-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HQfyv5KCMDgg5UmgpD8J9NJ0JPvgzZsw5ElihqMqPGRk2VSaINJS7stzgZBewWBx UgiIBzFYKbrcVVdZ+6O8+A== 0000912057-01-528177.txt : 20010814 0000912057-01-528177.hdr.sgml : 20010814 ACCESSION NUMBER: 0000912057-01-528177 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADAPTEC INC CENTRAL INDEX KEY: 0000709804 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 942748530 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15071 FILM NUMBER: 1707605 BUSINESS ADDRESS: STREET 1: 691 S MILPITAS BLVD STREET 2: M/S25 CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 4089458600 MAIL ADDRESS: STREET 1: 691 SOUTH MILPITAS BLVD STREET 2: M/S25 CITY: MILPITAS STATE: CA ZIP: 95035 10-Q 1 a2056442z10-q.txt 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to
FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER 0-15071 ------------------------ ADAPTEC, INC. (Exact name of registrant as specified in its charter) DELAWARE 794-2748530 (State of Incorporation) (I.R.S. Employer Identification No.) 691 S. MILPITAS BLVD., MILPITAS, CALIFORNIA 95035 (Address of principal executive offices) (Zip Code)
(408) 945-8600 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / The number of shares outstanding of the Company's common stock as of August 1, 2001 was 99,123,002. This document consists of 32 pages, excluding exhibits, of which this is page 1. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Statements of Operations................................................ 3 Condensed Consolidated Balance Sheets....... 4 Condensed Consolidated Statements of Cash Flows..................................................... 5 Notes to Condensed Consolidated Financial Statements................................................ 6-15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 16-30 Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................... 29 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K............ 30 Signatures........................................... 31
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ADAPTEC, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTH PERIOD ENDED ----------------------------------------- JUNE 30, JUNE 30, 2001 2000 ------------------- ------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net revenues.............................................. $110,688 $154,494 Cost of revenues.......................................... 58,252 64,509 -------- -------- Gross profit.............................................. 52,436 89,985 -------- -------- Operating expenses: Research and development................................ 26,241 24,921 Selling, marketing and administrative................... 26,875 31,627 Amortization of goodwill and other intangibles.......... 13,579 15,896 Restructuring charges................................... 6,912 -- Other charges........................................... 4,092 -- -------- -------- Total operating expenses.................................. 77,699 72,444 -------- -------- Income (loss) from operations............................. (25,263) 17,541 Interest and other income................................. 10,548 20,691 Interest expense.......................................... (3,013) (3,044) -------- -------- Income (loss) from continuing operations before provision for income taxes.............................. (17,728) 35,188 Provision for income taxes................................ 775 15,287 -------- -------- Net income (loss) from continuing operations.............. (18,503) 19,901 Net income from discontinued operations................... 495 1,747 -------- -------- Net income (loss)......................................... $(18,008) $ 21,648 ======== ======== Net income (loss) per share: Basic: Continuing operations................................. $ (0.19) $ 0.20 Discontinued operations............................... $ 0.00 $ 0.02 Diluted: Continuing operations................................. $ (0.19) $ 0.19 Discontinued operations............................... $ 0.00 $ 0.02 Shares used in computing net income (loss) per share: Basic................................................... 99,090 100,805 Diluted................................................. 99,090 105,480
See accompanying Notes to Condensed Consolidated Financial Statements. 3 ADAPTEC, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, MARCH 31, 2001 2001 ---------- ----------- (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents................................. $ 189,061 $ 207,644 Marketable securities..................................... 415,236 443,685 Accounts receivable, net.................................. 49,323 41,805 Inventories............................................... 51,615 72,781 Other current assets...................................... 99,556 93,966 ---------- ---------- Total current assets.................................... 804,791 859,881 Property and equipment, net................................. 103,720 107,634 Goodwill and other intangibles.............................. 134,637 148,216 Other long-term assets...................................... 43,372 47,906 Net assets of discontinued operations....................... -- 44,153 ---------- ---------- Total assets................................................ $1,086,520 $1,207,790 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 17,513 $ 24,882 Accrued liabilities....................................... 149,544 169,028 ---------- ---------- Total current liabilities............................... 167,057 193,910 ---------- ---------- 4 3/4% Convertible Subordinated Notes....................... 229,800 229,800 Other long-term liability................................... 3,700 5,550 Contingencies (Note 6) Stockholders' equity: Common stock.............................................. 99 99 Additional paid-in capital................................ 59,983 59,722 Accumulated other comprehensive income, net............... 3,874 4,215 Retained earnings......................................... 622,007 714,494 ---------- ---------- Total stockholders' equity.................................. 685,963 778,530 ---------- ---------- Total liabilities and stockholders' equity.................. $1,086,520 $1,207,790 ========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements. 4 ADAPTEC, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTH PERIOD ENDED ----------------------------- JUNE 30, 2001 JUNE 30, 2000 ------------- ------------- (IN THOUSANDS) NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES........ $(13,049) $ 26,161 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment......................... (3,838) (7,037) Net proceeds from sale of land.............................. -- 20,418 Purchases of marketable securities.......................... (118,467) (111,825) Sales of marketable securities.............................. 116,895 86,521 Maturities of marketable securities......................... 30,318 41,598 Purchases of other investments.............................. -- (350) -------- --------- NET CASH PROVIDED BY INVESTING ACTIVITIES................... 24,908 29,325 -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock...................... 261 4,724 Repurchases of common stock................................. -- (131,032) Advances from line of credit, net........................... -- 10,000 -------- --------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES........ 261 (116,308) -------- --------- NET CASH PROVIDED BY (USED BY) DISCONTINUED OPERATIONS...... (30,703) 1,788 -------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS................... (18,583) (59,034) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 207,644 180,519 -------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $189,061 $ 121,485 ======== =========
See accompanying Notes to Condensed Consolidated Financial Statements. 5 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements of Adaptec, Inc. and its wholly-owned subsidiaries (collectively the "Company") have been prepared on a consistent basis with the March 31, 2001 audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, except as described in Notes 3, 5, 9 and 10, necessary to provide a fair statement of the results for the interim periods presented. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 2001. For presentation purposes, the Company has indicated its first quarter of fiscal 2002 as having ended on June 30, 2001, whereas in fact, the Company's first quarter of fiscal 2002 ended on June 29, 2001. The results of operations for the three month period ended June 30, 2001 are not necessarily indicative of the results to be expected for the entire year. On April 12, 2001, the Company's Board of Directors formally approved a plan to spin off the Software segment, Roxio, Inc., into a fully independent and separate company (Note 3). As a result of the spin-off, the Company's historical condensed consolidated financial statements have been restated to account for Roxio as discontinued operations for all periods presented in accordance with Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." Unless otherwise indicated, the Notes to Condensed Consolidated Financial Statements relate to the discussion of the Company's continuing operations. 2. RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets," which are effective for all business combinations completed after June 30, 2001. SFAS No. 141 replaces APB Opinion No. 16, "Business Combinations," and eliminates pooling-of-interests accounting prospectively. It also provides guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach, whereby goodwill will be evaluated annually and whenever events or circumstances occur indicating that goodwill might be impaired. Upon adoption of SFAS No. 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under SFAS No. 141 will be reclassified to goodwill. Companies are required to adopt SFAS No. 142 for fiscal years beginning after December 15, 2001, but early adoption is permitted. The Company will adopt SFAS No. 142 on April 1, 2002, the beginning of fiscal 2003, for acquisitions consummated prior to July 1, 2001. The Company is in the process of determining the impact the adoption will have on its financial position and results of operations. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities and requires recognition of all derivatives as assets or liabilities and measurement of those instruments at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133," which defers the required date of adoption of SFAS No. 133 for one year, to fiscal years beginning after June 15, 6 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 2. RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED) 2000. The Company adopted SFAS No. 133 in the first quarter of fiscal 2002. The adoption did not have a material effect on the Company's financial position and results of operations. 3. DISCONTINUED OPERATIONS--ROXIO On April 12, 2001, the Company's Board of Directors formally approved a plan to spin off Roxio and declared a dividend of the Roxio's common stock to the Company's stockholders of record on April 30, 2001. The dividend was distributed after the close of business on May 11, 2001, in the amount of 0.1646 shares of Roxio's common stock for each outstanding share of the Company's common stock. The distribution of the Roxio's common stock was intended to be tax-free to the Company and to the Company's stockholders. The Company distributed all of the Roxio's common stock, except for 190,936 shares retained by the Company for issuance upon the potential exercise of the outstanding warrants held by Agilent Technologies, Inc. ("Agilent") to purchase shares of the Company's common stock (Note 5). The distribution of the Roxio's common stock dividend on May 11, 2001 resulted in the elimination of the net assets of discontinued operations and a $74.5 million reduction of retained earnings. Of this amount, $33.2 million represents the initial long-term funding the Company contributed to Roxio at the date of distribution. In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the Company classified the 190,936 shares of Roxio's common stock as available-for-sale securities. They were recorded at fair market value and included under "Marketable securities" in the Condensed Consolidated Balance Sheet as of June 30, 2001. As a result of the spin-off, the Company's historical condensed consolidated financial statements have been restated to account for Roxio as discontinued operations for all periods presented in accordance with APB Opinion No. 30. Accordingly, the net revenues, costs and expenses, assets and liabilities, and cash flows of Roxio have been excluded from the respective captions in the Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows. The net income, net assets and net cash flows of Roxio have been reported as "discontinued operations" in the accompanying condensed consolidated financial statements. The operating results of Roxio for the period from April 1, 2001 to April 11, 2001 were reflected under "Net income from discontinued operations" in the Condensed Consolidated Statement of Operations for the three month period ended June 30, 2001. 4. BALANCE SHEETS DETAILS Inventories are stated at the lower of cost (first-in, first-out) or market. The components of inventories were as follows:
JUNE 30, 2001 MARCH 31, 2001 ------------- -------------- (IN THOUSANDS) Raw materials............................................. $16,492 $25,789 Work-in-process 11,063 15,867 Finished goods............................................ 24,060 31,125 ------- ------- Total..................................................... $51,615 $72,781 ======= =======
7 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 4. BALANCE SHEETS DETAILS (CONTINUED) The components of accrued liabilities were as follows:
JUNE 30, 2001 MARCH 31, 2001 ------------- -------------- (IN THOUSANDS) Tax related............................................... $ 88,268 $ 95,635 Acquisition related....................................... 18,500 18,500 Accrued compensation and related taxes.................... 17,485 17,951 Sales and marketing related............................... 4,182 3,791 Accrued royalty fees...................................... -- 16,290 Other..................................................... 21,109 16,861 -------- -------- Total..................................................... $149,544 $169,028 ======== ========
5. AGILENT AGREEMENT In January 2000, the Company entered into a four-year Development and Marketing Agreement (the "Agreement") with Agilent to co-develop, market and sell fibre channel host bus adapters using fibre channel host bus adapter and software driver technology licensed from Agilent. The Company issued warrants to Agilent to purchase 1,160,000 shares of the Company's common stock at $62.25 per share. In addition, the Company was to pay royalties to Agilent based on revenues generated from the fibre channel products incorporating the licensed technology. The Agreement provided for minimum royalty fees of $6.0 million in the first contract year and $12.0 million in the second contract year. The Company incurred royalty fees of $1.0 million in the first contract year and estimated that it would incur $2.0 million in the second contract year associated with sales of the Company's products incorporating the licensed technology. Therefore, the Company accrued and expensed the remaining minimum royalty fees of $5.0 million for the first contract year in fiscal 2000, and $10.0 million for the second contract year in fiscal 2001. In June 2001, the Company and Agilent mutually agreed to terminate the Agreement. Pursuant to the Agreement's termination, the Company paid Agilent the minimum royalty fees of $18.0 million for the first and second contract years. In return, the Company received a fully paid, non-exclusive, worldwide perpetual license to use Agilent's fibre channel host bus adapter and software driver technology. In addition, Agilent will continue to supply the Company with the Tachyon chips used in the Company's fibre channel products. Of the $18.0 million royalty fees, $16.4 million had previously been accrued as of the date of termination. The remaining $1.6 million royalty fees were expensed and included as "Cost of revenues" in the Condensed Consolidated Statement of Operations for the three month period ended June 30, 2001. As a result of the Roxio spin-off (Note 3), the Company declared a dividend of the Roxio's common stock to the Company's stockholders of record on April 30, 2001. Upon exercise of its warrants to purchase 1,160,000 shares of the Company's common stock, Agilent will be entitled to receive the Roxio dividend as if it was a stockholder of record on April 30, 2001. As a result, the Company has retained 190,936 shares of Roxio's common stock from the distribution and will distribute these shares to Agilent in the event Agilent exercises its warrants. The termination of the Agreement does not affect the warrants held by Agilent. 8 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 6. CONTINGENCIES In December 1999, the Company purchased Distributed Processing Technology, Corp. ("DPT") and as part of the purchase agreement, $18.5 million of the purchase price was held back (the "Holdback Amount") from former DPT stockholders (the "DPT Stockholders") for unknown liabilities that may have existed as of the acquisition date. For accounting purposes, the Holdback Amount was included as part of the acquisition purchase price. Subsequent to the date of purchase, the Company determined that certain representations and warranties made by the DPT Stockholders were incomplete or inaccurate, which resulted in a loss of revenues and additional expenses to the Company. In addition, certain DPT products were found to be defective and the Company expects to incur additional product liability expenses. In December 2000, the Company filed a claim against the DPT Stockholders for the entire Holdback Amount. In January 2001, the DPT Stockholders notified the Company as to their objection to the Company's claim. Under the terms of the purchase agreement, the Company's claim will be submitted to arbitration. A class action lawsuit is pending in the United States District Court for the Northern District of California against the Company and certain of its current and former officers and directors. The class action lawsuit alleges that the Company made false and misleading statements at various times during the period between April 1997 and January 1998 in violation of federal securities laws. The Company's motion to dismiss the complaint was granted in April 2000. The plaintiffs filed an amended complaint in July 2000. In October 2000, the Company filed a motion to dismiss the amended complaint. The Company believes the class action lawsuit is without merit and intends to defend itself vigorously. On June 27, 2000, the Company received a statutory notice of deficiency from the Internal Revenue Service ("IRS") with respect to its federal income tax returns for fiscal 1994 through 1996. The Company filed a Petition with the United States Tax Court on September 25, 2000, contesting the asserted deficiencies. On December 15, 2000, the Company received a statutory notice of deficiency from the IRS with respect to its federal income tax return for fiscal 1997. The Company filed a Petition with the United States Tax Court on March 14, 2001, contesting the asserted deficiencies. The Company believes it has meritorious defenses against all deficiencies asserted in these statutory notices. In addition, the IRS is currently auditing the Company's federal income tax returns for fiscal 1998 and 1999, for which no proposed adjustments have been received. The Company believes sufficient taxes have been provided in all prior years and the ultimate outcome of the IRS audits will not have a material adverse effect on the Company's financial position and results of operations. The Company is a party to other litigation matters and claims which are normal in the course of its operations, and while the results of such litigation matters and claims cannot be predicted with certainty, the Company believes that the final outcome of such matters will not have a material adverse effect on the Company's financial position and results of operations. 7. STOCK OPTION EXCHANGE PROGRAM In May 2001, the Company announced a voluntary stock option exchange program (the "Program") for the Company's employees. Under the Program, employees had until June 21, 2001 to make an election to cancel their outstanding stock options having exercise prices greater than $15.00 per share under the 2000 Nonstatutory Stock Option Plan, the 1999 Stock Plan and the 1990 Stock Plan, in exchange for an equal number of new nonqualified stock options to be granted under either the 2000 Nonstatutory Stock Option Plan or the 1999 Stock Plan. If an election to cancel was made, employees must also cancel all 9 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 7. STOCK OPTION EXCHANGE PROGRAM (CONTINUED) stock options that were granted within the six months prior to June 21, 2001 regardless of the exercise prices of these stock options. The new stock options will be granted on the date of the Board of Directors' first compensation committee meeting held more than six months and one day after June 21, 2001 (the "Replacement Grant Date"). The exercise price of these new stock options will be the closing price of the Company's common stock on the day before the Replacement Grant Date. The new stock options will have a ten-year term, and will be vested to the same degree that the canceled stock options were vested. The unvested portion of the new stock options will vest in equal installments on a quarterly basis over the two years following the Replacement Grant Date. The Program is not available to the Company's non-employee directors. All canceled stock options were retired from the pool of stock options available for grant upon the completion of the Program on June 21, 2001. Approximately 1,400 employees participated in the Program and canceled 7.6 million stock options with exercise prices ranging between $8.87 and $59.13 per share. 8. STATEMENTS OF OPERATIONS The components of interest and other income were as follows:
THREE MONTH PERIOD ENDED ----------------------------- JUNE 30, 2001 JUNE 30, 2000 ------------- ------------- (IN THOUSANDS) Interest income............................................. $10,548 $ 7,640 Gain on sale of JNI common stock............................ -- 5,547 Gain on sale of land........................................ -- 7,504 ------- ------- Total....................................................... $10,548 $20,691 ======= =======
A net realized gain of $1.4 million and a net realized loss of $0.5 million from sales of marketable securities were included in interest income for the three month periods ended June 30, 2001 and 2000, respectively. 9. RESTRUCTURING CHARGES FISCAL 2002 FIRST QUARTER RESTRUCTURING PLAN: In response to the continuing economic slowdown, the Company implemented a restructuring plan in the first quarter of fiscal 2002 and recorded a restructuring charge of $6.2 million. The goal of the restructuring plan is to reduce costs and improve operating efficiencies in order to match the current business environment. The restructuring charge consisted of severance and benefits of $5.2 million related to the involuntary termination of approximately 325 employees. These terminated employees were primarily in the manufacturing, administrative, sales and marketing and engineering functions. Approximately 53% of these terminated employees were based in the U.S., 43% in Singapore and 4% in other locations. Additionally, the Company accrued for lease costs of $0.2 million pertaining to the estimated future obligations for non-cancelable lease payments for excess facilities in Florida that were vacated due to the reductions in workforce. The Company also wrote off leasehold improvements with a net book value of $0.4 million and production-related machinery and equipment with a net book value of 10 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 9. RESTRUCTURING CHARGES (CONTINUED) $0.4 million. The assets were taken out of service as they were deemed unnecessary due to the reductions in workforce. The following table sets forth an analysis of the components of the fiscal 2002 first quarter restructuring charge and the payments made against the reserve through June 30, 2001:
SEVERANCE AND ASSET OTHER BENEFITS WRITE-OFFS CHARGES TOTAL --------- ---------- -------- -------- (IN THOUSANDS) Restructuring provision: Severance and benefits......................... $5,174 $ -- $ -- $5,174 Accrued lease costs............................ -- -- 219 219 Property and equipment write-off............... -- 811 -- 811 Other charges.................................. -- -- 25 25 ------ ---- ---- ------ Total........................................ 5,174 811 244 6,229 Cash paid........................................ (1,077) -- -- (1,077) Non-cash charges................................. -- (811) -- (811) ------ ---- ---- ------ Reserve balance at June 30, 2001................. $4,097 $ -- $244 $4,341 ====== ==== ==== ======
FISCAL 2001 FOURTH QUARTER RESTRUCTURING PLAN: In the first quarter of fiscal 2002, the Company recorded an additional $0.7 million charge to the fiscal 2001 fourth quarter restructuring provision. The adjustments included accrued lease costs of $0.5 million, and the Company wrote down an additional $0.3 million of the estimated realizable value of certain manufacturing equipment identified in the fiscal 2001 fourth quarter restructuring. These adjustments were offset by a decrease in severance and benefits of $0.1 million as actual costs were lower than originally anticipated. 11 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 9. RESTRUCTURING CHARGES (CONTINUED) The following table sets forth an analysis of the components of the fiscal 2001 fourth quarter restructuring charge and the payments made against the reserve through June 30, 2001:
SEVERANCE AND ASSET OTHER BENEFITS WRITE-OFFS CHARGES TOTAL --------- ---------- -------- -------- (IN THOUSANDS) Restructuring provision: Severance and benefits......................... $6,083 $ -- $ -- $6,083 Accrued lease costs............................ -- -- 1,407 1,407 Property and equipment write-off............... -- 2,169 -- 2,169 Other charges.................................. -- -- 245 245 ------ ------ ------ ------ Total........................................ 6,083 2,169 1,652 9,904 Cash paid........................................ (2,264) -- (48) (2,312) Non-cash charges................................. -- (2,169) -- (2,169) ------ ------ ------ ------ Reserve balance at March 31, 2001................ 3,819 -- 1,604 5,423 Provision adjustment............................. (75) 252 506 683 Cash paid........................................ (1,769) -- (132) (1,901) Non-cash charges................................. -- (252) -- (252) ------ ------ ------ ------ Reserve balance at June 30, 2001................. $1,975 $ -- $1,978 $3,953 ====== ====== ====== ======
The Company anticipates that the total remaining restructuring reserve balance of $8.3 million relating to the fiscal 2002 first quarter and the fiscal 2001 fourth quarter restructuring plans will be substantially paid out by the end of fiscal 2002. 10. OTHER CHARGES The Company holds minority investments in certain nonpublic companies. These minority investments are accounted for under the cost method as the Company does not have the ability to exercise significant influence over operations. The Company regularly monitors these minority investments for impairment and records reductions in the carrying values when necessary. During the first quarter of fiscal 2002, the Company recorded an impairment charge of $4.1 million related to a decline in the values of certain minority investments deemed to be other than temporary. The impairment charge was included under "Other charges" in the Condensed Consolidated Statement of Operations for the three month period ended June 30, 2001. 12 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 11. INCOME TAXES Income tax provisions for interim periods are based on the Company's estimated annual income tax rate. The Company's effective tax rate is generally less than the combined U.S. federal and state statutory income tax rate of 40%, primarily due to income earned in Singapore where the Company is subject to a significantly lower income tax rate, resulting from a tax holiday relating to certain products. In the first quarter of fiscal 2002, the Company recorded an income tax provision of $0.8 million. The Company did not derive a tax benefit from its net loss primarily because the write-off of certain minority investments and a portion of the restructuring charges and the amortization of goodwill and other intangibles were not fully deductible for tax purposes. 12. NET INCOME (LOSS) PER SHARE A reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computations is as follows:
THREE MONTH PERIOD ENDED --------------------- JUNE 30, JUNE 30, 2001 2000 --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Numerators: Net income (loss) from continuing operations.............. $(18,503) $19,901 Net income from discontinued operations................... 495 1,747 -------- ------- Net income (loss)......................................... $(18,008) $21,648 ======== ======= Denominators: Weighted average shares outstanding--basic................ 99,090 100,805 Effect of dilutive securities: Employee stock options and other........................ -- 4,675 -------- ------- Weighted average shares and potentially dilutive common shares outstanding--diluted...................... 99,090 105,480 ======== ======= Net income (loss) per share--basic: Continuing operations..................................... $ (0.19) $ 0.20 Discontinued operations................................... $ 0.00 $ 0.02 Net income (loss) per share--diluted: Continuing operations..................................... $ (0.19) $ 0.19 Discontinued operations................................... $ 0.00 $ 0.02
For the three month period ended June 30, 2001, outstanding options to purchase 9,238,000 shares of common stock were not included in the computation of diluted net loss per share because the Company incurred a net loss during the period. For the three month period ended June 30, 2000, outstanding options to purchase 8,172,000 shares of common stock were not included in the computation of diluted net income per share because the options' exercise prices were greater than the average market price of the common stock. 13 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 12. NET INCOME (LOSS) PER SHARE (CONTINUED) As a result of the Roxio spin-off (Note 3), the number of unissued shares of common stock reserved by the Company for the 4 3/4% Convertible Subordinated Notes has been adjusted to 6,033,000 shares from 4,448,000 shares as a result of the adjustment to the conversion price. Neither the 6,033,000 shares nor the 4,448,000 shares of common stock related to the 4 3/4% Convertible Subordinated Notes were included in the computation of diluted net income (loss) per share for the three month periods ended June 30, 2001 and 2000, respectively, because they were anti-dilutive. 13. COMPREHENSIVE LOSS The Company's comprehensive loss consisted of net income (loss) and the changes in net unrealized gains on available-for-sale securities, net of income taxes. The components of comprehensive loss, net of income taxes, were as follows:
THREE MONTH PERIOD ENDED ------------------- JUNE 30, JUNE 30, 2001 2000 -------- -------- (IN THOUSANDS) Net income (loss)........................................... $(18,008) $21,648 Changes in net unrealized gains on available-for-sale securities, net of income taxes....................................... (341) (25,346) -------- ------- Total....................................................... $(18,349) $(3,698) ======== =======
Accumulated other comprehensive income presented in the accompanying Condensed Consolidated Balance Sheets represents the net unrealized gains on available-for-sale securities, net of income taxes. The realization of these gains is dependent on the market value of the securities, which is subject to fluctuation. There can be no assurance if and when these gains will be realized. 14. SEGMENT REPORTING The Company evaluates its product segments in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." Its current reportable business segments are Storage Solutions Group ("SSG"), Desktop Solutions Group ("DSG"), Storage Networking Group ("SNG") and Other. Please see "Item 1. Business" in Part I of the Company's Annual Report on Form 10-K for the year ended March 31, 2001 for a detailed discussion of the reportable business segments. 14 ADAPTEC, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 14. SEGMENT REPORTING (CONTINUED) Summarized financial information concerning the Company's reportable business segments is shown in the following table. The Company does not separately identify assets or depreciation by segments nor are the segments evaluated under these criteria.
THREE MONTH PERIOD ENDED ------------------- JUNE 30, JUNE 30, 2001 2000 -------- -------- (IN THOUSANDS) SSG: Net revenues........................................... $88,498 $119,984 Income (loss).......................................... (7,863) 12,718 DSG: Net revenues........................................... 18,929 27,942 Income................................................. 2,096 7,807 SNG: Net revenues........................................... 3,261 6,568 Loss................................................... (9,014) (1,316) Other: Net revenues........................................... -- -- Income (loss).......................................... (2,947) 15,979
The following table presents the details of "Other" segment's income (loss):
THREE MONTH PERIOD ENDED ------------------- JUNE 30, JUNE 30, 2001 2000 -------- -------- (IN THOUSANDS) Unallocated corporate expenses, net....................... $ 522 $(1,668) Restructuring charges..................................... (6,912) -- Other charges............................................. (4,092) -- Interest and other income................................. 10,548 20,691 Interest expense.......................................... (3,013) (3,044) ------- ------- Total..................................................... $(2,947) $15,979 ======= =======
15. SUBSEQUENT EVENT--ACQUISITION In July 2001, the Company announced a plan to purchase Platys Communications, Inc., a developer of advanced Internet protocol ("IP") storage solutions. The acquisition will include both stock and cash of approximately $150 million in value. The acquisition will be accounted for under SFAS No. 141 and SFAS No. 142. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The statements contained in this document that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding the future. We may identify these statements by the use of words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "project," "should," "will," "would" and other similar expressions. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the "Certain Factors Bearing Risks on Future Operating Results" section and elsewhere in this document. In evaluating our business, prospective investors should consider carefully these factors in addition to the other information set forth in this document. As discussed further in the "Roxio Spin-Off" section below, we successfully completed the spin-off of our Software segment, Roxio, Inc., into a fully independent and separate company in the first quarter of fiscal 2002. Unless otherwise indicated, the Management's Discussion and Analysis of Financial Condition and Results of Operations relate to our continuing operations. RESULTS OF OPERATIONS The following table sets forth the items in the Condensed Consolidated Statements of Operations as a percentage of net revenues:
THREE MONTH PERIOD ENDED ------------------- JUNE 30, JUNE 30, 2001 2000 -------- -------- Net revenues................................................ 100% 100% Cost of revenues............................................ 53 42 --- --- Gross margin................................................ 47 58 --- --- Operating expenses: Research and development.................................. 24 16 Selling, marketing and administrative..................... 24 21 Amortization of goodwill and other intangibles............ 12 10 Restructuring charges..................................... 6 -- Other charges............................................. 4 -- --- --- Total operating expenses.................................... 70 47 --- --- Income (loss) from operations............................... (23) 11 Interest and other income................................... 10 14 Interest expense............................................ (3) (2) --- --- Income (loss) from continuing operations before provision for income taxes.......................................... (16) 23 Provision for income taxes.................................. 1 10 --- --- Net income (loss) from continuing operations................ (17) 13 Net income from discontinued operations..................... 1 1 --- --- Net income (loss)........................................... (16)% 14% === ===
16 BUSINESS SEGMENTS. We evaluate our product segments in accordance with Statement of Financial Accounting Standards, or SFAS, No. 131, "Disclosures about Segments of an Enterprise and Related Information." Our current reportable business segments are Storage Solutions Group, or SSG, Desktop Solutions Group, or DSG, Storage Networking Group, or SNG, and Other. Please see "Item 1. Business" in Part I of our Annual Report on Form 10-K for the year ended March 31, 2001 for a detailed discussion of our reportable business segments. NET REVENUES. Net revenues were $110.7 million for the first quarter of fiscal 2002, a decrease of 28% from net revenues of $154.5 million for the first quarter of fiscal 2001. Net revenues for the first quarter of fiscal 2002 were comprised of $88.5 million from the SSG segment, a decrease of 26% from the first quarter of fiscal 2001, $18.9 million from the DSG segment, a decrease of 32% from the first quarter of fiscal 2001, and $3.3 million from the SNG segment, a decrease of 50% from the first quarter of fiscal 2001. Net revenues from the SSG segment decreased from the first quarter of fiscal 2001, primarily due to the industry-wide slowdown in capital spending which resulted in slower sales than we anticipated. The economic slowdown continued to cause both our original equipment manufacturer, or OEM, and channel distributor customers to focus on reducing their inventories on hand. These inventory pressures negatively affected orders for our redundant array of independent disks, or RAID, and small computer system interface, or SCSI, products in the first quarter of fiscal 2002. Net revenues from the DSG segment decreased from the first quarter of fiscal 2001, primarily due to the continued decline in the demand for our SCSI-based desktop solutions resulting from the penetration of lower cost solutions. The decline in net revenues was partially offset by sales of our FireWire/1394-based solutions which were launched in the third quarter of fiscal 2001, and our USB 2.0 host bus adapters which were launched in the first quarter of fiscal 2002. Net revenues from the SNG segment decreased from the first quarter of fiscal 2001, primarily because several of our customers pushed out their orders due to the economic slowdown. In addition, certain OEMs canceled their requirements for our network interface cards, or NICs, in their products. GROSS MARGIN. As a percentage of net revenues, gross margin for the first quarter of fiscal 2002 was 47% compared to 58% for the first quarter of fiscal 2001. Our gross margin in the first quarter of fiscal 2002 was adversely affected by excess inventory charges primarily due to customers delaying shipments or canceling orders as a result of the slowdown in capital expenditures, as well as excess manufacturing capacity due to lower production volumes. RESEARCH AND DEVELOPMENT EXPENSES. Spending for research and development was $26.2 million for the first quarter of fiscal 2002, an increase of 5% from $24.9 million for the first quarter of fiscal 2001. The increase in research and development expenses was primarily attributable to additional investments in developing new products targeted at the RAID, SCSI, Internet protocol, or IP, storage and desktop markets. These new investments include BIOS-based RAID, RAID on motherboard, or ROMB, zero-channel RAID and Ultra320 SCSI in our SSG segment; FireWire/1394 and USB 2.0 in our DSG segment; and iSCSI (an IP storage standard) and infiniband in our SNG segment. Despite the current economic slowdown, we are committed to a significant level of research and development in order to enhance our technological investments in our solutions. For example, we successfully demonstrated our first iSCSI solutions with certain major OEMs including Hewlett-Packard, IBM and Nishan in the first quarter of fiscal 2002. As a percentage of net revenues, research and development expenses for the first quarter of fiscal 2002 were 24% compared to 16% for the first quarter of fiscal 2001. 17 SELLING, MARKETING AND ADMINISTRATIVE EXPENSES. Spending for selling, marketing and administrative activities was $26.9 million for the first quarter of fiscal 2002, a decrease of 15% from $31.6 million for the first quarter of fiscal 2001. The decrease in selling, marketing and administrative expenses was primarily attributable to the reductions of our marketing programs and our workforce as a result of the restructuring plan implemented in the fourth quarter of fiscal 2001. As a percentage of net revenues, selling, marketing and administrative expenses were 24% for the first quarter of fiscal 2002 compared to 21% for the first quarter of fiscal 2001. AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill and other intangibles was $13.6 million for the first quarter of fiscal 2002, compared to $15.9 million for the first quarter of fiscal 2001. Amortization of goodwill and other intangibles for both quarters resulted from our fiscal 2000 acquisition of Distributed Processing Technology, Corp., or DPT. In addition, amortization expense for the first quarter of fiscal 2001 also included the amortization of warrant costs associated with the warrants issued to Agilent Technologies, Inc., or Agilent. RESTRUCTURING CHARGES. In response to the continuing economic slowdown, we implemented a restructuring plan in the first quarter of fiscal 2002 and recorded a restructuring charge of $6.2 million. The goal of the restructuring plan is to reduce costs and improve operating efficiencies in order to match the current business environment. The restructuring charge consisted of severance and benefits of $5.2 million related to the involuntary termination of approximately 325 employees. These terminated employees were primarily in the manufacturing, administrative, sales and marketing and engineering functions. Approximately 53% of the terminated employees were based in the U.S., 43% in Singapore and 4% in other locations. Additionally, we accrued for lease costs of $0.2 million pertaining to the estimated future obligations for non-cancelable lease payments for excess facilities in Florida that were vacated due to the reductions in workforce. We also wrote off leasehold improvements with a net book value of $0.4 million and production-related machinery and equipment with a net book value of $0.4 million. The assets were taken out of service as they were deemed unnecessary due to the reductions in workforce. In the first quarter of fiscal 2002, we recorded an additional $0.7 million charge to the fiscal 2001 fourth quarter restructuring provision. The adjustments included accrued lease costs of $0.5 million, and we also wrote down an additional $0.3 million of the estimated realizable value of certain manufacturing equipment identified in the fiscal 2001 fourth quarter restructuring. These adjustments were offset by a decrease in severance and benefits of $0.1 million as actual costs were lower than originally anticipated. OTHER CHARGES. We hold minority investments in certain nonpublic companies. These minority investments are accounted for under the cost method as we do not have the ability to exercise significant influence over operations. We regularly monitor these minority investments for impairment and record reductions in the carrying values when necessary. During the first quarter of fiscal 2002, we recorded an impairment charge of $4.1 million related to a decline in the values of certain minority investments deemed to be other than temporary. INTEREST AND OTHER INCOME. The components of interest and other income were as follows:
THREE MONTH PERIOD ENDED ------------------- JUNE 30, JUNE 30, 2001 2000 -------- -------- (IN THOUSANDS) Interest income............................................. $10,548 $ 7,640 Gain on sale of JNI common stock............................ -- 5,547 Gain on sale of land........................................ -- 7,504 ------- ------- Total....................................................... $10,548 $20,691 ======= =======
