EXHIBIT 10.1

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO A TERM IN THIS EXHIBIT, WHICH
TERM HAS BEEN OMITTED AND REPLACED WITH [***] AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

 

ASSET PURCHASE AGREEMENT

 

 

between

 

 

Sony Electronics Inc.

 

as Seller,

 

 

and

 

 

GSI Technology, Inc.

 

as Purchaser

 

 

August 28, 2009

 

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CONFIDENTIAL TREATMENT REQUESTED

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE 1

DEFINITIONS

1

 

 

 

1.1

Definitions

1

 

 

 

ARTICLE 2

PURCHASE OF ASSETS

1

 

 

 

2.1

Purchase and Sale of Transferred Assets

1

2.2

Excluded Assets

2

2.3

Nonassignable Contracts

3

 

 

 

ARTICLE 3

ASSUMPTION OF LIABILITIES

4

 

 

 

3.1

Assumed Liabilities

4

3.2

Retained Liabilities

5

 

 

 

ARTICLE 4

PURCHASE PRICE

5

 

 

 

4.1

Purchase Price

5

4.2

Closing Payment

6

4.3

Inventory Adjustment Payment

6

4.4

Contingent Payments

6

4.5

Allocation of Purchase Price

7

 

 

 

ARTICLE 5

CLOSING

7

 

 

 

5.1

Closing

7

5.2

Deliveries at Closing

8

5.3

Delivery of Purchased Assets

9

5.4

Conditions Precedent to Obligations of Purchaser

9

5.5

Conditions Precedent to Obligations of Seller

10

 

 

 

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF SELLER

10

 

 

 

6.1

Organization and Good Standing

10

6.2

Authorization and Effect of Agreement

11

6.3

No Conflicts

11

6.4

No Third Party Options

11

6.5

Financial Data

11

6.6

Litigation

12

6.7

Title to and Condition of Assets

12

6.8

Products

12

6.9

Contracts

13

6.10

Business Contained in Seller

13

6.11

Tax Matters

13

6.12

Compliance with Laws

13

6.13

Restrictions on Business Activities

13

6.14

Disclosure

13

6.15

Brokers

14

 

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CONFIDENTIAL TREATMENT REQUESTED

 

TABLE OF CONTENTS
(continued)

 

 

 

Page

 

 

 

ARTICLE 7

REPRESENTATIONS AND WARRANTIES OF PURCHASER

14

 

 

 

7.1

Corporate Organization

14

7.2

Authorization and Effect of Agreement

14

7.3

No Conflicts

14

7.4

Litigation

15

7.5

Condition of Transferred Assets

15

7.6

Brokers

15

 

 

 

ARTICLE 8

COVENANTS

16

 

 

 

8.1

Employees

16

8.2

Accounts Receivable

16

8.3

Covenant Not to Compete

16

8.4

Confidentiality

17

8.5

Specific Performance: Reformation

17

8.6

Warranty Support

17

8.7

Publicity

18

8.8

Maintenance of Books and Records

18

8.9

Bulk Transfer Laws

18

8.10

Insurance

18

8.11

Customer Support

19

8.12

Taking of Necessary Action; Further Action

19

8.13

Continued CIS-SRAM Operations

19

8.14

Reseller Agreement

19

8.15

Financial Statements

20

 

 

 

ARTICLE 9

SURVIVAL AND INDEMNIFICATION

20

 

 

 

9.1

Survival of Representations, Warranties and Covenants

20

9.2

Indemnification

21

9.3

Method of Asserting Claims, etc.

21

9.4

Indemnification Amounts

22

9.5

Losses Net of Insurance, Etc.

22

9.6

Sole Remedy/Waiver

23

9.7

No Consequential Damages

23

9.8

Mitigation of Damages

23

9.9

No Set-Off

23

 

 

 

ARTICLE 10

MISCELLANEOUS PROVISIONS

23

 

 

 

10.1

Notices

23

10.2

Expenses

24

10.3

Successors and Assigns

24

10.4

Waiver

25

10.5

Entire Agreement

25

10.6

Amendments, Supplements, Etc.

25

 

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CONFIDENTIAL TREATMENT REQUESTED

 

TABLE OF CONTENTS
(continued)

 

 

 

Page

 

 

 

10.7

Rights of Third Parties

25

10.8

Further Assurances

25

10.9

Applicable Law

25

10.10

Execution in Counterparts

25

10.11

Titles and Headings

26

10.12

Invalid Provisions

26

10.13

Bulk Sales

26

10.14

Transfers

26

10.15

Transfer Taxes

26

10.16

Brokers

26

10.17

Attorneys’ Fees

26

 

EXHIBITS

 

 

 

Exhibit A — Definitions

 

Exhibit B — SRAM Product Inventory

 

Exhibit C — Transferred Equipment

 

Exhibit D — SRAM Purchase Orders

 

Exhibit E — SRAM Contracts

 

Exhibit F — Form of Intellectual Property Agreement

 

Exhibit G — Form of LOI Amendment

 

Exhibit H — Form of Reseller Agreement

 

 

 

SCHEDULES

 

 

 

Schedule 2.2(a)(xvii) — Miscellaneous Excluded Assets

 

Schedule 5.3(e) — Key SRAM Contracts

 

Schedule 6.6(b) — Litigation

 

Schedule 6.8(a) — SRAM Product Parts List

 

Schedule 6.8(b) — Yield Expectations

 

Schedule 6.8(c) — Standard Product Warranties

 

Schedule 8.4 — Confidentiality Agreements

 

Schedule 8.11 — Customer Support

 

 

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CONFIDENTIAL TREATMENT REQUESTED

 

Sony Electronics-GSI Asset Purchase Agreement

 

August 28, 2009

 

ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
August 28, 2009 by and between GSI Technology, Inc., a Delaware corporation
(“Purchaser”), on the one hand, and Sony Electronics Inc., a Delaware
corporation (“Seller”), on the other hand.

 

RECITALS:

 

WHEREAS, Seller presently conducts the business (the “Business”) of
manufacturing, marketing and selling a line of SRAM memory devices under the
“SONY” brand (the “SRAM Products”), all of which are listed by part number on
Schedule 6.8(a) hereto; and

 

WHEREAS, Seller desires to sell and Purchaser desires to purchase and/or license
the right to manufacture, market and sell the SRAM Products and certain assets,
rights and properties owned by Seller and its Affiliates that are used or useful
in connection with the Business, all on the terms and subject to the conditions
set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements herein contained, the parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

1.1           Definitions.  As used in this Agreement, unless the context
otherwise requires, capitalized terms used in this Agreement shall have the
meanings set forth on Exhibit A hereto.

 

ARTICLE 2

 

PURCHASE OF ASSETS

 

2.1           Purchase and Sale of Transferred Assets.  On the terms and subject
to the conditions hereof at the Closing (as defined in Section 5.1), Seller and
its Affiliates will grant to Purchaser certain licenses under the SRAM
Intellectual Property, as set forth in the IP Agreement, and Seller and its
Affiliates will sell transfer, convey, assign and deliver, and Purchaser will
purchase and accept, all of their respective right, title and interest in and to
the rights, properties and assets described in this
Section 2.1(a)-(f) (collectively, the “Transferred Assets”) free and clear of
all Liens:

 

(a)           Products.  All right, title and interest of Seller and its
Affiliates in and to the SRAM Products and the manufacture, marketing and sale
thereof, including without limitation the part numbers and package designations
associated therewith (subject to limitations set forth in the IP Agreement).

 

(b)           Inventories.  All inventory of finished SRAM Products,
work-in-progress inventory for SRAM Products and, with regard to the New Product
all first silicon wafers and

 

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CONFIDENTIAL TREATMENT REQUESTED

 

package units, on hand at July 30, 2009, as set forth on Exhibit B hereto, as
such Exhibit shall be amended and updated as of the Closing Date (as defined in
Section 5.1) to reflect changes therein occurring in the ordinary course of the
Business prior to the Closing and approved in writing in advance by Purchaser
(the “SRAM Product Inventory”).

 

(c)           Equipment.  The manufacturing, assembly and test equipment, Mask
Works and other tangible assets and properties (and all spare parts on hand
therefor) set forth on Exhibit C hereto (the “Transferred Equipment”).

 

(d)           Purchase Orders.  All rights and incidents of interest in and to
all purchase orders and quotes for the purchase of SRAM Products as listed and
described on Exhibit D hereto (the “SRAM Purchase Orders”).

 

(e)           Contracts.  Subject to Section 2.3, all rights and incidents of
interest in and to the Contracts set forth on Exhibit E hereto (collectively,
the “SRAM Contracts”), provided that Seller’s obligations to effect the
assignment of the SRAM Contracts will be subject to the provisions of
Section 5.3(e).

 

(f)            Databases, Documentation and Records.  All databases,
documentation and operating records related to the Current Products and the New
Product, including:  marketing materials; product design databases and
documentation; computer aided design (CAD) programs and documentation (including
mask tape-out (MTO) preparations); production documentation (including
production flows, test programs and assembly documentation); yield history
documentation; manufacturing cost documentation; test software; historical
shipping records; quality and reliability records and documentation; and
historical pricing documentation.

 

2.2           Excluded Assets.

 

(a)           Assets not Subject to Transfer.  The Transferred Assets shall not
include the following assets of Seller or any Affiliate of Seller (the “Excluded
Assets”):

 

(i)            accounts receivable, cash or Cash Equivalents, whether or not
related to the Business;

 

(ii)           certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in any Person;

 

(iii)          any and all of Seller’s rights in any Contract or arrangement
representing an intercompany transaction between Seller and any Affiliate of
Seller, whether or not such transaction relates to the provision of goods and
services, payment arrangements, intercompany charges or balances, or the like;

 

(iv)          all Tax Returns and all losses, loss carry forwards and rights to
receive refunds, credits and credit carry forwards with respect to any and all
Taxes, including, without limitation, interest thereon, whether or not the
foregoing are derived from the Business;

 

(v)           the minute books, stock transfer books, corporate seals and other
books and records of Seller and its Affiliates;

 

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CONFIDENTIAL TREATMENT REQUESTED

 

(vi)          all current and prior insurance policies and all rights of any
nature with respect thereto, including all insurance recoveries thereunder and
rights to assert claims with respect to any such insurance recoveries;

 

(vii)         all assets of any employee benefit plan;

 

(viii)        all rights, title and interests in or to the name “SONY,” or any
derivation thereof, as well as any related or similar name, and any other
related trade names, trademarks, service marks, corporate names and logos or any
part, derivation, colorable imitation or combination thereof;

 

(ix)           any and all causes of action against third parties arising prior
to the Closing and relating to any of the Transferred Assets or Intellectual
Property, including any claims for refunds, prepayments, offsets, recoupment,
insurance proceeds, condemnation awards, judgments, and the like, whether
received as payment or credit against future liabilities or otherwise;

 

(x)            all real property owned in fee or leased by Seller;

 

(xi)           any governmental licenses, permits and approvals issued to
Seller, to the extent their transfer is not permitted by law;

 

(xii)          any rights in, to and under all Contracts, arrangements, permits
or licenses of any nature, of which the obligations of Seller thereunder are not
expressly assumed by Purchaser hereunder;

 

(xiii)         any books, ledgers, files, reports, plans and operating records
that Seller or any of its Affiliates are required to retain pursuant to any
applicable statute, rule, regulation or ordinance or which relate to the
Excluded Assets or the Retained Liabilities;

 

(xiv)        all assets not related exclusively to the Business;

 

(xv)         any Intellectual Property except for the specific Intellectual
Property specified in Section 2.1(c) and Section 2.1(f);

 

(xvi)        all of Seller’s rights under this Agreement and any agreement or
other written instrument entered into in connection with the transactions
contemplated hereby; and

 

(xvii)       those assets listed in Schedule 2.2(a)(xvii) hereto.

