Orders and Consents. Purchaser is not subject to any order, judgment, decree, stipulation, injunction or agreement with any Governmental Authority which would prevent or materially interfere with or delay the consummation of this Agreement or would be reasonably likely to have a Purchaser Material Adverse Effect. No Proceeding is pending or, to the knowledge of Purchaser, threatened against Purchaser which would prevent or materially interfere with or delay the consummation of this Agreement. Except for (i) required filings under applicable Antitrust Regulations and (ii) if determined to be necessary by Purchaser, the filing of this Agreement with the SEC, no Consent, order, or license from, notice to or registration, declaration or filing with, any Governmental Authority, is required on the part of Purchaser in connection with the execution, delivery or performance of this Agreement or any of the other Transaction Documents or the consummation of the transactions contemplated hereby and thereby except for such Consents, orders, or licenses from, notices to or registrations, declarations or filings which have been made or obtained and remain in full force and effect and those with respect to which the failure to have made or obtained or to remain in full force and effect would not have a Purchaser Material Adverse Effect.

5.4 Financial Capacity. Purchaser has possession of sufficient funds to consummate the transactions contemplated by this Agreement and each Conveyance Document.

5.5 Finders; Brokers. None of Purchaser nor any of its Affiliates has employed any finder or broker in connection with this Agreement who would have a valid claim for a fee or commission from any Seller Party or any of their respective Affiliates in connection with the negotiation, execution or delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the transactions contemplated hereby or thereby.

5.6 No Other Representations or Warranties. Except for the representations and warranties contained in this Article V, the Seller Parties acknowledge and agree that neither Purchaser nor any other Person makes any other express, implied or statutory representation or warranty on behalf of Purchaser.

 

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ARTICLE VI

COVENANTS AND AGREEMENTS

6.1 Operation of the Business. Except as otherwise expressly provided in this Agreement or as disclosed in Section 6.1 of the Disclosure Letter, each Seller Party covenants that, in respect of the Business (it being understood that nothing in this Section 6.1 shall in any way limit any Seller Party’s or any of their Subsidiaries’ operation of the Retained Business), from the date of this Agreement until the Closing they will, and will cause their Subsidiaries to, use commercially reasonable efforts, to maintain and preserve intact the Business in all material respects and to maintain in all material respects the ordinary and customary relationships of the Business with their suppliers, customers and others having business relationships with them with a view toward preserving for Purchaser after the Closing Date the Purchased Assets and the goodwill associated therewith. Subject to applicable Law and except as otherwise expressly provided in this Agreement or Section 6.1 of the Disclosure Letter, from the date of this Agreement until the Closing, without the prior written approval of Purchaser (which approval shall not be unreasonably withheld, conditioned or delayed), the Seller Parties shall, and shall cause their Subsidiaries in respect of the Business to, continue to operate and conduct the Business in the ordinary course of business consistent with past practice. Without limiting the generality of the foregoing, except as otherwise expressly provided in this Agreement or Section 6.1 of the Disclosure Letter, and subject to applicable Law, the Seller Parties, from the date of this Agreement until the Closing, shall not and shall cause their Subsidiaries not to, without the prior written approval of Purchaser (which approval shall not be unreasonably withheld, conditioned or delayed), take any of the following actions with respect to the Purchased Assets:

(a) transfer, sell, lease, assign, license or otherwise convey or dispose of, or suffer to exist any Lien (other than Permitted Liens) on, any of the Purchased Assets, the Owned Real Property or Assigned Real Property, other than (i) sales of inventory in the ordinary course of business consistent with past practices, or (ii) Permitted Liens;

(b) terminate any Business Employee, grant any leave of absence greater than two weeks (other than as required by applicable Law in which case Purchaser need only be notified of the reason for such leave and the approved length), transfer any Business Employee, hire any new employees, or grant any increase in the compensation or benefits arrangements of an Business Employee or under any Seller Plan, except for increases in the compensation or benefits of such employees: (A) in the ordinary course of business consistent with past practices, or (B) as required by applicable Law from time to time in effect or by any employee benefit plan, program or arrangement sponsored by any Seller Party or one of their Affiliates in effect on the date hereof;

(c) cancel, compromise, release or assign any Indebtedness owed to the Business or any claims held by the Business, in each case that would otherwise constitute Purchased Assets, other than in the ordinary course of business consistent with past practice and in any event not in excess of $500,000 in the aggregate;

 

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(d) enter into any Contract that would be deemed to be a Transferred Material Contract if it were in existence as of the date of this Agreement or terminate (other than by expiration) or amend or modify (other than by automatic extension or renewal if deemed an amendment or modification of any such contract) in any material respect the terms of any Transferred Material Contract or either Assigned Lease other than in the ordinary course of business consistent with past practice;

(e) enter into any Contract containing a covenant not to compete or any other covenant restricting the development, manufacture, marketing or distribution of the products or services of the Business or that would adversely affect Purchaser’s ability to use, deploy, exploit, market, distribute, sell or otherwise develop the Purchased Assets or amend or extend in a manner adverse to the Business any such covenant in any existing Transferred Contract;

(f) acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets (other than Inventory) that are material, individually or in the aggregate, to the Business;

(g) (i) institute, settle or agree to settle any pending demand or Proceeding relating to or affecting the Purchased Assets or Assumed Liabilities (other than settlements of Proceedings (1) not involving Intellectual Property or Tax matters, (2) involving solely the payment of money damages (3) not involving an admission of liability) and (4) settled for less than US$150,000, or (ii) waive or surrender any rights related to any pending or threatened litigation to the extent relating to or affecting the Purchased Assets or Assumed Liabilities;

(h) enter into any financing or guarantee arrangement, agreement or undertaking with any customer of the Business or any financial institution, leasing company or similar business that permits recourse to Purchaser or any of its Affiliates which would constitute an Assumed Liability (other than accounts payable incurred in the ordinary course of business consistent with past practice);

(i) grant any allowances or discounts outside the ordinary course of business or sell inventory (1) materially in excess of reasonably anticipated consumption for the near term, or (2) outside the ordinary course of business and inconsistent with past practice;

(j) make or change any material election in respect of Taxes, enter into any closing agreement in respect of Taxes, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; or

(k) agree or commit to do any of the foregoing.

6.2 Investigation of Business; Confidentiality.

(a) From the date of this Agreement until the Closing, the Seller Parties shall, and shall cause their Affiliates to, permit Purchaser and its authorized agents or representatives and financing sources to have reasonable access to the properties, books, records, Contracts and such financial (including working papers) and operating data of the Business and the Business Employees as Purchaser may reasonably request, at reasonable hours to review information and

 

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documentation, and the opportunity to ask questions relative to the properties, books, contracts, commitments and other records of the Business and to conduct any other reasonable investigations; provided, that such investigation shall only be upon reasonable notice and shall not unreasonably disrupt the personnel and operations of the Seller Parties, shall comply with the reasonable security and insurance requirements of the Seller Parties and shall be at Purchaser’s sole risk and expense. Notwithstanding the foregoing, the Seller Parties shall have no obligation to disclose any information the disclosure of which is subject to a confidentiality obligation in favor of any third party; provided that the Seller Parties shall use their commercially reasonable efforts to obtain waivers under such agreements or implement requisite procedures to enable the provision of reasonable access to such information without violating such obligations. All requests for access to the offices, properties, books and records of the Business and Business Employees shall be made to the representative designated at Section 11.1 or such other representatives of the Seller Parties as such party shall designate, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. It is further agreed that neither Purchaser nor any of its Affiliates, agents or representatives shall contact any of the employees, customers (including dealers and distributors), suppliers, joint venture partners or other Affiliates of the Seller Parties in connection with the transactions contemplated hereby, whether in person or by telephone, electronic or other mail or other means of communication, without the specific prior authorization of such representatives of the Seller Parties, which shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, no Seller Party shall be required to provide access to or disclose information where such access or disclosure would waive the attorney client privilege of the Seller Parties or contravene any Law or binding agreement entered into with a non-Seller Party prior to the date of this Agreement. The relevant parties shall make appropriate substitute disclosure arrangements under the circumstances in which the restrictions of the preceding sentence apply.

(b) The Parties expressly acknowledge and agree that this Agreement and its terms and all information, whether written or oral, furnished by either Party to the other Party or any Affiliate of such other Party in connection with the negotiation of this Agreement or pursuant to Section 6.5 (“Confidential Information”) shall be treated as “confidential information” under the Confidentiality Agreement.

6.3 Necessary Efforts; No Inconsistent Action.

(a) Subject to the other terms and conditions of this Agreement, including the conditions set forth in Article VII, the Seller Parties and Purchaser agree, and each of the Seller Parties agree to cause their Affiliates, to use their respective commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Law to consummate and make effective the transactions contemplated by the Transaction Documents and to use their respective commercially reasonable efforts to cause, with respect to the Seller Parties, the conditions set forth in Sections 7.1 and 7.3, and with respect to Purchaser, the conditions set forth in Sections 7.1 and 7.2, to be satisfied, including all actions necessary to obtain (i) all licenses, certificates, permits, approvals, clearances, expirations, waivers or terminations of applicable waiting periods, authorizations, qualifications and orders (each a “Consent”) of any Governmental Authority required for the satisfaction of the conditions set forth in Section 7.1(b), and (ii) all other Consents (it being understood that the failure to obtain

 

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any such Consents contemplated by this clause (ii) shall not, by itself, cause the condition set forth in Section 7.3(b) to be deemed not to be satisfied, and it being further understood that neither Party nor any of their respective Affiliates shall be required to expend any money other than for filing fees or expenses or de minimus costs or expenses or agree to any restrictions in order to obtain any Consents) necessary in connection with the consummation of the transactions contemplated by the Transaction Documents; provided, however, that the foregoing provisions of this Section 6.3 shall not require any Party to perform, satisfy or discharge any obligations of any other Party under this Agreement or otherwise.

6.4 Public Disclosures. Unless otherwise required by Law, the rules and regulations of any stock exchange or quotation services on which such Party’s stock is traded or quoted or pursuant to scheduled earnings releases and scheduled analyst conference calls, prior to the Closing Date, no news release or other public announcement pertaining to the transactions contemplated by this Agreement will be made by or on behalf of any Party or its Affiliates without the prior written approval of the other Party (which approval shall not be unreasonably withheld, conditioned or delayed). If in the judgment of either Party such a news release or public announcement is required prior to the Closing Date by Law or the rules or regulations of any stock exchange on which such Party’s stock is traded, the Party intending to make such release or announcement shall to the extent practicable use commercially reasonable efforts to provide prior written notice to the other Party of the contents of such release or announcement and to allow the other Party reasonable time to comment on such release or announcement in advance of such issuance. The Parties acknowledge and agree that Purchaser may issue a news release or public announcement immediately following the execution of this Agreement, as required by relevant Law; provided however that prior to such release or announcement Purchaser shall provide a copy of such proposed release or announcement and permit Seller a reasonable period of time to comment on such release or announcement.

6.5 Access to Records, Personnel, the Owned Real Property and the Assigned Real Property.

(a) Exchange of Information. From the Closing until the fifth anniversary of the Closing, each Party agrees to provide, or cause to be provided, to each other, as soon as reasonably practicable after written request therefor and at the requesting Party’s sole expense, reasonable access (including using commercially reasonable efforts to give access to third parties possessing information), during normal business hours, to the other Party’s employees and to any books, records, documents, files and correspondence in the possession or under the control of the other Party that the requesting Party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting Party (including under applicable securities Laws) by a Governmental Authority having jurisdiction over the requesting Party, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy Tax, audit, accounting, claims, regulatory, litigation or other similar requirements or (iii) to comply with its obligations under this Agreement; provided, however, that no Party shall be required to provide access to or disclose information where such access or disclosure would violate any Law or agreement, or waive any attorney client or other similar privilege, and each Party may redact information regarding itself or its Affiliates or otherwise not relating to the other Party and its Affiliates, and, in the event such provision of information could reasonably be expected to violate any Law or agreement or waive any attorney client or other similar privilege, the Parties shall take all commercially reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.

 

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(b) Record Retention. Except as otherwise provided herein, each Party agrees to use its commercially reasonable efforts to retain the books, records, documents, instruments, accounts, correspondence, writings, evidences of title and other papers relating to the Business, and the Purchased Assets (the “Books and Records”) in their respective possession or control for the longer of (i) a commercially reasonable period of time, as set forth in their regular document retention policies, following the Closing Date or (ii) for such longer period as may be required by Law or as may be reasonably requested in writing by any Party, or (iii) until the expiration of the relevant representation or warranty under any of the Transaction Documents and any related claim of indemnification related thereto. Notwithstanding the foregoing, any Party may destroy or otherwise dispose of any Books and Records not in accordance with its retention policy, provided that, prior to such destruction or disposal (i) such Party shall provide no less than 90 nor more than 120 days’ prior written notice to the other Party of any such proposed destruction or disposal (which notice shall specify in detail which of the Books and Records is proposed to be so destroyed or disposed of), and (ii) if a recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the information proposed to be destroyed or disposed of be delivered to such recipient, such Party proposing the destruction or disposal shall, as promptly as practicable, arrange for the delivery of such of the Books and Records as was requested by the recipient (it being understood that all reasonable out of pocket costs associated with the delivery of the requested Books and Records shall be paid by such recipient).

(c) Limitation of Liability. Except in the event of fraud, willful misconduct or gross negligence, no Party shall have any liability to any other Party in the event that any information exchanged or provided pursuant to this Section 6.5 is found to be inaccurate. No Party shall have any liability to any other Party if any information is destroyed or lost after commercially reasonable efforts by such Party to comply with the provisions of Section 6.5(b).

(d) Confidential Information. Nothing in this Section 6.5 shall require either Party to violate any agreement with any third parties regarding the confidentiality of confidential and proprietary information; provided, however, that in the event that either Party is required under this Section 6.5 to disclose any such information, that Party shall use all commercially reasonable efforts to seek to obtain such third party’s consent to the disclosure of such information and implement requisite procedures to enable the disclosure of such information.

6.6 Employee Relations and Benefits.

(a) The Parties intend that there shall be continuity of employment with respect to the Business Employees as follows:

(i) Automatic Transferred Employees shall not be terminated upon Closing, and the rights, powers, duties, liabilities and obligations of Seller (or the relevant Subsidiary of Seller) to such employees in respect of the material terms of employment with such employees in force immediately before Closing shall be transferred to Purchaser or one of its Affiliates in accordance with local employment Laws;

 

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(ii) Except as set forth on Section 6.6(a) of the Disclosure Letter, Purchaser or one of its Affiliates shall offer employment to each Business Employee who is not an Automatic Transferred Employee effective on the Closing Date. Each such offer shall include terms no less favorable in the aggregate than the terms provided to such employee by Seller or its Affiliates as of the date hereof.

(iii) Those employees who are transferred to Purchaser and/or one of its Affiliates in accordance with clause (i) above, and those who accept an offer of employment from Purchaser or one of its Affiliates in accordance with clause (ii) above and, in each case, who commence employment with Purchaser or one of its Affiliates shall be referred to herein as “Transferred Employees.”

(b) Effective as of the Closing Date with respect to those Transferred Employees who are not Automatic Transferred Employees, Purchaser shall, or shall cause one of its Affiliates to, provide employee benefits to such Transferred Employees on terms and conditions that are no less favorable in the aggregate to such employees as the terms and conditions of such benefits offered to such employees by Seller or its Affiliates as of the date hereof.

(c) Purchaser shall assume and shall indemnify Seller Parent and its Subsidiaries against all liabilities and obligations to provide any payments, including, without limitation, severance and payment-in-lieu of notice, to (i) any Business Employees who are entitled to severance or similar payments under applicable local Laws due to Purchaser’s noncompliance with Sections 6.6(a)(i), (a)(ii) and (a)(iii), and (ii) except as otherwise provided in this Section 6.6 or with respect to any payments under a Seller Plan, any Transferred Employee whose employment is terminated by Purchaser or its Affiliates following the Closing Date. The Purchaser’s liability under this Section 6.6(c) shall be limited to the greater of (X) the amount payable pursuant to the provisions of the severance plans, policies and programs of Seller Parent and its Subsidiaries, including any payment-in-lieu of notice policies, as in effect as of the date hereof, and (Y) the amount required to be paid pursuant to local Laws, including any payment-in-lieu of notice. Section 6.6(c) of the Disclosure Letter describes in summary form the amounts payable under such plans, policies or programs.

(d) Seller and its Affiliates shall retain responsibility for and continue to pay all medical, life insurance, disability and other welfare plan expenses and benefits for each Business Employee with respect to claims incurred by such Business Employees or their covered dependents under any Seller Plan.

(e) With respect to any welfare benefit plan maintained by Purchaser and provided to Transferred Employees, Purchaser shall, with respect to such Transferred Employees, (i) cause to be waived any pre existing condition and waiting periods, except to the extent such provisions were applicable under the similar Seller Plan as of the Closing Date, and (ii) give effect, in determining any deductible and maximum out of pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, such Transferred Employees during the plan year of the applicable plan sponsored by Seller or one of its Affiliates during which the Closing occurs with respect to similar plans maintained by Seller and its Affiliates immediately prior to the Closing Date.

 

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(f) For purposes of eligibility and vesting and for purposes of determining the amount of any benefits under any applicable sick leave, vacation or severance plan, Transferred Employees shall be given credit for all service with Seller, any of its Subsidiaries, and any predecessor employer for which Seller credited such service, including without limitation, Agilent, Hewlett Packard or their Subsidiaries under each plan of Purchaser or its Affiliates in which such Transferred Employees are eligible to participate.

(g) With respect to any accrued but unused leave time as of the Closing Date to which any Transferred Employee is entitled pursuant to Seller Parent or its Subsidiaries’ leave time policy immediately prior to the Closing Date, to the extent permitted by Law, Purchaser shall assume the liability for such accrued but unused leave time and allow such Transferred Employee to use such accrued leave time in accordance with the terms of the applicable Purchaser leave plan or program, including without limitation the required approval of management to take time off.

(h) The Seller Parties and Purchaser and their respective Affiliates shall comply with all of their respective obligations under applicable Laws to notify and/or consult with Business Employees or employee representatives, unions, works councils or other employee representative bodies, if any, and shall provide such information to the other Party as is required by that Party to comply with its notification and/or consultation obligations.

(i) The Parties acknowledge and agree that all provisions contained in this Section 6.6 with respect to employees are included for the sole benefit of the respective Parties and shall not create any right in any other Person, including, without limitation, any employees, former employees, any participant in any Seller Plan or any beneficiary thereof or any right to continued employment with Seller or Purchaser, nor shall require Purchaser or any Affiliate of Purchaser to continue or amend any particular benefit plan after the Closing Date for Transferred Employees, and any such plan may be amended or terminated in accordance with its terms and applicable law.

6.7 Joinder. As soon as is reasonably practicable after the date hereof, Seller will identify which Purchased Assets are not owned by Seller Parent or Seller and which Affiliate of Seller Parent or Seller owns such Purchased Assets. Seller Parent and Seller will cause each such Affiliate, to the extent not a signatory to this agreement, to execute a joinder to this Agreement in the form attached hereto as Exhibit A (the “Joinder”).

6.8 Insurance Matters.

(a) Purchaser acknowledges that the policies and insurance coverage that will have been maintained on behalf of the Business prior to Closing are part of the corporate insurance program maintained by the Seller Parties (the “Seller Corporate Policies”), and such coverage will not be available or transferred to Purchaser (except with respect to Assumed Liabilities for which claims have been made by the Seller Parties or any of their respective Affiliates against third party insurers under such policies on or prior to the Closing Date, subject to Purchaser’s paying any applicable deductible with respect to such claim).

(b) Purchaser agrees not to bring any claim for recovery under any of the Seller Corporate Policies, whether or not Purchaser may be so entitled in accordance with the terms of such Seller Corporate Policies.

 

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6.9 Tax Matters.

(a) Transfer Taxes.

(i) For purposes of this Agreement, the term “Transfer Taxes” shall mean all transfer, filing, recordation, ad valorem, value added, sales and use, bulk sales, stamp duties, excise, GST, license or similar fees or taxes (excluding income Taxes). The liability for Transfer Taxes attributable to the transactions occurring pursuant to this Agreement shall be borne one-half by Purchaser and one-half by Seller; provided, however, that Purchaser shall diligently pursue the recovery of any recoverable Transfer Taxes, and if Purchaser actually receives any recoverable Transfer Taxes, Purchaser shall promptly, but in no case later than twenty (20) days after such recovery, pay to Seller an amount equal to one-half of such recovered Transfer Taxes. Seller and Purchaser shall cooperate with each other in the provision of any information or preparation of any documentation that may be necessary or useful for obtaining any available mitigation, reduction or exemption from any Transfer Taxes. For the avoidance of doubt, Purchaser shall have no Liability of any kind and shall be indemnified against Transfer Taxes arising out of or attributable to the acquisition of the Business from Agilent.

(ii) Unless the Parties mutually agree otherwise, any Tax Returns that must be filed in connection with any Transfer Taxes shall be prepared by the Party that bears the responsibility for such Transfer Taxes, as required by applicable Law. For any Tax Return required by law to be filed by a Party (the “Filing Party”) other than the Party that is responsible for preparing such Tax Return pursuant to this Section 6.9 (the “Preparing Party”), the Filing Party shall pay the Transfer Taxes shown on such Tax Return and shall collect the Preparing Party’s applicable share of the Transfer Tax from Preparing Party determined in accordance with Section 6.9(a)(i) hereof. The Preparing Party shall use its commercially reasonable efforts to provide to the Filing Party any Tax Returns which it is required to file at least ten days before such Tax Returns are due to be filed. The Preparing Party shall make such changes to the applicable Tax Return as reasonably requested by the Filing Party. Such Tax Returns shall be consistent with any allocation of the Purchase Price that may be agreed to by the Parties pursuant to Section 3.3.

(b) Other Tax Returns and Payment of Taxes.

(i) Except as provided in Section 6.9(a), the Seller Parties shall be liable for and shall remit when due or cause to be remitted when due any amount of Taxes owed by or attributable to the Purchased Assets for any taxable period ending on or before the Closing Date. The Seller Parties shall duly file or cause to be duly filed any Tax Return required to be filed in respect of any Tax which it is required to pay pursuant to the immediately preceding sentence. Such Tax Returns shall be subject to the review and approval of Purchaser, which approval shall not be unreasonably withheld or delayed.

(ii) Purchaser shall be liable for and shall remit when due or cause to be remitted when due any amount of Taxes due in connection with the Purchased Assets for any taxable period beginning after the Closing Date. Purchaser shall duly file or cause to be duly filed any Tax Return required to be filed in respect of any Tax which it is required to pay pursuant to the immediately preceding sentence.

 

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(iii) Purchaser shall prepare or cause to be prepared and file or cause to be filed any Tax Returns with respect to the Purchased Assets for taxable periods that begin before the Closing Date and end after the Closing Date (a “Straddle Period”). The relevant Seller Party shall pay to Purchaser with respect to a Straddle Period an amount equal to the portion of such Taxes which relates to the portion of such Straddle Period ending on the Closing Date. For purposes of this Section 6.9(b)(iii), in the case of any Taxes that are imposed on a periodic basis and are payable for a Straddle Period, the portion of such Tax that relates to the portion of such taxable period ending on the Closing Date shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on and including the Closing Date and the denominator of which is the number of days in the entire taxable period, and (y) in the case of any Tax based upon or related to income or receipts be deemed to be equal to the amount which would be payable if the relevant taxable period ended on and included the Closing Date. Any credits relating to a Straddle Period shall be taken into account as though the relevant taxable period ended on the Closing Date.

(iv) If, after the Closing, Purchaser or any of its Affiliates receives any refund that relates to a Tax Period prior to such Closing or to an Excluded Asset, Purchaser shall, or shall cause such Affiliate to, promptly remit or cause to be remitted to the relevant Seller Party the amount of the refund or overpayment (including any interest paid by the Governmental Authority paying the refund or the overpayment, but net of any Taxes that may be due on such refund or interest amount after giving effect to any deductions directly relating to the payment of such amounts to the relevant Seller Party) received or utilized by Purchaser or such Affiliate which is attributable to the Tax Period prior to Closing or to Excluded Assets. If any such refund or benefit is subsequently reduced as a result of an adjustment required by any Governmental Authority, this Section 6.9(b) shall take such adjusted refund or benefit into account. If Purchaser or any of its Affiliates pays any amount to any Seller Party pursuant to this Section 6.9(b) prior to such adjustment, the relevant (1) Seller Party shall repay the difference between the amount paid and the adjusted amount of the refund or benefit, as the case may be, to Purchaser, if the adjusted amount is less than the amount paid by Purchaser or such Affiliate to such Seller Party pursuant to this Section 6.9(b), and (2) Purchaser shall pay the difference between the portion of the adjusted amount of the refund or benefit attributable to the Tax Period prior to Closing or to Excluded Assets (the “Attributable Portion of Adjusted Amount”) and the amount paid by Purchaser or such Affiliate to the relevant Seller Party if the amount paid by Purchaser or such Affiliate to such Seller Party is less than the Attributable Portion of Adjusted Amount.

(c) Cooperation and Assistance.

(i) The Parties shall cooperate with each other in the filing of any Tax Returns and the conduct of any audit or other proceeding. They each shall execute and deliver such powers of attorney and make available such other documents as are reasonably necessary to carry out the intent of this Section 6.9.

 

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(ii) If (A) any Party is liable under this Section 6.9, including amounts due to Section 6.9(b), for any portion of a Tax shown due on any Tax Return required to be filed by the other Party pursuant to this Section 6.9, subject to Section 6.9(a)(ii), the Party obligated to file such Tax Return pursuant to this Section 6.9 shall deliver a copy of the relevant portions of such Tax Return to the liable Party for such Party’s review and comment within 20 days prior to the due date for filing such Tax Return (taking into account any extensions, if applicable). Subject to Section 6.9(a)(ii), the Party who is required to file such Tax Return will make such changes to the Applicable Tax Return as reasonably requested by the other Party. If the Parties disagree as to the treatment of any item shown on such Tax Return or with respect to any calculation with respect to any Tax Return to be filed pursuant to this Section 6.9, an internationally recognized accounting firm mutually agreed upon by Purchaser and the relevant Seller Party, as the case may be, shall determine how the disputed item is to be treated on such Tax Return. Any payments made by a Party to another Party pursuant to this Section 6.9 shall be made no later than the later of 10 days prior to the due date of the applicable Tax Return and five Business Days after the receipt of the applicable Tax Return by the Party from whom payment is required.

(iii) Upon request or upon payment, each Party shall deliver to the tax director of the other Party, or if the other Party fails to provide contact details for such tax director the person identified at Section 11.1, certified copies of all receipts for any foreign Tax with respect to which such other Party or any of its Affiliates could claim a foreign tax credit and any supporting documents required in connection with claiming or supporting a claim for such a foreign tax credit.

(iv) The Parties shall retain records, documents, accounting data and other information in whatever form that are necessary for the preparation and filing, or for any Tax audit, of any and all Tax Returns with respect to any Taxes that relate to taxable periods that do not begin after the Closing Date. Such retention shall be in accordance with the record retention policy of the respective Party, but in no event shall any Party destroy or otherwise dispose of such records, documents, accounting data and other information prior to the expiration of the applicable statute of limitations (including extensions) and without first providing the other Party with a reasonable opportunity to review and copy the same. Each Party shall give any other Party reasonable access to all such records, documents, accounting data and other information as well as to its personnel and premises to the extent necessary for a reasonable review or a Tax audit of such Tax Returns and relevant to an obligation under this Section 6.9.

(d) Tax Controversies. A Party shall promptly notify the other Party in writing promptly upon (but in no event later than 30 days after) (a “Notification”) receipt of notice of any pending or threatened audits or assessments with respect to Taxes for which such other Party (or any of its Affiliates) is liable under this Section 6.9. Failure to give such Notification shall not relieve the indemnifying party from liability under this Section 6.9, except if and to the extent that the indemnifying party is actually prejudiced thereby. Each Party shall be entitled to take control

 

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of the complete defense of any issue directly relating to Taxes for which it may be liable hereunder that arises in any tax audit or administrative or court proceeding (a “Tax Claim”), and to employ counsel of its choice at its expense; provided, that the relevant Seller Party and Purchaser shall jointly control the defense of any Tax Claim relating to Taxes with respect to a Straddle Period for which Taxes are allocated to both the relevant Seller Party, as the case may be, and Purchaser under Section 6.9(b)(iii) of this Agreement. Notwithstanding the immediately preceding sentence, each Party shall be entitled to take control of the complete defense of any Tax Claim relating to Taxes for which it is obligated to file a Tax Return (but does not have any indemnification obligation hereunder) under this Section 6.9 (or by Law), and to employ counsel of its choice at its expense; provided, that such Party unconditionally releases in writing the other Party from its indemnification obligation hereunder with respect to such Tax Claim; provided further, that such Party shall take control of such Tax Claim within 60 days of the earlier of (x) the date on which such Notification is provided or (y) the date such Notification is due pursuant to the first sentence of this Section 6.9(d). If one Party takes control of any such audit or proceeding, the other Party shall be entitled to participate, at its expense, in the defense of such audit or proceeding, and the Party controlling such audit or proceeding shall consider in good faith any suggestions made or points raised by the other Party. The Parties may not agree to settle any claim for Taxes for which the other may be liable without the prior written consent of such other Party, which consent shall not be unreasonably withheld. This Section 6.10(d) shall govern to the extent it would otherwise be inconsistent with Section 9.3(a).

(e) Indemnification. The Seller Parties shall indemnify, save and hold the Purchaser Indemnified Parties harmless from and against any and all Purchaser Losses incurred in connection with, arising out of, resulting from or incident to (i) any Taxes with respect to the Purchased Assets for any Tax year or portion thereof ending on or before the Closing Date (or for any Straddle Period, to the extent allocable to the portion of such period beginning before and ending on the Closing Date, determined accordance with 6.9(b)(iii)), (ii) any failure of any representation or warranty of the Seller Parties set forth in Section 4.9 to be true and correct; (iii) any Taxes arising out of or attributable to the acquisition of the Business from Agilent; (iv) any withholding Taxes (whenever arising) attributable to the payment of the Purchase Price; and (v) the unpaid Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract, or otherwise.

6.10 Mail Handling.

(a) To the extent that Purchaser and/or any of its Affiliates receives any mail or packages addressed to any Seller Party or its Affiliates and delivered to Purchaser not relating to the Purchased Assets or the Assumed Liabilities, Purchaser shall promptly deliver such mail or packages to Seller. After the Closing Date, Purchaser may deliver to Seller any checks or drafts made payable to any Seller Party or its Affiliates that constitutes a Purchased Asset, and Seller shall promptly deposit such checks or drafts, and, upon receipt of funds, reimburse Purchaser within five Business Days for the amounts of all such checks or drafts, or, if so requested by Purchaser, endorse such checks or drafts to Purchaser for collection. To the extent any Seller Party or its Affiliates receives any mail or packages addressed and delivered to any Seller Party or its Affiliates but relating to the Purchased Assets or the Assumed Liabilities, Seller shall promptly

 

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deliver such mail or packages to Purchaser. After the Closing Date, to the extent that Purchaser receives cash or checks or drafts made payable to Purchaser that constitutes an Excluded Asset, Purchaser shall promptly use such cash to, or deposit such checks or drafts and upon receipt of funds from such checks or drafts, reimburse Seller within five Business Days for such amount received, or, if so requested by Seller, endorse such checks or drafts to Seller for collection. The Parties may not assert any set off, hold back, escrow or other restriction against any payment described in this Section 6.10.

6.11 Shared Contracts Other Than Software Licenses. The Seller Parties shall use their commercially reasonable efforts to seek the consent, if requested by Purchaser, of the counterparty to any Contract which is used primarily with respect to the Purchased Assets but is not included within the Transferred Contracts to partially assign or otherwise separate for the benefit of Purchaser the portion of such Contract relating to the Purchased Assets. The Seller Parties shall use their commercially reasonable efforts to identify such Contracts to Purchaser as soon as practicable following the execution of this Agreement. This Section 6.11 is not applicable to software licenses, which are covered by Section 6.12.

6.12 Shared Software Licenses. With respect to the software licenses (including CAD licenses) that prior to the Closing Date are used in the Business, but that are not used exclusively in the Business, Seller and Purchaser shall cooperate diligently prior to the Closing Date to obtain the consent of the respective licensors of such software licenses (the “Software Licensors”) to a partial assignment, or grant of a sublicense by Seller or of a new license to Purchaser by the Software Licensor, as the case may be, of Seller’s rights thereunder applicable to the Business. Purchaser acknowledges that any rights to be sublicensed to it may be limited as set forth in such software licenses; that the terms of any new license to be granted to it by the Software Licensors may be different from the terms of Seller’s existing licenses; and that Seller cannot control and is not responsible for the actions of any of the Software Licensors. Seller and Purchaser further agree that any division of rights, responsibilities and credits (including credits for pre paid fees) between them under the existing software licenses or any successors thereto shall be in proportion to the actual usage of such licenses by the Business during the Seller Parent’s 2006 fiscal year compared to the average usage of such licenses by the Retained Business during such period (it being understood that for purposes of determining actual usage, CAD license usage shall be as set forth on Schedule 6.12, and for all Software licenses other than CAD licenses, usage will be based on seat count).

6.13 NDAs. The Parties agree that with respect to the confidentiality and proprietary development agreements to which any Seller Party or any of their Subsidiaries is a party with any of the Business Employees (the “NDAs”), such Seller Party or Subsidiary, as applicable, will enter into a partial assignment with respect to such NDAs, assigning that portion of the NDAs relating to the Business to Purchaser.

6.14 No Solicitation of Acquisition Proposals; Inconsistent Activities.

(a) No Seller Party shall, and the Seller Parties shall cause their respective Subsidiaries, directors, employees, agents and representatives (including any investment banker, financial advisor, attorney or accountant retained by any Seller Party or any of their respective Affiliates) not to, directly or indirectly, initiate, solicit or encourage any Acquisition Proposal, or

 

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furnish any information to any other Person with respect to, or agree to, any Acquisition Proposal. Seller shall promptly notify Purchaser after receipt of any Acquisition Proposal or any request for information relating to the Purchased Assets or the Business by any Person who has informed any Seller Party that such Person is considering making, or has made, an Acquisition Proposal (which notice shall identify the Person making, or considering making, such Acquisition Proposal and shall set forth the material terms of any Acquisition Proposal received), and Seller shall keep Purchaser informed in reasonable detail of the terms, status and other pertinent details of any such Acquisition Proposal or request.

(b) To the extent that it has not done so already, each Seller Party shall, and shall cause its respective Subsidiaries, directors, employees, agents and representatives to discontinue and desist from any solicitation efforts or negotiations with respect to or in furtherance of any Acquisition Proposal.

ARTICLE VII

CONDITIONS TO CLOSING

7.1 Conditions Precedent to Obligations of Purchaser and the Seller Parties. The respective obligations of the Parties to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by the Party for whose benefit such condition exists) on or prior to the Closing Date of each of the following conditions:

(a) No Injunction, etc. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law which is in effect on the Closing Date which has or would, and no Proceeding by any Governmental Authority shall be pending against any of the parties hereto or any of the officers or directors of any of them seeking to, prohibit, enjoin or restrain the consummation of the transactions contemplated by this Agreement to occur on the Closing Date or otherwise making such transactions illegal.

(b) Regulatory Authorizations. All material Consents of any Governmental Authorities shall have been obtained and shall be in full force and effect.

7.2 Conditions Precedent to Obligation of the Seller Parties. The obligation of the Seller Parties to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by the Seller Parties) on or prior to the Closing Date of each of the following conditions:

(a) Accuracy of Purchaser’s Representations and Warranties. Each of the representations and warranties of Purchaser contained in this Agreement and the other Transaction Documents (which representations and warranties shall be deemed for purposes of this Section 7.2(a) not to include any qualification or limitation with respect to materiality) shall be true and correct as of the Closing Date with the same effect as though those representations and warranties had been made on and as of the Closing Date (except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall be true and correct as of such date), except where the matters in respect of which

 

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such representations and warranties are not true and correct, in the aggregate, have not materially prevented, materially delayed or materially impaired, and would not reasonably be expected to prevent, materially delay or materially impair, the ability of Purchaser to perform and comply with its obligations under this Agreement, and Seller shall have received a certificate signed by an authorized officer of Purchaser to such effect.

(b) Covenants of Purchaser. Purchaser shall have performed and complied in all material respects with all covenants, agreements and obligations contained in this Agreement and the other Transaction Documents that are required to be performed or complied with by it on or prior to the Closing, and Seller shall have received a certificate dated as of the Closing Date and signed by an authorized officer of Purchaser to such effect.

(c) Closing Documents. Purchaser shall have executed and delivered to Seller the documents set forth in Section 8.2, and each such agreement and document shall be in full force and effect.

7.3 Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser to consummate and cause the consummation of the transactions contemplated by this Agreement shall be subject to the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of each of the following conditions:

(a) Accuracy of Representations and Warranties of the Seller Parties. Each of the representations and warranties of the Seller Parties contained in this Agreement and the other Transaction Documents (which representations and warranties shall be deemed for purposes of this Section 7.3(a) not to include any qualification or limitation with respect to materiality, whether by reference to “Seller Material Adverse Effect” or otherwise) shall be true and correct as of the Closing Date with the same effect as though those representations and warranties had been made on and as of the Closing Date (except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall be true and correct as of such date) except where the matters in respect of which such representations and warranties are not true and correct, in the aggregate, have not had or resulted in and would not reasonably be expected to have or result in a Seller Material Adverse Effect, and Purchaser shall have received a certificate signed by an authorized officer of each Seller Party to such effect.

(b) Covenants of the Seller. Each Seller Party shall have performed and complied in all material respects with all covenants, agreements and obligations contained in this Agreement and the other Transaction Documents that are required to be performed or complied with by it on or prior to the Closing; and Purchaser shall have received a certificate dated as of the Closing Date and signed by an authorized officer of each Seller Party to such effect.

(c) Closing Documents. Purchaser shall have received the documents set forth in Section 8.3, such documents shall have been executed by the parties thereto and shall be in full force and effect.

(d) Consents. Each of the Consents set forth on Section 7.3(d) of the Disclosure Letter shall have been obtained in a form reasonably acceptable to Purchaser and shall be in full force and effect.

 

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(e) No Seller Material Adverse Effect. Since the date of this Agreement there shall have been no event, condition, change or development, or worsening of any existing event, condition, change or development that, individually or in the aggregate, has had or resulted in, or would reasonably be expected to result in a Seller Material Adverse Effect, and Purchaser shall have received a certificate dated as of the Closing Date and signed by an authorized officer of each Seller Party to such effect.

ARTICLE VIII

CLOSING

8.1 Closing.

(a) Unless this Agreement shall have been terminated pursuant to Article X hereof, the closing (the “Closing”) of the sale and transfer of the Purchased Assets and the other transactions hereunder shall take place at the offices of Lite-On Technology Corporation, 392 Ruey Kuang Road, Neihu, Taipei 114, Taiwan at 9:00 a.m., local time, and in such other places as are necessary to effect the transactions to be consummated at the Closing, on the second Business Day immediately following the satisfaction or, to the extent permitted, waiver of all of the conditions in Article VII (other than those conditions which by their nature are to be satisfied or, to the extent permitted, waived at the Closing but subject to the satisfaction or, to the extent permitted, waiver of such conditions, or at such other time, date and place as shall be fixed by mutual agreement of the Parties (such date of the Closing being herein referred to as the “Closing Date”).

(b) The effective time (“Effective Time”) of the Closing for tax, operational and all other matters shall be deemed to be 12:01 a.m., local time in each jurisdiction in which the Purchased Assets transferred are located on the Closing Date.

8.2 Purchaser Obligations. At the Closing, Purchaser shall deliver to Seller the payments required to be made on the Closing Date and execute and deliver to Seller the following, each of which shall continue to be in full force and effect:

(a) the Master Separation Agreement;

(b) the Supply Agreement – Malaysia

(c) the Supply Agreement – Singapore;

(d) the Trademark License Agreement;

(e) the Avago General IP License Agreement;

(f) the Noncompetition Agreement;

(g) the Sales Agreement; and

(h) such other documents and instruments as counsel for Purchaser and the Seller Parties mutually agree to be reasonably necessary to consummate the transactions described herein, including bills of sale, assignment and assumption agreements and local asset transfer agreements (such documents being hereinafter referred to as the “Conveyance Documents”).

 

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8.3 Seller Party Obligations. At the Closing, the Seller Parties shall execute and deliver to Purchaser, and Seller Parent and Seller shall cause such of its Affiliates as are party thereto or such other parties as are indicated below to execute and deliver to Purchaser, the following in such form and substance as are reasonably acceptable to Purchaser, each of which shall continue to be in full force and effect:

(a) the Master Separation Agreement;

(b) the Supply Agreement – Malaysia

(c) the Supply Agreement – Singapore;

(d) the Trademark License Agreement;

(e) the Avago General IP License Agreement;

(f) the Noncompetition Agreement;

(g) the Sales Agreement;

(h) certifications certifying that the transactions contemplated hereunder are exempt from withholding under Section 1445 of the Code; and

(i) such other documents and instruments as counsel for Purchaser and the Seller Parties mutually agree to be reasonably necessary to consummate the transactions described herein, including the Conveyance Documents.

ARTICLE IX

INDEMNIFICATION

9.1 Indemnification.

(a) Following the Closing and subject to the terms and conditions provided in this Article IX, the Seller Parties shall indemnify, defend and hold harmless Purchaser, its Affiliates, and their respective officers, directors, employees, stockholders, assigns and successors (each, a “Purchaser Indemnified Party”) from and against, and shall compensate and reimburse each Purchaser Indemnified Party for, all Losses imposed upon or incurred by such Purchaser Indemnified Party (“Purchaser Losses”), with respect to (i) any failure of any representation or warranty of any Seller Party set forth in this Agreement (other than Section 4.9, indemnification for the breach of which is covered by Section 6.9(e)) to be true and correct as of the date of this Agreement or as of, and as if made at, the Effective Time, (ii) any breach of any covenant or agreement of any Seller Party herein, or (iii) any Excluded Liabilities. Seller shall act as agent for all Seller Parties in connection with this Article IX. Purchaser shall not be entitled to recover more than once for the same Purchaser Loss.

 

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(b) Following the Closing and subject to the terms and conditions provided in this Article IX, Purchaser shall indemnify, defend and hold harmless each of the Seller Parties and their Affiliates and their respective officers, directors, employees, stockholders, assigns and successors (each, a “Seller Indemnified Party”) from and against, and shall compensate and reimburse each Seller Indemnified Party for, all Losses imposed upon or incurred by such Seller Indemnified Party (“Seller Losses”), with respect to (i) the failure of any representation or warranty of Purchaser set forth in this Agreement to be true and correct as of the date of this Agreement or as of, and as if made at, the Effective Time, (ii) any breach of any covenant or agreement of Purchaser herein, (iii) any of the Assumed Liabilities or (iv) the performance and satisfaction of the Assumed Liabilities from and after the Closing and the ownership, use and operation of the Purchased Assets by Purchaser and its Affiliates from and after the Closing. The Seller Parties shall not be entitled to recover more than once for the same Seller Loss.

(c) Notwithstanding the foregoing, Purchaser Losses and Seller Losses shall not include, and in no event shall any Purchaser Loss or Seller Loss be recoverable under the terms of this Agreement to the extent it consists of, punitive, special or exemplary damages, except to the extent such punitive, special or exemplary damages are awarded against any Purchaser Indemnified Party or Seller Indemnified Party, as the case may be, in a third party claim.

(d) For purposes of determining the amount of any Purchaser Losses pursuant to Section 9.1(a)(i), it is understood that (i) to the extent Purchaser has the right to recover all or any portion of such Losses from third party vendors pursuant to any express or implied warranty claims, the amount that any Purchaser Indemnified Party may recover from the Seller Parties hereunder shall be decreased by such recoverable amounts, and (ii) Purchaser shall use commercially reasonable efforts to recover pursuant to such express or implied warranty claims prior to making a claim hereunder.

9.2 Certain Limitations.

(a) Notwithstanding anything contained herein to the contrary, the Seller Parties shall not be obligated to indemnify Purchaser Indemnified Parties for aggregate Purchaser Losses under this Agreement pursuant to Section 9.1(a)(i) in excess of $2,000,000. In addition, neither Party or their Affiliates shall not be obligated to indemnify any other Indemnified Party for aggregate Losses under this Agreement (including pursuant to Sections 9.1(a)(ii), 9.1(a)(iii) or 6.9(e)), in excess of an amount equal to the Purchase Price.

(b) Notwithstanding anything contained herein to the contrary, the Seller Parties shall not be obligated to indemnify Purchaser Indemnified Parties under this Agreement pursuant to Section 9.1(a)(i), (x) with respect to any individual Purchaser Loss or series of related Purchaser Losses of less than $100,000 (the “Minimum Amount”) and (y) unless and until the aggregate Purchaser Losses (excluding individual Purchaser Losses or related Purchaser Losses less than the Minimum Amount) subject to such indemnification collectively exceed $750,000 (the “Threshold”), whereupon such indemnification shall be made by the Seller Parties only with respect to the amount of such Purchaser Losses (excluding individual Purchaser Losses or related Purchaser Losses less than the Minimum Amount) in excess of the Threshold.

 

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(c) The representations and warranties of the Seller Parties and Purchaser contained in Article IV and Article V, respectively, of this Agreement shall survive the Closing until the first anniversary of the Closing Date. The covenants and agreements contained in this Agreement shall survive the Closing until the date or dates explicitly specified therein or, if not so specified, until the expiration of the applicable statute of limitations with respect to the matters contained therein.

9.3 Procedures for Third Party Claims and Excluded Liabilities.

(a) General Procedures. Promptly (but in no event later than ten (10) days) after the receipt by any Indemnified Party of a notice of any Proceeding by any third party that may be subject to indemnification under this Article IX, including any Proceeding relating to any Excluded Liability or Assumed Liability, such Indemnified Party shall give written notice of such Proceeding to the indemnifying Party hereunder (the “Indemnifying Party”), stating in reasonable detail the nature and basis of each claim made in the Proceeding and the amount thereof, to the extent known, along with copies of the relevant documents received by the Indemnified Party evidencing the Proceeding and the basis for indemnification sought. Failure of the Indemnified Party to give such notice shall not relieve the Indemnifying Party from liability on account of this indemnification, except if and only to the extent that the Indemnifying Party is actually prejudiced thereby. Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, promptly after the Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Proceeding. Upon written notice to an Indemnifying Party from an Indemnified Party of any third party claim, the Indemnifying Party shall promptly, but in no event later than thirty (30) days after receipt of the particular notice of such third party claim from such Indemnified Party, assume the defense of the Indemnified Party against such third party claim. After an Indemnified Party provides written notice of any third party claim, and upon the Indemnifying Party assuming the defense thereof, for so long as the Indemnifying Party continues to assume the defense of the third party claim in accordance herewith, (i) the Indemnified Party may retain separate co counsel at its sole cost and expense and participate in the defense of the third party claim, it being understood that the Indemnifying Party shall pay all reasonable costs and expenses of counsel for the Indemnified Party after such time as the Indemnified Party has notified the Indemnifying Party of such third party claim and prior to such time as the Indemnifying Party has assumed the defense of such third party claim, (ii) the Indemnified Party shall not file any papers or consent to the entry of any judgment or enter into any settlement with respect to the third party claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed), unless the Indemnified Party first waives its claim to indemnification hereunder, and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the third party claim (other than a judgment or settlement that is solely for money damages in an amount less than the remaining balance of the limitations on indemnity set forth in Section 9.2 and is accompanied by a release of all indemnifiable claims against the Indemnified Party) without the prior written consent of the Indemnified Party (not to be unreasonably withheld, conditioned or delayed). No Indemnifying Party shall be obligated to indemnify and hold harmless the Indemnified Party hereunder for any settlement entered into without the Indemnifying Party’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, the provisions of this Section 9.3(a) shall not apply to any claim with respect to Taxes, which shall be governed solely by Section 6.9.

 

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(b) Equitable Remedies. In the case of any third party claims where the Indemnifying Party reasonably believes that it would be appropriate to settle such claim using equitable remedies (i.e., remedies involving the future use of the Purchased Assets), the Indemnifying Party and the Indemnified Party shall work together in good faith to agree to a settlement; provided, however, that no Party shall be under any obligation to agree to any such settlement.

(c) Treatment of Indemnification Payments; Insurance Recoveries. Any payment made pursuant to the indemnification obligations arising under this Agreement shall be treated as an adjustment to the Purchase Price to the extent allowable under applicable Law. Any indemnity payment under this Agreement shall be decreased by any amounts actually received by the Indemnified Party under third party insurance policies with respect to such Loss (net of any premiums paid by such Indemnified Party under the relevant insurance policy), each Party agreeing (i) to use commercially reasonable efforts to recover all available insurance proceeds and (ii) to the extent that any indemnity payment under this Agreement has been paid by the Indemnifying Party to or on behalf of the Indemnified Party prior to the receipt, directly or indirectly, by the Indemnified Party of any net insurance proceeds under third party insurance policies on account of such Loss which duplicate, in whole or in part, the payment made by the Indemnifying Party to or on behalf of the Indemnified Party, the Indemnified Party shall remit to the Indemnifying Party an amount equal to the amount of the net insurance proceeds actually received by the Indemnified Party on account of such Loss which duplicate, in whole or in part, the payment made by the Indemnifying Party to or on behalf of the Indemnified Party. If the amount of any Loss for which indemnification is provided under this Agreement (an “Indemnity Claim”) gives rise to a current deduction to the Indemnified Party making the claim, the indemnity payment shall be reduced by the amount of the Tax Benefit of such current deduction actually realized by the Indemnified Party on account of such Loss prior to the time payment by the Indemnifying Party is due and payable under this Agreement. In the event that the Indemnifying Party pays to or on behalf of an Indemnified Party any amount in respect of a Loss subject to indemnification under this Article IX and, subsequent to such payment the Indemnified Party actually realizes a Tax Benefit on account of such Loss, the Indemnified Party shall remit to the Indemnifying Party an amount equal to the amount of such Tax Benefit actually realized on account of such Loss. “Tax Benefit” means, with respect to any indemnity payment, the excess, if any, of (i) the Indemnified Party’s pro forma tax Liability for the taxable year in which it accrues the indemnity payment, calculated on the basis of the facts and circumstances actually pertaining to the Indemnified Party, but assuming for purposes of this calculation that the Indemnified Party had not suffered the loss giving rise to the Indemnification Claim or accrued the indemnity payment, over (ii) the Indemnified Party’s Adjusted Actual Tax Liability for such taxable year in each case as calculated in good faith by the Indemnified Party. The “Adjusted Actual Tax Liability” is the actual Tax Liability of the Indemnified Party, taking into account the items excluded from the calculation in clause (i).

9.4 Certain Procedures.

(a) The Indemnified Party shall notify the Indemnifying Party promptly of its discovery of any matter that may give rise to a claim for indemnification pursuant hereto. The Indemnified Party shall cooperate and assist the Indemnifying Party in determining the validity of any claim for indemnity by the Indemnified Party and in otherwise resolving such matters.

 

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Subject to the provisions of Section 9.3, in connection with any actual or threatened claims by, or actual or threatened litigation or other disputes with, third parties relating to Assumed Liabilities or Excluded Liabilities, any such claims, litigation and disputes being referred to as “claims” for purposes of this Section 9.4, the Indemnified Party shall cooperate in the defense by the Indemnifying Party of such claim (and the Indemnified Party and the Indemnifying Party agree with respect to all such claims that a common interest privilege agreement exists between them), including, (i) permitting the Indemnifying Party to discuss the claim with such officers, employees, consultants and representatives of the Indemnified Party as the Indemnifying Party reasonably requests, (ii) permitting the Indemnifying Party to have reasonable access to the reasonably potentially relevant properties, books, records, papers, documents, plans, drawings, electronic mail, databases and computers of the Indemnified Party at reasonable hours to review information and documentation relative to the claim, (iii) providing to the Indemnifying Party copies of reasonably potentially relevant documents and samples of IR Products as the Indemnifying Party reasonably requests in connection with defending such claim, (iv) permitting the Indemnifying Party to conduct privileged interviews and witness preparation of officers, employees and representatives of the Indemnified Party as the Indemnifying Party reasonably requests, (v) preserving all properties, books, records, papers, documents, plans, drawings, electronic mail and databases of the Business or included in the Purchased Assets relating to matters relating to Excluded Liabilities (in the case of the Purchaser) and Assumed Liabilities (in the case of the Seller Parties) in accordance with such Party’s corporate documents retention policies, or longer to the extent reasonably requested by the other Party in connection with any actual or threatened action that would reasonably be expected to result in a claim for indemnification hereunder, (vi) promptly collecting reasonably potentially relevant documents and extracting information from such documents for the Indemnifying Party’s review and use, as the Indemnifying Party reasonably requests, or allowing the Indemnifying Party’s representatives to do the same, (vii) notifying the Indemnifying Party promptly of receipt by the Indemnified Party of any subpoena or other third party request for documents or interviews and testimony, (viii) providing to the Indemnifying Party copies of any documents produced by the Indemnified Party in response to or compliance with any subpoena or other third party request for documents, and (ix) permitting the Indemnifying Party to conduct such other reasonable investigations and studies, and take such other actions, as are reasonably necessary in connection with the Indemnifying Party’s defense or investigation of such claim, all without cost to the Indemnified Party unless such efforts would require substantial time or expense, in which case the Parties shall discuss the Indemnifying Party providing the Indemnified Party with reasonable compensation for such efforts. In connection with any claims, except to the extent inconsistent with the Indemnified Party’s obligations under applicable Law and except to the extent that to do so could reasonably be construed as having the potential to subject the Indemnified Party or its employees, agents or representatives to criminal or civil sanctions, (1) unless ordered by a court to do otherwise, the Indemnified Party shall not produce documents to a third party until the Indemnifying Party has been provided a reasonable opportunity to review, copy and assert privileges covering such documents, (2) the transfer to the Indemnified Party by the Indemnifying Party of documents covered by the Indemnifying Party’s attorney/client or work product privileges shall not constitute a waiver of such privileges, (3) unless otherwise ordered by a court, the Indemnified Party shall withhold from production to any third party any documents as to which the Indemnifying Party asserts a privilege, (4) the Indemnified Party shall defend in court any such privilege asserted by the Indemnifying Party and (5) the Indemnified Party shall permit the Indemnifying Party to

 

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prepare any employees of the Indemnified Party required or requested to testify or otherwise be deposed or interviewed in connection with any claim and to be present during any such testimony or interviews. Notwithstanding the foregoing, in no event shall failure of the Indemnified Party to act as stated above relieve the Indemnifying Party from any Liability with regard to its indemnification obligation, except if and only to the extent that the Indemnified Party has materially breached the above requirements and the Indemnifying Party is actually prejudiced thereby.

(b) Notwithstanding anything in this Agreement to the contrary, Purchaser shall not make any claim for indemnification or otherwise in any circumstances whatsoever against any Seller Party other than by means of a claim against Seller as agent for such other Seller Party pursuant to the terms of this Agreement unless Seller fails to satisfy its obligations under this Article IX, and Purchaser shall indemnify Seller on its own behalf and as agent for all other Seller Parties against any claim for indemnification made against the Seller Parties contrary to this Section 9.4(b).

9.5 Remedies Exclusive. Following the Closing, with the exception of remedies based on fraud, willful misconduct and Section 6.9(e), the remedies set forth in this Article IX shall constitute the sole and exclusive remedy for money damages and shall be in lieu of any other remedies for money damages that may be available to the Indemnified Parties under any other agreement or pursuant to any statutory or common law (including Environmental Law) with respect to any Losses of any kind or nature incurred directly or indirectly resulting from or arising out of any of this Agreement, the Business, the Purchased Assets, the Assumed Liabilities or the Excluded Liabilities (it being understood that nothing in this Section 9.5 or elsewhere in this Agreement shall affect the Parties’ rights to specific performance or other similar non monetary equitable remedies with respect to the covenants referred to in this Agreement to be performed after the Closing).

ARTICLE X

TERMINATION

10.1 Termination Events. Without prejudice to other remedies which may be available to the Parties by Law or this Agreement, this Agreement may be terminated and the transactions contemplated herein may be abandoned:

(a) by mutual consent of the Parties;

(b) after February 15, 2008, (the “Outer Date,” which term shall include the date of any extension under this Section 10.1(b)), by any Party by notice to the other Party if the Closing shall not have been consummated on or prior to the Outer Date; provided, however, that the right to terminate this Agreement under this Section 10.1(b) shall not be available to any Party whose failure or whose Affiliate’s failure to perform in all material respects any of its obligations under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date;

 

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(c) by any Party by notice to the other Party, if (i) a final, non-appealable order, decree or ruling enjoining or otherwise prohibiting consummation of the transactions contemplated by this Agreement to occur on the Closing Date has been issued by any federal or state court in the United States having jurisdiction (unless such order, decree or ruling has been withdrawn, reversed or otherwise made inapplicable) or any U.S. federal or state Law has been enacted that would make the consummation of the transactions contemplated by this Agreement to occur on the Closing Date illegal.

10.2 Effect of Termination. In the event of any termination of this Agreement as provided in Section 10.1, this Agreement shall forthwith become wholly void and of no further force and effect, all further obligations of the parties under this Agreement shall terminate and there shall be no liability on the part of any Party (or any stockholder, director, officer, employee, agent, consultant or representative of such Party) to any other Party (or such other persons or entities), except that the provisions of Sections 6.2, 6.4 and Article XI of this Agreement shall remain in full force and effect and the Parties shall remain bound by and continue to be subject to the provisions thereof. Notwithstanding the foregoing, the provisions of this Section 10.2 shall not relieve any Party of any liability for any willful or intentional breach of this Agreement.

ARTICLE XI

MISCELLANEOUS AGREEMENTS OF THE PARTIES

11.1 Notices. All communications provided for hereunder shall be in writing and shall be deemed to be given when delivered in person, upon receipt by the sender of answer back confirmation when telefaxed, or on the next Business Day when sent by overnight courier, and

 

If to Purchaser:		Lite-On Technology Corporation 90, Chien I Road Chung-Ho, Taipei Hsien 235
		Taiwan Attention: Rex Chuang Fax: +886-2-2221-1948
with a copy to:		Lite-On Technology Corporation 22F, 392 Ruey Kuang Road Neihu, Taipei 114
		Taiwan Attention: General Counsel Fax: +886-2-8798-2047
If to any Seller Party:		Avago Technologies Limited c/o Avago Technologies US Inc. 350 West Trimble Road Building 90 San Jose, CA 95131
		Attention: General Counsel
		Fax: (408) 435-4172

 

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with a copy to:		Latham & Watkins LLP 140 Scott Drive Menlo Park, CA 94025
		Attention: Luke J. Bergstrom, Esq. Fax: (650) 463-2600

or to such other address as any such Party shall designate by written notice to the other Party.

11.2 Bulk Transfers. Purchaser waives compliance with the provisions of all applicable Laws relating to bulk transfers in connection with the transfer of the Purchased Assets, and the Seller Parties jointly and severally agree to pay and discharge when due all claims of creditors that could be asserted against Purchaser by reason of such waiver to the extent such Liability is not specifically assumed by Purchaser herein and to indemnify Purchaser for any Liabilities and Losses related thereto.

11.3 Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction in such manner as will effect as nearly as lawfully possible the purpose and intent of such invalid, illegal or unenforceable provision.

11.4 Further Assurances; Further Cooperation. From and after the Closing, each of the Parties agrees to use commercially reasonable efforts to execute and deliver, or cause to be executed and delivered, all documents and to take, or cause to be taken, all actions that may be reasonably necessary or appropriate, in the reasonable opinion of counsel for Seller and Purchaser, to more effectively convey and transfer to Purchaser any of the Purchased Assets, and Purchaser will execute and deliver such further instruments and take such other action, at the Seller Parties’ sole expense, as the Seller Parties may reasonably require to more effectively assume the Assumed Liabilities. Without limiting the foregoing, and by way of example, upon Purchaser’s reasonable request, the Seller Parties shall execute and deliver such other instruments and perform such other acts as may be necessary or desirable to convey the Purchased Intellectual Property Rights to Purchaser including, without limitation (i) executing, acknowledging and recording other papers, and using best efforts to obtain the same from inventors, as necessary or desirable for fully perfecting and conveying unto Purchaser the benefit of the transactions contemplated hereby, (ii) conducting all acts with the U.S. PTO required to transfer, assign and convey the Purchased Intellectual Property Rights, provided that all government filing, recordation, or similar fees shall be at the sole expense of the Purchaser.

11.5 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 11.5.

 

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11.6 Expenses. Except as otherwise expressly provided herein, whether or not the Closing occurs, the Parties shall each pay their respective expenses (such as legal, investment banker and accounting fees) incurred in connection with the negotiation and execution of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby.

11.7 Assignment. This Agreement shall not be assigned by either Party without the prior written consent of the other Party, and any attempted assignment, without such consent, shall be null and void; provided, however, Purchaser may assign any or all of its rights and obligations under this Agreement to any wholly owned (other than director qualifying shares) direct or indirect Subsidiary of Purchaser (provided that no such assignment shall release Purchaser from any obligation under this Agreement) or to a lender of Purchaser as collateral for bona fide indebtedness for money borrowed or in connection with a merger, consolidation, conversion or sale of assets of Purchaser. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by the Parties and their respective successors and permitted assigns.

11.8 Amendment; Waiver. This Agreement may be amended, supplemented or otherwise modified only by a written instrument executed by both Parties. No waiver by either Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the Party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, or a failure or delay by any Party in exercising any power, right or privilege under this Agreement shall be deemed to constitute a waiver by the Party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with the Closing. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

11.9 Specific Performance. The Parties agree that irreparable damage would occur if any provision of this Agreement was not performed in accordance with the terms hereof and thereof and that the Parties shall be entitled (without the requirement to post a bond or other security) to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in addition to any other remedy to which they are entitled at law or in equity. The rights and remedies of the Parties shall be cumulative (and not alternative).

11.10 Third Parties. This Agreement does not create any rights, claims or benefits inuring to any Person that is not a Party nor create or establish any third party beneficiary hereto (including with respect to any Business Employee) other than the provisions of Article IX hereof with respect to indemnification.

11.11 Governing Law. This Agreement and all claims arising out of this Agreement shall be governed by, and construed in accordance with, the Laws of Singapore, without regard to any conflicts of law principles that would result in the application of any law other than the law of Singapore.

 

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11.12 Consent to Arbitration in Singapore. Each Party hereby irrevocably agrees that all disputes arising out of this Agreement or any transaction contemplated thereby shall be exclusively referred to and finally resolved by, arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force which rules are deemed to be incorporated by reference into this Agreement. Each of the Parties, further agrees that service of any notice or document by registered mail to such Party’s respective address set forth in Section 11.1 shall be effective service in any such Proceeding; irrevocably and unconditionally waives and agrees not to plead or claim in any court any objection to resolving disputes as described in this Section due to allegedly improper jurisdiction, venue or inconvenient forum; irrevocably and unconditionally waives its right to a bench trial or trial by jury in any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby and for any counterclaim with respect thereto. This Section sets forth the exclusive means of resolving disputes pertaining to this Agreement except as expressly provided to the contrary herein.

11.13 Disclosure Letter. Inclusion of any matter or item in the Disclosure Letter or Purchaser Disclosure Letter does not imply that such matter or item would, under the provisions of this Agreement, have to be included in the Disclosure Letter or Purchaser Disclosure Letter or that such matter or item is otherwise material.

11.14 Entire Agreement. The Confidentiality Agreement, the Transaction Documents, the Annexes and Schedules, the Disclosure Letter, the Purchaser Disclosure Letter, and the other Exhibits hereto and any other agreements between Purchaser and the Seller Parties entered into on the date hereof set forth the entire understanding of the Parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the Parties or their respective Affiliates other than those set forth or referred to herein or therein. In the event of any inconsistency between the provisions of this Agreement and any other Transaction Document, the provisions of this Agreement shall prevail.

11.15 Time is of the Essence. Time is of the essence with respect to the performance of this Agreement.

11.16 Section Headings; Table of Contents. The section headings contained in this Agreement and the Table of Contents to this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the Parties have caused this Asset Purchase Agreement to be duly executed as of the date first written above.

 

[SIGNATURE PAGE OF SELLER PARTIES TO ASSET PURCHASE AGREEMENT –

PURCHASER’S SIGNATURE PAGE FOLLOWS]

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[SIGNATURE PAGE OF PURCHASER TO

ASSET PURCHASE AGREEMENT]

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ANNEX A

Definitions

“Acquisition Proposal” shall mean an inquiry or the making of an offer or proposal regarding any sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or any substantial portion of the Purchased Assets in a single transaction or series of related transactions (other than the transactions provided for in this Agreement).

“Adjusted Actual Tax Liability” shall have the meaning set forth in Section 9.3(c).

“Affiliate” of a Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned Person. For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through ownership of voting securities or by contract or otherwise, and the terms “controlling” and “controlled by” have meanings correlative to the foregoing.

“Agilent” shall mean Agilent Technologies, Inc., a Delaware corporation.

“Agreement” shall have the meaning set forth in the Recitals to the Agreement.

“Antitrust Regulations” shall mean any applicable laws or regulations relating to antitrust or competition.

“Assumed Liabilities” means collectively:

(a) any and all Liabilities arising under the Transferred Contracts from and after the Closing Date;

(b) any and all Liabilities of the Seller Parties and their Subsidiaries to the extent (but only to the extent) relating to claims that the IR Products sold by the Business at any time were defective or otherwise failed to meet the required quality, conditions or specification, such as Liabilities for refunds, adjustments, allowances, repairs, exchanges, returns and warranty, merchantability and other such claims arising on, prior to or after the Closing Date, but not including any claims for death, bodily injury, property damage, environmental damage, lost profits, or other such damages, or consequential or punitive damages allegedly caused by or arising from sale of such products prior to the Closing;

(c) except as otherwise provided herein, any and all Liabilities of the Seller Parties relating to any Transferred Employee; and

(d) any and all Liabilities to the extent (but only to the extent) arising out of or relating to or incurred primarily in connection with (i) the operation of the Business after the Closing Date, (B) the use of any of the Business Intellectual Property Rights by Purchaser or permissible licensees and (C) any condition arising on or prior to or after the Closing Date with respect to the Purchased Assets.

 

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“Automatic Transferred Employees” shall mean those Business Employees for whom applicable Laws provide for an automatic assumption or transfer of employment upon the acquisition or transfer of a business as a going concern and such assumption or transfer of employment occurs by Business of Law.

“Avago General IP License Agreement” means that certain Intellectual Property License Agreement attached hereto as Exhibit B.

“Books and Records” shall have the meaning set forth in Section 6.5(b).

“Business” means the business of the design, development, research, manufacture, supply, distribution, sale, support, maintenance and service of IR Products.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New York City are permitted or required by Law to close.

“Business Employee” shall mean (i) the employees of the Seller Parties and their respective Subsidiaries set forth in Section 4.11(b) of the Disclosure Letter, including (A) any such employees on temporary leave for purposes of jury or annual two week national service/military duty, employees on vacation and employees on a regularly scheduled day off from work and (B) any such employees who on the Closing Date are on maternity or paternity leave, education leave, military leave with veteran’s re employment rights under federal Law, leave under the Family Medical Leave Act of 1993 or equivalent provisions in other jurisdictions, approved personal leave, short term disability leave or medical leave (provided that the employees referenced in this subsection (B) shall be offered employment by Purchaser as of the date they return to active employment but only if such employee returns to active service within 180 days after the applicable Effective Time or such later time as their reemployment rights are protected by applicable Laws), but, unless otherwise required under local employment Laws, excluding any such employees on long term disability or whose employment with Seller Parent and its Subsidiaries has terminated prior to the Closing; (ii) each additional employee of the Seller Parties and their Subsidiaries hired by the Business between the date hereof and the Closing Date in the ordinary course of business or hired by the Seller Parties and their respective Subsidiaries in the ordinary course of business to replace employees identified in Section 4.11(b) of the Disclosure Letter who have terminated employment or taken leave between the date hereof and the Closing Date, all in accordance with Section 6.1; and (iii) each other employee of the Seller Parties and their Subsidiaries that Seller and Purchaser have mutually agreed to prior to the Closing Date, who is primarily engaged in work for the Business prior to the Closing Date.

“Business Intellectual Property Licenses” shall mean any Contract under which (i) a third party has licensed to a Seller Party or any of its Subsidiaries any Business Intellectual Property Rights that are used exclusively in the Business, or (ii) a Seller Party or any of its Subsidiaries has licensed to or agreed to restrict its exercise of rights under any Business Intellectual Property Rights, other than Customer Contracts and Supplier Contracts.

“Business Intellectual Property Rights” means Intellectual Property Rights in and to Business Technology and Intellectual Property Rights owned by a Seller Party, any of its Subsidiaries or any other Person and used in or relating to the Business.

 

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“Business Technology” means any Technology that is used in the conduct of the Business as of the Closing.

“Closing” shall have the meaning set forth in Section 8.1(a).

“Closing Date” shall have the meaning set forth in Section 8.1(a).

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

“Confidential Information” shall have the meaning set forth in Section 6.2.

“Confidentiality Agreement” shall mean that certain letter agreement dated [•], 2007 by and between Seller Parent and Purchaser.

“Contract” means any written or oral commitment, contract, subcontract, license, sublicense, lease, understanding, instrument, indenture, note or legally binding commitment or undertaking of any nature.

“Conveyance Documents” shall have the meaning set forth in Section 8.2.

“Copyright” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Customer Contract” means any Contract between any Seller Party or any of their respective Subsidiaries, on the one hand, and a customer, distributor or dealer of any Seller Party or any of their respective Affiliates, on the other hand, for the purchase, sale, distribution, marketing, servicing, support or manufacturing (or similar matters) of IR Products.

“Database Rights” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Disclosure Letter” shall have the meaning set forth in the first sentence of Article IV.

“Dollars” or “$,” when used in this Agreement or any other Transaction Document, shall mean United States dollars unless otherwise stated.

“Effective Time” shall have the meaning set forth in Section 8.1(b).

“Excluded Assets” shall mean the assets of the Seller Parties and their respective Affiliates other than the Purchased Assets, including those assets identified on Annex B.

“Excluded IT Infrastructure” means all IT systems; network or telecommunications equipment and software; desktop computer software; accounting, finance and database software; general software development and control systems; and tools, environments and other general IT functionality used in the Business of both the Retained Business and the Business but excluding Transferred IT Infrastructure. For the avoidance of doubt, “Excluded IT Infrastructure” does not include any data or other information with respect to the Business contained in such software, systems, tools, or environments.

 

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“Excluded Liabilities” shall mean those Liabilities of the Seller Parties other than the Assumed Liabilities.

“Filing Party” shall have the meaning set forth in Section 6.9(a)(ii).

“First Effective Filing Date” means the earliest effective filing date in the particular country for any Patent or any application for any Patent. By way of example, it is understood that the First Effective Filing Date for a United States Patent is the earlier of (a) the actual filing date of the United States Patent application which issued into such Patent, (b) the priority date under 35 U.S.C. § 119 for such Patent, or (c) the priority date under 35 U.S.C. § 120 for such Patent.

“GAAP” means United States generally accepted accounting principles as in effect from time to time, applied consistently with the principles used in preparing the Audited Seller Financial Statements.

“Governmental Authority” shall have the meaning set forth in Section 4.3.

“Indebtedness” means (i) all outstanding obligations for senior debt and subordinated debt and any other outstanding obligation for borrowed money, (ii) obligations evidenced by notes, bonds, debentures or other instruments, (iii) any outstanding obligations under capital leases and purchase money obligations (other than as included in Accounts Payable), (iv) any reimbursement obligations under letters of credit, whether or not at the time drawn, and (v) any outstanding guarantees of obligations of the type described in clauses (i) through (iv) above (including in each case all outstanding principal, prepayment premiums, if any, and accrued interest, fees and expenses related thereto).

“Indemnified Party” shall mean a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.

“Indemnifying Party” shall have the meaning set forth in Section 9.3(a).

“Indemnity Claim” shall have the meaning set forth in Section 9.3(c).

“Industrial Designs” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Intellectual Property Rights” means the rights associated with the following: (a) United States and foreign patents and applications therefor (including any continuations, continuations in part, divisionals, reissues, renewals, extensions or modifications for any of the foregoing) (“Patents”); (b) trade secret rights and all other rights in or to confidential business or technical information (“Trade Secrets”); (c) copyrights, copyright registrations and applications therefor and all other rights corresponding thereto (“Copyrights”); (d) trademarks, trade names, service marks, service names, trade dress rights and similar designation of origin and rights therein, and all goodwill symbolized thereby and associated therewith (“Trademarks”); (e) Uniform Resource Locators, Web site addresses and domain names (“Internet Properties”); (f) industrial design rights and any registrations and applications therefore (“Industrial Designs”); (g) rights in databases and data collections (including knowledge databases, customer lists and customer

 

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databases) under the laws of the United States or any other jurisdiction, whether registered or unregistered, and any applications for registration thereof (“Database Rights”); (h) mask works, and mask work registrations and applications therefor (“Mask Works”); and (i) any similar, corresponding or equivalent rights to any of the foregoing any where in the world. Intellectual Property Rights specifically excludes contractual rights (including license grants) and also excludes the tangible embodiment of any of the foregoing.

“Internet Properties” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Inventory” shall have the meaning set forth in Section 3.2(c).

“Inventory Arbitrator” shall have the meaning set forth in Section 3.2(g).

“Inventory Deficiency Amount” shall have the meaning set forth in Section 3.2(c).

“Inventory Discussion Period” shall have the meaning set forth in Section 3.2(g).

“Inventory Excess Amount” shall have the meaning set forth in Section 3.2(c).

“Inventory Proposed Adjustment Notice” shall have the meaning set forth in Section 3.2(f).

“Inventory Review Period” shall have the meaning set forth in Section 3.2(e).

“IR Products” means Infrared Data Associations (“IrDA”)compliant transceiver modules, IrDA compliant software protocol stacks, IrDA application software, IrDA compliant VFIR/FIR controller IP core, infrared emitter, infrared detector discrete components and barcode components. For purposes of this Agreement, “infrared” refers to the wavelength range from 850nm to 950nm.

“IRS” shall mean the United States Internal Revenue Service.

“Joinder” shall have the meaning set forth in Section 6.8.

To “the knowledge of” a Party shall mean, with respect to Seller, actual knowledge of [•], in each case after due inquiry, and with respect to Purchaser, the actual knowledge of [•], in each case after due inquiry. For purposes of this Agreement, “due inquiry” means the knowledge each of the above-referenced individuals would reasonably be expected to obtain by reviewing such representations and warranties set forth in this Agreement applicable to the duties performed by such individual on behalf of the Seller Parties or Purchaser, as applicable, with each employee of the Party by whom such individual is employed (other than secretarial and other clerical personnel) who reports directly to such individual.

“Law” means any law, treaty, statute, ordinance, rule, principle of common law or equity, code or regulation of a Governmental Authority or judgment, decree, order, writ, award, injunction or determination of an arbitrator or court or other Governmental Authority.

 

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“Liabilities” shall mean liabilities, obligations, guarantees (including lease guarantees), commitments, damages, losses, debts, claims, demands, judgments or settlements of any nature or kind, whether known or unknown, fixed, accrued, absolute or contingent, liquidated or unliquidated, matured or unmatured.

“Licensed Business Intellectual Property Rights” means Business Intellectual Property Rights which as of the Closing Date are owned by any Seller Party or any of their respective Subsidiaries, or to which any Seller Party or any of their respective Subsidiaries has the right to grant licenses to Purchaser of the scope granted in the Avago General IP License Agreement without the payment of royalties or other consideration to third parties, in each case other than Transferred Business Intellectual Property Rights and software licenses.

“Licensed Business Technology” means Business Technology that as of the Closing Date is owned by any Seller Party or any of their respective Subsidiaries, or to which any Seller Party or any of their respective Subsidiaries has the right to grant licenses to Purchaser of the scope granted in the Avago General IP License Agreement without the payment of royalties or other consideration to third parties, in each case other than Transferred Business Technology.

“Liens” shall mean any mortgage, easement, lease, sublease, right of way, trust or title retention agreement, pledge, lien (including any lien for unpaid Taxes), Liability, charge, security interest, option or any restriction or other encumbrance of any kind.

“Losses” means any and all losses, damages, Liabilities, deficiencies, claims, proceedings, causes of action, costs (including reasonable out of pocket costs of investigation) and expenses, including interest, diminution in value, penalties, settlement costs, judgments, awards, fines, costs of mitigation, losses in connection with any Environmental Law (including any clean up or remedial action), court costs and fees (including reasonable attorneys’ fees and expenses).

“Mask Works” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Master Separation Agreement” means that Master Separation Agreement attached hereto as Exhibit C.

“Minimum Amount” shall have the meaning set forth in Section 9.2(b).

“NDAs” shall have the meaning set forth in Section 6.13.

“Noncompetition Agreement” means that certain Noncompetition Agreement attached hereto as Exhibit D.

“Notification” shall have the meaning set forth in Section 6.9(d).

“ordinary course of business” means in the ordinary course of the Business of the Business, consistent with past practices of the Business.

“Outer Date” shall have the meaning set forth in Section 10.1(b).

 

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“Party” and “Parties” shall have the respective meanings set forth in the Recitals to this Agreement.

“Patent” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Permitted Liens” shall mean (i) Liens for Taxes, assessments and other governmental charges not yet due and payable or, if due, either (A) not delinquent or (B) being contested in good faith by appropriate proceedings, (ii) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other similar Liens, including all statutory Liens, arising or incurred in the ordinary course of business, (iii) protective filings related to operating leases with third parties entered into in the ordinary course of business, and (iv) Liens that do not materially adversely affect the ownership, value or use of the underlying Purchased Asset for the purpose it is being utilized by the Seller Parties or their respective Affiliates on the Closing.

“Person” means an individual, corporation, partnership, limited liability company, association, trust, incorporated organization, other entity or group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934).

“Preparing Party” shall have the meaning set forth in Section 6.9(a).

“Prime Rate” shall mean the rate of interest as announced from time to time by JPMorgan Chase at its principal office in New York City as its prime lending rate, the Prime Rate to change when and if such prime lending rate changes.

“Proceeding” means any claim, action, arbitration, audit, hearing, inquiry, examination, proceeding, investigation, litigation or suit (whether civil, criminal, administrative or investigative) commenced, brought, conducted, or heard by or before, or otherwise involving any Governmental Authority or arbitrator.

“Purchase Price” shall have the meaning set forth in Section 3.1.

“Purchased Assets” shall mean the assets set forth in Annex C and all of the goodwill associated therewith.

“Purchaser” shall have the meaning set forth in the Recitals to the Agreement.

“Purchaser Disclosure Letter” shall have the meaning set forth in Article V.

“Purchaser Indemnified Party” shall have the meaning set forth in Section 9.1(a).

“Purchaser Losses” shall have the meaning set forth in Section 9.1(a).

“Purchaser Material Adverse Effect” means a material adverse effect on the ability of Purchaser to consummate the transactions contemplated hereby and any documents delivered or entered into in connection herewith.

“Retained Business” means the design, manufacture and sale of semi-conductor products by Seller and its Affiliates other than the Business.

 

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“Sales Agreement” means that certain Avago Technology Sales Agreement attached hereto as Exhibit H.

“SEC” shall have the meaning set forth in Section 5.2(b).

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Seller” shall have the meaning set forth in the Recitals to this Agreement.

“Seller Corporate Policies” shall have the meaning set forth in Section 6.8.

“Seller Facility” shall have the meaning set forth in Section 2.3(b).

“Seller Indemnified Party” shall have the meaning set forth in Section 9.1(b).

“Seller Losses” shall have the meaning set forth in Section 9.1(b).

“Seller Material Adverse Effect” means any change, circumstance, event or effect that is materially adverse to the Purchased Assets or the Assumed Liabilities, in each case taken as a whole, provided that none of the following shall be deemed, either alone, or in combination, to constitute a Seller Material Adverse Effect: any change, circumstance, event or effect resulting from or arising out of (a) the public announcement of the entering into of this Agreement or the other Transaction Documents or the pendency of the transactions contemplated hereby or thereby, (b) except for the transactions contemplated by Sections 2.1, 2.2 and 2.3, the performance by any Seller Party of its obligations under this Agreement or the other Transaction Documents, (c) general economic conditions, including prevailing interest rates, (d) general conditions in the industry in which the Business is conducted, (e) any change related to the Excluded Assets or Excluded Liabilities that does not materially adversely affect the Purchased Assets or the Assumed Liabilities, or (f) any change in the relationship between any of the Seller Parties and any customer or potential customer of the Business (including any failure to achieve any design win for any IR Product undergoing a product qualification process with any third party prior to the termination of this Agreement), unless, in the case of the foregoing clauses (c) and (d), such changes, circumstances, events or effects referred to therein materially disproportionately affect the Business relative to the industry in which the Business competes as a whole; provided that in determining whether a Seller Material Adverse Effect has occurred with respect to changes, circumstances, events or effects resulting from or arising out of one or more Contracts, it shall be taken into consideration whether such alternatives or replacements to such Contracts are commercially available on comparable terms without material disruption to the ownership, use or operation of the Purchased Assets following the Closing.

“Seller Parent” shall have the meaning set forth in the Recitals to this Agreement.

“Seller Parties” shall have the meaning set forth in the Recitals to this Agreement.

“Seller Plan” means each plan, scheme, fund or arrangement of any Seller Party or any of their respective Affiliates within the Business which provides compensation or benefits to or in respect of Business Employees, but not including any mandatory government or social security pension arrangements.

 

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“Software Licensor” shall have the meaning set forth in Section 6.12.

“Straddle Period” shall have the meaning set forth in Section 6.9(b)(iii).

“Subsidiary” or “Subsidiaries” of Purchaser, Seller or any other Person means any corporation, partnership or other legal entity of which Purchaser, Seller or such other Person, as the case may be (either alone or through or together with any other Subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

“Supplier Contract” means any Contract between any Seller Party or any of their respective Affiliates on the one hand and a supplier of any Seller Party or any of their respective Affiliates on the other hand for the purchase or sale of components, subsystems, complete systems or other materials used in the manufacture of the IR Products or to the extent relating to the Business, and agreements or arrangements with regard to purchase or return of inventory of such components, subsystems, complete systems, materials or IR Products.

“Supply Agreement - Malaysia” means that certain Amendment to Development & Manufacturing Agreement attached hereto as Exhibit E.

“Supply Agreement - Singapore” means that certain Amendment to Development & Manufacturing Agreement attached hereto as Exhibit F.

“Tax” or “Taxes” shall mean any and all U.S. federal, state, local and non-U.S. taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, GST, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts.

“Tax Benefit” shall have the meaning set forth in Section 9.3(c).

“Tax Claim” shall have the meaning set forth in Section 6.9(d).

“Tax Return” shall mean any return, declaration, report, election, disclosure, form, estimated return and information statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Technology” means tangible embodiments, whether in electronic, written or other media, of technology, including designs, design and manufacturing documentation (such as bill of materials, build instructions and test reports), schematics, algorithms, routines, formulae, software, databases, lab notebooks, specifications, development and lab equipment, processes, prototypes, know-how and devices. “Technology” does not include Intellectual Property Rights, including any Intellectual Property Rights in any of the foregoing.

“Threshold” shall have the meaning set forth in Section 9.2(b).

 

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“Trademark” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Trademark License Agreement” means that certain Trademark License Agreement attached hereto as Exhibit G.

“Trade Secrets” shall have the meaning set forth in the definition of Intellectual Property Rights.

“Transaction Documents” shall have the meaning set forth in Section 4.2(a).

“Transfer” shall have the meaning set forth in Section 2.1.

“Transfer Taxes” shall have the meaning set forth in Section 6.9(a)(i).

“Transferred Business Intellectual Property” means (i) the Patents listed on Schedule 1 hereto with such changes as may be further agreed to in writing prior to the Closing Date, the Trademarks listed on Schedule 2 hereto, the Internet Properties listed on Schedule 3 hereto and the Copyright registrations and MaskWorks registrations listed on Schedule 4 hereto, and (ii) those Trade Secrets, Copyrights, Industrial Designs, Database Rights and Mask Works in the Transferred Business Technology that are owned by any one or more of the Seller Parties or any of their respective Subsidiaries, solely or jointly, as of the Closing Date.

“Transferred Business Intellectual Property Rights” means all rights relating to the Transferred Business Intellectual Property, all other Intellectual Property Rights owned, in whole or in part, by a Seller Party or any of their respective Subsidiaries and, as of the Closing Date, pertaining exclusively to, or used exclusively in, the Business, and all Intellectual Property Rights (other than Patents, Trademarks, Internet Properties and Copyright registrations and MaskWorks registrations) incorporated in the Transferred Business Technology and in the tangible embodiments thereof.

“Transferred Business Technology” means the Business Technology, as of the Closing Date, pertaining exclusively to, or used exclusively in, the Business.

“Transferred Contracts” shall have the meaning set forth in Annex C.

“Transferred Employees” shall have the meaning set forth in Section 6.6(a)(iii).

“Transferred IT Infrastructure” means:

(a) at the Owned Real Property and the Assigned Real Property, all desktop computers and or laptops used by Transferred Employees and all servers, printers and other such hardware for which 80% or more of their usage is for the benefit of Transferred Employees; and

(b) to the extent not included in (a) above, all IT systems; network or telecommunications equipment and software; desktop computer software; accounting, finance and database software; general software development and control systems; and tools, environments and other general IT functionality; in each case which is used exclusively in the Business of the Business;

 

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in each case, to the extent such Transferred IT Infrastructure is transferable (including upon receipt of a third party consent to such transfer) and, with respect to any Transferred IT Infrastructure that is leased or licensed from a third party, subject to the terms of such lease or license and the inclusion in the Assumed Liabilities of the obligations of Seller and its Affiliates under such lease or license to the extent (but only to the extent) related to such Transferred IT Infrastructure.

