ASSET PURCHASE AGREEMENT

Exhibit 2.1

[*] Portions denoted with an asterisk in this agreement (and its related exhibits and attachments) have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

 

ASSET PURCHASE AGREEMENT

between:

LSI L OGIC C ORPORATION ,

a Delaware corporation;

and

S EMICONDUCTOR C OMPONENTS I NDUSTRIES , LLC,

a Delaware limited liability company

 

Dated as of April 5, 2006

 

 

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ASSET PURCHASE AGREEMENT

T HIS A SSET P URCHASE A GREEMENT is being entered into as of April 5 ^th , 2006 (the “Signing Date”), by and between: LSI L OGIC C ORPORATION , a Delaware corporation (“LSI”), and S EMICONDUCTOR C OMPONENTS I NDUSTRIES , LLC, a Delaware limited liability company (“Purchaser”) and a wholly-owned subsidiary of ON Semiconductor Corporation, a Delaware corporation (“ON”). In this Agreement, LSI and Purchaser are referred to collectively as the “Parties” and each of them is sometimes referred to individually as a “Party,” and LSI and each Subsidiary of LSI that holds any ownership interest in the Specified Assets (as defined below), including LSI Logic Manufacturing Services, Inc. (“LSI Gresham Sub”), are referred to collectively as “Sellers” and each of them is sometimes referred to individually as a “Seller.” Certain other capitalized terms used in this Agreement are defined in Exhibit A.

R ECITAL

The Parties wish to provide for the purchase by Purchaser of certain assets from Sellers, and to provide for certain related transactions, on the terms and subject to the conditions and other provisions set forth in this Agreement and in the Ancillary Agreements.

A GREEMENT

The Parties, intending to be legally bound, agree as follows:

 

1.	S ALE AND P URCHASE OF A SSETS ; R ELATED T RANSACTIONS

1.1 Sale and Purchase of Assets. On the terms and subject to the conditions and other provisions set forth in this Agreement, at the Closing, LSI will cause Sellers to sell and transfer to Purchaser, and Purchaser will purchase from Sellers, all of Sellers’ right, title, and interest as of the Closing Date in and to the following (which, subject to Section 1.2, are referred to in this Agreement as the “Specified Assets”):

 

(a)

the Gresham Facilities Real Property (subject to Section 5);

 

(b)

the Fab Tangible Personal Property;

 

(c)

the Fab Intellectual Property;

 

(d)

the Other Specified Manufacturing Equipment;

 

(e)

the Fab-Related Contracts and the Fab-Related Government Permits (including the Wastewater Permit); and

 

(f)

the Fab Information, and any tangible medium in which solely the Fab Information is embodied.

 

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1.2 Excluded Assets. Notwithstanding anything to the contrary in Section 1.1 or elsewhere in this Agreement, the Specified Assets will not be deemed to include any of the following or any right or interest in or to any of the following (collectively, the “Excluded Assets”), except that any item specifically identified in Schedule 2, 3, 4, 5, or 6 will be a Specified Asset:

 

(a)

any Fab-Related Contract or Fab-Related Government Permit if (i) a Consent is required to be obtained from any Person in order to permit the sale or transfer to Purchaser of a Seller’s rights under such Fab-Related Contract or Fab-Related Government Permit, and (ii) such Consent has not been obtained as of the Closing Date (provided that the Wastewater Permit will in no event be deemed to be an Excluded Asset);

 

(b)

the Excluded Land;

 

(c)

the Retained Equipment;

 

(d)

the Tooling;

 

(e)

any finished goods or work-in-process inventory (including RapidChip ® Slices);

 

(f)

the Engineering Materials;

 

(g)

the Retained Employee Assets;

 

(h)

the Retained Software;

 

(i)

any Patents;

 

(j)

any Trademarks;

 

(k)

any Licensed Intellectual Property or Product Intellectual Property;

 

(l)

any Third-Party Intellectual Property;

 

(m)

any Excluded Information, or any tangible medium in which any Excluded Information is embodied;

 

(n)

any Excluded Contract; or

 

(o)

any asset referred to on Schedule 12.

Sellers will not be required to sell or transfer to Purchaser or any other Person any Excluded Asset or (except for any rights expressly granted to ON or any of its Subsidiaries under the Ancillary Agreements) any right or interest in or to any Excluded Asset.

1.3 Retained Liabilities. Notwithstanding anything to the contrary in this Agreement, Sellers will retain, and Purchaser will not assume, or will be deemed by virtue of the

 

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execution and delivery of this Agreement or of any other document delivered at the Closing (except to the extent expressly provided in such other document), or as a result of the consummation of the transactions contemplated by this Agreement or any such other document, to have assumed, any Liabilities of any of the Sellers, whether primary or secondary, direct or indirect, other than the Assumed Liabilities. Without limiting the generality of the foregoing, the Liabilities of Sellers that Purchaser is not assuming include the following (collectively, the “Retained Liabilities”):

(a) all Liabilities (other than Environmental Liabilities which are discussed in clause (e) below) of LSI or any of its Subsidiaries arising or resulting from the Fab Operations prior to the Closing or their use, manufacture, sale, ownership, lease, license, operation, or disposition of the Specified Assets prior to the Closing, or the performance or non-performance by LSI or any of its Subsidiaries of obligations under the Fab-Related Contracts prior to the Closing, except for any such Liabilities that are Assumed Liabilities pursuant to clause (i), (ii), or (iv) of the definition thereof;

(b) all Liabilities of LSI or any of its Subsidiaries relating to Taxes with respect to the Specified Assets, except for (i) Liabilities required to be borne or paid by Purchaser pursuant to Section 1.5, (ii) Real Property Taxes, the Liabilities for which will be determined solely by reference to Section 1.8(a)(i), and (iii) Personal Property Taxes, the Liabilities for which will be determined solely by reference to Section 1.8(a)(ii);

(c) all Liabilities of LSI or any of its Subsidiaries arising from the SIP or the SIP Bonds and Related Documents or the termination or unwinding of either of them;

(d) all Environmental Liabilities arising or resulting from Sellers’ and any of their Subsidiaries’ activities at and their operation of the Gresham Facilities Real Property from August 5, 1995 until the Closing Date; and

(e) any Liabilities of LSI or any of its Subsidiaries under any Excluded Contract, except as set forth in Section 12.3 or Section 12.4 or any of the Ancillary Agreements.

1.4 Purchase Price. As consideration for the sale of Sellers’ right, title, and interest in and to the Specified Assets to Purchaser, and the license of the Licensed Intellectual Property to be granted to Purchaser and another Subsidiary of ON pursuant to the IP License Agreement:

(a) on the Signing Date, Purchaser will pay to LSI, by wire transfer of immediately available funds, the sum of ten million, five hundred thousand dollars ($10,500,000) (the “Deposit”);

(b) at the Closing, Purchaser will pay to LSI (without deduction or setoff of any nature), by wire transfer of immediately available funds, the additional sum of seventy-nine million, five hundred thousand dollars ($79,500,000), subject to adjustment as provided in Section 1.8(b) (as so adjusted, the “Closing Cash Payment”);

 

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(c) at the Closing, Purchaser will assume the Assumed Liabilities by delivering to LSI an Assignment and Assumption Agreement in the form of Exhibit B (the “Assignment and Assumption Agreement”); and

(d) on the date that is ninety (90) days after the Closing Date (the “Final Installment Date”), Purchaser will pay to LSI (without deduction or setoff of any nature), by wire transfer of immediately available funds, the additional sum of fifteen million, two hundred twenty-five thousand dollars ($15,225,000) (the “Final Installment Payment”) (provided, however, that if the Parties have proceeded with the Partial Sale Alternative and if title to the Residual Real Property has not been conveyed to Purchaser pursuant to Section 5.3(f) on or before the Final Installment Date, then instead of the payment described above in this clause (d), Purchaser will pay to LSI (without deduction or setoff of any nature), by wire transfer of immediately available funds, (i) the additional sum of nine million, two hundred twenty-five thousand dollars ($9,225,000) on the Final Installment Date and (ii) the remaining sum of six million dollars ($6,000,000) on the date when title to the Residual Real Property is conveyed to Purchaser pursuant to Section 5.3(f)).

1.5 Transfer Taxes and Similar Charges. Purchaser will bear and pay, and (if any of the Sellers pay) will reimburse Sellers for, any sales Taxes, use Taxes, transfer Taxes, documentary charges, recording fees, filing fees (other than income or franchise Taxes) that may become payable in connection with the sale to Purchaser of Sellers’ right, title, and interest in and to the Specified Assets, the assumption by Purchaser of the Assumed Liabilities, or any of the other transactions contemplated by this Agreement. LSI and Purchaser agree to file jointly, or cause to be filed jointly, all required change of ownership and similar statements, to the extent joint filing is permitted or required.

1.6 Allocation of Purchase Price

(a) The Parties will use their reasonable best efforts to agree upon an allocation of the consideration referred to in Section 1.4 and Section 1.8 among the Specified Assets and the Licensed Intellectual Property (the “Allocation”) as soon as reasonably possible after the Closing Date. The Allocation will be determined in a manner consistent with this Section 1.6 and Section 1060 of the Code and the Treasury Regulations thereunder. Purchaser will provide a proposed allocation to LSI within 25 days after the Closing Date, and LSI will deliver to Purchaser a notice setting forth any proposed changes to such proposed allocation within 15 days after the delivery of such proposed allocation to LSI. The Parties will negotiate in good faith to resolve any disputed items, and if the Parties are unable to agree on the Allocation within 15 days after LSI’s delivery of such notice of proposed changes to Purchaser, then the dispute will be arbitrated by Ernst & Young and the resolution of such dispute by Ernst & Young will be conclusive and binding on the Parties.

(b) The Allocation, as finally agreed or determined in accordance with Section 1.6(a), will be conclusive and binding upon the Parties for Tax purposes, and no Party will make or permit any of its Subsidiaries to make any statement or declaration to any taxing authority that is inconsistent with the Allocation, except as provided below. No Party will take or permit any of its Subsidiaries or representatives to take any position on any Tax return, with any taxing

 

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authority, or in any judicial Tax proceeding that is inconsistent with the Allocation except as required by a final determination within the meaning of Section 1313(a) of the Code or any equivalent provision of any applicable state or local law. Each of LSI and Purchaser will promptly provide the other with any additional information required to complete Form 8594 if the filing of such form is required. Each of LSI and Purchaser will timely notify the other in the event of an examination, audit, or other proceeding regarding the Allocation. Each of LSI and Purchaser will timely provide the other with such assistance as the other may reasonably request in connection with any such examination, audit, or other proceeding regarding the Allocation (it being understood that the Party receiving such assistance will be required to reimburse the Party providing such assistance for all expenses incurred in providing such assistance).

1.7 Ancillary Agreements. At the Closing, Purchaser and LSI will enter into (or cause their respective Subsidiaries to enter into) the following additional agreements (along with the Assignment and Assumption Agreement, the “Ancillary Agreements”):

(a) a Wafer Supply and Test Services Agreement in the form of Exhibit D (the “Wafer Supply Agreement”);

(b) an Intellectual Property License Agreement in the form of Exhibit E (the “IP License Agreement”);

(c) a Transition Services Agreement in the form of Exhibit F (the “Transition Services Agreement”);

(d) a Facilities Use Agreement in the form of Exhibit G (the “Facilities Use Agreement”);

(e) a Master Nondisclosure Agreement in the form of Exhibit H;

(f) a Bill of Sale in favor of Purchaser in the form of Exhibit I; and

(g) if the Parties are proceeding with the Partial Sale Alternative, the Ground Lease.

1.8 Prorations and Adjustments

(a) The following items will be prorated and adjusted between Purchaser, on the one hand, and Sellers, on the other hand, on the Closing Date in the following manner (provided that such prorations and adjustments will be made without duplication of any amount payable by Purchaser pursuant to Section 1.5):

(i) Real Property Taxes

(A) If the Gresham Facilities Real Property has been re-assessed on or prior to the Closing Date for purposes of real property Taxes, then all city, county, and state ad valorem property Taxes or assessments for the real property tax year in which the Closing occurs (“Real Property Taxes”) payable by Sellers

 

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with respect to the Gresham Facilities Real Property will be prorated between Purchaser and LSI, as of the Closing Date, based on the tax bill for such tax year.

(B) If the Gresham Facilities Real Property has not been re-assessed on or prior to the Closing Date for purposes of Real Property Taxes, then all Real Property Taxes payable by Sellers with respect to the Aggregate Real Property will be prorated between Purchaser and LSI, as of the Closing Date, based on the Tax bill for such tax year and based on the Parties’ good faith best estimate of the Real Property Taxes equitably allocable to the Gresham Facilities Real Property and to the Excluded Land (and for purposes of such estimate, the allocation of Real Property Taxes with respect to any parcel included in the Gresham Facilities Real Property whose boundary is changed as a result of the Lot Line Adjustment or Land Division, or the Residual Property if the Lot Line Adjustment or Land Division has not been completed as of the Closing Date, will be done on a per-acre basis). LSI will be liable for all Real Property Taxes with respect to the Gresham Facilities Real Property (or so allocated to the Excluded Land, if applicable) due and payable that are attributable to any period prior to and including the Closing Date. Purchaser will be liable for all Real Property Taxes with respect to the Gresham Facilities Real Property (or so allocated to the Gresham Facilities Real Property if applicable) due and payable that are attributable to any period after the Closing Date.

(C) If any Real Property Taxes have not been set for any portion of the real property tax year in which the Closing occurs, then the proration of such Real Property Taxes will be based upon the Real Property Taxes for the preceding real property tax year, and after the Closing such proration will be readjusted between LSI and Purchaser when the tax bill for the real property tax year in which the Closing occurs is available.

(ii) Personal Property Taxes. All personal property taxes levied or assessed against the Fab Tangible Personal Property and the Other Specified Manufacturing Equipment for the applicable personal property tax year in which the Closing occurs (“Personal Property Taxes”) will be prorated between Purchaser and LSI, as of the Closing Date. LSI will be liable for all Personal Property Taxes due and payable that are attributable to any period to and including the Closing Date. Purchaser will be liable for all Personal Property Taxes due and payable that are attributable to any period after the Closing Date. If any Personal Property Taxes have not been set for any portion of the applicable personal property tax year in which the Closing occurs, then the proration of such Personal Property Taxes will be based upon the Personal Property Taxes for the preceding applicable personal property tax year, and after the Closing such proration will be readjusted between LSI and Purchaser when the Tax bill for the applicable personal property tax year in which the Closing occurs is available.

(iii) Utility Charges. All utility charges levied or assessed against the Gresham Facilities Real Property will be prorated between Purchaser and LSI as of the Closing Date. LSI will be liable for all such utility charges due and payable

 

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that are attributable to any period to and including the Closing Date. Purchaser will be liable for all such utility charges due and payable that are attributable to any period after the Closing Date. LSI will request that each utility meter on the Gresham Facilities Real Property be read by the appropriate utility company immediately before the Closing Date. If any such utility meter is not so read immediately before the Closing Date, then the applicable utility charges will be initially prorated as of the Closing Date based upon a per diem rate determined by reference to the utility charges for the month immediately preceding the month during which the Closing occurs and will be finally re-prorated as soon after the Closing Date as Sellers and Purchaser can obtain such reading, after which LSI or Purchaser, as the case may be, will promptly deliver to the other any amount owing as a result of such re-proration.

(b) On the Business Day immediately prior to the Closing Date, LSI will deliver to Purchaser a certificate (the “Closing Adjustments Certificate”) signed on behalf of LSI by an authorized officer of LSI and setting forth LSI’s good faith determination, without duplication of any amounts, of (i) the aggregate amount, if any, due from LSI to Purchaser pursuant to each clause of Section 1.8(a) (the “Purchaser Credit”), (ii) the aggregate amount, if any, due from Purchaser to LSI pursuant to each clause of Section 1.8(a) (the “Seller Credit”), (iii) the aggregate amount of any cash deposits held by any public or private utility company for utility service to the Gresham Facilities Real Property, which are to be assigned to Purchaser at the Closing (the “Cash Deposits”), (iv) the aggregate amount of any Pre-Paid Expenses to the extent attributable to any period after the Closing Date, (v) the aggregate amount of the Assumed Accounts Payable, (vi) the Excess Spare Parts Value, and (vii) the Accrued Paid Time Off Amount. If the net value determined by subtracting (A) the sum of the Purchaser Credit and the Assumed Accounts Payable and the Accrued Paid Time Off Amount from (B) the sum of the Seller Credit, the Cash Deposits, the Pre-Paid Expenses, and the Excess Spare Parts Value is positive, the Closing Cash Payment will be increased by such amount. If such net value is negative, the Closing Cash Payment will be reduced by the absolute value of such net value.

(c) All refunds and credits in respect of the Real Property Taxes and Personal Property Taxes will be apportioned between Purchaser and LSI as follows: LSI will be entitled to all refunds and credits (or any portion thereof) attributable to any period to and including the Closing Date; and Purchaser will be entitled to all refunds and credits (or any portion thereof) attributable to any period after the Closing Date.

(d) The Parties are not currently aware of any other costs or expenses that must be adjusted between them on the Closing Date, and if any such costs or expenses arise or become known to them on or before the Closing Date and are not otherwise addressed in this Agreement or any of the Ancillary Agreements, they will be equitably adjusted between the Parties in accordance with customary practice in Multnomah County, Oregon.

1.9 Closing. The closing of the purchase by Purchaser of Sellers’ right, title, and interest in and to the Specified Assets (other than, if the Parties proceed with the Partial Sale Alternative, the Residual Real Property) (the “Closing”) will take place at the offices of Cooley Godward LLP at 3175 Hanover Street, Palo Alto, California, at a time and on a date to be designated by LSI in writing upon at least three Business Days written notice to Purchaser. The

 

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date designated by LSI in such notice will be at least two Business Days but not more than ten Business Days after the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Sections 8 and 9 (other than the conditions set forth in Sections 8.4, 9.4, and 9.5, which by their nature are to be satisfied at the Closing, it being understood, however, that the Closing will be subject to the satisfaction or waiver of such conditions at the Closing).

