ASSET PURCHASE AGREEMENT

Exhibit 10.3

EXECUTION COPY
CONFIDENTIAL

ASSET PURCHASE AGREEMENT

between:

CONEXANT SYSTEMS, Inc .,
a Delaware corporation;

and

NXP B.V.

a Dutch besloten venootshap

Dated as of April 29, 2008

TABLE OF CONTENTS

TABLE OF EXHIBITS

      This Asset Purchase Agreement is being entered into as of April 29, 2008, by and between: Conexant Systems, Inc. , a Delaware corporation (the “ Seller ”); and NXP B.V. , a Dutch besloten venootshap (the “ Purchaser ”). The Seller and the Purchaser are referred to collectively in this Agreement as the “ Parties .” Certain other capitalized terms used in this Agreement are defined in Section 10.18.

Recitals

     WHEREAS, the Seller is engaged in the business of (i) the design, development, marketing and distribution of STB products for worldwide satellite, terrestrial, Internet Protocol and cable entertainment broadcasting networks, and (ii) the design and development of home networking subsystems to distribute video throughout a home via coaxial cable ( i.e. , “MoCA”) (as conducted by Seller over the period commencing on January 1, 2007 through the Closing Date, the “ Business ”);

     WHEREAS, the Seller desires to sell to the Purchaser and the Purchaser desires to purchase and assume from the Seller certain of the assets and liabilities of the Business, as more particularly set forth herein;

     WHEREAS, concurrently with the execution and delivery of this Agreement, the Seller and the Purchaser will enter into that certain IP License Agreement in the form of Exhibit A to become effective as of the Closing Date (the “ IP License Agreement ”);

     WHEREAS, on the Closing Date, the Seller and the Purchaser will enter into (or, as applicable, will cause one or more of their respective Affiliates to enter into) one or more Assignment and Assumption Agreements in the form of Exhibit B (the “ Assignment and Assumption Agreements ”), one or more Intellectual Property Assignment Agreements in the form of Exhibit C (the “ Intellectual Property Assignment Agreements ”), the Transition Services Agreement and the Supply Agreement;

     WHEREAS, on the Closing Date, the Seller and the Purchaser will enter into an Escrow Agreement (as defined below), substantially in the form attached hereto as Exhibit D , pursuant to which a portion of the Purchase Price will be deposited into and held in escrow to offset in part potential indemnification claims of the Purchaser under this Agreement;

     WHEREAS, as a condition and an inducement to the Purchaser to enter into this Agreement, each of those employees of the Seller listed in Schedule B has entered into an employment agreement with the Purchaser or one of its Affiliates, to be dated the date hereof but effective on the Closing Date and substantially in the form previously made available to the Seller (collectively, the “ Employee Agreements ”), that are conditioned on the Closing and will become effective on the Closing Date; and

     WHEREAS, certain of the purchase and sale transactions provided for in this Agreement shall be effected through one or more Local Purchase Agreements (as defined below) which will be subject to the terms, provisions and conditions of this Agreement.

     NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1. SALE AND PURCHASE OF ASSETS; RELATED TRANSACTIONS.

      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, the Seller will and will cause each of its Affiliates to, sell, convey, transfer, assign and deliver to the Purchaser, and the Purchaser will purchase from the Seller or such Affiliates, all of the rights, title and interests of the Seller and each of its Affiliates into and under the following, free and clear of all Encumbrances, other than Permitted Encumbrances (which, subject to Section 1.2, are referred to in this Agreement as the “ Transferred Assets ”):

           (a)  the Patents and patent applications identified on Schedule 1.1(a) , as well as any foreign or multinational counterparts (including Patents, statutory invention registrations, patent registrations industrial designs and industrial models) thereof, whether or not identified on Schedule 1.1(a), including all rights therein provided by multinational treaties or conventions and all improvements to the inventions disclosed in each of the foregoing (collectively, the “ Transferred Patents ”); and the invention disclosures identified on Schedule 1.1(a) including all rights therein as well as all improvements to the inventions disclosed therein made by the Purchaser;

           (b)  the Intellectual Property Rights (other than Patent rights) in and to or associated with the items identified on Schedule 1.1(b) (the “ Transferred Non-Patent IP ”);

           (c)  the Inventory (the “ Transferred Inventory ”);

           (d)  (i) the contracts identified on Schedule 1.1(d) , (ii) any source code evaluation license regarding the Transferred Assets that is in substantially the Seller’s standard form previously provided by the Seller to the Purchaser, (iii) all other contracts in existence as of the date hereof that are exclusively related to the Business and that individually and in the aggregate are not material to the Business, and (iv) any other contract primarily related to the Business, entered into by the Seller or any of its Affiliates after the date of this Agreement but prior to the Closing in compliance with this Agreement, (the “ Unlisted Contracts ” and, together with the contracts described in this Section 1.1(d) , the “ Transferred Contracts ”);

           (e)  the prototypes, systems, equipment, furniture, fixtures, computer equipment, masks and other fixed assets that are identified on Schedule 1.1(e) (the “ Transferred Fixed Assets ”);

           (f)  all of the shares of capital stock (the “ Transferred Shares ”) of Conexant Systems Israel (1996) Ltd. (the “ Transferred Subsidiary ”);

           (g)  all causes of action, lawsuits, judgments, claims and demands of any nature available from time to time to or being pursued by the Seller or any of its Affiliates in each case to the extent related to the Business, the Transferred Assets, the Assumed Liabilities or the ownership, operation, use, function or value of any Transferred Asset, whether known or unknown, suspected or unsuspected and whether arising by way of counterclaim or otherwise including the right of the Seller or any of its Affiliates to pursue claims and enforce the obligations of any party to any proprietary/confidential information agreements and non-competition agreements to which any current or former employee, consultant, contractor and actual or potential business partner, counterparty or investor of or in the Seller or any of its Affiliates is a party, in each case to the extent related to the Business or any of the Transferred Assets, except in each case to the extent (i) included in the Excluded Assets or (ii) related to Intellectual Property Rights that are not Transferred Assets;

           (h)  all credits, prepaid expenses, deferred charges, advance payments, security deposits, prepaid items and duties to the extent exclusively related to any Transferred Asset;

           (i)  all Books and Records; and

           (j)  all guaranties, warranties, indemnities and similar rights in favor of the Seller or any of its Affiliates to the extent primarily related to any Transferred Asset.

      1.2 Excluded Assets . The Seller will not be required to sell, convey, assign or transfer to the Purchaser, and the Transferred Assets will not be deemed to include any assets other than the Transferred Assets; notwithstanding anything to the contrary contained in Section 1.1 and, the Seller will not be required to sell or transfer to the Purchaser, and the Transferred Assets will not be deemed to include, any of the following or any right or interest in, to or under any of the following (collectively, the “ Excluded Assets ”):

           (a)  any cash, cash equivalents or Accounts Receivable;

           (b)  any asset identified on Schedule 1.2(b) ;

           (c)  all rights and interests in connection with, and assets of, any “employee benefit plan” within the meaning of Section 3(3) of ERISA and any other employee benefit plan, program, arrangement or agreement established, maintained, sponsored or contributed to by the Seller or any ERISA Affiliate, including, without limitation, the Seller Plans;

           (d)  all Intracompany Receivables; and

           (e)  all personnel records of employees that are not Transferred Employees and personnel records of any Transferred Employees whose consent to such transfer is required under Legal Requirement to the extent such Transferred Employee has not consented to such transfer.

      1.3 Purchase Price .

           (a)  Subject to the terms and conditions of this Agreement, in consideration for the sale of the Transferred Assets to the Purchaser, at the Closing, in addition to the Assumed Liabilities, the Purchaser will pay to the Seller, by wire transfer of immediately available funds, the sum of $82,500,000 as adjusted by the Transferred Subsidiary Purchase Price Adjustment determined pursuant to Section 1.4(b) and less any amounts being paid pursuant to the Local Purchase Agreements (collectively, the “ Cash Closing Payment ”).

           (b)  Subject to the terms and conditions of this Agreement, on the earlier of (i) September 30, 2008 and (ii) the date on which the Purchaser receives proceeds of more than $100,000,000 from an Asset Disposition, in consideration for the sale of the Transferred Assets to the Purchaser, the Purchaser will (A) pay to the Seller by wire transfer of immediately available funds, the sum of $16,500,000 (the “ Cash Deferred Payment ”) and (B) pay to US Bank National Association, as escrow agent (the “Escrow Agent”), by wire transfer of immediately available funds, the sum of $11,000,000 (the “Escrow Amount” and collectively with the Cash Closing Payment and the Cash Deferred Payment, the “Purchase Price”).