“Transferred Material Contracts” shall have the meaning set forth in Section 4.7(a).

 

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ANNEX B

Excluded Assets

“Excluded Assets” means all assets of the Seller Parties as of the Closing Date other than the Purchased Assets, and shall include, except as otherwise expressly provided to the contrary in this Agreement or any of the other Transaction Documents, the following:

(a) cash, bank accounts, certificates of deposit and other cash equivalents;

(b) any and all accounts receivable with third parties due in connection with the Business;

(c) except as provided for in Section 6.8, all insurance policies and any rights, claims or chooses in action under such insurance policies;

(d) all rights to refunds of any Tax payments, or prepayments or overpayments of any Tax, with respect to periods prior to the Closing, including recoverable payments of VAT or similar Taxes;

(e) (i) all Intellectual Property Rights other than the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights and such rights transferred in the Transferred Contracts and (ii) any Business Technology that is owned by a third party that Seller and its Affiliates do not have the right to provide to Purchaser hereunder;

(f) enterprise deployed, centrally managed computer software and hardware used by Seller or its Subsidiaries prior to the Closing, including any such computer software or hardware that is used by or for the Business prior to or as of the Closing, and all licenses or other agreements with third parties concerning the use thereof other than the hardware and software included in the Transferred IT Infrastructure and other than software licenses to the extent provided in Section 6.12;

(g) all of Seller’s enterprise wide procurement contracts;

(h) fixtures and leasehold improvements at all locations; and office furniture and office equipment at all locations;

(j) all Excluded IT Infrastructure;

(k) all interests in real property;

(l) assets and Contracts relating to any Seller Plan or Non U.S. Benefits Plan, except as expressly provided in Section 6.6;

(m) all equity or other ownership interests in any Person;

(n) all assets and other rights sold or otherwise transferred or disposed of between the date of this Agreement and the Closing not in violation of the terms of this Agreement;

 

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(o) all rights of Seller and its Affiliates under this Agreement and the Transaction Documents;

(p) all books, records and other information prepared by Seller and its Subsidiaries in connection with the transactions contemplated hereby;

(q) all tangible personal property other than that specifically identified in Annex C as a Purchased Asset; and

(r) all rights arising from Excluded Liabilities.

For the avoidance of doubt and notwithstanding anything to the contrary, including without limitation any language contained in this Agreement or any other document or based on any Law, known or unknown, suspected or unsuspected, express or implied, in law or equity, Purchaser shall not assume any liabilities that are not (i) related primarily to the Business, (ii) expressly assumed in this Agreement, or (iii) related to any Business Employees other than the Transferred Employees or Automatic Transferred Employees, including without limitation salary, bonus or severance pay.

 

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ANNEX C

Purchased Assets

Purchased Assets consist solely of the following assets related to the Business:

 

(a)	All tangible personal property identified on Annex C-1 (collectively, the “Personal Property”);

 

(b)

all inventories to the extent exclusively used or held exclusively and directly for use in the Business (including raw materials, purchased goods, parts, containers, recycled materials, work in process, supplies, finished goods and demo and consignment inventory) on the books of the Seller Parties or their Subsidiaries, held by vendors or which otherwise are exclusively used or exclusively and directly held for use in the Business;

 

(c)

all customers’ files, credit information, supplier lists, parts lists, vendor lists, business correspondence, business lists, sales literature, promotional literature and other selling and advertising materials and all other assets and rights exclusively used in the distribution, sale or marketing of the IR Products; provided, however, that to the extent any such materials also relate to or arise from or are used in connection with the Retained Business, or any such information is commingled with information used in the Retained Business, Seller shall have the right to use and license others to use such materials and information (provided such use and licenses to use are not in violation of or otherwise inconsistent with the terms of this Agreement, the Avago General IP License Agreement or the Master Separation Agreement), and the original version of all such materials and of all tangible embodiments of such information shall not be a Purchased Asset and shall be retained by the Seller Parties with true, complete and correct copies of all such originals and tangible embodiments to be provided to Purchaser at Closing;

 

(d)

to the extent transferable (assuming receipt of any required third-party consent to such transfer), all right, title or interest of the Seller Parties and their Affiliates in or to: (A) the Business Intellectual Property Licenses, and (B) the Supplier Contracts, maintenance or service agreements, purchase orders for materials and other services, dealer and distributorship agreements, advertising and promotional agreements, equipment leases, licenses (but excluding licenses relating to Intellectual Property Rights other than Business Intellectual Property Licenses), joint ventures, partnership agreements or other Contracts (including any agreements of the Seller Parties or their Affiliates with suppliers, sales representatives, distributors, agents, lessees of Personal Property, licensors, licensees, consignors and consignees specified therein (but excluding licenses related to Intellectual Property Rights other than Business Intellectual Property Licenses)), in each case in this clause “(B)” that are exclusively related to the Business, (collectively, the “Transferred Contracts”), and with respect to any of the foregoing types or categories of Contracts in clause “(B)” that are directly but not exclusively related to the Business, the portion thereof relating to the Business to the extent the Seller Parties obtain the consent of the counterparty thereto to assign in part or otherwise divide such Contracts between Purchaser and the applicable Seller Party or its Affiliates in accordance with Sections 6.11 and 6.12 hereof and upon receipt of such consent such portion thereof shall become a Transferred Contract;

 

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(e)	all Transferred Business Technology and all Transferred IT Infrastructure;

 

(f)

all marketing, personnel, financial and other books and all other documents, microfilm and business records and correspondence wherever located, directly related to the Business; provided, however, that to the extent any such documents also relate to or arise from or are used in connection with the Retained Business, or any such information is commingled with information used in the Retained Business, the original version of such information shall not be a Purchased Asset (and Seller shall have the right to use such information, provided such use and licenses to use are not in violation of or otherwise inconsistent with the terms of the Noncompetition Agreement, the Avago General IP License Agreement or the Master Separation Agreement) and shall be retained by Seller with true, complete and correct copies thereof to be provided to Purchaser at Closing; provided, however, upon reasonable request, the Seller Parties will provide the Purchaser with reasonable access to the foregoing information that relates to the Business but does not directly relate to the Business; and

 

(g)	any and all assets associated with or allocated to Transferred Employees in accordance with Section 6.6;

 

(h)	the Transferred Business Intellectual Property and the Transferred Business Intellectual Property Rights, including the goodwill of the Business appurtenant to trademarks included in the Transferred Business Intellectual Property, but subject to the terms of any licenses granted to third parties.

 

(i)	all rights of Seller under express or implied warranties from vendors related to the Purchased Assets to the extent transferable by Seller; and

 

(j)	all goodwill exclusively related to the Business.

With respect to the Purchased Assets identified in clause (a), to the extent such Purchased Assets are leased or licensed from a third party, the transfer to Purchaser shall only be to the extent of such lease or license.

 

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Exhibit A

JOINDER TO ASSET PURCHASE AGREEMENT

THIS JOINDER TO THE ASSET PURCHASE AGREEMENT (this “Joinder”) effecting a joinder to the ASSET PURCHASE Agreement, dated as of October 31, 2007 (the “Purchase Agreement”), by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies General IP (Singapore) Pte. Ltd, a company organized under the laws of Singapore (“Seller”), each Subsidiary of Seller Parent that executes a joinder to the Purchase Agreement pursuant to Section 6.7 thereof, and Lite-On Technology Corporation, a Taiwan corporation (“Purchaser”), is entered into as of             , 2007, by and among Seller Parent, Seller, Purchaser and             , a              corporation and a Subsidiary of Seller Parent , a Delaware corporation and a Subsidiary of Seller Parent and [other Subsidiaries as applicable] (the “Other Sellers”).

1. Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement.

2. Joinder. Each Other Seller hereby joins in and becomes a party to the Purchase Agreement as if it were an original party thereto and becomes jointly and severally bound with the other Seller Parties for all terms, conditions, representations, warranties, covenants, and agreements applicable to the Seller Parties, as more fully set forth in the Purchase Agreement, a copy of which is attached hereto as Exhibit A.

3. Representations and Warranties. Each Other Seller represents to the Purchaser that the representations and warranties set forth in Article IV of the Purchase Agreement are true and correct as to the Other Seller as if such representations and warranties were fully set forth in this Section 3 as of the date hereof.

4. Counterparts. This Joinder may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 4.

5. Governing Law. This Joinder and all claims arising out of this Joinder shall be governed by, and construed in accordance with, the Laws of Singapore, without regard to any conflicts of law principles that would result in the application of any law other than the law of the Singapore.

6. Purchase Agreement Controls. If any provision of this Joinder is in conflict with or inconsistent with any provision of the Purchase Agreement, the provisions of the Purchase Agreement shall control.

7. Binding Effect. This Joinder shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Joinder to Purchase Agreement has been duly executed and delivered by the parties as of the date first above written.

 

 

 

 

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EXHIBIT A

PURCHASE AND SALE AGREEMENT

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EXHIBIT B

INTELLECTUAL PROPERTY LICENSE AGREEMENT

This INTELLECTUAL PROPERTY LICENSE AGREEMENT (the “Agreement”) is effective as of the Closing Date (as defined herein), between AVAGO TECHNOLOGIES GENERAL IP (SINGAPORE) PTE. LTD., a Singaporean corporation (“Avago”), and Lite-On Technology Corporation, a Taiwan corporation (“Purchaser”).

WHEREAS, Avago and certain direct and indirect affiliates of Avago are engaged in, among other things, the Business (as defined below);

WHEREAS, Avago’s affiliated companies Avago Technologies Pte. Ltd. and certain of its Subsidiaries (the “Selling Entities”), and Purchaser have entered into an Asset Purchase Agreement, dated as of October 31, 2007 (“Purchase Agreement”), pursuant to which Purchaser shall purchase and assume, and the Selling Entities shall sell, transfer and assign substantially all of the equity, assets and liabilities of the Business to Purchaser; and

WHEREAS, as part of the foregoing, Avago desires to license to Purchaser certain of its intellectual property rights that have not been assigned to Purchaser under the Purchase Agreement and Purchaser desires to license to Avago certain intellectual property rights assigned to Purchaser under the Purchase Agreement.

NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and between the parties as follows:

ARTICLE I

DEFINITIONS

For the purpose of this Agreement the following capitalized terms are defined in this Article I and shall have the meaning specified in this Article I. Other terms that are capitalized but not specifically defined below shall have the meaning set forth in the Purchase Agreement.

1.1 AVAGO’S FIELD OF USE. “Avago’s Field of Use” means the business of Avago and its Subsidiaries and Affiliates, as currently or hereafter conducted, other than IR Products. Notwithstanding the foregoing, Avago’s Field of Use shall include products, services and other activities related to IR Products, but only to the extent that such products, services and activities are components of products of the Retained Business, are incidental to the development or sale of products and services of the Retained Business, or are specifically included in the definition of the Retained Business.

1.2 AVAGO PRODUCTS. “Avago Products” means any and all products and services of the businesses in which Avago or any of its Subsidiaries or Affiliates is now or hereafter engaged (including the business of making (but not having made) Third Party products for Third Parties when Avago or any of its Subsidiaries or Affiliates is acting as a contract manufacturer or foundry for such Third Parties), other than IR Products. Notwithstanding the foregoing, Avago’s Products shall include products and services related to IR Products, but only to the extent that such products and services are components of products of the Retained Business, are incidental to the development and sale of products and services of the Retained Business, or are specifically included in the definition of the Retained Business.

 

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1.3 CONFIDENTIAL INFORMATION. “Confidential Information” has the meaning set forth in Article V.

1.4 FIRST EFFECTIVE FILING DATE. “First Effective Filing Date” means the earliest effective filing date in the particular country for any Patent or any application for any Patent. By way of example, it is understood that the First Effective Filing Date for a United States Patent is the earlier of (i) the actual filing date of the United States Patent application which issued into such Patent, (ii) the priority date under 35 U.S.C. § 119 for such Patent, or (iii) the priority date under 35 U.S.C. § 120 for such Patent.

1.5 IMPROVEMENTS. “Improvements” to Technology means (i) with respect to Copyrights, any modifications, derivative works, and translations of works of authorship, (ii) with respect to Database Rights, any database that is created by extraction or re-utilization of another database, and (iii) with respect to Mask Work Rights, trade secrets and other intellectual property rights included within the definition of Technology and not covered by Section 1.3(i) – (ii) above, any improvements of Technology. For the purposes of clarification, an item of Technology will be deemed to be an Improvement of another item of Technology only if it is actually derived from such other item of Technology and not merely because it may have the same or similar functionality or use as such other item of Technology.

1.6 LICENSED BUSINESS PATENTS. “Licensed Business Patents” means:

(a) every Patent other than design patents to the extent entitled to a First Effective Filing Date prior to the Closing Date, provided that Avago (or any Subsidiary or Affiliate of Avago):

(i) has ownership or control of such Patent, or

(ii) otherwise has the right under such Patent to grant licenses of the type and on the terms herein granted by Avago without the obligation to pay royalties or other consideration to Third Parties; and

(iii) is not restricted from granting a license under such Patents by any other agreements; and

(b) applications for the foregoing Patents described in Section 1.4, including without limitation any continuations, continuations-in-part, divisions and substitutions.

1.7 PURCHASER’S FIELD OF USE. “Purchaser’s Field of Use” means the field of the Business as currently or hereafter conducted, including the design, manufacture, supply, distribution, sale, support and maintenance of Purchaser Products.

1.8 PURCHASER PRODUCTS. “Purchaser Products” means IR Products sold by Avago and its Subsidiaries, or after the Closing, by the Purchaser or any of its Affiliates, and all modified versions thereof, any reasonably foreseeable extensions or improvements thereto, or any new IR Products that are developed to replace products existing as of the Closing, that are sold by Purchaser or its Subsidiaries or Affiliates after the Closing as IR Products.

 

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1.9 THIRD PARTY. “Third Party” means a Person other than Avago and its Subsidiaries and Affiliates or Purchaser and its Subsidiaries and Affiliates.

ARTICLE II

PATENT LICENSE GRANTS

2.1 LICENSE GRANTS TO PURCHASER. Avago grants (and agrees to cause its appropriate Subsidiaries and Affiliates to grant) effective as of the Closing Date to Purchaser, under the Licensed Business Patents, an irrevocable, non-exclusive, worldwide, fully-paid, royalty-free and non-transferable (except as set forth in Section 9.12 hereof) license, with right of sublicense as set forth below, to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import Purchaser Products solely within the Purchaser’s Field of Use. With respect to those Licensed Business Patents owned by a Third Party, if any, (a) the license shall be non-exclusive, and (b) the license grant set forth in this Section shall be subject to the limitations set forth in the relevant license agreement between Avago and such Third Party.

2.2 SUBLICENSE RIGHTS OF PURCHASER.

(a) Subject to Sections 2.2(a) and (b) below and to Section 2.3, Purchaser may grant sublicenses to its respective Subsidiaries and Affiliates within the scope of its respective license hereunder (with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary or Affiliates, to another Subsidiary or Affiliate of Purchaser).

(b) Any sublicense under Section 2.2(a) may be made effective retroactively, but not prior to the sublicensee’s becoming a Subsidiary or Affiliate of Purchaser.

(c) Any licenses granted by Purchaser or its Subsidiaries or Affiliates to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers with respect to any Purchaser Product in the form of software may include a sublicense under the Licensed Business Patents within the scope of Purchaser’s license hereunder, provided that the scope of such sublicense is limited to the exercise of the rights granted by Purchaser with respect to such Purchaser Product.

2.3 HAVE MADE RIGHTS OF PURCHASER. Purchaser understands and acknowledges that the “have made” rights granted to it in Section 2.1, and the sublicenses of such “have made” rights granted pursuant to Section 2.2, are intended to cover only the products of Purchaser and its Subsidiaries and Affiliates (including private label or OEM versions of such products), and are not intended to cover foundry or contract manufacturing activities that Purchaser may undertake through Third Parties for Third Parties.

2.4 LICENSE GRANTS BACK TO AVAGO. Purchaser grants back (and agrees to cause its appropriate Subsidiaries and Affiliates to grant back) to Avago, under the Patents included in the Transferred Business Intellectual Property (excluding all design patents included therein), an irrevocable, non-exclusive, worldwide, fully-paid, royalty-free and non-transferable

 

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(except as set forth in Section 9.12 hereof) license, with right of sublicense as set forth below, solely within the Avago’s Field of Use, to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import Avago Products.

2.5 SUBLICENSE RIGHTS OF AVAGO.

(a) Subject to Sections 2.5(b) and (c) below and to Section 2.6, Avago may grant sublicenses to its respective Subsidiaries and Affiliates within the scope of its respective license hereunder (with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary or Affiliate, to another Subsidiary or Affiliate of Avago).

(b) Any sublicense under Section 2.5(a) may be made effective retroactively, but not prior to the sublicensee’s becoming a Subsidiary or Affiliate of Avago.

(c) Any licenses granted by Avago or its Subsidiaries or Affiliates to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers with respect to any Avago Product in the form of software may include a sublicense under the Patents included in the Transferred Business Intellectual Property within the scope of Avago’s license hereunder, provided that the scope of such sublicense is limited to the exercise of the rights granted by Purchaser with respect to such Avago Product.

2.6 HAVE MADE RIGHTS OF AVAGO. Avago understands and acknowledges that the “have made” rights granted to it in Section 2.4, and the sublicenses of such “have made” rights granted pursuant to Section 2.5, are intended to cover only the products of Avago and its Subsidiaries and Affiliates (including private label or OEM versions of such products), and are not intended to cover foundry or contract manufacturing activities that Avago may undertake through Third Parties for Third Parties.

2.7 DURATION.

(a) All licenses granted herein with respect to each Patent shall expire upon the expiration of the term of such Patent; provided, however, that licenses for those Licensed Business Patents owned by a Third Party shall expire on the expiration of the term of the relevant license agreement between Avago and such Third Party.

(b) All sublicenses granted pursuant to this Agreement to a particular Subsidiary or Affiliate of a party shall terminate on the date that the Subsidiary or Affiliate ceases to be a Subsidiary or Affiliate of that party.

ARTICLE III

OTHER LICENSE GRANTS

3.1 LICENSE TO PURCHASER.

(a) Avago grants (and agrees to cause its appropriate Subsidiaries and Affiliates to grant) effective as of the Closing Date to Purchaser and its Subsidiaries the following irrevocable, non-exclusive, worldwide, fully paid, royalty-free and non-transferable

 

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(except as specified in Section 9.12 below) licenses, with right of sublicense as set forth below, under its and their applicable Intellectual Property Rights as well as sublicensable Third Party Intellectual Property Rights, solely within the Purchaser’s Field of Use:

(i) under its and their Copyrights and sublicensable Third Party Copyrights in and to the Licensed Business Technology, (A) to reproduce and have reproduced the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Purchaser, in whole or in part, in order to create or as part of Purchaser Products, (B) to prepare Improvements or have Improvements prepared for it based upon the works of authorship included in such Licensed Business Technology in order to create Purchaser Products, (C) to distribute (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) copies of the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Purchaser as part of Purchaser Products, and (D) to perform (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) and display the works of authorship included in such Licensed Business Technology and Improvements thereof prepared by or for Purchaser, as part of Purchaser Products;

(ii) under its and their Database Rights and sublicensable Third Party Database Rights in and to the Licensed Business Technology, to develop or have developed Improvements and to extract data from the databases included in such Licensed Business Technology and such Improvements and to re-utilize such data to design, develop, manufacture and have manufactured Purchaser Products and to sell such Purchaser Products that incorporate such data, databases and Improvements thereof prepared by or for Purchaser;

(iii) under its and their Mask Works and sublicensable Third Party Mask Works in and to the Licensed Business Technology, (A) to develop or have developed Improvements and to reproduce and have reproduced mask works and semiconductor topologies included in such Licensed Business Technology and embodied in Purchaser Products by optical, electronic or any other means, (B) to import or distribute a product in which any such mask work or semiconductor topology is embodied, and (C) to induce or knowingly to cause a Third Party to do any of the acts described in Sections 3.1(a)(iii)(A) and (B) above; and

(iv) under its and their Trade Secrets and Industrial Designs and sublicensable Third Party Trade Secrets and Industrial Designs in and to the Licensed Business Technology, to develop or have developed Improvements and to use such Licensed Business Technology and Improvements thereof prepared by or for Purchaser to design, develop, manufacture and have manufactured, offer to sell, sell, support, and maintain Purchaser Products and make Improvements to Purchaser Products

(b) With respect to Licensed Business Technology owned by a Third Party, the license grant set forth in this Section shall be subject to the limitations set forth in the relevant license agreement between Avago and such Third Party.

 

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(c) Without limiting the generality of the foregoing, licenses granted in Section 3.1(a) above, with respect to software included within the Licensed Business Technology, such licenses include the right to use, modify, and reproduce such software and Improvements thereof made by or for Purchaser or its Subsidiaries or Affiliates to create Purchaser Products, in source code and object code form, and to sell and maintain such software and Improvements thereof made by or for Purchaser or its Subsidiaries, in source code and object code form, as part of Purchaser Products.

(d) The foregoing licenses in this Section 3.1 include the right to have contract manufacturers and foundries manufacture Purchaser Products for Purchaser.

(e) Purchaser may grant sublicenses within the scope of the licenses granted under Sections 3.1(a) and (b) above as follows:

(i) Purchaser may grant sublicenses to its Subsidiaries and Affiliates for so long as they remain its Subsidiaries or Affiliates, with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary or Affiliate, to another Subsidiary or Affiliates of such party; provided that any such sublicense may be made effective retroactively but not prior to the sublicensee’s becoming a Subsidiary or Affiliate; and

(ii) Purchaser and its Subsidiaries and Affiliates may grant sublicenses with respect to Purchaser Products in the form of software, in object code and source code form, to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers.

3.2 LICENSE BACK TO AVAGO.

(a) Purchaser grants back (and agrees to cause its appropriate Affiliates and Subsidiaries to grant back) to Avago and its Subsidiaries and Affiliates the following personal, irrevocable, non-exclusive, worldwide, fully paid, royalty-free and non-transferable (except as specified in Section 9.12 below) licenses under its and their applicable Intellectual Property Rights, together with the right to sublicense to Third Parties subject to the terms of this Agreement, solely within the Avago Field of Use:

(i) under its and their Copyrights in and to the Transferred Business Technology, (A) to reproduce and have reproduced the works of authorship included in the Transferred Business Technology and Improvements thereof prepared by or for Avago, in whole or in part, in order to create or as part of Avago Products, (B) to prepare Improvements or have Improvements prepared for it based upon the works of authorship included in the Transferred Business Technology in order to create Avago Products, (C) to distribute (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) copies of the works of authorship included in the Transferred Business Technology and Improvements thereof prepared by or for Avago as part of Avago Products, and (D) to perform (by any means and using any technology, whether now known or unknown, including without limitation electronic transmission) and display the works of authorship included in the Transferred Business Technology and Improvements thereof prepared by or for Avago, as part of Avago Products;

 

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(ii) under its and their Database Rights in and to the Transferred Business Technology, to develop or have developed Improvements and to extract data from the databases included in the Transferred Business Technology and such Improvements and to re-utilize such data to design, develop, manufacture and have manufactured Avago Products and to sell such Avago Products that incorporate such data, databases and Improvements thereof prepared by or for Avago;

(iii) under its and their Mask Works in and to the Transferred Business Technology, (A) to develop or have developed Improvements and to reproduce and have reproduced mask works and semiconductor topologies included in the Transferred Business Technology and embodied in Avago Products by optical, electronic or any other means, (B) to import or distribute a product in which any such mask work or semiconductor topology is embodied, and (C) to induce or knowingly to cause a Third Party to do any of the acts described in Sections 3.2(a)(iii)(A) and (B) above; and

(iv) under its and their Trade Secrets, Industrial Designs and other intellectual property rights in and to the Transferred Business Technology, to use the Transferred Business Technology and Improvements thereof prepared by or for Avago to design, develop, to manufacture and have manufactured, offer to sell, sell, support and maintain Avago Products and make Improvements to such Avago Products.

(b) Without limiting the generality of the foregoing licenses granted in Section 3.2(a) above, with respect to software included within the Transferred Business Technology, such licenses include the right to use, modify, and reproduce such software and Improvements thereof made by or for Avago or its Subsidiaries and Affiliates to Avago Products, in source code and object code form, and to sell and maintain such software and Improvements thereof made by or for Avago or its Subsidiaries and Affiliates, in source code and object code form, as part of Avago Products.

(c) The foregoing licenses in this Section 3.2 include the right to have contract manufacturers and foundries manufacture Avago Products for Avago and its Subsidiaries and Affiliates.

(d) Avago may grant sublicenses within the scope of the licenses granted under Sections 3.2(a) and (b) above as follows:

(i) Avago may grant sublicenses to its Subsidiaries and Affiliates for so long as they remain its Subsidiaries and Affiliates, with no right to grant further sublicenses other than, in the case of a sublicensed Subsidiary or Affiliate, to another Subsidiary or Affiliate of such party; provided that any such sublicense may be made effective retroactively but not prior to the sublicensee’s becoming a Subsidiary or Affiliate; and

(ii) Avago or its Subsidiaries or Affiliates may grant sublicenses with respect to Avago Products in the form of software, in object code and source code form, to its distributors, resellers, OEM customers, VAR customers, VAD customers, systems integrators and other channels of distribution and to its end user customers.

 

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3.3 IMPROVEMENTS. As between the parties, after the Closing Date:

(a) Avago hereby retains all right, title and interest, including all Intellectual Property Rights, in and to any Improvements to Transferred Business Technology made by or for Avago in the exercise of the licenses granted to it hereunder, subject only to the ownership of Purchaser in the underlying Transferred Business Technology and the non-competition terms agreed to by Avago pursuant to the Purchase Agreement. Avago shall not have any obligation under this Agreement to notify Purchaser of any Improvements made by or for it or to disclose or license any such Improvements to Purchaser; and

(b) Purchaser hereby retains all right, title and interest, including all Intellectual Property Rights, in and to any Improvements to Licensed Business Technology made by or for Purchaser in the exercise of the licenses granted to it hereunder, subject only to the ownership of Avago in the underlying Licensed Business Technology. Purchaser shall not have any obligation under this Agreement to notify Avago of any Improvements made by or for it or to disclose or license any such Improvements to Avago.

3.4 DURATION OF SUBLICENSES TO SUBSIDIARIES AND AFFILIATES. Any sublicenses granted to a particular Subsidiary or Affiliate by a party shall terminate upon the date that such Subsidiary or Affiliate ceases to be a Subsidiary or Affiliate of that party.

3.5 NO PATENT LICENSES. Nothing contained in this Article 3 shall be construed as conferring to either party by implication, estoppel or otherwise any license or right under any Patent or applications therefor, whether or not the exercise of any right herein granted necessarily employs an invention of any existing or later issued Patent. The applicable licenses granted by Avago to Purchaser and by Purchaser to Avago with respect to Patents are set forth in Article II above.

ARTICLE IV

ADDITIONAL OBLIGATIONS

4.1 ADDITIONAL OBLIGATIONS WITH REGARD TO PATENTS. Purchaser acknowledges that its employees and contractors who are former Avago or Avago Affiliate employees and contractors have a continuing duty to assist Avago with the prosecution of Licensed Business Patent applications and other Patent applications owned by Avago and, accordingly, Purchaser agrees to make available, to Avago or its counsel, on reasonable advance written notice, inventors and other persons employed by Purchaser for interviews and/or testimony to assist in good faith in further prosecution, maintenance or litigation of such Patent applications, including the signing of documents related thereto. Any actual and reasonable out-of-pocket expenses associated with such assistance shall be borne by Avago, expressly excluding the value of the time of such Purchaser personnel; provided, however, that in the case of assistance with litigation, the parties shall agree on a case by case basis on compensation, if any, of Purchaser for the value of the time of Purchaser’s employees as reasonably required.

4.2 ASSIGNMENT OF PATENTS. Neither party shall assign or grant any rights under any of the Licensed Business Patents unless such assignment or grant is made subject to the licenses granted in this Agreement.

 

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4.3 RESPONSE TO REQUESTS. Avago shall, upon a request from Purchaser sufficiently identifying any Patent or Patent application, inform Purchaser as to the extent to which said Patent or Patent application is subject to the licenses and other rights granted hereunder.

ARTICLE V

CONFIDENTIALITY

5.1 CONFIDENTIAL INFORMATION. The parties hereto expressly acknowledge and agree that all information, whether written or oral, furnished by either party to the other party or any Subsidiary of such other party pursuant to this Agreement (“Confidential Information”) shall be deemed to be confidential and shall be maintained by each party and their respective Subsidiaries in confidence, using the same degree of care to preserve the confidentiality of such Confidential Information that the party to whom such Confidential Information is disclosed would use to preserve the confidentiality of its own information of a similar nature and in no event less than a reasonable degree of care. Notwithstanding the foregoing, after the Closing Date all Transferred Business Technology shall be deemed the Confidential Information of Purchaser, not of Avago. Except as authorized in writing by the other party, neither party shall at any time use or disclose or permit to be disclosed any such Confidential Information to any person, firm, corporation or entity, (i) except as may reasonably be required in connection with the performance of this Agreement by Purchaser, Avago or its respective Subsidiaries, as the case may be; (ii) except as may reasonably be required after the Closing Date (A) by Purchaser or its Subsidiaries in connection with the use of the Licensed Business Technology and the operation of the Business or (B) by Avago or its Subsidiaries in connection with the licensed use of the Transferred Business Technology and the operation of its business; (iii) except to the parties’ agents or representatives who are informed by the parties of the confidential nature of the information and are bound to maintain its confidentiality; and (iv) in the course of due diligence in connection with the sale of all or a portion of either party’s business provided the disclosure is pursuant to a nondisclosure agreement having terms comparable to Sections 5.1 and 5.2 hereof.

5.2 EXCEPTIONS. The obligation not to disclose information under Section 5.1 hereof shall not apply to information that, as of the Closing Date or thereafter, (i) is or becomes generally available to the public other than as a result of disclosure made after the execution of the Purchase Agreement by the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof, (ii) was or becomes readily available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis, (iii) is or becomes available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis from a source other than its own files or personnel or the other party or its Subsidiaries, provided that such source is not known by the party desiring to treat such information as non-confidential to be bound by confidentiality agreements with the other party or its Subsidiaries or by legal, fiduciary or ethical constraints on disclosure of such information, or (iv) is required to be disclosed pursuant to a governmental order or decree or other legal requirement (including the requirements of the U.S. Securities and Exchange Commission and the listing rules of any applicable securities exchange), provided that the party required to disclose such information shall give the other party prompt notice thereof prior to

 

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such disclosure and, at the request of the other party, shall cooperate in all reasonable respects in maintaining the confidentiality of such information, including obtaining a protective order or other similar order. Nothing in this Section 5.2 shall limit in any respect either party’s ability to disclose information in connection with the enforcement by such party of its rights under this Agreement; provided that the proviso of clause (v) in the immediately preceding sentence shall apply to the party desiring to disclose such information.

5.3 DURATION. The obligations of the parties set forth in this Article V with respect to the protection of Confidential Information, shall remain in effect until five (5) years after (i) the Closing Date, with respect to Confidential Information of one party that is known to or in the possession of the other party as of the Closing Date, or (ii) the date of disclosure, with respect to Confidential Information that is disclosed by the one party to the other party after the Closing Date.

ARTICLE VI

TERMINATION

6.1 VOLUNTARY TERMINATION. By written notice to the other party, either party may voluntarily terminate all or a specified portion of the license and rights granted to it hereunder by such other party. Such notice shall specify the effective date of such termination and shall clearly specify any affected Intellectual Property Rights, Technology, product or service.

6.2 SURVIVAL. Any voluntary termination by either party of the license and rights granted to it by the other party under Section 6.1 hereof shall not affect such party’s license and rights with respect to any licensed product made or service furnished prior to such termination, and shall not affect the license rights it has granted to the other party hereunder.

6.3 NO OTHER TERMINATION. Each party acknowledges and agrees that its remedy for breach by the other party of the licenses granted to it hereunder during the applicable term of such licenses, or of any other provision hereof, shall be, subject to the requirements of Article VII, to bring a claim to recover damages subject to the limits set forth in this Agreement and to seek any other appropriate equitable relief, other than termination of the licenses granted by it in this Agreement.

ARTICLE VII

DISPUTE RESOLUTION

Except as otherwise set forth herein, resolution of any and all disputes arising from or in connection with this Agreement, whether based on contract, tort, or otherwise (collectively, “Disputes”), shall be exclusively governed by and settled in accordance with the provisions of this Article 7.

7.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through negotiation. Within thirty (30) days after notice of a Dispute is given by either party to the other party, each party shall select a first tier negotiating team comprised of director or general manager level employees of such party and shall meet and make a good faith attempt to resolve such Dispute and shall continue to negotiate

 

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in good faith in an effort to resolve the Dispute or renegotiate the applicable Section or provision without the necessity of any formal proceedings. If the first tier negotiating teams are unable to agree within thirty (30) days of their first meeting, then each party shall select a second tier negotiating team comprised of vice president level employees of such party and shall meet within thirty (30) days after the end of the first thirty (30) day negotiating period to attempt to resolve the matter. During the course of negotiations under this Section 7.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating teams but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. All negotiations between the parties pursuant to this Section 7.1 shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future litigation or arbitration.

7.2 FAILURE TO RESOLVE DISPUTES. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within fifteen (15) days after the first meeting of the second tier negotiating teams under Section 7.1, the parties may seek any remedies to which they may be entitled in accordance with the terms of this Agreement.

7.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party from initiating arbitration if such party would be substantially harmed by a failure to act during the time that such good faith efforts are being made to resolve the dispute or claim through negotiation or mediation. In the event that arbitration is commenced under this Section 7.3, the parties agree to continue to attempt to resolve any Dispute according to the terms of Sections 7.1 and 7.2 hereof during the course of such arbitration proceedings under this Section 7.3.

7.4 PAY AND DISPUTE. Except as provided herein, in the event of any dispute regarding payment of a third-party invoice (subject to standard verification of receipt of products or services), the party named in a third party’s invoice must make timely payment to such third party, even if the party named in the invoice desires to pursue the dispute resolution procedures outlined in this Article 7. If the party that paid the invoice is found pursuant to this Article 7 to not be responsible for such payment, such paying party shall be entitled to reimbursement, with interest accrued at an annual rate of the rate of interest as announced from time to time by JPMorgan Chase at its principal office in New York City as its prime lending rate, the Prime Rate to change when and if such prime lending rate changes, from the party found responsible for such payment.

ARTICLE VIII

LIMITATION OF LIABILITY

IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES OR AFFILIATES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT,

 

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WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING SHALL NOT, HOWEVER, LIMIT THE AMOUNT OR TYPES OF DAMAGES AVAILABLE TO EITHER PARTY FOR INFRINGEMENT OR MISAPPROPRIATION OF ITS OR ITS SUBSIDIARIES’ OR AFFILIATES’ INTELLECTUAL PROPERTY RIGHTS BY THE OTHER PARTY OR SUCH OTHER PARTY’S SUBSIDIARIES OR AFFILIATES, OR FOR ANY DISCLOSURE OF CONFIDENTIAL INFORMATION.

ARTICLE IX

MISCELLANEOUS PROVISIONS

9.1 DISCLAIMER. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE PURCHASE AGREEMENT, EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL (A) TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS LICENSED HEREUNDER, ARE LICENSED WITHOUT ANY WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Except as otherwise set forth herein or in the Purchase Agreement, neither party nor any of its Subsidiaries or Affiliates makes any warranty or representation that any manufacture, use, importation, offer for sale or sale of any product or service will be free from infringement of any patent or other intellectual property right of any Third Party. Except as otherwise set forth herein or in the Purchase Agreement, neither party nor any of its Subsidiaries or Affiliates makes any warranty or representation as to the validity or scope of any Patent licensed by it to the other party hereunder or any warranty or representation that any manufacture, use, importation, offer for sale or sale of any product or service will be free from infringement of any Patent or other Intellectual Property Right of any Third Party.

9.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be construed as conferring any rights by implication, estoppel or otherwise, under any Intellectual Property Right, other than the rights expressly granted in this Agreement. Neither party is required hereunder to furnish or disclose to the other any technical or other information (including copies of the Licensed Business Technology or Transferred Business Technology), except as specifically provided herein or in the Purchase Agreement.

9.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder to institute or maintain any action or suit against Third Parties for infringement or misappropriation of any Intellectual Property Right in or to any Technology licensed to the other party hereunder, or to defend any action or suit brought by a Third Party which challenges or concerns the validity of any of such rights or which claims that any Technology licensed to the other party hereunder infringes or constitutes a misappropriation of any Intellectual Property Right of any Third Party. Avago shall not have any right to institute any action or suit against Third Parties for infringement of any of the Transferred Business Intellectual Property Rights. Purchaser shall not have any right to institute any action or suit against Third Parties for infringement of any of the Licensed Business Intellectual Property Rights.

 

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9.4 NO OBLIGATION TO OBTAIN OR MAINTAIN RIGHTS IN TECHNOLOGY. Except as otherwise set forth herein or in the Purchase Agreement, neither party, nor any of its Subsidiaries, shall be obligated to provide the other party with any technical assistance or to furnish the other party with, or obtain, any documents, materials or other information or Technology.

9.5 NO OBLIGATION TO OBTAIN OR MAINTAIN PATENTS OR TRADEMARKS. Neither Avago, nor any of its Subsidiaries is obligated to (i) file any Patent application, or to secure any Patent or Patent rights or (ii) to maintain any Patent in force. Neither Avago, nor any of its Subsidiaries is obligated to (i) file any Trademark application, or to secure any Trademark rights or (ii) to maintain any Trademark registration in force.

9.6 RECONCILIATION. The parties acknowledge that, as part of the transfer of Transferred Business Intellectual Property, Transferred Business Technology, and Transferred Business Intellectual Property Rights, Avago may inadvertently retain Technology or Intellectual Property that should have been transferred to Purchaser as part of the contemplated transfer of assets, and Purchaser may inadvertently acquire Technology or Intellectual Property that should not have been thereby transferred. Each party agrees to transfer to the other any such later discovered Technology or Intellectual Property, subject to the licenses set forth above, at the reasonable request of the appropriate owner of such Technology or Intellectual Property.

9.7 NON-COMPETITION AGREEMENT. All licenses and other rights granted by Purchaser or retained by Avago under this Agreement, including without limitation all rights referred to at Articles 2.4, 2.5, 3.2, 3.3, are subject to the terms and conditions of the Non-Competition Agreement executed between Avago and Purchaser on or about October 31, 2007, for the term of such agreement, whose terms and conditions are incorporated herein by reference as if attached as an Exhibit hereto.

9.8 ENTIRE AGREEMENT. This Agreement and the Purchase Agreement constitute the entire understanding between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.

9.9 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of Singapore, without regard to any conflicts of laws principles.

CONSENT TO ARBITRATION IN SINGAPORE. Each Party hereby irrevocably agrees that all disputes arising out of this Agreement or any transaction contemplated thereby shall be exclusively referred to and finally resolved by, arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force which rules are deemed to be incorporated by reference into this Agreement. Each of the Parties, further agrees that service of any notice or document by registered mail to such Party’s respective address set forth in Section 9.12 shall be effective service in any such Proceeding; irrevocably and unconditionally waives and agrees not to plead or claim in any court any objection to resolving disputes as described in this Section due to allegedly improper jurisdiction, venue or inconvenient forum; irrevocably and unconditionally

 

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waives its right to a bench trial or trial by jury in any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby and for any counterclaim with respect thereto. This Section sets forth the exclusive means of resolving disputes pertaining to this Agreement except as expressly provided to the contrary herein.

9.11 SECTION HEADINGS. The section headings contained in this Agreement are inserted for reference purposes only and are not intended to be a part, nor should they affect the meaning or interpretation, of this Agreement.

9.12 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by telecopy with answer back, by express or overnight mail delivered by an internationally recognized air courier (delivery charges prepaid), by registered or certified mail (postage prepaid, return receipt requested) or by e-mail with receipt confirmed by return e-mail to the respective parties as follows:

 

If to Purchaser:		Lite-On Technology Corporation
		90, Chien I Road
		Chung-Ho, Taipei Hsien 235
		Taiwan, ROC
		Attention: Rex Chuang
		Fax: +886-2-2221-1948
with copies to:		Lite-On Technology Corporation
		22F, 392 Ruey Kuang Rd.
		Neihu, Taipei 114
		Taiwan, ROC
		Attention: General Counsel
		Fax: +886-2-8798-2047
If to Avago:		Avago Technologies General IP (Singapore) Pte. Ltd.
		c/o Avago Technologies US, Inc.
		350 W. Trimble Road
		San Jose, CA 95131
		Attn: Legal Department, Important Legal Notice
		Fax: +1 (408) 435-4174
with a copy to:		Latham & Watkins LLP
		140 Scott Drive
		Menlo Park, CA 94025
		Attention: Luke Bergstrom
		Anthony Klein
		Fax: (650) 463-2600

or to such other address as the party to whom notice is given may have previously furnished to the other in writing in the manner set forth above. Any notice or communication delivered in person shall be deemed effective on delivery. Any notice or communication sent by e-mail,

 

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telecopy or by air courier shall be deemed effective on the first Business Day following the day on which such notice or communication was sent. Any notice or communication sent by registered or certified mail shall be deemed effective on the third Business Day following the day on which such notice or communication was mailed. As used in this Section 9.11, “Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions located in the jurisdiction in which the person to whom notice is to be provided is located are authorized or obligated by law or executive order to close.

9.13 NONASSIGNABILITY.

(a) Neither party may, directly or indirectly, in whole or in part, assign or transfer this Agreement, without the other party’s prior written consent, and any attempted assignment, transfer or delegation without such prior written consent shall be voidable at the sole option of such other party; provided, however, that either party may assign this Agreement without such consent to an entity that succeeds to all or substantially all of its business or assets to which this Agreement relates, subject to the terms of Section 9.12(c) below.

(b) In addition, each party (including its respective Subsidiaries or Affiliates or its permitted successive assignees or transferees hereunder) may assign or transfer this Agreement as a whole, without consent, in connection with a corporate reorganization that places such party in a substantially equivalent position in terms of business, assets or ownership of such party as before the reorganization (e.g., a reorganization in another jurisdiction).

(c) In the event of any assignment or transfer under this Section 9.12 that is not covered by Section 9.12(b) above, Purchaser promptly shall give notice of such acquisition to Avago. The Patent license granted to Purchaser by Avago pursuant to Article II of this Agreement, and any sublicenses granted by Purchaser to its Subsidiaries, shall automatically become limited to the products, processes and services of Purchaser or its Subsidiaries that are commercially released or for which substantial steps have been taken to commercialization as of the effective date of the acquisition and for new versions that have merely minor incremental differences from such products, processes and services and shall not in any event include any products, processes or services of the acquiring party; provided, however, that in any event such license shall be terminable at will by Avago if Avago and the acquiring party are engaged in litigation, arbitration or other formal dispute resolution proceedings covering Patent infringement (pending in any court, tribunal, or administrative agency or before any appointed or agreed upon arbitrator in any jurisdiction worldwide) at the time that the acquisition agreement is entered into, or if such proceedings are initiated by the acquiring party within one hundred twenty-one days (121) days after the date that the acquisition agreement is entered into.

(d) No assignment or transfer made pursuant to Section 9.12 shall release the transferring or assigning party from any of its liabilities or obligations hereunder. Without limiting the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns.

9.14 SEVERABILITY. If any provision of this Agreement shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Agreement shall not be affected and shall remain in full force and effect, and Avago and Purchaser shall negotiate in good faith to replace such illegal, void or unenforceable provision with a provision that corresponds as closely as possible to the intentions of the parties as expressed by such illegal, void or unenforceable provision.

 

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9.15 AMENDMENT; WAIVER; REMEDIES CUMULATIVE. This Agreement, including this provision of this Agreement, may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. No waiver by either party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any party or a failure or delay by any party in exercising any power, right or privilege under this Agreement, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with the Closing hereunder. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

9.16 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 9.15, provided that receipt of copies of such counterparts is confirmed.

[SIGNATURE PAGE FOLLOWS]

 

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WHEREFORE, the parties have signed this Intellectual Property License Agreement effective as of the Closing Date.

 

AVAGO TECHNOLOGIES GENERAL IP (SINGAPORE) PTE. LTD.						LITE-ON TECHNOLOGY CORPORATION
By:						By:
Name:						Name:
Title:						Title:

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EXHIBIT C

FORM OF MASTER SEPARATION AGREEMENT

This MASTER SEPARATION AGREEMENT (this “Agreement”) is entered into this          day of                     , 2007, by and between Avago Technologies General IP (Singapore) Pte Ltd., a company organized under the laws of Singapore (“Seller”) and Lite-On Technology Corp., a corporation organized under the laws of Taiwan (“Buyer”), and is effective as of the Closing Date.

RECITALS

A. Pursuant to that certain Asset Purchase Agreement dated October 31, 2007, by and between Buyer and Seller (the “Purchase Agreement”), Buyer has agreed to purchase from Seller and Seller has agreed to sell to Buyer certain assets, properties, rights and claims of, and related to, the Business. Seller and Buyer are sometimes referred to herein as a “Party” and collectively as the “Parties.” Capitalized terms used herein and not otherwise defined have the meanings given to such terms in the Purchase Agreement.

B. In connection with the Purchase Agreement, Buyer desires that Seller provide Buyer with certain transition services following the Closing Date, as more fully set forth herein.

NOW, THEREFORE, in consideration of the promises and covenants set forth herein, Seller and Buyer each hereby agree as follows:

AGREEMENT

1. TRANSITION SERVICES. During the term of this Agreement, Seller shall provide Buyer the services more particularly described on Schedule A (the “Services”). The Parties may, by mutual written consent, amend Schedule A to include other services (“Additional Services”). The Services and the Additional Services are collectively referred to herein as the “Transition Services” and each service a “Transition Service.”

2. CHANGE CONTROL PROCEDURES. The Parties acknowledge that the scope or characteristics of the Transition Services may change during the term of this Agreement as Buyer completes its transition from dependence on Seller services. The Parties agree to use reasonable change control procedures to notify the other of intended material changes requested regarding the Services and the potential effects of such changes following procedures. A Party requesting a change will give the other Party written notice of the proposed change as well as the anticipated effects of the change. The other Party will respond promptly in writing on the feasibility of the proposed change, any additional fees required and any effects the change may have on the applicable Services or on other Services. The Parties will discuss in good faith whether to implement the proposed change and in the absence of written agreement, the change will not be implemented.

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3. MANAGEMENT AND CONFLICT RESOLUTION

(a) Seller Manager. During the term of this Agreement, Seller will appoint an employee (the “Seller Manager”) to have overall responsibility during the term of this Agreement for managing and coordinating the delivery of the Transition Services and one employee for each category of service. The Seller Manager and each of the sub-managers will coordinate and consult with the Buyer Manager (as defined in Section 3(b)) and the Buyer sub-managers. Seller may, at its discretion, designate other individuals to serve in these capacities during the term of this Agreement.

(b) Buyer Manager. During the term of this Agreement, Buyer will appoint an employee (the “Buyer Manager”) to have overall responsibility for managing and coordinating the delivery of the Transition Services and one of its employees for each category of service. The Buyer Manager and each of the Buyer sub-managers will coordinate and consult with the Seller Manager and each of the Seller sub-managers. Buyer may, at its discretion, designate other individuals to serve in these capacities during the term of this Agreement.

(c) Conflict Resolution.

(i) If Buyer determines that Seller has failed materially to perform its obligations for a particular Transition Service, the Buyer Manager will notify the Seller Manager of the deficiency. Upon receipt of notice, the Parties will promptly consider a corrective action plan in person or by telephone and will attempt in good faith to agree to a mutually acceptable corrective action plan. If the Parties cannot agree upon a corrective action plan within fifteen (15) days of the original notice date, the issue will be escalated in accordance with Section 3(c)(ii) below.

(ii) If the issue is not resolved in accordance with Section 3(c)(i) above, the issue will promptly be elevated to senior management at the respective Parties. For Buyer, escalation will be made to Rex Chuang. For Seller, escalation will be made to Ted Kevranian. The respective management representatives will promptly discuss the issue in person or by telephone and the Parties will attempt in good faith to resolve the issue for a period of ten (10) days. If the issue is not resolved, as agreed by the Parties, within such ten (10) day period, the issue will be escalated to the chief executive officers of the Parties for resolution.

(iii) In the event that the chief executive officers are unable to resolve a dispute as set forth in Section 3(c)(ii) above within ten (10) days, Buyer shall have the right to institute legal action in accordance with Section 12(c) below.

 

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4. TERM AND TERMINATION.

(a) Term. The term of this Agreement shall commence on the Closing Date and shall continue until the later of (i) the expiration of one hundred eighty (180) days from the Closing Date (the “Initial Period”) or (ii) the expiration of the period of time after the Initial Period during which the Parties have mutually agreed in writing prior to the expiration of the Initial Period that Seller will provide Transition Services to Buyer (the “Extended Period”). The Agreement may be terminated earlier as set forth in this Section 4.

(b) Early Termination of Transition Service. During the Initial Period and any Extended Period, Buyer may terminate any Transition Service upon five (5) days prior written notice to Seller. As soon as reasonably practicable following receipt of any such notice, but in no event later than five (5) days after receipt of notice, Seller shall advise Buyer as to whether termination of such Transition Service will result in any early termination costs or expenses, including those related to third party providers. Buyer may withdraw its termination notice within five (5) business days after receipt of notice of such early termination expenses. If Buyer does not withdraw its termination within such period, the termination shall be final. Upon such termination, Buyer’s obligation to pay for such Transition Service(s), if any, shall terminate, and Seller shall cease, or cause its Affiliates or third party service providers to cease, providing the terminated Transition Service(s). Buyer will reimburse Seller for the reasonable termination costs actually incurred by Seller resulting from Buyer’s early termination of such Transition Services if Seller has provided Buyer notice of such expenses as set forth above.

(c) Termination of Agreement for Cause. This Agreement may be terminated by either Party if the other Party materially breaches any provision of this Agreement, and such material breach or default has not been cured within thirty (30) days after such breaching Party’s receipt of notice of such a material breach or default from the non-breaching Party.

(d) Termination of Purchase Agreement. Notwithstanding the foregoing, this Agreement shall terminate and be of no further force and effect simultaneously upon the termination of the Purchase Agreement.

(e) Effect of Termination. Immediately following the expiration or termination of this Agreement, Seller shall cease, or cause its Affiliates or third party providers to cease, providing the Transition Services. Immediately following the termination or expiration of this Agreement or the termination of any particular Transition Service, the Seller and Buyer shall cooperate in order to transfer (at Buyer’s reasonable expense) all books, records and files and take all other actions necessary to provide Buyer with sufficient information to make alternate arrangements to perform or obtain from third parties comparable services with respect to the applicable Transition Service(s). Sections 4(e), 7, 8, 10, 11, and 12 shall survive any expiration or termination of this Agreement.

5. PAYMENT AND FEES. Buyer agrees to pay Seller the amounts set forth in Schedule A for the Services listed therein. For any Transition Services performed hereunder during the Extended Period, or for any Additional Services, the Parties shall mutually agree in advance upon the fees therefor. Except as expressly set forth herein, Seller shall be responsible for all third party expenses related to the performance of the Transition Services. Unless the

 

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Parties otherwise agree, amounts payable hereunder will be billed and paid in U.S. dollars. All charges based on a monthly or other time basis will be pro rated based on actual days elapsed during the period of service. Within thirty (30) days after the end of each fiscal month, Seller will submit one (1) invoice to Buyer for any amounts payable by Buyer hereunder for the previous month. Buyer will pay all amounts due pursuant to this Agreement within thirty (30) days after the receipt of the applicable invoice from Seller. Upon the termination of any Transition Service in accordance with Section 4 above, other than for termination for cause by Buyer, the amounts to be paid under this Section 5, if any, will be the accrued pro rated daily fees for the terminated applicable Transition Services. Seller shall be entitled to charge Buyer for any sales tax, withholding tax, VAT or similar charges that they are legally required to charge, other than any taxes based on the net income of Seller.

6. RECORDS AND AUDITS

(a) Records. Seller will maintain (and, as applicable, cause its Affiliates to maintain) accurate and complete records regarding its activities relating to this Agreement and the means of calculating the amounts billed to Buyer hereunder. Such books and records will be kept in a manner consistent with Seller’s practices prior to the Closing and, in any event, in accordance with good administrative practice and generally accepted accounting principles. Seller will retain (and, as applicable, cause its Affiliates to retain) all such records until two (2) years after any termination or expiration of this Agreement, unless otherwise directed by Buyer.

(b) Audits. Upon ten (10) days notice to Seller, Buyer and its designees will have the right to inspect and audit all the relevant records and books of account of Seller and its Affiliates to verify the accuracy of all payments made or to be made by Buyer pursuant to Section 5, provided that Buyer may not exercise this right more than once per calendar year. Any audit by Buyer or its designees will be conducted during regular business hours at the facilities of Seller or its Affiliates, and in a manner that does not unreasonably interfere with the normal business activities of Seller or its Affiliates. If any audit reveals an overpayment by Buyer, Seller will promptly refund any overpayment. If any audit reveals an underpayment by Buyer, Buyer will promptly pay to Seller any underpayment. The costs of any such audit shall be borne by Buyer. However, if any audit reveals an overpayment by Buyer exceeding ten percent (10%) during the audited period, Seller will reimburse Buyer for the costs of conducting the audit.

7. OWNERSHIP OF WORK PRODUCT. Any and all works, data, designs, drawings, software code, manuals, reports, documents, content or other deliverables created by Seller in the performance of a Transition Service pursuant to this Agreement shall be owned by Seller unless expressly agreed in advance to the contrary.

8. CONFIDENTIALITY

(a) Obligations. The Parties acknowledge and agree that all proprietary or nonpublic information disclosed by one Party (the “Disclosing Party”) to the other Party (the “Receiving Party”) in connection with this Agreement, directly or indirectly, where such information (i) is marked as “proprietary” or “confidential” or, if disclosed orally, is designated as confidential or proprietary at the time of disclosure and reduced in writing or other tangible

 

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(including electronic) form and delivered to the Receiving Party within thirty (30) days of disclosure, or (ii) is provided under circumstances reasonably indicating that it constitutes confidential and proprietary information of the Disclosing Party shall constitute the “Confidential Information” of the Disclosing Party. The Receiving Party may disclose Confidential Information only to those employees and subcontractors who have a need to know such Confidential Information and who are bound to retain the confidentiality thereof under provisions (including provisions relating to nonuse and nondisclosure) no less restrictive than those required by the Receiving Party for its own confidential information. The Receiving Party shall, and shall cause its employees to, retain in confidence and not disclose to any third Party (including any of its sub-contractors) any Confidential Information without the Disclosing Party’s express prior written consent, and the Receiving Party shall not use such Confidential Information except to exercise the rights and perform its obligations under this Agreement. Without limiting the foregoing, the Receiving Party shall use at least the same procedures and degree of care which it uses to protect its own confidential information of like importance, and in no event less than reasonable care. The Receiving Party shall be fully responsible for compliance by its employees and subcontractors with the foregoing, and any act or omission of an employee of the Receiving Party shall constitute an act or omission of the Receiving Party.

(b) Exceptions. Notwithstanding the foregoing, Confidential Information will not include information that: (i) was already known by the Receiving Party, other than under an obligation of confidentiality to the Disclosing Party or any third Party, at the time of disclosure hereunder, as evidenced by the Receiving Party’s tangible (including written or electronic) records in existence at such time; (ii) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party hereunder; (iii) became generally available to the public or otherwise part of the public domain after its disclosure other than through any act or omission of the Receiving Party in breach of this Agreement; (iv) was subsequently lawfully disclosed to the Receiving Party by a person other than the Disclosing Party not subject to any duty of confidentiality with respect thereto; or (v) was developed by the Receiving Party without reference to any Confidential Information disclosed by the Disclosing Party, as evidenced by the Receiving Party’s tangible (including written or electronic) records in existence at such time.

(c) Access. Upon a Disclosing Party’s request from time to time or upon the expiration or termination of this Agreement or, with respect to any particular Confidential Information of Buyer, on such earlier date that the same will be no longer required by Seller in order to render the Transition Services hereunder, the Receiving Party will promptly provide an electronic copy of all of Disclosing Party’s Confidential Information in Receiving Party’s (or its Affiliates’ or subcontractors’) possession or control to Disclosing Party, in the format reasonably requested by Disclosing Party. If Disclosing Party requests at any time, Receiving Party will destroy (and, as applicable, cause its Affiliates or subcontractors to destroy) all copies (other than back-up tapes made in the ordinary course) of the Disclosing Party Confidential Information in Receiving Party’s (or its Affiliates’ or subcontractors’) possession or control. Receiving Party will not withhold (or permit any of its Affiliates or subcontractors to withhold) any of Disclosing Party’s Confidential Information as a means of resolving any dispute. Receiving Party and its Affiliates will not possess or assert any lien or other right against or to Disclosing Party’s Confidential Information.

 

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(d) Injunctive Relief. Each Party acknowledges and agrees that the other Party would suffer irreparable harm for which monetary damages would be an inadequate remedy if there were a breach by such Party of obligations under this Section 8. Each Party further acknowledges and agrees that equitable relief, including injunctive relief, would be appropriate to protect the non-breaching Party’s rights and interests if such a breach were to arise, be threatened, or be asserted, and the non-breaching Party will be entitled to seek the entry of an order for immediate injunctive relief.

9. PERSONNEL.

(a) Right to Designate and Change Personnel. Seller will make available such personnel as will be required to provide the Transition Services. Seller may, in its sole discretion, designate which personnel will perform the Transition Services. Seller also may, in its sole discretion, remove and replace any such personnel at any time or designate any of its Affiliates or a third party provider at any time to perform the Transition Services; provided, however, that Seller will use reasonable efforts to limit the disruption to Buyer in the transition of the Transition Services to different personnel or a third party. In the event that personnel with the designated level of experience are not then employed by Seller, Seller will use reasonable efforts to provide other personnel or third party personnel having an adequate level of experience.

(b) Responsibility for Seller Personnel. All Seller Personnel providing Transition Services under this Agreement will be deemed to be employees or representatives solely of Seller (or its Affiliates) for purposes of all compensation and employee benefits and not to be employees or representatives of Buyer. Seller (or its Affiliates) will be solely responsible for payment of (i) all income, disability, withholding, and other employment taxes and (ii) all medical benefit premiums, vacation pay, sick pay, or other fringe benefits for any employees, agents, or contractors of Seller who perform Transition Services. Any request by Buyer for travel by any Seller employee will be considered and treated as a request for Additional Services pursuant to Section 1 and the costs of such travel shall be charged to Buyer as additional fees.

10. NO WARRANTY. Seller provides the Services under this Agreement, and any results therefrom, “AS IS” and without any warranty of any kind. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING THIS AGREEMENT OR THE SERVICES CONTEMPLATED HEREBY, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE OR NON-INFRINGEMENT OR IMPLIED WARRANTIES ARISING OUT OF COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF TRADE.

11. LIMITATION OF LIABILITY. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, AND EXCEPT WITH RESPECT TO EITHER PARTY’S OBLIGATIONS OF CONFIDENTIALITY PURSUANT TO SECTION 8, IN NO EVENT WILL EITHER PARTY OR ANY OF ITS AFFILIATES, BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, COLLATERAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, IN CONNECTION WITH ANY CLAIMS, LOSSES, DAMAGES OR INJURIES ARISING HEREUNDER, INCLUDING ANY SCHEDULES ATTACHED HERETO.

 

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12. MISCELLANEOUS.

(a) Relationship of the Parties. Each Party is and will remain at all times an independent contractor of the other Party in the performance of the Transition Services. In all matters relating to this Agreement, each Party will be solely responsible for the acts of its employees and agents, and employees or agents of one Party shall not be considered employees or agents of the other Party. Except as otherwise provided herein, no Party will have any right, power or authority to create any obligation, express or implied, on behalf of any other Party nor shall either Party act or represent or hold itself out as having authority to act as an agent or partner of the other Party, or in any way bind or commit the other Party to any obligations. Nothing in this Agreement is intended to create or constitute a joint venture, partnership, agency, trust or other association of any kind between the Parties or persons referred to herein and each Party shall be responsible only for its respective obligations as set forth in this Agreement.

(b) Compliance with Laws. Each Party will comply with all applicable laws, rules, ordinances and regulations of any governmental entity or regulatory agency governing the Transition Services. Neither Party will take any action in violation of any applicable law, rule, ordinance or regulation that could reasonably be expected to result in liability being imposed on the other Party.

(c) Governing Law. The laws of Singapore (without reference to its principles of conflicts of law) shall govern this Agreement. Each Party hereby irrevocably agrees that all disputes arising out of this Agreement or any transaction contemplated thereby shall be exclusively referred to and finally resolved by, arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force which rules are deemed to be incorporated by reference into this Agreement. Each of the Parties, further agrees that service of any notice or document by registered mail to such Party’s respective address set forth in Section 12(i) shall be effective service in any such Proceeding; irrevocably and unconditionally waives and agrees not to plead or claim in any court any objection to resolving disputes as described in this Section due to allegedly improper jurisdiction, venue or inconvenient forum; irrevocably and unconditionally waives its right to a bench trial or trial by jury in any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby and for any counterclaim with respect thereto. This Section sets forth the exclusive means of resolving disputes pertaining to this Agreement except as expressly provided to the contrary herein.

(d) Amendment; Waiver. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Seller and Buyer, or in the case of a waiver, by the Party against whom the waiver is to be effective. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

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(e) Entire Agreement. This Agreement, together with the Purchase Agreement and the documents contemplated to be delivered at the Closing, contains the entire agreement between the Parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters other than any written agreement of the Parties that expressly provides that it is not superseded by this Agreement.

(f) Headings. The heading references herein are for convenience purposes only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

(g) Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or entity or any circumstance, is invalid or unenforceable, (i) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (ii) the remainder of this Agreement and the application of such provision to other Persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

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

(i) Notices. All notices or other communications hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the Party for whom it is intended, if delivered by registered or certified mail, return receipt requested, or by a national courier service, or if sent by fax, provided that the fax is promptly confirmed by telephone confirmation thereof, to the person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such person:

To Seller:

Avago Technologies General IP (Singapore) Pte Ltd.

c/o Avago Technologies US Inc.

350 West Trimble Road

Building 90

San Jose, CA 95131

Attention: General Counsel

Fax: (408) 435-4172

with a copy to:

Latham & Watkins LLP

140 Scott Drive

Menlo Park, CA 94025

Attention: Luke Bergstrom, Esq.

Fax: (650) 463 2600

 

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To Buyer:

Lite-On Technology Corporation

90, Chien I Road

Chung-Ho, Taipei Hsien 235

Taiwan

Attn: Rex Chuang

Fax: +886-2-2221-1948

with a copy to:

Lite-On Technology Corporation

22F, 392 Ruey Kuang Road

Neihu, Taipei 114

Taiwan

Attention: General Counsel

Fax: +886-2-8798-2047

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, each Party has caused this Agreement to be executed by its duly authorized representative as of the date first written above.

 

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EXHIBIT D

FORM OF NON-COMPETITION AGREEMENT

THIS NON-COMPETITION AGREEMENT (this “Agreement”) is being executed and delivered as of                      , 2007 by AVAGO TECHNOLOGIES LIMITED, a company organized under the laws of Singapore (“Seller Parent”), AVAGO TECHNOLOGIES GENERAL IP (SINGAPORE) PTE. LTD., a company organized under the laws of Singapore (the “Seller,” and collectively with Seller Parent, the “Seller Parties”), and LITE-ON TECHNOLOGY CORPORATION, a Taiwan corporation (the “Purchaser,” and collectively with the Seller Parties, the “Parties”) and is effective as of the Closing Date.

RECITALS

A. The Seller Parties and Purchaser have entered into an Asset Purchase Agreement dated as of October 31, 2007 (the “Purchase Agreement”) pursuant to which the Seller Parties and certain of their Subsidiaries are selling certain assets related to the Business (as defined therein) to the Purchaser. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to such terms in the Purchase Agreement.

B. The Seller Parties have conducted and are conducting the Business on a worldwide basis.

AGREEMENT

The parties hereto, intending to be legally bound, hereby agree as follows:

1. Non-Competition.

(a) In order that Purchaser may have and enjoy the full benefit of the Business, the Seller Parties agree that for a period commencing on the Closing Date and ending on the third anniversary thereof (the “Non-Competition Period”), the Seller Parties shall not, and shall cause their Subsidiaries not to, engage, directly or indirectly, in a Competing Business or acquire more than ten percent (10%) of the outstanding equity interest in any Business Competitor. For purposes of this Agreement: (i) “Competing Business” shall mean designing, developing, researching, manufacturing, supplying, distributing, selling, supporting, maintaining or servicing any IR Product; and (ii) “Business Competitor” shall mean any Person that derived more than 10% of its consolidated gross revenues from Competing Businesses during the four fiscal quarters prior to the Seller Parties or any of their Subsidiaries entering into an agreement providing for the investment in or acquisition of such Person, for which financial statements are available. Notwithstanding the foregoing, the provisions of this Section 1 shall not restrict the Seller Parties or any of their Subsidiaries from: (x) acquiring and operating any Business Competitor so long as (A) the Seller Parties or such Subsidiary divests all or a portion of the Competing Business conducted by such Business Competitor within twelve (12) months of such transaction such that an acquisition by the Seller Party or such Subsidiary of the retained portion of the Competing Business would be permissible under the terms of the foregoing clause “(ii)”;

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and (B) while owned, the Seller Parties and their Subsidiaries do not provide such Business Competitor with any Licensed Business Technology or Licensed Business Intellectual Property Rights held by the Seller Parties or their Subsidiaries prior to the date of such acquisition; (y) owning, directly or indirectly, solely as an investment, securities of any Person traded on a national securities exchange, provided that no Seller Party or any of its Affiliates (1) is a controlling Person or member of a group that controls such Person and (2) directly or indirectly owns more than ten percent (10%) or more of the voting securities of such Person, or (z) continuing to operate existing lines of business, other than the Business.

(b) If any of the Seller Parties or any of their Subsidiaries is acquired by a Competing Business, or transfers or sells any or all of the Retained Businesses to a third party, (such acquiring or third-party buyer, the “Successor”) during the Non-Competition Period, then the Seller Parties shall not, and shall cause their Subsidiaries not to, grant the Successor a Patent license to make, have made, import, offer to sell or sell IR Products for the remainder of the Non-Competition Period and will only transfer Licensed Business Patents to a Successor subject to (y) the license granted under the Avago General IP License Agreement and (z) a contractual restriction preventing the Successor from exercising its rights under the transferred Licensed Business Patents for the remainder of the Non-Competition Period.

(c) During the Non-Competition Period, the Seller Parties shall not, and shall cause their Subsidiaries not to, grant any license to make, have made, import, offer to sell or sell IR Products, and the Seller Parties shall not, and shall cause their Subsidiaries not to, provide the Licensed Business Technology to any third party during such Non-Competition Period; provided that the foregoing shall not apply to licenses or disclosures that are incidental to the development or the sale of products and services of the Retained Business or are specifically included in the definition of Retained Business.

2. No Hiring or Solicitation of Employees.

(a) During the Non-Competition Period, the Seller Parties shall not, and shall cause their Subsidiaries not to, directly or indirectly, solicit to hire (or cause or seek to cause to leave the employ of Purchaser or any of its Affiliates) (i) any Transferred Employee or (ii) any other Person employed by Purchaser who became known to or was identified to the Seller Parties prior to the Closing in connection with the transactions contemplated by this Agreement, unless in each case such Person ceased to be an employee of Purchaser or its Affiliates prior to such action by the Seller Parties, or, in the case of such Person’s voluntary termination of employment with Purchaser or any of its Affiliates, at least three months prior to such action by the Seller Parties. This Section 2(a) shall not apply to any non-U.S. Transferred Employee who is required to be hired by any Seller Party or any of their Subsidiaries as a result of any actions required to be taken by any Seller Party or any of their Subsidiaries in order to comply with local Laws.

(b) During the Non-Competition Period, the Purchaser shall not, and it shall cause its Subsidiaries not to, directly or indirectly, solicit to hire (or cause or seek to cause to leave the employ of the Seller Parties or any of their Subsidiaries) any Person employed by the Seller Parties or any of their Subsidiaries who became known to or was identified to Purchaser in connection with the transactions contemplated by this Agreement prior to the Closing unless such Person ceased to be an employee of the Seller Parties or any of their Subsidiaries prior to

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such action by Purchaser or any of its Subsidiaries, or, in the case of such Person’s voluntary termination of employment with the Seller Parties or any of their Subsidiaries, at least three months prior to such action by Purchaser or any of its Subsidiaries.

(c) Notwithstanding the foregoing, the restrictions set forth in Sections 2(a) and 2(b) shall not apply to bona fide public advertisements for employment placed by any Party and not specifically targeted at the employees of any other Party.

3. Representations and Warranties. Each of the Parties represents and warrants to one another that: (a) each has full power and authority to execute and deliver, and to perform all of its obligations under, this Agreement; and (b) neither the execution and delivery of this Agreement nor the performance of this Agreement will result directly or indirectly in a violation or breach of (i) any agreement or obligation by which such Party is or may be bound, or (ii) any applicable law, rule or regulation.

4. Notices. All communications provided for hereunder shall be in writing and shall be deemed to be given when delivered in person, upon receipt by the sender of answer back confirmation when telefaxed, or on the next Business Day when sent by overnight courier, and

 

If to Purchaser:		Lite-On Technology Corporation
		90, Chien I Road
		Chung-Ho, Taipei Hsien 235
		Taiwan, ROC
		Attention: Rex Chuang
		Fax: +886-2-2221-1948
with a copy to:		Lite-On Technology Corporation
		22F, 392 Ruey Kuang Road
		Neihu, Taipei 114
		Taiwan, ROC
		Attention: General Counsel
		Fax: +886-2-8798-2047
If to any Seller Party:		Avago Technologies Limited
		c/o Avago Technologies US Inc.
		350 West Trimble Road
		Building 90
		San Jose, CA 95131
		Attention: General Counsel
		Fax: (408) 435-4172
with a copy to:		Latham & Watkins LLP
		140 Scott Drive
		Menlo Park, CA 94025
		Attention: Luke J. Bergstrom, Esq.
		Fax: (650) 463-2600

or to such other address as any such Party shall designate by written notice to the other Party.

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5. Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction in such manner as will effect as nearly as lawfully possible the purpose and intent of such invalid, illegal or unenforceable provision.

6. Further Assurances; Further Cooperation. Each of the Parties shall use commercially reasonable efforts to execute and deliver, or cause to be executed and delivered, all documents and to take, or cause to be taken, all actions that may be reasonably necessary or appropriate, in the reasonable opinion of counsel for the Seller Parties and Purchaser, for the purpose of carrying out or evidencing any of the provisions of this Agreement.

7. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 7.

8. Assignment. This Agreement shall not be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment, without such consent, shall be null and void; provided, however, Purchaser may assign any or all of its rights and obligations under this Agreement to any wholly owned direct or indirect Subsidiary of Purchaser; provided that no such assignment shall release Purchaser from any obligation under this Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by the Parties and their respective successors and permitted assigns.

9. Amendment; Waiver. This Agreement may be amended, supplemented or otherwise modified only by a written instrument executed by each of the Parties. No waiver by any Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the Party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, or a failure or delay by any Party in exercising any power, right or privilege under this Agreement shall be deemed to constitute a waiver by the Party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with the Closing. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

10. Governing Law. This Agreement and all claims arising out of this Agreement shall be governed by, and construed in accordance with, the Laws of Singapore, without regard to any conflicts of law principles that would result in the application of any law other than the law of Singapore.

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11. Consent to Arbitration in Singapore. Each Party hereby irrevocably agrees that all disputes arising out of this Agreement or any transaction contemplated thereby shall be exclusively referred to and finally resolved by, arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force which rules are deemed to be incorporated by reference into this Agreement. Each of the Parties, further agrees that service of any notice or document by registered mail to such Party’s respective address set forth in Section 4 shall be effective service in any such Proceeding; irrevocably and unconditionally waives and agrees not to plead or claim in any court any objection to resolving disputes as described in this Section due to allegedly improper jurisdiction, venue or inconvenient forum; irrevocably and unconditionally waives its right to a bench trial or trial by jury in any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby and for any counterclaim with respect thereto. This Section sets forth the exclusive means of resolving disputes pertaining to this Agreement except as expressly provided to the contrary herein.

12. Survival of Obligations. Except as specifically provided herein, the obligations of the Parties under this Agreement (including their obligations under Section 6) shall survive the expiration of the Non-Competition Period. The expiration of the Non-Competition Period shall not operate to relieve any Party of any obligation or liability arising from any prior breach by such Party of any provision of this Agreement.

13. Construction. Whenever required by the context, the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; and the neuter gender shall include the masculine and feminine genders. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement. Neither the drafting history nor the negotiating history of this Agreement shall be used or referred to in connection with the construction or interpretation of this Agreement. As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, and shall be deemed to be followed by the words “without limitation.” Except as otherwise indicated in this Agreement, all references in this Agreement to “Sections” are intended to refer to Sections of this Agreement.

14. Termination. This Agreement shall terminate and be of no further force and effect simultaneously upon the termination of the Purchase Agreement.

15. Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

[signature page follows]

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IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement as of the date first written above.

 

 

 

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EXHIBIT E

FORM OF AMENDMENT TO DEVELOPMENT & MANUFACTURING AGREEMENT

This Amendment (“Amendment”) to Development & Manufacturing Agreement is entered into on                     , 2007, between Lite-On Technology Corp. (“Lite-On”), a company organized under the laws of Taiwan, and Avago Technologies (Malaysia) Sdn. Bhd. (“Company” or “Avago Malaysia”), a company organized under the laws of Malaysia , to be effective as of the date of closing (the “Amendment Effective Date”) of that certain Asset Purchase Agreement, dated as of October 31, 2007 by and among Avago Technologies Limited, Avago Technologies General IP (Singapore) Pte. Ltd., and Lite-On (the “Purchase Agreement”), as such closing date is determined thereunder.

RECITALS

WHEREAS, Lite-On and Agilent Technologies (Malaysia) Sdn. Bhd. (“Agilent”) entered into that certain Development & Manufacturing Agreement, dated effective May 1, 2004 (“Agreement”);

WHEREAS, the Agreement was novated, effective December 1, 2005, by the parties hereto;

WHEREAS, the parties desire to amend the Agreement;

NOW, THEREFORE, in consideration of the mutual promises of the parties, and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree:

 

1.

Definitions. Capitalized terms not defined herein have the meanings ascribed to them in the Agreement.

 

2.

Amendment to Term. The expiration date of the Agreement is hereby extended to five (5) years after the Amendment Effective Date.

 

3.

Addition of Exhibit A-1. Subject to satisfaction, in Company’s sole discretion, of Company’s product qualification testing, including for quality and reliability (“Qualification”), the products listed on Exhibit A-1 attached hereto are hereby included as Exhibit A-1 of the Agreement and, subject to Qualification, each such product is hereby deemed an “Agilent Product” under the Agreement and shall be referred to in this Amendment as an “Avago Product.” Lite-On’s prices for the Avago Products are listed in Exhibit A-1, in U.S. currency unless otherwise stated. Any references in the Agreement to “Exhibit A” shall be deemed to include Exhibit A-1.

 

4.

Cost Reduction. Lite-On will use its best efforts to effectuate cost reductions in its manufacturing and delivery processes for the products listed on Exhibit A-1 of the Agreement (“Avago Malaysia Products”) and the products listed on Exhibit A-1 of that

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certain Development and Manufacturing Agreement (“Avago Singapore Products”) between Lite-On and Avago Technologies Manufacturing Singapore Pte. Ltd. (“Avago Singapore”) to meet the following aggregate cost reduction commitments and to pass such total cost savings to Company and Avago Singapore as specified herein:

 

Cost Reduction Commitment		Cost Reduction Period
US$5,000,000		Amendment Effective Date to June 1, 2008
US$3,000,000		June 2, 2008 to June 1, 2009
US$2,000,000		June 2, 2009 to June 1, 2010

Lite-On agrees to provide Company written reports following the end of each calendar quarter detailing Lite-On’s cost reduction efforts related to the Avago Malaysia Products. Additionally, upon request, Lite-On shall provide Company with information and access to manufacturing and delivery cost information related to the Avago Malaysia Products to ensure Lite-On’s compliance with this obligation.

In the event that any such Cost Reduction Commitments cannot be met, in whole or in part, through manufacturing or delivery process cost savings, Lite-On shall provide Company and Avago Singapore with a rebate on the aggregate purchase price of the Avago Malaysia Products and Avago Singapore Products payable at the end of each Cost Reduction Period, such that the aggregate cost reduction for such Cost Reduction Period from both manufacturing or delivery process cost savings and discounts equals the applicable Cost Reduction Commitment (“Rebate”).

The apportionment of the Cost Reduction Commitments and potential Rebates between Avago Malaysia and Avago Singapore will be agreed upon in advance among Avago Singapore, Avago Malaysia and Lite-On.

 

5.

Volume Commitments. In each one-year period following the Amendment Effective Date (each such period an “Annual Period”), Avago Malaysia and Avago Singapore shall purchase products from Lite-On under all agreements and amendments to agreements reflecting aggregate purchase prices for all such products purchased by both Avago companies combined of at least the following amounts, for a total target amount over such three-year period (the “Commitment Period”) of US$181 million (the “Total Target Amount”):

 

1st Annual Period		US $42 million
2d Annual Period		US $64 million
3d Annual Period		US $75 million
Total Target Amount		US $181 million

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If the actual combined purchases of Avago Singapore and Avago Malaysia during the Commitment Period (“Actual Purchases”) are less than the Total Target Amount, then, within 30 days after the end of the Commitment Period, Avago Singapore and/or Avago Malaysia shall pay Lite-On an amount in cash equal to the amount determined by the following formula:

(T – A) / T x US$3 million

where “T” is the Total Target Amount and “A” is the amount of Actual Purchases.

 

6.

Other Purchase Obligations. During the term of this Agreement, Lite-On and the Company shall collaborate in good faith and use their commercially reasonable best efforts to enable the sale by Lite-On and the purchase by the Company of at least the Target Amount during each Annual Period. Such collaboration shall include, at a minimum, quarterly meetings to discuss product development and strategy, product marketing efforts, customer strategies, the level of purchases required and other relevant issues. Each party shall designate a project coordinator for this purpose under this Agreement and shall give notice to the other party in the event such project coordinator is changed. If the Company fails to achieve the Target Amount in any Annual Period, the parties shall meet promptly to discuss the potential causes of the shortfall and appropriate, commercially reasonable steps either party may take in response.

 

7.

Termination. This Amendment shall terminate and be of no further force and effect simultaneously upon the termination of the Purchase Agreement.

 

8.

Counterparts. This Amendment may be executed in counterparts, which together will constitute one agreement binding on the parties.

 

9.

Ratification. As expressly amended by this Amendment, the Agreement is hereby ratified, confirmed and approved by the parties. All other terms and conditions of the Agreement not expressly amended by this Amendment remain in full force and effect.

[Remainder of this page is intentionally left blank.]

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IN WITNESS WHEREOF, the parties hereto have entered into this Amendment of the Agreement effective as of the Amendment Effective Date, and this Amendment has been executed by duly authorized officers of each party hereto.

 

Lite-On Technology Corporation

Avago Technologies (Malaysia) Sdn. Bhd.

By:

By:

Name:

Name:

Title:

Title:

Date signed:

Date signed:

Avago Technologies Manufacturing Singapore Pte. Ltd.

(Only for purposes of determining Cost Reduction Commitment and Rebate apportionment per Section 4 and Volume Commitment and Other Purchase Obligations per Sections 5 and 6)

By:
Name:
Title:
Date signed:

[Signature page to Amendment to Development and Manufacturing Agreement]

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EXHIBIT F

FORM OF AMENDMENT TO DEVELOPMENT & MANUFACTURING AGREEMENT

This Amendment (“Amendment”) to Development & Manufacturing Agreement is entered into on                     , 2007, between Lite-On Electronics Inc. (“Lite-On”), a company organized under the laws of Taiwan, and Avago Technologies Manufacturing Singapore Pte Ltd. (“Company”), a company organized under the laws of Singapore, to be effective as of the date of closing (the “Amendment Effective Date”) of that certain Asset Purchase Agreement, dated as of October 31, 2007 by and among Avago Technologies Limited, Avago Technologies General IP (Singapore) Pte. Ltd., and Lite-On (the “Purchase Agreement”), as such closing date is determined thereunder.

RECITALS

WHEREAS, Lite-On and Agilent Technologies Inc. (“Agilent”) entered into that certain Development & Manufacturing Agreement, dated effective November 1, 2001 (“Agreement”);

WHEREAS, the Agreement was novated, effective December 1, 2005, by the parties hereto;

WHEREAS, the parties have previously amended the term of the Agreement pursuant to that certain letter agreement, dated effective October 10, 2006;

WHEREAS, the parties desire to amend further the Agreement;

NOW, THEREFORE, in consideration of the mutual promises of the parties, and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree:

 

1.

Definitions. Capitalized terms not defined herein have the meanings ascribed to them in the Agreement.

 

2.

Amendment to Term. The expiration date of the Agreement is hereby extended to five (5) years after the Amendment Effective Date.

 

3.

Addition of Exhibit A-1. Subject to satisfaction, in Company’s sole discretion, of Company’s product qualification testing, including for quality and reliability (“Qualification”), the products listed on Exhibit A-1 attached hereto are hereby included as Exhibit A-1 of the Agreement and, subject to Qualification, each such product is hereby deemed an “Agilent Product” under the Agreement. Any references in the Agreement to “Exhibit A” shall be deemed to include Exhibit A-1.

 

4.

Addition of Exhibit C-1. Lite-On’s prices for the Agilent Products on Exhibit A-1 are listed in Exhibit C-1 attached hereto, in U.S. currency unless otherwise stated. Any references in the Agreement to “Exhibit C” shall be deemed to include Exhibit C-1.

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5.

Cost Reduction. Lite-On will use its best efforts to effectuate cost reductions in its manufacturing and delivery processes for the products listed on Exhibit A-1 of the Agreement (“Avago Singapore Products”) and the products listed on Exhibit A-1 of that certain Development and Manufacturing Agreement (“Avago Malaysia Products”) between Lite-On and [Avago Technologies (Malaysia) Sdn. Bhd] (“Avago Malaysia”) to meet the following aggregate cost reduction commitments and to pass such total cost savings to Company and Avago Malaysia as specified herein:

 

Cost Reduction Commitment		Cost Reduction Period
US$5,000,000		Amendment Effective Date to June 1, 2008
US$3,000,000		June 2, 2008 to June 1, 2009
US$2,000,000		June 2, 2009 to June 1, 2010

Lite-On agrees to provide Company written reports following the end of each calendar quarter detailing Lite-On’s cost reduction efforts related to the Avago Singapore Products. Additionally, upon request, Lite-On shall provide Company with information and access to manufacturing and delivery cost information related to the Avago Singapore Products to ensure Lite-On’s compliance with this obligation.

In the event that any such Cost Reduction Commitments cannot be met, in whole or in part, through manufacturing or delivery process cost savings, Lite-On shall provide Company and Avago Malaysia with a rebate on the aggregate purchase price of the Avago Singapore Products and Avago Malaysia Products in the payable at the end of each Cost Reduction Period, such that the aggregate cost reduction for such Cost Reduction Period from both manufacturing or delivery process cost savings and discounts equals the applicable Cost Reduction Commitment (“Rebate”).

The apportionment of the Cost Reduction Commitments and potential Rebates between Avago Malaysia and Avago Singapore will be agreed upon in advance among Avago Singapore, Avago Malaysia and Lite-On.

 

6.

Volume Commitment. In each one-year period following the Amendment Effective Date (each such period an “Annual Period”), Avago Malaysia and Avago Singapore shall purchase products from Lite-On under all agreements and amendments to agreements reflecting aggregate purchase prices for all such products purchased by both Avago companies combined of at least the following amounts, for a total target amount over such three-year period (the “Commitment Period”) of US$181 million (the “Total Target Amount”):

 

1st Annual Period		US $42 million
2d Annual Period		US $64 million
3d Annual Period		US $75 million
Total Target Amount		US $181 million

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If the actual combined purchases of Avago Singapore and Avago Malaysia during the Commitment Period (“Actual Purchases”) are less than the Total Target Amount, then, within 30 days after the end of the Commitment Period, Avago Singapore and/or Avago Malaysia shall pay Lite-On an amount in cash equal to the amount determined by the following formula:

(T – A) / T x US$3million

where “T” is the Total Target Amount and “A” is the amount of Actual Purchases.

 

7.

Other Purchase Obligations. During the term of this Agreement, Lite-On and the Company shall collaborate in good faith and use their commercially reasonable best efforts to enable the sale by Lite-On and the purchase by the Company of at least the Target Amount during each Annual Period. Such collaboration shall include, at a minimum, quarterly meetings to discuss product development and strategy, product marketing efforts, customer strategies, the level of purchases required and other relevant issues. Each party shall designate a project coordinator for this purpose under this Agreement and shall give notice to the other party in the event such project coordinator is changed. If the Company fails to achieve the Target Amount in any Annual Period, the parties shall meet promptly to discuss the potential causes of the shortfall and appropriate, commercially reasonable steps either party may take in response.

 

8.