 

(b)           Use of Name.  Purchaser shall not acquire under the terms of this
Agreement any title or interest in Seller’s name, monograms, logos, trademarks,
or any variations or combinations thereof.  The right to use such name,
monograms, logos, trademarks or any variations or combinations thereof shall be
pursuant to the IP Agreement.

 

2.3           Nonassignable Contracts.  Notwithstanding anything to the contrary
contained in this Agreement, except as specifically provided in Section 5.3(e),
to the extent that the sale,

 

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CONFIDENTIAL TREATMENT REQUESTED

 

assignment, lease, sublease, transfer, conveyance or delivery, or attempted
sale, lease, sublease, assignment, transfer, conveyance or delivery, to
Purchaser of any asset that would be a Transferred Asset or any claim or right
or any benefit arising thereunder or resulting therefrom is prohibited by any
Law or would require any Consent or waiver by any Governmental Authority or
other Person, and such Consent or waiver shall not have been obtained prior to
the Closing (a “Non-Assignable Contract”), the Closing shall proceed, subject to
Article 5, without the sale, assignment, lease, sublease, transfer, conveyance
or delivery of such asset (and the failure to obtain such Consent or waiver and
the failure to sell, assign, convey or deliver such asset shall not constitute a
breach of this Agreement by Seller), and this Agreement shall not constitute a
sale, assignment, sublease, transfer, conveyance or delivery of such asset or an
attempt thereof.  In the event that the Closing proceeds without the transfer,
sublease or assignment of any such asset, then following the Closing, the
parties shall use commercially reasonable efforts and cooperate with each other
to obtain promptly such Consents or waivers; provided, however, that Seller
shall not be required to pay any consideration or compromise any rights not
otherwise required by this Agreement to be compromised for any such Consent or
waiver, other than filing, recordation or similar fees, which shall be paid by
Seller.  Pending such Consent or waiver, the parties shall cooperate with each
other in any mutually agreeable, reasonable and lawful arrangements designed to
provide to Purchaser the benefits of use of such asset and to Seller the
benefits, including any indemnities, that it would have obtained had the asset
been conveyed to Purchaser at the Closing.  To the extent that Purchaser is
provided the benefits pursuant to this Section 2.3 of any Contract, Purchaser
shall perform for the benefit of the other Persons that are parties thereto the
obligations of Seller thereunder and pay, discharge and satisfy any related
liabilities that, but for the lack of a Consent or waiver to assign such
liabilities to Purchaser, would be Assumed Liabilities.  Once all required
Consents or waivers for the sale, assignment, lease, sublease, transfer,
conveyance or delivery of any such asset not sold, assigned, leased, subleased,
transferred, conveyed or delivered at the Closing is obtained, Seller shall
assign, lease, sublease, transfer, convey or deliver such asset to Purchaser at
no additional cost to Purchaser. To the extent that any such asset cannot be
transferred or the full benefits of use of any such asset cannot be provided to
Purchaser following the Closing pursuant to this Section 2.3, then Seller and
Purchaser shall enter into such arrangements (including leasing, subleasing,
sublicensing or subcontracting) 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.  Seller shall pay to
Purchaser promptly upon receipt thereof, all income, proceeds and other monies
received by Seller in connection with its use of any asset (net of any Taxes and
any other costs imposed upon Seller) in connection with the arrangements under
this Section 2.3.

 

ARTICLE 3

 

ASSUMPTION OF LIABILITIES

 

3.1           Assumed Liabilities.  Upon the terms and subject to the conditions
of this Agreement, Purchaser agrees, effective at the Closing, to assume the
following Liabilities of Seller relating to the Transferred Assets or the
Business (the “Assumed Liabilities”):

 

(a)           all Liabilities arising from the manufacture, distribution or sale
of any products of the Business after the Closing;

 

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CONFIDENTIAL TREATMENT REQUESTED

 

(b)           any Tax that may be imposed by any federal, state or local
government on the ownership, sale, operation or use of the Transferred Assets on
or after the Closing Date, except for any income taxes attributable to income
received by Seller;

 

(c)           all Liabilities of the Business arising and to be performed from
and after the Closing Date under or relating to the Assumed Contracts; and

 

(d)           all Liabilities arising and to be performed from and after the
Closing Date with respect to former employees of Seller that Purchaser elects to
hire pursuant to Section 8.1.

 

Purchaser’s obligations under this Section 3.1 will not be subject to offset or
reduction by reason of any actual or alleged breach of any representation,
warranty or covenant contained in this Agreement or any Schedule or
Exhibit hereto, or any closing or other document contemplated by this Agreement
or any Schedule or Exhibit hereto, any right or alleged right of indemnification
hereunder, or for any other reason.

 

3.2           Retained Liabilities.  Notwithstanding any provision in this
Agreement, Purchaser shall not assume, and Seller shall retain and be
responsible for performing and discharging, any and all Liabilities of Seller,
whether or not related to the Business, and whether presently fixed and
determined, contingent or otherwise, other than the Assumed Liabilities to be
expressly assumed by Purchaser under Section 3.1 (the “Retained Liabilities”). 
The Retained Liabilities shall include, without limitation:

 

(a)           Liabilities for which Seller expressly has responsibility pursuant
to the terms of this Agreement;

 

(b)           Liabilities to the extent arising out of or relating to the
Excluded Assets;

 

(c)           Liabilities of any kind to Seller’s employees and former
employees, except as specifically provided in Section 3.1(d);

 

(d)           the Accounts Payable of Seller (including Accounts Payable
relating exclusively to the Business existing as of the Closing Date); and

 

(e)           any and all Liabilities for Taxes related to the Business or the
Transferred Assets for taxable periods prior to the Closing Date, except for
Taxes attributable to actions of Purchaser, occurring on or after the Closing
Date.

 

ARTICLE 4

 

PURCHASE PRICE

 

4.1           Purchase Price.  In consideration of the conveyance to Purchaser
of the Transferred Assets and other rights granted to Purchaser pursuant hereto
and pursuant to the IP Agreement, Purchaser shall pay to Seller:  (i) the
Closing Payment, calculated and payable pursuant to Section 4.2; (ii) the
Inventory Adjustment Payment, calculated and payable pursuant to Section 4.3;
and (iii) the Contingent Payments, calculated and payable pursuant to Section
4.4 (collectively, the “Purchase Price”).

 

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CONFIDENTIAL TREATMENT REQUESTED

 

4.2           Closing Payment.  At the Closing, Purchaser shall (a) pay to
Seller the sum of $5,178,000 by wire transfer in accordance with written
instructions provided by Seller prior to the Effective Date (the “Closing
Payment”) and (b) assume the Assumed Liabilities.

 

4.3           Inventory Adjustment Payment.  Promptly following the Closing,
Seller shall amend and update Exhibit B to reflect the final SRAM Inventory as
of the Closing, including all changes in the SRAM Inventory between July 30,
2009 and the Closing (the “Closing SRAM Inventory Schedule”).  Purchaser shall
have the right to observe the final inventory count at Sellers’ facilities. 
Seller shall deliver its proposed Closing SRAM Inventory Schedule to Purchaser
not later than ten Business Days following the Closing.  Purchaser shall have
ten Business Days following receipt of the proposed Closing SRAM Inventory
Schedule to confirm its agreement or to advise Seller of any proposed revisions
thereto.  Within five Business Days following the parties’ agreement on the
Closing SRAM Inventory Schedule, Purchaser shall pay to Seller by wire transfer,
in accordance with written instructions given by Seller, the sum of $1,716,625,
as such amount shall be adjusted to reflect any reduction in the number of units
of SRAM Product Inventory in any of the following categories and/or any
increases in the number of such units approved in advance by Purchaser, as shown
on the Closing SRAM Inventory Schedule, from the number of units in such
category originally shown on Exhibit B, based on the following per unit values
(the “Inventory Adjustment Payment”):

 

Product

 

Front End
Work-in-Progress

 

Back End
Work-in-Progress

 

Finished
Goods

 

Sigma RAM

 

$

6.13

 

$

9.99

 

$

17.59

 

CIS-SRAM

 

$

27.68

 

$

39.09

 

$

51.65

 

36M SRAM

 

$

6.08

 

$

10.05

 

N/A

 

 

4.4           Contingent Payments.

 

(a)           Amount.  Purchaser shall pay to Seller cash payments equal to
[***] of the Net Revenues derived by Purchaser from the sale of CIS-SRAMs
(“CIS-SRAM Revenues”) during the eight calendar quarters beginning with the
first calendar quarter following the Closing in which CIS-SRAM Revenues are
recorded in compliance with GAAP by Purchaser (the “Contingent Payments”).

 

(b)           Payment.  The Contingent Payment for any applicable calendar
quarter shall be paid to Seller by wire transfer, in accordance with written
instructions provided by Seller, no later than 45 days following the end of the
applicable quarter and shall be accompanied by a written report showing the
amount of CIS-SRAM Revenues during the quarter, including a detailed line item
accounting of reductions in revenues charged against Gross Revenues for purposes
of determining CIS-SRAM Revenues.

 

(c)           Review Rights.  Upon the written request of Seller, made not more
frequently than twice during any 12-month period, Purchaser shall allow Seller
and its accountants reasonable access during normal business hours to
Purchaser’s books and records relating to the calculation of CIS-SRAM Revenues
for the limited purpose of reviewing such

 

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CONFIDENTIAL TREATMENT REQUESTED

 

calculation, provided that such accountants have entered into confidentiality
and non-disclosure agreements reasonably acceptable to Purchaser.  Access shall
be made available within 15 days following Seller’s written request. Should such
review disclose an error in the calculation of CIS-SRAM Revenues or any
Contingent Payment, Purchaser will promptly, but in no case more than five
Business Days following the determination of such error, remit to Seller any
additional Contingent Payment owed to Seller.  All expenses incurred by Seller
in performing any such review shall be borne by Seller, unless such review
discloses an error of 2% or more in the calculation of CIS-SRAM Revenues for any
calendar quarter, in which case Purchaser shall promptly, but in no case more
than five Business Days following the determination of such error, reimburse
Seller for such expenses.  In the event that any such review discloses an error
of 2% or more in such calculation, Seller shall thereafter have the right to
conduct such reviews on a quarterly basis.