1.10 Closing Deliveries

(a) At the Closing, LSI will deliver or cause to be delivered to Purchaser:

(i) a copy of each of the Ancillary Agreements other than the Bill of Sale and the Ground Lease, duly executed by LSI or one of its wholly-owned Subsidiaries (as applicable);

(ii) the Bill of Sale, duly executed by each Seller;

(iii) documentation effecting the assignment to Purchaser of the Cash Deposits, in form and substance reasonably satisfactory to Purchaser;

(iv) an original certificate of good standing for each Seller from the State of Delaware, as of a date that is no more than three Business Days prior to the Closing Date;

(v) an executed affidavit or certificate of non-foreign status from each Seller;

(vi) certified copies of the resolutions of LSI’s board of directors authorizing the execution, delivery, and performance of this Agreement and each Ancillary Agreement to which LSI will be a party, and certified copies of the resolutions of each other Seller’s board of directors authorizing the execution, delivery, and performance of each Ancillary Agreement to which such Seller will be a party;

(vii) the Deed (or, if the Parties proceed with the Partial Sale Alternative, the First Deed);

(viii) an affidavit in the form attached hereto as Exhibit J and such other documents in favor of the Title Company (but not in favor of Purchaser) and relating to title insurance as are customarily provided by a seller to a title company in Multnomah County, Oregon;

(ix) a certificate duly executed on behalf of LSI by an authorized officer of LSI, dated as of the Closing Date, certifying as to the satisfaction of the conditions set forth in Sections 8.1 and 8.2 (“LSI’s Closing Certificate”);

(x) a receipt for the Closing Cash Payment and all amounts paid by Purchaser at the Closing pursuant to Section 1.5; and

(xi) if the Parties are proceeding with the Partial Sale Alternative, the Ground Lease and related Memorandum of Lease, duly executed by LSI Gresham

 

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Sub or any other Seller that, as of the Closing Date, is the owner of the Gresham Facilities Real Property.

(b) At the Closing, Purchaser will deliver or cause to be delivered to LSI:

(i) the Closing Cash Payment by wire transfer to an account or accounts designated by LSI in writing no less than two (2) Business Days prior to the Closing Date;

(ii) a copy of each of the Ancillary Agreements other than the Ground Lease, duly executed by Purchaser or one of ON’s other Subsidiaries (as applicable);

(iii) certified copies of the resolutions of the board of directors of ON and the board of directors of Purchaser authorizing the execution, delivery, and performance of this Agreement and each Ancillary Agreement to which ON or Purchaser will be a party, and certified copies of the resolutions of the board of directors of each of ON’s other Subsidiaries entering into any Ancillary Agreement authorizing the execution, delivery, and performance of each such Ancillary Agreement;

(iv) an original certificate of good standing for Purchaser from the State of Delaware, as of a date that is no more than three Business Days prior to the Closing Date;

(v) a certificate duly executed on behalf of Purchaser by an authorized officer of Purchaser, dated as of the Closing Date, certifying as to the satisfaction of the conditions set forth in Sections 9.1 and 9.2 (“Purchaser’s Closing Certificate”);

(vi) a written acknowledgment that LSI is entitled to retain the Deposit; and

(vii) if the Parties are proceeding with the Partial Sale Alternative, the Ground Lease and related Memorandum of Lease, duly executed by Purchaser.

1.11 Accounting. Except as may be otherwise provided in the Transition Services Agreement or Section 12.3, to the extent that, after the Closing: (a) Purchaser or any of its Subsidiaries receives any payment that is for the account of LSI or any of its Subsidiaries according to the terms of this Agreement, or LSI or any of its Subsidiaries makes a payment on behalf of Purchaser or any of its Subsidiaries, Purchaser will promptly deliver the amount of such payment to LSI; or (b) LSI or any of its Subsidiaries receives any payment that is for the account of Purchaser or any of its Subsidiaries according to the terms of this Agreement, or Purchaser or any of its Subsidiaries makes a payment on behalf of LSI or any of its Subsidiaries, LSI will promptly deliver the amount of such payment to Purchaser. All amounts due and payable under this Section 1.11 will be paid by the applicable Party in immediately available funds.

 

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[*]	Portions denoted with an asterisk on this page have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

 

2.	R EPRESENTATIONS AND W ARRANTIES OF LSI

LSI represents and warrants to Purchaser that, except as set forth in the Sellers Disclosure Schedule (it being understood that each item of disclosure in the Sellers Disclosure Schedule with respect to any Section of this Agreement will also be deemed to qualify any other Section of this Agreement to the extent the applicability of such disclosure to such other Section is reasonably apparent on the face of such disclosure), as follows:

2.1 Title to Tangible Personal Property. As of the Closing Date, Sellers (or one of them) will have good and valid title to each item of the Fab Tangible Personal Property and Other Specified Manufacturing Equipment, in each case free and clear of any Encumbrances other than Permitted Encumbrances. At the Closing, Purchaser will acquire all of Sellers’ right, title, and interest in and to the Fab Tangible Personal Property and the Other Specified Manufacturing Equipment, free and clear of any lien, security interest, encumbrance, or adverse claim other than Permitted Encumbrances and liens, security interests, encumbrances, and adverse claims created or arising from any action or inaction of Purchaser, ON, or any other Subsidiary of ON.

2.2 Real Property

(a) To LSI’s knowledge: (i) no condemnation or other similar proceeding in eminent domain initiated by a Government Authority is pending or is being overtly threatened with respect to the Gresham Facilities Real Property or any portion thereof; and (ii) as of the Signing Date, none of the Gresham Facilities Real Property is located in a flood hazard area (as defined by the Federal Emergency Management Agency). Except for the [*], none of the Sellers is a party to or bound by any Contract currently in effect in which such Seller has agreed to lease, sublease, license, sell, or mortgage the Gresham Facilities Real Property (or any portion thereof) to any Person other than Purchaser.

(b) The sketch included in Schedule 1 accurately depicts, in all material respects, the boundaries of all areas of the Gresham Facilities Real Property [*] and all other arrangements [*], whether oral or written, with respect to the use or occupancy of the Gresham Facilities Real Property.

2.3 Sufficiency of Specified Assets; Raw Materials Inventory Levels

(a) To LSI’s knowledge, upon the Closing, except for the rights of LSI and its Subsidiaries as of the Closing Date under the Excluded Contracts, and any Fab-Related Contracts and Fab-Related Government Permits that are not assigned to Purchaser at Closing and except for Raw Materials, other consumables, and utility services, in each case that are readily available in the marketplace, the Specified Assets and the rights of Purchaser and its Subsidiaries as of the Closing Date under the Ancillary Agreements will include substantially all of the assets, properties, and rights needed by Purchaser and its Subsidiaries, as of the Closing Date, to fulfill their obligations under the Wafer Supply Agreement (including obligations related to yields and specifications) for the first ninety (90) days after the Closing Date.

(b) At the Closing, the Fab Raw Materials Inventory will be substantially consistent with levels of Raw Materials owned by Sellers and maintained at the Gresham

 

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Facilities in the ordinary course of business consistent with past practice of Sellers in operating the Fab, subject to the commercial availability of such Raw Materials and taking into account the run rate of the Fab as of the Closing.

2.4 Intellectual Property

(a) As of the Closing Date, Sellers (or one of them) will own the Fab Intellectual Property free and clear of any Encumbrances, except for Permitted Encumbrances and non-exclusive rights and licenses that were granted prior to the Signing Date or that arise in the ordinary course of business between the Signing Date and the Closing Date.

(b) To LSI’s knowledge, since March 1, 2001, no Seller has received any written claim of infringement of any Intellectual Property Rights of any third party arising from Sellers’ utilization of the Fab Intellectual Property or the Licensed Intellectual Property in connection with Sellers’ operation of the Fab, except for infringement claims that would not reasonably be expected to have a Seller Material Adverse Effect.

(c) As of the Closing Date, LSI (or one or more Subsidiaries of LSI) will have, by ownership or license or otherwise, all Intellectual Property Rights necessary to grant the licenses of the Licensed Intellectual Property to Purchaser and another Subsidiary of ON pursuant to the IP License Agreement.

(d) Other than in respect of Third-Party Intellectual Property, Product Intellectual Property, Tooling, and Engineering Materials, the Fab Intellectual Property, together with the Licensed Intellectual Property, the Licensed Materials (as defined in the Wafer Supply Agreement), and Sellers’ Intellectual Property Rights in the Fab Information and Excluded Information, constitutes all of the material Intellectual Property Rights owned by LSI or its Subsidiaries that are used or held for use by Sellers in their operation of the Fab (as currently conducted).

(e) The Fab Software and the Retained Software are all of the material software owned by Sellers that is also used by Sellers in their operation of the Fab (as currently operated).

(f) Schedule 11 contains a complete and accurate list of all material proprietary third-party software used by Sellers at the Gresham Facilities as of the Signing Date in their operation of the Fab (other than third-party software licensed under the terms of “shrink-wrap” licenses, “clickwrap” licenses, and other licenses for software generally available on standard terms including licenses for “open source” software).

2.5 Fab-Related Contracts. Prior to the Signing Date, LSI has made available to Purchaser an accurate and complete copy of each Significant Fab-Related Contract entered into prior to the Signing Date, as in effect on such date. Each Significant Fab-Related Contract entered into prior to the Signing Date is valid and in full force and effect as of the Signing Date. No Seller is in material breach of any Significant Fab-Related Contract, and, to LSI’s knowledge as of the Signing Date, no other party to any such Significant Fab-Related Contract is in material breach of such Significant Fab-Related Contract. To LSI’s knowledge as of the Signing Date, no event has occurred that, with notice or lapse of time or both, would constitute such a material breach by any Seller or by any other party under any Significant Fab-Related Contract. Except

 

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as would not reasonably be expected to have a Seller Material Adverse Effect, since June 30, 2005, none of the Sellers has received written notice that any party to any Significant Fab-Related Contract intends to cancel or prematurely terminate such Significant Fab-Related Contract. All payments required to be made by Sellers under the Fab-Related Contracts that are due on or prior to the Closing Date will have been made in full as of the Closing Date.

2.6 Government Permits. All of the material Fab-Related Government Permits are current and in full force and effect. Sellers are in compliance in all material respects with all such material Fab-Related Government Permits. There are no lawsuits or other legal proceedings or, to LSI’s knowledge, governmental investigations, pending or, to LSI’s knowledge, overtly threatened that would result in the premature termination or material impairment of any such material Fab-Related Government Permit. LSI has made available to Purchaser copies of all material correspondence with Government Authorities in LSI’s or its Subsidiaries’ files relating to such material Fab-Related Government Permits (including copies of official notices, citations, or decisions in LSI’s or its Subsidiaries’ files) with respect to which Purchaser has made a specific written request to LSI that such correspondence be made available.

2.7 Compliance with Legal Requirements. LSI and its Subsidiaries are in compliance in all material respects with all material Legal Requirements (other than Environmental Laws, which are addressed in Section 2.9) applicable to the Fab Operations. No Seller has received any written notice from any Government Authority alleging any failure by Sellers to comply with any Legal Requirement applicable to the Fab Operations, except for any such notice relating to a failure to comply that (i) has been cured or otherwise is no longer pending or (ii) would not reasonably be expected to have a Seller Material Adverse Effect.

2.8 Legal Proceedings; Governmental Orders. There is no lawsuit or other legal proceeding or, to LSI’s knowledge, governmental investigation, pending or, to LSI’s knowledge, being overtly threatened against LSI or any of its Subsidiaries as of the Signing Date that involves the Specified Assets or the Fab Operations and would reasonably be expected to have a Seller Material Adverse Effect. There are no Governmental Orders outstanding against LSI or any of LSI’s Subsidiaries with respect to the Fab Operations arising from any governmental investigation, lawsuit, or other legal proceeding against LSI or any of its Subsidiaries that would reasonably be expected to have a Seller Material Adverse Effect.

2.9 Environmental Matters

(a) To LSI’s knowledge, the Fab Operations are and for the preceding five years have been in substantial compliance with all applicable Environmental Laws. To LSI’s knowledge, no conditions exist at the Gresham Facilities Real Property that would by themselves reasonably be expected (i) to give rise to liability on the part of Sellers or Purchaser to any Government Authority or other third party pursuant to any Environmental Law or (ii) to materially impair Purchaser’s ability to operate the Gresham Facilities Real Property, in the same manner as it is currently operated, in substantial compliance with Environmental Laws. The Gresham Facilities Real Property has not been listed or, to LSI’s knowledge, proposed for listing on the National Priorities List established by the United States Environmental Protection Agency, or any similar list maintained by the State of Oregon. To LSI’s knowledge, the

 

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Gresham Facilities Real Property is not subject to any material Encumbrance (other than Permitted Encumbrances) that have attached to the Gresham Facilities Real Property pursuant to any Environmental Law.

(b) To LSI’s knowledge, no activities that have been or presently are being conducted at the Gresham Facilities would reasonably be expected to give rise to a material liability on the part of Sellers or Purchaser to any Government Authority or other third party as a result of:

(i) the handling, storage, use, transportation, or disposal, or arranging for transportation or disposal, of any Hazardous Substance by Sellers in, on, under, or from the Gresham Facilities;

(ii) any emission, discharge, or release of any Hazardous Substance by Sellers on or from the Gresham Facilities into or upon the air, surface water, ground water, or land; or

(iii) any disposal, handling, manufacturing, processing, distribution, use, treatment, or transport of any Hazardous Substances by Sellers on or from the Gresham Facilities.

(c) To LSI’s knowledge, no actual or threatened Discharges have occurred, and no Contamination exists, at the Gresham Facilities Real Property that in either case by themselves require, or would reasonably be expected to require, notification, investigation, or remediation, or to result in material liabilities or obligations of Sellers or Purchaser, pursuant to any Environmental Laws.

(d) To LSI’s knowledge, Sellers hold all registrations, permits, licenses, and approvals required to be issued by or filed with any federal, state, or local Government Authority pursuant to any Environmental Laws for the occupancy of the Gresham Facilities by Sellers, the conduct of the Fab Operations, and the ownership and use of the Specified Assets by Sellers (“Fab Environmental Permits”). To LSI’s knowledge: (i) any Fab Environmental Permits held by Sellers are currently in full force and effect, (ii) Sellers are, and for the preceding five years have been, in substantial compliance with the terms and conditions of such Fab Environmental Permits, and (iii) no condition exists at the Gresham Facilities Real Property that would prohibit Purchaser from being in substantial compliance with applicable Environmental Laws when operating the Gresham Facilities in the same manner as Sellers presently operate the Gresham Facilities.

(e) No Seller has expressly assumed or undertaken any liability or corrective, investigatory, or remedial obligation of any third party relating to any Environmental Laws applicable to Sellers’ operation of and activities at the Gresham Facilities Real Property that would reasonably be expected to result in a material liability under any Environmental Law on the part of Sellers or Purchaser to any Government Authority or other third party.

(f) LSI has made available to Purchaser copies of any material environmental reports, audits, permits, licenses, registrations, and other environmental, health, and safety

 

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documents relating to the Specified Assets and the Gresham Facilities that are in Sellers’ possession and that Purchaser has specifically requested in writing from LSI.

2.10 Taxes. There are no Taxes owed by Sellers and imposed by any Government Authority having jurisdiction over the Gresham Facilities Real Property with respect to the Gresham Facilities Real Property that are delinquent.

2.11 Brokers. LSI has not employed any broker, finder, investment banker, or other similar intermediary, except for CMN Inc. d.b.a. COLLIERS INTERNATIONAL, whose fees in connection with the Contemplated Transactions are solely the responsibility of Sellers, in connection with the Contemplated Transactions.

2.12 Authority; Binding Nature of Agreement. LSI has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement, and the execution, delivery, and performance by LSI of this Agreement have been duly authorized by all necessary action on the part of LSI and its board of directors. Each Seller has all necessary corporate power and authority to execute and deliver each of the Ancillary Agreements to which such Seller is to become a party and to perform its obligations under such Ancillary Agreements, and the execution, delivery, and performance by each Seller of the Ancillary Agreements to which such Seller is to become a party have been duly authorized by all necessary action on the part of such Seller and its board of directors. No vote of the holders of LSI’s common stock is required to authorize the Contemplated Transactions. This Agreement has been duly executed and delivered by LSI and constitutes the valid and binding obligation of LSI, enforceable against LSI in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency, and the relief of debtors and (ii) rules of law governing specific performance, injunctive relief, and other equitable remedies. Upon execution thereof, each of the Ancillary Agreements to which a Seller is to become a party will have been duly executed and delivered by such Seller and constitute the valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, subject to (a) laws of general application relating to bankruptcy, insolvency, and the relief of debtors and (b) rules of law governing specific performance, injunctive relief, and other equitable remedies.

2.13 Non-Contravention; Consents. The execution and delivery by LSI of this Agreement and by Sellers of the Ancillary Agreements, the consummation by Sellers of the transactions contemplated by this Agreement, and the performance by Sellers of their obligations under this Agreement and the Ancillary Agreements, do not and will not: (a) conflict with or result in any violation of any provision of the certificate of incorporation, bylaws, or other charter or organizational documents of any Seller; or (b) assuming the Consents referred to in Part 2.13 of the Sellers Disclosure Schedule are obtained, (i) contravene or result in a violation or breach by any Seller of any Legal Requirement or any material Government Order applicable to any Seller or any of the Specified Assets; (ii) result in any material breach of, constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a material default) by any Seller under, result in the loss of any material rights by any Seller or give rise to any material increased rights of any Person (other than Sellers) under, or give to any Person any material rights of termination, amendment, acceleration, or cancellation under, any Significant Fab-Related Contract or Fab-Related Government Permit; or (iii) result in

 

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the imposition of any Encumbrance upon any of the Specified Assets (except for Permitted Encumbrances.

2.14 Organization and Good Standing. Each Seller is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted. Each Seller is duly licensed or qualified to do business in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except to the extent that the failure to be so licensed or qualified would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect. Other than Sellers, no Subsidiary of LSI is presently engaged in the operation of the Gresham Facilities.

2.15 Labor Matters. Neither LSI nor any of its Subsidiaries is a party to any labor or collective bargaining agreement with respect to any of the Available Employees and, to LSI’s knowledge, there are no pending efforts to organize the Available Employees for purposes of representation by a labor organization. Prior to the Signing Date, LSI has delivered to Purchaser an accurate and complete list of all Available Employees (as of the Signing Date) by employee number and title and setting forth each such employee’s annual base salary or hourly wage rate, as applicable. All such Available Employees have taken and passed a drug-screening test administered by or on behalf of LSI or one of its Subsidiaries prior to commencing employment with LSI or any of its Subsidiaries.

2.16 Suppliers. Part 2.16 of the Sellers Disclosure Schedule sets forth a complete and correct list of the top ten suppliers of the Fab, based on expenditures during the fiscal year ended June 30, 2005 and a complete and correct list of the top ten suppliers of the Fab based on expenditures during the six months ended December 31, 2005. Since June 30, 2005, no Seller has received any written notice from any such supplier stating that such supplier intends to materially and adversely change its relationship with such Seller with respect to the Fab.

