exv10w31



 






Exhibit 10.31




EXECUTION COPY




 

 






ASSET PURCHASE AGREEMENT




by and among




iWatt, Inc.




IKOR Acquisition Corporation




and




Advanced Energy Industries, Inc.




Dated November 23, 2005




 

 






 









 












TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE 1 DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 
	1.1
	 	Defined Terms.	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE 2 TRANSFER OF ASSETS	 	 	9	 
	 
	 	 	 	 	 	 
	2.1
	 	Closing	 	 	9	 
	2.2
	 	Transfer of Assets	 	 	9	 
	2.3
	 	Assumption of Liabilities	 	 	10	 
	2.4
	 	Excluded Liabilities	 	 	10	 
	2.5
	 	Payments to Seller	 	 	11	 
	2.6
	 	Allocation of Purchase Price	 	 	11	 
	2.7
	 	Closing Deliveries; Collateral Agreements	 	 	11	 
	2.8
	 	Further Assurances, Conveyances, Agreement to Perform Necessary Acts	 	 	12	 
	2.9
	 	Responsibility for Taxes and Tax Returns	 	 	13	 
	2.10
	 	Withholding Rights	 	 	14	 
	2.11
	 	Transfer Taxes	 	 	14	 
	 
	 	 	 	 	 	 
	ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER	 	 	14	 
	 
	 	 	 	 	 	 
	3.1
	 	Organization of Seller	 	 	15	 
	3.2
	 	Authorization of Transaction	 	 	15	 
	3.3
	 	Non-contravention; Consents	 	 	15	 
	3.4
	 	Title of Properties; Absence of Liens and Encumbrances; Condition	 	 	16	 
	3.5
	 	Intellectual Property Rights	 	 	16	 
	3.6
	 	Brokers’ and Finders’ Fees	 	 	19	 
	3.7
	 	Legal and Other Compliance	 	 	19	 
	3.8
	 	Transferred Assets and Transferred Technology	 	 	19	 
	3.9
	 	Environmental Matters	 	 	20	 
	3.10
	 	Litigation	 	 	20	 
	3.11
	 	Employment Matters	 	 	20	 
	3.12
	 	Bulk Transfer Laws	 	 	22	 
	3.13
	 	Business Financial Information	 	 	22	 
	3.14
	 	Contracts; No Defaults	 	 	23	 
	3.15
	 	Warranties; Defects; Liabilities.	 	 	23	 
	3.16
	 	Insurance	 	 	23	 
	3.17
	 	Tax Matters	 	 	24	 
	3.18
	 	Accounts Receivable	 	 	24	 
	3.19
	 	Inventory	 	 	24	 
	3.20
	 	Representations and Disclosures Complete	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER	 	 	25	 
	 
	 	 	 	 	 	 
	4.1
	 	Organization	 	 	25	 
	4.2
	 	Authority for Agreement	 	 	25	 
	4.3
	 	Noncontravention	 	 	25	 






- i -









 





TABLE OF CONTENTS
(Continued)





	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE 5 ADDITIONAL AGREEMENTS OF THE PARTIES	 	 	26	 
	 
	 	 	 	 	 	 
	5.1
	 	Operation of the Business	 	 	26	 
	5.2
	 	Access	 	 	27	 
	5.3
	 	Post-Closing Audits of Business Financial Statements	 	 	28	 
	5.4
	 	Third Party Consents; Assignment of Transferred Contracts	 	 	28	 
	5.5
	 	Renewal Fees	 	 	29	 
	5.6
	 	Transition Services	 	 	29	 
	5.7
	 	Software Other than IT Systems	 	 	30	 
	5.8
	 	Technology Documentation	 	 	30	 
	5.9
	 	Intellectual Property	 	 	31	 
	5.10
	 	Reasonable Best Efforts	 	 	31	 
	5.11
	 	No Other Bids	 	 	31	 
	5.12
	 	Confidentiality; Public Announcements	 	 	32	 
	5.13
	 	Covenant Not to Compete	 	 	32	 
	5.14
	 	Covenant Not to Solicit or Hire	 	 	33	 
	5.15
	 	Notification of Certain Matters	 	 	33	 
	5.16
	 	Severability of Covenants	 	 	34	 
	5.17
	 	SEC Support Letter	 	 	34	 
	 
	 	 	 	 	 	 
	ARTICLE 6 EMPLOYEES	 	 	34	 
	 
	 	 	 	 	 	 
	6.1
	 	Seller Cooperation	 	 	34	 
	6.2
	 	Employment Offers	 	 	34	 
	6.3
	 	Waiver	 	 	35	 
	6.4
	 	Employees	 	 	35	 
	6.5
	 	COBRA Continuation Coverage	 	 	35	 
	6.6
	 	Employee Liability Claims	 	 	36	 
	 
	 	 	 	 	 	 
	ARTICLE 7 CLOSING, PURCHASE PRICE AND PAYMENTS	 	 	37	 
	 
	 	 	 	 	 	 
	7.1
	 	Conditions to Obligations of Buyer	 	 	37	 
	7.2
	 	Conditions to Obligations of Seller	 	 	38	 
	 
	 	 	 	 	 	 
	ARTICLE 8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION	 	 	40	 
	 
	 	 	 	 	 	 
	8.1
	 	Survival of Representations and Warranties	 	 	40	 
	8.2
	 	Indemnification by Seller	 	 	40	 
	8.3
	 	Limitation on Indemnification	 	 	41	 
	8.4
	 	Indemnification Procedure	 	 	41	 
	8.5
	 	Escrow	 	 	42	 
	8.6
	 	Purchase Price Adjustment	 	 	43	 
	 
	 	 	 	 	 	 
	ARTICLE 9 TERMINATION AND ABANDONMENT	 	 	43	 
	 
	 	 	 	 	 	 
	9.1
	 	Methods of Termination	 	 	43	 
	9.2
	 	Procedure upon Termination	 	 	44	 
	9.3
	 	Survival of Certain Provisions	 	 	44	 






- ii -









 





TABLE OF CONTENTS
(Continued)





	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE 10 GENERAL	 	 	44	 
	 
	 	 	 	 	 	 
	10.1
	 	No Agency	 	 	44	 
	10.2
	 	Fees and Expenses	 	 	44	 
	10.3
	 	Notices	 	 	45	 
	10.4
	 	Governing Law	 	 	45	 
	10.5
	 	Forum and Venue	 	 	45	 
	10.6
	 	Construction	 	 	46	 
	10.7
	 	Breaches and Remedies	 	 	46	 
	10.8
	 	Waiver	 	 	46	 
	10.9
	 	Assignment	 	 	47	 
	10.10
	 	Severability	 	 	47	 
	10.11
	 	Entire Agreement	 	 	47	 
	10.12
	 	Amendments	 	 	47	 
	10.13
	 	Counterparts	 	 	47	 







- iii -









 








ASSET PURCHASE AGREEMENT




     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
November 23,2005 (the “Effective Date”), by and among iWatt, Inc., a California corporation
(the “Parent”), IKOR Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of Parent (the “Buyer”), and Advanced Energy Industries, Inc., a Delaware
corporation (the “Seller”), each, a “Party,” together, the “Parties”.



RECITALS




     WHEREAS, Seller is currently engaged in, among other things, the Business (as defined below)
in its IKOR division;



     WHEREAS, Parent and Buyer wish to purchase all assets, tangible and intangible, of Seller used
in or necessary for the operation of the Business;



     WHEREAS, Seller wishes to sell such assets to Parent and Buyer; and




     WHEREAS, the Parties desire that certain current employees of Seller become employees of
Buyer.



     NOW, THEREFORE, in consideration of the covenants, promises, representations and warranties
set forth herein, and for other good and valuable consideration (the receipt and sufficiency of
which are hereby acknowledged by the Parties), intending to be legally bound hereby, the Parties
agree as follows:



Article 1

DEFINITIONS




     1.1 Defined Terms.



     The following capitalized terms shall have the meanings set forth below:



          (a) “Affiliate” means with respect to a Person, a Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by, or is under common Control with,
such Person, including any Subsidiary of such Person. A “Subsidiary” means with respect to
a Person, a Person that directly, or indirectly through one or more intermediaries, is Controlled
by such Person. For the purposes of this definition of “Affiliate”, “Control”
(including derivative forms such as “Controlling,” “Controlled by” and “under
common Control with”) means the ownership or possession, direct or indirect by the controlling
Person of: (a) voting shares or other securities, representing more than fifty percent (50%) of the
outstanding shares or securities entitled to vote for the election of the board of directors or
similar managing authority of such controlled Person; or (b) if such controlling Person does not
have voting shares or other securities, more than fifty percent (50%) of the ownership interest
that represents the right to make decisions, including the election of directors, for such
controlled Person.




 









 








          (b) “Assigned IPR” means (i) the Assigned Patents and (ii) the Assigned Trademarks.




          (c) “Assigned Patents” means each of the Patents and invention disclosures set forth
in Schedule 1.1(c) and any Patents that are a member of the same Patent Family as any one
of such scheduled Patents, in each case whether pending, issued, expired, abandoned or closed, and
all foreign counterparts of any such Patent.




          (d) “Assigned Trademarks” means each of the Trademarks listed or described in
Schedule 1.1(d), in each case whether or not such Trademarks are Registered IP or
registerable as Registered IP.




          (e) “Benefit Plan” means any plan, program, policy, practice, contract, agreement or
other arrangement providing for compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise, funded or unfunded, including
without limitation, each “employee benefit plan,” within the meaning of Section 3(3) of ERISA which
is maintained, contributed to, or required to be contributed to, by Seller or any ERISA Affiliate
for the benefit of any Employee, or with respect to which Seller or any ERISA Affiliate has or may
have any liability or obligation.




          (f) “Bill of Sale” means one or more fully executed bills of sale for the Transferred
Tangible Assets, in a form set forth in Schedule 1.1(f).




          (g) “Books and Records” means the books and records of Seller and its Affiliates that
are or have been related to, used in or necessary for the operation of the Business, the
Transferred Assets or the Designated Employees, including books of account; the sales records;
customer lists and information; supplier lists and information; Transferred Product records;
marketing materials; distributor and other sales information; copies of Transferred Contracts;
product and design materials (for internal or external use); plans; drawings; general financial and
accounting data; documentation sufficient to fully utilize, understand and implement the
Transferred Assets (including the Transferred Tangible Assets and Assigned IPR); technical and
operating materials (for internal or external use); in each case in whatever form (hard copy or
electronic) relating to the Transferred Assets, copies of policies and procedures or other
communications regarding marketing and customer matters, and the Patent Files.




          (h) “Business” means the development, sale, licensing, distribution and support of
power supply components, modules and systems utilized in computing, office automation and
communications products, including the business, intellectual property, technology, assets and
operations of Seller and its Affiliates currently conducted in its “IKOR” business unit, and the
activities and operations of the Designated Employees.




          (i) “Closing Date” means the date upon which the Closing occurs in accordance with
Section 2.1.




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




 - 2 -









 








          (k) “Confidential Information” means any nonpublic information disclosed by one Party
(the “Disclosing Party”) to the other (the “Receiving Party”) (including any
nonpublic information disclosed in the course of the performance of the Transition Services): (a)
which relates to the actual or anticipated business or research and development of the Disclosing
Party, technical data, trade secrets or know-how, including, but not limited to, research, product
plans or other information regarding the Disclosing Party’s products or services and markets
therefor, customer lists and customers, software, developments, inventions, processes, formulas,
technology, designs, drawings, engineering, hardware configuration information, marketing, finances
or other business information or (b) which is otherwise deemed to be “Confidential Information” by
the terms of this Agreement, other than information the Receiving Party can demonstrate was in the
public domain at the time of disclosure through no act or omission on the part of the Receiving
Party.




          (l) “Consent” means any consent, approval, permit, or authorization of any Person not
a Party to this Agreement.




          (m) “Control,” “Controls,” “Controlled” or “Controlling”
means, with respect to any Intellectual Property Rights, the possession by Seller or its Affiliates
of the right to grant a license or sublicense under such Intellectual Property Rights of the scope
provided herein without incurring an obligation to pay additional consideration to a third party
(except for payments among such Party and its Affiliates, and payments to employees for inventions
made by them while employed by such Party or its Affiliates made in the ordinary course of their
employment).




          (n) “Designated Employees” means the individuals listed on Schedule 1.1(n)
(including individuals identified between the Effective Date and the Closing Date and added to
Schedule 1.1(n) in accordance with Section 6.1) as “Designated Employees.” For
clarity, any reference in this Agreement to “Designated Employees” shall include all individuals on
Schedule 1.1(n) that are also designated as “Key Employees.”




          (o) “Employee” shall mean any current or former employee, consultant or director of
Seller or any ERISA Affiliate, who has provided services to the Business.




          (p) “Employment Agreement” shall mean each management, employment, severance,
consulting, relocation, repatriation, expatriation, visa, work permit or other agreement, contract
or understanding between Seller or any ERISA Affiliate and any Employee.




          (q) “Employment Liabilities” shall mean any and all claims, debts, liabilities,
commitments and obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever or however arising,
including all costs and expenses relating thereto arising under law, rule, regulation, permit,
action or proceeding before any governmental authority, order or consent decree or any award of any
arbitrator of any kind relating to any Benefit Plan, Employment Agreement or otherwise relating to
an Employee and his or her employment with Seller or any ERISA Affiliate.




          (r) “ERISA Affiliate” shall mean each subsidiary of Seller and any other person or
entity under common control with Seller or any of its subsidiaries within the meaning of Section
414(b), (c), (m) or (o) of the Code and the regulations issued thereunder.




 - 3 -









 








          (s) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.




          (t) “Escrow Agent” means the escrow agent identified in the Escrow Agreement.




          (u) “Escrow Agreement” means an Escrow Agreement among Parent, Buyer, Seller and
Escrow Agent (as identified therein) effective as of the Closing Date, in the form attached hereto
as Exhibit A.




          (v) “Excluded Assets” means (a) all of Seller’s tangible assets other than the
Transferred Assets, (b) all cash, (c) all amounts prepaid on any insurance policy maintained by the
Seller on behalf of the Business and (d) such other assets of Seller as are listed on Schedule
1.1(v).




          (w) “Exploit” or “Exploitation” means with respect to any Technology, process
or product, to make, have made, use, modify, enhance, sell, offer for sale, market, import, make
derivative works from, perform, copy, disclose, or distribute such product or Technology (or
derivative thereof) or practice such process (or derivative thereof), as the case may be.




          (x) “Governmental Entity” means any court, administrative agency or commission or
other federal, state, provincial, county, local or other governmental authority, instrumentality,
agency or commission in any country worldwide.




          (y) “Hazardous Material” means any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without limitation all
substances listed as hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws.




          (z) “Intellectual Property Rights” or “IPR” means any or all of the following
and all statutory and/or common law rights throughout the world in, arising out of, or associated
therewith: (a) all patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof and all rights that claim
priority therefrom, along with each foreign patent or patent application that shares common
disclosure therewith (collectively, “Patents”); (b) all inventions (whether patentable or
not), invention disclosures and improvements, all trade secrets, proprietary information, know-how
and technology; (c) all works of authorship, copyrights, rights in Mask Works, copyright and Mask
Work registrations and applications; (d) all industrial designs and any registrations and
applications therefor; (e) all trade names, logos, trademarks and service marks; trademark and
service mark registrations and applications (collectively, “Trademarks”); (f) all databases
and data collections (including knowledge databases, customer lists and customer databases) and all
rights therein; (g) all rights in Software; (h) rights to Uniform Resource Locators, Web site
addresses and domain names; (i) any similar, corresponding or equivalent rights to any of the
foregoing and (j) all moral and equivalent rights throughout the world.




 - 4 -









 








          (aa) “Key Employees” means the Designated Employees listed on Schedule 1.1(n)
that are specified as “Key Employees”.




          (bb) “Liability” means any liability, duty, obligation or indebtedness (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, whether incurred or consequential and whether due or
to become due), including any liability for Taxes.




          (cc) “License Agreement” means that license agreement entered into between Seller and
Parent and Buyer effective as of the Closing Date, in the form attached hereto as Exhibit F
pursuant to which Seller licenses to Parent and Buyer the Licensed IPR.




          (dd) “Licensed IPR” means all Intellectual Property Rights (other than the Assigned
IPR) used in or necessary for the operation of the Business.




          (ee) “Lien” means any mortgage, pledge, lien, security interest, charge, claim,
equity, encumbrance, limitation, restriction on use or transfer, conditional sale or other title
retention device or arrangement (including, without limitation, a capital lease), transfer for the
purpose of subjection to the payment of any indebtedness, or restriction on the creation of any of
the foregoing, whether relating to any property or right or the income or profits therefrom.




          (ff) “Loss” means any and all Liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including without limitation legal costs and
expenses and interest on the amount of any Loss from the date suffered or incurred).