 

4.5           Allocation of Purchase Price.  No later than 90 days following the
Closing, Purchaser shall prepare and deliver to Seller, for its review and
approval, a statement (the “Allocation Statement”) allocating, for U.S. federal
income tax purposes, the Purchase Price (as adjusted for federal income tax
purposes to take into account any Assumed Liabilities) among the Transferred
Assets, in accordance with Section 1060 of the Code and the regulations
promulgated thereunder.  The Allocation Statement may be revised by Seller and
Purchaser to reflect any Purchase Price adjustments.  In the event that Seller
objects in writing to all or any part of the Allocation Statement within 20 days
following Seller’s receipt thereof, Seller and Purchaser shall seek in good
faith to resolve any differences they have with respect to the Allocation
Statement during the 20 days immediately following delivery of such notice. 
Notwithstanding anything herein to the contrary, if the parties are unable to
resolve their differences within such period, then the parties shall not be
bound by the Allocation Statement and shall be free to allocate the Purchase
Price for Tax purposes on an inconsistent basis.  If the Allocation Statement is
not timely objected to by Seller, or is agreed to by Seller and Purchaser, then
(i) the Allocation Statement shall be conclusive and binding upon the parties
for all purposes, and neither Seller nor Purchaser shall take any tax position
which is inconsistent with such allocation, (ii) Purchaser and Seller shall each
file IRS Form 8594 and all federal, state, local and other Tax Returns required
to be filed in accordance with the Allocation Statement and (iii) the parties
agree to consult, and to cause their respective Affiliates to consult, with one
another with respect to any Tax audit, controversy or litigation relating to the
Allocation Statement by the IRS or another tax authority (it being understood
that, notwithstanding the foregoing, in the event the IRS challenges any
position taken by either party relating to the Allocation Statement, such party
may settle or litigate such challenge without the consent of, or liability to,
the other parties).

 

ARTICLE 5

 

CLOSING

 

5.1           Closing.  The consummation of the transactions contemplated hereby
(the “Closing”) shall take place at the offices of Seller, 1730 N. First Street,
San Jose, California (or at such other place as the parties may designate), at
9:00 a.m. on August     , 2009 or, if later, the third Business Day after such
later date as the conditions specified in Sections 5.4 and 5.5 are

 

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CONFIDENTIAL TREATMENT REQUESTED

 

fulfilled.  The date on which the Closing is effected is referred to in this
Agreement as the “Closing Date.”

 

5.2           Deliveries at Closing.  At the Closing:

 

(a)           Seller Deliveries.  Seller shall deliver to Purchaser the items
described in clauses (i) through (vii) below:

 

(i)            one or more bills of sale, in form and substance reasonably
satisfactory to Purchaser and Seller (collectively, the “Bill of Sale”),
executed by Seller and its Affiliates with respect to the Transferred Assets
owned by each such Person;

 

(ii)           assignments of contracts, in form and substance reasonably
satisfactory to Purchaser and Seller (the “Assignments of Contracts”), executed
by Seller and its Affiliates with respect to the SRAM Purchase Orders and SRAM
Contracts to which each such Person is a party;

 

(iii)          the Intellectual Property Agreement, dated as of the Closing
Date, in the form attached hereto as Exhibit F (the “IP Agreement”), executed by
Seller;

 

(iv)          the Amendment to the Letter of Intent between the parties dated
February 12, 2008 (the “Letter of Intent”), substantially in the form attached
hereto as Exhibit G (the “LOI Amendment”), executed by Seller and Parent;

 

(v)           the Reseller Agreement, dated as of the Closing Date, in the form
attached hereto as Exhibit H (the “Reseller Agreement”), executed by Seller;

 

(vi)          evidence that the individuals signing this Agreement and the
Collateral Agreements on behalf of Seller and its Affiliates are authorized to
do so; and

 

(vii)         all other documents, certificates, instruments or writings
required hereunder to be delivered by Seller or reasonably requested by
Purchaser in connection herewith.

 

(b)           Purchaser Deliveries.  Purchaser shall deliver to Seller the items
described in clauses (i) through (vi) below:

 

(i)            the Closing Payment by wire transfer of immediately available
funds to the account designated in writing by Seller;

 

(ii)           any sales tax applicable to the transfer of U.S. based
Transferred Assets as set out in any Bill of Sale delivered to Purchaser;

 

(iii)          the IP Agreement, executed by Purchaser;

 

(iv)          the LOI Amendment, executed by Purchaser;

 

(v)           the Reseller Agreement, executed by Purchaser;

 

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CONFIDENTIAL TREATMENT REQUESTED

 

(vi)          evidence that the individuals signing this Agreement and the
Collateral Agreements on behalf of Purchaser are authorized to do so; and

 

(vii)         all other documents, certificates, instruments or writings
required hereunder to be delivered by Purchaser or reasonably requested by
Seller in connection herewith.

 

(c)           Collateral Agreements.  The Bill of Sale, Assignments of
Contracts, IP Agreement and Reseller Agreement shall constitute, collectively,
the “Collateral Agreements.”

 

5.3           Delivery of Purchased Assets.  Title to the Transferred Assets
will pass to Purchaser as of the Closing at the locations where such Transferred
Assets are physically located.  Promptly following the Closing, Seller will
place Purchaser in full possession and control of the Transferred Assets and all
other information to be provided in accordance with the terms of the IP
Agreement, and Purchaser shall promptly remove the Transferred Assets from
Seller’s premises as follows:

 

(a)           All Transferred Assets and other information capable of electronic
transmission will be transmitted to Purchaser in such manner, as reasonably
instructed by Purchaser.

 

(b)           All other assets and information will be made available to
Purchaser by Seller at the facilities where such items are currently located. 
Purchaser and Seller shall agree on a schedule for the transfer of such
Transferred Assets as soon as practicable following the Closing.  Seller shall
allow reasonable access to its premises and otherwise cooperate reasonably with
Purchaser so that Purchaser may promptly remove such items.  Seller shall, at
its expense:  (i) disassemble and crate all Transferred Equipment in accordance
with applicable industry standards and subject to appropriate manufacturer
certification; and (ii) make any permanent or temporary modifications to its
facilities (including the removal of windows or doors), in each case as may be
necessary for the removal of any Transferred Equipment from Seller’s premises. 
Purchaser shall otherwise be responsible for the removal and transportation of
such assets, at its cost and risk of loss.

 

(c)           Seller shall have no responsibility for the maintenance of the
Transferred Equipment following the Closing.

 

(d)           Seller shall have the right to retain copies and/or originals of
the databases, documentation, records and other Transferred Assets described in
Section 2.1(f) solely for archival purposes and for use related to warranty
claims and other customer claims concerning SRAM Products sold by Seller prior
to the Closing.

 

(e)           Seller shall obtain and deliver to Purchaser within 30 days
following the Closing Date all Consents and waivers required to permit the
assignment to Seller of the key SRAM contracts listed on Schedule 5.3(e) hereto
(the “Key SRAM Contracts”).  Seller will use commercially reasonable efforts to
effect the assignment of the other SRAM Contracts as soon as possible after the
Closing.

 

5.4           Conditions Precedent to Obligations of Purchaser. The obligations
of Purchaser under this Agreement to consummate the transactions contemplated
hereby will be

 

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CONFIDENTIAL TREATMENT REQUESTED

 

subject to the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived at the option of Purchaser:

 

(a)           All representations and warranties of Seller made in this
Agreement or in any exhibit, schedule or document delivered pursuant hereto
shall be true and complete in all material respects on and as of the Closing
Date as if made on and as of that date.

 

(b)           All of the terms, covenants and conditions of this Agreement to be
complied with and performed by Seller on or prior to the Closing Date shall have
been duly complied with or performed.

 

(c)           No suit, action, claim or governmental proceeding shall be pending
against, and no order, decree or judgment of any court, agency or Governmental
Authority shall have been rendered against, any party hereto that would render
it unlawful, as of the Closing Date, to effect the transactions contemplated by
this Agreement in accordance with its terms.

 

5.5           Conditions Precedent to Obligations of Seller.  The obligations of
Seller under this Agreement to consummate the transactions contemplated hereby
will be subject to the satisfaction, at or prior to the Closing, of all the
following conditions, any one or more of which may be waived at the option of
Seller:

 

(a)           All representations and warranties of Purchaser made in this
Agreement or in any exhibit, schedule or document delivered pursuant hereto
shall be true and complete in all material respects as of the Closing Date as if
made on and as of that date.

 

(b)           All of the terms, covenants and conditions of this Agreement to be
complied with and performed by Purchaser on or prior to the Closing Date shall
have been duly complied with or performed.

 

(c)           No suit, action, claim or governmental proceeding shall be pending
against, and no order, decree or judgment of any court, agency or other
Governmental Authority shall have been rendered against, any party hereto that
would render it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement in accordance with its terms.

 

ARTICLE 6

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller hereby makes the following representations and warranties to Purchaser,
each of which shall be true and correct as of the date hereof and as of the
Closing Date and shall be unaffected by any investigation heretofore or
hereafter made.

 

6.1           Organization and Good Standing.  Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease or
otherwise hold its properties and assets and to carry on its business as
presently conducted.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

6.2           Authorization and Effect of Agreement.  Seller and its Affiliates
each has the requisite corporate power and authority to execute and deliver this
Agreement and the Collateral Agreements to which it is a party, and to perform
the transactions contemplated hereby and thereby.  The execution and delivery by
Seller of this Agreement, the execution and delivery by Seller and its
Affiliates of the Collateral Agreements and the performance by each of them of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Seller and its Affiliates, as
applicable, and do not and will not require any consent or approval of any
Governmental Authority or any other Person.  This Agreement has been duly
executed and delivered by Seller and constitutes a valid and binding agreement
of Seller, enforceable against Seller in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, fraudulent
conveyance and similar laws affecting creditors’ rights and remedies generally
and subject, as to enforceability, to general principles of equity.  Each of the
Collateral Agreements, when executed and delivered by Seller and its Affiliates
at the Closing, will constitute a valid and binding agreement of Seller and/or
its Affiliate(s), as applicable, enforceable against such Person(s) in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, fraudulent conveyance and similar laws affecting
creditors’ rights and remedies generally and subject, as to enforceability, to
general principles of equity.