 

3.	R EPRESENTATIONS AND W ARRANTIES OF P URCHASER

Purchaser represents and warrants to LSI that, except as set forth in the Purchaser Disclosure Schedule (it being understood that each item of disclosure in the Purchaser Disclosure Schedule with respect to any Section of this Agreement will also be deemed to qualify any other Section of this Agreement to the extent the applicability of such disclosure to such other Section is reasonably apparent on the face of such disclosure):

3.1 SEC Filings; Financial Statements

(a) Since April 1, 2005, ON has timely filed all registration statements, proxy statements, and other statements, reports, schedules, forms, and other documents required to be filed by it with the SEC (the “ON SEC Documents”). None of ON’s Subsidiaries is required to file any documents with the SEC. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the Signing Date, then on the date of such filing): (i) each of the ON SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the ON SEC

 

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Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(b) The financial statements (including any related notes) contained in the ON SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments); and (iii) fairly present the consolidated financial position of ON and its consolidated subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of ON and its consolidated subsidiaries for the periods covered thereby.

(c) The Purchaser financial statements (including any related notes) contained in the ON SEC Documents: (i) were prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and except that the financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments); and (ii) fairly present in all material respects the consolidated financial position of Purchaser as of the respective dates thereof and the consolidated results of operations and cash flows of Purchaser and its consolidated subsidiaries for the periods covered thereby.

3.2 Absence of Changes. Since December 31, 2005 until the Signing Date:

(a) no event has occurred or circumstance has arisen that, in combination with any other events or circumstances, has had or would reasonably be expected to have a Purchaser Material Adverse Effect; and

(b) neither ON nor Purchaser has (i) declared, accrued, set aside, or paid any dividend or made any other distribution in respect of any shares of capital stock, or (ii) repurchased, redeemed, or otherwise reacquired any shares of capital stock or other securities.

3.3 No Notice of Default. No notice of violation, default, or potential default has been given since June 1, 2005 or is required to be given by ON or Purchaser under any ON Debt Instrument.

3.4 Financial Ability. At and after the Closing, as applicable, Purchaser will have sufficient unrestricted cash or cash equivalents or will have borrowing facilities that together will be sufficient to enable it to consummate the transactions contemplated to occur at the Closing (including the payment of the Closing Cash Payment) and to pay the Final Installment Payment and all of its other current liabilities (including all liabilities coming due on or prior to the Final Installment Date).

 

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3.5 Brokers. Neither ON nor Purchaser has employed any broker, finder, investment banker, or other similar intermediary in connection with the Contemplated Transactions.

3.6 Authority; Binding Nature of Agreement. Purchaser has all necessary power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its obligations hereunder and thereunder, and the execution, delivery, and performance by Purchaser (or another Subsidiary of ON, as the case may be) of this Agreement and the Ancillary Agreements have been duly authorized by all necessary action on the part of Purchaser (or such other Subsidiary) and its board of directors. No vote of the holders of ON’s capital stock is required to authorize the purchase by Purchaser of Sellers’ right, title, and interest in and to the Specified Assets or any of the other Contemplated Transactions. This Agreement has been duly executed and delivered by Purchaser and constitutes the valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency, and the relief of debtors and (ii) rules of law governing specific performance, injunctive relief, and other equitable remedies. Upon execution thereof, each of the Ancillary Agreements to which Purchaser or another Subsidiary of ON is to become a party will have been duly executed and delivered by Purchaser or such other Subsidiary (as the case may be) and will constitute the valid and binding obligation of Purchaser or such other Subsidiary (as the case may be), enforceable against Purchaser or such other Subsidiary in accordance with its terms, subject to (a) laws of general application relating to bankruptcy, insolvency, and the relief of debtors and (b) rules of law governing specific performance, injunctive relief, and other equitable remedies.

3.7 Non-Contravention; Consents. The execution and delivery of this Agreement by Purchaser, and of the Ancillary Agreements by Purchaser or any of ON’s other Subsidiaries that are parties thereto, and the consummation by Purchaser of the Contemplated Transactions and the performance by Purchaser and such other Subsidiaries of their obligations under this Agreement and the Ancillary Agreements, do not and will not: (i) conflict with or result in any violation of any provision of the certificate of incorporation, bylaws, or other charter or organizational documents of ON or Purchaser or any of ON’s other Subsidiaries that is or will be a party to an Ancillary Agreement; (ii) contravene, result in a violation or breach of any Legal Requirement or Government Order applicable to ON or Purchaser or any of ON’s other Subsidiaries; or (iii) result in any material breach of, constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a default) under, result in the loss of any material rights or give rise to any material increased rights of any Person (other than ON or Purchaser or any other Subsidiary of ON) under, or give to any Person any material rights of termination, amendment, acceleration, or cancellation under, any ON Debt Instrument. All Consents required to be obtained by ON or Purchaser on or prior to the Closing Date under any ON Debt Instrument in connection with the Contemplated Transactions have been obtained in writing prior to the Signing Date and remain in full force and effect, and accurate and complete copies of such Consents have been delivered to LSI.

3.8 Due Diligence. Purchaser has had ample opportunity, including sufficient time and access, to do a full and complete due diligence investigation of the Gresham Facilities, the operations conducted at the Gresham Facilities, and the other Specified Manufacturing Equipment prior to the Signing Date, including with respect to (i) the Gresham Facilities Real Property, Fab Tangible Personal Property, Fab Intellectual Property, and Significant Fab-Related

 

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Contracts and (ii) financial, legal, employee, and environmental matters. Purchaser’s due diligence investigation included visiting the Gresham Facilities and conducting an environmental investigation of the Gresham Facilities Real Property as Purchaser deemed appropriate. Purchaser’s representatives have had the opportunity to meet with all employees of LSI with whom they wished to meet.

 

4.	E MPLOYEE M ATTERS

4.1 Employment of Available Employees. Purchaser agrees that Purchaser will offer to employ all or substantially all of the Available Employees who are employed by LSI or another Seller on the Closing Date, on the terms and subject to the provisions set forth in this Section 4. Without limiting the generality of the foregoing:

(a) Offers to Specified Employees. Within three days following the Signing Date, LSI will deliver to Purchaser a list of all Available Employees by name, title, and annual base salary or hourly wage rate, as applicable. Within ten days after the Signing Date, Purchaser will provide to LSI a list identifying the Available Employees to whom Purchaser plans to offer employment as of the Closing Date (the employees identified on such list being referred to in this Agreement as the “Specified Employees”). If any Specified Employee’s employment with LSI is voluntarily or involuntarily terminated prior to the Closing, (i) LSI may, in its discretion, hire a replacement for such Specified Employee, (ii) any replacement hired by LSI will not become an Available Employee or a Specified Employee without Purchaser’s prior written approval, and (iii) Purchaser will have the right, but not the obligation, to choose another Available Employee who performs substantially the same job function as the terminated employee (if there is any such Available Employee) to replace the terminated employee as a Specified Employee. LSI will promptly provide Purchaser with an updated list of Available Employees as necessary to reflect any changes to the list delivered to Purchaser within three days the Signing Date, including any change in the base salary or hourly wage rate of any Available Employee; provided that an individual will be removed from the list of Available Employees only if his or her employment with LSI or any of its Subsidiaries is terminated or upon the mutual agreement of LSI and Purchaser. Prior to the Closing, on a date mutually agreed by the Parties, Purchaser will extend to each Specified Employee an offer of at-will employment that, if accepted, would contemplate that such Specified Employee would commence his or her employment with Purchaser at the Gresham Facilities as of the Closing Date. Each such written offer of employment will be conditioned on the occurrence of the Closing and will include the following terms which Purchaser agrees to maintain through June 30, 2006 (collectively, the “Minimum Employment Terms”) (provided, however, that Purchaser will not be required to guarantee employment to any Hired Employee and nothing herein will preclude Purchaser, at any time after the Closing Date, from terminating the employment of any Hired Employee for cause):

(i) Compensation. Purchaser will offer each Specified Employee base compensation at least equal to such Specified Employee’s base compensation as of the Closing Date, expressed either as base salary or as an hourly wage with a comparable shift schedule, as set forth in the list of Available Employees delivered by LSI to Purchaser on or prior to the Signing Date, as updated by LSI during the Pre-Closing Period, provided that any change in the base salary or hourly wage rate that may be made during the Pre-Closing Period is approved by Purchaser or is otherwise permitted under Section 6.2(c)(v).

 

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(ii) Past Service Credit. Except to the extent expressly prohibited by Purchaser’s employee benefit plans, Purchaser will offer to credit each Specified Employee with service equal to the amount of service credit such Specified Employee has with LSI for purposes of vesting and eligibility (but not accrued benefits) under Purchaser’s employee benefit plans, including Purchaser’s qualified retirement plans, and for purposes of the rate of accrual of the Specified Employee’s vacation time. The existing balances of paid time off under LSI’s employee benefit plans as of the Closing Date of each Specified Employee who becomes a Hired Employee (collectively, the “Accrued Paid Time Off”) will be transferred to Purchaser without reduction.

(iii) Employee Benefits. Purchaser will offer the Specified Employees health and welfare benefits that are comparable to the health and welfare benefits provided to similarly situated employees of Purchaser. With respect to each Specified Employee, Purchaser, except to the extent expressly prohibited by its employee benefit plans, will offer to waive all waiting periods and pre-existing condition exclusions for health and dental coverage to the extent that the Specified Employee would have been entitled to coverage under the corresponding plan of LSI immediately prior to the Closing Date, and will give appropriate credit for all co-payments and deductibles paid or accrued under LSI’s medical, dental, and other health plans during the portion of the calendar year 2006 that precedes the Closing Date.

(iv) Payment of Transition Bonuses. Purchaser will offer to pay the bonuses earned by the Specified Employees who become Hired Employees, in amounts and under the terms specified in LSI’s bonus plan set forth in Exhibit L-1 (the “Transition Bonus Program”), provided that Purchaser’s obligation to pay these bonuses will be limited to paying the amounts funded by LSI pursuant to Section 4.1(d) and to making such payments to Hired Employees in the amounts instructed by LSI.

(v) Acceptance of Offers. If, at any time before the Closing, it appears that any substantial portion of the Specified Employees may not accept Purchaser’s employment offers such that the Employee Closing Condition might not be satisfied, Purchaser will use all reasonable efforts to ensure that all or substantially all of the Specified Employees accept Purchaser’s employment offers.

(b) Retention of Hired Employees. Purchaser will hire each Specified Employee who accepts the offer of employment and whose employment with LSI is not terminated prior to the Closing, and each such Specified Employee who commences employment with Purchaser on or after the Closing Date will be referred herein as a “Hired Employee.” Purchaser will promptly notify LSI of each Specified Employee who becomes a Hired Employee. LSI will be responsible for all compensation and benefits, including any severance benefits, for Available Employees accrued before the Closing. Purchaser will be responsible for all compensation and benefits, including any severance benefits, for Hired Employees accrued or incurred after the Closing, except that LSI will provide the necessary funding to Purchaser for the amounts to be paid by Purchaser to Hired Employees pursuant to the Transition Bonus Program as provided in Section 4.1(d). Purchaser will immediately notify LSI’s Director of Talent Acquisition and Management of any termination of the employment of any Hired Employee occurring after Closing and on or before June 30, 2006 and the basis for such

 

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termination. Purchaser will not terminate the employment of any Hired Employee without cause on or before June 30, 2006.

(c) Employment Records. All of LSI’s personnel files relating to the Available Employees and the Specified Employees will be retained by and remain the property of LSI. To the extent permitted by applicable Legal Requirements, LSI will provide to Purchaser a copy of each Specified Employee’s last performance evaluation and any disciplinary matters arising with respect to any Specified Employee in the twelve (12) month period immediately prior to the Signing Date.

(d) Hired Employee Bonuses. Purchaser will accurately report to LSI, on a timely basis but no later than July 3, 2006, the information and data described in Exhibit L-2, which is required by LSI to calculate bonuses earned under the Transition Bonus Program. No later than July 7, 2006 LSI will accurately report to Purchaser the bonus amounts earned as of June 30, 2006, if any, by each Hired Employee and will deposit an amount of immediately available funds equal to the aggregate amount of all such bonus payments together with the employer’s corresponding FICA contribution amounts and Medicare taxes into to an account or accounts designated by Purchaser in writing (the “Bonus Account”) to be used by Purchaser to pay such bonuses and FICA contributions and Medicare taxes. Thereupon Purchaser will pay such bonuses, in the amounts specified and to the extent funded by LSI, to the Hired Employees as soon as possible and in no event later than July 15, 2006.

(e) Indemnification by Purchaser. From and after the Closing, Purchaser will indemnify and hold harmless LSI from and against, and will compensate and reimburse LSI for, any loss, damage, injury, liability, claim, demand, settlement, judgment, award, notice requirement, payment, backpay, benefits assessment, fine, penalty, tax, fee (including any legal fee, expert fee, accounting fee, or advisory fee), charge, cost (including any cost of investigation), or expense of any nature that is directly or indirectly incurred by LSI or to which LSI may otherwise become subject (whether or not relating to any third-party claim) and that arises from or as a result of, or is directly or indirectly connected with:

(i) any interviews with Available Employees conducted by Purchaser, ON, or any other Subsidiary of ON or any decision or determination made by Purchaser, ON, or any other Subsidiary of ON regarding which Available Employees will become Specified Employees or will receive employment offers from Purchaser, ON, or any other Subsidiary of ON;

(ii) the employment of the Hired Employees by Purchaser, ON, or any of ON’s other Subsidiaries on or after the Closing Date;

(iii) the termination of any Hired Employee’s employment with Purchaser, ON, or any of ON’s other Subsidiaries on or after the Closing Date;

(iv) Purchaser’s breach of any of its obligations under this Section 4.1;

(v) Purchaser’s failure to provide notice, pay, or benefits or otherwise comply with the WARN Act relating to any of the Available Employees; or

 

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(vi) any suit or other legal proceeding related to any matter set forth in clause (i), (ii), (iii), (iv), or (v) of this Section 4.1(e) (including any legal proceeding commenced by LSI for the purpose of enforcing any of its rights under this Section 4.1(e));

provided, however, that Purchaser will not be obligated to indemnify or hold harmless LSI with respect to any claim asserted against LSI by any Hired Employee based upon the Transition Bonus Program (except to the extent that any such claim arises from Purchaser’s breach of any of its obligations under Section 4.1(a)(iv) or Section 4.1(d)).

(f) Indemnification by LSI. From and after the Closing, LSI will indemnify and hold harmless Purchaser from and against, and will compensate and reimburse Purchaser for, any loss, damage, injury, liability, claim, demand, settlement, judgment, award, notice requirement, payment, backpay, benefits assessment, fine, penalty, tax, fee (including any legal fee, expert fee, accounting fee, or advisory fee), charge, cost (including any cost of investigation), or expense of any nature that is directly or indirectly incurred by Purchaser or to which Purchaser may otherwise become subject (whether or not relating to any third-party claim) and that arises from or as a result of, or is directly or indirectly connected with:

(i) the employment or termination by LSI or any of its Subsidiaries of any Retained Employee;

(ii) the employment of the Available Employees by LSI or any of its Subsidiaries prior to the Closing Date;

(iii) the termination of any Available Employee’s employment with LSI or any of its Subsidiaries prior to the Closing Date;

(iv) LSI’s breach of any of its obligations under this Section 4.1 or Section 4.3;

(v) the Transition Bonus Program (except to the extent that a claim arises from Purchaser’s breach of any of its obligations under Section 4.1(a)(iv) or Section 4.1(d)); or

(vi) any suit or other legal proceeding related to any matter set forth in clause (i), (ii), (iii), (iv), or (v) of this Section 4.1(f) (including any legal proceeding commenced by Purchaser for the purpose of enforcing any of its rights under this Section 4.1(f));

provided, however, that LSI will not be obligated to indemnify or hold harmless Purchaser with respect to any claim that arises from or relates to any interviews with Available Employees conducted by Purchaser, or any decision or determination made by Purchaser regarding which Available Employees will become Specified Employees or will receive employment offers from Purchaser.

For purposes of Section 4.1(e) and this Section 4.1(f), a claim will be deemed to have been incurred on the date on which medical, dental, vision, life, disability, or other related health or

 

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welfare treatment or services was rendered and not the date of the submission of a claim related thereto.

(g) Employees on Leave or Disability. Notwithstanding anything to the contrary contained in this Section 4: Purchaser will not be required to offer employment to any Specified Employee who, at the Closing Date, is on short-term or long-term disability or long-term or short-term leave unless and until such Specified Employee returns to active work from such leave or disability, at which time he or she will be offered employment by Purchaser in accordance with Section 4.1(a); and Purchaser will have no obligation or liability for compensation or benefits of any such Specified Employee with respect to periods prior to the time he or she accepts such offer of employment and becomes a Hired Employee.

4.2 Termination at Closing. Effective as of the Closing Date, LSI will terminate the employment of each Hired Employee. After the Closing Date, LSI will not have any responsibility or obligation to Purchaser with respect to any Hired Employee, except for LSI’s obligation to report accurately to Purchaser the earned bonus amounts to be paid to Hired Employees pursuant to the Transition Bonus Program and to fund the amount of such payments pursuant to Section 4.1(d) and except as otherwise expressly set forth herein.

4.3 Hired Employee 401(k) Plan Accounts. LSI will (a) cause each Hired Employee to vest in his or her interest under LSI’s section 401(k) plan, (b) provide each Hired Employee with the right to receive a distribution of his or her interest under the LSI section 401(k) plan to the extent permitted by applicable Legal Requirements, and (c) provide each Hired Employee with an election to rollover his or her vested interest to a Purchaser section 401(k) plan. Purchaser will take all actions reasonably necessary to permit the Hired Employees to make a direct rollover of his or her entire account balance (including participant loans, to the extent not in default) to Purchaser’s section 401(k) plan, to the extent permitted by such plan of Purchaser. As a condition to Purchaser’s acceptance of any Hired Employee’s rollover of his or her vested interest, Purchaser will be entitled to receive from LSI an officer’s certificate or an opinion of counsel (with customary qualifications) to the effect that the LSI section 401(k) plan either (i) has received a recent favorable determination letter as to its qualification under the Code, and nothing has occurred since the date of such letter which could reasonably be expected to cause the loss of such qualification or (ii) substantially complies by its terms with the relevant qualification provisions of the Code and LSI will make such changes to the plan as are requested by the Internal Revenue Service as a condition of such qualification.