18 A net realized gain of $1.4 million and a net realized loss of $0.5 million from sales of marketable securities were included in interest income for the three month periods ended June 30, 2001 and 2000, respectively. INTEREST EXPENSE. Interest expense was $3.0 million for the first quarters of both fiscal 2002 and 2001. Interest expense during these periods resulted primarily from our 4 3/4% Convertible Subordinated Notes. INCOME TAXES. Our income tax provisions were $0.8 million and $15.3 million in the first quarters of fiscal 2002 and 2001, respectively. Income tax provisions for interim periods are based on our estimated annual income tax rate. Our effective tax rate is generally less than the combined U.S. federal and state statutory income tax rate of 40%, primarily due to income earned in Singapore where we are subject to a significantly lower income tax rate, resulting from a tax holiday relating to certain products. In the first quarter of fiscal 2002, we did not derive a tax benefit from our net loss primarily because the write-off of certain minority investments and a portion of the restructuring charges and amortization of goodwill and other intangibles were not fully deductible for tax purposes. In the first quarter of fiscal 2001, the reduction in our effective income tax rate from the Singapore tax holiday was more than offset by the effects of the portion of the amortization of goodwill and other intangibles not deductible for tax purposes. ROXIO SPIN-OFF On April 12, 2001, our Board of Directors formally approved a plan to spin off our Software segment, Roxio, into a fully independent and separate company. Roxio is a provider of digital media software solutions that enable individuals to create, manage and move music, photos, video and data onto recordable CDs. Our Board of Directors declared a dividend of the Roxio's common stock to our stockholders of record on April 30, 2001. The dividend was distributed after the close of business on May 11, 2001, in the amount of 0.1646 shares of Roxio's common stock for each outstanding share of our common stock. The distribution of the Roxio's common stock was intended to be tax-free to us and to our stockholders. We distributed all of the Roxio's common stock, except for 190,936 shares that are retained by us for issuance upon the potential exercise of the warrants held by Agilent to purchase shares of our common stock. The distribution of the Roxio's common stock dividend on May 11, 2001 resulted in the elimination of our net assets of discontinued operations and a $74.5 million reduction of our retained earnings. Of this amount, $33.2 million represents the initial long-term funding we contributed to Roxio at the date of distribution. As a result of the spin-off, our historical condensed consolidated financial statements have been restated to account for Roxio as discontinued operations for all periods presented in accordance with Accounting Principles Board, or APB, Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." Under the Master Transitional Services Agreement we entered into with Roxio, we agreed to provide Roxio certain corporate support services, including information technology systems, supply chain management, human resources administration, product order administration, customer service, and legal, finance and accounting services. Our fees for providing these services are generally the cost of providing the services plus five percent. These transitional service arrangements generally have a term of one year following the legal separation. We also entered into a five year arrangement to lease Roxio its corporate headquarter building at fair market value. In addition, we entered into a Tax Sharing Agreement, or TSA, with Roxio for tax matters. The TSA provides for the allocation of income, losses, credits and other tax attributes prior to the distribution of the Roxio's common stock to our stockholders, and assigns certain responsibilities for administrative matters such as the filing of returns, payment of taxes due, retention of records and conducts of audits, examinations or similar proceedings. The TSA provides that we retain the risk of any modification of tax liabilities for periods prior to the distribution date. In addition, the TSA requires Roxio to indemnify us for 19 certain taxes and similar obligations that we could incur if the distribution does not qualify for tax-free treatment due to certain events, such as an acquisition of a controlling interest in Roxio's or our common stock after the distribution, Roxio's failure to continue its business after the distribution or a repurchase of Roxio's common stock. AGILENT AGREEMENT In January 2000, we entered into a four-year Development and Marketing Agreement, or the Agreement, with Agilent to co-develop, market and sell fibre channel host bus adapters using fibre channel host bus adapter and software driver technology licensed from Agilent. Pursuant to the Agreement, we were to pay royalties to Agilent based on revenues generated from the fibre channel products incorporating the licensed technology. The Agreement provided for minimum royalty fees of $6.0 million in the first contract year and $12.0 million in the second contract year. We incurred royalty fees of $1.0 million in the first contract year and estimated that we would incur $2.0 million in the second contract year associated with sales of our products incorporating the licensed technology. Therefore, we accrued and expensed the remaining minimum royalty fees of $5.0 million for the first contract year in fiscal 2000, and $10.0 million for the second contract year in fiscal 2001. In June 2001, Agilent and we agreed to terminate the Agreement. Pursuant to the Agreement's termination, we paid Agilent the minimum royalty fees of $18.0 million for the first and second contract years. In return, we received a fully paid, non-exclusive, worldwide perpetual license to use Agilent's fibre channel host bus adapter and software driver technology. In addition, Agilent will continue to supply us with the Tachyon chips used in our fibre channel products. Of the $18.0 million royalty fees, $16.4 million had previously been accrued as of the date of termination. The remaining $1.6 million royalty fees were expensed and included as "Cost of revenues" in the Condensed Consolidated Statement of Operations for the three month period ended June 30, 2001. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2001, our principal sources of liquidity consisted of $604.3 million of cash, cash equivalents and marketable securities, and an unsecured $20.0 million revolving line of credit which expires in July 2002. No borrowings were outstanding under the line of credit as of June 30, 2001. Our cash, cash equivalents and marketable securities decreased 7% from $651.3 million as of March 31, 2001. During the first three months of fiscal 2002, our use of cash was primarily attributable to cash used for operating activities, purchases of property and equipment and the initial cash funding to Roxio. Net cash used for operating activities for the three month period ended June 30, 2001 was $13.0 million. The use of cash for operating activities was primarily a result of our net loss, adjusted for a decrease in our inventories as we focused on reducing inventories, as well as other non-cash items including depreciation and amortization expenses, and restructuring and other charges. The use of cash was also attributable to our payment of the royalty fees to Agilent during the quarter. We believe that our existing working capital, together with expected cash flows from operations and available sources of bank, equity and equipment financing, will be sufficient to support our operations over the next twelve months. RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board, or FASB, issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets," which are effective for all business combinations completed after June 30, 2001. SFAS No. 141 replaces APB Opinion No. 16, "Business Combinations," and eliminates pooling-of-interests accounting prospectively. It also provides 20 guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach, whereby goodwill will be evaluated annually and whenever events or circumstances occur indicating that goodwill might be impaired. Upon adoption of SFAS No. 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under SFAS No. 141 will be reclassified to goodwill. Companies are required to adopt SFAS No. 142 for fiscal years beginning after December 15, 2001, but early adoption is permitted. We will adopt SFAS No. 142 on April 1, 2002, the beginning of fiscal 2003, for acquisitions consummated prior to July 1, 2001, and we are in the process of determining the impact the adoption will have on our financial position and results of operations. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities and requires recognition of all derivatives as assets or liabilities and measurement of those instruments at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133," which defers the required date of adoption of SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000. We adopted SFAS No. 133 in the first quarter of fiscal 2002. The adoption did not have a material effect on our financial position and results of operations. CERTAIN FACTORS BEARING RISKS ON FUTURE OPERATING RESULTS OUR FUTURE OPERATING RESULTS ARE SUBJECT TO FLUCTUATION. Our operating results may fluctuate as a result of a wide variety of factors, including, but not limited to, the following: - cancellations or postponements of orders; - shifts in the mix of our products and sales channels; - changes in pricing policies by our suppliers; - shortages of components or wafer fabrication capacity affecting us, our customers or our suppliers; - market acceptance of new and enhanced versions of our products; - product obsolescence; - shortage of skilled labor; - future accounting pronouncements and changes in accounting policies; - timing of acquisitions of other businesses and any associated charges; - restructuring actions or other involuntary terminations; - general economic trends; and - pending legal proceedings. Fiscal 2002 first quarter operating results were materially affected by unusual charges, including the following: - restructuring charges; and - asset impairment charge. Fiscal 2001 operating results were materially affected by unusual charges, including the following: - accrued minimum royalty fees to Agilent; 21 - restructuring charges; and - asset impairment charge. OUR SALES HAVE BEEN NEGATIVELY AFFECTED BY THE CURRENT ECONOMIC SLOWDOWN, AND IF THESE CONDITIONS PERSIST OR DETERIORATE, THEY MAY CONTINUE TO ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. Beginning in the second half of fiscal 2001, our operating results were significantly affected by the continuing slowdown in information technology investments. Many of our customers announced workforce reductions and delayed capital spending in response to the economic slowdown. If the current economic conditions continue to persist or deteriorate, our customers will likely further postpone capital spending, which would continue to adversely affect our financial results. WE MAY NOT MEET THE GOALS AND OBJECTIVES OF OUR RESTRUCTURING PLANS, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. As a result of the economic slowdown, in both the fourth quarter of fiscal 2001 and first quarter of fiscal 2002, we implemented restructuring plans to reduce our operating costs to match the current business environment. The plans included primarily the reduction of our workforce and the consolidation of our manufacturing operations to Singapore. The goals of the plans are to support future growth opportunities, focus on investments that grow revenues and increase operating margins. If we do not meet our restructuring objectives or if the economic slowdown continues, we may have to implement additional plans in order to reduce our operating costs, which could have an adverse effect on our financial results. IF DEMAND IN THE SERVER, NETWORK STORAGE AND DESKTOP MARKETS DECLINES, OUR REVENUES MAY DECLINE. Historically, our growth has been supported by increasing demand for systems that support: - client/server applications; - computer-aided engineering; - Internet/intranet applications; - data storage and digital content; and - multimedia and video. Our business or operating results could be adversely affected by a decline for our products. In addition, other technologies may replace our existing technologies and the acceptance of our technologies in the market may not be widespread, which could adversely affect our revenues. IF DEMAND FOR OUR CUSTOMERS' PRODUCTS DECLINES OR IF OUR CUSTOMERS DO NOT CONTROL THEIR INVENTORIES EFFECTIVELY, OUR REVENUES MAY BE ADVERSELY AFFECTED. The volume and timing of orders received during a quarter are difficult to forecast. Our customers generally order based on their forecasts, and they frequently encounter uncertain and changing demand for their products. If demand falls below such forecasts or if our customers do not control their inventories effectively, they may cancel or reschedule shipments previously ordered from us. We have historically operated with a relatively small backlog and have set our operating budget based on forecasts of future revenues. Because much of our operating budget is relatively fixed in the short-term, if revenues do not meet our expectations, then our financial results will be adversely affected. IF WE DO NOT PROVIDE ADEQUATE SUPPORT DURING OUR CUSTOMERS' DESIGN AND DEVELOPMENT STAGE, OR IF WE ARE UNABLE TO PROVIDE SUCH SUPPORT IN A TIMELY MANNER, REVENUES MAY BE LOST TO OUR COMPETITION. Certain of our products are designed to meet our customers' specifications and, to the extent we are not able to meet these expectations in a timely manner or provide adequate support during our customers' design and development stage, our customers may choose to buy similar products from another company. As a result, our financial results could be adversely affected. 22 IF THERE IS A SHORTAGE OF COMPUTER COMPONENTS USED IN OUR CUSTOMERS' PRODUCTS, OUR SALES MAY DECLINE, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. If our customers are unable to purchase certain components which are embedded into their products, their demand for our products may decline. For example, beginning in the fourth quarter of fiscal 2000, we experienced the impact of other companies' chip supply shortages, which reduced the demand for some of our SSG products. This negatively affected our revenues in the first half of fiscal 2001. Similar shortages of computer components used in our customers' products could adversely affect our sales and financial results in future periods. OUR RELIANCE ON INDUSTRY STANDARDS AND TECHNOLOGICAL CHANGES IN THE MARKETPLACE MAY CAUSE OUR REVENUES TO FLUCTUATE OR DECLINE. The computer industry is characterized by various, evolving standards and protocols. We design our products to conform to certain industry standards and protocols such as the following: TECHNOLOGIES: - ATA; - Fibre channel; - FireWire/1394; - Infiniband; - IP storage; - PCI; - RAID; - SCSI; - Ultra-DMA; and - USB. OPERATING SYSTEMS: - Linux; - Macintosh; - Netware; - Novell; - OS/2; - UNIX; and - Windows (including Windows 2000 and Windows NT). In particular, a majority of our revenues are currently derived from products based on the SCSI standards. If consumer acceptance of these standards declines, or if new standards emerge, and if we do not anticipate these changes and develop new products, these changes could adversely affect our business and financial results. For example, we believe that changes in consumers' perceptions of the relative merits of SCSI-based products and products incorporating lower cost solutions adversely affected our sales beginning in fiscal 1998 and may continue to affect our future sales. 23 IF OUR PRODUCTS DO NOT OPERATE EFFECTIVELY WITH OTHER PRODUCTS, IT COULD NEGATIVELY AFFECT OUR REVENUES. We must design our products to operate effectively with a variety of hardware and software products supplied by other manufacturers, including the following: - microprocessors; - peripherals; and - operating system software. We depend on significant cooperation with these manufacturers to achieve our design objectives and develop products that interoperate successfully. We believe that generally we have good relationships with leading system, peripheral, and microprocessor suppliers; however, these suppliers may, from time to time, make it more difficult for us to design our products for successful operability with their products. In addition, these suppliers may decide to compete with us. If any of these events were to occur, our revenues could be adversely affected. OUR DEPENDENCE ON NEW PRODUCTS MAY CAUSE OUR REVENUES TO FLUCTUATE OR DECLINE. Our future success significantly depends upon our completing and introducing new products at competitive prices and performance levels in a timely manner. The success of new product introductions depends on several factors, including the following: - defining products to meet customer needs; - product costs; - timely completion and introduction of new product designs; - quality of new products; - differentiation of new products from those of our competitors; and - market acceptance of our products. As a result, we believe that continued significant expenditures for research and development will be required in the future. We may fail to identify new product opportunities and may not develop and bring new products to market in a timely manner. In addition, products or technologies developed by others may render our products or technologies obsolete or noncompetitive, or our targeted customers may not select our products for design or integration into their products. The failure of any of our new product development efforts could have an adverse effect on our business and financial results. IF WE ARE UNABLE TO COMPETE EFFECTIVELY, OUR REVENUES COULD BE ADVERSELY AFFECTED. The markets for all of our products are intensely competitive and are characterized by the following: - rapid technological advances; - frequent new product introductions; - evolving industry standards; and - price erosion. As we continue to broaden our product offerings into the server, network storage and desktop environments, we have experienced, and expect to experience in the future, significantly increased competition both from existing competitors and from additional companies that may enter our markets. Some of these companies have greater technical, marketing, manufacturing and financial resources than we do. We cannot assure that we will have sufficient resources to accomplish any of the following: - meet growing product demand; - make timely introductions of new leading-edge solutions; 24 - compete successfully in the future against existing or potential competitors; - provide OEMs with design specifications in a timely manner; and - prevent price competition from eroding margins. COSTS ASSOCIATED WITH ACQUISITIONS OR PARTNERSHIPS MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS, WHICH COULD BE EXACERBATED IF WE ARE UNABLE TO INTEGRATE THE ACQUIRED COMPANIES, PRODUCTS OR TECHNOLOGIES. In July 2001, we announced our plan to acquire Platys Communications, Inc, a developer of IP storage solutions. In fiscal 2000, we acquired Distributed Processing Technology, Corp., or DPT, to strengthen our position in the RAID market. In addition, we enter into partnerships and strategic alliances from time to time with other companies. As part of our overall strategy, we may continue to acquire or invest in complementary companies, products or technologies and enter into partnerships and strategic alliances with other companies. In order to be successful in these activities, we must: - assimilate the operations and personnel of the combined companies; - minimize the potential disruption of our ongoing business; - retain key technical and managerial personnel; - integrate the acquired company into our strategic and financial plans; - accurately assess the value of potential target businesses, products or technologies; - harmonize standards, controls, procedures and policies; and - minimize the impairment of relationships with employees and customers. The benefits of acquisitions or partnerships may prove to be less than anticipated and may not outweigh the costs reported in our financial statements. Completing any potential future acquisitions or partnerships could cause significant diversions of management time and resources. If we acquire new businesses, products or technologies in the future, we may be required to assume contingent liabilities and amortize significant amounts of other intangible assets. If we consummate any potential future acquisitions in which the consideration consists of stock or other securities, our existing stockholders' ownership may be significantly diluted. If we proceed with any potential future acquisitions in which the consideration is cash, we may be required to use a substantial portion of our available cash. We may not be successful in overcoming these risks or any other problems encountered in connection with these or other business combinations, investments or partnerships. These transactions may adversely affect our business, financial position and operating results. WE DEPEND ON WAFER SUPPLIERS WHOSE FAILURE TO MEET OUR MANUFACTURING NEEDS COULD NEGATIVELY AFFECT OUR OPERATIONS. Independent foundries manufacture to our specifications all of the finished silicon wafers used for our products. We currently purchase most of our wafers through our agreements with Taiwan Semiconductor Manufacturing Co., or TSMC. The manufacture of semiconductor devices is sensitive to a wide variety of factors, including the following: - the availability of raw materials; - the availability of manufacturing capacity; - the level of contaminants in the manufacturing environment; - impurities in the materials used; and - the performance of personnel and equipment. While we have been satisfied with the quality, yield and timeliness of wafer deliveries to date, we cannot assure you that manufacturing problems may not occur in the future. In addition, although we have various supply agreements with our suppliers, a shortage of raw materials or production capacity could 25 lead our wafer suppliers to allocate available capacity to other customers. Any prolonged inability to obtain wafers with competitive performance and cost attributes, adequate yields or timely deliveries from our foundries would delay our production and our product shipments, and could have an adverse effect on our business and financial results. We expect that our current suppliers will continually seek to convert their fabrication process arrangements to smaller wafer geometries and to more advanced process technologies. Such conversions entail inherent technological risks that can affect yields and delivery times. If for any reason our current suppliers are unable or unwilling to satisfy our wafer needs, we will be required to identify and qualify additional foundries. Additional wafer foundries may be unavailable, may take significant amounts of time to qualify or may be unable to satisfy our requirements on a timely basis. IF OUR MANUFACTURING DEMAND OF SILICON WAFERS FALLS BELOW OUR PROJECTIONS, WE MAY NOT BE ABLE TO FULLY UTILIZE OUR PREPAYMENTS TO TSMC, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. From time to time, we have entered into "take or pay" contracts that have committed us to purchase specific wafer quantities over extended periods based on our projected needs. In addition, we have made prepayments to TSMC in order to secure a guaranteed wafer capacity. If our demand for wafer units falls below our projections, we may not be able to fully utilize our prepayments. The unused portion of the prepayments may be impaired and written off as an asset impairment charge, which would adversely affect our financial results. WE DEPEND ON SUBCONTRACTORS WHOSE FAILURE TO MEET OUR MANUFACTURING NEEDS COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS. We rely on subcontractors for the assembly and packaging of the integrated circuits included in our products. We have no long-term agreements with our assembly and packaging subcontractors. We have, from time to time, used board subcontractors to better balance production runs and capacity. We cannot assure that such subcontractors will continue to be able and willing to meet our requirements for such components or services. Any significant disruption in supplies from, or degradation in the quality of components or services supplied by, such subcontractors could delay shipments and result in the loss of customers or revenues, which could have an adverse effect on our financial results. WE DEPEND ON THE EFFORTS OF OUR DISTRIBUTORS, WHICH IF REDUCED, WOULD NEGATIVELY AFFECT OUR BUSINESS AND OUR RESULTS OF OPERATIONS. Our distributors generally offer a diverse array of products from several different manufacturers. Accordingly, we are at risk that these distributors may give higher priority to selling products from other suppliers. A reduction in sales efforts by our current distributors could adversely affect our business and financial results. Our distributors may on occasion build inventories in anticipation of substantial growth in sales, and when such growth does not occur as rapidly as they anticipate, our distributors may subsequently decrease the size of their product orders. If we decrease our price protection or distributor-incentive programs, our distributors may also decrease their orders from us. In addition, we may from time to time take actions to reduce levels of products at distributors. These actions could reduce our revenues and negatively affect our financial results. OUR OPERATIONS DEPEND ON KEY PERSONNEL, THE LOSS OF WHOM COULD AFFECT OUR BUSINESS AND REDUCE OUR FUTURE REVENUES. Our future success depends in large part on the continued service of our key technical, marketing and management personnel, and on our ability to continue to attract and retain qualified employees, particularly those highly skilled engineers who are involved in the design enhancement, manufacturing of existing products and the development of new ones. The loss of key employees could adversely affect our business. Our continued growth and future operating results will depend upon our ability to attract, hire and retain significant numbers of qualified employees. OUR INTERNATIONAL OPERATIONS INVOLVE RISKS, AND MAY NEGATIVELY AFFECT OUR REVENUES AND RESULTS OF OPERATIONS. As a result of our fiscal 2001 fourth quarter restructuring plan, we are consolidating our manufacturing facilities to Singapore. Many of our subcontractors are primarily located in Asia and we have sales offices and customers throughout Europe, Japan and other countries. Our international operations and sales are subject to political and economic risks, including political instability, currency controls, exchange rate fluctuations, and changes in import/export regulations, tariffs and freight rates. We may use forward 26 exchange contracts to manage any exposure associated with certain foreign currency-denominated commitments. In addition, because our primary wafer supplier, TSMC, is located in Taiwan, we may be subject to certain risks resulting from the political instability in Taiwan, including conflicts between Taiwan and the People's Republic of China. These and other international risks could negatively affect our business and financial results. WE MAY ENCOUNTER NATURAL DISASTERS, WHICH MAY NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. Our corporate headquarters in California are located near major earthquake faults. Any damage to our facilities as a result of an earthquake, fire or any other natural disasters could have an adverse effect on our business and financial results. Additionally, our primary wafer supplier, TSMC, is located in Taiwan, which has experienced significant earthquakes in the past. A severe earthquake could interrupt the manufacturing process, which could affect its ability to supply wafers to us, which could negatively affect our business and financial results. WE MAY EXPERIENCE VOLATILE FLUCTUATIONS IN OUR STOCK PRICE. The stock market in general, and the market for shares of technology companies in particular, has from time to time experienced extreme price fluctuations. Often, these changes have been unrelated to the operating performance of the affected companies. In addition, factors such as technological innovations or new product introductions by us, our competitors or our customers may have a significant effect on the market price of our common stock. Furthermore, quarter-to-quarter fluctuations in our results of operations caused by changes in customer demand, changes in the microcomputer and peripherals markets or other factors may have a significant effect on the market price of our common stock. In addition, general market conditions and international economic factors unrelated to our performance may affect our stock price. These and other conditions and factors that generally affect the market for shares of technology companies could cause the price of our common stock to fluctuate substantially over short periods. IF THE CARRYING VALUE OF OUR LONG-LIVED ASSETS IS NOT RECOVERABLE, AN IMPAIRMENT LOSS MUST BE RECOGNIZED WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. Certain events or changes in circumstances would mandate us to access the recoverability of the carrying amount of our long-lived assets. For example, in the third quarter of fiscal 2001, we evaluated the warrant costs associated with the warrants issued to Agilent and determined that the future undiscounted cash flows would be insufficient to recover any of the carrying value of the warrant costs. As such, we wrote off the carrying balance of the warrant costs. We will continue to evaluate the recoverability of the carrying amount of our long-lived assets, and we may incur additional impairment charges which could adversely affect our financial results. WE HOLD A MINORITY INTEREST IN CERTAIN NONPUBLIC COMPANIES, AND IF THESE COMPANIES FACE FINANCIAL DIFFICULTIES IN THEIR OPERATIONS, OUR INVESTMENTS COULD BE IMPAIRED. We continue to hold a minority interest in certain privately held companies that acquired our divested business lines in fiscal 1999. These investments are inherently risky because these companies are still in the development stage and depend on third parties for financing to support their ongoing operations. In addition, the markets for their technologies or products are typically in the early stages and may never develop. If these companies do not have adequate cash funding to support their operations, or if they encounter difficulties developing their technologies or products, especially in the recent economic downtown, our investments in these companies may be impaired, which could adversely affect our financial results. For example, we recorded an impairment charge in the first quarter of fiscal 2002 related to a decline in the values of certain minority investments deemed to be other than temporary. IF WE ARE UNABLE TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, WE MAY BE UNABLE TO COMPETE EFFECTIVELY. Although we actively maintain and defend our intellectual property rights, we may be unable to adequately protect our proprietary rights. In addition, the laws of certain territories in which our products are or may be developed, manufactured or sold, including Asia and Europe, may not protect our products and intellectual property rights to the same extent as the laws of the United States. 27 Despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property, which could harm our business and ability to compete effectively. We have from time to time discovered counterfeit copies of our products being manufactured or sold by others. Although we have programs to detect and deter the counterfeiting of our products, significant availability of counterfeit products could reduce our revenues and damage our reputation and goodwill with customers. THIRD PARTIES MAY ASSERT INFRINGEMENT CLAIMS AGAINST US, WHICH MAY BE EXPENSIVE TO DEFEND AND COULD ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS. From time to time, third parties may assert exclusive patent, copyright and other intellectual property rights to our key technologies. For example, we entered into a patent cross-license agreement with a third party in May 2000. Under this agreement, we will pay the third party a patent settlement fee in return for a release from infringement claims prior to January 1, 2000. In addition, we will pay a patent license fee for the use of certain of the third party's patents through June 30, 2004, and we granted the third party a license to use all of our patents for the same period. We cannot assure you that third parties will not assert other infringement claims against us in the future, that assertions by third parties will not result in costly litigation or that we would prevail in such litigation or be able to license any valid and infringed patents from third parties on commercially reasonable terms. Litigation, regardless of the outcome, could result in substantial costs to us and diversion of our resources. Any infringement claims or other litigation against or by us could adversely affect our business and financial results. WE MAY BE ENGAGED IN LEGAL PROCEEDINGS THAT COULD NEGATIVELY AFFECT OUR BUSINESS OPERATIONS OR FINANCIAL POSITION. From time to time we are subject to litigation or claims that could negatively affect our business operations and financial position. For instance, a class action lawsuit is pending in the United States District Court for the Northern District of California against us and certain of our current and former officers and directors. This lawsuit alleges that we made false and misleading statements at various times during the period between April 1997 and January 1998 in violation of federal securities laws. Our motion to dismiss the complaint was granted in April 2000. The plaintiffs filed an amended complaint in July 2000. In October 2000, we filed a motion to dismiss the amended complaint. We believe this lawsuit is without merit and we intend to defend ourselves vigorously. However, any disputes, including this lawsuit, could cause us to incur unforeseen expenses, could occupy a significant amount of our management's time and attention, and could negatively affect our business operations and financial position. IF WE REPATRIATE CASH FROM OUR FOREIGN SUBSIDIARIES, WE MAY INCUR ADDITIONAL INCOME TAXES WHICH COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. Our cash and cash equivalents are held principally in both the United States and in our subsidiary in Singapore. From time to time we may need additional cash flow to support our operations, which may require us to repatriate our cash from Singapore to the United States. We will incur additional income taxes from the repatriation, which could negatively affect our financial results. WE MAY BE SUBJECT TO A HIGHER EFFECTIVE TAX RATE THAT COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. Our effective tax rate is benefited by a Singapore tax holiday relating to certain of our products. The terms of the tax holiday provide that profits derived from certain products will be exempt from tax through fiscal 2005, subject to certain conditions. If we do not continue to meet the conditions and requirements of the tax holiday in Singapore, our effective tax rate will increase, which would adversely affect our financial results. WE MAY BE REQUIRED TO PAY ADDITIONAL FEDERAL INCOME TAXES WHICH COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL POSITION. On June 27, 2000, we received a statutory notice of deficiency from the Internal Revenue Service, or IRS, with respect to our federal income tax returns for fiscal 1994 through 1996. We filed a Petition with the United States Tax Court on September 25, 2000, contesting the asserted deficiencies. On December 15, 2000, we received a statutory notice of deficiency from the IRS with respect 28 to our federal income tax return for fiscal 1997. We filed a Petition with the United States Tax Court on March 14, 2001, contesting the asserted deficiencies. In addition, the IRS is currently auditing our federal income tax returns for fiscal 1998 and 1999, for which no proposed adjustments have been received. While we believe we have meritorious defenses against the asserted deficiencies and any proposed adjustments and that sufficient taxes have been provided, the final outcome of these matters could adversely affect our results of operations and financial position. OUR SPIN-OFF OF ROXIO REQUIRES US TO PERFORM CERTAIN OBLIGATIONS UNDER THE TRANSITIONAL SERVICE AGREEMENT, WHICH, IF NOT SATISFACTORILY PERFORMED, COULD CAUSE US TO BE HELD LIABLE FOR RESULTING LOSSES SUFFERED BY ROXIO. In May 2001, we completed the spin-off of Roxio, our Software segment. As part of the separation, we entered into a transitional service agreement with Roxio to support ongoing Roxio operations relating to information technology systems, supply chain management, product order administration, and legal, finance and accounting. These services generally have a term of one year following the separation. If we do not satisfactorily perform our obligations under the agreement, we may be held liable for any resulting losses suffered by Roxio. THERE MAY BE POTENTIAL SUBSEQUENT TAX LIABILITIES THAT COULD NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS. Pursuant to our distribution of the Roxio's common stock, we have received an opinion from PricewaterhouseCoopers, LLP, or PwC, that the transaction would qualify as tax-free to us and to our stockholders under Section 355 of the Internal Revenue Code. IRS regulations provide that if another entity acquires a controlling interest in Roxio's or our common stock within two years of the distribution, a presumption will arise that the acquisition was made in connection with the distribution, causing the distribution to become taxable. The validity of the PwC opinion relating to the qualification of the distribution as a tax-free transaction is subject to factual representations and assumptions. We are not aware of any facts or circumstances that would cause such representations and assumptions to be untrue. In addition, the opinion of PwC is not binding on the IRS. If we or Roxio fails to conform to the requirements set forth in the IRS regulations, it could cause the distribution to be taxable to us and to our stockholders, and our financial results could be adversely affected. WE MAY HAVE POTENTIAL BUSINESS CONFLICTS OF INTEREST WITH ROXIO WITH RESPECT TO OUR PAST AND ONGOING RELATIONSHIPS, AND WE MAY NOT RESOLVE THESE CONFLICTS ON TERMS FAVORABLE TO US. Conflicts of interest may arise between Roxio and us in a number of areas relating to our past and ongoing relationship, including: - labor, tax, employee benefits, indemnification and other matters arising from the separation; - intellectual property matters; - employee retention and recruiting; - the nature, quality and pricing of transitional services we have agreed to provide to Roxio; and - business opportunities that may be attractive to both Roxio and us. These and other business conflicts could adversely affect the growth of our business in the future. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For financial market risks related to changes in interest rates and foreign currency exchange rates, reference is made to "Quantitative and Qualitative Disclosures About Market Risk" in Part II, Item 7A, of our Annual Report on Form 10-K for the year ended March 31, 2001. 29 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS:
NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 2.1 First Amended and Restated Master Separation and Distribution Agreement between Adaptec, Inc. and Roxio, Inc., dated February 28, 2001 2.2 General Assignment and Assumption Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.3 Indemnification and Insurance Matters Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.4 Master Patent Ownership and License Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.5 Master Technology Ownership and License Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.6 Master Confidential Disclosure Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.7 Master Transitional Services Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.8 Employee Matters Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.9 Tax Sharing Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.10 Real Estate Matters Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.11 Manufacturing Services Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001 2.12 International Asset Transfer Agreement between Adaptec Mfg (S) Pte Ltd. and Roxio CI Ltd., dated May 5, 2001 2.13 Letter of Agreement between Adaptec, Inc. and Roxio, Inc., dated May 5, 2001
(B) REPORTS ON FORM 8-K: On May 4, 2001, we filed a report on Form 8-K to disclose under Item 5 our May 1, 2001 press release regarding Roxio's Form 10 Registration Statement and other additional information on our Roxio spin-off. On May 18, 2001, we filed a report on Form 8-K to disclose under Item 5 the completion of our Roxio spin-off and the distribution of the Roxio's common stock. 30 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADAPTEC, INC. By: /s/ DAVID A. YOUNG --------------------------------------- David A. Young Date: August 13, 2001 VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL OFFICER) By: /s/ KENNETH B. AROLA --------------------------------------- Kenneth B. Arola Date: August 13, 2001 VICE PRESIDENT AND CORPORATE CONTROLLER (PRINCIPAL ACCOUNTING OFFICER)
31 EX-2.1 3 a2056442zex-2_1.txt EXHIBIT 2.1 Exhibit 2.1 FIRST AMENDED AND RESTATED MASTER SEPARATION AND DISTRIBUTION AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. EFFECTIVE AS OF FEBRUARY 28, 2001
TABLE OF CONTENTS PAGE ---- ARTICLE I SEPARATION..........................................................................2 Section 1.1 Separation Date.............................................................2 Section 1.2 Closing of Transactions.....................................................2 Section 1.3 Exchange of Secretary's Certificates........................................2 ARTICLE II DOCUMENTS AND ITEMS TO BE DELIVERED ON OR BEFORE THE SEPARATION DATE...............2 Section 2.1 Documents to Be Delivered By Adaptec........................................2 Section 2.2 Contribution to Capital.....................................................3 Section 2.3 Documents to Be Delivered by Roxio..........................................3 ARTICLE III THE DISTRIBUTION AND ACTIONS PENDING THE DISTRIBUTION.............................4 Section 3.1 Transactions Prior to the Distribution......................................4 Section 3.2 The Distribution............................................................5 Section 3.3 Conditions to Distribution..................................................5 Section 3.4 Sole Discretion of Adaptec..................................................6 Section 3.5 Fractional Shares...........................................................7 ARTICLE IV COVENANTS AND OTHER MATTERS........................................................7 Section 4.1 Other Agreements............................................................7 Section 4.2 Further Instruments.........................................................7 Section 4.3 Agreement For Exchange of Information.......................................8 Section 4.4 Auditors and Audits; Annual and Quarterly Statements and Accounting.........9 Section 4.5 Consistency with Past Practices............................................11 Section 4.6 Payment of Expenses........................................................11 Section 4.7 Dispute Resolution.........................................................11 Section 4.8 Governmental Approvals.....................................................12 Section 4.9 Representations and Warranties.............................................12 Section 4.10 Cooperation in Obtaining New Agreements....................................13 Section 4.11 Property Damage to Roxio Assets Prior to the Separation Date...............13 Section 4.12 Asset Transfers in Connection with Separation..............................13 ARTICLE V MISCELLANEOUS......................................................................14 Section 5.1 Limitation of Liability....................................................14 Section 5.2 Entire Agreement...........................................................14 Section 5.3 Governing Law..............................................................14 Section 5.4 Termination................................................................14 Section 5.5 Notices....................................................................14 Section 5.6 Counterparts...............................................................15 Section 5.7 Binding Effect; Assignment.................................................15 Section 5.8 Severability...............................................................16
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PAGE ---- Section 5.9 Waiver of Breach..........................................................16 Section 5.10 Amendment and Execution...................................................16 Section 5.11 Authority.................................................................16 Section 5.12 Descriptive Headings......................................................16 Section 5.13 Gender and Number.........................................................16 Section 5.14 Additional Assurances.....................................................17 Section 5.15 Force Majeure.............................................................17 Section 5.16 Conflicting Agreements....................................................17 Section 5.17 Prior Agreement...........................................................17 ARTICLE VI DEFINITIONS......................................................................17 Section 6.1 Adaptec Business..........................................................17 Section 6.2 Adaptec Group.............................................................17 Section 6.3 Adaptec's Auditors........................................................17 Section 6.4 AMS.......................................................................17 Section 6.5 Ancillary Agreements......................................................17 Section 6.6 Assignment Agreement......................................................17 Section 6.7 Business Day..............................................................17 Section 6.8 Code......................................................................18 Section 6.9 Commission................................................................18 Section 6.10 Disputes..................................................................18 Section 6.11 Distribution..............................................................18 Section 6.12 Distribution Agent........................................................18 Section 6.13 Distribution Date.........................................................18 Section 6.14 Exchange Act..............................................................18 Section 6.15 Form 10 Registration Statement............................................18 Section 6.16 GAAP......................................................................18 Section 6.17 Governmental Approvals....................................................18 Section 6.18 Governmental Authority....................................................18 Section 6.19 Gray Cary.................................................................18 Section 6.20 Information...............................................................18 Section 6.21 Nasdaq....................................................................18 Section 6.22 Person....................................................................19 Section 6.23 Prime Rate................................................................19 Section 6.24 Prior Agreement...........................................................19 Section 6.25 Record Date...............................................................19 Section 6.26 Roxio Assets..............................................................19 Section 6.27 Roxio's Auditors..........................................................19 Section 6.28 Roxio Business............................................................19 Section 6.29 Roxio Group...............................................................19 Section 6.30 Separation................................................................19