 

6.3           No Conflicts.  The execution and delivery of this Agreement and
the Collateral Agreements by Seller and its Affiliates does not, and the
performance by Seller and its Affiliates of the transactions contemplated by
this Agreement and the Collateral Agreements will not, conflict with, or result
in any violation of, or constitute a default under, or, as applicable, give rise
to the creation of a Lien upon any of the Transferred Assets or to a right of
termination, cancellation or acceleration of any obligation or to a loss of a
benefit under, (a) any provision of the Certificate of Incorporation or Bylaws
or other applicable constituent documents of Seller or any of its Affiliates,
(b) except for Consents required to permit Seller or its Affiliates to assign
SRAM Contracts (each of which consent is described on Exhibit E hereto), any of
the terms, conditions or provisions of any Contract by which Seller of any of
its Affiliates is bound, or (c) any Law or Order applicable to or binding on
Seller or any of its Affiliates or any of their respective assets.  Except for
any Consents required to permit the assignment of SRAM Contracts, no Consent is
required to be obtained, made or given (whether pursuant to applicable Law,
Contract or otherwise) in connection with the execution and delivery of this
Agreement or any of the Collateral Agreements by Seller or any of its Affiliates
or the performance by any of them of the transactions contemplated hereby or
thereby.

 

6.4           No Third Party Options.  There are no existing agreements, options
or commitments granting to any Person the right to acquire any of the
Transferred Assets or any interest therein except for sales of SRAM Product
Inventory in the ordinary course of business.

 

6.5           Financial Data.  All historical financial data related to the
Business provided to Purchaser in connection with the negotiation of the
transactions contemplated hereby was accurately extracted from the books and
records of Seller.  Such financial information presents fairly, in all material
respects, the financial position and the results of operations of the Business
for the periods indicated (exclusive of the Excluded Assets and the Retained
Liabilities), except for the omission of certain information required by GAAP to
be included in footnotes to such financial information, which footnotes have not
been prepared by Seller.  Seller makes no other

 

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CONFIDENTIAL TREATMENT REQUESTED

 

representations with regard to such financial information.  Purchaser
acknowledges that such financial information was prepared solely for the purpose
of this Agreement and that the Business was not conducted on a stand-alone basis
as a separate entity during the periods indicated in such financial information
and that the financial information includes allocations and estimates not
necessarily indicative of the costs that would have resulted if the Business had
been operated and conducted on a stand-alone basis as a separate entity during
such periods.

 

6.6           Litigation.

 

(a)           There are no judicial or administrative actions, proceedings or
investigations pending or threatened that question the validity of this
Agreement or any action taken or to be taken by Seller in connection with this
Agreement.

 

(b)           There are no lawsuits, claims, administrative or other proceedings
or investigations relating to the conduct of the Business or otherwise affecting
the Transferred Assets pending or threatened against Seller or any of its
Affiliates, except as disclosed on Schedule 6.6(b) hereto.

 

(c)           There are no Orders of any Governmental Authority binding on
Seller or any of its Affiliates that relate to the Business or otherwise affect
the Transferred Assets.

 

6.7           Title to and Condition of Assets.  Seller and each of its
Affiliates owns, leases or has the legal right to use all of its respective
Transferred Assets, as identified in the exhibits hereto (other than SRAM
Intellectual Property which is subject to the IP Agreement) and has good title
to (or in the case of leased Transferred Assets, valid leasehold interests in)
all such Transferred Assets (other than SRAM Intellectual Property which is
subject to the IP Agreement).  The Transferred Assets are in good operating
condition and repair, subject to normal wear, are usable in the regular and
ordinary course of business and conform to all applicable Laws.  At the Closing,
Seller and its Affiliates will sell, convey, assign, transfer and deliver to
Purchaser (i) valid and marketable title to all of the Transferred Assets, and
(ii) all their respective right and interest in and to all of the Transferred
Assets (other than SRAM Intellectual Property which is subject to the IP
Agreement), free and clear of any Liens.

 

6.8           Products

 

(a)           Attached hereto as Schedule 6.8(a) is a complete list of the SRAM
Products by part number.

 

(b)           All SRAM Product Inventory consisting of finished SRAM Products is
of good and merchantable quality and is free of defects, except for such
inventory that is designated as defective on Exhibit B hereto and as to which no
value has been assigned.  All other SRAM Product Inventory meets Seller’s
defined yield expectations as set forth on Schedule 6.8(b) hereto, but no
warranty of merchantability or other warranties are given for such goods.

 

(c)           Schedule 6.8(c) sets forth the standard form terms and conditions
of all product warranties generally extended by Seller to purchasers of the SRAM
Products during the preceding three years.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

(d)           Aside from its obligations under such standard warranties, Seller
is not under any liability or obligation with respect to the return of any
inventory in the possession of distributors or other customers.

 

6.9           Contracts.  Each SRAM Contract is valid and enforceable in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, fraudulent conveyance and similar laws affecting
creditors’ rights and remedies generally and subject, as to enforceability, to
general principles of equity.  Seller is not, and to Seller’s Knowledge, no
other party thereto is, in material default in the performance, observance or
fulfillment of any obligation under the SRAM Contracts.  To Seller’s Knowledge,
no event has occurred which, with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder.  To Seller’s Knowledge,
the SRAM Contracts represent all contracts material to the operation of the
Business.

 

6.10         Business Contained in Seller. All of the assets, properties and
rights under agreements, contracts, licenses and leases constituting the
Transferred Assets are owned, leased, held or licensed by Seller or its
Affiliates.  Where not owned by Seller, the owner is indicated on the exhibits
attached hereto.

 

6.11         Tax Matters.  All material Tax Returns that are required to be
filed on or before the date hereof with respect to any Tax by or on behalf of
Seller have been filed and all Taxes shown to be due and payable on such Tax
Returns have been paid except where such Tax is being contested in good faith by
appropriate proceedings or where the failure to so file or pay would not be
reasonably likely to be material to Seller.  There are no Liens for Taxes upon
any of the Transferred Assets, except for Liens for Taxes not yet due and
payable.  For current property taxes, Purchaser and Seller agree that the
assessment date (or lien date) will determine the ownership of the liability. If
the Closing takes place after the assessment date, then the property tax
liability remains with Seller. If the Closing takes place before the assessment
date then the liability will transfer to Purchaser.

 

6.12         Compliance with Laws.  Seller, its Affiliates and their respective
officers and employees have complied in all material respects with, are not in
violation in any material respect of, and have not received any notices of
violation with respect to, any foreign, federal, state, province or local Law
with respect to the conduct of the Business or the ownership or operation of the
Transferred Assets.  There are no governmental licenses, permits or approvals
issued to Seller that relate exclusively to the Business or the SRAM Products.

 

6.13         Restrictions on Business Activities.  There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which Seller, any of its Affiliates or, to Seller’s Knowledge, any of their
respective officers is a party or otherwise binding upon Seller, any of its
Affiliates or, to Seller’s Knowledge, any of their respective officers that has
or reasonably could be expected to have the effect of prohibiting or materially
impairing the transactions contemplated hereby, the conduct of the Business by
Purchaser or the performance of any party’s obligations under this Agreement or
the Collateral Agreements.

 

6.14         Disclosure.  No representation or warranty of Seller contained
herein, and no statement contained in any document or other instrument furnished
or to be furnished by Seller

 

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CONFIDENTIAL TREATMENT REQUESTED

 

to Purchaser in connection with the transactions contemplated hereby, contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the representation, warranty or
statement so made not misleading.  Seller has delivered to Purchaser complete
and accurate copies of each Contract or other document referred to in any
Exhibit or Schedule hereto or otherwise included in the Transferred Assets.

 

6.15         Brokers.  No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller.

 

ARTICLE 7

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby makes the following representations and warranties to Seller,
each of which shall be true and correct as of the date hereof and as of the
Closing Date and shall be unaffected by any investigation heretofore or
hereafter made.

 

7.1           Corporate Organization.  Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease or
otherwise hold its properties and assets and to carry on its business as
presently conducted.

 

7.2           Authorization and Effect of Agreement.  Purchaser has the
requisite corporate power and authority to execute and deliver this Agreement
and the Collateral Agreements and to perform the transactions contemplated
hereby and thereby.  The execution and delivery by Purchaser of this Agreement
and the Collateral Agreements and the performance by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Purchaser, and do not and will not require any
consent or approval of any Governmental Authority or any other Person.  This
Agreement has been duly executed and delivered by Purchaser and constitutes a
valid and binding agreement of Purchaser, enforceable against Purchaser in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, fraudulent conveyance and similar laws affecting
creditors’ rights and remedies generally and subject, as to enforceability, to
general principles of equity.  Each of the Collateral Agreements, when executed
and delivered by Purchaser at the Closing, will constitute a valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium, and similar
laws affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity.

 

7.3           No Conflicts. The execution and delivery of this Agreement and the
Collateral Agreements by Purchaser does not, and the performance by Purchaser of
the transactions contemplated by this Agreement and the Collateral Agreements
will not, conflict with, or result in any violation of, or constitute a default
under (a) any provision of the Certificate of Incorporation or Bylaws of
Purchaser, (b) any of the terms, conditions, or provisions of any Contract by
which Purchaser is bound, or (c) any Law or Order applicable to or binding on
Purchaser.  No Consent is required to be obtained, made or given (whether
pursuant to applicable

 

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CONFIDENTIAL TREATMENT REQUESTED

 

Law, Contract or otherwise) in connection with the execution and delivery of
this Agreement or any of the Collateral Agreements by Purchaser or the
performance by Purchaser of the transactions contemplated hereby or thereby.

 

7.4           Litigation.  There are no judicial or administrative actions,
proceedings or investigations pending or, to Purchaser’s knowledge, threatened
that question the validity of this Agreement or any action taken or to be taken
by Purchaser in connection with this Agreement.