Termination. This Amendment shall terminate and be of no further force and effect simultaneously upon the termination of the Purchase Agreement.

 

9.

Counterparts. This Amendment may be executed in counterparts, which together will constitute one agreement binding on the parties.

 

10.

Ratification. As expressly amended by this Amendment, the Agreement is hereby ratified, confirmed and approved by the parties. All other terms and conditions of the Agreement not expressly amended by this Amendment remain in full force and effect.

[Remainder of this page is intentionally left blank.]

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IN WITNESS WHEREOF, the parties hereto have entered into this Amendment of the Agreement effective as of the Amendment Effective Date, and this Amendment has been executed by duly authorized officers of each party hereto.

 

Lite-On Technology Corporation

Avago Technologies Manufacturing Singapore Pte Ltd

By:

By:

Name:

Name:

Title:

Title:

Date signed:

Date signed:

Avago Technologies (Malaysia) Sdn. Bhd.

(Only for purposes of determining Cost Reduction Commitment and Rebate apportionment per Section 5 and Volume Commitment and Other Purchase Obligations per Sections 6 and 7)

By:
Name:
Title:
Date Signed:

[Signature page to Amendment to Development and Manufacturing Agreement]

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EXHIBIT G

TRADEMARK LICENSE AGREEMENT

This TRADEMARK LICENSE AGREEMENT (“License”) is executed as of                     , 2007 and is effective as of the Closing Date (as defined in the Purchase Agreement), between AVAGO TECHNOLOGIES GENERAL IP (SINGAPORE) PTE. LTD., a Singapore corporation (“Seller”), and Lite-On Technology Corporation, incorporated under the laws of Taiwan (“Purchaser”).

WHEREAS, Seller and certain Affiliates of Seller are engaged in, among other things, the manufacturing and distribution of Licensed Products;

WHEREAS, Seller and Purchaser have entered into an Asset Purchase Agreement, dated as of October 31, 2007 (“Purchase Agreement”), pursuant to which Purchaser shall purchase and assume, and Seller, through itself and one or more of its Affiliates, shall sell, transfer and assign substantially all of the assets and liabilities of the Operations (as defined in the Purchase Agreement) to Purchaser; and

WHEREAS, in connection with the foregoing, Seller desires to grant to Purchaser a license to use certain Trademarks (as defined in the Purchase Agreement) of Seller;

NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and between the parties as follows:

ARTICLE I

DEFINITIONS

For the purpose of this License, unless specifically defined otherwise in this License, all capitalized terms will have the meanings set forth in the Purchase Agreement:

1.1 AUTHORIZED DEALERS. “Authorized Dealers” means any distributor, dealer, OEM customer, VAR customer, VAD customer, systems integrator or other agent that on or after the Closing Date is authorized by Purchaser or any of its Subsidiaries to market, advertise, sell, lease, rent, service or otherwise offer Licensed Products.

1.2 COLLATERAL MATERIALS. “Collateral Materials” means all packaging, tags, labels, instructions, warranties, Licensed Product data sheets, descriptions and specifications (including online versions thereof), and other materials of any similar type associated with the Licensed Products that are marked with at least one of the Licensed Marks.

1.3 CORPORATE IDENTITY MATERIALS. “Corporate Identity Materials” means materials that are not Licensed Products or Licensed Product-related and that Purchaser may now or hereafter use to communicate its identity, including, by way of example and without limitation, business cards, letterhead, stationery, paper stock and other supplies, signage on real property, buildings, fleet and uniforms.

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1.4 FAMILY. “Family” means IR Products with similar specifications and functions to a Licensed Product, which are intentionally associated with one or more other Licensed Products and which are intended to perform similar functions. Members of the same Family of Licensed Products communicate this connection to customers by using sequential or related part numbers, similar or related product names or descriptions, and the like.

1.5 LICENSED MARKS. “Licensed Marks” means Seller’s Trademarks listed on Attachment 1 to this License.

1.6 LICENSED PRODUCTS. “Licensed Products” means any IR Product that was commercially sold or offered for sale by Seller immediately prior to the Closing Date and rights to which have been transferred to Purchaser under the Purchase Agreement, and new versions thereof that have merely minor incremental differences from any such IR Product. Licensed Products shall also include maintenance (whether diagnostic, preventive, remedial, warranty or non-warranty), support and similar services associated with Licensed Products, pursuant to maintenance contracts or otherwise.

1.7 MARKETING MATERIALS. “Marketing Materials” means advertising, promotions, display fixtures or any of any similar type of literature or things, in any medium, for the marketing, promotion or advertising of the Licensed Products or parts therefore that are marked with at least one of the Licensed Marks.

1.8 PERSON. “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

1.9 SELL. To “Sell” a product means to sell, transfer, lease or otherwise dispose of a product. “Sale” and “Sold” have the corollary meanings ascribed thereto.

1.10 TERM. “Term” means the term defined in Article X of this License.

1.11 THIRD PARTY. “Third Party” means a Person other than Seller and its Subsidiaries and Affiliates or Purchaser and its Subsidiaries.

1.12 SELLER QUALITY STANDARDS. “Seller Quality Standards” means written standards of quality applicable to the Licensed Products, as in use by Seller immediately prior to the Closing Date, unless otherwise modified in writing by Seller from time to time during the Term and communicated to Purchaser.

1.13 SELLER TRADEMARK USAGE GUIDELINES. “Seller Trademark Usage Guidelines” means the written guidelines for proper usage of the Licensed Marks, as in use by Seller immediately prior to the Closing Date and attached hereto as Attachment 2. For the avoidance of confusion with regard to product labeling embedded into the manufacturing process, any such labeling that was created by Seller will be deemed to be in compliance with any product labeling standards, provided the embedded product labeling has not been altered by Purchaser.

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ARTICLE II

LICENSES

2.1 LICENSE GRANT. Subject to the terms and conditions of this Agreement, Seller grants to Purchaser a personal, non-exclusive, worldwide and non-transferable (except as set forth in Section 15.8 hereof) license during the Term to use: (a) the Licensed Marks on or in connection with the Licensed Products and Collateral Materials in connection with the Sale and offer for Sale of such Licensed Products (or, in the case of Licensed Products in the form of software, in connection with licensing of such Licensed Products); (b) the Licensed Marks in Marketing Materials for the Licensed Products; (c) the Licensed Marks in connection with Corporate Identity Materials; and (d) Seller Part Numbers (as that term is defined in Section 10.5(g)) in connection with Licensed Products and any other Purchaser-manufactured IR Product in the same Family.

2.2 LICENSE RESTRICTIONS.

(a) Once Purchaser abandons the use of all of the Licensed Marks on a particular Licensed Product, then Purchaser agrees that its license granted hereunder with respect to that Licensed Product shall thereupon automatically terminate.

(b) Purchaser may not make any use whatsoever, in whole or in part, of the Licensed Marks, or any other Trademarks owned by Seller, in connection with Purchaser’s corporate, doing business as, or fictitious name, or on Corporate Identity Materials, except as set forth in this License.

(c) Purchaser may not use any Licensed Mark in direct association with another Trademark such that the two Trademarks appear to be a single Trademark or in any other composite manner with any Trademarks of Purchaser or any Third Party.

(d) In all respects, Purchaser’s usage of the Licensed Marks during the Term pursuant to the license granted hereunder shall be in a manner consistent with the high standards, reputation and prestige of Seller as represented by Seller’s use of the Licensed Marks, and any usage by Purchaser that is inconsistent with the foregoing shall be deemed to be outside the scope of the license granted hereunder. As a condition to the license granted hereunder, Purchaser shall at all times present, position and promote the Licensed Products marked with one or more of the Licensed Marks in a manner consistent with the high standards and prestige of Seller.

2.3 LICENSEE UNDERTAKINGS. As a condition to the licenses granted hereunder, Purchaser undertakes to Seller that:

(a) Purchaser shall not use the Licensed Marks (or any other Trademark of Seller) in any manner contrary to public morals, in any manner which is deceptive or misleading, which ridicules or is derogatory to the Licensed Marks, or which compromises or reflects unfavorably upon the goodwill, good name, reputation or image of Seller, or the Licensed Marks, or which might jeopardize or limit Seller’s proprietary interest therein.

(b) Purchaser shall not use the Licensed Marks in connection with any products other than the Licensed Products, including without limitation any other products sold or manufactured by Purchaser. Notwithstanding the foregoing, Purchaser may use Seller Part Numbers in connection with IR Products in a Family associated with a Licensed Product.

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(c) Purchaser shall not: (i) misrepresent to any Person the scope of its authority under this License, or (ii) incur or authorize any expenses or liabilities chargeable to Seller.

(e) In all external communications involving any use of the Licensed Marks on Corporate Identity Materials, Purchaser shall use its best efforts to avoid confusion regarding the source of the communications.

ARTICLE III

PERMITTED SUBLICENSES

3.1 SUBLICENSES TO SUBSIDIARIES. Subject to the terms and conditions of this License, including the Seller Quality Standards and Seller Trademark Usage Guidelines and other restrictions in this License, Purchaser may grant sublicenses to its Subsidiaries to use the Licensed Marks in accordance with the license grant in Section 2.1 above; provided, that: (a) Purchaser enters into a written sublicense agreement with each such Subsidiary sublicensee, and (b) such agreement does not include the right to grant further sublicenses, except as set forth in Section 3.2 below. If Purchaser grants any sublicense rights pursuant to this Section 3.1 and any such sublicensed Subsidiary ceases to be a Subsidiary, then the sublicense granted to such Subsidiary pursuant to this Section 3.1 shall terminate immediately upon the date of such cessation.

3.2 AUTHORIZED DEALERS’ USE OF MARKS. Subject to the terms and conditions of this License, including the Seller Quality Standards and Seller Trademark Usage Guidelines and other restrictions in this License, Purchaser (and those Subsidiaries sublicensed to use the Licensed Marks pursuant to Section 3.1) may allow Authorized Dealers, and may allow such Authorized Dealers to allow other Authorized Dealers, to Sell or otherwise distribute Collateral Materials and Licensed Products bearing the Licensed Marks, provided that such Authorized Dealers execute written agreements with Purchaser (or its Subsidiaries) that impose upon such Authorized Dealers an obligation of full compliance with all relevant provisions of this License.

3.3 ENFORCEMENT OF AGREEMENTS. Purchaser shall take all reasonably appropriate measures at Purchaser’s expense promptly and diligently to enforce the terms of any sublicense agreement or other agreement with any Subsidiary or Authorized Dealer and shall restrain any such Subsidiary or Authorized Dealer from violating such terms, including without limitation: (a) monitoring the Subsidiaries’ and Authorized Dealers’ compliance with the Seller Trademark Usage Guidelines and Seller Quality Standards and causing any non-complying Subsidiary or Authorized Dealer promptly to remedy any failure, (b) if need be, terminating such agreement, and/or (c) if need be, commencing legal action. In each case, Purchaser shall use a standard of care consistent with Seller’s practices as of the Closing Date, but in no case using a standard of care less than what is reasonable in the industry.

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ARTICLE IV

TRADEMARK USAGE GUIDELINES

4.1 TRADEMARK USAGE GUIDELINES. Purchaser, its Subsidiaries and Authorized Dealers shall use the Licensed Marks during the Term only in a manner that is consistent with the Seller Trademark Usage Guidelines.

4.2 TRADEMARK REVIEWS. At Seller’s reasonable request, Purchaser agrees to furnish or make available for inspection to Seller two samples of each of its Licensed Products, Collateral Materials and Marketing Materials of Purchaser and its Subsidiaries that are marked with one or more of the Licensed Marks. Purchaser further agrees to take reasonably appropriate measures to require its Authorized Dealers to furnish or make available for inspection to Purchaser two samples of each of its Marketing Materials and Collateral Materials of its Authorized Dealers. If Purchaser is notified or reasonably determines that it or any of its Subsidiaries or Authorized Dealers is not complying with any applicable Trademark Usage Guidelines, it shall notify Seller and the provisions of Article V and Section 3.3 hereof shall apply to such noncompliance.

ARTICLE V

TRADEMARK USAGE GUIDELINES ENFORCEMENT

5.1 INITIAL CURE PERIOD. If Seller becomes aware that Purchaser or any Subsidiary is not complying with the Seller Trademark Usage Guidelines, Seller shall notify Purchaser in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Purchaser shall then have thirty (30) days after receipt of such notice (“Guideline Initial Cure Period”) to correct such noncompliance or submit to Seller a written plan to correct such noncompliance, which written plan is reasonably acceptable to Seller, unless Seller previously affirmatively concurs in writing, in its sole discretion, that Purchaser or its Subsidiary is not in noncompliance. If Seller or Purchaser becomes aware that an Authorized Dealer is not complying with the Seller Trademark Usage Guidelines, Purchaser shall promptly notify such Authorized Dealer in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Such Authorized Dealer shall then have the Guideline Initial Cure Period to correct such noncompliance or submit to Purchaser a written plan to correct such noncompliance, which written plan is reasonably acceptable to Purchaser and Seller.

5.2 SECOND CURE PERIOD. If the noncompliance with the Seller Trademark Usage Guidelines continues beyond the Guideline Initial Cure Period, Purchaser and Seller shall each promptly appoint a representative to negotiate in good faith actions that may be necessary to correct such noncompliance. The parties shall have fifteen (15) days following the expiration of the Guideline Initial Cure Period to agree on corrective actions, and Purchaser shall have fifteen (15) days from the date of an agreement of corrective actions to implement such corrective actions and cure or cause the cure of such noncompliance (“Second Guideline Cure Period”).

5.3 FINAL CURE PERIOD. If the noncompliance with the Trademark Usage Guidelines by Purchaser or any Subsidiary (as the case may be) remains uncured after the expiration of the Second Guideline Cure Period, then at Seller’s reasonable election, Purchaser or the

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non-complying Subsidiary (as the case may be) promptly shall cease using the non-complying Collateral Materials until Seller reasonably determines that Purchaser or the non-complying Subsidiary (as the case may be) has demonstrated its ability and commitment to comply with the Seller Trademark Usage Guidelines. If the noncompliance with the Seller Trademark Usage Guidelines by an Authorized Dealer remains uncured after the expiration of the Second Guideline Cure Period, then at Purchaser’s election, such Authorized Dealer promptly shall cease using the non-complying Collateral Materials and Marketing Materials until Purchaser determines that such Authorized Dealer has demonstrated its ability and commitment to comply with the Seller Trademark Usage Guidelines. Nothing in this Article V shall be deemed to limit Purchaser’s obligations under Section 3.3 above or to preclude Seller from exercising any rights or remedies under Section 3.3 above.

ARTICLE VI

QUALITY STANDARDS

6.1 GENERAL. Purchaser acknowledges that the Licensed Products permitted by this License to be marked with one or more of the Licensed Marks must continue to be of sufficiently high quality as to provide protection of the Licensed Marks and the goodwill they symbolize.

6.2 QUALITY STANDARDS. Purchaser and its Subsidiaries shall use the Licensed Marks only on and in connection with Licensed Products that meet or exceed in all respects the applicable Seller Quality Standards.

6.3 QUALITY CONTROL REVIEWS. At Seller’s reasonable request, Purchaser agrees to furnish or make available to Seller for inspection sample Licensed Products marked with one or more of the Licensed Marks. If Purchaser is notified or reasonably determines that it or any of its Subsidiaries is not complying with any Seller Quality Standards, it shall notify Seller and the provisions of Article VII and Section 2.3 shall apply to such noncompliance.

ARTICLE VII

QUALITY STANDARD ENFORCEMENT

7.1 INITIAL CURE PERIOD. If Seller becomes aware that Purchaser or any Subsidiary is not complying with the Seller Quality Standard, Seller shall notify Purchaser in writing, setting forth in reasonable detail a written description of the noncompliance and any requested action for curing such noncompliance. Following receipt of such notice, Purchaser shall make an inquiry promptly and in good faith concerning each instance of noncompliance described in the notice. Purchaser shall then have thirty (30) days after receipt of such notice (“Initial Cure Period”) to correct such noncompliance or submit to Seller a written plan to correct such noncompliance, which written plan is reasonably acceptable to Seller, unless Seller previously affirmatively concurs in writing, in its sole discretion, that Purchaser or its Subsidiaries is not in noncompliance.

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7.2 SECOND CURE PERIOD. If the said noncompliance with the Seller Quality Standards continues beyond the Initial Cure Period, Purchaser and Seller shall each promptly appoint a representative to negotiate in good faith actions that may be necessary to correct such noncompliance. The parties shall have fifteen (15) days following the expiration of the Initial Cure Period to agree on corrective actions, and Purchaser shall have fifteen (15) days from the date of an agreement of corrective actions to implement such corrective actions and cure or cause the cure of such noncompliance (“Second Cure Period”).

7.3 FINAL CURE PERIOD. If the said noncompliance with the Seller Quality Standards by Purchaser or any Subsidiary (as the case may be) remains uncured after the expiration of the Second Cure Period, then at Seller’s reasonable election, Purchaser or the non-complying Subsidiary (as the case may be) promptly shall cease offering the non-complying Licensed Products under the Licensed Marks until Seller reasonably determines that Purchaser, or the non-complying Subsidiary (as the case may be) has reasonably demonstrated its ability and commitment to comply with the Seller Quality Standards. Nothing in this Article VII shall be deemed to limit Purchaser’s obligations under Section 3.3 above.

ARTICLE VIII

PROTECTION OF LICENSED MARKS

8.1 OWNERSHIP AND RIGHTS. Purchaser agrees not to challenge the ownership or validity of the Licensed Marks. Purchaser shall not disparage, dilute or adversely affect the validity of the Licensed Marks. Purchaser’s use of the Licensed Marks shall inure exclusively to the benefit of Seller and Purchaser shall not acquire or assert any rights therein. Purchaser recognizes the value of the goodwill associated with the Licensed Marks, and that the Licensed Marks may have acquired secondary meaning in the minds of the public.

8.2 PROTECTION OF MARKS. Purchaser shall assist Seller, at Seller’s request and expense, in the procurement and maintenance of Seller’s Intellectual Property Rights in the Licensed Marks. Purchaser will not grant or attempt to grant a security interest in the Licensed Marks or record any such security interest in the United States Patent and Trademark Office or elsewhere against any Trademark application or registration belonging to Seller. Purchaser agrees to, and to cause its Subsidiaries to, execute all documents reasonably requested by Seller to effect further registration of, maintenance and renewal of the Licensed Marks, recordation of the license relationship between Seller and Purchaser, and recordation of Purchaser as a registered user. Seller makes no warranty or representation that Trademark registrations have been or will be applied for, secured or maintained in the Licensed Marks throughout, or anywhere within, the world. Purchaser shall cause to appear on all Licensed Products, all Marketing Materials and all Collateral Materials, such legends, markings and notices as may be required by applicable law or reasonably requested by Seller.

8.3 SIMILAR MARKS. Purchaser agrees not to use or register in any country any Trademark that infringes on the rights of Seller in the Licensed Marks, or any element thereof. If any application for registration is, or has been, filed in any country by Purchaser which relates to any Trademark that infringes the rights of Seller in the Licensed Marks, Purchaser shall immediately abandon any such application or registration or assign it to Seller. Purchaser may not adopt any trademarks incorporating the roots “Avag,” or any other Trademark similar to the Licensed Trademarks. Purchaser shall not challenge Seller’s ownership of or the validity of the Licensed

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Marks or any application for registration thereof throughout the world. Purchaser shall not use or register in any country or jurisdiction, or permit others to use or register on its behalf in any country or jurisdiction, any copyright, domain name, telephone number, keyword, metatag, other electronic identifier or any other Intellectual Property Right, whether recognized currently or in the future, or any other designation which would affect the ownership or rights of Seller in and to the Licensed Marks, or otherwise take any action which would adversely affect any of such ownership rights, or assist anyone else in doing so. Purchaser shall cause its Subsidiaries and Authorized Dealers to comply with the provisions of this Section 8.3.

8.4 INFRINGEMENT PROCEEDINGS. In the event that the Purchaser learns, during the Term of this License, of any infringement or threatened infringement of the Licensed Marks, or any unfair competition, passing-off or dilution with respect to the Licensed Marks, Purchaser shall immediately notify Seller or its authorized representative giving particulars thereof, and Purchaser shall provide necessary information and assistance to Seller or its authorized representatives at Seller’s expense in the event that Seller decides that proceedings should be commenced. Notwithstanding the foregoing, Purchaser is not obligated to monitor or police use of the Licensed Marks by Third Parties other than as specifically set forth in Section 3.3 hereof. Except for those actions initiated by Purchaser pursuant to Section 3.3 hereof to enforce any sublicense or other agreement with any Subsidiary or Authorized Dealer, Seller shall have exclusive control of any litigation, opposition, cancellation, or related legal proceedings. The decision whether to bring, maintain or settle any such proceedings shall be at the exclusive option and expense of Seller, and all recoveries shall belong exclusively to Seller. Purchaser shall not and shall have no right to initiate any litigation, opposition, cancellation, or related legal proceedings with respect to the Licensed Marks in its own name (except for those actions initiated by Purchaser pursuant to Section 3.3 hereof), but, at Seller’s request, agrees to cooperate with Seller at Seller’s reasonable expense to enforce its rights in the Licensed Marks, including to join or be joined as a party in any action taken by Seller against a third party for infringement or threatened infringement of the Licensed Marks, to the extent such joinder is required under mandatory local law for the prosecution of such an action. Seller shall not incur any liability to Purchaser or any other Person under any legal theory by reason of Seller’s failure or refusal to prosecute or by Seller’s refusal to permit Purchaser to prosecute, any alleged infringement by Third Parties, nor by reason of any settlement to which Seller may agree.

ARTICLE IX

CONFIDENTIALITY

9.1 CONFIDENTIAL INFORMATION. The parties hereto expressly acknowledge and agree that all information, whether written or oral, furnished by either party to the other party or any Subsidiary of such other party pursuant to this License (“Confidential Information”) shall be deemed to be confidential and shall be maintained by each party and their respective Subsidiaries in confidence, using the same degree of care to preserve the confidentiality of such Confidential Information that the party to whom such Confidential Information is disclosed would use to preserve the confidentiality of its own information of a similar nature and in no event less than a reasonable degree of care. Except as authorized in writing by the other party, neither party shall at any time disclose or permit to be disclosed any such Confidential Information to any person, firm, corporation or entity: (a) except as may reasonably be required in connection with the performance of this License by Purchaser, Seller or its respective Subsidiaries, as the case may be,

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(b) except as may reasonably be required after the Closing Date by Purchaser or its Subsidiaries in connection with the use of the Licensed Marks or operation of the Business, (c) except to the parties’ agents or representatives who are informed by the parties of the confidential nature of the information and are bound to maintain its confidentiality, and (d) in the course of due diligence in connection with the sale of all or a portion of either party’s business, provided the disclosure is pursuant to a nondisclosure agreement having terms comparable to Sections 9.1 and 9.2 hereof.

9.2 EXCEPTIONS. The obligation not to disclose information under Section 9.1 hereof shall not apply to information that, as of the Closing Date or thereafter: (a) is or becomes generally available to the public other than as a result of disclosure made after the execution of the Purchase Agreement by the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof, (b) was or becomes readily available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis, (c) is or becomes available to the party desiring to treat such information as non-confidential or any of its Subsidiaries or representatives thereof on a non-confidential basis from a source other than its own files or personnel or the other party or its Subsidiaries, provided that such source is not known by the party desiring to treat such information as non-confidential to be bound by confidentiality agreements with the other party or its Subsidiaries or by legal, fiduciary or ethical constraints on disclosure of such information, or (d) is required to be disclosed pursuant to a governmental order or decree or other legal requirement (including the requirements of the U.S. Securities and Exchange Commission and the listing rules of any applicable securities exchange), provided that the party required to disclose such information shall give the other party prompt notice thereof prior to such disclosure and, at the request of the other party, shall cooperate in all reasonable respects in maintaining the confidentiality of such information, including obtaining a protective order or other similar order. Nothing in Section 9.1 shall limit in any respect either party’s ability to disclose information in connection with the enforcement by such party of its rights under this License; provided that the proviso of clause (d) in the immediately preceding sentence shall apply to the party desiring to disclose such information.

9.3 DURATION. The obligations of the parties set forth in this Article IX, with respect to the protection of Confidential Information, shall remain in effect until five (5) years after: (a) the Closing Date, with respect to Confidential Information of one party that is known to or in the possession of the other party as of the Closing Date, or (b) the date of disclosure, with respect to Confidential Information that is disclosed by the one party to the other party after the Closing Date.

ARTICLE X

TERM OF LICENSE

10.1 The term of the license granted pursuant to Section 2.1 hereof shall begin on the Closing Date and, unless terminated sooner pursuant to the provisions of Article XII hereof, shall last for the periods set forth in Section 10.5 below.

10.2 “Term” as used herein means the foregoing periods of permissible use for the Licensed Marks.

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10.3 “Non-Customer-Facing Parts” means tangible parts whose branding is not visible to end consumers in the ordinary course of use. For the avoidance of doubt, “ordinary course of business” includes normal inspection, use, calibration, maintenance, service, repair and/or failure analysis.

10.4 “Branded Products” means Licensed Products on or in connection with which the Licensed Marks are used, unless such use is solely on Non-Customer-Facing Parts. Trademarks are in use “on or in connection with” a given Licensed Product if they are used on the Licensed Product itself or on Collateral Materials associated with such Licensed Product.

10.5 Purchaser agrees to discontinue all use of the Licensed Marks as quickly as is commercially reasonable. Without limiting the foregoing, Purchaser shall have the right to use said Trademarks according to the following conditions and schedule, with which Purchaser shall comply strictly:

(a) Until September 1, 2008, Purchaser may use the Licensed Marks in Marketing Materials on a royalty free basis;

(b) Until September 1, 2008, Purchaser may use the Licensed Marks on a royalty free basis on or in connection with the Branded Products manufactured by Seller prior to the Closing Date or manufactured by Purchaser after the Closing Date and on or before September 1, 2008;

(c) Except as would be a violation of law, any Non-Customer-Facing Parts bearing the Licensed Marks manufactured after September 1, 2008, shall bear a prominent label indicating that they are manufactured by Purchaser and, unless commercially unreasonable, such label shall cover the Licensed Marks on such part.

(d) Notwithstanding the foregoing, Purchaser may continue to use the Seller part number alphanumerics beginning with the letter “A” (“Seller Part Numbers”) on or in connection with any Licensed Product or IR Products within the same Family as a Licensed Product until that Family is discontinued. For the avoidance of doubt, it is understood and agreed that this License does not purport to restrict Purchaser’s use of any part number that does not begin with the letter “A”.

10.6 Purchaser agrees to provide written confirmation of compliance with the License Term on the dates specified above. Purchaser shall also advise Seller when it has discontinued use of all remaining Non-Customer-Facing Parts bearing the Licensed Marks and discontinued or obsoleted all Families of Licensed Products.

10.7 Except as would be a violation of Law, Purchaser agrees to notify all consumers receiving parts and materials bearing the Licensed Marks that Purchaser is the source of and is the proper contact for such Licensed Products, Collateral Materials, parts, and materials.

10.8 It is understood and agreed that it shall not be a violation of this License for Purchaser, its Subsidiaries or Authorized Dealers, at any time after the Term, to make accurate references to the fact that Purchaser has succeeded to the business of Seller with respect to the

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Licensed Products, or to advertise or promote its or their provision of maintenance services or supply of spare parts for Licensed Products previously sold under any of the Licensed Marks, provided that Purchaser, its Subsidiaries and Authorized Dealers do not in connection therewith suggest any affiliation with Seller, do not claim to be authorized by Seller in any manner with respect to such activities, and do not brand any IR Products, Marketing Materials, Collateral Materials, or parts Sold after the Term with any of the Licensed Marks in a manner that is inconsistent with this Article X.

ARTICLE XI

TERMINATION

11.1 VOLUNTARY TERMINATION. By written notice to Seller, Purchaser may voluntarily terminate all or a specified portion of the licenses and rights granted to it hereunder by Seller. Such notice shall specify the effective date of such termination and shall clearly specify any affected Licensed Marks and Licensed Products.

11.2 AUTOMATIC TERMINATION. This Agreement shall terminate and be of no further force and effect simultaneously upon the termination of the Purchase Agreement.

11.3 SURVIVAL. Any voluntary termination of licenses and rights of Purchaser under Section 11.1 hereof shall not affect Purchaser’s licenses and rights with respect to any Licensed Products made or furnished prior to such termination.

ARTICLE XII

DISPUTE RESOLUTION

12.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any dispute or claim arising out of or related to this License through negotiation. Within thirty (30) days after notice of a dispute or claim is given by either party to the other party, the parties’ first tier negotiating teams (as determined by each party’s Director of Intellectual Property (or person holding a similar position or title) or his or her delegate) shall meet and make a good faith attempt to resolve such dispute or claim and shall continue to negotiate in good faith in an effort to resolve the dispute or claim or renegotiate the applicable section or provision without the necessity of any formal proceedings. If the first tier negotiating teams are unable to agree within thirty (30) days of their first meeting, then the parties’ second tier negotiating teams (as determined by each party’s Director of Intellectual Property or his or her delegate) shall meet within thirty (30) days after the end of the first thirty (30) day negotiating period to attempt to resolve the matter. During the course of negotiations under this Section 12.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating teams but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. All negotiations between the parties pursuant to this Section 12.1 shall be treated as compromise and settlement negotiations. Nothing said or disclosed, nor any document produced, in the course of such negotiations that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future litigation.

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12.2 NONBINDING MEDIATION. In the event that any dispute or claim arising out of or related to this License is not settled by the parties within fifteen (15) days after the first meeting of the second tier negotiating teams under Section 12.1 hereof, the parties will attempt in good faith to resolve such dispute or claim by nonbinding mediation in accordance with the American Arbitration Association Commercial Mediation Rules. The mediation shall be held within thirty (30) days of the end of such fifteen (15) day negotiation period of the second tier negotiating teams. Except as provided below in Section 12.3, no litigation for the resolution of such dispute may be commenced until the parties try in good faith to settle the dispute by such mediation in accordance with such rules, and either party has concluded in good faith that amicable resolution through continued mediation of the matter does not appear likely. The costs of mediation shall be shared equally by the parties to the mediation. Any settlement reached by mediation shall be recorded in writing, signed by the parties, and shall be binding on them.

12.3 PROCEEDINGS. Nothing herein, however, shall prohibit either party from initiating litigation or other judicial or administrative proceedings if such party would be substantially harmed by a failure to act during the time that such good faith efforts are being made to resolve the dispute or claim through negotiation or mediation. In the event that litigation is commenced under this Section 12.3, the parties agree to continue to attempt to resolve any dispute or claim according to the terms of Sections 12.1 and 12.2 hereof during the course of such litigation proceedings under this Section 12.3.

12.4 ELECTION TO BYPASS. In the event that the parties attempt to resolve any Dispute through good-faith negotiation between personnel of a position higher than the second tier employees referenced in Section 12.1, regardless of whether the parties have previously commenced the dispute resolution process referenced in Section 12.1, then the parties shall be deemed to have satisfied the process required by Section 12.1 and may at any time invoke their respective rights under Section 12.2.

ARTICLE XIII

LIMITATION OF LIABILITY

TO THE GREATEST EXTENT ENFORCEABLE BY APPLICABLE LAW, IN NO EVENT SHALL (A) SELLER OR ITS SUBSIDIARIES BE LIABLE TO PURCHASER OR ITS SUBSIDIARIES FOR ANY DAMAGES, INCLUDING WITHOUT LIMITATION SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SELLER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR (B) PURCHASER OR ITS SUBSIDIARIES BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SELLER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE PARTIES ACKNOWLEDGE AND AGREE THAT NEITHER PARTY WOULD HAVE ENTERED INTO THIS AGREEMENT OR GRANTED THE LICENSES GRANTED HEREUNDER WITHOUT THE LIMITATIONS OF LIABILITY SET FORTH HEREIN.

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ARTICLE XIV

MISCELLANEOUS PROVISIONS

14.1 DISCLAIMER. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THE PURCHASE AGREEMENT, EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL LICENSED MARKS AND ANY OTHER INFORMATION OR MATERIALS LICENSED OR FURNISHED HEREUNDER ARE LICENSED OR FURNISHED WITHOUT ANY WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Except as otherwise set forth herein or in the Purchase Agreement, neither Seller, nor any of its Affiliates or Subsidiaries, makes any warranty or representation as to the validity of any Trademark licensed by it to Purchaser or any warranty or representation that any use of any Trademark with respect to any Licensed Product or service will be free from infringement of any rights of any Third Party

14.2 NO IMPLIED LICENSES. Nothing contained in this License shall be construed as conferring any rights by implication, estoppel or otherwise, under any Intellectual Property Right, other than the rights expressly granted in this License with respect to the Licensed Marks. Neither party is required hereunder to furnish or disclose to the other any information (including copies of registrations of the Trademarks), except as specifically provided herein or in the Purchase Agreement.

14.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder to institute any action or suit against Third Parties for infringement of any of the Licensed Marks or to defend any action or suit brought by a Third Party which challenges or concerns the validity of any of the Licensed Marks. Purchaser shall not have any right to institute any action or suit against Third Parties for infringement of any of the Licensed Marks.

14.4 NO OBLIGATION TO OBTAIN OR MAINTAIN MARKS. Neither party, nor any of its Subsidiaries or Affiliate is obligated to: (a) file any application for registration of any Trademark, or to secure any rights in any Trademarks, (b) maintain any Trademark registration, or (c) provide any assistance, except for the obligations expressly assumed in this License.

14.5 ENTIRE AGREEMENT. This License and the Purchase Agreement constitute the entire understanding between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. To the extent there is a conflict between this License and the Purchase Agreement between the parties, the terms of the Purchase Agreement shall govern, provided, however, that the terms of this License shall govern with respect to: (a) Article IX with respect to Confidential Information transferred or disclosed pursuant to this License, (b) Article XI with respect to termination of the licenses granted hereunder, (c) Article XII concerning dispute resolution, (d) Article XIII solely with respect to Intellectual Property Rights that are licensed by one party to another party pursuant to this License, (e) Section 14.7 concerning notice, and (f) Section 14.8 concerning assignment or transfer of rights or obligations arising under this License. In addition, in the event of a conflict between this License and the Seller Trademark Usage Guidelines or the Seller Quality Standards, this License shall prevail.

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14.6 SECTION HEADINGS; TABLE OF CONTENTS. The section headings contained in this License are inserted for reference purposes only and are not intended to be a part, nor should they affect the meaning or interpretation, of this License.

14.7 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by telecopy with answer back, by express or overnight mail delivered by an internationally recognized air courier (delivery charges prepaid), by registered or certified mail (postage prepaid, return receipt requested) or by e-mail with receipt confirmed by return e-mail to the respective parties as follows:

if to Seller:

Avago Technologies General IP (Singapore) Pte. Ltd.

c/o Avago Technologies US, Inc.

350 West Trimble Road

Building 90

San Jose, CA 95131

Attention: General Counsel

Fax:

with copies to:

Latham & Watkins LLP

135 Commonwealth Drive

Menlo Park, CA 94025

Attention: Luke Bergstrom, Esq.

                 Anthony Klein, Esq.

Fax: (650) 463-2600

if to Purchaser:

Lite-On Technology Corporation

90, Chien I Road

Chung-Ho, Taipei Hsien 235

Taiwan, ROC

Attention: Rex Chuang

Fax: +886-2-2221-1948

With copies to:

Lite-On Technology Corporation

22F, 392 Ruey Kuang Road

Neihu, Taipei 114

Taiwan, ROC

Attention: General Counsel

Fax: +886-2-8798-2047

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or to such other address as the party to whom notice is given may have previously furnished to the other in writing in the manner set forth above. Any notice or communication delivered in person shall be deemed effective on delivery. Any notice or communication sent by e-mail, telecopy or by air courier shall be deemed effective on the first Business Day (as defined in the Purchase Agreement) following the day on which such notice or communication was sent. Any notice or communication sent by registered or certified mail shall be deemed effective on the third Business Day following the day on which such notice or communication was mailed.

14.8 NON-ASSIGNABILITY. Neither party may, directly or indirectly, in whole or in part, whether by operation of law or otherwise, assign or transfer this License, without the other party’s prior written consent, and any attempted assignment, transfer or delegation without such prior written consent shall be voidable at the sole option of such other party. Notwithstanding the foregoing, each party (or its permitted successive assignees or transferees hereunder) may assign or transfer any or all of its rights or obligations under this License to one or more Subsidiaries of such party; provided, however, that no such assignment or transfer shall release the assigning party from any of its liabilities or obligations hereunder. Without limiting the foregoing, this License will be binding upon and inure to the benefit of the parties and their permitted successors and assigns.

14.9 SEVERABILITY. If any provision of this License shall be declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this License shall not be affected and shall remain in full force and effect, and Seller and Purchaser shall negotiate in good faith to replace such illegal, void or unenforceable provision with a provision that corresponds as closely as possible to the intentions of the parties as expressed by such illegal, void or unenforceable provision.

14.10 AMENDMENT; WAIVER; REMEDIES CUMULATIVE. This License, including this provision of this License, may be amended, supplemented or otherwise modified only by a written instrument executed by the parties hereto. No waiver by either party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this License, including any investigation by or on behalf of any party or a failure or delay by any party in exercising any power, right or privilege under this License, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this License and the Purchase Agreement. The waiver by any party hereto of a breach of any provision of this License shall not operate or be construed as a waiver of any subsequent breach. All rights and remedies existing under this License are cumulative to, and not exclusive of, any rights or remedies otherwise available.

14.11 COUNTERPARTS. This License may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 14.11, provided that receipt of copies of such counterparts is confirmed.

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14.12 GOVERNING LAW. This Agreement and all claims arising out of this Agreement shall be governed by, and construed in accordance with, the Laws of Singapore, without regard to any conflicts of law principles that would result in the application of any law other than the law of Singapore.

14.13 ARBITRATION IN SINGAPORE. Each Party hereby irrevocably agrees that all disputes arising out of this Agreement or any transaction contemplated thereby shall be exclusively referred to and finally resolved by, arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force which rules are deemed to be incorporated by reference into this Agreement. Each of the Parties, further agrees that service of any notice or document by registered mail to such Party’s respective address set forth in Section 14.7 shall be effective service in any such Proceeding; irrevocably and unconditionally waives and agrees not to plead or claim in any court any objection to resolving disputes as described in this Section due to allegedly improper jurisdiction, venue or inconvenient forum; irrevocably and unconditionally waives its right to a bench trial or trial by jury in any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby and for any counterclaim with respect thereto. This Section sets forth the exclusive means of resolving disputes pertaining to this Agreement except as expressly provided to the contrary herein.

[SIGNATURE PAGE FOLLOWS]

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WHEREFORE, the parties have signed this Trademark License Agreement effective as of the Closing Date first set forth above.

 

AVAGO TECHNOLOGIES GENERAL IP (SINGAPORE) PTE. LTD.						LITE-ON TECHNOLOGY CORPORATION
By:						By:

Name:						Name:

Title:						Title:

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EXHIBIT H

Form of Avago Technologies Sales Agreement

This Avago Technologies Sales Agreement (“Agreement”) is entered into on                     , 2007, to be effective the date of the Closing Date (as that term is defined in the Asset Purchase Agreement (the “Purchase Agreement”) between Avago Technologies Limited, Avago Technologies General IP (Singapore) PTE. LTD., and Lite-On Technology Corporation dated as of October 31, 2007) (the “Effective Date”) between Lite-On Technology Corp., a corporation governed by the laws of Taiwan, whose registered office is at 392 Ruey Kuang Road, Neihu, Taipei 114, Taiwan (“Customer”) and Avago Technologies International Sales Pte. Ltd., Registration Number 200512231E, and its subsidiaries (“Manufacturer”). Customer and Manufacturer shall each be referred to individually as a “Party” and collectively as the “Parties.”

RECITALS

Whereas Manufacturer desires to sell to Customer and Customer desires to purchase from Manufacturer the Products under the following terms and conditions for internal use or incorporation in a Customer product for resale;

Now, therefore, in consideration of the premise and the mutual promises set forth in this Agreement, the Parties agree as follows:

 

1.	DEFINITIONS

 

a)	“Applicable Trade Term” means the term defined in Incoterms 2000 and documented in the quotation.

 

b)	“Customer’s Personal Data” means Customer’s personal data in Manufacturer’s control, including but not limited to names, telephone numbers and e-mail addresses.

 

c)

“Delivery” occurs when Manufacturer places the Products at Customer’s or Customer’s representative’s disposal at the named place as agreed to by Customer in accordance with the applicable trade term as defined in Incoterms 2000 (for example, “DDP VAT unpaid [city], Customer’s dock, Incoterms 2000” or “FCA, port of export, Incoterms 2000”).

 

d)	“Delivery Date” means the date specified in an Order for the Delivery of Products by Manufacturer to the destination required under the Order.

 

e)	“Intellectual Property Rights” means any patent, copyright, trademark, trade secret, mask work, know-how, or any other intellectual property right or proprietary right, whether registered or unregistered, and whether now known or hereafter recognized in any jurisdiction.

 

f)	“Law” means any law, treaty, statute, ordinance, rule, principle of common law or equity, code or regulation of a governmental authority or judgment, decree, order, writ, award, injunction or determination of an arbitrator or court or other governmental authority.

 

g)

“Nonconforming Products” means any Manufacturer Product received by Customer that does not comply with the Specifications, or otherwise does not comply with the requirements of an order or other provisions of this Agreement. Nonconforming Products include, without limitation, dead-on-arrival products, over-shipments and early shipments.

 

h)	“Order” means a written or electronic purchase order or release issued by Customer to Manufacturer for purchase of Products.

 

i)	“Parts” means replacement parts, components, consumables or other products that may be supplied in conjunction with or as additions to the Products.

 

j)

“Products” means any Manufacturer proprietary component, including both Standard Product and Special/Custom Products, sold under this Agreement. “ASICs” means application specific integrated circuit Products and may be subject to additional or different terms. Where ASICs Products will be sold under this Agreement, any different or contrary terms for ASICs Products will be specified in an ASICs Addendum attached hereto.

 

k)	“Software” means one or more computer programs in object code format, whether stand-alone or bundled with Product; and related documentation provided to the Customer under this Agreement.

 

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l)	“Special/Custom Products” means: (i) Standard Product modified per Customer requirements; (ii) Standard Products modified per non-published (limited release) standards; or (iii) Product designed, configured or manufactured to meet Customer requirements.

 

m)	“Specifications” means specific technical information about Products or Software published by Manufacturer and in effect on the date Manufacturer ships Customer’s order.

 

n)	“Standard Product” means Products that are routinely offered for sale by Manufacturer to any customer other than Customer.

 

2.

TERM

This Agreement will take effect upon the Effective Date and will, subject to the rights of termination herein, continue in operation for a period of five (5) years (the “Term”) unless terminated under Section 11, Termination, of this Agreement. After the initial Term, this Agreement will continue automatically for 5 additional one year periods. This Agreement may be terminated at the end of the initial Term or at the end of any subsequent renewal period if either Party provides the other at least 60 days prior notice of its intent to terminate.

 

3.

PRICES

 

a)	US Dollars. Prices for Products purchased under this Agreement are in U.S. dollars unless otherwise agreed.

 

b)	Excluding Delivery. Unless otherwise indicated on the quotation, prices exclude delivery charges and are valid for the period indicated on the quotation or for the applicable ordering period, as agreed upon.

 

c)

Taxes. Prices exclude any sales, use, service, value added or similar taxes or duties after delivery to the designated destination (other than taxes levied on Manufacturer’s income), if applicable, which will payable by Customer in addition to the purchase price, provided such taxes or duties appear as a separate item on Manufacturer’s invoice. If exemption from taxes is claimed, Customer must provide a certificate of exemption to Manufacturer. In the event that Customer is required to withhold taxes imposed upon Manufacturer for any payment under this Agreement by virtue of the statutes, laws, codes or governmental regulations of a country in which the Products are sold to Customer, then Customer shall remit such taxes to the proper authorities on a timely basis, and the payments provided for under this Agreement will be adjusted appropriately, provided that Customer supplies Manufacturer with official documentation and/or tax receipts on such withholdings, as such documentation or receipts become available to Customer. Manufacturer shall provide Customer with reasonable assistance, upon Customer’s reasonable request and at Customer’s sole cost, to aid Customer in seeking any applicable credits, exemptions or other relief regarding such taxes.

 

4.	ORDERS, CANCELLATIONS AND RETURNS

 

a)

Each order submitted to Manufacturer must include: (i) Customer part number, (ii) quantity, (iii) unit price per the valid Manufacturer quote, (iv) shipping destination, and (v) requested Delivery Date(s). Orders must specify Delivery within six (6) months from Order date, unless otherwise agreed or indicated on the quotation. Customer may schedule regular intervals for Deliveries by an appropriate Order setting forth the intervals. All Orders shall be deemed accepted unless rejected by Manufacturer in writing within five (5) business days of Manufacturer’s receipt of the Order.

 

b)	Order Flexibility.

 

1)

Customer may, without charge, postpone, decrease, increase, or cancel any Order by written notice to Manufacturer at least five (5) business days prior to the acknowledged Delivery Date with regard to Standard Products or five (5) weeks prior with regard to Special/Custom Products. Except as mutually agreed by the Parties, any Order may be re-scheduled only once, Requests to delay Delivery may not exceed ninety (90) days from the original acknowledged committed Delivery date, and the re-scheduled request may not be canceled or further modified.

 

2)

Except as mutually agreed by the Parties, less than five (5) weeks prior to the acknowledged Delivery Date, Special/Custom Products are non-cancelable and Delivery Dates may not be rescheduled. .

 

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c)	Returns. Except as otherwise provided in this Agreement, Standard Products may not be returned without Manufacturer’s authorization and Special/Custom Products are non-returnable.

 

d)	Minimum Requirements. Except with regard to Manufacturer’s obligations concerning warranty and Nonconforming Products, minimum order and/or minimum packaging quantity requirements may apply. Minimum shippable line order values of US$1,000.00 will apply unless otherwise stated in a valid quote.

 

e)

Forecasts. Customer shall send an electronic twenty-six (26) week rolling forecast of its estimated requirement by Product (“Forecast”) to Manufacturer updated on a monthly basis containing the information identified in the Exhibit A, Product Exhibit. Any quantities listed in any Forecast or other correspondence between the Parties are only estimates made as an accommodation for planning purposes and do not constitute a commitment on Customer’s part to purchase such quantity. Customer may revise any Forecasts in its sole discretion.

 

f)

Inventory. Manufacturer will maintain a protective inventory equal to two (2) weeks supply of each Product. If this inventory is depleted, Manufacturer will replenish the inventory as soon as possible after depletion. In addition, Manufacturer will rotate its supply of Product in inventory to maintain a fresh stock of inventory.

 

g)

Returns. Customer may elect in its sole discretion, subject to the force majeure provision herein, to return any Nonconforming Product.for replacement or repair at Manufacturer’s expense as provided in Section 7 below. In addition, Customer may return for repair or replacement an entire lot of Products if a statistically-significant tested sample of that lot contains Nonconforming Products. Manufacturer will return the replacement or repaired Products as soon as possible but in no event later than ten (10) business days after receipt of the Nonconforming Product from Customer.

 

h)

Freight for Returns. All Nonconforming Products returned by Customer to Manufacturer, and all replacement or repaired Products shipped by Manufacturer to Customer to replace Nonconforming Products, will be at Manufacturer’s risk and expense, including transportation charges (round trip charges for replacement or repaired Products).

 

5.	SHIPMENT, TITLE AND RISK OF LOSS

 

a)

Partial Shipments. All Orders are required to be shipped complete. Manufacturer will give Customer immediate notice at least three (3) business days prior to Delivery Date if it knows that it cannot meet an acknowledged Delivery Date or that only a portion of the Products or Parts will be available for shipment to meet an acknowledged Delivery Date. For partial shipments, Manufacturer will ship the available Products or Parts unless directed by Customer to reschedule shipment. If Manufacturer ships any Product or Part by a method other than as specified in the corresponding Order, Manufacturer will pay any resulting increase in the cost of freight.

 

b)

Over-Shipments. If Manufacturer ships more Products or Parts than ordered, the amount of over-shipment may either be (i) kept by Customer for credit against future Orders or (ii) returned to Manufacturer within sixty (60) days after Customer’s receipt of the over-shipment in accordance with this Agreement, at Customer’s sole discretion.

 

c)

Alternative Shipment. If due to Manufacturer’s failure to make a timely shipment, the specified method of transportation would not permit Manufacturer to meet the Delivery Date, the Products or Parts affected will be shipped by air transportation or other expedient means acceptable to Customer. Manufacturer will pay for any resulting increase in the freight cost over that which Customer would have been required to pay by the specified method of transportation.

 

d)

Early Shipment. If Products or Parts are delivered more than three (3) days in advance of the Delivery Date, Customer may, at its option, either return the Products or Parts pursuant to this Agreement within sixty (60) days after Customer’s receipt of the early shipment, or keep the Products or Parts with payment due as required under Article 6.

 

e)

Allocation. In the event that any Products sold under this Agreement are in allocation, the Parties agree that upon the effective date and throughout Manufacturer allocation period, Manufacturer shall proceed with shipments according to its policies and procedures for determining the distribution of products on allocation, notwithstanding the commitments herein. Further, the obligations of the Parties shall be modified to reflect the extent of the allocation during this period.

 

f)	Risk of Loss. Title to Products or Parts and risk of loss and damage to Products will pass to Customer at the address agreed to by the Parties in accordance with the Applicable Trade Term. Acceptance of Products by Customer will occur upon Delivery.

 

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g)	Packing List. Each delivery of Products or Parts to Customer shall include a packing list that contains at least:

 

(i)

The Order number and Customer part number;

 

(ii)

The quantity of Products or Parts shipped; and

 

(iii)

The date of shipment.

 

h)

Packaging. Manufacturer must preserve, package, handle and pack all Products or Parts so as to protect them from loss or damage, in conformance with good commercial practice, the Specification, government regulations, and other applicable standards. Special static protection must be provided for Products or Parts requiring such protection.

 

i)

Damage. Manufacturer will be liable for any loss or damage due to its failure to properly preserve, package, handle or pack Products or Parts. Customer will not be required to assert any claims for such loss or damage against the common carrier involved. Further Customer will not be liable for any loss or damage due to a release of chemicals or other hazardous materials to the environment prior to Delivery.

 

6.

PAYMENT

 

a)

Reductions. Manufacturer’s prices for the Products are listed in Exhibit A in US currency unless otherwise stated and may not be increased without Customer’s consent. The prices for Parts will be Manufacturer’s published prices, less any applicable discounts, unless the Parties agree to a price schedule for Parts. Manufacturer and Customer agree to review Manufacturer’s Product prices quarterly. If, during the Term, Manufacturer effectuates cost reductions in its manufacturing and delivery processes, it will pass such reductions to Customer and amend the prices equitably.

 

b)

Due Date. Payment for Products or Parts will be net forty-five (45) days after the latest of (i) receipt by Customer of an appropriate invoice from Manufacturer; (ii) receipt by Customer of the corresponding Manufacturer Products or Parts; or (iii) the Delivery Date. Except as otherwise provided in this Agreement, associate freight expenses and duties will be paid directly by Customer. Customer will not be liable for any costs related to or payments for unordered or Nonconforming Products.

 

c)

Most Favored Purchaser. If Manufacturer offers a better price or pricing formula to other similar purchasers for similar volumes of the Products, then Manufacturer agrees to offer such price or pricing formula to Customer retroactively as of the date first offered to the third party. Manufacturer agrees to fulfill its obligations in this section in good faith and further agrees that it will not create any purchasing programs, pricing formulas or other conditions that serve to deny Customer the benefits of its most favored purchaser status.

 

d)	Interest. Payments due under this Agreement shall, if not paid when due, bear interest at the lower of one percent (1.0%) per month or the highest rate permitted by law.

 

7.	LIMITED WARRANTY

 

a)	Warranties. Manufacturer warrants that all Products and Parts will:

 

(i)

Be manufactured, processed and assembled by Manufacturer or by companies under Manufacturer’s direction;

 

(ii)

Conform to the Specifications and other criteria referred to in this Agreement or agreed to by the Parties in writing;

 

(iii)

Be new (unused and non-reworked or repaired), except as otherwise agreed by the Parties;

 

(iv)

Be free from defects in design, material and workmanship;

 

(v)

Be free and clear of all liens, encumbrances, restrictions and other claims against title or ownership;

 

b)

Warranty Period. All warranties specified above will be in effect for the longer of Manufacturer’s normal warranty period or the two (2) year period following the date of shipment of the Product or Part to Customer or its designee. All warranties will survive any inspection, delivery, acceptance, or payment by Customer as well as any obsolescence or other Manufacturer cessation of the manufacture or support of such Product.

 

c)	Epidemic Failure. In addition to the warranties specified above, Manufacturer warrants all Products against epidemic failure for the three (3) year period following the date of shipment of the Products to Customer or its designee. An

 

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epidemic failure means the occurrence of any failure/defects with a failure rate of five hundred parts per million (500 PPM) of Products within a specified date code population of such Products or the occurrence of such failures/defects in the field resulting in serious compensation claims from Customer’s customers.

 

d)

Software. Manufacturer warrants that Software will not fail to execute its programming instructions during the Warranty Period due to defects in materials and workmanship when properly installed and used on the hardware designated by Manufacturer. Manufacturer further warrants that during the Warranty Period, Manufacturer’s standard Software will substantially conform to Specifications in effect at the time of Delivery.

 

e)

Warranty Remedy. In the event that the Products or Software exhibit defects or non-conformance to Specifications during the Warranty Period, manufacturer will promptly upon their return to Manufacturer, at its option, repair or replace the affected Products or Software, or refund of the net purchase price or license fees of the affected Products or Software.

 

f)

DISCLAIMER. The above warranties do not apply to defects resulting from improper or inadequate maintenance; Customer or third party supplied software, interfacing or supplies; unauthorized modification; improper use or operation outside of the Specifications for the Product; abuse, negligence, accident, loss or damage in transit, improper site preparation; or unauthorized maintenance or repair. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, MANUFACTURER MAKES NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, REGARDING THE PRODUCTS, OR REGARDING THEIR MERCHANTABILITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.

 

g)	Illegal Practices. The Parties represent and warrant that they shall at all times refrain from engaging in any illegal, unfair, deceptive or unethical business practices whatsoever, with respect to the Products and Parts and the performance of the terms of this Agreement.

 

h)	No Pledge. Each Party represents and warrants that it will not incur any liability on behalf of the other Party, nor in any way pledge or purport to pledge the other Party’s credit, or purport to make any contract binding upon the other Party, without the express written consent of the other Party.

 

8.	OWNERSHIP; LICENSES

 

a)

License by Manufacturer. Subject to the terms and conditions of this Agreement, Manufacturer hereby grants to Customer a non-exclusive, worldwide, fully paid-up right and license under all of Manufacturer’s Intellectual Property Rights, with right of sublicense to Customers, affiliates, agents and subcontractors, to use, import, reproduce, offer for sale and distribute the Software incorporated in the Products and Parts and any documentation in accordance with the terms and conditions of this Agreement, solely for (i) internal use or (ii) the purpose of using, selling, offering for sale and/or supporting the Products or Parts or resale in Customer’s products. Such documentation may include license terms provided by Manufacturer Technologies and Manufacturer Technologies’ third party suppliers, which will apply to the use of Software and take precedence over these license terms. In the absence of documentation specifying the applicable license, Customer is granted the right to use one (1) copy of the Software for internal use on one (1) machine or instrument, or as otherwise indicated on the quotation.

 

b)

License Restrictions. The license granted to Customer under Section 8 shall be subject to the following restrictions: Except with Manufacturer’s express written consent, which may be withheld in Manufacturer’s sole and reasonable discretion, Customer shall not (i) modify or alter the Products, or offer the Software for sale other than as incorporated in the Products, (ii) cause or permit the reverse engineering, translation or disassembly of the Products, (iii) remove, obscure, or alter any Manufacturer or other proprietary rights notice affixed to or contained within the Products, or (iv) copy the Software onto any public or distributed network.

 

c)	Intellectual Property Protection. Customer will promptly bring to the attention of Manufacturer any improper or wrongful use of Manufacturer’s trademarks, emblems, designs, models or other Intellectual Property Rights which come to the notice of Customer.

 

d)

Ownership. Customer acknowledges that, any and all Intellectual Property Rights in or related to the Products are and shall remain the property of Manufacturer. The Software is owned and copyrighted by Manufacturer or by third party suppliers. All Software is licensed not sold by Manufacturer to Customer, and Manufacturer and its third party suppliers

 

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retain all right, title and interest in the Software. Third party suppliers may protect their rights in the Software in the event of any violation of these license terms. All rights not expressly granted under this Agreement are reserved. Manufacturer acknowledges that any and all Intellectual Property Rights in or related to all portions of the Customer’s products other than the Products are and shall remain the property of Customer or its licensors, as applicable.

 

e)

Government. Software and technical data rights granted to the federal government include only those rights customarily provided to end user Customers. Manufacturer provides customary commercial license in Software and technical data pursuant to FAR 12.211 (Technical Data) and 12.212 (Computer Software) and, for the Department of Defense, DFARS 252.227-7015 (Technical Data - Commercial Items) and DFARS 227.7202-3 (Rights in Commercial Computer Software Documentation).

 

9.	ENGINEERING PROCESS OR DESIGN CHANGES; DISCONTINUED PRODUCTS

 

a)

Manufacturer Proposed Changes. Manufacturer will not, without prior written notice to Customer, make or incorporate in the Products or Parts any of the following changes (collectively, “Engineering Changes”): (i) process or design changes, (ii) geographical relocation of manufacturing processes; or (iii) process step discontinuances affecting the electrical performance (whether specified or not), the mechanical form, fit, or function, the environmental compatibility or chemical characteristics, or the life, reliability, or quality of the Products.

 

b)	Notice of Change. Manufacturer will give Customer notice of any proposed Engineering Change, and will provide evaluation samples and other appropriate information as specified by Customer at least ninety (90) days prior to the first proposed Delivery of any Products involving an Engineering Change.

 

c)

Discontinuance. Manufacturer may discontinue the manufacture, sale and/or the support of any Product only upon. In the event of any such discontinuance, Avago Technologies will reasonably endeavor to give Customer at least nine (9) months advance written notice thereof, which shall include instructions for last-time-buy and last-time shipment, provided that, in no way shall this affect any obligations for Manufacturer to repair or replace Products as set forth in this Agreement.

 

10.	CONFIDENTIALITY

 

a)

Duty to Protect. In the event that confidential information is exchanged, each Party will protect the confidential information of the other in the same manner in which it protects its own like proprietary, confidential, and trade secret information. Information will be deemed “Confidential Information” if the Party claiming the benefit of the provision furnishes such information in writing and marks such information as “Confidential” or if such information is provided orally and the transmitting Party (“Discloser”) confirms in writing to the receiving Party (“Recipient”) that it is confidential within thirty (30) days of its communication. Such Confidential Information will remain confidential for three (3) years after the date of disclosure.

 

b)

All Confidential Information exchanged between the Parties pursuant to this Agreement shall not be distributed, disclosed, or disseminated in any way or form by the Recipient to anyone except its own employees who have a reasonable need to know such Confidential Information and who have been advised of the confidential nature and required to observe the terms and conditions hereof; nor shall Confidential Information be used by the Recipient for its own purpose, except for the purposes of exercising its rights or fulfilling its obligations under this Agreement. The restriction on disclosure will not apply to Confidential Information which is required to be disclosed by a court, government agency or regulatory requirement, provided that Recipient shall first notify the Discloser of such disclosure requirement or order and use reasonable efforts to obtain confidential treatment or a protective order.

 

c)

Exclusions. This Section imposes no obligation upon a Recipient with respect to Confidential Information which (a) was in the Recipient’s possession before the disclosure; (b) is or becomes a matter of public knowledge through no fault of the Recipient; (c) is rightfully received by the Recipient from a third party without duty of confidentiality; (d) is disclosed by the Discloser to a third party without duty of confidentiality on the third party; (e) is independently developed by the Recipient without use of any Confidential Information; (f) is disclosed under operation of law; or (g) is disclosed by the Recipient with the Discloser’s prior written approval.

 

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d)

Return of Information. Upon request of the Discloser, copies and embodiments of the Discloser’s Confidential Information shall be promptly returned to the Discloser by the Recipient, unless such copies are required to support existing customers under the terms of this Agreement. Upon termination of this Agreement, for any reason, each party shall promptly return to the other party all Confidential Information provided by the other Party, including all copies thereof, unless such copies are required to support existing customers under the terms of this Agreement.

 

11.	TERMINATION

 

a)	Without Cause. Either Party, upon giving the other party at least six (6) months prior written notice, may terminate this Agreement at any time, without cause. Such termination shall be effective on the date stated in the said notice.

 

b)

With Cause. Either Party may terminate this Agreement if the other Party is in material breach of any provision of this Agreement and has failed to cure such breach within thirty (30) days after receipt of written notice of such breach. For purposes of this section only, a material breach has occurred if the other Party:

 

1)

shall become insolvent; or

 

2)

admits in writing its inability to pay its debts as they mature; or

 

3)

ceases to function as a going concern or to conduct its operations in the normal course of business; or

 

4)

assigns or transfers, either voluntarily or by operation of law, any or all of its rights or obligations under this Agreement without having obtained the prior written consent of the other Party; or

 

5)

effects any material change in its management or ownership (for the purposes of this Section, a change in the Chief Executive Officer or the Chief Operating Officer shall be deemed a material change of management, and a change of twenty-five (25%) percent or more in ownership shall be deemed a material change in ownership); or

 

6)

upon the filing of a petition by or against it under any state or federal bankruptcy or insolvency law, fails to tender to the other Party a guaranty of its obligations under this Agreement by a person, firm or other entity having a net worth of at least eighty-five (85%) percent of its own net worth as of the commencement of this Agreement, such guaranty to be in a form satisfactory to the other Party; or

 

7)

fails to perform any of its obligations under this Agreement so as to be in default hereunder and fails to cure such default within thirty (30) days after written notice thereof.

 

c)

Outstanding Orders. All Orders issued prior to the expiration or termination of this Agreement must be fulfilled in accordance with the terms of this Agreement, even if the Delivery Dates fall after expiration or termination. Upon termination of this Agreement for Manufacturer’s breach, Customer may cancel any outstanding Order or require Orders to be fulfilled even if a Delivery Date is after the date of expiration or termination.

 

d)	Licenses Terminate. Upon any termination or expiration of this Agreement, the licenses granted herein shall terminate except as to Products already delivered or to be delivered pursuant to Section 11(c).

 

e)	Automatic. Notwithstanding the foregoing, this Amendment shall terminate and be of no further force and effect simultaneously upon the termination of the Purchase Agreement.

 

f)

Surviving Provisions. Notwithstanding any termination or expiration of this Agreement, the provisions of Sections 1, 6, 7(d), 7(g), 8(d), 10, 11(f), 12, 13, 14, 16 and 18 will survive termination or expiration, except that the provisions of confidentiality will survive only through the periods set forth in this Agreement.

 

12.	INTELLECTUAL PROPERTY INDEMNITY

 

a)

Duty to Defend. Manufacturer will defend and hold harmless Customer, Customer’s subsidiaries, affiliates, officers, and employees, (each an “Indemnified Party”) against any third party claim that any Parts, Products or Software, delivered under this Agreement infringes any Intellectual Property Rights (each a “Claim”) provided (i) Customer notifies Manufacturer in writing, (ii) Manufacturer has sole authority to settle the Claim to the extent that it concerns the Parts,

 

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Products and Software, and (iii) Customer cooperates and provides Manufacturer, at Manufacturer’s expense, with all reasonable assistance, information, and authority to perform these duties of Manufacturer hereunder. To the extent that any unreasonable delay by Customer in notifying Manufacturer results in any additional cost, expense, or liability to Manufacturer which would otherwise have been avoided, Manufacturer shall be entitled to deduct such amount from sums to be paid on behalf of, or collect such amount from Customer.

 

b)

Remedies. Without limiting the foregoing, in the event of an infringement claim under Section 12(a) Manufacturer will pay infringement claim defense costs and damages finally awarded by a court of competent jurisdiction or agreed upon in settlement resulting from such infringement claim. If a Claim is made or appears likely, Manufacturer may, at its option, (i) modify the Parts, Products or Software that are the subject of the Claim so that they are of equivalent function and performance but are no longer infringing, (ii) procure any necessary license, (iii) replace the Parts, Products or Software with non-infringing Parts, Products or Software of equivalent function and performance, or (iv) refund Customer’s purchase price upon return of the Parts, Product or Software (costs of shipping paid by Manufacturer); provided that none of those options shall deprive Customer of any remedies that may be owed pursuant to other provisions of this Agreement, including those stated at Section 12(a).

 

c)

Limitation. Manufacturer will be relieved of its obligations under this Article 12 to the extent that the Claim of infringement or unauthorized use arises out of (i) compliance with Customer’s requirements, provided that the implementation of a requirement constitutes unauthorized use or infringement of a third party’s Intellectual Property Rights, or (ii) Customer’s use of Products or Software in combination with materials or software not provided by Customer.

 

d)	Exclusive Remedy. This Agreement states Manufacturer’s sole and exclusive liability, and Customer’s sole and exclusive recourse and remedy, for claims of intellectual property infringement.

 

13.	LIMITATION OF REMEDIES AND LIABILITY

 

a)

UNLESS OTHERWISE STATED IN THIS AGREEMENT, IN NO EVENT WILL EITHER PARTY, ITS SUBCONTRACTORS OR SUPPLIERS BE LIABLE FOR SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT LIMITATION DOWNTIME COSTS, LOSS OF DATA, RESTORATION COSTS, LOST PROFITS, OR COST OF COVER) ARISING OUT OF ANY PERFORMANCE OF THIS AGREEMENT OR IN FURTHERANCE OF THE PROVISIONS OR OBJECTIVES OF THIS AGREEMENT, REGARDLESS OF WHETHER SUCH CLAIMS ARE BASED ON CONTRACT, TORT, WARRANTY OR ANY OTHER LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

b)

TO THE EXTENT THAT LIMITATION OF LIABILITY IS PERMITTED BY LAW, MANUFACTURER’S LIABILITY TO CUSTOMER IS LIMITED TO THE AMOUNT ACTUALLY PAID BY CUSTOMER TO MANUFACTURER FOR THE PARTS, PRODUCT OR SOFTWARE THAT IS SUBJECT OF SUCH DAMAGES IN THE TWENTY-FOUR (24) MONTHS PRIOR TO THE ACCRUAL OF SUCH DAMAGES, EXCEPT THAT MANUFACTURER’S OBLIGATION TO MAKE WARRANTY REFUNDS UNDER SECTION 7, WARRANTY, IS LIMITED TO THE PRODUCT PURCHASE PRICE.

 

c)	The limitations set forth in Section 13(a) will not apply to any claims under Article 12 (Intellectual Property Indemnity)

 

d)

The remedies in these this Agreement are Customer’s sole and exclusive remedies and Manufacturer’s sole and exclusive liabilities. The Parties acknowledge that the foregoing limitations are an essential element of the Agreement and in the absence of such limitations the pricing and other terms set forth in this Agreement would be substantially different.

 

14.	RELATIONSHIP

 

a)

Independent Contractors. Customer’s relationship with Manufacturer is that of independent contractors for purposes of this Agreement. This Agreement does not establish a franchise, joint venture or partnership, or create any relationship of employer and employee, master and servant, or principal and agent between the parties.

 

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b)	No Authority to Bind. Neither party will have, nor represent that it has, any power, right or authority to bind the other party, or to assume or create any obligation or responsibility, express or implied, on behalf of the other Party without such other Party’s written consent.

 

c)

Non-Exclusive. This Agreement applies only to the Products listed on the Product Exhibit(s), as amended from time to time by mutual consent, and the relationship between the Parties is non-exclusive. Customer acknowledges that Manufacturer may market other products, including those in competition with Products listed on the Product Exhibit(s) without making them available to Customer. Manufacturer acknowledges that Customer may market other products, including those in competition with Products listed on the Product Exhibit(s). Each Party reserves the right to advertise, promote and sell any product, including Products on the Product Exhibit(s), in competition with the other Party.

 

d)	Customer Agreements. Manufacturer will not be deemed a party to any agreement between Customer and any subsequent purchaser or licensee.

 

15.	CHANGES OR AMENDMENTS

This Agreement may not be amended except by the prior written consent of both Parties, which shall not be unreasonably withheld or denied.

 

16.

NOTICES

All notices that are required under this Agreement shall be in writing and will be considered given as of twenty-four (24) hours after sending by electronic means, facsimile transmission, overnight courier, or hand delivery, or as of five (5) days of certified mailing, and shall be delivered to the following contacts:

 

Manufacturer:
Avago Technologies 350 W Trimble Road San Jose, CA 95131 Attention: Legal Department,                   Important Legal Notice Phone: +1 (408) 435-4252 Fax: +1 (408) 435-4174 Email:                                          @Avagotech.com
Customer:
Lite-On Technology Corporation, with a copy to 90 Chien I Road Chung-Ho, Taipei Hsien 235 Taiwan Attention: Rex Chuang Phone: +886-2- Fax: +886-2- Email: Rex.Chuang@Liteon.com		Lite-On Technology Corporation 22F, 392 Ruey Kuang Rd. Neihu, Taipei 114 Taiwan Attention: General Counsel Phone: +886-2-8798-2888, ext. 6840 Fax: +886-2-8798-2047 Email: TS.Chang@Liteon.com

 

17.	ASSIGNMENT

Neither Party may, directly or indirectly, in whole or in part, by operation of law or otherwise, assign or transfer this Agreement or delegate any of its obligations under this Agreement without the other Party’s written consent, which shall not be unreasonably withheld or denied .

 

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18.

GENERAL

 

a)

Force Majeure – Neither Party will be liable for any delay in performance under this Agreement, due to “acts of God” or other causes beyond its reasonable control and without that Party’s fault or negligence (including, war, rebellion, civil commotion, strikes, lock-outs or industrial disputes; fire, explosion, earthquake, acts of God, flood, drought or bad weather; the unavailability of deliveries, supplies, software, disks or other media; acts of terror; or the requisitioning or other act or order by any government department, council or other constituted body) (a “delaying cause”). Notwithstanding the above, neither Party will be relieved of any liability for any delay or failure to perform its defense obligations with respect to third party Intellectual Property Rights or furnishing remedies pursuant for Claims of infringement thereof. Each Party experiencing a delaying cause will immediately give the other Party notice of such delaying cause and an estimate of its duration, and the other Party may act in its sole and reasonable discretion to terminate this Agreement or any part hereof or suspend this Agreement in whole or in part for the duration of the delaying cause. The Parties may resume performance under this Agreement once the delaying cause ceases and extend the Term up to the length of time the delaying cause endured.

 

b)

Value Added Tax – Upon request, Customer will provide VAT-ID numbers to support VAT exemptions of intra-community supplies where appropriate as governed by national and European legislation and Customer will notify Manufacturer promptly if the VAT-ID number provided becomes invalid or is changed or amended in any way. Manufacturer may have to retroactively charge VAT in the event that VAT has been incorrectly exempted solely due to Customer’s failure to notify Manufacturer of the invalidation or change of VAT-ID number.

 

c)

Compliance with Law; Exports - In performing their duties under this Agreement, each Party shall at all times comply with all applicable international, federal, state and local Laws, including without limitation Laws pertaining to safety standards, environmental protection, ozone, hazardous materials, labor, employment, non-discrimination, exports, transfers, re-exports or imports of Products, Software, technology or technical data and shall obtain all required authorizations from the appropriate government entity.

 

d)

Personal Data – Except as otherwise provided herein or by reasonable request of the other Party, each Party (i) will store and use any of the other Party’s Personal Data in accordance with standard commercial practices and will not sell, rent or lease such Personal Data to others, (ii) agrees that the other Party may forward any such Personal Data to its subsidiaries, affiliates or business partners (including agents, resellers and subcontractors) solely to conduct business activities in furtherance of the purpose and spirit of this Agreement, including communication with third parties (such as the handling of orders, advertising campaigns or market research), in all countries where the relevant Party and its entities do business, and (iii) represents and acknowledges that consent from individual data subject has been obtained or is not needed.

 

e)

Disputes – This Agreement and all disputes involving this Agreement will be governed by and construed in accordance with the laws of the Republic of Singapore, without regard to conflict of law provisions or other principles that would result in the application of any Law other than the Law of Singapore.

 

f)

Arbitration in Singapore.- Except as otherwise expressly provided herein, each Party hereby irrevocably agrees that all disputes arising out of or relating to this Agreement shall be exclusively referred to and finally resolved by, arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force which rules are deemed to be incorporated by reference into this Agreement. Each Party further agrees that service of any notice or document by registered mail to such Party’s respective address set forth in Article 16 shall be effective service in any such Proceeding; irrevocably and unconditionally waives and agrees not to plead or claim in any court any objection to resolving disputes as described in this Section due to allegedly improper jurisdiction, venue or inconvenient forum; irrevocably and unconditionally waives its right to a bench trial or trial by jury in any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby and for any counterclaim with respect thereto.

 

g)	Provisions herein which by their nature extend beyond the completion or termination of any sale of Product or license of Software will remain in effect until fulfilled.

 

h)	Waiver - Neither Party’s failure to exercise any of its rights under this Agreement will be deemed a waiver or forfeiture of those rights nor in any way affect the validity of the whole or any part of this Agreement nor prejudice such Party’s rights to take subsequent action.

 

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i)	Severability - To the extent that any provision of this Agreement is determined to be illegal or unenforceable, such provision shall to that extent be severed from the Agreement and the remainder of this Agreement will remain in full force and effect.

 

j)	The United Nations Convention on Contracts for the International Sale of Goods will not apply to this Agreement or to transactions under this Agreement.

 

k)

Nuclear and Medical - Products are not specifically designed, manufactured or intended for sale as parts, components or assemblies for the planning, construction, maintenance or direct operation of a nuclear facility or medical devices or applications and in no event shall Manufacturer be liable for any damages relating to Products sold by Customer for these applications.

 

l)

Headings – The headings to the provisions of this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Unless the context otherwise requires, the terms “this Agreement,” “hereof,” “hereunder” and any similar expressions refer to this Agreement and not to any particular Section or other portion hereof. As used in this Agreement, the words “include” and “including,” and variations thereof, will be deemed to be followed by the words “without limitation.”

 

m)

Joint Drafting – Each of the Parties to this Agreement acknowledges that it has participated in the drafting and negotiation of this Agreement. For purposes of interpreting this Agreement, each provision, paragraph, sentence and word herein shall be deemed to have been jointly drafted by the Parties. The Parties intend for this Agreement to be construed and interpreted neutrally in accordance with the plain meaning of the language contained herein, and not presumptively construed against any actual or purported drafter or any specific language contained herein.

 

n)

Advice of Counsel – The Parties to this Agreement acknowledge, agree, and represent that each: (a) has been represented in connection with the negotiations and preparation of the Agreement by counsel of that Party’s choosing; (b) has read the Agreement and had it fully explained by its counsel; (c) is fully aware of the contents and legal effect of the Agreement; (d) has authority to enter into and sign the Agreement, and (e) enters into and signs it by its own free will.

 

o)	Incorporation of Exhibits - All exhibits attached to this Agreement are also incorporated in this Agreement:

Exhibit A - PRODUCT SCHEDULE

 

p)	Entire Agreement - This Agreement constitutes the entire agreement between Manufacturer and Customer-with respect to the subject matter hereof, and supersedes any prior communications, representations or agreements between the parties, whether oral or written, regarding transactions hereunder.

 

q)	Conflict with Purchase Order - The terms and conditions in this Agreement shall supersede and replace all conflicting terms or conditions set forth on any quote or purchase order and all such conflicting terms and conditions are hereby rejected.

 

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The parties hereby agree to the terms and conditions set forth in this Agreement.

 

Avago Technologies International Sales Pte. Limited				Lite-On Technology Corporation
Authorized Signature				Authorized Signature
Printed or Typed Name Title				Printed or Typed Name Title
Date				Date

 

Exhibit 2.10

AMENDMENT NO. 1 TO

ASSET PURCHASE AGREEMENT AND

NON-COMPETITION AGREEMENT

This Amendment No. 1 to Asset Purchase Agreement and Non-Competition Agreement (this “Amendment”), is dated as of January 8, 2008 (the “Amendment Effective Date”) by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies General IP (Singapore) Pte. Ltd., a company organized under the laws of Singapore (“Seller”), and Lite-On Technology Corporation, a Taiwan corporation (“Purchaser”) (each, a “Party” and collectively, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Parties have previously entered into an Asset Purchase Agreement dated as of October 31, 2007 (the “Purchase Agreement”) and a Non-Competition Agreement, dated as of October 31, 2007 (the “Non-Competition Agreement”);

WHEREAS, the Purchase Agreement and the Non-Competition Agreement each provides that the parties thereto may amend such agreement at any time by written agreement of each party thereto;

WHEREAS, capitalized terms not defined in this Amendment have the respective meanings ascribed to such terms in the Purchase Agreement; and

WHEREAS, the Parties now mutually desire to amend the Purchase Agreement and the Non-Competition Agreement as set forth herein to reflect certain agreements of the Parties with respect to the matters set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

1.1 Section 2.1.

Section 2.1 of the Purchase Agreement is hereby amended and restated in its entirety to read as follows:

“Purchase and Sale of Purchased Assets. Upon the terms and subject to the conditions set forth in this Agreement, the Purchased Assets shall be sold, assigned, transferred, conveyed and delivered (“Transferred”) to the Purchaser as follows:

(a) at the Closing the Seller Parties shall, and shall cause their Subsidiaries to, Transfer to Purchaser or, if instructed by Purchaser in writing prior to the Closing Date, to one of Purchaser’s Affiliates, and Purchaser shall, or shall cause one of its Affiliates to, purchase, acquire and accept from the Seller Parties, all of the Seller Parties’ respective right, title and interest in and to the Purchased Assets other than the China Purchased Assets, free and clear of all Liens other than Permitted Liens, but in all cases subject to the terms of any

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licenses granted to third parties existing as of the date of this Agreement or any licenses granted after the date hereof not in violation of this Agreement with respect to such Transferred Business Intellectual Property and Transferred Business Intellectual Property Rights, and subject to the rights granted to Seller in the Avago General IP License Agreement; and

(b) at the China Closing the Seller Parties shall, and shall cause their Subsidiaries to, Transfer to Purchaser or, if instructed by Purchaser in writing prior to the China Closing Date, to one of Purchaser’s Affiliates, and Purchaser shall, or shall cause one of its Affiliates to, purchase, acquire and accept from the Seller Parties, all of the Seller Parties’ respective right, title and interest in and to the China Purchased Assets, free and clear of all Liens other than Permitted Liens.”

1.2 Section 2.5.

The following is hereby added as a new Section 2.5 of the Purchase Agreement:

“China Closing. The Parties acknowledge and agree that notwithstanding any other provisions of this Agreement, the consummation of the Transfer to Purchaser or one or more of its Affiliates of the Purchased Assets consisting of tangible personal property located in mainland China and for which title must pass in mainland China (collectively the “China Purchased Assets”) will not occur on the Closing Date and will instead be consummated on the earliest to occur of (i) the date which is two Business Days after the receipt of approval from the Ministry of Commerce and the State Administration for Industry and Commerce of the People’s Republic of China, (ii) February 20, 2008, or (iii) such other date that is mutually agreed upon by the Parties (the date of such Transfer, the “China Closing Date”), and the failure to so Transfer the China Purchased Assets as of the Closing Date shall not be a breach or default of this Agreement. On the China Closing Date, the Parties will enter into, or will cause their respective applicable Subsidiaries to enter into a Local Asset Transfer Agreement or such other instruments of conveyance, to the extent required, providing for the Transfer of the China Purchased Assets to Purchaser or one or more of its Affiliates. To the extent permitted by Law, Purchaser shall assume title to the China Purchased Assets as of the China Closing Date, provided, however that Purchaser shall assume risk of loss to the China Purchased Assets as of the Closing Date.”

1.3 Section 3.2.

Section 3.2(a) of the Purchase Agreement is hereby amended and restated in its entirety to read as follows.

“(i) On the Closing Date, Purchaser shall, or shall cause one of its Affiliates to, pay to Seller (for its own account and as agent for any other Seller Party unless otherwise provided in any Local Asset Transfer Agreement) an amount equal to (A) $17,600,000, and (B) plus or minus, as applicable, the

 

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difference between the Estimated Inventory (as defined in Section 3.2(b)) at the opening of business on the Closing Date (without giving effect to the Closing) and the Base Inventory. Such amount provided for in the immediately preceding sentence shall be payable in United States dollars in immediately available federal funds to such bank account or accounts as shall be designated in writing by Seller no later than one Business Day prior to the Closing.

(ii) On the China Closing Date, Purchaser shall, or shall cause one of its Affiliates to, pay to Seller (for its own account and as agent for any other Seller Party unless otherwise provided in any Local Asset Transfer Agreement) an amount equal to $2,400,000. Such amount provided for in the immediately preceding sentence shall be payable in United States dollars in immediately available federal funds to the bank account or accounts designated by the Seller pursuant to Section 3.2(a)(i) above, or to such other bank account or accounts as shall be designated in writing by Seller no later than one Business Day prior to the China Closing Date.”

1.4 Section 8.1.

Section 8.1 of the Purchase Agreement is hereby amended and restated in its entirety to read as follows:

“(a) Unless this Agreement shall have been terminated pursuant to Article X hereof, the closing (the “Closing”) of the sale and transfer of the Purchased Assets (other than the China Purchased Assets) and the other transactions hereunder (other than the transactions which are to occur at the China Closing) shall take place at the offices of Lite-On Technology Corporation, 392 Ruey Kuang Road, Neihu, Taipei 114, Taiwan at 9:00 a.m., local time, and in such other places as are necessary to effect the transactions to be consummated at the Closing, on January 7, 2008, or at such other time, date and place as shall be fixed by mutual agreement of the Parties (such date of the Closing being herein referred to as the “Closing Date”).

(b) The China Closing shall take place at the offices of Lite-On Technology Corporation, 392 Ruey Kuang Road, Neihu, Taipei 114, Taiwan at 9:00 a.m., local time, and in such other places as are necessary to effect the transactions to be consummated at the China Closing, on the China Closing Date.

(c) The effective time (“Effective Time”) of the Closing for tax, operational and all other matters shall be deemed to be 12:01 a.m., local time in each jurisdiction in which the Purchased Assets transferred are located on the Closing Date.

1.5 Section 10.1(b).

Section 10.1(b) of the Purchase Agreement is hereby amended by replacing “February 15, 2008” with “February 29, 2008”.

 

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1.6 Annex A to the Purchase Agreement.

The following definitions are added to Annex A to the Purchase Agreement.

“Base Inventory” means Two Million Four Hundred Seventy Three Thousand One Hundred Sixty Seven U.S. Dollars ($2,473,167).”

“China Closing” means the consummation of the Transfer to Purchaser or one or more of its Affiliate of the China Purchased Assets, the assumption by Purchaser of the Assumed Liabilities associated with the China Purchased Assets.”

“China Closing Date” shall have the meaning set forth in Section 2.5.”

“China Purchased Assets” shall have the meaning set forth in Section 2.5.”

1.7 Schedules to the Purchase Agreement.

(a) Schedule 1 to the Purchase Agreement is hereby amended and restated in its entirety to read as set forth on Exhibit A attached hereto.

(b) Annex C-1 to the Purchase Agreement is hereby amended and restated in its entirety to read as set forth on Exhibit B attached hereto.

1.8 Section 1(a) to the Non-Competition Agreement. Section 1(a) of the Non-Competition Agreement is hereby amended and restated in its entirety to read as follows:

“1. Non-Competition.

(a) In order that Purchaser may have and enjoy the full benefit of the Business, the Seller Parties agree that for a period commencing on the Closing Date and ending on the fifth anniversary thereof (the “Non-Competition Period”), the Seller Parties shall not, and shall cause their Subsidiaries not to, engage, directly or indirectly, in a Competing Business or acquire more than ten percent (10%) of the outstanding equity interest in any Business Competitor. For purposes of this Agreement: (i) “Competing Business” shall mean designing, developing, researching, manufacturing, supplying, distributing, selling, supporting, maintaining or servicing any IR Product; and (ii) “Business Competitor” shall mean any Person that derived more than 10% of its consolidated gross revenues from Competing Businesses during the four fiscal quarters prior to the Seller Parties or any of their Subsidiaries entering into an agreement providing for the investment in or acquisition of such Person, for which financial statements are available. Notwithstanding the foregoing, the provisions of this Section 1 shall not restrict the Seller Parties or any of their Subsidiaries from: (x) acquiring and operating any Business Competitor so long as (A) the Seller Parties or such Subsidiary divests all or a portion of the Competing Business conducted by such Business Competitor within twelve (12) months of such transaction such that an acquisition by the Seller Party or such Subsidiary of the retained portion of the Competing Business would

 

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be permissible under the terms of the foregoing clause “(ii)”; and (B) while owned, the Seller Parties and their Subsidiaries do not provide such Business Competitor with any Licensed Business Technology or Licensed Business Intellectual Property Rights held by the Seller Parties or their Subsidiaries prior to the date of such acquisition; (y) owning, directly or indirectly, solely as an investment, securities of any Person traded on a national securities exchange, provided that no Seller Party or any of its Affiliates (1) is a controlling Person or member of a group that controls such Person and (2) directly or indirectly owns more than ten percent (10%) or more of the voting securities of such Person, or (z) continuing to operate existing lines of business, other than the Business.”

1.9 Miscellaneous.

(a) Except as specifically provided for in this Amendment, the respective terms of the Purchase Agreement and the Non-Competition Agreement shall be unmodified and shall remain in full force and effect.

(b) This Amendment may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Amendment.