          (gg) “Mask Works” means the physical mask works or reticles for the manufacture or
customization of a semiconductor device.




          (hh) “Open Source Software” means Software or other material that is distributed as
“free software,” “open source software” or under a similar licensing or distribution model
(including but not limited to the GNU General Public License (GPL) and GNU Lesser General Public
License (LGPL)) that require, as a condition of use, modification and/or distribution of such Open
Source Software that other Software incorporated into, derived from or distributed with such Open
Source Software be (a) disclosed or distributed in source code form; (b) be licensed for the
purpose of making derivative works; or (c) be redistributable at no charge.




          (ii) “Patent Family” means a set comprised of all Patents that (a) are directly or
indirectly linked or entitled to be linked through one or more Priority Claims or by a terminal
disclaimer (including under 35 U.S.C. Sec. 253 or 37 CFR 1.321 or the equivalent laws or regulation
of any other patent authority); (b) are foreign counterparts, reissues, divisionals, renewals,
extensions, parents, continuations or continuations-in-part with respect to any other Patent in
such set; or (c) issue from any of the foregoing.




          (jj) “Patent Files” means complete prosecution files for the Assigned Patents,
including all correspondence and filings with patent authorities with respect to such Patents and
any related materials or documents in the possession or control of Seller or its Affiliates or any
attorney or patent agent involved in the prosecution or enforcement of such Patents.




 - 5 -









 








          (kk) “Person” means an individual, partnership, corporation, limited liability
company, association, joint venture, trust, unincorporated organization or Governmental Entity.




          (ll) “Priority Claim” means a claim to priority made in any Patent or Patent
application to any other Patent or Patent application pursuant to 35 U.S.C. Secs. 120 or 119(e) or
the equivalent claim to priority under the laws and regulations applicable to a foreign Patent or
Patent application, as the case may be.




          (mm) “Product Software” means all Software that is included in or part of any version
of the Transferred Products as firmware or otherwise, or that is part of or related to the use,
operation, programming, verification, design, simulation, testing, support or application of a
Transferred Product or the reference design related thereto, including the Software listed or
described on Schedule 1.1(mm), all versions of any of the foregoing, and any Software from
which any of the foregoing Software was derived or that was derived from such Software.




          (nn) “Registered IP” means all United States, international and foreign: (a) Patents;
(b) registered Trademarks, applications to register Trademarks, intent-to-use applications, or
other registrations or applications related to Trademarks; (c) registered copyrights and
applications for copyright registration; (d) domain name registrations; and (e) any other
Intellectual Property Rights that are the subject of an application, certificate, filing,
registration or other document issued, filed with, or recorded by any Governmental Entity.




          (oo) “Software” means any and all computer software and code, including assemblers,
applets, compilers, source code, object code, data (including image and sound data), design tools
and user interfaces, in any form or format, however fixed. Software includes source code listings
and documentation.




          (pp) “Tax” and “Taxes” means (a) any and all federal, provincial, state, and
local taxes in any country worldwide (including estimated taxes), assessments, and other
governmental charges, duties, impositions and liabilities, including taxes based upon or measured
by gross receipts, income, profits, sales, use and occupation, and value-added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes,
together with all interest, penalties and additions imposed with respect to such amounts; (b) any
liability for the payment of any amounts of the type described in clause (a) of this definition as
a result of being a member of an affiliated, consolidated, combined or unitary group for any
period; and (c) any liability for the payment of any amounts of the type described in clause (a) or
(b) of this definition 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
or entity with respect to such amounts and including any liability for taxes of a predecessor
entity.




          (qq) “Technology” means all technology, including all know-how, show-how, techniques,
design rules, trade secrets, inventions (whether or not patented or patentable) and invention
disclosures, algorithms, routines, Software, files, databases, works of authorship, processes,
devices, prototypes, lab notebooks, reference designs, test boards, test fixtures, test programs,
development and lab equipment, schematics, netlist, Mask Works, test methodologies, documentation,
hardware development tools, any media on which any of the foregoing is recorded, and any other
tangible embodiments of any of the foregoing.




 - 6 -









 








          (rr) “Transferred Claims” means all rights and claims of Seller or its Subsidiaries
related to the Business against any third parties, including all rights under express or implied
warranties relating to the Business or the ownership, use, function or value of any Transferred
Asset.




          (ss) “Transferred Contracts” means those contracts listed on Schedule 1.1(ss),
and all open purchase agreements and other agreements to purchase work in progress with respect to
the Transferred Products.




          (tt) “Transferred Inventory” means any and all inventory, wherever located, including
raw materials, work in process, finished products, recycled materials, inventoriable supplies, and
spare parts owned by Seller and its Affiliates and related to, used in, or necessary for the
operation of the Business, and any rights of Seller and its Affiliates to the warranties received
from suppliers of such inventory and any and all rights of Seller and its Affiliates to related
claims, credits, rights of recovery and setoff with respect to such inventory, but only to the
extent such rights are assignable.




          (uu) “Transferred Permits” means all governmental permits and licenses, certificates
of inspection, approvals or other authorizations issued to Seller with respect to the Business or
the premises used in connection with the Business and necessary for the operation or conduct of the
Business as currently conducted under applicable laws.




          (vv) “Transferred Personal Property” means any and all personal property (including
equipment, computers, servers, machinery, furniture, office equipment, furnishings, office
supplies, storage devices, etc.) that are or have been, related to, used in or necessary for the
operation of the Business. For the avoidance of doubt, such Transferred Personal Property shall
include any personal property related to, used in or necessary for the operation of the Business
that was previously provided to Seller under a leasing arrangement that is not covered under a
Transferred Contract (e.g. copy machines, phone systems, etc.).




          (ww) “Transferred Products” means any and all products, in whatever stage of
development and in whatever form, that are (a) designed by or for, or related to, the Business; or
(b) otherwise listed or described on Schedule 1.1(ww) and any Product Software that is part
of such Transferred Products, and any reference designs or development boards or platforms for such
Transferred Products (including boards and systems for the simulation, test or verification of such
Products) (x) that are of the type provided to actual or potential purchasers for use with or
evaluation of such Transferred Products or (y) otherwise listed or described on Schedule
1.1(ww).




          (xx) “Transferred Tangible Assets” means all tangible assets of any type or nature,
other than Excluded Assets, that are or have been: (a) used in or necessary for the operation of
the Business, including the Transferred Products, Transferred Personal Property and Transferred
Inventory; (b) reflected on the Business’s balance sheet, including accounts receivable; or (c)
otherwise described on Schedule 1.1(xx).




          (yy) “Transferred Technology” means all Technology used in or necessary to the
operation of the Business or constituting any of the Transferred Products or otherwise listed or
described on Schedule 1.1(yy) and including all (a) know-how and other Technology known by
any



 - 7 -









 





and all Designated Employees, whether or not such Technology was reduced to any tangible media
on or prior to the Closing Date; (b) copies and versions of the Product Software; (c) Technology
that is used in the design, development, manufacture or testing Transferred Products (including all
versions of any design tools or development environments used in the design of any Transferred
Product); (d) Mask Works, netlists, GERBER files and other representations of any Transferred
Product; and (e) files necessary for the operation of the Transferred Websites, including all of
the content therein.




          (zz) “Transferred Websites” means those Web sites (including content) and the Uniform
Resource Locators set forth in Schedule 1.1(zz).




          (aaa) Each of the following terms is defined in the Section or Exhibit set forth opposite such
term:




	 	 	 	 	 
	TERM	 	SECTION/EXHIBIT
	“Allocation”
	 	 	 	Section 2.6
	“Assumed Liabilities”
	 	 	 	Section 2.3
	“Audit Completion Date”
	 	 	 	Section 5.3
	“Buyer Indemnitee”
	 	 	 	Section 8.2
	“Buyer Indemnitees”
	 	 	 	Section 8.2
	“Cash Amount”
	 	 	 	Section 2.5(a)
	“Claim”
	 	 	 	Section 8.4(a)
	“Closing”
	 	 	 	Section 2.1
	“Closing Date”
	 	 	 	Section 2.1
	“COBRA”
	 	 	 	Section 6.5
	“Collateral Agreements”
	 	 	 	Section 2.7(b)
	“Conflict”
	 	 	 	Section 3.3
	“Disclosing Party”
	 	 	 	Section 1.1(k)
	“Disclosure Schedule”
	 	 	 	Article 3
	“Employee Excluded Liabilities”
	 	 	 	Section 6.6(a)
	“Escrow Amount”
	 	 	 	Section 2.5(b)
	“Excluded Liabilities”
	 	 	 	Section 2.4
	“Indemnifiable Audit Costs”
	 	 	 	Section 5.3
	“International Employee Plan”
	 	 	 	Section 3.11(a)
	“IP Assignments”
	 	 	 	Section 2.7(b)
	“M&A Qualified Beneficiaries”
	 	 	 	Section 6.5
	“Multiemployer Plan”
	 	 	 	Section 3.11(a)
	“Non-Assignable Contract”
	 	 	 	Section 5.4
	“Non-Paying Party”
	 	 	 	Section 2.9(c)
	“Patents”
	 	 	 	Section 1.1(z)
	“Paying Party”
	 	 	 	Section 2.9(c)
	“Pension Plan”
	 	 	 	Section 3.11(a)
	“Purchase Price”
	 	 	 	Section 2.5(b)
	“Receiving Party”
	 	 	 	Section 1.1(k)
	“Selling Group”
	 	 	 	Section 6.5
	“Straddle Period Taxes”
	 	 	 	Section 2.9(c)






 - 8 -









 






	 	 	 	 	 
	TERM	 	SECTION/EXHIBIT
	“Tax Returns”
	 	 	 	Section 2.9
	“Termination Date”
	 	 	 	Section 9.1
	“Trademarks”
	 	 	 	Section 1.1(z)
	“Transfer Taxes”
	 	 	 	Section 2.11
	“Transferred Assets”
	 	 	 	Section 2.2
	“Transition Services”
	 	 	 	Section 5.6
	“Transition Services Fees”
	 	 	 	Section 5.6






Article 2

TRANSFER OF ASSETS




     2.1 Closing. Subject to the terms hereof, the closing of the transactions
contemplated by this Agreement (the “Closing”) will take place on a date occurring as
promptly as reasonably practicable but no later than two (2) days following the date on which all
conditions set forth in Sections 7.1 and 7.2 have been satisfied or waived, or on
such date as may be agreed upon by the Parties (the “Closing Date”), at the offices of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, CA
94304.



     2.2 Transfer of Assets. Upon the terms and subject to the conditions set forth in
this Agreement, effective as of the Closing Date, Seller shall, and shall cause its Affiliates to,
grant, deliver, sell, convey, transfer and assign to Buyer or its Affiliate(s) (with the allocation
among such entities to be designated by Buyer) all rights, title and interest in and to the
following assets (the “Transferred Assets”), free and clear of all Liens:




	 	(a)	 	the Transferred Tangible Assets;
	 
	 	(b)	 	the Transferred Contracts;
	 
	 	(c)	 	the Assigned IPR;
	 
	 	(d)	 	the Books and Records;
	 
	 	(e)	 	the Transferred Permits;
	 
	 	(f)	 	the Transferred Claims;
	 
	 	(g)	 	the Transferred Websites;
	 
	 	(h)	 	the Transferred Technology; and
	 
	 	(i)	 	all goodwill relating to the Business.




For the purposes of this Section 2.2, Assigned IPR shall include the right to register,
prosecute, maintain or record any of such Intellectual Property Rights with any Governmental Entity
and the right to all past and future income, royalties, damages and payments due with respect to such


 - 9 -









 






Intellectual Property Rights, including without limitation rights to damages and payments for
past, present or future infringements or misappropriations thereof, as well as all goodwill
associated with such Intellectual Property Rights or the Business. Notwithstanding the foregoing
transfers, Buyer shall grant to Seller a royalty-free, perpetual, non-exclusive, non-assignable,
non-transferable, license (without right to sublicense) under the Assigned Patents to make, use,
sell, offer to sell and import any products (and modifications and derivatives thereof) offered by
units of Seller other than the IKOR unit Business as of the Closing Date, all of which Seller
represents, warrants and covenants are unrelated to and are not and will not be competitive with
any products offered or under development by the Business.




     2.3 Assumption of Liabilities. Upon the terms and subject to the conditions set forth
in this Agreement, effective at the time of the Closing Date, Buyer shall assume the following
Liabilities, and only the following Liabilities, of Seller (collectively, the “Assumed
Liabilities”):



          (a) Liabilities under or arising out of the Transferred Contracts, which are required to be
paid or performed from or after the Closing Date, through no act, omission or fault of Seller
(other than the Liabilities of Seller under Section 5.4 and Section 5.5).




          (b) Liabilities relating to any warranty, returns, refunds, support obligation or similar
claims with respect to any Transferred Products sold prior to the Closing Date and required to be
performed after the Closing Date, which obligations arise under any Transferred Contract; and




          (c) Trade accounts payable of the Business existing on the Closing Date, it being understood
that Seller will continue to pay all trade payables at the times and in a manner consistent with
prior practices from the Effective Date until the Closing Date.




          (d) Liabilities arising out of Parent’s or Buyer’s operation and ownership of the Transferred
Assets, but only to the extent such Liabilities accrue after the Closing Date.




     2.4 Excluded Liabilities. Notwithstanding the foregoing, unless otherwise expressly set
forth in this Agreement and other than the Assumed Liabilities, nothing set forth herein shall
constitute the transfer to, or the assumption by, Parent or Buyer of any Liability or Lien of the
Seller, including but not limited to the following (collectively, the “Excluded
Liabilities”):



          (a) any indebtedness of Seller;




          (b) any Liability with respect to any Employee who does not accept in writing an offer of
employment with Buyer by the Closing Date;




          (c) any Liability to an Affiliate of Seller;




          (d) any Liability not disclosed on the Disclosure Schedule or the Financial Statements;




          (e) Employee Excluded Liabilities;




          (f) any Liability related to or arising from any asset that is not a Transferred Asset; or




 - 10 -









 








          (g) any Liability of Seller for Taxes for any taxable period, and any Liability for Taxes
arising from or attributable to the Business, the Transferred Assets or Seller’s operation of the
Business for all taxable periods (or portions thereof) ending on or prior to the Closing Date,
including any Transfer Taxes for which Seller is liable pursuant to Section 2.11 and the
portion of any Straddle Period Taxes allocated to Seller pursuant to Section 2.9(c) (and
all Employment Liabilities).




     2.5 Payments to Seller. In consideration of the grant, delivery, sale, conveyance,
transfer and assignment of the Transferred Assets, and in addition to the assumption of certain
Liabilities, upon the terms and subject to the conditions set forth in this Agreement:



          (a) At the Closing, Parent shall pay to Seller, in cash by wire transfer of immediately
available funds to an account number provided to Parent by the Seller prior to the Closing, a total
of $9,425,000 (the “Cash Amount”).




          (b) At the Closing, Parent shall deposit $1,000,000 (the “Escrow Amount,” together
with the Cash Amount, the “Purchase Price”) in the Escrow Fund pursuant to the Escrow
Agreement and Section 8.5.




     2.6 Allocation of Purchase Price. Within ninety (90) days of the Closing Date, Parent
or Buyer shall provide Seller with an allocation of the Purchase Price (and the Assumed Liabilities
to the extent properly taken into account) among the Transferred Assets and any other rights
acquired hereunder in accordance with Section 1060 of the Code and the regulations promulgated
thereunder (the “Allocation”) (as adjusted to take into account any indemnity payments
pursuant to Article 8). The Parties agree that the amount allocated to the Transferred
Personal Property shall be the depreciated book value of such property as of the Closing Date. The
Allocation shall be conclusive and binding upon Parent, Buyer and Seller for all purposes, and the
parties agree that all returns and reports (including IRS Form 8594) and all financial statements
shall be prepared in a manner consistent with (and the Parties shall not otherwise file a Tax
Return position inconsistent with) the Allocation unless required by the IRS or any other
applicable taxing authority.



     2.7 Closing Deliveries; Collateral Agreements.



          (a) On the Closing Date, Seller shall, and shall cause its Affiliates to, at Seller’s sole
cost, in the manner and form and to the locations specified by Buyer, deliver to Buyer all of the
Transferred Assets, or in the case of the Assigned IPR or other intangible assets, deliver such
instruments as are necessary or desirable to transfer title to such assets from Seller (or its
Affiliates) to Buyer. Transfer and delivery of the Transferred Tangible Assets shall include
physical or electronic delivery of all Transferred Technology, including delivery or production of
Books and Records and other appropriate documentation thereof as reasonably requested by Buyer to
facilitate the transfer and operation of the Business. The Parties shall cooperate in good faith
to define and transfer such Transferred Technology, but it is understood and acknowledged that
Seller is ultimately responsible for delivering all Transferred Tangible Assets. It is further
understood and acknowledged that any Transferred Tangible Assets not delivered on the Closing Date
shall be held by Seller for and on behalf of Buyer until such time as Buyer is granted possession
thereof and that, during that period, Seller shall bear all risk of loss with respect to such
Transferred Tangible Assets. To the maximum extent practicable, all Software to be delivered
hereunder shall be delivered by

 - 11 -









 








electronic means in a manner specified by Buyer. Seller shall not
retain in its possession or control any Transferred Tangible Assets or Transferred Technology or
any copy thereof.