           (c)  The Seller shall also be entitled to payment of the Contingent Payments, if any, in the amount, and subject to the terms and conditions, set forth in Section 1.6.

           (d)  To the extent that the Allocation (as defined in Section 1.10) allocates a portion of the Purchase Price to Transferred Assets located in China or India, the Purchaser (or an Affiliate of the Purchaser) shall pay in U.S. dollars (unless otherwise required under local Legal Requirements) that portion of the Cash Closing Payment to the Affiliate of the Seller that is party to the Local Purchase Agreement related to such country. Payment made under this Section 1.3(d) shall reduce the payment required to be made by the Purchaser under Section 1.3(a) or 1.3(b)(ii)(A) above (which will, in the case of any payment made other than in U.S. dollars, will be converted into U.S. dollars at the applicable Noon Buying Rate).

      1.4 Adjustments .

           (a) Inventory Adjustment.

                (i)  Within 45 days following the Closing Date, the Purchaser shall deliver to the Seller a statement (the “ Purchaser’s Calculation ”) setting forth the Transferred Inventory, net of reserves (“ Net Inventory ”) as of the Closing Date (the “ Closing Inventory Value ”) determined in conformity with GAAP.

                (ii)  If the Seller disagrees with the Purchaser’s Calculation, the Seller may, within 15 days after delivery of the Purchaser’s Calculation, deliver a notice (the “ Seller’s Objection ”) to the Purchaser disagreeing with the Purchaser’s Calculation

and specifying, in reasonable detail (i) the Seller’s calculation of the Closing Inventory Value and (ii) the Purchaser’s grounds for such disagreement.

                (iii)  If a Seller’s Objection is duly delivered pursuant to Section 1.4(a)(ii), the Purchaser and the Seller shall, during the 15 days following such delivery, use their reasonable efforts to reach agreement on the Closing Inventory Value. If they are unable to reach such agreement during such period, the parties shall promptly engage the CPA Firm to review promptly the Net Inventory for the purpose of calculating the Closing Inventory Value. In making such calculation, the CPA Firm shall determine the Closing Inventory Value. The CPA Firm shall deliver to the Purchaser and the Seller, as promptly as practicable, a report setting forth such calculation of the Closing Inventory Valuation. Such report shall be final and binding upon the Purchaser and the Seller (absent manifest error). The cost of the CPA Firm shall be borne equally by the Purchaser and the Seller.

                (iv)  The Purchaser and the Seller each agree to reasonably cooperate and assist in the determination of the Closing Inventory Value under this Section 1.4(a), including by making available to the other party and its representatives, to the extent reasonably requested, reasonable access to books, records, work papers, personnel and representatives in connection with such other party’s preparation and review of the closing statement.

                (v)  If the Final Inventory Value (as defined below) is less than the Base Inventory Value, the Seller shall pay to the Purchaser, as an adjustment to the Purchase Price, the amount by which the Final Inventory Value is less than the Base Inventory Value. If the Final Inventory Value is greater than the Base Inventory Value, the Purchaser shall pay to the Seller, as an adjustment to the Purchase Price, the amount by which the Final Inventory Value is greater than the Base Inventory Value; provided that any such payment by the Purchaser to the Seller shall not exceed $3,900,000. “ Final Inventory Value ” means the Closing Inventory Value (i) as shown in the Purchaser’s Calculation if no Seller’s Objection is duly delivered to the Purchaser in compliance with Section 1.4(a)(ii); or (ii) if such a notice of disagreement is delivered, (A) as agreed by the Purchaser and the Seller pursuant to Section 1.4(a)(iii) or (B) in the absence of such agreement, as shown in the CPA Firm’s calculation delivered pursuant to Section 1.4(a)(iii).

                (vi)  Any payment pursuant to this Section 1.4 shall be made at a mutually convenient time and place within 10 days after the determination of Final Inventory Value by the delivery by the Seller or the Purchaser, as the case may be, by wire transfer of immediately available funds to such account or accounts as may be designated by the Seller or the Purchaser, as the case may be.

           (b)  The Purchase Price shall be adjusted (the “ Transferred Subsidiary Purchase Price Adjustment ”) to reflect the Transferred Subsidiary Closing Assets and the Transferred Subsidiary Closing Liabilities as follows: (i) to the extent that the Transferred Subsidiary Closing Assets exceeds the Transferred Subsidiary Closing Liabilities, the Purchase Price shall be increased by the amount by which the Transferred Subsidiary Closing Assets exceeds the Transferred Subsidiary Closing Liabilities and (ii) to the extent that the Transferred Subsidiary Closing Liabilities exceeds the Transferred Subsidiary Closing Assets, the Purchase Price shall be reduced by the amount by which the Transferred Subsidiary Closing Liabilities exceeds the Transferred Subsidiary Closing Assets. Initial Payment of the Transferred Subsidiary Purchase Price Adjustment shall be made at Closing based upon the estimated Transferred Subsidiary Closing Balance Sheet prepared in good faith by the Seller and delivered to the Purchaser pursuant to Section 1.14(i) (provided that the Seller shall deliver a draft of such estimated Transferred Subsidiary Closing Balance Sheet at least four (4) Business Days but not more than seven (7) Business Days prior to the Closing Date). Final settlement of the Transferred Subsidiary Purchase Price Adjustment shall be made on the basis of a Transferred Subsidiary Closing Balance Sheet delivered by the Transferred Subsidiary to the Parties not more than 20 Business Days following the Closing. If either Party disagrees with the Transferred Subsidiary Closing Balance Sheet, such Party may deliver a notice disagreeing therewith. In such case, the dispute resolution provisions under Section 1.4(a)(ii)-(a)(iii) will be applied to resolve such disagreement.

      1.5 Escrow Fund. On or prior to the Closing, the Seller and the Purchaser shall enter into an escrow agreement, in substantially the form attached hereto as Exhibit D (the “ Escrow Agreement ”), with the Escrow Agent. Pursuant to the terms of the Escrow Agreement, the Purchaser will create the escrow fund (the “ Escrow Fund ”) on the date specified in Section 1.3(b) above (the “Escrow Creation Date”) by depositing the Escrow Amount with the Escrow Agent on the Escrow Creation Date. The Escrow Agent shall hold the Escrow Fund in an escrow account and invest the Escrow Fund in a money market fund mutually agreed upon by the Seller and the Purchaser (“ Investment Fund ”). In addition, the Escrow Agent will not transfer any interest in such Escrow Fund except pursuant to the terms of the Escrow Agreement. Subject to the terms of the Escrow Agreement, the Escrow Amount still held in escrow (including accrued interest to the extent provided in the Escrow Agreement) and not subject to pending, unresolved claims thereunder shall be released from the Escrow Fund to the Purchaser ten (10) Business Days following the end of the General Survival Period. Any distributions from the Escrow Fund shall be governed pursuant to and in accordance with the terms and conditions of the Escrow Agreement. The parties agree that, consistent with Proposed Treasury Regulation Section 1.468B-8, for Tax reporting purposes, the Seller shall be deemed the owner of the Escrow Amount and all interest or other income earned from the investment of the Escrow Amount or any portion thereof in any Tax year shall be reported as allocated to the Seller until the distribution of the Escrow Amount (or portions thereof) is determined and thereafter to the Seller and the Purchaser in accordance with their respective interests in the Escrow Amount consistent with Proposed Treasury Regulation Section 1.468B-8.

      1.6 Contingent Payments .

           (a)  Subject to the terms and conditions of this Section 1.6, (i) if BMP Sales during the period of six calendar quarters commencing on July 1, 2008 and ending on December 31, 2009 (such period, the “ Contingent Payment Period ”) exceed $330,000,000, the Purchaser shall pay to the Seller an amount (such amount, the “ Initial Contingent Payment ”), if any, equal to the product of (x) 0.1 times (y) the amount by which BMP Sales during the Contingent Payment Period exceeds $330,000,000, up to a maximum Initial Contingent Payment of $5,000,000; and (ii) if BMP Sales during the Contingent Payment Period exceed $380,000,000, the Purchaser shall pay to the Seller, in addition to the Initial Contingent Payment, an additional amount equal to the product of (x) 0.4 times (y) the amount by which BMP Sales during the Contingent Payment Period exceeds $380,000,000, up to a maximum payment of $30,000,000 (the sum of the amount in this clause “(ii)” and the Initial Contingent Payment, the “ Contingent Payment ”).