4.4 Nonsolicitation. Purchaser agrees that, during the period commencing on the Signing Date and ending on the first anniversary of the earlier of (a) the termination of this Agreement pursuant to Section 10 or (b) the Closing Date, neither ON nor any of its Subsidiaries (including Purchaser) will solicit for employment with ON or Purchaser (or any other Person) or hire any of the Retained Employees who remain employed by LSI or any Subsidiary of LSI. LSI agrees that, (x) during the period commencing on the Closing Date and ending on the first anniversary of the Closing Date, LSI will not solicit for employment with LSI or any other Person or hire any of the Hired Employees who remain employed by ON or Purchaser or any other Subsidiary of Purchaser, and (y) during the period commencing on the Signing Date and ending on the Closing Date, LSI will not solicit for employment with LSI or any other Person (other than Purchaser) any of the Specified Employees (it being understood open position

 

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postings, job requisitions, general employment advertisements, and similar internal or external notices published or circulated by LSI in the ordinary course of business will not be considered a violation of this clause (y)). However, this Section 4.4 will not be construed to prohibit any Party from placing general advertisements or similar notices that are not targeted specifically at employees of the other Parties or from engaging any recruiting firm or similar organization to identify or solicit persons for employment on behalf of such Party, as long as such recruiting firm or organization is not instructed to target any employees of the other Parties.

4.5 WARN Act. If Purchaser breaches its obligations under Section 4.1, then without limiting Purchaser’s obligations and liabilities under Section 4.1(e), Purchaser will be responsible for, and will indemnify and hold harmless LSI with respect to, any notices, payments, benefits, fines, penalties, backpay, and damages required under the WARN Act relating to the Available Employees.

 

5.	R EAL P ROPERTY M ATTERS

5.1 Completion of Land Survey. Purchaser will use its best efforts to cause the Survey to be completed, and to cause copies of the definitive ALTA Survey report to be delivered to the Parties, as soon as possible after the Signing Date. LSI will lend its full and timely support and cooperation to Purchaser with respect to the completion of the ALTA Survey as soon as possible after the Signing Date. However, neither LSI nor any of its Subsidiaries will be required to become subject to any Liabilities, or to incur any out-of-pocket costs or expenses or to pay any consideration to any Person, pursuant to this Section 5.1.

5.2 Lot Line Adjustment and Land Division

(a) The Gresham Facilities Real Property is anticipated generally to be the real property with the same or substantially the same boundaries as those indicated in the drawing attached as Schedule 1. Such real property is currently comprised of four legal parcels that can be conveyed at Closing without the need for a lot line adjustment or land division (the “Existing Legal Parcels”), and certain partial parcels that will need to be adjusted or created by means of the Lot Line Adjustment or the Land Division (as defined below) in order to be legally conveyable (the “Residual Real Property”).

(b) Promptly after the Signing Date, Sellers will diligently pursue its application, and will take all additional required action, under the ordinances, rules, and regulations of the City of Gresham, and, as applicable, the County of Multnomah (collectively, the “Applicable Authorities”) to either (i) legally adjust the boundaries of the Gresham Facilities Real Property so as to have the same or substantially the same boundaries as those indicated in the drawing attached as Schedule 1 pursuant to Chapter 92 of the Oregon Revised Statutes, and thereby to cause the Residual Real Property to be legally conveyable, or (ii) under the circumstances described in the penultimate sentence of this Section 5.2(b), cause the Residual Property to be legally partitioned or subdivided into one or more separate legal lots. LSI anticipates accomplishing the foregoing by means of an adjustment to the lot lines of adjacent lots owned by LSI Gresham Sub as permitted under Section 92.010(7)(b) of the Oregon Revised Statutes (the “Lot Line Adjustment”). If the Applicable Authorities make a final, non-appealable determination that they will not permit the Lot Line Adjustment, then upon obtaining knowledge

 

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of such decision, LSI will promptly undertake the required action to create such separate legal lot (or lots) by means of partition or subdivision of the larger parcel of property owned by Sellers and of which the Gresham Facilities Real Property is a part. This creation of such separate legal lot (or lots) by partition or subdivision is hereinafter referred to as the “Land Division.”

(c) Purchaser will lend its full and timely support and cooperation to Sellers (both before and, if applicable, after Closing) with respect to the Lot Line Adjustment. If the Applicable Authorities will not permit the creation of one or more separate legal lots for the Gresham Facilities Real Property by Lot Line Adjustment, Purchaser will lend its full and timely support and cooperation to Sellers with respect to the Land Division. Neither Purchaser nor any of its Subsidiaries will be required to become subject to any Liabilities, or to incur any out-of-pocket costs or expenses or to pay any consideration to any Person, pursuant to this Section 5.2.

(d) If, during the Pre-Closing Period, Purchaser receives notice of any Encumbrance on the Gresham Facilities Real Property that was not previously disclosed or known to Purchaser and that would cause the condition in Section 8.6 not to be satisfied, Purchaser will promptly notify LSI thereof in writing and LSI will use commercially reasonable efforts to cause such Encumbrance to be removed prior to the End Date.

5.3 Partial Sale Alternative. If the End Date has been extended pursuant to Section 10.1, but neither the Lot Line Adjustment nor the Land Division has been accomplished by June 30, 2006, then the Parties will proceed as follows (the “Partial Sale Alternative”):

(a) at the Closing, LSI will cause LSI Gresham Sub to execute and deliver to Purchaser a duly executed and acknowledged special warranty deed, in the form attached to this Agreement as Exhibit C, in favor of Purchaser with respect to the Existing Legal Parcels (the “First Deed”);

(b) at the Closing, LSI Gresham Sub and Purchaser will enter into a ground lease with respect to the Residual Real Property (the “Ground Lease”), the terms of which will be negotiated reasonably and in good faith by the Parties prior to the Closing and will be designed to put the Parties in as close to the same position, economically and otherwise (subject to Section 1.4(d)), as they would have been in if the Closing had occurred and the Parties had not proceeded with the Partial Sale Alternative (and if the Parties are unable to agree on any material terms in the Ground Lease, the dispute will be submitted to binding arbitration before a single arbitrator appointed by JAMS, who will have the power to determine such material terms based upon the foregoing);

(c) at the Closing, LSI Gresham Sub and Purchaser will enter into a memorandum of Lease with respect to the Residual Real Property (the “Memorandum of Lease”);

(d) at the Closing, LSI will deliver to Purchaser affidavits, each in the form attached hereto as Exhibit J and such other documents in favor of the Title Company (but not in favor of Purchaser) and relating to title insurance as are customarily provided by a seller and by a lessor to a title company in Multnomah County, Oregon;

 

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(e) after the Closing, the Parties will cooperate to complete the Lot Line Adjustment or the Land Division as quickly as reasonably possible; and

(f) the closing of the purchase of the Residual Real Property (the “Subsequent Closing”) will take place at a time and on a date to be designated by LSI in writing that is at least two Business Days but not more than ten Business Days after the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Section 5.3(g) (except for the condition set forth in Section 5.3(g)(iii), which by its nature can be satisfied only at the Subsequent Closing), and at the Subsequent Closing:

(i) LSI will deliver to Purchaser a recorded lot line adjustment deed or a partition or subdivision plat, evidencing the City of Gresham’s final approval of the Lot Line Adjustment or Land Division, as the case may be, after the expiration of the appeals period, if any, or entry of a final judgment upon any appeal affirming the Lot Line Adjustment or Land Division;

(ii) LSI will cause LSI Gresham Sub to execute and deliver to Purchaser a duly executed and acknowledged special warranty deed, in the form attached to this Agreement as Exhibit C, in favor of Purchaser with respect to the Residual Real Property (as the same may have been reconfigured during the Lot Line Adjustment or Land Division process (provided that the Residual Real Property will have the same or substantially the same boundaries as those indicated in the drawing attached as Schedule 1) so that the same is legally conveyable) (the “Second Deed”);

(iii) LSI will deliver to Purchaser an affidavit in the form attached hereto as Exhibit J and such other documents in favor of the Title Company (but not in favor of Purchaser) and relating to title insurance as are customarily provided by a seller to a title company in Multnomah County, Oregon;

(iv) if, and only if, the Subsequent Closing occurs after the Final Installment Date, Purchaser will deliver or cause to be delivered to LSI the $6,000,000 payment referred to in Section 1.4(d), and upon receipt of such payment, LSI will deliver to Purchaser a receipt for this payment;

(v) the Memorandum of Lease will be terminated; and

(vi) the Ground Lease will be terminated.

(g) LSI’s obligations under clause (f) above and Purchaser’s obligation to make the $6,000,000 payment referred to in Section 1.4(d) at the Subsequent Closing, will be subject to the following conditions:

(i) the Title Company must be committed to issue to Purchaser an ALTA Owner’s Policy of Title Insurance with the standard printed exceptions deleted, containing such endorsements as the Title Company has, prior to the date on which the Subsequent Closing occurs, agreed in a binding written commitment in favor of Purchaser and in a binding written commitment in favor of LSI (or LSI

 

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Gresham Sub), to issue, all dated the date and time of the recording of the Second Deed in an amount not less than $6,000,000, insuring Purchaser as owner of fee simple title to the Residual Real Property subject only to Permitted Encumbrances and any exceptions caused by, or resulting from actions or inactions of, ON or Purchaser or any other Subsidiary of ON;

(ii) no Governmental Order preventing, prohibiting, or making unlawful the sale of the Residual Real Property to Purchaser will have been issued by any United States federal or state court or, to the extent the failure to comply with such Governmental Order would result in the imposition on Purchaser or ON of a material fine, sanction, or penalty, by any other federal, state, or local Government Authority and remain in effect; and no United States federal, state, or local Legal Requirement that makes the sale of the Residual Real Property to Purchaser illegal will have been enacted or adopted and remain in effect (except where the failure to comply with such Legal Requirement would not result in the imposition on Purchaser or ON of a material fine, sanction, or penalty); and

(iii) the deliveries and actions set forth in Section 5.3(f) will be completed substantially concurrently.

5.4 Title Insurance. LSI will pay the “standard coverage” portion of the title insurance premium for each title insurance policy referred to in this Agreement insuring Purchaser, and Purchaser will pay the additional premium for extended coverage and the cost of the endorsements requested by Purchaser with respect to each such title insurance policy.

 

6.	P RE -C LOSING C OVENANTS OF LSI

6.1 Access. Subject to the provisions of the Confidentiality Agreement and to applicable Legal Requirements, during the period from the Signing Date through the Closing Date (the “Pre-Closing Period”), LSI will, after receiving reasonable advance notice from Purchaser, give Purchaser reasonable access (during normal business hours) to (a) the Gresham Facilities Real Property and to Sellers’ personnel and books and records relating to the Specified Assets, the Assumed Liabilities and the Available Employees, for the purposes of enabling Purchaser (i) to further investigate, at Purchaser’s sole expense, the Specified Assets and the Available Employees, and (ii) to verify the accuracy of the representations and warranties set forth in Section 2; and (b) such reasonably available additional existing financial and operating data and other information relating to the Specified Assets, the Assumed Liabilities and the operation of the Fab as Purchaser may from time to time reasonably request; provided, however , that except as provided in Section 4 or solely in connection with the performance and administration of the engineering services provided by LSI to Purchaser to evaluate the feasibility of the Trench 2 process, Purchaser will not (without LSI’s approval, which approval will not be unreasonably withheld, conditioned, or delayed) contact or otherwise communicate with any of the Available Employees.

6.2 Conduct of Fab Operations. Except (i) as expressly permitted by this Agreement or described in Part 6.2 of the Sellers Disclosure Schedule, (ii) as necessary to comply with any Legal Requirement, or (iii) with the express prior written consent of Purchaser

 

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(which consent will not be unreasonably withheld, conditioned, or delayed), during the Pre-Closing Period:

(a) LSI will, and will cause the other Sellers to, conduct the Fab Operations in the ordinary course of business consistent with past practice (except to the extent that the manufacture or testing of new or different products requires different practices);

(b) LSI will, and will cause the other Sellers to, use commercially reasonable efforts to maintain good relations with the Available Employees and the parties to the Significant Fab-Related Contracts;

(c) LSI will not, and will cause its Subsidiaries not to:

(i) sell, transfer, assign, lease, license, or otherwise dispose of any interest in any of the Specified Assets, except (A) to another Seller or (B) for the use of Fab Raw Materials Inventory and the license of Fab Intellectual Property in connection with the manufacture and sale of products in the ordinary course of business;

(ii) knowingly create or cause to exist, or knowingly and voluntarily permit to be created, any Encumbrance (other than Permitted Encumbrances, disregarding for this purpose clause (v)(B) of the definition thereof) on any Specified Asset in favor of any third party or assign ownership of, or grant any exclusive right or license to, any Licensed Intellectual Property to any Person other than another Subsidiary of LSI;

(iii) terminate (other than upon the expiration thereof in accordance with its terms), amend in any material respect, or assign to any Person other than another Seller any Fab-Related Contract, or waive or release any material post-Closing right or claim of any Seller under any of the Fab-Related Contracts, or enter into any Significant Fab-Related Contract or extend beyond the Closing Date the term of any Significant Fab-Related Contract;

(iv) enter into any compromise or settlement of any claim, legal proceeding, or governmental investigation relating to the Specified Assets or the Assumed Liabilities if such compromise or settlement would be reasonably expected to have a Seller Material Adverse Effect; or

(v) make any increase in the level of compensation or benefits applicable to any Specified Employees (except as required under the terms of applicable Benefit Plans or other Contracts as in effect on the Signing Date);

(vi) adopt, enter into, or amend any Benefit Plan or employment Contract with any Specified Employee or enter into, adopt, extend (beyond the Closing Date), renew or amend any collective bargaining agreement or other Contract with any labor organization, union, or association, except in each case as required by applicable Legal Requirements or with respect to any Person who is not a Specified Employee;

 

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(vii) terminate the employment of any Specified Employee, except for cause; or

(viii) authorize, or commit or agree (orally or in writing) to take, any of the foregoing actions.

(d) LSI will, and will cause its Subsidiaries to:

(i) maintain in full force and effect any Seller’s certificate of occupancy for the Gresham Facilities or any other Fab-Related Government Permit;

(ii) use commercially reasonable efforts to maintain the Fab Equipment and Fab IT Equipment and the Gresham Facilities Real Property in good working condition and repair in all material respects according to the standards maintained up to the Signing Date, subject to ordinary wear and tear;

(iii) maintain insurance for the Gresham Facilities Real Property and the Fab Tangible Personal Property (other than the Other Specified Manufacturing Equipment) in such amounts and of such kinds as are comparable to that in effect on the Signing Date, and with insurers of substantially the same or better financial condition, provided that such insurance remains available at commercially reasonable rates and terms; and

(iv) use commercially reasonable efforts to maintain normalized levels of spare parts and Raw Materials inventory at the Fab substantially in the ordinary course consistent with past practice.

6.3 HSR Filing. As promptly as possible after the Signing Date, LSI will file the notification form required to be filed on behalf of LSI under the HSR Act with respect to the transactions contemplated by this Agreement, and will request early termination of the applicable waiting period.

6.4 Notices. At least 10 days prior to Closing Date, LSI will give written notice to the Oregon Department of Environmental Quality of the Contemplated Transactions, as required by the equitable servitude and easement created by instrument, including the terms and provisions thereof, recorded September 15, 1997 as Recorder’s Fee No. 97140293, between LSI Logic Corporation and Department of Environmental Quality.

6.5 Consents. LSI will use commercially reasonable efforts during the Pre-Closing Period to obtain the Consents identified in Part 2.13 of the Sellers Disclosure Schedule. Neither LSI nor any of its Subsidiaries will be required to become subject to any Liabilities, or to incur any out-of-pocket costs or expenses or to pay any consideration to any Person, pursuant to this Section 6.5.

6.6 Cooperation. During the Pre-Closing Period: (a) LSI will cooperate with Purchaser, and respond promptly to requests from Purchaser, in connection with Purchaser’s preparations for the transition of the Fab operations to Purchaser and its Subsidiaries, including

 

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with respect to identification of third-party software licenses needed to enable Purchaser to operate the Fab immediately after the Closing Date; and (b) LSI will cooperate with Purchaser, as Purchaser may reasonably request, regarding Purchaser’s efforts to negotiate and enter into Contracts for the software, services, or other benefits provided to LSI or any of its Subsidiaries under Shared Contracts (“Replacement Contracts”). Neither LSI nor any of its Subsidiaries will be required to become subject to any Liabilities, or to incur any out-of-pocket costs or expenses or to pay any consideration to any Person, pursuant to this Section 6.6.

6.7 Conditions. During the Pre-Closing Period, LSI will use commercially reasonable efforts to cause the conditions set forth in Sections 8 and 9.6 to be satisfied on a timely basis.

 

7.	P RE -C LOSING C OVENANTS OF P URCHASER

7.1 Notification. During the Pre-Closing Period, subject to applicable Legal Requirements, Purchaser will provide LSI with prompt written notice, upon Purchaser obtaining knowledge thereof, of: (a) the receipt by ON or Purchaser or any of ON’s other Subsidiaries of any written notice of default under any ON Debt Instrument; (b) any change to the credit rating of ON or Purchaser, or the credit rating of any of ON’s or Purchaser’s publicly issued notes or securities, in each case issued by Standard & Poor’s Corporation or Moody’s Investor Service; and (c) the occurrence after the Signing Date of a Purchaser Material Adverse Effect; provided that the failure to deliver any such notice will not, in itself, cause any of the conditions in Sections 8 and 9 to fail to be satisfied.

7.2 HSR Filing. As promptly as possible after the Signing Date, Purchaser will file the notification form required to be filed on behalf of Purchaser under the HSR Act with respect to the transactions contemplated by this Agreement, and will request early termination of the applicable waiting period.

7.3 Consents; Releases. During the Pre-Closing Period, Purchaser will cooperate with LSI, as LSI may reasonably request, for the purpose of (i) attempting to obtain the Consents identified in Part 2.13 of the Sellers Disclosure Schedule and (ii) arranging for Sellers to be released and discharged from their obligations and other liabilities under the Significant Fab-Related Contracts. Neither Purchaser nor any of its Subsidiaries will be required to become subject to any Liabilities, or to incur any out-of-pocket costs or expenses or to pay any consideration to any Person, pursuant to this Section 7.3.

7.4 Cooperation. During the Pre-Closing Period, Purchaser will cooperate with LSI, and respond promptly to requests from LSI, in connection with the Sellers’ operation of the Fab during the Pre-Closing Period and Sellers’ preparations for the transition of the Fab operations to Purchaser and its Subsidiaries. In addition, during the Pre-Closing Period, Purchaser will cooperate with and reasonably assist Sellers, as Sellers may reasonably request, regarding the termination and winding up of any Contracts relating to the Seller’s operation of the Fab (including any Contracts with suppliers of equipment, spare parts, raw materials, services, or other items used in Sellers’ operation of the Fab) that will not be assumed by Purchaser at or after the Closing. Neither Purchaser nor any of its Subsidiaries will be required to become

 

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subject to any Liabilities, or to incur any out-of-pocket costs or expenses or to pay any consideration to any Person, pursuant to this Section 7.4.