          (b) On the Closing Date, Seller shall deliver to Buyer (i) the Bill of Sale; (ii) fully
executed documents in a form reasonably satisfactory to Parent and Buyer, sufficient to enable
transfer of all Assigned IPR and proper recordation thereof in each jurisdiction in which such
Assigned IPR exist or have been filed, registered or issued (“IP Assignments”); (iii) the
sublease, in the form attached hereto as Exhibit E, covering the space presently occupied
by the Business at 4424 Innovation Drive, Fort Collins, Colorado as set forth in Section
7.1(d) hereof; (iv) the Escrow Agreement; (v) the License Agreement; and (vi) any other
transfer documents reasonably requested by, and in a form reasonably satisfactory to, Buyer
(collectively, the “Collateral Agreements”).




     2.8 Further Assurances, Conveyances, Agreement to Perform Necessary Acts. 



          (a) From time to time following the Closing, Seller and Buyer shall, and shall cause their
respective Affiliates to, execute, acknowledge and deliver all such further conveyances, notices,
assumptions, releases and acquittances and such other instruments, and shall take such further
actions, as may be necessary or appropriate to fully and effectively transfer, assign and convey
onto Buyer and its Affiliates and their respective successors or assigns, all of the properties,
rights, titles, interests, estates, remedies, powers and privileges intended to be conveyed to
Buyer under this Agreement and the Collateral Agreements, to fully and effectively transfer, assign
and convey onto Buyer and its Affiliates and their successors and assigns, any Assumed Liabilities
and obligations intended to be assumed by Buyer under this Agreement and the Collateral Agreements,
to otherwise make effective the transactions contemplated hereby and thereby and to confirm Buyer’s
title to or interest in the Transferred Assets, to put Buyer in actual possession and operating
control thereof and to assist Buyer in exercising all rights with respect thereto. If it is
determined that any material Transferred Asset (including any Patent owned or Controlled by Seller)
that falls within the definition of a “Transferred Asset,” was not included on a Schedule and
transferred to Buyer as of the Closing, Seller shall promptly, without payment of further
consideration by Parent or Buyer, transfer and assign such asset to Seller, which assignment shall be deemed to have
been effective as of the Closing Date, and the relevant Schedule shall be amended accordingly.




          (b) Seller agrees that, if requested by Parent or Buyer, it will cooperate with Parent or
Buyer in enforcing the terms of any agreements between Seller and any third party involving the
Business, including without limitation terms relating to confidentiality and the protection of
Intellectual Property Rights. In the event that Parent or Buyer is unable to enforce its
Intellectual Property Rights against a third party as a result of a rule or law barring enforcement
of such rights by a transferee of such rights, Seller agrees to reasonably cooperate with Parent or
Buyer by assigning to Parent or Buyer such rights as may be required by Parent or Buyer to enforce
its Intellectual Property Rights in its own name. If such assignment still does not permit Parent
or Buyer to enforce its Intellectual Property Rights against the third party, Seller agrees to
initiate proceedings against such third party in Seller’s name, provided that Seller shall be
entitled to participate in such proceedings, all at Parent’s or Buyer’s expense.




          (c) Following the Closing and without demanding further consideration therefor, Seller shall,
and shall cause its Affiliates and its and their Employees (including any named

 - 12 -









 








inventors on any Patents included in the Transferred Assets) and agents, to provide Parent or Buyer with access to
relevant information and otherwise to provide Parent or Buyer with reasonable cooperation and
assistance in the enforcement or prosecution of any Assigned IPR and the proper recordation of the
transfer thereof. Assistance under this Section 2.8 shall include, upon Parent’s or
Buyer’s reasonable request, the execution, acknowledgment and recordation of specific assignments,
oaths, declarations and other documents on a jurisdiction-by-jurisdiction and/or a
country-by-country basis and such other instruments of sale, transfer, conveyance, and assignment
as Parent or Buyer may reasonably request.




          (d) Seller hereby grants Parent and Buyer the irrevocable power of attorney to represent
Seller, where such representation is legally permissible, without restrictions towards legal
entities and natural persons, public authorities and courts, to do, sign under hand (or, as
required, under personal seal), deliver, receive and perform all and any acts, matters, statements
and things which may be necessary to put Buyer or its Affiliates in ownership, possession, and
operating control of the Transferred Assets, including execution, acknowledgment and recordation of
specific assignments, oaths, declarations and other documents on a country-by-country basis and
such other instruments of sale, transfer, conveyance, and assignment as may be required for this
purpose. Under this power of attorney, Parent and Buyer is entitled to enter into transactions on
behalf of Seller with itself in its own name or in its capacity as attorney-in-fact of a third
party and, therefore, Parent and Buyer are released from any prohibition or restriction of
self-dealing which may exist under any applicable law. Parent and Buyer shall be entitled to
delegate the rights granted to it by this power-of-attorney and to grant dispensation from any
legal prohibition or restriction of self-dealing that may exist. The foregoing power of attorney
is coupled with an interest and as of the closing shall be irrevocable. Notwithstanding anything
to the contrary in this Section 2.8(d), Parent and Buyer shall not exercise the foregoing
power of attorney unless and to the extent Seller does not comply with its obligations under this
Section 2.8.




     2.9 Responsibility for Taxes and Tax Returns.



          (a) Subject to Section 2.9(c) below, Seller will be responsible for the preparation
and filing of all returns, estimates, information statements and reports required to be filed with
a taxing authority (“Tax Returns”) (including Tax Returns required to be filed after the
Closing Date), to the extent such Tax Returns include or relate to the operation of the Business or
the use or ownership of the Transferred Assets on or prior to the Closing Date. Seller will be
responsible for and make all payments of Taxes shown to be due on such Tax Returns to the extent
they relate to the Transferred Assets or the Business.




          (b) Parent will be responsible for the preparation and filing of all Tax Returns it is
required to file with respect to Buyer’s ownership or use of the Transferred Assets or its
operation of the Business attributable to taxable periods (or portions thereof) commencing after
the Closing Date. Parent will make all payments of Taxes shown to be due on such Tax Returns to
the extent they relate to the Transferred Assets or the Business.




          (c) In the case of any real or personal property taxes (or other similar Taxes) attributable
to the Transferred Assets for which Taxes are reported on a Tax Return covering a period commencing
before the Closing and ending thereafter (a “Straddle Period Tax”), any such Straddle
Period Taxes shall be prorated between Parent and Seller on a per diem basis. The party

 - 13 -









 








required by law to pay any such Straddle Period Tax (the “Paying Party”) shall file the Tax Return
related to such Straddle Period Tax within the time period prescribed by law and shall timely pay
such Straddle Period Tax. To the extent any such payment exceeds the obligation of the Paying
Party hereunder, the Paying Party shall provide the other party (the “Non-Paying Party”)
with notice of payment, and within ten (10) days of receipt of such notice of payment, the
Non-Paying Party shall reimburse the Paying Party for the Non-Paying Party’s share of such Straddle
Period Taxes.




          (d) To the extent relevant to the Business or the Transferred Assets, each Party shall (a)
provide the other with such assistance as may reasonably be required in connection with the
preparation of any Tax Return and the conduct of any audit or other examination by any taxing
authority or in connection with judicial or administrative proceedings relating to any liability
for Taxes and (b) retain and provide the other with all records or other information that may be
relevant to the preparation of any Tax Returns, or the conduct of any audit or examination, or
other proceeding relating to Taxes. Seller shall retain all documents, including prior years’ Tax
Returns, supporting work schedules and other records or information with respect to all sales, use
and employment tax returns and, absent the receipt by Seller of the relevant tax clearance
certificates, shall not destroy or otherwise dispose of any such records for six (6) years after
Closing Date without the prior written consent of Parent or Buyer.




     2.10 Withholding Rights. Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement such amounts as Parent is required to
deduct and withhold with respect to the making of such payment under the Code or any provision of
state, local or foreign Tax law. To the extent that amounts are so withheld by Parent, such
withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller.



     2.11 Transfer Taxes . All sales, use, value-added, gross receipts, excise, registration, stamp duty, transfer or
other similar taxes or governmental fees (“Transfer Taxes”) imposed or levied by reason of,
in connection with or attributable to this Agreement and the transactions contemplated hereby shall
be borne by Seller; provided, however, the sales tax on the transfer of the
Transferred Personal Property to Buyer pursuant to this Agreement by the state of Colorado shall be
shared equally by Seller and Parent. The Parties shall cooperate with each other to the extent
reasonably requested and legally permitted to minimize any such Transfer Taxes. The Party required
by law to file a Tax Return with respect to such Transfer Taxes shall do so within the time period
prescribed by law, and the other Party shall reimburse the filing Party for its share of such tax
upon receipt of notice that such Transfer Taxes have been paid.



Article 3

REPRESENTATIONS AND WARRANTIES OF SELLER




     Seller represents and warrants to Parent and Buyer, subject to such exceptions as are
specifically set forth in the disclosure schedule (referencing the appropriate Section numbers)
attached hereto as Exhibit C (the “Disclosure Schedule”) and dated as of the
Closing Date, as follows. Nothing in the Disclosure Schedule shall be deemed adequate to disclose
an exception to a representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without



 - 14 -









 




limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein unless the representation or warranty has to
do with the existence of the document or other item itself.




     3.1 Organization of Seller. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full power and authority
(corporate and governmental) to conduct the Business as it is presently being conducted and to own
and lease its properties and assets including the Transferred Assets. Seller is duly qualified to
do business as a foreign corporation and is in good standing in each jurisdiction where the
character of its properties owned or leased or the nature of its activities make such qualification
necessary, except where the failure to be so qualified or in good standing would not, either
individually or in the aggregate, have a material adverse effect on the Transferred Assets or
Business.



     3.2 Authorization of Transaction. Seller has all requisite corporate power and
authority to enter into this Agreement, the Collateral Agreements and all related agreements and
instruments to be executed and delivered by Seller and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement, the Collateral Agreements and
all related agreements and instruments to be executed and delivered by Seller and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by all other
necessary corporate action on the part of Seller. The signatory officers of Seller have the power
and authority to execute and deliver this Agreement
and the Collateral Agreements and to consummate the transactions contemplated hereby and
thereby and to take all other actions required to be taken by Seller pursuant to the provisions
hereof and thereof. This Agreement and the Collateral Agreements have been duly executed and
delivered by Seller and constitute the legal, valid and binding obligation of Seller, enforceable
in accordance with their terms, except as such enforceability may be subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.



     3.3 Non-contravention; Consents.



          (a) None of the execution, delivery or performance of this Agreement or the Collateral
Agreements, the consummation of the transactions contemplated hereby or thereby, nor compliance by
Seller with any of the provisions hereof or thereof, will, with or without the passage of time or
the delivery of notice or both, (a) violate or conflict with any terms, conditions or provision of
the certificate of incorporation or bylaws, each as in effect, of Seller, (b) violate, conflict
with, result in a breach of or constitute a default under, or result in the termination of, or
accelerate the performance required by, or result in a right to terminate, accelerate or modify
under, or require a notice under, or result in the creation of any Lien upon any of the Transferred
Assets under any contract, lease, sublease, license, sublicense, franchise, patent, permit,
indenture, agreement for borrowed money or mortgage, instrument of indebtedness, security interest
or other arrangement to which Seller or any Affiliate of Seller is a party or by which it is bound
or to which any of its assets are subject, (c) violate any statute, ordinance, law, rule,
regulation, order, writ, injunction or decree of any Governmental Entity, or (d) impose any Lien on
any Transferred Assets or the Business (any such event, a “Conflict”).




 - 15 -









 








          (b) Except as set forth on Schedule 3.3(b), no consent, waiver, or order of, or
registration, declaration or filing with, any Governmental Entity or any third party is required by
or with respect to Seller or any of its Affiliates in connection with the execution and delivery of
this Agreement or the Collateral Agreements or the consummation of the transactions contemplated
hereby or thereby.




          (c) There is no agreement (not to compete or otherwise), commitment, judgment, injunction,
order or decree to which Seller or any Affiliate of Seller is a party or otherwise binding upon
Seller or any of its Affiliates which has or may have the effect of prohibiting the transactions
contemplated by this Agreement or the Collateral Agreements or impairing the Business or the
Transferred Assets or the value thereof in any material respect. Neither Seller nor any Affiliate
of Seller has entered into any agreement that restricts Seller or any of its Affiliates with
respect to selling, licensing or distributing the Transferred Products, providing services related
to the Transferred Products, or otherwise conducting the Business.




     3.4 Title of Properties; Absence of Liens and Encumbrances; Condition. Seller has
good and valid title to all of the Transferred Assets and the unrestricted power and the
unqualified right to sell, assign and deliver to Buyer the Transferred Assets free and clear of any
Liens, and at Closing Seller will transfer to Buyer good, valid and marketable title to all of the
Transferred Assets free and clear of any Liens. To the knowledge of the Seller, no basis
exists for the assertion of any claim which, if adversely determined, would result in a Lien on any
Transferred Asset or result in a material adverse effect. The Transferred Tangible Assets are (i)
adequate for the conduct of the Business by Seller as currently conducted and as currently
contemplated to be conducted, and (ii) in good operating condition, regularly and properly
maintained, subject to normal wear and tear. Except as set forth on Schedule 3.4, Seller
is in custody and control of all the Transferred Assets being sold and transferred by Seller to
Buyer pursuant to this Agreement and the Collateral Agreements.



     3.5 Intellectual Property Rights.



          (a) Schedules. All schedules referenced in this Section 3.5 are complete and
accurate in all material respects.




          (b) Assigned IPR. Schedule 3.5(b) lists all Transferred Assets that are
Registered IP, including the Assigned Patents and Assigned Trademarks. All such Registered IP is
currently in compliance with formal legal requirements (including payment of filing, examination
and maintenance fees and proofs of use), and is not subject to any unpaid maintenance fees or taxes
or actions falling due within one hundred twenty (120) days after the date hereof. All Assigned
IPR is, to the best of Seller’s knowledge, valid and subsisting and is free and clear of all Liens.
There are no proceedings or actions known to Seller before any court, tribunal (including the
United States Patent and Trademark Office or equivalent authority anywhere in the world) related to
any such Assigned IPR. Seller has not made any misrepresentations to any Governmental Entity in
the prosecution and maintenance of any Transferred Assets that are Registered IP, or otherwise
impaired the enforceability of such Registered IP through action or inaction. Immediately prior to
the Closing, all Assigned Patents are solely and exclusively owned by Seller, and all assignments
of the Assigned Patents (from the inventors thereof and any and all intermediate assignees) are
effective and have been properly recorded with the appropriate Governmental Entity. The Assigned

 - 16 -









 








IPR transferred to Buyer and the Licensed IPR hereunder constitute all of the Intellectual Property
Rights of Seller, which absent such transfer would be infringed by the operation of the Business by
Parent or Buyer following the Closing in the manner the Business as conducted by Seller immediately
prior to the Closing.




          (c) Non-Infringement. To the best of Seller’s knowledge, neither (i) the Transferred
Assets when Exploited by Buyer after the Closing (including the development, use, distribution,
sales, licensing and support of the Transferred Products), nor (ii) conduct of the Business or the
use of Transferred Assets or Licensed IPR by Seller prior to the Closing will or did: (A) infringe
or misappropriate the Intellectual Property Rights of any Person, (B) violate the rights of any
Person (including rights to privacy or publicity), or (C) constitute unfair competition or trade
practices under the laws of any jurisdiction. Neither Seller nor any of its Affiliates have
received notice from any Person claiming or alleging any such infringement, misappropriation, or
violation. To the best of Seller’s knowledge, there has been and is no unauthorized use,
disclosure, infringement or misappropriation of any Assigned IPR by any person or entity, including
any employee or former employee of Seller. Seller has not brought any action, suit or proceeding
for infringement of Assigned IPR against any third party and does not currently have any plans to
do so.