           (b)  The Seller acknowledges, understands and agrees that, after the Closing, the Purchaser shall exercise operational control of the Business and the Transferred Assets without interference by the Seller. The Seller understands that, except as expressly provided herein, the future design, creation, manufacturing, marketing, sales and distribution of the Business and its products and projects shall be exercised by the Purchaser in accordance with its own business judgment and in its sole and absolute discretion. The Seller further acknowledges, understands and agrees that: (i) the Purchaser will have complete control and sole and absolute discretion with respect to decisions concerning the Business after the Closing, (ii) such control and discretion by the Purchaser could have a material adverse effect upon any Contingent Payment that may otherwise be payable under Section 1.6(a), (iii) such control and discretion by the Purchaser could result in the Seller receiving no Contingent Payment whatsoever under Section 1.6(a) and (iv) the Purchaser has no duty to the Seller to commercially exploit the products or projects of the Business or to exert any level of effort in marketing the products or projects of the Business. In addition, the Seller acknowledges, understands and agrees that whether or not the Purchaser makes any BMP Sales after the Closing, the Purchaser shall not be prohibited pursuant to this Section 1.6 from researching, developing, manufacturing, marketing or selling other products that may compete with the Business or reduce the BMP Sales. The Seller also acknowledges, understands and agrees that personnel of the Purchaser shall take actions in connection with the commercial exploitation of the Business and its products and projects that such personnel believe to be in the best interests of the Purchaser, and that they are not required to take into account, nor will they take into account, the interests of the Seller in determining whether to take any such actions. Accordingly, with respect to this Section 1.6, except as hereinafter expressly provided, the Seller agrees not to challenge, in any subsequent claim or action, any decision regarding such commercial exploitation of the Business and its products and projects made by any director, officer, employee or agent of the Purchaser, unless such action (x) constitutes a breach by the Purchaser of any of its express obligations under this Agreement or (y) was taken in bad faith for the principal purpose of avoiding payment of the Contingent Payment or frustrating the provisions of this Section 1.6.

           (c)  In the event that prior to the end of the Contingent Payment Period a Person (other than a Permitted Holder) (an “ NXP Acquiring Person ”) acquires (i) a majority of the outstanding capital stock of or other equity interests in the Purchaser, (ii) all or substantially all of the assets of the Purchaser or (iii) a portion of the assets of one or more business units or other operating units of the Purchaser of which the Business or all or substantially all of the Transferred Assets is a part, then within 30 days of the occurrence of any such event, such NXP Acquiring Person shall elect, to either (x) pay to the Seller the amount of any Contingent Payment that remains capable of being earned by the Seller as of and after such date, or (y) assume all of the Purchaser’s remaining obligations under the terms of Section 1.6(a). For the avoidance of doubt, the Seller shall not be entitled to receive nor shall such NXP Acquiring Person be required to assume any obligations to pay any portion of the Contingent Payment pursuant to Section 1.6(a) to the extent the Contingent Payment Period has ended prior to the date of the event described under (i), (ii) or (iii) above and the applicable conditions to the payment of the Contingent Payment had not been satisfied.

      1.7 Assumption of Liabilities .

           (a)  On the terms and subject to the conditions set forth herein, at the Closing, the Purchaser shall assume the following obligations and liabilities of the Seller (the “ Assumed Liabilities ”): (i) all Liabilities arising on or after the Closing under the Transferred Contracts (but excluding any Liability for any breach arising in whole or in part on or prior to the Closing Date); (ii) all Liabilities with respect to Taxes arising out of or related to the operation of the Business or the Transferred Assets after the Closing Date; (iii) all Liabilities with respect to Open Incoming POs entered into (A) on or before the date hereof or (B) otherwise in compliance with this Agreement (but not including any Liability for any breach arising in whole or in part on or prior to the Closing Date); (iv) all Liabilities with respect to Open Outgoing POs entered into (A) on or before the date hereof or (B) otherwise in compliance with this Agreement (but not including any Liability for any breach arising in whole or in part on or prior to the Closing Date); (v) all Liabilities for product warranty claims and product liability claims with respect to Seller Products manufactured and sold after the Closing Date; and (vi) all Liabilities to the extent arising out of, relating to or in connection with the ownership or operation of the Business or the Transferred Assets after the Closing Date. For the avoidance of doubt, Assumed Liabilities shall not include (x) any Liabilities, including Liabilities for refunds, rebates, rights of return or similar obligations, with respect to any Seller Products sold prior to the Closing Date; (y) any Liabilities of Seller as an employer related to the employee rights, compensation and benefits arising up to and including the Closing Date; and (z) any Liabilities for Intellectual Property infringements or unpaid royalty payments with respect to activities conducted by Seller prior to the Closing Date, including any Seller Products sold prior to the Closing Date.

           (b)  At the Closing, the Purchaser shall deliver to the Seller the Assignment and Assumption Agreements. For the avoidance of doubt it is hereby clarified that the Purchaser’s assumption of liabilities under this Section 1.7 shall be

considered part of the consideration paid for the Transferred Assets. Taxes shall only be an Assumed Liability to the extent provided for in this Section 1.7.

      1.8 Excluded Liabilities . The Seller and its Affiliates shall retain and be responsible for all Excluded Liabilities.

      1.9 Sales and Transfer Taxes; VAT; Transferred Subsidiary Tax Matters .

           (a)  Any sales taxes, use taxes, transfer taxes, documentary charges, recording fees, Import Duties up to an aggregate maximum local currency equivalent of $1,500,000 (the “ Import Duty Cap ”), filing fees or similar taxes, charges, fees or expenses (other than Taxes attributable to Seller’s gain or income from the sale of the Transferred Assets or Seller’s ownership, use and operation of the Business or any Transferred Assets or expenses associated with a failure by the Seller to appropriately remit Taxes or timely file the appropriate Tax Returns) that may become payable in connection with the sale of the Transferred Assets to the Purchaser and the assumption by the Purchaser of the Assumed Liabilities or any of the other transactions contemplated by the Transactional Agreements shall be split evenly such that one-half of such amounts shall be borne and paid by the Seller and one-half shall be borne and paid by the Purchaser; provided that the Purchaser shall bear any incremental such Taxes incurred as a result of the Purchaser’s allocation of a portion of the Purchase Price to the customer base of the Business. Any Import Duties that are in excess of the Import Duty Cap shall be borne and paid by the Seller.

           (b)  The Purchase Price under this Agreement in respect of the sale of the Transferred Assets and the assumption of the Assumed Liabilities is exclusive of any VAT in respect of which the provisions of this Section 1.9(b) shall apply. To the extent that any relevant jurisdiction provides for relief or exemption from VAT on the transfer of a business or a company or treats such a transaction as being non-taxable for VAT purposes, including as a result of it being a transfer of a going concern, the Seller and the Purchaser shall each use all reasonable efforts to secure such treatment as regards the sale of the Transferred Assets and the assumption of the Assumed Liabilities (insofar as the Business is carried on in the relevant jurisdiction) under this Agreement. Such efforts shall, for the avoidance of doubt, include the making of an election or application in respect of VAT in any such jurisdiction or entering into a written agreement. The Purchaser agrees that it will use the Transferred Assets acquired in carrying on the same kind of business, whether or not as part of its existing business, as the Seller, unless otherwise explicitly stated in this Agreement.

          The Seller shall have the right to obtain a ruling in the relevant jurisdiction as to whether the sale of the Transferred Assets and the assumption of the Assumed Liabilities is eligible for a relief or exemption or are otherwise non-taxable for the purposes of the Legal Requirement governing VAT in that jurisdiction and to charge (or not to charge) VAT to the Purchaser(s) in accordance with that ruling. The Seller shall not be obliged to challenge that ruling. If the Purchaser wishes to challenge any ruling, it may do so.