7.5 Conditions. During the Pre-Closing Period, Purchaser will use commercially reasonable efforts to cause the conditions set forth in Sections 8.5, 8.6, and 9 to be satisfied on a timely basis.

 

8.	C ONDITIONS P RECEDENT TO P URCHASER ’ S O BLIGATION TO C LOSE

Purchaser’s obligation to purchase Sellers’ right, title, and interest in and to the Specified Assets and to take the other actions required to be taken by Purchaser at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (it being understood that (i) any one or more of the following conditions may be waived by Purchaser, in whole or in part, and (ii) by proceeding with the Closing, Purchaser will be deemed to have waived any of such conditions that remain unsatisfied):

8.1 Accuracy of Representations. Those representations and warranties of LSI set forth in Section 2 that refer specifically to and by their terms are made as of the Signing Date will have been accurate as of the Signing Date, and all other representations and warranties of LSI set forth in Section 2 will be accurate as of the Closing Date as if made on and as of the Closing Date, in each case without giving effect to any limitation on any representation or warranty indicated by the words “Seller Material Adverse Effect”, “in all material respects”, “in any material respect”, “material” or “materially”, except to the extent such limitation applies to a list expressly required by such representation or warranty to be set forth in the Sellers Disclosure Schedule or a Schedule to this Agreement; provided, however , that, for purposes of this Section 8.1, any inaccuracies in the representations and warranties of LSI will be disregarded if the facts or circumstances constituting or giving rise to such inaccuracies (considered collectively) do not have, and would not reasonably be expected to have, a Seller Material Adverse Effect. For purposes of determining whether such facts or circumstances have a Seller Material Adverse Effect, none of the following will be taken into account: (i) any adverse effect (including any claim, litigation, disruption of business relationships, or loss of employees) arising from or attributable to (A) the announcement or pendency of any of the Contemplated Transactions, or (B) changes after the Signing Date affecting the semiconductor industry or the U.S. economy generally; (ii) the taking of any action required by this Agreement or any of the Ancillary Agreements; (iii) any breach by Purchaser of this Agreement or the Confidentiality Agreement; and (iv) any change after the Signing Date in applicable Legal Requirements or the interpretation thereof.

8.2 Performance of Covenants. LSI will have performed, in all material respects, all covenants required by this Agreement to be performed by LSI on or before the Closing Date.

8.3 HSR Act. The waiting period applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act will have expired or been terminated.

8.4 Additional Documents. LSI will have delivered to Purchaser all of the items specified to be delivered by LSI in Section 1.10 and any other item expressly required by the terms of this Agreement to be delivered by LSI at or prior to the Closing.

 

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8.5 No Restraints. No Governmental Order preventing, prohibiting, or making unlawful the consummation of the Contemplated Transactions will have been issued by any United States federal or state court or, to the extent the failure to comply with such Governmental Order would result in the imposition on Purchaser or ON of a material fine, sanction, or penalty, by any other federal, state, or local Government Authority and remain in effect as of the Closing Date; and no United States federal, state, or local Legal Requirement that makes consummation of the Contemplated Transactions illegal will have been enacted or adopted and remain in effect as of the Closing Date (except where the failure to comply with such Legal Requirement would not result in the imposition on Purchaser or ON of a material fine, sanction, or penalty).

8.6 Title

(a) If the Parties do not proceed with the Partial Sale Alternative, the Title Company will be committed to issue to Purchaser an ALTA Owner’s Policy of Title Insurance with the standard printed exceptions deleted, containing such endorsements as the Title Company has, prior to the Closing Date, agreed in a binding written commitment in favor of Purchaser and in a binding written commitment in favor of LSI (or LSI Gresham Sub), to issue, all dated the date and time of the recording of the Deed in an amount not less than $12,000,000, insuring Purchaser as owner of fee simple title to the Gresham Facilities Real Property subject only to Permitted Encumbrances and any exceptions caused by, or resulting from actions or inactions of, ON or Purchaser or any other Subsidiary of ON.

(b) If the Parties proceed with the Partial Sale Alternative, (i) the Title Company will be committed to issue to Purchaser an ALTA Owner’s Policy of Title Insurance with the standard printed exceptions deleted, containing such endorsements as the Title Company has, prior to the Closing Date, agreed in a binding written commitment in favor of Purchaser and in a binding written commitment in favor of LSI (or LSI Gresham Sub), to issue, all dated the date and time of the recording of the First Deed in an amount not less than $6,000,000, insuring Purchaser as owner of fee simple title to the Existing Legal Parcels subject only to Permitted Encumbrances and any exceptions caused by, or resulting from actions or inactions of, ON or Purchaser or any other Subsidiary of ON; and (ii) the Title Company will be committed to issue to Purchaser an ALTA Leasehold Policy of Title Insurance with the standard printed exceptions deleted, containing such endorsements as the Title Company has, prior to the Closing Date, agreed in a binding written commitment in favor of Purchaser and in a binding written commitment in favor of LSI (or LSI Gresham Sub), to issue, all dated the date and time of the Closing in an amount not less than $6,000,000, insuring Purchaser as owner of a leasehold interest in the Residual Real Property subject only to the Lease and Permitted Encumbrances and any exceptions caused by, or resulting from actions or inactions of, ON or Purchaser or any other Subsidiary of ON.

(c) Notwithstanding the foregoing or any other provision of this Agreement, the condition described in this Section 8.6 will be deemed satisfied on the End Date if the Title Company is unable to so commit solely as a result of Purchaser’s failure to use reasonable efforts to obtain such title insurance commitment, Purchaser’s failure to use reasonable efforts to satisfy the requirements of the applicable title insurance commitment, Purchaser’s failure to use

 

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reasonable efforts to obtain the ALTA Survey, or Purchaser’s creation of liens or exceptions to title other than Permitted Encumbrances.

8.7 Completion of Lot Line Adjustment or Land Division. The Lot Line Adjustment or the Land Division will have been accomplished (and the appeals period, if any, for the Lot Line Adjustment or Land Division will have expired without any Person having instituted an appeal, or all such appeals will have been resolved affirming the Lot Line Adjustment or Land Division) such that the Gresham Facilities Real Property has the same or substantially the same boundaries as those indicated in the drawing attached as Schedule 1; provided, however, that if neither the Lot Line Adjustment nor the Land Division has been so accomplished as of June 30, 2006, then the Parties will proceed in accordance with Section 5.3, in which case this condition will be deemed to have been waived automatically by Purchaser.

8.8 No Seller Material Adverse Effect. Since the Signing Date, no event will have occurred, and no circumstance or condition will have arisen, that has had or would reasonably be expected to have a material adverse effect on the operational capability and performance of the Gresham Facilities, such that, upon the Closing, the Gresham Facilities could not reasonably be used under normal operating conditions to perform the obligations of Purchaser under the Wafer Supply Agreement in material compliance with the standards and requirements set forth in the Wafer Supply Agreement.

8.9 Employee Condition. The Employee Condition will be satisfied as of the Closing.

 

9.	C ONDITIONS P RECEDENT TO LSI’ S O BLIGATION TO C LOSE

LSI’s obligation to cause Sellers to sell and transfer their right, title, and interest in and to the Specified Assets to Purchaser and to take the other actions required to be taken by Sellers at the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (it being understood that (i) any one or more of the following conditions may be waived by LSI, in whole or in part, and (ii) by proceeding with the Closing, LSI will be deemed to have waived any of such conditions that remain unsatisfied):

9.1 Accuracy of Representations. All representations and warranties of Purchaser set forth in Section 3 will be accurate as of the Closing Date as if made on and as of the Closing Date, without giving effect to any limitation on any representation or warranty indicated by the words “Purchaser Material Adverse Effect”, “in all material respects”, “in any material respect”, “material” or “materially”; provided, however , that, for purposes of this Section 9.1, any inaccuracies in the representations and warranties of Purchaser will be disregarded if the facts or circumstances constituting or giving rise to such inaccuracies (considered collectively) do not have, and would not reasonably be expected to have, a Purchaser Material Adverse Effect.

9.2 Performance of Covenants. Purchaser will have performed, in all material respects, all covenants required by this Agreement to be performed by Purchaser on or before the Closing Date.

9.3 HSR Act. The waiting period applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act will have expired or been terminated.

 

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9.4 Delivery of Consideration. LSI will have received the Deposit and the Closing Cash Payment.

9.5 Additional Documents. Purchaser will have delivered to LSI all of the items specified to be delivered by Purchaser in Section 1.10 and any other item expressly required by the terms of this Agreement to be delivered by Purchaser at or prior to the Closing.

9.6 No Restraints. No Governmental Order preventing, prohibiting, or making unlawful the consummation of the Contemplated Transactions will have been issued since the Signing Date by any United States federal or state court, or, to the extent the failure to comply with such Governmental Order would result in the imposition on LSI or any of its Subsidiaries of a material fine, sanction, or penalty, by any other federal, state, or local Government Authority and remain in effect as of the Closing Date; and no United States federal, state, or local Legal Requirement that makes consummation of the Contemplated Transactions illegal will have been enacted or adopted since the Signing Date and remain in effect as of the Closing Date (except where the failure to comply with such Legal Requirement would not result in the imposition on LSI or any of its Subsidiaries of a material fine, sanction, or penalty).

9.7 Completion of Lot Line Adjustment or Land Division. The Lot Line Adjustment or the Land Division will have been accomplished (and the appeals period, if any, for the Lot Line Adjustment or Land Division will have expired without any Person having instituted an appeal, or all such appeals will have been resolved) such that the Gresham Facilities Real Property has the same or substantially the same boundaries as those indicated in the drawing attached as Schedule 1; provided, however, that if neither Lot Line Adjustment nor the Land Division has been so accomplished as of June 30, 2006, then this condition will be deemed to have been waived automatically by LSI.

9.8 Material Adverse Effect. Since the Signing Date, no event will have occurred, and no circumstance or condition will have arisen, that has had or would reasonably be expected to have a Purchaser Material Adverse Effect.

 

10.	T ERMINATION

10.1 Right to Terminate Agreement. This Agreement may be terminated prior to the Closing:

(a) by the mutual written consent of the Parties;

(b) by either LSI or Purchaser (by delivery of a written termination notice in accordance with Section 10.2) at any time after the End Date if the Closing has not taken place on or before the End Date ( provided, however, that the right to terminate this Agreement under this Section 10.1(b) will not be available to any Party whose failure to fulfill any obligation under this Agreement was the cause of, or resulted in, the failure of the Closing to occur prior to the End Date);

(c) by LSI (by delivery of a written termination notice in accordance with Section 10.2) if (i) there has been a breach on the part of Purchaser of any of its covenants such that the condition set forth in Section 9.2 would not be satisfied as of the

 

33

time of such breach, (ii) LSI has given written notice of such breach to Purchaser, (iii) at least twenty days have elapsed since the delivery of such written notice to Purchaser, and (iv) such breach has not been cured in all material respects;

(d) by Purchaser (by delivery of a written termination notice in accordance with Section 10.2) if (i) there has been a breach on the part of LSI of any of its covenants such that the condition set forth in Section 8.2 would not be satisfied as of the time of such breach, (ii) Purchaser has given written notice of such breach to LSI, (iii) at least twenty days have elapsed since the delivery of such written notice to LSI, and (iv) such breach has not been cured in all material respects; or

(e) by Purchaser if (i) it receives notice of any Encumbrance on the Gresham Facilities Real Property that is not a Permitted Encumbrance and that would reasonably be expected to have a Seller Material Adverse Effect, (ii) Purchaser delivers a notice to LSI, within five Business Days after Purchaser receives such notice, stating Purchaser’s intention to terminate this Agreement due to such Encumbrance, (iii) such Encumbrance has not been removed and LSI has not taken action to mitigate such Encumbrance such that such Encumbrance no longer has a Seller Material Adverse Effect, (iv) a period of ten (10) days has elapsed since the delivery of such notice to LSI and LSI has not delivered a notice to Purchaser stating that LSI will diligently pursue removal of such Encumbrance, and (v) Purchaser delivers a written termination notice in accordance with Section 10.2 to LSI within three Business Days after the expiration of such ten-day period.

If Purchaser does not deliver a written termination notice to LSI pursuant to Section 10.1(e) within three Business Days after the expiration of the ten-day period referred to in Section 10.1(e), then the Encumbrance referred to in Section 10.1(e) will be deemed to be a Permitted Encumbrance. For purposes of this Agreement, “End Date” means May 31, 2006; provided, however, that if on May 31, 2006, the conditions set forth in Section 8.7 and Section 9.7 (Completion of Lot Line Adjustment or Land Division) have not been satisfied and each of the other conditions set forth in Sections 8 and 9 has been satisfied or waived (other than the conditions set forth in Sections 8.4, 9.4, and 9.5, which by their nature are to be satisfied at the Closing, and other than the condition set forth in Section 8.6), the End Date will be automatically extended to June 30, 2006.

10.2 Termination Procedures. If either Purchaser or LSI wishes to terminate this Agreement pursuant to Section 10.1, such Party will deliver to the other Party a written termination notice stating that such Party is terminating this Agreement and setting forth a brief statement of the basis on which such Party is terminating this Agreement.

10.3 Effect of Termination. Upon the termination of this Agreement pursuant to Section 10.1, neither Party will have any obligation or other Liability to the other Party, except that: (a) the Parties will remain bound by the provisions of Section 4.4, this Section 10.3, and Section 13 and by the provisions of the Confidentiality Agreement; (b) neither Party will be relieved of any Liability for any breach of its obligation to consummate the transactions contemplated by this Agreement or its obligation to take any other action required to be taken by

 

34

such Party at or before the Closing; and (c) LSI will be entitled to retain the Deposit if, and only if:

 

(i)

either Party has terminated this Agreement pursuant to Section 10.1(b); and

 

(ii)

the Closing has not taken place by the End Date because of (A) breaches of, or inaccuracies in, the representations made by Purchaser in Section 3, as a result of which the Closing condition in Section 9.1 was not satisfied as of the End Date, (B) breaches of the covenants made by Purchaser in this Agreement, as a result of which the Closing condition in Section 9.2 was not satisfied as of the End Date, or (C) the occurrence of an event, circumstance, or condition that has had or would reasonably be expected to have a Purchaser Material Adverse Effect, as a result of which the Closing condition in Section 9.8 was not satisfied as of the End Date; and

 

(iii)

all of the conditions set forth in Section 8 were satisfied on the End Date, other than (x) the condition set forth in Section 8.4, which by its nature is to be satisfied at the Closing, and (y) any other condition whose failure to be satisfied results solely from Purchaser’s material breach of this Agreement.

If Purchaser is not entitled to a refund of the Deposit pursuant to clause (c) of the preceding sentence, then without limiting any right or remedy that LSI might otherwise be entitled to exercise with respect to any breach by Purchaser of any provision of this Agreement or the Confidentiality Agreement, LSI will be entitled to retain the Deposit free of any claims by Purchaser. If LSI is not entitled to retain the Deposit pursuant to this Section 10.3, LSI will refund the Deposit to Purchaser within five days after the termination of this Agreement, unless there is a good faith dispute regarding whether LSI is entitled to retain the Deposit.

 

11.	I NDEMNIFICATION

11.1 Survival. The representations and warranties of the Parties set forth in Sections 2 and 3 and in their respective Closing Certificates, and the rights of the Parties to assert claims based on actual or alleged breaches of the covenants in Section 6 and Section 7, will survive the Closing but will terminate and expire, and will cease to be of any force or effect, at 10:00 a.m. (Pacific time) on the first anniversary of the Closing Date and all Liability of the Parties pursuant to Sections 11.2(a), 11.2(b), 11.4(a) and 11.4(b) with respect to such representations, warranties, and covenants will thereupon be extinguished; provided, however , that if, prior to such first anniversary, either Purchaser or LSI has duly delivered to the other Party, in conformity with all of the applicable procedures set forth in Section 11.9, a Claim Notice setting forth a claim for indemnification based upon the other Party’s breach of any of such representations, warranties, or covenants, then the specific claim set forth in such Claim Notice will survive (and will not be extinguished upon) such first anniversary.

11.2 Indemnification by LSI. Subject to the limitations set forth in Section 11.1 and Section 11.3 and elsewhere in this Section 11, from and after the Closing Date, LSI will indemnify Purchaser and its Subsidiaries and each of their respective officers, directors,

 

35

[*]	Portions denoted with an asterisk on this page have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

employees, agents, and representatives in their capacities as such (collectively, the “Purchaser Indemnified Persons”) against all Damages incurred or sustained by any such Purchaser Indemnified Person to the extent resulting from:

 

(a)

any breach of the representations and warranties of LSI set forth in Section 2 of this Agreement or in LSI’s Closing Certificate;

 

(b)

any breach by LSI of any of its covenants set forth in Section 6 of this Agreement;

 

(c)

any of the Retained Liabilities;

 

(d)

(i) any pending or future dispute between LSI or any of its Subsidiaries and [*] in respect of the [*], (ii) the termination of the [*] pursuant to Section [*], (iii) the use and occupancy of the Gresham Facilities Real Property or any portion thereof by [*] or its agents or contractors prior to the Closing, or (iv) the use and occupancy of the Gresham Facilities Real Property or any portion thereof by [*] or its agents or contractors, to the extent such use and occupancy is made pursuant to the [*] or otherwise is substantially consistent with the pattern of such use and occupancy during the six-month period prior to the Closing Date, or the termination of such use and occupancy (other than such use or occupancy as to which Purchaser may expressly consent in writing after the Closing); or

 

(e)

the SIP or the SIP Bonds and Related Documents or the termination or unwinding of the SIP or the SIP Bonds and Related Documents.

11.3 Limitations on LSI’s Indemnification Obligations

(a) LSI will not be required to indemnify any Purchaser Indemnified Person pursuant to Section 11.2(a) or Section 11.2(b), except to the extent that the cumulative amount of the Damages for which LSI, but for this Section 11.3(a), would be liable under Section 11.2(a) or Section 11.2(b) exceeds $2,100,000 (the “Deductible Amount”); and LSI will be required to pay, and will be liable for, only the cumulative amount of such excess; provided that the limitation set forth in this Section 11.3(a) will not apply to indemnification pursuant to Section 11.2(b) to the extent that Damages result from any willful breach by LSI of any covenant in Section 6.2(c).

(b) The total amount of the payments that LSI can be required to make to all Purchaser Indemnified Persons pursuant to Sections 11.2(a) and (b) will be limited in the aggregate to a maximum of $10,500,000; provided that the limitation set forth in this Section 11.3(b) will not apply to indemnification pursuant to Section 11.2(b) to the extent that Damages result from any willful breach by LSI of any covenant in Section 6.2(c).