          (d) Ownership. Seller owns and has the right to transfer ownership to Buyer of all
Assigned IPR and Transferred Technology free and clear of all Liens. Following the Closing, Buyer
will own exclusively all such Transferred Technology and Assigned IPR except pursuant to
non-exclusive licenses pursuant to the Transferred Contracts. All of the Transferred Technology
and the Intellectual Property Rights therein and thereto, either (i) were created by an Employee of
Seller, within the scope of that Employee’s employment, such that ownership of and all Intellectual
Property Rights in and to the Transferred Assets has vested in Seller pursuant to a written
agreement under which the Employee agreed to assign ownership of all inventions to Seller, or (ii)
were created by another Person exclusively for Seller, and Seller has a written agreement with that
Person that has been provided to Buyer under which Seller has obtained ownership of, and is the
exclusive owner of, all such Transferred Technology and Intellectual Property Rights. Seller has
taken all steps that are reasonably required to protect Seller’s rights in confidential information
and trade secrets of Seller or provided by any other person to Seller, including entering into a
binding proprietary information, confidentiality and assignment agreement with each of its current
and former Employees, consultants and contractors, each of which have been provided to Buyer.
Except with respect to any individuals separately identified on Schedule 3.5(d), all
current and former employees, consultants and contractors of Seller who have created or modified
any of the Transferred Technology have executed such an agreement assigning all of such employees’,
consultants’ and contractors’ rights in and to the Transferred Technology and the Intellectual
Property Rights to Seller. With respect to any individuals identified on Schedule 3.5(d),
the description of such individual’s activities related to the Transferred Technology and
Intellectual Property Rights provided in Schedule 3.5(d) is accurate and complete in all
material respects. Except as set forth in Schedule 3.5(d), neither Seller nor any of its
Affiliates has transferred ownership of or, granted any exclusive licenses to, any Intellectual
Property Rights of Seller or any of its Affiliates otherwise required to be transferred to Buyer as
a Transferred Asset.




 - 17 -









 








          (e) Transferred Products and Product Software.




               (i) Schedule 1.1(ww) together with Schedule 3.5(e) is a complete and accurate
list of all Transferred Products that are or have been sold or offered for sale by Seller or its
Affiliates in the five year period prior to the Effective Date or that are currently under
development by Seller or any of its Affiliates.



               (ii) Seller has taken reasonable steps and implemented reasonable procedures (based on
standard industry practices) to ensure that the Transferred Products are free from defects, bugs,
viruses and other disabling codes that would have an adverse effect on the Transferred Products,
and Seller has disclosed to Parent and Buyer all information about material defects, bugs, viruses
and other disabling codes in the Transferred Products about which Seller has knowledge, and has
used a system and a procedure for tracking those bugs, the results of which have been shared with
Parent and Buyer and are included in the Transferred Assets. Each of the Transferred Products
complies in all material respects with the specifications therefor. There are no defects or errors
in any of the designs for any of the Transferred Products. All of the Transferred Products when
manufactured in accordance with the design and specifications therefor will be free from defects.



               (iii) To the extent the Transferred Products or other Transferred Technology include or
incorporate any open source, public source or freeware code, or any modification or derivative
thereof, including any version of any Open Source Software, Seller has disclosed and described to
Parent and Buyer, in writing, the manner in which such Open Source Software is incorporated or
included. No third party possesses any copy of any material source code to any Product Software or
other Software included in the Transferred Assets. Other than as explicitly set forth in
Section 2.8, as of the Closing Seller will have delivered to Parent and Buyer, and neither
Seller nor any of its Affiliates will have retained any copy of, any source code to any Product
Software or other material Software included in the Transferred Assets.



               (iv) With respect to Transferred Products in commercial production as of the Closing Date, all
design databases, GERBER files and other information necessary to manufacture, design, test and
simulate, and necessary for the verification of, all of such Transferred Products will correspond
in all material respects (except with respect to the GERBER files which shall correspond exactly)
to such Transferred Products at the time of the relevant Closing. Schedule 1.1(mm) lists
any Product Software and other material Software that is included in or part of the current version
of the Transferred Products as firmware or otherwise or that is part of, used in or necessary to
the use, operation, programming, verification, testing, support or application Software of any
Transferred Product or the reference design related thereto that is owned by a third Person, and
neither Seller nor its Affiliates is a party or subject to any contract, license or agreement with
respect to such Product Software or other material Software except as set forth on Schedule
3.5(f)(i).



          (f) Agreements.




               (i) Schedule 3.5(f)(i) lists all contracts, licenses or agreements to which Seller or
any Affiliate of Seller is a party (A) related to the licensing to, or acquisition of, any third
party Intellectual Property Rights or Technology related to or used in the Business or incorporated



 - 18 -









 




into the Transferred Products or (B) related to the sale or licensing of any Assigned IPR,
including any covenants not to sue thereunder, other than non-exclusive object code-only licenses
granted by Seller in the ordinary course and provided that forms of such licenses have been
provided to Parent and Buyer. There are no contracts, licenses or agreements between Seller and
any other Person with respect to the Transferred Assets under which there is any dispute or, to the
knowledge of Seller, any threatened dispute regarding the scope of such agreement or performance
under such agreement.




               (ii) Neither this Agreement nor the transactions contemplated by this Agreement, including the
assignment to Buyer, by operation of law or otherwise, of any contracts or agreements to which
Seller is a Party, will result, under the terms of any contract, license or agreement of Seller, in
(A) Buyer granting to any third party any right to or with respect to any Technology or
Intellectual Property Rights Right owned by, or licensed to, Buyer, (B) Parent or Buyer being bound
by, or subject to, any non-compete or other restriction on the operation or scope of its
businesses, or (C) Parent or Buyer being obligated to pay any royalties or other amounts to any
third party in excess of those payable by Parent or Buyer upon Closing.



               (iii) The Transferred Contracts when transferred to Buyer in accordance with Section
2.8 will confer and grant to Buyer all rights and licenses with respect to third party
Intellectual Property Rights and Technology previously licensed to Seller under such agreements
that are necessary to enable Parent or Buyer to operate the Business following the Closing
without infringing the Intellectual Property Right or incurring any liability to such third parties
(other than as expressly set forth in such Transferred Contracts).



          (g) Standards Bodies. Schedule 3.5(g) lists all industry standards bodies or
similar organizations related to the Business or Transferred Assets to which Seller or its
Affiliates participates and has or is required to contribute or disclose any Technology or
Intellectual Property Rights related to the Business or the Transferred Assets.




     3.6 Brokers’ and Finders’ Fees. Except as set forth on Schedule 3.6, neither
Seller nor any of its Affiliates has employed any broker or finder or incurred, nor will they,
Parent or Buyer (except for Parent or Buyer with respect to any such person engaged directly by
Parent or Buyer) incur, directly or indirectly, any liability for brokerage or finders’ fees or
agents’ commissions or any similar charges in connection with the Agreement or any transaction
contemplated hereby.



     3.7 Legal and Other Compliance. Seller and each Affiliate of Seller have been and are
in compliance with all applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of Governmental Entities applicable to
the Business, Transferred Assets, and Designated Employees, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice alleging any failure to so
comply has been made, filed or commenced. Neither Seller nor any Affiliate of Seller holds, nor is
it required by any applicable law, rule or regulation of any Governmental Entity to hold, any
permits, government approvals, licenses, registrations, clearances, authorizations or consents
necessary for the conduct of the Business.



     3.8 Transferred Assets and Transferred Technology. The Transferred Assets comprise
all of the tangible and intangible assets, properties and rights of every type and description
(other than real property) used in or necessary to the operation of the Business and are sufficient
for the



 - 19 -









 




operation of the Business by Parent and Buyer following the Closing in the manner the
Business was conducted by Seller immediately prior to the Closing. The Transferred Technology
comprises all of the Technology used in or necessary to the operation of the Business by Parent and
Buyer following the Closing in the manner the Business was conducted by Seller immediately prior to
the Closing. Neither Seller nor any Affiliate of Seller has made or entered into any agreement,
written or oral, to sell or transfer any part of the Transferred Assets, or has sold or transferred
any part of the Transferred Assets, to any party other than Parent and Buyer.




     3.9 Environmental Matters. No Hazardous Materials are present in, on or under any
property, including the land and the improvements, ground water and surface water thereof, that
Seller or any of its Affiliates has at any time owned, operated, occupied or leased in connection
with operation of the Business. Neither Seller nor any of its Affiliates have, in connection with
operation of the Business, transported, stored, used, manufactured, disposed of, released or
exposed its Employees or others to Hazardous Materials or any product containing a Hazardous
Material in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of the Effective
Date. No action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim
is pending or, to the knowledge of Seller or any of its Affiliates, threatened concerning any
activities of Seller or any of its Affiliates related to Hazardous Materials in connection with
operation of the Business. Neither Seller nor any of its Affiliates have knowledge of any fact or
circumstance which could involve any Person in any environmental litigation or impose upon any
Person any environmental liability in connection with operation of the Business.



     3.10 Litigation. There are no claims, actions, suits, inquiries, proceedings or
investigations against Seller or any of its Affiliates relating to the Business, the Designated
Employees or the Transferred Assets which are currently pending or, to Seller’s knowledge,
threatened, at law or in equity or before or by any Governmental Entity. There are no grievance or
arbitration proceedings pending or, to Seller’s knowledge, threatened. There are no judgments,
orders, decrees, citations, fines or penalties heretofore assessed against Seller or any of its
Affiliates affecting or involving the Business, the Designated Employees or the Transferred Assets
under any foreign, federal, state, provincial or local law.



     3.11 Employment Matters.



          (a) Definitions. The following terms, when used in this Section 3.11, shall
have the following meanings:




               (i) “International Employee Plan” shall mean each Benefit Plan that has been adopted
or maintained by Seller or any ERISA Affiliate, whether informally or formally, or with respect to
which Seller or any ERISA Affiliate will or may have any liability, for the benefit of Employees
who perform or performed services outside the United States.



               (ii) “Multiemployer Plan” means any Pension Plan which is a “multiemployer plan,” as
defined in Section 3(37) of ERISA.



               (iii) “Pension Plan” shall mean each Benefit Plan which is an “employee pension
benefit plan,” within the meaning of Section 3(2) of ERISA.



 - 20 -









 





          (b) Designated Employees and Key Employees. Schedule 1.1(n) contains a
complete and accurate list of the Employees and shows: (i) Employee name, position held, annual
base salary, target incentive compensation and equity compensation; (ii) net credited service date;
(iii) vacation eligibility for calendar year 2005; (iv) visa status; (v) leave status (including
type of leave, expected return date for non-disability related leaves and expiration dates for
disability leaves); and (vi) the name of any union, collective bargaining agreement or other
similar labor agreement covering such Employee.




          (c) Pension and Benefit Plans.




               (i) Neither Seller nor any ERISA Affiliate has ever maintained, established, sponsored,
participated in, contributed to, or had or could have any obligation to, any (A) Pension Plan which
is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the
Code, (B) multiple employer plan or to any plan described in Section 413 of the Code, or (C)
Multiemployer Plan. The Seller does not now, nor has it ever had the obligation to, maintain,
establish, sponsor, participate in, or contribute to any International Employee Plan.



               (ii) Section 3.11(c)(ii) of the Disclosure Schedule contains a complete list of all
Benefit Plans for which Employees are eligible or that that currently provide, or have provided,
benefits to Employees. Seller and, as applicable, its ERISA Affiliates, are in material compliance
with Benefit Plan terms and all applicable laws for each Benefit Plan including, but not limited
to, ERISA and the Code.



          (d) No Post-Employment Obligations. No Benefit Plan provides, or has any liability to
provide, life insurance, medical or other employee benefits to any current or former Employee upon
his or her retirement or termination of employment for any reason, except as may be required by
statute, and neither Seller nor any of its ERISA Affiliates has ever represented, promised or
contracted (whether in oral or written form) to any Employee (either individually or to Employees
as a group) that such Employee(s) would be provided with life insurance, medical or other employee
welfare benefits upon their retirement or termination of employment, except to the extent required
by statute.




          (e) Employment Matters. Seller and its ERISA Affiliates: (i) are in compliance with
all applicable federal, state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in each case, with
respect to Employees; (ii) have withheld and reported all amounts required by law or by agreement
to be withheld and reported with respect to the wages, salaries and other payments to Employees by
virtue employment, the transactions specifically contemplated by this Agreement or otherwise; (iii)
are not liable for any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; and (iv) are not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than routine payments to be
made in the normal course of business and consistent with past practice). There are no pending or,
to the knowledge of Seller or any ERISA Affiliate, any threatened or reasonably anticipated claims
or actions against Seller or any ERISA Affiliate under any worker’s compensation policy or
long-term disability policy with respect to any Employees.




 - 21 -









 








          (f) Labor. No work stoppage or labor strike against Seller or any ERISA Affiliate is
pending, threatened or reasonably anticipated with respect to the Business. Seller does not know
of any activities or proceedings of any labor union to organize any current Employees (including
Designated Employees). There are no actions, suits, claims, labor disputes or grievances pending,
or, to the knowledge of Seller, threatened or reasonably anticipated relating to any labor, safety
or discrimination matters involving any Employee (including Designated Employees), including,
without limitation, charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any material liability to
Seller or any of its subsidiaries. Neither Seller nor any of its subsidiaries has engaged in
any unfair labor practices within the meaning of the National Labor Relations Act. Seller is not
presently, nor has it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees (including Designated Employees) and no
collective bargaining agreement is being negotiated with respect to Employees (including Designated
Employees).




          (g) No payment or benefit which will or may be made by Seller or its ERISA Affiliates with
respect to any Employee or any other “disqualified individual” (as defined in Code Section 280G and
the regulations thereunder) will be characterized as a “parachute payment,” within the meaning of
Section 280G(b)(2) of the Code.




     3.12 Bulk Transfer Laws. There are no current or past creditors of Seller to whom any
law, rule or regulation requires the delivery of notice or from whom any form of consent is
required in conjunction with undertaking the transactions contemplated by this Agreement, and the
“bulk transfer laws” of any state in which the Transferred Assets are located do not apply to the
transfer of those Transferred Assets under this Agreement.



     3.13 Business Financial Information.



          (a) Seller has delivered to Parent and Buyer, and Schedule 3.13(a) contains, true,
correct and complete copies of (i) the unaudited partial balance sheet of the Business at September
30, 2005 which includes only the categories of Transferred Assets and Assumed Liabilities as of
such date and (ii) unaudited statements of revenue and direct expenses of the Business for the year
ended December 31, 2004 and the nine months ended September 30, 2005 (the “Financial
Statements”). The Financial Statements were compiled from books and records regularly
maintained by management of Seller used to prepare financial statements of Seller and fairly
present the financial condition and results of operations at the date and for the periods covered
thereby.




          (b) Since September 30, 2005, there has not occurred any event or condition of any character
that has had or is reasonably likely to have a material adverse effect on the Business, the
Transferred Products or the Transferred Assets, or any damage, destruction or loss, whether or not
covered by insurance.




          (c) Except as and to the extent reflected on the Financial Statements or on Schedule
3.13(c), Seller does not have Liabilities that are within the definition of Assumed Liabilities
and are of a nature customarily reflected on a balance sheet. The amount of Seller’s warranty
obligations with respect to the Transferred Products sold by Seller prior to Closing Date does not
exceed $75,000.




 - 22 -









 








     3.14 Contracts; No Defaults.



          (a) Contracts. Schedule 3.14(a) sets forth a complete and accurate list, with
respect to the Business, the Transferred Assets and the Designated Employees, of each agreement,
contract, understanding or commitment (including, without limitation, any of the Transferred
Contracts) entered into by Seller or any of its Affiliates with respect to the Business or the
Transferred Assets.




          (b) Defaults. Neither Seller nor any Affiliate of Seller is in default under or with
respect to any judgment, order, writ, injunction or decree of any Governmental Entity. There does
not exist any default by Seller or, to the knowledge of Seller, by any other Person, or event that,
with notice or lapse of time, or both, would constitute a default under any agreement, contract,
understanding or commitment (including, without limitation, any of the Transferred Contracts)
entered into by Seller or any of its Affiliates with respect to the Business or the Transferred
Assets, and no notices of breach thereof have been received by Seller or any of its Affiliates.
Except as set forth on Schedule 3.14(b), neither the Seller nor any Affiliate of Seller is
a party to or bound by any agreement, contract, understanding, or commitment with respect to the
Business or the Transferred Assets which is not immediately terminable by Seller without penalty.
Each of the Transferred Contracts is fully assignable to Buyer without giving rise to any
obligation, loss of rights or penalty and when assigned to Buyer, shall place Buyer in the position
of Seller (or its Affiliate) under the terms of such Transferred Contract.