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PAGE ---- Section 6.31 Separation Date...........................................................19 Section 6.32 Subsidiary................................................................19 Section 6.33 Transferred Subsidiary....................................................20 Section 6.34 Transitional Service Schedules............................................20 Section 6.35 WSGR......................................................................20
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EXHIBITS Exhibit A Certificate of Secretary of Adaptec Exhibit B Certificate of Secretary of Roxio Exhibit C General Assignment and Assumption Agreement Exhibit D-1 Master Technology Ownership and License Agreement Exhibit D-2 Master Patent Ownership and License Agreement Exhibit E Employee Matters Agreement Exhibit F Tax Sharing Agreement Exhibit G Real Estate Agreement Exhibit H Master Confidential Disclosure Agreement Exhibit I Indemnification and Insurance Matters Agreement Exhibit J Manufacturing Services Agreement Exhibit K Master Transitional Services Agreement Exhibit L International Transfer of Assets Agreement
-iv- SCHEDULES Schedule 2.1(b) Subsidiaries of Adaptec to be Transferred to Roxio -v- FIRST AMENDED AND RESTATED MASTER SEPARATION AND DISTRIBUTION AGREEMENT This First Amended and Restated Master Separation and Distribution Agreement (this "AGREEMENT") is entered into as of February 28, 2001, between Adaptec, Inc., a Delaware corporation ("ADAPTEC"), and Roxio, Inc., a Delaware corporation ("ROXIO"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in ARTICLE VI hereof. Adaptec and Roxio are sometimes referred to herein individually as a "party" or collectively as the "parties." RECITALS WHEREAS, the Boards of Directors of each of Adaptec and Roxio have determined that it is appropriate and desirable for Adaptec to contribute and transfer to Roxio, and for Roxio to receive and assume, directly or indirectly, substantially all of the assets and liabilities currently associated with the Roxio Business and the stock, investments or similar interests currently held by Adaptec in subsidiaries and other entities that conduct such business (the "SEPARATION"); WHEREAS, Adaptec has caused Roxio to be incorporated in order to effect the Separation and Adaptec currently owns all of the issued and outstanding capital stock of Roxio; WHEREAS, the Board of Directors of Adaptec has determined that it is appropriate and desirable on the terms and conditions contemplated hereby to distribute to the holders of its common stock, $0.01 par value, by means of a pro rata distribution following the Separation, all of the shares of Roxio common stock owned by Adaptec (the "DISTRIBUTION"); WHEREAS, Adaptec and Roxio intend that the Separation and the Distribution will qualify as a tax-free reorganization under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the "CODE"), and that this Agreement is intended to be, and is hereby adopted as, a plan of reorganization under Section 368 of the Code; and WHEREAS, Adaptec and Roxio previously entered into a Master Separation and Distribution Agreement dated September 21, 2000 (the "PRIOR AGREEMENT"), which, among other things, contemplated that prior to the Distribution Roxio would effect a registered initial public offering of its Common Stock ( the "IPO"); WHEREAS, the Board of Directors of each of Adaptec and Roxio no longer desire Roxio to effect the IPO; WHEREAS, Adaptec and Roxio desire to terminate in all respects the Prior Agreement and enter into this Agreement; and WHEREAS, the parties intend in this Agreement, including the Exhibits and Schedules hereto, to set forth the principal arrangements between them regarding the separation of the Roxio Business. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth below, the parties hereto, intending to be legally bound, agree as follows: ARTICLE I SEPARATION SECTION 1.1 SEPARATION DATE. Unless otherwise provided in this Agreement, or in any agreement to be executed in connection with this Agreement, the effective time and date of each transfer of property, assumption of liability, license, undertaking, or agreement in connection with the Separation shall be 12:01 a.m., Pacific Time, April 1, 2001 or such other date as may be fixed by the Board of Directors of Adaptec (the "SEPARATION DATE"). SECTION 1.2 CLOSING OF TRANSACTIONS. Unless otherwise provided herein, the closing of the transactions contemplated in ARTICLE II shall occur by the lodging of each of the executed instruments of transfer, assumptions of liability, undertakings, agreements, instruments or other documents executed or to be executed with both Wilson Sonsini Goodrich & Rosati, Professional Corporation ("WSGR"), 650 Page Mill Road, Palo Alto, California 94304, and Gray Cary Ware & Freidenrich LLP ("GRAY CARY"), 400 Hamilton Avenue, Palo Alto, California 94301, to be held in escrow for delivery as provided in SECTION 1.3 of this Agreement. SECTION 1.3 EXCHANGE OF SECRETARY'S CERTIFICATES. Upon receipt of a certificate of the Secretary or an Assistant Secretary of Adaptec in the form attached to this Agreement as EXHIBIT A, WSGR shall deliver to Roxio on behalf of Adaptec all of the items required to be delivered by Adaptec hereunder pursuant to SECTION 2.1 of this Agreement and each such item shall be deemed to be delivered to Roxio as of the Separation Date upon delivery of such certificate. Upon receipt of a certificate of the Secretary or an Assistant Secretary of Roxio in the form attached to this Agreement as EXHIBIT B, Gray Cary shall deliver to Adaptec on behalf of Roxio all of the items required to be delivered by Roxio pursuant to SECTION 2.2 hereunder and each such item shall be deemed to be delivered to Adaptec as of the Separation Date upon receipt of such certificate. ARTICLE II DOCUMENTS AND ITEMS TO BE DELIVERED ON OR BEFORE THE SEPARATION DATE SECTION 2.1 DOCUMENTS TO BE DELIVERED BY ADAPTEC. On or before the Separation Date, Adaptec will deliver, or will cause its appropriate Subsidiaries to deliver, to Roxio all of the following items and agreements (collectively, together with all agreements and documents contemplated by such agreements, the "ANCILLARY AGREEMENTS"): (a) A duly executed General Assignment and Assumption Agreement (the "ASSIGNMENT AGREEMENT") substantially in the form attached hereto as EXHIBIT C; -2- (b) Certificates representing the stock in the Subsidiaries (the "TRANSFERRED SUBSIDIARIES") of Adaptec set forth on SCHEDULE 2.1(b) with duly executed stock powers in the form proper for transfer; (c) A duly executed Master Technology Ownership and License Agreement substantially in the form attached hereto as EXHIBIT D-1, a duly executed Master Patent Ownership and License Agreement substantially in the form attached hereto as EXHIBIT D-2, and; (d) A duly executed Employee Matters Agreement substantially in the form attached hereto as EXHIBIT E; (e) A duly executed Tax Sharing Agreement substantially in the form attached hereto as EXHIBIT F; (f) A duly executed Real Estate Matters Agreement substantially in the form attached hereto as EXHIBIT G; (g) A duly executed Master Confidential Disclosure Agreement substantially in the form attached hereto as EXHIBIT H; (h) A duly executed Indemnification and Insurance Matters Agreement substantially in the form attached hereto as EXHIBIT I; (i) A duly executed Manufacturing Services Agreement substantially in the form attached hereto as EXHIBIT J; (j) A duly executed Master Transitional Services Agreement substantially in the form attached hereto as EXHIBIT K; (k) A duly executed International Transfer of Assets Agreement substantially in the form attached hereto as EXHIBIT L; (l) Resignations of each person who is an officer or director of any member of Roxio or its Subsidiaries immediately prior to the Separation Date, but who will be an employee of only Adaptec from and after the Separation Date; and (m) Such other agreements, documents or instruments as the parties may agree are necessary or desirable in order to achieve the purposes hereof, including, without limitation, all Transitional Service Schedules to the Master Transitional Services Agreement and those documents referred to in SECTION 4.2. SECTION 2.2 CONTRIBUTION TO CAPITAL. On or prior to the Separation Date, Adaptec will transfer to Roxio the amount of Ten Million Dollars ($10,000,000) in the form of additional paid-in capital. SECTION 2.3 DOCUMENTS TO BE DELIVERED BY ROXIO. As of the Separation Date, Roxio will or will cause its appropriate Subsidiaries to deliver to Adaptec all of the following: -3- (a) In each case where Roxio is a party to any agreement or instrument referred to in SECTION 2.1, a duly executed counterpart of such agreement or instrument; and (b) Resignations of each person who is an officer or director of any member of the Adaptec Group immediately prior to the Separation Date, but who will be an employee or director of only Roxio or its Subsidiaries from and after the Separation Date. ARTICLE III THE DISTRIBUTION AND ACTIONS PENDING THE DISTRIBUTION SECTION 3.1 TRANSACTIONS PRIOR TO THE DISTRIBUTION. Subject to the conditions specified in SECTION 3.4, Adaptec and Roxio shall use their reasonable commercial efforts to consummate the Distribution. Such efforts shall include, but not necessarily be limited to, those specified in this SECTION 3.1 (a) REGISTRATION STATEMENT. Roxio, with the cooperation and assistance of Adaptec, shall register its common stock under Section 12 of the Securities Exchange Act of 1934 (the "EXCHANGE ACT") by filing a Form 10 Registration Statement, and such amendments or supplements thereto, as may be necessary in order to cause the same to become and remain effective as required by law, including, but not limited to, filing such amendments to the Form 10 Registration Statement as may be required by the Securities and Exchange Commission (the "COMMISSION") or federal, state or foreign securities laws. Adaptec and Roxio shall also cooperate in preparing and filing with the Commission any registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the Separation, the Distribution or the other transactions contemplated by this Agreement. (b) INFORMATION STATEMENT. Adaptec and Roxio shall prepare and mail, prior to the Distribution Date, to the holders of common stock of Adaptec, such information concerning Roxio and the Distribution and such other matters as Adaptec and Roxio shall reasonably determine are necessary and as may be required by law. Adaptec and Roxio will prepare, and Roxio will, to the extent required under applicable law, file with the Commission any such documentation which Adaptec and Roxio reasonably determine is necessary or desirable to effectuate the Distribution, and Adaptec and Roxio shall each use its reasonable commercial efforts to obtain all necessary approvals from the Commission with respect thereto as soon as practicable. (c) OTHER MATTERS. Adaptec and Roxio shall consult with each other and their financial advisors regarding the timing, pricing and other material matters with respect to the Distribution. (d) BLUE SKY. Adaptec and Roxio shall take all such actions as may be necessary or appropriate under the securities or blue sky laws of the United States (and any comparable laws under any foreign jurisdiction) in connection with the Distribution. -4- (e) NASDAQ LISTING. Roxio shall prepare, file and use reasonable commercial efforts to seek to make effective, an application for listing of the common stock of Roxio distributed in the Distribution on the Nasdaq National Market ("NASDAQ"), subject to official notice of distribution. SECTION 3.2 THE DISTRIBUTION. (a) DELIVERY OF SHARES FOR DISTRIBUTION. Subject to SECTION 3.3 hereof, on or prior to the date the Distribution is effective (the "DISTRIBUTION DATE"), Adaptec will deliver to the distribution agent (the "DISTRIBUTION AGENT") to be appointed by Adaptec to distribute to the stockholders of Adaptec the shares of common stock of Roxio held by Adaptec pursuant to the Distribution for the benefit of holders of record of common stock of Adaptec on the Record Date, a single stock certificate, endorsed by Adaptec in blank, representing all of the outstanding shares of common stock of Roxio then owned by Adaptec, and shall cause the transfer agent for the shares of common stock of Adaptec to instruct the Distribution Agent to distribute on the Distribution Date the appropriate number of such shares of common stock of Roxio to each such holder or designated transferee or transferees of such holder. (b) SHARES RECEIVED. Subject to SECTIONS 3.3 and 3.5, each holder of common stock of Adaptec on the Record Date (or such holder's designated transferee or transferees) will be entitled to receive in the Distribution a number of shares of common stock of Roxio equal to the number of shares of common stock of Adaptec held by such holder on the Record Date multiplied by a fraction the numerator of which is the number of shares of common stock of Roxio beneficially owned by Adaptec on the Record Date and the denominator of which is the number of shares of common stock of Adaptec outstanding on the Record Date. (c) OBLIGATION TO PROVIDE INFORMATION. Roxio and Adaptec, as the case may be, will provide to the Distribution Agent all share certificates and any information required in order to complete the Distribution on the basis specified above. (d) CONDITIONS. Adaptec and Roxio shall take all reasonable steps necessary and appropriate to cause the conditions set forth in SECTION 3.3 to be satisfied and to effect the Distribution on the Distribution Date. SECTION 3.3 CONDITIONS TO DISTRIBUTION. The parties hereto shall use their reasonable commercial efforts to effect the Distribution prior to April 30, 2001, or as soon thereafter as practicable. The obligations of the parties to consummate the Distribution shall be conditioned on the satisfaction, or written waiver by Adaptec, of the following conditions: (a) IRS RULING. Adaptec shall have received an opinion from PricewaterhouseCoopers, LLP in form and substance satisfactory to Adaptec (in its sole discretion), to the effect that (i) the transfer by the Adaptec Group to the Roxio Group of the property, subject to liabilities, of the Roxio Business in exchange for the issuance to Adaptec of the stock of Roxio, and Roxio's assumption of liabilities, followed by the distribution by Adaptec of all of its Roxio stock to the stockholders of Adaptec, will qualify as a reorganization under Sections 368(a)(1)(D) and 355 of the Code; (ii) no gain or loss will be recognized by Adaptec on its transfer of the property of the -5- Roxio Business to Roxio in exchange for Roxio common stock; (iii) no gain or loss will be recognized by Roxio on its receipt of the property of the Roxio Business from Adaptec in exchange for the issuance of Roxio common stock; and (iv) no gain or loss will be recognized by (and no amount will otherwise be included in the income of) the stockholders of Adaptec upon their receipt of Roxio common stock pursuant to the Distribution. (b) GOVERNMENT APPROVALS. Any material governmental approvals and consents necessary to consummate the Distribution shall have been obtained and be in full force and effect; (c) REGISTRATION STATEMENT. The Form 10 Registration Statement shall have been filed and become effective, and there shall be no stop-order in effect with respect thereto. (d) NASDAQ LISTING. The common stock of Roxio to be issued in the Distribution shall have been accepted for listing on Nasdaq, subject to official notice of distribution. (e) NO LEGAL RESTRAINTS. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution or any of the other transactions contemplated by this Agreement shall be in effect. (f) SEPARATION. The Separation shall have become effective as described in ARTICLES I AND II hereof. (g) OTHER ACTIONS. Such other actions as the parties hereto may, based upon the advice of counsel, reasonably request to be taken prior to the Distribution in order to assure the successful completion of the Distribution shall have been taken. (h) NO MATERIAL ADVERSE EFFECT. No other events or developments shall have occurred subsequent to the Separation Date that, in the judgment of the Board of Directors of Adaptec, would result in the Distribution having a material adverse effect on Adaptec or on the stockholders of Adaptec. (i) NO TERMINATION. This Agreement shall not have been terminated. SECTION 3.4 SOLE DISCRETION OF ADAPTEC. Adaptec currently intends to complete the Distribution by April 30, 2001. Adaptec shall, in its sole and absolute discretion, determine the date of the consummation of the Distribution and all terms of the Distribution, including, without limitation, the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing of and conditions to the consummation of the Distribution. In addition, Adaptec may at any time and from time to time until the completion of the Distribution modify or change the terms of the Distribution, including, without limitation, by accelerating or delaying the timing of the consummation of all or part of the Distribution. Roxio shall cooperate with Adaptec in all respects to accomplish the Distribution and shall, at Adaptec's direction, promptly take any and all actions necessary or desirable to effect the Distribution, including, without limitation, the registration under the Securities Act of the common stock of Roxio on an appropriate registration form or forms to be designated by Adaptec. Adaptec shall select any investment banker(s) and manager(s) in connection with the Distribution, as well as any financial printer, solicitation and/or exchange agent and outside counsel for Adaptec; PROVIDED, HOWEVER, that nothing herein shall -6- prohibit Roxio from engaging (at its own expense) its own financial, legal, accounting and other advisors in connection with the Distribution. SECTION 3.5 FRACTIONAL SHARES. As soon as practicable after the Distribution Date, Adaptec shall direct the Distribution Agent to determine the number of whole shares and fractional shares of common stock of Roxio allocable to each holder of record or beneficial owner of common stock of Adaptec as of the Record Date, to aggregate all such fractional shares and sell the whole shares obtained thereby at the direction of Adaptec, in open market transactions, at then prevailing trading prices, and to cause to be distributed to each such holder or for the benefit of each such beneficial owner to which a fractional share shall be allocable such holder's or owner's ratable share of the proceeds of such sale, after making appropriate deductions of the amount required to be withheld for federal income tax purposes and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale. Adaptec and the Distribution Agent shall use their reasonable commercial efforts to aggregate the shares of common stock of Adaptec that may be held by any beneficial owner thereof through more than one account in determining the fractional share allocable to such beneficial owner. ARTICLE IV COVENANTS AND OTHER MATTERS SECTION 4.1 OTHER AGREEMENTS. In addition to the specific agreements, documents and instruments that are Exhibits to this Agreement, Adaptec and Roxio agree to execute or cause to be executed by the appropriate parties and deliver, as appropriate, such other agreements, instruments and other documents as may be necessary or desirable in order to effect the purposes of this Agreement and the Ancillary Agreements. SECTION 4.2 FURTHER INSTRUMENTS. At the request of Roxio and without further consideration, Adaptec will execute and deliver, and will cause its applicable Subsidiaries to execute and deliver, to Roxio and its Subsidiaries such other instruments of transfer, conveyance, assignment, substitution and confirmation and take such action as Roxio may reasonably deem necessary or desirable in order more effectively to transfer, convey and assign to Roxio and its Subsidiaries and confirm Roxio's and its Subsidiaries' title to all of the assets, rights and other things of value contemplated to be transferred to Roxio and its Subsidiaries pursuant to this Agreement, the Ancillary Agreements, and any documents referred to therein, to put Roxio and its Subsidiaries in actual possession and operating control thereof and to permit Roxio and its Subsidiaries to exercise all rights with respect thereto (including, without limitation, rights under contracts and other arrangements as to which the consent of any third party to the transfer thereof shall not have previously been obtained). At the request of Adaptec and without further consideration, Roxio will execute and deliver, and will cause its applicable Subsidiaries to execute and deliver, to Adaptec and its Subsidiaries all instruments, assumptions, novations, undertakings, substitutions or other documents and take such other action as Adaptec may reasonably deem necessary or desirable in order to have Roxio fully and unconditionally assume and discharge the liabilities contemplated to be assumed by Roxio under this Agreement or any document in connection herewith and to relieve the Adaptec Group of any liability or obligation with respect thereto and evidence the same to third -7- parties. Neither Adaptec nor Roxio shall be obligated, in connection with the foregoing, to expend money other than reasonable out-of-pocket expenses, attorneys' fees and recording or similar fees. Furthermore, each party, at the request of another party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be necessary or desirable for effecting completely the consummation of the transactions contemplated hereby. SECTION 4.3 AGREEMENT FOR EXCHANGE OF INFORMATION. Each of Adaptec and Roxio agrees to provide, or cause to be provided, to each other, at any time before or after the Distribution Date, as soon as reasonably practicable after written request therefor, any Information in the possession or under the control of such party that the requesting party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting party (including under applicable securities laws) by a Governmental Authority having jurisdiction over the requesting party, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation or other similar requirements, (iii) to comply with its obligations under this Agreement or any Ancillary Agreement or (iv) in connection with the ongoing businesses of Adaptec or Roxio, as the case may be; PROVIDED, HOWEVER, that in the event that any party determines that any such provision of Information could be commercially detrimental, violate any law or agreement, or waive any attorney-client privilege, the parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence. (a) INTERNAL ACCOUNTING CONTROLS; FINANCIAL INFORMATION. Until the seventh anniversary of the Separation Date, (i) each party shall maintain in effect at its own cost and expense adequate systems and controls for its business to the extent necessary to enable the other party to satisfy its reporting, accounting, audit and other obligations, and (ii) each party shall provide, or cause to be provided, to the other party and its Subsidiaries in such form as such requesting party shall request, at no charge to the requesting party, all financial and other data and information as the requesting party determines necessary or advisable in order to prepare its financial statements and reports or filings with any Governmental Authority. (b) OWNERSHIP OF INFORMATION. Any Information owned by a party that is provided to a requesting party pursuant to this SECTION 4.3 shall be deemed to remain the property of the providing party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information. (c) RECORD RETENTION. To facilitate the possible exchange of Information pursuant to this SECTION 4.3 and other provisions of this Agreement after the Distribution Date, each party agrees to use its reasonable commercial efforts to retain all tax, employee and financial Information in their respective possession or control on the Distribution Date for seven years after the Distribution Date. No party will destroy, or permit any of its Subsidiaries to destroy, any Information that exists on the Separation Date (other than Information that is permitted to be destroyed under the current record retention policy of such party) without first using its reasonable commercial efforts to notify the other party of the proposed destruction and giving the other party the opportunity to take possession of such Information prior to such destruction. -8- (d) LIMITATION OF LIABILITY. No party shall have any liability to any other party in the event that any Information exchanged or provided pursuant to this SECTION 4.3 is found to be inaccurate, in the absence of willful misconduct by the party providing such Information. No party shall have any liability to any other party if any Information is destroyed or lost after reasonable commercial efforts by such party to comply with the provisions of SECTION 4.3(C). (e) OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The rights and obligations granted under this SECTION 4.3 are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of Information set forth in this Agreement and any Ancillary Agreement. (f) PRODUCTION OF WITNESSES; RECORDS; COOPERATION. After the Distribution Date, except in the case of a legal or other proceeding by one party against another party (which shall be governed by such discovery rules as may be applicable under SECTION 4.7 or otherwise), each party hereto shall use its reasonable commercial efforts to make available to each other party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of such party as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any legal, administrative or other proceeding in which the requesting party may from time to time be involved, regardless of whether such legal, administrative or other proceeding is a matter with respect to which indemnification may be sought hereunder. The requesting party shall bear all costs and expenses in connection therewith. SECTION 4.4 AUDITORS AND AUDITS; ANNUAL AND QUARTERLY STATEMENTS AND ACCOUNTING. Each party agrees that, for so long as Adaptec is required in accordance with GAAP to consolidate Roxio's results of operations and financial position in Adaptec's financial statements: (a) SELECTION OF AUDITORS. Roxio shall not select a different accounting firm than PricewaterhouseCoopers, LLP to serve as its (and its Subsidiaries') independent certified public accountants ("ROXIO'S AUDITORS") for purposes of providing an opinion on its consolidated financial statements without Adaptec's prior written consent (which shall not be unreasonably withheld). (b) DATE OF AUDITORS' OPINION AND QUARTERLY REVIEWS. Roxio shall use its reasonable commercial efforts to enable the Roxio Auditors to complete their audit such that they will date their opinion on Roxio's audited annual financial statements on the same date that Adaptec's independent certified public accountants ("ADAPTEC'S AUDITORS") date their opinion on Adaptec's audited annual financial statements, and to enable Adaptec to meet its timetable for the printing, filing and public dissemination of Adaptec's annual financial statements. Roxio shall use its reasonable commercial efforts to enable the Roxio Auditors to complete their quarterly review procedures such that they will provide clearance on Roxio's quarterly financial statements on the same date that Adaptec's Auditors provide clearance on Adaptec's quarterly financial statements. (c) ANNUAL AND QUARTERLY FINANCIAL STATEMENTS. Roxio shall provide to Adaptec on a timely basis all Information that Adaptec reasonably requires to meet its schedule for the -9- preparation, printing, filing, and public dissemination of Adaptec's annual and quarterly financial statements. Without limiting the generality of the foregoing, Roxio will provide all required financial Information with respect to Roxio and its Subsidiaries to Roxio's Auditors in a sufficient and reasonable time and in sufficient detail to permit Roxio's Auditors to take all steps and perform all reviews necessary to provide sufficient assistance to Adaptec's Auditors with respect to Information to be included or contained in Adaptec's annual and quarterly financial statements. Similarly, Adaptec shall provide to Roxio on a timely basis all Information that Roxio reasonably requires to meet its schedule for the preparation, printing, filing, and public dissemination of Roxio's annual and quarterly financial statements. Without limiting the generality of the foregoing, Adaptec will provide all required financial Information with respect to Adaptec and its Subsidiaries to Adaptec's Auditors in a sufficient and reasonable time and in sufficient detail to permit Adaptec's Auditors to take all steps and perform all reviews necessary to provide sufficient assistance to Roxio's Auditors with respect to Information to be included or contained in Roxio's annual and quarterly financial statements. (d) IDENTITY OF PERSONNEL PERFORMING THE ANNUAL AUDIT AND QUARTERLY REVIEWS. Roxio shall authorize Roxio's Auditors to make available to Adaptec's Auditors both the personnel who performed or are performing the annual audits and quarterly reviews of Roxio and work papers related to the annual audits and quarterly reviews of Roxio, in all cases within a reasonable time prior to Roxio's Auditors' opinion date, so that Adaptec's Auditors are able to perform the procedures they consider necessary to take responsibility for the work of Roxio's Auditors as it relates to Adaptec's Auditors' report on Adaptec's financial statements, all within sufficient time to enable Adaptec to meet its timetable for the printing, filing and public dissemination of Adaptec's annual and quarterly statements. Similarly, Adaptec shall authorize Adaptec's Auditors to make available to Roxio's Auditors both the personnel who performed or are performing the annual audits and quarterly reviews of Adaptec and work papers related to the annual audits and quarterly reviews of Adaptec, in all cases within a reasonable time prior to Adaptec's Auditors' opinion date, so that Roxio's Auditors are able to perform the procedures they consider necessary to take responsibility for the work of Adaptec's Auditors as it relates to Roxio's Auditors' report on Roxio's statements, all within sufficient time to enable Roxio to meet its timetable for the printing, filing and public dissemination of Roxio's annual and quarterly financial statements. (e) ACCESS TO BOOKS AND RECORDS. Roxio shall provide Adaptec's internal auditors and their designees access to Roxio's and its Subsidiaries' books and records so that Adaptec may conduct reasonable audits relating to the financial statements provided by Roxio pursuant hereto as well as to the internal accounting controls and operations of Roxio and its Subsidiaries. Similarly, Adaptec shall provide Roxio's internal auditors and their designees access to Adaptec's and its Subsidiaries' books and records so that Roxio may conduct reasonable audits relating to the financial statements provided by Adaptec pursuant hereto as well as to the internal accounting controls and operations of Adaptec and its Subsidiaries. (f) NOTICE OF CHANGE IN ACCOUNTING PRINCIPLES. Roxio shall give Adaptec as much prior notice as reasonably practical of any proposed determination of, or any significant changes in, its accounting estimates or accounting principles from those in effect on the Separation Date. Roxio will consult with Adaptec and, if requested by Adaptec, Roxio will consult with Adaptec's independent public accountants with respect thereto. Adaptec shall give Roxio as much -10- prior notice as reasonably practical of any proposed determination of, or any significant changes in, its accounting estimates or accounting principles from those in effect on the Separation Date. (g) CONFLICT WITH THIRD-PARTY AGREEMENTS. Nothing in SECTIONS 4.3 and 4.4 shall require Roxio to violate any agreement with any third parties regarding the confidentiality of confidential and proprietary Information relating to that third party or its business; PROVIDED, HOWEVER, that in the event that Roxio is required under SECTIONS 4.3 AND 4.4 to disclose any such Information, Roxio shall use all commercially reasonable efforts to seek to obtain such customer's consent to the disclosure of such Information. SECTION 4.5 CONSISTENCY WITH PAST PRACTICES. At all times prior to the Separation Date, Adaptec will cause the Roxio Business to continue to ship products, invoice customers, make payments, maintain properties, manage distribution channels and otherwise conduct business in the ordinary course, consistent with past practices. SECTION 4.6 PAYMENT OF EXPENSES. Except as otherwise provided in this Agreement, the Ancillary Agreements or any other agreement between the parties relating to the Separation or the Distribution, all costs and expenses of the parties hereto in connection with the Separation and Distribution (excluding internal costs and expenses of Roxio) shall be paid by Adaptec. SECTION 4.7 DISPUTE RESOLUTION. Resolution of any and all disputes, claims and causes of action of any nature whatsoever (collectively, "DISPUTES"), arising from or in connection with this Agreement, shall be exclusively governed by and settled in accordance with the provisions of this SECTION 4.7. (a) NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through informal negotiation between appropriate representatives from each of Adaptec and Roxio. If at any time either party feels that such negotiations are not leading to a resolution of the Dispute, such party may send a notice to the other party describing the Dispute and requesting a meeting of the senior executives from each party. Within ten (10) business days after such notice is given, each party shall select appropriate senior executives (e.g., director or V.P. level) of each party who shall have the authority to resolve the matter and shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. During the course of negotiations under this SECTION 4.7(a), all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating senior executives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within thirty (30) days after the first meeting of the negotiating senior executives, either party may commence litigation with respect to the Dispute. However, except as provided below in SECTION 5.7(b), neither party shall commence litigation against the other party to resolve the Dispute (i) until the parties try in good faith to settle the Dispute by negotiation for at least thirty (30) days after the first meeting of the negotiating senior executives or (ii) until forty (40) days after notice of a Dispute is given by either party to the other party, whichever occurs first. -11- (b) PROCEEDINGS. Any Dispute regarding the following is not required to be negotiated prior to seeking relief from a court of competent jurisdiction: breach of any obligation of confidentiality; infringement, misappropriation, or misuse of any intellectual property right; or any other claim where interim relief from the court is sought to prevent serious and irreparable injury to a party. However, the parties shall make a good faith effort to negotiate such Dispute, according to SECTION 4.7(a), while such court action is pending. (c) CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this SECTION 4.7 with respect to all matters not subject to such dispute, controversy or claim. SECTION 4.8 GOVERNMENTAL APPROVALS. To the extent that the Separation requires any Governmental Approvals, the parties will use their reasonable commercial efforts to obtain any such Governmental Approvals. SECTION 4.9 REPRESENTATIONS AND WARRANTIES . Adaptec hereby represents and warrants as follows: (a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Adaptec, Adaptec MFG(S) PTE LTD, a Singapore corporation ("AMS"), and each of the Transferred Subsidiaries are corporations duly organized, validly existing and in good standing under the laws of the respective jurisdictions under which they are incorporated and have all requisite corporate power and authority to carry on their business as currently conducted. Adaptec, AMS and each of the Transferred Subsidiaries are duly qualified to transact business and are in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the Roxio Business. (b) CORPORATE POWER. Each of Adaptec, and AMS, as applicable, has all requisite legal and corporate power to (i) execute and deliver this Agreement, the Ancillary Agreements and all applicable exhibits and schedules attached hereto and thereto at such times as are contemplated by this Agreement and the Ancillary Agreements; and (ii) perform its obligations hereunder and thereunder. (c) NO OTHER REPRESENTATIONS OR WARRANTIES. Adaptec does not, in this Agreement or any other agreement, instrument or document contemplated by this Agreement, make any representation as to, warranty of or covenant with respect to: (i) the value of any asset or thing of value to be transferred to Roxio; (ii) the freedom from encumbrance of any asset or thing of value to be transferred to Roxio; (iii) the absence of defenses or freedom from counterclaims with respect to any claim to be transferred to Roxio; or -12- (iv) the legal sufficiency of any assignment, document or instrument delivered hereunder to convey title to any asset or thing of value upon its execution, delivery and filing. (d) RISK ASSOCIATED WITH TRANSFERRED ASSETS. Except as may expressly be set forth herein or in any Ancillary Agreement, all assets to be transferred to Roxio shall be transferred "AS IS, WHERE IS" and Roxio shall bear the economic and legal risk that any conveyance shall prove to be insufficient to vest in Roxio good and marketable title, free and clear of any lien, claim, equity or other encumbrance. SECTION 4.10 COOPERATION IN OBTAINING NEW AGREEMENTS. Adaptec understands that, prior to the Separation Date, Roxio has derived benefits under certain agreements between Adaptec and third parties, which agreements are not being assigned to Roxio in connection with the Separation. Upon the request of Roxio, Adaptec agrees to make introductions to appropriate Roxio personnel to Adaptec's contacts at such third parties, and agrees to provide reasonable assistance to Roxio, at Adaptec's own expense, so that Roxio may obtain agreements from such third parties under substantially equivalent terms and conditions, including financial terms and conditions, that apply to Adaptec. Such assistance may include, but is not limited to, (i) requesting and encouraging such third parties to enter into such agreements with Roxio, (ii) attending meetings and negotiating sessions with Roxio and such third parties, and (iii) participating in buying consortiums with Roxio. Adaptec also understands that there are certain agreements between Adaptec and third parties, which agreements are being assigned to Roxio in connection with the Separation but which may require the consent of the applicable third party. Upon the request of Roxio, Adaptec agrees to assist Roxio in seeking and obtaining the consent of such third parties to such assignment. The parties expect that the activities contemplated by this SECTION 4.10 will be substantially completed by the Distribution Date, but in no event will Adaptec have any obligations hereunder after the first anniversary of the Distribution Date. SECTION 4.11 PROPERTY DAMAGE TO ROXIO ASSETS PRIOR TO THE SEPARATION DATE. In the event of any property damage to any Roxio Assets prior to the Separation Date, Adaptec shall repair or otherwise address such damage in the ordinary course of business consistent with past practices; PROVIDED, HOWEVER, that nothing in this clause shall restrict Adaptec from disposing of any Assets in the ordinary course of business consistent with past practices. SECTION 4.12 ASSET TRANSFERS IN CONNECTION WITH SEPARATION. Adaptec shall use its best efforts to have AMS transfer to Roxio CI Ltd., a Cayman Island corporation, prior to the Separation Date, all of AMS's interest in any intellectual property relating to the Roxio Business owned by AMS and AMS's ownership of CG1 Gmbh, a German corporation, pursuant to the International Transfer of Assets Agreement substantially in the form attached hereto as EXHIBIT L. -13- ARTICLE V MISCELLANEOUS SECTION 5.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL ANY MEMBER OF THE ADAPTEC GROUP OR ROXIO GROUP BE LIABLE TO ANY OTHER MEMBER OF THE ADAPTEC GROUP OR ROXIO GROUP FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THE INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT. SECTION 5.2 ENTIRE AGREEMENT. This Agreement, the other Ancillary Agreements and the Exhibits and Schedules referenced or attached hereto and thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. SECTION 5.3 GOVERNING LAW. This Agreement shall be construed in accordance with and all Disputes hereunder shall be governed by the laws of the State of California, excluding its conflict of law rules and the United Nations Convention on Contracts for the International Sale of Goods. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California, San Jose Division, shall have jurisdiction and venue over all Disputes between the parties that are permitted to be brought in a court of law pursuant to SECTION 4.7 above. SECTION 5.4 TERMINATION. This Agreement and all Ancillary Agreements may be terminated and the Distribution abandoned at any time prior to the IPO Closing Date by and in the sole discretion of Adaptec without the approval of Roxio. This Agreement may be terminated at any time after the IPO Closing Date and before the Distribution Date by mutual consent of Adaptec and Roxio. In the event of termination pursuant to this SECTION 5.4, no party shall have any liability of any kind to the other party. SECTION 5.5 NOTICES. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) Business Day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one (1) Business Day after being deposited with a nationally recognized overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of: IF TO ADAPTEC, INC.: Adaptec, Inc. -14- 691 S. Milpitas Blvd. Milpitas, CA 95035 Attention: Vice President and General Counsel Facsimile No.: (408) 957-7137 with a copy to: Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Attention: Henry P. Massey, Jr. Facsimile No.: (650) 493-6811 IF TO ROXIO, INC.: Roxio, Inc. 461 South Milpitas Blvd. Milpitas, CA 95035 Attention: William Christopher Gorog Facsimile No.: (408) 957-7963 with a copy to: Gray Cary Ware & Freidenrich LLP 400 Capitol Mall, Suite 2400 Sacramento, CA 95814 Attention: Kevin A. Coyle Facsimile No.: (916) 930-3201 Adaptec and Roxio may substitute a different address or facsimile number, from time to time, if such substitute is provided to the intended notice recipient in writing by notice given in the manner provided in this SECTION 5.5. SECTION 5.6 COUNTERPARTS. This Agreement, including the Schedules and Exhibits hereto and the other documents referred to herein, may be executed via facsimile or otherwise in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. SECTION 5.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may be enforced separately by each member of the Adaptec Group and each member of the Roxio Group. Except as herein specifically provided to the contrary, neither party may assign this Agreement or any rights or obligations hereunder, without the prior written consent of the other party, and any such assignment shall be void; provided, however, either party (or its permitted successive assignees or transferees hereunder) may assign or transfer this Agreement as a whole without consent to an entity -15- that succeeds to all or substantially all of the business or assets of such party to which this Agreement relates. SECTION 5.8 SEVERABILITY. The parties hereto have negotiated and prepared the terms of this Agreement in good faith with the intent that each and every one of the terms, covenants and conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Agreement, to the extent possible consistent with its purposes, to conform to law. SECTION 5.9 WAIVER OF BREACH. The waiver by either party hereto of a breach or violation of any provision of this Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. SECTION 5.10 AMENDMENT AND EXECUTION. This Agreement and amendments hereto shall be in writing and executed in multiple copies via facsimile or otherwise on behalf of Adaptec and Roxio by their respective duly authorized officers and representatives. Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument. SECTION 5.11 AUTHORITY. Each of the parties hereto represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other actions, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. SECTION 5.12 DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article or a Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. SECTION 5.13 GENDER AND NUMBER. Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine and neuter, and the number of all words herein shall include the singular and plural. -16- SECTION 5.14 ADDITIONAL ASSURANCES. Except as may be specifically provided herein to the contrary, the provisions of this Agreement shall be self-operative and shall not require further agreement by the parties; provided, however, at the request of either party, the other party shall execute such additional instruments and take such additional acts as are reasonable, and as the requesting party may reasonably deem necessary, to effectuate this Agreement. SECTION 5.15 FORCE MAJEURE. Neither party shall be liable or deemed to be in default for any delay or failure in performance under this Agreement or other interruption of service deemed to result, directly or indirectly, from acts of God, civil or military authority, acts of public enemy, war, accidents, explosions, earthquakes, floods, failure of transportation, strikes or other work interruptions by either party's employees, or any other similar cause beyond the reasonable control of either party unless such delay or failure in performance is expressly addressed elsewhere in this Agreement. SECTION 5.16 CONFLICTING AGREEMENTS. In the event of conflict between this Agreement and any Ancillary Agreement or other agreement executed in connection herewith, the provisions of such other agreement shall prevail. SECTION 5.17 PRIOR AGREEMENT. Pursuant to Section 6.10 of the Prior Agreement, the Parties hereby terminate the Prior Agreement. ARTICLE VI DEFINITIONS SECTION 6.1 ADAPTEC BUSINESS. "ADAPTEC BUSINESS" means any business of Adaptec other than the Roxio Business. SECTION 6.2 ADAPTEC GROUP. "ADAPTEC GROUP" means Adaptec and each Subsidiary of Adaptec (other than any member of the Roxio Group) immediately after the Separation Date, and each Person that becomes a Subsidiary of Adaptec after the Separation Date. SECTION 6.3 ADAPTEC'S AUDITORS. "ADAPTEC'S AUDITORS" has the meaning set forth in Section 4.4(b) hereof. SECTION 6.4 AMS. "AMS" has the meaning set forth in Section 4.9(a) hereof. SECTION 6.5 ANCILLARY AGREEMENTS. "ANCILLARY AGREEMENTS" has the meaning set forth in Section 2.1 hereof. SECTION 6.6 ASSIGNMENT AGREEMENT. "ASSIGNMENT AGREEMENT" has the meaning set forth in Section 2.1(a) hereof. SECTION 6.7 BUSINESS DAY. "BUSINESS DAY" means a day other than a Saturday, a Sunday or a day on which banking institutions located in the State of California are authorized or obligated by law or executive order to close. -17- SECTION 6.8 CODE. "CODE" has the meaning set forth in the Recitals hereof. SECTION 6.9 COMMISSION. "COMMISSION" has the meaning set forth in Section 3.1(a) hereof. SECTION 6.10 DISPUTES. "Disputes" has the meaning set forth in Section 4.7 hereof. SECTION 6.11 DISTRIBUTION. "Distribution" has the meaning set forth in the Recitals hereof. SECTION 6.12 DISTRIBUTION AGENT. "Distribution Agent" has the meaning set forth in Section 3.2 hereof. SECTION 6.13 DISTRIBUTION DATE. "Distribution Date" has the meaning set forth in Section 3.2 hereof. SECTION 6.14 EXCHANGE ACT. "EXCHANGE ACT" has the meaning set forth in Section 3.1(a) hereof. SECTION 6.15 FORM 10 REGISTRATION STATEMENT. "FORM 10 REGISTRATION STATEMENT" shall mean the Form 10 Registration Statement described in Section 3.1(a) including any amendments or supplements thereto. SECTION 6.16 GAAP. "GAAP" means generally accepted accounting principals promulgated by the Financial Accounting Standards Board, in effect on the Separation Date, consistently applied. SECTION 6.17 GOVERNMENTAL APPROVALS. "GOVERNMENTAL APPROVALS" means any notices, reports or other filings to be made, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Authority. SECTION 6.18 GOVERNMENTAL AUTHORITY. "GOVERNMENTAL AUTHORITY" shall mean any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority. SECTION 6.19 GRAY CARY. "GRAY CARY" has the meaning set for in Section 1.2 hereof. SECTION 6.20 INFORMATION. "INFORMATION" means information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data. SECTION 6.21 NASDAQ. "NASDAQ" has the meaning set for in Section 3.1(e) hereof. -18- SECTION 6.22 PERSON. "PERSON" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. SECTION 6.23 PRIME RATE. "PRIME RATE" means the prime lending rate as published in the Wall Street Journal, Western Edition, on the date of determination. SECTION 6.24 PRIOR AGREEMENT. "PRIOR AGREEMENT" has the meaning set forth in the Recitals hereof. SECTION 6.25 RECORD DATE. "RECORD DATE" means the close of business on the date to be determined by the Board of Directors of Adaptec as the record date for determining the stockholders of Adaptec entitled to receive shares of common stock of Roxio in the Distribution. SECTION 6.26 ROXIO ASSETS. "ROXIO ASSETS" has the meaning set forth in Section 1.2 of the Assignment Agreement. SECTION 6.27 ROXIO'S AUDITORS. "ROXIO'S AUDITORS" has the meaning set forth in Section 4.4(a) hereof. SECTION 6.28 ROXIO BUSINESS. "ROXIO BUSINESS" means (a) the business and operations of Adaptec currently operated as the Software Products Group, as described in the Form 10 Registration Statement including, without limitation, the business and operation responsible for developing, marketing, and selling the following products (i) Easy CD Creator, (ii) GoBack, (iii) SoundStream, (vi) Toast, (v) Jam, (vi) TakeTwo and (vii) WinOnCD and (b) except as otherwise expressly provided herein, any terminated, divested or discontinued businesses or operations that at the time of termination, divestiture or discontinuation primarily related to the Roxio Business as then conducted. SECTION 6.29 ROXIO GROUP. "ROXIO GROUP" means Roxio and each Subsidiary of Roxio immediately after the Separation Date and each Person that becomes a Subsidiary of Roxio after the Separation Date. SECTION 6.30 SEPARATION. "Separation" has the meaning set forth in the Recitals hereof. SECTION 6.31 SEPARATION DATE. "Separation Date" has the meaning set forth in Section 1.1 hereof. SECTION 6.32 SUBSIDIARY. "SUBSIDIARY" means with respect to any specified Person, any corporation, any limited liability company, any partnership or other legal entity of which such Person or its Subsidiaries owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of the members of the board of directors or similar governing body. Unless context otherwise requires, reference to Adaptec and its Subsidiaries shall not include the subsidiaries of Adaptec that will be transferred to Roxio after giving effect to the Separation. -19- SECTION 6.33 TRANSFERRED SUBSIDIARY. "TRANSFERRED SUBSIDIARY" shall have the meaning set forth in Section 2.1(b) hereof. SECTION 6.34 TRANSITIONAL SERVICE SCHEDULES. "TRANSITIONAL SERVICE SCHEDULES" shall have the meaning set forth in Article 2 of the Master Transitional Services Agreement. SECTION 6.35 WSGR. "WSGR" has the meaning set forth in Section 1.2 hereof. -20- WHEREFORE, the parties have signed this First Amended and Restated Master Separation and Distribution Agreement effective as of the date first set forth above. ADAPTEC, INC. ROXIO, INC. By: /s/ ROBERT N. STEPHENS By: /s/ WM. CHRISTOPHER GOROG --------------------------- ---------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog --------------------------- ---------------------------- Title: Chief Executive Officer Title: Chief Executive Officer and President and President --------------------------- ---------------------------- EX-2.2 4 a2056442zex-2_2.txt EXHIBIT 2.2 Exhibit 2.2 EXECUTION COPY GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. MAY 5, 2001 TABLE OF CONTENTS
PAGE ARTICLE I CONTRIBUTION AND ASSUMPTION........................................................................1 Section 1.1 Contribution of Assets and Assumption of Liabilities........................................1 Section 1.2 Roxio Assets................................................................................2 Section 1.3 Roxio Liabilities...........................................................................3 Section 1.4 Methods of Transfer and Assumption..........................................................5 Section 1.5 Governmental Approvals and Consents for Transfer of Roxio Assets............................6 Section 1.6 Nonrecurring Costs and Expenses.............................................................7 Section 1.7 Novation of Assumed Roxio Liabilities.......................................................7 ARTICLE II LITIGATION........................................................................................8 Section 2.1 Allocation..................................................................................8 Section 2.2 Cooperation.................................................................................9 ARTICLE III DISPUTE RESOLUTION...............................................................................9 Section 3.1 Negotiation.................................................................................9 Section 3.2 Proceedings................................................................................10 Section 3.3 Continuity of Service and Performance......................................................10 ARTICLE IV MISCELLANEOUS....................................................................................10 Section 4.1 Limitation of Liability....................................................................10 Section 4.2 Entire Agreement...........................................................................10 Section 4.3 Governing Law..............................................................................10 Section 4.4 Notices....................................................................................11 Section 4.5 Counterparts...............................................................................12 Section 4.6 Binding Effect; Assignment.................................................................12 Section 4.7 Severability...............................................................................12 Section 4.8 Waiver of Breach...........................................................................12 Section 4.9 Amendment and Execution....................................................................13 Section 4.10 Authority..................................................................................13 Section 4.11 Descriptive Headings.......................................................................13 Section 4.12 Gender and Number..........................................................................13 Section 4.13 Additional Assurances......................................................................13 Section 4.14 Force Majeure..............................................................................14 Section 4.15 Conflicting Agreements.....................................................................14 ARTICLE V DEFINITIONS.......................................................................................14 Section 5.1 Action.....................................................................................14 Section 5.2 Adaptec Group..............................................................................14 Section 5.3 Ancillary Agreement........................................................................14 Section 5.4 Assets.....................................................................................14 Section 5.5 Consents...................................................................................16 PAGE Section 5.6 Contracts..................................................................................16 Section 5.7 Disputes...................................................................................16 Section 5.8 Distribution...............................................................................16 Section 5.9 Distribution Date..........................................................................16 Section 5.10 Environmental Actions......................................................................16 Section 5.11 Excluded Assets............................................................................16 Section 5.12 Excluded Liabilities.......................................................................17 Section 5.13 GAAP.......................................................................................17 Section 5.14 Governmental Approvals.....................................................................17 Section 5.15 Governmental Authority.....................................................................17 Section 5.16 Indemnification and Insurance Matters Agreement............................................17 Section 5.17 Insurance Policies.........................................................................17 Section 5.18 Insured Roxio Liability....................................................................17 Section 5.19 Intellectual Property......................................................................17 Section 5.20 IPO........................................................................................18 Section 5.21 Liabilities................................................................................18 Section 5.22 Litigation Disclosure Letter...............................................................18 Section 5.23 OFLs.......................................................................................18 Section 5.24 Person.....................................................................................18 Section 5.25 Roxio Assets...............................................................................19 Section 5.26 Roxio Balance Sheet........................................................................19 Section 5.27 Roxio Business.............................................................................19 Section 5.28 Roxio Contingent Gain......................................................................19 Section 5.29 Roxio Contingent Liability.................................................................19 Section 5.30 Roxio Contracts............................................................................20 Section 5.31 Roxio Group................................................................................21 Section 5.32 Roxio Liabilities..........................................................................21 Section 5.33 Security Interest..........................................................................21 Section 5.34 Separation.................................................................................21 Section 5.35 Separation Agreement.......................................................................21 Section 5.36 Separation Date............................................................................21 Section 5.37 Subsidiary.................................................................................21 Section 5.38 Taxes......................................................................................21 Section 5.39 Tax Sharing Agreement......................................................................21 Section 5.40 Transferred Subsidiary.....................................................................22
SCHEDULES SCHEDULE 1.2(b) Excluded Assets SCHEDULE 1.3(b) Excluded Liabilities GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT This General Assignment and Assumption Agreement (this "AGREEMENT") is entered into on May 5, 2001 between Adaptec, Inc., a Delaware corporation ("ADAPTEC"), and Roxio, Inc., a Delaware corporation ("ROXIO"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in ARTICLE V hereof. Adaptec and Roxio are sometimes referred to herein collectively as the "party" or individually as the "parties." RECITALS WHEREAS, Adaptec hereby and by certain other instruments of even date herewith transfers or will transfer to Roxio effective as of the Separation Date, substantially all of the business and assets of the Roxio Business owned by Adaptec in accordance with the Separation Agreement. It is the intent of the parties hereto, by this Agreement and the other agreements and instruments provided for in the Separation Agreement, that Adaptec and its Subsidiaries convey to Roxio and its Subsidiaries substantially all of the business and assets of the Roxio Business. WHEREAS, it is further intended between the parties that Roxio assume certain of the liabilities related to the Roxio Business, as provided in this Agreement, the Separation Agreement or the other agreements and instruments provided for in the Separation Agreement. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows: ARTICLE I CONTRIBUTION AND ASSUMPTION SECTION 1.1 CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES. (a) TRANSFER OF ASSETS. Effective on the Separation Date, Adaptec hereby assigns, transfers, conveys and delivers to Roxio, and Roxio hereby accepts from Adaptec, all of Adaptec's right, title and interest in all Roxio Assets; PROVIDED, HOWEVER, that any Roxio Assets that are specifically assigned or transferred pursuant to another Ancillary Agreement shall not be assigned or transferred pursuant to this SECTION 1.1(a). (b) ASSUMPTION OF LIABILITIES. Effective on the Separation Date, Roxio hereby assumes and agrees faithfully to perform and fulfill, all the Roxio Liabilities, in accordance with their respective terms. Roxio shall be responsible for all Roxio Liabilities, regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based occurred prior to, on or after the date hereof, regardless of where or against whom such Liabilities are asserted or determined (including any Roxio Liabilities arising out of claims made by Adaptec's or Roxio's respective directors, officers, consultants, independent contractors, employees or agents against any member of the Adaptec Group or the Roxio Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of law, fraud or misrepresentation by any member of the Adaptec Group or the Roxio Group or any of their respective directors, officers, employees or agents. (c) MISALLOCATED ASSETS. In the event that at any time or from time to time (whether prior to or after the Separation Date), any party hereto (or any member of the Adaptec Group or Roxio Group) shall receive or otherwise possess any Asset that is allocated to any other Person pursuant to this Agreement or any other Ancillary Agreement, such party shall promptly transfer, or cause to be transferred, such Asset to the Person so entitled thereto. Prior to any such transfer, the Person receiving or possessing such Asset shall hold such Asset in trust for any such other Person entitled to such Asset. (d) INDEMNIFICATION Agreement. The assignment and assumption of liabilities described in this Section 1.1 is not intended to alter or supercede either parties' obligation, if any, under Indemnification and Insurance Matters Agreement between the parties of even date with respect to such liabilities. SECTION 1.2 ROXIO ASSETS. (a) INCLUDED ASSETS. For purposes of this Agreement, "ROXIO ASSETS" shall mean (without duplication) the following Assets, except as otherwise provided for in any Ancillary Agreement or other express agreement of the parties: (i) all Assets reflected in the Roxio Balance Sheet, subject to any dispositions of such Assets subsequent to the date of the Roxio Balance Sheet; (ii) all Assets that have been written off, expensed or fully depreciated such that, had they not been written off, expensed or fully depreciated, such Assets would have been reflected in the Roxio Balance Sheet in accordance with the principles and accounting policies under which the Roxio Balance Sheet was prepared; (iii) all Assets acquired by Adaptec or its Subsidiaries after the date of the Roxio Balance Sheet that would be reflected in a consolidated balance sheet of Roxio as of the Separation Date if such consolidated balance sheet was prepared using the same principles and accounting policies under which the Roxio Balance Sheet was prepared; (iv) all Assets that are used primarily by the Roxio Business at the Separation Date but improperly were not reflected in the Roxio Balance Sheet; PROVIDED, HOWEVER, that no such Asset shall be a Roxio Asset unless a member of the Roxio Group, on or before the first anniversary of the Distribution Date, has given a member of the Adaptec Group written notice that such Asset is a Roxio Asset; (v) all Roxio Contingent Gains; (vi) all Roxio Contracts; -2- (vii) all issued and outstanding stock, investments or similar interests of Adaptec and the Subsidiaries of Adaptec listed on SCHEDULE 2.1(b) of the Separation Agreement; (viii) all computers, desks, equipment (including equipment used for research and development) and other Assets used or managed primarily by employees of Adaptec that will become employees of Roxio in connection with the Separation; and (ix) to the extent permitted by law and subject to the Indemnification and Insurance Matters Agreement, all rights of any member of the Roxio Group under any of Adaptec's Insurance Policies or other insurance policies issued by Persons unaffiliated with Adaptec; and (x) all Assets that are expressly contemplated by this Agreement, the Separation Agreement or any other Ancillary Agreement (or any other Schedule hereto or thereto) as Assets to be transferred to Roxio or any other member of the Roxio Group. Notwithstanding the foregoing, any Assets held directly or indirectly by any Transferred Subsidiary shall not be assigned or transferred pursuant to SECTION 1.1(a), and the Roxio Assets shall not in any event include the Excluded Assets referred to in SECTION 1.2(b) below. (b) EXCLUDED ASSETS. For the purposes of this Agreement, "EXCLUDED ASSETS" shall mean: (i) the Assets listed or described on SCHEDULE 1.2(b); and (ii) any Assets that are expressly contemplated by the Separation Agreement, this Agreement or any other Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by Adaptec or any other member of the Adaptec Group. SECTION 1.3 ROXIO LIABILITIES. (a) INCLUDED LIABILITIES. For the purposes of this Agreement, "ROXIO LIABILITIES" shall mean (without duplication) the following Liabilities, except as otherwise provided for in any Ancillary Agreement or other express agreement of the parties: (i) all Liabilities reflected in the Roxio Balance Sheet, to the extent such Liabilities have not been satisfied or discharged subsequent to the date of the Roxio Balance Sheet; (ii) all Liabilities of Adaptec or its Subsidiaries that arise after the date of the Roxio Balance Sheet that would be reflected in a consolidated balance sheet of Roxio dated as of the Separation Date if such consolidated balance sheet was prepared using the same principles and accounting policies under which the Roxio Balance Sheet was prepared; (iii) all Liabilities that are related primarily to the Roxio Business at the Separation Date but improperly were not reflected in the Roxio Balance Sheet; PROVIDED, HOWEVER, that no Liability shall be a Roxio Liability unless a member of the Adaptec Group, on or before the first -3- anniversary of the Distribution Date, has given a member of the Roxio Group written notice that such Liability is a Roxio Liability; (iv) all Roxio Contingent Liabilities; (v) all Liabilities (other than Liabilities for Taxes), whether arising before, on or after the Separation Date, primarily relating to, arising out of or resulting from: (1) the operation of the Roxio Business, as conducted at any time prior to, on or after the Separation Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person's authority)); (2) the operation of any business conducted by any member of the Roxio Group at any time after the Separation Date (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person's authority)); or (3) any Roxio Assets; (vi) and (vii) all Liabilities that are expressly contemplated by this Agreement, , the Separation Agreement or any other Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed by Roxio or any other member of the Roxio Group; and (viii) all obligations and Liabilities of any member of the Roxio Group under the Separation Agreement, this Agreement or any of the other Ancillary Agreements. Notwithstanding the foregoing, (i) any Liabilities of Transferred Subsidiaries shall not be assumed pursuant to SECTION 1.2(a), and (ii) the Roxio Liabilities shall not include the Excluded Liabilities referred to in SECTION 1.3(b) below. (b) EXCLUDED LIABILITIES. For the purposes of this Agreement, "EXCLUDED LIABILITIES" shall mean: (i) the Liabilities listed on Schedule 1.3(b); (ii) all Insured Roxio Liabilities; (iii) any obligations of CG1 GmbH to Adaptec Mfg. (S) Pte. Ltd. under the Loan Agreements between such parties, dated July 6, 1999 and November 3, 1999. (iv) all Environmental Actions set forth in SECTION 1.4(b) of the Indemnification and Insurance Matters Agreement; and -4- (v) all Liabilities that are expressly contemplated by this Agreement, the Separation Agreement or any other Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be retained or assumed by Adaptec or any other member of the Adaptec Group, and all agreements and obligations of any member of the Adaptec Group under the Separation Agreement, this Agreement or any other Ancillary Agreement. SECTION 1.4 METHODS OF TRANSFER AND ASSUMPTION. (a) TERMS OF OTHER ANCILLARY AGREEMENTS GOVERN. The parties shall enter into the other Ancillary Agreements, on or about the date of this Agreement. To the extent that the transfer of any Roxio Asset or the assumption of any Roxio Liability is expressly provided for by the terms of any other Ancillary Agreement, the terms of such other Ancillary Agreement shall effect, and determine the manner of, such transfer or assumption. It is the intent of the parties that pursuant to SECTION 1.1, SECTION 1.2, and SECTION 1.3, the transfer and assumption of all other Roxio Assets and Roxio Liabilities shall be made effective as of the Separation Date; PROVIDED, HOWEVER, that circumstances in various jurisdictions outside the United States may require the transfer of certain Roxio Assets and the assumption of certain Roxio Liabilities to occur in such other manner and at such other time as the parties shall agree, as provided in SECTION 1.5(b) hereof. (b) MISTAKEN ASSIGNMENTS AND ASSUMPTIONS. In addition to those transfers and assumptions accurately identified and designated by the parties to take place but which the parties are not able to effect prior to the Separation Date, there may exist (i) Assets that the parties discover were, contrary to the agreements between the parties, by mistake or omission, transferred to Roxio or retained by Adaptec or (ii) Liabilities that the parties discover were, contrary to the agreements between the parties, by mistake or omission, assumed by Roxio or not assumed by Roxio. The parties shall cooperate in good faith to effect the transfer or re-transfer of such Assets, and/or the assumption or re-assumption of such Liabilities, to or by the appropriate party and shall not use the determination that remedial actions need to be taken to alter the original intent of the parties hereto with respect to the Assets to be transferred to or Liabilities to be assumed by Roxio. Each party shall reimburse the other or make other financial adjustments (e.g., without limitation, cash reserves) or other adjustments to remedy any improper transfer or failure to transfer any Asset or any improper assumption or failure to assume any Liability. (c) TRANSFER OF ASSETS AND LIABILITIES NOT INCLUDED IN ROXIO ASSETS AND ROXIO LIABILITIES. In the event the parties discover Assets and Liabilities that relate primarily to the Roxio Business but do not constitute Roxio Assets under SECTION 1.2 or Roxio Liabilities under SECTION 1.3, the parties shall cooperate in good faith to effect the transfer of such Assets at book value, or the assumption of such Liabilities, to Roxio or its Subsidiaries and shall not use the determination of remedial actions contemplated in the Separation Agreement to alter the original intent of the parties hereto with respect to the Assets to be transferred to or Liabilities to be assumed by Roxio. Each party shall reimburse the other or make other financial adjustments (e.g., without limitation, cash reserves) or other adjustments to remedy any improper transfer or failure to transfer any Asset or any improper assumption or failure to assume any Liability. -5- (d) DOCUMENTS RELATING TO OTHER TRANSFERS OF ASSETS AND ASSUMPTION OF LIABILITIES. In furtherance of the assignment, transfer, conveyance and delivery of Roxio Assets and the assumption of Roxio Liabilities set forth in SECTION 1.4 (a), (b) and (c) and certain other Ancillary Agreements, simultaneously with the execution and delivery hereof or as promptly as practicable thereafter, (i) the members of the Adaptec Group shall execute and deliver such bills of sale, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of Adaptec's and its Subsidiaries' right, title and interest in and to the Roxio Assets to Roxio and (ii) Roxio shall execute and deliver, to Adaptec and its Subsidiaries such bills of sale, stock powers, certificates of title, assumptions of contracts and other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Roxio Liabilities by Roxio. SECTION 1.5 GOVERNMENTAL APPROVALS AND CONSENTS FOR TRANSFER OF ROXIO ASSETS. (a) TRANSFER IN VIOLATION OF LAWS. If and to the extent that the valid, complete and perfected transfer assignment or novation to the Roxio Group of any Roxio Assets would be a violation of applicable laws or require any Consent or Governmental Approval in connection with the Separation, the IPO or the Distribution, then, unless Adaptec shall otherwise determine, the transfer, assignment or novation to the Roxio Group, as the case may be, any of such Roxio Asset automatically shall be deemed deferred and any such purported transfer, assignment or novation shall be null and void until such time as all legal impediments are removed and/or such Consents or Governmental Approvals have been obtained. Notwithstanding the foregoing, any such Asset shall still be deemed a Roxio Asset for purposes of determining whether any Liability is a Roxio Liability; PROVIDED, HOWEVER, that if any such Consent or Governmental Approval has not been obtained within six months of the Distribution Date, the parties will use their reasonable commercial efforts to achieve an alternative solution in accordance with the parties' intentions. If any such Consent shall not be obtained, Adaptec shall cooperate with Roxio in any reasonable arrangement designed to provide for Roxio the benefits intended to be assigned to Roxio under the relevant contract, license or other instrument, including enforcement at the cost and for the account of Roxio of any and all rights of Adaptec against the other party thereto arising out of the breach or cancellation thereof by such other party or otherwise. (b) TRANSFERS NOT CONSUMMATED PRIOR TO SEPARATION DATE. If the transfer, assignment or novation of any Assets intended to be transferred or assigned hereunder is not consummated prior to or on the Separation Date, whether as a result of the provisions of SECTION 1.5(a) or for any other reason, then the Person retaining such Asset shall thereafter hold such Asset for the use and benefit, insofar as reasonably possible, of the Person entitled thereto (at the expense of the Person entitled thereto). In addition, the Person retaining such Asset shall take such other actions as may be reasonably requested by the Person to whom such Asset is to be transferred in order to place such Person, insofar as reasonably possible, in the same position as if such Asset had been transferred as contemplated hereby and so that all the benefits and burdens relating to such Roxio Assets, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Assets, are to inure from and after the Separation Date to the Roxio Group. If and when the Consents and/or Governmental Approvals, the absence of which caused the deferral of transfer of -6- any Asset pursuant to SECTION 1.5(a), are obtained, the transfer of the applicable Asset shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement. (c) EXPENSES. The Person retaining an Asset due to the deferral of the transfer of such Asset shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced by the Person entitled to the Asset, other than reasonable out-of-pocket expenses, attorneys' fees and recording or similar fees, all of which shall be promptly reimbursed by the Person entitled to such Asset. SECTION 1.6 NONRECURRING COSTS AND EXPENSES. Notwithstanding anything herein to the contrary, any nonrecurring costs and expenses incurred by the parties hereto to effect the transactions contemplated hereby which are not allocated pursuant to the terms of the Separation Agreement, this Agreement or any other Ancillary Agreement shall be the responsibility of the party which incurs such costs and expenses. SECTION 1.7 NOVATION OF ASSUMED ROXIO LIABILITIES. (a) REASONABLE COMMERCIAL EFFORTS. Each of Adaptec and Roxio, at the request of the other, shall use their reasonable commercial efforts to obtain, or to cause to be obtained, any Consent, Government Approval, substitution or amendment required to effect a novation of (including with respect to any federal government contract) or assign all rights and obligations under agreements, leases, licenses and other obligations or Liabilities (including Roxio OFLs) of any nature whatsoever that constitute Roxio Liabilities or to obtain in writing the unconditional release of all parties to such arrangements other than any member of the Roxio Group, so that, in any such case, Roxio and its Subsidiaries will be solely responsible for such Liabilities; PROVIDED, HOWEVER, that neither Adaptec, Roxio nor their Subsidiaries shall be obligated to pay any consideration therefor to any third party from whom such Consents, Government Approvals, substitutions and amendments are requested. Notwithstanding anything to the contrary in the Separation Agreement or any of the Ancillary Agreements, the former officers and employees of Adaptec and the present officers, directors and employees of Roxio do not release Adaptec from any indemnification obligations it may have to them arising from Delaware or California law, Adaptec's Bylaws or Certificate of Incorporation or which arise by contract by operation of law or otherwise and Roxio shall have no obligation to use any effort to obtain or cause to be obtained any novation or assignment of such agreements, obligations or liabilities of Adaptec. (b) INABILITY TO OBTAIN NOVATION. If Adaptec or Roxio is unable to obtain, or to cause to be obtained, any such required Consent, Government Approval, release, substitution or amendment, the applicable member of the Adaptec Group shall continue to be bound by such agreements, leases, licenses and other obligations and, unless not permitted by law or the terms thereof (except to the extent expressly set forth in this Agreement, the Separation Agreement or any other Ancillary Agreement), Roxio shall, as agent or subcontractor for Adaptec or such other Person, as the case may be, pay, perform and discharge fully, or cause to be paid, transferred or discharged all the obligations or other Liabilities of Adaptec or such other Person, as the case may be, thereunder from and after the date hereof. Adaptec shall, without further consideration, pay and remit, or cause to be paid or remitted, to Roxio or its appropriate Subsidiary promptly all money, rights and other -7- consideration received by it or any member of its respective Group in respect of such performance (unless any such consideration is an Excluded Asset). If and when any such Consent, Government Approval, release, substitution or amendment shall be obtained or such agreement, lease, license or other rights or obligations shall otherwise become assignable or able to be novated, Adaptec shall thereafter assign, or cause to be assigned, all its rights, obligations and other Liabilities thereunder or any rights or obligations of any member of its respective Group to Roxio without payment of further consideration and Roxio shall, without the payment of any further consideration, assume such rights and obligations. ARTICLE II LITIGATION SECTION 2.1 ALLOCATION. (a) LITIGATION TO BE TRANSFERRED TO ROXIO. Notwithstanding any contrary provisions in the provisions of the Indemnification and Insurance Matters Agreement, on the Separation Date, the responsibilities for management of the litigation identified in SECTION 2.1(a) of a litigation disclosure letter (the "LITIGATION DISCLOSURE LETTER"), which will be delivered by Adaptec to Roxio on the Separation Date, shall be transferred in their entirety from Adaptec and its Subsidiaries to Roxio and its Subsidiaries. As of the Separation Date and thereafter, Roxio shall manage the defense of this litigation and shall cause its applicable Subsidiaries to do the same. Adaptec and its Subsidiaries must first obtain the prior consent of Roxio or its applicable Subsidiary for any action taken subsequent to the Separation Date in connection with the litigation identified in the Litigation Disclosure Letter, which consent cannot be unreasonably withheld or delayed. All other matters relating to such litigation, including but not limited to indemnification for such claims, shall be governed by the provisions of the Indemnification and Insurance Matters Agreement. (b) LITIGATION TO BE DEFENDED BY ADAPTEC AT ROXIO'S EXPENSE. Notwithstanding any contrary provisions in the Indemnification and Insurance Matters Agreement, Adaptec shall defend, and shall cause its applicable Subsidiaries to defend, the litigation identified in SECTION 2.1(B) of the Litigation Disclosure Letter. All other matters relating to such litigation, including but not limited to indemnification for such claims, shall be governed by the provisions of the Indemnification and Insurance Matters Agreement. (c) ALL OTHER LITIGATION. All other litigation outstanding at the Separation Date not included in the Litigation Disclosure Letter shall remain with Adaptec, and Roxio shall have no liability in connection with, or responsibility for defending, such litigation. SECTION 2.1 COOPERATION. Adaptec and Roxio and their respective Subsidiaries shall cooperate with each other in the defense of any litigation covered under this ARTICLE II and afford to each other reasonable access upon reasonable advance notice to witnesses and information (other than information protected from disclosure by applicable privileges) that is reasonably required to defend this litigation as set forth in SECTION 5.3 of the Separation Agreement. The foregoing agreement to cooperate includes, but is not limited to, an obligation to provide access to qualified -8- assistance to provide information, witnesses and documents to respond to discovery requests in specific lawsuits. In such cases, cooperation shall be timely so that the party responding to discovery may meet all court-imposed deadlines. The party requesting information shall reimburse the party providing information consistent with the terms of SECTION 5.3 of the Separation Agreement. The obligations set forth in this paragraph are more clearly defined in SECTION 5.3 of the Separation Agreement, to which reference is hereby made. ARTICLE III DISPUTE RESOLUTION Resolution of any and all Disputes arising from or in connection with this Agreement, shall be exclusively governed by and settled in accordance with the provisions of this ARTICLE III. SECTION 3.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through informal negotiation between appropriate representatives from each of Adaptec and Roxio. If at any time either party feels that such negotiations are not leading to a resolution of the Dispute, such party may send a notice to the other party describing the Dispute and requesting a meeting of the senior executives from each party. Within ten (10) business days after such notice is given, each party shall select appropriate senior executives (e.g., director or V.P. level) of each party who shall have the authority to resolve the matter and shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. During the course of negotiations under this SECTION 3.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating senior executives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within thirty (30) days after the first meeting of the negotiating senior executives, either party may commence litigation with respect to the Dispute. However, except as provided below in SECTION 3.2, neither party shall commence litigation against the other party to resolve the Dispute (i) until the parties try in good faith to settle the Dispute by negotiation for at least thirty (30) days after the first meeting of the negotiating senior executives or (ii) until forty (40) days after notice of a Dispute is given by either party to the other party, whichever occurs first. SECTION 3.2 PROCEEDINGS. Any Dispute regarding the following is not required to be negotiated prior to seeking relief from a court of competent jurisdiction: breach of any obligation of confidentiality; infringement, misappropriation, or misuse of any intellectual property right; or any other claim where interim relief from the court is sought to prevent serious and irreparable injury to a party. However, the parties shall make a good faith effort to negotiate such Dispute, according to SECTION 3.1, while such court action is pending. SECTION 3.3 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement -9- and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this ARTICLE III with respect to all matters not subject to such dispute, controversy or claim. ARTICLE IV MISCELLANEOUS SECTION 4.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SECTION 4.2 ENTIRE AGREEMENT. This Agreement, the Master Separation and Distribution Agreement, the other Ancillary Agreements and the Exhibits and Schedules referenced or attached hereto and thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. SECTION 4.3 GOVERNING LAW. This Agreement shall be construed in accordance with and all Disputes hereunder shall be governed by the laws of the State of California, excluding its conflict of law rules and the United Nations Convention on Contracts for the International Sale of Goods. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California, San Jose Division, shall have jurisdiction and venue over all Disputes between the parties that are permitted to be brought in a court of law pursuant to SECTION 3.2 above. SECTION 4.4 NOTICES. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) Business Day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one (1) Business Day after being deposited with a nationally recognized overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of: IF TO ADAPTEC, INC.: Adaptec, Inc. 691 S. Milpitas Blvd. Milpitas, CA 95035 Attention: Vice President and General Counsel Facsimile No.: (408) 957-7137 with a copy to: -10- Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Attention: Henry P. Massey, Jr. Facsimile No.: 650-493-6811 IF TO ROXIO, INC.: Roxio, Inc. 461 South Milpitas Blvd. Milpitas, CA 95035 Attention: William Christopher Gorog Facsimile No.: 408-957-7963 with a copy to: Gray Cary Ware & Freidenrich LLP 400 Capitol Mall, Suite 2400 Sacramento, CA 95814 Attention: Kevin A. Coyle Facsimile No.: 916-930-3201 Adaptec and Roxio may substitute a different address or facsimile number, from time to time, if such substitute is provided to the intended notice recipient in writing by notice given in the manner provided in this SECTION 4.4. SECTION 4.5 COUNTERPARTS. This Agreement, including the Schedules hereto and the other documents referred to herein, may be executed in counterparts via facsimile or otherwise, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. SECTION 4.6 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may be enforced separately by each member of the Adaptec Group and each member of the Roxio Group. Except as herein specifically provided to the contrary, neither party may assign this Agreement or any rights or obligations hereunder, without the prior written consent of the other party, and any such assignment shall be void; provided, however, either party (or its permitted successive assignees or transferees hereunder) may assign or transfer this Agreement as a whole without consent to an entity that succeeds to all or substantially all of the business or assets of such party to which this Agreement relates. SECTION 4.7 SEVERABILITY. The parties hereto have negotiated and prepared the terms of this Agreement in good faith with the intent that each and every one of the terms, covenants and -11- conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Agreement, to the extent possible consistent with its purposes, to conform to law. SECTION 4.8 WAIVER OF BREACH. The waiver by either party hereto of a breach or violation of any provision of this Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. SECTION 4.9 AMENDMENT AND EXECUTION. This Agreement and amendments hereto shall be in writing and executed in multiple copies via facsimile or otherwise on behalf of Adaptec and Roxio by their respective duly authorized officers and representatives. Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument. SECTION 4.10 AUTHORITY. Each of the parties hereto represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other actions, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. SECTION 4.11 DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article or a Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. SECTION 4.12 GENDER AND NUMBER. Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine and neuter, and the number of all words herein shall include the singular and plural. SECTION 4.13 ADDITIONAL ASSURANCES. Except as may be specifically provided herein to the contrary, the provisions of this Agreement shall be self-operative and shall not require further agreement by the parties; provided, however, at the request of either party, the other party shall execute such additional instruments and take such additional acts as are reasonable, and as the requesting party may reasonably deem necessary, to effectuate this Agreement. -12- SECTION 4.14 FORCE MAJEURE. Neither party shall be liable or deemed to be in default for any delay or failure in performance under this Agreement or other interruption of service deemed to result, directly or indirectly, from acts of God, civil or military authority, acts of public enemy, war, accidents, explosions, earthquakes, floods, failure of transportation, strikes or other work interruptions by either party's employees, or any other similar cause beyond the reasonable control of either party unless such delay or failure in performance is expressly addressed elsewhere in this Agreement. SECTION 4.15 CONFLICTING AGREEMENTS. In the event of conflict between this Agreement and any other Ancillary Agreement or other agreement executed in connection herewith, the provisions of such other agreement shall prevail (other than (i) as otherwise provided herein and (ii) the Separation and Distribution Agreement). ARTICLE V DEFINITIONS SECTION 5.1 ACTION. "ACTION" means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international governmental authority or any arbitration or mediation tribunal. SECTION 5.2 ADAPTEC GROUP. "ADAPTEC GROUP" has the meaning set forth in Section 6.2 of the Separation Agreement. SECTION 5.3 ANCILLARY AGREEMENT. "ANCILLARY AGREEMENT" has the meaning set forth in SECTION 2.1 of the Separation Agreement. SECTION 5.4 ASSETS. "ASSETS" means assets, properties and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person, including the following: (i) all accounting and other books, records and files whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape or any other form; (ii) all apparatus, computers and other electronic data processing equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks, aircraft, rolling stock, vessels, motor vehicles and other transportation equipment, special and general tools, test devices, prototypes and models and other tangible personal property; (iii) all inventories of materials, parts, raw materials, supplies, work-in-process and finished goods and products; -13- (iv) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest, lessor, sublessor, lessee, sublessee or otherwise; (v) all interests in any capital stock or other equity interests of any Subsidiary or any other Person; all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person; all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person; and all other investments in securities of any Person; (vi) all license agreements, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products and other contracts, agreements or commitments; (vii) all deposits, letters of credit and performance and surety bonds; (viii) all written technical information, data, specifications, research and development information, engineering drawings, operating and maintenance manuals, and materials and analyses prepared by consultants and other third parties; (ix) all Intellectual Property and licenses from third Persons granting the right to use any Intellectual Property; (x) all computer applications, programs and other software, including operating software, network software, firmware, middleware, design software, design tools, systems documentation and instructions; (xi) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product literature, artwork, design, development and manufacturing files, vendor and customer drawings, formulations and specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents; (xii) all prepaid expenses, trade accounts and other accounts and notes receivables; (xiii) all rights under contracts or agreements, all claims or rights against any Person arising from the ownership of any Asset, all rights in connection with any bids or offers and all claims, choses in action or similar rights, whether accrued or contingent; (xiv) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution; (xv) all licenses (including radio and similar licenses), permits, approvals and authorizations which have been issued by any Governmental Authority; -14- (xvi) cash or cash equivalents, bank accounts, lock boxes and other deposit arrangements; and (xvii) interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements. SECTION 5.5 CONSENTS. "CONSENTS" means any consents, waivers or approvals from, or notification requirements to, any third parties. SECTION 5.6 CONTRACTS. "CONTRACTS" means any contract, agreement, lease, license, sales order, purchase order, instrument or other commitment that is binding on any Person or any part of its property under applicable law. SECTION 5.7 DISPUTES. "DISPUTES" shall have the meaning set forth in Section 4.7 of the Separation Agreement. SECTION 5.8 DISTRIBUTION. "DISTRIBUTION" shall have the meaning set forth in the Recitals of the Separation Agreement. SECTION 5.9 DISTRIBUTION DATE. "DISTRIBUTION DATE" has the meaning set forth in SECTION 3.2 of the Separation Agreement. SECTION 5.10 ENVIRONMENTAL ACTIONS. "ENVIRONMENTAL ACTIONS" has the meaning set forth in SECTION 5.9 of the Indemnification and Insurance Matters Agreement. SECTION 5.11 EXCLUDED ASSETS. "EXCLUDED ASSETS" has the meaning set forth in SECTION 1.2(B) of this Agreement. SECTION 5.12 EXCLUDED LIABILITIES. "EXCLUDED LIABILITIES" has the meaning set forth in SECTION 1.3(B) of this Agreement. SECTION 5.13 GAAP. "GAAP" has the meaning set forth in Section 6.16 of the Separation Agreement. SECTION 5.14 GOVERNMENTAL APPROVALS. "GOVERNMENTAL APPROVALS" means any notices, reports or other filings to be made, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Authority. SECTION 5.15 GOVERNMENTAL AUTHORITY. "GOVERNMENTAL AUTHORITY" means any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority. SECTION 5.16 INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT. "Indemnification and Insurance Matters Agreement" means the Indemnification and Insurance Matters Agreement attached as Exhibit I to the Separation Agreement. -15- SECTION 5.17 INSURANCE POLICIES. "INSURANCE POLICIES" means insurance policies pursuant to which a Person makes a true risk transfer to an insurer. SECTION 5.18 INSURED ROXIO LIABILITY. "INSURED ROXIO LIABILITY" means any Roxio Liability to the extent that it is covered under the terms of Adaptec's Insurance Policies. SECTION 5.19 INTELLECTUAL PROPERTY. "INTELLECTUAL PROPERTY" means all domestic and foreign patents and patent applications, together with any continuations, continuations-in-part or divisional applications thereof, and all patents issuing thereon (including reissues, renewals and re-examinations of the foregoing); design patents, invention disclosures; mask works; copyrights, and copyright applications and registrations; Web addresses, trademarks, service marks, trade names, and trade dress, in each case together with any applications and registrations therefor and all appurtenant goodwill relating thereto; trade secrets, commercial and technical information, know-how, proprietary or confidential information, including engineering, production and other designs, notebooks, processes, drawings, specifications, formulae, and technology; computer and electronic data processing programs and software (object and source code), data bases and documentation thereof; inventions (whether patented or not); utility models; registered designs, certificates of invention and all other intellectual property under the laws of any country throughout the world. SECTION 5.20 IPO. "IPO" has the meaning set forth in the Recitals of the Separation Agreement. SECTION 5.21 LIABILITIES. "LIABILITIES" means all debts, liabilities, guarantees, assurances, commitments and obligations, whether fixed, contingent or absolute, asserted or unasserted, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due, whenever or however arising (including, without limitation, whether arising out of any Contract or tort based on negligence or strict liability) and whether or not the same would be required by GAAP to be reflected in financial statements or disclosed in the notes thereto. SECTION 5.22 LITIGATION DISCLOSURE LETTER. "LITIGATION DISCLOSURE LETTER" has the meaning set forth in SECTION 2.1(A) of this Agreement. SECTION 5.23 OFLS. "OFLS" mean all liabilities, obligations, contingencies, instruments and other Liabilities of any member of the Adaptec Group of a financial nature with third parties existing on the date hereof or entered into or established between the date hereof and the Separation Date, including any of the following: (i) foreign exchange contracts; (ii) letters of credit; (iii) guarantees of third party loans to customers; (iv) surety bonds (excluding surety for workers' compensation self-insurance); -16- (v) interest support agreements on third party loans to customers; (vi) performance bonds or guarantees issued by third parties; (vii) swaps or other derivatives contracts; and (viii) recourse arrangements on the sale of receivables or notes. SECTION 5.24 PERSON. "PERSON" has the meaning set forth in Section 6.22 of the Separation Agreement. SECTION 5.25 ROXIO ASSETS. "ROXIO ASSETS" has the meaning set forth in Section 1.2 of this Agreement. SECTION 5.26 ROXIO BALANCE SHEET. "ROXIO BALANCE SHEET" means the audited consolidated balance sheet (including the notes thereto) of the Roxio Business as of March 31, 2001. SECTION 5.27 ROXIO BUSINESS. "ROXIO BUSINESS" has the meaning set forth in Section 6.28 of the Separation Agreement. SECTION 5.28 ROXIO CONTINGENT GAIN. "ROXIO CONTINGENT GAIN" means any claim or other right of a member of the Adaptec Group or the Roxio Group that primarily relates to the Roxio Business, whenever arising, against any Person other than a member of the Adaptec Group or the Roxio Group, if and to the extent that (i) such claim or right arises out of events, acts or omissions occurring prior to the Separation Date (based on then existing law) and (ii) the existence or scope of the obligation of such other Person as of the Separation Date was not acknowledged, fixed or determined in any material respect, due to a dispute or other uncertainty as of the Separation Date or as a result of the failure of such claim or other right to have been discovered or asserted as of the Separation Date. A claim or right meeting the foregoing definition shall be considered a Roxio Contingent Gain regardless of whether there was any Action pending, threatened or contemplated as of the Separation Date with respect thereto. In the case of any claim or right a portion of which arises out of events, acts or omissions occurring prior to the Separation Date and a portion of which arises out of events, acts or omissions occurring on or after the Separation Date, only that portion that arises out of events, acts or omissions occurring prior to the Separation Date shall be considered a Roxio Contingent Gain. For purposes of the foregoing, a claim or right shall be deemed to have accrued as of the Separation Date if all the elements of the claim necessary for its assertion shall have occurred on or prior to the Separation Date, such that the claim or right, were it asserted in an Action on or prior to the Separation Date, would not be dismissed by a court on ripeness or similar grounds. Notwithstanding the foregoing, none of (i) any Insurance Proceeds, (ii) any Excluded Assets, (iii) any reversal of any litigation or other reserve, or (iv) any matters relating to Taxes (which are governed by the Tax Sharing Agreement) shall be deemed to be a Roxio Contingent Gain. SECTION 5.29 ROXIO CONTINGENT LIABILITY. "ROXIO CONTINGENT LIABILITY" means any Liability, other than Liabilities for Taxes (which are governed by the Tax Sharing Agreement), of a -17- member of the Adaptec Group or the Roxio Group that primarily relates to the Roxio Business, whenever arising, to any Person other than a member of the Adaptec Group or the Roxio Group, if and to the extent that (i) such Liability arises out of the events, acts or omissions occurring as of the Separation Date and (ii) the existence or scope of the obligation of a member of the Adaptec Group or the Roxio Group as of the Separation Date with respect to such Liability was not acknowledged, fixed or determined in any material respect, due to a dispute or other uncertainty as of the Separation Date or as a result of the failure of such Liability to have been discovered or asserted as of the Separation Date. The parties agree that the existence of a litigation or other reserve with respect to any Liability shall not be sufficient for such Liability to be considered acknowledged, fixed or determined. In the case of any Liability a portion of which arises out of events, acts or omissions occurring prior to the Separation Date and a portion of which arises out of events, acts or omissions occurring on or after the Separation Date, only that portion that arises out of events, acts or omissions occurring prior to the Separation Date shall be considered a Roxio Contingent Liability. For purposes of the foregoing, a Liability shall be deemed to have arisen out of events, acts or omissions occurring prior to the Separation Date if all the elements necessary for the assertion of a claim with respect to such Liability shall have occurred on or prior to the Separation Date, such that the claim, were it asserted in an Action on or prior to the Separation Date, would not be dismissed by a court on ripeness or similar grounds. For purposes of clarification of the foregoing, the parties agree that no Liability relating to, arising out of or resulting from any obligation of any Person to perform the executory portion of any contract or agreement existing as of the Separation Date, or to satisfy any obligation accrued under any Plan (as defined in the Employee Matters Agreement) as of the Separation Date, shall deemed to be a Roxio Contingent Liability. SECTION 5.30 ROXIO CONTRACTS. "ROXIO CONTRACTS" means the following contracts and agreements to which Adaptec is a party or by which it or any of its Assets is bound, whether or not in writing, except for any such contract or agreement that is contemplated to be retained by Adaptec or any member of the Adaptec Group pursuant to any provision of this Agreement or any other Ancillary Agreement: (i) any contract or agreement entered into in the name of, or expressly on behalf of, any division or business unit of Roxio; (ii) any contract or agreement that relates primarily to the Roxio Business; (iii) any contracts or agreements related to the computers, desks, equipment (including equipment used for research and development) and other Assets used or managed primarily by employees of Adaptec that will become employees of Roxio in connection with the Separation; (iv) any contract or agreement that is otherwise expressly contemplated pursuant to this Agreement, the Separation Agreement or any of the other Ancillary Agreements to be assigned to Roxio; (v) any guarantee, indemnity, representation, warranty or other Liability of any member of the Roxio Group or the Adaptec Group in respect of any other Roxio Contract, any Roxio -18- Liability or the Roxio Business (including guarantees of financing incurred by customers or other third parties in connection with purchases of products or services from the Roxio Business); and (vi) any Roxio OFL. SECTION 5.31 ROXIO GROUP. "ROXIO GROUP" has the meaning set forth in Section 6.29 of the Separation Agreement. SECTION 5.32 ROXIO LIABILITIES. "ROXIO LIABILITIES" has the meaning set forth in SECTION 1.3 of this Agreement. SECTION 5.33 SECURITY INTEREST. "SECURITY INTEREST" means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever. SECTION 5.34 SEPARATION. "SEPARATION" has the meaning set forth in the Recitals of the Separation Agreement. SECTION 5.35 SEPARATION AGREEMENT. "SEPARATION AGREEMENT" means the First Amended and Restated Master Separation and Distribution Agreement dated as of February 28, 2001, of which this is an Exhibit. SECTION 5.36 SEPARATION DATE. "SEPARATION DATE" has the meaning set forth in Section 1.1 of the Separation Agreement. SECTION 5.37 SUBSIDIARY. "SUBSIDIARY" means with respect to any specified Person, any corporation, any limited liability company, any partnership or other legal entity of which such Person or its Subsidiaries owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of the members of the board of directors or similar governing body. Unless context otherwise requires, reference to Adaptec and its Subsidiaries shall not include the subsidiaries of Adaptec that will be transferred to Roxio after giving effect to the Separation. SECTION 5.38 TAXES. "TAXES" has the meaning set forth in the Tax Sharing Agreement. SECTION 5.39 TAX SHARING AGREEMENT. "Tax Sharing Agreement" means the Tax Sharing Agreement attached as Exhibit F to the Separation Agreement. SECTION 5.40 TRANSFERRED SUBSIDIARY. "TRANSFERRED SUBSIDIARY" has the meaning set forth in Section 2.1(b) of the Separation Agreement. [SIGNATURES ON FOLLOWING PAGE] -19- IN WITNESS WHEREOF, each of the parties has caused the General Assignment and Assumption Agreement to be executed on its behalf by its officers thereunto duly authorized on the day and year first above written. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------ --------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog --------------------------- ------------------------------ Title: President, Title: President and Chief Executive Officer Chief Executive Officer --------------------------- ------------------------------ [SIGNATURE PAGE TO GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT] EX-2.3 5 a2056442zex-2_3.txt EXHIBIT 2.3 Exhibit 2.3 EXECUTION COPY INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. MAY 5, 2001 TABLE OF CONTENTS
PAGE ARTICLE I. MUTUAL RELEASES; INDEMNIFICATION...........................................................................1 Section 1.1. Release of Pre-Closing Claims...................................................................1 Section 1.2. Indemnification by Roxio........................................................................2 Section 1.3. Indemnification by Adaptec......................................................................3 Section 1.4. Indemnification With Respect to Environmental Actions and Conditions............................3 Section 1.5. Procedures for Defense, Settlement and Indemnification of Third Party Claims....................4 Section 1.6. Additional Matters..............................................................................5 Section 1.7. Survival of Indemnities.........................................................................6 Section 1.8. Other Agreements Evidencing Indemnification Obligations.........................................6 ARTICLE II. INSURANCE MATTERS.........................................................................................6 Section 2.1. Roxio Insurance Coverage After the Separation Date..............................................6 Section 2.2. Cooperation and Agreement Not to Release Carriers...............................................6 Section 2.3. Procedures With Respect to Insured Roxio Liabilities............................................7 Section 2.4. Cooperation.....................................................................................7 Section 2.5. No Assignment or Waiver.........................................................................7 Section 2.6. No Liability....................................................................................8 Section 2.7. Further Agreements..............................................................................8 Section 2.8. Matters Governed by Employee Matters Agreement..................................................8 ARTICLE III. DISPUTE RESOLUTION.......................................................................................8 Section 3.1. Negotiation.....................................................................................8 Section 3.2. Proceedings.....................................................................................9 Section 3.3. Continuity of Service and Performance...........................................................9 ARTICLE IV. MISCELLANEOUS.............................................................................................9 Section 4.1. Entire Agreement................................................................................9 Section 4.2. Governing Law...................................................................................9 Section 4.3. Notices........................................................................................10 Section 4.4. Counterparts...................................................................................11 Section 4.5. Binding Effect; Assignment.....................................................................11 Section 4.6. Severability...................................................................................11 Section 4.7. Waiver of Breach...............................................................................11 Section 4.8. Amendment and Execution........................................................................11 Section 4.9. Authority......................................................................................12 Section 4.10. Descriptive Headings...........................................................................12 Section 4.11. Gender and Number..............................................................................12 Section 4.12. Additional Assurances..........................................................................12 Section 4.13. Force Majeure..................................................................................12 ARTICLE V. DEFINITIONS...............................................................................................13 -i- TABLE OF CONTENTS (CONTINUED) PAGE Section 5.1. Adaptec Business...............................................................................13 Section 5.2. Adaptec Facilities.............................................................................13 Section 5.3. Adaptec Group..................................................................................13 Section 5.4. Adaptec Indemnitees............................................................................13 Section 5.5. Action.........................................................................................13 Section 5.6. Assets.........................................................................................13 Section 5.7. Assignment Agreement...........................................................................13 Section 5.8. Employee Matters Agreement.....................................................................13 Section 5.9. Environmental Actions..........................................................................13 Section 5.10. Environmental Conditions.......................................................................14 Section 5.11. Environmental Laws.............................................................................14 Section 5.12. Form 10 Liabilities............................................................................14 Section 5.13. Form 10 Registration Statement.................................................................14 Section 5.14. Hazardous Materials............................................................................14 Section 5.15. Indemnifying Party.............................................................................14 Section 5.16. Indemnitee.....................................................................................15 Section 5.17. Insurance Policies.............................................................................15 Section 5.18. Insured Roxio Liability........................................................................15 Section 5.19. Liabilities....................................................................................15 Section 5.20. Person.........................................................................................15 Section 5.21. Pre-Separation Third Party Site Liabilities....................................................15 Section 5.22. Release........................................................................................15 Section 5.23. Roxio Business.................................................................................15 Section 5.24. Roxio Contracts................................................................................16 Section 5.25. Roxio Facilities...............................................................................16 Section 5.26. Roxio Group....................................................................................16 Section 5.27. Roxio Indemnitees..............................................................................16 Section 5.28. Roxio Liabilities..............................................................................16 Section 5.29. Separation.....................................................................................16 Section 5.30. Separation Agreement...........................................................................16 Section 5.31. Separation Date................................................................................16 Section 5.32. Subsidiary.....................................................................................16 Section 5.33. Tax Sharing Agreement..........................................................................16 Section 5.34. Taxes..........................................................................................16 Section 5.35. Third Party Claim..............................................................................17
-ii- INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT This Indemnification and Insurance Matters Agreement (this "AGREEMENT") is entered into on May 5, 2001 between Adaptec, Inc., a Delaware corporation ("ADAPTEC"), and Roxio, Inc., a Delaware corporation ("ROXIO"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in ARTICLE V below. Adaptec and Roxio are sometimes referred to herein individually as a "party" or collectively as the "parties." RECITALS WHEREAS, Adaptec and its Subsidiaries have transferred or will transfer to Roxio and its Subsidiaries effective as of the Separation Date, substantially all of the assets of the Roxio Business in accordance with the Separation Agreement. WHEREAS, the parties desire to set forth certain agreements regarding indemnification and insurance. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows: ARTICLE I. MUTUAL RELEASES; INDEMNIFICATION SECTION 1.1. RELEASE OF PRE-CLOSING CLAIMS. (a) ROXIO RELEASE. Except as provided in SECTION 1.1(c) to this Agreement, effective as of the Separation Date, Roxio does hereby, for itself and as agent for each member of the Roxio Group, remise, release and forever discharge the Adaptec Indemnitees from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Separation Date, including in connection with the transactions and all other activities to implement any of the Separation and the Distribution. (b) ADAPTEC RELEASE. Except as provided in SECTION 1.1(c) to this Agreement, effective as of the Separation Date, Adaptec does hereby, for itself and as agent for each member of the Adaptec Group, remise, release and forever discharge the Roxio Indemnitees from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Separation Date, including in connection with the transactions and all other activities to implement any of the Separation and the Distribution. (c) NO IMPAIRMENT. Nothing contained in SECTION 1.1(a) or (b) shall impair any right of any Person arising under the Separation Agreement or any other Ancillary Agreement (including this Agreement), in each case in accordance with its terms. (d) NO ACTIONS AS TO RELEASED CLAIMS. Roxio agrees, for itself and as agent for each member of the Roxio Group, not to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Adaptec or any member of the Adaptec Group, or any other Person released pursuant to SECTION 1.1(a), with respect to any Liabilities released pursuant to SECTION 1.1(a). Adaptec agrees, for itself and as agent for each member of the Adaptec Group, not to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Roxio or any member of the Roxio Group, or any other Person released pursuant to SECTION 1.1(b), with respect to any Liabilities released pursuant to SECTION 1.1(b). (e) FURTHER INSTRUMENTS. At any time, at the request of any other party, each party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions hereof. SECTION 1.2. INDEMNIFICATION BY ROXIO. Subject to SECTION 1.4 or as otherwise provided in this Agreement, Roxio shall, for itself and as agent for each member of the Roxio Group, indemnify, defend (or, where applicable, pay the defense costs for) and hold harmless the Adaptec Indemnitees from and against any and all Liabilities that any third party seeks to impose upon the Adaptec Indemnitees, or which are imposed upon the Adaptec Indemnitees, and that (without duplication) (i) primarily relate to, arise out of or result from the Roxio Business prior to the Separation Date other than any Liability which arises out of or results from the intentional and willful misconduct of an employee of the Adaptec Group other than an employee who becomes an employee of the Roxio Group; or that relate to, arise out of or result from any of the following items: (ii) the Roxio Business after the Separation Date; (iii) any Roxio Liability or any Roxio Contract other than any Liability which arises out of or results from the intentional and willful misconduct of an employee of the Adaptec Group prior to the Separation Date, other than an employee who becomes an employee of the Roxio Group; (iv) any breach by Roxio or any member of the Roxio Group of the Separation Agreement or any of the Ancillary Agreements (including this Agreement); and (v) any Form 10 Liabilities. This SECTION 1.2 shall not apply to: -2- (i) any amounts recovered from any third party and/or covered by any insurance policy by Adaptec in respect of the related loss; (ii) any Liability created under federal or state securities laws arising from or related to statements made by Adaptec in its filings with the United States Securities and Exchange Commission or press releases issued by Adaptec addressing the Roxio Business; or (iii) any Liability indemnified under SECTION 1.4. SECTION 1.3. INDEMNIFICATION BY ADAPTEC. Except as otherwise provided in this Agreement, Adaptec shall, for itself and as agent for each member of the Adaptec Group, indemnify, defend (or, where applicable, pay the defense costs for) and hold harmless the Roxio Indemnitees from and against any and all Liabilities that any third party seeks to impose upon the Roxio Indemnitees, or which are imposed upon the Roxio Indemnitees, and that (without duplication) (i) relate to, arise out of or result from the Roxio Business prior to the Separation Date to the extent that such items are not the responsibility of Roxio as an Indemnifying Party pursuant to SECTION 1.2(i)-(iv) above; or that relate to, arise out of or result from any of the following items: (ii) the Adaptec Business or any Liability of the Adaptec Group other than the Roxio Liabilities; (iii) any breach by Adaptec or any member of the Adaptec Group of the Separation Agreement or any of the Ancillary Agreements (including this Agreement). This SECTION 1.3 shall not apply to any Liability indemnified under SECTION 1.4. SECTION 1.4. INDEMNIFICATION WITH RESPECT TO ENVIRONMENTAL ACTIONS AND CONDITIONS. (a) INDEMNIFICATION BY ROXIO. Roxio shall, for itself and as agent for each member of the Roxio Group, indemnify, defend and hold harmless the Adaptec Indemnitees from and against any and all Environmental Actions relating to, arising out of or resulting from Environmental Conditions (i) arising out of operations occurring on and after the Separation Date at any of the Roxio Facilities, or (ii) on any of the Roxio Facilities arising from an event causing contamination that first occurs on or after the Separation Date (including any Release of Hazardous Materials occurring after the Separation Date that migrates to any of the Roxio Facilities), except to the extent that such Environmental Conditions arise out of the operations of the Adaptec Group on and after the Separation Date. (b) INDEMNIFICATION BY ADAPTEC. Adaptec shall, for itself and as agent for each member of the Adaptec Group, indemnify, defend and hold harmless the Roxio Indemnitees from and against any and all Environmental Actions relating to, arising out of or resulting from any of the following items: -3- (i) Environmental Conditions (x) existing on, under, about or in the vicinity of any of the Roxio Facilities prior to the Separation Date, or (y) arising out of operations occurring on or before the Separation Date at any of the Roxio Facilities; (ii) Except as arising out of the operations of the Roxio Group on and after the Separation Date, Environmental Conditions on, under, about or arising out of operations occurring at any time, whether before or after the Separation Date, at any of the Adaptec Facilities; and (iii) Pre-Separation Third Party Site Liabilities. (c) AGREEMENT REGARDING PAYMENTS TO INDEMNITEE. In the event an Indemnifying Party makes any payment to or on behalf of an Indemnitee with respect to an Environmental Action for which the Indemnifying Party is obligated to indemnify under this SECTION 1.4, and the Indemnitee subsequently receives any payment from a third party on account of the same financial obligation covered by the payment made by the Indemnifying Party for that Environmental Action or otherwise diminishes the financial obligation, the Indemnitee will promptly pay the Indemnifying Party the amount by which the payment made by the Indemnifying Party, exceeds the actual cost of the financial obligation. SECTION 1.5. PROCEDURES FOR DEFENSE, SETTLEMENT AND INDEMNIFICATION OF THIRD PARTY CLAIMS. (a) NOTICE OF CLAIMS. If a Adaptec Indemnitee or a Roxio Indemnitee (as applicable) (an "INDEMNITEE") shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) who is not a member of the Adaptec Group or the Roxio Group of any claim or of the commencement by any such Person of any Action (collectively, a "THIRD PARTY CLAIM") with respect to which a party (an "INDEMNIFYING PARTY") may be obligated to provide indemnification to such Indemnitee pursuant to SECTION 1.2, 1.3 or 1.4, or any other section of the Separation Agreement or any Ancillary Agreement (including this Agreement), Adaptec and Roxio (as applicable) will ensure that such Indemnitee shall give such Indemnifying Party written notice thereof within 30 days after becoming aware of such Third Party Claim. Any such notice shall describe the Third Party Claim in reasonable detail. Notwithstanding the foregoing, the delay or failure of any Indemnitee or other Person to give notice as provided in this SECTION 1.5(a) shall not relieve the related Indemnifying Party of its obligations under this ARTICLE I, except to the extent that such Indemnifying Party is actually and substantially prejudiced by such delay or failure to give notice. (b) DEFENSE BY INDEMNIFYING PARTY. Except as otherwise inconsistent with the provisions of any applicable Insurance Policy, an Indemnifying Party will manage the defense of and may settle or compromise any Third Party Claim. Within 30 days after the receipt of notice from an Indemnitee in accordance with SECTION 1.5(A) (or sooner, if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnitee that the Indemnifying Party will assume responsibility for managing the defense of such Third Party Claim, which notice shall specify any reservations or exceptions. -4- (c) DEFENSE BY INDEMNITEE. If an Indemnifying Party fails to assume responsibility for managing the defense of a Third Party Claim, or fails to notify an Indemnitee that it will assume responsibility as provided in Section 1.5(a), such Indemnitee may manage the defense of such Third Party Claim; PROVIDED, HOWEVER, that the Indemnifying Party shall reimburse all such costs and expenses in the event it is ultimately determined that the Indemnifying Party is obligated to indemnify the Indemnitee with respect to such Third Party Claim. (d) NO SETTLEMENT BY INDEMNITEE WITHOUT CONSENT. Unless the Indemnifying Party has failed to manage the defense of the Third Party Claim in accordance with the terms of this Agreement, no Indemnitee may settle or compromise any Third Party Claim without the consent of the Indemnifying Party. (e) NO CONSENT TO CERTAIN JUDGMENTS OR SETTLEMENTS WITHOUT CONSENT. Notwithstanding any provision of this SECTION 1.5, no party shall consent to entry of any judgment or enter into any settlement of a Third Party Claim without the consent of the other party (such consent not to be unreasonably withheld) if the effect of such judgment or settlement is to (A) permit any injunction, declaratory judgment, other order or other nonmonetary relief to be entered, directly or indirectly, against the other party or (B) affect the other party in a material fashion due to the allocation of Liabilities and related indemnities set forth in the Separation Agreement, this Agreement or any other Ancillary Agreement. SECTION 1.6. ADDITIONAL MATTERS. (a) COOPERATION IN DEFENSE AND SETTLEMENT. With respect to any Third Party Claim that implicates both Roxio and Adaptec in a material fashion due to the allocation of Liabilities, responsibilities for management of defense and related indemnities set forth in the Separation Agreement, this Agreement or any of the Ancillary Agreements, the parties agree to cooperate fully and maintain a joint defense (in a manner that will preserve the attorney-client privilege with respect thereto) so as to minimize such Liabilities and defense costs associated therewith. The party that is not responsible for managing the defense of such Third Party Claims shall, upon reasonable request, be consulted with respect to significant matters relating thereto and may, if necessary or helpful, associate counsel to assist in the defense of such claims. (b) SUBROGATION. In the event of payment by or on behalf of any Indemnifying Party to or on behalf of any Indemnitee in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee, in whole or in part based upon whether the Indemnifying Party has paid all or only part of the Indemnitee's Liability, as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim. (c) NOT APPLICABLE TO TAXES. This Agreement shall not apply to Taxes (which are covered by the Tax Sharing Agreement). -5- SECTION 1.7. SURVIVAL OF INDEMNITIES. Subject to SECTION 4.5, the rights and obligations of the members of the Adaptec Group and the Roxio Group under this ARTICLE I shall survive the sale or other transfer by any party of any Assets or businesses or the assignment by it of any Liabilities or the sale by any member of the Adaptec Group or the Roxio Group of the capital stock or other equity interests of any Subsidiary to any Person. SECTION 1.8. OTHER AGREEMENTS EVIDENCING INDEMNIFICATION OBLIGATIONS. Adaptec hereby agrees to execute, for the benefit of any Roxio Indemnitee, such documents as may be reasonably requested by such Roxio Indemnitee, evidencing Adaptec's agreement that the indemnification obligations of Adaptec set forth in this Agreement inure to the benefit of and are enforceable by such Roxio Indemnitee. Roxio hereby agrees to execute, for the benefit of any Adaptec Indemnitee, such documents as may be reasonably requested by such Adaptec Indemnitee, evidencing Roxio's agreement that the indemnification obligations of Roxio set forth in this Agreement inure to the benefit of and are enforceable by such Adaptec Indemnitee. ARTICLE II. INSURANCE MATTERS SECTION 2.1. ROXIO INSURANCE COVERAGE AFTER THE SEPARATION DATE. From and after the Separation Date, Roxio shall be responsible for obtaining and maintaining insurance programs for its risk of loss and such insurance arrangements shall be separate and apart from Adaptec's insurance programs. Notwithstanding the foregoing, Adaptec, upon the request of Roxio, shall use all commercially reasonable efforts to assist Roxio in the transition to its own separate insurance programs from and after the Separation Date, and shall provide Roxio with any information that is in the possession of Adaptec and is reasonably available and necessary to either obtain insurance coverages for Roxio or to assist Roxio in preventing unintended self-insurance, in whatever form. SECTION 2.2. COOPERATION AND AGREEMENT NOT TO RELEASE CARRIERS. Each of Adaptec and Roxio will share such information as is reasonably necessary in order to permit the other to manage and conduct its insurance matters in an orderly fashion. Each of Adaptec and Roxio, at the request of the other, shall cooperate with and use commercially reasonable efforts to assist the other in recoveries for claims made under any insurance policy for the benefit of any insured party, and neither Adaptec nor Roxio, nor any of their Subsidiaries, shall take any action which would intentionally jeopardize or otherwise interfere with either party's ability to collect any proceeds payable pursuant to any insurance policy. Except as otherwise contemplated by the Separation Agreement, this Agreement or any Ancillary Agreement, after the Separation Date, neither Adaptec nor Roxio shall (and shall ensure that no member of their respective Groups shall), without the consent of the other, provide any insurance carrier with a release, or amend, modify or waive any rights under any such policy or agreement, if such release, amendment, modification or waiver would adversely affect any rights or potential rights of any member of the other Group thereunder. However, nothing in this SECTION 2.2 shall (A) preclude any member of any Group from presenting any claim or from exhausting any policy limit, (B) require any member of any Group to pay any premium or other amount or to incur any Liability, or (C) require any member of any Group to renew, extend or continue any policy in force. -6- SECTION 2.3. PROCEDURES WITH RESPECT TO INSURED ROXIO LIABILITIES. (a) REIMBURSEMENT. Adaptec shall seek Roxio's approval, which approval shall not be unreasonably withheld, to incur attorneys fees, costs (including internal costs), or any other amounts to pursue insurance recoveries from Insurance Policies for insured Roxio Liabilities. Adaptec will bill Roxio and Roxio will reimburse Adaptec on a monthly basis for all such amounts incurred to pursue insurance recoveries from Insurance Policies for Insured Roxio Liabilities. (b) MANAGEMENT OF CLAIMS. Except as otherwise inconsistent with the provisions of any applicable Insurance Policy, the defense of claims, suits or actions giving rise to potential or actual Insured Roxio Liabilities will be managed (in conjunction with Adaptec's insurers, as appropriate) by the party that would have had responsibility for managing such claims, suits or actions had such Insured Roxio Liabilities been Roxio Liabilities. SECTION 2.4. COOPERATION. Adaptec and Roxio will cooperate with each other in all respects, and they shall execute any additional documents which are reasonably necessary, to effectuate the provisions of this ARTICLE II. SECTION 2.5. NO ASSIGNMENT OR WAIVER. This Agreement shall not be considered as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of the Adaptec Group or the Roxio Group in respect of any Insurance Policy or any other contract or policy of insurance. SECTION 2.6. NO LIABILITY. Roxio does hereby, for itself and as agent for each other member of the Roxio Group, agree that no member of the Adaptec Group or any Adaptec Indemnitee shall have any Liability whatsoever as a result of the insurance policies and practices of Adaptec and its Subsidiaries as in effect at any time prior to the Separation Date, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise. SECTION 2.7. FURTHER AGREEMENTS. The Parties acknowledge that they intend to allocate financial obligations without violating any laws regarding insurance, self-insurance or other financial responsibility. If it is determined that any action undertake pursuant to the Separation Agreement, this Agreement or any Ancillary Agreement is violative of any insurance, self-insurance or related financial responsibility law or regulation, the parties agree to work together to do whatever is necessary to comply with such law or regulation while trying to accomplish, as much as possible, the allocation of financial obligations as intended in the Separation Agreement, this Agreement and any Ancillary Agreement. SECTION 2.8. MATTERS GOVERNED BY EMPLOYEE MATTERS AGREEMENT. This ARTICLE II shall not apply to any insurance policies that are the subject of the Employee Matters Agreement. -7- ARTICLE III. DISPUTE RESOLUTION Resolution of any and all Disputes arising from or in connection with this Agreement shall be exclusively governed by and settled in accordance with the provisions of this ARTICLE III. SECTION 3.1. NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through informal negotiation between appropriate representatives from each of Adaptec and Roxio. If at any time either party feels that such negotiations are not leading to a resolution of the Dispute, such party may send a notice to the other party describing the Dispute and requesting a meeting of the senior executives from each party. Within ten (10) business days after such notice is given, each party shall select appropriate senior executives (e.g., director or V.P. level) of each party who shall have the authority to resolve the matter and shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. During the course of negotiations under this SECTION 3.