(c) LSI will not have liability to any Purchaser Indemnified Person for amounts claimed under Section 11.2(a) to the extent LSI proves that (i) any member of the Purchaser Knowledge Group had actual knowledge at the Signing Date of the facts and circumstances of the breach or breaches underlying such claims and (ii) based on such facts and circumstances, as of the Signing Date such breach or breaches would have reasonably been expected to give rise to Damages exceeding $5,000,000 in the aggregate.

 

36

11.4 Indemnification by Purchaser. Subject to the limitations set forth in Section 11.1 and Section 11.5 and elsewhere in this Section 11, from and after the Closing Date, Purchaser will indemnify LSI and its Subsidiaries and each of their respective officers, directors, employees, agents and representatives (collectively, the “Seller Indemnified Persons”) against all Damages incurred or sustained by any such Seller Indemnified Person to the extent resulting from:

 

(a)

any breach of the representations and warranties of Purchaser set forth in Section 3 of this Agreement or in Purchaser’s Closing Certificate;

 

(b)

any breach by Purchaser of any of the covenants set forth in Section 7 of this Agreement;

 

(c)

all Environmental Liabilities arising or resulting from Purchaser’s, ON’s, and any of ON’s other Subsidiaries’ activities at and operation of the Gresham Facilities Real Property after the Closing Date, except to the extent such Environmental Liabilities constitute Retained Liabilities; or

 

(d)

any of the Assumed Liabilities.

11.5 Limitations on Purchaser’s Indemnification Obligations

(a) Purchaser will not be required to indemnify any Seller Indemnified Person pursuant to Section 11.4(a) or Section 11.4(b), except to the extent that the cumulative amount of the Damages for which Purchaser, but for this Section 11.5(a), would be liable under Section 11.4(a) or Section 11.4(b) exceeds the Deductible Amount; and Purchaser will be required to pay, and will be liable for, only the cumulative amount of such excess.

(b) The total amount of the payments that Purchaser can be required to make to all Seller Indemnified Persons pursuant to Sections 10.4(a) and (b) will be limited in the aggregate to a maximum of $10,500,000.

(c) Purchaser will not have liability to any Seller Indemnified Person for amounts claimed under Section 11.4(a) to the extent Purchaser proves that (i) any member of the Seller Knowledge Group had actual knowledge at the Signing Date of the facts and circumstances of the breach or breaches underlying such claims and (ii) based on such facts and circumstances, as of the Signing Date such breach or breaches would have reasonably been expected to give rise to Damages exceeding $5,000,000 in the aggregate.

11.6 Right of Subrogation. To the extent an Indemnified Party receives any payment from an Indemnifying Party in respect of Damages, and such Indemnified Party could have recovered or could later have recovered all or a part of such Damages from a third party (including any insurer) based on the underlying claim or demand asserted against such Indemnifying Party, then such Indemnifying Party will be entitled to exercise, and will be subrogated to, any rights and remedies of such Indemnified Party (including rights of indemnity, rights of contribution, and other rights of recovery) to the extent necessary to permit such Indemnifying Party to recover from such third party the amount of such payment. Such Indemnified Party will take such actions as such Indemnifying Party may reasonably request for

 

37

the purpose of enabling such Indemnifying Party to perfect or exercise such Indemnifying Party’s right of subrogation hereunder.

11.7 Insurance; Set-off. The amount of any Damages for which indemnification is provided under Section 11.2 or Section 11.4 will be net of any amounts actually recovered by the Indemnified Party under insurance policies. Except as may be otherwise expressly provided in any Ancillary Agreement, no Party nor any of its Subsidiaries will have any right to set-off any payment due pursuant to any Ancillary Agreement against any unresolved indemnification claim.

11.8 Exclusive Remedy

(a) From and after the Closing, the rights to assert indemnification claims and receive indemnification payments pursuant to Section 11 will be the sole and exclusive right and remedy exercisable by any Party or any of its Subsidiaries with respect to any breach of any representation or warranty set forth in Section 2 or Section 3 or in any Party’s Closing Certificate or the nonperformance of any covenant set forth in Section 6 or Section 7 of this Agreement, except that this exclusive remedy does not preclude any Party or any of its Subsidiaries from bringing an action for common law intentional fraud against a Person who has committed such fraud.

(b) Except as expressly provided in Section 11.2, no Seller and no current or former stockholder, director, officer, employee, affiliate, or advisor of any Seller will have any personal or individual Liability of any nature to Purchaser with respect to any inaccuracy of any representation or warranty made by LSI in Section 2. The Parties acknowledge that (A) no current or former stockholder, director, officer, employee, affiliate, or advisor of any Seller has made or is making any representations, warranties, or commitments whatsoever regarding the subject matter of this Agreement, express or implied, (B) except as expressly provided in Section 2 and LSI’s Closing Certificate, no Seller has made or is making any representations or warranties whatsoever regarding the subject matter of this Agreement, express or implied, and (C) except for the representations and warranties expressly provided in Section 2 and LSI’s Closing Certificate, Purchaser is not relying or has relied on any representations or warranties whatsoever regarding the subject matter of this Agreement, express or implied. W ITHOUT LIMITING THE GENERALITY OF THE FOREGOING , EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY PROVIDED IN S ECTION  2 AND LSI’ S C LOSING C ERTIFICATE , THE F AB T ANGIBLE P ERSONAL P ROPERTY , F AB I NTELLECTUAL P ROPERTY , O THER S PECIFIED M ANUFACTURING E QUIPMENT , AND L ICENSED I NTELLECTUAL P ROPERTY WILL BE SOLD , TRANSFERRED , OR LICENSED “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS” AND S ELLERS EXPRESSLY DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY , TITLE , NON - INFRINGEMENT , OR FITNESS FOR A PARTICULAR PURPOSE .

(c) Except as expressly provided in Section 11.4, neither Purchaser nor any current or former stockholder, director, officer, employee, affiliate, or advisor of ON or Purchaser will have any personal or individual Liability of any nature to LSI with respect to any inaccuracy of any representation or warranty made by Purchaser in Section 3. The Parties acknowledge that (A) no current or former stockholder, director, officer, employee, affiliate, or advisor of ON or Purchaser has made or is making any representations, warranties, or commitments whatsoever regarding the subject matter of this Agreement, express or implied,

 

38

(B) except as expressly provided in Section 3 and Purchaser’s Closing Certificate, Purchaser has not made or is not making any representations or warranties whatsoever regarding the subject matter of this Agreement, express or implied, and (C) except for the representations and warranties expressly provided in Section 3 and Purchaser’s Closing Certificate, LSI is not relying and has not relied on any representations or warranties whatsoever regarding the subject matter of this Agreement, express or implied.

11.9 Procedures for Indemnification Claims

(a) Claim Notices. A Person (the “Indemnified Party”) that wishes to assert an indemnification claim pursuant to Section 11.2 or Section 11.4 will promptly deliver to the Person liable for such indemnification (the “Indemnifying Party”) a written notice (a “Claim Notice”) of any Matter which the Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement (it being understood that no Claim Notice may be delivered unless the Indemnified Party has reasonably determined, on the basis of facts known to such Indemnified Party, that the claim set forth in such Claim Notice is valid and not a speculative claim and has given or is reasonably likely to give rise to Damages of the Indemnified Party) and, to the extent known:

(i) a reasonably detailed description of the facts and circumstances giving rise to the claim for indemnification; and

(ii) a reasonably detailed description of, and a good faith estimate of the total amount of, the Damages actually incurred to the date of such Claim Notice as a result of such claim;

provided , however , that in the event of any claim for indemnification hereunder resulting from or in connection with any Matter brought or asserted by any third Person (a “Third Party Claim”) against an Indemnified Party, such Indemnified Party will give notice thereof to the Indemnifying Party (x) not later than ten Business Days prior to the time any response to the Third Party Claim is required, if reasonably practicable, and (y) in any event within five Business Days following receipt of notice thereof; provided , further , that failure to give such notification will not affect the rights to indemnification provided hereunder except to the extent the Indemnifying Party is actually prejudiced as a result of such failure.

(b) Third Party Claims. The Indemnifying Party will have the right, at its own expense, to assume the defense of any Third Party Claim by written notice within 30 calendar days. If the Indemnifying Party so elects:

(i) the Indemnifying Party will employ counsel selected by it and reasonably acceptable to the Indemnified Party (provided that such counsel has no conflict of interest) and will assume and defend any such Third Party Claim at its own costs and expense, subject to Section 11.3(b) and Section 11.5(b);

(ii) as long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party will not be required to pay or otherwise indemnify the Indemnified Party against any attorneys’ fees or other expenses of counsel incurred on behalf of such Indemnified Party in connection with such Third Party

 

39

Claim; however, the Indemnified Party will be entitled to participate in (but not control) such defense at its own expense;

(iii) the Indemnifying Party and the Indemnified Party will cooperate in all aspects of such Third Party Claim, including by providing the other Party or its agents with reasonable access to employees and officers (including as witnesses) and all books, records, and other documents and materials that are under the control of such Party or any of such Party’s Subsidiaries, advisors, or representatives and that are reasonably required for such Party’s use in contesting such Third Party Claim;

(iv) the Indemnifying Party will not compromise, settle, adjust, or consent to the entry of any judgment with respect to such Third Party Claim without the prior written consent of the Indemnified Party (which consent will not be unreasonably withheld, delayed or conditioned), unless the judgment or proposed settlement by its terms: (A) obligates the Indemnifying Party to pay the full amount of the Liability in connection with such Third Party Claim without reimbursement from or contribution by the Indemnified Party; (B) releases the Indemnified Party completely in connection with such Third Party Claim; (C) does not impose an injunction or other equitable relief upon the Indemnified Party; and (D) does not otherwise adversely affect the Indemnified Party;

(v) the Indemnified Party will not compromise, settle, adjust, or consent to the entry of any judgment with respect to such Third Party Claim without the prior written consent of the Indemnifying Party (which consent will not be unreasonably withheld, delayed, or conditioned), unless the judgment or proposed settlement by its terms: (A) obligates the Indemnified Party to pay the full amount of the Liability in connection with such Third Party Claim without reimbursement from or contribution by the Indemnifying Party; (B) releases the Indemnifying Party completely in connection with such Third Party Claim; (C) does not impose an injunction or other equitable relief upon the Indemnifying Party; and (D) does not otherwise adversely affect the Indemnifying Party;

(vi) subject to the provisions of clause (iv) and clause (v) of this Section 11.9(b), the Indemnified Party and the Indemnifying Party will (and will cause its respective Subsidiaries to) execute such documents and take such other actions as the other Party may reasonably request for the purpose of facilitating the defense of, or any settlement, compromise, or adjustment relating to, such Third Party Claim.

If the Indemnifying Party elects not to assume the defense of such Third Party Claim, then the Indemnified Party will be entitled to defend such Third Party Claim in such manner as it may deem appropriate, including settling, compromising, adjusting, or consenting to the entry of any judgment with respect to such Third Party Claim; provided, however , the Indemnified Party will not compromise, settle, adjust, or consent to the entry of any judgment with respect to such Third Party Claim without the prior written consent of the Indemnifying Party (which consent will not be unreasonably withheld, delayed, or conditioned), unless the judgment or proposed settlement by its terms: (A) obligates the Indemnified Party to pay the full amount of the Liability in

 

40

connection with such Third Party Claim without reimbursement from or contribution by the Indemnifying Party; (B) releases the Indemnifying Party completely in connection with such Third Party Claim; (C) does not impose an injunction or other equitable relief upon the Indemnifying Party; and (D) does not otherwise adversely affect the Indemnifying Party.

(c) Environmental Claims. If Purchaser receives any claim, including any inquiry or request for information from a Government Authority, pertaining to a matter that Purchaser believes, in good faith, might result in an Environmental Liability for which Purchaser is entitled to indemnification pursuant to Section 11.2 (an “Environmental Claim”), Purchaser will promptly deliver a Claim Notice to LSI pursuant to Section 11.9(a). Notwithstanding anything to the contrary in Section 11.9(b) or elsewhere in this Agreement, Purchaser will have the duty to respond to such Environmental Claim, at its sole cost and expense, until such time as Purchaser is able to establish that such Environmental Claim would reasonably be expected to result in an Environmental Liability for which Purchaser is entitled to indemnification pursuant to Section 11.2. The duty to respond includes any and all investigations or requests for information required by any Government Authority. Purchaser and LSI will mutually cooperate in response of any such Environmental Claim. LSI and Purchaser each will have a continuing right to participate, at its own cost, and provide its own response to any such Environmental Claim.

11.10 Tax Effects of Indemnity Payments. All indemnification payments made pursuant to this Section 11 will be treated for all Tax purposes as adjustments to the consideration paid with respect to the Specified Assets and the Licensed Intellectual Property.

 

12.	P OST -C LOSING C OVENANTS

12.1 Access to Information. At all times after the Closing Date, each Party will, and will cause its Subsidiaries to, at the other Party’s reasonable request, give the other Party and its advisors and representatives reasonable access, during normal business hours and upon reasonable notice, to the first Party’s books and records to the extent related to the operation of the Fab prior to the Closing, and will furnish copies thereof, at the requesting Party’s expense, for legitimate business reasons including (a) in connection with Matters and other regulatory or legal proceedings involving the operation of the Fab prior to the Closing and (b) verifying the accuracy of calculations made pursuant to this Agreement (including, for example, the prorations and adjustments contemplated by Section 1.8); provided that such access does not unreasonably disrupt the normal operations of such Party or its Subsidiaries. Without limiting the generality of the foregoing, Purchaser will provide LSI with reasonable access to, and permit LSI at its sole expense to make copies of, any and all Fab Information in existence as of Closing, as reasonably requested by LSI.

12.2 Further Assurances. From and after the Closing Date, each Party will and will cause its Subsidiaries to, to the extent reasonably requested by another Party, execute and deliver such documents and instruments and take such other actions as the other Party may reasonably request in order to consummate and make effective the transactions contemplated by this Agreement.

 

41

12.3 Certain Contracts and Permits

(a) With respect to any Long-Term Supply Contract that is not assigned to Purchaser at the Closing, during the period from the Closing Date until (i) LSI (or the Subsidiary of LSI that is party to the Long-Term Supply Contract) is able to terminate such Long-Term Supply Contract without incurring any termination fees, penalties, or similar Liabilities and (ii) Purchaser has made alternative arrangements for the continued supply of the products or services provided pursuant to such Long-Term Supply Contract, Purchaser will, at its own expense, act as the agent of LSI (or its Subsidiary) in submitting forecasts to the supplier, in ordering, purchasing, and paying for products and services, and in otherwise carrying out LSI’s (or its Subsidiary’s) rights (other than termination rights) and obligations under the Long-Term Supply Contract. Purchaser acknowledges and agrees that the products and services it purchases as LSI’s (or LSI’s Subsidiary’s) agent under a Long-Term Supply Contract will be used to produce products that will be sold, or provide services that will be rendered, to LSI under the Wafer Supply Agreement, and that Purchaser will not be entitled to any separate reimbursement from LSI for amounts paid by Purchaser as LSI’s (or LSI’s Subsidiary’s) agent to a supplier under a Long-Term Supply Contract other than the amounts paid by LSI to Purchaser pursuant to the Wafer Supply Agreement. Each of LSI and Purchaser will, and will cause its respective Subsidiaries to, take such actions, in connection with any such Long-Term Supply Contract, as are reasonably necessary so that LSI and its Subsidiaries will remain at all times in compliance in all material respects with their obligations under such Long-Term Supply Contracts and to prevent the imposition of termination fees, penalties, or other Liabilities (other than routine payment obligations associated with the purchase of products and services) on LSI or any of its Subsidiaries, unless LSI has given its prior written consent thereto. In addition, Purchaser will defend, indemnify, and hold harmless LSI and its Subsidiaries from and against, all Damages incurred or sustained by LSI and its Subsidiaries that arise or result from any failure by Purchaser (or any other Subsidiary of ON) to comply with the terms of any such Long-Term Supply Contract (including payment terms) when carrying out LSI’s (or its Subsidiary’s) rights and obligations under the Long-Term Supply Contract. LSI will not, and will cause its Subsidiaries not to, amend any such Long-Term Supply Contract or waive any material right thereunder during the period referred to in the first sentence of this Section 12.3(a) without the prior written consent of Purchaser, which will not be unreasonably withheld, conditioned, or delayed.

(b) Except as may be otherwise provided in the Ancillary Agreements, with respect to each Shared Contract that is not replaced by a Contract of Purchaser as of the Closing Date, the Parties will enter into an alternative, lawful arrangement under which Purchaser (or one or more other designated ON Subsidiaries) will have the material benefits of such Shared Contract that are applicable to the operation of the Fab, during the period from the Closing Date until a Replacement Contract is entered into or one year after the Closing Date, whichever occurs first.

(c) For a period of one year following the Closing Date, LSI will, and will cause the other Sellers to, use commercially reasonable efforts to make available to Purchaser the material benefits of any Fab-Related Contract (other than the Long-Term Supply Contracts) or Fab-Related Government Permit that was not assigned to Purchaser as a result of the failure to obtain any Consent required for the assignment of such Fab-Related Contract to Purchaser. In

 

42

[*]	Portions denoted with an asterisk on this page have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

addition, Purchaser will cooperate with and reasonably assist Sellers, as Sellers may reasonably request, regarding the termination and winding up of any such Fab-Related Contracts that are not assumed by Purchaser.

(d) After the Closing Date, Purchaser will make reasonable accommodations to permit the continued use of the Gresham Facilities Real Property by [*] in substantially the same manner as [*] is using the Gresham Facilities Real Property immediately prior to the Closing Date, except as provided below. If Purchaser gives LSI at least [*] advance notice that Purchaser desires to have [*] cease using any portion of the Gresham Facilities Real Property, LSI will exercise all rights it has, if any, to terminate (prior to the end of this [*] period and diligently during any period thereafter, as necessary) any rights [*] may have under the [*] to use such portion of the Gresham Facilities Real Property; provided that Purchaser’s compliance with its obligations under this Section 12.3(d) will not constitute consent to the use and occupancy of the Gresham Facilities Real Property for purposes of the parenthetical at the end of Section [*].

(e) If, prior to the Closing, LSI (or a Subsidiary of LSI) has not paid the portion of the purchase price of the [*] that remains unpaid as of the Signing Date, then after the Closing Date: (i) Purchaser will be responsible for carrying out properly the final acceptance tests in accordance with the terms of the Seller Contract related to the [*], (ii) Purchaser will notify LSI when final acceptance of the [*] in accordance with the terms of such Seller Contract has occurred, and (iii) upon receipt of such notice, LSI will pay to [*] the remaining portion of the purchase price for the [*]. If Purchaser does not provide final acceptance of the [*] in accordance with the terms of the Seller Contract related to the [*], LSI will be responsible for returning the [*] to [*] and LSI will be entitled to (and Purchaser will assign to LSI the right to receive) any refund, credit, or other compensation that may be owed or provided by [*] as a result thereof.