(c) This Amendment shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns, except that neither this Amendment nor any rights or obligations hereunder shall be assigned or delegated by either Party; provided, however, Purchaser may assign any or all of its rights and obligations under this Amendment to any wholly-owned (other than director qualifying shares) direct or indirect Subsidiary of Purchaser (provided that no such assignment shall release Purchaser from any obligation under this Amendment) or to a lender of Purchaser as collateral for bona fide indebtedness for money borrowed in connection with a merger, consolidation, conversion or sale of assets of Purchaser. This Amendment is not intended to confer upon any person or entity other than the Parties and their permitted assigns any rights or remedies.

(d) This Amendment may be amended only by a written instrument signed by each of the Parties. No provision of this Amendment may be extended or waived orally, but only by a written instrument signed by the Party against whom enforcement of such extension or waiver is sought. All notices and other communications provided for herein shall be dated and in writing.

(e) This Amendment and all claims arising out of this Amendment shall be governed by, and construed in accordance with, the Laws of Singapore, without regard to any conflicts of law principles that would result in the application of any law other than the law of Singapore.

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the Parties have caused this Amendment No. 1 to Asset Purchase Agreement to be duly executed as of the Amendment Effective Date.

 

[Signature Page to APA Amendment No. 1]

Exhibit 2.11

AMENDMENT NO. 2 TO

ASSET PURCHASE AGREEMENT

This Amendment No. 2 to Asset Purchase Agreement (this “Amendment”), is dated as of January 21, 2009 (the “Amendment Effective Date”) by and among Avago Technologies Limited, a company organized under the laws of Singapore (“Seller Parent”), Avago Technologies General IP (Singapore) Pte. Ltd., a company organized under the laws of Singapore (“Seller”), and Lite-On Technology Corporation, a Taiwan corporation (“Purchaser”) (each, a “Party” and collectively, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Parties have previously entered into an Asset Purchase Agreement dated as of October 31, 2007 (the “Purchase Agreement”); a Non-Competition Agreement, dated as of October 31, 2007 (the “Non-Competition Agreement”); and an Amendment No. 1 to Asset Purchase Agreement and Non-Competition Agreement dated as of January 8, 2008 (the “Amendment No. 1”);

WHEREAS, the Purchase Agreement and Amendment No. 1 each provides that the parties thereto may amend such agreement at any time by written agreement of each party thereto;

WHEREAS, capitalized terms not defined in this Amendment have the respective meanings ascribed to such terms in the Purchase Agreement and Amendment No. 1; and

WHEREAS, a dispute has arisen between the Parties concerning the final sum due under the Asset Purchase Agreement and the condition of the Purchased Assets and China Purchased Assets and the Parties wish to fully and finally resolve all issues concerning that dispute by way of this Amendment; and

WHEREAS, a further dispute has arisen concerning alleged unlawful solicitation and/or hiring by Lite-On of certain former Avago employees, including [Name of Employees], and alleged unlawful removal and misuse of confidential information by Lite-On and/or such employees (all claims relating to such matters based on facts arising prior to execution of this Amendment shall be referred to herein as the “Employment Claims”);

WHEREAS, the Parties now mutually desire to amend the Purchase Agreement and Amendment No. 1 as set forth herein to reflect certain agreements of the Parties with respect to the matters set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

1.1 Section 2.5 of the Purchase Agreement

Pursuant to section 1.2 of Amendment No. 1, which adds a new section 2.5 to the Purchase Agreement, referring to a China Closing Date that may occur on any date mutually agreed to by the Parties, the Parties hereby agree that the China Closing Date shall occur on February 2, 2009.

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1.2 Section 3.1 of the Purchase Agreement

Section 3.1 of the Purchase Agreement is hereby amended and stated in its entirety to read as follows:

“Purchase Price. The purchase price in respect to the purchase and sales transactions hereunder (the “Purchase Price”) shall be (a) an amount of cash equal to $18,600,000.00, and (b) the assumption of the Assumed Liabilities, which comprises the aggregate of the respective purchase prices to be paid for the Purchased Assets.”

1.3 Section 3.2(a) of the Purchase Agreement

Section 1.3 of Amendment No. 1 amends and restates section 3.2(a) of the Purchase Agreement. The second paragraph of section 3.2(a) of the Purchase Agreement is hereby further amended and restated in its entirety to read as follows.

“(ii) On the or before February 2, 2009, Purchaser shall, or shall cause one of its Affiliates to, pay to Seller (for its own account and as agent for any other Seller Party unless otherwise provided in any Local Asset Transfer Agreement) an amount equal to $1,000,000. The date Seller receives such payment shall be the “China Closing Date.” Such amount provided for in the immediately preceding sentence shall be payable in United States dollars in immediately available federal funds to the bank account or accounts designated by the Seller pursuant to Section 3.2(a)(i) above, or to such other bank account or accounts as shall be designated in writing by Seller no later than one Business Day prior to the China Closing Date.”

1.4 Settlement of Claims; Employment Claims

(a) Upon payment of the $1,000,000 as described in section 1.2 of this Amendment, each Party fully releases, waives, and forever discharges each of the other Parties, their officers, directors, successors in interest, subsidiaries and affiliates, from any and all claims, demands, actions, liabilities and causes of actions, of every kind and character, whether asserted or unasserted, known or unknown, suspected or unsuspected, in law or in equity, related to or arising from the purchase of or condition of the Purchased Assets or China Purchased Assets.

(b) Seller (for its own account and as agent for any other Seller Party) hereby previously notified the Purchaser that Seller drops its demands related to the Employment Claims made in the letter to Purchaser dated 3 October 2008. Seller reserves all rights to bring any action in the future related to employment matters should Purchaser improperly hire any Seller or Seller Party employee in the future.

1.5 Miscellaneous.

(a) Except as specifically provided for in this Amendment, the respective terms of the Purchase Agreement and Amendment No. 1 shall be unmodified and shall remain in full force and effect.

 

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(b) This Amendment may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall be deemed to be one and the same instrument. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Amendment.

(c) This Amendment shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns, except that neither this Amendment nor any rights or obligations hereunder shall be assigned or delegated by either Party; provided, however, Purchaser may assign any or all of its rights and obligations under this Amendment to any wholly-owned (other than director qualifying shares) direct or indirect Subsidiary of Purchaser (provided that no such assignment shall release Purchaser from any obligation under this Amendment) or to a lender of Purchaser as collateral for bona fide indebtedness for money borrowed in connection with a merger, consolidation, conversion or sale of assets of Purchaser. This Amendment is not intended to confer upon any person or entity other than the Parties and their permitted assigns any rights or remedies.

(d) This Amendment may be amended only by a written instrument signed by each of the Parties. No provision of this Amendment may be extended or waived orally, but only by a written instrument signed by the Party against whom enforcement of such extension or waiver is sought. All notices and other communications provided for herein shall be dated and in writing.

(e) This Amendment and all claims arising out of this Amendment shall be governed by, and construed in accordance with, the Laws of Singapore, without regard to any conflicts of law principles that would result in the application of any law other than the law of Singapore.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK

 

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IN WITNESS WHEREOF, the Parties have caused this Amendment No. 2 to Asset Purchase Agreement to be duly executed as of the Amendment Effective Date.

 

[Signature Page to APA Amendment No. 2]

Exhibit 2.12

EXECUTION COPY

ASSET PURCHASE AGREEMENT

regarding the

Bulk Acoustic Wave Filter Business

of

INFINEON TECHNOLOGIES AG

dated as of June 25, 2008

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EXECUTION COPY

 

ASSET PURCHASE AGREEMENT

by and between

 

1.	Infineon Technologies AG, a stock corporation under the laws of the Federal Republic of Germany, with principal place of business at Am Campeon 1-12, 85579 Neubiberg, Germany, registered with the commercial register of the lower court (Amtsgericht) of Munich under HRB 126492;

- hereinafter the “Seller” -

 

2.	Avago Technologies GmbH, a limited liability company under the laws of the Federal Republic of Germany, with principal place of business at Herrenberger Strasse 130, 71034 Böblingen, Germany, registered with the commercial register of the lower court (Amtsgericht) of Stuttgart under HRB 246116;

- hereinafter “Purchaser 1” -

 

3.	Avago Technologies International Sales Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512231E;

- hereinafter “Purchaser 2” -

 

4.	Avago Technologies Wireless IP (Singapore) Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512332K;

- hereinafter “Purchaser 3” -

- Purchaser 1 through 3 hereinafter individually a “Purchaser”

and collectively the “Purchasers” -

 

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5.	Avago Technologies Finance Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512223N;

- hereinafter “Guarantor” -

- Seller, Purchasers and Guarantor hereinafter individually a “Party”

and collectively the “Parties” -

 

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TABLE OF CONTENTS

 

§ 1 Definitions and Abbreviations		8
§ 2 Sale of Assets; Sale and Licensing of Intellectual Property Rights		20
§ 3 Sale of Contracts		24
§ 4 Consideration		26
§ 5 Transfer of Purchased Assets; Assumption of Purchased Contracts		31
§ 6 Business Employees		32
§ 7 Closing and Withdrawal		37
§ 8 Representations and Warranties of Seller		40
§ 9 Representations and Warranties of Purchasers		49
§ 10 Remedies for Breaches of Representations and Warranties		51
§ 11 Taxes		55
§ 12 Expiration of Claims and Limitation of Liability		56
§ 13 Certain Covenants		59
§ 14 Post-Closing Undertakings		64
§ 15 Confidentiality; Press Release		68
§ 16 Miscellaneous		69

 

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SCHEDULES AND EXHIBITS

 

Schedules
Schedule 1.1(a)		Business Employees
Schedule 1.1(b)		Individuals with Knowledge
Schedule 1.1(c)		Products
Schedule 2.1.1		Purchased Fixed Assets
Schedule 2.1.3		Purchased Know-How
Schedule 3.1		Purchased Contracts
Schedule 3.2		Third Party Consents
Schedule 4.2		Seller’s Valuation Principles
Schedule 4.7.2		Seller’s Account; Purchasers’ Account
Schedule 8.1.2		Selling Subsidiaries
Schedule 8.7		Status of Purchased Contracts
Schedule 8.8		Litigation
Schedule 8.9.1		Business Employees with Additional Occupation (Nebentätigkeit)
Schedule 8.9.2		Information on Business Employees
Schedule 8.9.3		Collective Bargaining Agreements
Schedule 8.9.4		Early Retirement Arrangements
Schedule 8.9.5		Employee Benefit Plans
Schedule 8.9.6		Work Guarantees
Schedule 8.9.7		Pension Commitments and Jubilee Commitments
Schedule 8.9.11		Calculation of Provisions related to Pension Commitments
Schedule 8.10.1		Co-owned Purchased Intellectual Property
Schedule 8.10.2		Intellectual Property Rights of Third Parties
Schedule 8.10.5		Third Party Licenses
Schedule 14.7.1		Prices for Seller’s Continuing Products
Exhibits
Exhibit A		Form of IT Service Agreement
Exhibit B		Form of Patent Assignment Agreement
Exhibit C		Form of Transitional Services Agreement
Exhibit D		Form of Transitional Supply Agreement
Exhibit E		Form of Asset Transfer Agreement

 

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Exhibit F		Form of Assumption Agreement
Exhibit G		Form of Closing Confirmation

 

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RECITALS

WHEREAS, Seller, among other activities, is engaged in the development, production, marketing and sale of bulk acoustic wave filters or bulk acoustic wave resonators using wafer level packaging (hereinafter the “Business”).

WHEREAS, Seller after a strategic review of its business portfolio has decided to divest the Business by selling and transferring certain assets and liabilities pertaining to the Business.

WHEREAS, Purchasers wish to extend their business activities by purchasing and acquiring the Business subject to the terms and conditions of this asset purchase agreement (hereinafter the “Agreement”).

WHEREAS, Seller and Purchasers intend to enter into several ancillary agreements pertaining to a transition of the Business which shall become effective upon the consummation of the transactions contemplated by this Agreement.

WHEREAS, Guarantor wishes to guarantee Purchasers’ obligations under this Agreement and the Ancillary Agreements.

NOW, THEREFORE, in consideration of the foregoing, the Parties agree as follows:

 

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§ 1

Definitions and Abbreviations

 

1.1	Certain Definitions and Abbreviations

For purposes of this Agreement, the following terms and abbreviations shall have the meanings specified in this Section 1.1:

“Ancillary Agreements” means the IT Services Agreement, the Patent Assignment Agreement, the Transitional Services Agreement and the Transitional Supply Agreement.

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, and the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) means the possession, directly or indirectly through one or more intermediaries, of the power to direct, or cause the direction of, the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise.

“AO” means the German Tax Code (Abgabenordnung), as amended.

“BGB” means the German Civil Code (Bürgerliches Gesetzbuch), as amended.

“BetrVG” means the German Works Constitution Act (Betriebsverfassungs-gesetz), as amended.

“Business Day” means any day other than a Saturday, Sunday or public holiday, in each case in Munich/Germany.

“Business Employees” means the employees of Seller which are identified on Schedule 1.1(a).

 

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“Business Records” means all books, records, ledgers, tangible data, disks, tapes, other media-storing data and files or other similar information, whether in hardcopy or computer format and whether stored in network facilities or otherwise, in each case to the extent Exclusively Used for the Business, including a list of all current customers of the Business and prospective customers of the Business (i.e., customers who have been approached by Seller or have approached Seller with a view to do future business with the Business), excluding, however, historical operations, accounting and financial records as well as any information the transfer of which would be prohibited pursuant to applicable Laws.

“Contract” means any written or oral, express or implied contract, agreement, obligation, promise, commitment or undertaking to which Seller or a Selling Subsidiary is a party as well as any contractual offer made by or to Seller or a Selling Subsidiary.

“Copyrights” means copyrights, whether registered or unregistered, arising under the Laws of any jurisdiction anywhere in the world, including all registrations and applications for registration with respect thereto.

“Employee Benefit Plan” means any plan or collective grant (Gesamtzusage) of Seller which (i) provides benefits in addition to salary and wages, (ii) applies to any of the Business Employees, and (iii) does not qualify as a Pension Commitment or a deferred compensation plan.

“Encumbrances” means any lien, claim, charge, security interest, mortgage, pledge, deed of trust, option, right of first refusal, servitude, easement, conditional sale or other title retention agreement, covenant or other similar restriction, adverse claims of ownership or use, transfer restriction or other similar restriction or Third Party right, but shall not include Permitted Encumbrances.

 

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“Euribor” means the European inter-bank offer rates for Euro deposits with interest periods of one (1) month quoted on the Reuters Page EURIBOR at 11.00 am CET on the first Business Day of the relevant month.

“Exclusively Used for the Business” means with respect to any asset, contract or right that such asset, contract or right is used for the Business only.

“Governmental Authority” means any legislative, executive or judicial authority (supranational, national, federal, provincial, state or local) or any department, commission, board, agency, bureau or official thereof.

“HGB” means the German Commercial Code (Handelsgesetzbuch), as amended.

“Intellectual Property Rights” means all intellectual property rights arising from (i) Patents, (ii) Copyrights and (iii) Trademarks.

“Inventory Value” means the value of the Purchased Inventory as of the Closing Date as determined pursuant to Section 4.5.

“IT Services Agreement” means the agreement in substantially the form attached hereto as Exhibit A.

“Jubilee Commitments” means all schemes, plans, promises, arrangements, agreements and other commitments of individual or collective nature which provide the Business Employees with lump sums, gratuities or similar benefits in the event or in anticipation of a jubilee (Jubiläumsleistungen).

“Know How” means all information of any kind or nature, in whatever form and whether or not embodied in a tangible medium, including customer lists, concepts, ideas, methods, processes, trade secrets, methodologies, designs, plans, schematics, bill of materials, drawings, formulae, technical data, specifications, research and development information, technology and product roadmaps, models, data bases, marketing materials, and other proprietary or confidential information, excluding any Intellectual Property Rights that cover or protect any of the foregoing.

 

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“Knowledge of Seller” or “Seller’s Knowledge” means the actual knowledge of the individuals identified on Schedule 1.1(b).

“Law” or “Laws” means any foreign, federal, state or local law, statute, code, rule or regulation.

“Legal Entity” means any corporation, company, partnership, association or other legal entity established pursuant to any jurisdiction.

“Losses” means all liabilities, costs, expenses and other damages within the meaning of Sections 249 et seq. BGB, but excluding any internal administration and overhead costs.

“Material Adverse Effect” means any fact, circumstance, change or effect that, individually or when taken together with all other such facts, circumstances, changes or effects that exist at the date of determination of the occurrence of the Material Adverse Effect, is materially adverse to the business, operations or financial condition of the Business, taken as a whole, or Seller’s ability to perform its obligations under this Agreement or consummate the transactions contemplated thereby; provided, however, that no facts, circumstances, changes or effects (by themselves or when aggregated with any other facts, circumstances, changes or effects) resulting from, relating to or arising out of the following shall be deemed to be or constitute a Material Adverse Effect, and no facts, circumstances, changes or effects resulting from, relating to or arising out of the following shall be taken into account when determining whether a Material Adverse Effect has occurred or may, would or could occur:

 

(i)

economic, financial or political conditions in any jurisdiction in which the Business has substantial business or operations, and any changes therein (including any changes arising out of acts of terrorism, war, weather condition or other force majeure events);

 

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(ii)

conditions in the wireless industry, and any industry wide changes therein (including any changes arising out of acts of terrorism, war, weather conditions or other force majeure events);

 

(iii)

conditions in the financial markets, and any changes therein (including any changes arising out of acts of terrorism, war, weather conditions or other force majeure events);

 

(iv)

acts of terrorism or war;

 

(v)

directly from the execution, announcement or pendency of this Agreement and the transactions contemplated thereby;

 

(vi)

directly from compliance by Seller or the Selling Subsidiaries with the terms of this Agreement or the failure by Seller or the Selling Subsidiaries to take any action that is prohibited by this Agreement; and

 

(vii)

any failure by the Business to achieve projected revenue or operating results as such.

“Ordinary Course of Business” means the ordinary and usual course of normal day-to-day operations of the Business as conducted by Seller consistent with Seller’s past practice.

“Patents” means patents or patent applications of any kind or nature (including industrial designs and utility models that are subject to statutory protection), wheresoever issued or pending anywhere in the world.

“Patent Assignment Agreement” means the agreement in substantially the form attached hereto as Exhibit B.

 

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“Pension Commitments” means all schemes, plans, promises, arrangements, agreements and other commitments of individual or collective nature which provide the Business Employees with pensions, lump sums, gratuities or similar monetary benefits in the event of early retirement, death or disability (betriebliche Altersversorgung).

“Permitted Encumbrances” means any (i) statutory lien for Taxes, assessments and other governmental charges or liens of carriers, landlords, warehousemen and mechanics incurred in the Ordinary Course of Business, (ii) rights of retention (Eigentumsvorbehalte) granted in the Ordinary Course of Business, (iii) liens incurred or deposits made in the Ordinary Course of Business in connection with workers’ compensation, unemployment insurance and other types of social security, and (iv) non-exclusive licenses granted by Seller or an Affiliate of Seller in connection with sales of Products to customers in the Ordinary Course of Business.

“Person” means any individual or Legal Entity.

“Post-Closing Tax Period” means any Tax period beginning after the Closing Date, and, in the case of any Straddle Period, the portion of such Straddle Period beginning on the day after the Closing Date.

“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and, in the case of any Straddle Period, the portion of such Straddle Period ending on the Closing Date.

“Products” means all bulk acoustic wave filters or bulk acoustic wave resonators using wafer level packaging, including the products set forth on Schedule 1.1(c).

“Selling Subsidiary” means any Person of which a majority of the outstanding share capital, voting securities or other voting equity interests is owned, directly or indirectly, by Seller, and which will sell and transfer Purchased Assets, Purchased Intellectual Property or Purchased Contracts to Purchasers as contemplated by this Agreement.

 

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“Straddle Period” means any Tax period that begins on or before and ends after the Closing Date.

“Subsidiary” means any Person that is, directly or indirectly through one or more intermediaries, controlled by any other Person, and the term “control” means the possession, directly or indirectly through one or more intermediaries, of the power to direct, or cause the direction of, the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise.

“Third Party” means any person or Legal Entity other than a Party or an Affiliate of a Party.

“Trademarks” means trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers and general intangibles of like nature, together with goodwill associated therewith, whether registered or unregistered and whether arising under the Laws of any jurisdiction anywhere in the world, and registrations and applications for registration with respect to any of the foregoing.

“Transfer Date” means the first day of the month following the Closing Date.

“Transitional Services Agreement” means the agreement in substantially the form attached hereto as Exhibit C.

“Transitional Supply Agreement” means the agreement in substantially the form attached hereto as Exhibit D.

“Tax” or “Taxes” means all kinds of (i) taxes and similar assessments or charges within the meaning of Section 3 AO or the relevant provisions under applicable foreign Laws, including, without any limitation, federal statutory, state, local, municipal and governmental duties, corporate income tax, trade

 

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tax, state tax, stamp duty, transfer tax, custom duty, registration tax, wealth tax, wage tax, value added tax, and any other form of taxation, levy, duty, charge, contribution, withholding or impost of whatever nature, (ii) all social security contributions, and (iii) any fines, penalties, surcharge charges, costs or interest or similar charges with respect to (i) and (ii).

“VAT” means value added tax pursuant to the German VAT Act (Umsatzsteuergesetz) or any other value added or sales tax.

 

1.2	Terms Defined Elsewhere in this Agreement

For purposes of this Agreement, the following terms shall have the meanings set forth in the Sections indicated below:

 

“Additionally Transferred Employees”		Section 6.4.2
“Adjustment Amount”		Section 4.5.3
“Aggregate Consideration”		Section 4.1
“Agreement”		Recitals
“Asset Transfer Agreement”		Section 5.1.1
“Assumption Agreement”		Section 5.2
“Business”		Recitals
“Closing”		Section 7.1
“Closing Actions”		Section 7.3
“Closing Conditions”		Section 7.2
“Closing Date”		Section 7.1
“Disclosed Information”		Section 10.3.1
“Estimated Inventory Value”		Section 4.2

 

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“Guarantor”		Preamble
“Indemnified Liability”		Section 14.2
“Independent Expert”		Section 4.5.2
“Interim Period”		Section 14.8
“Investigation”		Section 10.2.1
“Key Business Employees”		Section 7.2.3
“Licensed Intellectual Property”		Section 2.3.2
“Licensed Products”		Section 2.3.2
“Notice”		Section 16.2
“Objecting Business Employee”		Section 6.4.1
“Objection Notice”		Section 4.5.1
“Party” or “Parties”		Preamble
“Permits”		Section 8.11
“Purchase Price”		Section 4.1
“Purchased Assets”		Section 2.1
“Purchased Contracts”		Section 3.1
“Purchased Fixed Assets”		Section 2.1.1
“Purchased Intellectual Property”		Section 2.3.1
“Purchased Inventions”		Section 2.3.1
“Purchased Inventory”		Section 2.1.2

 

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“Purchased Know How”		Section 2.1.3
“Purchased Tangible Assets”		Section 2.1.2
“Purchaser” or “Purchasers”		Preamble
“Purchasers’ Claim”		Section 10.2.1
“Purchasers’ Representations”		Section 9
“Purchasers’ Representatives”		Section 10.3.1
“Reconciliation of Interest Agreement and Social Plan”		Section 6.3
“Remediation Notice”		Section 10.2.1
“Seller”		Preamble
“Seller’s Breach”		Section 10.1
“Seller’s Continuing Products”		Section 14.7.1
“Seller’s Representations”		Section 8
“Seller’s Valuation Principles”		Section 4.2
“Third Party Claim”		Section 10.2.2
“Third Party Consents”		Section 3.2
“Time Limitations”		Section 12.1.2
“VAT Reimbursement Amount”		Section 4.3
“VAT Reimbursement Obligation”		Section 4.3

 

1.3	Other Definitional and Interpretive Matters

Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:

 

1.3.1

Calculation of Time Period

When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the provisions of Section 187 BGB et seq. shall apply.

 

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1.3.2

Gender and Number

Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.

 

1.3.3

Headings

The provision of a Table of Contents, the division of this Agreement into Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any “Section” are to the corresponding Section of this Agreement unless otherwise specified.

 

1.3.4

Herein

The words such as “herein”, “hereinafter”, “hereof”, and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.

 

1.3.5

Including

The word “including” or any variation thereof means “including, without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.

 

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1.3.6

Currency

All currency references included in this Agreement and the Ancillary Agreements shall refer to Euro(s).

 

1.3.7

Reasonable Commercial Efforts

Reasonable commercial efforts means that the obligated Party is required to make a diligent, reasonable and good faith effort to accomplish the applicable objective. Such obligation, however, does not require an expenditure of material funds or the incurrence of a liability on the part of the obligated Party, nor does it require that the obligated Party acts in a manner that would be contrary to normal commercial practices in order to accomplish the objective. The fact that the objective is or is not actually accomplished is no indication that the obligated Party did or did not in fact utilize its reasonable commercial efforts in attempting to accomplish the objective.

 

1.3.8

Schedules and Exhibits

The Schedules and Exhibits attached to this Agreement shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. Any matter specifically disclosed by either Party on any Schedule with respect to any representation, warranty or covenant of such Party shall be deemed disclosed for purposes of all other representations, warranties or covenants of such Party to the extent that it is reasonably apparent from such disclosure that it also relates to such other representations, warranties or covenants, and to the extent any matter disclosed on any Schedule conflicts with any representation, warranty or covenant of such Party contained in this Agreement, and to the extent such conflict is reasonably apparent thereto, such Party shall not have any liability with respect to such representation, warranty or covenant.

 

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1.3.9

German Terms

Where a German term has been inserted in italics, it alone (and not the English term to which it relates) shall be authoritative for the purpose of the interpretation of the relevant English term in this Agreement.

§ 2

Sale of Assets;

Sale and Licensing of Intellectual Property Rights

 

2.1	Sale and Purchase of Assets

Upon the terms and subject to the conditions of this Agreement, Seller herby sells (verkauft) or agrees to cause a Selling Subsidiary, as appropriate, to sell (verkaufen) to Purchasers, and Purchasers hereby agree to purchase (kaufen) from Seller or the applicable Selling Subsidiary, the Purchased Assets. Seller undertakes to procure that any Selling Subsidiary shall fully comply with all obligations resulting from this Agreement. For purposes of this Agreement, “Purchased Assets” means all the assets of Seller or a Selling Subsidiary which are set forth or described in Section 2.1.1 through Section 2.1.5 below, whether or not any of such assets have any value for accounting purposes or are carried or reflected on, or are specifically referred to, in Seller’s or the Selling Subsidiary’s books or financial statements:

 

2.1.1

the movable fixed assets identified on Schedule 2.1.1 (the “Purchased Fixed Assets”), provided, that:

 

(i)

movable fixed assets which are identified on Schedule 2.1.1 but which will be sold or otherwise disposed of by Seller or a Selling Subsidiary in the Ordinary Course of Business between the date hereof and the Closing Date shall not constitute Purchased Assets; and

 

(ii)

movable fixed assets which are not identified on Schedule 2.1.1, but which will be acquired by Seller or a Selling Subsidiary in the Ordinary Course of Business between the date hereof and the Closing Date and which will be Exclusively Used for the Business shall constitute Purchased Assets;

 

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2.1.2

all finished goods within the meaning of Section 266 (2) (B) (I) No. 3 HGB which will be Exclusively Used for the Business and which will be owned by Seller or a Selling Subsidiary, in each case as of the Closing Date, except for any inventory within the meaning of Section 266 (2) (B) (I) No. 1- 3 HGB which is related to the Product NWX 1915C (including NWX 1915CR, NWX 1915CT and NWX 1915CTM) (the “Purchased Inventory” and, together with the Purchased Fixed Assets, the “Purchased Tangible Assets”);

 

2.1.3

all Know How owned by Seller or a Selling Subsidiary which is Exclusively Used for the Business, including the Know How identified on Schedule 2.1.3 (the “Purchased Know How”);

 

2.1.4

the Business Records; and

 

2.1.5

Seller’s warranty claims related to the Purchased Tangible Assets to the extent these warranty claims (i) constitute either a right of supplementary performance (Nacherfüllung), a right of reduction (Minderung), a right of rescission (Wandlung) or a right to claim damages due to a defect (Schadensersatzanspruch wegen Sachmangel), and (ii) are transferable; to the extent such warranty claims cannot be transferred to Purchasers, Seller shall, upon Purchasers’ request, pursue such warranty claims on behalf of Purchasers and, unless there is a Seller’s Breach and Purchasers are entitled to damages pursuant to this Agreement in connection with such warranty claim, at Purchasers’ cost.

 

2.2	Excluded Assets

For the avoidance of doubt, the Parties agree that the Purchased Assets shall not include any accounts receivables or account payables pertaining to the Business which become due and payable prior to the Closing Date.

 

2.3	Sale of Patents; License to Intellectual Property Rights

 

2.3.1

Upon and subject to the terms and conditions of the Patent Assignment Agreement, Seller hereby sells (verkauft) or agrees to cause a Selling

 

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Subsidiary, as appropriate, to sell (verkaufen) to Purchasers, and Purchasers hereby agree to purchase (kaufen) from Seller or the applicable Selling Subsidiary, the Patents which are identified on Annex A to the Patent Assignment Agreement (the “Purchased Intellectual Property”) and the patentable inventions which are identified on Annex B to the Patent Assignment Agreement (the “Purchased Inventions”). The Parties agree that sale of the Patents which constitute the Purchased Intellectual Property shall include the sale of all members of each such Patent’s patent family. The Parties agree that it shall be Purchasers’ responsibility to pursue any further legal protection or filings with respect to the inventions included in the Purchased Intellectual Property or the Purchased Inventions.

 

2.3.2

With effect as of the Closing Date, Seller hereby grants to Purchaser 3 to the extent legally permitted a non-exclusive, irrevocable, perpetual, worldwide, non-transferable, and royalty-free right and license (not including the right to sub-license) to the Know-How and the Intellectual Property Rights which are owned by Seller or a Selling Subsidiary and which are required for the Business, in each case, however, (i) limited to the development, manufacturing, marketing and sale of the Products, and (ii) except for any rights pertaining to the Seller’s name “Infineon” in any form and combination (the “Licensed Intellectual Property”). As an exception to the principle that the Licensed Intellectual Property may not be sub-licensed, Purchaser 3 shall have the right to sub-license the Licensed Intellectual Property to (i) any manufacturer of Products previously approved by Seller (such approval not to be unreasonably withheld by Seller) with the right of such approved manufacturer to manufacture Products using the Licensed Intellectual Property (the “Licensed Products”) exclusively for Purchaser or (ii) to any Subsidiary of Avago Technologies Limited, a company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200510713C, in each case with the same license scope as granted to Purchaser pursuant to this Section 2.3.2, provided, however, that such right to sub-license as well as

 

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the granted sub-license itself shall cease to exist with immediate effect as soon as (i) the respective Subsidiary of Avago Technologies Limited no longer constitutes a Subsidiary of Avago Technologies Limited or (ii) the respective manufacturer ceases to manufacture Licensed Products exclusively for Purchasers (provided, however, that the right to sub-license the Licensed Intellectual Property to a manufacturer previously approved by Seller as well as the sub-license granted to such manufacturer shall not cease to exist if the respective manufacturer begins to manufacture Products other than Licensed Products for a Third Party without being required to use or without actually using the Licensed Intellectual Property). If Purchasers intend to transfer the Business as a whole to a Third Party, the consent of Seller to a transfer of the license to the Licensed Intellectual Property (which is required pursuant to the first sentence of this Section 2.3.2) shall not be unreasonably withheld.

 

2.3.3

The Parties agree the Seller shall neither actively produce copies of the Purchased Know How nor take any other active measures to maintain copies of the Purchased Know How. To the extent Seller is not in breach with its obligations set forth in the preceding sentence, Seller shall be entitled to retain existing copies of the Purchased Know How. With effect as of the Closing Date, Purchasers grant to Seller a non-exclusive, non-transferable, worldwide, perpetual and fully paid-up right and license to use the Purchased Know How for any and all purposes outside the scope of the Business. The limitations on sub-licensing which are set forth in Section 2.3.2 shall apply mutatis mutandis to Seller’s right to sublicense the license granted pursuant to this Section 2.3.3, except for the reference to Avago Technologies Limited in Section 2.3.2 which shall be replaced with a reference to Seller for purposes of this Section 2.3.3. In addition and with effect as of the Closing Date, Purchasers grant Seller a non-exclusive, non-transferable, worldwide and fully-paid up right and license to use the Purchased Know How within the scope of the Business to perform Seller’s obligations under the Transitional Supply Agreement, the IT Services Agreement and the Transitional Services Agreement.

 

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§ 3

Sale of Contracts

 

3.1	Sale of Contracts

Upon the terms and subject to the conditions of this Agreement, Seller hereby sells (verkauft) or agrees to cause a Selling Subsidiary, as appropriate, to sell (verkaufen) to Purchasers by way of an assumption of contract with full discharge of Seller (im Wege der Vertragsübernahme mit befreiender Wirkung) all rights and obligations resulting from (i) all Contracts which are Exclusively Used for the Business as of the date hereof, including the Contracts identified on Schedule 3.1, and (ii) all Contracts which will be entered into by Seller or a Selling Subsidiary between the date hereof and the Closing Date in the Ordinary Course of Business and which will be Exclusively Used for the Business (collectively, the “Purchased Contracts”). The Seller undertakes to update Schedule 3.1 on the Closing Date to include all open purchase orders which pertain to the Business as of the Closing Date. The Parties acknowledge that except for the Purchased Contracts and the employment agreements with the Business Employees (which will be transferred to Purchasers pursuant to operation of law as described in Section 6), Purchasers will not assume any other Contracts pursuant to this Agreement.

 

3.2	Consent of Third Parties

Seller will use reasonable commercial efforts to obtain the consents of the Third Parties which are required to transfer the Purchased Contracts to Purchasers and which are identified on Schedule 3.2 (the “Third Party Consents”) and Purchasers shall use reasonable commercial efforts to support Seller in obtaining the Third Party Consents, provided, that Seller may in its sole discretion and without incurring any liability under this Agreement or otherwise determine the date on when it contacts the respective Third Parties to obtain the Third Party Consents, and, provided further, that Seller shall make contacts to such Third Parties at the latest on the day the objection

 

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period for the Business Employees as set forth in Section 613a (6) BGB has expired. To the extent that the Third Party Consents cannot be obtained prior to or after the Closing Date, Seller or the respective Selling Subsidiary will vis-à-vis the Third Party (im Außenverhältnis) remain the party to the respective Purchased Contract and the Parties will, for the purpose of their internal relationship (im Innenverhältnis) and to the extent permitted by applicable Laws and the terms and provision of the respective Purchased Contract, behave and treat each other as if the transfer of the Purchased Contract had effectively taken place on the Closing Date. In particular, Seller or the respective Selling Subsidiary will follow Purchasers’ instructions regarding the exercise of any rights under such Purchased Contract and Purchasers shall indemnify Seller or the respective Selling Subsidiary against any liability arising from the fact that Seller or the respective Selling Subsidiary remains a party to the respective Purchased Contract vis-à-vis the Third Party (im Außenverhältnis).

 

3.3	Obligations of Purchasers

As of and from the Closing Date, Purchasers on behalf of themselves and their Affiliates shall carry out, perform and discharge all of the obligations and liabilities under the Purchased Contracts and shall indemnify and to hold harmless Seller or the respective Affiliates of Seller from and against any and all liabilities or costs suffered or incurred by Seller or the respective Affiliate of Seller as a result of any failure by Purchasers to carry out, perform and discharge such obligations and liabilities.

 

3.4	Claims and Liabilities under the Purchased Contracts

 

3.4.1

Purchasers shall not assume any of Seller’s liabilities under any of the Purchased Contracts which arise from performances received by Seller from Third Parties prior to or on the Closing Date or which arise from performances rendered by Seller to Third Parties prior to or on the Closing Date.

 

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3.4.2

Purchasers shall not assume any of Seller’s claims under any of the Purchased Contracts which arise from performances received by Seller from Third Parties prior to or on the Closing Date, unless and to the extent such claims relate to disadvantages or damages occurring after the Closing Date, or which arise from performances rendered by Seller to Third Parties prior to or on the Closing Date.

 

3.4.3

To the extent Seller has received any advance payments from Third Parties with respect to delivery obligations which become due after the Closing Date, Seller shall remit such advance payments to Purchasers in accordance with the obligations set forth in Section 14.4.

 

3.4.4

Seller shall indemnify Purchasers against any liabilities, claims, costs or expenses under or in connection with the Purchased Contracts which are not intended to be transferred to Purchasers according to Section 3.4.1 and Section 3.4.2, but for which Purchasers should nevertheless be held liable by a Third Party. The rights and obligations set forth in Section 10.2 shall apply mutatis mutandis.

§ 4

Consideration

 

4.1	Aggregate Consideration

The aggregate consideration to be paid by Purchasers to Seller pursuant to this Agreement shall be an amount in cash equal to the sum of (i) EUR 20,449,612 (in words: twenty million four-hundred forty-nine thousand six-hundred and twelve Euros) (the “Purchase Price”) and (ii) the Inventory Value (the Purchase Price and the Inventory Value collectively the “Aggregate Consideration”). The Parties agree that the Purchase Price includes the consideration for the Purchased Intellectual Property and the Purchased Inventions which amounts to EUR 4,500,000 (in words: 4 million five hundred thousand Euros).

 

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4.2	Estimated Inventory Value

No later than five (5) Business Days prior to the Closing Date, Seller shall deliver to Purchasers a written notice setting forth Seller’s good faith estimate of the quantity of Inventory that Seller reasonably expects to transfer to Purchasers on the Closing Date, together with Seller’s good faith estimate of the value of the Inventory as of the Closing Date (the “Estimated Inventory Value”). The Estimated Inventory Value shall be determined by Seller on the basis of Seller’s existing principles for valuing Inventory which are set forth on Schedule 4.2 (“Seller’s Valuation Principles”).

 

4.3	Value Added Tax

The Parties assume that the sale and transfer of the Business as contemplated by this Agreement may be, depending on the respective assets, subject to VAT (steuerbar) and thus taxable (steuerpflichtig) or tax-exempt (steuerfrei). Seller and the Selling Subsidiaries shall submit to Purchasers within two weeks after the Closing Date an invoice or invoices, meeting the legal requirements of the German VAT Act (Umsatzsteuergesetz) or any other VAT regime the sale of the assets will be subject to, in order to enable Purchasers to claim input VAT (Anspruch auf Abzug der Vorsteuer). If the competent tax authorities qualify the sale and transfer of the Business as not being subject to VAT (in whole or in part), Seller shall repay the VAT amount or the relevant portion thereof (plus ancillary charges, if any) (the “VAT Reimbursement Amount”) to Purchasers (such payment obligation the “VAT Reimbursement Obligation”) if and to the extent that the respective VAT Reimbursement Amount is actually reimbursed to Seller or Selling Subsidiaries by the competent tax authorities. Upon written request of Purchasers, Seller and the Selling Subsidiaries shall settle the VAT Reimbursement Obligation by assignment of the relevant claim to reimbursement of the VAT Reimbursement Amount against the tax authorities, and Purchasers shall accept such assignment on account of performance (erfüllungshalber) with full release of Seller and the Selling

 

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Subsidiaries from the VAT Reimbursement Obligation. The Parties agree to perform the assignment vis-à-vis the tax authorities in compliance with all formal requirements of Section 46 (3) AO. To the extent the VAT Reimbursement Obligation remains unsettled, Seller and the Selling Subsidiaries shall repay the outstanding VAT Reimbursement Amount to Purchasers within due course.

 

4.4	Closing Date Payments

On the Closing Date, Purchasers shall pay to Seller an amount equal to the sum of (i) the Purchase Price and (ii) the Estimated Inventory Value, in each case plus applicable VAT.

 

4.5	Final Determination of Inventory Value; Dispute Resolution

 

4.5.1

Any objections of Purchasers against the Estimated Inventory Value calculated by Seller pursuant to Section 4.2 must be raised within one month after the Closing Date by providing Seller with a written statement which specifies in reasonable detail the basis for such objections and includes Purchasers’ calculation of the Inventory Value (the “Objection Notice”). If and to the extent Purchasers do not object during such period and in such manner, the Estimated Inventory Value shall become final and binding upon the Parties and shall constitute the Inventory Value for purposes of this Agreement.

 

4.5.2

If and to the extent Purchasers provide Seller with an Objection Notice as set forth in Section 4.5.1, Purchasers and Seller shall cooperate in good faith to resolve any disputed items as promptly as possible. In the event Purchasers and Seller are unable to resolve all of the disputed items within one month following receipt by Seller of the Objection Notice, each of Seller and Purchasers shall be entitled to request the German Institute of Chartered Accountants (Institut der Wirtschaftsprüfer in Deutschland e.V.) to appoint an auditor (the “Independent Expert”) to determine the correct amount of the Inventory Value. The Independent Expert shall act as an expert

 

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(Schiedsgutachter) and not as a mediator (Schlichter). Seller and Purchasers shall each cooperate with the Independent Expert and shall grant the Independent Expert access to such books and records as may be reasonably necessary to permit a determination by the Independent Expert. Seller and Purchasers shall each submit to the Independent Expert its proposed resolution of the disputed items, and the Independent Expert shall decide only on the specific items in dispute. The final decision of the Independent Expert shall not fall beyond or outside the positions taken by the Parties. The Independent Expert shall make its determination in accordance with Seller’s Valuation Principles and shall give the Parties an adequate opportunity to present their views in writing and at a hearing or hearings to be held in the presence of Seller and Purchasers and their advisors. The decision of the Independent Expert shall give reasons for the Independent Expert’s determination of the Inventory Value and shall address the specific items in dispute between Seller and Purchasers. The Independent Expert shall use reasonable commercial efforts to complete its review within thirty (30) Business Days following its engagement. The Independent Expert’s fees and expenses shall be allocated based on the inverse of the percentage its determination (before such allocation) bears to the total amount in dispute as originally submitted to the Independent Expert. For example, should the items in dispute total in amount to EUR 1,000 and the Independent Expert awards EUR 600 in favour of Seller’s position, 60% of the costs of its review would be borne by Purchasers and the remaining 40% of the costs would be borne by Seller. The value of the Inventory determined by the Independent Expert shall be final and binding on the Parties, unless there is manifest error, and shall constitute the Inventory Value for purposes of this Agreement.

 

4.5.3

Upon resolution of any disputes in accordance with the provisions of Section 4.5.2, any deviations between the Estimated Inventory Value and the Inventory Value (the “Adjustment Amount”) shall be settled as follows:

 

(i)

in the event the Adjustment Amount is in favour of Seller, Purchasers shall pay to Seller the Adjustment Amount plus interest thereon at a rate of 300 basis points over Euribor from and including the Closing Date to, but excluding, the date of payment;

 

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(ii)

in the event the Adjustment Amount is in favour of Purchasers, Seller shall pay to Purchasers the Adjustment Amount plus interest thereon at a rate of 300 basis points over Euribor from and including the Closing Date to, but excluding, the date of payment.

 

4.6	Allocation of Aggregate Consideration

Seller and Purchasers shall in good faith agree on an allocation of the Aggregate Consideration. This allocation shall serve as a basis for any invoicing by Seller or the Selling Subsidiaries and shall be provided to Seller or the Selling Subsidiaries prior to the Closing Date. In case the allocation needs to be amended after Seller or the Selling Subsidiaries have issued invoices to the Purchasers, an amendment of such invoices will be made based on Section 14 of the German VAT Act (Umsatzsteuergesetz) or based on the provisions of the VAT regimes applicable to the sale of the assets, respectively. The Parties shall be obliged to comply with the legal requirements resulting from any amendment of the allocation.

 

4.7	Rules for Payments

 

4.7.1

Any payments pursuant to this Agreement shall be made by wire transfer in immediately available funds, value as of the relevant due date set out in this Agreement or otherwise provided by law, free of bank and/or any other charges.

 

4.7.2

Any payments to Seller or Purchasers pursuant to this Agreement shall be made to the bank accounts of Seller or Purchasers set forth on Schedule 4.7.2 or to such other bank accounts to be designated by Seller or Purchasers, respectively, to the respective other Party at least five (5) Business Days prior to the due date of the respective payment.

 

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§ 5

Transfer of Purchased Assets; Assumption of Purchased Contracts

 

5.1	Transfer of Purchased Tangible Assets

 

5.1.1

At the Closing Seller and each of the Selling Subsidiaries, on the one hand, and Purchasers, on the other hand shall agree (sich darüber einigen) to transfer title to the Purchased Tangible Assets to one of Purchasers identified to Seller at least five (5) Business Days before the envisaged Closing Date with in rem effect (mit dinglicher Wirkung) as of the Closing Date by virtue of one or more separate asset transfer agreements to be executed on the Closing Date substantially in the form attached hereto as Exhibit E (each an “Asset Transfer Agreement”).

 

5.1.2

At the Closing Seller and each of the Selling Subsidiaries shall deliver (übergeben) to Purchasers the Purchased Tangible Assets. To the extent that such delivery does not occur with respect to individual Purchased Tangible Assets, the delivery (Übergabe) required in respect of the transfer of title will be replaced by the agreement that such assets are to be kept in safe custody from the Closing Date by the Seller or the applicable Selling Subsidiary for Purchasers (Besitzkonstitut). To the extent that certain Purchased Tangible Assets should be in the possession of Third Parties on the Closing Date, the delivery (Übergabe) shall be replaced by the Seller’s or the Selling Subsidiary’s assignment to Purchasers of its possessory claim related to such Purchased Tangible Asset (Abtretung des Herausgabeanspruchs).

 

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5.2	Assumption of Purchased Contracts

At the Closing Purchasers shall assume, with effect as of the Closing Date, the Purchased Contracts and all rights and obligations thereunder by virtue of one or more agreements to be executed on the Closing Date substantially in the form attached hereto as Exhibit F (each an “Assumption Agreement”).

 

5.3	Transfer of Business Records

As soon as reasonably practical after the Closing Date, Seller shall hand over to Purchasers the Business Records. The provisions of Section 5.1 and Section 5.2 shall apply mutatis mutandis, provided, that the Parties shall not be obliged to enter into any Asset Transfer Agreement with respect to the transfer of Business Records.

§ 6

Business Employees

 

6.1	Transfer of Undertaking (Betriebsübergang)

The Parties assume that the consummation of the transactions contemplated by this Agreement will constitute a transfer of undertaking (Betriebsübergang) as defined in Section 613a BGB. As a consequence, the employment relationships between the Seller and the Business Employees will transfer to Purchaser 1 by operation of law with effect as of the Transfer Date, except for the employment relationships with Business Employees who have objected to the transfer of their employment relationship pursuant to Section 613a (6) BGB.

 

6.2	Changes in the Scope of the Business Employees

The Parties acknowledge that due to normal fluctuations, the employment relationships with some of the Business Employees may terminate between the date hereof and the Transfer Date, while other employees who may be

 

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hired for the Business or assigned to the Business by Seller with the approval of Purchasers, such approval not to be unreasonably withheld, between the date hereof and the Transfer Date will be transferred to Purchaser 1 by operation of law as set forth in Section 6.1. Seller undertakes to update Schedule 1.1(a) on the Transfer Date to reflect such changes.

 

6.3	Notification

Immediately after Seller has notified Purchasers that a reconciliation of interest agreement (Interessenausgleich) and a social plan (Sozialplan) pursuant to Section 111 et seq. BetrVG regarding the transactions contemplated by this Agreement and the assumption by Purchaser 1 of the operation (betriebliche Leitungsmacht) of the Business and its relocation (the “Reconciliation of Interest Agreement and Social Plan”) are not required or, to the extent the Reconciliation of Interest Agreement and Social Plan are required, after Seller’s negotiations with Seller’s works council with regard to them have been finalized, Seller and Purchaser 1 shall jointly notify the Business Employees in accordance with the requirements of Section 613a (5) BGB. The notice shall set a time limit of one (1) month within which each Business Employee must inform the Seller or the Purchaser 1 in writing if the Business Employee objects to the transfer of its employment relationship to Purchaser 1. Purchaser 1 shall, without undue delay, furnish Seller with sufficient and accurate information which are required by Seller to fulfil Seller’s information obligations towards the Business Employees pursuant to this Section 6.3 and the statutory requirements. Seller and Purchaser 1 shall inform each other of any notice of objection (Widerspruch) which either Party has received from any Business Employee

 

6.4	Indemnification

 

6.4.1

With respect to each Business Employee who objects to the transfer of its employment relationship to Purchaser 1 in accordance with Section 613a (6) BGB (each an “Objecting Business Employee”), Purchasers shall indemnify Seller for, and hold Seller harmless against, any salaries, benefits, employer’s

 

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portions of social security contributions (Arbeitgeberbeiträge zur Sozialversicherung) payable to or in favour of such Objecting Business Employee during a period of six (6) months following the Transfer Date and any severance payment payable to or in favour of such Objecting Business Employee to the extent such severance payment has been approved by Purchaser 1 (such approval not to be unreasonably withheld), provided, that Seller shall not be indemnified for salaries payable to any Objecting Business Employees for times during which Seller actually used the services of the Objecting Business Employees.

 

6.4.2

Seller shall indemnify Purchasers for, and hold Purchasers harmless against,

 

(i)

any salaries payable during the first twelve (12) months after the Transfer Date to employees of Seller other than Business Employees who should transfer to Purchaser 1 by operation of law (the “Additionally Transferred Employees”) or any severance payments made in favour of Additionally Transferred Employees to the extent such severance payments have been approved by Seller (such approval not to be unreasonably withheld), provided, that Purchasers shall not be indemnified for salaries payable to Additionally Transferred Employees for times during which Purchaser 1 actually used the services of the Additionally Transferred Employees;

 

(ii)

any salaries payable to the Business Employees as well as any other costs, expenses, or liabilities arising from or in connection with the employment relationships of the Business Employees if these payment obligations (x) become due on or before the Transfer Date or (y) become due after the Transfer Date but relate to periods before the Transfer Date.

 

(iii)

any claims of the Business Employees against Purchasers relating to pay raises that had been suspended at Seller for the period until the Transfer Date to be transferred into the fund “ERA-Anpassungsfonds” as provided for by the respective collective agreements, in particular

 

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“Tarifvertrag ERA-Anpassungsfonds in der bayerischen Metall- und Elektroindustrie” of 19 December 2003 and “Gesamtbetriebsvereinbarung zur Fortführung der Zuführung zum ERA-Anpassungsfonds der Firma Infineon Technologies AG” of 9 March 2006.

 

6.4.3

Seller shall indemnify Purchasers for, and hold Purchasers harmless against, any bonus arrangements, finder’s fees (Vermittlungsvergütungen) or other benefits in connection with the transactions contemplated by this Agreement which Seller has agreed with Business Employees, regardless whether they become due before the Transfer Date or thereafter.

 

6.4.4

Obligations of Seller vis-à-vis former employees who have left Seller prior to or on the Transfer Date out of company pension schemes (be they already payable or only vested) remain with Seller. Seller shall indemnify Purchasers for, and hold Purchasers harmless against all such claims.

 

6.4.5

If following the date hereof Seller has notified Purchasers that the Reconciliation of Interest Agreement and Social Plan

 

(i)

are required, Purchasers shall cooperate with Seller in good faith to identify and make such commitments to the Business Employees that may be reasonably required in order to reach an agreement with Seller’s work council (Betriebsrat). Such commitments may, e.g. include bonus payments by Purchaser 1 to the Transferred Employees or the waiver of the exemption under Section 112(a)(2) BetrVG. All such commitments need the prior approval of Purchasers which shall not be unreasonably withheld.

 

(ii)

are not required, Seller shall indemnify Purchasers for, and hold Purchasers harmless against, 50% of any claims of the Business Employees or Additionally Transferred Employees as well as 50% of any other costs, expenses or liabilities arising from or in connection with the fact that Seller has not entered into an Reconciliation of Interest Agreement and Social Plan.

 

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6.5	Cooperation

Each Party shall provide the other Party with all information reasonably required by the other Party to

 

(i)

comply with any legal requirement (whether statutory or pursuant to any written agreement with any relevant trade union, works council or other employee representative body); and

 

(ii)

inform, consult or negotiate with or seek consent from its employees, relevant trade unions, relevant works councils or any other employee representative body in relation to this Agreement.

Each Party shall indemnify the other Party from and against any damages incurred or suffered by the other Party as a result of such Party’s failure to comply with the provisions of this Section 6.5.

 

6.6	Communication with Business Employees

Unless agreed in advance with the other Party, either Party shall at any time between the date hereof and the Transfer Date refrain from any communication which is capable or intended to cause, provoke or encourage a Business Employee to object to the transfer of her or his employment relationship to Purchaser 1. In the event of a violation of this obligation, all costs, expenses and liabilities resulting from such objection shall be borne by the violating Party.

 

6.7	Transfer of Personnel Files

To the extent permitted by applicable Laws, Seller shall on the Transfer Date provide Purchaser 1 with the personnel files of the Business Employees.

 

6.8	Assumption of Liabilities

 

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6.8.1

Seller shall remain solely liable for any liabilities accrued for the benefit of the Business Employees under any existing stock option schemes.

 

6.8.2

Purchasers agree to have been fully compensated for the assumption of (i) all pension liabilities towards the Business Employees to the effect that no further compensation is due and (ii) any claims of the Business Employees for compensation (be it monetary compensation or additional vacation) for working time accounts (Zeitkonten) accrued for periods ending on the Transfer Date.

 

6.9	No Transfer of Undertaking

If contrary to the expectations of Seller and Purchasers the consummation of the transactions contemplated by this Agreement should not constitute a transfer of undertaking (Betriebsübergang) and the employment relationships of the Business Employees should therefore not transfer to Purchaser 1 by operation of law, Purchaser 1 shall make offers of employment to the Business Employees which provide for (i) at least the same salaries as the one paid to each Business Employee by Seller as set forth on Schedule 9.8.2, and (ii) benefits that, in the aggregate, are no less favourable than the benefits provided to each Business Employee by Seller as set forth on Schedule 9.8.2.

§ 7

Closing and Withdrawal

 

7.1	Closing Date

The consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Infineon Technologies AG, Am Campeon 1-12, 85579 Neubiberg, Germany on a date which shall be no later than the seventh (7^th) Business Day after satisfaction or waiver of the conditions set forth in Section 7.2, unless another time, date or place is agreed to in writing by the Parties, (the “Closing Date”).

 

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7.2	Closing Conditions

The respective obligation of Seller and Purchasers to consummate the transactions contemplated by this Agreement and to perform the actions and events set forth in Section 7.3 shall be subject to the fulfilment or waiver, prior to or at the Closing, of each of the conditions set forth in Section 7.2.1 through Section 7.2.5 (collectively the “Closing Conditions”):

 

7.2.1

No Governmental Authority shall have enacted, issued, promulgated or enforced any Law, judgement, decree, injunction or other order which is in effect on the Closing Date and which would prohibit, restrict or delay the consummation of the transactions contemplated by this Agreement.

 

7.2.2

There shall not have occurred a Material Adverse Effect from the date hereof to the Closing Date.

 

7.2.3

Messrs. Dr. Lueder Elbrecht, Martin Handtmann, Dr. Andreas Meckes and Dr. Winfried Nessler (collectively, the “Key Business Employees”) have either waived their right to object to the transfer of their employment relationship to Purchaser 1 pursuant to Section 613a (6) BGB, or the objection period set forth in Section 613a (6) BGB to which the Key Business Employees are entitled has expired and the Key Business Employees have not objected to the transfer of their employment relationships to Purchaser 1 during such expiration period.

 

7.2.4

Not more than two (2) Business Employees (other than the Key Business Employees) have objected to the transfer of their employment relationships to Purchaser 1 pursuant to Section 613a (6) BGB within the objection period set forth in Section 613a (6); if more than two (2) Business Employees should object to the transfer of their employment relationships to Purchaser 1, Purchaser 1 will in good faith determine whether the objections of the

 

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respective Business Employees justify a withdrawal from this Agreement; Purchaser 1 agrees that such good faith determination shall consider the opinion of Mr. Lueder Elbrecht as to whether the respective objecting employees are vital to the Business or whether they can be replaced without major efforts; in case Purchaser should decide not to withdraw from this Agreement, Purchaser and Seller agree to enter into good faith discussions regarding an adjustment of the Purchase Price.

 

7.2.5

Seller has either notified Purchasers that the Reconciliation of Interest Agreement and Social Plan are not required or Seller has notified Purchasers that they are required and have been finalized in accordance with the procedure set out in Sections 111 et seq. BetrVG.

 

7.2.6

The Parties shall inform each other without undue delay (unverzüglich) as soon as all Closing Conditions have been satisfied.

 

7.2.7

Purchasers may, at any time, unilaterally waive fulfilment of the Closing Conditions by written declaration to Seller.

 

7.3	Closing Actions

On the Closing Date the Parties shall perform the following actions (the “Closing Actions”) simultaneously (Zug um Zug):

 

7.3.1

Purchasers shall pay the Purchase Price and the Estimated Inventory Value to Seller as contemplated by Section 4.4 of this Agreement;

 

7.3.2

Seller and Purchasers shall jointly execute one or more Asset Transfer Agreements as contemplated by Section 5.1.1 of this Agreement;

 

7.3.3

Seller and Purchasers shall jointly execute one or more Assumption Agreements as contemplated by Section 5.2 of this Agreement;

 

7.3.4

Seller shall grant the Purchasers possession (Besitz) of the Purchased Tangible Assets as contemplated by Section 5.1.2 of this Agreement; and

 

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7.3.5

Seller and Purchasers shall jointly execute the Ancillary Agreements.

 

7.4	Closing Confirmation

After all Closing Actions have been performed, Seller and Purchasers shall confirm in a written document to be jointly executed by Seller and Purchasers substantially in the form attached hereto as Exhibit G that all Closing Actions have been performed or waived and that the Closing has occurred.

 

7.5	Withdrawal

Either Party may withdraw by written notice to the other Party from this Agreement (vom Vertrag zurücktreten) if the Closing shall not have occurred within six (6) months following the date hereof, provided, that the withdrawing Party is not in breach in any material respect of any of its obligations under this Agreement. In the event a Party has validly withdrawn from this Agreement, each Party shall be relieved of its duties and obligations arising under this Agreement, and such withdrawal shall be without liability to either Party, provided, that no such withdrawal shall relieve any Party hereto from liability for any breach of this Agreement arising prior to such withdrawal and, provided, further, that the obligations of the Parties with respect to confidentiality and publicity as contemplated in Section § 15, expenses as contemplated in Section 16.1 and this Section 7.5 shall survive any such withdrawal and shall remain enforceable hereunder.

§ 8

Representations and Warranties of Seller

Seller hereby represents and warrants (sichert zu und garantiert) to Purchasers by way of an independent promise of guaranty (selbständiges Garantieversprechen) within the meaning of Section 311 (1) BGB that the statements set forth in this Section 8 are true and correct in all material respects and are not misleading, in each case as of the date hereof, unless a certain representation or warranty is made as of

 

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a different date (collectively, the “Seller’s Representations”). Seller’s Representations set forth in Sections 8.1 through 8.4, 8.5, 8.6.1, 8.7.1, 8.9.1, 8.9.3 through 8.9.5, 8.10.1, 8.11 and 8.13 are true and correct in all material respects and are not misleading as of the date hereof and will be true and correct in all material respects and will not be misleading on the Closing Date.

 

8.1	Organization and Qualification of Seller and the Selling Subsidiaries

 

8.1.1

Seller is a stock corporation duly organized and validly existing under the Laws of the Federal Republic of Germany. Seller has all requisite corporate power and authority to own and operate the Purchased Assets and to carry on the Business as currently conducted.

 

8.1.2

Schedule 8.1.2 sets forth a list of each Selling Subsidiary, together with each Selling Subsidiary’s jurisdiction of organization. Each Selling Subsidiary is duly organized and validly existing under the Laws of its jurisdiction and has all requisite corporate power and authority to own and operate the Purchased Assets owned by it or the Purchased Contract to which it is a party, and to carry on its portion of the Business as currently conducted.

 

8.2	Authorization; Binding Effect

 

8.2.1

Seller has all requisite corporate power and authority to execute this Agreement and the Ancillary Agreements to which Seller will be a party, and to consummate the transactions contemplated hereby and thereby. The execution of this Agreement and the Ancillary Agreements to which Seller will be a party has been or will be duly authorized by all requisite corporate action.

 

8.2.2

Each Selling Subsidiary has all requisite corporate power and authority to execute the Ancillary Agreements to which such Selling Subsidiary will be a party and to consummate the transactions contemplated by such Ancillary Agreement. The execution of the Ancillary Agreements to which the Selling Subsidiary will be a party has been duly authorized by all requisite corporate action.

 

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8.2.3

This Agreement has been duly executed by Seller and this Agreement constitutes, and the Ancillary Agreements to which Seller and each Selling Subsidiary will be a party when duly executed by Seller or such Selling Subsidiary will constitute, valid and binding legal obligations of Seller or such Selling Subsidiary, enforceable against Seller or such Selling Subsidiary, as applicable, in accordance with its respective terms, except to the extent that enforcement of the rights and remedies created hereby and thereby may be affected by insolvency or similar Laws of general application affecting the rights and remedies of creditors and by general principles of public policy.

 

8.3	Non-Contravention; Consents

 

8.3.1

The execution of this Agreement and the consummation of the transactions contemplated thereby do not and will not result in a breach or violation of (i) Seller’s articles of association (Satzung) or other corporate documents or (ii) any applicable Laws, judgments, decrees or orders of any Governmental Authority having jurisdiction over Seller.

 

8.3.2

No consent, approval or authorization is required to be obtained by Seller or a Selling Subsidiary in connection with (i) the transfer of the co-ownership regarding the co-owned Purchased Intellectual Property Rights set forth on Schedule 8.10.1, (ii) the execution of this Agreement and the Ancillary Agreements to which Seller or such Selling Subsidiary will be a party or for the consummation of the transactions contemplated hereby or thereby by Seller or such Selling Subsidiary, except for the Third Party Consents.

 

8.4	No Insolvency

No insolvency or similar proceedings have been initiated or applied for under any applicable Laws against Seller or the Selling Subsidiaries, and, to the Knowledge of Seller, there are no circumstances that would require or justify the opening of such proceedings.

 

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8.5	Purchased Assets

The Purchased Assets are all of the assets of Seller or any Selling Subsidiary which are Exclusively Used for the Business.

 

8.6	Purchased Tangible Assets

 

8.6.1

Seller or, as the case may be, a Selling Subsidiary is the legal and beneficial owner of the Purchased Tangible Assets. The Purchased Tangible Assets are free of any Encumbrances.

 

8.6.2

Each Purchased Tangible Asset is, subject to usual wear and tear, in good operating condition and suitable for the purposes for which it is currently being used.

 

8.7	Purchased Contracts

 

8.7.1

Except as set forth on Schedule 8.7, each of the Purchased Contracts set forth in Section A.I.1), Section A.III and Section B of Schedule 3.1 is valid, binding and enforceable against Seller or the applicable Selling Subsidiary and, to Seller’s Knowledge, the other parties thereto in accordance with its terms, and to Seller’s Knowledge each of the Purchased Contracts set forth in Section A.I.1), Section A.III and Section B of Schedule 3.1 is in full force and effect.

 

8.7.2

Except as set forth on Schedule 8.7, neither Seller nor any Selling Subsidiary had received any notice that it is in material default under, or in material breach of, or is otherwise materially delinquent in performance under any Purchased Contract, and, to Seller’s Knowledge, each of the other parties to the Purchased Contracts has performed all obligations required to be performed by it under, and is not in default under, any Purchased Contract. Neither Seller nor any Selling Subsidiary has terminated or received any notice of termination of any Purchased Contract, and no other party to any of the Purchased Contracts has seriously stated to Seller or a Selling Subsidiary its intention to terminate any of the Purchased Contracts. Seller has provided Purchasers or its advisors with true and correct copies of the Purchased Contracts set forth in Section A.I.1), Section A.III and Section B of Schedule 3.1.

 

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8.7.3

The Purchased Contracts are all of the Contracts which are Exclusively Used for the Business.

 

8.8	Litigation

Except as set forth on Schedule 8.8, there is no action, suit, proceeding, arbitration or governmental investigation pending or, to Seller’s Knowledge, threatened against Seller or any Selling Subsidiary which (i) seeks to restrain or enjoin the consummation of the transactions contemplated by this Agreement or (ii) pertains to the Purchased Assets, the Purchased Contracts or the Business Employees.

 

8.9	Business Employees

 

8.9.1

Except for the additional occupations (Nebentätigkeiten) set forth on Schedule 8.9.1, the Business Employees work exclusively for the Business and not for any of Seller’s other business activities.

 

8.9.2

Schedule 8.9.2 sets forth with respect to each Business Employee such Business Employee’s job function, location, start of employment with Seller, aggregate annual base salary, aggregate annual compensation for 2007, bonus arrangements and claims under Employee Benefit Plans.

 

8.9.3

Schedule 8.9.3 contains a list of all collective bargaining agreements (Tarifverträge) which apply to the Business, be it directly, by reference in shop agreements (Betriebsvereinbarungen) or in the individual employment contracts of the Business Employees.

 

8.9.4

Except as set forth on Schedule 8.9.4, none of the Business Employees is party to an early retirement arrangement (Altersteilzeitregelung) and none of the Business Employees is entitled to enter into any such early retirement arrangement (Altersteilzeitregelung).

 

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8.9.5

Schedule 8.9.5 contains a true and complete list of all Employee Benefit Plans maintained by Seller which are applicable to any of the Business Employees.

 

8.9.6

Except as set forth on Schedule 8.9.6, none of the Business Employees is entitled to any kind of work guarantee (besonderer Kündigungsschutz).

 

8.9.7

Schedule 8.9.7 contains a true and complete list of all Pension Commitments and Jubilee Commitments to which the Business Employees are entitled. All employer and employee contributions required by law or by the terms of the Pension Commitments to be paid, deducted or remitted with respect to a Business Employee have been so paid, deducted, or remitted in a timely fashion.

 

8.9.8

No Business Employee has taken any legal action against Seller and to Seller’s Knowledge no Business Employee has threatened to take any legal action against Seller in relation to any of the Pension Commitments which would become a liability of Purchasers after Closing, irrespective of any indemnities by Seller pursuant to this Agreement.

 

8.9.9

No binding representations or with respect to participation, eligibility for benefits, vesting, benefit accrual or coverage under any Pension Commitments have been made to any Business Employees which are not in accordance with the terms of such plans and which would require Purchasers to provide benefits at a level greater than that required under the terms of such plan.

 

8.9.10

Except as required by applicable law or disclosed on Schedule 8.9.7, Seller does not have any formal plan or commitment, whether contractually binding or not, to create any new Pension Commitments in respect of any Business Employee, for whom Purchasers will be required to provide benefits after Closing or to modify or change any existing Pension Commitment in a way that would increase the benefits of any Business Employee. No promises or commitments that would be binding on Purchasers have been made by Seller to amend any of the Pension Commitments after the date of this Agreement, except as required by applicable laws or disclosed on Schedule 8.9.7.

 

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8.9.11

Schedule 8.9.11 contains a calculation in which Seller’s provisions for obligations under the Pension Commitments have been updated to reflect the anticipated amount of such provisions as of 30 June 2008. The calculation is an estimation based on the census data as of June 30, 2007. The calculation has been prepared by Seller’s certified actuary and it is based on commercially reasonable assumptions. The calculation is in compliance with the terms of the Pension Commitments and does not contain any calculation errors.

 

8.10	Intellectual Property

 

8.10.1

Except for the co-owned Purchased Intellectual Property set forth on Schedule 8.10.1, either Seller or a Selling Subsidiary is the sole owner of all of the Purchased Intellectual Property and the Purchased Inventions and the Purchased Intellectual Property and the Purchased Inventions are not encumbered with any liens (Pfandrechte) or any other security interests (beschränkte dingliche Rechte). With regard to Purchased Intellectual Property and the Purchased Inventions, to Seller’s Knowledge all inventions made by Seller’s or the Selling Subsidiaries’ present or former managing directors, directors, officers and employees have been assigned to the Seller or the Selling Subsidiary and all inventions which are covered by the German Act On Employee Inventions (Arbeitnehmererfindungsgesetz) have been claimed in compliance with all applicable Laws. To the extent necessary to maintain the Purchased Intellectual Property in force, all registration or administration fees have been duly paid.

 

8.10.2

Except as set forth on Schedule 8.10.2, to Seller’s Knowledge, the activities of the Business as currently conducted do not infringe the Intellectual Property Rights of any Third Party.

 

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8.10.3

To Seller’s Knowledge, there is no suit or proceeding pending or threatened against Seller and Seller has not received any written claims which (x) challenge or seek to deny or restrict the rights of Seller or any of its Affiliates in any of the Purchased Intellectual Property or the Purchased Know How, (y) allege that the use of the Purchased Intellectual Property or the Purchased Know How do or may conflict with, misappropriate, infringe or otherwise violate the Intellectual Property Rights or Know How of any Third Party, or (z) allege that Seller or any of its Affiliates infringed, misappropriated or otherwise violated any Intellectual Property Rights or Know How of any Third Party in connection with Seller’s conduct of the Business. With respect to the events described in Section 8.10.3(x) above, to Seller’s Knowledge there are have not occurred any incidents which are likely to result in any such written claims.

 

8.10.4

To Seller’s Knowledge, neither Seller nor a Selling Subsidiary has granted rights or licenses in the Purchased Intellectual Property or the Purchased Inventions to any Third Party which are limited in scope to the Purchased Intellectual Property or which have solely been granted (i) for the development, manufacturing, marketing and/or sale of the Products and/or (ii) for any other purpose within the scope of the Business.

 

8.10.5

To Seller’s Knowledge, no Intellectual Property Rights or Know How, in each case owned by Seller or a Selling Subsidiary, other than the Purchased Intellectual Property and the Licensed Intellectual Property are necessary to carry on the Business after the Closing Date as the Business has been carried out by Seller and the Selling Subsidiaries until the Closing Date. Except for (i) the rights and licenses which are set forth on Schedule 8.10.5 and (ii) such rights or licenses where Purchasers’ lack of having such rights or licenses would not be materially detrimental to Purchasers’ ability to carry on the Business after the Closing Date as previously conducted by Seller, to Seller’s Knowledge, Seller has not been granted any rights or licenses to any Intellectual Property Rights of a Third Party which are necessary to carry on the Business after the Closing Date as previously conducted by Seller and the Selling Subsidiaries before the Closing Date.

 

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8.11

Permits

To Seller’s Knowledge, Seller is possession of all permits necessary to operate the Business as currently conducted (the “Permits”), and, to Seller’s Knowledge, Seller is in full compliance with the terms of the Permits. No Governmental Authority has given written notice to Seller in which it threatened to cancel, withdraw or amend any Permit. To Seller’s Knowledge, no event has occurred as a result of which any of the Permits may be revoked.

 

8.12	Compliance with Laws

The Business has been and is currently being operated in all material aspects in full compliance with all applicable Laws. To Seller’s Knowledge, within three (3) years prior to the date hereof neither Seller nor any of its Affiliates has received written notice of an investigation or review by any Governmental Authority with respect to a material violation of any law or regulation relating to the Business and, to Seller’s Knowledge, no such investigation or review is pending or threatened. To Seller’s Knowledge, there are no circumstances which would be likely to give rise to such investigation or review.

 

8.13	No finders fees

There are no finders’ fees, commissions, bonuses or any special incentives payable to any Third Party in relation to the transactions contemplated by this Agreement for which Purchasers may be held liable.

 

8.14	No Other Representations and Warranties

 

8.14.1

Except for the representations and warranties contained in this Section § 8, none of Seller, any Affiliate of Seller or any other Person makes any representations or warranties and Seller hereby disclaims any other representations or warranties, whether made by Seller or any Affiliate of Seller or any of their respective directors or officers, employees, agents or representations with respect to the execution of this Agreement or the

 

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transactions contemplated thereunder. In particular and without limiting the generality of the preceding sentence, Purchasers acknowledge that Seller makes no representation or warranty with respect to

 

(i)

any projections, estimates or budgets delivered or made available to Purchasers or future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) or the future business and operations of the Business; and

 

(ii)

any other information or documents made available to Purchasers or its representatives with respect to the Business, except as expressly set forth in this Agreement.

 

8.14.2

The Parties agree that Seller’s Representations do not qualify as guarantees (Beschaffenheitsgarantien) within the meaning of Section 443 BGB and Section 444 BGB, and that the consequences of any breach of Seller’s Representations shall be governed exclusively by the terms and conditions of this Agreement.

§ 9

Representations and Warranties of Purchasers

Purchasers hereby represent and warrant (sichern zu und garantieren) to Seller by way of an independent promise of guaranty (selbständiges Garantieversprechen) within the meaning of Section 311 (1) BGB that the statements set forth in this Section § 9 are true and correct in all respects and are not misleading, in each case as of the date hereof, unless a certain representation or warranty is made as of a different date (collectively, the “Purchasers’ Representations”). Purchasers’ Representations set forth in Section 9.1 through Section 9.3 shall be true and correct as of the date hereof and as of the Closing Date.

 

9.1	Organization and Qualification of Purchasers

 

9.1.1

Purchaser 1 is a limited liability company duly organized and validly existing under the Laws of the Federal Republic of Germany.

 

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9.1.2

Purchaser 2 is a limited liability company duly organized and validly existing under the Laws of Singapore.

 

9.1.3

Purchaser 3 is a limited liability company duly organized and validly existing under the Laws of Singapore.

 

9.2	Authorization; Binding Effect

 

9.2.1

Purchasers have all requisite corporate power and authority to execute this Agreement and the Ancillary Agreements, and to consummate the transactions contemplated hereby and thereby. The execution of this Agreement and the Ancillary Agreements by Purchasers has been or will be duly authorized by all requisite corporate actions.

 

9.2.2

This Agreement has been duly executed by Purchasers and this Agreement constitutes, and the Ancillary Agreements when duly executed by Purchasers will constitute, valid and binding legal obligations of Purchasers, enforceable against Purchasers in accordance with their respective terms.

 

9.3	Non-Contravention; Consents

 

9.3.1

The execution of this Agreement and the consummation of the transactions contemplated thereby do not or will not result in a breach or violation of, or conflict with (i) Purchasers’ corporate documents or (ii) any applicable Law, judgment, decree or order of any Governmental Authority having jurisdiction over Purchasers.

 

9.3.2

No consent, approval or authorization is required to be obtained by Purchasers in connection with the execution of this Agreement and the Ancillary Agreements or for the consummation of the transactions contemplated hereby or thereby by Purchasers.

 

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9.4	No Insolvency

No insolvency or similar proceedings have been initiated or applied for under any applicable Laws against Purchasers and there are no circumstances that would require or justify the opening of such proceedings.

 

9.5	Litigation

There is no action, suit, investigation or proceeding pending against, or, as of the date hereof, threatened against Purchasers before any court or arbitrator or Governmental Authority which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.

 

9.6	Financial Capacity

Purchasers will at the Closing Date have sufficient immediately available funds or binding and unconditional and irrevocable financing commitments to pay the Aggregate Compensation.

§ 10

Remedies for Breaches of Representations and Warranties

 

10.1

General

 

10.1.1

In the event any of Seller’s Representations should prove to be incorrect to the detriment of Purchasers (“Seller’s Breach”), Seller shall put Purchasers into the position Purchasers would have been in had Seller’s Representation been correct (restitution in kind, Naturalrestitution). If and to the extent Seller is unable to provide Purchasers with restitution in kind (Naturalrestitution) within two (2) months after receipt of Purchasers’ Remediation Notice (as defined below), Seller shall pay monetary damages (Schadensersatz in Geld) to Purchasers for any Losses incurred or suffered by Purchasers as a result of Seller’s Breach.

 

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10.1.2

In the event any of Purchasers’ Representations should prove to be incorrect to the detriment of Seller, Purchasers shall, jointly and severally, indemnify Seller for any loss or detriment incurred by the Seller as a result thereof.

 

10.2	Remediation Procedures

 

10.2.1

In the event Purchasers become aware of any facts that might give rise to a claim of Purchasers pursuant to this Section § 10 (“Purchasers Claim”), Purchasers shall within one month after discovery of the relevant facts, submit a written notice to Seller (“Remediation Notice”). The Remediation Notice shall specify in reasonable detail the facts upon which the alleged Seller’s Breach is based, the legal basis of the alleged Purchasers Claim and, to the extent possible, the amount of the alleged Purchasers Claim. Without prejudice to the validity of the alleged Purchasers Claim, Purchasers shall allow Seller and Seller’s advisors to investigate the matter or circumstance alleged to give rise to such alleged Purchasers Claim, and whether and to what extent any amount is payable in respect of such alleged Purchasers Claim (the “Investigation”) and, for such purpose, Purchasers shall give, subject to being paid reasonable out-of-pocket costs and expenses, such information and assistance, including access to Purchasers’ premises and personnel and including the right to examine and copy or photograph any assets, accounts, documents and records, as Seller or its advisors may reasonably request. Seller shall begin the Investigation without delay and conduct it as quickly as reasonably practical.

 

10.2.2

If (i) an order of any Governmental Authority is issued or threatened to be issued against Purchasers or (ii) Purchasers are sued or threatened to be sued by a Third Party, including any Governmental Authority, or (iii) if Purchasers are subjected to any audit or examination by any tax authority which may give rise to a Purchasers Claim (“Third Party Claim”), Purchasers shall give Seller prompt written notice of such Third Party Claim. Purchasers shall ensure that Seller shall be provided with all materials, information and assistance relevant in relation to the Third Party Claim, be given reasonable

 

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opportunity to comment or discuss with Purchasers any measures which Seller proposes to take or to omit in connection with the Third Party Claim, and, in particular, Seller shall be given an opportunity to comment on, participate in, and review any reports and all relevant tax and social security audits or other measures and receive without undue delay copies of all relevant orders (Bescheide) of any Governmental Authority. No admission of liability shall be made by or on behalf of Purchasers and the Third Party Claim shall not be compromised, disposed of or settled without the prior written consent of Seller, such consent not to be unreasonably withheld. Purchasers will give, subject to being paid all reasonable out-of-pocket costs and expenses, all such information and assistance, as described above, including access to premises and personnel and including the right to examine and copy or photograph any assets, accounts, documents and records for the purpose of avoiding, disputing, denying, defending, resisting, appealing, compromising or contesting any such Third Party Claim as Seller or its advisors may reasonably request. Seller agrees to use all such information confidentially only for such purpose. To the extent the Third Party Claim results in a Seller’s Breach, all costs and expenses reasonably incurred by Purchasers in defending the Third Party Claim shall be borne by Seller. To the extent the Third Party Claim does not result in a Seller’s Breach, any costs and expenses reasonably incurred by Seller in connection with the defence of the Third Party Claim shall be borne by Purchasers.

 

10.3	Exclusion of Liability

 

10.3.1

Seller shall not be liable for, and Purchasers shall not be entitled to bring any Purchasers Claim or any other claim under or in connection with this Agreement if and to the extent that:

 

(i)

the amount of claim is recovered by Purchasers from a Third Party or under an insurance policy; Purchasers shall use reasonable commercial efforts to realize recovery from such Third Party or under an insurance policy and, to the extent recovery was not realized,

 

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Purchasers shall assign its claim to Seller concurrently (Zug um Zug) with the compensation of the claim;

 

(ii)

the claim results from or is increased by a failure of Purchasers to mitigate damages pursuant to Section 254 BGB;

 

(iii)

the payment or settlement of any item giving rise to a claim results in a tax benefit for the Purchasers;

 

(iv)

the matter to which the claim relates was known by Purchasers or its employees, representatives and advisors (collectively, “Purchasers’ Representatives”), taking into account that Purchasers prior to entering into this Agreement, had the opportunity to thoroughly review the condition of the Business; Purchasers shall be deemed to have knowledge of all matters disclosed to Purchasers or Purchasers’ Representatives in written or electronic form, irrespective of whether such written or electronic information was included in the electronic data room provided by IntraLinks which was accessible for Purchasers and Purchasers’ Representatives between April 23, 2008 and the date hereof or whether such written or electronic information was provided to Purchasers or certain of Purchasers’ Representatives by other form of communication, including e-mail attachments (collectively, “Disclosed Information”), provided, however, that Purchasers shall only be deemed to have knowledge of a certain item of Disclosed Information if a true and correct copy of such item was provided to Purchasers’ legal counsel prior to the date hereof;

 

(v)

the claim results from or is increased by the passing of or any change in, after the date hereof, any Law or administrative practice of any Governmental Authority in effect at the date hereof;

 

(vi)

the procedures set forth in Section 10.2 were not observed by Purchasers and Seller was prejudiced by such non-compliance; or

 

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(vii)

Purchasers have caused (verursacht oder mitverursacht) such claim after the Closing Date.

§ 11

Taxes

 

11.1	Apportioning of Taxes levied on the Business

All Taxes levied with respect to the Business for a Straddle Period shall be apportioned between Seller and Purchasers based on the number of days of such Straddle Period, and Seller shall be liable for the proportionate amount of such Taxes that is attributable to the Pre-Closing Tax Period within such Straddle Period, and Purchasers shall be liable for the proportionate amount of such Taxes that is attributable to the Post-Closing Tax Period within such Straddle Period. The preceding sentence shall apply mutatis mutandis to any refund, rebate, abatement or other recovery of such Taxes.

 

11.2	Tax Indemnity

Seller shall indemnify and hold Purchasers harmless from and against any liability (Haftung) for Taxes relating to the Business for any Pre-Closing Tax Period, and Purchasers shall indemnify and hold Seller harmless from and against any liability for Taxes relating to the Business for any Post-Closing Tax Period. In particular, Seller shall indemnify and hold harmless Purchasers from and against any secondary liability within the meaning of Section 75 AO related to any Pre-Closing Tax Period if, contrary to the expectations of the Parties, this provision should apply. If and to the extent any indemnification is paid hereunder such payment shall be treated as a reduction of the Purchase Price between the Parties.

 

11.3	Taxes resulting from this Agreement

Except for the regulations set forth in Section 4.3, Section 4.4 and Section § 11 of this Agreement, all Taxes incurred in connection with the transactions contemplated by this Agreement shall be paid by the Party prescribed by applicable Law as primarily liable.

 

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11.4	Sole Remedy

Except for the regulations set forth in Section 4.3 and Section 4.4 of this Agreement, this Section § 11 provides the sole remedies for any Tax related matters under this Agreement. The provisions of Section § 10 of this Agreement shall apply mutatis mutandis to any claims of Purchasers under this Section § 11.

§ 12

Expiration of Claims and Limitation of Liability

 

12.1	Limitation Period

All claims of Purchasers against Seller under or in connection with this Agreement, including any Purchasers Claim pursuant to Section § 10, shall become time-barred (verjähren) twelve (12) months after the Closing Date, except for

 

12.1.1

all claims of Purchasers arising under Section § 11 which shall become time barred for each Tax six (6) months after the respective Tax liability has become final and non-appealable;

 

12.1.2

all Purchasers Claims based on Seller’s Representations set forth in Section 8.1, Section 8.2, Section 8.6.1 (to the extent such Purchasers Claim relates to a defect in title (Rechtsmangel)), Section 8.10.1 (to the extent such Purchasers Claim relates to a defect in title (Rechtsmangel)) and Purchasers’ claims for indemnification pursuant to Section 3.4 and Section 6.4 which shall become be time-barred four (4) years after the Closing Date; and

 

12.1.3

all claims of Purchasers under this Agreement arising as a result of wilful or intentional breaches of Seller’s obligations under this Agreement which shall

 

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become time barred in accordance with the statutory rules in Section 195 BGB and Section 199 BGB (the expiration periods in this Section 12.1 collectively, the “Time Limitations”).

 

12.2	Tolling of Claims

The expiry of a Time Limitation shall be tolled (gehemmt) pursuant to Section 209 BGB by any notification of Seller pursuant to Section 10.2, provided, that Purchasers commences judicial proceedings within six (6) months after the expiry of the relevant Time Limitation. Section 203 BGB shall not apply, unless the Parties agree in writing that the expiry period shall be tolled on the basis of pending settlement negotiations.

 

12.3	Limitations of Liability

 

12.3.1

Seller shall only be liable for any claims of Purchasers under this Agreement, including any Purchasers Claim pursuant to Section § 10, if and to the extent

 

(i)

the amount of the liability resulting out of or in connection with an individual claim brought by Purchasers under this Agreement exceeds an amount of EUR 25,000 (in words: twenty five thousand Euros); and

 

(ii)

the aggregate amount of the liability resulting from all claims brought by Purchasers under this Agreement which are not already excluded by Section 12.3.1(i) exceeds an amount of EUR 250,000 (in words: two hundred fifty thousand Euros), in which case Seller shall only be liable for the excess amount.

 

12.3.2

The aggregate liability of Seller arising out of or in connection with this Agreement, including all liabilities resulting from Purchasers Claims pursuant to Section § 10, shall not exceed 25% of the Aggregate Consideration.

 

12.3.3

The limitations on Seller’s liability pursuant to this Section 12.3 shall not apply to

 

(i)

claims resulting from intentional or wilful (vorsätzlich) behaviour of Seller or to the extent such limitations are not permitted under mandatory Laws; and

 

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(ii)

Purchasers Claims based on Seller’s Representations set forth in Section 8.1 and Section 8.2; and

 

(iii)

claims of Purchasers for indemnification pursuant to Section 3.4, Section 6.4 or Section § 11.