          If, notwithstanding the foregoing, any Governmental Entity with responsibility for Taxes determines that any sale carried out pursuant to this Agreement will be treated as a supply of goods or a supply of services for VAT purposes, or does not qualify for relief or exemption from VAT or is otherwise chargeable to VAT, the Seller shall hold harmless and indemnify the Purchaser and each of its Affiliates, and their respective directors, officers, shareholders, partners, members, attorneys, accountants, agents, representatives and employees (other than the Transferred Employees) and their heirs, successors and permitted assigns, each in their capacity as such against any and all costs, charges, VAT and penalties arising except to the extent that the Purchaser is (acting reasonably) able to recover such amounts from the applicable authorities and (i) where the Purchaser has overpaid any amount, the Seller will repay this amount to the Purchaser plus interest and any related costs and shall also provide the Purchaser with a correcting invoice or credit note for an amount equal to the overpayment made by the Purchaser, and (ii) where the Purchaser has paid less than the correct amount, the Purchaser shall pay the outstanding amount to the Seller upon the receipt of a valid VAT invoice.

          If VAT is chargeable, the Seller shall provide the Purchaser with a valid VAT invoice that meets all requirements imposed by the relevant Governmental Entity with responsibility for Taxes and which specifically states the VAT (or equivalent, if any) and meets further conditions necessary to allow the Purchaser to obtain relief from such VAT to the extent such relief is available. Provided the Purchaser is in receipt of a valid VAT invoice, the Purchaser will, subject to the provision of the preceding paragraph, pay to the Seller such VAT in addition to any amounts expressed in this Agreement.

          The Purchaser reserves the right to withhold payment of any VAT (or equivalent, if any) to the Seller until the Seller has provided the Purchaser with a valid VAT invoice and such other further information as the Purchaser may reasonably request.

          The VAT amounts shall be paid in the currency in which the VAT in question must be accounted for in the relevant jurisdiction.

          (c) Following the Closing, the Purchaser shall have responsibility for preparing and filing the Tax Returns of the Transferred Subsidiary that include any period after the Closing Date. The Tax Returns of the Transferred Subsidiary which include any period prior to the Closing Date shall be prepared in a manner substantially consistent with Seller’s prior practices except to the extent that such practices are, in the Purchaser’s reasonable judgment, inconsistent with applicable Legal Requirements or otherwise likely to subject the Purchaser to a penalty imposed by an applicable Tax authority. The Seller shall promptly provide the Purchaser with all information that the Purchaser may from time to time reasonably request to permit the Purchaser to prepare and file (or cause to be prepared and filed) any Tax Returns of the Transferred Subsidiary that the Purchaser, under this Section 1.9(c), has responsibility for preparing and filing. The Purchaser shall give the Seller notice of any audit adjustments that are proposed that could impact any periods prior to the Closing. The Purchaser shall at its own expense have the option to elect to assume the defense of such adjustments.

          In the case of Taxes (other than income Taxes ) payable by the Transferred Subsidiary and attributable to taxable periods beginning on or before, and ending after, the Closing Date (“ Straddle Periods ”), if any, the amount of such Taxes for the pre closing period to be borne and paid by the Seller, on the one hand, and the amount of Taxes for the post-closing period to be borne and paid by the Purchaser, on the other hand, shall be determined such that (i) the Seller bears and pays an amount of such Taxes equal to the total amount of such Taxes multiplied by a fraction the numerator of which is the number of days in such Straddle Period up to and including the Closing Date and the denominator of which is the total number of days in such Straddle Period and (ii) the Purchaser bears and pays an amount of such Taxes equal to the total amount of such Taxes multiplied by a fraction the numerator of which is the total number of days in such Straddle Period following the Closing Date and the denominator of which is the total number of days in such Straddle Period.

          (d) At Closing, the Purchaser shall withhold Tax at source, at the prevailing rates under Israeli Tax Legal Requirements, with respect to the portion of the Purchase Price allocated to the Transferred Shares pursuant to Section 1.10 (or otherwise determined by the Israeli Tax authorities), unless the Seller shall deliver on or before the Closing Date to the Purchaser an exemption certificate from the Israeli Tax authorities in connection with the sale and transfer of the Transferred Shares.

      1.10 Allocation of Purchase Price . The Seller and the Purchaser recognize their mutual obligations pursuant to Section 1060 of the Code (and any comparable provisions of any other Tax law) to allocate the Purchase Price and all other items properly included in “consideration”, if any, consistent with the principles set forth therein, and to timely file IRS Form 8594 (or comparable form) and subsequent Forms 8594 (or comparable forms), if any are required, with each of their respective Tax Returns (the “Asset Allocation Statements”). Accordingly, the Seller and the Purchaser agree to cooperate in the preparation of any Asset Allocation Statements. Within 5 Business Days after the date of this Agreement, the Purchaser shall deliver to the Seller a statement of allocation of the Purchase Price and all other items properly included in “consideration”, if any, among the Transferred Assets, which shall be prepared in a manner consistent with the principles set forth in Section 1060 of the Code and which shall specify in reasonable detail the amount (supported by an appraisal to be obtained by the Purchaser) to be allocated to inventory, customer base, work force, intellectual property and other intangible assets (i.e. goodwill) located both inside and outside the United States (the “Allocation”). The Purchaser and the Seller will endeavor in good faith to resolve any differences with respect to the Allocation within 10 days following the Seller’s receipt of the Allocation from the Purchaser. If the Seller withholds its consent to the Allocation after such 10-day period, then any remaining disputed matters will be finally and conclusively determined by an independent accounting firm of recognized national standing (the “Allocation Arbiter”) jointly selected by the Purchaser and the Seller. Promptly, but not later than 20 days after its acceptance of appointment hereunder; the Allocation Arbiter will determine (based solely on presentations by the Seller and the Purchaser and not by independent review) only those matters in dispute and will render a written report as to the disputed matters and the resulting allocation of

Purchase Price (together with any assumed liabilities), which report shall be conclusive and binding upon the parties. Each of the Seller and the Purchaser shall (i) be bound by the Allocation for purposes of determining any Taxes, (ii) prepare and file, and cause its Affiliates to prepare and file, its Tax Returns on a basis consistent with the Allocation, and (iii) take not position, and cause its Affiliates to take no position, inconsistent with the Allocation on any applicable Tax Return or in any proceeding before any taxing authority or otherwise. In the event that the Allocation is disputed by any taxing authority, the Party receiving notice of the dispute shall promptly notify the other Party hereto concerning resolution of the dispute. Seller and Purchaser acknowledge that the Allocation was made in accordance with the provisions of Section 1060 of the Code and Treasury Regulation thereunder.

      1.11 Ancillary Agreements . At the Closing, the Seller and the Purchaser, or their respective Affiliates, as applicable, will enter into the following additional agreements to the extent not entered into previously (the “ Ancillary Agreements ”):

           (a)  the IP License Agreement;

           (b)  the Assignment and Assumption Agreements;

           (c)  the Transition Services Agreement;

           (d)  the Escrow Agreement;

           (e)  the Local Purchase Agreements; and

           (f)  the Intellectual Property Assignment Agreements.

      1.12 Closing . The closing of the purchase of the Transferred Assets by the Purchaser (the “ Closing ”) will take place at the offices of Sullivan & Cromwell LLP, 1870 Embarcadero Road, Palo Alto, California 94303-3308 at 8:00 A.M. California time, on the third Business Day after the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Sections 5 and 6 (other than those conditions that by their nature are to be satisfied at the Closing but subject to the fulfillment or waiver of those conditions). For purposes of this Agreement, “ Closing Date ” means the date on which the Closing actually takes place.

      1.13 Deliveries by the Purchaser . At the Closing, the Purchaser or an Affiliate of the Purchaser shall deliver, or cause to be delivered:

           (a)  to the Seller the following (except to the extent actually delivered to the Seller or an Affiliate of the Seller at or prior to the Closing pursuant to a Local Purchase Agreement):

                (i)  the Cash Closing Payment in immediately available funds by wire transfer to an account or accounts which have been designated by the Seller at least four (4) Business Days prior to the Closing Date;

                (ii)  a duly executed counterpart of each Assignment and Assumption Agreement and other instruments of assumption or other documents in form and substance reasonably acceptable to the Purchaser and the Seller, as may be necessary to effect Purchaser’s assumption of the Assumed Liabilities and the effective assignment of any Transferred Contracts or other Transferred Assets;

                (iii)  a duly executed counterpart of each of the other Ancillary Agreements;

                (iv)  a duly executed counterpart of the Supply Agreement;

                (v)  the certificate to be delivered pursuant to Section 6.8; and

                (vi)  such other customary instruments of transfer, assumptions, filings or documents, in form and substance reasonably satisfactory to the Seller, as may be required to give effect to this Agreement.