(f) Notwithstanding anything to the contrary herein, the amounts payable by LSI or one of its Subsidiaries under a purchase order that LSI or one of its Subsidiaries intends to place during the Pre-Closing Period, for a [*] for use in the Fab (the [*]) will not be an Assumed Liability, but rather LSI will pay such amounts when they become due provided that: (i) Purchaser will be responsible for accepting delivery, arranging for installation, and certifying final acceptance of the [*] in accordance with the terms of such purchase order, and (ii) Purchaser will keep LSI apprised of the status of the delivery, installation, and acceptance of the [*] so that LSI can determine when payment of such amounts is due. For avoidance of doubt, the purchase order for the [*] will be a Fab-Related Contract. If Purchaser properly refuses to accept the [*] in accordance with the terms of the purchase order therefor, LSI will be responsible for returning the [*] to the supplier thereof and LSI will be entitled to (and Purchaser will assign to LSI the right to receive) any refund, credit, or other compensation that may be owed or provided by the supplier thereof as a result thereof.

(g) The Parties acknowledge and agree that the [*] is a Fab-Related Contract. Notwithstanding anything to the contrary herein, LSI will pay the monthly [*] and the monthly [*] (as such terms are defined in the [*]) up through the expiration of the [*] (as such term is defined in the [*]) of the [*], and the obligation to pay such monthly [*] and monthly [*] will not be an Assumed Liability.

 

43

[*]	Portions denoted with an asterisk on this page have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

 

(h) Each Party will, and will cause its Subsidiaries to, execute and deliver such instruments and to take such actions as are reasonably necessary in order to effect the intent of this Section 12.3.

12.4 [*] Contract

(a) With respect to the [*] Contract, at the Closing the Parties will enter into an alternative, lawful arrangement under which Purchaser (or one or more designated Subsidiaries of Purchaser) will have the right to procure [*] services under the [*] Contract after the Closing Date, which arrangement will be terminable by Purchaser upon [*] prior written notice to LSI. Such arrangement will include the following terms and will otherwise be reasonably satisfactory to LSI and Purchaser: (i) Purchaser will pay the contractual per hour charge and performance incentive payments for such [*] services payable pursuant to the [*] Contract; (ii) Purchaser will be entitled to receive any [*] received by LSI or its Subsidiaries pursuant to the [*] Contract; and (iii) LSI will pay any [*] charges payable pursuant to the [*] Contract.

(b) During the effectiveness of the arrangements described in clause (a) above, and subject to the provisions of Section 12.4(a), Purchaser will, at its own expense, act as the agent of LSI (or its Subsidiary) in submitting forecasts and orders to [*] Inc. Each of LSI and Purchaser will, and will cause its respective Subsidiaries to, take such actions, in connection with the [*] Contract, as are reasonably necessary so that LSI and its Subsidiaries will remain at all times in compliance in all material respects with their obligations under the [*] Contract (other than any [*] or contract cancellation provisions or obligations relating to the assignment of such Contract to Purchaser). LSI will not, and will cause its Subsidiaries not to, amend the [*] Contract or waive any material right thereunder without the prior written consent of Purchaser, which will not be unreasonably withheld, conditioned, or delayed.

12.5 Release. Purchaser, for itself and its agents, affiliates, successors, and assigns, hereby releases and forever discharges Sellers and their agents, affiliates, successors, and assigns from any and all rights, claims, and demands at law or in equity for damages, contribution, indemnity, or cost recovery, whether known or unknown on the Signing Date or the Closing Date, which Purchaser has or may have in the future arising out of the environmental condition of the Gresham Facilities Real Property (or any event occurring or circumstance existing with respect thereto) on or before August 6, 1995, including any claim for indemnification or contribution arising under the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601, et. seq.) or any other Environmental Law, but excluding any claims arising out of any breach by LSI of this Agreement, any claims for indemnification pursuant to Section 11 of this Agreement, or any claims for common law intentional fraud by Sellers. The foregoing release will not apply to any statutory right under any law, including any Environmental Law, to investigate any Environmental Liability or potential Environmental Liability if Purchaser, acting in good faith, believes that such Environmental Liability or potential Environmental Liability may be, in whole or in part, a Retained Liability or neither a Retained Liability nor Purchaser’s Liability, and provided further that such release does not limit or preclude Purchaser’s rights or ability to obtain from Sellers and their agents, affiliates, successors, and assigns information, data, documents, or testimony through litigation or arbitration, whether directly or by third-party process, or to take any other actions as may be necessary or appropriate for Purchaser to evaluate, develop, respond to, or defend any claims or

 

44

potential claims of any sort related to the Gresham Facilities Real Property, whether or not such claims arise from the environmental or other condition of the Gresham Facilities Real Property before, on, or after August 6, 1995. The foregoing release does not apply to any rights, claims, or demands at law to the extent arising out of the environmental condition of, or out of activities at or management or operation of, real property adjoining the Gresham Facilities Real Property on or after the date of LSI’s or any of its Subsidiaries’ acquisition of such adjoining real property. For the foregoing purposes (but without in any way expanding the scope of the foregoing release), Purchaser hereby specifically waives the provisions of Section 1542 of the California Civil Code and any similar law of any other state, territory or jurisdiction (if and to the extent that they would otherwise be applicable to the release set forth in this paragraph). Section 1542 provides:

A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.

Purchaser hereby specifically acknowledges that it has carefully reviewed this subsection and discussed its import with legal counsel and that the provisions of this subsection are a material part of this Agreement.

 

12.6 Strategic Investment Program. On or before the date that is six months after the Closing Date, LSI will (a) repay in full any amounts outstanding in respect of the SIP Bonds or Related Documents, and (b) terminate or cause to be terminated the Security Lease between LSI (as Lessor) and the State of Oregon Economic Development Department and State Treasurer (as Lessee) and the Operating Lease between the State of Oregon Economic Development Department and State Treasurer (as Lessor) and LSI (as Lessee) and use reasonable efforts to deliver to Purchaser a recordable instrument evidencing such termination. Prior to the completion of such actions, LSI will not, and will cause its Subsidiaries not to, cause or permit any interest in the SIP Bonds and Related Documents to be transferred to any Person who does not hold an interest in the SIP Bonds and Related Documents on the Closing Date.

 

13.	M ISCELLANEOUS

13.1 Time of Essence. Time is of the essence in this Agreement.

13.2 Governing Law. This Agreement will be construed in accordance with, and governed in all respects by, the laws of the State of California (without giving effect to principles of conflicts of law).

13.3 Venue and Jurisdiction. If any legal proceeding or other legal action relating to this Agreement is brought or otherwise initiated, the venue therefor will be in the State of California, which will be deemed to be a convenient forum. Each Party hereby expressly and

 

45

irrevocably consents and submits to the jurisdiction of the state and federal courts in the State of California.

13.4 Notices. Any notice or other communication required or permitted to be delivered to any Party under this Agreement must be in writing and will 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 will have specified in a written notice given to the other Party):

if to Purchaser:

Semiconductor Components Industries, LLC

5005 E. McDowell Road, M/S A700

Phoenix, Arizona 85008

Attention: General Counsel

Facsimile: (602) 244-5601

with a copy to:

Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza

New York, New York 10006

Attention: Paul J. Shim

Facsimile: (212) 693-9762

if to LSI:

LSI Logic Corporation

1621 Barber Lane, M/S D-106

Milpitas, CA 95035-7458

Attention: General Counsel

Facsimile: (408) 433-6896

with a copy to:

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306

Attention: Eric Reifschneider

Facsimile: (650) 849-7400

13.5 Public Announcements. Except as may be required by any Legal Requirement, no Party will (and no Party will permit any of its advisors, representatives, or subsidiaries to) issue any press release or make any public statement regarding this Agreement or any of the Contemplated Transactions, without the other Party’s prior written consent.

 

46

13.6 Costs and Expenses of Transaction. Except as may be otherwise expressly provided in this Agreement or any of the Ancillary Agreements, each Party will pay all costs and expenses incurred by it or its subsidiaries in connection with this Agreement, the Ancillary Agreements, and the Contemplated Transactions.

13.7 Assignment. No Party may assign any of its rights or delegate any of its obligations under this Agreement (whether voluntarily, involuntarily, by way of merger, or otherwise) to any other Person without the prior written consent of the other Party; provided, however , that (a) LSI may, before or after the Closing, (i) assign any of its rights under this Agreement to any of its wholly-owned Subsidiaries, if such Subsidiary agrees in writing to be jointly and severally liable with LSI for the performance by LSI of its obligations under this Agreement and (ii) pledge or grant any security interest in any of its rights under this Agreement to any Person in order to secure indebtedness; and (b) Purchaser may, before the Closing, assign the right to purchase all or any portion of Sellers’ right, title, and interest in and to any of the Specified Assets to any other wholly-owned Subsidiary of ON if such other Subsidiary agrees in writing to be jointly and severally liable with Purchaser for the performance by Purchaser of its obligations under this Agreement and the Ancillary Agreements.

13.8 Parties in Interest. Nothing in this Agreement is intended to provide any rights or remedies to any employee of LSI or to any other Person other than the Parties.

13.9 Severability. If any provision of this Agreement, or the application of such provision to any Person or set of circumstances, is determined to be invalid, unlawful, void, or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void, or unenforceable, will not be affected and will continue to be valid and enforceable to the fullest extent permitted by law.

13.10 Entire Agreement. This Agreement, the Confidentiality Agreement (which remains in full force and effect, except that at Closing, the restrictions therein will cease to apply insofar as they relate to the Fab Information), and the Ancillary Agreements set forth the entire understanding of the Parties and supersede all prior agreements and understandings between the Parties relating to the subject matter hereof and thereof.

13.11 Waiver. No failure on the part of any 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 thereof; 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.

13.12 Amendments. This Agreement may not be amended, modified, altered, or supplemented except by means of a written instrument executed on behalf of all Parties.

13.13 Counterparts. This Agreement may be executed in several counterparts, each of which will constitute an original and all of which, when taken together, will constitute one agreement.

 

47

13.14 Land Use Notice. THE PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE WITHIN A FIRE PROTECTION DISTRICT PROTECTING STRUCTURES. THE PROPERTY IS SUBJECT TO LAND USE LAWS AND REGULATIONS, THAT, IN FARM OR FOREST ZONES, MAY NOT AUTHORIZE CONSTRUCTION OR SITING OF A RESIDENCE AND THAT LIMIT LAWSUITS AGAINST FARMING OR FOREST PRACTICES AS DEFINED IN ORS 30.930 IN ALL ZONES. BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON TRANSFERRING FEE TITLE SHOULD INQUIRE ABOUT THE PERSON’S RIGHTS, IF ANY, UNDER ORS 197.352). BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY APPROVED USES, THE EXISTENCE OF FIRE PROTECTION FOR STRUCTURES AND THE RIGHTS OF NEIGHBORING PROPERTY OWNERS, IF ANY, UNDER ORS 197.352).

13.15 Interpretation of Agreement

(a) Each Party acknowledges that it has participated in the drafting of this Agreement, and any applicable rule of construction to the effect that ambiguities are to be resolved against the drafting party will not be applied in connection with the construction or interpretation of this Agreement.

(b) Whenever required by the context hereof, the singular number will include the plural, and vice versa; the masculine gender will include the feminine and neuter genders; and the neuter gender will include the masculine and feminine genders.

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

(d) For purposes of this Agreement, the word “will” is equivalent in meaning to the word “shall,” both of which describe an act or forbearance which is mandatory under this Agreement.

(e) Unless the context otherwise requires, references in this Agreement to “Sections,” “Schedules,” and “Exhibits” are intended to refer to Sections of and Schedules and Exhibits to this Agreement.

(f) The table of contents of this Agreement and the bold-faced headings contained 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.

[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

48

The Parties have caused this Agreement to be executed as of the Signing Date.

 

LSI Logic Corporation						Semiconductor Components Industries, LLC
By:		/s/ BYRON LOOK				By:		/s/ DONALD COLVIN
Name:		Byron Look				Name:		Donald Colvin
Title:		Executive Vice President & Chief Financial Officer				Title:		Chief Financial Officer

 

49

E XHIBIT A

Certain Definitions

Attached below.

[*] Portions denoted with an asterisk in this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

E XHIBIT A

C ERTAIN D EFINITIONS

For purposes of the Agreement:

“Accrued Paid Time Off” has the meaning set forth in Section 4.1(a)(ii).

“Accrued Paid Time Off Amount” means an amount equal to the accrued liability with respect to Accrued Paid Time Off that would be shown on a balance sheet of LSI prepared as of the Closing Date in accordance with U.S. generally accepted accounting principles; provided that such accrued liability will be calculated with respect to each Hired Employee using such Hired Employee’s base salary or wage rate as in effect on the Closing Date plus scheduled overtime (including employer Tax owed thereon).

“Aggregate Real Property” means the Gresham Facilities Real Property and the Excluded Land.

“Allocation” has the meaning set forth in Section 1.6(a).

“ALTA Owner’s Policy of Title Insurance” means ALTA Owners Policy (10-17-92) issued by the Title Company with General Exceptions 1 through 5 deleted, containing OTIRO Endorsements No. 80 (Access), 85 (O) Arbitration, 75 (Contiguity), and 43 (Creditor’s Rights).

“ALTA Leasehold Policy of Title Insurance” means ALTA Leasehold Policy (10-17-92) issued by the Title Company with General Exceptions 1 through 5 deleted, containing OTIRO Endorsements No. 80 (Access), 85 (O) Arbitration, 75 (Contiguity), and 43 (Creditor’s Rights).

“ALTA Survey” means a survey of the Gresham Facilities Real Property that (i) meets the Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys, jointly established and adopted by ALTA and NSPS in 2005, (ii) is certified by the Surveyor in favor of the Purchaser, Purchaser’s lenders, and the Title Company, and (iii) depicts the final, approved Lot Line Adjustment or Land Division, as the case may be, and the boundaries of the [*] each with the same or substantially the same boundaries as those indicated in the sketch attached as Schedule 1 hereto.

“Agreement” means the Asset Purchase Agreement to which this Exhibit A is attached, including the Sellers Disclosure Schedule and the Purchaser Disclosure Schedule and all Schedules attached to such Asset Purchase Agreement.

“Ancillary Agreements” has the meaning set forth in Section 1.7.

“Applicable Authorities” has the meaning set forth in Section 5.2(b).

“Assignment and Assumption Agreement” has the meaning set forth in Section 1.4(c).

 

A-1.

“Assumed Accounts Payable” means all payment obligations arising from commitments (in the form of issued purchase orders or otherwise) to purchase or acquire Raw Materials, components, spare parts, supplies, or services, to the extent such Raw Materials, equipment, components, spare parts, supplies, or services are related to the operations of the Fab and are to be delivered to the Fab or performed for the benefit of the Fab on or after the Closing Date in the ordinary course of business. Payment obligations incurred prior to the Closing Date (even if the payments are not due until after the Closing Date) under purchase orders or other commitments for Raw Materials, equipment, components, spare parts, supplies, or services delivered to the Fab or performed prior to the Closing Date will not be included in Assumed Accounts Payable.

“Assumed Liabilities” means the following Liabilities:

(i) all Taxes, charges, fees, and expenses imposed on a Seller that Purchaser is required to bear and pay pursuant to Section 1.5;

(ii) all Assumed Accounts Payable;

(iii) all Liabilities of ON or Purchaser or any other Subsidiary of ON arising from the operation of the Fab or the use, manufacture, sale, ownership, lease, license operation, or disposition of the Specified Assets by ON or Purchaser or any other Subsidiary of ON, but not including Retained Liabilities that are Retained Liabilities pursuant to Section 1.3(b), (c), (d), or (e); and

(iv) all Liabilities arising with respect to the performance or non-performance after the Closing of obligations under any Fab-Related Contract that is assumed by ON or Purchaser (or any other Subsidiary of ON) at or after the Closing (but only to the extent such obligations are required to be performed after the assumption of such Fab-Related Contract by ON or Purchaser or any other Subsidiary of ON). Notwithstanding the foregoing, payment obligations of LSI and its Subsidiaries under any Fab-Related Contract that were incurred prior to the Closing Date (even if the payments are not due until after the Closing Date) for Raw Materials, equipment, components, spare parts, supplies, or services delivered to the Fab or performed prior to the Closing Date will not be Assumed Liabilities.

“Available Employees” means the employees of LSI (whether full-time or part-time) who are permanently based at the Gresham Facilities as of the Signing Date (including persons on maternity leave, short-term disability, or short-term or long-term leave of absence), other than the Retained Employees.

“Bonus Account” has the meaning set forth in Section 4.1(d).

“Business Day” means any day that is not a Saturday, a Sunday, or other day on which banks are required or authorized by law or executive order to be closed in New York City, New York.

“Cash Deposits” has the meaning set forth in Section 1.8(b).

“Claim Notice” has the meaning set forth in Section 11.9(a).

 

A-2.

“Closing” has the meaning set forth in Section 1.9.

“Closing Adjustments Certificate” has the meaning set forth in Section 1.8(b).

“Closing Cash Payment” has the meaning set forth in Section 1.4(b).

“Closing Certificates” means LSI’s Closing Certificate and Purchaser’s Closing Certificate.

“Closing Date” means the date on which the Closing actually takes place.

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

“Confidentiality Agreement” means the Confidentiality Agreement between LSI and ON dated as of October 11, 2005, as it may be amended from time to time.

“Consent” means any consent, approval, or waiver.

“Contamination” means the presence of a Hazardous Substance at, in, or on the Environment.

“Contemplated Transactions” means the transactions contemplated by this Agreement and the Ancillary Agreements.

“Contract” means any written, oral, or other agreement, contract, lease, deed, bill of sale, deed of trust, guaranty instrument, promissory note, letter of credit, indenture, financial instrument, insurance policy, purchase order, license, or legally binding commitment, understanding, or undertaking of any nature.

“Damages” means all losses, damages, liabilities, judgments, awards, settlements, and expenses (including costs of investigation, interest, penalties, court costs, arbitration costs and fees, witness fees, and reasonable fees and expenses of attorneys, investigators, expert witnesses, accountants, and other professionals) actually incurred or sustained by a Person, but excluding indirect, consequential, incidental, special, and punitive damages.

“Deductible Amount” has the meaning set forth in Section 11.3(a).

“Deed” means a Special Warranty Deed conveying title to the Gresham Facilities Real Property in the form of Exhibit C.

“Deposit” has the meaning set forth in Section 1.4(a).