 

12.4	Exclusive Remedies

 

12.4.1

The Parties agree that the rights and remedies Purchasers may have against Seller for breach of obligations set forth in this Agreement are solely governed by this Agreement, and the rights and remedies provided for by this Agreement shall be the exclusive remedies available to Purchasers. Any and all rights or remedies of any legal nature which Purchasers may otherwise have (in addition to the claims for specific performance (primäre Erfüllungspflichten) and the rights and remedies provided for by this Agreement) against Seller in connection with the sale and transfer of the Purchased Assets, the Purchased Contracts, the Purchased Intellectual Property and the employment relationships of the Business Employees and the licensing of the Licensed Intellectual Property shall be excluded. In particular, without limiting the generality of the foregoing, Purchasers hereby waive any claims under statutory representations and warranties (Section 434 et seqq. BGB), statutory contractual or pre-contractual obligations as set forth in Sections 280 to 282 BGB and Section 311 BGB, frustration of contract (Section 313 BGB) or tort (Section 823 et seqq. BGB), and Purchasers shall not have any right to resign, cancel, rescind (anfechten) or otherwise terminate this Agreement or exercise any right or remedy which would have a similar effect. The applicability of Section 433 to 453 BGB (except for Section 433 (1) (1) BGB and Section 433 (2) BGB) and Section 377 HGB, including any and all statutory claims thereunder, shall be excluded. The limitations in this Section 12.4 shall not apply to any rights or remedies based on intentional or wilful (vorsätzlich) behaviour.

 

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12.4.2

The Parties are in agreement that Seller’s Representations are only designed for the specific remedies of Purchasers set forth in Section § 10 above and the restrictions contained in this Section § 12 and that Seller’s Representations shall not serve to provide Purchasers with any other claims than those set forth in this Agreement.

 

12.5	Adjustment of the Purchase Price

If and to the extent Seller indemnifies Purchasers for any Losses resulting from a Seller’s Breach, the Parties will treat the respective payment as a reduction of the Purchase Price.

§ 13

Certain Covenants

 

13.1	Access to Information

From and after the date hereof and until the Closing Date, Purchasers shall have the right to request information on any material transaction or decisions which might materially affect the Business, and Seller shall provide Purchasers with such information without undue delay (unverzüglich), provided, that such disclosure is permitted under all applicable Laws or any Contracts with Third Parties.

 

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13.2	Conduct of the Business

From and after the date hereof and until the Closing Date, except as otherwise contemplated by this Agreement or as Purchasers shall otherwise consent to in writing (which consent shall not be unreasonably withheld), Seller and each of the Selling Subsidiaries will carry on the Business in the Ordinary Course of Business and will, with respect to the Business,

 

13.2.1

take all reasonable commercial efforts to protect and preserve the Purchased Assets, the Purchased Contracts and the Purchased Intellectual Property;

 

13.2.2

not sell, assign or transfer any of the Purchased Assets, the Purchased Intellectual Property or the Purchased Contracts outside the Ordinary Course of Business;

 

13.2.3

maintain the Purchased Fixed Assets in proper working condition, subject to normal wear and tear;

 

13.2.4

not sell inventory outside the Ordinary Course of Business and maintain inventory sufficient to meet expected customer requirements;

 

13.2.5

comply with its obligations under the Purchased Contracts and not amend or terminate any of the Purchased Contracts other than in the Ordinary Course of Business;

 

13.2.6

continue to pay salaries, wages and any other employee benefits to the Business Employees when due and use reasonable commercial efforts to procure that the Business Employees do not object to the transfer of their employment relationships to Purchasers;

 

13.2.7

not increase the compensation or benefits (including Pension Commitments) of any of the Business Employees, unless in the Ordinary Course of Business or unless Seller is obliged to do so by law or binding collective bargaining agreements (Tarifvertrag) concluded by a employers’ association of which Seller is a member;

 

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13.2.8

not cancel or waive any claims or rights with a value of more than EUR 50,000 (in words: fifty thousand Euros) in each individual case under any of the Purchased Contracts or otherwise relating to the Business;

 

13.2.9

commence or settle any litigation or arbitration proceeding with a value in dispute of more than EUR 50,000 (in words: fifty thousand Euros) in each individual case. Seller shall notify Purchasers without undue delay (unverzüglich) of any such litigation or arbitration proceeding being commenced by any Third Party.

 

13.2.10

continue to conduct the Business in compliance with all applicable Laws.

 

13.2.11

not enter into or amend any workers’ council agreements or general binding undertakings relevant for Business Employees which would result in any additional financial burden for Purchasers after the Closing Date, unless in the Ordinary Course of Business or unless Seller is obliged to do so by law or binding collective bargaining agreement (Tarifvertrag) concluded by the employers’ association of which Seller is a member;

 

13.2.12

not materially alter payment terms with customers and/or suppliers other than in the Ordinary Course of Business;

 

13.2.13

pay, deduct and remit in a timely fashion all employer and employee contributions with respect to Pension Commitments which are required by law or by the terms of the Pension Commitments;

 

13.2.14

not make any binding representations with respect to participation, eligibility for benefits, vesting, benefit accrual or coverage under any Pension Commitments to any Business Employees which are not in accordance with the terms of such plans and which would require Purchasers to provide benefits at a level greater than that required under the terms of such plan; and

 

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13.2.15

not incur any liabilities (Verbindlichkeiten) which are to be assumed by Purchasers under this Agreement, other than in the Ordinary Course of Business or as provided for in the annual investment budget or R & D budget.

 

13.3

Insurance

 

13.3.1

Purchasers acknowledge that as of the Closing Date, all insurance coverage provided in relation to the Business shall expire. For the period from the date hereof until and including the Closing Date, Seller shall continue to enforce all policies of insurance maintained in respect to the Business.

 

13.3.2

Purchasers undertake to procure insurance coverage for the Business and the Purchased Assets as of the Closing Date, it being understood that such coverage shall be commensurate to the insurance coverage existing for the Business until the Closing Date. Purchasers shall indemnify Seller from any claims, damages, liabilities or costs resulting from any failure of Purchasers to comply with this Section 13.3.

 

13.4	Contacts with Suppliers and Customers

Prior to the Closing Date Purchasers shall not contact any suppliers to or customers of the Business in connection with or pertaining to any subject matter of this Agreement or the Ancillary Agreements without the prior consent of Seller.

 

13.5	Non-Solicitation or Hiring of Business Employees

None of Seller, any of its representatives or any of its Affiliates will at any time prior to the date which is three (3) years after the Transfer Date, directly or indirectly, solicit the employment of or hire any Business Employee without Purchasers’ prior written consent. The term “solicit the employment” shall not be deemed to include generalized searches for employees through media advertisements, employment firms or otherwise that are not focused on or directed to Business Employees. This restriction shall not apply to any Business Employee whose employment relationship is terminated by Purchaser 1 or its successors for business reasons (betriebsbedingte Kündigung) after the Closing Date.

 

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13.6	No Negotiation or Solicitation

Prior to the Closing Date, Seller and its Affiliates will not (and Seller will take all action necessary to cause each of its employees, officers, representatives and agents or advisors not to and shall cause its Affiliates to cause employees, officers, representatives and agents or advisors not to) directly or indirectly solicit, initiate, entertain, encourage or accept the submission of any proposal, offer or any discussions relating to or that might reasonably be expected to lead to or result in any proposal or offer from any Third Party relating to the direct or indirect acquisition of the Business or any portion of the Purchased Assets (other than purchases of Products or services from the Business in the Ordinary Course of Business), the Purchased Intellectual Property or the Licensed Intellectual Property.

 

13.7	Non-Competition

Seller agrees that, as part of the consideration for the payment of the Aggregate Compensation, for a period of three (3) years following the Closing Date, neither Seller nor any of its Affiliates will (i) pursue research, development, marketing or sale of products competing with the Products of the Business as presently conducted or (ii) acquire an interest of more than ten (10) percent (equity or voting rights) in a Legal Entity which competes with the Business, provided, however, that Seller shall not be restricted in acquiring interests in a Legal Entity which comprises multiple activities of which the annual revenues generated by activities in the area of the Business do not exceed fifteen (15) percent. For the avoidance of doubt, the Parties agree and acknowledge that (i) Seller’s activities under the Transitional Supply Agreement as well as the Transitional Services Agreement and (ii) Seller’s divestiture to its original customer of the existing inventory which is related to the Product NWX 1915C (including NWX 1915CR, NWX 1915CT and NWX 1915CTM) shall not be deemed or interpreted to infringe Seller’s obligations pursuant to this Section 13.7.

 

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§ 14

Post-Closing Undertakings

 

14.1	Post Closing Cooperation

After the Closing the Parties shall cooperate and assist each other in good faith as is necessary and appropriate to ensure a smooth transfer of the Business to Purchasers. Each Party shall afford to the other Party reasonable access and duplicating rights (with copying costs to be borne by the requesting Party) during normal business hours and upon reasonable notice, to all books, records, documents and communications relating to the Business and within the knowledge, possession, custody or control of the other Party and to the extent the information requested directly pertaining to the Business is reasonably required or helpful for the conduct of the Business, provided, in each case that such access to information is in compliance with applicable Laws.

 

14.2	Indemnity by Purchasers

If Seller is held liable by a Third Party for any liability related to the Business (“Indemnified Liability”) after the Closing Date, Purchasers shall for a period of three (3) years from the Closing Date, jointly and severally, indemnify and hold harmless Seller and its Affiliates and employees from any and all losses or damages and reasonably out-of-pocket costs and expenses (including reasonable legal fees, expenses and disbursements) arising out of or in connection with such Indemnified Liability, unless and to the extent Purchasers have the right to claim indemnification from Seller in respect of the relevant Indemnified Liability under the terms of this Agreement.

 

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14.3	Use of Seller’s Name

Purchasers undertake and covenant to remove or cause to be removed from the Products all names, marks and identifications heretofore used by Seller or its Affiliates and all variations and derivates thereof and logos relating thereto to the extent they include the word “Infineon” or any derivation thereof or combination therewith as soon as reasonable possible after the Closing Date, unless such names, marks and identifications and logos have been attached by Seller to the Products.

 

14.4	Post Closing Remittances

If on or after Closing Date, either Party receives a payment from a Third Party (including a customer of the Business), that, pursuant to the terms of this Agreement, should have been paid to the other Party, the Party who receives the payment agrees to hold in trust and remit such payment to the Party entitled thereto within five (5) Business Day of such receipt.

 

14.5	Obligation to Transfer Additional Patents or Patentable Inventions

Seller hereby represents and warrants to Purchasers that (i) the Patents which are identified on Annex A to the Patent Assignment Agreement include all of the Patents owned by Seller or a Selling Subsidiary which are Exclusively Used for the Business on the date hereof, and (ii) the patentable inventions which are identified on Annex B to the Patent Assignment Agreement include all of the patentable inventions owned by Seller or a Selling Subsidiary which are Exclusively Used for the Business on the date hereof or, to the extent they are not yet actually used by Seller, which are intended to be Exclusively Used for the Business by Seller on the date hereof. Seller furthermore represents and warrants that there are no Copyrights owned by Seller or a Selling Subsidiary which are Exclusively Used for the Business on the date thereof. To the extent any of the representations set forth in this Section 14.5 should turn out to be incorrect, Purchasers shall be entitled to receive at no additional charge, as the case may be, (i) any Patents

 

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or Copyrights owned by Seller or a Selling Subsidiary which were Exclusively Used for the Business on the date hereof, and (ii) any patentable inventions (including any Patents based on the content of the patentable inventions) owned by Seller or a Selling Subsidiary which were Exclusively Used for the Business on the date hereof or, to the extent they were not yet actually used by Seller on the date hereof, intended to be Exclusively Used for the Business by Seller on the date hereof. The aforementioned right shall constitute Purchasers’ sole and exclusive remedy in connection with any breaches of the representation and warranty set forth in this Section 14.5.

 

14.6	Transfer of additional business records

If following the Closing Date Purchasers should discover that there are certain business records which do not constitute Business Records, but which are nevertheless indispensable to conduct the Business as conducted by Seller and the Selling Subsidiaries as of the date hereof, Purchasers shall notify Seller thereof, and the Parties shall negotiate in good faith whether such business records are actually indispensable to conduct the Business as conducted by Seller and the Selling Subsidiaries as of the date hereof. To the extent such Business Records are actually indispensable to conduct the Business as conducted by Seller and the Selling Subsidiaries as of the date hereof, Seller shall transfer to Purchasers such additional business records without any additional charge.

 

14.7	Supply of certain Products to Seller

 

14.7.1

The Parties are aware and acknowledge that the Products “NWR 1501C” and “NWR 150C” (collectively, “Seller’s Continuing Products”) have been developed by Seller to supply Seller’s business group “Automotive, Industrial and Multimarket”. Purchasers agree that for a period of eighteen (18) months following the Closing Date, Seller shall have the right to place binding purchase orders for Seller’s Continuing Products with Purchasers. Following receipt of such binding purchase orders, Purchasers shall (i) place corresponding purchase orders with Seller to manufacture the respective

 

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amount of Seller’s Continuing Products in accordance with the terms of the Transitional Supply Agreement, and (ii) subsequently sell and transfer such amount of Seller’s Continuing Products to Seller. Purchasers and Seller agree that any sales and transfers of Seller’s Continuing Products by and from Purchasers to Seller shall not be subject to less favourable terms and conditions, in particular with regard to purchase orders, delivery, invoicing, warranty, and liability, than Seller’s corresponding sales and transfers to Purchasers according to the terms of the Transitional Supply Agreement. The prices for each of the Seller’s Continuing Products shall be fixed and shall be as set forth in Schedule 14.7.1. Purchasers and Seller agree that in case of an amendment of the prices for Seller’s Continuing Products as set forth in the Transitional Supply Agreement, the prices for Seller’s Continuing Products shall be amended accordingly.

 

14.7.2

To the extent the Parties deem it required or appropriate to enter into a specific supply agreement for the supply of Seller’s Continuing Products after the date hereof, the Parties shall enter into good faith negotiations to execute such a specific supply agreement. Such specific supply agreement shall (i) be based on the terms set forth in Section 14.7.1, (ii) take into account that the manufacturing of Seller’s Continuing Products is carried out by Seller, and (iii) in all other respects be based on commercial reasonable terms which adequately reflect the interests of Seller and Purchasers.

 

14.7.3

Each Party agrees to cause its Affiliates to adhere to and comply with such Party’s obligations set forth in this Section 14.7.

 

14.8	Interim Renting of Office Space to Purchasers

The Parties are aware and acknowledge that Purchasers will most likely not be in a position to provide office space to the Business Employees on the date following the Closing Date. Therefore, the Parties agree that Seller will for an interim period which shall start on the day following the Closing Date and which shall end on September 30, 2008 (the “Interim Period”) provide the Purchasers with adequate office space on its premises located at Am

 

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Campeon 1-12, 85579 Neubiberg, Germany. The rent for such office space including all ancillary costs and expenses shall amount to EUR 4,410 (four thousand four hundred and ten Euros) per week and shall become due and payable on a weekly basis. The Parties agree that Seller shall not be entitled to charge Purchasers for any rent for such office space during the period ending on August 31, 2008, and that Purchasers shall be entitled to terminate the lease of such office space without cause at any time. Seller hereby expressly disclaims and excludes any and all responsibility and/or liability for any and all damages which might arise or follow from the fact that the Business Employees will be located on its premises during the Interim Period, and Purchasers agree to indemnify and hold Seller harmless from any and all claims and damages resulting from the fact that the Business Employees will be located on Seller’s premises during the Interim Period. If after the date hereof the Parties should deem it required or appropriate to enter into a specific lease agreement for the lease of office space during the Interim Period, such specific lease agreement shall be based on the terms and conditions set forth in this Section 14.8.

§ 15

Confidentiality; Press Release

 

15.1	Confidentiality

 

15.1.1

Each Party shall keep strictly confidential all information obtained by it in connection with the negotiation and execution of this Agreement and the transactions contemplated by this Agreement and effectively prevent Third Parties access to such information. Purchasers shall not be entitled to disclose or announce the execution of this Agreement before Seller has approved such disclosure or announcement in writing.

 

15.1.2

Seller shall keep strictly confidential all information relating to the Business, effectively prevent any access by Third Parties to such information and shall

 

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not use such confidential information for itself or for any Third Party, except to the extent that the relevant facts or circumstances are (i) publicly known, (ii) become publicly known without any violation of this covenant, or (iii) must be disclosed pursuant to applicable Laws.

 

15.2	Press Release

Notwithstanding Purchasers’ obligation set forth in Section 15.1.1, neither Seller nor Purchasers shall, without the approval of the other Party, issue any press release or other announcement concerning the existence of this Agreement or the terms of the transactions contemplated by this Agreement, except as and to the extent that any such Party shall be so obligated by Law, in which case the other Party shall be advised and the Parties shall use their reasonable commercial efforts to cause a mutually agreeable release or announcement to be issued.

§ 16

Miscellaneous

 

16.1

Expenses

All expenses, costs, fees and charges in connection with the transactions contemplated by this Agreement, including, without limitation, fees for legal services, shall be borne by the Party commissioning the respective costs, fees and charges.

 

16.2

Notices

 

16.2.1

Any statement of legal significance, notice or other declaration (“Notice”) in connection with this Agreement shall be made in writing, unless notarization or any other specific form is required by mandatory law. The written form shall include telecopy (but no other transmission by way of telecommunication) and exchange of letters. Any electronic form (e.g. e-mail) shall not replace the written form. The Parties are to communicate any change of their respective

 

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addresses set forth below as soon as possible in writing to the respective other Parties. Until such communication the respective addresses set forth below shall be relevant. The receipt of copies of Notices hereunder by the Parties’ advisors shall not constitute or substitute the receipt of such Notices by the Parties themselves. Any Notice hereunder shall be deemed received by a Party regardless of whether any copy of such Notice has been sent to or received by an advisor of such Party.

 

16.2.2

Any Notice to be given to Seller hereunder shall be addressed as follows:

Infineon Technologies AG

Strategy M&A

Attn.: Jack Artman

Legal Department

Attn.: Dr. Jörn Kubalek

Am Campeon 1-12

D-85579 Neubiberg

Germany

Telefax: +49-89-234-1563339

 

16.2.3

Any Notice to be given to Purchasers hereunder shall be addressed as follows:

Avago Technologies US, Inc.

Attn.: Legal Department, Important Legal Notice

350 W Trimble Road

San Jose, California 95131

U.S.A.

Telefax +1-408-435 41742

and

Avago Technologies GmbH

Attn.: Ms. Tina Kaske

Herrenberger Strasse 130

D-71034 Böblingen

Germany

Telefax: +49 -7031-436 3354

 

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with a copy to

Latham & Watkins LLP

Attn.: Dr. Joachim Freiherr von Falkenhausen

Warburgstrasse 50

D-20354 Hamburg

Telefax: +49-40-41403130

 

16.3	Entire Agreement; Modifications

 

16.3.1

The agreement of the Parties, which consists of this Agreement, the Schedules and Exhibits hereto and the documents referred to herein, sets forth the entire agreement and understanding, written or oral, relating to the subject matter of this Agreement.

 

16.3.2

Changes or amendments to this Agreement (including this Section 16.3.2) must be made in writing by the Parties or in any other legally required form.

 

16.4	Assignment

Neither Party shall be entitled to assign any rights or claims under this Agreement or any of the Ancillary Agreements without the written consent of the other Party. Seller and Purchasers shall, however, be entitled to assign any rights or claims under this Agreement or any of the Ancillary Agreements without the written consent of the other Party to their Affiliates.

 

16.5

Interest

Except as otherwise provided in this Agreement, each Party shall pay interest on any amounts becoming due and payable to the other Party, as the case may be, under this Agreement as from the respective due dates until, but not including, the day of payment at the rate of 400 basis points over Euribor. The claiming of any default interest and further default-related damages shall remain unaffected. Interest payable under any provision of this Agreement or any of the Ancillary Agreements (unless otherwise provided in the Ancillary Agreement) shall be calculated on the basis of actual days elapsed divided by 360.

 

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16.6	Right to Set Off; Retention Rights

No Party, except as provided otherwise herein or in the respective Ancillary Agreement, shall be entitled (i) to set-off (aufrechnen) any rights and claims it may have against any rights or claims any other Party may have under this Agreement or under any of the Ancillary Agreements or (ii) to refuse to perform any obligation it may have under this Agreement or under any of the Ancillary Agreements on the grounds that it has a right of retention (Zurückbehaltungsrecht) unless the rights or claims of the relevant Party claiming a right of set-off (Aufrechnung) or retention (Zurückbehaltung) have been acknowledged (anerkannt) in writing by the relevant other Party or have been confirmed by final decision of a competent court (Gericht).

 

16.7	Governing Law

This Agreement shall be governed by, and be construed in accordance with, the laws of the Federal Republic of Germany, without regard to principles of conflicts of laws and without regard to the UN Convention on the Sale of Goods. For all disputes arising out of or in connection with this Agreement or its validity the competent courts in Munich, Germany shall have the exclusive jurisdiction.

 

16.8	Severability

In the event that one or more provisions of this Agreement shall, or shall be deemed to, be invalid or unenforceable, the validity and enforceability of the other provisions of this Agreement shall not be effected thereby. In such case, the Parties hereto agree to recognize and give effect to such valid and enforceable provision or provisions which correspond as closely as possible with the commercial intent of the Parties. The same shall apply in the event that the Agreement contains any gaps (Vertragslücken).

 

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16.9	Guarantor’s Obligations

Guarantor hereby unconditionally and irrevocably guarantees to Seller the due and punctual performance of any obligations of Purchasers under this Agreement and the Ancillary Agreements, including, but not limited to, the payment of the Aggregate Consideration. Guarantor shall not be entitled to any claims of secondary liability (Einrede der Vorausklage) or any other similar rights which would limit Seller in asserting any claims under this Agreement or the Ancillary Agreements against Guarantor as compared to asserting such claims against Purchasers.

 

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IN WITNESS WHEREOF, each Party has caused this Agreement to be duly executed by its duly authorized officers as of the date first written above:

 

Infineon Technologies AG						Avago Technologies GmbH
by:		/s/    [Illegible]				by:		/s/    [Illegible]
Munich, 25.06.2008						Boeblingen, 25.6.2008
Place, Date						Place, Date
by:		/s/    [Illegible]				by:
Munich, 25.6.2008
Place, Date						Place, Date
Avago Technologies International Sales Pte. Ltd.						Avago Technologies Wireless IP (Singapore) Pte. Ltd.
by:		/s/    David M. Perna				by:		/s/    David M. Perna
San Jose, June 25, 2008						San Jose, June 25, 2008
Place, Date						Place, Date
by:						by:
Place, Date						Place, Date

 

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Avago Technologies Finance Pte. Ltd.
by:		/s/    David M. Perna
San Jose, June 25, 2008
Place, Date
by:
Place, Date

 

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EXHIBIT A

FORM OF IT TRANSITION SERVICES AGREEMENT

by and between

 

1.	Infineon Technologies AG, a stock corporation under the laws of the Federal Republic of Germany, with principal place of business at Am Campeon 1-12, 85579 Neubiberg, Germany, registered with the commercial register of the lower court (Amtsgericht) of Munich under HRB 126492;

- “Infineon” -

and

 

2.	Avago Technologies International Sales Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512231E

- “Purchaser” - -

- Infineon and Purchaser individually also a “Party”

and collectively also the “Parties” -

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RECITALS

 

(A)

WHEREAS, Infineon agreed to sell and transfer certain assets and liabilities pertaining to the development, production, marketing and sale of products based on bulk acoustic wave filters or bulk acoustic wave resonators using wafer level packaging (the “Business”) to Purchaser and other purchasers by means of a separate Asset Purchase Agreement between, inter alia, the Parties dated June 25, 2008, as amended (the “Asset Purchase Agreement”).

 

(B)

WHEREAS, the Parties agreed in the Asset Purchase Agreement to enter into several ancillary agreements pertaining to a transition of the Business which shall become effective upon the consummation of the transactions contemplated by the Asset Purchase Agreement, including this IT Transition Services Agreement (the “Agreement”).

 

(C)	WHEREAS, for a period of time as defined herein, Purchaser requires Infineon to deliver certain IT services in connection with the operation of the Business;

 

(D)	WHEREAS, Infineon is willing to provide certain IT services to Purchaser, and Purchaser desires to obtain such IT services;

 

(E)	WHEREAS, the Parties hereto wish to agree on the terms and conditions of the provision of such IT services to Purchaser;

NOW, IT IS HEREBY AGREED BY THE PARTIES as follows:

§ 1

IT SERVICES TO BE PROVIDED

 

1.1	It is the intention of the Parties that the IT services required for the operation of the Business be transitioned away from Infineon’s IT environment and operations to Purchaser’s IT environment and operations (the “IT Carve-out”)

 

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as soon as possible. To achieve this, the Parties have jointly developed a project plan which outlines the steps which have to be taken by Purchaser and Infineon respectively in order to timely complete the IT Carve-out (“IT Carve-out Project Plan”). The IT Carve-out Project Plan includes significant milestones, definitions of deliverables and fulfillment criteria of defined deliverables as well as the planned dates of attainment of milestones and deliverables.

The IT Carve-out Project Plan may, at the time of signature of this Agreement, not have been finally agreed and attached to this Agreement as Schedule C. The Parties agree to negotiate the IT Carve-out Project Plan promptly and in good faith and to attach its mutually agreed and signed final version to this Agreement as Schedule C in due course. Purchaser understands and agrees that changes to the IT Carve-out Plan after the effective date of this Agreement may result in additional services and/or fees to be charged to Purchaser.

 

1.2

During the term of this Agreement, as requested by Purchaser, Infineon shall provide: the IT services described in Schedule A attached hereto (collectively the “Services” and individually, a “Service”). The Services are further categorized as (a) “Transition Services” which are those Services designated as needed during the Fixed Term, as defined below, (b) “Other Services” which are those Services designated as needed both during the Fixed Term as well as for an agreed period of time after completion of the Fixed Term.

Infineon will provide each of the Transition Services until the earlier of (i) the date specified in Schedule B or Schedule C for termination of a respective Service, (ii) the respective Transition Service is terminated earlier by a Party as provided herein, or (iii) expiry of the Fixed Term of this Agreement. Infineon will provide each of the Other Services until the earlier of (i) the date specified in Schedule B, (ii) the respective Other Service is terminated earlier by a Party as provided herein, or (iii) expiry of the Fixed Term of this Agreement.

 

1.3

By way of clarification, it is understood that Purchaser will ensure that it has acquired all software licenses required for Purchaser’s use of the Services. Infineon will not transfer to Purchaser or otherwise provide software licenses to Purchaser unless specifically agreed in writing as part of this Agreement or any

 

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other definitive agreements to be entered by and between the Parties. Purchaser agrees to promptly delete from any computer equipment purchased from Infineon any installed software for which Purchaser does not have a valid license.

§ 2

FEES FOR SERVICES, PAYMENTS

 

2.1	As consideration for the Services, Purchaser shall pay to Infineon during the term of this Agreement the fees specified in Schedule B attached hereto for each of the Services rendered by Infineon.

 

2.2

Unless the Parties agree otherwise, all fees and charges shall be invoiced and paid in the euro currency (“EUR”). All fees and charges specified in this Agreement are expressed exclusive of any value added tax, sales tax, goods and services tax or similar tax thereon, but if applicable, any such tax shall be payable by Purchaser at the then prevailing rate. If any such tax should be payable by Purchaser, Infineon shall render proper invoices within the meaning of Section 14 of the German Value Added Tax Act (Umsatzsteuergesetz) or any other applicable law to Purchaser. Payment of any such tax shall become due within forty-five (45) calendar days upon receipt of such invoice.

 

2.3

For each calendar month in which Services are provided, Infineon shall submit to Purchaser a written invoice for all Services rendered during that month. The fees for all Services provided by Infineon shall be invoiced based on the fees agreed in Schedule B. If Service(s) have not been provided on all calendar days of the respective month, monthly fees shall be calculated pro rata on the basis of the calendar days on which they have been provided vis-à-vis the total number of calendar days of the respective month. The invoice shall show the amount for each respective Service and any pass-through amounts subject to reimbursement. The invoiced amounts shall be due and payable by Purchaser to Infineon by wire transfer of immediately available funds within forty-five (45) calendar days after receipt of each written invoice hereunder for the Services.

 

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In the event that Purchaser in good faith and with reasonable grounds questions any invoiced Service, Purchaser will provide written explanation specifying such grounds and identifying the Service concerned as well as including the relevant invoice (“Invoice Complaint”). Payment of the disputed portion of that item does not have to be made until the resolution of the Invoice Complaint. In such case Purchaser and Infineon will negotiate in accordance with the escalation procedure set forth in Section 10 to resolve such dispute as soon as possible and Infineon will continue to render the respective Service(s) and Purchaser will pay the amount which is not in dispute pending the resolution of any such good faith dispute.

Infineon shall have the right, at its option, to discontinue providing the respective Service(s) if full payment of due fees for the respective Service(s) is not received in a timely manner unless Purchaser disputes any invoiced Service as set forth above.

 

2.4

If Purchaser is in delay with any due payments that are not disputed in accordance with Section 2.3, Infineon may charge default interest as from the respective due dates until, but not including, the day of payment at the rate of 800 basis points over EURIBOR, without Infineon being obliged to issue any further notice (Mahnung) to Purchaser and Purchaser shall pay such interest. For the avoidance of doubt, Purchaser shall be in delay with payments on the forty-sixth (46th) calendar day after receipt of an invoice in accordance with Section 2.3, unless an Invoice Complaint has been filed. Interest payable under any provision of this Agreement shall be calculated on the basis of actual days elapsed divided by 360. “EURIBOR” shall mean the European inter-bank offer rates for Euro deposits with interest periods of one (1) month quoted on the Reuters Page EURIBOR=at 11.00 a. m. CET on the first Business Day of the relevant month. This Section 2.4 shall not restrict Infineon’s rights set forth in Sections 2.3 and 5.3.

Furthermore, the Parties agree that in the event of a discontinuance of Services for nonpayment pursuant to Section 2.3, Infineon will as promptly as reasonably practicable recommence such Services upon full payment by Purchaser of such amount of fees owed plus interest thereon in accordance with the previous paragraph.

 

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§ 3

PERFORMANCE OF SERVICES

 

3.1	Infineon shall perform all Services in a professional and workmanlike manner according to the terms and provisions of this Agreement as well as any applicable laws.

 

3.2	Service levels in the performance of the Services will be substantially the same as those service levels provided by Infineon to its own users when providing services of a similar nature.

 

3.3

Infineon shall make available such personnel as will be required to provide the Services. Infineon shall have the right to designate which personnel it will assign to perform the Services. Infineon also shall have the right to remove and replace any such personnel at any time or any of its affiliates in the meaning of Section 15 et seq. German Stock Corporation Act (AktG) (the “Affiliates”) or a third party provider at any time to perform the Services. Purchaser shall be entitled to request Infineon to remove and/or replace or to procure the removal or replacement of certain personnel upon delivery of reasonable proof (Glaubhaftmachung) that the performance of the Services by the person in question violates material interests of Purchaser (e. g. in case of criminal offences, sexual or racial harassment).

 

3.4

If Infineon explicitly owes a work performance (Erfolg) and if statutory law provides for a right of supplementary performance in the individual case, claims of Purchaser against mal-performance shall be limited to such right of supplementary performance (Nacherfüllung), provided, however, that in case Infineon refrains from its right of supplementary performance and in case the supplementary performance may not be rendered in due time or may still be defective after two rectifications, Purchaser shall only have the right to reduce the remuneration or to claim damages if and to the extent Purchaser incurred additional costs for a supplementary performance by a third party (Ersatzlieferung durch Dritte).

 

3.5	If Infineon is not in a position to render the Services within the timeframe of performance agreed between the Parties, Purchaser shall only be entitled to (i)

 

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the right of reduction of the remuneration, (ii) terminate the individual service, or (iii) claim damages in accordance with the terms and conditions set forth in Section 4.

 

3.6	Infineon and Purchaser agree to cooperate, to provide such information and to take such actions as may be reasonably required to assist in providing the Services.

 

3.7

At the time of signature of this Agreement, Infineon is not aware that the rendering of the Services will violate any agreement with a third party, including any software license agreement, and nothing in this agreement shall constitute an obligation of Infineon to violate any such agreement. Purchaser shall promptly provide direction to Infineon where business decisions are required in the performance of Services by Infineon. Where necessary for the performance of the Services, Purchaser shall designate Infineon as its authorized agent.

 

3.8

Each Party shall notify the other Party at least two weeks prior to an agreed milestone date that a delay may be imminent and certain Services may need to be provided beyond the milestone date otherwise an interruption of Service may occur. In such case, the Parties will promptly meet and consider ways to avoid a delay, to amend the Service or the time frame of the Service and to avoid or mitigate any damage deriving from the delay. Any final compromise between the Parties set forth in written form shall exclude any further liability of the Parties with regard to the respective delay. In case the Parties are unable to agree on a solution within a reasonable period of time, Purchaser and Infineon will negotiate in accordance with the escalation procedure set forth in Section 10 to resolve such dispute as soon as possible.

 

3.9

For those systems or applications where logical data separation or secure access is not feasible to implement, Infineon specifically emphasizes and Purchaser agrees that it will strictly observe the non-disclosure and confidentiality measures set forth in Section 8 of this Agreement in relation to data that are not or not only related to the Business but to Infineon at large.

 

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§ 4

LIMITATION OF LIABILITY, INDEMNIFICATION

 

4.1	Except for cases of willful misconduct (Vorsatz) or if otherwise not permitted due to mandatory law,

 

4.1.1

any liability of Infineon to pay damages in connection with this Agreement shall be limited per event of damage (Schadensereignis) or per series of connected events of damage (Kette verbundener Schadensereignisse) to twenty-five percent (25%) of the aggregate remuneration paid or payable by Purchaser to Infineon for the Services in Infineon’s respective business year according to the provisions of this Agreement; and

 

4.1.2

the total amount of damages payable by Infineon in connection with this Agreement in respect of damage incurred or sustained by Purchaser during any business year of Infineon shall be limited to one hundred percent (100%) of the aggregate remuneration paid or payable by Purchaser to Infineon in Infineon’s respective business year according to the provisions of this Agreement.

 

4.2	Infineon’s liability to Purchaser for the following consequential or indirect losses or damages shall be excluded: loss of profits, anticipated savings and goodwill and loss of data, except in cases of willful misconduct (Vorsatz) or if otherwise regulated by mandatory law.

 

4.3	If Infineon performs its obligations under this Agreement through subcontractors or vicarious agents (Erfüllungsgehilfen), Infineon’s liability to pay damages under this Agreement (including all forms of limitation such as time limitations etc.) shall remain unaffected.

 

4.4

Purchaser may make any claims under this Agreement only within sixty (60) days from delivery of such Service, provided that if reasonable representatives of Purchaser discover the basis for a claim not at delivery, the sixty (60) days period starts only on the day on which it is so discovered. At the end of the sixty (60) days period and in any event after twelve (12) months from delivery of the Service, any such claim not so notified shall be null and void.

 

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4.5	If the damage is attributable to acts or omissions of both Infineon and Purchaser, they shall share liability in the proportion that their acts or omissions contributed to such damage in accordance with Section 254 of the German Civil Code (BGB).

§ 5

TERM AND TERMINATION

 

5.1

The term of this Agreement shall commence on the Closing Date (as defined in the Asset Purchase Agreement) and is made for a term of two (2) months (the “Fixed Term”). The term of each Service shall end on the respective date set forth in Schedule B (or Schedule C as the case may be). In case the IT Carve-out has not been completed prior to expiry of the Fixed Term, the Parties shall negotiate in good faith regarding terms and conditions for a possible extension of the Fixed Term, including but not limited to additional compensation to Infineon. In case the IT Carve-out is completed prior to expiry of the Fixed Term, this Agreement shall end upon completion or termination of all Services.

 

5.2

Unless explicitly agreed otherwise for any specific Service, either Party may terminate any individual Service for convenience by giving ninety (90) calendar days prior written notice to a month’s end. Notwithstanding the foregoing, Purchaser may terminate any Transition Service to the end of the month by giving thirty (30) calendar days prior written notice and any Transition Service set forth in Schedule A lit. C. with immediate effect by giving ten (10) calendar days prior written notice.

 

5.3	This Agreement may be terminated by either Party for cause (wichtiger Grund) immediately by giving written notice to the other Party in particular (but not limited to)

 

5.3.1

if the other Party breaches or is in default of any material obligation under this Agreement provided that, if such breach or default is capable of being cured, it has not been cured within a reasonable time period which shall not exceed forty-five (45) calendar days after the Party’s receipt of the other Party’s written notice of such a breach or default;

 

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5.3.2

if Purchaser is in default of any material payment obligation for more than forty-five (45) calendar days after Purchaser’s receipt of written invoice by Infineon unless payment amount(s) in question is/are being disputed in accordance with Section 2.3, or

 

5.3.3

if insolvency or similar proceedings have been instituted against the assets of one of the Parties or the institution of such proceedings has been refused for lack of assets and no filings for such proceedings are required to be made.

 

5.4	If all or part of any Services is terminated, Infineon will thereafter have no obligation to resume provision of any such terminated Services.

§ 6

WARRANTY

Unless otherwise provided for in this Agreement, Infineon does not provide any warranty, express or implied, with respect to the Services, including, without limitation, a warranty for merchantability and fitness for a particular purpose.

§ 7

FORCE MAJEURE

 

7.1

Neither Party shall be liable for delay or failure to perform any of its obligations under this Agreement in so far as the performance of such obligation is entirely or partially prevented by a Force Majeure Event. “Force Majeure Event” as used in this Agreement means any event affecting the performance by the respective Party or any permitted subcontractor of any obligations under this Agreement arising from or attributable to acts, events, omissions or accidents beyond the reasonable control of Infineon including, but without limitation, any abnormally inclement weather, flood, lightning, storm, fire, explosion, earthquake, tsunami, subsidence, structural damage, epidemic or other natural physical disaster, inability or difficulty in obtaining fuel, power, raw materials, breakdown of plant and/or machinery, war, military operations, riot, crowd disorder, strike, terrorist action, civil commotion and/or any legislation,

 

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regulation, ruling or omissions (including failure to grant any necessary permissions) of any relevant government, court or authority but shall not include lack of funds or events caused by the Party whose performance is affected by the relevant event.

 

7.2

Each Party shall notify the other Party immediately upon the occurrence of a Force Majeure Event together with document of proof and shall use all reasonable endeavors to continue to perform its obligations for the duration of such Force Majeure Event. Any Party whose failure to perform results from a Force Majeure Event shall further take all reasonable steps to mitigate any costs arising out of the Force Majeure Event.

 

7.3

Any liability for damages resulting from Force Majeure Event is excluded between the Parties to the extent permitted due to mandatory law. Either Party shall have an extra-ordinary termination right with respect to this Agreement, if a Force Majeure Event persists for a time period of three (3) months or more.

§ 8

CONFIDENTIALITY

 

8.1

For purposes of this Agreement “Confidential Information” shall mean any technical and/or commercial information of a Party, whether or not expressly designated as Confidential Information, received by the other Party in any form under or in connection with this Agreement, including information relating to the disclosing Party’s respective businesses, facilities, products, services, techniques and processes, whether in the form of oral disclosure, demonstration, device, apparatus, model, sample of any kind, computer software (including, but not limited to, source code and documentation), magnetic media, document, specification, circuit diagram, or drawing or visual observation of the above. Confidential Information shall include any copies or abstracts made thereof as well as any modules, samples, prototypes or parts thereof.

 

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8.2

Each Party acknowledges that one Party may, from time to time, reveal to the other Party certain Confidential Information of a business or technical nature which will be confidential or proprietary to the disclosing Party. Each Party agrees that it will not use in any way for its own account or the account of any third party except pursuant to this Agreement any such Confidential Information revealed to it by the other Party throughout the term of this Agreement and for an additional period of three (3) years thereafter. Each Party shall use the same standard of care in protecting the Confidential Information of the other Party as it normally uses in protecting its own trade secrets and proprietary information.

If a Party or its Affiliates has to process personal data as part of this Agreement, such personal data shall comply with the data protection legislation, agree to take data security measures and enable the other Party to keep itself informed regarding compliance. These obligations shall also continue to apply after the termination of this Agreement according to the applicable laws.

 

8.3

Further, the Parties acknowledge that, due to the nature of the Services provided during the Fixed Term, their respective staff (e.g., employees, contractors and agents) may have access to Confidential Information of the other Party until such time as application databases, network access capabilities, etc. are physically split. Accordingly, each Party will ensure that its respective staff is bound to a non-disclosure requirement at least as stringent as the terms of this Agreement.

 

8.4	Notwithstanding any other provision of this Agreement, no information received by a Party hereunder shall be Confidential Information if said information is:

 

8.4.1

published or otherwise made available to the public other than by a breach of this Agreement;

 

8.4.2

furnished to a Party by an independent third party without restriction on its own dissemination;

 

8.4.3

approved for release in writing by the Party designating said information as Confidential Information;

 

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8.4.4

known to or independently developed by the Party receiving Confidential Information hereunder without reference to use of said Confidential Information;

 

8.4.5

disclosed to a third party by the Party transferring said information hereunder without restricting its subsequent disclosure and use by said third party.

 

8.4.6.

Disclosure of any Confidential Information by a Party hereto shall not be precluded if such disclosure is in response to a valid order of a court or other governmental body, provided that the receiving Party promptly notifies the other Party of such order and makes a good faith effort, at the expense of the other Party which originally disclosed the information, to obtain a disclosed information confirmation that the same shall be kept in confidence and used only for the purpose for which such order was issued.

 

8.4.7

The above does not preclude the sharing of Confidential Information between Infineon and its Affiliates or Purchaser and its Affiliates in order to fulfill the performance of this Agreement.

§ 9

EXPORT REGULATIONS

 

9.1

With respect to the Services Purchaser shall comply with any and all export regulations and rules in effect at the date of this Agreement and applicable to Purchaser in the countries in which Purchaser is acting, e.g. the U.S., Germany, the EU and Singapore or as may be issued from time to time by any competent government or court, arbitrational tribunal, administrative agency, or commission or other governmental or other regulatory authority or agency, federal or state, local, transnational or foreign which has jurisdiction relating to the subject matter of this Agreement. In particular, Purchaser shall not export, re-export or transfer any of Infineon’s products, information, software or technologies developed with or utilizing Infineon’s technology, in violation of any applicable laws or regulations of the countries named above or any other country or regulatory regime having jurisdiction over an export or re-export of such products, information, software or technologies.

 

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9.2	Purchaser shall implement effective measures to ensure compliance with EU, U.S. and other applicable anti-terrorism regulations as well as with any applicable official blacklists of any country.

§ 10

RESPONSIBLE MANAGERS, ESCALATION PROCEDURE

 

10.1

Promptly following the signing of this Agreement, each Party shall appoint one of its employees (the “Responsible Managers”) who shall have overall responsibility for managing and coordinating the performance of such Party’s duties and obligations under this Agreement and consult with the other Party in any conflict or if otherwise necessary or expedient.

 

10.2

If the Responsible Managers cannot reach an unanimous agreement with regard to any issue, either during its regular meetings or within ten (10) business days (business days as applicable for Infineon’s Munich offices, the “Business Days”) of a decision having been requested in written form by either Party, such issue shall be escalated to a committee which consists of a member of the senior management to be nominated by each Party immediately after the date of signing of this Agreement (the “Services Committee”). The Services Committee shall meet within five (5) Business Days upon receipt of a written request by either Party for the reasons of escalation. The Services Committee shall try to reach a mutually acceptable solution on each matter escalated to it.

 

10.3	Either Party may alter its respective Responsible Manager and/or its respective member of the Services Committee from time to time by notifying the other Party in writing.

§ 11

SUBCONTRACTS AND ASSIGNABILITY

 

11.1

No Party shall be entitled to assign any rights or claims under this Agreement without the prior written consent of the other Party. Notwithstanding the foregoing, each Party shall be entitled to assign this Agreement to any of its Affiliates without the prior written consent of the other Party, provided, however, that the assigning Party shall continue to be jointly and severally

 

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liable for any obligation under this Agreement after the assignment. Infineon shall be further entitled to assign this Agreement or individual Services to a third party in the event that Infineon’s capability to provide the Services is outsourced or otherwise transferred to such third party, subject to Purchaser’s written consent which shall not be unreasonably withheld.

 

11.2	For avoidance of doubt, and notwithstanding Section 11.1, Infineon is entitled to perform its contractual obligations through a third party as subcontractor or auxiliary person (Erfüllungsgehilfe) without consent of Purchaser. Section 4.3 remains unaffected.

§ 12

SET-OFF AND RIGHT OF RETENTION

Purchaser, except as provided otherwise herein, shall not be entitled to set-off (aufrechnen) any rights and claims it may have against any rights or claims of Infineon under this Agreement unless the rights or claims of Purchaser claiming a right of set-off (Aufrechnung) has been acknowledged (anerkannt) in writing by Infineon or has been confirmed by final decision of a competent court (Gericht).

§ 13

GOVERNING LAW; COMPETENT COURT OF JURISDICTION

This Agreement shall be construed in accordance with and governed by the laws of the Federal Republic of Germany without reference to its provisions on conflict of laws or other law. The United Nations Convention on Contracts for the International Sale of Goods dated April 11, 1980 shall not apply. For all disputes arising out of or in connection with this Agreement or its validity the competent courts in Munich, Germany shall have the exclusive jurisdiction.

 

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§ 14

SEVERABILITY

If any one or more of the provisions contained in this Agreement should be found invalid, illegal or unenforceable in any respect, the enforceability, validity and legality of the remaining provisions shall not in any way be affected or impaired thereby, and the Parties hereto shall enter into good faith negotiations to replace the invalid, illegal or unenforceable provision. If the Parties are unable to agree upon such replacement provision, then it is the intention of the Parties that such provisions be enforced to the fullest extent which a court of competent jurisdiction deems legal, valid and enforceable, and the Agreement shall thereby be reformed and the validity, legality and enforceability of the remaining provisions of this Agreement and the future application of such provision shall not in any way be affected or impaired thereby. The same shall apply in the case of an omission in the Agreement.

§ 15

NOTICES

 

15.1

Any notice or demand required to be given or made to either Party shall be in writing and shall be deemed sufficiently served if the same is sent by registered post or by fax to the address herein stated and shall be deemed to have been received by them on the day following the date of posting. A copy of any notice should also be sent to the Party concerned by fax or email on same date.

 

15.2	Any notice to be given to Infineon hereunder shall be addressed as follows:

Infineon Technologies AG

Legal Department

Attn. Dr. Horst Meyer

Am Campeon 1-12

D-85579 Neubiberg, Germany

Telefax +49 89 234 955 2546]

 

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with a copy to:

Infineon Technologies AG

Chief Information Officer

Attn. Michael Schmelmer

Am Campeon 1-12

D-85579 Neubiberg, Germany

Phone: +49 (89) 234-25809

eFax: +49 (89) 234-9558475

 

15.3	Any notice to be given to the Purchaser hereunder shall be addressed as follows:

Avago Technologies GmbH

Attn.: Ms. Tina Kaske

Herrenberger Strasse 130

D-71034 Böblingen, Germany

Telefax: +49 -7031-436 3354

with a copy to:

Avago Technologies GmbH

Attn.: Helmut Strobel

Herrenbergerstrasse 130

D- 71034 Böblingen, Germany

Telefax: +49-7031-436 3111

 

15.4	The Parties shall, without being legally obliged to, communicate any change of their respective addresses set forth in Sections 15.2 and 15.3 as soon as possible in writing to the respective other Parties. Until such communication, the address as hitherto shall be relevant.

 

15.5	Any notice hereunder shall be deemed received by a Party regardless of whether any copy of such notice has been sent to or received by an advisor of such Party or the acting notary, irrespective of whether the delivery of such copy was mandated by this Agreement.

 

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§ 16

ENTIRE AGREEMENT

The following Schedules which are attached hereto shall constitute an integral part hereof:

Schedule A Services

Schedule B Service Details (Fees, Termination Dates)

Schedule C IT Carve-out Project Plan

This Agreement (including all its annexes, exhibits, schedules and other attachments, such as SoWs) constitute the entire agreement between Infineon and Purchaser with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.

§ 17

AMENDMENT, WAIVER

 

17.1	To be effective, any amendment, modification or waiver to this Agreement, its schedules, attachments or any SoW that is a part hereof, including this requirement of written form must be in writing and signed by each Party.

 

17.2

Notwithstanding any other provision in this Agreement, no failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver by any Party of the breach of any term or covenant contained in this Agreement shall be deemed to be, or construed as, a further or continuing waiver of any such breach or a waiver of the breach of any other term or covenant contained in this Agreement.

 

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§ 18

AGENCY

The relationship of the Parties under this Agreement shall be as independent contractors. Nothing contained herein or done in pursuance of this Agreement shall constitute the Parties as entering into joint venture or partnership, or shall constitute either Party the agent for employees of the other Party for any purpose or in any sense whatsoever.

§ 19

HEADINGS; GERMAN TERMS

In this Agreement the headings are inserted for convenience only and shall not affect the interpretation of this Agreement; where a German term has been inserted in italics it alone (and not the English term to which it relates) shall be authoritative for the purpose of the interpretation of the relevant English term in this Agreement.

§ 20

COUNTERPARTS

This Agreement may be executed simultaneously in several duplicate originals in the English Language, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their respective duly authorized representatives:

 

Infineon Technologies AG				Avago Technologies International
				Sales Pte. Ltd.
By:				By:
Name:		Stefan Wolff		Name:
Title:		Vice President & General Manager		Title:
Date:				Date:
By:				By:
Name:		Dr. Jörn Kubalek		Name:
Title:		Corporate Legal Counsel		Title:
Date:				Date:

 

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EXHIBIT B

Form of Patent Assignment Agreement

between

 

1.	Avago Technologies Wireless IP (Singapore) Pte. Ltd., 1 Yishun Avenue 7, 768923 Singapore, Singapore

- hereinafter referred to as “Purchaser” -

 

2.	Infineon Technologies AG, Am Campeon 1-12, 85579 Neubiberg, Germany

- hereinafter referred to as “Seller” -

- Purchaser and Seller hereinafter referred to as “Parties”

or individually as “Party” -

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PREAMBLE

WHEREAS, Seller is a stock corporation under the laws of the Federal Republic of Germany, with principal place of business at Am Campeon 1-12, 85579 Neubiberg, Germany, registered with the commercial register (Handelsregister) of the lower court (Amtsgericht) of Munich under HRB 126492.

WHEREAS, Purchaser is a limited liability company under the laws of Singapore, with principal place of business at No. 1 Yishun Avenue 7, 768923 Singapore, registered under incorporation number 200512332 K.

WHEREAS, Seller, Purchaser and certain other parties are party to an asset purchase agreement, dated June 25, 2008, as amended, pursuant to which Seller agreed to sell and transfer to Purchaser and certain other parties certain assets and liabilities pertaining to its bulk acoustic wave filter business (the “Asset Purchase Agreement”).

WHEREAS, the Parties agreed in the Asset Purchase Agreement to sell and transfer the Patents listed in Annex A to this Agreement as well as the inventions listed in Annex B to this Agreement.

NOW THEREFORE, the Parties hereby agree as follows:

 

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§ 1

Certain Definitions; Reference to Asset Purchase Agreement

 

1.1	“Agreement” shall mean this patent assignment agreement.

 

1.2	“Assigned Patents” shall mean the Purchased Intellectual Property and the Purchased Inventions.

 

1.3	“Due Date” shall mean the latest date on which a payment can be made or an action can be taken without incurring a penalty, surcharge or other additional payment.

 

1.4

“Licensee” shall mean any third party (including Subsidiaries of Seller) to which Seller: (i) has granted or is obligated to grant licenses, immunities, covenants not to sue or any other rights under an Assigned Patent as of the Closing Date; or (ii) reserves the right under this Agreement to grant licenses, immunities, covenants not to sue or any other rights under an Assigned Patent.

 

1.5	Unless otherwise provided for in this Agreement, the capitalized terms used in this Agreement shall have the meanings attributed to them in the Asset Purchase Agreement, and all definitions set forth in the Asset Purchase Agreement shall also apply to this Agreement.

 

1.6	In case of a conflict between this Agreement and the Asset Purchase Agreement, the Asset Purchase Agreement shall prevail over this Agreement, unless explicitly provided otherwise in the Asset Purchase Agreement.

§ 2

Assignment

 

2.1

Subject to all rights granted to others prior to the Closing Date and Seller’s reservation of rights set forth in Section 3, Seller hereby sells, transfers and assigns to Purchaser on the Closing Date all right, title and interest in and to the Assigned Patents that Seller has as of the Closing Date, including the right to sue for injunctive relief and damages for infringement of any of the

 

3

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Assigned Patents whether accruing before or on and after the Closing Date. Between the date the Asset Purchase Agreement is entered into and the Closing Date Seller undertakes not to grant any licenses under the Assigned Patents to any Third Party, except (i) for licenses granted in connection with Products sold on or before the Closing Date and/or (ii) as part of general cross licenses where the Assigned Patents are not licensed by themselves.

 

2.2

Except as expressly set forth in this Section 2.2, Purchaser shall be solely responsible for all actions and all costs whatsoever, including but not limited to taxes, attorneys’ fees and patent office fees in any jurisdiction, associated with the perfection of the Purchaser’s right, title, and interest in and to each Assigned Patent and recordation thereof. With respect to the Assigned Patents, upon Purchaser’s written request and at Purchaser’s expense, Seller shall execute all documents and instruments prepared by Purchaser, and shall do all lawful acts, in each case as may be reasonably necessary to perfect Purchaser’s right, title, and interest in and to such Assigned Patents and recordation thereof within a reasonable period of time, and Purchaser shall provide Seller with any documents requiring Seller’s signature, suitable for recording, having terms and conditions acceptable to Seller that would be legally necessary in patent assignments of each jurisdiction. Purchaser shall provide Seller with an English translation of each such document concurrently therewith if requested by Seller.

 

2.3

Purchaser shall be solely responsible for all actions and all costs, including attorneys’ fees and patent office fees in any jurisdiction, having a Due Date on or after the Closing Date and associated with: (i) maintaining the enforceability of any of the Assigned Patents; or (ii) further prosecution of any of the Assigned Patents. In the event that the validity of the Assigned Patents is challenged on any point upon which the Seller has or can procure information or advice which may assist in meeting and defeating or reducing the effect of such challenge, the Seller undertakes to use reasonable efforts to supply or procure the supply of such information and/or advice without unreasonable delay, but subject to the right to charge the Purchaser out-of-pocket expenses properly and reasonably incurred. Notwithstanding the above, Seller undertakes to use reasonable efforts to deliver its files regarding any filed applications related to Purchased Intellectual Property as well as its files regarding Purchased Inventions to Purchaser.

 

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2.4	Except with respect to the Assigned Patents as expressly set forth in this Agreement, no license, immunity, ownership interest, or other right is granted under this Agreement, either directly or by implication, estoppel, or otherwise.

 

2.5

As between Seller and Purchaser, and subject to restrictions appearing above, Purchaser, as the acquirer of Seller’s right, title, and interest in each Assigned Patent, has sole discretion whether or not to institute any action or suit against third parties for infringement of any Assigned Patent or to defend any action or suit which challenges or concerns the validity of any Assigned Patent. Nothing in this Section 2.5 shall prevent the Purchaser from filing a patent infringement lawsuit as a counterclaim or a cross-claim against a third party in response to a patent infringement lawsuit filed by that party. Seller will use reasonable efforts to cooperate with Purchaser in any litigation or enforcement action under this Section 2.5 to the extent that Seller’s assistance is required and subject to Seller’s legitimate interests. Purchaser shall indemnify Seller against all reasonable costs of such cooperation, including attorneys’ fees.

§ 3

Reserved Rights

 

3.1

Seller reserves and retains, for the benefit of itself and its Subsidiaries and their successors and assigns, an irrevocable, non-exclusive, non-transferable, worldwide, fully paid-up, royalty-free right and license under the Assigned Patents, and Purchaser hereby grants to Seller and its Subsidiaries an irrevocable, non-exclusive, worldwide, non-transferable, fully paid up, royalty-free right and license under Purchaser’s patent applications and patents granted thereupon related to the Purchased Inventions and/or to the Purchased Intellectual Property, including, but not limited to, divisional applications, continuation application and continuation in part applications based on any of the Purchased Inventions and/or of the Purchased Intellectual Property and claiming priority of such Purchased Inventions and/or Purchased Intellectual Property to make, have made by subcontractors exclusively for Seller and/ its Subsidiaries, use, have used, import, license, offer to sell, sell, lease, and otherwise transfer any product or service, and to practice and have practiced any method, outside the field of the Business. Such reserved right and license includes the right to grant, without notice or

 

5

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accounting, sub-licenses of the same or lesser scope to any entities that are on the Closing Date, or thereafter become, a Subsidiary of Seller, provided, however, that such right to sub-license as well as the granted sub-license itself shall cease to exist with immediate effect as soon as the respective Subsidiary of Seller no longer constitutes a Subsidiary of Seller; in such event Purchaser agrees to negotiate a separate license with such company on non–discriminatory and fair terms. In case on or after the Closing Date, Seller and/or a Subsidiary of Seller transfers a product line or a business as a whole that practiced the Assigned Patents prior to the Closing Date to any Third Party, Purchaser agrees to negotiate a separate license with such third party on non-discriminatory and fair terms.

In relation to the license granted pursuant to this Section 3.1, Purchaser makes no representation or warranty regarding the validity or enforceability of the Assigned Patents and no other representations, warranties, or covenants, express or implied, nor shall Purchaser have any liability in respect of any infringement of patents or other rights of third parties with respect to this license.

 

3.2	Seller reserves the right to license or re-license any Licensees that, by operation of law lose rights under the Assigned Patents due to a transfer of rights or assignment of any Assigned Patent.

 

3.3

Seller reserves and retains, for the benefit of itself and its Subsidiaries and its and their successors and assigns, all rights to past, present, and future royalties and other consideration given or to be given in exchange for rights with respect to any Assigned Patent arising or accruing under agreements executed by Seller or Seller’s Subsidiaries prior to the Closing Date. Seller further reserves and retains all such royalties and other consideration arising out of or accruing under any release, license, sublicense, immunity or other right granted by Seller or its Subsidiaries under any agreements existing prior to the Closing Date.

 

3.4

With respect to the licenses and other rights reserved by Seller and to the agreements, rights, duties, and obligations between Seller and its Licensees, Purchaser agrees to require its successors in interest and assigns of each Assigned Patent to abide by terms that are the same as the terms of this Agreement.

 

6

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3.5

Purchaser shall execute all documents and instruments, and shall do all lawful acts, in each case as may be reasonably necessary, at Seller’s request, to record or perfect the reserved rights of Seller and its Licensees under this Agreement. Any acts undertaken by Purchaser solely under this Section 3.5 shall be at Seller’s expense.

 

3.6	The term of rights and licenses reserved hereunder shall be from the Closing Date until the date that the last Assigned Patent expires.

 

3.7

The Parties agree that in the event of invalidation of any of, or some patent claims of, or all of the Assigned Patents, Purchaser’s obligation under this Agreement shall remain intact. Payments received by Seller shall not be returned to Purchaser and Seller shall not be liable for such termination or invalidation.

§ 4

Miscellaneous

Section 16 of the Asset Purchase Agreement shall apply mutatis mutandis to this Agreement.

 

7

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Place, Date				Place, Date
Infineon Technologies AG				Avago Technologies Wireless IP (Singapore) Pte. Ltd
by:				by:
		Stefan Wolff
		Vice President and General Manager
by:
		Dr. Jörn Kubalek
		Corporate Legal Counsel

 

8

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EXHIBIT C

Form of Transitional Service Agreement

by and between

Avago Technologies International Sales Pte. Ltd.,

a limited liability company under the laws of Singapore,

having offices at 1 Yishun Avenue 7, 768923 Singapore, Singapore

- hereinafter referred to as “Customer” -

and

Infineon Technologies AG,

a corporation duly incorporated under the laws of Germany,

having offices at Am Campeon 1-12, 85579 Neubiberg, Germany

- hereinafter referred to as “Infineon” -

- Customer and Infineon hereinafter also referred to

individually as a “Party” and collectively as “Parties” -

 

1

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PREAMBLE

WHEREAS, Infineon and Customer are party to an Asset Purchase Agreement, dated as of June 25, 2008, as amended (hereinafter referred to as “Asset Purchase Agreement”), pursuant to which Infineon agreed to sell and transfer to Customer, and Customer agreed to buy and acquire from Infineon, certain assets and liabilities pertaining to the development, production, sale and marketing of bulk acoustic wave filters or bulk acoustic wave resonators using wafer level packaging (hereinafter referred to as “Business”).

WHEREAS, the Asset Purchase Agreement provides that as of the Closing Date, the Parties shall enter into several ancillary agreements to ensure a smooth transition of the Business from Infineon to Customer, including this Transitional Service Agreement, pursuant to which Infineon shall for an interim period provide certain services to Customer.

 

2

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NOW THEREFORE, in consideration of the foregoing, the Parties agree as follows:

 

1.	Certain Definitions

 

1.1	“Agreement” shall mean this Transitional Service Agreement.

 

1.2	“Effective Date” shall mean the date of both Parties’ signature of this Agreement.

 

1.3	“Transition Period” shall mean a period of time of eighteen (18) months starting on the Effective Date.

 

1.4	In addition, capitalized terms which are used but not expressively defined herein shall have the meaning ascribed to them in the Asset Purchase Agreement.

 

2.	Scope of Services

 

2.1

Except as set out in Section 2.2 below, all services to be provided to Customer by Infineon shall be governed by the terms and conditions of this Agreement. The services to be provided to Customer by Infineon pursuant to this Agreement include, inter alia, services in the following areas (hereinafter referred to as “Services”):

 

•

BAW development and ramp-up support

 

•

Package development support

 

•

Quality management, reliability test and failure analysis support

 

2.2.	This Agreement shall, however, not apply to any services in the areas of:

 

•

Lease or sublease of office space

 

•

Facility management, including provision of utilities

 

•

Supply of products and distribution of products

 

•

Sales, Marketing, Business Development; CLM and Marcom support services

 

•

License of software and technologies

 

•

IT services, such as IT maintenance and support

 

3

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Due to their specific nature, such services will be covered by separate agreements for the respective specific purpose, if needed.

 

2.3	The scope of the Services as well as other service-specific regulations are set forth in Exhibit 1.

 

3.	Place and nature of performance, subcontractors

 

3.1	Unless otherwise agreed in writing, the place of performance of the Services shall be at the office of the respective entity performing the Service.

 

3.2	Unless otherwise agreed in writing, the Services shall be provided in a form which is common for such Services in the general course of business of Infineon.

 

3.3

All intellectual property rights, including, without limitation, rights involving or relating to copyrights, inventions (whether patentable or not), processes, know-how, designs, computer software, trademarks and other names arising out of any Services provided for hereunder shall be the sole property of Customer. This applies also to databases, models, drawings, data and other materials even if such rights are not protected by law. However, Customer hereby grants Infineon a non-exclusive, non-transferable, royalty-free, fee-free license under all intellectual property rights arising out of any work performed by Infineon to use, have used, modify, have modified import, have imported, display, have displayed, perform, have performed, sell, have sold and otherwise dispose any of such intellectual property rights for Infineon’s processes and products which are outside the scope of the Business.

 

4.	Default; Liability

 

4.1

If any Services are not performed within the agreed time or are performed in a faulty manner and the provider of the Services is solely responsible for the delay or faulty performance, Infineon shall be obliged to remedy and perform the required Services in a satisfactory manner within a reasonable period of time or, at Customer’s sole discretion, Customer shall be entitled to claim damages.

 

4.2

Except for any damages resulting from the breach of the confidentiality obligation in Section 6 of this Agreement, Infineon’s liability under this Agreement shall not exceed 50 percent (50%) of the total of the payments received by Infineon in consideration of Services provided to Customer pursuant to this Agreement.

 

4

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5.	Remuneration

 

5.1

The remuneration for each individual Service is set forth in Exhibit 2. Notwithstanding sentence 3 and in addition to the remuneration set out in Exhibit 2, Customer shall reimburse Infineon for all of its external expenses (including, but not limited to, travel expenses) which have not been factored into the prices set forth in Exhibit 2, provided that Infineon provides Customer with sufficient evidence that such external expenses have actually been incurred by Infineon. Any individual external expense exceeding the amount of EUR 500.00 (in words: five hundred Euros) must be approved by Customer in advance.

 

5.2	Unless otherwise agreed in writing, the remuneration for any Services shall be invoiced monthly. Infineon will provide Customer with an invoice for the Services rendered in the past month and such invoice shall be paid within forty-five (45) days net after receipt of the respective invoice.

 

5.3	Payments shall be made in EUR to the following Infineon account:

ABN AMRO Bank N.V.

Niederlassung Deutschland

Theodor – Heuss – Allee 80

60486 Frankfurt am Main

Konto: 6713027008

IBAN: DE49502304006713027008

Swift Code: ABNADEFFFRA

 

6.	Confidentiality

 

6.1

All information and documents received by the Parties to which access is granted (e.g., via data banks) in connection with this Agreement, even if not expressly designated as business or trade secrets, shall only be used by the receiving Party for the performance of its obligations under this Agreement. For as long as and to the extent that such confidential information is not generally known or the respective other Party to the Agreement has not previously consented in writing to such confidential information being made known, the receiving Party shall treat the information and documents as confidential with regard to third parties who are not involved in the

 

5

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performance of any obligation under this Agreement. If a Party has to process personal data as part of this Agreement, it shall comply with all applicable data protection laws, agree to take all appropriate data security measures and enable the other Party to keep itself informed with respect to compliance matters. These obligations shall also continue to apply after the termination of this Agreement.

 

6.2

The Parties shall ensure that their employees maintain the secrecy of all business or trade secrets of the respective other Party to which they have access on the basis of their work or to which they are given access as a result of this Agreement, and the Parties shall also impose this confidentiality obligation upon their employees in respect of the relevant period required under applicable laws after the termination of their employment agreements.

 

7.	Term of this Agreement

 

7.1	This Agreement shall become effective on the Effective Date and be binding for the Transition Period, unless the Parties agree to extend the term for certain Services in writing.

 

7.2	If any Party to this Agreement defaults in its obligations under this Agreement despite being given not less than thirty (30) days written notice to remedy such default, the other Party may terminate this Agreement.

 

8.	Competent Court of Jurisdiction

For all disputes arising out of or in connection with this Agreement or its validity, the competent courts in Munich, Germany, shall have the exclusive jurisdiction.

 

9.	Applicable Law

This Agreement shall be subject to and be construed in accordance with the laws of Germany without reference to its conflicts of law provisions. The application of the United Nations Convention on contracts for the International Sale of Goods of April 11, 1980 shall be excluded.

 

6

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10.	Force Majeure

Neither Party shall be liable to the other Party for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by force majeure such as, but not limited to, riots, civil commotions, wars, freight embargo, hostilities between nations, governmental laws, orders or regulations, actions by the government or any agency thereof, storms, fires, sabotages, explosions or any other contingencies beyond the reasonable control of the respective Party. In such events the affected Party shall immediately inform the other Party of such circumstances together with documents of proof and the performance of obligations hereunder shall be suspended during, but not longer than, the period of existence of such cause and the period reasonably required to perform the obligations in such cases. The affected Party shall take commercially reasonable steps to mitigate damages arising out of the force majeure event.

 

11.	Assignment

Neither Party shall be entitled to assign this Agreement or any rights or obligations thereunder without the prior written consent of the other Party which shall not be unreasonably withheld.

 

12.	Provision of Services / Export Control Regulations

 

12.1	Infineon shall provide any and all Services in a professional and workmanlike manner and in compliance with all applicable Laws and applicable industrial standards.

 

12.2	The Parties agree to comply with any export control legislation applicable to them and to the subject matter of this Agreement.

 

13.	General Provisions

 

13.1

This Agreement and all documents referred to herein constitute the entire agreement between the Parties with respect to the subject matter therein described, and supersede any prior or simultaneous communications, representations or agreements with respect hereto, whether oral or written, including all pre-printed terms and conditions appearing on either Party’s standard transaction documents whether or not accepted by the receiving Party.

 

7

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13.2	Additions and amendments to this Agreement, including this clause, shall only be valid if made in writing and duly signed by the Parties.

 

13.3

If any provision of this Agreement is held to be invalid, illegal or unenforceable under applicable law, the remaining provisions shall continue to remain in full force and effect. The Parties undertake to replace the invalid provision or parts thereof by a new provision which will meet as closely as possible the economic effect intended by the Parties at the time of execution of this Agreement.

 

13.4

No expressed or implied waiver by any of the Parties to this Agreement of any breach of any term, condition or obligation of this Agreement shall be construed as a waiver of any subsequent or continuing breach of that term, condition or obligation or of any other term, condition or obligation of this Agreement of the same or of a different nature. Any waiver, consent, or approval of any kind regarding any breach, violation, default, provision or condition of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing.

 

13.5	Except if and to the extent specifically provided for in this Agreement, no rights or licenses of any kind (whether express or implied) are granted hereunder.

 

13.6	Any notices permitted or required hereunder shall be made by registered mail or by telefax and confirmed by registered mail to the following addresses or such other addresses as submitted by a Party to the other from time to time in writing and either in English or in German:

 

If to Customer:		If to Infineon:
Avago Technologies International Sales Pte. Ltd.		Infineon Technologies AG
1 Yishun Avenue 7   768923 Singapore   Singapore		Attn.: Dietmar Wild   Am Campeon 1-12   85579 Neubiberg   Germany

 

8

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13.7	The following Exhibits are appended to and form part of this Agreement:

Exhibit 1: Scope of Services

Exhibit 2: Remuneration Table

 

9

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

 

Customer				Infineon Technologies AG
Signature				Signature
Name				Name		Stefan Wolff
Title				Title		Vice President and General Manager
Date				Date
Signature				Signature
Name				Name		Dr. Jörn Kubalek
Title				Title		Corporate Legal Counsel
Date				Date

 

10

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EXHIBIT D

Transitional Supply Agreement

between

Infineon Technologies AG, a stock corporation under the laws of the Federal Republic of Germany, with principal place of business at Am Campeon 1-12, 85579 Neubiberg, Germany, registered with the commercial register of the lower court (Amtsgericht) of Munich under HRB 126492

- hereinafter referred to as “Seller” -

and

Avago Technologies Trading Ltd., a corporation under the laws of Mauritius, with principal place of business at 4th Floor, IBL House, Caudan, Port Louis, Mauritius, registered under registration no. 075667 C1/GBL

- hereinafter referred to as “Buyer” -

- Seller and Buyer are hereinafter referred to as “Party” or collectively as “Parties” -

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PREAMBLE

WHEREAS, Seller and certain Affiliates of Buyer are party to an Asset Purchase Agreement (as hereinafter defined), pursuant to which Seller agreed to sell and transfer to certain Affiliates of Buyer, and certain Affiliates of Buyer agreed to buy and acquire from Seller, certain assets and liabilities pertaining to the development, production, sale and marketing of bulk acoustic wave filters or bulk acoustic wave resonators using wafer level packaging (the “Business”).

WHEREAS, the Asset Purchase Agreement provides that as of the Closing Date, the Parties shall enter into several Ancillary Agreements to ensure a smooth transition of the Business from Seller to certain Affiliates of Buyer, including this Transitional Supply Agreement, pursuant to which Seller shall for an interim period manufacture and deliver to Buyer bulk acoustic wave filters to be distributed by Buyer.

WHEREAS the Parties seek, for their mutual benefit, to secure the supply, to take care of the planning and to ensure timely delivery of such bulk acoustic wave filters.

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NOW THEREFORE in consideration of the above, the Parties agree to the following terms and conditions:

 

1.	Certain Definitions

 

1.1	The following terms shall have the meaning as defined hereinafter:

 

1.1.1

“Agreement” shall mean this Transitional Supply Agreement.

 

1.1.2

“Asset Purchase Agreement” shall mean the Asset Purchase Agreement by and between Seller and certain Affiliates of Buyer, dated as of 25 June 2008, as amended.

 

1.1.3

“Effective Date” shall mean the date of both Parties’ signature of this Agreement.

 

1.1.4

“Incoterms 2000” shall mean the official rules for the interpretation of trade terms as issued by the International Chamber of Commerce, Paris, in January 2000.

 

1.1.5

“Transition Period” shall mean a period of time of eighteen (18) months starting on the Effective Date.

 

1.1.6

“Yield” shall mean the number of good and functional Products delivered during a calendar quarter divided through the total number of dies on all wafers that were started for the manufacturing whereas such calculation excludes dies that cannot be functional due to their geometrical form. The calculation of the Yield is explained more closely in Exhibit 1.

 

1.2	In addition, capitalized terms which are used but not expressively defined herein shall have the meaning ascribed to them in the Asset Purchase Agreement.

 

2.	Purpose of the Agreement

 

2.1	The purpose of this Agreement is the procurement of the Product(s) set forth in Exhibit 2 during the Transition Period.

 

2.2	The Parties agree that the terms and conditions set forth in this Agreement shall also apply to each Party’s Subsidiaries, provided, that Buyer’s and Seller’s Subsidiaries declare their consent to this Agreement, respectively.

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2.3	The Products shall be delivered according to the provisions of this Agreement, subject to purchase orders of Buyer that are accepted by Seller.

 

3.	Demand Planning, Purchase Orders, Baseload

 

3.1

Seller shall maintain for Buyer a production capacity of five-hundred (500) wafer starts per week. Should Buyer require additional capacity, such additional capacity may be provided by Seller if Buyer pays the investments which are necessary to provide such additional capacity. Any facilities and equipment resulting from such investments shall remain the full property of Buyer and shall be returned to Buyer upon termination or expiration of this Agreement.

 

3.2

Buyer shall, at the beginning of each calendar month, provide Seller with a rolling forecast which sets forth Buyer’s demand for each Product during the next nine (9) months. The forecast for the first three (3) months upon issuance thereof shall set forth the anticipated demand of Buyer on a weekly basis. Upon confirmation by Seller, the forecast for the first three (3) months shall be binding. This means Buyer is obligated to purchase one-hundred percent (100%) of the forecasted Product volumes and Seller is obligated to sell and deliver one-hundred percent (100%) of the forecasted Product volumes. Any non-compliance with the obligations to place purchase orders and cancellations of individual purchase contracts shall be governed by Section 5 of this Agreement. The forecast for the period of time thereafter shall outline Buyer’s anticipated demand on a monthly basis and be non-binding and for planning purposes only. In case Buyer wishes an end of life production, Buyer shall inform Seller latest one-hundred-twenty (120) days before the end of the Transition Period. Buyer shall provide Seller, at the time he announces the end of life for a Product, with purchase orders for its remaining demand. These purchase orders shall be non-cancellable.

 

3.3

Buyer shall provide Seller with purchase orders in accordance with the requirements as set forth in Section 3.2 above. Individual sales agreements shall only be deemed concluded if Seller has confirmed the purchase orders. Seller shall accept these purchase orders as long as they are in accordance with the requirements of Section 3.2 above and shall take reasonable efforts to confirm such purchase orders within four (4) days upon receipt thereof.

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3.4	If Buyer’s forecast deviates from the requirements as set forth in Section 3.2 or Buyer wants to order in deviation from the requirements as set forth in Section 3.3, Seller shall take reasonable efforts to comply with Buyer’s requirements.

 

3.5

Buyer understands and accepts that Seller needs a minimum production base load in order to maintain all necessary quality assurance parameters. To assure this base load, Buyer shall purchase at least fifty (50) wafer starts per week for Products to be delivered in the form of wafers. In addition, Buyer may order Products to be delivered in the form of wafers only in full delivery lots. One lot comprises twenty-five wafers.

 

4.

Delivery

 

4.1	The Products are sold at “FCA” according to Incoterms 2000.

 

4.2	If the delivery date is defined

 

(a)

by day, then Seller shall not deliver more than three (3) days earlier or two (2) days later than the agreed delivery day;

 

(b)

by week, then Seller shall deliver within the agreed delivery week.

 

4.3	If Seller realizes that an agreed delivery date cannot be met, it shall inform Buyer and indicate the anticipated duration of the delay. The Parties shall immediately attempt to find reasonable remedial measures.

 

4.4	If Seller’s delivery of a Product is late, Seller is solely responsible for the delay and if Buyer substantiates that it has suffered damages directly due to the delay, then Buyer may claim damages in accordance with Section 16 of this Agreement.

 

4.5	If Seller’s delivery of a Product is late and Seller is solely responsible for this delay, then Buyer may cancel the relevant individual purchase contract without incurring any

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liability only if all of the following conditions are met: (1) the delay has exceeded a period of two (2) weeks, (2) Buyer has, after the expiration of the two (2) weeks period as set forth above, set a time limit of five (5) Business Days during which Seller must deliver the respective Products, (3) the Products were not delivered within said time limit and (4) Buyer notifies Seller of its cancellation in writing within 3 (three) Business Days after the expiration of the above mentioned time limit.

 

4.6	Any and all further claims for damages, costs or rights of Buyer due to a delivery delay shall be excluded.

 

4.7	The Products are marked with an Infineon trademark. Should Buyer wish a different marking, the Parties shall discuss marking changes and related costs in good faith.

 

5.	Cancellation

In case Buyer cancels confirmed purchase orders or informs Seller that it will not provide Seller with purchase orders for Products forecasted within the binding period, then Buyer shall pay Seller a compensation of:

 

(a)

forty percent (40%) of the actual purchase price if Seller receives the cancellation or the information that Buyer will not provide Seller with purchase orders according to its obligation as set forth in Section 3.2 during the first two (2) weeks of the binding period of the forecast;

 

(b)

sixty percent (60%) of the actual purchase price if Seller receives the cancellation or the information that Buyer will not provide Seller with purchase orders according to its obligation as set forth in Section 3.2 during weeks three (3) and four (4) of the binding period of the forecast;

 

(c)

eighty percent (80%) of the actual purchase price if Seller receives the cancellation or the information that Buyer will not provide Seller with purchase orders according to its obligation as set forth in Section 3.2 during weeks five (5) and six (6) of the binding period of the forecast; and

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(d)

one hundred percent (100%) of the actual purchase price if Seller receives the cancellation during the seventh (7th) week of the binding period of the forecast or later or if Buyer does not place purchase orders in accordance with its obligations as set forth in Section 3.2 and Seller does not receive the information that Buyer will not provide Seller with such purchase orders prior to the seventh (7th) week of the binding period of the forecast.

These rules of cancellation and compensation shall not apply for non-cancellable orders for Buyer’s end of life demand as set forth in Section 3.2.

 

6.

Support

The Parties are aware that as part of the transactions contemplated by the Asset Purchase Agreement, an Affiliate of Buyer has assumed the employment relationships with the Business Employees. The Parties are further aware that the support of the Business Employees has in the past been, and will continue to be in the future, crucial for the success of Seller’s production activities which are the subject matter of this Agreement (including, but not limited to, Seller’s ability to reach targeted Yields and meet certain agreed upon quality requirements). Therefore, Buyer agrees to, and agrees to cause the employer of the Business Employees to, support Seller’s production activities by providing Seller at no additional charge with the services of the Business Employees if and to the extent reasonably requested by Seller to perform its obligations under this Agreement. Buyer may only refuse the request of Seller to provide Seller with the services of the Business Employees if there are (i) no legitimate business reasons for Seller’s request or (ii) the support to be provided by the Business Employees would significantly exceed the degree or type of support usually provided by them to Seller’s production activities prior to the date their employment relationships transferred to Buyer’s Affiliate as part of the transactions contemplated by the Asset Purchase Agreement. To the extent Buyer should not comply with its obligations set forth in this Section 6, Buyer shall not be entitled to any rights and remedies pursuant to this Agreement with respect to any purchase orders which were affected by Buyer’s non-compliance with its obligations set forth in this Section 6.

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7.

Prices

 

7.1

The fixed purchase prices for the Products (“Prices”) are specified in Exhibit 2 for each Product and shall be valid for the agreed upon time period. In case of a significant Yield deterioration or in case of Buyer’s non-compliance with its obligations set forth in Section 6, the Parties will re-discuss the Prices.

 

7.2	Prices shall be exclusive of any Goods and Service Tax (“GST”), Value Added Tax (“VAT”) or other similar taxes (including applicable federal, state or local sales taxes) which shall be charged in accordance with applicable legal requirements by Seller to Buyer in addition to the Prices.

 

8.	Invoices and Terms of Payment

 

8.1

The basis for the invoices is delivered good dies if the Products are delivered in the form of wafers and otherwise individual packaged Products. Seller shall be entitled to deliver and invoice an amount of Products that deviates by five percent (5%) below and ten percent (10%) above the scheduled amount of Products purchased. Buyer shall not have any right or claim due to under-delivery if the number of delivered Products undergoes the purchased amount of Products by up to five percent (5%) and shall accept and pay over-deliveries of up to ten percent (10%). For the avoidance of doubt, the Parties agree that Buyer shall only be obliged to pay for the amount of Products actually delivered by Seller. If the deviation of delivered good dies from the originally ordered number of good dies falls short of or exceeds the percentages as outlined above, then Seller shall ask for Buyer’s approval before shipping.

 

8.2	For every delivery, Seller shall issue an invoice that meets the requirements of applicable tax laws. The invoice shall show the price per ordered Product, the order number, and the Product part number.

 

8.3	Buyer shall pay each invoice within thirty (30) days of the date of the invoice unless Buyer and Seller otherwise agree in writing. Payment shall be effected upon receipt of

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the funds in Seller’s bank account. Payment shall be made only in the currency stated on the invoice. In case of dispute related to an invoice, Buyer shall in any case pay the undisputed part of the invoice according to the payment terms stated above.

 

8.4	Seller will not require interest payment or withhold any future delivery if Buyer is in delay with payments as long as the delay does not exceed five (5) days.

 

9.	Risk, Title

Title to the Products and the risk of loss or damages associated with the Products shall pass to Buyer in accordance with the respective clause of the Incoterms 2000 as defined in Section 4.1.

 

10.

Warranty

 

10.1

Seller warrants to Buyer that the Products will be free from defects in manufacturing and workmanship. Seller shall not be responsible for (a) any defects in material and workmanship if such defects do not substantially affect the use, including the sale, of the Products intended by Buyer and (b) defects arising out of designs, parts, equipment, software, data or other material or instructions provided by Buyer. If a catalogue of defects is available for any Products, Seller shall provide Buyer with such catalogue which shall be used to determine whether the Products are free from defects according to this Section 10.1.

 

10.2

In the event of any breach of the above warranty, Seller shall replace the non-compliant Product or part. If Seller is not able to do so within a reasonable period of time, Buyer shall be entitled to a refund for the affected products or to claim damages. Buyer may also cancel the specific Purchase Order pertaining to the affected Product or part.

 

10.3	The warranty period shall be 18 (eighteen) months starting on the date the risk of loss or damages has passed to Buyer in accordance with Section 9.

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10.4	THE WARRANTIES STATED IN THIS SECTION 10 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

11.	Technical Changes

 

11.1

The Seller may technically change the manufacturing process for each Product. If contemplated technical changes would affect form, fit, function or reliability of the Product(s) supplied directly by Seller to Buyer (i.e., major changes according to JEDEC 46 C), Seller shall inform Buyer about the changes contemplated by Product Change Notification (“PCN”) in writing, provide a reasonable amount (but not more than one-hundred (100)) representative samples incorporating the contemplated change and a qualification test report within six (6) months before start of delivery of the altered Product(s). Notwithstanding the above, Buyer shall communicate any concerns or objections within thirty (30) days after receiving the PCN.

 

11.2

In case Buyer requests changes of the Products, Seller shall evaluate the anticipated consequences and respond to such request without undue delay. The Parties shall then discuss the anticipated result of such evaluation with respect to (i) increase or decrease in the cost to be incurred by Seller to incorporate such change; (ii) time required by Seller to incorporate such change; and/or (iii) effect that such change would have on the Product. The Parties shall discuss in good faith the costs resulting from such changes. Seller disclaims any warranty or liability whatsoever related to a change of the Products.

 

12.	Intellectual Property Rights Infringement

Seller has sold and transferred to Buyer the designs for the Products as well as all Patents and Know How which is Exclusively Used for the Business according to the Asset Purchase Agreement. Seller’s liability for any defects in right, including, but not limited to, claims of Third Parties’ based on the allegation that a Product delivered hereunder infringes such Third Party’s Intellectual Property Rights or Know How shall

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be governed exclusively by the terms and conditions of the Asset Purchase Agreement, and Buyer agrees that it shall not have any further rights, claims or remedies against Seller in connection with any defects in right, including, but not limited to claims of Third Parties based on the allegation that a Product delivered hereunder infringes such Third Party’s Intellectual Property Rights or Know How.

 

13.	Confidential Information

 

13.1

Except as contained in this Agreement, the Parties agree that all information that they receive from each other and that is marked as “Confidential Information” or with a similar legend by the disclosing party shall be deemed to be confidential and will be maintained by the receiving party in confidence and not be disclosed to any Third Party, provided, however, that the receiving party may disclose such information to its own or its Affiliates’ employees who have a reasonable need to know such confidential information and who are bound to confidentiality by their employment agreements or otherwise not less stringent than under the obligations of this Agreement.

 

13.2

The receiving party additionally agrees to treat the confidential information with the same degree of care that it affords its own confidential information to avoid unauthorized disclosure to any Third Party. In any event, the Parties agree that they will treat the other’s confidential information with no less than reasonable care. Neither Seller nor Buyer shall be liable for disclosure and/or any use of such confidential information insofar and to the extent as such information:

 

(a)

is in, or becomes part of, the public domain other than through a breach of this Agreement or other obligation of confidentiality by the receiving party;

 

(b)

is already known to the receiving party at or before the time it receives the same from the disclosing party or is disclosed to the receiving party by a Third Party as a matter of right;

 

(c)

is independently developed by the receiving party without the benefit of such information received from the disclosing party;

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(d)

is disclosed and/or used by the receiving party with the prior written consent of the disclosing party; or

 

(e)

is required to be disclosed to comply with legal mandatory regulations, a judicial or official order or decree, provided that written notice of such judicial action was given by the receiving party to the disclosing party within ten (10) days after notice of same was received by the disclosing party, or prior to production of the confidential information, whichever is earlier.