 

7.5           Condition of Transferred Assets. Purchaser and its representatives
and agents have had and exercised, prior to the date hereof, the right to make
all inspections and investigations of the Business and the Transferred Assets
deemed necessary or desirable by Purchaser.  In light of these inspections and
investigations and the representations and warranties made to Purchaser by
Seller in Article 6 hereof, Purchaser is relinquishing any right to any claim
based on any representations and warranties other than those specifically
included in Article 6 hereof and in the Collateral Agreements.  ALL OTHER
WARRANTIES OF MERCHANTABILITY, INFRINGEMENT AND FITNESS FOR ANY PARTICULAR
PURPOSE, AND ALL OTHER WARRANTIES ARISING UNDER THE UNIFORM COMMERCIAL CODE (OR
SIMILAR FOREIGN LAWS), ARE HEREBY WAIVED BY PURCHASER.  PURCHASER FURTHER
REPRESENTS THAT NEITHER SELLER NOR ANY OTHER PERSON HAS MADE ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF ANY
INFORMATION REGARDING ANY OF SELLER, THE BUSINESS, THE TRANSFERRED ASSETS OR THE
ASSUMED LIABILITIES NOT EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE
COLLATERAL AGREEMENTS, AND NEITHER SELLER NOR ANY OTHER PERSON WILL HAVE OR BE
SUBJECT TO ANY LIABILITY TO PURCHASER OR ANY OTHER PERSON RESULTING FROM THE
DISTRIBUTION TO PURCHASER OR ITS REPRESENTATIVES OR PURCHASER’S USE OF, ANY SUCH
INFORMATION RELATING TO THE BUSINESS, ANY OFFERING MEMORANDUM OR OTHER
PUBLICATION PROVIDED TO PURCHASER OR ITS REPRESENTATIVES, OR ANY OTHER DOCUMENT
OR INFORMATION PROVIDED TO PURCHASER OR ITS REPRESENTATIVES IN CONNECTION WITH
THE SALE OF THE BUSINESS.  SUBJECT TO THE REPRESENTATIONS AND WARRANTIES OF
SELLER CONTAINED HEREIN AND IN THE COLLATERAL AGREEMENTS, (I) PURCHASER IS
ASSUMING ALL LIABILITIES AND OBLIGATIONS WITH RESPECT TO THE CONDITION OF THE
TRANSFERRED ASSETS, AND (II) PURCHASER IS ACKNOWLEDGING THAT IT IS BUYING THE
TRANSFERRED ASSETS ON AN “AS IS, WHERE IS” BASIS “WITH ALL FAULTS” AND THAT
SELLER IS NOT MAKING ANY FURTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND,
EXPRESS OR IMPLIED, RESPECTING THE TRANSFERRED ASSETS.  PURCHASER ACKNOWLEDGES
THAT ANY FINANCIAL PROJECTIONS PROVIDED BY SELLER ARE FOR ILLUSTRATIVE PURPOSES
ONLY AND DO NOT FORM THE BASIS FOR ANY LIABILITY.

 

7.6           Brokers.  No broker, finder or investment banker is entitled to
any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Purchaser.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

ARTICLE 8

COVENANTS

 

8.1           Employees. Purchaser shall have the right, but shall be under no
obligation, either prior to or after the Closing, to make offers of employment
(to be effective at or following the Closing) to such current employees of the
Business as it shall designate in its sole discretion.  Any such offer made
prior to the Closing may be conditioned upon the consummation of the
transactions contemplated hereby at the Closing.  All obligations of Seller to
all employees of the Business through the Closing, including, without
limitation, obligations for salary, sales commissions, bonus compensation,
payroll taxes, fringe benefits and severance pay, are and shall remain, the sole
obligations of Seller.  All employment arrangements between Purchaser and any
such employees that may be hired by Purchaser will be negotiated directly
between Purchaser and such employees.

 

8.2           Accounts Receivable.  Purchaser shall promptly remit to Seller any
payments received by Purchaser following the Closing Date with respect to any
accounts receivable of Seller accrued as of the Closing Date.  Seller shall
promptly remit to Purchaser any payments received by Seller following the
Closing Date with respect to any accounts receivable of the Business accruing
from and after the Closing Date.

 

8.3           Covenant Not to Compete.

 

(a)           Ownership of Competing Business Interests.  Seller, for itself and
on behalf of Parent and SCK, agrees that prior to the fifth anniversary of the
Closing Date, none of them will, directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or control of any
business, whether in corporate, proprietorship or partnership form or otherwise,
engaged in the sale of Competing Products, provided, however, that nothing
herein shall preclude Seller, Parent or SCK from (i) owning a non-controlling
equity interest in any publicly traded company listed on a stock exchange, or
(ii) investing in ventures, partnerships or other entities that do not
constitute affiliates (as such term is defined in the Securities Exchange Act of
1934, as amended) of Seller or any of its Affiliates.

 

(b)           Manufacture and Sale of Competing Products.  Seller, for itself
and on behalf of Parent and SCK, further agrees that prior to the fifth
anniversary of the Closing Date, Seller, Parent and SCK shall not make, have
made, sell, offer to sell, import or otherwise distribute any Competing
Products; provided, however, that nothing herein shall preclude Seller, Parent
or SCK from making (or having made), using, purchasing, selling, importing or
otherwise distributing a Competing Product, to the extent that such Competing
Product is incorporated into any of such party’s or its Affiliates’ end
products.

 

(c)           Nonsolicitation of Employees.  Seller, for itself and on behalf of
Parent and SCK, agrees that during the period in which they are bound by the
covenants contained in Sections 8.3(a) and 8.3(b), none of them will, directly
or indirectly, specifically target, solicit or induce any employee of Purchaser
(i) to discontinue his or her relationship with Purchaser or (ii) to accept
employment by, or enter into a business relationship with Seller or any of its
Affiliates; provided, however, that Seller, Parent and SCK shall not be
prohibited from

 

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CONFIDENTIAL TREATMENT REQUESTED

 

(A) soliciting by means of general advertisement or third party agent (it being
permissible for third party agents to solicit Purchaser’s employees as long as
Seller, Parent and/or SCK do not direct such third party agents to solicit
Purchaser’s employees) or (B) soliciting or hiring individuals who initiate
contact with Sony, Parent or SCK regarding potential employment.

 

8.4           Confidentiality.

 

(a)           Seller’s Obligations.  Seller agrees that from and after the
Closing, Seller will not, directly or indirectly, disclose, reveal, divulge or
communicate to any person or entity other than authorized officers, directors
and employees of Purchaser, or use or otherwise exploit for its own benefit or
for the benefit of anyone other than Purchaser, any Confidential Information (as
defined below).  Seller shall not have any obligation to keep confidential any
Confidential Information if and to the extent disclosure thereof is required by
Law or in the enforcement of its rights hereunder; provided, however, that in
the event disclosure is required by applicable Law, Seller shall, to the extent
reasonably possible, provide Purchaser with prompt notice of such requirement
prior to making any disclosure so that Purchaser may seek an appropriate
protective order.  For purposes of this Section 8.4, “Confidential Information”
shall mean any confidential information with respect to the conduct or details
of the Business, including, without limitation, methods of operation, products,
proposed products, former products, prices, fees, costs, plans, designs,
technology, inventions, trade secrets, know-how, software, marketing methods,
policies, plans, or other specialized information or proprietary matters.  The
term Confidential Information does not include, and there shall be no obligation
hereunder with respect to, information that (a) is generally available to the
public on the date of this Agreement, (b) becomes generally available to the
public other than as a result of a disclosure by Seller not otherwise
permissible thereunder, (c) is independently developed by Seller as established
by documentary evidence, (d) Seller learns from other sources where such sources
have not, to Seller’s Knowledge, violated their confidentiality obligation to
Purchaser, or (e) Seller or its Affiliates use in other lines of business.

 

(b)           Purchaser’s Obligations.  Purchaser shall be bound to the same
extent as Seller to the confidentiality agreements listed on Schedule 8.4,
provided, and to the extent, that such agreements or other documents provided to
Purchaser by Seller clearly identify the confidential information subject to
such agreements.  If requested by the other party or parties to any such
agreement, Purchaser shall sign a counterpart to such confidentiality agreement
confirming its agreement to be so bound.

 

8.5           Specific Performance: Reformation.  The parties hereto
specifically acknowledge and agree that the remedy at law for any breach of
Sections 8.3 or 8.4 may be inadequate and that Purchaser, in addition to any
other relief available to it, shall be entitled to seek temporary and permanent
injunctive relief without the necessity of proving actual damage or posting any
bond whatsoever.  In the event that the provisions of Sections 8.3 or 8.4 should
ever be deemed to exceed the limitations provided by applicable Law, then the
parties hereto agree that such provisions shall be reformed to set forth the
maximum limitations permitted.

 

8.6           Warranty Support.  Purchaser will make available for sale to
Seller SRAM Products for a period of one year following the Closing Date in
order for Seller to satisfy, in its good faith determination, Seller’s warranty
obligations for SRAM Products distributed prior to

 

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CONFIDENTIAL TREATMENT REQUESTED

 

the Closing Date.  Purchaser shall sell such SRAM Products to Seller for such
purpose at Purchaser’s then current manufacturing cost.  Delivery of such
products shall be pursuant to Seller’s standard purchase order terms and
conditions.

 

8.7           Publicity.  Neither party will issue or cause the publication of
any press release or other public announcement with respect to this Agreement or
the transactions contemplated hereby without the prior consent of the other
party; provided, however, that nothing herein will prohibit either party from
issuing or causing publication to the extent that such party determines, on
advice of counsel, that such publication is required by Law or the rules of any
national stock exchange applicable to it, in which event the party making such
determination will use reasonable efforts to allow the other party reasonable
time to comment on such release or announcement, and will make all revisions
thereto reasonably requested by such other party, in advance of its issuance.

 

8.8           Maintenance of Books and Records.  Each of Seller and Purchaser
shall preserve until the second anniversary of the Closing Date all electronic
records (excluding emails) possessed by such party directly relating to the
assets, liabilities or operations of the Business prior to the Closing Date. 
After the Closing Date, where there is a legitimate purpose, such party shall
provide the other party with access, upon prior reasonable written request
specifying the need therefor, during regular business hours, to (i) the relevant
officers and employees of such party and (ii) the books of account and records
of such party, but, in each case, only to the extent relating to the assets,
liabilities and operations of the Business prior to the Closing Date, and the
other party and its representatives shall have the right to make copies of such
books and records; provided, however, that the foregoing right of access shall
not be exercisable in such a manner as to interfere unreasonably with the normal
operations and business of such party; and further provided that, as to so much
of such information as constitutes trade secrets or confidential business
information of such party, the requesting party and its representatives will use
due care to not disclose such information except (i) as required by Law,
(ii) with the prior written consent of such party, which consent shall not be
unreasonably withheld, or (iii) where such information becomes available to the
public generally, or becomes generally known to competitors of such party,
through sources other than the requesting party and its representatives.  Such
records may nevertheless be destroyed by a party if such party sends the other
party written notice of its intent to destroy records, specifying with
particularity the contents of the records to be destroyed.  Such records may
then be destroyed after the 30th day following delivery of such notice unless
the other party objects to the destruction, in which case the party seeking to
destroy the records shall either agree to retain such records or to deliver such
records to the objecting party.

 

8.9           Bulk Transfer Laws. Purchaser acknowledges that Seller has not
taken, and does not intend to take, any action required to comply with any
applicable bulk sale or bulk transfer laws or similar laws.

 

8.10         Insurance.  Prior to and following the Closing, the coverage under
all insurance policies of Seller and its Affiliates related to the Business
shall continue in force only for the benefit of Seller and its Affiliates and
not for the benefit of Purchaser.  Purchaser agrees to arrange for its own
insurance policies with respect to the Business covering all periods following
the Closing and agrees not to seek, through any means, to benefit from any of
Seller’s or its

 

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CONFIDENTIAL TREATMENT REQUESTED

 

Affiliates’ insurance policies which may provide coverage for claims relating in
any way to the Business.