     3.15 Warranties; Defects; Liabilities. Each Transferred Product manufactured, sold,
licensed, leased or delivered by Seller, and all services performed by Seller, have been in
conformity with all applicable contractual commitments and all express and implied warranties
except where the failure to be in such conformity would not have a material adverse effect. Except
for Seller’s standard product warranty, the Seller has no Liability (and to the knowledge the
Seller, there is no current reasonable basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against any of them giving rise to any
Liability) for replacement or repair thereof or other damages in connection therewith. No
Transferred Product manufactured, sold, licensed, leased, or delivered by Seller, and no service
performed by Seller, is subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale, license or lease or beyond that implied or imposed by
applicable law. Schedule 3.15 includes copies of the standard terms and conditions of
license or services for Seller (each Contract setting forth such standard terms and conditions for
licensing a Transferred Product shall be referred to herein as a “Standard Product License
Agreement”) and sets forth all Contracts under which Seller has manufactured, sold, or licensed
Transferred Products or performed services or provided any guaranty, warranty or indemnity to a
third party in connection therewith which contains terms that materially deviate from such standard
terms and conditions.



     3.16 Insurance. There is no claim by Seller pending under any insurance policy or
fidelity bond covering the Business, the Transferred Products or the Transferred Assets. All
premiums payable under all such policies and bonds have been paid, and Seller is otherwise in
compliance with the terms of such policies and bonds. To the knowledge of the Seller, such
policies of insurance and bonds are of the type and in amounts customarily carried by persons conducting businesses similar to those of
Seller in the jurisdictions in which Seller operates.



 - 23 -









 





     3.17 Tax Matters.



          (a) To the extent relevant to the Transferred Assets or the Business, Seller has prepared and
timely filed all required Tax Returns relating to any and all Taxes concerning or attributable to
the Seller and such Tax Returns are true and correct and have been completed in accordance with
applicable law.




          (b) To the extent failure to do so could adversely impact Parent or Buyer, the Business, the
Transferred Assets, or Parent’s or Buyer’s use or ownership of the Transferred Assets or operation
of the Business, Seller has timely paid all Taxes it is required to pay and has timely withheld and
paid over to the appropriate Governmental Entity all income taxes, social security and national
insurance contributions and other Taxes required to be withheld.




          (c) Neither Parent nor Buyer shall have any liability or obligation, nor shall Parent or Buyer
incur any loss, expense or cost, and none of the Transferred Assets shall be subject to any Liens,
by reason of any Taxes arising out of (i) the Business as conducted by Seller prior to the
consummation of the sale hereunder of the Transferred Assets or (ii) any other operations or
activities of Seller whether conducted prior to the date hereof or hereafter. Seller is not aware
of, and has no knowledge of a factual basis for the assertion of, any claim for Taxes for which
Parent or Buyer would become liable as a result of the transactions contemplated by this Agreement.




          (d) To the extent failure to do so could adversely impact Parent or Buyer, the Business, the
Transferred Assets, or Parent’s or Buyer’s use or ownership of the Transferred Assets or operation
of the Business, as of the Closing Date, Seller will not be delinquent in the payment of any Tax,
nor will there be any Tax deficiency outstanding, assessed or proposed against Seller.




          (e) Seller has not executed any waiver of any statute of limitations on or extending the
period for assessment or collection of any Tax.




          (f) No audit or other examination of any Tax Return of Seller’s with respect to the Business
or Transferred Assets is presently in progress, nor has any Seller been formally or informally
notified of any request for such an audit or other examination.




     3.18 Accounts Receivable. All of the accounts receivable of the Business (a) arose
from bona fide sales transactions in the ordinary course of business, and are payable on ordinary
trade terms, (b) are legal, valid, and binding obligations of the respective debtors enforceable in
accordance with their respective terms, (c) are not subject to any valid set-off or counterclaim,
and (d) do not represent obligations for goods sold on consignment, on approval or on a
sale-or-return basis or subject to any other repurchase or return arrangement. No person has any
Lien on any accounts receivable of the Business and no request or agreement for deduction or
discount has been made with respect to any accounts receivable of the Business.



     3.19 Inventory. The Transferred Inventory is of a quality and quantity usable and
salable in the ordinary course of business. All items included in the Transferred Inventory of the
Business are the property of the Seller, free and clear of any Lien, have not been pledged as
collateral, are not held on consignment from others and conform in all material respects to all
standards applicable to such Transferred Inventory and its use or sale imposed by any Governmental
Entity.



 - 24 -









 





     3.20 Representations and Disclosures Complete. Seller is not aware of any facts or
circumstances that affect the Business, the Transferred Assets or the Designated Employees in a
material adverse manner or that are reasonably likely to affect the Business, the Transferred
Assets or the Designated Employees in a material adverse manner. None of the representations or
warranties made by Seller (as modified by the Disclosure Schedule), nor any statement made in any
Schedule, Exhibit, agreement or certificate furnished by Seller pursuant to this Agreement,
contains or will contain at the Closing any untrue statement of a material fact, or omits or will
omit at the Closing to state any material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which made, not misleading. Seller has
delivered or made available true and complete copies of each existing document that has been
requested by Parent, Buyer or its counsel.



Article 4

REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER




     Parent and Buyer represent and warrant to Seller as follows:



     4.1 Organization. Parent is duly organized, validly existing, and in good standing
under the laws of the jurisdiction of the State of California. Buyer is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of the State of Delaware.



     4.2 Authority for Agreement. Parent and Buyer have all requisite corporate power and
authority to enter into this Agreement, the Collateral Agreements to which Parent and Buyer are a
party and all related agreements and instruments to be executed and delivered by Parent and Buyer
and to consummate the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement, the Collateral Agreements to which Parent and Buyer are a party and the related
agreements and instruments and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of Parent and Buyer. This
Agreement has been duly executed and delivered by Parent and Buyer and constitutes, and the related
agreements and instruments, when duly executed and delivered by Parent and Buyer, will constitute
the valid and binding obligations of Parent and Buyer, enforceable in accordance with their terms,
except as such enforceability may be subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.



     4.3 Noncontravention(a) . As of the Closing Date, neither the execution and the
delivery of this Agreement, the related agreements and instruments to be executed and delivered by
Parent and Buyer nor the consummation of the transactions contemplated hereby or thereby, will (a)
violate any provision of the certificate of incorporation or bylaws, each as in effect, of each of
Parent and Buyer or (b) Conflict with any material agreement, contract, lease, license, instrument,
or other arrangement to which Parent and Buyer are a party or by which it is bound or to which any
of its assets is subject except for such Conflicts which would not, either individually or in the
aggregate, have a material adverse effect on Parent and Buyer.



 - 25 -









 





Article 5

ADDITIONAL AGREEMENTS OF THE PARTIES




     5.1 Operation of the Business.



          (a) Between the Effective Date and the Closing Date, unless otherwise agreed in writing in
advance by Parent or Buyer, Seller shall: (i) except as otherwise allowed or required pursuant to
the terms of this Agreement, conduct the Business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted; (ii) pay the debts, trade payables and Taxes
of the Business when due and in a manner consistent with prior practices; (iii) pay or perform
other obligations of the Business when due; (iv) preserve intact the current business organization
of Seller relating to the Business, keep available the services of the Designated Employees, and
maintain the relations and goodwill with the suppliers, customers, distributors, licensors,
licensees, landlords, trade creditors, Employees, agents, and others having business relationships
with Seller relating to the Business, with the goal of preserving unimpaired the goodwill and
ongoing business of the Business; (v) maintain all of the Transferred Assets in their current
condition, ordinary wear and tear excepted, and, in the event of any damage to or destruction of
any of the Transferred Assets prior to the Closing Date, promptly replace, repair or restore such
Transferred Assets; (vi) promptly notify Parent and Buyer in writing of any event or occurrence not
in the usual, regular and ordinary course of the operation of the Business, or that has resulted,
will result, or is reasonably likely to result, in the failure to satisfy any of the conditions
specified in this Section 5.1 hereof;




          (b) Except as otherwise expressly permitted by this Agreement, between the Effective Date and
the Closing Date, Seller will not, without the prior written consent of Parent or Buyer:




               (i) sell, lease or otherwise transfer or dispose of, or enter into any outbound license
agreement with respect to any of the Transferred Assets;



               (ii) take any action to impair, encumber, create a Lien against or otherwise adversely affect
the Transferred Assets;



               (iii) revalue any of the Transferred Assets, including without limitation writing down the
value of any inventory;



               (iv) amend or modify, or violate the terms of, any of the Transferred Contracts;



               (v) make or change any election in respect of Taxes, adopt or change any accounting method in
respect of Taxes, enter into any closing agreement, settle any claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes, in each case relating to the Business, the Transferred Products or
the Transferred Assets;



               (vi) create, incur or assume any Liability that would materially and adversely affect the
Business, the Transferred Assets or Parent’s and Buyer’s ability to conduct the



 - 26 -









 




Business in substantially the same manner and condition as conducted by Seller on the Effective Date;




               (vii) commence or settle any legal actions or proceedings or obtain any releases of threatened
actions or proceedings involving or relating to the Business or the Transferred Assets;



               (viii) accelerate any accounts receivable or defer any accounts payable in any manner outside
the ordinary course of business;



               (ix) take any action, or fail to take any action, that would result in any of the
representations and warranties set forth in Article 3 not being true and correct on and as
of the Closing Date with the same force and effect as if such representations and warranties had
been made on and as of the Closing Date; or



               (x) agree to take any action described in subsection (i) through (ix) above.



     5.2 Access.



          (a) During the period commencing on the Effective Date and continuing through the Closing
Date, Seller will permit Parent and Buyer to make a full and complete investigation of the
Transferred Assets and the Business and to receive all information of Seller relating to the
Transferred Assets or reasonably related to Seller’s conduct of the Business. In addition, to the
maximum extent permitted by applicable laws and regulations, Seller will provide Parent and Buyer
access to the employee files of the Designated Employees or Employees that would potentially be
Designated Employees. Without limitation on this right, Seller, upon reasonable prior notice from
Parent or Buyer to Seller, will (i) afford to Parent and Buyer and their representatives, at all
reasonable times during normal business hours, full and complete access to the Transferred Assets
and Seller’s personnel, professional advisors, properties, contracts, files, Books and Records, and
other documents and data; (ii) furnish Parent or Buyer and its representatives with copies of all
such Transferred Contracts, Books and Records, and other existing documents and data as Parent or
Buyer may reasonably request; and (iii) furnish Parent or Buyer and their representatives with such
additional financial (including Tax Returns and supporting documentation), operating, and
other data and information as Parent or Buyer may reasonably request, in each case relating to the
Business. Seller shall maintain and make available the information and records specified in this
Section 5.2 in the ordinary course of Seller’s business and document retention policies, as
if the transactions contemplated by this Agreement had not occurred. No information or knowledge
obtained in any investigation pursuant to this Section 5.2 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the obligations of the
Parties hereto to consummate the transactions contemplated hereby.




          (b) During the period commencing on the Effective Date and continuing through the Closing
Date, each Party shall provide the other Party (at such other Party’s expense) with such reasonable
assistance, including the provision of available relevant records or other information and
reasonable access to and cooperation of any personnel within their employ, as may be reasonably
requested by either of them in connection with the preparation of any financial statement or Tax




 - 27 -









 







Return, or any audit or examination by any taxing authority, or any judicial or administrative
proceeding relating to liability for Taxes.




          (c) For two (2) years after the Closing Date, Seller shall give Parent and Buyer reasonable
access, during normal business hours, to all books, records and files requested by Parent and Buyer
that are reasonably necessary in order for Parent and Buyer to respond to any third party or
governmental inquiries, investigations, claims or audits related to the Transferred Assets or the
Business.




     5.3 Post-Closing Audits of Business Financial Statements. During the period
commencing on the Closing Date and ending on the date that the audits of the Business’s financial
statements for the years ended December 31, 2004 and the period from January 1, 2005 through the
Closing Date by third party auditors are completed (the “Audit Completion Date”), Seller
shall provide Parent (at Seller’s expense) with such reasonable assistance, including the provision
of available relevant records or other information and reasonable access to and cooperation of any
personnel within Seller’s employ, as may be reasonably requested by Parent in connection with the
preparation of the audits of the Business’s financial statements for the years ended December 31,
2004 and the period from January 1, 2005 through the Closing Date (the “Post-Closing
Audits”). Parent shall select the third party auditor for the Post-Closing Audits and will
bear the fees of the third party auditor for the Post-Closing Audits up to $125,000 for a so-called
“carve out” audit. Any third party auditor fees in excess of $125,000 for the “carve out” audit
shall be referred to as “Indemnifiable Audit Costs” and shall constitute “Losses” for
purposes of Article 8.



     5.4 Third Party Consents; Assignment of Transferred Contracts.



          (a) Seller, Parent and Buyer shall use reasonable best efforts to obtain, within the
applicable time periods required, all waivers, permits, consents, assignments and approvals and to
effect all registrations, filings and notices with or to third parties or Governmental Entities
that are necessary to consummate the transactions contemplated by this Agreement, including without
limitation by cooperating in good faith to effect any required assignment to Buyer or its designees
of each of the Transferred Contracts in such a manner that Buyer or its designees shall assume
only those obligations under such Transferred Contracts arising from Buyer’s or its designee’s
performance or non-performance of its obligations under such Transferred Contracts from and after
the Closing Date.




          (b) With respect to contracts that are to be Transferred Assets, Seller shall use prior to the
Closing commercially reasonable efforts to obtain the consent of the other Persons to the
assignment thereof to Buyer or its designees (at no cost to Buyer) such that Buyer or its designees
shall be able to secure the benefits of such Transferred Contracts directly. If such consent is
not obtained prior to the Closing, or if an attempted assignment thereof would be ineffective or
would adversely affect the rights thereunder so that Buyer or its designees would not receive
substantially all such rights, (i) this Agreement shall not constitute an agreement to assign such
contracts (a “Non-Assignable Contract”) and (ii) Seller shall (x) continue to use
reasonable best efforts to obtain the consent of the other Persons for the assignment thereof to
Buyer or its designees, and (y) use reasonable best efforts so as to ensure that Buyer or its
designees would obtain the benefits and assume the obligations thereunder in accordance with this
Agreement, including subcontracting, sublicensing or subleasing to Buyer or its designees, or enter
into




 - 28 -









 







arrangements under which Seller would enforce for the benefit of Buyer or its designees, with
Buyer or its designee, assuming Seller’s obligations, any and all rights of Seller against a third
party thereto. Seller shall promptly pay to Parent all monies received by Seller with respect to
such Non-Assignable Contracts, except to the extent the same represents an Excluded Asset. To the
extent the benefits therefrom and obligations thereunder have been provided by alternative
arrangements as provided above reasonably acceptable to Parent or Buyer, any such Non-Assignable
Contract shall be deemed to be a Transferred Asset or Assumed Liability, as the case may be,
provided Parent and Buyer shall not be responsible for any Liabilities (i) arising out of a claim
of breach of such Non-Assignable Contract due to the establishment of the alternative arrangements,
or (ii) arising out of such Non-Assignable Contract as a result of Seller’s action without Parent’s
or Buyer’s approval in a manner inconsistent with the alternative arrangements. Parent and Buyer
will use commercially reasonable efforts to assist Seller in obtaining such consents (such
commercially reasonable efforts shall not include the payment of money).




          (c) In furtherance, and not in limitation of the foregoing subsection (a), in the event that
Seller is unable to obtain any required consent to the transfer at the Closing to the Buyer or its
designees of any Non-Assignable Contract and Seller and Buyer have failed to agree on alternate
arrangements to an assignment reasonably satisfactory to Buyer, then (i) the party thereto shall
remain a party and shall continue to be bound by such Non-Assignable Contract, (ii) Buyer or its
designee shall pay, perform and discharge fully all of the obligations of such party from and after
the Closing Date, upon the terms and subject to the conditions of such Non-Assignable Contract,
(iii) such party shall, without further consideration therefor, pay, assign and remit to Buyer or
its designee promptly all monies, rights and other consideration received in respect of such
Non-Assignable Contract on and after the Closing Date, and (iv) such party shall, without further
consideration therefor, exercise its rights and options under such Non-Assignable Contract in the
manner and only to the extent directed by Buyer. If and when any consent shall be obtained
following the Closing Date with respect to the transfer by Seller to Buyer of any such
Non-Assignable Contract or such Non-Assignable Contract shall otherwise become assignable following
the Closing Date, Seller shall promptly assign all of its rights and obligations thereunder to
Buyer or its designee, without further consideration therefor, and Buyer shall, without further
consideration therefor, assume such rights and obligations, to the fullest extent permitted
and such Non-Assignable Contract shall be deemed to be a Transferred Asset or Assumed Liability, as
the case may be. The existence of the provisions of this Section 5.4 shall not reduce or
otherwise adversely affect any party’s ability to enforce any of its rights under this Agreement.




     5.5 Renewal Fees. In furtherance, and not in limitation of the foregoing Section
5.4, Seller agrees to pay for Buyer’s renewal fees of all agreements and licenses with respect
to third party Software previously licensed to Seller that are (i) listed on Schedule 5.5;
(ii) Non-Assignable Contracts or (iii) otherwise necessary to enable Parent or Buyer to operate the
Business following the Closing.