      1.14 Deliveries by the Seller . At the Closing, the Seller or an Affiliate of the Seller shall deliver, or cause to be delivered, to the Purchaser or an Affiliate of the Purchaser the following (except to the extent actually delivered to the Purchaser or one of its Affiliates at or prior to the Closing pursuant to a Local Purchase Agreement):

           (a)  a duly executed counterpart of each Assignment and Assumption Agreement, bill of sale and any other appropriate document of transfer in form and substance reasonably acceptable to the Purchaser and the Seller, transferring the tangible personal property included in the Transferred Assets to the Purchaser and assigning to the Purchaser all rights of the Seller and its Affiliates in and to all of the Transferred Contracts;

           (b)  a duly executed counterpart of each of the other Ancillary Agreements;

           (c)  a duly executed counterpart of the Supply Agreement;

           (d)  assignments, in form and substance reasonably acceptable to the Purchaser and, if applicable, as required by any Governmental Entity with which the Seller’s or any of its Affiliates’ rights to any Transferred Intellectual Property have been filed, assigning to the Purchaser the Transferred Intellectual Property;

           (e)  a duly executed certification that the Seller is not a foreign Person within the meaning set forth in Treasury Regulation Section 1.1445-2(b)(2)(iii)(A); it being understood that notwithstanding anything to the contrary contained herein, if the Seller fails to provide the Purchaser with such certification, the Purchaser shall be entitled to withhold the requisite amount from the Purchase Price in accordance with Section 1445 of the Code and the applicable Treasury Regulations;

           (f)  evidence of the obtaining of each Seller Required Approval that is a condition to the Purchaser’s obligations under Section 5.8;

           (g)  the certificate to be delivered pursuant to Section 5.9;

           (h)  such other customary instruments of transfer, assumptions, filings or documents, in form and substance reasonably satisfactory to the Purchaser, as may reasonably be deemed necessary or appropriate by the Purchaser to give effect to this Agreement; and

           (i)  an estimated Transferred Subsidiary Closing Balance Sheet.

      1.15 Nonassignability of Assets . Notwithstanding anything to the contrary contained in this Agreement, to the extent that the sale, assignment, sublease, transfer, conveyance or delivery or attempted sale, sublease, assignment, transfer, conveyance or delivery to the Purchaser of any asset that would be a Transferred Asset or any claim or right or any benefit arising thereunder or resulting therefrom is prohibited by any Legal Requirement or would require any Governmental Authorizations or third party authorizations, approvals, consents or waivers, and such authorizations, approvals, consents or waivers shall not have been obtained prior to the Closing, the Closing shall proceed without the sale, assignment, sublease, transfer, conveyance or delivery of such asset unless such failure causes a failure of any of the conditions to Closing set forth in Section 5, in which event the Closing shall proceed only if the failed condition is waived by the party or parties entitled to the benefit thereof. In the event that the failed condition is waived and the Closing proceeds without the transfer, sublease or assignment of any such asset, then following the Closing, the parties shall use their reasonable efforts, and cooperate with each other, to obtain promptly such authorizations, approvals, consents or waivers; provided , however , that none of the Seller or the Purchaser or any of their respective Affiliates shall be required to pay any consideration to obtain any contractual consent or waiver, other than (a) any de minimis fees, expenses or other consideration or (ii) any such fees, expenses or other consideration required to be paid pursuant to the express provisions of the contract requiring such consent, which consideration, fees or expenses shall be paid by the party obligated to seek such consent, nor shall any such party be required to pay any amounts in respect of any Governmental Authorization other than filing, recordation or similar fees which shall be shared equally by the Seller and the Purchaser. Pending such authorization, approval, consent or waiver, the parties shall cooperate with each other in any mutually agreeable, reasonable and lawful arrangements designed to provide to the Purchaser the benefits of use of such asset and to the Seller or its Affiliates the benefits, including any indemnities, that they would have obtained had the asset been conveyed to the Purchaser at the Closing. Once authorization, approval, consent or waiver for the sale, assignment, sublease, transfer, conveyance or delivery of any such asset not sold, assigned, subleased, transferred, conveyed or delivered at the Closing is obtained, the Seller shall or shall cause the relevant Affiliates to, assign, transfer, convey and deliver such asset to the Purchaser at no additional cost. To the extent that any such asset cannot be transferred or the full benefits of use of any such asset cannot be provided to the Purchaser following the Closing pursuant to this Section 1.15, then the Purchaser and the Seller shall enter into such arrangements (including subleasing, sublicensing or subcontracting) to provide to the parties hereto the economic (taking into account Tax costs and benefits) and operational equivalent, to the

extent permitted, of obtaining such authorization, approval, consent or waiver and the performance by the Purchaser of the obligations thereunder. The Seller shall hold in trust for and pay to the Purchaser promptly upon receipt thereof, all income, proceeds and other monies received by the Seller or any of its Affiliates in connection with its use of any asset (net of any Taxes and any other costs imposed upon the Seller or any of its Affiliates) in connection with the arrangements under this Section 1.15.

      1.16 Affiliate Acquisitions . Notwithstanding anything to the contrary contained in this Agreement, the Purchaser may elect to have any or all of the Transferred Assets conveyed or transferred to, or any of the Assumed Liabilities assumed by, one or more of its Affiliates so long as no such election results in any greater cost or obligation than the Seller would otherwise have had; provided, however , that no such election shall relieve the Purchaser or the Seller of any of its obligations to the other Party and such Party’s Affiliates hereunder with respect to the Assumed Liabilities or otherwise. The Purchase Price shall be allocated among those Transferred Assets to be conveyed to the Purchaser and those Transferred Assets to be conveyed to the respective Affiliates of the Purchaser, but in no event shall the amount of the Purchase Price or any other items to be paid for the Transferred Assets, the nature of the Assumed Liabilities to be assumed, the obligation to pay Taxes or transfer taxes or the allocation of risk and responsibility between the Seller and the Purchaser be modified to the detriment of the Seller and/or the Purchaser and their Affiliates as a result of the delivery of separate bills of sale, assignments and other closing documents.

2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.

     The Seller represents and warrants to the Purchaser, as of the date hereof and as of the Closing, as follows, subject in each case to such exceptions as are specifically set forth in the attached disclosure schedules of the Seller (the “ Seller Disclosure Schedules ”), it being understood that each exception set forth in a section or subsection of the Seller Disclosure Schedules shall qualify only the corresponding representation and warranty set forth in this Agreement and shall qualify other representations and warranties in this Agreement to the extent (but only to the extent) that it is readily apparent on its face from a reading of the Seller Disclosure Schedules that such disclosure is intended to be applicable to such other representations and warranties:

      2.1 Due Organization and Qualification . The Seller (and in the case of any Local Purchase Agreement, the relevant Seller Affiliate) is a legal entity duly organized, validly existing and (to the extent such concept is applicable in such jurisdiction) is in good standing under the laws of its respective jurisdiction of organization and has all requisite power and authority to own, lease and operate its assets (including any Transferred Assets) and to carry on the Business as currently conducted. The Seller (and in the case of any Local Purchase Agreement, the relevant Seller Affiliate) is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or the operation of the Transferred Assets or the conduct of the Business requires such qualification.

      2.2 Title to Assets . As of the Closing Date, the Seller (or in the case of any Local Purchase Agreement, the relevant Seller Affiliate) will have good and valid title to the Transferred Inventory and the Transferred Fixed Assets, free and clear of any Encumbrances, except for Permitted Encumbrances

      2.3 Financial Information . (a) The quarterly statements of product line contribution for the year ended December 28, 2007 set forth in Section 2.3(a) of the Seller Disclosure Schedule (the “ Financial Information ”), have been prepared from the books and records of the Seller and present fairly in all material respects the revenues and direct expenses of the Business for such period. The revenues and direct expenses set forth in the Financial Information were recognized in accordance with the Seller’s historical revenue recognition and expense policies and practices all of which are consistent with GAAP. Any allocations made by Seller and applicable to the expenses recorded on the statements of revenue and expenses have been made and recorded on a systematic and rational basis. The Seller maintains a system of internal accounting controls applicable to the Business sufficient to provide reasonable assurances, with respect to the Seller and its Subsidiaries, that (i) all transactions are executed in accordance with management’s general or specific authorization and (ii) all transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain proper accountability for items. The Seller’s enterprise-wide system of internal accounting controls is sufficient as applicable to the Seller and its Subsidiaries taken as a whole to provide reasonable assurances that (i) access to their properties and assets is permitted only in accordance with management’s general or specific authorization and (ii) the recorded accountability for items is compared with the actual levels at reasonable intervals and appropriate action is taken with respect to any differences.