 

8.11         Customer Support.  Purchaser will assume front line customer
support functions with respect to the Business on and after the Closing Date. 
Purchaser will respond to initial customer support inquiries, including
inquiries related to SRAM Products sold by Seller prior to the Closing. 
Purchaser will perform the initial response functions listed on Schedule 8.11
with respect to such SRAM Products within the times noted thereon.  Seller shall
reimburse Purchaser for the cost of such services in the amounts set forth on
Schedule 8.11.  Any additional customer service support to be provided by
Purchaser with respect to SRAM Products sold prior to the Closing will be
subject to further agreement between the parties.

 

8.12         Taking of Necessary Action; Further Action.  If, at any time after
the Closing Date, any further action is necessary to carry out the purposes of
this Agreement and to vest Purchaser with full right, title and possession to
the Transferred Assets, Seller will take, and cause its Affiliates to take, all
such lawful and necessary action. Neither Purchaser nor Seller shall take any
action that is materially inconsistent with its obligations under this
Agreement.

 

8.13         Continued CIS-SRAM Operations.  Purchaser acknowledges that a
material inducement for Seller to enter into this Agreement is Purchaser’s good
faith commitment to support the manufacture, sale and distribution of CIS-SRAMs,
without which Seller would not have entered into this Agreement.  Purchaser
further acknowledges that it is Purchaser’s current intention, following the
Closing, to continue to actively support the development, manufacture and sale
of CIS-SRAMs to the mutual financial advantage of both Purchaser and Seller.  To
that end, Purchaser covenants that during the two-year period in which
Contingent Payments may be payable, Purchaser will not develop a product that
directly competes with CIS-SRAM; provided, however, that Purchaser shall be
relieved from such obligation in the event that any viable claim of infringement
is asserted against Purchaser by a third party or Purchaser encounters a
material technical problem which, in either case, Purchaser reasonably
determines would materially affect its ability to manufacture, sell or
distribute CIS-SRAMs but would not so affect such competitive product.  Seller
acknowledges, however, that the SRAM industry is characterized by rapidly
changing technologies, evolving industry standards and frequent new product
introductions and that Purchaser must be able to react, on a timely and
cost-effective basis, to meet changing customer requirements.  Accordingly,
Seller acknowledges that, except as specifically provided in this Section 8.13,
Purchaser’s obligation to make Contingent Payments shall not in any way affect
Purchaser’s right to exercise management control over all aspects of its
business.  Without limiting the generality of the foregoing, Purchaser shall not
be required to:  (i) continue to manufacture or sell CIS-SRAMs for any period of
time following the Closing; (ii) devote more resources to the sale of CIS-SRAMs
than is, in the opinion of Purchaser’s management, prudent in the context of
Purchaser’s overall business; or (iii) seek to maximize CIS-SRAM Revenues where
to do so, in the opinion of Purchaser’s management, would have an adverse effect
on Purchaser’s profitability or on the sale of Purchaser’s other products.

 

8.14         Reseller Agreement.   Notwithstanding any rights conferred on
Purchaser in this Agreement or the IP Agreement to the contrary, if any finished
SRAM Products delivered by Seller to Purchaser, and bearing the Sony logo on the
exterior packaging, have not been sold by

 

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CONFIDENTIAL TREATMENT REQUESTED

 

Purchaser to an unaffiliated third party by the 180th day following the Closing
Date, any sales of such SRAM Products made by Purchaser thereafter shall be
subject to the Reseller Agreement.

 

8.15         Financial Statements.

 

(a)           On or before the 65th day after the Closing Date, Seller shall, to
the extent required by the SEC, deliver to Purchaser, financial statements of
the Business to support Purchaser’s SEC Form 8-K filing consistent with SEC
requirements.  Such financial statements shall be in the form required by
Regulation S-X, subject to such modifications as the SEC may permit, and audited
by registered independent public accountants (collectively, the “Audited
Financial Statements”).  Seller shall bear all of its internal costs related to
the preparation of the Audited Financial Statements.  Seller and Purchaser shall
share equally in (i) the fees and expenses of Seller’s registered independent
public accountants incurred in connection with their services related to the
Audited Financial Statements and (ii) the reasonable fees and expenses of
Seller’s outside counsel incurred in connection with the preparation of the
Audited Financial Statements and approved in advance by Purchaser (which
approval shall not be unreasonably withheld).

 

(b)           In addition, Seller shall, to the extent required by the SEC,
deliver to Purchaser any unaudited interim financial information of the Business
required by the SEC in connection with Purchaser’s SEC reporting obligations. 
Such interim financial information shall be in the form required by
Regulation S-X, subject to such modifications as the SEC may permit.  Seller
shall bear all of its internal costs related to the preparation of such interim
financial statements.  Seller and Purchaser shall share equally in (i) the fees
and expenses of Seller’s registered independent public accountants in connection
with their services related to such interim financial information and (ii) the
reasonable fees and expenses of Seller’s outside counsel incurred in connection
with the preparation of such interim financial information and approved in
advance by Purchaser (which approval shall not be unreasonably withheld).

 

ARTICLE 9

SURVIVAL AND INDEMNIFICATION

 

9.1           Survival of Representations, Warranties and Covenants

 

(a)           The representations and warranties of Seller and Purchaser
contained in this Agreement shall survive the Closing until the expiration of
two years from the Closing Date. No claims for Losses based on such
representations and warranties may be asserted following the expiration of such
period.  The covenants contained in this Agreement shall survive until they
terminate pursuant to their terms.

 

(b)           No party hereto shall be deemed to have breached any
representation, warranty, or covenant contained herein if (i) the other party
was aware prior to the execution and delivery of this Agreement of the breach
of, or inaccuracy in, or of any facts or circumstances constituting or resulting
in the breach of, or inaccuracy in, such representation, warranty or covenant,
or (ii) such party shall have notified the other party hereto in writing, on or
prior to the Closing Date, of the breach of, or inaccuracy in, or of any facts
or circumstances constituting or

 

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CONFIDENTIAL TREATMENT REQUESTED

 

resulting in the breach of or inaccuracy in, such representation, warranty or
covenant, and such other party has permitted the Closing to occur.

 

9.2           Indemnification.

 

(a)           From and after the Closing Date and subject to Sections 9.1 and
9.4, Seller agrees to indemnify and hold harmless Purchaser against and in
respect of any and all losses, claims, damages, liabilities, reasonable costs
and expenses, including reasonable legal fees and expenses (“Losses”), resulting
or arising from or otherwise relating to (i) any breaches of the representations
and warranties of Seller or its Affiliates set forth in this Agreement or any of
the Collateral Agreements, (ii) any nonfulfillment of or material failure to
comply with any covenant of Seller or its Affiliates set forth in this Agreement
or any of the Collateral Agreements, or (iii) any Retained Liability.

 

(b)           From and after the Closing Date and subject to Sections 9.1 and
9.4, Purchaser agrees to indemnify and hold harmless Seller against and in
respect of any and all Losses resulting or arising from or otherwise relating to
(i) any breaches of Purchaser’s representations and warranties set forth in this
Agreement, (ii) any nonfulfillment of or material failure to comply with any
covenant set forth in this Agreement by Purchaser, (iii) the operation of the
Business or the Transferred Assets or actions taken by or on behalf of Purchaser
after the Closing, or (iv) any Assumed Liability.

 

9.3           Method of Asserting Claims, etc.  All claims for indemnification
by any Indemnified Party hereunder shall be asserted and resolved as set forth
in this Section 9.3.  In the event that any written claim or demand for which an
Indemnifying Party would be liable to any Indemnified Party hereunder is
asserted against or sought to be collected from any Indemnified Party by a third
party, such Indemnified Party shall promptly, but in no event more than 30 days
following such Indemnified Party’s receipt of such claim or demand, notify the
Indemnifying Party of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such claim and demand) (the “Claim Notice”). 
The Indemnifying Party shall have 30 days from the delivery of the Claim Notice
(the “Notice Period”) to notify the Indemnified Party whether or not it desires
to defend (or permit any of its predecessors (a “Permitted Designee”) to defend)
the Indemnified Party against such claim or demand.  An election to assume the
defense of such claim or demand shall not be deemed to be an admission that the
Indemnifying Party is liable to the Indemnified Party in respect of such claim
or demand.  All costs and expenses incurred by the Indemnifying Party in
defending such claim or demand shall be a liability of, and shall be paid by,
the Indemnifying Party; provided, however, that the amount of such expenses
shall be a liability of the Indemnifying Party hereunder, subject to the
limitations set forth in this Article 9.  In the event that it is ultimately
determined that the Indemnifying Party is not obligated to indemnify, defend or
hold the Indemnified Party harmless from and against any third party claim, the
Indemnified Party shall reimburse the Indemnifying Party for any and all costs
and expenses (including, without limitation, attorney’s fees and court costs)
incurred by the Indemnifying Party in its defense of the third party claim.  In
the event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend or permit a Permitted Designee to
defend, the Indemnified Party against such claim or demand, except as
hereinafter provided, the Indemnifying Party shall have the right to defend the
Indemnified Party by

 

21

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CONFIDENTIAL TREATMENT REQUESTED

 

appropriate proceedings.  If any Indemnified Party desires to participate in any
such defense or settlement for which the Indemnifying Party has elected,
pursuant to the prior sentence to defend, or permit its Permitted Designee to
defend, the Indemnified Party may do so at its sole cost and expense.  The
Indemnified Party shall not settle a claim or demand without the consent of the
Indemnifying Party, which shall not be unreasonably withheld.  The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party,
which shall not be unreasonably withheld, settle, compromise or offer to settle
or compromise any such claim or demand on a basis which would result in the
imposition of a consent order, injunction or decree that would restrict the
future activity or conduct of the Indemnified Party or any Subsidiary or
Affiliate thereof.  If the Indemnifying Party elects not to defend the
Indemnified Party against a claim or demand for which the Indemnifying Party has
an indemnification obligation hereunder, whether by not giving the Indemnified
Party timely notice as provided above or otherwise, then the amount of any such
claim or demand, or, if the same shall be contested by the Indemnified Party,
then that portion thereof as to which such contest is unsuccessful (and the
reasonable costs and expenses pertaining to such contest) shall be the liability
of the Indemnifying Party hereunder, subject to the limitations set forth in
this Article 9.  To the extent the Indemnifying Party shall control or
participate in the defense or settlement of any third party claim or demand, the
Indemnified Party will give the Indemnifying Party, its counsel and any
Permitted Designee (with respect to any liability for which the Indemnifying
Party may have an indemnity claim pursuant to any agreement it had made with
such Permitted Designee as in effect as of the date hereof), access to, during
normal business hours, the property and relevant business records and other
documents, and shall permit them to consult with the employees and counsel of
the Indemnified Party.  The Indemnified Party shall use its best efforts in the
defense of all such claims.  Any notice of a claim by reason of any of the
representations, warranties or covenants contained in this Agreement shall state
specifically the representation, warranty, or covenant with respect to which the
claim is made, the facts giving rise to an alleged basis for the claim, and the
amount of the liability asserted against the Indemnifying Party by reason of the
claim.