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating senior executives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within thirty days after the first meeting of the negotiating senior executives, either party may commence litigation with respect to the Dispute. However, except as provided below in SECTION 3.2, neither party shall commence litigation against the other party to resolve the Dispute (i) until the parties try in good faith to settle the Dispute by negotiation for at least thirty (30) days after the first meeting of the negotiating senior executives or (ii) until forty (40) days after notice of a Dispute is given by either party to the other party, whichever occurs first. SECTION 3.2. PROCEEDINGS. Any Dispute regarding the following is not required to be negotiated prior to seeking relief from a court of competent jurisdiction: breach of any obligation of confidentiality; infringement, misappropriation, or misuse of any intellectual property right; or any other claim where interim relief from the court is sought to prevent serious and irreparable injury to a party. However, the parties shall make a good faith effort to negotiate such Dispute, according to SECTION 3.1, while such court action is pending. SECTION 3.3. CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this ARTICLE III with respect to all matters not subject to such dispute, controversy or claim. ARTICLE IV. MISCELLANEOUS SECTION 4.1 ENTIRE AGREEMENT. This Agreement, the Master Separation Agreement, the other Ancillary Agreements and the Exhibits and Schedules referenced or attached hereto and -8- thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. SECTION 4.2. GOVERNING LAW. This Agreement shall be construed in accordance with and all Disputes hereunder shall be governed by the laws of the State of California, excluding its conflict of law rules and the United Nations Convention on Contracts for the International Sale of Goods. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California, San Jose Division, shall have jurisdiction and venue over all Disputes between the parties that are permitted to be brought in a court of law pursuant to SECTION 3.2. SECTION 4.3. NOTICES. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) Business Day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one (1) Business Day after being deposited with a nationally recognized overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of: IF TO ADAPTEC, INC.: Adaptec, Inc. 691 S. Milpitas Blvd. Milpitas, CA 95035 Attention: Vice President and General Counsel Facsimile No.: (408) 957-7137 with a copy to: Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Attention: Henry P. Massey, Jr. Facsimile No.: 650-493-6811 IF TO ROXIO, INC.: Roxio, Inc. 461 South Milpitas Blvd. Milpitas, CA 95035 Attention: William Christopher Gorog Facsimile No.: (408) 957-7963 with a copy to: Gray Cary Ware & Freidenrich LLP -9- 400 Capitol Mall, Suite 2400 Sacramento, CA 95814 Attention: Kevin A. Coyle Facsimile No.: 916-930-3201 Adaptec and Roxio may substitute a different address or facsimile number, from time to time, if such substitute is provided to the intended notice recipient in writing by notice given in the manner provided in this SECTION 4.3. SECTION 4.4. COUNTERPARTS. This Agreement, including the other documents referred to herein, may be executed in counterparts via facsimile or otherwise, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. SECTION 4.5. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may be enforced separately by each member of the Adaptec Group and each member of the Roxio Group. Except as herein specifically provided to the contrary, neither party may assign this Agreement or any rights or obligations hereunder, without the prior written consent of the other party, and any such assignment shall be void; provided, however, either party (or its permitted successive assignees or transferees hereunder) may assign or transfer this Agreement as a whole without consent to an entity that succeeds to all or substantially all of the business or assets of such party to which this Agreement relates. SECTION 4.6. SEVERABILITY. The parties hereto have negotiated and prepared the terms of this Agreement in good faith with the intent that each and every one of the terms, covenants and conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Agreement, to the extent possible consistent with its purposes, to conform to law. SECTION 4.7. WAIVER OF BREACH. The waiver by either party hereto of a breach or violation of any provision of this Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. SECTION 4.8. AMENDMENT AND EXECUTION. This Agreement and amendments hereto shall be in writing and executed in multiple copies via facsimile or otherwise on behalf of Adaptec and Roxio by their respective duly authorized officers and representatives. Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument. -10- SECTION 4.9. AUTHORITY. Each of the parties hereto represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other actions, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. SECTION 4.10. DESCRIPTIVE HEADINGS. The headings contained in this Agreement and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When a reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. SECTION 4.11. GENDER AND NUMBER. Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine and neuter, and the number of all words herein shall include the singular and plural. SECTION 4.12. ADDITIONAL ASSURANCES. Except as may be specifically provided herein to the contrary, the provisions of this Agreement shall be self-operative and shall not require further agreement by the parties; provided, however, at the request of either party, the other party shall execute such additional instruments and take such additional acts as are reasonable, and as the requesting party may reasonably deem necessary, to effectuate this Agreement. SECTION 4.13. FORCE MAJEURE. Neither party shall be liable or deemed to be in default for any delay or failure in performance under this Agreement or other interruption of service deemed to result, directly or indirectly, from acts of God, civil or military authority, acts of public enemy, war, accidents, explosions, earthquakes, floods, failure of transportation, strikes or other work interruptions by either party's employees, or any other similar cause beyond the reasonable control of either party unless such delay or failure in performance is expressly addressed elsewhere in this Agreement. ARTICLE V. DEFINITIONS SECTION 5.1. ADAPTEC BUSINESS. "ADAPTEC BUSINESS" has the meaning set forth in Section 6.1 of the Separation Agreement. SECTION 5.2. ADAPTEC FACILITIES. "ADAPTEC FACILITIES" means all of the real property and improvements thereon owned or occupied at any time on or before the Separation Date by any member of the Adaptec Group, whether for the Adaptec Business or the Roxio Business, excluding the Roxio Facilities. -11- SECTION 5.3. ADAPTEC GROUP. "ADAPTEC GROUP" means Adaptec, each Subsidiary of Adaptec (other than any member of the Roxio Group) immediately after the Separation Date and each Person that becomes a Subsidiary of Adaptec after the Separation Date. SECTION 5.4. ADAPTEC INDEMNITEES. "ADAPTEC INDEMNITEES" means Adaptec, each member of the Adaptec Group and each of their respective directors, officers and employees. SECTION 5.5. ACTION. "ACTION" means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international governmental authority or any arbitration or mediation tribunal. SECTION 5.6. ASSETS. "ASSETS" has the meaning set forth in Section 5.4 of the Assignment Agreement. SECTION 5.7. ASSIGNMENT AGREEMENT. "ASSIGNMENT AGREEMENT" means the General Assignment and Assumption Agreement attached as Exhibit C to the Separation Agreement. SECTION 5.8. EMPLOYEE MATTERS AGREEMENT. "EMPLOYEE MATTERS AGREEMENT" means the Employee Matters Agreement attached as Exhibit E to the Separation Agreement. SECTION 5.9. ENVIRONMENTAL ACTIONS. "ENVIRONMENTAL ACTIONS" means any notice, claim, act, cause of action, order, decree or investigation by any third party (including, without limitation, any Governmental Authority) alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, damage to flora or fauna caused by Environmental Conditions, real property damages, personal injuries or penalties) arising out of, based on or resulting from the Release of or exposure of any individual to any Hazardous Materials. SECTION 5.10. ENVIRONMENTAL CONDITIONS. "ENVIRONMENTAL CONDITIONS" means the presence in the environment, including the soil, groundwater, surface water or ambient air, of any Hazardous Material at a level which exceeds any applicable standard or threshold under any Environmental Law or otherwise requires investigation or remediation (including, without limitation, investigation, study, health or risk assessment, monitoring, removal, treatment or transport) under any applicable Environmental Laws. SECTION 5.11. ENVIRONMENTAL LAWS. "ENVIRONMENTAL LAWS" means all laws and regulations of any Governmental Authority with jurisdiction that relate to the protection of the environment (including ambient air, surface water, ground water, land surface or subsurface strata) including laws and regulations relating to the Release of Hazardous Materials, or otherwise relating to the treatment, storage, disposal, transport or handling of Hazardous Materials, or to the exposure of any individual to a Release of Hazardous Materials. SECTION 5.12. FORM 10 LIABILITIES. "FORM 10 LIABILITIES" means any Liabilities relating to, arising out of or resulting from any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to -12- make the statements therein not misleading, with respect to all information contained in the Form 10 Registration Statement or any information statement relating to the Form 10 Registration Statement. SECTION 5.13. FORM 10 REGISTRATION STATEMENT. "FORM 10 REGISTRATION STATEMENT" has the meaning set forth in Section 6.15 of the Separation Agreement. SECTION 5.14. HAZARDOUS MATERIALS. "HAZARDOUS MATERIALS" means chemicals, pollutants, contaminants, wastes, toxic substances, radioactive and biological materials, hazardous substances, petroleum and petroleum products or any fraction thereof. SECTION 5.15. INDEMNIFYING PARTY. "INDEMNIFYING PARTY" has the meaning set forth in Section 1.5(a) hereof. SECTION 5.16. INDEMNITEE. "INDEMNITEE" has the meaning set forth in Section 1.5(a) hereof. SECTION 5.17. INSURANCE POLICIES. "INSURANCE POLICIES" means insurance policies pursuant to which a Person makes a true risk transfer to an insurer. SECTION 5.18. INSURED ROXIO LIABILITY. "Insured Roxio Liability" means any Roxio Liability to the extent that it is covered under the terms of Adaptec's Insurance Policies. SECTION 5.19. LIABILITIES. "LIABILITIES" has the meaning set forth in Section 5.21 of the Assignment Agreement. SECTION 5.20. PERSON. "PERSON" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. SECTION 5.21. PRE-SEPARATION THIRD PARTY SITE LIABILITIES. "PRE-SEPARATION THIRD PARTY SITE LIABILITIES" means any and all Environmental Actions arising out of Hazardous Materials found on, under or about any landfill any waste, storage, transfer or recycling site and resulting from or arising out of Hazardous Materials stored, treated, recycled disposed or otherwise handled at such site prior to the Separation Date (whether for the operation of the Roxio Business or for the operation of any past or presently (as of the date hereof) existing Adaptec Business as operated on or before the Separation Date). SECTION 5.22. RELEASE. "RELEASE" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, groundwater, wetlands, land or subsurface strata. SECTION 5.23. ROXIO BUSINESS. "ROXIO BUSINESS" means the business and operations of Roxio, as described in the IPO Registration Statement and except as otherwise expressly provided herein, any terminated, divested or discontinued businesses or operations that at the time of termination, divestiture or discontinuation primarily related to the Roxio Business as then conducted. -13- SECTION 5.24. ROXIO CONTRACTS. "ROXIO CONTRACTS" has the meaning set forth in Section 5.30 of the Assignment Agreement. SECTION 5.25. ROXIO FACILITIES. "ROXIO FACILITIES" means all of those facilities to be transferred to Roxio on the Separation Date as set forth on Schedule 1 to the Real Estate Matters Agreement. SECTION 5.26. ROXIO GROUP. "ROXIO GROUP" has the meaning set forth in Section 6.29 of the Separation Agreement. SECTION 5.27. ROXIO INDEMNITEES. "ROXIO INDEMNITEES" means Roxio, each member of the Roxio Group and each of their respective directors, officers and employees. SECTION 5.28. ROXIO LIABILITIES. "ROXIO LIABILITIES" has the meaning set forth in Section 1.3 of the Assignment Agreement. SECTION 5.29. SEPARATION. "SEPARATION" has the meaning set forth in the Recitals of the Separation Agreement. SECTION 5.30. SEPARATION AGREEMENT. "SEPARATION AGREEMENT" means the First Amended and Restated Master Separation and Distribution Agreement dated as of February 28, 2001, of which this is an Exhibit thereto. SECTION 5.31. SEPARATION DATE. "SEPARATION DATE" has the meaning set forth in Section 1.1 of the Separation Agreement. SECTION 5.32. SUBSIDIARY. "SUBSIDIARY" has the meaning set forth in Section 6.32 of the Separation Agreement. SECTION 5.33. TAX SHARING AGREEMENT. "TAX SHARING AGREEMENT" means the Tax Sharing Agreement, attached as EXHIBIT F to the Separation Agreement. SECTION 5.34. TAXES. "TAXES" has the meaning set forth in the Tax Sharing Agreement. SECTION 5.35. THIRD PARTY CLAIM. "THIRD PARTY CLAIM" has the meaning set forth in Section 1.5(a) of this Agreement. [SIGNATURES ON FOLLOWING PAGE] -14- IN WITNESS WHEREOF, each of the parties has caused this Indemnification and Insurance Matters Agreement to be executed on its behalf by its officers thereunto duly authorized on the day and year first above written. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------- ---------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog ---------------------------- ------------------------------- Title: President, Title: President and Chief Executive Officer Chief Executive Officer ---------------------------- ------------------------------ [SIGNATURE PAGE TO INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT] EX-2.4 6 a2056442zex-2_4.txt EXHIBIT 2.4 EXHIBIT 2.4 EXECUTION COPY MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. EFFECTIVE AS OF MAY 5, 2001 MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT TABLE OF CONTENTS
PAGE ARTICLE 1 DEFINITIONS.................................................................................................1 1.1 ADAPTEC PATENTS.....................................................................................1 1.2 ANCILLARY AGREEMENTS................................................................................1 1.3 ASSIGNED PATENTS....................................................................................2 1.4 CONFIDENTIAL INFORMATION............................................................................2 1.5 DISPUTES............................................................................................2 1.6 FIRST EFFECTIVE FILING DATE.........................................................................2 1.7 INVENTION DISCLOSURE................................................................................2 1.8 MASTER ASSIGNMENT AND ASSUMPTION AGREEMENT..........................................................3 1.9 MASTER CONFIDENTIAL DISCLOSURE AGREEMENT............................................................3 1.10 MASTER SEPARATION AND DISTRIBUTION AGREEMENT........................................................3 1.11 PATENTS.............................................................................................3 1.12 PERSON..............................................................................................3 1.13 RESTRICTED FIELD....................................................................................3 1.14 SEPARATION DATE.....................................................................................3 1.15 SUBSIDIARY..........................................................................................3 1.16 THIRD PARTY.........................................................................................4 1.17 WILD FILE PATENTS...................................................................................4 ARTICLE 2 OWNERSHIP...................................................................................................4 2.1 OWNERSHIP OF PATENTS................................................................................4 2.2 PRIOR GRANTS........................................................................................5 2.3 ASSIGNMENT DISCLAIMER...............................................................................5 ARTICLE 3 PATENT LICENSES.............................................................................................5 3.1 LICENSE TO WILD FILE PATENTS........................................................................5 3.2 TRANSFER OF PRODUCT BY ADAPTEC......................................................................6 3.3 ADAPTEC LICENSE TO ROXIO FOR CURRENT PRODUCTS.......................................................6 3.4 ROXIO LICENSE TO ADAPTEC FOR CURRENT PRODUCTS.......................................................6 3.5 ADAPTEC LICENSE TO ROXIO FOR SUBSEQUENT PRODUCTS....................................................6 3.6 ROXIO LICENSE TO ADAPTEC FOR SUBSEQUENT PRODUCTS....................................................7 3.7 NO LICENSE GRANTED UNDER EXCLUSIVELY LICENSED PATENTS...............................................7 3.8 EXTENSION OF LICENSES TO SUBSIDIARIES...............................................................7 3.9 LICENSE RIGHTS AS TO CERTAIN OTHER PATENTS..........................................................7 ARTICLE 4 ADDITIONAL OBLIGATIONS......................................................................................7 4.1 ADDITIONAL OBLIGATIONS WITH REGARD TO ASSIGNED PATENTS..............................................8 4.2 RECORDATION OF LICENSES.............................................................................8 -i- TABLE OF CONTENTS (CONTINUED) PAGE ARTICLE 5 CONFIDENTIALITY.............................................................................................9 ARTICLE 6 TERM AND TERMINATION........................................................................................9 6.1 TERM OF AGREEMENT...................................................................................9 6.2 VOLUNTARY TERMINATION...............................................................................9 6.3 SURVIVAL............................................................................................9 6.4 NO OTHER TERMINATION...............................................................................10 ARTICLE 7 DISPUTE RESOLUTION.........................................................................................10 7.1 NEGOTIATION........................................................................................10 7.2 PROCEEDINGS........................................................................................10 7.3 CONTINUITY OF SERVICE AND PERFORMANCE..............................................................11 ARTICLE 8 LIMITATION OF LIABILITY....................................................................................11 ARTICLE 9 REPRESENTATIONS AND WARRANTIES.............................................................................11 9.1 FULL POWER AND AUTHORITY...........................................................................11 9.2 EXECUTION DULY AUTHORIZED..........................................................................11 ARTICLE 10 MISCELLANEOUS PROVISIONS..................................................................................12 10.1 DISCLAIMER.........................................................................................12 10.2 NO IMPLIED LICENSES................................................................................12 10.3 INFRINGEMENT SUITS.................................................................................12 10.4 NO OTHER OBLIGATIONS...............................................................................12 10.5 ENTIRE AGREEMENT...................................................................................13 10.6 CONFLICTING AGREEMENTS.............................................................................13 10.7 GOVERNING LAW......................................................................................13 10.8 DESCRIPTIVE HEADINGS...............................................................................13 10.9 NOTICES............................................................................................13 10.10 NONASSIGNABILITY...................................................................................14 10.11 SEVERABILITY.......................................................................................15 10.12 WAIVER OF BREACH...................................................................................15 10.13 AMENDMENT AND EXECUTION............................................................................15
-ii- MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT This Master Patent Ownership and License Agreement (the "Agreement") is effective as of May 5, 2001, at 12:01 A.M., P.S.T. (the "Effective Date"), between Adaptec, Inc., a Delaware corporation ("Adaptec"), having an office 691 South Milpitas Boulevard, Milpitas, CA 95035, and Roxio, Inc., a Delaware corporation ("Roxio"), having an office at 461 South Milpitas boulevard, Milpitas, Boulevard, Milpitas, CA 95035. RECITALS WHEREAS, the Boards of Directors of each of Adaptec and Roxio have determined that it is appropriate and desirable for Adaptec to contribute and transfer to Roxio, and for Roxio to receive and assume, directly or indirectly, substantially all of the assets and liabilities currently associated with the Roxio Business and the stock, investments or similar interests currently held by Adaptec in subsidiaries and other entities that conduct such business (the "Separation"); WHEREAS, Adaptec has caused Roxio to be incorporated in order to effect the Separation and Adaptec currently owns all of the issued and outstanding capital stock of Roxio; and WHEREAS, the parties intend in this Agreement, including the Exhibits and Schedules hereto, to set forth the principal arrangements between them regarding patent ownership and licenses upon the Separation. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS For the purpose of this Agreement the following capitalized terms are defined in this Article 1 and shall have the meaning specified herein: 1.1 ADAPTEC PATENTS. "Adaptec Patents" means all Patents, other than the Assigned Patents and Wild File Patents, having the benefit of a First Effective Filing Date before the Separation Date which are owned or licensable (without payment of royalties for the granting of licenses thereunder) by Adaptec as of the Separation Date. 1.2 ANCILLARY AGREEMENTS. "Ancillary Agreements" has the meaning set forth in the Master Separation and Distribution Agreement. 1.3 ASSIGNED PATENTS. "Assigned Patents" means only those -1- (a) Patents, Patent applications and Invention Disclosures that are listed in Schedule A; (b) Patent applications filed on the foregoing Invention Disclosures described in Section 1.3(a); (c) continuations, continuations-in-part, divisionals and substitutions of any of the foregoing Patent applications described in Sections 1.3(a) and (b); (d) Patents which may issue on any of the foregoing Patent applications described in Sections 1.3(a)-(c); (e) renewals, reissues, reexaminations and extensions of the foregoing Patents described in Sections 1.3(a) and (d); and (f) foreign Patent applications and Patents that are counterparts of any of the foregoing Patent applications or Patents described in Sections 1.3(a)-(e), including any Patent application or Patent to the extent that it claims priority from any of the foregoing Patent applications or Patents described in Sections 1.3(a)-(e). 1.4 CONFIDENTIAL INFORMATION. "Confidential Information" has the meaning set forth in the Master Confidential Disclosure Agreement. 1.5 DISPUTES. "Disputes" has the meaning set forth in the Master Separation and Distribution Agreement. 1.6 FIRST EFFECTIVE FILING DATE. "First Effective Filing Date" means the earliest effective filing date in the particular country for any Patent or any application for any Patent. By way of example, it is understood that the First Effective Filing Date for a United States Patent is the earlier of (i) the actual filing date of the United States Patent application which issued into such Patent, (ii) the priority date under 35 U.S.C. Section 119 for such Patent, or (iii) the priority date under 35 U.S.C. Section 120 for such Patent. 1.7 INVENTION DISCLOSURE. "Invention Disclosure" means a disclosure of an invention conceived before the Separation Date and which is (i) written for the purpose of allowing legal and business people to determine whether to file a Patent application with respect to such invention and (ii) recorded with a control number in the owning party's records). 1.8 MASTER ASSIGNMENT AND ASSUMPTION AGREEMENT. "Master Assignment and Assumption Agreement" means the Master Assignment and Assumption Agreement between the parties. 1.9 MASTER CONFIDENTIAL DISCLOSURE AGREEMENT. "Master Confidential Disclosure Agreement" means the Master Confidential Disclosure Agreement between the parties. -2- 1.10 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master Separation and Distribution Agreement" means the Master Separation and Distribution Agreement between the parties. 1.11 PATENTS. "Patents" means patents, utility models, design patents, design registrations, certificates of invention and other governmental grants for the protection of inventions or industrial designs anywhere in the world and all reissues, renewals, re-examinations and extensions of any of the foregoing. 1.12 PERSON. "Person" has the meaning set forth in the Master Separation and Distribution Agreement. 1.13 RESTRICTED FIELD. "Restricted Field" means software products (a) which do not have a hardware component as a material part of the solution sold or licensed to the customer, and (b) which are intended for use primarily on desktop, laptop, palmtop or similar personal computers (as distinguished from use primarily on servers, storage area networks, or other products primarily designed as storage products). 1.14 SEPARATION DATE. "Separation Date" has the meaning set forth in the Master Separation and Distribution Agreement. 1.15 SUBSIDIARY. "Subsidiary" has the meaning set forth in the Master Separation and Distribution Agreement. 1.16 THIRD PARTY. "Third Party" means a Person other than Adaptec and its Subsidiaries and Roxio and its Subsidiaries. 1.17 WILD FILE PATENTS. "Wild File Patents" means only the following held legally or beneficially by Adaptec's wholly owned Subsidiary Wild File, Inc. on the Separation Date, all of which are transferred to Roxio, together with the capital stock of Wild File, Inc., under the General Assignment and Assumption Agreement: (a) Patents, Patent applications and Invention Disclosures that are listed in Schedule B; (b) Any other Patents, Patent applications and Invention Disclosures legally or beneficially held by Wild File, Inc.; (c) Patent applications filed on the foregoing Invention Disclosures described in Sections 1.17(a) and (b); (d) continuations, continuations-in-part, divisionals and substitutions of any of the foregoing Patent applications described in Sections 1.17(a), (b) and (c); -3- (e) Patents which may issue on any of the foregoing Patent applications described in Sections 1.17(a)-(d); (f) renewals, reissues, reexaminations and extensions of the foregoing Patents described in Sections 1.17(a), (b) and (e); and (g) foreign Patent applications and Patents that are counterparts of any of the foregoing Patent applications or Patents described in Sections 1.17(a)-(f), including any Patent application or Patent to the extent that it claims priority from any of the foregoing Patent applications or Patents described in Sections 1.17(a)-(f). ARTICLE 2 OWNERSHIP 2.1 OWNERSHIP OF PATENTS. (a) ASSIGNED PATENTS. Subject to Sections 2.2 and 2.3 below, Adaptec hereby grants, conveys and assigns (and agrees to cause its appropriate Subsidiaries to grant, convey and assign) to Roxio, by execution hereof (or, where appropriate or required, by execution of separate instruments of assignment), all its (and their) right, title and interest in and to the Assigned Patents, to be held and enjoyed by Roxio, its successors and assigns. Adaptec further grants, conveys and assigns (and agrees to cause its appropriate Subsidiaries to grant, convey and assign) to Roxio all its (and their) right, title and interest in and to any and all causes of action and rights of recovery for past infringement of the Assigned Patents and the right to claim priority from the Assigned Patents. Adaptec will, without demanding any further consideration therefor, at the request and expense of Roxio (except for the value of the time of Adaptec employees), do (and cause its Subsidiaries to do) all lawful and just acts, that may be or become necessary for prosecuting, sustaining, obtaining continuations, continuations-in-part and divisionals of, or reissuing or re-examining, said Assigned Patents and for evidencing, maintaining, recording and perfecting Roxio's rights to said Assigned Patents, including but not limited to execution and acknowledgement of (and causing its Subsidiaries to execute and acknowledge) assignments and other instruments in a form reasonably required by Roxio for each Patent jurisdiction. 2.2 PRIOR GRANTS. Roxio acknowledges and agrees that the foregoing assignments are subject to any and all licenses or other rights that may have been granted by Adaptec or its Subsidiaries with respect to the Assigned Patents prior to the Effective Date. Adaptec shall respond to reasonable inquiries from Roxio regarding any such prior grants. 2.3 ASSIGNMENT DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT THE FOREGOING ASSIGNMENTS ARE MADE ON AN "AS-IS," QUITCLAIM BASIS AND THAT NEITHER PARTY NOR ANY SUBSIDIARY OF SUCH PARTY HAS MADE OR WILL MAKE ANY WARRANTY WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF -4- MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY, NON-INFRINGEMENT, OR VALIDITY OF PATENT CLAIMS (ISSUED OR PENDING). ARTICLE 3 PATENT LICENSES 3.1 LICENSE TO WILD FILE PATENTS. Roxio hereby grants to Adaptec a nonexclusive, irrevocable, fully paid-up, worldwide license, without the right to grant sublicenses, under the Wild File Patents to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import any products and services embodying or made in accordance with any invention of the Wild File Patents, but excluding products within the Restricted Field. 3.2 TRANSFER OF PRODUCT BY ADAPTEC. If Adaptec shall transfer to a third party (a "Transferee") a product licensed under the Wild File Patents under Section 3.1 (a "Transferred Product"), as part of a transfer of assets, stock or other rights in a product line, then, after Adaptec's notification to Roxio of such transfer, Adaptec may transfer its license for the Transferred Product to the Transferee on the condition that Adaptec becomes unlicensed for the Transferred Product (as that term is defined in the agreement transferring the product from Adaptec to the Transferee ("Product Transfer Agreement")). The foregoing shall not affect Adaptec's license under the Wild File Patents with respect to any other product. Roxio hereby grants Adaptec an option for a royalty free license under the Wild File Patents of the same scope as the license transferred to the Transferee, provided that the scope of the license in such option shall be reduced to conform with such restrictions (including time restrictions), if any, on Adaptec's ability to compete with the Transferred Product as may be agreed to between Adaptec and the Transferee. Adaptec may exercise such option, by giving written notice to Roxio after such transfer, during such time as Roxio holds such Wild File Patents and subject to such restrictions, and, if any such restrictions have been agreed to, including with such notice a copy of the relevant sections of the Product Transfer Agreement or related agreement that sets forth such restrictions. 3.3 ADAPTEC LICENSE TO ROXIO FOR CURRENT PRODUCTS. Adaptec hereby grants to Roxio a nonexclusive, irrevocable, fully paid-up, worldwide license, without the right to grant sublicenses, under the Adaptec Patents to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import any products and services that are commercially released by Roxio prior to or on the Separation Date that embody or are made in accordance with any invention of the Adaptec Patents ("Current Roxio Licensed Products"). 3.4 ROXIO LICENSE TO ADAPTEC FOR CURRENT PRODUCTS. Roxio hereby grants to Adaptec a nonexclusive, irrevocable, fully paid-up, worldwide license, without the right to grant -5- sublicenses, under the Assigned Patents to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import any products and services that are commercially released by Adaptec prior to or on the Separation Date that embody or are made in accordance with any invention of the Assigned Patents ("Current Adaptec Licensed Products"). 3.5 ADAPTEC LICENSE TO ROXIO FOR SUBSEQUENT PRODUCTS. Adaptec hereby grants to Roxio a nonexclusive, irrevocable, fully paid-up, worldwide license, without the right to grant sublicenses, under the Adaptec Patents to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import products or services containing functionality (a) embodied in a Current Roxio Licensed Product, and (b) embodying or made in accordance with any invention(s) of the Adaptec Patents. Such license shall not extend to any functionality or feature of the product or service not embodied in a Current Roxio Licensed Product. 3.6 ROXIO LICENSE TO ADAPTEC FOR SUBSEQUENT PRODUCTS. Roxio hereby grants to Adaptec a nonexclusive, irrevocable, fully paid-up, worldwide license, without the right to grant sublicenses, under the Assigned Patents to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import products or services containing functionality (a) embodied in a Current Adaptec Licensed Product, and (b) embodying or made in accordance with any invention(s) of the Assigned Patents. Such license shall not extend to any functionality or feature of the product or service not embodied in a Current Adaptec Licensed Product. 3.7 NO LICENSE GRANTED UNDER EXCLUSIVELY LICENSED PATENTS. Not withstanding any other statement in this Agreement, no license is granted by Roxio to Adaptec under any Patent to the extent such Patent was exclusively licensed or exclusively optioned to a third party by Adaptec before the Separation Date. 3.8 EXTENSION OF LICENSES TO SUBSIDIARIES. Notwithstanding any prohibition on sublicenses set forth in this Article 3, the licenses granted in this Agreement shall include the right of the parties hereto to sublicense their respective Subsidiaries. Each sublicensed Subsidiary shall be bound by the terms and conditions of this Agreement as if it were named herein in the place of the party with whom the sublicense originated. If a sublicensed Subsidiary ceases to be a Subsidiary and holds any patents or patent applications under which a party hereto is licensed, such license will continue for the life of such patents or patent applications. Any sublicense granted to a Subsidiary shall terminate on the date such Subsidiary ceases to be a Subsidiary. 3.9 LICENSE RIGHTS AS TO CERTAIN OTHER PATENTS. If Adaptec holds rights under any patent that would qualify as one of the Adaptec Patents solely but for the requirement of payment of royalties for the granting of licenses thereunder ("Royalty Bearing Patent"), Adaptec agrees, within a reasonable time of Roxio's written request, to grant Roxio a license under the Royalty Bearing Patent ("Royalty Bearing Patent License"). Such Royalty Bearing Patent License shall be granted under the terms and conditions of licenses granted to Roxio herein under the Adaptec Patents, but only during such time as Adaptec holds such rights under the Royalty Bearing -6- Patent and at the royalty rate which Adaptec is obligated to pay for the grant of such Royalty Bearing Patent License. ARTICLE 4 ADDITIONAL OBLIGATIONS 4.1 ADDITIONAL OBLIGATIONS WITH REGARD TO ASSIGNED PATENTS (a) The parties will cooperate to effect a smooth transfer of the responsibility for prosecution, maintenance and enforcement of the Assigned Patents and Wild File Patents from Adaptec or any Subsidiary to Roxio. Until such transfer has been effected, Adaptec agrees to continue the prosecution and maintenance of, and ongoing litigation (if any) with respect to, the Assigned Patents and Wild File Patents (including payment of maintenance fees), and to maintain its files and records relating to the Assigned Patents and Wild File Patents using the same standard of care and diligence that it uses with respect to Adaptec's Patents. Roxio will reimburse Adaptec for all actual and reasonable expenses (excluding the value of the time of Adaptec employees) to continue to prosecute and maintain the Assigned Patents and Wild File Patents after the Effective Date until the transfer of responsibility for the Assigned Patents and Wild File Patents has been completed and to continue any such ongoing litigation. The parties shall agree on a case by case basis on compensation, if any, of Adaptec for the value of time of Adaptec's employees as reasonably required in connection with any such litigation. Adaptec will provide Roxio with the originals or copies of its files relating to the Assigned Patents and Wild File Patents upon such transfer or at such earlier time as the parties may agree. (b) Adaptec shall provide continuing reasonable support to Roxio with respect to the Assigned Patents and Wild File Patents, including by way of example the following: (i) executing all documents prepared by Roxio necessary for prosecution, maintenance, and litigation of the Assigned Patents and Wild File Patents, (ii) making available to Roxio or its counsel, inventors and other persons employed by Adaptec for interviews and/or testimony to assist in good faith in further prosecution, maintenance or litigation of the Assigned Patents and Wild File Patents, including the signing of documents related thereto, (iii) forwarding copies of all correspondence sent and received concerning the Assigned Patents and Wild File Patents within a reasonable period of time after receipt by Adaptec, and (iv) making all relevant documents in the possession or control of Adaptec and corresponding to the Assigned Patents and Wild File Patents, or any licenses thereunder, available to Roxio or its counsel. -7- Any actual and reasonable out-of-pocket expenses associated with any such assistance shall be borne by Roxio, expressly excluding the value of the time of such Adaptec employees; provided, however, that in the case of assistance with litigation, the parties shall agree on a case by case basis on compensation, if any, of Adaptec for the value of the time of Adaptec's employees as reasonably required in connection with such litigation. 4.2 RECORDATION OF LICENSES (a) For any country, now or in the future, that requires the express consent of all inventors or their assignees to the grant of licenses or rights under Patents issued in such countries for Assigned Patents, Wild File Patents or Adaptec Patents: (i) each party shall give such consent, or shall obtain such consent from its employees, its Subsidiaries or employees of any of its Subsidiaries, as required to make full and effective any such licenses and rights respecting any Patent license granted to a grantee hereunder by such party; and (ii) each party shall take steps that are reasonable under the circumstances to obtain from Third Parties whatever other consents are necessary to make full and effective such licenses and rights respecting any Patent license purported to be granted by it hereunder. If, in spite of such reasonable steps, such party is unable to obtain the requisite consents from such Third Parties, the resulting inability of such party to make full and effective its purported grant of such licenses and rights shall not be considered to be a breach of this Agreement. (b) Each party agrees, without demanding any further consideration, to execute (and to cause its Subsidiaries to execute) all documents reasonably requested by the other party to effect recordation of the license relationship between the parties created by this Agreement. ARTICLE 5 CONFIDENTIALITY The terms of the Master Confidential Disclosure Agreement between the parties shall apply to any Confidential Information which is the subject matter of this Agreement. ARTICLE 6 TERM AND TERMINATION 6.1 TERM OF AGREEMENT. The term of this Agreement shall be from the Effective Date until the last to expire of the Assigned Patents and the Wild File Patents. 6.2 VOLUNTARY TERMINATION. By written notice to the other party, either party may voluntarily terminate all or a specified portion of the licenses and rights granted to it hereunder by -8- the other party. Such notice shall specify the effective date of such termination and shall clearly specify any affected Patent, Patent application, Invention Disclosure, product or service. 6.3 SURVIVAL. Any voluntary termination of licenses and rights of a party under Section 6.2 shall not affect such party's licenses and rights with respect to any licensed product made or service furnished prior to such termination, and shall not affect the licenses and rights granted to such party hereunder. 6.4 NO OTHER TERMINATION. Each party acknowledges and agrees that its remedy for breach by the other party of the licenses granted to it hereunder or of any other provision hereof, shall be, subject to the requirements of Article 7, to bring a claim to recover damages and to seek any other appropriate equitable relief. ARTICLE 7 DISPUTE RESOLUTION Resolution of any and all Disputes arising from or in connection with this Agreement shall be exclusively governed by and settled in accordance with the provisions of this Article 7. 7.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through informal negotiation between appropriate representatives from each of Adaptec and Roxio. If at any time either party feels that such negotiations are not leading to a resolution of the Dispute, such party may send a notice to the other party describing the Dispute and requesting a meeting of the senior executives from each party. Within ten (10) business days after such notice of a Dispute is given, each party shall select appropriate senior executives (e.g., director or V.P. level) of each party who shall have the authority to resolve the matter and shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. During the course of negotiations under this Section 7.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating senior executives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within thirty (30) days after the first meeting of the negotiating senior executives, either party may commence litigation with respect to the Dispute. However, except as provided below in Section 7.2, neither party shall commence litigation against the other party to resolve the Dispute (i) until the parties try in good faith to settle the Dispute by negotiation for at least thirty (30) days after the first meeting of the negotiating senior executives or (ii) until forty (40) days after notice of a Dispute is given by either party to the other party, whichever occurs first. 7.2 PROCEEDINGS. Any Dispute regarding the following is not required to be negotiated prior to seeking relief from a court of competent jurisdiction: breach of any obligation of confidentiality; infringement, misappropriation, or misuse of any intellectual property right; or any other claim where interim relief from the court is sought to prevent serious and irreparable injury to -9- a party. However, the parties shall make a good faith effort to negotiate such Dispute, according to Section 7.1, while such court action is pending. 7.3 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article 7 with respect to all matters not subject to such dispute, controversy or claim. ARTICLE 8 LIMITATION OF LIABILITY IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT DAMAGES FOR INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS TO THE EXTENT NOT LICENSED OR COVENANTED HEREIN; PROVIDED FURTHER THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THE INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT. ARTICLE 9 REPRESENTATIONS AND WARRANTIES 9.1 FULL POWER AND AUTHORITY. Each party represents and warrants that as of the Effective Date it has the full legal right, power and authority to enter into and perform this Agreement. 9.2 EXECUTION DULY AUTHORIZED. Each party represents and warrants that the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action and that the individual executing such document on its behalf is duly authorized to do so. ARTICLE 10 MISCELLANEOUS PROVISIONS -10- 10.1 DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL PATENTS AND ANY OTHER INFORMATION OR MATERIALS LICENSED OR PROVIDED HEREUNDER ARE LICENSED OR PROVIDED ON AN "AS IS" BASIS AND THAT NEITHER PARTY NOR ANY OF ITS SUBSIDIARIES MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Without limiting the generality of the foregoing, neither party nor any of its Subsidiaries makes any warranty or representation as to the validity and/or scope of any Patent licensed by it to the other party hereunder or any warranty or representation that any manufacture, use, importation, offer for sale or sale of any product or service will be free from infringement of any Patent or other intellectual property right of any Third Party. 10.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be construed as conferring any rights by implication, estoppel or otherwise, under any intellectual property right, other than the rights expressly granted in this Agreement with respect to the Assigned Patents, Wild File Patents and Adaptec Patents. Neither party is required hereunder to furnish or disclose to the other any technical or other information except as specifically provided herein. 10.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder to institute any action or suit against Third Parties for infringement of any Patent or to defend any action or suit brought by a Third Party which challenges or concerns the validity of any Patent. Unless the parties otherwise agree in writing, neither party shall have any right to institute any action or suit against Third Parties for infringement of any Patent owned by the other party. 10.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY RESPONSIBILITIES OR OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN AGREEMENT BETWEEN THE PARTIES. Without limiting the generality of the foregoing, neither party, nor any of its Subsidiaries is obligated to (i) file any Patent application, or to secure any Patent or Patent rights, (ii) to maintain any Patent in force, or (iii) provide any technical assistance, except for the obligations expressly assumed in this Agreement. 10.5 ENTIRE AGREEMENT. This Agreement, the Master Separation and Distribution Agreement and the other Ancillary Agreements and the Exhibits and Schedules referenced or attached hereto and thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. 10.6 CONFLICTING AGREEMENTS. In the event of a conflict between this Agreement and the Master Separation and Distribution Agreement or the other Ancillary Agreements, the provisions of this Agreement shall prevail. -11- 10.7 GOVERNING LAW. This Agreement shall be construed in accordance with and all Disputes hereunder shall be governed by the laws of the State of California, excluding its conflict of law rules and the United Nations Convention on Contracts for the International Sale of Goods. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California, San Jose Division, shall have jurisdiction and venue over all Disputes between the parties that are permitted to be brought in a court of law pursuant to Article 7 above. 10.8 DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article or a Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. 10.9 NOTICES. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) Business Day after being delivered by facsimile (with electronic receipt of appropriate confirmation), (iv) one (1) Business Day after being deposited with a nationally recognized overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of: IF TO ADAPTEC, INC.: Adaptec, Inc. 691 S. Milpitas Blvd. Milpitas, CA 95035 Attention: Vice President and General Counsel Facsimile No.: (408) 957-7137 with a copy to: Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Attention: Henry P. Massey, Jr. Facsimile No.: (650)-493-6811 IF TO ROXIO, INC.: Roxio, Inc. 461 South Milpitas Blvd. Milpitas, CA 95035 Attention: William Christopher Gorog -12- Facsimile No.: (408) 957-7963 with a copy to: Gray Cary Ware & Freidenrich LLP 400 Capitol Mall, Suite 2400 Sacramento, CA 95814 Attention: Kevin A. Coyle Facsimile No.: 916-930-3201 Adaptec and Roxio may substitute a different address or facsimile number, from time to time, if such substitute is provided to the intended notice recipient in writing by notice given in the manner provided in this Section 10.8. 10.10 NONASSIGNABILITY. Neither party may, directly or indirectly, in whole or in part, whether by operation of law or otherwise, assign or transfer this Agreement, without the other party's prior written consent, and any attempted assignment, transfer or delegation without such prior written consent shall be voidable at the sole option of such other party. Notwithstanding the foregoing, each party (or its successive assignees or transferees hereunder) may, without such consent, assign or transfer this Agreement to a Person (i) that succeeds to all or substantially all of its business or assets of such party, or (ii) in a merger, acquisition or other corporate reorganization in which such party is a constituent corporation, as long as such Person agrees to accept all of the terms set forth herein. Without limiting the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns. 10.11 SEVERABILITY. The parties hereto have negotiated and prepared the terms of this Agreement in good faith with the intent that each and every one of the terms, covenants and conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Agreement, to the extent possible consistent with its purposes, to conform to law. 10.12 WAIVER OF BREACH. A waiver of breach hereof shall be made only by a writing signed by the party making such waiver. The waiver by either party hereto of a breach or violation of any provision of this Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. 10.13 AMENDMENT AND EXECUTION. This Agreement and amendments hereto shall be in writing and executed in multiple copies via facsimile or otherwise on behalf of Adaptec and -13- Roxio by their respective duly authorized officers and representatives. Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument. -14- WHEREFORE, the parties have signed this Master Patent Ownership and License Agreement effective as of the date first set forth above. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------- -------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog ---------------------------- ------------------------------ Title: President, Title: President and Chief Executive Officer Chief Executive Officer ---------------------------- ----------------------------- [SIGNATURE PAGE TO MASTER PATENT OWNERSHIP AND LICENSE AGREEMENT] EX-2.5 7 a2056442zex-2_5.txt EXHIBIT 2.5 Exhibit 2.5 EXECUTION COPY MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT between ADAPTEC, INC. and ROXIO, INC. Effective as of May 5, 2001 MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT TABLE OF CONTENTS