     5.6 Transition Services. For a period of not more than 9 months from the Closing
Date, Seller will continue to provide Parent and Buyer with support services to the Business as
detailed in Exhibit B-1 (the “Transition Services”). The cost of such support
services will be paid by Parent or Buyer to Seller at the rates set forth on Exhibit B-1 (the
“Transition Services Fees”), pro-rated for partial months. Parent and Buyer may terminate
each or all of such Transition Services at any time, provided, however, that
Seller’s provision of IT system services shall not be terminated until Parent



 - 29 -









 




or Buyer implements a
system capable of handling such IT system services. For any support service that Parent and Buyer
is utilizing after 90 days, the Transition Services Fees will increase for such services by 20%
each quarter after such 90 days. Seller agrees to transfer all data of or related to the Business
which resides on Seller’s IT system for use with Parent’s or Buyer’s IT system, at Parent’s or
Buyer’s request and at Seller’s cost. Seller shall provide the Transition Services, or cause the
Transition Services to be provided, in a diligent and workmanlike manner, in good faith and in a
manner consistent with the historical provision of such services in the ordinary course of
business, with at least the same degree of skill, duty, care and timeliness as such services have
been provided in Seller’s Fort Collins facilities prior to the Closing Date, but in no event less
than reasonable care. Seller will provide the Transition Services to Parent and Buyer with the
same priority as it provides similar services to its own subsidiaries and businesses, including
similar treatment with respect to critical and time-sensitive needs. Seller shall not have the
right to subcontract the provision of the Transition Services without the prior written consent of
Parent or Buyer except to the extent such Services were subcontracted prior to the Closing Date.
Prior to termination of such Transition Services, Seller will provide any transition-related
assistance and migrate to Parent or Buyer all data reasonably necessary for Parent or Buyer to
effect the transition of Transition Services, so that Parent or Buyer will be able to perform the
Transition Services itself or through a third party service provider. Seller will be responsible
for costs or expenses incurred in support of Parent’s or Buyer’s migration plan.




     5.7 Software Other than IT Systems



     Seller has provided Parent and Buyer, and attached hereto as Exhibit B-2, a complete
list of third- party software presently utilized by Employees of the Business including the
relicensing costs which are required to continue such use after the Closing. Seller has allowed
Parent a credit against the purchase price for the Transferred Assets to enable Parent or Buyer to
acquire such software as Parent or Buyer deems necessary. All license payments to third parties
shall be at Parent’s and Buyer’s expense. Seller shall allow Parent and Buyer to acquire an unlimited, perpetual
license to Seller’s P-Tools software in exchange for a onetime payment of $10,000. Such license to
Seller’s P-Tools software shall be transferable in the event of a change in control or acquisition
of Parent or Buyer.



     5.8 Technology Documentation. Commencing on the Effective Date, Seller shall fully
cooperate with Parent and Buyer to perform a detailed technical review of all Transferred
Technology and shall diligently prepare such documentation sufficient to enable Parent and Buyer to
fully utilize, understand and implement the Transferred Technology for delivery to Buyer at the
Closing. It is understood and acknowledged that any Technology created solely or jointly by either
Party in the creation of such documentation shall be Transferred Tangible Assets, and any
Intellectual Property Rights therein shall be Assigned IPR.



 - 30 -









 





     5.9 Intellectual Property.



          (a) Except as otherwise expressly permitted by this Agreement, between the Effective Date and
the Closing Date, Seller will not, without the prior written consent of Parent or Buyer:




               (i) enter into any inbound license agreement with respect to Intellectual Property Rights or
Technology of any third party to be incorporated in or used in connection with the Transferred
Assets or the Business;



               (ii) sell, lease or otherwise transfer or dispose of or encumber (including any Lien), or
enter into any outbound license agreement (including any covenant not to sue a third party) with
respect to, any of the Transferred Assets or the Business;



               (iii) propose, enter into or negotiate a contract with any Person, other than Parent and
Buyer, providing for the possible acquisition, transfer or disposition (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) of any of the Transferred Assets or the
Business; or



               (iv) enter into any other contract relating to (A) the sale or distribution of any Transferred
Technology; (B) the provision of any services related to the Business; or (C) any other of the
Transferred Assets.



          (b) Between the Effective Date and the Closing Date, Seller shall, and shall cause its
Affiliates to, take all actions, and not omit to take any action, necessary to preserve and
maintain all Assigned IPR, including payment of any Patent issuance, maintenance or other fees when
due and the filing of any documents, certificates or notices when due related to the prosecution or
maintenance of any Assigned IPR.




     5.10 Reasonable Best Efforts . The Parties shall use reasonable best efforts (a) to cause to be fulfilled and satisfied
all of the conditions to the Closing to be fulfilled and satisfied by each of them and (b) to cause
to be performed all of the matters required of each of them at the Closing.



     5.11 No Other Bids. Until the earlier to occur of (a) the Closing or (b) the
termination of this Agreement pursuant to its terms, neither Seller nor any of its Affiliates,
officers, directors, Employees, stockholders, agents or other representatives shall, directly or
indirectly: (i) initiate, solicit, entertain or encourage (including by way of furnishing
information regarding the Business or the Transferred Assets) any proposals, inquiries or offers,
or make any statements to third parties which may reasonably be expected to lead to any proposal,
inquiry or offer, from any Person concerning the acquisition or license of all or any material
portion of the Business or the Transferred Assets; or (ii) negotiate, engage in any substantive
discussions, or enter into any agreement, with any Person concerning the acquisition or license of
all or any material portion of the Business or the Transferred Assets. Seller will promptly inform
Parent and Buyer in writing of any third party inquiries or proposals received by Seller and shall
provide to Parent and Buyer the name of such third party and the terms of any such proposal. The
covenants in this Section 5.11 will apply to any and all discussions in which Seller is
currently involved with third parties, and Seller shall immediately terminate all such discussions.



 - 31 -









 





     5.12 Confidentiality; Public Announcements.



          (a) The Receiving Party shall treat as confidential all of the Disclosing Party’s Confidential
Information and shall not use or disclose to third parties such Confidential Information except as
expressly permitted under this Agreement. Without limiting the foregoing, the Receiving Party
shall use at least the same degree of care that it uses to prevent the disclosure of its own
confidential information, but in no event with less than reasonable care, to prevent the disclosure
of the Disclosing Party’s Confidential Information.




          (b) Notwithstanding the foregoing Section 5.12(a), after the Closing the following
shall be deemed the Confidential Information of Parent and Buyer and the obligations set forth in
Section 5.12(a) shall no longer apply to Parent and Buyer with respect thereto: any
Confidential Information related to the Business or the Transferred Assets or constituting or
included with the Transferred Assets.




          (c) Seller agrees that the terms, conditions and existence of this Agreement shall be treated
as Confidential Information of Parent and Buyer and that no reference to this Agreement or the
transactions contemplated herein may be made by Seller in any form of public or commercial
announcement or advertising without the prior written consent of the other; provided, however, that
Seller may disclose, upon prior written notice to the other, the terms, conditions and existence of
this Agreement: (a) as required by any Governmental Entity (including the United States Securities
and Exchange Commission) in which case, the Parties shall confer as to the appropriate disclosure;
(b) as otherwise required by law; (c) in confidence, to legal counsel and accountants of Seller; or (d) in confidence, in connection with the enforcement of this Agreement or Seller’s rights
under this Agreement.




          (d) In the event the Receiving Party must disclose the Disclosing Party’s Confidential
Information pursuant to the order or requirement of a court, administrative agency, or other
Governmental Entity, the Receiving Party shall provide prompt notice thereof to the Disclosing
Party to allow the Disclosing Party to obtain a protective order, and the Receiving Party shall
also use its reasonable efforts to obtain a protective order, assist Disclosing Party in obtaining
a protective order or otherwise prevent public disclosure of such information.




          (e) The Parties agree that Seller’s Confidential Information related to the Business and known
to the Designated Employees is included in the Transferred Assets under this Agreement.
Accordingly, to the extent a Designated Employee hired by Buyer would, as a result of an employment
or other agreement between Seller and that Designated Employee, be restricted from disclosing
Confidential Information to Parent or Buyer or from using information on Parent’s or Buyer’s behalf
or otherwise in connection with its employment by Parent or Buyer, Seller agrees to, and hereby
does waive, in favor or Parent and Buyer, any right that it may have to enforce such restrictions
and consents to Parent’s or Buyer’s use and disclosure of such information for its own benefit and
on its own behalf, without restriction.




     5.13 Covenant Not to Compete. Beginning on the Closing Date and ending on the third
(3rd) anniversary of the Closing Date, neither Seller nor any of its Affiliates or
permitted successors or assigns shall, directly or indirectly, without the prior written consent of
Parent or Buyer, engage anywhere in the world in (whether as an agent, consultant, advisor,
independent contractor,



 - 32 -









 




proprietor, partner, officer, director or otherwise), or have any ownership
interest in, or participate in the financing, operation, management or control of, any firm,
partnership, corporation, entity or business that engages or participates in the design,
development, manufacture, marketing or sale of Transferred Products or other products intended for
use in the Business, or otherwise engages in the Business; provided, however, that
it shall not be a violation of this Section 5.13 for Seller to (a) own debt securities or
other debt obligations (other than convertible debt) of any Person, or (b) invest in securities
representing less than one percent (1%) of the outstanding capital stock of any Person, whose stock
is traded on a national securities exchange or through the automated quotation system of a
registered securities association. Notwithstanding Section 1.1(a), any entity that (i) in
the future acquires Control of Seller in an acquisition or merger transaction and (ii) at the time
of such transaction sells products intended for use in the Business shall not be deemed an
“Affiliate” for purposes of this Section 5.13 only.




     5.14 Covenant Not to Solicit or Hire.



          (a) Beginning on the Closing Date and ending on the third (3rd) anniversary of the
Closing Date, neither Seller nor its Affiliates shall, directly or indirectly, without the prior
written consent of Parent: (i) hire any employee of Parent or Buyer (including any Designated
Employees) for employment by Seller or any of its Affiliates; or (ii) solicit any employee of
Parent or Buyer (including any Designated Employees) to terminate his or her employment or
consultancy with Parent or Buyer or any of their Affiliates; provided, however, that this
Section 5.14(a) shall not prohibit Seller or any Affiliate of Seller from: (i) soliciting
employees through, or hiring employees who respond to, general job advertisements or similar
notices that are not targeted specifically at the employees of a party; or (ii) engaging any
recruiting firm or similar organization to identify or solicit persons for employment on its behalf
as long as such recruiting firm or organization is not instructed or otherwise informed to target
any employee of Buyer.




          (b) Beginning on the Closing Date and ending on the third (3rd) anniversary of the
Closing Date, neither Parent, Buyer nor their Affiliates shall, directly or indirectly, without the
prior written consent of Seller: (i) hire any employee of Seller (other than any Designated
Employee) for employment by Parent, Buyer or any of their Affiliates; or (ii) solicit any employee
of Seller (other than any Designated Employee) to terminate his or her employment or consultancy
with Seller or any Affiliate of Seller; provided, however, that Section 5.14(b) shall not
prohibit Parent, Buyer or any of their Affiliates from: (i) soliciting employees through, or hiring
employees who respond to, general job advertisements or similar notices that are not targeted
specifically at the employees of a party; or (ii) engaging any recruiting firm or similar
organization to identify or solicit persons for employment on its behalf as long as such recruiting
firm or organization is not instructed or otherwise informed to target any employee of Seller.




     5.15 Notification of Certain Matters. Seller shall give prompt notice to Parent and
Buyer of (a) Seller becoming aware of the occurrence or non-occurrence of any event that is likely
to cause any representation or warranty of Seller contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing, and (b) any failure of Seller to
comply with or satisfy in any material respect any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.15 shall not (i) limit or otherwise affect any remedies
available to the party receiving such notice or (ii) constitute an acknowledgment or admission of a
breach of this Agreement. No disclosure by pursuant to this



 - 33 -









 




Section 5.15, however, shall
be deemed to amend or supplement the Disclosure Schedule or prevent or cure any misrepresentations,
breach of warranty or breach of covenant.




     5.16 Severability of Covenants. The covenants contained in the preceding paragraphs
shall be construed as a series of separate covenants, one for each county, city and state of any
geographic area where any business is carried on by Parent or Buyer or their Affiliates. Except
for geographic coverage, each such separate covenant shall be deemed identical in terms to the
covenant contained in the preceding paragraphs. If, in any judicial proceeding, a court refuses to
enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or
such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. If the provisions of Sections
5.13 and 5.14 are deemed to exceed the time, geographic or scope limitations permitted
by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope
limitations, as the case may be, permitted by applicable laws.



     5.17 SEC Support Letter. Seller covenants to provide a letter to the Securities and Exchange Commission (the
“SEC”), similar to the forms provided by Parent to Seller as of the Closing (the
“Support Letter”), in support of the request by Parent or Buyer to the SEC for permission
to file certain financial information in lieu of the full financial statements that may otherwise
be required in any future SEC filings by Parent or Buyer, such as a registration statement on Form
S-1 or Form S-4 (the “SEC Request”). Seller shall provide Parent and Buyer with such
reasonable assistance, including the provision of available relevant records or other information
and reasonable access to and cooperation of any personnel within Seller’s employ, as may be
reasonably requested by Parent or Buyer, in preparing the SEC Request, providing information
requested by the SEC, or complying with the SEC’s response to the SEC Request. Seller covenants to
provide Parent and Buyer a draft of the Support Letter by December 31, 2005.



Article 6

EMPLOYEES




     6.1 Seller Cooperation. During the period commencing on the Effective Date and
continuing through the Closing Date, Seller shall assist and cooperate with Parent and Buyer to
identify Seller’s Employees employed in connection with the Business who will be Designated
Employees, including by permitting Parent and Buyer to review employee files, compensation data,
and job descriptions for any such Employees. In the event Parent or Buyer identifies additional
Employees as Designated Employees in its discretion during such period, Parent or Buyer shall
notify Seller thereof in writing and Schedule 1.1(n) shall thereafter be amended to include
such additional Designated Employees. After the Effective Date, Seller shall promptly provide
Parent and Buyer with copies of the employment files of all Designated Employees to the extent not
already provided to Parent and Buyer, and shall promptly provide any additional information about
such Employees upon Parent’s or Buyer’s reasonable request. After the Effective Date, Seller shall
permit Parent and Buyer to contact and interview Designated Employees at Seller’s premises during
normal business hours, and Seller shall cooperate fully with Parent and Buyer in all such respects.



     6.2 Employment Offers.



 - 34 -









 





          (a) It is expected that prior to Closing, Buyer shall make offers of “at-will” employment to
all Designated Employees, provided that Buyer may elect not to make an offer to any Designated
Employees in its sole discretion. Any such “at-will” employment offers will (a) be contingent on
Closing; (b) be subject to and in compliance with Parent’s or Buyer’s standard human resources
policies and procedures, including requirements for proof evidencing a legal right to work in the
offeree’s country of current employment; (c) have terms, including the position, salary and
responsibilities of such Employee, which will be determined by Buyer in its sole discretion, except
that all Designated Employees will be offered a hiring bonus equal to one month’s base salary and a
retention bonus consistent with its prior discussions with Seller; and (d) supersede any prior
Employment Agreements and other arrangements with such Employee in effect prior to the Closing
Date.




          (b) For each day that the Designated Employees start employment with Buyer after the Closing,
Parent will reimburse Seller an amount equal to one day’s salary of the Designated Employees who
accept employment with Buyer at the time of the Closing, based on the then-current salaries of the
Designated Employees with Seller, such payment to be made at the time of Buyer’s first payment to
Seller for the Transition Services.




     6.3 Waiver. Seller hereby agrees to waive any condition or restriction which it may
have the contractual right to impose on the hiring and employment of Designated Employees by Parent
or Buyer.



     6.4 Employees. Between the Effective Date and the Closing Date, Seller will not,
without the prior written consent of Parent or Buyer:



          (a) terminate the employment of any Employee, except for cause, provided Seller provides
notice to Parent and Buyer prior to any such termination;




          (b) reassign any Designated Employee to another business unit of Seller;




          (c) hire any employees relating to the Business;




          (d) change, increase or amend the rate of remuneration (cash, equity or otherwise) or any
other terms of employment of any of the Designated Employees or adopt, grant extend or increase the
rate or terms of any bonus, insurance pension or other employee benefit plan, payment or
arrangement made to, for or with any Designated Employees, except increases pursuant to any
applicable law, rule or regulation;




          (e) grant any severance or termination pay (whether payable in cash, stock or other equity
instruments) to any Designated Employee, or adopt any new severance plan, amend or modify or alter
in any manner any severance plan, agreement or arrangement relating to any Designated Employee on
the date hereof; or




          (f) adopt or amend any Employment Agreement with a Designated Employee.