 

9.4           Indemnification Amounts.  No Indemnifying Party shall have
liability under Sections 9.2(a) or 9.2(b) until the aggregate amount of Losses
to such Indemnified Party exceeds $200,000 (the “Basket Amount”), in which case
the Indemnified Party shall be entitled to recover Losses in an amount up to 20%
of the aggregate amount of the Closing Payment plus the Inventory Adjustment
Payment; provided, however, that the Indemnifying Party shall be liable only for
the amount by which all Losses exceed the Basket Amount; and provided, further,
that no individual claim for payment of a Loss may be made under Sections
9.2(a)(i)-(ii) or 9.2(b)(i)-(ii) unless such claim is an amount of $75,000 or
greater.  Nothing contained in this Section 9.4 shall apply to limit in any way
the amount that Purchaser owes to Seller under Article 4 or that either party
may recover against the other under Article 4.

 

9.5           Losses Net of Insurance, Etc.  The amount of any Loss for which
indemnification is provided under Section 9.2 shall be net of (i) any amounts
recovered by the Indemnified Party pursuant to any indemnification by or
indemnification agreement with any third party, (ii) any insurance proceeds or
other cash receipts or sources of reimbursement received as an offset against
such Loss (each source named in clauses (i) and (ii), a “Collateral Source”) and
(iii) an amount equal to the present value of the Tax benefit, if any, available
to or taken by the Indemnified Party attributable to such Loss. Indemnification
under this Article 9 shall not be available to Seller or Purchaser, as the case
may be, unless the party seeking

 

22

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CONFIDENTIAL TREATMENT REQUESTED

 

indemnification under this Article 9 first uses all reasonable efforts to seek
recovery from all Collateral Sources. The parties acknowledge and agree that no
right of subrogation shall accrue or inure to the benefit of any Collateral
Source hereunder.  The Indemnifying Party may require an Indemnified Party to
assign the rights to seek recovery pursuant to the preceding sentence;
provided, however, that the Indemnifying Party will then be responsible for
pursuing such recovery at its own expense.  If the amount to be netted hereunder
from any payment required under Section 9.2 is determined after payment by the
Indemnifying Party of any amount otherwise required to be paid to an Indemnified
Party pursuant to this Article 9, the Indemnified Party shall repay to the
Indemnifying Party, promptly after such determination, any amount that the
Indemnifying Party would not have had to pay pursuant to this Article 9 had such
determination been made at the time of such payment.

 

9.6           Sole Remedy/Waiver.  To the extent permitted by Law, the indemnity
provisions of this Article 9 shall be the sole and exclusive remedy of the
parties with respect to claims arising under or related to this Agreement and
the Collateral Agreements that are asserted subsequent to the Closing;
provided, however, that nothing contained in this Article 9 shall:  (i) prohibit
any party from seeking an injunction or any other equitable remedy in respect
thereof or (ii) limit in any manner any remedy at law or in equity to which an
Indemnified Party shall be entitled against an Indemnifying Party as a result of
willful fraud or intentional misrepresentation by the Indemnifying Party or any
of its employees, representatives or agents.

 

9.7           No Consequential Damages.  Notwithstanding anything to the
contrary contained herein, no Indemnifying Party shall be liable to or otherwise
responsible to any Indemnified Party for consequential, incidental or punitive
damages, for lost profits or for diminution in value which arise out of or
relate to this Agreement or the performance or breach thereof or any liability
retained or assumed hereunder.

 

9.8           Mitigation of Damages.  The Indemnified Party shall take all
reasonable steps to mitigate any Loss upon becoming aware of any event that
would reasonably be expected to, or does, give rise thereto, including incurring
costs only to the minimum extent necessary to remedy the breach or other
occurrence which gives rise to the Loss.

 

9.9           No Set-Off.  Neither Seller nor Purchaser shall have any right to
set-off any Losses against any payments to be made by either of them pursuant to
this Agreement or otherwise.

 

ARTICLE 10

MISCELLANEOUS PROVISIONS

 

10.1         Notices.  All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
when dispatched by electronic facsimile transfer (confirmed in writing by mail
simultaneously dispatched) or one business day after having been dispatched by a
nationally recognized overnight courier service to the appropriate party at the
address specified below:

 

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CONFIDENTIAL TREATMENT REQUESTED

 

(a)           If to Purchaser, to:

 

GSI Technology, Inc.

2360 Owen Street

Santa Clara, CA  95054

Attention:  Chief Financial Officer

Facsimile No.:  (408) 980-8377

 

with a copy (which will not constitute notice) to :

 

DLA Piper LLP (US)

2000 University Avenue

East Palo Alto, CA  94303-2215

Attention:  Dennis C. Sullivan

Facsimile No.:  (650) 867-1200

 

(b)           If to Seller, to:

 

Sony Electronics Inc.

1730 N. First Street

San Jose, CA 95112

Attention: Law Department

Facsimile No.: (408) 352-4169

 

with a copy (which will not constitute notice) to :

 

Sony Electronics Inc.

16530 Via Esprillo, MZ7300

San Diego, CA 92127

Attention:  General Counsel

Facsimile No.:  (858) 942-8170

 

or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.

 

10.2         Expenses.  Except as otherwise expressly provided herein, each
party hereto will pay any expenses incurred by it incident to this Agreement,
and in preparing to consummate and consummating the transactions provided for
herein.

 

10.3         Successors and Assigns.  This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but will not be assignable or delegable by any party without
the prior written consent of the other party.  Notwithstanding the foregoing, a
party may transfer or assign its rights under this Agreement in connection with
a merger, acquisition or sale of all or substantially all of its assets, on
condition that it provides the other party with notice of the transfer or
assignment.  Any attempted transfer in contravention of this Section 10.3 shall
be null and void.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

10.4         Waiver.  Purchaser may, by written notice to Seller, and Seller
may, by written notice to Purchaser, (a) extend the time for performance of any
of the obligations of the other party under this Agreement, (b) waive any
inaccuracies in the representations or warranties of the other party contained
in this Agreement, (c) waive compliance with any of the conditions or covenants
of the other party contained in this Agreement, or (d) waive or modify
performance of any of the obligations of the other party under this Agreement;
provided, however, that no such party may, without the prior written consent of
the other party, make or grant such extension of time, waiver of inaccuracies or
compliance or waiver or modification of performance with respect to its
representations, warranties, conditions or covenants hereunder.  Except as
provided in the immediately preceding sentence, no action taken pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties, conditions or covenants contained in this Agreement
and will not operate or be construed as a waiver of any subsequent breach,
whether of a similar or dissimilar nature.

 

10.5         Entire Agreement.  This Agreement, the Collateral Agreements and
the LOI Amendment, including all schedules and exhibits hereto and thereto,
supersede any other agreement, whether written or oral, that may have been made
or entered into by any party relating to the matters contemplated hereby and
constitutes the entire agreement by and among the parties hereto.  That certain
confidentiality agreement dated as of April 6, 2009 and that certain
confidentiality agreement dated September 13, 2006, each entered into between
the parties, shall be deemed terminated as of the Closing, with both Seller and
Purchaser waiving and releasing any and all rights, claims (known and unknown)
or interests such party may have had arising under or related to those
agreements prior to the Closing Date.

 

10.6         Amendments, Supplements, Etc.  This Agreement may be amended or
supplemented at any time by additional written agreements as may mutually be
determined by Purchaser and Seller to be necessary, desirable or expedient to
further the purposes of this Agreement or to clarify the intention of the
parties.

 

10.7         Rights of Third Parties.  Nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give any Person
other than the parties hereto any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.

 

10.8         Further Assurances.  From time to time, as and when requested by
any party hereto, the other party will execute and deliver, or cause to be
executed and delivered, all such documents and instruments, make such other
deliveries and take such other actions as may be reasonably necessary to
consummate the transactions contemplated by this Agreement.

 

10.9         Applicable Law.  This Agreement and the legal relations among the
parties hereto will be governed by and construed in accordance with the
rules and substantive Laws of the State of California, United States of America,
without regard to conflicts of law provisions thereof.

 

10.10       Execution in Counterparts.  This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

10.11       Titles and Headings.  Titles and headings to Sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.

 

10.12       Invalid Provisions.  If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future Law, and if
the rights or obligations under this Agreement of Seller on the one hand and
Purchaser on the other hand will not be materially and adversely affected
thereby, (a) such provision will be fully severable; (b) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof; (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance from this
Agreement; and (d) in lieu of such illegal, invalid, or unenforceable provision,
there will be added automatically as a part of this Agreement a legal, valid,
and enforceable provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible.

 

10.13       Bulk Sales.  Purchaser waives compliance by Seller with the
provisions of the so-called bulk sales Law of any applicable jurisdiction.

 

10.14       Transfers.  Purchaser and Seller will cooperate and take such action
as may be reasonably requested by the other in order to effect an orderly
transfer of the Transferred Assets with a minimum of disruption to the
operations and employees of the businesses of Purchaser and Seller.

 

10.15       Transfer Taxes.  All sales, use, transfer, stamp, conveyance, value
added or other similar taxes, duties, excises or governmental charges imposed by
any taxing jurisdiction, domestic or foreign, and all recording or filing fees,
notarial fees or other similar costs of Closing with respect to the transfer of
the Transferred Assets or otherwise on account of this Agreement or the
transactions contemplated hereby will be borne by Purchaser.

 

10.16       Brokers.  Purchaser hereby agrees to indemnify and hold harmless
Seller, and Seller hereby agrees to indemnify and hold harmless Purchaser,
against any liability, claim, loss, damage or expense incurred by Seller or
Purchaser, respectively, relating to any fees or commissions owed to any broker,
finder or financial advisor as a result of actions taken by Purchaser or Seller,
respectively.

 

10.17       Attorneys’ Fees.  If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover in such action its reasonable attorneys’ fees, costs and
necessary disbursements in addition to any other relief to which it may be
entitled.

 

[Remainder of this Page Intentionally Left Blank]

 

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CONFIDENTIAL TREATMENT REQUESTED

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

 

 

 

Sony Electronics Inc.

 

 

 

 

 

 

 

 

By:

/s/ Tomoya Hayakawa

 

 

 

 

 

 

Name:

Tomoya Hayakawa

 

 

 

 

 

 

Title:

President of CSBD

 

 

 

 

 

 

 

 

GSI Technology, Inc.

 

 

 

 

 

 

 

 

By:

/s/ Lee-Lean Shu

 

 

 

 

 

 

Name:

Lee-Lean Shu

 

 

 

 

 

 

Title:

President & CEO

 

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CONFIDENTIAL TREATMENT REQUESTED

 

EXHIBIT A

 

DEFINITIONS

 

“Accounts Payable” shall mean all trade accounts payable and all evidences of
indebtedness arising out of purchases of inventory and other property, assets or
services by any Person.