“Discharge” means any spilling, leaking, pumping, pouring, emitting, discharging, disposing, leaching, or other release of any Hazardous Substance into the Environment, including the migration of any Hazardous Substances into the Environment and the abandonment, discharge, or disposal or any drums, tanks, or containers containing any Hazardous Substance.

 

A-3.

[*] Portions denoted with an asterisk on this page have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

“Employee Condition” [*]

“Encumbrance” means any mortgage, easement, sublease, license, tenancy, restrictive covenant, right-of-way, option, right of first offer or first refusal, restriction, right of occupancy, conditional sale agreement or other title retention agreement, deed or trust, pledge, hypothecation, security interest, encumbrance, adverse claim, lien, lease, or charge of any kind.

“End Date” has the meaning set forth in Section 10.1.

“Engineering Materials” means all personal property, software, data, and related documentation used by LSI or any of its Subsidiaries in connection with their product-related engineering activities, including engineering activities conducted at the Gresham Facilities prior to or as of the Closing Date (but excluding any item that is specifically identified on Schedule 2, 3, 4, 5, or 6).

“Environment” means any ambient, workplace or indoor air, surface water, drinking water, groundwater, land surface, subsurface strata, river sediment, plant or animal life, natural resources, workplace, and real property and the physical buildings, structures, and improvements thereon, including the sewer, septic and waste treatment, storage and disposal systems servicing the properties.

“Environmental Claim” has the meaning set forth in Section 11.9(c).

“Environmental Laws” means all Legal Requirements and Government Orders relating to (a) the Environment, including protection, pollution, Contamination, investigation, assessment or remediation of the Environment, (b) exposure of workers or third parties to Hazardous Substances, and (c) the management, generation, treatment, handling, Discharge, use, storage, or disposal of Hazardous Substances, including the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9901 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Toxic Substance Control Act, 15 U.S.C. § 2601 et seq., the Safe Drinking Water Act, U.S.C. § 300f et seq., the Occupational Safety and Health Act, 42 U.S.C. § 1801 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., all as amended, and any state or local counterparts, and any regulations or rules adopted or promulgated pursuant thereto.

“Environmental Liabilities” means any liabilities: (a) arising under or relating to any Environmental Law with respect to personal injury, property damage, damage to the Environment, or any threatened or actual Discharge or Contamination (whether based on negligent acts or omissions, statutory liability, or strict liability without fault or otherwise); or (b) arising from or related to any investigation, study, testing, removal, response, remediation, or abatement of any Discharge or Contamination that a Party or any of its Subsidiaries is required to undertake pursuant to a Governmental Order issued in connection with any Environmental Law; or (c) incurred by reason of a failure to comply with any applicable Environmental Law,

 

A-4.

[*] Portions denoted with an asterisk on this page have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

including any fines, penalties, and any costs or expenditures necessary to comply with Environmental Laws.

“Excess Spare Parts” means the amount of spare parts for the Fab Equipment in excess of the supply of such spare parts needed for the six months of operation of the Fab after the Closing Date, assuming that the Fab is operated in the ordinary course of business consistent with Sellers’ past practices.

“Excess Spare Parts Value” means the sum of (a) seventy-five percent (75%) of the inventoried cost (based on LSI’s accounting policies) of the Excess Spare Parts located at the Gresham Facilities as of the Closing Date that are carried as inventory on LSI’s books as of the Closing Date, and (b) fifteen percent (15%) of the expensed cost (based on LSI’s accounting policies) of the Excess Spare Parts located at the Gresham Facilities as of the Closing Date that are not carried as inventory on LSI’s books as of the Closing Date.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Assets” has the meaning set forth in Section 1.2.

“Excluded Contract” means (a) each Shared Contract; (b) each Contract between LSI (or any of its Subsidiaries) and any employee of LSI, (c) each insurance policy held by LSI or any of its Subsidiaries, (d) any Contract related to the licensing or maintenance of the third-party software identified in Schedule 11 (except to the extent the Parties agree otherwise in writing); (e) the [*] Contract, and (f) each of the Contracts identified on Schedule 13.

“Excluded Information” means (i) all data, reports, analyses, databases, know-how, and other information, however created or existing, including in books, ledgers, records, files, lists, correspondence, invoices, billing records, or other manner of documentation in any form or medium, pertaining to LSI’s or its Subsidiaries’ Intellectual Property Rights or LSI products, technologies, financial affairs, business dealings, or other activities, whether conducted at the Gresham Facility or elsewhere, that is not specifically described as Fab Information, and (ii) all Third Party Intellectual Property.

“Excluded Land” means (a) if the Parties do not proceed with the Partial Sale Alternative, the real property owned by any of the Sellers in Gresham, Oregon that is not included in the description of the Gresham Facilities Real Property in the Deed, or (b) if the Parties proceed with the Partial Sale Alternative, the real property owned by any of the Sellers in Gresham, Oregon other than the Existing Legal Parcels and the Residual Property (as the same may have been reconfigured during the Lot Line Adjustment or Land Division process).

“Existing Legal Parcels” has the meaning set forth in Section 5.2(a).

“Fab” means the portion of the Gresham Facilities used to conduct LSI’s semiconductor wafer fabrication operations.

“Fab Equipment” means all (a) the semiconductor wafer fabrication equipment identified on Schedule 2, (b) any other semiconductor wafer fabrication equipment owned by Sellers and located at the Gresham Facilities as of the Closing Date other than the Retained

 

A-5.

Equipment, (c) the wafer sort equipment, testers, and probers identified on Schedule 3, and (d) any other wafer sort equipment, testers, and probers owned by Sellers and located at the Gresham Facilities as of the Closing Date other than the Retained Equipment.

“Fab Information” means all data, reports, analyses, databases, know how, and other information, however created or existing, including in books, ledgers, records, files, lists, records, or other manner of documentation in any form or medium, pertaining solely to the operational activities of the Fab, including maintenance of the Specified Assets, but excluding therefrom (a) personnel files, except as set forth in the second sentence of Section 4.1(c), (b) any information that describes or reveals, in whole or in part, any process technology used or any product engineered, manufactured, or tested at the Fab or elsewhere for LSI, (c) any Licensed Intellectual Property, and (d) any Third Party Intellectual Property.

“Fab Intellectual Property” means Sellers’ Intellectual Property Rights (other than Patents and Trademarks) in the Fab Software.

“Fab IT Equipment” means (a) the factory automation and other IT equipment identified on Schedule 4, and (b) any other factory automation or other IT equipment owned by Sellers and located at the Gresham Facilities as of the Closing Date other than the Retained Equipment and the Retained Employee Assets.

“Fab Operations” means the operations and activities of Sellers and any of their Subsidiaries at the Gresham Facilities Real Property prior to the Closing Date.

“Fab Raw Materials Inventory” means Raw Materials inventory located at the Gresham Facilities as of the Closing Date.

“Fab-Related Contracts” means (i) the Seller Contracts identified on Schedule 8; (ii) each other Seller Contract relating exclusively to Sellers’ operation of the Fab that is not a Significant Fab-Related Contract, including any such Seller Contract that is executed or entered into on behalf of a Seller on or after the Signing Date and prior to the Closing in the ordinary course of business or with the approval of Purchaser, but excluding any Excluded Contract; and (iii) any other Seller Contract that the Parties expressly agree in writing will be assigned to and assumed by Purchaser at the Closing.

“Fab-Related Government Permits” means the permits, approvals, consents, certificates of occupancy, orders, grants, authorizations, and licenses of Sellers, to the extent that such permits, approvals, consents, certificates of occupancy, orders, grants, authorizations, and licenses (a) are issued by a Government Authority and (b) relate to Sellers’ ownership, use, or operation of the Gresham Facilities Real Property or the Specified Assets.

“Fab Software” means the software identified in Schedule 5, to the extent such software is used by Sellers at the Gresham Facilities in connection with their operation of the Fab as of the Closing Date, but excluding any third-party software licensed to any Seller.

“Fab Tangible Personal Property” means (a) the Fab Equipment; (b) the Fab IT Equipment; (c) all spare parts for the Fab Equipment and Fab IT Equipment that are owned by Sellers and located at the Gresham Facilities as of the Closing Date; (d) the Fab Raw Materials

 

A-6.

Inventory; and (e) all furniture, machinery, and other tangible personal property that is owned by Sellers and located at the Gresham Facilities as of the Closing Date, other than the Engineering Materials, Tooling, Retained Equipment, Retained Employee Assets, finished goods or work-in-process inventory (including RapidChip ^® Slices), and any other tangible personal property that is an Excluded Asset.

“Facilities Use Agreement” has the meaning set forth in Section 1.7(d).

“Final Installment Date” has the meaning set forth in Section 1.4(d).

“Final Installment Payment” has the meaning set forth in Section 1.4(d).

“First Deed” has the meaning set forth in Section 5.3(a).

“Government Authority” means any (a) nation, state, province, county, municipality, or other governmental jurisdiction of any nature, or (b) federal, state, local, municipal, foreign, or other government regulatory or administrative authority, agency or commission or any court, or self-regulatory organization, tribunal, or judicial body operating under the authority of any of the foregoing and any instrumentality of any of the foregoing.

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, or award issued, promulgated, or entered by any Government Authority.

“Gresham Facilities” means Sellers’ facilities located at 23400 NE Glisan, Gresham, Oregon, consisting of the following buildings: Wafer Fab Building, CP1 Building, Office Building, Energy Center 1, Energy Center 2, and Acid Waste Plant.

“Gresham Facilities Real Property” means (a) the land under and around the Gresham Facilities and parking lots, as ultimately determined by the Lot Line Adjustment or the Land Division, which is expected to consist of approximately 83 acres as described in the drawing attached hereto as Schedule 1, excluding the area indicated on Schedule 1 as “P.G.E. 5.510 ACRES”, and (b) the Gresham Facilities, including any real property in the form of fixtures and improvements to the Gresham Facilities as of the Closing Date).

“Ground Lease” has the meaning set forth in Section 5.3(b).

“Hazardous Substance” means any contaminant or pollutant; toxic, radioactive or hazardous waste, chemical, substance, material or constituent; asbestos or asbestos-containing material; polychlorinated biphenyls (PCBs); paint containing lead or mercury; natural or liquefied gas; flammable, explosive, corrosive, radioactive, medical, and infectious waste; and oil or other petroleum product, byproduct, or waste, all as defined in Environmental Laws.

“Hired Employee” has the meaning set forth in Section 4.1(b).

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules promulgated thereunder.

“Indemnified Party” has the meaning set forth in Section 11.9(a).

 

A-7.

[*] Portions denoted with an asterisk on this page have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

“Indemnifying Party” has the meaning set forth in Section 11.9(a).

“[*] Contract” means [*] Outsourcing Agreement between LSI and [*] Inc., dated [*], as amended.

“Intellectual Property Rights” means all (a) Patents, (b) copyrights (whether or not registered) and mask work rights, (c) trade secrets, (d) Trademarks, (e) other types of legally recognized rights in intangible assets, and (f) applications for any of the foregoing.

“IP License Agreement” has the meaning set forth in Section 1.7(b).

“knowledge” means, (i) with respect to LSI, the actual knowledge of any of the individuals listed on Schedule 15(a), and (ii) with respect to Purchaser, the actual knowledge of any of the individuals listed on Schedule 15(b).

“Land Division” has the meaning set forth in Section 5.2(b).

“Legal Requirement” means any law, rule, or regulation of any Government Authority.

“Liability” means any debt, liability, or obligation, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or undeterminable, on- or off- balance sheet, including (i) those arising under any Legal Requirement or Governmental Order, (ii) those arising in connection with any litigation, complaint, claim, demand, action, cause of action, suit, arbitration, inquiry, proceeding, or investigation by or before any Government Authority, and (iii) those arising under any Contract or otherwise.

“Licensed Intellectual Property” means the Intellectual Property Rights to be licensed to Purchaser and another Subsidiary of ON pursuant to the IP License Agreement.

“Long-Term Supply Contract” means each of the Contracts listed on Schedule 7, including any amendments, modifications, and collateral documents associated therewith by which the parties thereto have mutually intended to bind themselves, in each case as listed on Schedule 7.

“Lot Line Adjustment” has the meaning set forth in Section 5.2(b).

“LSI” has the meaning set forth in the preamble of the Agreement.

“LSI Gresham Sub” has the meaning set forth in the preamble of the Agreement.

“LSI Knowledge Group” means the persons identified on Schedule 15(a).

“LSI’s Closing Certificate” has the meaning set forth in Section 1.10(a)(ix).

“Matter” means any claim, demand, dispute, action, suit, proceeding, investigation, or other similar matter.

“Memorandum of Lease” has the meaning set forth in Section 5.3(c).

 

A-8.

[*] Portions denoted with an asterisk on this page have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

“Minimum Employment Terms” has the meaning set forth in Section 4.1(a).

“ON” has the meaning set forth in the preamble of the Agreement.

“ON Debt Instrument” means any Contract creating, evidencing, or otherwise relating to any indebtedness for money borrowed, any guaranty of any indebtedness for money borrowed, or any security interest, pledge, mortgage, deed of trust, or other Encumbrance, in each case securing indebtedness for money borrowed, (a) to which ON or any of its Subsidiaries is a party, or (b) by which ON or any of its Subsidiaries, or any asset of ON or any of its Subsidiaries, is bound.

“ON SEC Documents” has the meaning set forth in Section 3.1(a).

“Other Specified Manufacturing Equipment” means the specific items of manufacturing equipment owned by Sellers that are identified on Schedule 6.

“Partial Sale Alternative” has the meaning set forth in Section 5.3.

“Parties” has the meaning set forth in the preamble of the Agreement.

“Patents” means any and all patent applications and patents (including letters patent, industrial designs, and inventor’s certificates), design registrations, invention disclosures, and applications to register industrial designs that issue, and any and all rights to any of the foregoing anywhere in the world, including any provisionals, substitutions, extensions, supplementary patent certificates, reissues, renewals, divisions, continuations in part (or in whole), continued prosecution applications, requests for continued examination, and other similar filings or notices provided for under the laws of the United States, or of any other country.

“Permitted Encumbrances” means (i) any lien for current Taxes that are not yet due and payable; (ii) minor Encumbrances that do not, individually or in the aggregate, materially interfere with or impair the ownership or continued use (in the ordinary course of business consistent with past practice) of the assets to which they relate; (iii) deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, workers’ compensation, unemployment insurance, or similar programs mandated by applicable Legal Requirements; (iv) statutory or common law liens in favor of carriers, warehousemen, mechanics, and materialmen, arising in the ordinary course of business, to secure claims for labor, materials, or supplies, and other like liens, in each case for amounts not yet due and payable; (v) with respect to the Gresham Facilities Real Property, any Encumbrance (A) disclosed in the Preliminary Title Report or in the draft of the ALTA Survey attached hereto as Exhibit M or (B) of which Purchaser receives notice during the Pre-Closing Period and that would not reasonably be expected to have a Seller Material Adverse Effect; (vi) with respect to the Gresham Facilities Real Property, the [*]; and (vii) any Encumbrance that is deemed to be a Permitted Encumbrance pursuant to Section 10.1.

“Person” means any individual, corporation, general partnership, limited partnership, limited liability company, trust, association, firm, organization, company, business, entity, union, society, or Government Authority.

 

A-9.

“Personal Property Taxes” has the meaning set forth in Section 1.8(a)(ii).

“Pre-Closing Period” has the meaning set forth in Section 6.1.

“Pre-Paid Expenses” means all amounts paid by LSI or any of its Subsidiaries prior to the Closing Date for services to be performed or provided, in whole or in part, after the Closing Date, to the extent that such services will be performed under Fab-Related Contracts that are assigned to Purchaser (or ON or any other Subsidiary of ON) at the Closing or that Purchaser (or ON or any other Subsidiary of ON) will otherwise receive the benefit of such services after the Closing Date.

“Preliminary Title Report ” means the preliminary title report issued by the Title Company and attached to the Agreement as Exhibit K.

“Product Intellectual Property” means all Intellectual Property Rights of LSI and its Subsidiaries in (a) integrated circuit designs or portions thereof (including cores, cells, and libraries), at any level of abstraction and in any form of expression (including netlists and GDSII files), and (b) any other products that have been or are being developed, designed, manufactured, marketed, or sold by LSI or any of its Subsidiaries or that are on LSI’s product roadmap.

“Purchaser” has the meaning set forth in the preamble of the Agreement.

“Purchaser Credit” has the meaning set forth in Section 1.8(b).

“Purchaser Indemnified Persons” has the meaning set forth in Section 11.2.

“Purchaser Knowledge Group” means the persons identified on Schedule 15(b).

“Purchaser Material Adverse Effect” means a material adverse effect on the ability of ON, Purchaser, or any of ON’s other Subsidiaries to perform in a timely manner any of its obligations under this Agreement.

“Purchaser Disclosure Schedule” means the disclosure schedule delivered by Purchaser to LSI contemporaneously with the execution and delivery of the Agreement.

“Purchaser’s Closing Certificate” has the meaning set forth in Section 1.10(b)(v).

“RapidChip ^® Slice” means a partially manufactured integrated circuit in which all silicon-based layers have been built based upon LSI’s proprietary RapidChip ^® technology but which does not include the top metal layers.

“Raw Materials” means any material or substance, or combination of materials or substances, in any form that is incorporated into or used to produce any product produced or to be produced at the Fab, including silicon wafers, gasses, chemicals, and deposition targets, and including any material that may be removed from or used to remove another material from any product that is produced or to be produced at the Fab.

“Real Property Taxes” has the meaning set forth in Section 1.8(a)(i).

 

A-10.

“Residual Real Property” has the meaning set forth in Section 5.2(a).

“Retained Employees” means the employees of LSI identified on Schedule 14 and each employee hired by LSI during the Pre-Closing Period and designated by LSI as a “Retained Employee”; provided that an employee hired during the Pre-Closing Period who has been designated an Available Employee by agreement of the Parties may not thereafter be designated as a Retained Employee.

“Retained Equipment” means the items of equipment and other tangible personal property located at the Gresham Facilities that are identified on Schedule 9 and the associated spare parts.

“Retained Employee Assets” means the equipment and other tangible personal property located at the Gresham Facilities as of the Closing Date that is used primarily by any of the Retained Employees, including the equipment and other items identified on Schedule 10, but excluding any equipment or other item listed on Schedule 2, Schedule 3, or Schedule 4.

“Retained Liabilities” has the meaning set forth in Section 1.3.

“Retained Software” means the software identified in Schedule 16.

“SEC” means the United States Securities and Exchange Commission.

“Second Deed” has the meaning set forth in Section 5.3(f)(ii).

“Securities Act” means the Securities Act of 1933, as amend