     6.5 COBRA Continuation Coverage. Seller agrees and acknowledges that the selling
group (as defined in Treasury Regulation Section 54.4980B-9, Q&A-3(a)) of which it is a part (the
“Selling Group”) will continue to offer a group health plan to employees after the Closing
Date and,



 - 35 -









 




accordingly, that Seller and the Selling Group shall be solely responsible for providing
continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”) to those individuals who are M&A qualified beneficiaries (as defined in Treasury
Regulation Section 54.4980B-9, Q&A-4(a)) with respect to the transactions contemplated by this
Agreement (collectively, the “M&A Qualified Beneficiaries”). Seller shall indemnify,
defend and hold harmless Parent and Buyer for, from and against any and all claims, liabilities,
losses, costs and expenses (including attorney’s fees) relating to, arising out of, or resulting
from any and all COBRA obligations, liabilities and claims related to M&A Qualified Beneficiaries and all other qualified beneficiaries (as defined in Code Section
4980B(g)(1)) with respect to Sellers’ group health plans. Seller further agrees and acknowledges
that in the event that the Selling Group ceases to provide any group health plan to any employee
prior to the expiration of the continuation coverage period for all M&A Qualified Beneficiaries
(pursuant to Treasury Regulation Section 54.4980B-9, Q&A-8(c)), then Seller shall provide Parent
and Buyer with (a) written notice of such cessation as far in advance of such cessation as is
reasonably practicable (and, in any event, at least thirty (30) days prior to such cessation), and
(b) all information necessary or appropriate for Parent or Buyer to offer continuation coverage to
such M&A Qualified Beneficiaries.




     6.6 Employee Liability Claims.



          (a) As between the Parties, the Seller and any ERISA Affiliate shall (i) sponsor and (ii)
assume or retain, as the case may be, and be solely responsible for all of the following from and
after Closing, which will be considered “Employee Excluded Liabilities” for purposes of
this Agreement, including Section 2.3 hereof:




               (i) Employment Liabilities, including but not limited to payments or entitlements that Seller
may owe or have promised to pay to the Designated Employees or any other Employees, including
wages, other remuneration, holiday or vacation pay, bonus, severance pay (statutory or otherwise),
commission, pension contributions, taxes, and any other liability, payment or obligations related
to Employees or contractors;



               (ii) all payments with respect to the Designated Employees that are due to be paid prior to or
on the Closing Date (including, without prejudice to the generality of the foregoing, pension
contributions, insurance premiums and taxation) to any third party in connection with the
employment of any of the Designated Employees; and



               (iii) any non-forfeitable claims or expectancies of any Designated Employees from their prior
employment with Seller or an ERISA Affiliate which have been incurred or accrued on or prior to the
Closing Date.



          (b) All costs and disbursements incurred in connection with the termination of any employment
of a Designated Employee or any other Employee prior to or in connection with the Closing Date
(including any Designated Employee who does not accept an offer of employment with Parent or Buyer)
shall be borne by Seller.




 - 36 -









 








Article 7

CLOSING, PURCHASE PRICE AND PAYMENTS




     7.1 Conditions to Obligations of Buyer. The obligations of Parent and Buyer to
consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at
or prior to the Closing Date of the conditions set forth in this Section 7.1, any of which
may be waived, in writing, exclusively by Parent:



          (a) Representations and Warranties. The representations and warranties of the Seller
contained in this Agreement shall be true, correct and complete in all material respects (without
regard to any materiality qualifications set forth in any such representation or warranty) as of
the Effective Date and shall be true, correct and complete in all material respects (without regard
to any materiality qualifications set forth in any such representation or warranty) as of the
Closing Date as if made on and as of the Closing Date (other than representations and warranties
which by their express terms are made solely as of a specified earlier date, which shall be true,
correct and complete in all material respects (without regard to any materiality qualifications set
forth in any such representation or warranty) as of such specified earlier date). Notwithstanding
the foregoing, representations and warranties of the Seller contained in this Agreement that are
qualified by reference to materiality shall be true, correct and complete in all respects as of the
dates set forth in this Section 7.1(a).




          (b) Performance. Seller shall have performed and complied in all material respects
with each agreement, covenant and obligation required by this Agreement to be so performed or
complied with by Seller on or before the Closing Date.




          (c) Employees. All of the Key Employees and no fewer than ninety percent (90%) of the
Designated Employees shall have accepted in writing an offer of employment with Buyer, in a form
acceptable to Buyer and substantially in the form attached as Exhibit D;
provided, however, that Buyer chooses in its sole discretion to make such offers to
such Key Employees and/or Designated Employees.




          (d) Sublease of Facility. Seller shall have provided to Buyer a sublease in the form
of Exhibit E annexed hereto with respect to that portion of the space at 4424 Innovation
Drive, Fort Collins, Colorado (approximately 12,000 sq. ft.) which is presently allocated to the
Business. The sublease shall be for the same term as the Master Lease (June 30, 2009) provided
Buyer may terminate such sublease on not less than 90 days prior notice to Seller and provided
further that Buyer will pay Seller full rent (not including utilities and other costs of
facility-related services provided by Seller to Buyer) through the later of June 30, 2006 or the
date Buyer moves out of the facility and 50% of the rent (not including utilities and other costs
of facility-related services provided by Seller to Buyer) from the date Buyer moves out of the
facility to September 30, 2006, if Buyer moves out of the facility prior to September 30, 2006.
Buyer also acknowledges that under the Master Lease both Seller and Landlord have the right to
terminate such Master Lease upon 270 days prior notice in which event the sublease shall terminate
at the same time provided Buyer shall have been provided with a copy of the notice of termination
at the time it was given or received by Seller. The sublease rent shall be $6,720 per month, for a
total of $7,100 per month inclusive of all utilities (water, gas and electric).





 - 37 -









 








          (e) No Material Adverse Effect. Since the Effective Date, there shall not have
occurred any event or condition of any character that has had or is reasonably likely to have a
material adverse effect on the Business, the Transferred Products, the Transferred Assets or the
financial condition or prospects of the Business.




          (f) Closing Certificate. Parent and Buyer shall have received a certificate, dated as
of the Closing Date, signed and verified by an officer of Seller on behalf of Seller certifying as
to the matters set forth in Sections 7.1(a), (b) and (e).




          (g) Consents. All third party consents required to transfer or assign the Transferred
Assets (free of any Liens), the Transferred Permits and the Transferred Contracts to Buyer set
forth on Schedule 7.1(g) shall have been obtained in a form acceptable to Parent.




          (h) Other Agreements. Seller shall have executed and delivered to Parent and Buyer
each of the Collateral Agreements, and such agreements shall remain in full force and effect.




          (i) No Proceeding or Litigation.




               (i) No preliminary or permanent injunction or other order shall have been issued by any
Governmental Entity, nor shall any statute, rule, regulation or executive order be promulgated or
enacted by any Governmental Entity which prevents the consummation of the transactions contemplated
by this Agreement.



               (ii) No suit, action, claim, proceeding or investigation before any Governmental Entity shall
have been commenced or have been threatened against Seller, Parent or Buyer, or any of their
respective Affiliates, associates, officers or directors, seeking to prevent the sale of the
Transferred Assets or asserting that the sale of the Transferred Assets would be illegal or create
liability for damages.



          (j) Documents. This Agreement, any other instruments of conveyance and transfer and
all other documents to be delivered by Seller to Parent and Buyer at the Closing and all actions of
Seller required by this Agreement or incidental thereto, and all related matters, shall be in form
and substance reasonably satisfactory to Parent.




          (k) Governmental Filings. Seller, Parent and Buyer shall have made all required
filings with Governmental Entities, and any approvals related thereto shall have been obtained or
any applicable waiting periods shall have expired.




          (l) Series C Preferred Stock Financing. The sale of Parent’s Series C Preferred Stock
for an aggregate purchase price of at least $20 million shall have been completed.




     7.2 Conditions to Obligations of Seller. The obligations of Seller to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the
Closing of the conditions set forth in this Section 7.2, any of which may be waived, in
writing, exclusively by Seller:



          (a) Representations and Warranties. The representations and warranties of the Parent
and Buyer contained in this Agreement shall be true, correct and complete in all material

 - 38 -









 








respects (without regard to any materiality qualifications set forth in any such representation or warranty)
as of the Effective Date and shall be true, correct and complete in all material respects (without
regard to any materiality qualifications set forth in any such representation or warranty) as of
the Closing Date as if made on and as of the Closing Date (other than representations and
warranties which by their express terms are made solely as of a specified earlier date, which shall
be true, correct and complete in all material respects (without regard to any materiality
qualifications set forth in any such representation or warranty) as of such specified earlier
date).




          (b) Performance. Parent and Buyer shall have performed and complied in all material
respects with each agreement, covenant and obligation required by this Agreement to be so performed
or complied with by the Parent and Buyer on or before the Closing Date.




          (c) Closing Certificate. Seller shall have received a certificate, dated as of the
Closing Date, signed and verified by an officer of each of Parent and Buyer on behalf of each of
Parent and Buyer certifying as to the matters set forth in Sections 7.2(a) and
7.2(b).




          (d) Other Agreements. Parent and Buyer shall have executed and delivered to Seller
each of the Collateral Agreements to which Parent and Buyer are a party, and such agreements shall
remain in full force and effect.




          (e) No Proceeding or Litigation.




               (i) No preliminary or permanent injunction or other order shall have been issued by any
Governmental Entity, nor shall any statute, rule, regulation or executive order be promulgated or
enacted by any Governmental Entity which prevents the consummation of the transactions contemplated
by this Agreement.



               (ii) No suit, action, claim, proceeding or investigation before any Governmental Entity shall
have been commenced or have been threatened against Seller, Parent or Buyer, or any of their
respective Affiliates, associates, officers or directors, seeking to prevent the sale of the
Transferred Assets or asserting that the sale of the Transferred Assets would be illegal or create
liability for damages.



          (f) Documents. This Agreement, any other instruments of conveyance and transfer and
all other documents to be delivered by Parent and Buyer to Seller at the Closing and all actions of
Parent and Buyer required by this Agreement or incidental thereto, and all related matters, shall
be in form and substance reasonably satisfactory to Seller.




          (g) Governmental Filings. Seller, Parent and Buyer shall have made all required
filings with Governmental Entities, and any approvals related thereto shall have been obtained or
any applicable waiting periods shall have expired.




 - 39 -









 








Article 8

SURVIVAL OF REPRESENTATIONS,

WARRANTIES AND INDEMNIFICATION




     8.1 Survival of Representations and Warranties. The representations, warranties,
covenants and agreements of Seller in this Agreement shall survive until the earlier to occur of
(i) twelve (12) months after the Closing Date and (ii) ninety (90) days after the Audit Completion
Date, and shall thereafter automatically expire; provided, however, that (x)
Seller’s representations in Section 3.5 (Intellectual Property) shall survive for a period
of three (3) years after the Closing Date, and shall thereafter automatically expire; (y) Seller’s
representations in Section 3.9 (Environmental Matters) and Section 3.17 (Tax
Matters) shall survive until the expiration of the applicable statute of limitations; and (z)
Seller’s representations in Section 3.4 (Title of Properties) and Section 3.8 (Transferred Assets and
Transferred Technology) and Seller’s obligation to indemnify in Section 8.2(c) (Excluded
Assets and Excluded Liabilities), Section 8.2(f) (Transition Services) and Section
8.2(g) (License Agreement) shall survive indefinitely. The representations and warranties of
Parent and Buyer in Article 4 shall terminate on the Closing Date. No investigation, or
knowledge acquired, by Parent or Buyer or on behalf of Parent or Buyer with respect to any breach
of any representation or warranty made by Seller or any other matter shall affect Parent’s or
Buyer’s rights to indemnification pursuant to this Article 8.



     8.2 Indemnification by Seller. Subject to the terms and conditions of this Article 8,
following the Closing, Seller shall indemnify and hold harmless Parent, Buyer and their Affiliates
and each of their officers, directors, employees, agents, successors and assigns (“Buyer
Indemnitees”) for any and all Losses, whether such Loss exists or accrues prior or subsequent
to the Closing Date, arising out of, resulting from or caused by:



          (a) any inaccuracy or misrepresentation in or breach of any of the representations or
warranties made by Seller contained in this Agreement or any Collateral Agreement, it being
understood that solely for purposes of calculating Losses relevant to any such inaccuracy or
misrepresentation, materiality and knowledge qualifiers will be disregarded;




          (b) any breach of any of the covenants or agreements of Seller contained in this Agreement or
any Collateral Agreement (other than the License Agreement);




          (c) any of the Excluded Assets or Excluded Liabilities, including any Liability arising out of
the ownership or operation of the Assets prior to the Closing Date other than the Assumed
Liabilities;




          (d) any Indemnifiable Audit Costs;




          (e) all Liabilities relating to any warranty, returns, refunds, support obligation or similar
claims with respect to any Transferred Products sold prior to the Closing Date to the extent that
such Liabilities exceed $75,000;




          (f) any Losses of any kind or nature whatsoever which may be sustained or suffered by any of
them arising out of or based upon any gross negligence or willful misconduct on the part of Seller
in performing the Transition Services for Parent and Buyer;





 - 40 -









 








          (g) any breach of any of the representations, covenants or agreements of Seller contained in
the License Agreement; and




          (h) any failure to comply with any applicable “bulk sales” law or regulation in connection
with the transactions contemplated by this Agreement.



Notwithstanding the foregoing, for purposes of calculating Losses relevant to any breach,
inaccuracy or misrepresentation of the first sentence of Section 3.5(c) (the
“Non-Infringement Representation”), the knowledge qualifier of the Non-Infringement
Representation will be disregarded for twelve (12) months after the Closing Date.




     8.3 Limitation on Indemnification. Notwithstanding the foregoing, (i) Seller shall have no
liability under Section 8.2 until the aggregate of all such Losses exceeds $100,000 (at
which point the Seller will be obligated to indemnify the Buyer Indemnitees against all Losses
relating back to the first dollar of Losses) and (ii) except for intentional fraud or willful
misconduct, the aggregate liability for Seller under Section 8.2 for all Losses shall in no
event exceed $1,500,000 for Seller. The limitations in this Section 8.3(ii) shall not
apply to matters arising in respect of Section 3.4 (Title of Properties), Section
3.5 (Intellectual Property) (excluding the Non-Infringement Representation), Section
3.8 (Transferred Assets and Transferred Technology), Section 3.9 (Environmental
Matters), Section 3.17 (Tax Matters), and the limitations in this Section 8.3(i)
and Section 8.3(ii) shall not apply to matters arising in respect of Section 8.2(c)
(Excluded Assets and Excluded Liabilities), Section 8.2(f) (Transition Services), and
Section 8.2(g) (License Agreement). For purposes of clarity, any Losses related to the
Non-Infringement Representation will be subject to Section 8.3(i) and Section
8.3(ii).



     8.4 Indemnification Procedure.



          (a) Whenever any Loss shall be asserted against or incurred by a Buyer Indemnitee, the Buyer
Indemnitee shall give written notice thereof (a “Claim”) to Seller. The Buyer Indemnitee
shall furnish to the Seller in reasonable detail such information as the Buyer Indemnitee may have
with respect to the Claim (including in any case copies of any summons, complaint or other pleading
which may have been served on it and any written claim, demand, invoice, billing or other document
evidencing or asserting the same). If the Claim has been provided to the Seller prior to the lapse
of the expiration of the right to make a Claim, then the Seller shall continue to have the
obligation to indemnify until the resolution of such Claim. The failure to give such notice shall
not relieve the Seller of its indemnification obligations under this Agreement.




          (b) Any controversy involving only Parent, Buyer and Seller regarding whether a Claim is
properly indemnifiable under the terms of this Article 8 shall be settled by binding
arbitration administered by the American Arbitration Association (“AAA”) in accordance with
its Commercial Arbitration Rules, and judgment upon the award rendered through arbitration may be
entered in any court having jurisdiction thereof. Such arbitration shall be held in Santa Clara
County, California, unless the parties mutually agree in writing to change the location, before a
single neutral arbitrator appointed in the manner prescribed in AAA Commercial Arbitration Rule 13
provided that Parent, Buyer and Seller have attempted to resolve such controversy through
negotiations in good faith. Either Parent, Buyer or Seller may seek from any court, interim or




 - 41 -









 







provisional, relief that is necessary to protect the rights or property of such Party, pending the
appointment of the arbitrator or the arbitrator’s determination of the merits of the controversy.
The Parties shall be entitled to conduct discovery in accordance with the Federal Rules of Civil
Procedure. The fees and expenses of the arbitrators shall be borne equally by Buyer and Seller.
Each Party shall be responsible for its own legal fees and expenses for the proceeding. The
decision of the arbitrators shall be final and non-appealable. The arbitration award shall be in
writing and shall specify the factual and legal bases for the award. Judgment on the award
may be entered in any court having jurisdiction.