 

13.3

Neither Party shall (and shall ensure that none of its agents, representatives or attorneys shall) disclose the terms of this Agreement or any Exhibits hereto to any Third Party without the prior written consent of the other Party, except that either Party may disclose the terms of this Agreement (a) to the extent reasonably necessary, in confidence, to its legal counsel and accountants, (b) as requested by any governmental authority or required by, or advisable under, any applicable law or the applicable rules or regulations of any securities exchange on which any of such Party’s securities are listed (in either case, as determined by such Party upon advice of counsel), provided, that prior to any such required disclosure, the disclosing Party gives the non-disclosing Party reasonable advance notice of such disclosure in writing, minimizes the scope of such disclosure (including by making redactions to documents provided as part of such disclosure and by cooperating with the non-disclosing Party to obtain protective orders) to the extent permitted under applicable law, and otherwise coordinates with the non-disclosing Party with respect to the scope of such disclosure, or (c) in connection with the enforcement of this Agreement. Notwithstanding the foregoing, the obligations of the Parties under this Section 13.3 shall not apply to any terms of this Agreement that have been disclosed by either Party as permitted by Subsections 13.2 (a)-(c) above.

 

14.	Force Majeure

Neither Party shall be liable to the other for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by force majeure such as, but not limited to, riots, civil commotions,

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wars, strikes, freight embargo, lock-outs, hostilities between nations, governmental laws, orders or regulations, actions by the government or any agency thereof, storms, floods, fires, sabotages, explosions or any other contingencies beyond the reasonable control of the respective Party and of its sub-contractors. In such events, the affected Party shall immediately inform the other Party of such circumstances together with documents of proof, and the performance of obligations hereunder shall be suspended during, but not longer than, the period of existence of such cause and the period reasonably required to perform the obligations in such cases.

 

15.	Export Control Regulations

The Parties agree to comply with any export control legislation applicable to them and to the subject of this Agreement and to the regulations outlined in Exhibit 3 to this Agreement.

 

16.	Limitation of Liability

 

16.1

SELLER’S LIABILITY UNDER THIS AGREEMENT FOR ANY DAMAGES, COSTS, LOSSES, EXPENSES ETC. OF ANY KIND, REGARDLESS OF THE CAUSE IN LAW SHALL IN ANY CALENDAR YEAR NOT EXCEED IN THE AGGREGATE THE MAXIMUM AMOUNT OF TEN (10) PERCENT OF THE REVENUES THAT SELLER HAS ACHIEVED BY THE SALE AND DELIVERY OF THE PRODUCTS UNDER THIS AGREEMENT DURING THE CALENDAR YEAR BEFORE SELLER WAS NOTIFIED BY BUYER THAT BUYER WOULD BRING A LIABILITY CLAIM AGAINST SELLER (“NOTICE DATE”) PURSUANT TO SECTION 16 OF THIS AGREEMENT. IF AT THE NOTICE DATE THIS AGREEMENT HAS BEEN IN FORCE FOR LESS THAN A CALENDAR YEAR, THE REFERENCE PERIOD FOR PURPOSES OF THE PRECEDING SENTENCE SHALL BE THE REVENUES THAT SELLER HAS ACHIEVED OR WILL ACHIEVE DURING THE CALENDAR YEAR FOLLOWING THE EFFECTIVE DATE.

 

16.2	NOTWITHSTANDING THE ABOVE AND REGARDLESS OF THE CAUSE IN LAW, SELLER SHALL NOT BE LIABLE FOR ANY INDIRECT, INCIDENTAL OR

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CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION ANY DAMAGES ARISING FROM INTERRUPTED OPERATION INCLUDING LINE STOPP, LOSS OF PROFITS, LOSS OF REVENUE, LOSS OF GOODWILL, LOSS OF CAPITAL AND/OR LOSS OF INFORMATION AND DATA.

 

16.3	ANY LIABILITY OF SELLER SHALL BE EXCLUDED IF DAMAGES ARE DUE TO BUYER’S LACK OF SUPPORT AS COMMITTED IN SECTION 6.

 

16.4	ANY LIABILITY OF SELLER SHALL BE EXCLUDED IF BUYER DOES NOT NOTIFY SELLER IN WRITING OF ITS CLAIMS WITHIN SIX MONTHS AFTER BEING AWARE OF SUCH RIGHTS.

 

16.5	THE LIMITATIONS AND EXCLUSIONS SET FORTH IN THIS SECTION 16 SHALL NOT APPLY IN THE CASE OF SELLER’S WILLFUL MISCONDUCT OR IN ANY OTHER CASE WHERE LIABILITY IS MANDATORY AT LAW.

 

17.

Term

 

17.1	This Agreement shall be binding for the Transition Period.

 

17.2

Notwithstanding of the above, either Party may terminate this Agreement as well as any finally accepted purchase orders hereunder for cause in the event of a Default of the other Party. “Default” means (i) either Party’s breach of one or several of the material obligations and/or provisions of this Agreement or any applicable law or governmental regulation, or (ii) insolvency, bankruptcy, liquidation or dissolution of either Party.

 

17.3	The following Sections of this Agreement shall survive the termination (for any reason) of this Agreement: 7, 8, 12, 13, 16, 17, 18 and 21.

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18.	Competent Court of Jurisdiction

For all disputes arising out of or in connection with this Agreement or its validity, the competent courts in Munich, Germany, shall have the exclusive jurisdiction.

 

19.	Applicable Law

This Agreement shall be governed by and construed in accordance with the law in force in Germany without reference to its conflicts of law provisions. The application of the United Nations Convention on Contracts for the International Sale of Goods of April 11, 1980 shall be excluded.

 

20.	Assignment and Transfer of Rights and Obligations

Neither Party may assign this Agreement, transfer its obligations or assign its rights hereunder without the prior written consent of the other Party, which consent will not be unreasonably withheld.

 

21.	Miscellaneous

 

21.1

The Parties may conclude separate agreements on issues relating to quality, packaging, consignment, logistics and other matters mutually agreed upon. Except as expressly provided for in such separate agreements, the terms and conditions of this Agreement shall take precedence over the terms and conditions of such separate agreements.

 

21.2	Alterations and amendments to this Agreement shall only be valid if made in writing. Any waiver of this requirement for the written form shall likewise be in writing.

 

21.3	The effectiveness of this Agreement shall not be impaired if any provision of this Agreement should be completely or partially invalid or unenforceable. In this case, the Parties shall agree on a provision that meets the economical intention of the invalid or unenforceable provision.

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21.4	The language of this Agreement shall be English. Correspondence, technical and commercial documents as well as any information relating to this Agreement shall be in English.

 

22.	Entirety of Agreement

This Agreement and the Exhibits attached hereto shall constitute the entire understanding between the Parties to the subject matter herein. Therefore neither Buyer’s nor Seller’s General Terms and Conditions shall be applicable for the delivery of Products.

This Agreement supersedes all prior or contemporaneous oral or written communications, proposals and representations with respect to the subject matter thereof.

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their respective duly authorized representatives:

 

Date:				Date:
Avago Technologies Trading Ltd				Infineon Technologies AG

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EXHIBIT E-1

Form of Asset Transfer Agreement

(Singapore)

by and between

Infineon Technologies Asia Pacific Pte Ltd

and

Avago Technologies International Sales Pte. Ltd.

dated as of [            ]

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RECITALS

WHEREAS, Infineon Technologies AG, a stock corporation under the laws of the Federal Republic of Germany, with principal place of business at Am Campeon 1-12, 85579 Neubiberg, Germany, registered with the commercial register of the lower court (Amtsgericht) of Munich under HRB 126492 (“Infineon”), Avago Technologies International Sales Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512231E (“Assignee”), and certain other entities are party to an asset purchase agreement, dated as of 25 June 2008, as amended (“Asset Purchase Agreement”).

WHEREAS, pursuant to the Asset Purchase Agreement Infineon agreed to cause Infineon Technologies Asia Pacific Pte Ltd (Company Registration Number: 19700667M), a private company limited by shares incorporated in Singapore, having its registered office at 8 Kallang Sector Infineon Singapore 349282 (“Assignor”), to transfer to Assignee title to certain Purchased Tangible Assets which are set forth on Annex A hereto, in each case as more fully described and upon the terms and subject to the conditions set forth in the Asset Purchase Agreement.

WHEREAS, Assignor is the owner of the Purchased Tangible Assets which are set forth on Annex A hereto and desires to transfer to Assignee, and Assignee desires to obtain from Assignor, title to the Purchased Tangible Assets which are set forth on Annex A hereto.

WHEREAS, capitalized terms used but not defined herein shall have the meaning ascribed to them in the Asset Purchase Agreement.

NOW, THEREFORE, in consideration of the payment in the amount of EUR 788,295 (in words: seven-hundred eighty-eight thousand two-hundred and ninety-five Euros) (paid together with applicable GST of 7% or EUR 55,180.65) by Assignee to Assignor, and in further consideration of the mutual agreements and covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.

Assignor hereby transfers to Assignee, and Assignee hereby accepts such transfer and obtains from Assignor, all rights, title and interest in and to all of the Purchased Tangible Assets which are set forth on Annex A hereto in accordance with and subject to the terms and conditions of the Asset Purchase Agreement.

 

2

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2.

Assignor and Assignee hereby agree that Assignor shall grant Assignee possession of the Purchased Tangible Assets which are set forth on Annex A on the Closing Date. To the extent that on the Closing Date Assignee does not obtain possession of individual Purchased Tangible Assets which are set forth on Annex A, Assignor shall grant Assignee possession of such Purchased Tangible Assets on a date reasonably requested by Assignee. To the extent that on the Closing Date certain of the Purchased Tangible Assets which are set forth on Annex A are in the possession of Third Parties, delivery is hereby replaced by Assignor’s assignment to the Assignee of Assignor’s possessory claim related to such Purchased Tangible Assets.

 

3.

Each party hereby covenants and agrees that, at any time and from time to time forthwith upon the written request of the other party, it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, each and all of such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be required by the other party or as required pursuant to the Asset Purchase Agreement in order to transfer the Purchased Tangible Assets which are set forth on Annex A or otherwise carry out the purpose and intent of this Asset Transfer Agreement.

 

4.	This Asset Transfer Agreement is subject to the terms and conditions of the Asset Purchase Agreement, which are incorporated herein by reference, and shall be binding upon Assignor and Assignee.

 

5.	This Asset Transfer Agreement shall be governed by and construed and interpreted in accordance with the laws of Singapore, irrespective of the choice of laws principles of Singapore.

 

6.	This Asset Transfer Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument.

 

3

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IN WITNESS WHEREOF, each party has caused this Asset Transfer Agreement to be duly executed by its duly authorized officers as of the date first written above:

 

Infineon Technologies Asia Pacific Pte Ltd				Avago Technologies International Sales Pte. Ltd.
by:				by:
Name:				Name:
Title:				Title:

 

4

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EXHIBIT E-2

Form of Asset Transfer Agreement

(Germany)

by and between

Infineon Technologies AG

and

Avago Technologies GmbH

and

Avago Technologies International Sales Pte. Ltd.

dated as of [            ]

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RECITALS

WHEREAS, Infineon Technologies AG, a stock corporation under the laws of the Federal Republic of Germany, with principal place of business at Am Campeon 1-12, 85579 Neubiberg, Germany, registered with the commercial register of the lower court (Amtsgericht) of Munich under HRB 126492 (“Seller”), Avago Technologies GmbH, a limited liability company under the laws of the Federal Republic of Germany, with principal place of business at Herrenberger Strasse 130, 71034 Böblingen, Germany, registered with the commercial register of the lower court (Amtsgericht) of Stuttgart under HRB 246116 (“Purchaser 1”), Avago Technologies International Sales Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512231E (“Purchaser 2”) and certain other entities are party to an asset purchase agreement, dated as of 25 June 2008, as amended (“Asset Purchase Agreement”).

WHEREAS, pursuant to the Purchase Agreement, Seller agreed to transfer to each of Purchaser 1 and Purchaser 2 title to certain Purchased Tangible Assets which are set forth on Annex A hereto, in each case as more fully described and upon the terms and subject to the conditions set forth in the Asset Purchase Agreement.

WHEREAS, Seller is the owner of the Purchased Tangible Assets which are set forth on Annex A hereto and desires to transfer to Purchaser 1 and Purchaser 2, as the case may be, and Purchaser 1 and Purchaser 2, as the case may be, desire to obtain from Seller, title to the Purchased Tangible Assets which are set forth on Annex A hereto.

WHEREAS, capitalized terms used but not defined herein shall have the meaning ascribed to them in the Asset Purchase Agreement.

NOW, THEREFORE, in consideration of (i) the payment in the amount of EUR 4,004,644 (in words: four million four thousand six-hundred and forty-four Euros) (paid together with applicable VAT of 19% or EUR 760,882.36) by Purchaser 1 to Seller and (ii) the payment in the amount of EUR 114,740 (in words: one-hundred and fourteen thousand and seven-hundred forty Euros) (paid together with applicable VAT of EUR 19,505.80) by Purchaser 2 to Seller, and in further consideration of the mutual agreements and covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.

Seller hereby transfers to Purchaser 1, and Purchaser 1 hereby accepts such transfer and obtains from Seller, all rights, title and interest in and to all of the Purchased Tangible Assets which are set forth on Annex A.1 hereto in accordance with and subject to the terms and conditions of the Asset Purchase Agreement.

 

2

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2.

Seller hereby transfers to Purchaser 2, and Purchaser 2 hereby accepts such transfer and obtains from Seller, all rights, title and interest in and to all of the Purchased Inventory which is set forth on Annex A.2 hereto in accordance with and subject to the terms and conditions of the Asset Purchase Agreement.

 

3.

Seller and Purchaser 1 hereby agree that the Purchased Tangible Assets listed on Annex A.1.1 shall remain in Seller’s custody because these are required by Seller to perform Seller’s obligations under the Transitional Supply Agreement. Seller and Purchaser 1 hereby enter into gratuitous lease agreement (unentgeltliche Gebrauchsüberlassungsverträge) with respect to the Purchased Tangible Assets listed on Annex A.1.1 and Seller agrees not to take these Purchased Tangible Assets into its custody as long as Seller requires these Purchased Tangible Assets to perform its obligations under the Transitional Supply Agreement.

 

4.

Seller and Purchaser 1 hereby agree that Seller shall grant Purchaser 1 possession (Besitz) of the Purchased Tangible Assets which are set forth on Annex A.1.2 and Annex A.1.3 on the Closing Date. To the extent that on the Closing Date Purchaser 1 does not obtain possession of individual Purchased Tangible Assets which are set forth on Annex A.1.2 and Annex A.1.3, Seller shall grant Purchaser 1 possession of such Purchased Tangible Assets on a date reasonably requested by Purchaser 1 and keep such Purchased Tangible Assets in custody (verwahren) for Purchaser 1 until such date. To the extent that on the Closing Date certain of the Purchased Tangible Assets which are set forth on Annex A.1.2 or Annex A.1.3 are in the possession of Third Parties, delivery is hereby replaced by Seller’s assignment to Purchaser 1 of Seller’s possessory claim related to such Purchased Tangible Assets (Abtretung des Herausgabeanspruchs).

 

5.	Seller and Purchaser 2 hereby agree that at the Closing Seller shall not be obliged to deliver (übergeben) to Purchaser the Purchased Inventory which is set forth on Annex A.2. Instead Seller shall hold such Purchased Inventory in safe custody for Purchaser 2.

 

3

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6.

Each party hereby covenants and agrees that, at any time and from time to time forthwith upon the written request of the other party, it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, each and all of such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be required by the other party or as required pursuant to the Asset Purchase Agreement in order to transfer the Purchased Tangible Assets which are set forth on Annex A or otherwise carry out the purpose and intent of this Asset Transfer Agreement.

 

7.	This Asset Transfer Agreement is subject to the terms and conditions of the Asset Purchase Agreement, which are incorporated herein by reference, and shall be binding upon Seller and Purchaser.

 

8.	This Asset Transfer Agreement shall be governed by and construed and interpreted in accordance with the laws of Germany, irrespective of its conflicts of law provisions.

 

9.	This Asset Transfer Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument.

 

4

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IN WITNESS WHEREOF, each party has caused this Asset Transfer Agreement to be duly executed by its duly authorized officers as of the date first written above:

 

Infineon Technologies AG				Avago Technologies GmbH
by:				by:
Place, Date				Place, Date
by:
Place, Date
Avago Technologies International Sales Pte. Ltd.
by:
Place, Date

 

5

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EXHIBIT F-1

Form of Assignment and Assumption Agreement

(US)

by and between

Infineon Technologies North America Corp.

and

Avago Technologies International Sales Pte. Ltd.

dated as of [            ]

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RECITALS

WHEREAS, Infineon Technologies AG, a stock corporation under the laws of the Federal Republic of Germany, with principal place of business at Am Campeon 1-12, 85579 Neubiberg, Germany, registered with the commercial register of the lower court (Amtsgericht) of Munich under HRB 126492 (“Infineon”), Avago Technologies International Sales Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512231E (“Assignee”), and certain other entities are party to an asset purchase agreement, dated as of 25 June 2008, as amended (“Asset Purchase Agreement”).

WHEREAS, pursuant to the Asset Purchase Agreement Assignee agreed to assume from Infineon or a Selling Subsidiary all rights and obligations under certain Purchased Contracts which are set forth on Annex A hereto, in each case as more fully described and upon the terms and subject to the conditions set forth in the Asset Purchase Agreement.

WHEREAS, Infineon Technologies North America Corp., a Delaware corporation, with principal place of business at 640 N. McCarthy Blvd., Milpitas, CA 95035, USA (“Assignor”), is a party to the Purchased Contracts which are set forth on Annex A hereto, and desires to assign and delegate to Assignee, and Assignee desires to assume from Assignor, all rights and obligations under the Purchased Contracts which are set forth on Annex A hereto.

WHEREAS, capitalized terms used but not defined herein shall have the meaning ascribed to them in the Asset Purchase Agreement.

NOW, THEREFORE, in consideration of the payment in the amount of EUR 1,253,460 (in words: one million two-hundred fifty-three thousand four-hundred and sixty Euros) by Assignee to Assignor, and in further consideration of the mutual agreements and covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.	Assignor hereby assigns and delegates to Assignee, and Assignee hereby assumes from Assignor, all rights and obligations under the Purchased Contracts set forth on Annex A in accordance with and subject to the terms and conditions of the Asset Purchase Agreement.

 

2

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2.

Each party hereby covenants and agrees that, at any time and from time to time forthwith upon the written request of the other party, it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, each and all of such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be required by the other party or as required pursuant to the Asset Purchase Agreement in order to assume the rights and obligations under the Purchased Contracts set forth on Annex A or otherwise carry out the purpose and intent of this Assignment and Assumption Agreement.

 

3.	This Assignment and Assumption Agreement is subject to the terms and conditions of the Asset Purchase Agreement, which are incorporated herein by reference, and shall be binding upon Assignor and Assignee.

 

4.	This Assignment and Assumption Agreement shall be governed by and construed and interpreted in accordance with the laws of California, irrespective of the choice of law principles of California.

 

5.	This Assignment and Assumption Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument.

 

3

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IN WITNESS WHEREOF, each party has caused this Assignment and Assumption Agreement to be duly executed by its duly authorized officers as of the date first written above:

 

Infineon Technologies North America Corp				Avago Technologies International Sales Pte. Ltd.
by:				by:
Name		Greg Bibbes		Name:
Title:		Secretary		Title:

 

4

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EXHIBIT F-2

Form of Assumption Agreement

(Germany)

by and between

Infineon Technologies AG

and

Avago Technologies International Sales Pte. Ltd.

dated as of [            ]

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RECITALS

WHEREAS, Infineon Technologies AG, a stock corporation under the laws of the Federal Republic of Germany, with principal place of business at Am Campeon 1-12, 85579 Neubiberg, Germany, registered with the commercial register of the lower court (Amtsgericht) of Munich under HRB 126492 (“Seller”), Avago Technologies International Sales Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512231E (“Purchaser”) and certain other entities are party to an asset purchase agreement, dated as of 25 June 2008, as amended (“Asset Purchase Agreement”).

WHEREAS, pursuant to the Purchase Agreement, Purchaser agreed to assume from Seller all rights and obligations under certain Purchased Contracts which are set forth on Annex A hereto, in each case as more fully described and upon the terms and subject to the conditions set forth in the Asset Purchase Agreement.

WHEREAS, Seller is a party to the Purchased Contracts which are set forth on Annex A hereto and desires to assign and delegate to Purchaser, and Purchaser desires to assume from Seller, all rights and obligations under the Purchased Contracts which are set forth on Annex A hereto.

WHEREAS, capitalized terms used but not defined herein shall have the meaning ascribed to them in the Asset Purchase Agreement.

NOW, THEREFORE, in consideration of the payment in the amount of EUR 1,253,460 (in words: one million two-hundred fifty-three thousand four-hundred and sixty Euros) (together with applicable VAT of 19% or EUR 238,157) by Purchaser to Seller, and in further consideration of the mutual agreements and covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.	Seller hereby assigns and delegates to Purchaser, and Purchaser hereby assumes from Seller, all rights and obligations under the Purchased Contract set forth on Annex A in accordance with and subject to the terms and conditions of the Asset Purchase Agreement.

 

2

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2.

Each party hereby covenants and agrees that, at any time and from time to time forthwith upon the written request of the other party, it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, each and all of such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be required by the other party or as required pursuant to the Asset Purchase Agreement in order to assume the rights and obligations under the Purchased Contracts set forth on Annex A or otherwise carry out the purpose and intent of this Assumption Agreement.

 

3.	This Assumption Agreement is subject to the terms and conditions of the Asset Purchase Agreement, which are incorporated herein by reference, and shall be binding upon Seller and Purchaser.

 

4.	This Assumption Agreement shall be governed by and construed and interpreted in accordance with the laws of Germany, irrespective of the conflicts of law provisions of Germany.

 

5.	This Assumption Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument.

 

3

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IN WITNESS WHEREOF, each party has caused this Assumption Agreement to be duly executed by its duly authorized officers as of the date first written above:

 

Infineon Technologies AG				Avago Technologies International Sales Pte. Ltd.
by:				by:
Place, Date				Place, Date
by:
Place, Date

 

4

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EXHIBIT G

FORM OF CLOSING CONFIRMATION

with respect to the

Asset Purchase Agreement

by and among

Infineon Technologies AG,

Avago Technologies GmbH,

Avago Technologies International Sales Pte. Ltd.,

Avago Technologies Wireless IP (Singapore) Pte. Ltd., and

Avago Technologies Finance Pte. Ltd.

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RECITALS

WHEREAS, on 25 June 2008, Infineon Technologies AG, a stock corporation under the laws of the Federal Republic of Germany, with principal place of business at Am Campeon 1-12, 85579 Neubiberg, Germany, registered with the commercial register of the lower court (Amtsgericht) of Munich under HRB 126492 (“Seller”), Avago Technologies GmbH, a limited liability company under the laws of the Federal Republic of Germany, with principal place of business at Herrenberger Strasse 130, 71034 Böblingen, Germany, registered with the commercial register of the lower court (Amtsgericht) of Stuttgart under HRB 246116 (“Purchaser 1”), Avago Technologies International Sales Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512231E (“Purchaser 2”), Avago Technologies Wireless IP (Singapore) Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512332K (“Purchaser 3”, and, together with Purchaser 1 and Purchaser 2, “Purchasers”) and Avago Technologies Finance Pte. Ltd., a limited liability company under the laws of Singapore, with principal place of business at 1 Yishun Avenue 7, 768923 Singapore, Singapore, registered under incorporation number 200512223N (“Guarantor”, and, together with Seller and Purchasers, the “Parties”) entered into an asset purchase agreement (“Asset Purchase Agreement”), pursuant to which Seller agreed to sell and transfer certain assets and liabilities related to its bulk acoustic wave filter business to Purchasers.

WHEREAS, the Asset Purchase Agreement provides that the consummation of the transactions contemplated by the Asset Purchase Agreement shall be subject to various Closing Conditions and the performance of various Closing Actions.

WHEREAS, each of the Closing Conditions has been fulfilled and each of the Closing Actions has been performed, and the Parties therefore intend to confirm by means of this written confirmation (“Closing Confirmation”) that the Closing has occurred.

WHEREAS, capitalized terms which are used but not defined in this Closing Confirmation shall have the meaning ascribed to them in the Asset Purchase Agreement.

 

2

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NOW, THEREFORE, in consideration of the foregoing, the Parties confirm the following:

§ 1

Fulfilment of Closing Conditions

The Parties hereby confirm that all of the Closing Conditions which are set forth in Section 7.2 of the Asset Purchase Agreement have been fulfilled as follows:

 

1.1	No Governmental Authority has enacted, issued, promulgated or enforced any Law, judgement, decree, injunction or other order which is in effect on the Closing Date and which would prohibit, restrict or delay the consummation of the transactions contemplated by the Asset Purchase Agreement.

 

1.2	There has not occurred a Material Adverse Effect between 25 June 2008 and the Closing Date.

 

1.3

The Key Employees have either waived their right to object to the transfer of their employment relationship to Purchaser 1 pursuant to Section 613a (6) BGB, or the objection period set forth in Section 613a (6) BGB to which the Key Business Employees are entitled has expired and the Key Business Employees have not objected to the transfer of their employment relationships to Purchaser 1 during such expiration period.

 

1.4	Not more than two (2) Business Employees (other than the Key Business Employees) have objected to the transfer of their employment relationships to Purchaser 1 pursuant to Section 613a (6) BGB within the objection period set forth in Section 613a (6).

 

1.5	Seller has notified Purchasers that the Reconciliation of Interest Agreement and Social Plan are not required.

§ 2

Performance of Closing Actions

The Parties hereby confirm that all of the Closing Actions set forth in Section 7.3 of the Asset Purchase Agreement have been performed as follows:

 

2.1	Purchasers have paid the Purchase Price and the Estimated Inventory Value to Seller as contemplated by Section 4.4 of the Asset Purchase Agreement.

 

3

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2.2	The Parties have executed an Asset Transfer Agreement (Germany) and an Asset Transfer (Singapore) as contemplated by Section 5.1.1 of the Asset Purchase Agreement.

 

2.3	The Parties have executed an Assumption Agreement (Germany) and an Assignment and Assumption Agreement (US) as contemplated by Section 5.2 of the Asset Purchase Agreement.

 

2.4	Seller has granted Purchasers possession (Besitz) of the Purchased Tangible Assets as contemplated by Section 5.1.2 of the Asset Purchase Agreement.

 

2.5	The Parties have jointly executed the Ancillary Agreements.

§ 3

Treatment of the Customer Nokia

 

3.1

The Parties agree and acknowledge that the Third Party Consent of Seller’s customer Nokia Mobile Phones (“Nokia”) has not been obtained on the Closing Date, and that the regulations set forth in Section 3.2 of the Asset Purchase Agreement shall apply until the date on which Seller obtains the Third Party Consent of Nokia (the “Consent Date”).

 

3.2

Notwithstanding Section 3.2 of the Asset Purchase Agreement, the Parties agree that until and including the Consent Date, Seller or a Subsidiary of Seller shall, in each case on behalf of Purchaser 2 (Fall der mittelbaren Stellvertretung), continue to (i) receive all purchase orders which are placed by Nokia or its providers of electronic manufacturing services (collectively, the “Customer”), (ii) deliver all Products ordered by the Customer, (iii) issue all invoices therefore, and (iv) collect all payments made by the Customer.

 

3.3	Processing of Deliveries

 

3.3.1

Deliveries made out of Purchased Inventory

To the extent any deliveries by Seller or a Subsidiary of Seller to the Customer are made out of Purchased Inventory, Seller or a Subsidiary of Seller will place a purchase order with Purchaser 2 reflecting the content of the incoming purchase order from the Customer and will be invoiced by Purchaser 2 accordingly. Purchaser 2 shall not be obliged to place any corresponding purchase orders with Seller or a Subsidiary of Seller under the Transitional Supply Agreement.

 

4

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3.3.2

Replenishment of Buffer Stock

The Parties agree and acknowledge that Seller or a Subsidiary of Seller has an obligation vis-à-vis Nokia to maintain a certain amount of buffer stock in the I-Hubs (as defined below) (the “Required Stock”). In case the actual stock level in such I-Hubs should fall below the Required Stock, Seller or a Subsidiary of Seller shall notify Purchaser 2 of the amount which is required to bring the actual stock level in the I-Hubs back to the Required Stock, and Purchaser 2 shall immediately place a corresponding purchase order with Seller or a Subsidiary of Seller under the Transitional Supply Agreement.

 

3.3.3

Deliveries not made out of Purchased Inventory

To the extent the deliveries to the Customer are not made out of Purchased Inventory, Seller or a Subsidiary of Seller will place a purchase order with Purchaser 2 reflecting the content of the incoming purchase order from the Customer and will be invoiced by Purchaser 2 accordingly. Purchaser 2 shall be obliged to immediately place corresponding purchase orders with Seller or a Subsidiary of Seller under the Transitional Supply Agreement, and Seller or a Subsidiary of Seller shall provide Purchaser 2 with respective invoices based on the prices set forth in the Transitional Supply Agreement.

 

3.4

The Parties agree and acknowledge that (i) the Purchased Inventory comprises a certain amount of the Product NWR 150 which is set forth in more detail on Schedule 2.1.2 of the Disclosure Schedule to the Asset Purchase Agreement (the “Purchased NWR 150 Inventory”), and that (ii) the Purchased NWR 150 Inventory is currently located at certain consignment stores of the Customer (“I-Hubs”). Until the Consent Date Purchasers shall not (i) remove or cause to remove any portion of the Purchased NWR 150 Inventory from the I-Hubs, (ii) transfer or assign any portion of the Purchased NWR 150 Inventory to a Third Party, or (iii) take any other action with respect to the Purchased NWR 150 Inventory which would be detrimental to or endanger the ongoing customer relationship between Seller and the Customer.

 

3.5

The Parties agree that Seller’s activities pursuant to this Section 3 of this Closing Confirmation shall not be deemed to violate Seller’s non-compete obligations as set forth in Section 13.7 of the Asset Purchase Agreement. The Parties further agree that Purchasers shall not contact the Customer before the Consent Date with respect to any matters related to the contractual relationship between Seller and the Customer which is addressed in Section 3 of this Closing Confirmation, unless Seller has granted its prior consent.

 

5

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3.6	The activities of Seller pursuant to Section 3 of this Closing Confirmation shall be provided free of any charges.

§ 4

Treatment of the Customers ZTE and Motorola

 

4.1

The Parties agree and acknowledge that the Third Party Consents of Seller’s customers ZTE Corporation and Motorola, Inc. have not been obtained on the Closing Date, and that the regulations set forth in Section 3.2 of the Asset Purchase Agreement shall apply until the date on which Seller obtains the Third Party Consents of ZTE Corporation and Motorola, Inc.

 

4.2	Except for Sections 3.3.2 and Section 3.4 of this Closing Confirmation, the provisions of Section 3 of this Closing Conformation shall apply mutatis mutandis to the treatment of Seller’s customers ZTE Corporation and Motorola, Inc.

§ 5

Occurrence of the Closing

 

5.1	The Parties hereby confirm that the Closing Date is the date of this Closing Confirmation.

 

5.2	The Parties hereby confirm that by executing this Closing Confirmation, the Closing has occurred and becomes effective on [            ], 24:00 CET.

 

6

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IN WITNESS WHEREOF, each Party has caused this Closing Confirmation to be duly executed by its duly authorized officers as of the date first written above:

 

Infineon Technologies AG				Avago Technologies GmbH
by:				by:
Place, Date				Place, Date
by:				by:
Place, Date				Place, Date
Avago Technologies International Sales Pte. Ltd.				Avago Technologies Wireless IP (Singapore) Pte. Ltd.
by:				by:
Place, Date				Place, Date
by:				by:
Place, Date				Place, Date
Avago Technologies Finance Pte. Ltd.
by:
Place, Date
by:
Place, Date

 

7

Exhibit 4.3

 

 

FORM OF SECOND AMENDED AND RESTATED SHAREHOLDER AGREEMENT

among

Avago Technologies Limited,

Silver Lake Partners II Cayman, L.P.,

Silver Lake Technology Investors II Cayman, L.P.

Integral Capital Partners VII, L.P.

KKR Millennium Fund (Overseas), Limited Partnership,

KKR European Fund, Limited Partnership,

KKR European Fund II, Limited Partnership,

KKR Partners (International), Limited Partnership,

Capstone Equity Investors LLC,

Avago Investment Partners, Limited Partnership,

Bali Investments S.à r.l.,

Seletar Investments Pte. Ltd.,

Geyser Investment Pte Ltd and

certain other Persons

Dated as of [•], 2009

 

 

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TABLE OF CONTENTS

 

								Page
1.		AMENDMENT AND RESTATEMENT; EFFECTIVE DATE						3
2.		VOTING AGREEMENT						3
		2.1		Board of Directors				3
				2.1.1.		Board Size		3
				2.1.2.		Designation of Directors		3
				2.1.3.		Board Observer		3
				2.1.4.		Sell-Down Provisions		4
				2.1.5.		Company Articles of Association		4
				2.1.6.		Additional Independent Directors		5
		2.2		Removal and Replacement; Vacancies				5
				2.2.1.		Removal and Replacement; Vacancies Generally		5
				2.2.2.		Vacancies upon a Reduction in a Sponsor’s Ownership Percentage		5
		2.3		Directors of Subsidiaries				6
		2.4		Committees				6
				2.4.1.		Composition		6
				2.4.2.		Authority		6
		2.5		Actions Requiring Majority Sponsor Approval				6
				2.5.1.		Composition of the Board		6
				2.5.2.		Change in Control		7
				2.5.3.		Certain Dispositions		7
				2.5.4.		Certain Acquisitions		7
				2.5.5.		Certain Joint Ventures and Business Alliances		7
				2.5.6.		Certain Indebtedness		7
				2.5.7.		Dissolution; Liquidation; Reorganization; Bankruptcy		8
				2.5.8.		Affiliated Transactions		8
				2.5.9.		Nature of Business		8
				2.5.10.		Management Shareholder Agreement; Capstone Shareholder Agreement		8
		2.6		Disproportionate Effects on Co-Investors				8
		2.7		Further Assurances by all Shareholders				8
				2.7.1.		Board of Directors Provisions		8
				2.7.2.		Approved Change in Control		9
		2.8		Actions in Contravention				9
		2.9		Period				9
3.		TRANSFER RESTRICTIONS						9
		3.1		General Transfer Restrictions				9
		3.2		Allowed Transfers				9
				3.2.1.		Permitted Transferees		9
				3.2.2.		Public Transfers		10
				3.2.3.		Distributions and Charitable Contributions		10
				3.2.4.		Participation in Drag-Along and Tag-Along		10

 

- i -

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				3.2.5.		Transfers by Co-Investors		10
				3.2.6.		Other Private Transfers		11
				3.2.7.		Luxco and Avago Partners Distributions		11
		3.3		Certain Transferees to Become Parties				11
		3.4		Restrictions on Public Transfers under Rule 144				12
		3.5		Impermissible Transfer				12
		3.6		Notice of Transfer				12
		3.7		Period				12
4.		“TAG ALONG” AND “DRAG ALONG” RIGHTS						12
		4.1		Tag Along				12
				4.1.1.		Notice		12
				4.1.2.		Exercise		13
				4.1.3.		Irrevocable Offer		13
				4.1.4.		Reduction of Shares Sold		14
				4.1.5.		Additional Compliance		14
				4.1.6.		Actions with Respect to Tag Along		15
		4.2		Drag Along				15
				4.2.1.		Exercise		15
				4.2.2.		Drag Along Seller Exclusions		16
		4.3		[Reserved]				16
		4.4		Miscellaneous				16
				4.4.1.		Further Assurances		16
				4.4.2.		Sale Process		16
				4.4.3.		Treatment of Options, Warrants and Convertible Securities		17
				4.4.4.		Closing		17
		4.5		Period				17
5.		[RESERVED]						17
6.		COVENANTS						18
		6.1		Information Rights				18
				6.1.1.		Historical Financial Information		18
				6.1.2.		Tax Information		18
				6.1.3.		Access		18
				6.1.4.		Period		18
		6.2		Confidentiality				18
		6.3		Suspension of Information Rights				19
7.		REMEDIES						20
		7.1		Generally				20
8.		LEGENDS						20
		8.1		Restrictive Legend				20
		8.2		Securities Act Legend				20
		8.3		Stop Transfer Instruction				21
		8.4		Termination of the Securities Act Legend				21

 

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9.		AMENDMENT, TERMINATION, ETC				21
		9.1		Oral Modifications		21
		9.2		Written Modifications		21
		9.3		Effect of Termination		21
10.		DEFINITIONS				22
		10.1		Certain Matters of Construction		22
		10.2		Definitions		22
11.		MISCELLANEOUS				28
		11.1		Aggregation of Shares		28
		11.2		Authority; Effect		29
		11.3		Notices		29
		11.4		Binding Effect, Etc		35
		11.5		Descriptive Heading		35
		11.6		Counterparts		35
		11.7		Severability		35
		11.8		No Recourse		35
		11.9		Expenses; Indemnity		36
		11.10		No Third Party Beneficiaries		36
		11.11		Consent of Shareholders to Advisory Agreement		36
12.		GOVERNING LAW				37
		12.1		Governing Law		37
		12.2		Consent to Jurisdiction		37
		12.3		WAIVER OF JURY TRIAL		37
		12.4		Exercise of Rights and Remedies		38

 

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FORM OF SECOND AMENDED AND RESTATED SHAREHOLDER AGREEMENT

This Second Amended and Restated Shareholder Agreement (this “Agreement”) is made as of [•], 2009 by and among:

 

(i)

Avago Technologies Limited (Registration No. 200510713C), a public limited company incorporated in Singapore (together with its successors and permitted assigns, the “Company”);

 

(ii)

Bali Investments S.à r.l., a company organized under the laws of Luxembourg (together with its Permitted Transferees, “Luxco”);

 

(iii)

Silver Lake Partners II Cayman, L.P. (“SLP Cayman”), Silver Lake Technology Investors II Cayman, L.P. (together with SLP Cayman and, together with their Permitted Transferees, “Silver Lake”) and Integral Capital Partners VII, L.P. (together with its Permitted Transferees, “Integral Capital”) (collectively with Silver Lake and together with their Permitted Transferees, “SLP”);

 

(iv)

KKR Millennium Fund (Overseas), Limited Partnership (“KKR Millennium”), KKR European Fund, Limited Partnership (“KKR Europe”), KKR European Fund II, Limited Partnership (“KKR Europe II”), and KKR Partners (International), Limited Partnership (collectively, and together with their Permitted Transferees, “KKR”); and

 

(v)

Avago Investment Partners, Limited Partnership, a limited partnership formed under the Exempt Limited Partnership Law (2003 Revision) of the Cayman Islands (together with its Permitted Transferees, “Avago Partners”).

Parties not executing this Agreement but which are parties to the Amended Agreement and therefore bound by the provisions hereof are the following:

 

(i)

Capstone Equity Investors LLC, a Delaware limited liability company (together with its Permitted Transferees, “Capstone”);

 

(ii)

Seletar Investments Pte. Ltd., a private limited company organized under the laws of Singapore (together with its Permitted Transferees, “Temasek”);

 

(iii)

Geyser Investment Pte Ltd, a private limited company organized under the laws of Singapore (together with its Permitted Transferees, “Geyser”); and

 

(iv)

such other Persons, if any, that from time to time become parties hereto as transferees of Shares pursuant to Section 3.3 (collectively, together with the Sponsors, the “Shareholders”).

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RECITALS

WHEREAS, the Company and the Sponsors other than Capstone are party to that certain Shareholder Agreement (the “Original Agreement”), dated December 1, 2005 (the “Original Agreement Effective Date”), and the Company and the Sponsors are party to that certain Amended and Restated Shareholder Agreement (the “Amended Agreement”), dated February 3, 2006 (the “Amended Agreement Effective Date”), which amended and restated the Original Agreement in its entirety;

WHEREAS, Section 9.2 of the Amended Agreement provides that the Amended Agreement may be amended with an agreement in writing signed by the Company and Sponsors holding not less than 70% of the Outstanding Company Shares;

WHEREAS, the Company and Sponsors holding 70% or more of the Outstanding Company Shares desire to, and by the execution of this Agreement do hereby, amend and restate the Amended Agreement in its entirety to read as set forth herein;

WHEREAS, subject to the approval of the Company’s shareholders, the directors of the Company are authorized by the Company Memorandum of Association to issue ordinary shares of the Company’s share capital (the “Company Shares”);

WHEREAS, as of the Effective Date, Luxco is owned by SLP, KKR, Capstone and Avago Partners;

WHEREAS, as of the Effective Date, each of the Sponsors owns the number of Company Shares set forth opposite such Sponsor’s name on Schedule I attached hereto, including in the case of SLP, KKR, Capstone and Avago Partners, their pro rata share of Company Shares owned by Luxco, based upon their ownership of Luxco equity securities;

WHEREAS, certain managers of the Company and its Subsidiaries have purchased or may purchase Company Shares, or have received or may receive Options exercisable for Company Shares, pursuant to the Company’s Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries (the “Management Equity Plan”). With respect to Company Shares purchased by such certain managers under the Management Equity Plan and in certain instances other compensatory plans maintained by the Company, or any Company Shares issued to such certain managers upon exercise of any Options granted under the Management Equity Plan and in certain instances other compensatory plans maintained by the Company, the holders thereof (and their permitted transferees) (collectively, the “Management Shareholders”) are or will be subject to the terms of a Management Shareholder Agreement, dated as of February 3, 2006 (as amended from time to time, the “Management Shareholder Agreement”), among the Company and the Management Shareholders; and

WHEREAS, the parties hereto desire to establish the composition of the Company’s board of directors (the “Board”), to restrict the sale, assignment, transfer, encumbrance or other disposition of Company Shares, to provide for certain additional covenants and to provide for certain rights and obligations as between themselves in relation to the affairs of the Company and its Subsidiaries as hereinafter provided.

 

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AGREEMENT

NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties to this Agreement intending to be bound hereby agree as follows:

1. AMENDMENT AND RESTATEMENT; EFFECTIVE DATE. This Agreement amends and restates the Amended Agreement in full to read as set forth herein, and this Agreement shall become effective as of the date first written above (the “Effective Date”).

2. VOTING AGREEMENT.

2.1 Board of Directors.

2.1.1. Board Size. The authorized number of directors of the Board shall be fixed at eleven (11), or such other number as is determined from time to time pursuant to Section 2.1.6 or Section 2.5.1.

2.1.2. Designation of Directors. Subject to Sections 2.1.3, 2.1.5 and 2.1.6 and the Company Articles of Association, the following persons shall be elected to the Board:

(a) three (3) persons designated by Silver Lake, who shall initially be James A. Davidson, Kenneth Y. Hao and John R. Joyce (the “SLP Designees”);

(b) three (3) persons designated by KKR, one of whom shall be designated by KKR Millennium, who shall initially be David Kerko, one of whom shall be designated by KKR Europe, who shall initially be Adam H. Clammer, and one of whom shall be designated by KKR Europe II, who shall initially be James H. Greene, Jr. (the “KKR Designees”);

(c) one (1) person designated by Temasek, who shall initially be Bock Seng Tan, and who shall at all times be a person who qualifies as the Company’s Singapore resident director (the “Temasek Designee” and together with the SLP Designees and KKR Designees, the “Sponsor Designees”);

(d) one (1) person who shall be the then current Chief Executive Officer of the Company; and

(e) three (3) persons who shall, for so long as Section 2.5 shall be effective, be approved by Majority Sponsor Approval.

2.1.3. Board Observer. Subject to the Company Articles of Association, Geyser shall be entitled to designate one (1) person (the “Observer”), who shall be reasonably acceptable to the Company and shall initially be Tay Lim Hock, to attend all meetings of the Board, and the Company shall provide to the Observer, concurrently with the members of the Board and in the same manner, notice of such meetings and a copy of all materials provided to such members; provided, however, the Board, by majority vote, shall be entitled to exclude the Observer from portions of any Board meeting and to cause

 

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portions of any Board materials delivered to the Observer to be redacted where and to the extent that the Board determines that exclusion is reasonably necessary to preserve attorney-client privilege; provided, further, for the avoidance of doubt, the Observer shall be subject to the confidentiality obligations set forth in Section 6.2 hereof and Geyser shall be responsible for the Observer’s compliance therewith.

2.1.4. Sell-Down Provisions. In the event that Silver Lake has sold any of its Company Equity Shares or otherwise transferred any of its Company Equity Shares to an unaffiliated entity, or Luxco has sold any of its Company Equity Shares and distributed the proceeds to Silver Lake, and SLP (x) ceases to own at least 24% of the Outstanding Company Shares but continues to own at least 15% of the Outstanding Company Shares, Silver Lake shall no longer have the right to designate three (3) Sponsor Designees and shall have the right to designate only two (2) Sponsor Designees, (y) ceases to own at least 15% of the Outstanding Company Shares but continues to own at least 5% of the Outstanding Company Shares, Silver Lake shall no longer have the right to designate two (2) Sponsor Designees and shall have the right to designate only one (1) Sponsor Designee, and (z) ceases to own at least 5% of the Outstanding Company Shares, Silver Lake shall no longer have the right to designate any Sponsor Designees.

(a) In the event that KKR has sold any of its Company Equity Shares or otherwise transferred any of its Company Equity Shares to an unaffiliated entity, or Luxco has sold any of its Company Equity Shares and distributed the proceeds to KKR, and KKR (x) ceases to own at least 24% of the Outstanding Company Shares but continues to own at least 15% of the Outstanding Company Shares, it shall no longer have the right to designate three (3) Sponsor Designees and shall have the right to designate only two (2) Sponsor Designees (in which case, the Board Designators (as defined below) will be KKR Millennium and KKR Europe II), (y) ceases to own at least 15% of the Outstanding Company Shares but continues to own at least 5% of the Outstanding Company Shares, it shall no longer have the right to designate two (2) Sponsor Designees and shall have the right to designate only one (1) Sponsor Designee (in which case, the Board Designator will be KKR Europe II), and (z) ceases to own at least 5% of the Outstanding Company Shares, it shall no longer have the right to designate any Sponsor Designees.

(b) In the event that Temasek ceases to own the lesser of (x) at least 2.5% of the Outstanding Company Shares, provided that it has not sold any of its Company Equity Shares, or (y) at least 5% of the Outstanding Company Shares, it shall no longer have the right to designate the Temasek Designee.

(c) In the event that Geyser ceases to own the lesser of (x) at least 2.5% of the Outstanding Company Shares, provided that it has not sold any of its Company Equity Shares, or (y) at least 5% of the Outstanding Company Shares, it shall no longer have the right to designate the Observer.

2.1.5. Company Articles of Association. Notwithstanding the provisions of Sections 2.1.2, 2.1.3 and 2.1.4, the rights to designate the Sponsor Designees and the Observer provided for in Section 2.1.2, 2.1.3 and 2.1.4 are subject to the Company Articles of Association and applicable laws.

 

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2.1.6. Additional Independent Directors. For so long as Section 2.5 shall be effective, the number of directors designated pursuant to Section 2.1.2(e) may from time to time temporarily be increased above the number set forth in such section if Majority Sponsor Approval is received in advance of any such designation; provided, however, that any such Majority Sponsor Approval may be revoked at any time, without notice and without cause, by a subsequent Majority Sponsor Approval to such effect, whereupon the excess director or directors above and beyond the number permitted by Section 2.1.2(e), as identified in the Majority Sponsor Approval, shall immediately be removed from the Board and the Board size and composition returned to that specified in Section 2.1.2; and provided, further, however, in the event of any vacancy of any such Board seat in excess of that permitted by Section 2.1.2(e), such vacancy may not be filled without Majority Sponsor Approval. As of the date of the adoption hereof, it is acknowledged that Majority Sponsor Approval has been provided for Section 2.1.2(e) temporarily to permit four (4) directors.

2.2 Removal and Replacement; Vacancies.

2.2.1. Removal and Replacement; Vacancies Generally. Subject to Section 2.2.2, the Company Articles of Association and applicable laws, members of the Board designated by Silver Lake, KKR Millennium, KKR Europe, KKR Europe II or Temasek (each, a “Board Designator”), as the case may be, may be removed by, and only by, the affirmative vote or written consent of such Board Designator. If, prior to his or her election to the Board, any person is unable or unwilling to serve as a Sponsor Designee, then the applicable Board Designator shall, subject to Section 2.1.3, be entitled to designate a replacement. If, following election to the Board, any Sponsor Designee resigns, is removed, or is unable to serve for any reason prior to the expiration of his or her term as a director, then, subject to Section 2.1.3, the Company Articles of Association and applicable laws, the applicable Board Designator shall be entitled to designate a replacement. If any Board Designator entitled to designate a person to fill any directorship fails to do so, then such directorship shall remain vacant until filled by such Board Designator.

2.2.2. Vacancies upon a Reduction in a Sponsor’s Ownership Percentage. To the extent that, pursuant to Section 2.1.4, there is any reduction in the number of Sponsor Designees that any Board Designator is entitled to designate, then such Board Designator shall send a written notice to the Secretary of the Company stating the name of the Sponsor Designee(s) to be removed from the Board and, upon receipt of such notice by the Secretary of the Company (or, in the event such Board Designator fails to deliver such notice within ten (10) days after written request from the Company, such selection of a Sponsor Designee(s) of such Board Designator shall be made by the Company by lot), such Sponsor Designee(s) shall be deemed to have resigned from the Board, and the vacancy or vacancies created thereby (and, thereafter, any vacancies created in that particular directorship) shall be filled by a person designated by the Board acting in accordance with the Company’s nomination and governance procedures.

 

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2.3 Directors of Subsidiaries. Subject to applicable laws, the size and composition of the boards of directors of the Company’s Subsidiaries shall be as determined by the Board; provided that, if at any time any Person other than an employee of the Company or any of its Subsidiaries (other than a Person who is also an employee, partner, member, shareholder or Affiliate of any Sponsor) or a local qualifying director is appointed to the board of directors of any Subsidiary of the Company, then each Board Designator shall have the right to designate a number of members to such board of directors in the same proportion as such Board Designator has the right to designate Sponsor Designees to the Board under Section 2.1.

2.4 Committees.

2.4.1. Composition. The Board may from time to time designate one or more committees, each of which shall have such number of members as is determined from time to time by the Board acting in accordance with the Company’s nomination and governance procedures; provided that for so long as Silver Lake or KKR is entitled to designate one or more Sponsor Designees under Section 2.1, it shall have the right to designate one of its Sponsor Designees to serve as a member of each of the Board’s committees (and if it has more than one Sponsor Designee, it may appoint a different Sponsor Designee to different Board committees); provided, further, however, that no such right to designate one or more Sponsor Designees to a Board committee would violate the U.S. federal securities laws or the requirements of the primary United States exchange on which the Company Shares are listed for trading. To the extent that a Sponsor Designee is removed from the Board pursuant to Section 2.2.2, such Sponsor Designee shall be deemed to have resigned from all committees upon which such Sponsor Designee is serving. Any vacancies on the Board’s committees created thereby (and, thereafter, any vacancies created in these committee memberships) shall, subject to this Section 2.4.1 to the extent Silver Lake or KKR continues to have the right to appoint one of its Sponsor Designees to the Board’s committees, be filled by the Board acting in accordance with the Company’s nomination and governance procedures.

2.4.2. Authority. Each of the Board’s committees, to the extent provided in the enabling resolution of such committee, the Company Articles of Association or this Agreement, shall have and may exercise all of the authority of the Board delegated to such committee. Any such delegation may be revoked at any time by action of the Board. Notwithstanding the foregoing, no committee of the Board shall have the power to act for the Board where such action would require Majority Sponsor Approval or otherwise expressly require the vote or consent of a majority of the Board’s directors under applicable law, the Company Memorandum of Association or Company Articles of Association or this Agreement.

2.5 Actions Requiring Majority Sponsor Approval. Except as expressly provided in this Section 2.5 and subject to the Company Articles of Association and applicable laws, until such time as the Shareholders beneficially own, collectively, less than 50% of the Outstanding Company Shares, Majority Sponsor Approval is required for the following actions by the Company and/or its Subsidiaries:

2.5.1. Composition of the Board. Except as otherwise expressly provided in this Agreement, change the size or the composition of the Board or any committee of the Board or the board of directors or similar governing body of any Subsidiary; provided, however, the prior written consent of Temasek shall also be required to amend, delete or otherwise change its rights under Section 2.1.4(c); provided, further, the prior written consent of Geyser shall also be required to amend, delete or otherwise change its rights under Section 2.1.4(d).

 

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2.5.2. Change in Control. Enter into or effect a Change in Control.

2.5.3. Certain Dispositions. Directly or indirectly, enter into or effect any transaction or series of related transactions involving the sale, lease, license, exchange or other disposal (including by merger, consolidation, sale of stock, or sale of assets) by the Company or the Subsidiaries of any assets having a fair market value or for consideration having a fair market value (in each case as reasonably determined by the Board) in excess of US$300,000,000, other than transactions solely between and among the Company and Wholly Owned Subsidiaries.

2.5.4. Certain Acquisitions. Directly or indirectly, enter into or effect any transaction or series of related transactions involving the purchase, lease, license, exchange or other acquisition (including by merger, consolidation, acquisition of stock, or acquisition of assets) by the Company or the Subsidiaries of any assets and/or equity securities of any Person for consideration having a fair market value (as reasonably determined by the Board) in excess of US$300,000,000, other than transactions solely between and among the Company and Wholly Owned Subsidiaries.

2.5.5. Certain Joint Ventures and Business Alliances. Enter into any joint venture or similar business alliance involving investment, contribution or disposition by the Company or the Subsidiaries of assets (including stock of Subsidiaries) having a fair market value (as reasonably determined by the Board) in excess of US$300,000,000 other than transactions solely between and among the Company and Wholly Owned Subsidiaries.

2.5.6. Certain Indebtedness. Incur (or extend, supplement, or otherwise modify any of the material terms of) any indebtedness (including any refinancing of existing indebtedness); assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person (provided that the Company or any Subsidiary may provide cross-guarantees for any indebtedness in existence as of the Original Agreement Effective Date or that has otherwise been approved under this Section 2.5.6); enter into (or extend, supplement, or otherwise modify any of the material terms of) any agreement under which it may incur indebtedness in the future; or make any loan, advance or capital contribution to any Person (other than the Company or any Wholly Owned Subsidiaries); or make any voluntary prepayment of indebtedness of the Company or any of the Subsidiaries outside the ordinary course of business; in each case in an aggregate principal amount in excess of US$300,000,000 in any transaction or series of related transactions, and other than (x) a draw down in the ordinary course of business under a debt agreement entered into prior to the date of such draw down, the execution of which previously received Majority Sponsor Approval or (y) occurred on or prior to the Original Agreement Effective Date.

 

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2.5.7. Dissolution; Liquidation; Reorganization; Bankruptcy. Dissolve, liquidate or engage in any recapitalization or reorganization of the Company or any Subsidiary or initiate a voluntary liquidation, dissolution, receivership, bankruptcy or other insolvency proceeding involving the Company or any Subsidiary.

2.5.8. Affiliated Transactions. Enter into or effect any transaction with a Majority Sponsor (or with an Affiliate of such Majority Sponsor, or with any officer, director, or employee of such Majority Sponsor or its Affiliates), other than this Agreement, the Securities Subscription Agreement, the Luxco Securities Subscription Agreement, the Advisory Agreement and the Registration Rights Agreement and other than transactions which do not have a materially disproportionate effect on any of the Sponsors, in their capacity as Shareholders, relative to the other Sponsors; and such Majority Sponsor shall be excluded from the determination of Majority Sponsor Approval for such transaction under this Section 2.5.8.

2.5.9. Nature of Business. Make any material change in the nature of the business conducted by the Company and its Subsidiaries.

2.5.10. Management Shareholder Agreement; Capstone Shareholder Agreement. Amend, waive or otherwise modify the Management Shareholder Agreement or Capstone Shareholder Agreement in any material respect.

2.6 Disproportionate Effects on Co-Investors. Except for such actions as are specifically set forth in this Agreement, the Company shall not take any action in respect of any class of its shares that shall have a materially disproportionate effect on the Co-Investors, in their capacity as Shareholders of such class of shares, as compared to the Majority Sponsors, in their capacity as Shareholders of such class of shares, without first obtaining the prior written consent of the Co-Investors holding a majority of the number of such class of shares held by all the Co-Investors. Without limiting the foregoing, the Company agrees that any repurchase or redemption of equity or debt securities by it, other than any repurchase or redemption of equity securities from any current or former director, executive officer or employee of the Company where such equity securities were issued pursuant to or in connection with any compensatory plan, and other than pursuant to the Capstone Shareholder Agreement, will be made pro rata, based upon the ownership of such securities, among the Sponsors.

2.7 Further Assurances by all Shareholders.

2.7.1. Board of Directors Provisions. Each Shareholder hereby agrees to take, at any time and from time to time, all actions necessary or desirable (whether in such Shareholder’s capacity as a shareholder, director or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for the purposes of achieving a quorum and voting such Shareholder’s Shares or execution of a written consent in lieu of attending a meeting) to accomplish the provisions of Sections

 

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2.1 through 2.4, and the Company agrees to take, at any time and from time to time, all actions necessary or desirable within its control (including, without limitation, calling special board and shareholder meetings) to ensure that the provisions of Sections 2.1 through 2.4 are accomplished.

2.7.2. Approved Change in Control. With respect to any Change in Control that has received the Majority Sponsor Approval required under Section 2.5.2, each Shareholder agrees to cast all votes to which such Shareholder is entitled in respect of the Shares, whether at any annual or special meeting, by written consent or otherwise, in such manner as the Majority Sponsors may instruct by written notice to approve, effect, or implement such approved transaction. Each Shareholder hereby grants to the Majority Sponsors an irrevocable proxy coupled with an interest to vote, including in any action by written consent, such Shareholder’s Shares in accordance with such Shareholder’s agreements contained in this Section 2.7.2, which proxy shall be valid and remain in effect until the provisions of this Section 2.7.2 expire pursuant to Section 2.9.

2.8 Actions in Contravention. Subject to applicable law, neither the Company nor any of its Subsidiaries will give effect to any action by any Shareholder or any other Person which is in contravention of this Section 2.

2.9 Period. Each of the foregoing provisions of this Section 2 shall expire upon the consummation of a Change in Control that has received Majority Sponsor Approval.

3. TRANSFER RESTRICTIONS.

3.1 General Transfer Restrictions Each Shareholder understands and agrees that the Shares held by such Shareholder on the date hereof have not been registered under the Securities Act or registered or qualified under any state or foreign securities laws. No Shareholder shall Transfer such Shares (or solicit any offers in respect of any Transfer of such Shares), except in compliance with the Securities Act, any applicable state or foreign securities laws and any restrictions on Transfer contained in this Agreement or any other provisions set forth in the Securities Subscription Agreement (or, in the case of Luxco, the Luxco Securities Subscription Agreement), the Registration Rights Agreement or any other agreements or instruments pursuant to which such Shares were issued.

3.2 Allowed Transfers. Until the expiration of the provisions of this Section 3, no Shareholder shall Transfer any of such Shareholder’s Shares to any other Person except as follows:

3.2.1. Permitted Transferees. Any Shareholder may Transfer any or all of such Shareholder’s Shares to such Shareholder’s Permitted Transferees and, after complying with the terms of Section 3.3, such a Permitted Transferee shall be deemed to be a Shareholder hereunder.

 

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3.2.2. Public Transfers.

(a) Any Shareholder may Transfer any or all of such Shareholders’ Shares in a Public Offering in accordance with and pursuant to the Registration Rights Agreement.

(b) From and after the closing of the Initial Public Offering, a Majority Sponsor may Transfer any or all of such Majority Sponsor’s Shares pursuant to Rule 144 and in compliance with Section 3.4, or pursuant to a block sale to a financial institution in the ordinary course of its trading business; provided that any Transfer pursuant to this Section 3.2.2(b) occurring during the two-year period commencing on the closing of the Initial Public Offering shall not be made without Majority Sponsor Approval.

(c) Shares Transferred pursuant to this Section 3.2.2 shall conclusively be deemed thereafter not to be Shares under this Agreement.

3.2.3. Distributions and Charitable Contributions. From and after the closing of the Initial Public Offering, any Majority Sponsor may Transfer any or all of such Shareholder’s Shares (a) in a pro rata Transfer to its partners, members or shareholders, as applicable, or (b) to a Charitable Organization, in each case without regard to any other restrictions on transfer contained elsewhere in this Agreement; provided that any Transfer pursuant to this Section 3.2.3 occurring during the two-year period commencing on the closing of the Initial Public Offering shall not be made without Majority Sponsor Approval. Any Shares so Transferred shall conclusively be deemed thereafter not to be Shares under this Agreement.

3.2.4. Participation in Drag-Along and Tag-Along.

(a) Drag-Along. Any Shareholder shall Transfer any or all of such Shareholder’s Shares to the extent required pursuant to Section 4.2.

(b) Tag-Along. A Participating Seller may Transfer Shares pursuant to and in accordance with the provisions of Section 4.1, so long as each transferee agrees to be bound by the terms of this Agreement in accordance with Section 3.3 (if not already bound hereby).

3.2.5. Transfers by Co-Investors. In the event that a Co-Investor’s Current Percentage Ownership of Shares is greater than the Current Percentage Ownership of Shares of whichever of Silver Lake or KKR has the smallest Current Percentage Ownership of Shares at such time, such Co-Investor may Transfer any of such Co-Investor’s Shares provided that following any such Transfer such Co-Investor’s Current Percentage Ownership of Shares shall not be less than the Current Percentage Ownership of Shares of whichever of Silver Lake or KKR has the smallest Current Percentage Ownership of Shares at such time. Any Shares so Transferred shall conclusively be deemed thereafter to be Shares under this Agreement and each transferee shall be bound by the terms of this Agreement in accordance with Section 3.3; provided, however, that if such Shares are Transferred (a) in a Public Offering, (b) from and after the closing of the Initial Public Offering, (i) pursuant to Rule 144 or a block sale to a

 

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financial institution in the ordinary course of its trading business, in each case in compliance with Section 3.4, or (ii) pursuant to Regulation S under the Securities Act if such Shares following such Transfer are not “restricted securities” as defined in Rule 144, (c) in a pro rata Transfer to its partners, members or shareholders, as applicable, or (d) to a Charitable Organization, then the Shares Transferred pursuant to this Section 3.2.5 shall conclusively be deemed thereafter not to be Shares under this Agreement.

3.2.6. Other Private Transfers. In addition to any Transfers made in accordance with Sections 3.2.1, 3.2.2, 3.2.3, 3.2.4, 3.2.5 and 3.2.7, any Shareholder may Transfer any or all of such Shareholder’s Shares with Majority Sponsor Approval if such Transfer takes place before the closing of the Initial Public Offering and in compliance with Sections 3.3 and 4.1. Any Shares so Transferred shall conclusively be deemed thereafter to be Shares under this Agreement and each transferee shall be bound by the terms of this Agreement in accordance with Section 3.3.

3.2.7. Luxco and Avago Partners Distributions. Luxco may at any time effect a Transfer of any or all of its Shares in a pro rata Transfer to its shareholders, without regard to any other restrictions on transfer contained elsewhere in this Agreement. Following such a distribution by Luxco, Avago Partners may at any time effect a Transfer of any or all of its Shares in a pro rata Transfer to its partners, without regard to any other restrictions on transfer contained elsewhere in this Agreement. Any Shares so Transferred by Luxco or Avago Partners shall conclusively be deemed thereafter to be Shares under this Agreement, each transferee shall be bound by the terms of this Agreement and, following any such Transfer by Avago Partners, its partners shall be deemed to be Sponsors hereunder.

3.3 Certain Transferees to Become Parties. Any transferee receiving Shares in a Transfer pursuant to Section 3.2.1, 3.2.4(b), 3.2.5 (except a Transfer following which the Shares are deemed not to be Shares hereunder), 3.2.6 or 3.2.7 shall become a Shareholder, party to this Agreement and subject to the terms and conditions of, and be entitled to enforce, this Agreement to the same extent, and in the same capacity, as the Person that Transfers such Shares to such transferee; provided that only a Permitted Transferee of a Sponsor will be deemed to be a Sponsor for purposes of this Agreement (and shall be deemed to be the same Sponsor as the Sponsor which Transferred to it). For the avoidance of doubt, (a) any transferee receiving Shares in a Transfer pursuant to Section 3.2.4(b), 3.2.5 (except a Transfer following which the Shares are deemed not to be Shares hereunder), 3.2.6 or 3.2.7 that is not a Permitted Transferee of a Sponsor will become a party to this Agreement without the benefit of the right to designate board and committee members, or to approve certain actions of the Company and its Subsidiaries, under Section 2; and (b) any transferee receiving Shares in a Transfer pursuant to Section 3.2.4(b), 3.2.5 (except a Transfer following which the Shares are deemed not to be Shares hereunder), 3.2.6 or 3.2.7 that is neither an existing Shareholder nor a Permitted Transferee of a Sponsor will become party to this Agreement as a Shareholder without the benefit of the rights of Tag Along Holders (Section 4.1). Prior to the Transfer of any Shares to any transferee pursuant to Section 3.2.1, 3.2.4(b), 3.2.5 (except a Transfer following which the Shares are deemed not to be Shares hereunder), 3.2.6 or 3.2.7, and as a condition thereto, each Shareholder effecting such Transfer shall (x) cause such transferee to deliver to the Company and each of the Sponsors its written agreement, in form and substance reasonably satisfactory to the Company, to be bound

 

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by the terms and conditions of this Agreement to the extent described in the preceding sentence and (y) if such Transfer is to a Permitted Transferee, remain directly liable for the performance by such Permitted Transferee of all obligations of such transferee under this Agreement.

3.4 Restrictions on Public Transfers under Rule 144. After the Initial Public Offering, and subject to the provisions of Sections 3.2.2 and 3.2.5, if any Shareholders’ sales of Shares pursuant to Rule 144 would be subject to aggregation (each such Shareholder whose Shares would be subject to aggregation, a “Related Holder”), then each such Related Holder shall promptly notify each other Related Holder (a) when it has commenced a measurement period for purposes of the Rule 144 group volume limit in connection with a Sale that is subject to such limit and (b) what the volume limit for that measurement period, determined as of its commencement, will be. Subject to Sections 3.2.2 and 3.2.5, each Related Holder shall be entitled to effect Sales that are subject to the Rule 144 group volume limit pro rata during the applicable measurement period based on its percentage ownership of Shares held by all such Related Holders at the start of such measurement period. The provisions of this Section 3.4 shall not apply to any Transfer of Shares (x) in a Public Offering or (y) not subject to volume limitation under Rule 144.

3.5 Impermissible Transfer. Subject to applicable law, any attempted Transfer of Shares not permitted under the terms of this Section 3 shall be null and void, and the Company shall not in any way give effect to any such impermissible Transfer.

3.6 Notice of Transfer. To the extent that, prior to the Initial Public Offering, any Shareholder or Permitted Transferee shall Transfer any Shares, such Shareholder or Permitted Transferee shall, within three (3) Business Days following consummation of such Transfer, deliver notice thereof to the Company and each Sponsor.

3.7 Period. Each of the foregoing provisions of this Section 3 shall expire upon the earlier of (i) a Change in Control and (ii) Majority Sponsor Approval of the termination in full of the provisions of this Section 3 after the Initial Public Offering.

4. “TAG ALONG” AND “DRAG ALONG” RIGHTS.

4.1 Tag Along. If any Prospective Selling Shareholder proposes to Sell any Shares to any Prospective Buyer(s) other than in a Transfer pursuant to Section 3.2.1, 3.2.2, 3.2.3 or 3.2.7:

4.1.1. Notice. The Prospective Selling Shareholder shall, prior to any such proposed Transfer, deliver a written notice (the “Tag Along Notice”) to each Co-Investor (each such Co-Investor, a “Tag Along Holder”). The Tag Along Notice shall include:

(a) the principal terms and conditions of the proposed Sale, including (i) the number and class of the Shares to be purchased from the Prospective Selling Shareholder, (ii) the fraction(s) expressed as a percentage, determined by dividing the number of Shares of each class to be purchased from the Prospective Selling Shareholder by the total number of Shares of each such class held by the Prospective Selling Shareholder (for each class, the “Tag Along Sale Percentage”) (it being understood that the Company shall reasonably cooperate with the Prospective Selling Shareholder in respect of the determination of each applicable

 

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Tag Along Sale Percentage), (iii) the purchase price or the formula by which such price is to be determined and the payment terms, including a description of any non-cash consideration sufficiently detailed to permit valuation thereof, (iv) the name and address of each Prospective Buyer and (v) if known, the proposed Transfer date; and

(b) an invitation to each Tag Along Holder to make an offer to include in the proposed Sale to the applicable Prospective Buyer(s) Shares of the same class(es) being sold by the Prospective Selling Shareholder held by such Tag Along Holder (not in any event to exceed the Tag Along Sale Percentage of the total number of Shares of the applicable class held by such Tag Along Holder), on the same terms and conditions (subject to Section 4.4.3 in the case of Options, Warrants and Convertible Securities), with respect to each Share Sold, as the Prospective Selling Shareholder shall Sell each of its Shares. For purposes of this Section 4.1, but subject to Section 4.4.3, all Options, Warrants and Convertible Securities will be treated as the same class of Shares for which they may be exercised.

4.1.2. Exercise. Within ten (10) Business Days after the date of delivery of the Tag Along Notice (such date the “Tag Along Deadline”), each Tag Along Holder desiring to make an offer to include Shares in the proposed Sale (each a “Participating Seller” and, together with the Prospective Selling Shareholder and any other shareholders of the Company entitled to participate in the proposed Transfer, collectively, the “Tag Along Sellers”) shall deliver a written notice (the “Tag Along Offer”) to the Prospective Selling Shareholder indicating the number of Shares which such Participating Seller desires to have included in the proposed Sale (subject to the limitation set forth in Section 4.1.1(b)). Each Tag Along Holder who does not make a Tag Along Offer in compliance with the above requirements, including the time period, shall be deemed to have waived all of such Tag Along Holder’s rights to participate in such Sale, and the Tag Along Sellers shall thereafter be free to Sell to the Prospective Buyer, at a purchase price no greater than the purchase price set forth in the Tag Along Notice and on other terms and conditions which are not materially more favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, without any further obligation to such non-accepting Tag Along Holder(s) pursuant to this Section 4.1.

4.1.3. Irrevocable Offer. The offer of each Participating Seller contained in such Participating Seller’s Tag Along Offer shall be irrevocable, and, to the extent such offer is accepted, such Participating Seller shall be bound and obligated to Sell in the proposed Sale on the same terms and conditions, with respect to each Share Sold (subject to Section 4.4.3 in the case of Options, Warrants and Convertible Securities), as the Prospective Selling Shareholder, up to such number of Shares as such Participating Seller shall have specified in such holder’s Tag Along Offer; provided, however, that if the principal terms of the proposed Sale change with the result that the purchase price shall be less than the purchase price set forth in the Tag Along Notice or the other terms and conditions shall be materially less favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, the Prospective Seller shall provide written notice thereof to each Participating Seller and each Participating Seller shall be permitted to withdraw the

 

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offer contained in such holder’s Tag Along Offer by written notice to the Prospective Selling Shareholder within three (3) Business Days after delivery of such written notice from the Prospective Selling Shareholder and upon such withdrawal shall be released from such Participating Seller’s obligations thereunder.

4.1.4. Reduction of Shares Sold. The Prospective Selling Shareholder shall attempt to obtain the inclusion in the proposed Sale of the entire number of Shares which each of the Tag Along Sellers requested to have included in the Sale (as evidenced in the case of the Prospective Selling Shareholder by the Tag Along Notice and in the case of each Participating Seller by such Participating Seller’s Tag Along Offer). In the event the Prospective Selling Shareholder shall be unable to obtain the inclusion of such entire number of Shares in the proposed Sale, the number of Shares to be sold in the proposed Sale shall be allocated among the Tag Along Sellers in proportion, as nearly as practicable, as follows:

(a) there shall be first allocated to each Tag Along Seller a number of Shares equal to the lesser of (i) the number of Shares of the applicable class offered (or proposed, in the case of the Prospective Selling Shareholder) to be included by such Tag Along Seller in the proposed Sale pursuant to this Section 4.1, and (ii) a number of Shares equal to such Tag Along Seller’s Pro Rata Portion; and

(b) the balance, if any, not allocated pursuant to clause (a) above shall be allocated to the Prospective Selling Shareholder and each other Tag Along Seller which offered to sell a number of Shares of the applicable class in excess of such Person’s Pro Rata Portion, pro rata to each Tag Along Seller based upon the amount of such excess, or in such manner as the Tag Along Sellers may otherwise agree.

4.1.5. Additional Compliance. If, prior to consummation, the terms of the proposed Sale shall change with the result that the purchase price to be paid in such proposed Sale shall be greater than the purchase price set forth in the Tag Along Notice or the other terms of such proposed Sale shall be materially more favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, the Tag Along Notice shall be null and void, and it shall be necessary for a separate Tag Along Notice to be delivered, and the terms and provisions of this Section 4.1 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.1; provided, however, that in the case of such a separate Tag Along Notice, the applicable period to which reference is made in Section 4.1.2 shall be three (3) Business Days. In addition, if the Prospective Selling Shareholders have not completed the proposed Sale by the end of the 180th day after the date of delivery of the Tag Along Notice, each Participating Seller shall be released from such Participating Seller’s obligations under such Participating Seller’s Tag Along Offer, the Tag Along Notice shall be null and void, and it shall be necessary for a separate Tag Along Notice to be delivered, and the terms and provisions of this Section 4.1 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.1, unless the failure to complete such proposed Sale resulted from any failure by any Participating Seller to comply with the terms of this Section 4.1.

 

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4.1.6. Actions with Respect to Tag Along. In connection with a proposed Sale to which Section 4.1 applies, each Prospective Selling Shareholder agrees that it shall not enter into any agreement or take any action, the principal purpose of which is to discourage or prevent a particular Tag Along Holder from exercising such Tag Along Holder’s Tag Along rights pursuant to this Section 4.1.

4.2 Drag Along. With respect to a Change in Control which receives Majority Sponsor Approval, each Shareholder hereby agrees, if requested by the Majority Sponsors, to Sell the same percentage (the “Drag Along Sale Percentage”) of the total number of each class of such Shares held by the Prospective Selling Shareholders that is proposed to be sold by the Prospective Selling Shareholders to a Prospective Buyer in such Change in Control (in one transaction or a series of related transactions), in the manner and on the terms set forth in this Section 4.2. For purposes of this Section 4.2, but subject to Section 4.4.3, all Options, Warrants and Convertible Securities will be treated as the same class of Shares for which they may be exercised. All Shares to be sold to the Prospective Buyer shall be included in determining whether or not a proposed transaction constitutes a Change in Control.

4.2.1. Exercise. If the Prospective Selling Shareholders wish to exercise the drag-along rights contained in this Section 4.2, then the Prospective Selling Shareholders shall deliver a written notice (the “Drag Along Notice”) to each other Shareholder at least ten (10) Business Days prior to the consummation of the Change in Control transaction. The Drag Along Notice shall set forth the principal terms and conditions of the proposed Sale, including (a) the number and class of Shares to be acquired from the Prospective Selling Shareholders, (b) the Drag Along Sale Percentage for each class, (c) the consideration to be received in the proposed Sale for each class, (d) the name and address of the Prospective Buyer and (e) if known, the proposed Transfer date. If the Prospective Selling Shareholders consummate the proposed Sale to which reference is made in the Drag Along Notice, each other Shareholder (each, a “Participating Seller,” and, together with the Prospective Selling Shareholders, collectively, the “Drag Along Sellers”) shall: (i) be bound and obligated to Sell the Drag Along Sale Percentage of such Drag Along Seller’s Shares of each class in the proposed Sale on the same terms and conditions, with respect to each Share Sold (subject to Section 4.2.2 and, in the case of Options, Warrants and Convertible Securities, Section 4.4.3) as the Prospective Selling Shareholders shall Sell each Share in the Sale (subject to Section 4.4.3 in the case of Options, Warrants and Convertible Securities); and (ii) except as provided in Section 4.4.3, shall receive the same form and amount of consideration per Share to be received by the Prospective Selling Shareholders for the corresponding class of Shares (on an as converted basis, in the case of Convertible Securities). If any holders of Shares of any class are given an option as to the form and amount of consideration to be received, all holders of Shares of such class will be given the same option. Unless otherwise agreed by each Drag Along Seller, any non-cash consideration shall be allocated among the Drag Along Sellers pro rata based upon the aggregate amount of consideration to be received by such Drag Along Sellers. If at the end of the 180th day after the date of delivery of the Drag Along Notice the Prospective Selling Shareholders have not completed the proposed Sale, the Drag Along Notice shall be null and void, each Participating Seller shall be released from such holder’s obligation under the Drag Along Notice and it shall be necessary for a separate Drag Along Notice to be delivered and the terms and provisions of this Section 4.2 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.2.

 

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4.2.2. Drag Along Seller Exclusions. Notwithstanding Section 4.2.1 but subject to Section 4.4.1, the requirement that Drag Along Sellers Sell on the same terms and conditions as the Prospective Selling Shareholders shall not apply to any provisions providing for bona fide advisory fees paid for actual services rendered for any Sponsor or requiring any Sponsor to agree to a non-compete.

4.3 [Reserved].

4.4 Miscellaneous. The following provisions shall be applied to any proposed Sale to which Section 4.1 or 4.2 applies:

4.4.1. Further Assurances. The Company and each Participating Seller shall take or cause to be taken all such actions as may be reasonably necessary or reasonably desirable in order to expeditiously consummate each Sale pursuant to Section 4.1 or Section 4.2 and any related transactions, including executing, acknowledging and delivering consents, assignments, waivers and other documents or instruments; furnishing information and copies of documents; filing applications, reports, returns, filings and other documents or instruments with governmental authorities; and otherwise cooperating with the Prospective Selling Shareholder(s) and the Prospective Buyer; provided, however, that Participating Sellers shall be obligated to become liable in respect of any representations, warranties, covenants, indemnities or otherwise to the Prospective Buyer solely to the extent provided in the immediately following sentence. Without limiting the generality of the foregoing, each Participating Seller agrees to execute and deliver such agreements as may be reasonably specified by the Prospective Selling Shareholder(s) to which such Prospective Selling Shareholder(s) will also be party, including agreements to (a)(i) make individual representations, warranties, covenants and other agreements as to the unencumbered title to its Shares and the power, authority and legal right to Transfer such Shares, the absence of any Adverse Claim with respect to such Shares and the non-contravention of other agreements and (ii) be liable as to such representations, warranties, covenants and other agreements, in each case to the same extent (but with respect to its own Shares) as the Prospective Selling Shareholder(s), and (b) in the case of a Sale pursuant to Sections 4.1 or 4.2, be liable (whether by purchase price adjustment, indemnity payments or otherwise) in respect of representations, warranties, covenants and agreements in respect of the Company and its subsidiaries; provided, however, that the aggregate amount of liability described in this clause (b) in connection with any Sale of Shares shall not exceed the lesser of (i) such Participating Seller’s pro rata portion of any such liability, to be determined in accordance with such Participating Seller’s portion of the aggregate proceeds to all Participating Sellers and Prospective Selling Shareholder(s) in connection with such Sale and (ii) the proceeds to such Participating Seller in connection with such Sale.

4.4.2. Sale Process. The Majority Sponsors, in the case of a proposed Sale pursuant to Section 4.2, or the Prospective Selling Shareholder, in the case of a proposed Sale pursuant to Section 4.1, shall, in its sole discretion, decide whether or not to pursue,

 

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consummate, postpone or abandon any proposed Sale and the terms and conditions thereof. No Shareholder nor any Affiliate thereof shall have any liability to any other Shareholder or the Company arising from, relating to or in connection with the pursuit, consummation, postponement, abandonment or terms and conditions of any proposed Sale except to the extent such holder shall have failed to comply with the provisions of this Section 4 and such failure shall have prevented the Company or such other Shareholder from exercising its rights pursuant to Section 4.1 or 4.2, as applicable.

4.4.3. Treatment of Options, Warrants and Convertible Securities. If any Participating Seller shall Sell any Options, Warrants or Convertible Securities that are exercisable, convertible or exchangeable in any Sale pursuant to Section 4, such Participating Seller shall receive in exchange for such Options, Warrants or Convertible Securities consideration in the amount (if greater than zero) equal to the purchase price received by the Prospective Selling Shareholder(s) in such Sale for the number of Outstanding Company Shares that would be issued upon exercise, conversion or exchange of such Options, Warrants or Convertible Securities less the exercise price, if any, of such Options, Warrants or Convertible Securities (or, with respect to Convertible Securities, if greater, the amount of the liquidation preference, if any, such securities would be entitled to in connection with such Sale in lieu of converting), in each case, subject to reduction for any tax or other amounts required to be withheld under applicable law.

4.4.4. Closing. The closing of a Sale to which Section 4.1 or 4.2 applies shall take place (i) on the proposed Transfer date, if any, specified in the Tag Along Notice or Drag Along Notice, as applicable (provided that consummation of any Transfer may be extended beyond such date to the extent necessary to obtain any applicable governmental approval or other required approval or to satisfy other conditions), (ii) if no proposed Transfer date was required to be specified in the Drag Along Notice, at such time as the Prospective Selling Shareholders shall specify by notice to each Participating Seller, and (iii) at such place as the Prospective Selling Shareholder(s) shall specify by notice to each Participating Seller. At the closing of such Sale, each Participating Seller shall deliver the certificates evidencing the Shares to be Sold by such Participating Seller, duly endorsed, or with stock (or equivalent) powers duly endorsed, for transfer with signature guaranteed, free and clear of any liens or encumbrances (other than any arising as a result of the terms of this Agreement), with any stock (or equivalent) transfer tax stamps affixed, against delivery of the applicable consideration.

4.5 Period. The provisions of Sections 3.2, 4.1 and 4.2 may be collectively terminated in their entirety at any time following the Initial Public Offering with Majority Sponsor Approval. All of the provisions of this Section 4 above shall expire upon a Change in Control that has been approved by Majority Sponsor Approval.

5. [RESERVED].

 

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6. COVENANTS.

6.1 Information Rights.

6.1.1. Historical Financial Information. The Company will furnish to each Sponsor that owns at least 2.5% of the Outstanding Company Shares, as soon as available, and in any event within 30 days after the end of each month (other than the last month of a fiscal quarter), the consolidated balance sheet of the Company and its Subsidiaries as at the end of such month and the related consolidated statements of income and cash flows for such month and the portion of the fiscal year then ended (to the extent prepared by the Company), setting forth in each case the figures for the corresponding periods of the previous fiscal year in comparative form, all in reasonable detail.

6.1.2. Tax Information Within 90 days after the end of each fiscal year to the extent reasonably practicable, and in any event within 120 days after the end of each fiscal year, the Company shall cause to be delivered to any Person who was a Shareholder during such prior fiscal year all information necessary for the preparation of such Person’s income tax returns (whether federal, state or foreign).

6.1.3. Access. So long as any Sponsor owns at least 5% of the Outstanding Company Shares, such Sponsor shall have the right to (a) inspect, during normal business hours upon reasonable advance notice to the Company and its Subsidiaries, as applicable, and without unreasonably interfering with the Company’s and the Subsidiaries’, as applicable, normal business operations, such of the Company’s and its Subsidiaries’ facilities, records, files and other information as it may reasonably request and (b) meet with the Company’s and its Subsidiaries’ officers, other management personnel and outside accountants to obtain such information regarding the Company and its Subsidiaries and their respective businesses and prospects as it may reasonably request.

6.1.4. Period. The provisions of this Section 6.1 shall expire on a Change in Control.

6.2 Confidentiality. Each Shareholder agrees that it will keep confidential and will not disclose, divulge or use for any purpose, other than in connection with its investment in the Company and its Subsidiaries, any confidential information obtained from the Company pursuant to the terms of this Agreement, unless such confidential information (i) is known or becomes known to the public in general (other than as a result of a breach of this Section 6.2 by such Shareholder or its Affiliates), (ii) is or has been independently developed or conceived by such Shareholder without use of the Company’s or any Subsidiary’s confidential information or (iii) is or has been made known or disclosed to such Shareholder by a third party (other than an Affiliate or agent of such Shareholder) without a breach of any obligation of confidentiality such third party may have to the Company or any Subsidiary that is known to such Shareholder; provided, however, that a Shareholder may disclose confidential information (a) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with its investment in the Company or for evaluating and preparing disclosure pursuant to clause (d) below, (b) to any prospective purchaser of any Shares from such

 

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Shareholder as long as such prospective purchaser agrees to be bound by the provisions of this Section 6.2, (c) to any Affiliate, partner or member of such Shareholder in the ordinary course of business, (d) to the extent necessary for a Shareholder to enforce its rights under this Agreement, the other agreements entered into in connection herewith and under the Company Memorandum of Association and Company Articles of Association or (e) as may otherwise be required by law (including reporting under Securities laws and governmental filings); provided that such Shareholder takes reasonable steps to minimize the extent of any such required disclosure, including using best efforts to obtain a protective order in any legal proceeding, and provide the Company with written notice describing the disclosure that was or is to be made; provided, further, that the acts and omissions of any Person to whom such Shareholder may disclose confidential information pursuant to clauses (a) and (c) of the preceding proviso shall be attributable to such Shareholder for purposes of determining such Shareholder’s compliance with this Section 6.2.