 

“Affiliate” shall mean with respect to any Person, any other person who,
directly or indirectly, controls, is controlled by, or is under common control
with that Person.

 

“Agreement” shall have the meaning ascribed to such term in the preamble to this
Agreement.

 

“Allocation Statement” shall have the meaning ascribed to such term in
Section 4.6 of this Agreement.

 

“Assignments of Contracts” shall have the meaning ascribed to such term in
Section 5.2(a)(ii) of this Agreement.

 

“Assumed Liabilities” shall have the meaning ascribed to such term in
Section 3.1 of this Agreement.

 

“Audited Financial Statements” shall have the meaning ascribed to such term in
Section 8.15 of this Agreement.

 

“Basket Amount” shall have the meaning ascribed to such term in Section 9.4 of
this Agreement.

 

“Bill of Sale” shall have the meaning ascribed to such term in
Section 5.2(a)(i) of this Agreement.

 

“Business” shall have the meaning ascribed to such term in the recitals to this
Agreement.

 

“Business Day” shall mean any day except Saturday, Sunday or any Japanese, U.S.
federal or California state holiday.

 

“Cash Equivalents” shall mean checks, money orders, marketable or other
securities, short-term instruments and other cash equivalents, prepaid deposits,
demand deposits or similar accounts, and any evidence of indebtedness issued or
guaranteed by any United States Governmental Authority.

 

“CIS-SRAM” shall mean Seller’s CIS-SRAM memory products (also referred to by
Seller’s principal customer as CSRAM products), but specifically excluding
Sellers Cache SRAM products.

 

“CIS-SRAM Revenues” shall have the meaning ascribed to such term in
Section 4.4(a) of this Agreement.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

“Claim Notice” shall have the meaning ascribed to such term in Section 9.3 of
this Agreement.

 

“Closing” shall have the meaning ascribed to such term in Section 5.1 of this
Agreement.

 

“Closing Date” shall have the meaning ascribed to such term in Section 5.1 of
this Agreement.

 

“Closing Payment” shall have the meaning ascribed to such term in
Section 4.2(a) of this Agreement.

 

“Closing SRAM Inventory Schedule” shall have the meaning ascribed to such term
in Section 4.3 of this Agreement.

 

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

 

“Collateral Agreements” shall have the meaning ascribed to such term in
Section 5.2(c) of this Agreement.

 

“Collateral Source” shall have the meaning ascribed to such term in Section 9.5
of this Agreement.

 

“Competing Products” shall mean any SRAM product in discrete or component form.
For avoidance of doubt, Competing Products does not include any large-scale
integration with memory, memory with CPU, or system-in-package products
(including those with embedded SRAM on chip).

 

“Confidential Information” shall have the meaning ascribed to such term in
Section 8.4(a) of this Agreement.

 

“Consent” shall mean any consent, approval or authorization of, notice to, or
designation, registration, declaration or filing with, any Person.

 

“Contingent Payments” shall have the meaning ascribed to such term in
Section 4.4(a) of this Agreement.

 

“Contract” shall mean any agreement, contract, lease, commitment, license,
undertaking or other legally binding contractual right or obligation to which a
Person is a party or by which a Person or its assets or properties are bound.

 

“Current Products” shall mean Seller’s SigmaRAM, CIS-SRAM and 36M SigmaQuad SRAM
memory products.

 

“Effective Date” shall mean the latest date on which an authorized
representative of one of the parties signs the Agreement.

 

“Excluded Assets” shall have the meaning ascribed to such term in
Section 2.2(a) of this Agreement.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

“GAAP” shall mean United States generally accepted accounting policies,
consistently applied.

 

“Governmental Authority” shall mean any federal, state, local or foreign
government or any subdivision, agency, instrumentality, authority, department,
commission, board or bureau thereof or any federal state, local or foreign
court, tribunal or arbitrator.

 

“Gross Revenues” shall mean gross revenues as recognized by Purchaser in
accordance with GAAP and Purchaser’s general revenue recognition policies,
consistently applied.

 

“Indemnifying Party” shall mean any party required to indemnify another party
pursuant to Article 9 hereof.

 

“Indemnified Party” shall mean any party entitled to indemnification pursuant to
Article 9 hereof.

 

“Intellectual Property” shall mean any or all of the following and all rights
in, arising out of, or associated therewith:  (i) all United States and foreign
patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof, and
equivalent or similar rights anywhere in the world in inventions and discoveries
(“Patents”); (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation embodying
or evidencing any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor and all other rights corresponding
thereto throughout the world (“Copyrights”); (iv) all mask works, mask work
registrations and applications therefor, and any equivalent or similar rights in
semiconductor masks, layouts, architectures or topology (“Mask Works”); (v) all
industrial designs and any registrations and applications therefor throughout
the world; (vi) all databases and data collections and all rights therein
throughout the world; and (vii) all computer software including all source code,
object code, firmware, development tools, files, records and data, all media on
which any of the foregoing is recorded; and (viii) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the world.

 

“Inventory Adjustment Payment” shall have the meaning ascribed to such term in
Section 4.3 of this Agreement.

 

“IP Agreement” shall have the meaning ascribed to such term in
Section 5.2(a)(iii) of this Agreement.

 

“JTAG” shall mean the electronic code embedded on SRAM Products that indicate
the identity of the manufacturer.

 

“Key SRAM Contracts” shall have the meaning ascribed to such term in
Section 5.3(e) of this Agreement.

 

“Knowledge of Seller” (or, for purposes of the IP Agreement, “Knowledge of
SONY”) shall mean the current, actual knowledge, after reasonable inquiry, of
any of the following officers, directors or employees of Seller and Parent: 
General Manager, Memory Department,

 

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CONFIDENTIAL TREATMENT REQUESTED

 

LSI Business Division, Semiconductor Business Group of Parent; Strategic
Alliance Manager, Business Strategy Department, Planning & Control Division,
Semiconductor Business Group of Parent; President, Product, Memory Department,
Component Solutions Business Division of Seller; Vice President, Memory
Department, Component Solutions Business Division of Seller; Vice President,
Corporate Development of Seller; Vice President, Intellectual Property of Sony
Corporation of America; and Senior Managing Counsel of SEL.

 

“Laws” shall mean all federal, state, local or foreign laws, ordinances,
rules and regulations.

 

“Letter of Intent” shall have the meaning ascribed to such term in
Section 5.2(a)(iv) of this Agreement.

 

“Liabilities” shall mean any and all debts, liabilities and obligations, whether
accrued or fixed, known or unknown, absolute or contingent, matured or unmatured
or determined or determinable.

 

“Liens” shall mean all title defects or objections, mortgages, liens, claims,
charges, pledges or other encumbrances of any nature whatsoever, whether
accrued, absolute, contingent or otherwise, including without limitation
licenses, leases, chattel or other mortgages, collateral security arrangements,
pledges, title imperfections, defect or objection liens, security interests,
conditional and installment sales agreements, easements, encroachments or
restrictions, of any kind and other title or interest retention arrangements,
reservations or limitations of any nature.

 

“LOI Amendment” shall have the meaning ascribed to such term in
Section 5.2(a)(iv) of this Agreement.

 

“Loss” or “Losses” shall have the meaning ascribed to such term in
Section 9.2(a) of this Agreement.

 

“Net Revenues” shall mean net revenues as recognized by Purchaser in accordance
with GAAP and Purchaser’s general revenue recognition policies, consistently
applied.

 

“New Product” shall mean Seller’s 65nm 72M SQ memory products (including the
products designated 260L IIIe/IIe and 165L II+/II) currently being developed.

 

“Non-Assignable Contract” shall have the meaning ascribed to such term in
Section 2.3 of this Agreement.

 

“Notice Period” shall have the meaning ascribed to such term in Section 9.3 of
this Agreement.

 

“Order” shall mean any judgment, award, order, writ, injunction or decree issued
by any Governmental Authority.

 

“Parent” shall mean Sony Corporation.

 

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CONFIDENTIAL TREATMENT REQUESTED

 

“Person” shall mean any individual, partnership, joint venture, corporation,
trust, unincorporated organization, Governmental Authority or other entity.

 

“Permitted Designee” shall have the meaning ascribed to such term in Section 9.3
of this Agreement.

 

“Purchase Price” shall have the meaning ascribed to such term in Section 4.1 of
this Agreement.

 

“Purchaser” shall have the meaning ascribed to such term in the preamble to this
Agreement.

 

“Reseller Agreement” shall have the meaning ascribed to such term in
Section 5.2(a)(v) of this Agreement.

 

“Retained Liabilities” shall have the meaning ascribed to such term in
Section 3.2 of this Agreement.

 

“SCK” shall mean Sony Semiconductor Kyushu Corporation.

 

“SEC” shall mean the U.S. Securities and Exchange Commission.

 

“Seller” shall have the meaning ascribed to such term in the preamble to this
Agreement.

 

“SRAM” shall mean static random access memory.

 

“SRAM Contracts” shall have the meaning ascribed to such term in
Section 2.1(e) of this Agreement.

 

“SRAM Intellectual Property” shall mean all Intellectual Property as can be
documented as being in existence on or before the Closing, only to the extent
that any SRAM Product incorporates, is based on or infringes such Intellectual
Property.

 

“SRAM Products” shall mean Current Products together with the New Product.

 

“SRAM Product Inventory” shall have the meaning ascribed to such term in
Section 2.1(b) of this Agreement.

 

“SRAM Purchase Orders” shall have the meaning ascribed to such term in
Section 2.1(d) of this Agreement.

 

“Tax” or, collectively, “Taxes,” shall mean (i) any and all federal, state,
province, local and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities, wherever imposed, including, without
limitation, taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, goods and services,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts; (ii) any liability for the payment of any amounts of
the type described in clause (i) as a

 

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CONFIDENTIAL TREATMENT REQUESTED

 

result of being a member of an affiliated, consolidated, combined or unitary
group for any period; and (iii) any liability for the payment of any amounts of
the type described in clause (i) or (ii) as a result of any express or implied
obligation to indemnify any other Person or as a result of any obligations under
any agreements or arrangements with any other Person with respect to such
amounts and including any liability for taxes of a predecessor entity.

 

“Tax Return” or “Tax Returns” shall mean any return, report, declaration,
information return, statement or other document filed or required to be filed
with any Governmental Authority, in connection with the determination,
assessment or collection of any Tax or the administration of any Laws relating
to any Tax.

 

“Transferred Assets” shall have the meaning ascribed to such term in Section 2.1
of this Agreement.

 

“Transferred Equipment” shall have the meaning ascribed to such term in
Section 2.1(c) of this Agreement.

 

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