          (b)  Section 2.3(b) of the Seller Disclosure Schedules sets forth the amounts, as of March 31, 2008, by category of the Transferred Subsidiary Closing Assets. There are no credits, prepaid expenses, deferred charges, advance payments, security deposits, prepaid items or duties that are primarily, but not exclusively, related to any Transferred Assets that are individually or in the aggregate material to the Business.

      2.4 Intellectual Property.

           (a)  Section 2.4(a) of the Seller Disclosure Schedules sets forth a complete and accurate list of any and all contracts pursuant to which the Seller or any of its Subsidiaries has granted to any Person any express right to use, exercise, or otherwise practice any right under any Transferred IP, indicating for each such contract the title, the parties, the date executed, and whether or not it is exclusive, other than (i) contracts pursuant to which a customer purchasing or licensing a Seller Product from the Seller in the ordinary course of business acquires only a nonexclusive right to use such product , and (ii) contracts entered into after the date of this Agreement by the Seller without violation of Section 4.2 (the “ Outbound IP Licenses ”).

           (b)  Section 2.4(b)(i) of the Seller Disclosure Schedules sets forth a complete and accurate list of any and all written contracts pursuant to which the Seller or

any of its Subsidiaries is a party and has been granted any express right by the other party to use, exercise, or otherwise practice any right under any Intellectual Property of such other party used in or necessary to the conduct of the Business as currently conducted by the Seller, and which are being transferred to the Purchaser, indicating for each such contract the title, the parties, the date executed, and whether or not it is exclusive (the “ Transferred Inbound IP Licenses ” and together with the Outbound IP Licenses, the “ IP Contracts ”). Section 2.4(b)(ii) of the Seller Disclosure Schedules sets forth a complete and accurate list of any and all written contracts pursuant to which the Seller or any of its Subsidiaries has been granted any express right to use, exercise, or otherwise practice any right under any Intellectual Property of such other party that is related to any Seller Product and either (x) is incorporated into any Seller Product (or any component thereof) or any item of Transferred Non-Patent IP, or (y) comprises a software tool necessary for the development, design, support, or maintenance of any Seller Product, but which in each case, are not being transferred to the Purchaser, indicating for each such contract or arrangement the title, the parties, the date executed, and whether or not it is exclusive (the “ Non-Transferred Inbound IP Licenses ”).

           (c)  The Transferred Non-Patent IP, the Transferred Patents, the Intellectual Property that is the subject of the Transferred Inbound IP Licenses or the Non-Transferred Inbound IP Licenses, the Licensed Non-Patent IP, and the Licensed Patents collectively include all of the Intellectual Property owned by or licensed to the Seller that (i) is incorporated into any Seller Product (or any component thereof) or any item of Transferred Non-Patent IP, or (ii) comprises a software tool necessary for the development, design, support, or maintenance of any Seller Product or any item of Transferred Non-Patent IP.

           (d)  Each IP Contract that is transferred to the Purchaser is valid, subsisting and enforceable against the other party, and is in full force and effect, subject to applicable bankruptcy and insolvency laws and general principles of equity, and will continue to be so immediately following the consummation of the transactions contemplated by this Agreement. The Seller is not subject to any outstanding order, judgment or decree materially adversely affecting the Seller’s or its Subsidiaries’ rights under the IP Contracts that are transferred to the Purchaser. To the Seller’s Knowledge, no claim has been threatened or asserted in writing that the Seller or its Subsidiaries, or (to the Seller’s Knowledge) another Person, has materially breached any IP Contract that is transferred to the Purchaser. To the Seller’s Knowledge, there exists no event, condition or occurrence that, with the giving of notice or lapse of time, or both, would constitute a material breach or default by the Seller or its Subsidiaries, or to the Seller’s Knowledge another Person, under any IP Contract. No party to any IP Contract that is transferred to the Purchaser has given notice of its intention to cancel, terminate, change the scope of rights under, or fail to renew such contract. Neither the Seller nor its Subsidiaries, nor to the Seller’s Knowledge any other party to any IP Contract, has repudiated in writing any IP Contract that is transferred to the Purchaser. Consummation of the transactions contemplated by this Agreement will not place the Seller or its Subsidiaries in breach or default of any IP Contract that is transferred to the Purchaser, or trigger any modification, termination or acceleration thereunder, or create any license

under or lien on Transferred IP (except for licenses or liens granted or created by, or imposed on, the Purchaser or its assets independently of the transactions contemplated by this Agreement).

           (e)  Except as set forth in Section 2.4(e) of the Seller Disclosure Schedules, immediately prior to the Closing, the Seller (or in the case of any Local Purchase Agreement, the relevant Seller Affiliate) will exclusively own (beneficially and in the case of Patents or otherwise as applicable, of record), and will assign, transfer and convey to the Purchaser all right, title, and interest to and in all Transferred IP free and clear of any liens or other material encumbrances (other than encumbrances arising under the Transferred Contracts). !

           (f)  The Seller and its Subsidiaries have taken commercially reasonable steps to preserve the confidential nature of the Transferred IP that they, in their reasonable business judgment, determine should be held as confidential or proprietary (including, without limitation, any trade secrets). Without limiting the foregoing, the Seller and its Subsidiaries have enforced a policy of requiring each employee, consultant, contractor, and potential business partner or investor receiving access to such Transferred IP to execute confidentiality agreements substantially consistent with the Seller’s standard forms thereof (complete and current forms of which have been delivered or made available to the Purchaser). To the Seller’s Knowledge, except under valid and binding confidentiality obligations, there has been no material disclosure by the Seller of any information related to the Transferred IP that Seller, in its reasonable business judgment, determined should be held as confidential information or a trade secret. To the Seller’s Knowledge, the Seller’s and its Subsidiaries’ employees’ performance of their employment activities does not violate any Person’s Intellectual Property Rights or any such employee’s contractual obligation to any Person regarding a noncompetition restriction or misuse of such Person’s trade secrets.

           (g)  To the Seller’s Knowledge, all Registered IP (other than pending applications for Registered IP) is valid, subsisting, and enforceable. The Seller is not subject to any outstanding order, judgment, decree issued by a court of competent jurisdiction adversely affecting the Seller’s or its Subsidiaries’ use of, or rights to, such Registered IP. All filings, payments, and other actions required to be made or taken to maintain each item of Registered IP in full force and effect have been made by the applicable deadline. Section 2.4(g) of the Seller Disclosure Schedules is a complete and accurate list of all actions (including payment of fees) necessary within the 120 day-period following the Closing Date, to maintain or otherwise to keep in full force and effect the Registered IP. As of the date of this Agreement, no interference, opposition, reissue, reexamination, or other legal proceeding is pending or, to the Seller’s Knowledge, threatened, in which the scope, validity, ownership, right to use, or enforceability of any Registered IP is being contested or challenged.

           (h)  Neither the conduct of Business as conducted in the past or as currently conducted, any Transferred Non-Patent IP, nor any Seller Product has or does infringe upon, misappropriate, dilute, violate or constitute the unauthorized use of any Intellectual Property Rights of any Person. Except as set forth in Section 2.4(h) of the

Seller Disclosure Schedules, neither the Seller nor any of its Subsidiaries has been notified of any allegation that any Seller Product or the conduct of the Business infringes upon, misappropriates, dilutes or violates the Intellectual Property Rights of any Person. To the Seller’s Knowledge, no valid basis for any such claim exists. Since January 1, 2002, no Person has notified the Seller or any of its Subsidiaries that (i) any of such Person’s Intellectual Property Rights are infringed, misappropriated, diluted, violated, or used without authorization by Seller or any of its Affiliates in the conduct of the Business, or (ii) the Seller or any of its Subsidiaries requires a license to any of such Person’s Intellectual Property Rights in order to conduct the Business as currently conducted. Further, neither the Seller nor any of its Subsidiaries has received a written offer from any Person to license any of such Person’s Intellectual Property Rights in connection with its conduct of the Business by the Seller and its Affiliates.