PAGE ARTICLE 1 DEFINITIONS.................................................................................................1 1.1 ANCILLARY AGREEMENTS................................................................................1 1.2 ASSIGNED TECHNOLOGY.................................................................................1 1.3 ASSIGNED TRADEMARKS.................................................................................1 1.4 CONFIDENTIAL INFORMATION............................................................................2 1.5 COPYRIGHTS..........................................................................................2 1.6 DISPUTES............................................................................................2 1.7 DATABASE RIGHTS.....................................................................................2 1.8 DISTRIBUTION DATE...................................................................................2 1.9 ESCROW MATERIALS....................................................................................2 1.10 GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT.........................................................2 1.11 INTELLECTUAL PROPERTY RIGHTS........................................................................2 1.12 INVENTION DISCLOSURE................................................................................3 1.13 LICENSED MATERIALS..................................................................................3 1.14 LICENSED TECHNOLOGY.................................................................................3 1.15 LICENSED TRADEMARKS.................................................................................3 1.16 LISTED COMPANIES....................................................................................3 1.17 MASTER CONFIDENTIAL DISCLOSURE AGREEMENT............................................................3 1.18 MASTER PATENT OWNERSHIP AND ASSIGNMENT AGREEMENT....................................................3 1.19 MASTER SEPARATION AND DISTRIBUTION AGREEMENT........................................................3 1.20 PATENTS.............................................................................................3 1.21 PERSON..............................................................................................4 1.22 RESIDUALS...........................................................................................4 1.23 ROXIO BUSINESS......................................................................................4 1.24 SELL................................................................................................4 1.25 SEPARATION DATE.....................................................................................4 1.26 SOURCE CODE.........................................................................................4 1.27 SUBSIDIARY..........................................................................................4 1.28 TECHNOLOGY..........................................................................................4 1.29 THIRD PARTY.........................................................................................5 ARTICLE 2 OWNERSHIP...................................................................................................5 2.1 OWNERSHIP OF ASSIGNED TECHNOLOGY....................................................................5 2.2 ASSIGNMENT OF TRADEMARKS............................................................................5 2.3 PRIOR GRANTS........................................................................................5 2.4 ASSIGNMENT DISCLAIMER...............................................................................5 2.5 RESIDUALS...........................................................................................6 2.6 TRANSFER OF ESCROW MATERIALS........................................................................6 2.7 NO DELIVERY.........................................................................................6 ARTICLE 3 LICENSES AND RIGHTS.........................................................................................7 3.1 LICENSED TECHNOLOGY.................................................................................7 3.2 LICENSED TRADEMARKS.................................................................................7 3.3 NO PATENT LICENSES..................................................................................8 3.4 THIRD PARTY TECHNOLOGY..............................................................................8 3.5 PERSONAL INFORMATION................................................................................8 ARTICLE 4 CONFIDENTIALITY.............................................................................................9 ARTICLE 5 NO TERMINATION..............................................................................................9 ARTICLE 6 DISPUTE RESOLUTION..........................................................................................9 6.1 NEGOTIATION.........................................................................................9 6.2 PROCEEDINGS........................................................................................10 6.3 CONTINUITY OF SERVICE AND PERFORMANCE..............................................................10 ARTICLE 7 LIMITATION OF LIABILITY....................................................................................10 ARTICLE 8 REPRESENTATIONS AND WARRANTIES.............................................................................10 ARTICLE 9 MISCELLANEOUS PROVISIONS...................................................................................11 9.1 DISCLAIMER.........................................................................................11 9.2 NO IMPLIED LICENSES................................................................................11 9.3 INFRINGEMENT SUITS.................................................................................11 9.4 NO OTHER OBLIGATIONS...............................................................................11 9.5 ENTIRE AGREEMENT...................................................................................12 9.6 CONFLICTING AGREEMENTS.............................................................................12 9.7 GOVERNING LAW......................................................................................12 9.8 DESCRIPTIVE HEADINGS...............................................................................12 9.9 NOTICES............................................................................................12 9.10 NONASSIGNABILITY...................................................................................13 9.11 SEVERABILITY.......................................................................................14 9.12 WAIVER OF BREACH...................................................................................14 9.13 AMENDMENT AND EXECUTION............................................................................14 9.14 COUNTERPARTS.......................................................................................14
-2- MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT This Master Technology Ownership and License Agreement (the "Agreement") is effective as of May 5, 2001, 12:01 A.M., P.S.T., (the "Effective Date") between Adaptec, Inc., a Delaware corporation ("Adaptec"), having an office at 691 South Milpitas Boulevard, Milpitas, CA 95035, and Roxio, Inc. ("Roxio"), a Delaware corporation ("Roxio"), having an office at 461 South Milpitas Boulevard, Milpitas, CA 95035. RECITALS WHEREAS, the Boards of Directors of each of Adaptec and Roxio have determined that it is appropriate and desirable for Adaptec to contribute and transfer to Roxio, and for Roxio to receive and assume, directly or indirectly, substantially all of the assets and liabilities currently associated with the Roxio Business and the stock, investments or similar interests currently held by Adaptec in subsidiaries and other entities that conduct such business (the "Separation"); WHEREAS, Adaptec has caused Roxio to be incorporated in order to effect the Separation and Adaptec currently owns all of the issued and outstanding capital stock of Roxio; and WHEREAS, the parties intend in this Agreement, including the Exhibits and Schedules hereto, to set forth the principal arrangements between them regarding the separation of the Roxio Business with respect to the transfer and license of the technology relating to the Roxio Business . NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS For the purpose of this Agreement the following capitalized terms are defined in this Article 1 and shall have the meaning specified herein: 1.1 ANCILLARY AGREEMENTS. "Ancillary Agreements" shall have the meaning set forth in the Master Separation and Distribution Agreement. 1.2 ASSIGNED TECHNOLOGY. "Assigned Technology" means all Technology listed on Schedule A and the Escrow Materials. 1.3 ASSIGNED TRADEMARKS. "Assigned Trademarks" means the United States trademarks and the registrations thereof listed on Schedule A. 1.4 CONFIDENTIAL INFORMATION. "Confidential Information" has the meaning set forth in the Master Confidential Disclosure Agreement. 1.5 COPYRIGHTS. "Copyrights" mean (i) any copyright in any original works of authorship fixed in any tangible medium of expression as set forth in 17 U.S.C. Section 101 et. seq., whether registered or unregistered, including any applications for registration thereof, (ii) any corresponding foreign copyrights under the laws of any jurisdiction, in each case, whether registered or unregistered, and any applications for registration thereof, and (iii) moral rights under the laws of any jurisdiction. 1.6 DISPUTES. "Disputes" has the meaning set forth in the Master Separation and Distribution Agreement. 1.7 DATABASE RIGHTS. "Database Rights" means any rights in databases under the laws of the United States or any other jurisdiction, whether registered or unregistered, and any applications for registration thereof. 1.8 DISTRIBUTION DATE. "Distribution Date" shall have the meaning set forth in the Master Separation and Distribution Agreement. 1.9 ESCROW MATERIALS. "Escrow Materials" means the materials listed on Schedule C. 1.10 GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT. "General Assignment and Assumption Agreement" means the General Assignment and Assumption Agreement between the parties. 1.11 INTELLECTUAL PROPERTY RIGHTS. "Intellectual Property Rights" means Copyrights, Database Rights, trade secrets and any other intellectual property right, but expressly does not include (i) any trademark, trade name, trade dress or service mark, or applications for registration thereof or (ii) any Patents or applications therefor, including any of the foregoing that may be based on Invention Disclosures that are covered by the Master Patent Ownership and License Agreement between the parties, but does include trade secret rights in and to inventions disclosed in such Patent applications and Invention Disclosures. 1.12 INVENTION DISCLOSURE. "Invention Disclosure" means a disclosure of an invention (i) written for the purpose of allowing legal and business people to determine whether to file a Patent application with respect to such invention and (ii) recorded with a control number in the owning party's records. 1.13 LICENSED MATERIALS. "Licensed Materials" means the materials listed on Schedule F. 1.14 LICENSED TECHNOLOGY. "Licensed Technology" means the Technology listed on Schedule B. 1.15 LICENSED TRADEMARKS. "Licensed Trademarks" means the United States trademarks and the registrations thereof listed on Schedule G. 1.16 LISTED COMPANIES. "Listed Companies" means those companies listed on Schedule H. 1.17 MASTER CONFIDENTIAL DISCLOSURE AGREEMENT. "Master Confidential Disclosure Agreement" means the Master Confidential Disclosure Agreement between Adaptec and Roxio. 1.18 MASTER PATENT OWNERSHIP AND ASSIGNMENT AGREEMENT. "Master Patent Ownership and Assignment Agreement" means the Master Patent Ownership and Assignment Agreement between Adaptec and Roxio. 1.19 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master Separation and Distribution Agreement" means the Master Separation and Distribution Agreement between Adaptec and Roxio. 1.20 PATENTS. "Patents" means patents, utility models, design patents, design registrations, certificates of invention and other governmental grants for the protection of inventions or industrial designs anywhere in the world and all reissues, renewals, re-examinations and extensions of any of the foregoing. 1.21 PERSON. "Person" has the meaning set forth in the Master Separation and Distribution Agreement. 1.22 RESIDUALS. "Residuals" means information retained in the unaided memory of an individual who has had access to Confidential Information without conscious attempt by such individual to memorize such information. 1.23 ROXIO BUSINESS. "Roxio Business" has the meaning set forth in the Master Separation and Distribution Agreement. 1.24 SELL. "Sell" a product means to sell, transfer, lease or otherwise dispose of a product. "Sale" and "Sold" have the corollary meanings ascribed thereto. 1.25 SEPARATION DATE. "Separation Date" has the meaning set forth in the Master Separation and Distribution Agreement. 1.26 SOURCE CODE. "Source Code" means the Licensed Technology software, and/or derivatives thereof, in human readable source code format. 1.27 SUBSIDIARY. "Subsidiary" has the meaning set forth in the Master Separation and Distribution Agreement. 1.28 TECHNOLOGY. "Technology" means technological models, algorithms, manufacturing processes, design processes, behavioral models, logic diagrams, schematics, test vectors, know-how, computer and electronic data processing and other apparatus programs and software (object code and source code), databases and documentation thereof, trade secrets, technical information, specifications, drawings, records, documentation, works of authorship or other creative works, websites, ideas, knowledge, data or the like. 1.29 THIRD PARTY. "Third Party" means a Person other than Adaptec and its Subsidiaries and Roxio and its Subsidiaries. ARTICLE 2 OWNERSHIP 2.1 OWNERSHIP OF ASSIGNED TECHNOLOGY. Adaptec hereby grants, conveys and assigns (and agrees to cause its appropriate Subsidiaries to grant, convey and assign) to Roxio, by execution hereof (or, where appropriate or required, by execution of separate instruments of assignment), all its (and their) right, title and interest in and to the Assigned Technology (and its Intellectual Property Rights therein), to be held and enjoyed by Roxio, its successors and assigns. Adaptec further covenants that Adaptec will, without demanding any further consideration therefor, at the request and expense of Roxio (except for the value of the time of Adaptec employees), do (and cause its Subsidiaries to do) all lawful and just acts that may be or become necessary for evidencing, maintaining, recording and perfecting Roxio's rights to such Assigned Technology consistent with Adaptec's general business practice as of the Separation Date, including but not limited to, execution and acknowledgement of (and causing its Subsidiaries to execute and acknowledge) assignments and other instruments in a form reasonably required by Roxio for each Copyright or Database Right jurisdiction. 2.2 ASSIGNMENT OF TRADEMARKS. Adaptec hereby grants, conveys and assigns (and agrees to cause its appropriate Subsidiaries to grant, convey and assign) to Roxio, by execution hereof (or, where appropriate or required, by execution of separate instruments of assignment), all its (and their) right, title and interest in and to the Assigned Trademarks, together with the goodwill of the business symbolized by the Assigned Trademarks. 2.3 PRIOR GRANTS. Roxio acknowledges and agrees that the foregoing assignments are subject to any and all licenses or other rights that may have been granted by or to Adaptec or its Subsidiaries with respect to the Assigned Technology and Assigned Trademarks prior to the Separation Date. Adaptec shall respond to reasonable inquiries from Roxio regarding any such prior grants. 2.4 ASSIGNMENT DISCLAIMER. THE PARTIES ACKNOWLEDGE AND AGREE THAT THE FOREGOING ASSIGNMENTS ARE MADE ON AN "AS IS," QUITCLAIM BASIS AND THAT NEITHER PARTY NOR ANY SUBSIDIARY OF EITHER PARTY HAS MADE OR WILL MAKE ANY WARRANTY WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. FURTHER, THE PARTIES ACKNOWLEDGE AND AGREE THAT NEITHER PARTY NOR ANY SUBSIDIARY OF EITHER PARTY SHALL HAVE ANY OBLIGATION UNDER THIS AGREEMENT TO MAINTAIN OR SUPPORT ANY OF THE ASSIGNED TECHNOLOGY OR TO PROVIDE ANY UPGRADES OR ENHANCEMENTS THERETO TO THE OTHER PARTY. 2.5 RESIDUALS. Notwithstanding any other provision of this Agreement, each party (the "Receiving Party") shall be free, and the other party (the "Disclosing Party") hereby grants to the Receiving Party, except as otherwise provided in this Section 2.5, the right to use for any purpose the Residuals resulting from access to or work with the Confidential Information of the Disclosing Party. The Receiving Party shall have no obligation to pay royalties for any use of Residuals. However, this Section 2.5 does not grant the Receiving Party any rights under any patents or copyrights of the Disclosing Party. The preceding sentence shall not operate to relieve the Receiving Party from paying royalties to the Disclosing Party under any future patent or copyright license between them. 2.6 TRANSFER OF ESCROW MATERIALS. As of the Effective Date, Roxio shall have opened a technology escrow account substantially similar to the Adaptec technology escrow account in which the Escrow Materials were stored up to the Effective Date. Upon execution of this Agreement, Adaptec shall authorize its escrow agent to transfer the Escrow Materials from Adaptec's technology escrow account to Roxio's technology escrow account. 2.7 NO DELIVERY. Roxio acknowledges that, except as expressly provided in Sections 2.1, 2.2 and 2.6 above, Adaptec has no obligation to deliver to Roxio any materials or information, including without limitation any materials or technical information relating to Assigned Technology or Assigned Trademarks. Notwithstanding the foregoing sentence if, after the Separation Date, it is found that the Assigned Technology, Licensed Technology and the Licensed Materials do not include certain Technology used before the Separation Date and intended for use by Roxio in the day to day conduct of its business as contemplated in this Agreement or in the Ancillary Agreements, and such Technology is not otherwise provided to Roxio under the Ancillary Agreements, Adaptec will provide Roxio such Technology under the assignments and licenses granted in this Agreement to the extent it is able to do so, but only to the extent such Technology is reasonably necessary for Roxio to accomplish such day to day operation of its business. Such Technology will be provided after good faith discussion of the subject between Adaptec and Roxio. ARTICLE 3 LICENSES AND RIGHTS 3.1 LICENSED TECHNOLOGY. On the Effective Date, Adaptec shall make available to Roxio one (1) copy of the Licensed Materials. Adaptec hereby grants to Roxio under its rights to the Licensed Technology, a perpetual, worldwide, fully paid up, non-exclusive license, including the right to grant sublicenses, to use, reproduce, perform, display and distribute the Licensed Technology as part of products of the Roxio Business (or products resulting from joint development between Roxio and one or more third parties or products developed for Roxio by one or more third parties) and any successor products, create derivative works of the Licensed Technology and reproduce, perform, display and distribute such derivative works as part of such products and any successor products. Notwithstanding the foregoing, Roxio agrees to the confidentiality provisions in Schedule D, and Roxio shall distribute the Licensed Technology or derivatives thereof in Source Code form only pursuant to a Source Code license containing confidentiality provisions at least as protective as those set forth in Schedule E. Adaptec agrees that, for a period of two years following the Separation Date, it shall not grant to any of the Listed Companies any licenses to the Licensed Technology. 3.2 LICENSED TRADEMARKS. Adaptec hereby grants to Roxio under its rights in the Licensed Trademarks a non-assignable, non-transferable, worldwide, non-exclusive, royalty-free license, without the right to grant sublicenses, to use the Licensed Trademarks in connection with the promotion, marketing and distribution of Roxio's products for a period of two (2) years following the Separation Date, subject to the terms and conditions hereof. (a) OWNERSHIP. As between Adaptec and Roxio, Roxio acknowledges and agrees that Adaptec is the sole owner of all right, title, and interest in and to the Licensed Trademarks and all goodwill associated therewith, including but not limited to the goodwill associated with Roxio's use of the Licensed Trademarks. Roxio shall not (a) challenge Adaptec's ownership or use of the Licensed Trademarks; (b) attempt to register any Licensed Trademarks or any marks confusingly similar thereto in any jurisdiction in the world; (c) alter or add to any Licensed Trademarks; or (d) incorporate any Licensed Trademarks into Roxio's trademarks, product names, service marks, company names, domain names, or any other similar designations. If, at any time, Roxio acquires any rights in, or trademark or service mark registrations or applications for, any Licensed Trademarks by operation of law or otherwise, Roxio will immediately upon request from Adaptec and at no expense to Adaptec assign such rights, registrations or applications to Adaptec, along with any and all associated goodwill. (b) QUALITY CONTROL. Roxio acknowledges that the Licensed Trademarks represent the goodwill that Adaptec has earned for itself and are well recognized in the minds of the public, and that it is of great importance to each party that, in the promotion, marketing and distribution of Roxio's products, the high standards and reputation established by Adaptec be maintained at all times. Accordingly, Roxio products, advertising material and promotional material containing or depicting the Licensed Trademarks on and after the Separation Date shall be of quality at least as high as that of Roxio products prior to the Separation Date. (c) PRIOR APPROVAL. All products, advertising material and promotional material containing or depicting any of the Licensed Trademarks shall be subject to Adaptec's prior written approval. Prior to promoting, marketing or distributing such a product or using such material, Roxio shall submit a sample of such product or material for Adaptec's review and approval. Adaptec shall have a period of ten (10) days from its receipt of such material within which to review such material. If Adaptec does not notify Roxio of Adaptec's disapproval within such ten (10) day period, such product or material shall be deemed approved. If Adaptec provides Roxio with notice of disapproval, Roxio shall promptly remove the Licensed Trademarks from the disapproved products or materials. (d) TERMINATION. Except as otherwise provided in this Section 3.2(d), if Roxio breaches any of its obligations under Section 3.2, Adaptec may terminate the license granted to Roxio under Section 3.2 upon thirty (30) days notice to Roxio of such breach if such breach is not completely cured within such thirty (30) day period. Notwithstanding the foregoing, Adaptec may terminate the license granted to Roxio under Section 3.2 immediately upon notice to Roxio without any right to cure if any of the following events occurs: (i) with respect to the Licensed Trademarks only, if Roxio merges or consolidates with or into any other corporation, or directly or indirectly sells or otherwise transfers, sells or disposes of all or a substantial portion of its business or assets except as permitted or contemplated under Section 9.10 ("NONASSIGNABILITY"); (ii) if Roxio ceases or threatens to cease to carry on its business relating to its use of the Licensed Technology or Licensed Trademarks, or any substantial part thereof, or becomes insolvent or unable to pay or discharge its liabilities in the ordinary course of business; or (iii) if Roxio assigns the whole or any substantial part of its assets or undertakings for the benefit of creditors. No assignee for the benefit of creditors, receiver, liquidator, sequestrator, trustee in bankruptcy, sheriff or any other officer of the court or official charges with taking over custody of Roxio's assets or business shall have any right to continue the performance or rights of Roxio under this Agreement. 3.3 NO PATENT LICENSES. Nothing contained in this Agreement shall be construed as conferring to either party by implication, estoppel or otherwise any license or right under any Patent or applications therefor, whether or not the exercise of any right herein granted necessarily employs an invention of any existing or later issued Patent. The applicable licenses granted by Adaptec to Roxio with respect to Patents are set forth in a separate Master Patent Ownership and License Agreement. 3.4 THIRD PARTY TECHNOLOGY. The assignment of any applicable license agreements with respect to Third Party Technology are set forth in the General Assignment and Assumption Agreement. 3.5 PERSONAL INFORMATION. Unless different terms of use are agreed to by the applicable individuals, to the extent any databases within the Assigned Technology include personal data of any individuals, Roxio covenants to use such personal data only in the same manner as it was used by Adaptec prior to assignment hereunder. ARTICLE 4 CONFIDENTIALITY The terms of the Master Confidential Disclosure Agreement between the parties shall apply to any Confidential Information which is the subject matter of this Agreement. ARTICLE 5 NO TERMINATION Each party acknowledges and agrees that its remedy for breach by the other party of any provision hereof shall be, subject to the requirements of Article 6, to bring a claim to recover damages subject to the limits set forth in this Agreement and to seek any other appropriate equitable relief, other than termination of this Agreement. For the avoidance of doubt, the parties intend that this Agreement continue in perpetuity. ARTICLE 6......... DISPUTE RESOLUTION Resolution of any and all Disputes arising from or in connection with this Agreement shall be exclusively governed by and settled in accordance with the provisions of this Article 6. 6.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through informal negotiation between appropriate representatives from each of Adaptec and Roxio. If at any time either party feels that such negotiations are not leading to a resolution of the Dispute, such party may send a notice to the other party describing the Dispute and requesting a meeting of the senior executives from each party. Within ten (10) business days after such notice of a Dispute is given, each party shall select appropriate senior executives (e.g., director or V.P. level) of each party who shall have the authority to resolve the matter and shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. During the course of negotiations under this Section 6.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating senior executives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within thirty (30) days after the first meeting of the negotiating senior executives, either party may commence litigation with respect to the Dispute. However, except as provided below in Section 6.2, neither party shall commence litigation against the other party to resolve the Dispute (i) until the parties try in good faith to settle the Dispute by negotiation for at least thirty (30) days after the first meeting of the negotiating senior executives or (ii) until forty (40) days after notice of a Dispute is given by either party to the other party, whichever occurs first. 6.2 PROCEEDINGS. Any Dispute regarding the following is not required to be negotiated prior to seeking relief from a court of competent jurisdiction: breach of any obligation of confidentiality; infringement, misappropriation, or misuse of any intellectual property right; or any other claim where interim relief from the court is sought to prevent serious and irreparable injury to a party. However, the parties shall make a good faith effort to negotiate such Dispute, according to Section 6.1, while such court action is pending. 6.3 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article 6 with respect to all matters not subject to such dispute, controversy or claim. ARTICLE 7 LIMITATION OF LIABILITY IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THE INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT. ARTICLE 8 REPRESENTATIONS AND WARRANTIES Each party represent and warrants that as of the Effective Date it has the full legal right, power and authority to enter into and perform this Agreement. ARTICLE 9 MISCELLANEOUS PROVISIONS 9.1 DISCLAIMER. EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL TECHNOLOGY, TRADEMARKS AND ANY OTHER INFORMATION OR MATERIALS PROVIDED HEREUNDER IS PROVIDED ON AN "AS IS" BASIS, AND THAT NEITHER PARTY NOR ANY OF ITS SUBSIDIARIES MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT THERETO, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. Without limiting the generality of the foregoing, neither party nor any of its Subsidiaries makes any warranty or representation that any manufacture, use, importation, offer for sale or sale of any product or service will be free from infringement of any Patent or other intellectual property right of any Third Party. 9.2 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be construed as conferring any rights by implication, estoppel or otherwise, under any intellectual property right, other than the rights expressly granted in this Agreement with respect to the Assigned Technology and the Licensed Technology. Neither party is required hereunder to furnish or disclose to the other any technical or other information, except as specifically provided herein. 9.3 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder to institute any action or suit against Third Parties for infringement of any Copyrights or Database Rights or misappropriation of any trade secret rights in or to any Technology licensed to the other party hereunder, or to defend any action or suit brought by a Third Party which challenges or concerns the validity of any of such rights or which claims that any Technology assigned or licensed to the other party hereunder infringes any Patent, Copyright, Database Right or other intellectual property right of any Third Party or constitutes a misappropriated trade secret of any Third Party. Adaptec shall not have any right to institute any action or suit against Third Parties for infringement of any of the Copyrights or Database Rights in or to the Assigned Technology. 9.4 NO OTHER OBLIGATIONS. NEITHER PARTY ASSUMES ANY RESPONSIBILITIES OR OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN AGREEMENT BETWEEN THE PARTIES. Without limiting the generality of the foregoing, neither party, nor any of its Subsidiaries, is obligated under this Agreement to provide any technical assistance. 9.5 ENTIRE AGREEMENT. This Agreement, the Master Separation and Distribution Agreement and the other Ancillary Agreements and the Exhibits and Schedules referenced or attached hereto and thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. This Agreement shall prevail in the event of any conflicting terms or legends which may appear on any portion of the Assigned Technology or the Licensed Technology. 9.6 CONFLICTING AGREEMENTS. In the event of a conflict between this Agreement and the Master Separation and Distribution Agreement or any Ancillary Agreement executed in connection herewith, the provisions of this Agreement shall prevail. 9.7 GOVERNING LAW. This Agreement shall be construed in accordance with and all Disputes hereunder shall be governed by the laws of the State of California, excluding its conflict of law rules and the United Nations Convention on Contracts for the International Sale of Goods. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California, San Jose Division, shall have jurisdiction and venue over all Disputes between the parties that are permitted to be brought in a court of law pursuant to Article 6 above. 9.8 DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article or a Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. 9.9 NOTICES. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) Business Day after being delivered by facsimile (with electronic receipt of appropriate confirmation), (iv) one (1) Business Day after being deposited with a nationally recognized overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of: IF TO ADAPTEC, INC.: Adaptec, Inc. 691 S. Milpitas Blvd. Milpitas, CA 95035 Attention: Vice President and General Counsel Facsimile No.: (408) 957-7137 with a copy to: Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Attention: Henry P. Massey, Jr. Facsimile No.: 650-493-6811 IF TO ROXIO, INC.: Roxio, Inc. 461 South Milpitas Blvd. Milpitas, CA 95035 Attention: CEO Facsimile No.: 408-957-7963 with a copy to: Gray Cary Ware & Freidenrich LLP 400 Capitol Mall, Suite 2400 Sacramento, CA 95814 Attention: Kevin A. Coyle Facsimile No.: 916-930-3201 Adaptec and Roxio may substitute a different address or facsimile number, from time to time, if such substitute is provided to the intended notice recipient in writing by notice given in the manner provided in this Section 9.8. 9.10 NONASSIGNABILITY. Neither party may, directly or indirectly, in whole or in part, whether by operation of law or otherwise, assign or transfer this Agreement, without the other party's prior written consent, and any attempted assignment, transfer or delegation without such prior written consent shall be voidable at the sole option of such other party. Notwithstanding the foregoing, each party (or its successive assignees or transferees hereunder) may, without such consent, assign this Agreement to (i) an entity that succeeds to all or substantially all of the business or assets of such party, or (ii) an entity involved in a merger, acquisition or other corporate reorganization in which such party is a constituent corporation, as long as such entity agrees to accept all of the terms set forth herein. Without limiting the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns. 9.11 SEVERABILITY. The parties hereto have negotiated and prepared the terms of this Agreement in good faith with the intent that each and every one of the terms, covenants and conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Agreement, to the extent possible consistent with its purposes, to conform to law. 9.12 WAIVER OF BREACH. The waiver by either party hereto of a breach or violation of any provision of this Agreement shall be made only in a writing signed by the party making such waiver, and shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. 9.13 AMENDMENT AND EXECUTION. This Agreement and amendments hereto shall be in writing and executed in multiple copies via facsimile or otherwise on behalf of Adaptec and Roxio by their respective duly authorized officers or representatives. Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument. 9.14 COUNTERPARTS. This Agreement, including the Schedules and Exhibits hereto and the other documents referred to herein, may be executed in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. WHEREFORE, the parties have signed this Master Technology Ownership and License Agreement effective as of the date first set forth above. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------- -------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog ---------------------------- ------------------------------ Title: President, Title: President and Chief Executive Officer Chief Executive Officer ---------------------------- ----------------------------- [SIGNATURE PAGE TO MASTER TECHNOLOGY OWNERSHIP AND LICENSE AGREEMENT] EX-2.6 8 a2056442zex-2_6.txt EXHIBIT 2.6 Exhibit 2.6 EXECUTION COPY MASTER CONFIDENTIAL DISCLOSURE AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. EFFECTIVE AS OF MAY 5, 2001 MASTER CONFIDENTIAL DISCLOSURE AGREEMENT This Master Confidential Disclosure Agreement (the "Agreement") is effective as of May 5, 2001 (the "Effective Date"), between Adaptec, Inc., a Delaware corporation ("Adaptec"), and Roxio, Inc., a Delaware corporation ("Roxio"). Adaptec and Roxio are sometimes referred to herein as the "party" or the "parties." WHEREAS, the Board of Directors of each of Adaptec and Roxio have determined that it is in the best interest of Adaptec and its stockholders to separate Adaptec's existing businesses into two independent businesses; WHEREAS, as part of the foregoing, Adaptec and Roxio have entered into a Master Separation Agreement (as defined below), which provides, among other things, for the separation of certain Roxio assets and Roxio liabilities, the initial public offering of Roxio stock, the distribution of such stock and the execution and delivery of certain other agreements in order to facilitate and provide for the foregoing; and WHEREAS, also as part of the foregoing, the parties further desire to enter into this Agreement to provide for the protection of their Confidential Information (as defined below). NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and between the parties as follows: ARTICLE I DEFINITIONS For the purpose of this Agreement the following capitalized terms are defined in this Article I. 1.1 ANCILLARY AGREEMENTS. "ANCILLARY AGREEMENTS" means the items and agreements listed in Section 2.1 of the Master Separation Agreement and all agreements and documents contemplated by such agreements. 1.2 CONFIDENTIAL INFORMATION. "CONFIDENTIAL INFORMATION" means any and all financial, technical, commercial or other information of Adaptec or Roxio, as appropriate (whether written or oral), including, without limitation, all information, notes, client lists and records, reports, analyses, financial statements, compilations, studies, forms, business or management methods, marketing data, fee schedules, information technology systems and programs, projections, forecasts or trade secrets of Adaptec or Roxio, as applicable, whether or not such Confidential Information is disclosed or otherwise made available to one party by the other party pursuant to this Agreement. Confidential Information shall also include the terms and provisions of this Agreement and any transactions consummated or documents executed by the parties pursuant to this Agreement. Confidential Information does not include any information that (i) is or becomes generally available to and known by the public (other than as a result of an unpermitted disclosure directly or indirectly by the Receiving Party or its affiliates, advisors or representatives); (ii) is or becomes available to the Receiving Party on a nonconfidential basis from a source other than the Disclosing Party or its affiliates, advisors or representatives, provided that such source is not and was not bound by a confidentiality agreement with or other obligation of secrecy to the Disclosing Party; or (iii) has already been developed, or is hereafter independently acquired or developed, by the Receiving Party without violating any confidentiality agreement with or other obligation of secrecy to the Disclosing Party. 1.3 CONFIDENTIALITY PERIOD. "CONFIDENTIALITY PERIOD" means, (i) with respect to Confidential Information that is not Highly Confidential Information, five (5) years, and (ii) with respect to Highly Confidential Information, in perpetuity, after either (A) the Separation Date with respect to Confidential Information of the Disclosing Party that is known to or in the possession of the Receiving Party as of the Separation Date or (B) the date of disclosure with respect to Confidential Information that is disclosed by the Disclosing Party to the Receiving Party after the Separation Date. 1.4 DISCLOSING PARTY. "DISCLOSING PARTY" means the party owning or disclosing the relevant Confidential Information. 1.5 DISPUTES. "DISPUTES" has the meaning set forth in the Master Separation Agreement. 1.6 DISTRIBUTION DATE. "DISTRIBUTION DATE" has the meaning set forth in the Master Separation Agreement. 1.7 HIGHLY CONFIDENTIAL INFORMATION. "HIGHLY CONFIDENTIAL INFORMATION" means Confidential Information that is source code for products that are commercially released or for which substantial steps have been taken to commercialization. 1.8 MASTER SEPARATION AGREEMENT. "MASTER SEPARATION AGREEMENT" means the First Amended and Restated Master Separation and Distribution Agreement dated February 28, 2001 between the parties. 