Each of the parties hereto acknowledges that the Sponsors may review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company or the Subsidiaries. Nothing in this Section 6.2 shall preclude or in any way restrict the Sponsors or their Affiliates from investing or participating in any particular enterprise, or trading in the securities thereof, whether or not such enterprise has products or services that compete with those of the Company or the Subsidiaries. Except as a Sponsor may otherwise agree in writing after the date hereof with respect to itself or its Affiliates (or its or its Affiliates’ employees, officers, directors, partners, members, shareholders, or agents): (i) such Persons shall have the right to, and shall have no duty (contractual or otherwise) not to, directly or indirectly: (A) engage in the same or similar business activities or lines of business as the Company or any of its Subsidiaries and (B) do business with any client or customer of the Company or any of its Subsidiaries; (ii) no such Person shall be liable to the Company or any of its Subsidiaries or Shareholders for breach of any duty (contractual or otherwise) by reason of any such activities or of such Person’s participation therein; and (iii) in the event that any such Person acquires knowledge of a potential transaction or matter that may be a corporate opportunity for the Company or its Subsidiaries on the one hand, and any such Person on the other hand, or any other person, no such Person shall have any duty (contractual or otherwise) to communicate or present such corporate opportunity to the Company or any of its Subsidiaries or any of its Shareholders and, notwithstanding any provision of this Agreement to the contrary, such Persons shall not be liable to the Company or its Subsidiaries or Shareholders for breach of any duty (contractual or otherwise) by reason of the fact that any such Person directly or indirectly pursues or acquires such opportunity for itself, directs such opportunity to another person, or does not present such opportunity to the Company or its Subsidiaries or Shareholders.

Nothing in this Section 6.2 shall authorize the use of any confidential information in contravention of applicable securities laws.

6.3 Suspension of Information Rights. Any Sponsor entitled to receive any information from the Company pursuant to this Section 6 may, by written notice to the Company, suspend its right to receive any or all of such information for any period of time, as indicated in such notice, and the Company shall comply with such Sponsor’s request.

 

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7. REMEDIES.

7.1 Generally. The parties shall have all remedies available at law, in equity or otherwise in the event of any breach or violation of this Agreement or any default hereunder. The parties acknowledge and agree that in the event of any breach of this Agreement, in addition to any other remedies which may be available, each of the parties hereto shall be entitled to specific performance of the obligations of the other parties hereto and, in addition, to such other equitable remedies (including preliminary or temporary relief) as may be appropriate in the circumstances.

8. LEGENDS.

8.1 Restrictive Legend. Each certificate representing Shares shall have the following legend endorsed conspicuously thereupon:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN TRANSFER AND OTHER RESTRICTIONS PURSUANT TO A SHAREHOLDER AGREEMENT DATED AS OF DECEMBER 1, 2005 AMONG THE ISSUER OF SUCH SECURITIES (THE “COMPANY”) AND CERTAIN OF THE COMPANY’S SHAREHOLDERS, AS AMENDED. A COPY OF SUCH SHAREHOLDER AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”

Any Person who acquires Shares which are not subject to the terms of this Agreement shall have the right to have such legend (or the applicable portion thereof) removed from certificates representing such Shares.

8.2 Securities Act Legend. Each certificate representing Shares shall have the following legend endorsed conspicuously thereupon:

“THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY COUNTRY AND ARE BEING OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE SECURITIES PURCHASED HEREUNDER ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND RESALE UNDER A SHAREHOLDER AGREEMENT AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE LAWS PURSUANT TO REGISTRATION OR EXEMPTION FROM REGISTRATION REQUIREMENTS THEREUNDER AND UNDER SUCH SHAREHOLDER AGREEMENT”

 

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8.3 Stop Transfer Instruction. The Company will instruct any transfer agent not to register the Transfer of any Shares until the conditions specified in the foregoing legends and this Agreement are satisfied.

8.4 Termination of the Securities Act Legend. The requirement imposed by Section 8.2 shall cease and terminate as to any particular Shares (a) when, in the opinion of counsel reasonably acceptable to the Company, such legend is no longer required in order to assure compliance by the Company with the Securities Act or applicable foreign securities laws or (b) when such Shares have been effectively registered under the Securities Act or transferred pursuant to Rule 144 and in accordance with applicable foreign securities laws. Wherever such requirement shall cease and terminate as to any Shares, the holder thereof shall be entitled to receive from the Company, without expense, new certificates not bearing the legend set forth in Section 8.2.

9. AMENDMENT, TERMINATION, ETC.

9.1 Oral Modifications. This Agreement may not be orally amended, modified, extended or terminated, nor shall any oral waiver of any of its terms be effective.

9.2 Written Modifications. Except as otherwise expressly set forth herein, this Agreement may be amended, modified, extended or terminated, and the provisions hereof may be waived, only by an agreement in writing signed by the Company and Sponsors holding not less than 70% of the Outstanding Company Shares held by all Sponsors; provided, however, the admission of new parties pursuant to the terms of Section 3.3 shall not constitute an amendment of or notification of this Agreement for purposes of this Section 9.2.

Notwithstanding the foregoing, if any amendment, modification, extension, termination or waiver (an “Amendment”) would (i) adversely change or affect the rights of a particular Sponsor in a manner disproportionate to the rights of the Sponsors approving such Amendment, or (ii) adversely impose any additional material obligations on a particular Sponsor, then the consent of such particular Sponsor shall also be required.

Each such Amendment shall be binding upon each party hereto and each Shareholder subject hereto. In addition, each party hereto and each Shareholder subject hereto may waive any right hereunder, as to itself, by an instrument in writing signed by such party or Shareholder. To the extent the Amendment of any Section of this Agreement would require a specific consent pursuant to this Section 9.2, any Amendment to definitions to the extent used in such Section shall also require the specified consent.

9.3 Effect of Termination. No termination under this Agreement shall relieve any Person of liability for breach prior to termination.

 

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10. DEFINITIONS. For purposes of this Agreement:

10.1 Certain Matters of Construction. In addition to the definitions referred to or set forth below in this Section 10:

(a) The words “hereof,” “herein,” “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any particular Section or provision of this Agreement, and reference to a particular Section of this Agreement shall include all subsections thereof;

(b) The word “including” shall mean including, without limitation;

(c) Definitions shall be equally applicable to both nouns and verbs and the singular and plural forms of the terms defined; and

(d) The masculine, feminine and neuter genders shall each include the other.

10.2 Definitions. The following terms shall have the following meanings:

“Acquisition” means the acquisition of the Semiconductor Products Group of Agilent pursuant to an Asset Purchase Agreement, and ancillary agreements, between the Company and Agilent dated August 14, 2005, as amended from time to time.

“Adverse Claim” shall have the meaning set forth in Section 8-102 of the applicable Uniform Commercial Code.

“Advisory Agreement” shall mean the Advisory Agreement made and entered into as of the Original Agreement Effective Date by and among the Company, Kohlberg Kravis Roberts & Co., L.P., a Delaware limited partnership, and Silver Lake Management Company, L.L.C., a Delaware limited liability company.

“Affiliate” shall mean, with respect to any Person, (i) any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise); provided, however, that neither the Company nor any of its controlled Affiliates shall be deemed an Affiliate of any of the Shareholders (and vice versa); provided, further, neither Integral Capital nor Capstone shall be deemed to be an Affiliate of any of Silver Lake, Avago Partners or KKR, (ii) if such Person is an investment fund, any other investment fund the primary investment advisor to which is the primary investment advisor to such Person or an Affiliate thereof and (iii) if such Person is a natural Person, any Family Member of such natural Person.

“Agilent” means Agilent Technologies, Inc., a Delaware corporation.

“Agreement” shall have the meaning set forth in the Preamble.

“Amended Agreement” shall have the meaning set forth in the Recitals.

“Amended Agreement Effective Date” shall have the meaning set forth in the Recitals.

 

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“Amendment” shall have the meaning set forth in Section 9.2.

“Avago Partners” shall have the meaning set forth in the Preamble.

“Board” shall have the meaning set forth in the Recitals.

“Board Designator” has the meaning set forth in Section 2.2.1.

“Business Day” shall mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in Singapore.

“Capstone” shall have the meaning set forth in the Preamble.

“Capstone Shareholder Agreement” shall mean the Shareholder Agreement, dated as of February 3, 2006, between the Company and Capstone.

“Change in Control” shall mean any transaction or series of related transactions (whether by merger, consolidation or sale or transfer of the Company Equity Shares or assets (including stock of its Subsidiaries), or otherwise) as a result of which an Independent Third Party obtains ownership, directly or indirectly, (i) of Company Equity Shares which represent more then 50% of the total voting power in the Company or (ii) by lease, license, sale or otherwise, of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.

“Charitable Organization” shall mean a charitable organization as described by Section 501(c)(3) of the Internal Revenue Code of 1986, as in effect from time to time.

“Co-Investor” shall mean any of Temasek, Geyser, Avago Partners, Integral Capital or Capstone.

“Company” shall have the meaning set forth in the Preamble.

“Company Articles of Association” shall mean the amended and restated articles of association of the Company, as amended from time to time.

“Company Equity Shares” shall mean the Company Shares and any other classes of ordinary or preferred shares of the Company.

“Company Memorandum of Association” shall mean the amended and restated memorandum of association of the Company, as amended from time to time.

“Company Shares” shall have the meaning set forth in the Recitals.

“Convertible Securities” shall mean any evidence of indebtedness, shares of stock or other securities or rights (other than Options and Warrants) which are directly or indirectly convertible into or exchangeable or exercisable for Company Shares.

“Current Percentage Ownership” of Silver Lake, KKR or a Sponsor means, as of a date of determination, the number of Shares owned by Silver Lake, KKR or such Sponsor, as the case may be, divided by the number of Silver Lake’s, KKR’s or such Sponsor’s, as the case may be,

 

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Initial Shares. For purposes of calculating the Current Percentage Ownership of Silver Lake or KKR, each of Silver Lake and KKR shall be deemed to own its pro rata portion of the number of Shares owned by Luxco based upon their ownership of Luxco equity securities.

“Drag Along Notice” shall have the meaning set forth in Section 4.2.1.

“Drag Along Sale Percentage” shall have the meaning set forth in Section 4.2.

“Drag Along Sellers” shall have the meaning set forth in Section 4.2.1.

“Effective Date” shall have the meaning set forth in Section 1.

“Equivalent Shares” shall mean, at any date of determination, (a) as to any Outstanding Company Shares, such number of Outstanding Company Shares and (b) as to any outstanding Options, Warrants or Convertible Securities which constitute Shares, the number of Outstanding Company Shares for which or into which such Options, Warrants or Convertible Securities may at the time be exercised, converted or exchanged (or which will become exercisable, convertible or exchangeable on or prior to, or by reason of, the transaction or circumstance in connection with which the number of Equivalent Shares is to be determined).

“Exchange Act” shall mean the Securities Exchange Act of 1934, as in effect from time to time.

“Family Member” shall mean, with respect to any natural Person, such Person’s spouse and descendants (whether or not adopted) and any trust, family limited partnership or limited liability company that is and remains solely for the benefit of such Person’s spouse and/or descendants.

“Geyser” shall have the meaning set forth in the Preamble.

“Indemnitees” shall have the meaning set forth in Section 11.9.

“Independent Third Party” means any Person or group (within the meaning of Section 13(d)(3) of the Exchange Act) that is not one of the Majority Sponsors (or any Affiliate of such Majority Sponsor, or any officer, director, or employee of such Majority Sponsor or its Affiliates).

“Initial Public Offering” shall mean the initial firm commitment underwritten Public Offering registered under the Securities Act or equivalent foreign securities laws (other than a registration statement on Form F-4, Form S-4 or Form S-8 (or any similar or successor form or equivalent foreign form)).

“Initial Shares” shall mean, with respect to Silver Lake, KKR or any Sponsor, the number of Shares owned by Silver Lake, KKR or such Sponsor, as the case may be, on the date hereof, as set forth opposite such Person’s name on Schedule I attached hereto; which number of Shares shall be proportionally adjusted (and Schedule I shall be modified accordingly) for any stock split, combinations, stock dividend or other recapitalization affecting the Company Equity Shares. For purposes of calculating the number of Initial Shares held by each of Silver Lake and KKR, each of Silver Lake and

 

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KKR shall be deemed to own its pro rata portion of the number of Company Shares owned by Luxco on the date hereof based upon their ownership of Luxco equity securities.

“Integral Capital” shall have the meaning set forth in the Preamble.

“KKR Designees” shall have the meaning set forth in Section 2.1.2(b).

“KKR” shall have the meaning set forth in the Preamble.

“KKR Europe” shall have the meaning set forth in the Preamble.

“KKR Europe II” shall have the meaning set forth in the Preamble.

“KKR Millennium” shall have the meaning set forth in the Preamble.

“Luxco” shall have the meaning set forth in the Preamble.

“Luxco Securities Subscription Agreement” shall mean the Securities Subscription Agreement made as of the Amended Agreement Effective Date between the Company and Luxco.

“Majority Sponsor Approval” means the written approval of Silver Lake and KKR.

“Majority Sponsors” shall mean Silver Lake and KKR, and for so long as Luxco holds Shares, Luxco.

“Management Equity Plan” shall have the meaning set forth in the Recitals.

“Management Shareholder Agreement” shall have the meaning set forth in the Recitals.

“Management Shareholders” shall have the meaning set forth in the Recitals.

“Observer” shall have the meaning set forth in Section 2.1.3.

“Options” shall mean any options to subscribe for, purchase or otherwise directly acquire Company Shares, other than any such option held by the Company or any right to purchase shares pursuant to this Agreement.

“Original Agreement” has the meaning set forth in the Recitals.

“Original Agreement Effective Date” shall have the meaning set forth in the Recitals.

“Outstanding Company Shares” shall mean as of the time of determination, the outstanding Company Shares as of such time, including any Company Shares into which the outstanding Convertible Securities as of such time are convertible (treating such Convertible Securities as a number of outstanding Company Shares for which or into which such Convertible Securities may at the time be converted for all purposes of this Agreement except as otherwise specifically set forth herein). Outstanding Company Shares does not include Company Shares

 

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issuable upon exercise of Options or Warrants which have not actually been issued as of the time of determination. In determining Outstanding Company Shares owned by KKR or Silver Lake, in addition to the application of Section 11.1, (i) each of KKR, Silver Lake, Integral Capital, Capstone and Avago Partners shall be deemed to own their pro rata share of Company Equity Securities owned by Luxco based upon their ownership of Luxco equity securities and (ii) each of KKR and Silver Lake shall be deemed to own Company Equity Shares owned, or deemed owned pursuant to clause (i) above, by Avago Partners.

“Participating Seller” shall have the meaning set forth in Sections 4.1.2 and 4.2.1.

“Permitted Transferee” shall mean, with respect to any Shareholder, an Affiliate of such Shareholder (other than any “portfolio company” of such Shareholder or any entity controlled by any portfolio company of such Shareholder); provided that such transferee shall agree to be bound by the terms of this Agreement in accordance with Section 3.3. With respect to Temasek, Permitted Transferees of Temasek includes Affiliates of Temasek Holdings (Private) Limited.

“Person” shall mean any individual, partnership, corporation, company, association, trust, joint venture, limited liability company, unincorporated organization, entity or division, or any government, governmental department or agency or political subdivision thereof.

“Pro Rata Portion” shall mean, with respect to each Tag Along Seller, a number of Shares equal to the aggregate number of Shares of the applicable class that the Prospective Buyer is willing to purchase in the proposed Sale, multiplied by a fraction, the numerator of which is the aggregate number of Shares of the applicable class held by such Tag Along Seller and the denominator of which is the aggregate number of Shares of the applicable class held by all Tag Along Sellers.

“Prospective Buyer” shall mean any Person, including the Company or any of its Subsidiaries, proposing to purchase or otherwise acquire Shares from a Prospective Selling Shareholder.

“Prospective Selling Shareholder” shall mean:

(a) for purposes of Section 4.1, any Majority Sponsor that proposes to Transfer any Shares to any Prospective Buyer; and

(b) for purposes of Section 4.2, any Shareholder forming part of the group of Majority Sponsors that has elected to exercise the drag along right provided by such Section.

“Public Offering” shall mean a public offering and sale of Company Shares by the Company (or any successor) pursuant to an effective registration statement under the Securities Act and/or in compliance with equivalent applicable foreign securities laws.

“Registration Rights Agreement” shall have the meaning set forth in Section 11.4.

“Related Holder” shall have the meaning set forth in Section 3.4.

 

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“Rule 144” shall mean Rule 144 under the Securities Act (or any successor rule).

“Sale” shall mean a Transfer for value and the terms “Sell” and “Sold” shall have correlative meanings.

“Securities Act” shall mean the United States Securities Act of 1933, as in effect from time to time.

“Securities Subscription Agreement” shall mean the Securities Subscription Agreement made as of the Original Agreement Effective Date among the Company and each of the investors listed on Schedule 1 thereto.

“Senior Manager” shall mean the chief executive officer (or if none, the highest ranking executive officer) of the Company, and any management employee of the Company that reports directly to the chief executive officer (or if none, the highest ranking executive officer) of the Company.

“Shareholders” shall have the meaning set forth in the Preamble.

“Shares” shall mean (a) all Outstanding Company Shares held by a Shareholder, whenever issued, including all Outstanding Company Shares issued upon the exercise, conversion or exchange of any Options, Warrants or Convertible Securities, and (b) all Options, Warrants and Convertible Securities held by a Shareholder (treating such Options, Warrants and Convertible Securities as a number of Company Shares equal to the number of Equivalent Shares represented by such Options, Warrants and Convertible Securities for all purposes of this Agreement except as otherwise specifically set forth herein).

“Silver Lake” shall have the meaning set forth in the Preamble.

“SLP” shall have the meaning set forth in the Preamble.

“SLP Cayman” shall have the meaning set forth in the Preamble.

“SLP Designees” shall have the meaning set forth in Section 2.1.2(a).

“Sponsor Designees” shall have the meaning set forth in Section 2.1.2(c).

“Sponsors” shall mean the Majority Sponsors and the Co-Investors.

“Subsidiary” means, with respect to any Person, any company, corporation, partnership, limited liability company, association, joint venture or other business entity of which (i) if a company or corporation, at least 50% of the total voting power of shares or stock entitled (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, association, joint venture or other business entity, at least 50% of the partnership, joint venture or other similar ownership

 

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interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries, and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Company.

“Tag Along Deadline” shall have the meaning set forth in Section 4.1.2.

“Tag Along Holder” shall have the meaning set forth in Section 4.1.1.

“Tag Along Notice” shall have the meaning set forth in Section 4.1.1.

“Tag Along Offer” shall have the meaning set forth in Section 4.1.2.

“Tag Along Sale Percentage” shall have the meaning set forth in Section 4.1.1(a).

“Tag Along Sellers” shall have the meaning set forth in Section 4.1.2.

“Temasek” shall have the meaning set forth in the Preamble.

“Temasek Designee” shall have the meaning set forth in Section 2.1.2(c).

“Third-Party Claim” shall have the meaning set forth in Section 11.9.

“Transaction Agreements” shall mean this Agreement, the Registration Rights Agreement, the Securities Subscription Agreement and the Luxco Securities Subscription Agreement.

“Transfer” shall mean any sale, pledge, assignment, encumbrance or other transfer or disposition of any Shares to any other Person, whether directly, indirectly, voluntarily, involuntarily, by operation of law, pursuant to judicial process or otherwise.

“Warrants” shall mean any warrants to subscribe for, purchase or otherwise directly acquire Company Equity Shares.

“Wholly Owned Subsidiary” means any Subsidiary of the Company of which all of the capital stock or other ownership interests (including any options, warrants, or other securities convertible into, or exercisable or exchangeable for, equity securities) are owned by the Company and/or one or more Wholly Owned Subsidiaries.

11. MISCELLANEOUS.

11.1 Aggregation of Shares. All Shares held by a Shareholder and its Affiliates shall be aggregated together for purposes of (a) determining the availability of any rights under Sections 2, 3.4, 4, 6 and 9.2 and (b) applying the defined terms “Initial Shares” and “Current Percentage Ownership”. Each of Silver Lake and KKR shall be deemed to own its own, its Affiliates’ and Avago Partners’ pro rata portion of the number of Outstanding Company Shares owned by Luxco, in addition to all Shares held directly by Avago Partners, for purposes of

 

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determining the availability of any rights of Silver Lake and KKR under Section 2 and Section 6.1. Silver Lake shall also be deemed to own Integral Capital’s pro rata portion of the number of Outstanding Company Shares owned by Luxco, in addition to all Shares held directly by Integral Capital, for purposes of determining the availability of any rights of Silver Lake under Section 6.1. If the Shares held by a Sponsor are held by or transferred to one or more Affiliates or Permitted Transferees of such Sponsor, then for purposes of this Agreement, the vote or action of such Sponsor shall be made by the holder(s) of a majority of the Shares of the relevant class(es) held by such Sponsor, Affiliates and Permitted Transferees as to which such vote or action is to be made.

11.2 Authority; Effect. Each party hereto represents and warrants to and agrees with each other party that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on behalf of such party and do not violate any agreement or other instrument applicable to such party or by which its assets are bound. This Agreement does not, and shall not be construed to, give rise to the creation of a partnership among any of the parties hereto, or to constitute any of such parties members of a joint venture, group or other association.

11.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given, delivered and effective on the earliest of (i) the date of receipt of confirmation of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section 11.3 prior to 5:00 p.m. (New York time) on a Business Day, (ii) the Business Day after the date of receipt of confirmation of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 5:00 p.m. (local time for the recipient) on any Business Day and earlier than 11:59 p.m. (local time for the recipient) on the day preceding the next Business Day, (iii) one (1) Business Day after being sent, if sent by nationally recognized overnight courier service (charges prepaid), (iv) the date of receipt of a non-automated reply email confirming receipt, if sent via email, or (v) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows (or such other address as any such party shall designate by written notice to the other parties):

 

If to the Company:
		Avago Technologies Limited
		No. 1 Yishun Avenue 7
		Singapore 768923
		Singapore
		Facsimile:		(408) 435-4288
		Attention:		Hock E. Tan and Patricia H. McCall
		E-mail:		hock.tan@avagotech.com and phmccall@avagotech.com

 

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with a copy to:
		Kohlberg Kravis Roberts & Co.
		2800 Sand Hill Road, Suite 200
		Menlo Park, California 94025
		Facsimile:		(650) 233-6574 and (650) 233-6548
		Attention:		James H. Greene Jr. and Adam A. Clammer
		E-mail:		jgreene@kkr.com and adam@kkr.com
and with a copy to:
		Silver Lake Partners
		2725 Sand Hill Road, Suite 150
		Menlo Park, California 94025
		Facsimile:		(650) 234-2593
		Attention:		Alan K. Austin, Managing Director and Chief Operating Officer, and Yolande Jun, Chief Financial Officer
		E-mail:		alan.austin@silverlake.com and yolande.jun@silverlake.com
and with a copy to:
		Latham & Watkins LLP
		140 Scott Drive
		Menlo Park, CA 94025
		Facsimile:		(650) 463-2600
		Attention:		Peter F. Kerman
		E-mail:		peter.kerman@lw.com
If to Luxco:
		Bali Investments S.à r.l.
		59, rue de Rollingergrund
		L-2440 Luxembourg
		Luxembourg
		Facsimile:		+352 263 891 03 70
		Attention:		Dr. Wolfgang Zettel
		E-mail:		Wolfgang.Zettel@bali-investments.lu
with a copy to:
		Kohlberg Kravis Roberts & Co.
		2800 Sand Hill Road, Suite 200
		Menlo Park, California 94025
		Facsimile:		(650) 233-6574 and (650) 233-6548
		Attention:		James H. Greene Jr. and Adam A. Clammer
		E-mail:		jgreene@kkr.com and adam@kkr.com
and with a copy to:
		Silver Lake Partners
		2725 Sand Hill Road, Suite 150
		Menlo Park, California 94025
		Facsimile:		(650) 234-2593
		Attention:		Alan K. Austin, Managing Director and Chief Operating Officer,
				and Yolande Jun, Chief Financial Officer
		E-mail:		alan.austin@silverlake.com and yolande.jun@silverlake.com

 

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and with a copy to:
		Latham & Watkins LLP
		140 Scott Drive
		Menlo Park, CA 94025
		Facsimile:		(650) 463-2600
		Attention:		Peter F. Kerman
		E-mail:		peter.kerman@lw.com
If to Avago Partners:
		Avago Investment Partners, Limited Partnership
		c/o Walkers SPV Limited
		PO Box 908GT
		George Town, Grand Cayman
		Cayman Islands
		Facsimile:		(345) 814-8217
		Attention:		Iain McMurdo
		E-mail:		imcmurdo@walkers.com.ky
with a copy to:
		Kohlberg Kravis Roberts & Co.
		2800 Sand Hill Road, Suite 200
		Menlo Park, California 94025
		Facsimile:		(650) 233-6574 and (650) 233-6548
		Attention:		James H. Greene Jr. and Adam A. Clammer
		E-mail:		jgreene@kkr.com and adam@kkr.com
and with a copy to:
		Silver Lake Partners
		2725 Sand Hill Road, Suite 150
		Menlo Park, California 94025
		Facsimile:		(650) 234-2593
		Attention:		Alan K. Austin, Managing Director and Chief Operating Officer,
				and Yolande Jun, Chief Financial Officer
		E-mail:		alan.austin@silverlake.com and yolande.jun@silverlake.com

 

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and with a copy to:
		Latham & Watkins LLP
		140 Scott Drive
		Menlo Park, CA 94025
		Facsimile:		(650) 463-2600
		Attention:		Peter F. Kerman
		E-mail:		peter.kerman@lw.com
If to Silver Lake:
		Silver Lake Partners II Cayman and
		Silver Lake Technology Investors II Cayman
		c/o Walkers SPV Limited
		PO Box 908GT
		George Town, Grand Cayman
		Cayman Islands
		Facsimile:		(345) 814-8217
		Attention:		Iain McMurdo
		E-mail:		imcmurdo@walkers.com.ky
with a copy to:
		Silver Lake Partners
		2725 Sand Hill Road, Suite 150
		Menlo Park, California 94025
		Facsimile:		(650) 234-2593
		Attention:		Alan K. Austin, Managing Director and Chief Operating Officer,
				and Yolande Jun, Chief Financial Officer
		E-mail:		alan.austin@silverlake.com and yolande.jun@silverlake.com
and with a copy to:
		Latham & Watkins LLP
		140 Scott Drive
		Menlo Park, CA 94025
		Facsimile:		(650) 463-2600
		Attention:		Peter F. Kerman
		E-mail:		peter.kerman@lw.com
If to KKR:
		KKR Millennium Fund (Overseas), KKR European Fund,
		KKR European Fund II and KKR Partners (International)
		c/o Eeson & Woolstencroft LLP
		Suite 500, 603 - 7th Avenue S.W.
		Calgary, Alberta
		Canada
		Facsimile:		(403) 264-1603
		Attention:		Mark N. Woolstencroft
		E-mail:		mark.woolstencroft@ewlegal.com

 

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with a copy to:
		Kohlberg Kravis Roberts & Co.
		2800 Sand Hill Road, Suite 200
		Menlo Park, California 94025
		Facsimile:		(650) 233-6574 and (650) 233-6548
		Attention:		James H. Greene Jr. and Adam A. Clammer
		E-mail:		jgreene@kkr.com and adam@kkr.com
and with a copy to:
		Latham & Watkins LLP
		140 Scott Drive
		Menlo Park, CA 94025
		Facsimile:		(650) 463-2600
		Attention:		Peter F. Kerman
		E-mail:		peter.kerman@lw.com
If to Integral Capital:
		Integral Capital Partners
		3000 Sand Hill Road
		Bldg. 3, Suite 240
		Menlo Park, California 94025
		Facsimile:		(650) 233-0366
		Attention:		Pamela K. Hagenah
		E-mail:		pam@icp.com
If to Temasek:
		Seletar Investments Pte. Ltd.
		60B Orchard Road
		#06-18
		Tower 2
		The Atrium @ Orchard
		Singapore 238891
		Singapore
		Facsimile:		011-65-6821-1172
		Attention:		Ang Peng Huat and Toufic Sehnaoui
		E-mail:		penghuat@temasek.com.sg and touficsehnaoui@temasek.com.sg

 

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with a copy to:
		Milbank, Tweed, Hadley & McCloy LLP
		30 Raffles Place
		#14-00 Caltex House
		Singapore 048622
		Singapore
		Facsimile:		011-65-6428-2500 and (650) 739-7100
		Attention:		David H. Zemans and Melainie K. Mansfield
		E-mail:		dzemans@milbank.com and mmansfield@milbank.com
If to Geyser:
		Geyser Investment Pte Ltd
		c/o GIC
		168 Robinson Road
		#37-01 Capital Tower
		Singapore 068912
		Singapore
		Facsimile:		011-65-6889-6891
		Attention:		Ng Kin Sze
		E-mail:		ngkinsze@gic.com.sg
with a copy to:
		Geyser Investment Pte Ltd
		c/o GIC Special Investments Pte. Ltd.
		255 Shoreline Drive, Suite 600
		Redwood City, CA 94065
		Facsimile:		(650) 802-1213
		Attention:		Tay Lim Hock and Soo Yar Ping
		E-mail:		taylimhock@gic.com.sg and sooyarping@gic.com.sg
and with a copy to:
		Jones Day
		555 California Street, 26th Floor
		San Francisco, CA 94104-1500
		Facsimile:		(415) 963-6861
		Attention:		Randall B. Schai
		E-mail:		rschai@jonesday.com

 

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If to Capstone:
		Capstone Equity Investors LLC
		9 West 57th Street
		New York, New York 10019
		Facsimile:		(212) 230-9795
		Attention:		Dean Nelson
		E-mail:		nelsd@kkr.com

11.4 Binding Effect, Etc. Except for the Company Memorandum of Association, the Company Articles of Association, the Management Shareholder Agreement, the Capstone Shareholder Agreement, the Securities Subscription Agreement, the Luxco Securities Subscription Agreement and the Registration Rights Agreement dated as of the Original Agreement Effective Date among the Company, the Sponsors and certain other Persons (as amended from time to time, the “Registration Rights Agreement”), this Agreement constitutes the entire agreement of the parties with respect to its subject matter, supersedes all prior or contemporaneous oral or written agreements or discussions with respect to such subject matter, including the term sheet dated August 14, 2005 among the Company, Temasek, Geyser and certain entities affiliated with KKR and Silver Lake, and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives, successors and permitted assigns. Except as otherwise expressly provided herein, no holder party hereto may assign any of its respective rights or delegate any of its respective obligations under this Agreement without the prior written consent of each of the Sponsors, and any attempted assignment or delegation in violation of the foregoing shall be null and void.

11.5 Descriptive Heading. The descriptive headings of this Agreement are for convenience of reference only, are not to be considered a part hereof and shall not be construed to define or limit any of the terms or provisions hereof.

11.6 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one instrument.

11.7 Severability. In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, such provision shall be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable law. The provisions hereof are severable, and in the event any provision hereof should be held invalid or unenforceable in any respect, it shall not invalidate, render unenforceable or otherwise affect any other provision hereof.

11.8 No Recourse. Notwithstanding anything that may be expressed or implied in this Agreement, the Company and each Shareholder covenant, agree and acknowledge that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any current or future director, officer, employee, general or limited partner, Shareholder, holder of beneficial interest or member of any Shareholder or of any Affiliate or assignee thereof, as such, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law,

 

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it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current or future officer, agent or employee of any shareholder or any current or future member of any Shareholder or any current or future director, officer, employee, partner, shareholder, holder of beneficial interest or member of any Shareholder or of any Affiliate or assignee thereof, as such, for any obligation of any Shareholder under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of or by reason of such obligations or their creation.

11.9 Expenses; Indemnity. To the extent permitted by applicable law, the Company and the Subsidiaries, jointly and severally, will pay, and will indemnify, exonerate and hold each of the Sponsors, and each of their respective partners, shareholders, members, Affiliates, directors, officers, fiduciaries, managers, controlling Persons, employees and agents and each of the partners, shareholders, members, Affiliates, directors, officers, fiduciaries, managers, controlling Persons, employees and agents of each of the foregoing (collectively, the “Indemnitees”) free and harmless from and against any and all liability for payment of, the out-of-pocket expenses (including reasonable fees and expenses of all advisors, accountants and counsel) incurred by the Indemnitees or any of them, in connection with: (a) any amendments or waivers (whether or not the same become effective) under or in respect of this Agreement, the other Transaction Agreements, the Company Memorandum of Association or the Company Articles of Association, (b) the interpretation of, and enforcement of the rights granted under, this Agreement, the other Transaction Agreements, the Company Memorandum of Association or the Company Articles of Association, (c) any transaction to which the Company or any of the Subsidiaries is a party and as to which such Person seeks advice of counsel, and (d) any Third-Party Claim arising out of its investment in the Company (other than liabilities arising out of its breach of this Agreement, any of the other Transaction Agreements, or any other agreement or instrument to which such Indemnitee is or becomes a party). If and to the extent that the foregoing undertaking may be unavailable or unenforceable for any reason, the Company and the Subsidiaries, jointly and severally, hereby agree to make the maximum contribution to the payment and satisfaction of each of the foregoing indemnified liabilities which is permissible under applicable law. The rights of any Indemnitee to indemnification hereunder will be in addition to any other rights any such Person may have under any other agreement or instrument referenced above or any other agreement or instrument to which such Indemnitee is or becomes a party or is or otherwise becomes a beneficiary or under law or regulation. A “Third-Party Claim” means any (i) claim brought by a Person other than the Company or any of the Subsidiaries, a Sponsor or any Indemnitee and (ii) any derivative claim brought in the name of the Company or any of the Subsidiaries that is initiated by a Person other than a Sponsor or any Indemnitee.

11.10 No Third Party Beneficiaries. Nothing in this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.

11.11 Consent of Shareholders to Advisory Agreement. Each of the Shareholders hereby acknowledges that the Company has entered into the Advisory Agreement under which certain Affiliates of KKR and Silver Lake will receive fees and reimbursement of expenses not received by the other Shareholders or any of their Affiliates, and each such Shareholder agrees and consents to the Company entering into the Advisory Agreement and to

 

- 36 -

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the payment by the Company, and the receipt by certain Affiliates of KKR and SLP, of the amounts provided for by the Advisory Agreement; provided, however, no amendment to the Advisory Agreement that materially increases the financial benefits payable to KKR, Silver Lake or both thereunder shall be entered into without the prior written approval of a majority of the Company’s disinterested directors or a majority in interest of the Company’s disinterested shareholders.

12. GOVERNING LAW.

12.1 Governing Law. The Companies Act, Chapter 50 of Singapore will govern all issues concerning the internal corporate affairs of the Company. All other claims arising out of or based upon this Agreement or relating to the subject matter hereof shall be governed by and construed in accordance with the domestic substantive laws of the State of New York without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

12.2 Consent to Jurisdiction. Each party to this Agreement, by its execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York and the state courts sitting in the State of New York, County of New York for the purpose of any action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation arising out of or based upon this Agreement or relating to the subject matter hereof, (b) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, and agrees not to allow any of its subsidiaries to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such proceeding brought in one of the above-named courts is improper, or that this Agreement or the subject matter hereof or thereof may not be enforced in or by such court and (c) hereby agrees not to commence or maintain any action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation arising out of or based upon this Agreement or relating to the subject matter hereof or thereof other than before one of the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such action, claim, cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or investigation to any court other than one of the above-named courts whether on the grounds of inconvenient forum or otherwise. Notwithstanding the foregoing, to the extent that any party hereto is or becomes a party in any litigation in connection with which it may assert indemnification rights set forth in this agreement, the court in which such litigation is being heard shall be deemed to be included in clause (a) above. Notwithstanding the foregoing, any party to this Agreement may commence and maintain an action to enforce a judgment of any of the above-named courts in any court of competent jurisdiction. Each party hereto hereby consents to service of process in any such proceeding in any manner permitted by New York law, and agrees that service of process by registered or certified mail, return receipt requested, at its address specified pursuant to Section 11.3 hereof is reasonably calculated to give actual notice.

12.3 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS

 

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PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS SECTION 12.3 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 12.3 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

12.4 Exercise of Rights and Remedies. No delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any such delay, omission nor waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.

* * Signature pages follow * *

 

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IN WITNESS WHEREOF, the parties have executed this Second Amended and Restated Shareholder Agreement on the day and year first written above.

 

Signature Page to Second Amended and Restated Shareholder Agreement for

Avago Technologies Limited

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Signature Page to Second Amended and Restated Shareholder Agreement for

Avago Technologies Limited

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Signature Page to Second Amended and Restated Shareholder Agreement for

Avago Technologies Limited

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Signature Page to Second Amended and Restated Shareholder Agreement for

Avago Technologies Limited

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Signature Page to Second Amended and Restated Shareholder Agreement for

Avago Technologies Limited

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Signature Page to Second Amended and Restated Shareholder Agreement for

Avago Technologies Limited

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Schedule I

AVAGO TECHNOLOGIES LIMITED

Sponsor Ownership of Shares

 

Shareholder		Capital Contribution			Number of Ordinary Shares
Sponsors
Bali Investments S.à r.l.		$	863,382,010		172,676,402
Silver Lake Partners II Cayman, L.P.		$	392,550,720		78,510,144
Silver Lake Technology Investors II Cayman, L.P.		$	1,115,970		223,194
Integral Capital Partners VII, L.P.		$	6,748,865		1,349,773
KKR Millennium Fund (Overseas), Limited Partnership		$	88,913,505		17,782,701
KKR European Fund, Limited Partnership		$	177,038,700		35,407,740
KKR European Fund II, Limited Partnership		$	118,742,725		23,748,545
KKR Partners (International), Limited Partnership		$	15,720,245		3,144,049
Avago Investment Partners, Limited Partnership		$	60,618,185		12,123,637
Capstone Equity Investors LLC		$	1,933,090		386,618
Seletar Investments Pte. Ltd.		$	113,354,585		22,670,917
Geyser Investment Pte Ltd		$	75,569,720		15,113,944
TOTAL		$	1,052,306,310		210,461,263

Exhibit 5.1

Form of WongPartnership Opinion

[On the letterhead of WongPartnership LLP]

WongPartnership LLP

One George Street

#20-01

Singapore 049145

Tel: 65 6416 8000

Date:

The Board of Directors

Avago Technologies Limited

1 Yishun Avenue 7

Singapore 768923

Dear Sirs:

AVAGO TECHNOLOGIES LIMITED (THE “COMPANY”) – REGISTRATION STATEMENT IN RESPECT TO THE PUBLIC OFFERING OF CERTAIN SHARES OF THE COMPANY

 

A.	Introduction

 

1.

We have acted as Singapore legal advisers to Avago Technologies Limited (the “Company”), a company incorporated under the laws of Singapore, in connection with its filing with the Securities and Exchange Commission (the “SEC”) in the United States of America of a registration statement on Form S-1 (File No. 333-153127) (as amended, the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the public offering (the “Offering”) of (a) [•] new ordinary shares of the Company being offered by the Company (the “New Shares”), (b) [•] ordinary shares of the Company being offered by certain shareholders of the Company (the “Vendor Shares”) and [(c) up to [•] ordinary shares which may be purchased by the underwriters pursuant to an option to purchase additional shares granted by such shareholders (the “Vendor Option Shares”) pursuant to the Final Underwriting Agreement (as defined below)].

 

B.

Documents

 

2.	In rendering this opinion, we have examined:

 

2.1

a copy of the certificate of incorporation of the Company;

 

2.2

a copy of the memorandum of association and articles of association of the Company, as amended as of [•];

 

2.3

a copy of the minutes and resolutions in writing of the Board of Directors of the Company dated 21 August 2008 and [•] (the “Board Resolutions”);

 

2.4

a copy of the minutes and resolutions passed by the shareholders of the Company on [•] (the “Company Shareholders’ Resolutions”);

 

2.5

a copy of the Registration Statement as filed with the SEC; and

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2.6

the proposed form of the underwriting agreement (draft dated [•]) (the “Draft Underwriting Agreement”) to be entered into among (i) the Company; (ii) certain shareholders of the Company (the “Selling Shareholders”) and (iii) Deutsche Bank Securities Inc., Barclays Capital Inc., Morgan Stanley & Co. Incorporated and Citigroup Global Markets Inc. (as representatives of the several underwriters named in Schedule I of the Draft Underwriting Agreement) (the “Underwriters”).

 

3.

For the purposes of this legal opinion, we have not examined any documents other than those specifically listed in paragraphs 2 and 7 of this legal opinion. In particular, save as expressly provided in paragraph 5 of this legal opinion, we express no opinion whatsoever with respect to any agreement or document.

 

C.	Assumptions

 

4.	We have assumed (without enquiry):

 

4.1

the genuineness of all signatures on all documents and the completeness, and the conformity to original documents, of all copies submitted to us;

 

4.2

that the facts stated in all documents submitted to us are correct;

 

4.3

any signatures and seals on the documents reviewed by us are genuine;

 

4.4

that the copies of the Board Resolutions and the Company Shareholders’ Resolutions submitted to us for examination are true, complete and up-to-date copies, have not been amended or rescinded and are in full force and effect and no other action has been taken which may affect the validity of the Board Resolutions or the Company Shareholders’ Resolutions, as the case may be;

 

4.5

(a) that the information disclosed in the searches made on [•] 2009 at the Accounting and Corporate Regulatory Authority of Singapore against the Company (the “ACRA Searches”) are true and complete, (b) that such information has since not then been materially altered and (c) that the ACRA Searches did not fail to disclose any material information which has been delivered for filing but did not appear on the public file at the time of the ACRA Searches; and

 

4.6

the Draft Underwriting Agreement submitted to us is not materially different from the final underwriting agreement to be executed in relation to the Offering (the “Final Underwriting Agreement”).

 

D.

Opinion

 

5.	Based on the foregoing and subject to the assumptions set out in this opinion and having regard to such legal considerations as we have deemed relevant and subject to any matters not disclosed to us, we are of the opinion that:

 

5.1

the New Shares, when issued and delivered in accordance with the terms of the Final Underwriting Agreement and the articles of association of the Company, will be duly authorised by the Company for issuance and subscription and will be validly issued, fully paid and non-assessable; and

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5.2

the Vendor Shares [and Vendor Option Shares] are duly authorised by the Company for issuance and subscription and are (a) validly issued and non-assessable and (b) fully paid.

 

6.

For the purposes of this legal opinion, we have assumed that the term “non-assessable” (a term which has no recognised meaning under Singapore law) in relation to the New Shares, Vendor Shares [and Vendor Option Shares] to be offered means that holders of such shares, having fully paid up all amounts due on such shares, are under no further personal liability to contribute to the assets or liabilities of the Company in their capacities purely as holders of such shares.

 

7.

In rendering our opinion in paragraph 5.2(b) above, we have received and relied upon as to factual matters, a certificate (the “Company Certificate”) dated [•] 2009 from [•], a director of the Company, and (b) the ACRA Searches. Save for the ACRA Searches, we have made no independent investigation into any factual matters set out in the Company Certificate and we have not ourselves checked the accuracy or completeness or otherwise verified the factual matters furnished in the Company Certificate.

 

8.

This opinion relates only to the laws of general application of the Republic of Singapore as at the date hereof and as currently applied by the Singapore courts, and is given on the basis that it will be governed by and construed in accordance with the laws of the Republic of Singapore. We have made no investigation of, and do not express or imply any views on, the laws of any country other than the Republic of Singapore.

 

9.	With respect to matters of fact material to this opinion, we have relied on the statements of the responsible officers of the Company.

 

10.

We hereby consent to the use of our opinion as herein set forth as an exhibit to the Registration Statement and to the use of our name under the caption “Legal Matters” in the prospectus forming a part of the Registration Statement. In giving this consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act.

 

11.

The opinion given herein is strictly limited to the matters stated herein and is not to be read as extending by implication to any other matter in connection with the Offering, or otherwise including, but without limitation, any other document signed in connection with the Offering. Further, save for the filing of this opinion with the SEC as an exhibit to the Registration Statement, this opinion is not to be circulated to, or relied upon by, any other person (other than persons entitled to rely on it pursuant to applicable provisions of federal securities law in the United States, if applicable) or quoted or referred to in any public document or filed with any governmental body or agency without our prior written consent.

Yours faithfully,

WongPartnership LLP

Exhibit 10.28

July 17, 2009

Hock E. Tan

 

Re:	Employment Offer

Dear Hock:

You and Avago Technologies Limited (the “Company”) are parties to that certain offer letter agreement dated as of March 28, 2006 (the “Prior Agreement”), which sets forth, among other things, the terms of your employment with the Company. This letter agreement (this “Agreement”) amends and restates the Prior Agreement in its entirety. This Agreement supersedes the Prior Agreement and any other agreement or policy to which the Company is a party with respect to your employment with the Company. Notwithstanding the foregoing, your Agreement Regarding Confidential Information and Proprietary Developments (the “Confidentiality Agreement”) remains in full effect. You may accept this Agreement by signing and returning a copy of this Agreement to the Company as provided below.

 

•

DUTIES. Your employment with the Company commenced as of March 31, 2006. You are employed as the President and Chief Executive Officer to perform the duties customarily associated with such positions. You shall continue to report to and remain a member of the Company’s Board of Directors (the “Board”) and shall continue to perform your services on a full-time basis at the Company’s headquarters in San Jose, California. You shall continue to devote your full working time and attention to the business affairs of the Company.

 

•

BASE SALARY/BONUS. You will continue to receive an annual base salary of $625,000 for all hours worked to be paid in accordance with the Company’s customary payroll procedures, less payroll deductions and withholdings. You will remain eligible to receive a cash bonus each year based upon your and/or the Company’s attainment of certain performance objectives as determined by the Board following consultation with you. The target level for attaining 100% of your objectives will be 120% of your base salary. Based upon actual performance versus such performance objectives, your cash bonus payouts may exceed, or be lower than, your target amount. Except as otherwise provided herein, any cash bonus earned by you must be paid by March 15 of the year following the calendar year during which such bonus is earned.

 

•

EQUITY COMPENSATION. You will continue to be eligible to participate in the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries or any successor equity plan.

 

•

Initial Stock Option Grant. Pursuant to the Prior Agreement, on April 13, 2006 the Board granted you an initial non-qualified option to purchase 2,350,000 ordinary shares of the Company with a per share exercise price of $5.00 per share (the “Initial Option”). Of the total ordinary shares subject to the Initial Option, 925,000 vest in equal

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annual installments over five years commencing on December 1, 2005 and 1,425,000 vest based upon the Company’s attainment of certain performance targets at a rate of up to 20% per year over five years commencing on December 1, 2005, in each case, assuming your continued employment through the date of vesting.

 

•

Subsequent Stock Option Grant. On March 3, 2009 the Board granted you a non-qualified option to purchase 300,000 ordinary shares of the Company with a per share exercise price of $10.00 per share (the “Subsequent Option”). The ordinary shares subject to the Subsequent Option vest in equal annual installments over five years commencing on the date of grant of the Subsequent Option.

 

•

Ordinary Share Purchase. On April 13, 2006, you exercised your right to purchase 400,000 ordinary shares of the Company at a price of $5.00 per share.

 

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BENEFITS. You will continue to be eligible to participate in all of the employee benefit plans or programs the Company generally makes available to its executive employees, pursuant to the terms and conditions of such plans. You will continue to be entitled to three (3) weeks of paid flexible time off per year.

 

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EXPENSES. You shall continue to be entitled to reimbursement for all ordinary and reasonable out-of-pocket business expenses which are reasonably incurred by you in furtherance of the Company’s business and in accordance with the Company’s standard policies.

 

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INDEMNIFICATION. Your indemnification agreement with the Company shall remain in full force and effect on terms no less favorable than the terms of any such indemnification agreement between the Company and any other director. You shall continue to be covered under the Company’s director’s and officer’s insurance policy consistent with the coverage of other directors generally.

 

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COMPANY POLICIES AND CONFIDENTIALITY AGREEMENT. As an employee of the Company, you are expected to abide by all of the Company’s policies and procedures. As a condition of your employment, you agree to continue to abide by the terms of your Confidentiality Agreement.

 

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OTHER AGREEMENTS. As a condition to your continued employment with the Company, you agree that your performance of your duties for the Company will not violate any agreements, obligations or understandings that you may have with any third party or prior employer. You agree not to make any unauthorized disclosure or use, on behalf of the Company, of any confidential information belonging to any of your former employers. You also represent that you are not in unauthorized possession of any materials containing a third party’s confidential and proprietary information.

 

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OUTSIDE ACTIVITIES. While employed by the Company, you will not engage in any business activity in competition with the Company nor make preparations to do so. With prior approval of the Board you may serve as a member of the board of directors of other companies not in competition with the Company; provided such service does not interfere with the performance of your duties hereunder.

 

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AT-WILL EMPLOYMENT. As an employee of the Company, you may terminate your employment and your service as a member of the Board at any time and for any reason whatsoever simply by notifying the Company. Similarly, the Company may terminate your employment and your service as a member of the Board at any time and for any reason whatsoever, with or without Cause or advance notice. Your at-will employment relationship with the Company cannot be changed except in writing signed by an authorized representative of the Board.

 

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SEVERANCE BENEFITS.

 

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Termination By The Company Without Cause or for Good Reason, Death or Disability. If your employment by the Company is terminated by the Company without Cause (as defined below), or if you voluntarily terminate your employment for Good Reason (as defined below), and if you provide the Company with, and do not revoke during any applicable revocation period, a signed customary and reasonable general release of all claims against the Company and its affiliates in a form acceptable to the Company within sixty (60) days of your termination of employment, the Company shall provide you with continuation of your base salary for a period of twelve (12) months after your termination date at the rate in effect immediately prior to your termination of employment, less applicable withholdings and payment of an amount equal to the lesser of (a) your prior year’s bonus and (b) your prior year’s target bonus, both payable in twelve (12) substantially equal installments pursuant to the Company’s normal and customary payroll procedures with such payments to commence as soon as administratively practicable after the release becomes no longer subject to revocation. In the event your employment terminates because of your death or disability, upon provision to the Company, and the failure to revoke during any applicable revocation period, of a signed general release of all claims against the Company and its affiliates in a form acceptable to the Company within sixty (60) days of such death or disability, you (or your estate) will receive the severance benefits described in this paragraph. In the event that a Change in Control (as defined below) occurs within the three (3) month period immediately following the termination of your employment pursuant to which you are entitled to benefits under this paragraph, then, effective as of such Change in Control, in lieu of the benefits provided by this paragraph, you shall become entitled to the benefits set forth in the next paragraph as if you had experienced a termination of employment during the twelve month period commencing on such Change in Control, provided, that any benefits payable to you pursuant to this sentence shall be reduced by any payments which as of such date have already been made pursuant to this paragraph.

 

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Change in Control Benefits. If your employment by the Company is terminated by the Company without Cause, or if you voluntarily terminate your employment for Good Reason, or if you terminate your employment with the Company because of your death or disability, in each case within the twelve (12) month period commencing on a Change in Control, and if you provide the Company with, and do not revoke during any

 

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applicable revocation period, a signed customary and reasonable general release of all claims against the Company and its affiliates in a form acceptable to the Company within sixty (60) days of such termination of employment, then in lieu of the severance benefits described in the preceding paragraph, the Company shall provide you (or your estate) with continuation of your base salary for a period of twenty-four (24) months after your termination date at the rate in effect immediately prior to your termination of employment, less applicable withholdings, and payment of an amount equal to 200% of the lesser of (a) your prior year’s bonus and (b) your prior year’s target bonus, both payable in twenty-four (24) substantially equal installments pursuant to the Company’s normal and customary payroll procedures with such payments to commence as soon as administratively practicable after the release becomes no longer subject to revocation. Finally, your then outstanding options shall immediately accelerate and become vested and exercisable for that number of shares subject thereto with respect to which such options would have become vested and exercisable over the succeeding twelve (12) month period based solely on the passage of time and your performance of services (i.e., you will receive twelve (12) month accelerated vesting on your time vesting options).

 

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Gross-Up Payment. Prior to the Company becoming listed on an established stock exchange or national market system, Kohlberg Kravis & Roberts Co., L.P. and Silver Lake Partners, LLC (the “Sponsors”) shall use commercially reasonable efforts to obtain shareholder approval for any payments that would otherwise result in an excise tax liability under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) following your timely, written request therefore. In the event the Company becomes listed on any established stock exchange or a national market system, the Board shall negotiate in good faith with you regarding whether to amend this Agreement to provide for a payment to offset any excise taxes imposed by Section 4999 of the Code.

 

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Termination By The Company With Cause Or Termination By You. If your employment by the Company is terminated by the Company with Cause, or if you voluntarily terminate your employment with the Company (other than for Good Reason), you shall not be entitled to any severance pay, severance benefits, or any compensation or benefits from the Company whatsoever, other than as required under applicable law.

 

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DEFINITIONS.

 

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Cause. For purposes of this Agreement, “Cause” shall mean (A) your willful refusal to perform in any material respect your duties or responsibilities for the Company or its affiliates or willful disregard in any material respect of any financial or other budgetary limitations established in good faith by the Board; or (B) your material breach of any provision of this Agreement that is not cured upon ten (10) days notice thereof; or (C) the engaging by you in conduct that causes material and demonstrable injury, monetarily or otherwise, to the Company or any affiliates, including, but not limited to, misappropriation or conversion of assets of the Company or any affiliates (other than non-material assets); or (D) your engagement in an act of moral turpitude or conviction of or entry of a plea of nolo contendere to a felony.

 

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Change in Control. For purposes of this Agreement, “Change in Control” shall mean (i) the sale of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole to a person who is not an affiliate of the Company or the Sponsors; (ii) a sale by the Sponsors or any of their respective affiliates resulting in more than fifty percent (50%) of the voting shares of the Company being held by a person or related group of persons that does not include the Sponsors or any of their respective affiliates or (iii) a merger or consolidation of the Company into another person which is not an affiliate of the Company or the Sponsors, if and only if as a result of such merger or consolidation the Sponsors lose the ability to elect a majority of the Board (or the resulting entity). Notwithstanding the foregoing, an event shall not constitute a “Change in Control” unless such event constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, as described in Section 1.409A-3(i)(5) of the Department of Treasury regulations promulgated under Section 409A of the Code (“Section 409A”).

 

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Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any of the following: (A) a reduction in your base salary (other than as part of a broad salary reduction program instituted because the Company or its affiliates is in financial distress); (B) a substantial reduction in your duties and responsibilities; (C) the elimination or reduction of your eligibility to participate in the Company’s benefit programs that is inconsistent with the eligibility of executive employees of the Company to participate therein; (D) the Company informs you of its intention to transfer your primary workplace to a location that is more than 50 miles from your workplace as set forth herein; (E) the Company’s material breach of this Agreement that is not cured within sixty (60) days written notice thereof; and (F) any serious chronic mental or physical illness of a member of your family that requires you to terminate your employment because of substantial interference with your duties at the Company; provided, that at the Company’s request you shall provide the Company with a written physician’s statement confirming the existence of such mental or physical illness.

 

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SECTION 409A

 

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Separation from Service. Notwithstanding anything in the Agreement to the contrary, any compensation or benefits payable under the Agreement that constitute “nonqualified deferred compensation” within the meaning of Section 409A (“Deferred Compensation”) and which are designated under the Agreement as payable upon your termination of employment shall be payable only upon your “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided under the next paragraph, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the sixtieth (60th) day following your Separation from Service. Any installment payments that would have been made to you during the sixty (60) day period immediately following your Separation from Service but for the preceding sentence shall be paid to you on the sixtieth (60th) day following your Separation from Service and the remaining payments shall be made as provided in the Agreement.

 

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Specified Employee. If the Company determines that you are a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at the time of your Separation from Service, any Deferred Compensation to which you are entitled under the Agreement in connection with such Separation from Service shall be delayed to the extent required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. To the extent that the payment of any compensation is delayed in accordance with this subsection, such compensation shall be paid to you in a lump sum on the first business day following the earlier to occur of (i) the expiration of the six-month period measured from the date of your Separation from Service, or (ii) the date of your death, and any compensation or benefits that are payable under the Agreement following such delay shall be paid as otherwise provided in the Agreement.

 

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Expense Reimbursement. To the extent that any reimbursements provided to you are deemed to constitute Deferred Compensation, such amounts shall be paid or reimbursed to you promptly, but in no event later than December 31 of the year following the year in which the expense is incurred. The amount of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and your right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.

 

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Installments. Your right to receive any installment payments under this Agreement, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Treasury Regulation Section 1.409A-2(b)(2)(iii).

 

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Exceptions to Prohibition on Acceleration of Payments. To the extent applicable, each of the exceptions to Section 409A’s prohibition on acceleration of payments of Deferred Compensation provided under Treasury Regulation 1.409A-3(j)(4) shall be permitted under the Agreement.

 

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General. To the extent applicable, the Agreement shall be interpreted in accordance with Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that, the Company determines in good faith that any compensation or benefits payable under the Agreement may not be either exempt from or compliant with Section 409A, the Company may adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effective), or take any other commercially reasonable actions necessary or appropriate (i) to preserve the intended tax treatment of the compensation and benefits payable hereunder and/or preserve the economic benefits of such compensation and benefits, and/or (ii) to exempt the compensation and benefits payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder.

 

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ENTIRE AGREEMENT. This Agreement and the documents referenced herein (including, without limitation, the Confidentiality Agreement, your indemnification agreement and equity-related documents) constitute the complete, final and exclusive embodiment of the entire agreement between you and the Company with respect to the terms and conditions of your employment specified herein. This Agreement supersedes any other such promises, warranties, representations or agreements, including, without limitation, the Prior Agreement. This Agreement may not be amended or modified except by a written instrument signed by you and an authorized representative of the Board.

 

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GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of California without regard to the conflicts of law provisions thereof.

 

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DISPUTE RESOLUTION. To ensure the timely and economical resolution of disputes that arise in connection with your employment with the Company, you and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance or interpretation of this Agreement, your employment, or the termination of your employment, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in Santa Clara County, California, conducted by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) under the applicable JAMS employment rules. By agreeing to this arbitration procedure, both you and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that you or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required if the dispute were decided in a court of law. Nothing in this Agreement is intended to prevent either you or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Notwithstanding the foregoing, you and the Company each have the right to resolve any issue or dispute over intellectual property rights by Court action instead of arbitration.

We are looking forward to a long and fruitful continued working relationship with you. If you choose to accept this Agreement under the terms described above, please acknowledge your acceptance of our offer by returning a signed copy of this letter to our attention.

Sincerely,

 

/s/    Debra Landers

Debra Landers

Avago Technologies Limited

 

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Agreed and Accepted this 17 day of July, 2009

 

/s/    Hock E. Tan

Hock E. Tan

 

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Exhibit 10.32

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”) is entered into as of July 17, 2009 (the “Effective Date”) by and between Fariba Danesh (the “Executive”) and Avago Technologies U.S. Inc. (the “Employer”), a wholly-owned subsidiary of Avago Technologies Limited (“Parent”, and together with the Employer, the “Company”). This Agreement amends and restates in its entirety that certain Employment Agreement entered into effective as of November 1, 2007 by and between the Executive and the Company (the “Prior Agreement”). This Agreement supersedes the Prior Agreement and any other agreement or policy to which the Company is a party with respect to Executive’s employment with the Company. Notwithstanding the foregoing, Executive’s Confidentiality Agreement remains in full effect.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is hereby agreed by and between the parties hereto as follows:

ARTICLE I

DEFINITIONS

For purposes of the Agreement, the following terms are defined as follows:

1.1 “Affiliate” means, with respect to any party, any corporation, limited liability company, partnership, joint venture, firm and/or other entity which Controls, is Controlled by or is under common Control with such party.

1.2 “Board” means the Board of Directors of Parent.

1.3 “Business” means the business of the Company as of the Effective Date, and any other business activity or service in which the Company is engaged or making an active effort to develop business at the time of termination of Executive’s employment with the Company or any Affiliate of the Company.

1.4 “Cause” means:

(a) Executive’s willful refusal to perform in any material respect her lawful duties or responsibilities for the Company or its Affiliates or willful disregard in any material respect of any financial or other budgetary limitations established in good faith by the Board or the board of any Affiliate by which Executive is employed; or

(b) the engaging by the Executive in conduct that causes material and demonstrable injury, monetarily or otherwise, to the Company or any of its Affiliates, including, but not limited to, misappropriation or conversion of assets of the Company or its Affiliates (other than non-material assets); or

(c) Executive’s engagement in an act of moral turpitude or conviction of or entry of a plea of nolo contendere to a felony.

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No act or failure to act by Executive shall be deemed “willful” if done, or omitted to be done, by Executive in good faith and with the reasonable belief that Executive’s action or omission was in the best interest of the Company or its subsidiaries or consistent with Company policies or the directive of the Board.

1.5 “Change in Control” means (i) the sale of all or substantially all of the assets of Parent and its subsidiaries, taken as a whole to a person who is not an Affiliate of Parent or the Sponsors; (ii) a sale by the Sponsors or any of their respective Affiliates resulting in more than fifty percent (50%) of the voting shares of Parent being held by a person or related group of persons that does not include the Sponsors or any of their respective Affiliates; or (iii) a merger or consolidation of Parent into another person which is not an Affiliate of Parent or the Sponsors, if and only if as a result of such merger or consolidation the Sponsors lose the ability to elect a majority of the Board (or the resulting entity). Notwithstanding the foregoing, an event shall not constitute a “Change in Control” unless such event constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, as described in Section 1.409A-3(i)(5) of the Department of Treasury regulations promulgated under Section 409A of the Code (“Section 409A”).

1.6 “Control” means (i) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or participating assets entitled to vote for the election of directors; and (ii) in the case of non-corporate entities (such as individuals, limited liability companies, partnerships or limited partnerships), either (A) direct or indirect ownership of at least fifty percent (50%) of the equity interest, or (B) the power to direct the management and policies of the noncorporate entity.

1.7 “Covered Entity” means every Affiliate of Executive, and every business, association, trust, corporation, partnership, limited liability company, proprietorship or other entity in which Executive has invested (whether through debt or equity securities), or has contributed any capital or made any advances to, or in which any Affiliate of Executive has an ownership interest or profit sharing percentage, or a firm from which Executive or any Affiliate of Executive receives or is entitled to receive income, compensation or consulting fees in which Executive or any Affiliate of Executive has an interest as a lender (other than solely as a trade creditor for the sale of goods or provision of services that do not otherwise violate the provisions of this Agreement); provided, however, that only entities whose management decisions are influenced by Executive shall be considered Covered Entities for purposes of this Agreement. Notwithstanding anything contained in the foregoing provisions to the contrary, the term “Covered Entity” shall not include the Company or any Affiliate of the Company.

1.8 “Disability” means a determination that Executive is unable to substantially perform the material duties and responsibilities contemplated by this Agreement as a result of a disability within the meaning of the Company’s disability insurance plan despite reasonable accommodation by the Company as required by the Americans with Disabilities Act, which inability continues for a period exceeding ninety (90) consecutive days or shorter periods exceeding ninety (90) days in the aggregate during any period of one hundred eighty (180) consecutive days.

 

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1.9 “Involuntary Termination Without Cause” means Executive’s dismissal or discharge by the Company for any reason other than for Cause. The termination of Executive’s employment as a result of Executive’s death or Disability shall not be deemed to be an Involuntary Termination Without Cause.

1.10 “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended and the Department of Treasury Regulations and other interpretive guidance issued thereunder.

1.11 “Severance Period” means the period of time beginning with the effective date of Executive’s termination of employment with the Company and ending on the earlier of (i) the twelve-month anniversary of such termination of employment with the Company or (ii) the date Executive takes any action, directly or indirectly, that, if such action had been taken while employed by the Company, would breach the terms of Section 5.2 or Section 5.3 of this Agreement.

1.12 “Sponsors” means Kohlberg Kravis & Roberts Co., L.P. and Silver Lake Partners, LLC.

1.13 “Term” means the period commencing on the Effective Date and continuing until employment is terminated pursuant to the provisions of this Agreement, or otherwise.

1.14 “Territory” means each and every state, county, city or other political subdivision or geographic location in the United States or in any other territory or jurisdiction outside of the United States, in each case in which the Company or any Affiliate of the Company is engaged in the Business.

1.15 “Voluntary Termination for Good Reason” means the voluntary termination by Executive of Executive’s employment under this Agreement for any of the following reasons:

(a) A reduction in Executive’s Salary (other than as part of a broad salary reduction program instituted because the Company or its affiliates are in financial distress);

(b) A substantial reduction in Executive’s duties and responsibilities;

(c) The elimination or reduction of Executive’s eligibility to participate in the Company’s benefit programs that is inconsistent with the eligibility of executive employees of the Company to participate therein;

(d) The Company informs Executive of its intention to transfer Executive’s primary workplace to a location that is more than fifty (50) miles from Executive’s workplace as of the Effective Date;

(e) The Company’s material breach of its obligations under this Agreement that is not cured within sixty (60) days following written notice thereof; or

(f) Any serious chronic mental or physical illness of a member of Executive’s family that requires Executive to terminate Executive’s employment because of substantial interference with Executive’s duties at the Company; provided, that at the Company’s request Executive shall provide the Company with a written physician’s statement confirming the existence of such mental or physical illness.

 

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ARTICLE II

EMPLOYMENT BY THE COMPANY

2.1 Position and Duties. During the Term, the Company hereby agrees to employ Executive in the position of Senior Vice President and General Manager – Fiber Optics Product Division and Executive hereby agrees to provide services for the Company, on such terms and conditions as provided in this Agreement. Executive shall perform such duties as are customarily associated with the position of Senior Vice President and General Manager – Fiber Optics Product Division and such other duties as are commensurate with Executive’s position and are assigned to Executive by the Company. Executive shall report to the Chief Executive Officer of Parent. While Executive is employed by the Company during the Term, Executive shall devote Executive’s commercially reasonable efforts and substantially all of Executive’s business time and attention (except for vacation periods and reasonable periods of illness or other incapacities permitted by the Company’s general employment policies or as otherwise set forth in this Agreement) to the business of the Company. Except with the prior written consent of the Company, Executive shall not during the Term undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor and are not in violation of the provisions in Article V.

2.2 Employment Policies. The employment relationship between the parties shall also be governed by the employment policies of the Company, including those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company’s employment policies, this Agreement shall control.

ARTICLE III

COMPENSATION

3.1 Base Salary. During the Term, Executive shall receive for services to be rendered hereunder an annual base salary of $364,164 (as may be adjusted from time to time, the “Salary”), payable on the regular payroll dates of the Company as may be in effect from time to time.

3.2 Target Bonus. During the Term, Executive shall be eligible to participate in the Avago Performance Bonus program with an annual bonus targeted at 75% of Executive’s Salary on the terms and conditions determined by the Company (the “Target Bonus”). Except as otherwise provided herein, Executive must remain employed through the date of payment to continue to be eligible for a cash bonus.

3.3 Equity Compensation. While employed hereunder, Executive shall continue to be eligible to receive such equity incentive awards as shall be determined by the Board, in its sole discretion.

 

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3.4 Standard Company Benefits. During the Term, Executive shall be entitled to all rights and benefits under the terms and conditions of the standard Company benefits and compensation practices that may be in effect from time to time and are provided by the Company to similarly situated employees generally.

ARTICLE IV

TERMINATION

4.1 Termination for Cause; Voluntary Termination for Any Reason other than Good Reason. In the event that the Company terminates Executive’s employment for Cause or in the event Executive terminates Executive’s employment for any reason other than a Voluntary Termination for Good Reason, the Company shall have no obligation to Executive except for payment of any Salary, vacation and expense reimbursement accrued and unpaid to the effective date of termination and except as otherwise required by law (collectively, the “Accrued Obligations”). The date of a resignation by Executive shall be the date specified in a written notice of resignation from Executive to the Company, provided that Executive shall provide at least thirty (30) days’ advance written notice of Executive’s resignation.

4.2 Involuntary Termination Without Cause; Voluntary Termination for Good Reason. In the event that, prior to the second anniversary of the Effective Date, Executive’s employment terminates due to an Involuntary Termination Without Cause, Executive’s death or Executive’s disability, or a Voluntary Termination for Good Reason, (a) Executive shall receive payment of Executive’s Accrued Obligations, and (b) subject to Executive’s delivery, execution and nonrevocation (during the applicable revocation period) of a general release of all claims against the Company and its Affiliates in a form acceptable to the Company (a “General Release”) within sixty (60) days of such termination, the Company shall (i) continue to pay Executive’s Salary during the Severance Period on the regular payroll dates of the Company as may be in effect from time to time, and (ii) the vesting of each option to purchase the ordinary shares of Parent held by Executive immediately prior to such termination shall accelerate to the extent such option would otherwise have vested had Executive remained employed through the second anniversary of the Effective Date. Except as provided in this Section 4.2 or as otherwise required by applicable law, Executive shall have no right under this Agreement or otherwise to receive any other compensation or to participate in any other plan, program or arrangement, including, without limitation, any employee benefit plans, after an Involuntary Termination Without Cause or Voluntary Termination for Good Reason with respect to the year of such termination and later years.

4.3 Termination Prior to a Change in Control

In the event that Executive’s employment is terminated by the Company due to an Involuntary Termination Without Cause, Executive’s death or Executive’s Disability or by Executive due to a Voluntary Termination for Good Reason after the second anniversary of the Effective Date and during the three-month period immediately preceding a Change in Control, then subject to the terms and conditions of Section 4.4, Executive shall be entitled to the benefits as set forth in Section 4.4 as if Executive had experienced an Involuntary Termination Without Cause effective on the date of such Change in Control. Any benefits to which Executive becomes entitled pursuant to this Section 4.3 shall be reduced by any payments made to Executive, other than Accrued Obligations, as severance following his termination of employment.

 

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4.4 Termination On or After a Change in Control. In the event that after the second anniversary of the Effective Date and within the 12-month period commencing on a Change in Control, Executive’s employment is terminated by the Company due to an Involuntary Termination Without Cause, Executive’s death or Executive’s Disability or by Executive due to a Voluntary Termination for Good Reason, (a) Executive shall receive payment of Executive’s Accrued Obligations, and (b) subject to Executive’s delivery, execution and nonrevocation (during the applicable revocation period) of a General Release within sixty (60) days of such termination, the Company shall (i) continue to pay Executive’s Salary during the Severance Period on the regular payroll dates of the Company as may be in effect from time to time and (ii) pay to Executive on the date such payment is made to the executives of the Company, the lesser of Executive’s Target Bonus for the year during which such termination of employment occurs and the Target Bonus amount paid to Executive for the year prior to the year during which Executive’s employment terminates; and (iii) the vesting of each option to purchase the ordinary shares of Parent held by Executive immediately prior to such termination shall immediately become vested and exercisable with respect to that number of shares which such options would have become vested and exercisable over the succeeding 12-month period based solely on the passage of time and Executive’s performance of services. Except as provided in this Section 4.3 or as otherwise required by applicable law, Executive shall have no right under this Agreement or otherwise to receive any other compensation or to participate in any other plan, program or arrangement, including, without limitation, any employee benefit plans, after an Involuntary Termination Without Cause or Voluntary Termination for Good Reason within the 12-month period commencing on a Change in Control with respect to the year of such termination and later years.

ARTICLE V

COVENANTS OF EXECUTIVE

5.1 Confidentiality Agreement. Executive hereby acknowledges and understands that Executive remains bound by the Confidentiality Agreement, and the provisions of the Confidentiality Agreement shall survive any termination of this Agreement or of Executive’s employment relationship with the Company as set forth in the Confidentiality Agreement.

5.2 Non-Compete. During the Term, Executive shall not, either directly or indirectly, individually or by or through any Covered Entity, participate in, assist, aid or advise in any way, any business or enterprise that competes with the Business in the Territory. During the Term Executive shall not, either directly or indirectly, individually or by or through any Covered Entity, invest in (whether through debt or equity securities), contribute any capital or make any advances to, take an ownership interest or profit-sharing percentage in, seek to purchase or acquire, or receive income, compensation or consulting fees from, any entity or person involved in the Business in the Territory. Notwithstanding the foregoing, nothing contained in this Section 5.2 prohibits Executive or any Affiliate of Executive from owning less than two percent (2%) of any class of voting securities publicly held and quoted on a recognized securities exchange or inter-deal quotation system, of any issuer, and no such issuer shall be considered a

 

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Covered Entity solely by virtue of such ownership or the incidents thereof; provided, however, that Executive hereby acknowledges and agrees that the ownership of securities permitted herein is limited to a passive investment and that Executive is hereby prohibited from actively participating in the business of or otherwise maintaining a relationship with such issuer that would contravene the restricted activities contemplated by this Section 5.2, other than to participate in the general rights and benefits as a shareholder thereof.

5.3 Non-Solicitation. During the Term and for twelve (12) months thereafter, Executive shall not, either directly or indirectly and shall not permit any Covered Entity which is Controlled by Executive to, either directly or indirectly, (a) solicit, or take any other action that is intended to solicit, the business of any customers of the Company or any of its Affiliates, (b) solicit, take away, or attempt to solicit or take away (either on such Executive’s behalf or on behalf of any other person or entity) any person (i) who is then an employee of the Company or any Affiliate of the Company, or (ii) who has terminated his or her employment with the Company or any Affiliate of the Company within the six (6) months preceding such solicitation or other action, or (c) entice or solicit or attempt to induce, solicit or influence (either on such Executive’s behalf or on behalf of any other person or entity) any employee of the Company or any Affiliate of the Company to terminate or otherwise leave their employment with the Company or any Affiliate of the Company.

5.4 Enforcement; Remedies. Executive hereby agrees and acknowledges that the Company has a valid and legitimate business interest in protecting the Business in the Territory from any activity prohibited by Article V hereof. Executive acknowledges that Executive’s expertise in the Business is of a special and unique character which gives this expertise a particular value, and that a breach of the covenants in Article V hereof by Executive will cause serious and irreparable harm to the Company. Executive therefore acknowledges that a breach of the covenants in Article V hereof by Executive cannot be adequately compensated in an action for damages at law, and equitable relief would be necessary to protect the Company from a violation of this Agreement and from the harm which this Agreement is intended to prevent. By reason thereof, Executive acknowledges that the Company is entitled, in addition to any other remedies it may have under this Agreement or otherwise, to preliminary and permanent injunctive and other equitable relief to prevent or curtail any breach of this Agreement without any requirement to prove actual damages or post a bond. Executive acknowledges, however, that no specification in this Agreement of a particular legal or equitable remedy may be construed as a waiver of or prohibition against pursuing other legal or equitable remedies in the event of a breach of this Agreement by Executive.

5.5 Severability and Modification of Any Unenforceable Covenant. It is the parties’ intent that each of the covenants under this Article V be read and interpreted with every reasonable inference given to its enforceability. However, it is also the parties’ intent that if any term, provision or condition of the covenants is held to be invalid, void or unenforceable, the remainder of the provisions thereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is also the parties’ intent that if it is determined any of the covenants are unenforceable because of overbreadth, then the covenants shall be modified so as to make them reasonable and enforceable under the prevailing circumstances.

 

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ARTICLE VI

GENERAL PROVISIONS

6.1 Notices. All notices and other communications under or in connection with this Agreement shall be in writing and shall be deemed given (i) if delivered personally, upon delivery, (ii) if delivered by registered or certified mail (return receipt requested), upon the earlier of actual delivery or three (3) business days after being mailed, (iii) if given by overnight courier with receipt acknowledgment requested, the next business day following the date sent, or (iv) if given by facsimile or telecopy, upon confirmation of transmission by facsimile or telecopy, in each case to the parties at the following addresses:

 

To the Company:		Avago Technologies
		Attn: General Counsel
		350 W. Trimble Road, MS 90MG
		San Jose, CA 95131
		Facsimile: 408-435-4172
with a copy to:		Latham & Watkins LLP
		Attn: Joseph M. Yaffe, Esq.
		140 Scott Drive
		Menlo Park, California 94025
		Facsimile: (650) 463-2600
To Executive:		Fariba Danesh
		[—]
		[—]
		Facsimile: [—]

6.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

6.3 Modifications; Waivers. Waivers or modifications of this Agreement, or of any covenant, condition, or limitation contained herein, are valid only if in writing duly executed by the parties hereto. If either party should waive any breach of any provisions of this Agreement, they shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

 

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6.4 Entire Agreement.

(a) This Agreement, together with the Confidentiality Agreement, contains the parties’ sole and entire agreement regarding the subject matter hereof, and supersedes any and all other agreements, understandings, statements and representations of the parties, including, but not limited to, the Prior Agreement, any offer letter agreement, employment agreement or other agreement regarding Executive’s compensation or terms of employment entered into prior to the Effective Date.

(b) The parties acknowledge and agree that, except for those representations specifically referenced herein, no party has made any representations (i) concerning the subject matter hereof or (ii) inducing the other party to execute and deliver this Agreement. The parties have relied on their own judgment in entering into this Agreement.

6.5 Counterparts. This Agreement may be executed in one or more separate counterparts, including electronically transmitted counterparts, any one of which need not contain signatures of more than one party, but all of which shall be deemed an original and taken together will constitute one and the same Agreement.

6.6 Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

6.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of Executive’s duties hereunder and Executive may not assign any of Executive’s rights or other interest herein (except in connection with any assignment of rights to receive consideration hereunder by or to Executive’s estate made upon the death of Executive) to any party without the prior written consent of the Company, and any such purported assignment shall be null and void. Notwithstanding the foregoing, the Company may, without obtaining the consent of Executive, assign any or all of its rights and obligations under this Agreement to any of its Affiliates; provided, however, that any such assignment shall not expand the obligations or restrictions of Executive. To the extent that the Company assigns its rights and obligations hereunder, the Company shall not be relieved of its obligations hereunder in respect of any such assignment.

6.8 Survival of Rights and Obligations. The rights and obligations of the parties as stated herein shall survive the termination of this Agreement.

6.9 Joint Preparation. All parties to this Agreement have negotiated it at length, and have had the opportunity to consult with and be represented by their own competent counsel. This Agreement is therefore deemed to have been jointly prepared by the parties, and any uncertainty or ambiguity existing in it shall not be interpreted against any party, but rather shall be interpreted according to the rules generally governing the interpretation of contracts.

6.10 Arbitration. Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in Santa Clara County, California, conducted by

 

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Judicial Arbitration and Mediation Services, Inc. (“JAMS”) under the applicable JAMS employment rules. By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required if the dispute were decided in a court of law. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Notwithstanding the foregoing, Executive and the Company each have the right to resolve any issue or dispute over intellectual property rights by Court action instead of arbitration.

6.11 Third-Party Beneficiaries. No term or provision of this Agreement is intended to be, or shall be, for the benefit of any person, firm, organization, corporation or entity not a party hereto, and no such other person, firm, organization, corporation or entity shall have any right or cause of action hereunder.

6.12 Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

6.13 Attorneys’ Fees. If either party hereto brings any action to enforce rights hereunder, each party in any such action shall be responsible for its own attorneys’ fees and costs incurred in connection with such action.

6.14 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California without regard to the conflicts of law provisions thereof.

6.15 Internal Revenue Code Section 409A. The provisions of this Section 6.15 shall only apply to the extent required to avoid Executive’s incurrence of any penalty tax or interest under Section 409A or any regulations or guidance promulgated thereunder.

(a) Separation from Service. Notwithstanding anything in the Agreement to the contrary, any compensation or benefits payable under the Agreement that constitute “nonqualified deferred compensation” within the meaning of Section 409A (“Deferred Compensation”) and which are designated under the Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided under the next paragraph, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the sixtieth (60^th) day following Executive’s Separation from Service. Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s

 

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Separation from Service but for the preceding sentence shall be paid to Executive on the sixtieth (60^th) day following Executive’s Separation from Service and the remaining payments shall be made as provided in the Agreement.

(b) Specified Employee. If the Company determines that Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at the time of Executive’s Separation from Service, any Deferred Compensation to which Executive is entitled under the Agreement in connection with such Separation from Service shall be delayed to the extent required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. To the extent that the payment of any compensation is delayed in accordance with this subsection, such compensation shall be paid to Executive in a lump sum on the first business day following the earlier to occur of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service, or (ii) the date of the Executive’s death, and any compensation or benefits that are payable under the Agreement following such delay shall be paid as otherwise provided in the Agreement.

(c) Expense Reimbursement. To the extent that any reimbursements provided to Executive are deemed to constitute Deferred Compensation, such amounts shall be paid or reimbursed to Executive promptly, but in no event later than December 31 of the year following the year in which the expense is incurred. The amount of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and Executive’s right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.

(d) Installments. Executive’s right to receive any installment payments under this Agreement, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Treasury Regulation Section 1.409A-2(b)(2)(iii).

(e) Exceptions to Prohibition on Acceleration of Payments. To the extent applicable, each of the exceptions to Section 409A’s prohibition on acceleration of payments of Deferred Compensation provided under Treasury Regulation 1.409A-3(j)(4) shall be permitted under the Agreement.

(f) General. To the extent applicable, the Agreement shall be interpreted in accordance with Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that, the Company determines in good faith that any compensation or benefits payable under the Agreement may not be either exempt from or compliant with Section 409A, the Company may adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effective), or take any other commercially reasonable actions necessary or appropriate (i) to preserve the intended tax treatment of the compensation and benefits payable hereunder and/or preserve the economic benefits of such compensation and benefits, and/or (ii) to exempt the compensation and benefits payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder.

 

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(Signature page follows)

 

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement on the day and year first above written.

 

 

Exhibit 10.33

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”) is entered into as of July 17, 2009 (the “Effective Date”) by and between Bryan Ingram (the “Executive”) and Avago Technologies U.S. Inc. (the “Employer”), a wholly-owned subsidiary of Avago Technologies Limited (“Parent”, and together with the Employer, the “Company”). This Agreement amends and restates in its entirety that certain Employment Agreement entered into effective as of November 1, 2007 by and between the Executive and the Company (the “Prior Agreement”). This Agreement supersedes the Prior Agreement and any other agreement or policy to which the Company is a party with respect to Executive’s employment with the Company. Notwithstanding the foregoing, Executive’s Confidentiality Agreement remains in full effect.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, it is hereby agreed by and between the parties hereto as follows:

ARTICLE I

DEFINITIONS

For purposes of the Agreement, the following terms are defined as follows:

1.1 “Affiliate” means, with respect to any party, any corporation, limited liability company, partnership, joint venture, firm and/or other entity which Controls, is Controlled by or is under common Control with such party.

1.2 “Board” means the Board of Directors of Parent.

1.3 “Business” means the business of the Company as of the Effective Date, and any other business activity or service in which the Company is engaged or making an active effort to develop business at the time of termination of Executive’s employment with the Company or any Affiliate of the Company.

1.4 “Cause” means:

(a) Executive’s willful refusal to perform in any material respect his lawful duties or responsibilities for the Company or its Affiliates or willful disregard in any material respect of any financial or other budgetary limitations established in good faith by the Board or the board of any Affiliate by which Executive is employed; or

(b) the engaging by the Executive in conduct that causes material and demonstrable injury, monetarily or otherwise, to the Company or any of its Affiliates, including, but not limited to, misappropriation or conversion of assets of the Company or its Affiliates (other than non-material assets); or

(c) Executive’s engagement in an act of moral turpitude or conviction of or entry of a plea of nolo contendere to a felony.

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No act or failure to act by Executive shall be deemed “willful” if done, or omitted to be done, by Executive in good faith and with the reasonable belief that Executive’s action or omission was in the best interest of the Company or its subsidiaries or consistent with Company policies or the directive of the Board.

1.5 “Change in Control” means (i) the sale of all or substantially all of the assets of Parent and its subsidiaries, taken as a whole to a person who is not an Affiliate of Parent or the Sponsors; (ii) a sale by the Sponsors or any of their respective Affiliates resulting in more than fifty percent (50%) of the voting shares of Parent being held by a person or related group of persons that does not include the Sponsors or any of their respective Affiliates; or (iii) a merger or consolidation of Parent into another person which is not an Affiliate of Parent or the Sponsors, if and only if as a result of such merger or consolidation the Sponsors lose the ability to elect a majority of the Board (or the resulting entity). Notwithstanding the foregoing, an event shall not constitute a “Change in Control” unless such event constitutes a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, as described in Section 1.409A-3(i)(5) of the Department of Treasury regulations promulgated under Section 409A of the Code (“Section 409A”).

1.6 “Control” means (i) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or participating assets entitled to vote for the election of directors; and (ii) in the case of non-corporate entities (such as individuals, limited liability companies, partnerships or limited partnerships), either (A) direct or indirect ownership of at least fifty percent (50%) of the equity interest, or (B) the power to direct the management and policies of the noncorporate entity.

1.7 “Covered Entity” means every Affiliate of Executive, and every business, association, trust, corporation, partnership, limited liability company, proprietorship or other entity in which Executive has invested (whether through debt or equity securities), or has contributed any capital or made any advances to, or in which any Affiliate of Executive has an ownership interest or profit sharing percentage, or a firm from which Executive or any Affiliate of Executive receives or is entitled to receive income, compensation or consulting fees in which Executive or any Affiliate of Executive has an interest as a lender (other than solely as a trade creditor for the sale of goods or provision of services that do not otherwise violate the provisions of this Agreement); provided, however, that only entities whose management decisions are influenced by Executive shall be considered Covered Entities for purposes of this Agreement. Notwithstanding anything contained in the foregoing provisions to the contrary, the term “Covered Entity” shall not include the Company or any Affiliate of the Company.

1.8 “Disability” means a determination that Executive is unable to substantially perform the material duties and responsibilities contemplated by this Agreement as a result of a disability within the meaning of the Company’s disability insurance plan despite reasonable accommodation by the Company as required by the Americans with Disabilities Act, which inability continues for a period exceeding ninety (90) consecutive days or shorter periods exceeding ninety (90) days in the aggregate during any period of one hundred eighty (180) consecutive days.