           (i)  Except to the extent disclosed in Section 2.4(h) of the Seller Disclosure Schedules, there is no litigation, opposition, cancellation, proceeding, objection, or claim pending, asserted or, to the Seller’s Knowledge, threatened against the Seller or its Subsidiaries concerning the ownership, validity, registerability, enforceability, infringement or use of, or licensed right to use, any Intellectual Property used in the conduct of the Business.

           (j)  To the Seller’s Knowledge, no Person is misappropriating, infringing, diluting or violating any Transferred IP and no such claims have been brought or threatened against any Person by or on behalf of the Seller or any of its Subsidiaries.

           (k)  To the Seller’s Knowledge, all Transferred IP comprising software (except that designated as currently under development) owned by or licensed to the Seller or any of its Subsidiaries is free from (i) any major defect that cannot reasonably be remedied by the application of a patch, bugfix, error correction, or workaround of a commercially-reasonable scope and character; or (ii) any other defect that renders such software, when used by Seller’s intended customers within normal operating parameters, substantially incapable of performing its critical core functions as described in the related documentation and specifications, which defect cannot reasonably be remedied by the application of a patch, bugfix, error correction, or workaround of a commercially-reasonable scope and character. With respect to software owned by the Seller and its Subsidiaries, the applications thereof can be compiled from the associated source code using commercially reasonable means of compilation. Except as disclosed in Section 2.4(k) of the Seller Disclosure Schedules, the Transferred IP comprising software owned by the Seller and its Subsidiaries is not the subject of any escrow or similar agreement or arrangement giving any third party rights in such software upon the occurrence of certain events.

           (l)  Section 2.4(l) of the Seller Disclosure Schedules sets forth a complete and accurate list of the Seller Products, including any Transferred Non-Patent IP and any Licensed Non-Patent IP, that are, in whole or in part, subject to any open source or other type of license agreement or distribution model that: (i) requires the distribution or making available of the source code for the Seller Products, (ii) prohibits or limits the Seller or any of its Subsidiaries from charging a fee or receiving

consideration in connection with licensing, sublicensing, or distributing any Seller Product, (iii) except as specifically permitted by law, grants any right to any Person (other than the Seller and its Subsidiaries) or otherwise allows any such Person to decompile, disassemble, or otherwise reverse-engineer any Seller Product, or (iv) requires the licensing of any Seller Product for the purpose of making derivative works (any such open source or other type of license agreement or distribution model described in clause (i), (ii), (iii), or (iv) above, a “ Limited License ”). By way of clarification, but not limitation, the term “ Limited License ” shall include: (A) GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL); (B) the Artistic License (e.g., PERL); (C) the Mozilla Public License; (D) the Netscape Public License; (E) the Sun Community Source License (SCSL); and (F) the Sun Industry Standards License (SISL). Except as set forth in Section 2.4(l) of the Seller Disclosure Schedules, the Seller does not incorporate or distribute any of the Seller Products with any software that is subject to a Limited License, nor does any Seller Product constitute a derivative work of, statically link with, or otherwise interact with any such software. To the Seller’s Knowledge, Seller’s use of the software identified in Section 2.4(l) of the Seller Disclosure Schedules in the Transferred Non-Patent IP does not result in the grant of a Limited License of any proprietary software of the Seller or a third party.

           (m)  Except as set forth in Section 2.4(m) of the Seller Disclosure Schedules, no government funding, facilities of a university, college, other educational institution, or research center, or funding from any Person was used in the creation or development of the Transferred IP in a manner that would give such government, university, college, educational institution, or research center any rights in the Transferred IP as a result. Except as set forth in Section 2.4(m) of the Seller Disclosure Schedules, neither the Seller nor any of its Subsidiaries is party to any contract, license, or agreement with any Governmental Entity that grants to such Governmental Entity any right or license with respect to the Transferred IP.

           (n)  Since January 1, 2006, Seller has not sold, assigned or otherwise disposed of any Patent used in or necessary for the Business to any third party (including through any exclusive license or other arrangement that transfers the economic rights or management of any such Patent).

      2.5 Transferred Contracts . Each Transferred Contract identified on Schedule 1.1(d) is valid, is in full force and effect and is enforceable against each party thereto in accordance with the express terms thereof. With respect to each Transferred Contract: (a) the Seller has not (and to the Seller’s Knowledge no other Person has) breached or violated such Transferred Contract and (b) there has not been an event of default, or any event or condition that, after notice or lapse of time or both, would constitute a violation, breach or event of default thereunder on the part of the Seller, or to the Seller’s Knowledge, any other party thereto. There are no material disputes pending or to the Seller’s Knowledge threatened under any Transferred Contract.

      2.6 Transferred Subsidiary. There are no outstanding shares of capital stock or other securities of the Transferred Subsidiary other than the Transferred Shares. The Seller (or a wholly-owned Subsidiary of the Seller) is the sole record and beneficial

owner of and has good and marketable title to the Transferred Shares, free and clear of any lien, charge or encumbrance.

      2.7 Compliance with Legal Requirements . (a) The Seller and each of its Affiliates has at all relevant times and currently is conducting the Business and operating the Transferred Assets in compliance in all material respects with all Legal Requirements relevant to the ownership, operation or use of the Business or the Transferred Assets; (b) neither the Seller nor any of its Affiliates has received any notice alleging any failure to comply with any Legal Requirement relating to the ownership, operation or use of the Business or the Transferred Assets; (c) the Seller and each of its Affiliates possess all Governmental Authorizations necessary for the ownership, operation or use of the Business or the Transferred Assets as currently operated or used each of which is valid and in full force and effect and (d) no Governmental Authorizations or Non-Governmental Authorizations or applications therefor are required to be held by the Seller or any of its Affiliates that are specific to the design, manufacture, sale and distribution of any Seller Products (as opposed to other goods, products or services).

      2.8 Employee Matters .

           (a)  Section 2.8(a) of the Seller Disclosure Schedules specifies, with respect to each Specified Employee and Special Jurisdiction Employee as of the date of this Agreement: (i) the original date of employment of such employee; (ii) the position held by such employee as of the date of this Agreement; (iii) whether such employee is not available to perform work as of the date of this Agreement because of disability or other leave; (iv) location of such employee; and (v) total annual remuneration, including a breakdown of salary, bonus, commissions or other incentive compensation.

           (b)  With respect to the Specified Employees and Special Jurisdiction Employees: (i) no collective bargaining or other agreement exists between the Seller and any labor organization, trade union or works counsel; (ii) the Seller has not received written notice that any labor representation question presently exists, and, to the Seller’s Knowledge, no petition concerning representation under the National Labor Relations Act, as amended, or similar law is pending or threatened; (iii) no unfair labor practice charge or complaint is pending or, to the Seller’s Knowledge, threatened, before the National Labor Relations Board or similar agency or entity; and (iv) no labor dispute, strike, picketing, work slowdown, work stoppage or handbilling is pending or, to the Seller’s Knowledge, threatened.

           (c)  On or before May 15, 2008, the Seller shall deliver a schedule setting forth a good faith calculation of the estimated accrued vacation and other paid time off, as of July 1, 2008, with respect to all Transferred Employees.

      2.9 Employee Benefits; ERISA.

           (a)  Section 2.9(a) of the Seller Disclosure Schedules sets forth a true and complete list of: (i) all “employee benefit plans” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) and

any other employee benefit or compensation plans, policies, trust funds or arrangements (whether written or unwritten, insured or self-insured, domestic or foreign) maintained or contributed to (or with respect to which an obligation to contribute has been undertaken) by the Seller or any Affiliate of the Seller on behalf of any employee of the Business or their dependents, spouses, or beneficiaries and (ii) other than individual employment agreements or offer letters executed in substantially the Seller’s (or its applicable Affiliate’s) form of employment agreement or offer letter, copies of which have been made available to the Purchaser, all contracts with any employee of the Business, including any employment, termination, severance, retention, non-competition, compensation or change in control arrangements or any arrangement relating to a sale of the Business (each a “Seller Plan”). True and complete copies of each of the Seller Plans, amendments thereto and all related service agreements, summaries and summary plan descriptions have been made available to the Purchaser.