          (c) If the Claim is based on a claim of a person that is not a party to this Agreement, the
Seller shall, at its expense, undertake the defense of such Claim with attorneys of its own
choosing reasonably satisfactory to the Buyer Indemnitee provided that the Seller acknowledges the
Buyer Indemnitee’s right to indemnification for such Claim pursuant to this Agreement. In the
event the Seller, within ten (10) business days after receiving notice of a Claim from the Buyer
Indemnitee, fails to defend the Claim, the Buyer Indemnitee may, at the Seller’s expense, undertake
the defense of the Claim and may compromise or settle the Claim, all for the account of the Seller.
After notice from the Seller to the Buyer Indemnitee of its election to assume the defense of such
Claim, the Seller shall not be liable to the Buyer Indemnitee under this Section 8.4 for
any legal expenses subsequently incurred by the Buyer Indemnitee in connection with the defense
thereof, except for such expenses incurred in connection with cooperation with, or at the request
of, the Seller; provided, however, that the Buyer Indemnitee shall have the right to engage counsel
to represent it if, in the Buyer Indemnitee’s reasonable judgment, based upon the advice of
counsel, it is advisable, in light of the separate interests of the Buyer Indemnitee and the
Seller, for the Buyer Indemnitee to be represented by separate counsel, and in that event the
reasonable fees and expenses of such separate counsel shall be paid by the Seller.




          (d) The Seller shall not consent to entry of any judgment, except with the consent of the
Buyer Indemnitee (which may be given or withheld in its sole discretion), or enter into any
settlement, except with the consent of the Buyer Indemnitee, which such consent shall not be
unreasonably withheld or delayed. In the event the Buyer Indemnitee refuses to consent to the
entry of a judgment or a settlement for which the Seller is solely and entirely responsible and has
indicated its sole and entire responsibility in writing to the Buyer Indemnitee, following such
refusal, the liability of the Seller to the Buyer Indemnitee will be fixed at the amount of any
money damages provided in the proposed judgment or settlement.




     8.5 Escrow. As partial security for the indemnity provided for in Section 8.2
hereof, at the Closing, Buyer will deposit with the Escrow Agent the Escrow Amount into an escrow
fund (the “Escrow Fund”) maintained by the Escrow Agent and established pursuant to the
Escrow Agreement; it being understood that the Escrow Fund shall not be the sole and exclusively
remedy of Buyer Indemnitees for the indemnity provided for in Section 8.2. Subject to the
following requirements, the Escrow Fund shall be in existence immediately following the initial
delivery of the Escrow Fund to the Escrow Agent and shall expire as follows: 50% of the Escrow
Fund shall be released twelve (12) months after the Closing Date, and 50% of the Escrow Fund shall
be released thirty (30) days after the Audit Completion Date (the “Escrow Period”);
provided that the Escrow Period shall not terminate with respect to such amount as is necessary, to
satisfy any Claims previously asserted and which are being contested. As soon as all such Claims
have been resolved,



 - 42 -









 




the Escrow Agent shall deliver to Seller the remaining portion of the Escrow
Fund not required to satisfy such Claims.




          8.6 Purchase Price Adjustment. Any payment pursuant to this Article 8 shall
be treated for all Tax purposes as an adjustment to the Purchase Price.




Article 9

TERMINATION AND ABANDONMENT




     9.1 Methods of Termination. The transactions contemplated herein may be terminated
and/or abandoned at any time prior to the Closing:



          (a) by the mutual written consent of the Parent, Buyer and Seller;




          (b) By Parent, Buyer or Seller, if the Closing shall not have occurred on or before December
31, 2005 (the “Termination Date”); provided, however, that the right to terminate this
Agreement under this clause (b) of Section 9.1 shall not be available to any party whose
breach of this Agreement has resulted in the failure of the Closing to occur on or before the
Termination Date;




          (c) at the election of Parent, Buyer or Seller, if any Governmental Entity shall have issued
an order, decree or ruling or taken any other action enjoining or otherwise prohibiting the
transactions contemplated under this Agreement and such order, decree, ruling or other action shall
have become final and nonappealable;




          (d) by the Parent or Buyer if any of the representations and warranties of the Seller
contained in this Agreement shall have been inaccurate as of the date of this Agreement or shall
have become inaccurate as of any subsequent date (as if made on such subsequent date), in either
case such that the condition set forth in Section 7.1(a) would not be satisfied, or if any
of the Seller’s covenants contained in this Agreement shall have been breached in any respect such
that the condition set forth in Section 7.1(b) would not be satisfied; provided,
however, that if an inaccuracy in any of the representations and warranties of the Seller
as of a date subsequent to the date of this Agreement or a breach of a covenant by the Seller is
curable by the Seller through the use of commercially reasonable efforts within 10 days after the
Parent or Buyer notifies the Seller in writing of the existence of such inaccuracy or breach (the
“Seller Cure Period”), then the Parent or Buyer may not terminate this Agreement under this
Section 9.1(d) as a result of such inaccuracy or breach prior to the expiration of the
Seller Cure Period, provided the Seller, during the Seller Cure Period, continues to exercise
commercially reasonable efforts to cure such inaccuracy or breach (it being understood that Parent
or Buyer may not terminate this Agreement pursuant to this Section 9.1(d) with respect to
such inaccuracy or breach if such inaccuracy or breach is cured prior to the expiration of the
Seller Cure Period); or




          (e) by the Seller if any of Parent’s or Buyer’s representations and warranties contained in
this Agreement shall have been inaccurate as of the date of this Agreement or shall have become
inaccurate as of any subsequent date (as if made on such subsequent date), in either case such that
the condition set forth in Section 7.2(a) would not be satisfied, or if any of Parent’s
or Buyer’s covenants contained in this Agreement shall have been breached in any respect such
that

 - 43 -









 








the condition set forth in Section 7.2(b) would not be satisfied; provided,
however, that if an inaccuracy in any of the representations and warranties of Parent or
Buyer as of a date subsequent to the date of this Agreement or a breach of a covenant by Parent or
Buyer is curable by Parent or Buyer through the use of commercially reasonable efforts within 10
days after the Seller notifies Parent or Buyer in writing of the existence of such inaccuracy or
breach (the “Buyer Cure Period”), then the Seller may not terminate this Agreement under
this Section 9.1(e) as a result of such inaccuracy or breach prior to the expiration of the
Buyer Cure Period, provided the Parent or Buyer, during the Buyer Cure Period, continues to
exercise commercially reasonable efforts to cure such inaccuracy or breach (it being understood
that the Seller may not terminate this Agreement pursuant to this Section 9.1(e) with
respect to such inaccuracy or breach if such inaccuracy or breach is cured prior to the expiration
of the Buyer Cure Period)




     9.2 Procedure upon Termination. In the event of termination and abandonment by a
Party pursuant to Section 9.1, written notice thereof shall be given to the other Party and
the transactions contemplated by this Agreement shall be terminated and/or abandoned, without
further action by the Parties. If the transactions contemplated by this Agreement are terminated
and/or abandoned as provided herein:



          (a) each Party will redeliver all documents, work papers and other material (and all copies
thereof) of the other Party relating to the transactions contemplated hereby, whether so obtained
before or after the execution hereof, to the other Party furnishing the same; and




          (b) all Confidential Information received by either Party hereto with respect to the business
of the other Party shall be treated in accordance with Section 5.12, provided that either
Party shall be free to use or exploit for any purpose the residuals resulting from access to or
work with the other Party’s Confidential Information. For the purposes of this Section
9.2(b), “residuals” means information retained in the unaided memories of individuals who have
had access to such Confidential Information.




     9.3 Survival of Certain Provisions. The following provisions of this Agreement shall
survive any termination of this Agreement: Section 5.12 (Confidentiality), this Article
9, and Article 10 (General) and any provision which, by its terms, must survive.



Article 10

GENERAL




     10.1 No Agency. Except as expressly provided herein, each Party shall in all matters
relating to this Agreement act as an independent contractor. Neither Party shall have authority,
nor shall either Party represent that it has any authority, to assume or create any obligation,
express or implied, on behalf of the other, or to represent the other Party as agent or employee or
in any other capacity. Neither execution nor performance of this Agreement shall be construed to have established any
agency, joint venture, or partnership.



     10.2 Fees and Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, all expenses, including without limitation all legal, accounting,
financial advisory, consulting and other fees, incurred in connection with the negotiation or
effectuation of this



 - 44 -









 




Agreement or consummation of the transactions contemplated by this Agreement,
shall be the obligation of the respective Party incurring such expenses.




     10.3 Notices. Any notice or other communication required or permitted to be delivered
to any Party under this Agreement must be in writing and shall be deemed properly delivered, given
and received when delivered (by hand, by registered mail, by courier or express delivery service or
by facsimile) to the address or facsimile telephone number set forth beneath the name of such Party
below (or to such other address or facsimile telephone number as such Party may have specified in a
written notice given to the other Party):



	 	 	 	 	 	 	 
	 	 	if to Parent or Buyer:	 	iWatt, Inc.
	 

	 	 	 	 	 	101 Albright Way
	 

	 	 	 	 	 	Los Gatos, California 95032-1827
	 

	 	 	 	 	 	Attn: Curtis Davis, Chief Executive Officer
	 

	 	 	 	 	 	Telephone: (408) 374-4200
	 

	 	 	 	 	 	Facsimile: (408) 341-0455
	 
	 	 	 	 	 	 
	 

	 	 	 	with a copy to:
	 	Wilson Sonsini Goodrich & Rosati
	 

	 	 	 	 	 	Professional Corporation
	 

	 	 	 	 	 	650 Page Mill Road
	 

	 	 	 	 	 	Palo Alto, California 94304-1050
	 

	 	 	 	 	 	Attn: Neil J. Wolff
	 

	 	 	 	 	 	Telephone: (650) 493-9300
	 

	 	 	 	 	 	Facsimile: (650) 493-6811
	 
	 	 	 	 	 	 
	 

	 	 	 	if to Seller:
	 	Advanced Energy Industries, Inc.
	 

	 	 	 	 	 	1625 Sharp Point Drive
	 

	 	 	 	 	 	Fort Collins, Colorado 80525
	 

	 	 	 	 	 	Attn: Michael El-Hillow, Chief Financial Officer
	 

	 	 	 	 	 	Telephone: (800) 446-9167
	 

	 	 	 	 	 	Facsimile: (970) 407-6550
	 
	 	 	 	 	 	 
	 

	 	 	 	with a copy to:
	 	Thelen Reid & Priest LLP
	 

	 	 	 	 	 	225 W. Santa Clara Street, 12th Floor
	 

	 	 	 	 	 	San Jose, California 95113
	 

	 	 	 	 	 	Attn: Jay L. Margulies
	 

	 	 	 	 	 	Telephone: (408) 282-1815
	 

	 	 	 	 	 	Facsimile: (408) 278-8215






     10.4 Governing Law. This Agreement shall be governed in all respects by the laws of
the United States of America and the State of California as such laws apply to agreements entered
into and to be performed entirely within California by California residents.



     10.5 Forum and Venue. Any judicial action or proceeding arising hereunder or relating
hereto shall be brought in, and the Parties hereby consent to the exclusive, personal jurisdiction
of, the state and federal courts located in the County of Santa Clara, California. Seller hereby
consents



 - 45 -









 




to the jurisdiction of such courts and hereby appoints its counsel identified in
Section 10.3 as its agent for service of process.




     10.6 Construction.



          (a) For purposes of this Agreement, whenever the context requires: the singular number will
include the plural, and vice versa; the masculine gender will include the feminine and neuter
genders; the feminine gender will include the masculine and neuter genders; and the neuter gender
will include the masculine and feminine genders.




          (b) Any rule of construction to the effect that ambiguities are to be resolved against the
drafting Party will not be applied in the construction or interpretation of this Agreement.




          (c) As used in this Agreement, the words “include” and “including” and variations thereof,
will not be deemed to be terms of limitation, but rather will be deemed to be followed by the words
“without limitation.”




          (d) Unless the context requires otherwise, the term “Seller” as used herein refers to Seller
and its Affiliates.




          (e) Except as otherwise indicated, all references in this Agreement to “Schedules,” “Sections”
and “Exhibits” are intended to refer to Schedules, Sections and Exhibits to this Agreement.




          (f) The headings in this Agreement are for convenience of reference only, will not be deemed
to be a part of this Agreement, and will not be referred to in connection with the construction or
interpretation of this Agreement.




     10.7 Breaches and Remedies. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of
any one remedy will not preclude the exercise of any other remedy. Without limiting the generality
of the foregoing, Seller agrees that if it breaches any provision of Sections 5.13 and
5.14, Parent and Buyer will have available, in addition to any other right or remedy
otherwise available, the right to seek an injunction from a court
of competent jurisdiction restraining such breach or threatened breach and to specific
performance of any such provision of this Agreement without the requirement that Parent or Buyer
post a bond.



     10.8 Waiver. No failure on the part of a Party to exercise any power, right,
privilege, or remedy under this Agreement, and no delay on the part of any Party in exercising any
power, right, privilege, or remedy under this Agreement, will operate as a waiver of such power,
right, privilege, or remedy; and no single or partial exercise of any such power, right, privilege,
or remedy will preclude any other or further exercise thereof or of any other power, right,
privilege, or remedy. No Party shall be deemed to have waived any claim arising from this
Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such
claim, power, right, privilege or remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of such Party; and any such waiver will not be applicable or have
any effect except in the specific instance in which it is given.



 - 46 -









 





     10.9 Assignment. Neither Party may assign this Agreement in whole or in part without
the prior written consent of the other Party. After the Closing, except as provided herein, Parent
and Buyer may assign or transfer this Agreement in whole or part. Any attempted transfer or
assignment except as provided herein shall be void and of no effect. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the successors or permitted
assigns of the Parties. Nothing set forth herein shall in any way limit the transfer, assignment
or licensing by Parent or Buyer of the Transferred Assets in their entirety or in part after the
Closing.



     10.10 Severability. If, for any reason, a court of competent jurisdiction finds any
provision of this Agreement, or portion thereof, to be invalid or unenforceable, such provision of
the Agreement will be enforced to the maximum extent permissible so as to effect the intent of the
Parties, and the remainder of this Agreement will continue in full force and effect. The Parties
agree to negotiate in good faith an enforceable substitute provision for any unenforceable
provision that most nearly achieves the intent and economic effect of the unenforceable provision.
Notwithstanding the foregoing, if a court of competent jurisdiction determines that any restriction
on any license granted herein is invalid or unenforceable, then the license grants to which such
restriction relates shall terminate automatically.



     10.11 Entire Agreement. This Agreement (including the Collateral Agreements,
Schedules and Exhibits hereto) sets forth the entire understanding of the Parties hereto relating
to the subject matter hereof and supersedes all prior agreements and understandings between the
Parties hereto relating to the subject matter hereof.



     10.12 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and delivered on behalf of
Seller, Parent and Buyer.



     10.13 Counterparts. This Agreement may be executed in counterparts, which, when taken
together, shall constitute one agreement.



* * * * *




 - 47 -









 





     IN WITNESS WHEREOF, the Parties, by their duly authorized representatives, have executed this
Agreement as of the date first written above.



	 	 	 	 	 	 	 	 	 
	“SELLER”	 	 	 	“PARENT”
	 
	 	 	 	 	 	 	 	 
	ADVANCED ENERGY INDUSTRIES, INC.	 	 	 	IWATT, INC.
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	“BUYER”	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	IKOR ACQUISITION CORPORATION	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 





[Asset Purchase Agreement]




 









 








List of Schedules and Exhibits




	 	 	 
	Schedule Number	 	Title of Schedule
	1.1(c)
	 	Assigned Patents
	1.1(d)
	 	Assigned Trademarks
	1.1(f)
	 	Form of Bill of Sale
	1.1(n)
	 	Designated Employees
	1.1(mm)
	 	Product Software
	1.1(v)
	 	Excluded Assets
	1.1(ss)
	 	Transferred Contracts
	1.1(ww)
	 	Transferred Products
	1.1(xx)
	 	Transferred Tangible Assets
	1.1(yy)
	 	Transferred Technology
	1.1(zz)
	 	Transferred Websites
	5.5
	 	Software Licenses
	7.1(g)
	 	Required Consents






	 	 	 
	Exhibit Number	 	Exhibit Title
	A
	 	Escrow Agreement
	B-1
	 	Transition Services
	B-2
	 	Third Party Software Licenses
	C
	 	Disclosure Schedule
	D
	 	Form of Employment Offer Letter
	E
	 	Form of Sublease
	F
	 	Form of License Agreement