 

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1.9 “Involuntary Termination Without Cause” means Executive’s dismissal or discharge by the Company for any reason other than for Cause. The termination of Executive’s employment as a result of Executive’s death or Disability shall not be deemed to be an Involuntary Termination Without Cause.

1.10 “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended and the Department of Treasury Regulations and other interpretive guidance issued thereunder.

1.11 “Severance Period” means the period of time beginning with the effective date of Executive’s termination of employment with the Company and ending on the earlier of (i) the twelve-month anniversary of such termination of employment with the Company or (ii) the date Executive takes any action, directly or indirectly, that, if such action had been taken while employed by the Company, would breach the terms of Section 5.2 or Section 5.3 of this Agreement.

1.12 “Sponsors” means Kohlberg Kravis & Roberts Co., L.P. and Silver Lake Partners, LLC.

1.13 “Term” means the period commencing on the Effective Date and continuing until employment is terminated pursuant to the provisions of this Agreement or otherwise.

1.14 “Territory” means each and every state, county, city or other political subdivision or geographic location in the United States or in any other territory or jurisdiction outside of the United States, in each case in which the Company or any Affiliate of the Company is engaged in the Business.

1.15 “Voluntary Termination for Good Reason” means the voluntary termination by Executive of Executive’s employment under this Agreement for any of the following reasons:

(a) A reduction in Executive’s Salary (other than as part of a broad salary reduction program instituted because the Company or its affiliates are in financial distress);

(b) A substantial reduction in Executive’s duties and responsibilities;

(c) The elimination or reduction of Executive’s eligibility to participate in the Company’s benefit programs that is inconsistent with the eligibility of executive employees of the Company to participate therein;

(d) The Company informs Executive of its intention to transfer Executive’s primary workplace to a location that is more than fifty (50) miles from Executive’s workplace as of the Effective Date;

(e) The Company’s material breach of its obligations under this Agreement that is not cured within sixty (60) days following written notice thereof; or

(f) Any serious chronic mental or physical illness of a member of Executive’s family that requires Executive to terminate Executive’s employment because of substantial interference with Executive’s duties at the Company; provided, that at the Company’s request Executive shall provide the Company with a written physician’s statement confirming the existence of such mental or physical illness.

 

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ARTICLE II

EMPLOYMENT BY THE COMPANY

2.1 Position and Duties. During the Term, the Company hereby agrees to employ Executive in the position of Senior Vice President and General Manager – Wireless Semiconductor Division and Executive hereby agrees to provide services for the Company, on such terms and conditions as provided in this Agreement. Executive shall perform such duties as are customarily associated with the position of Senior Vice President and General Manager – Wireless Semiconductor Division and such other duties as are commensurate with Executive’s position and are assigned to Executive by the Company. Executive shall report to the Chief Executive Officer of Parent. While Executive is employed by the Company during the Term, Executive shall devote Executive’s commercially reasonable efforts and substantially all of Executive’s business time and attention (except for vacation periods and reasonable periods of illness or other incapacities permitted by the Company’s general employment policies or as otherwise set forth in this Agreement) to the business of the Company. Except with the prior written consent of the Company, Executive shall not during the Term undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor and are not in violation of the provisions in Article V.

2.2 Employment Policies. The employment relationship between the parties shall also be governed by the employment policies of the Company, including those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company’s employment policies, this Agreement shall control.

ARTICLE III

COMPENSATION

3.1 Base Salary. During the Term, Executive shall receive for services to be rendered hereunder an annual base salary of $334,608 (as may be adjusted from time to time, the “Salary”), payable on the regular payroll dates of the Company as may be in effect from time to time.

3.2 Target Bonus. During the Term, Executive shall be eligible to participate in the Avago Performance Bonus program with an annual bonus targeted at 75% of Executive’s Salary on the terms and conditions determined by the Company (the “Target Bonus”). Except as otherwise provided herein, Executive must remain employed through the date of payment to continue to be eligible for a cash bonus.

3.3 Equity Compensation. While employed hereunder, Executive shall continue to be eligible to receive such equity incentive awards as shall be determined by the Board, in its sole discretion.

 

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3.4 Standard Company Benefits. During the Term, Executive shall be entitled to all rights and benefits under the terms and conditions of the standard Company benefits and compensation practices that may be in effect from time to time and are provided by the Company to similarly situated employees generally.

ARTICLE IV

TERMINATION

4.1 Termination for Cause; Voluntary Termination for Any Reason other than Good Reason. In the event that the Company terminates Executive’s employment for Cause or in the event Executive terminates Executive’s employment for any reason other than a Voluntary Termination for Good Reason, the Company shall have no obligation to Executive except for payment of any Salary, vacation and expense reimbursement accrued and unpaid to the effective date of termination and except as otherwise required by law (collectively, the “Accrued Obligations”). The date of a resignation by Executive shall be the date specified in a written notice of resignation from Executive to the Company, provided that Executive shall provide at least thirty (30) days’ advance written notice of Executive’s resignation.

4.2 Involuntary Termination Without Cause; Voluntary Termination for Good Reason. In the event that, prior to the second anniversary of the Effective Date, Executive’s employment terminates due to an Involuntary Termination Without Cause, Executive’s death or Executive’s disability, or a Voluntary Termination for Good Reason, (a) Executive shall receive payment of Executive’s Accrued Obligations, and (b) subject to Executive’s delivery, execution and nonrevocation (during the applicable revocation period) of a general release of all claims against the Company and its Affiliates in a form acceptable to the Company (a “General Release”) within sixty (60) days of such termination, the Company shall (i) continue to pay Executive’s Salary during the Severance Period on the regular payroll dates of the Company as may be in effect from time to time, and (ii) the vesting of each option to purchase the ordinary shares of Parent held by Executive immediately prior to such termination shall accelerate to the extent such option would otherwise have vested had Executive remained employed through the second anniversary of the Effective Date. Except as provided in this Section 4.2 or as otherwise required by applicable law, Executive shall have no right under this Agreement or otherwise to receive any other compensation or to participate in any other plan, program or arrangement, including, without limitation, any employee benefit plans, after an Involuntary Termination Without Cause or Voluntary Termination for Good Reason with respect to the year of such termination and later years.

4.3 Termination Prior to a Change in Control

In the event that Executive’s employment is terminated by the Company due to an Involuntary Termination Without Cause, Executive’s death or Executive’s Disability or by Executive due to a Voluntary Termination for Good Reason after the second anniversary of the Effective Date and during the three-month period immediately preceding a Change in Control, then subject to the terms and conditions of Section 4.4, Executive shall be entitled to the benefits as set forth in Section 4.4 as if Executive had experienced an Involuntary Termination Without Cause effective on the date of such Change in Control. Any benefits to which Executive becomes entitled pursuant to this Section 4.3 shall be reduced by any payments made to Executive, other than Accrued Obligations, as severance following his termination of employment.

 

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4.4 Termination On or After a Change in Control. In the event that, after the second anniversary of the Effective Date and within the 12-month period commencing on a Change in Control, Executive’s employment is terminated by the Company due to an Involuntary Termination Without Cause, Executive’s death or Executive’s Disability or by Executive due to a Voluntary Termination for Good Reason, (a) Executive shall receive payment of Executive’s Accrued Obligations, and (b) subject to Executive’s delivery, execution and nonrevocation (during the applicable revocation period) of a General Release within sixty (60) days of such termination, the Company shall (i) continue to pay Executive’s Salary during the Severance Period on the regular payroll dates of the Company as may be in effect from time to time and (ii) pay to Executive on the date such payment is made to the executives of the Company, the lesser of Executive’s Target Bonus for the year during which such termination of employment occurs and the Target Bonus amount paid to Executive for the year prior to the year during which Executive’s employment terminates; and (iii) the vesting of each option to purchase the ordinary shares of Parent held by Executive immediately prior to such termination shall immediately become vested and exercisable with respect to that number of shares which such options would have become vested and exercisable over the succeeding 12-month period based solely on the passage of time and Executive’s performance of services. Except as provided in this Section 4.3 or as otherwise required by applicable law, Executive shall have no right under this Agreement or otherwise to receive any other compensation or to participate in any other plan, program or arrangement, including, without limitation, any employee benefit plans, after an Involuntary Termination Without Cause or Voluntary Termination for Good Reason within the 12-month period commencing on a Change in Control with respect to the year of such termination and later years.

ARTICLE V

COVENANTS OF EXECUTIVE

5.1 Confidentiality Agreement. Executive hereby acknowledges and understands that Executive remains bound by the Confidentiality Agreement, and the provisions of the Confidentiality Agreement shall survive any termination of this Agreement or of Executive’s employment relationship with the Company as set forth in the Confidentiality Agreement.

5.2 Non-Compete. During the Term, Executive shall not, either directly or indirectly, individually or by or through any Covered Entity, participate in, assist, aid or advise in any way, any business or enterprise that competes with the Business in the Territory. During the Term Executive shall not, either directly or indirectly, individually or by or through any Covered Entity, invest in (whether through debt or equity securities), contribute any capital or make any advances to, take an ownership interest or profit-sharing percentage in, seek to purchase or acquire, or receive income, compensation or consulting fees from, any entity or person involved in the Business in the Territory. Notwithstanding the foregoing, nothing contained in this Section 5.2 prohibits Executive or any Affiliate of Executive from owning less than two percent (2%) of any class of voting securities publicly held and quoted on a recognized securities exchange or inter-deal quotation system, of any issuer, and no such issuer shall be considered a

 

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Covered Entity solely by virtue of such ownership or the incidents thereof; provided, however, that Executive hereby acknowledges and agrees that the ownership of securities permitted herein is limited to a passive investment and that Executive is hereby prohibited from actively participating in the business of or otherwise maintaining a relationship with such issuer that would contravene the restricted activities contemplated by this Section 5.2, other than to participate in the general rights and benefits as a shareholder thereof.

5.3 Non-Solicitation. During the Term and for twelve (12) months thereafter, Executive shall not, either directly or indirectly and shall not permit any Covered Entity which is Controlled by Executive to, either directly or indirectly, (a) solicit, or take any other action that is intended to solicit, the business of any customers of the Company or any of its Affiliates, (b) solicit, take away, or attempt to solicit or take away (either on such Executive’s behalf or on behalf of any other person or entity) any person (i) who is then an employee of the Company or any Affiliate of the Company, or (ii) who has terminated his or her employment with the Company or any Affiliate of the Company within the six (6) months preceding such solicitation or other action, or (c) entice or solicit or attempt to induce, solicit or influence (either on such Executive’s behalf or on behalf of any other person or entity) any employee of the Company or any Affiliate of the Company to terminate or otherwise leave their employment with the Company or any Affiliate of the Company.

5.4 Enforcement; Remedies. Executive hereby agrees and acknowledges that the Company has a valid and legitimate business interest in protecting the Business in the Territory from any activity prohibited by Article V hereof. Executive acknowledges that Executive’s expertise in the Business is of a special and unique character which gives this expertise a particular value, and that a breach of the covenants in Article V hereof by Executive will cause serious and irreparable harm to the Company. Executive therefore acknowledges that a breach of the covenants in Article V hereof by Executive cannot be adequately compensated in an action for damages at law, and equitable relief would be necessary to protect the Company from a violation of this Agreement and from the harm which this Agreement is intended to prevent. By reason thereof, Executive acknowledges that the Company is entitled, in addition to any other remedies it may have under this Agreement or otherwise, to preliminary and permanent injunctive and other equitable relief to prevent or curtail any breach of this Agreement without any requirement to prove actual damages or post a bond. Executive acknowledges, however, that no specification in this Agreement of a particular legal or equitable remedy may be construed as a waiver of or prohibition against pursuing other legal or equitable remedies in the event of a breach of this Agreement by Executive.

5.5 Severability and Modification of Any Unenforceable Covenant. It is the parties’ intent that each of the covenants under this Article V be read and interpreted with every reasonable inference given to its enforceability. However, it is also the parties’ intent that if any term, provision or condition of the covenants is held to be invalid, void or unenforceable, the remainder of the provisions thereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is also the parties’ intent that if it is determined any of the covenants are unenforceable because of overbreadth, then the covenants shall be modified so as to make them reasonable and enforceable under the prevailing circumstances.

 

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ARTICLE VI

GENERAL PROVISIONS

6.1 Notices. All notices and other communications under or in connection with this Agreement shall be in writing and shall be deemed given (i) if delivered personally, upon delivery, (ii) if delivered by registered or certified mail (return receipt requested), upon the earlier of actual delivery or three (3) business days after being mailed, (iii) if given by overnight courier with receipt acknowledgment requested, the next business day following the date sent, or (iv) if given by facsimile or telecopy, upon confirmation of transmission by facsimile or telecopy, in each case to the parties at the following addresses:

 

To the Company:		Avago Technologies
		Attn: General Counsel
		350 W. Trimble Road, MS 90MG
		San Jose, CA 95131
		Facsimile: 408-435-4172
with a copy to:		Latham & Watkins LLP
		Attn: Joseph M. Yaffe, Esq.
		140 Scott Drive
		Menlo Park, California 94025
		Facsimile: (650) 463-2600
To Executive:		Bryan Ingram
		[—]
		[—]
		Facsimile: [—]

6.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

6.3 Modifications; Waivers. Waivers or modifications of this Agreement, or of any covenant, condition, or limitation contained herein, are valid only if in writing duly executed by the parties hereto. If either party should waive any breach of any provisions of this Agreement, they shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

 

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6.4 Entire Agreement.

(a) This Agreement, together with the Confidentiality Agreement, contains the parties’ sole and entire agreement regarding the subject matter hereof, and supersedes any and all other agreements, understandings, statements and representations of the parties, including, but not limited to, the Prior Agreement, any offer letter agreement, employment agreement or other agreement regarding Executive’s compensation or terms of employment entered into prior to the Effective Date.

(b) The parties acknowledge and agree that, except for those representations specifically referenced herein, no party has made any representations (i) concerning the subject matter hereof or (ii) inducing the other party to execute and deliver this Agreement. The parties have relied on their own judgment in entering into this Agreement.

6.5 Counterparts. This Agreement may be executed in one or more separate counterparts, including electronically transmitted counterparts, any one of which need not contain signatures of more than one party, but all of which shall be deemed an original and taken together will constitute one and the same Agreement.

6.6 Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

6.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of Executive’s duties hereunder and Executive may not assign any of Executive’s rights or other interest herein (except in connection with any assignment of rights to receive consideration hereunder by or to Executive’s estate made upon the death of Executive) to any party without the prior written consent of the Company, and any such purported assignment shall be null and void. Notwithstanding the foregoing, the Company may, without obtaining the consent of Executive, assign any or all of its rights and obligations under this Agreement to any of its Affiliates; provided, however, that any such assignment shall not expand the obligations or restrictions of Executive. To the extent that the Company assigns its rights and obligations hereunder, the Company shall not be relieved of its obligations hereunder in respect of any such assignment.

6.8 Survival of Rights and Obligations. The rights and obligations of the parties as stated herein shall survive the termination of this Agreement.

6.9 Joint Preparation. All parties to this Agreement have negotiated it at length, and have had the opportunity to consult with and be represented by their own competent counsel. This Agreement is therefore deemed to have been jointly prepared by the parties, and any uncertainty or ambiguity existing in it shall not be interpreted against any party, but rather shall be interpreted according to the rules generally governing the interpretation of contracts.

6.10 Arbitration. Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in Santa Clara County, California, conducted by

 

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Judicial Arbitration and Mediation Services, Inc. (“JAMS”) under the applicable JAMS employment rules. By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required if the dispute were decided in a court of law. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Notwithstanding the foregoing, Executive and the Company each have the right to resolve any issue or dispute over intellectual property rights by Court action instead of arbitration.

6.11 Third-Party Beneficiaries. No term or provision of this Agreement is intended to be, or shall be, for the benefit of any person, firm, organization, corporation or entity not a party hereto, and no such other person, firm, organization, corporation or entity shall have any right or cause of action hereunder.

6.12 Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

6.13 Attorneys’ Fees. If either party hereto brings any action to enforce rights hereunder, each party in any such action shall be responsible for its own attorneys’ fees and costs incurred in connection with such action.

6.14 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California without regard to the conflicts of law provisions thereof.

6.15 Internal Revenue Code Section 409A. The provisions of this Section 6.15 shall only apply to the extent required to avoid Executive’s incurrence of any penalty tax or interest under Section 409A or any regulations or guidance promulgated thereunder.

(a) Separation from Service. Notwithstanding anything in the Agreement to the contrary, any compensation or benefits payable under the Agreement that constitute “nonqualified deferred compensation” within the meaning of Section 409A (“Deferred Compensation”) and which are designated under the Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided under the next paragraph, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the sixtieth (60^th) day following Executive’s Separation from Service. Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s

 

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Separation from Service but for the preceding sentence shall be paid to Executive on the sixtieth (60^th) day following Executive’s Separation from Service and the remaining payments shall be made as provided in the Agreement.

(b) Specified Employee. If the Company determines that Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at the time of Executive’s Separation from Service, any Deferred Compensation to which Executive is entitled under the Agreement in connection with such Separation from Service shall be delayed to the extent required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. To the extent that the payment of any compensation is delayed in accordance with this subsection, such compensation shall be paid to Executive in a lump sum on the first business day following the earlier to occur of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service, or (ii) the date of the Executive’s death, and any compensation or benefits that are payable under the Agreement following such delay shall be paid as otherwise provided in the Agreement.

(c) Expense Reimbursement. To the extent that any reimbursements provided to Executive are deemed to constitute Deferred Compensation, such amounts shall be paid or reimbursed to Executive promptly, but in no event later than December 31 of the year following the year in which the expense is incurred. The amount of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and Executive’s right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.

(d) Installments. Executive’s right to receive any installment payments under this Agreement, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Treasury Regulation Section 1.409A-2(b)(2)(iii).

(e) Exceptions to Prohibition on Acceleration of Payments. To the extent applicable, each of the exceptions to Section 409A’s prohibition on acceleration of payments of Deferred Compensation provided under Treasury Regulation 1.409A-3(j)(4) shall be permitted under the Agreement.

(f) General. To the extent applicable, the Agreement shall be interpreted in accordance with Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that, the Company determines in good faith that any compensation or benefits payable under the Agreement may not be either exempt from or compliant with Section 409A, the Company may adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effective), or take any other commercially reasonable actions necessary or appropriate (i) to preserve the intended tax treatment of the compensation and benefits payable hereunder and/or preserve the economic benefits of such compensation and benefits, and/or (ii) to exempt the compensation and benefits payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder.

 

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(Signature page follows)

 

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement on the day and year first above written.

 

 

[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

Exhibit 10.54

 

 

Avago Distributor Agreement		Avago Confidential

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This Distributor Agreement between Arrow Electronics, Inc. and Avago Technologies International Sales Pte. Limited, Registration Number 200512231E, shall become effective on the 20^th of January 2008 (the “Effective Date”) (the “Agreement”).The signatures below stipulate the party’s acceptance of the terms and conditions of this Agreement:

 

AVAGO TECHNOLOGIES INTERNATIONAL SALES PTE LIMITED:						ARROW ELECTRONICS, INC.:
Sign:		/s/ Pe Wynn Kin				Sign:		/s/ Jeff Eastman
Name:		Pe Wynn Kin				Name:		Jeff Eastman
(Typed or Printed)						(Typed or Printed)
Title:		Company Secretary				Title:		VP Global Supplier Marketing
Date:		26/3/08				Date:		3-19-08

 

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ADDENDUM 1

ADDITIONAL TERMS AND CONDITIONS

UNITED STATES OF AMERICA

The following terms and conditions will apply to Products marketed in the United States by Distributor and these terms will supersede conflicting provisions in the Agreement:

 

1.

Governing Laws

This Agreement will be governed according to the laws of California. The Superior Court of the County of Santa Clara or the United States District Court for the Northern District of California will have jurisdiction and venue for all controversies arising out of, or relating, to this Agreement. The parties expressly waive the applicability of the UN Convention on Contracts for the International Sale of Goods and it will not apply to the terms and conditions of this Agreement.

 

2.

Statutory Conformance

With respect to the Products ordered under this Agreement and delivered to Distributor’s locations in the United States, Avago warrants and agrees that it has complied with the requirements of: (i) the Fair Labor Standards Act of 1938, as amended, and its invoices will so state; (ii) Social Security and Workers Compensation laws, if work is performed on Distributor’s premises; (iii) Equal Opportunity clause in Section 202 of Executive Order 11246, as the same may be amended; (iv) Section 503 of the Rehabilitation Act of 1973; (v) The Vietnam Veterans Readjustment Assistance Act of 1974; and (vi) all other applicable federal, state and local laws, codes and requirements.

 

3.

Ozone Depleting Substances

Distributor reserves the right to reject any Products delivered to Distributor’s locations in the United States containing or manufactured with substances identified as a Class I or Class II ozone depleting substances by the U.S. Environmental Protection Agency pursuant to Title VI of the Clean Air Act Amendments of 1990, and any amendments thereto, whether or not such Products will be required to bear labelling.

 

4.

Export Controls

Avago and Distributor will comply with the U.S. Foreign Corrupt Practices Act.

Without limitation on the foregoing, the exportation, importation and re-exportation of Avago’s Products and related supplies and technical data will be made or otherwise effected in accordance with the laws, regulations, licensing requirements and procedures of the U.S. governmental authorities exercising jurisdiction in such matters; as such, the validity of this Agreement and the obligation of Distributor and Avago to perform under this Agreement are expressly subject to the ability of Distributor and Avago to comply with applicable laws. Further, in the event of changes to such laws, regulations, licensing requirements and procedures, Distributor and Avago agree to continue compliance of such U.S. regulations.

 

5.

Notices

Any notice provided for or permitted in this Agreement will be deemed to have been given three (3) business days after mailed postage prepaid by certified mail or registered mail, return receipt requested, or via electronic mail confirmation requested, to the authorized Distributor location.

 

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ADDENDUM 2

ADDITIONAL TERMS AND CONDITIONS

CANADA

The following terms and conditions will apply to Products marketed in Canada by Distributor and these terms will supersede conflicting provisions in the Agreement.

 

1.

Statutory Conformance

With respect to the Products ordered under this Agreement and delivered to Distributor’s locations in Canada, Avago warrants and agrees that it has complied with the requirements of all applicable Canadian federal, provincial and local laws, codes and requirements.

 

2.

Ozone Depleting Substances

Distributor reserves the right to reject any Products delivered to Distributor’s locations in Canada containing or manufactured with ozone depleting substances as defined under the laws of Canada, whether or not such Products will be required to bear labelling.

 

3.

Language

The parties expressly agree that this Agreement and any related documents be drawn in English. Il est la volonte expresse des Parties aux presentes que cette Convention et tous les documents s’y rattachant soient rediges en Anglais.

 

4.

Currency

All transactions will be in U.S. Dollars.

 

5.

Notices

Any notice provided for or permitted in this Agreement will be deemed to have been given three (3) business days after mailed postage prepaid by certified mail or registered mail, return receipt requested, or via electronic mail confirmation requested, to the authorized Distributor location.

 

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ADDENDUM 3

ADDITIONAL TERMS AND CONDITIONS

ASIA PACIFIC

The following terms and conditions will apply to Products marketed in Asia Pacific by Distributor and these terms will supersede conflicting provisions in the Agreement.

 

1.

Governing Laws

These Terms will be governed according to the laws of Singapore. The courts of Singapore will have jurisdiction and venue for all controversies arising out of, or relating, to this Agreement. The parties expressly waive the applicability of the UN Convention on Contracts for the International Sale of Goods and it will not apply to the terms and conditions of this Agreement.

 

2.

Notice

Any notices provided for or permitted in this Agreement will be deemed to have been given three (3) business days after mailed postage prepaid by certified mail or registered mail, return receipt requested, or via electronic mail confirmation requested, to the authorized Distributor location.

 

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ADDENDUM 4

ADDITIONAL TERMS AND CONDITIONS

EUROPE

The following terms and conditions will apply to Products marketed in Europe by Distributor and these terms will supersede conflicting provisions in the Agreement.

 

1.

Prices

Unless specified differently, all prices include shipments arranged by Avago, according to Avago’s standard commercial practice with insurance and customs clearance charges.

 

2.

Governing Law

These Terms will be governed according to the laws of the Switzerland. The courts of Zurich, Switzerland will have jurisdiction and venue for all controversies arising out of, or relating, to this Agreement; this will also be applicable to summary procedures where the plaintiff relies entirely on documentary evidence. The parties expressly waive the applicability of the UN Convention on Contracts for the International Sale of Goods and it will not apply to the terms and conditions of this Agreement.

 

3.

Shipment

Avago will make commercially reasonable efforts to meet Distributor’s Delivery and Shipment requirements. If Avago is unable to meet Distributor’s Delivery and Shipment requirements, the parties may agree to alternate arrangements. In the absence of such agreement, Distributor’s sole remedies are to cancel the remainder of the order or to claim damages due to gross negligence or intentional conduct.

Risk of loss will pass to Distributor upon delivery DDP (Delivery Duty Paid), VAT unpaid, Incoterms 2000, to the agreed Distributor location unless otherwise agreed.

 

4.

Transfer of Title

Avago reserves title to the Products delivered until full payment of the purchase price has been made. Avago has the right to register its proprietary rights, accordingly.

 

5.

Notices

Any notice provided for or permitted in this Agreement will be deemed to have been given three (3) business days after mailed postage prepaid by certified mail or registered mail, return receipt requested, or via electronic mail confirmation requested, to the authorized Distributor location.

 

6.

Limitation of Liability

 

6.1

Unless otherwise provided below or required by applicable compulsory law, neither Avago, nor its subcontractors or suppliers or Distributor will be liable for indirect or consequential damages, including downtime costs, loss of data, or lost profits, regardless of whether such claims are based on contract, tort, warranty or any other legal theory, even if advised of the possibility of such damages. This exclusion is independent of any remedy set forth in these Terms.

 

6.2

To the extent that limitation of liability is permitted by law and except as otherwise provided in this Agreement, Avago’s liability to Distributor is limited to U.S. one million United States dollars ($1,000,000.00), except that Avago’s obligation to make warranty refunds under this Agreement is limited to the Product net purchase price for the affected Products.

 

6.3

The limitations set forth in Section 6 above will not apply to infringement claims under section 22, to damages for bodily injury or death, damages caused by Avago gross negligence or wilful misconduct, strict liability imposed by compulsory product liability laws and regulation.

 

7.

Currency

Transactions in Europe shall be in Euro.

 

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ADDENDUM 5

ADDITIONAL TERMS AND CONDITIONS

BRAZIL

The following terms and conditions shall apply to Products marketed in Brazil by Distributor and these terms shall supersede conflicting provisions in the Agreement:

 

1.

Statutory Conformance

With respect to the Products ordered under this Agreement and delivered to Distributor’s locations in Brazil, Avago warrants and agrees that it has complied with the requirements of all applicable Brazilian laws, codes and requirements.

 

2.

Language

The parties expressly wish that this Agreement and any related documents be drawn in English.

 

3.

Notices

Any notice provided for or permitted in this Agreement will be deemed to have been given three (3) business days after mailed postage prepaid by certified mail or registered mail, return receipt requested, or via electronic mail confirmation requested, to the authorized Distributor location.

 

4.

Currency

All transactions shall be in U.S. Dollars.

 

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ADDENDUM 7

TRADEMARKS

The purpose of this Exhibit is to provide Avago Authorized Distributors with a right to use an insignia that identifies them as such, under conditions that properly protect the insignia.

 

1.	DEFINITIONS

 

1.1

Unless otherwise specified, all definitions set forth in the underlying Distributor Agreement are incorporated in this Addendum by reference.

 

1.2

“Program” means the Avago program under which Distributor has been admitted as an Authorized Distributor by written notice.

 

1.3

“Authorized Products” means Avago Products which are sold under this Agreement.

 

1.4

“Authorized Services” means any warranty maintenance and repair services and/or distribution services Distributor is authorized to provide with respect to the Authorized Products pursuant to this Agreement (including, as applicable, materials used in the advertising, promotion and sale of such Products or services).

 

1.5

“Insignia” means the insignia shown above (which Avago may amend from time to time):

 

1.6

“Avago Mark” means any trademark, trade name, logo or insignia, including the Insignia, owned by Avago Technologies, Inc. (“Avago”) or any of its subsidiaries (collectively, with their parent, the “Avago Companies”).

 

2.	INSIGNIA OWNERSHIP

Distributor acknowledges that the Insignia is a trademark of Avago and that it will remain the sole property of Avago. Distributor’s right to use the Insignia arises solely by virtue of this Exhibit, and Distributor will acquire no rights in the Insignia through use. Distributor agrees not to attack or challenge the validity of the Insignia as a trademark, Avago’s ownership thereof, or Avago’s right to control the use of the Insignia. Distributor agrees that any use it makes of the Insignia will inure to the benefit of Avago.

 

3.	AUTHORIZATION

Distributor is authorized to use the Insignia (the “Authorization”) solely in connection with the Authorized Products and/or Services, and pursuant to and in compliance with the Agreement. Distributor will not use the Insignia other than in connection with the Authorized Products and/or Services. Distributor will comply with all provisions in this Exhibit and the Agreement as well as all rules, standards or guidelines promulgated from time to time by Avago for the display and use of the Insignia. Participant will comply with all provisions in this Exhibit and the underlying Distributor Agreement and all rules, standards or guidelines promulgated from time to time by Avago for the display and use of the Insignia. Distributor will at all time use the Insignia in good taste and will refrain from using it in a manner that would bring the Avago Companies into

 

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disrepute. Distributor will not use the Insignia in a manner that is likely to confuse consumers as to the nature or extent of its relationship with the Avago Companies. This Exhibit does not authorize Distributor to use any other Avago Mark in connection with the Authorized Products and/or Services. This Exhibit does not authorized Distributor to sublicense any use of the Avago marks to any Affiliate or third party. Distributor will promptly report to Avago any unauthorized use of Avago Marks that comes to Distributor’s attention. Distributor will not incorporate the word AVAGO into its domain or business names. Distributor may not use the word AVAGO as a keyword, metatag or other electronic identifier. Any change or addition to the scope or duration of this Authorization must be in writing and must be signed by an authorized representative of Avago.

 

4.	QUALITY STANDARD

Distributor agrees to maintain at least the same level of quality for the Authorized Products and/or Services as it maintained when the Distributor qualified for the Program, and to comply with all standards set by the Avago Companies from time to time for inclusion in the program (taken together, the “Quality Standards”). Distributor understands that Avago will from time to time evaluate the Authorized Products and/or Services for compliance with the Quality Standards, including surveying Distributor’s Customers, and Distributor agrees to cooperate with Avago in any such evaluation. Any time that, in Avago’s sole judgment and absolute discretion, the Authorized Products and/or Services fail to meet the Quality Standards, Avago may immediately terminate the Authorization.

 

5.	TERMINATION

Avago may terminate or suspend the foregoing Authorization: (i) at will upon thirty (30) days prior written notice in the event Avago suspends or changes the Program; or (ii) immediately upon written notice to Distributor if Distributor fails to comply with any of the provisions of this Exhibit or any of the rules or standards promulgated by Avago for the use of the Insignia. This Authorization will automatically terminate upon the termination of the underlying Distributor Agreement. Upon any termination of the Authorization, Distributor will immediately cease use of the Insignia. Without limiting the foregoing, Distributor agrees to remove the Insignia from any and all Authorized Products and materials in Distributor’s possession or control, and to replace any Authorized Products or materials that bear the Insignia that are still in the hands of any distributors or other re-sellers with Authorized Products and materials that do not bear the Insignia. Distributor agrees that any unauthorized use of the Insignia will cause irreparable harm to Avago, for which damages would not be an adequate remedy, and agrees not to contest the entry of an immediate injunction should Distributor engage in any such unauthorized use.

 

6.

APPROVALS

Distributor will, upon request by Avago, submit to Avago for its prior approval any and all proposed uses for the Insignia. Any failure by Avago to object to a particular use or omission by Distributor will not be construed as a waiver of the right to object to or require changes in such use or omission in the future, nor will it be construed as an approval of such use or omission.

 

7.	REGISTRATIONS

Distributor will cooperate with Avago in making or facilitating any governmental registrations or submissions that are necessary to protect the Insignia and Avago’s ownership thereof, including, but not limited to, registration of Distributor as a Registered User of the Insignia. Upon termination of this Exhibit, Distributor will cooper-ate with Avago in the revocation of any such registration.

 

8.	LEGAL RELATIONSHIP

Distributor’s relationship with the Avago Companies will be that of an independent contractor. Neither party will have, nor represent that it has, any power, right or authority to bind the other party, or to assume or create any obligation or responsibility, express or implied on behalf of the other party. Nothing stated in this Exhibit will be construed as creating a legal partnership between Distributor and the Avago Companies, or as creating the relationship of employer and employee, master and servant or principal and agent between or among the parties.

 

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9.	COMMUNICATIONS WITH THIRD PARTIES

Distributor understands that the term “partner” is often used to promote arms-length relationships between a hardware vendor and non-affiliated business entities such as VARs, OEMs and software suppliers. Distributor will not suggest that the use of the term “partner” as part of the Insignia implies any actual legal partnership between Distributor and Avago or the Avago Companies. Distributor will not hold itself out to third parties as being in a legal partnership, sharing profits or losses, or sharing management responsibility with any Avago Company.

The signatures below stipulate the party’s acceptance of the above terms and conditions of this License Agreement effective as of the date of signature:

 

AVAGO TECHNOLOGIES INTERNATIONAL SALES PTE. LIMITED:						ARROW ELECTRONICS, INC.:
Sign:		/s/ Pe Wynn Kin				Sign:		/s/ Jeff Eastman
Name:		Pe Wynn Kin				Name:		Jeff Eastman
(Typed or Printed)						(Typed or Printed)
Title:		Company Secretary				Title:		VP Global Supplier Marketing
Date:		26/3/08				Date:		3-19-08

 

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EXHIBIT A

PRODUCT LISTING

All Products contained in the Avago Technologies Distributor Price Book or electronic price file.

 

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EXHIBIT B

MAJORITY OWNED DISTRIBUTOR AUTHORIZED AFFILIATES

 

1.	Distributor certifies that each Distributor Affiliate listed in Exhibit B1, attached hereto, is related to Distributor in one of the following ways:

 

1.1

Distributor, either directly or indirectly, holds more than fifty (50%) percent of the issued shares of voting stock of the Distributor Affiliate or has the power to exercise more than fifty (50%) percent of the voting rights in the Distributor Affiliate, or holds more than fifty (50%) percent of the capital or business assets of the Distributor Affiliate;

 

1.2

Distributor Affiliate, either directly or indirectly, holds more than fifty (50%) percent of the issued shares of voting stock of the Distributor or has the power to exercise more than fifty (50%) percent of the voting rights in the Distributor, or holds more than fifty (50%) percent of the capital or business as-sets of the Distributor; or

 

1.3

Distributor and Distributor Affiliate, either directly or indirectly, are both owned by a person or company which holds more than fifty (50%) percent of the issued shares of voting stock of the Distributor and Distributor Affiliate or has the power to exercise more than fifty (50%) percent of the voting rights in the Distributor and Distributor Affiliate, or holds more than fifty (50%) percent of the capital or business assets of the Distributor and Distributor Affiliate.

 

2.	If applicable law limits ownership and control, the above conditions will be met where ownership and control are the maximum allowed by law.

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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EXHIBIT B1

AFFILIATES

List Affiliates Here.

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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EXHIBIT B2

AVAGO ORDER ENTRY LOCATIONS

Avago Technologies US Inc.

350 W. Trimble Rd.

San Jose, CA 95131-1096

United States

Attn: Customer Service

Avago Technologies International Sales Pte. Ltd.

Company No. 200512231E

No 1 Yishun Avenue 7

Singapore 768 923, Singapore

Attn: Customer Service

Avago Technologies Japan, Ltd.

7F Sumitomo-Fudosan Aobadai Hills

4-7-7 Aobadai, Meguro-ku

Tokyo, 153-0042 Japan

Attn: Customer Service

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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EXHIBIT C

AUTHORIZED REGIONS, COUNTRIES AND/OR TERRITORIES

 

1.	North, South and Central Americas

2.	Asia Pacific

3.

Europe

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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ADDENDUM 8

EDI ADDENDUM

This Addendum governs the batch and on-line electronic interchange of data between Trading Partner and Avago.

 

1.	DEFINITIONS

 

1.1

“Adopted Format” is the accepted method for the interchange of Messages under this Addendum based on the standards for the presentation and structuring of the electronic transmission of Messages, or other such format, including Web-based submissions, as specified in the Electronic Data Interchange Partner Addendum (Exhibit EDI).

 

1.2

“Data Log” is the complete record of data interchanged and represents the Messages and Documents sent and received by each party.

 

1.3

“Document” is a type of transaction transmitted in accordance with this Addendum by either party to the other party as specified in the Electronic Data Interchange Trading Partner Exhibit (Exhibit EDI).

 

1.4

“EDI” is the electronic interchange of data for those business operations identified in the Electronic Data Interchange Trading Partner Exhibit (Exhibit EDI).

 

1.5

“Message” is data structured in accordance with the Adopted Format and transmitted electronically between the parties.

 

1.6

“Trading Partner’s Personal Data” means Trading Partner’s personal data or other personal data in Trading Partner’s control, including but not limited to names, telephone numbers and e-mail addresses.

 

1.7

“Third Party Service Provider” is an agent of Avago or of the Trading Partner who is authorized to act as an intermediary between the parties and that provides EDI services.

 

2.

SCOPE

This Addendum will apply to all Messages and Documents transmitted in accordance with the provisions contained in the Electronic Data Interchange Trading Partner Exhibit (Exhibit EDI).

 

3.	SECURITY OF DATA

Each party will use appropriate security, storage, access and encryption procedures to ensure that all transmissions of Messages or Documents are authorized and to protect its business records and data from improper use.

 

4.	AUTHENTICITY OF MESSAGES

Each party will adopt as its signature a unique, verifiable electronic identification consisting of symbol(s) or code(s), that are to be affixed to or contained in each Message or Document transmitted by such party (“Signature”). Each party agrees that any Signature of such party affixed to or contained in any transmitted Message or Document will be sufficient to verify such party originated such Message or Document. Neither party will disclose to any unauthorized person the Signatures of the other party. The parties may upon written agreement also use higher levels of authentication to verify the Message.

 

5.	INTEGRITY OF MESSAGES

Each party accepts the integrity of all Messages and agrees to accord these the same status as would be applicable to a document or to information sent other than by electronic means. If the recipient believes a Message is corrupted as a result of technical failure on the part of machine, system, third party format translation, or transmission line, or lacks the information required by the Avago EDI Handbook for transmitting Messages, the recipient will endeavor to promptly notify sender of the error; sender will correct the error as set out in the Avago EDI Handbook. If the recipient receives a Message addressed to it in error, then recipient should notify the sender and should delete from its system the information contained in such Message but not the record of its receipt.

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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6.	CONFIRMATION OF RECEIPT OF MESSAGES

Except where receipt of a Message is automatically confirmed, the sender of a Message may request the recipient to confirm receipt of that Message subject to the provisions of the Avago EDI Handbook. Upon such request, recipient must send confirmation without unreasonable delay.

 

7.	STORAGE OF DATA

Each party’s Data Log will be maintained without any modification. Each party will maintain a Data log to the extent required by local laws or for a period of seven (7) years, whichever is greater. The Data Log may be maintained on computer media or other suitable means provided that the data can be readily retrieved and presented in readable form.

 

8.	THIRD PARTY SERVICE PROVIDERS

 

8.1

If a party to this Addendum contracts the services of a Third Party Service Provider in order to transmit, log or process Messages, then that party will be responsible for any acts, failures or omissions by that Third Party Service Provider.

 

8.2

If a party to this Addendum instructs the other party to use the services of a Third Party Service Provider for transmitting, logging, formatting, confirming, or processing a Message, then that party giving such instructions will be responsible to the other party for such Third Party Service Provider’s acts and omissions.

 

8.3

Any party giving such instructions to use a Third Party Service Provider will ensure that it is a contractual responsibility of the Third Party Service Provider that no change in the substantive data content of the Messages to be re-transmitted is made and that such Messages are not disclosed to any unauthorized person.

 

8.4

Either party may modify its election to use, not use or change a Third Party Service Provider upon thirty (30) days written notice.

 

9.	ENFORCEABILITY

 

9.1

The parties agree that any Message or Document properly transmitted by EDI pursuant to this Addendum will be considered to be a writing or in writing; and any such Message or Document when containing, or to which there is affixed, a Signature will be deemed for all purposes to have been signed and to constitute an original when printed from electronic files or records established and maintained in the normal course of business.

 

9.2

The parties agree not to contest the admissibility of paper documentation copies of electronically transmitted data under the Business Records exception to the Hearsay Rule, or the Best Evidence Rule, or the Statute of Frauds, on the basis that the data was not originated or maintained in documentary form, or that it does not constitute a signed writing by a party to intending to be bound thereby.

 

10.

EXHIBITS

The following Exhibit is attached and is incorporated into this Addendum: Electronic Data Interchange Trading Partner Addendum (Exhibit EDI). In the event of any conflict between the terms and conditions of the Exhibits mentioned above and the terms and conditions in this Addendum, the latter will govern.

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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EXHIBIT EDI

Trading Partner:                                                                                       

 

1.

PRODUCTS:

This Exhibit EDI applies to EDI transactions for products purchased from Avago.

 

2.	ADOPTED FORMAT:

 

2.1

All Messages will be structured in accordance with the standards stated below:

 

2.1.1

American National Standards Institute, Accredited Standards Committee X12 (ANSI/ASC X12) – applicable in the United States, Canada, South America, and Asia Pacific.

 

2.1.2

United Nations rules for Electronic Data Interchange for Administration, Commerce and Transport (“EDIFACT”) – applicable in Europe.

 

2.1.3

Electronic Industries Association of Japan (“EIAJ”)

 

2.2

If a standard or the published industry guidelines are revised or updated, the parties will mutually agree in writing as to which version will apply to this Agreement.

 

3.

TESTING:

Before Avago will accept a Message or Document under this Agreement, Trading Partner must comply with any Avago request to test Avago’s and Trading Partner’s system. This testing may include but is not limited to Trading Partner submitting a quote number with each purchase order transaction, identifying where the quote number will be located on each purchase order, supplying the EDI ShipTP location codes and ensuring that the invoice and other outbound documents are satisfactory to Trading Partner.

 

4.	CHECK APPLICABLE EDI DOCUMENTS TO BE EXCHANGED:

 

X		ANSI X12		Transaction Set		Version #
		Inbound
		850		Purchase Order
		860		PO Change
		Outbound
		810		Invoice
		855		PO Acknowledgement
		856		Advance Ship Notice
		865		PO Change Acknowledgement

The following are for Avago only and should be deleted if not an Avago agreement

 

ANSI X12		Transaction Set		Version #
830		Forecast Transaction
856		Shipment Notice
861		Shipment Receipt
846		Inventory
867		Receipt and Usage

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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When Using EDIFACT the following documents may apply:

 

ANSI X12		Transaction Set		Version #
APERAK		Application Advice
INVRPT		Inventory Report (Avago Only)
Inventory		Acknowledgement (Avago Only)
ORDERS		PO
ORDCHG		PO Change

All Purchase order transactions must include the Avago quote number and product number.

 

5.	AVAGO INFORMATION:

 

Avago Business Contact:						Avago Technical Contact:
Name:						Name:
Title:						Title:
Address:						Address:
Phone:						Phone:
Email:						Email:
Avago Testing Contact:
Name:
Title:
Address:
Phone:
Email:
Avago Remit to Address:						Production
						ISA = Interchange Control Header
						Production ISA
						Qualifier = 14
						ISA address: 084963177SPGAN
						GS: Functional Group Header Segment
						Production GS = US8213
Avago Third Party Service Provider: (contact information) VAN)						TEST ISA
Name:						Qualifier = 14
Contact:						ISA address: 084963177SPGANT
Phone:
Email:						GS = US8213

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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6.	PARTNER/CUSTOMER INFORMATION:

 

Customer Business Contact:						Customer Technical Contact:
Name:						Name:
Title:						Title:
Address:						Address:
Phone:						Phone:
Email:						Email:
Customer Testing Contact:						Primary Buyers (Avago products)
Name:						Name:
Title:						Phone:
Address:						Email:
Phone:
Email:
Customer Third Party Service Provider: (contact information) VAN						Production
						ISA = Interchange Control Header
						Production ISA
Name:						Qualifier =
Contact:						ISA address:
Phone:
Email:						GS: Functional Group Header Segment
						Production GS =
						TEST ISA
						Qualifier =
						ISA address:
						GS =

Connection Preference:

“Direct Connection” via GXS

“Interconnect via” (specify)                                                                      

Indicate communication schedule with VAN/VPN:                                                                          

Name of translator used:

AI (Application Integrator)

Other, please define

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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7.	EDI TRANSACTION DETAILS:

Interchange header information:

Miscellaneous Information:

 

Delimiters		HEX		EBCDIC		ASCII
Element
Segment
Sub Element

Avago Quote number should be located at the following location:

Customer Ship-to Information:

 

Ship-to Location Code		Ship-to Address

Primary Bill-to Location Code:                                         

Primary Sold-to Location Code:                                                          

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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EXHIBIT SID

List products here.

 

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[*] = Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Amendment No. 4 to the Registration Statement on Form S-1 of Avago Technologies Limited of our report dated June 5, 2006, except for the effects of discontinued operations discussed in Note 17, as to which the date is December 16, 2008, relating to the financial statements of the Semiconductor Products Business, a business segment of Agilent Technologies, Inc., which appears in such Amendment No. 4 to the Registration Statement. We also consent to the reference to us under the heading “Experts” in such Amendment No. 4 to the Registration Statement.

/s/    PricewaterhouseCoopers LLP

San Jose, California

July 20, 2009

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Amendment No. 4 to the Registration Statement on Form S-1 of Avago Technologies Limited of our report dated December 16, 2008 relating to the financial statements and financial statement schedule of Avago Technologies Limited, which appears in such Amendment No. 4 to the Registration Statement. We also consent to the reference to us under the heading “Experts” in such Amendment No. 4 to the Registration Statement.

/s/    PricewaterhouseCoopers LLP

San Jose, California

July 20, 2009

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549-6010

 

Attention:

Russell Mancuso, Esq., Legal Branch Chief Mary Beth Breslin, Esq., Senior Attorney Ruairi Regan, Esq. Brian Cascio, Accounting Branch Chief Jong Hwang

 

Re:

Avago Technologies Limited Registration Statement on Form S-1 File No. 333-153127

Ladies and Gentlemen:

On behalf of Avago Technologies Limited (the “Company” or “Avago”), we are hereby filing Amendment No. 4 (“Amendment No. 4”) to the Company’s above-referenced Registration Statement on Form S-1, which was initially filed with the Securities and Exchange Commission (the “Commission”) on August 21, 2008 and amended by Amendment No. 1 (“Amendment No. 1”) filed with the Commission on October 1, 2008, Amendment No. 2 (“Amendment No. 2”) filed with the Commission on July 2, 2009, and an “exhibit only” Amendment No. 3 (“Amendment No. 3”) filed with the Commission on July 14, 2009 (as amended, the “Registration Statement”). For your convenience, we have enclosed a courtesy package which includes ten copies of Amendment No. 4, five of which have been marked to show changes from Amendment No. 2 (except with respect to Part II, Item 16 of the Registration Statement, which has been marked to show the exhibit changes from Amendment No. 3).

At the outset, on behalf of the Company, we want to express our appreciation for the efforts by the Staff to turn comments back to us on a very prompt basis.

Amendment No. 4 has been revised to reflect the Company’s responses to the comments received from the Staff of the Commission (the “Staff”) by facsimile on July 17, 2009. For ease of review, we have set forth below each of the numbered comments of the Staff’s letter and the Company’s responses thereto.

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July 21, 2009

Page 2

 

1.	We may have further comments after you complete the blanks in your document.

Response: The Company acknowledges the Staff’s comment and has filled in all blanks other than the estimated offering price range and blanks dependent upon the estimated offering price range and size of the offering. The managing underwriters have advised the Company that if it commenced the offering today, the estimated offering price range would not have changed from the $14 to $16 per ordinary share price range supplementally provided to the Staff on July 2, 2009.

Our Business, page 2

 

2.

We note the changes to the customers named in this section. Please update your response to comment 5 in our September 17, 2008 letter which asked you to tell us the objective criteria used to determine which customers to highlight in your summary and to tell us whether you have identified all customers who satisfy these criteria.

Response: The Company hereby confirms to the Staff that the objective criteria used to determine which customers to highlight in the summary remains the same as previously described to the Staff in response to comment 5 in the Staff’s September 17, 2008 letter. The Company sought consent to be named in the Registration Statement from all customers which met this criteria and disclosed the names of such customers except for one customer which has affirmatively refused to give its consent to be named in the Registration Statement. The customer which has refused to grant consent to be named in the Registration Statement does not represent ten percent or more of the Company’s revenue.

The enactment of legislation, page 18

 

3.	With a view toward clarified disclosure, please tell us whether this risk is greater for you than for other companies with international operations. If it is, please clarify why.

Response: The Company has concluded that this risk is potentially significant to the Company because the Company has large scale international operations. Accordingly, the Company has revised the referenced disclosure in Amendment No. 4 to clarify that, depending upon the final form of legislation, if any, this risk may be significant for Avago.

We rely on third parties, page 23

 

4.	Please identify the material countries that present the risks mentioned in the second sentence.

Response: The Company reconsidered the appropriateness of the disclosure in light of the countries in which this outsourcing work is presently conducted. As a result of this reconsideration, the Company has decided to delete the referenced sentence from Amendment No. 4.

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July 21, 2009

Page 3

 

We will be required to address our internal control over financial reporting, page 30

 

5.

We note that in your response 13 of your letter dated October 1, 2008, you indicate that you intend to adopt the phase-in period to which your subsidiary is subject. Please tell us why your intentions changed. Also tell us whether you intend to rely on the reporting history of your subsidiary for purposes of Form S-3 eligibility.

Response: In its response 13 in the Company’s letter dated October 1, 2008, the Company informed the Staff that “[t]he Company intend[ed] to reconsider its position and related disclosure if its initial public offering [was] not completed by November 2, 2008, the end of its [then] fiscal year.” In light of the fact that the offering was postponed until the third fiscal quarter of 2009, in Amendment No. 2, the Company changed its disclosure regarding when it would adopt and become compliant with Section 404 of the Sarbanes-Oxley Act. However, since the filing of Amendment No. 2, the Company has again reconsidered its decision and now confirms to the Staff that it intends to comply with Section 404(a) for its fiscal year ended November 1, 2009, and to comply with Section 404(b) beginning with its fiscal year ending October 31, 2010. The Company has revised the referenced disclosure in Amendment No. 4 accordingly.

The Company will respond to the Staff’s inquiry regarding Form S-3 eligibility under separate cover no later than July 22, 2009.

Use of Proceeds, page 41

 

6.	Please quantify the portion of the proceeds to be paid to KKR and its affiliates.

Response: The Company has revised the referenced disclosure in Amendment No. 4 to disclose that KKR and its affiliates will receive $28.5 million of the Company’s net proceeds from the offering representing one-half of the fee to be paid in connection with the termination of the advisory agreement, so that, along with the current disclosure, an investor can determine the maximum amount of the Company’s net proceeds that KKR and its affiliates may receive if the Company’s senior floating rate notes, senior notes and senior subordinated notes were to be fully repaid. In addition, the Company has provided additional disclosure that KKR is an indirect selling shareholder by virtue of its ownership of Bali Investments S.àr.l, and therefore will be receiving proceeds in the offering as a selling shareholder.

Overview, page 49

 

7.	With a view towards clarified disclosure, please tell us what you did when you “worked with” your distributors to reduce their inventory. Did you offer incentives? What type? Did you repurchase inventory?

Response: The Company has revised the referenced disclosure in Amendment No. 4 to explain that in response to significantly reduced end customer demand, the Company’s distributors unilaterally decided to reduce their inventory levels of the Company’s products and all decisions regarding appropriate inventory levels were made by the distributors, not the Company. The Company advises the Staff that the Company did not repurchase inventory or offer incentives in connection with this reduction in inventory.

Selected Financial Data, page 46

 

8.	Please tell us how the sale of your infra-red operations in October 2007 resulted in a gain of $3 million in fiscal 2008 and a loss of $5 million in fiscal 2009 as discussed in Note (10). In addition, tell us about the settlement agreement entered into during the quarter ended February 1, 2009.

Response: The final loss of $5 million on disposal of the infra-red operations was recorded in fiscal 2008 as disclosed in Note 17 to the consolidated financial statements. The disclosure in footnote 10 to the Selected Financial Data table in Amendment No. 4 has been modified to clarify when the gains and losses were recorded.

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July 21, 2009

Page 4

 

With respect to the timing of gain and loss, upon disposal of the infra-red operations, the Company compared the fair value of the cash received, the note receivable from Lite-On Corporation and the fair value of future cost reductions with the net book value of assets to be disposed of in computing the gain on disposal during the quarter ended February 3, 2008. The basis for computing the gain is disclosed in Note 17 to the consolidated financial statements. The final loss of $5 million represents the Company’s assessment of recoverability of amounts due from Lite-On based on preliminary discussions with Lite-On during the quarter ended November 2, 2008, which discussions were finalized in a settlement agreement entered into during the quarter ended February 1, 2009. Although the settlement agreement was not finalized during the fiscal year ended November 2, 2008, the Company concluded that sufficient, reliable information was available at that date to assess the recoverability of amounts due from Lite-On and accordingly recorded a loss of $8 million during the quarter ended November 2, 2008. The settlement agreement entered into during the quarter ended February 1, 2009 confirmed the information available to the Company at November 2, 2008 and covered final purchase price adjustments relating to inventory sold, the resolution of remaining amounts due from Lite-On related to deferred payments and the removal of a clause regarding future cost reductions. As a result, an overall loss on disposal of $5 million was recorded at November 2, 2008 as disclosed in the Registration Statement.

Provision for income taxes, page 52

 

9.	Refer to the last sentence of the second paragraph. Please clarify whether your reference to inconsistencies in the application of the standard mean inconsistencies by you or inconsistencies by the taxing authorities.

Response: The Company has revised the referenced disclosure in Amendment No. 4 to clarify that the applicable taxing authorities apply inconsistent standards from jurisdiction to jurisdiction. The Company confirms to the Staff that the Company is consistent in its application of tax standards.

Critical Accounting Policies and Estimates

Valuation of Long Lived Assets, Intangible Assets and Goodwill, page 57

 

10.	In the interest of providing readers with a better insight into management’s judgments, please tell us and disclose the following:

 

•

How you perform the two-step impairment test discussed in SFAS 142, including the reporting unit level at which you test goodwill for impairment and your basis for that determination;

Response: The Company performs its annual impairment test of goodwill during the fourth quarter of each fiscal year, or more frequently if management believes that indicators of impairment have occurred and follows the two-step approach in performing the impairment test. The first step of the goodwill impairment test compares the estimated fair value of the reporting unit with the related carrying amount. If the fair value of the reporting unit exceeds its carrying amount, the reporting unit’s goodwill is not considered to be impaired and the second step of the impairment test is unnecessary. If the reporting unit’s carrying amount exceeds its estimated fair value, the second step of the test must be performed to measure the amount of the goodwill impairment loss, if any. The second step of the test compares the implied fair value of the reporting unit’s goodwill, determined in the same manner as the amount of goodwill recognized in a business combination, with the carrying amount of such goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess.

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July 21, 2009

Page 5

 

The Company determined that it has one reporting unit for goodwill impairment testing purposes which is based on the manner in which the Company operates its business and the nature of those operations, including consideration of how the Chief Operating Decision Maker manages the business as a whole. The Company operates as one semiconductor company with sales of semiconductors representing the only material source of revenue. Substantially all products offered incorporate analog functionality and are manufactured under similar manufacturing processes. Based on the aforementioned considerations, the Company determined the fair value of the reporting unit in substance by determining the fair value of the Company as a whole.

 

•

Each of the valuation methodologies used to value goodwill (if multiple approaches are used), including sufficient information to enable a reader to understand how each of the methods differ, the assumed benefits of a valuation prepared under each of the method, and why management selected these methods as being the most meaningful for the company in preparing the goodwill impairment analysis;

Response: In determining the fair value of the reporting unit (in substance, the fair value of the Company as a whole), management utilized the calculations of enterprise value used for purposes of valuing its ordinary shares as the measure of fair value as of the valuation date nearest the Company annual impairment assessment date. As disclosed in Amendment No. 4, this fair value determination used a weighted approach of both the Discounted Cash Flow (DCF), also known as the “Income” approach, and the “Market” approach and was based on a set of assumptions and estimates embedded in each model consistent with that used in valuing its ordinary shares. Management concluded that the methodologies used to determine the enterprise value for goodwill impairment testing purposes should be consistent with that used to value our ordinary shares since both methodologies are at the enterprise level.

The enterprise value calculations as of the date of the last annual impairment assessment resulted in a significant excess of the fair value over the net book value of the Company and, accordingly, a conclusion that no impairment indicator existed. The fair value of the reporting unit (Company) under the two valuation models ranged between $2.5 billion and $3.4 billion as of the fourth quarter of fiscal 2008, which is well in excess of the approximately $780 million book value of net assets of the Company.

 

•

How you weight each of the methods used including the basis for that weighting (if multiple approaches are used);

Response: As discussed above, the Company leveraged the enterprise value calculation used for valuing its ordinary shares and weighted approximately 75% to the Market approach and 25% to the Income approach in determining the enterprise value. In determining the weighting between the two approaches, the Company considered various elements of the valuation inputs with regards to the Company’s forecasted performance, as well as the comparable companies analyzed. This included consideration of the Company’s current performance, as well as the potential that the Company’s growth rate might not be as strong in the future due to the current and any future economic downturn. Further, considering the fact that the Company had restructured significantly at the time of its spin-off from Agilent, a greater weighting of the Market approach was deemed by the Company to be reasonable.

 

•

A quantitative and qualitative description of the material assumptions used and a sensitivity analysis of those assumptions based upon reasonably likely changes;

Response: While the Market approach is based on a set of comparables, it would result in a lower enterprise value because the semiconductor industry is subject to high volatility given the diversity of the

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July 21, 2009

Page 6

 

various end markets. The Income approach is not necessarily impacted as much by volatility as the Market approach and therefore would result in a higher enterprise value. This trend was evident based on the recent valuations performed when valuing the Company’s ordinary shares. The Company did not concentrate on one particular input or consideration in determining the approach to derive enterprise value. Rather the Company considered a variety of factors as noted above, such as the Company’s own performance as well as the current economic environment.

The Company has included a sensitivity analysis in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of Amendment No. 4.

 

•

If applicable, how the assumptions and methodologies used for valuing goodwill in the current year have changed since the prior year highlighting the impact of any changes.

Response: The Company has not changed the assumptions and methodologies used for valuing goodwill in the current year compared to the prior year. After the Company’s initial public offering occurs, management may elect to use the Company’s public trading value for purposes of determining the fair value of its reporting unit, but will not make such determination until the time of the next annual goodwill impairment test based on all available information.

In response to this comment 10, the Company has enhanced the disclosure on its goodwill impairment assessment in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of Amendment No. 4.

 

11.	In addition, disclose the significant estimates and assumptions used in your assessment of the impairment of long-lived assets. The results of your most recent assessment should also be discussed.

Response: The Company advises the Staff that as of the end of fiscal 2008, management considered whether any triggering events occurred (as noted in paragraph 8 of SFAS No. 144) which would require an assessment of the recoverability of long-lived assets and determined that none of those situations were present. The Company’s Critical Accounting Policy disclosure on evaluating impairment of long-lived and intangible assets describes the Company’s policy and approach rather than the results of a recent assessment. However, in response to comments by the Staff, the Company has clarified disclosure of its impairment assessment policy related to long-lived assets in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of Amendment No. 4.

 

12.	Please tell us how you considered the global recession and deteriorating economic conditions that resulted in the significant decline in revenues in the six months ended May 3, 2009 compared to the prior year discussed on page 63 in your assessment of goodwill and long-lived assets.

Response: The Company’s management conducted valuations of the business enterprise value in the first and second quarters of fiscal 2009 in connection with the determination of fair value of its ordinary shares. Management considered whether the global recession and deteriorating economic conditions, as well as the Company’s recent performance and expected future performance, were triggering events. Despite the decline in the Company’s enterprise value during this period as evidenced by the declines in the fair value of the Company’s ordinary shares as discussed in the Company’s response to Comment 13 below, the fair value remained in excess of the carrying value of the Company’s net assets and, accordingly, management determined that there was no initial indicator of potential goodwill impairment given that its reporting unit is the enterprise as discussed in the response to Comment 10 above.

Management did consider the potential effects of the current global recession and other business factors as noted in paragraph 8 of SFAS No. 144 in determining whether the carrying value of its long-lived assets should be evaluated for impairment under the SFAS No. 144 Step 1 test. However, after considering the Company’s significant cash flow generating capabilities, the longer period over which such long-lived assets, particularly its intangible assets, are recoverable, the benefits of recent cost reduction measures, management’s intentions with respect to its business operations and the fact that there has been no change in the nature and manner of use of its long-lived asset groups, the Company determined that no triggering events occurred warranting a Step 1 analysis of the recoverability of its long-lived assets.

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July 21, 2009

Page 7

 

Share-Based Compensation, page 61

 

13.

Please disclose the reason for the significant decrease in the estimated value of your ordinary shares from August 28, 2008 through March 3, 2009. In addition, tell us the reasons and significant factors contributing to the difference between your estimated fair value as of the date of grant and the estimated IPO price (or pricing range) for options granted in fiscal 2009.

Response: The Company has revised the referenced disclosure in Amendment No. 4 to address the Staff’s comment.

By way of background and to assist the Staff in its review, the table below summarizes the option grants in fiscal 2009:

 

Date of Grant		Number of options granted		Estimated FV of ordinary shares						Exercise Price
				Before NMD*			After NMD*
November 7, 2008		52,500		$	11.93		$	10.68		$	10.68
December 3, 2008		273,500			9.20			8.12			8.12
January 15, 2009		350,000			9.20			8.12			8.12
March 3, 2009		261,000			8.01			6.76			6.76
March 3, 2009		2,008,250			8.01			6.76			10.00
June 2, 2009		122,500			8.66			7.30			7.30
June 2, 2009		4,500			8.66			7.30			10.00

 

*	Non-Marketability Discount

Approximately 66% of the stock options granted in fiscal 2009 have been granted at prices considerably in excess of fair value after non-marketability discount. This was a conscious decision by the Compensation Committee of the Board of Directors (the “Compensation Committee”) in order to challenge and motivate the Company’s employees and executive officers to increase shareholder value. In fact, starting with the grants on March 3, 2009, the only employees receiving grants of options with an exercise price at fair value as opposed to the higher exercise price of $10.00 per share imposed by the Compensation Committee were new hires or employees receiving certain promotions; otherwise, all existing employees received grants with a $10.00 per share exercise price.

The Company had contemplated an initial public offering in 2008 and intended to grant options in connection with the IPO with an exercise price equal to the price to the public. The existence of an intention to grant options at the time of the initial public offering was disclosed publicly on page 6 of Amendment No. 1. This public disclosure created an expectation among the Company’s employees. As a result of the economic downturn, the Company stopped working on the IPO in December 2008.

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July 21, 2009

Page 8

 

As the outlook for the IPO continued to look particularly bleak in March 2009 and because no IPO was contemplated at that time, the Compensation Committee determined to grant at that time a portion of the options that had been identified for grant at the time of the IPO, albeit at a price in excess of fair value. Also in connection with the March 2009 grant, the Compensation Committee decided not to grant any merit pay raises. These were the reasons for the large grant in March 2009. The Company did not recommence work on the IPO until June 16, 2009.

In response to the Staff’s comment, the Company has added disclosure of the principal reasons for the significant decrease in the estimated value of the Company’s ordinary shares from August 28, 2008 through March 3, 2009 in Amendment No. 4.

The principal reasons and significant factors for the difference in fair value of the Company’s ordinary shares as of March 3, 2009 compared to the presently estimated price range in the IPO are as follows:

 

•

The significant increase in semiconductor industry valuations overall, including those companies in the Company’s peer group. For example, the Philadelphia Semiconductor Index as of March 3, 2009 was 191 compared with 287 as of July 17, 2009, an increase of 50.3%.

 

•

Expectations that semiconductor industry valuations will continue to increase through the expected IPO date in early August 2009 due to the broad-based recovery that the Company believes the semiconductor industry is currently experiencing.

 

•

The fact that an IPO of the Company’s ordinary shares reflects a significant liquidity event with expectations of enhanced enterprise value.

 

•

The benefits to the Company of reducing its long-term debt burden with the use of proceeds of the offering compared to the historical valuations of the Company which necessarily assumed a much more substantial ongoing debt burden.

 

•

The IPO price range established with the Company’s underwriters took into account both peer group multiples of fiscal 2010 projected financial results reflecting improved expected performance as compared to the assumptions and expectations of future performance as of March 2009 when overall industry valuations and outlooks were depressed and the benefits to the Company from a number of cost reduction efforts undertaken by the Company that had not been fully reflected in the fiscal 2010 projections used in the March 3, 2009 valuation.

 

•

The non-marketability discount of 15.7% employed at March 3, 2009 because on that date there was no expectation that the Company’s IPO would be consummated given market conditions at that time; the estimated IPO price range does not assume any non-marketability discount.

The Company believes that it has used reasonable methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held Company Equity Securities issued as Compensation, to determine the fair value of the Company’s ordinary shares.

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July 21, 2009

Page 9

 

Cost of products sold, page 64

 

14.	Please clarify what you mean by “manufacturing transitions” and how those transitions result in payments to suppliers.

Response: The referenced disclosure related to a specific situation in which the Company terminated a contract manufacturing relationship with one of its suppliers to move the business to another supplier. As part of the termination, the Company recorded a $3 million charge which primarily related to production equipment procured by the contract manufacturer which would no longer be used and for which the Company agreed to compensate the contract manufacturer. The Company has revised the referenced disclosure in Amendment No. 4 to clarify the referenced disclosure.

Business, page 88

 

15.

Please note that we are not taking a position at this time regarding the accuracy of the analysis or the conclusions in your response to prior comment 3. Please refer to the acknowledgements at the end of this letter that Avago must provide with any acceleration request. It is unclear, however, why it was appropriate to remove the related risk factor from your prospectus given the significance of the issues previously addressed in that risk factor; please revise your filing accordingly.

Response: The Company originally included a risk factor because the precedent IPO transactions had a risk factor, but as a result of the analysis the Company conducted in responding to prior Staff comments, which is set forth in our response to comment 3 in the Company’s July 2, 2009 letter, the Company determined that a risk factor was not necessary and that the relevant disclosure could be included in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in Amendment No. 4. Consequently, the Company respectfully submits that no further revision of the filing is necessary. The Company advises the Staff that it is aware of the acknowledgements at the end of the Staff’s comment letter dated July 17, 2009.

Intellectual Property, page 95

 

16.	With a view toward clarified disclosure, please provide us your analysis of the materiality of patents expired in the past year and patents to expire this year and in the next few years.

Response: Approximately 30 patents have expired in 2009 and approximately 69 are due to expire in 2010 and 2011. The impact of such expirations is not expected to be material to the Company’s intellectual property portfolio or the operation of its business. The Company has revised the referenced disclosure in Amendment No. 4 to clarify its disclosure.

Base Salary, page 108

 

17.

We note your disclosure on page 109 that the 4% increase was based on the committee’s assessment of market trends using in part “compa-ratios.” Please clarify what the compa-ratio showed about the market trend. Was 4% the average market increase? Have you succeeded in the goal mentioned on page 106 of keeping compensation between the 50th and 60th percentile?

Response: The Company has revised the referenced disclosure in Amendment No. 4 to clarify the Compensation Committee’s process for determining the 4% average base salary increase for the Company’s employees. In determining base salary increases for February 1, 2008, the Compensation Committee assessed market trends, the level of prior salary increases for the Company’s employees and the Company’s ability to pay salary increases. The Compensation Committee’s assessment of market trends indicated that the average base salary increase among the Company’s peer group companies at the 50^th percentile was approximately 3.5%, and the Compensation Committee adjusted the average base salary increase for the Company’s employees, including executives, to 4% because prior base salary increases had been lower than the Company’s peer group companies due to the Company’s inability to pay such increases in prior years.

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July 21, 2009

Page 10

 

The Company has revised the referenced disclosure in Amendment No. 4 to disclose that the Compensation Committee makes exceptions to its goal of keeping total cash compensation between the 50^th and 60^th percentile of its peer group companies when it determines exceptions are necessary to (i) attract or retain an executive with the experience and skill the Compensation Committee determines is desirable for a particular position, (ii) provide additional incentive to an executive to achieve the Company’s goals or (iii) maintain internal parity among executives with similar levels of responsibilities.

The Company has also revised Amendment No. 4 to indicate that the total cash compensation paid to Mr. Hock E. Tan, Ms. Johnson and Mr. Bettinger (excluding sign-on bonus) during 2008 was between the 50^th and 60^th percentile of the average total cash compensation paid at the Company’s peer group companies. The total cash compensation paid by the Company during 2008 to each of its named executive officers other than Mr. Hock E. Tan, Ms. Johnson and Mr. Bettinger exceeded the 60^th percentile of the Company’s peer group companies because each such named executive officer achieved the majority of his or her divisional goals above the target set for such named executive officer, each such named executive officer has a base salary that is higher than the average at the 60^th percentile of the Company’s peer group companies and, with respect to Ms. Danesh and Mr. Ingram, such named executive officers have a higher target annual bonus opportunity as a percentage of base salary. The base salary of Ms. Danesh is higher than the 60^th percentile of the Company’s peer group companies for her position as the result of arms length negotiation when she was hired by the Company and the Company’s determination that such a base salary was appropriate in light of each her experience and base salary with her prior employer. The base salaries of Messrs. Bian-Ee Tan and Ingram are higher than the 60^th percentile of the Company’s peer group companies for such positions based on each executive’s prior experience and base salary with the Company’s predecessor. Ms. Danesh has a target annual bonus opportunity was set at the time of her hiring and is higher than the average 50% of base salary at the Company’s peer group companies for her position based on the Compensation Committee’s determination that such a target annual bonus opportunity was appropriate in light of Ms. Danesh’s experience and target annual bonus opportunity of 75% of base salary with her prior employer. Mr. Ingram’s target annual bonus opportunity is higher than the average 50% of base salary at the Company’s peer group companies for his position based on the Compensation Committee’s determination that a higher target annual bonus opportunity was appropriate in light of Mr. Ingram’s experience and the target annual bonus opportunity for executives with similar responsibilities.

Summary Bonus Table, page 113

 

18.	Refer to the last sentence of this section. Please clarify what you mean by “competitive.”

Response: The Company has revised the referenced disclosure in Amendment No. 4 to clarify that by “competitive” it means the percentage of base salary targets for the Company’s named executive officers are within the 50^th to 60^th percentile of the Company’s peer group companies when the Company’s named executive officers achieve their annual cash incentive bonus at target, except for the percentage of base salary targets for Mr. Hock E. Tan, Ms. Danesh and Mr. Ingram which exceed the 60 ^th percentile of the Company’s peer group companies for the reasons set forth in the Company’s response to Comment 17 above.

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July 21, 2009

Page 11

 

Equity Incentive Compensation, page 114

 

19.	Refer to the fourth paragraph in which you disclose that your operating income was the exact amount of your target operating income. Please clarify:

 

•

Whether the August 2008 adjustments to the target increased or decreased the target. Also discuss with greater specificity how the amount of the adjustment was determined.

Response: The Company has revised the referenced disclosure in Amendment No. 4 to disclose that the August 2008 adjustments to the target for performance-based options decreased the target. The Compensation Committee, using its authority to amend grants made under the Amended and Restated Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries (the “Plan”) pursuant to the terms of the Plan, adjusted the target amounts to reflect the then-current financial forecast for fiscal year 2008 and projecting 20% compounded growth for fiscal years 2009 and 2010. The Compensation Committee determined that the adjustments were appropriate because the business model used to initially set the operating profit target was no longer consistent with then-current economic conditions.

The Company has also revised Amendment No. 4 to disclose that on July 20, 2009, the Compensation Committee, pursuant to its authority under the Plan, approved the amendment of outstanding grants of performance-based options held by named executive officers to remove the performance targets and extend the vesting period. The amended options will vest two years after such options could have first vested had the performance targets been achieved, provided that the named executive officer remains employed by the Company through the vesting date. The Compensation Committee determined that the removal of performance targets was appropriate in light of the Company’s current financial projections, which are lower than when the original performance targets were set, and the uncertainty present in the current global economy. In making its determination, the Compensation Committee heavily weighted the importance of providing the Company’s named executive officers with significant incentives to continue with the Company for a substantial period following its initial public offering. As described in its response to Comment 20 below, prior to the removal of the performance targets, the performance-based options that do not become exercisable in a given year due to the failure to meet a performance target can be earned in future years.

 

•

How to reconcile the operating income mentioned in that paragraph with the operating income shown in your audited financial statements. Discuss the reasons for any adjustments from the audited amount.

Response: The Company has also revised Amendment No. 4 to reconcile the amounts reported in the referenced paragraph to its audited financial statements and to discuss the reasons for using adjusted operating income. The operating income target used for performance-vested options is income (loss) from operations calculated in accordance with GAAP but adjusted to exclude amortization of acquisition-related intangibles, share-based compensation, restructuring and asset impairment charges, acquired in-process research and development, loss on extinguishment of debt, and (income) loss from and (gain) loss on discontinued operations. The Compensation Committee determined that non-GAAP operating income provides a better overall measure of the Company’s financial performance among periods than operating income calculated in accordance with GAAP would otherwise provide because the amounts excluded from the non-GAAP operating income target are either non-recurring, in which case such amounts do not reflect the results of continuing operations for which our Compensation Committee wants its named executive officers to be accountable, or, if recurring, are not related to the Company’s operating performance or are amounts over which the Compensation Committee believes the named executive officers do not have control. For example, the Compensation Committee excludes share-based compensation expense from the operating income target because this expense is not reflective of the Company’s operating performance, the Company’s share options typically do not require cash settlement by the Company and the share-based compensation expense is often the result of complex calculations using an option pricing model that estimates share-based awards’ fair value based on factors such as volatility and risk-free interest rates that are beyond the control of the named executive officers.

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July 21, 2009

Page 12

 

20.	If performance-based options that do not become exercisable in a given year due to failure to achieve the target are not forfeited but instead may be earned in future years, please discuss this feature of the options.

Response: The Company has revised Amendment No. 4 to disclose that pursuant to their initial terms performance-based options that do not become exercisable in a given year may be earned in future years, up to the fifth year following the date of grant, based on performance in such future years. As described in its response to Comment 19 above, the Company has also revised Amendment No. 4 to disclose the removal of performance targets from performance-based options held by named executive officers.

Termination-Based Compensation, page 115

 

21.	Please clarify whether the actual separation payments made to the named executives under their separation agreements varied from your previously existing severance agreements with those executives. If so, quantify the amount and discuss the reasons for the differences.

Response: The Company has revised the referenced disclosure in Amendment No. 4 to disclose that the named executive officers with whom the Company entered into separation agreements were not entitled to receive separation payments under any severance agreement or policy with the Company since each named executive officer terminated employment under circumstances not entitling such named executive officer to separation payments.

Summary Compensation Table, page 118

 

22.	Given that you were required to include 2007 information in your prior amendment, the information may not be excluded from this table. See instruction 1 to Regulation S-K Item 402(c).

Response: The Company has revised the Summary Compensation Table in Amendment No. 4 to reinsert the 2007 information as requested.

 

23.	Please expand the penultimate paragraph of your response to prior comment 1 to explain why the required portion of the payment may be excluded. Cite with specificity the authority on which you rely.

Response: The Company has revised the referenced disclosure in Amendment No. 4 to include the required portion of its Malaysian Provident Fund contributions.

 

24.	Please tell us why Mr. Stewart is not included in the subsequent two tables.

Response: The Company has revised Amendment No. 4 to include Mr. Stewart in each of the referenced tables.

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July 21, 2009

Page 13

 

Potential Severance Payments, page 126

 

25.	Please tell us the authority on which you exclude from this table the $3,248,000 paid to Mr. Tan as mentioned on page 115 and the $640,800 paid to Ms. Johnson mentioned on page 139.

Response: The Company has revised the footnotes to the Potential Severance Payments table to include amounts paid to Mr. Tan and Ms. Johnson for the repurchase of ordinary shares held by each of Mr. Tan and Ms. Johnson at a repurchase price equal to the fair market value of such shares following their termination of employment. The ordinary shares were repurchased pursuant to call rights held by the Company under the Management Shareholders Agreement to which each named executive officer is a party.

Shareholder Agreement, page 139

 

26.

Please ensure that you have disclosed all material terms of the agreement. We note for example the information rights and board observer rights mentioned in exhibit 4.3. In this regard, please tell us whether the financial information mentioned in section 6.1.1 of the agreement will also be made public given the right of the shareholders in section 6.2 to use the information in connection with their investment.

Response: The Company has revised the referenced disclosure in Amendment No. 4 to disclose all the material terms of the Second Amended and Restated Shareholders Agreement. In addition, the form of Second Amended and Restated Shareholders Agreement has been revised to expressly provide that the use of any such confidential financial information is subject to compliance by the recipient with all applicable securities laws. The Company has filed the revised form of the Second Amended and Restated Shareholders Agreement as Exhibit 4.3 to Amendment No. 4.

Principal and Selling Shareholders, page 145

 

27.	We note that you have yet to provide the information requested in response to our prior comment 58 in our letter dated September 17, 2008. Please advise.

Response: The Company has revised the referenced disclosure in Amendment No. 4 to include the requested information.

Recent Sales of Unregistered Securities, page II-2

 

28.	Please tell us why you deleted the last paragraph of this section.

Response: The deletion of the last paragraph of the referenced section in Amendment No. 3 was in error and the text has been reinserted in Amendment No. 4.

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July 21, 2009

Page 14

 

Exhibits

 

29.	The rule regarding schedules and similar attachments that you mention in your response to prior comment 8 applies only to exhibits properly filed pursuant to Regulation S-K Item 601(b)(2). You should not use that rule for documents filed under Item 601(b)(10). Therefore, we reissue the comment.

Response: The Company has revised Part II, Item 16 and the Exhibit Index of Amendment No. 4 to refile all of its material acquisition agreements under Regulation S-K Item 601(b)(2) instead of Item 601(b)(10).

 

30.	We note your response to prior comment 4 regarding omitting material pursuant to a confidential treatment request. Note that you must submit your own request for confidential treatment and may not rely on an application filed by another entity.

Response: The Company has resubmitted under separate cover a counterpart confidential treatment request under the Company’s name instead of that of its wholly-owned subsidiary, Avago Technologies Finance Pte. Ltd.

 

31.	Please tell us which exhibits represent the agreements mentioned at the bottom of page 48 and the Bulk Acoustic Wave Filter acquisition mentioned on page 53.

Response: The Company has filed the following agreements and included them in Part II, Item 16 and the Exhibit Index as follows:

 

Exhibit No.		Description
2.8		Purchase and Sale Agreement, dated November 17, 2006, by and among Avago Technologies Limited, Avago Technologies Imaging Holding (Labuan) Corporation, Avago Technologies Sensor (U.S.A.) Inc., other sellers and Micron Technology, Inc.
2.9		Asset Purchase Agreement, dated October 31, 2007, by and among Avago Technologies Limited, Avago Technologies General IP (Singapore) Pte. Ltd., other sellers and Lite-On Technology Corporation (“Lite-On Asset Purchase Agreement”).
2.10		Amendment No. 1 to Lite-On Asset Purchase Agreement, dated January 8, 2008.
2.11		Amendment No. 2 to Lite-On Asset Purchase Agreement, dated January 21, 2009.
2.12		Asset Purchase Agreement, dated June 25, 2008, by and among Avago Technologies GmbH, Avago Technologies International Sales Pte. Ltd., Avago Technologies Wireless IP (Singapore) Pte. Ltd., Avago Technologies Finance Pte. Ltd. and Infineon Technologies AG.

Exhibit 5.1

 

32.	The exhibit that you file to satisfy your obligations under Regulation S-K Item 601(b)(5) should be based on all applicable documents, not merely a selected set of documents:

 

•

Given that documents are not “specifically listed” in section 2.7 of the opinion, please file an opinion that clarifies whether section 3 of the exhibit means that the opinion is not based on the documents covered by section 2.7.

Response: In response to this comment, the Company has filed a new form of Exhibit 5 opinion of Singapore counsel with Section 2.7 removed.

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July 21, 2009

Page 15

 

•

Given section 7 of the exhibit, please file an opinion that clarifies whether the legal question of whether the shares are fully paid is affected by documents or records other than the Company Certificate. Also, please ensure that your revised exhibit clarifies whether the Company Certificate addresses legal or factual matters.

Response: In response to this comment, the Company has filed a new form of Exhibit 5 opinion of Singapore counsel which clarifies this matter.

 

33.	The opinion that you file should not assume facts that are readily ascertainable. Please tell us why the facts assumed in section 4.4 are not readily ascertainable pursuant to the “Company Certificate” or otherwise.

Response: The Company respectfully submits that the assumptions made in section 4.4 are customary and appropriate assumptions taken in opinions rendered pursuant to Item 601(b)(5) of Regulation S-K as the facts assumed are not readily ascertainable. Singapore counsel may not have knowledge of all actions or decisions taken by the Company’s board of directors or shareholders that may impact the full force and effect of the resolutions authorizing the issuance of the ordinary shares and makes the referenced assumption.

Separately, the Company advises the Staff that the Company Certificate is a factual certificate customarily provided under Singapore opinion practice to support the rendering of the “fully paid” portion of Singapore counsel’s opinion. As the concept of “par value” for shares has been abolished under Singapore law, the question of whether shares are fully paid is a factual enquiry which is determined by ascertaining whether a company has received all monies due to it in relation to the allotment and issue of such shares. Although Singapore counsel could also assume these facts because they are not readily ascertainable, it is customary in Singapore opinion practice for outside counsel to confirm these facts in the Company Certificate.

 

34.

Please tell us why the assumption in section 4.5 is necessary and appropriate for an opinion that addresses the issues in Regulation S-K Item 601(b)(5). Also, if the assumption is necessary and appropriate, please confirm our understanding that the date currently omitted from the section will be the date that the registration statement becomes effective.

Response: The Company advises the Staff that the ACRA Searches are electronic searches which reflect, among others, the number of ordinary shares that have been issued by the Company as well as the total paid-up share capital of the Company based on statutory filings made by the Company and is used by Singapore counsel to back up the Company Certificate in connection with the rendering of the “fully paid” portion of the opinion. ACRA does not warrant the accuracy of the information reflected in the searches or that the information provided in such searches are updated and correct. Indeed, each search contains a disclaimer from ACRA in respect of any liability for damage or loss that may be caused as a result of any error or omission. Consequently, the assumption in paragraph 4.5 is therefore necessary given the limitations inherent in this method of extracting information on the Company’s share capital from the ACRA records. Singapore counsel has advised the Company that this assumption is typical and customary under Singapore opinion practice for “fully paid” opinions where ACRA searches are referred to in legal opinions.

 

35.	Please tell us why the assumption in section 4.7 is necessary and appropriate given that the opinion in section 5.1 is conditioned on the shares being “issued in accordance with the terms of the Underwriting Agreement.”

Response: In response to this comment, the Company has filed a new form of Exhibit 5 opinion of Singapore counsel with section 4.7 removed.

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July 21, 2009

Page 16

 

36.	Given the date restrictions like those in section 8 of this exhibit, please ensure that the final, signed opinions that you include in the registration statement are dated the date that your registration statement becomes effective.

Response: The Company confirms to the Staff that the final signed opinion of Singapore Counsel will be dated the date of effectiveness of the Registration Statement and will be filed with a pre-effective amendment to the Registration Statement on such date.

 

37.	We note that statements in section 8 and 9 regarding the opinion being governed and construed in accordance with Singapore law. Please tell us how those statements are consistent with Section 14 of the Securities Act.

Response: In response to this comment, the Company has filed a new form of Exhibit 5 opinion. With respect to the referenced language in section 8, the Company has been advised by Singapore counsel that the inclusion of language clarifying that the opinion is governed and construed in accordance with Singapore law is standard Singapore opinion practice. The counsel has identified a number of examples of other Item 601(b)(5) opinions from other registered Singapore companies, including Chartered Semiconductor Manufacturing (File No. 333-155774), Flextronics International Ltd. (File No. 333-121814, File No. 333-144486) and Verigy Ltd. (File No. 333-132291) in which the referenced language is included in opinions of Singapore counsel filed as exhibits to those companies’ registration statements. The Company respectfully submits that the form of Exhibit 5 opinion from Singapore counsel complies with Section 14 of the Securities Act.

* * *

We hope the foregoing answers are responsive to your comments. Please do not hesitate to contact me by telephone at (650) 463-2643, John J. Huber at (202) 637-2242 or Christopher Kaufman at (650) 463-2606, or by fax at (650) 463-2600 with any questions or comments regarding this correspondence.

As previously discussed with the Staff, the Company’s objective is to launch its offering in late July, preferably July 24 or July 27. We are appreciative of the Staff’s assistance to date, and are available to answer any questions or provide supplemental materials related to this filing.

Very truly yours,

/S/ ANTHONY J. RICHMOND

Anthony J. Richmond

of LATHAM & WATKINS LLP

 

cc:	Avago Technologies Limited

William H. Hinman, Jr., Simpson Thacher & Bartlett LLP