           (b)  None of the Seller, any entity that would be deemed a “single employer” with the Seller under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA (an “ ERISA Affiliate ”) or any of their respective predecessors has contributed to, contributes to, has been required to contribute to, or otherwise participated in or participates in or in any way has any liability, directly or indirectly with respect to (i) any plan subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, including any “multiemployer plan” (within the meaning of Sections 3(37)or 4001(a)(3) of ERISA or Section 414(f) of the Code) or any single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) that is subject to Sections 4063, 4064 or 4069 of ERISA or Section 413(c) of the Code that covered or has covered any employee or former employee of the Business; or (ii) any plan or arrangement that provides for post-employment medical, life insurance or other welfare-type benefits (other than health continuation coverage required by Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA (“ COBRA ”)). The Seller has no liability under, and is not subject to any lien relating to, any plan or any liability under Title IV of ERISA or Section 412 of the Code that would (x) affect in any manner whatsoever the Purchaser’s right, title and interest in, or the Purchaser’s right to use or enjoy (free and clear of any lien or encumbrance) any of the Transferred Assets, or (y) result in the assumption by or imposition on the Purchaser or any of its Affiliates of any liability.

           (c)  Except as set forth on Section 2.9(c) of the Seller Disclosure Schedules, (i) none of the Seller Plans obligates the Seller or any Affiliate of Seller to pay any separation, severance, termination or similar benefit solely as a result of the transactions contemplated by this Agreement and (ii) no employee of the Business is eligible for short-term or long-term disability insurance benefits as of the Closing Date.

      2.10 Legal Proceedings .

           (a)  Except as set forth on Section 2.10 of the Seller Disclosure Schedules, there is no civil, criminal or administrative action, suit, demand, claim, hearing, proceeding or investigation pending or, to the Seller’s Knowledge, threatened against the Seller as of the date of this Agreement that is against, relates to or involves the Transferred Assets, the Business or the transaction contemplated hereby.

           (b)  None of the Transferred Assets is subject to any order, writ, judgment, award, injunction or decree of any court or Governmental Entity of competent jurisdiction or any arbitrator or arbitrators.

      2.11 Authority . The Seller (and in the case of any Local Purchase Agreement, the relevant Seller Affiliate) has full corporate power and authority to execute and deliver each Transactional Agreement and to perform its obligations under the Transactional Agreements; and the execution, delivery and performance by the Seller (and in the case of any Local Purchase Agreement, the relevant Seller Affiliate) of the Transactional Agreements have been duly and validly authorized and no additional authorization or consent is required in connection with the performance of the Transactional Agreements. In particular, the Seller does not require an affirmative vote of its stockholders, whether under Section 271 of the DGCL or otherwise, to enter into, perform its obligations under or consummate the transactions contemplated by this Agreement or any of the other Transactional Agreements.

      2.12 Binding Nature of Agreements . This Agreement constitutes, and, upon execution and delivery thereof, each of the other Transactional Agreements will constitute, the valid and legally binding obligation of the Seller, enforceable against the 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, delivery and performance by the Seller of this Agreement and the other Transactional Agreements and the consummation of the transactions contemplated hereby and thereby 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 the Seller or any of its Affiliates; (b) assuming the receipt of all consents, approvals, waivers and authorizations and the making of the notices and filings set forth on Section 2.13 of the Seller Disclosure Schedules (collectively, the “ Seller Required Approvals ”), (i) conflict with, contravene or result in a violation or breach of, or constitute a default under, or result in the termination, modification or acceleration (whether after the filing of notice or the lapse of time or both) of any right or obligation of the Seller or any of its Affiliates under, or result in a loss of any material benefit to which the Seller or any of its Affiliates is entitled under, any Transferred Contract, or (ii) violate or result in a breach of or constitute a default under any Legal Requirement applicable to the Seller or any of its Affiliates; or (c) result in the creation of any Encumbrance upon any of the Transferred Assets.

      2.14 Taxes . Except as provided in Section 2.14 of the Seller Disclosure Schedules, all of the Tax Returns required to be filed by the Seller or any of its Affiliates (including the Transferred Subsidiary) on or before the date hereof that relate to the Business or the Transferred Assets have been filed and all such Tax Returns required to be filed on or before the Closing Date will have been filed on or before the date on which they are required to be filed and all such Tax Returns were when filed, and are, true, complete and correct in all material respects. All material Taxes required to be paid by

the Seller prior to the Closing that relate to the Business or the Transferred Assets have been (or with respect to those not required to be paid as of the date hereof will prior to the Closing be) paid in full. No statute of limitations has been extended or waived by any Tax authority with respect to any Taxes or Tax Returns referred to in the two preceding sentences. No issues that have been raised by the relevant taxing authority in connection with any examination of the Tax Returns referred to in this Section 2.14 are currently pending, and all deficiencies asserted or assessments made, if any, as a result of such examinations have been paid in full. There are no Encumbrances for Taxes upon any of the Transferred Assets nor, to the Seller’s Knowledge, is any taxing authority in the process of or otherwise contemplating imposing any Encumbrances for Taxes on any of the Transferred Assets.

      2.15 Territorial Restrictions . None of the Seller or any of its Affiliates is restricted by any agreement with any Person from carrying on the Business anywhere in the world or from expanding the Business in any way or entering into any new businesses, except for such restrictions that do not apply to any of the Business, the Transferred Assets or the Purchaser following the Closing.

      2.16 Absence of Changes . Since October 1, 2007, (a) the Seller and its Affiliates have owned and operated the Transferred Assets and conducted the Business only in the ordinary course of business, (b) no event or condition has occurred or exists, and to the Seller’s Knowledge no event or condition is threatened, that, individually or in the aggregate, has had or is reasonably likely to have, a Seller Material Adverse Effect and (c) none of the actions or events prohibited or circumscribed by Section 4.2 have been taken or have occurred, except as disclosed in Section 2.16 of the Seller Disclosure Schedules or permitted by this Agreement.

      2.17 Assets .

           (a)  Other than the material tangible assets and material services (i) used or provided by Seller’s internal business support and general and administrative functions, such as, but not limited to, legal, sales, finance, human resources, information technology, manufacturing, process engineering and back end operations, (ii) used or provided by Seller under the Transition Services Agreement, or (iii) included in the Excluded Assets, the Transferred Assets, when taken together with Purchaser’s rights under the other Ancillary Agreements, constitute all of the material tangible assets and material services of the Seller and its Affiliates necessary to conduct the Business as currently conducted.

           (b)  No Transferred Asset is owned by any entity other than the Seller (or in the case of any Local Purchase Agreement, the relevant Seller Affiliate).

      2.18 Customers and Suppliers . No customer or supplier material to the Business as currently conducted or as proposed to be conducted by the Seller, has canceled or otherwise terminated any contract with the Seller relevant to the Business prior to the expiration of such Transferred Contract’s term, or, to the Seller’s Knowledge, has threatened to cancel or otherwise terminate its relationship with the Seller or to

substantially reduce its sales to or purchases from the Seller of any products, equipment, goods or services.

      2.19 Seller Products and Inventory .

           (a)  (i) Neither the Seller nor any of its Affiliates has made or provided a warranty, express or implied, written or oral, with respect to the Seller Products other than pursuant to the Seller’s standard terms and conditions as identified in Section 2.19(a) of the Seller Disclosure Schedules and which have been made available to the Purchaser; (ii) as of the date hereof there are no pending or, to the Seller’s Knowledge, threatened claims with respect to any such warranty; (iii) there are no statements, citations or decisions by any Governmental Entity declaring any of the Seller Products defective or unsafe; (iv) there have been no recalls, including any recalls ordered by any Governmental Entity, with respect to any Seller Product; and (v) there are no material pending, or, to the Seller’s Knowledge, threatened, product liability claims against or involving the Seller or any the Seller Product and no such claims have been settled or adjudicated. All of the Seller Products comply in all material respects with applicable authorizations, permits or licenses of any Governmental Entity and all applicable Legal Requirements.

           (b)  All of the Transferred Inventory has been created or acquired in the ordinary course of business, and, as of the date of this Agreement, is fit for the purpose for which it was procured or manufactured and such Transferred Inventory (i) is not obsolete, damaged or defective, and (ii) is of a good quality usable or saleable in the ordinary course of business, subject in the case of clauses (i) and (ii) to reserves therefor recorded in accordance with GAAP and reflected in the Financial Information. Section 2.19(b) of the Seller Disclosure Schedules sets forth the Transferred Inventory as if the Closing Date were March 31, 2008.

      2.20 Export Controls, Trade Sanctions and Certain Payments.

           (a)  The Seller has in the conduct of the Business and the ownership and operation of the Transferred Assets complied in all material respects with all statutory and regulatory requirements relating to export controls and trade sanctions under all applicable Legal Requirements of each jurisdiction in which the S