1.9 PERSON. "PERSON" has the meaning set forth in the Master Separation Agreement. 1.10 RECEIVING PARTY. "RECEIVING PARTY" means the non-owning party or recipient of the relevant Confidential Information. 1.11 RESIDUALS. "RESIDUALS" means information retained in the unaided memory of an individual who has had access to Confidential Information without conscious attempt by such individual to memorize such information. 1.12 SEPARATION DATE. "SEPARATION DATE" has the meaning set forth in the Master Separation Agreement. -2- 1.13 SUBSIDIARY. "SUBSIDIARY" means with respect to any specified Person, any corporation, any limited liability company, any partnership or other legal entity of which such Person or its Subsidiaries owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of the members of the board of directors or similar governing body. Unless context otherwise requires, reference to Adaptec and its Subsidiaries shall not include the subsidiaries of Adaptec that will be transferred to Roxio after giving effect to the Separation (as defined in the Master Separation Agreement). 1.14 THIRD PARTY. "THIRD PARTY" means a Person other than Adaptec, its Subsidiaries and their respective employees and Roxio, its Subsidiaries and their respective employees. 1.15 TRANSACTION AGREEMENTS. "TRANSACTION AGREEMENTS" means the Master Separation Agreement and the Ancillary Agreements. ARTICLE II CONFIDENTIALITY 2.1 CONFIDENTIALITY AND NON-USE OBLIGATIONS. During the Confidentiality Period, the Receiving Party shall (i) protect the Confidential Information of the Disclosing Party by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized use, dissemination, or publication of the Confidential Information as the Receiving Party uses to protect its own Confidential Information of a like nature, (ii) not use such Confidential Information in violation of any use restriction in any Transaction Agreement, and (iii) not disclose such Confidential Information to any Third Party, except as expressly permitted under this Agreement, in the Transaction Agreements or in any other agreements entered into between the parties in writing, without prior written consent of the Disclosing Party. 2.2 DISCLOSURE TO SUBLICENSEES. The Receiving Party has the right to disclose to its permitted sublicensees portions of Confidential Information as reasonably necessary in the exercise of the Receiving Party's right to grant sublicenses that is expressly granted under any Transaction Agreement, subject to the sublicensee's agreement in writing to confidentiality and non-use terms at least as protective of the Disclosing Party's Confidential Information as the provisions of this Agreement. 2.3 CONTRACT MANUFACTURERS AND FOUNDRIES. The Receiving Party has the right to disclose to its permitted contract manufacturers and foundries portions of the Confidential Information as reasonably necessary in the exercise of the Receiving Party's "have made" rights that are expressly granted under any Transaction Agreement, subject to the contract manufacturer's and foundry's agreement in writing to confidentiality and non-use terms at least as protective of the Disclosing Party's Confidential Information as the provisions of this Agreement. 2.4 RESIDUALS. Notwithstanding any other provision of this Agreement, the Receiving Party shall be free, and the Disclosing Party hereby grants to the Receiving Party, except as otherwise provided in this Section 2.4 the right, to use for any purpose the Residuals resulting from access to or work with the Confidential Information of the Disclosing Party. The Receiving Party -3- shall have no obligation to pay royalties for any use of Residuals. However, this Section 2.4 does not grant the Receiving Party any rights under any patents or copyrights of the Disclosing Party. The preceding sentence shall not operate to relieve the Receiving Party from paying royalties to the Disclosing Party under any future patent or copyright license between them. 2.5 COMPELLED DISCLOSURE. If the Receiving Party or any of its respective Subsidiaries believes that it will be compelled by a court or other authority to disclose Confidential Information of the Disclosing Party, it shall (i) give the Disclosing Party prompt and timely written notice so that the Disclosing Party may take steps to oppose such disclosure, but in any event the Receiving Party shall not be prohibited from complying with such requirement and (ii) cooperate with the Disclosing Party in its attempts to oppose such disclosure, provided that such opposition is reasonable in light of applicable law or regulation. If the Receiving Party complies with the above, it shall not be prohibited from complying with such requirements to disclose, but shall cooperate with the Disclosing Party to take all reasonable steps to make such disclosure subject to a suitable protective order or otherwise prevent unrestricted or public disclosure. 2.6 NO RESTRICTION ON DISCLOSING PARTY. Nothing in this Agreement shall restrict the Disclosing Party from using, disclosing, or disseminating its own Confidential Information in any way provided that, in so doing, it does not use, disclose or disseminate any Confidential Information of the Receiving Party. 2.7 NO RESTRICTION ON REASSIGNMENT. This Agreement shall not restrict reassignment of the Receiving Party's employees. 2.8 THIRD PARTY RESTRICTIONS. Nothing in the Agreement supersedes any restriction imposed by Third Parties on their Confidential Information, and there is no obligation on the Disclosing Party to conform Third Party agreements to the terms of this Agreement. ARTICLE III WARRANTY DISCLAIMER EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL CONFIDENTIAL INFORMATION IS PROVIDED ON AN "AS IS, WHERE IS" BASIS AND THAT NEITHER PARTY NOR ANY OF ITS SUBSIDIARIES HAS MADE OR WILL MAKE ANY WARRANTY WHATSOEVER WITH RESPECT TO CONFIDENTIAL INFORMATION, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR NON-INFRINGEMENT. ARTICLE IV TERM AND TERMINATION 4.1 TERM. This Agreement shall remain in full force and effect unless and until terminated by the mutual written agreement of the parties. -4- 4.2 SURVIVAL. Articles II (with respect to Confidential Information acquired or disclosed prior to the date of termination), III, V, and VI shall survive any termination of this Agreement. ARTICLE V DISPUTE RESOLUTION Resolution of any and all Disputes arising from or in connection with this Agreement shall be exclusively governed by and settled in accordance with the provisions of this Article V. 5.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through informal negotiation between appropriate representatives from each of Adaptec and Roxio. If at any time either party feels that such negotiations are not leading to a resolution of the Dispute, such party may send a notice to the other party describing the Dispute and requesting a meeting of the senior executives from each party. Within ten (10) business days after such notice of a Dispute is given, each party shall select appropriate senior executives (e.g., director or V.P. level) of each party who shall have the authority to resolve the matter and shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. During the course of negotiations under this Section 5.1, all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating senior executives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within thirty (30) days after the first meeting of the negotiating senior executives, either party may commence litigation with respect to the Dispute. However, except as provided below in Section 5.2, neither party shall commence litigation against the other party to resolve the Dispute (i) until the parties try in good faith to settle the Dispute by negotiation for at least thirty (30) days after the first meeting of the negotiating senior executives or (ii) until forty (40) days after notice of a Dispute is given by either party to the other party, whichever occurs first. 5.2 PROCEEDINGS. Any Dispute regarding the following is not required to be negotiated prior to seeking relief from a court of competent jurisdiction: breach of any obligation of confidentiality; infringement, misappropriation, or misuse of any intellectual property right; or any other claim where interim relief from the court is sought to prevent serious and irreparable injury to a party. However, the parties shall make a good faith effort to negotiate such Dispute, according to Section 5.1, while such court action is pending. 5.3 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article V with respect to all matters not subject to such dispute, controversy or claim. -5- ARTICLE VI MISCELLANEOUS PROVISIONS 6.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES, LOST DATA OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 6.2 EXPORT RESTRICTIONS. Both parties shall adhere to all applicable laws, regulations and rules relating to the export of technical data, and shall not export or reexport any technical data, any products received from Disclosing Party, or the direct product of such technical data, to any proscribed country listed in such applicable laws, regulations and rules unless properly authorized. 6.3 NO IMPLIED LICENSES. Nothing contained in this Agreement shall be construed as conferring any rights by implication, estoppel or otherwise, under any intellectual property right, other than the rights expressly granted in this Agreement with respect to Confidential Information. Neither party is required hereunder to furnish or disclose to the other any technical or other information. 6.4 INFRINGEMENT SUITS. Neither party shall have any obligation hereunder to institute any action or suit against Third Parties for misappropriation of any of its Confidential Information or to defend any action or suit brought by a Third Party that alleges infringement of any intellectual property rights by the Receiving Party's authorized use of the Disclosing Party's Confidential Information. 6.5 ENTIRE AGREEMENT. This Agreement, the Master Separation Agreement, the other Ancillary Agreements and the Exhibits and Schedules referenced or attached hereto and thereto constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. 6.6 GOVERNING LAW. This Agreement shall be construed in accordance with and all Disputes hereunder shall be governed by the laws of the State of California, excluding its conflict of law rules and the United Nations Convention on Contracts for the International Sale of Goods. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California, San Jose Division, shall have jurisdiction and venue over all Disputes between the parties that are permitted to be brought in a court of law pursuant to Article V above. 6.7 NOTICES. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, -6- (iii) one (1) Business Day after being delivered by facsimile (with electronic receipt of appropriate confirmation), (iv) one (1) Business Day after being deposited with a nationally recognized overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of: IF TO ADAPTEC, INC.: Adaptec, Inc. 691 S. Milpitas Blvd. Milpitas, CA 95035 Attention: Vice President and General Counsel Facsimile No.: (408) 957-7137 with a copy to: Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Attention: Henry P. Massey, Jr. Facsimile No.: (650)-493-6811 IF TO ROXIO, INC.: Roxio, Inc. 461 South Milpitas Blvd. Milpitas, CA 95035 Attention: William Christopher Gorog Facsimile No.: (408) 957-7963 with a copy to: Gray Cary Ware & Freidenrich LLP 400 Capitol Mall, Suite 2400 Sacramento, CA 95814 Attention: Kevin A. Coyle Facsimile No.: (916)-930-3201 Adaptec and Roxio may substitute a different address or facsimile number, from time to time, if such substitute is provided to the intended notice recipient in writing by notice given in the manner provided in this Section 6.7. 6.8 COUNTERPARTS. This Agreement, including other documents referred to herein, may be executed in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. 6.9 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives and successors, and -7- nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may be enforced separately by each member of the Adaptec Group and each member of the Roxio Group. Except as herein specifically provided to the contrary, neither party may assign this Agreement or any rights or obligations hereunder, without the prior written consent of the other party, and any such assignment shall be void; provided, however, either party (or its permitted successive assignees or transferees hereunder) may assign or transfer this Agreement as a whole without consent to an entity that succeeds to all or substantially all of the business or assets of such party to which this Agreement relates. 6.10 SEVERABILITY. The parties hereto have negotiated and prepared the terms of this Agreement in good faith with the intent that each and every one of the terms, covenants and conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Agreement, to the extent possible consistent with its purposes, to conform to law. 6.11 WAIVER OF BREACH. The waiver by either party hereto of a breach or violation of any provision of this Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. 6.12 AMENDMENT AND EXECUTION. This Agreement and amendments hereto shall be in writing and executed in multiple copies via facsimile or otherwise on behalf of Adaptec and Roxio by their respective duly authorized officers and Representatives. Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument. 6.13 AUTHORITY. Each of the parties hereto represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other actions, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. 6.14 DESCRIPTIVE HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When a reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. -8- 6.15 GENDER AND NUMBER. Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine and neuter, and the number of all words herein shall include the singular and plural. 6.16 ADDITIONAL ASSURANCES. Except as may be specifically provided herein to the contrary, the provisions of this Agreement shall be self-operative and shall not require further agreement by the parties; provided, however, at the request of either party, the other party shall execute such additional instruments and take such additional acts as are reasonable, and as the requesting party may reasonably deem necessary, to effectuate this Agreement. 6.17 FORCE MAJEURE. Neither party shall be liable or deemed to be in default for any delay or failure in performance, other than of confidentiality and use restrictions, under this Agreement or other interruption of service deemed to result, directly or indirectly, from acts of God, civil or military authority, acts of public enemy, war, accidents, explosions, earthquakes, floods, failure of transportation, strikes or other work interruptions by either party's employees, or any other similar cause beyond the reasonable control of either party unless such delay or failure in performance is expressly addressed elsewhere in this Agreement. -9- WHEREFORE, the parties have signed this Master Confidential Disclosure Agreement effective as of the date first set forth above. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------- -------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog ---------------------------- ------------------------------ Title: President, Title: President and Chief Executive Officer Chief Executive Officer ---------------------------- ----------------------------- [SIGNATURE PAGE TO MASTER CONFIDENTIAL DISCLOSURE AGREEMENT] EX-2.7 9 a2056442zex-2_7.txt EXHIBIT 2.7 EXHIBIT 2.7 EXECUTION COPY MASTER TRANSITIONAL SERVICES AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. EFFECTIVE AS OF MAY 5, 2001 MASTER TRANSITIONAL SERVICES AGREEMENT This Master Transitional Services Agreement (the "Agreement") is effective as of May 5, 2001 between Adaptec, Inc., a Delaware corporation ("Adaptec"), having an office at 491 S. Milpitas Blvd., Milpitas, CA 95035 and Roxio, Inc., a Delaware corporation ("Roxio"), having an office at 461 S. Milpitas Blvd., Milpitas, CA 95035. Adaptec and Roxio are sometimes referred to herein individually as a "party" or collectively as the "parties." ARTICLE 1 DEFINITIONS For the purpose of this Agreement, the following capitalized terms shall have the following meanings: 1.1 ADAPTEC GROUP. "Adaptec Group" shall have the meaning set forth in Section 6.2 of the Master Separation and Distribution Agreement. 1.2 ADDITIONAL SERVICES. "Additional Services" shall have the meaning set forth in Section 3.5. 1.3 ANCILLARY AGREEMENTS. "Ancillary Agreements" shall have the meaning set forth in Section 2.1 of the Master Separation and Distribution Agreement. 1.4 DISPUTES. "Disputes" shall have the meaning set forth in Section 4.7 of the Master Separation and Distribution Agreement. 1.5 DISTRIBUTION DATE. "Distribution Date" shall have the meaning set forth in Section 3.2 of the Master Separation and Distribution Agreement. 1.6 IMPRACTICABLE. "Impracticable" shall have the meaning set forth in Section 3.3. 1.7 FORCE MAJEURE. "Force Majeure" shall have the meaning set forth in Article 11 hereof. 1.8 MASTER CONFIDENTIAL DISCLOSURE AGREEMENT. "Master Confidential Disclosure Agreement" shall mean that certain Master Confidential Disclosure Agreement dated May 5, 2001 between Adaptec and Roxio. 1.9 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master Separation and Distribution Agreement" shall mean that certain First Amended and Restated Master Separation and Distribution Agreement dated February 28, 2001 between Adaptec and Roxio. 1.10 ROXIO GROUP. "Roxio Group" shall have the meaning set forth in Section 6.29 of the Master Separation and Distribution Agreement. 1.11 SEPARATION DATE. "Separation Date" shall have the meaning set forth in Section 1.1 of the Master Separation and Distribution Agreement. 1.12 SERVICE(S). "Service(s)" shall have the meaning set forth in Section 3.1 hereof. 1.13 SUBCONTRACTOR. "Subcontractor" shall have the meaning set forth in Article 9 hereof. 1.14 SUBSIDIARY. "Subsidiary" shall have the meaning set forth in Section 6.32 of the Master Separation and Distribution Agreement. 1.15 TRANSITION SERVICE SCHEDULE. "Transition Service Schedule" shall have the meaning set forth in Article 2. ARTICLE 2 TRANSITION SERVICE SCHEDULES This Agreement will govern individual transitional services as requested by Roxio and provided by Adaptec, the details of which are set forth in the Transition Service Schedules (each transition service schedule, a "Transition Service Schedule") attached to this Agreement. Each Service shall be covered by this Agreement upon execution of a Transition Service Schedule in the form attached hereto. For each Service, the Transition Service Schedule shall be signed by a duly authorized representative of each party and set forth, among other things, the time period during which the Service will be provided if different from the term of this Agreement determined pursuant to Article 4 hereof, a summary of the Service to be provided; a description of the Service; and the estimated charge, if any, for the Service and any other terms applicable thereto. Obligations regarding each Transition Service Schedule shall be effective upon execution of this Agreement, or, if a particular Transition Service Schedule is amended or a new Transition Service Schedule is executed after the execution of this Agreement, the obligations created by such amendment or new Transition Service Schedule shall be effective upon execution of such amendment or such new Transition Service Schedule. This Agreement and all the Transition Service Schedules shall be defined as the "Agreement" and incorporated herein wherever reference to it is made. ARTICLE 3 SERVICES 3.1 SERVICES GENERALLY. Except as otherwise provided herein, for the term determined pursuant to Article 4 hereof, Adaptec shall provide or cause to be provided to Roxio the service(s) described in the Transition Service Schedule(s) attached hereto. The service(s) described on a single Transition Service Schedule shall be referred to herein as a "Service." Collectively, the -2- services described on all the Transition Service Schedules (including Additional Services) shall be referred to herein as "Services." 3.2 SERVICE BOUNDARIES. Except as provided in a Transition Service Schedule for a specific Service: (i) Adaptec shall be required to provide the Services only to the extent and only at the locations such Services are being provided by Adaptec for Roxio immediately prior to the Separation Date; and (ii) the Services will be available only for purposes of conducting the business of Roxio substantially in the manner it was conducted prior to the Separation Date. 3.3 IMPRACTICABILITY. Adaptec shall not be required to provide any Service to the extent the performance of such Service becomes "Impracticable" as a result of a cause or causes outside the reasonable control of Adaptec despite the Adaptec's good faith effort to provide the relevant Service including unfeasible technological requirements, or to the extent the performance of such Services (a) would require Adaptec (in the opinion of its counsel) to violate any applicable laws, rules or regulations or (b) would result in the breach of any software license or other applicable contract. 3.4 ADDITIONAL RESOURCES. Except as provided in a Transition Service Schedule for a specific Service, in providing the Services, Adaptec shall not be obligated to: (i) hire any additional employees; (ii) maintain the employment of any specific employee; (iii) purchase, lease or license any additional equipment or software; or (iv) pay any costs related to the transfer or conversion of Roxio's data to Roxio or any alternate supplier of Services. Prior to executing a Transition Service Schedule, the parties shall in good faith attempt to determine whether any of actions described in immediately preceding clauses (i), (ii) or (iii) would be required for Adaptec to perform the contemplated Services. 3.5 ADDITIONAL SERVICES. From time to time after the Separation Date, the parties may identify Services other than those described on the Transition Service Schedules attached hereto, that Adaptec will provide to Roxio in accordance with the terms of this Agreement (the "Additional Services"). Accordingly, the parties shall execute additional Transition Service Schedules for such Additional Services pursuant to Article 2. 3.6 OBLIGATIONS AS TO ADDITIONAL SERVICES. Except as set forth in the next sentence, Adaptec shall be obligated to perform, at a charge determined using the principles for determining fees under Section 5.1, any Additional Service that: (a) was provided by Adaptec immediately prior to the Separation Date and that Roxio reasonably believes was inadvertently or unintentionally omitted from the list of Services described in the Transition Service Schedules attached hereto, or (b) is in the reasonable opinion of the parties necessary or desirable to effectuate an orderly transition of the Roxio Business under the Master Separation and Distribution Agreement unless such performance would significantly disrupt Adaptec's operations or materially increase the scope of its responsibility under this Agreement. If Adaptec reasonably believes the performance of Additional Services required under subparagraphs (a) or (b) would significantly disrupt its operations or materially increase the scope of its responsibility under this Agreement, Adaptec and Roxio shall negotiate in good faith to establish terms under which Adaptec can provide such -3- Additional Services, but Adaptec shall not be obligated to provide such Additional Services if, following good faith negotiation, the parties are unable to reach agreement on such terms. ARTICLE 4 TERM The term of this Agreement shall commence on the Separation Date and shall remain in effect until one year after the Separation Date (the "Expiration Date"), unless earlier terminated under Article 7. This Agreement may be extended by the parties in writing, either in whole or with respect to one or more of the Services; provided, however, that such extension shall only apply to the Services for which the Agreement was extended. The parties shall be deemed to have extended this Agreement with respect to a specific Service if the Transition Service Schedule for such Service specifies a completion date beyond the aforementioned Expiration Date. The parties may agree on an earlier expiration date respecting a specific Service by specifying such date on the Transition Service Schedule for that Service. ARTICLE 5 COMPENSATION 5.1 CHARGES FOR SERVICES. Roxio shall pay Adaptec the charges, if any, set forth on the Transition Service Schedules for each of the Services listed therein as adjusted, from time to time, in accordance with the processes and procedures established under Section 5.4 and Section 5.5 hereof. Such fees shall include the costs, as determined using the process described in such Transition Service Schedule, of providing the Services plus five percent (5%), unless specifically indicated otherwise on a Transition Service Schedule. The parties also intend for charges to be easy to administer and justify and, therefore, they hereby acknowledge it may be counterproductive to try to recover every cost, charge or expense, particularly those that are insignificant or de minimus. The parties shall use good faith efforts to discuss any situation in which the actual charge for a Service is reasonably expected to exceed the estimated charge, if any, set forth on a Transition Service Schedule for a particular Service; provided, however, that the incurrence of charges in excess of any such estimate on such Transition Service Schedule shall not justify stopping the provision of, or payment for, Services under this Agreement. 5.2 PAYMENT TERMS. Adaptec shall bill Roxio monthly for all charges pursuant to this Agreement. Such bills shall be accompanied by reasonable documentation or other reasonable explanation supporting such charges. Roxio shall pay Adaptec for all Services provided hereunder within forty-five (45) days after receipt of an invoice therefor. Late payments shall bear interest at the lesser of 12% per annum or the maximum rate allowed by law. 5.3 PERFORMANCE UNDER ANCILLARY AGREEMENTS. Notwithstanding anything to the contrary contained herein, Roxio shall not be charged under this Agreement for any obligations that are specifically required to be performed under the Master Separation -4- and Distribution Agreement or any other Ancillary Agreement and any such other obligations shall be performed and any charge therefore levied in accordance with the terms of the Master Separation and Distribution Agreement or such other Ancillary Agreement. 5.4 ERROR CORRECTION; TRUE-UPS; ACCOUNTING. The parties shall reasonably agree in writing on a process and procedure for conducting internal audits and making adjustments to charges as a result of the movement of employees and functions between parties, the discovery of errors or omissions in charges, as well as a true-up of amounts owed. In no event shall such processes and procedures extend beyond two (2) years after completion of a Service. 5.5 PRICING ADJUSTMENTS. In the event of a tax audit adjustment relating to the pricing of any or all Services provided pursuant to this Agreement in which it is determined by a taxing authority that any of the charges, individually or in combination, did not result in an arm's-length payment, as determined under internationally accepted arm's-length standards, then the parties, including any Adaptec subcontractor providing Services hereunder, may agree to make corresponding adjustments to the charges in question for such period to the extent necessary to achieve arm's-length pricing. Any adjustment made pursuant to this Section 5.5 at any time during the term of this Agreement or after termination of this Agreement and shall be reflected in the parties' legal books and records, and the resulting underpayment or overpayment shall create, respectively, an obligation to be paid in the manner specified in Section 5.2, or shall create a credit against amounts owed under this Agreement. ARTICLE 6 GENERAL OBLIGATIONS; STANDARD OF CARE 6.1 PERFORMANCE METRICS: ADAPTEC. Subject to Section 3.4 and any other terms and conditions of this Agreement, Adaptec shall maintain sufficient resources to perform its obligations hereunder and under the Transition Service Schedules. Specific performance metrics for Adaptec for a specific Service may be set forth in the corresponding Transition Service Schedule. Where none is set forth, Adaptec shall use reasonable efforts to provide Services in accordance with the policies, procedures and practices in effect before the Separation Date relating to or in connection with the Roxio Business and shall exercise the same care and skill as it exercises in performing similar services for itself. 6.2 DISCLAIMER OF WARRANTIES. ADAPTEC MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES, SOFTWARE OR OTHER DELIVERABLES PROVIDED BY IT HEREUNDER. 6.3 PERFORMANCE METRICS: ROXIO. Specific performance metrics for Roxio for a specific Service may be set forth in the corresponding Transition Service Schedule. Where none is set forth, Roxio shall use reasonable efforts, in connection with receiving Services, to follow the -5- policies, procedures and practices in effect before the Separation Date including providing information and documentation sufficient for Adaptec to perform the Services as they were performed before the Separation Date and making available, as reasonably requested by Adaptec, adequate personnel and timely decisions, approvals and acceptances in order that Adaptec may accomplish its obligations hereunder in a timely manner. 6.4 TRANSITIONAL NATURE OF SERVICES; CHANGES. The parties acknowledge the transitional nature of the Services and that Adaptec may make changes from time to time in the manner of performing the Services if Adaptec is making similar changes in performing similar services for itself and if Adaptec furnishes to Roxio 60 days prior written notice regarding such changes. 6.5 RESPONSIBILITY FOR ERRORS; DELAYS. Adaptec's sole responsibility to Roxio: (a) for errors or omissions in Services, other than errors or omissions attributable to Adaptec's gross negligence or willful misconduct, shall be to furnish correct information, payment and/or adjustment in the Services, at no additional cost or expense to Roxio; provided, Roxio must promptly advise Adaptec of any such error or omission of which it becomes aware. (b) for failure to deliver any Service because of Impracticability, shall be to use reasonable efforts to make any portion of the Services which are not Impracticable available and/or to resume performing the Services which are or have become impracticable as promptly as reasonably practicable. 6.6 GOOD FAITH COOPERATION; CONSENTS. The parties will use good faith efforts to cooperate with each other in all matters relating to the provision and receipt of Services. Such cooperation shall include exchanging information, performing true-ups and adjustments, and obtaining all third party consents, licenses, sublicenses or approvals necessary to permit each party to perform its obligations hereunder and under any Transition Service Schedule (including by way of example, not by way of limitation, rights to use third party software needed for the performance of Services). The reasonable and documented costs of obtaining such third party consents, licenses, sublicenses or approvals shall be borne by Roxio. The parties will maintain in accordance with their respective standard document retention procedures, documentation supporting the information relevant to cost calculations contained in the Transition Service Schedules and cooperate with each other in making such information available as needed in the event of a tax audit, whether in the United States or any other country. 6.7 ALTERNATIVES. If Adaptec reasonably believes it is unable to provide any Service because of a failure to obtain necessary consents, licenses, sublicenses or approvals pursuant to Section 6.6 or because of Impracticability, the parties shall mutually and reasonably determine the best alternative approach. Until such alternative approach is found or the problem otherwise resolved to the satisfaction of the parties, Adaptec shall use reasonable efforts to continue providing the Service. To the extent a mutually agreed upon alternative approach requires payment above and beyond that which is included in Adaptec's charge for the Service in question, the parties shall share equally in making any such payment unless they otherwise agree in writing. -6- ARTICLE 7 TERMINATION 7.1 TERMINATION. Roxio may terminate this Agreement, either with respect to all or with respect to any one or more of the Services provided to Roxio hereunder, for any reason or for no reason, at any time upon thirty (30) days prior written notice to Adaptec. In addition, subject to the provisions of Article 12 below, either party may terminate this Agreement with respect to a specific Service if the other party materially breaches a material provision with regard to that particular Service and does not cure such breach (or does not take reasonable steps required under the circumstances to cure such breach) within thirty (30) days after being given written notice of the breach. 7.2 SURVIVAL. In the event of any termination with respect to one or more, but less than all Services, this Agreement shall continue in full force and effect with respect to any Services not terminated in accordance with the terms of this Agreement. 7.3 USER IDS, PASSWORDS. Each of the parties shall use good faith efforts at the termination or expiration of this Agreement, any specific Service hereunder or any Transition Service Schedule attached hereto to ensure that all applicable user IDs and passwords issued to such party by the other party are canceled or returned, as applicable. ARTICLE 8 RELATIONSHIP BETWEEN THE PARTIES It is expressly acknowledged that the parties are "independent contractors," and nothing in this Agreement is intended and nothing shall be construed to allow either party to exercise control or direction over the manner or method by which the other party performs the Services that are the subject matter of this Agreement; provided, that the Services to be provided hereunder shall be furnished in a manner consistent with the standards governing such Services and the provisions of this Agreement. Each party understands and agrees that (i) neither party will withhold on behalf of the other party any sums for income tax, unemployment insurance, social security or any other withholding pursuant to any law or requirement of any governmental body or make available any of the benefits afforded to its employees, (ii) all of such payments, withholdings and benefits, if any, are the sole responsibility of the party incurring the liability, and (iii) each party will indemnify and hold the other harmless from any and all loss or liability arising with respect to such payments, withholdings and benefits, if any. ARTICLE 9 SUBCONTRACTORS -7- Adaptec may engage a "Subcontractor" to perform all or any portion of Adaptec's duties under this Agreement, provided that any such Subcontractor agrees in writing to be bound by confidentiality obligations at least as protective as the terms of Article 10 regarding confidentiality below, and provided further that Adaptec remains responsible for the performance of such Subcontractor. As used in this Agreement, "Subcontractor" will mean any individual, partnership, corporation, firm, association, unincorporated organization, joint venture, trust or other entity engaged to perform hereunder. ARTICLE 10 CONFIDENTIALITY The terms of the Master Confidential Disclosure Agreement between the parties shall apply to any Confidential Information (as defined therein) which is the subject matter of this Agreement. ARTICLE 11 FORCE MAJEURE Each party will be excused for any failure or delay in performing any of its obligations under this Agreement, other than the obligations of Roxio to make certain payments to Adaptec pursuant to Article 5 hereof for services rendered, if such failure or delay is caused by Force Majeure. "Force Majeure" means any act of God or the public enemy, any accident, explosion, fire, storm, earthquake, flood, or any other circumstance or event beyond the reasonable control of the party relying upon such circumstance or event. ARTICLE 12 DISPUTE RESOLUTION Resolution of any and all Disputes arising from or in connection with this Agreement shall be exclusively governed by and settled in accordance with the provisions of this Article 12. 12.1 NEGOTIATION. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through informal negotiation between appropriate representatives from each of Adaptec and Roxio. If at any time either party feels that such negotiations are not leading to a resolution of the Dispute, such party may send a notice to the other party describing the Dispute and requesting a meeting of the senior executives from each party. Within ten (10) business days after such notice of a Dispute is given, each party shall select appropriate senior executives (e.g., director or V.P. level) of each party who shall have the authority to resolve the matter and shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. During the course of negotiations under this Section 12.1, all reasonable requests made by one party to the other for information, including requests for -8- copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating senior executives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within thirty (30) days after the first meeting of the negotiating senior executives, each party may commence litigation with respect to the Dispute. However, except as provided below in Section 12.2, neither party shall commence litigation against the other party to resolve the Dispute (i) until the parties try in good faith to settle the Dispute by negotiation for at least thirty (30) days after the first meeting of the negotiating senior executives or (ii) until forty (40) days after notice of a Dispute is given by either party to the other party, whichever occurs first. 12.2 PROCEEDINGS. Any Dispute regarding the following is not required to be negotiated prior to seeking relief from a court of competent jurisdiction: breach of any obligation of confidentiality; infringement, misappropriation, or misuse of any intellectual property right; or any other claim where interim relief from the court is sought to prevent serious and irreparable injury to a party. However, the parties shall make a good faith effort to negotiate such Dispute, according to Section 12.1, while such court action is pending. 12.3 PAY AND DISPUTE. Except as provided herein or in any Ancillary Agreement, in the event of any Dispute regarding which party is responsible for payment of a third-party invoice (subject to standard verification of receipt of products or services) relating to Services provided hereunder or under any transition Service Schedule, the party named in such invoice must make timely payment to such third party, even if the party named in the invoice desires to pursue the dispute resolution procedures outlined in this Article 12. If the party that paid the invoice is found pursuant to this Article 12 to not be responsible for such payment, such paying party shall be entitled to reimbursement, with interest accrued at a compound annual rate of the Prime Rate plus 2%, from the party found responsible for such payment. Such reimbursement shall be paid within thirty (30) days after the party that paid the invoice gives written notice to the party found responsible for payment of such invoice. 12.4 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article 12 with respect to all matters not subject to such dispute, controversy or claim. ARTICLE 13 MISCELLANEOUS 13.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING -9- NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 13.2 ENTIRE AGREEMENT. This Agreement, the Master Separation and Distribution Agreement and the other Ancillary Agreements and the Exhibits and Schedules referenced or attached hereto and thereto constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof and thereof. 13.3 GOVERNING LAW. This Agreement shall be construed in accordance with and all Disputes hereunder shall be governed by the laws of the State of California, excluding its conflict of law rules and the United Nations Convention on Contracts for the International Sale of Goods. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California, San Jose Division, shall have jurisdiction and venue over all Disputes between the parties that are permitted to be brought in a court of law pursuant to Section 12.2 above. 13.4 NOTICES. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) Business Day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one (1) Business Day after being deposited with a nationally recognized overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of: IF TO ADAPTEC, INC.: Adaptec, Inc. 691 S. Milpitas Blvd. Milpitas, CA 95035 Attention: Vice President and General Counsel Facsimile No.: (408) 957-7137 with a copy to: Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Attention: Henry P. Massey, Jr. Facsimile No.: 650-493-6811 IF TO ROXIO, INC.: Roxio, Inc. 461 South Milpitas Blvd. -10- Milpitas, CA 95035 Attention: William Christopher Gorog Facsimile No.: (408) 957-7963 with a copy to: Gray Cary Ware & Freidenrich LLP 400 Capitol Mall, Suite 2400 Sacramento, CA 95814 Attention: Kevin A. Coyle Facsimile No.: 916-930-3201 Adaptec and Roxio may substitute a different address or facsimile number, from time to time, if such substitute is provided to the intended notice recipient in writing by notice given in the manner provided in this Section 13.4. 13.5 COUNTERPARTS. This Agreement, including the Schedules and Exhibits hereto and the other documents referred to herein, may be executed in counterparts via facsimile or otherwise, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. 13.6 BINDING EFFECT; NONASSIGNABILITY. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may be enforced separately by each member of the Adaptec Group and each member of the Roxio Group. Except as herein specifically provided to the contrary, neither party may assign this Agreement or any rights or obligations hereunder, without the prior written consent of the other party, and any such assignment shall be void; provided, however, either party (or its permitted successive assignees or transferees hereunder) may assign or transfer this Agreement as a whole without consent to an entity that succeeds to all or substantially all of the business or assets of such party to which this Agreement relates. 13.7 SEVERABILITY. The parties hereto have negotiated and prepared the terms of this Agreement in good faith with the intent that each and every one of the terms, covenants and conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Agreement, to the extent possible consistent with its purposes, to conform to law. -11- 13.8 WAIVER OF BREACH. The waiver by either party hereto of a breach or violation of any provision of this Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. 13.9 AMENDMENT AND EXECUTION. This Agreement and amendments hereto shall be in writing and executed in multiple copies via facsimile or otherwise on behalf of Adaptec and Roxio by their respective duly authorized officers and representatives. Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument. 13.10 AUTHORITY. Each of the parties hereto represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other actions, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. 13.11 DESCRIPTIVE HEADINGS. The headings contained in this Agreement or in any Exhibit or Schedule hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article or a Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. 13.12 GENDER AND NUMBER. Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine and neuter, and the number of all words herein shall include the singular and plural. 13.13 ADDITIONAL ASSURANCES. Except as may be specifically provided herein to the contrary, the provisions of this Agreement shall be self-operative and shall not require further agreement by the parties; provided, however, at the request of either party, the other party shall execute such additional instruments and take such additional acts as are reasonable, and as the requesting party may reasonably deem necessary, to effectuate this Agreement. -12- IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed in duplicate originals by its duly authorized representatives. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------- -------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog ---------------------------- ------------------------------ Title: President, Title: President and Chief Executive Officer Chief Executive Officer ---------------------------- ----------------------------- [SIGNATURE PAGE TO MASTER TRANSITIONAL SERVICES AGREEMENT] EX-2.8 10 a2056442zex-2_8.txt EXHIBIT 2.8 Exhibit 2.8 EXECUTION COPY EMPLOYEE MATTERS AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. EFFECTIVE AS OF May 5, 2001 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS.................................................................................................1 1.1 Adaptec.............................................................................................1 1.2 Adaptec Business....................................................................................1 1.3 Adaptec Group.......................................................................................1 1.4 Adaptec Employee....................................................................................1 1.5 Affiliate...........................................................................................2 1.6 Agreement...........................................................................................2 1.7 Ancillary Agreements................................................................................2 1.8 California State Disability Insurance...............................................................2 1.9 COBRA...............................................................................................2 1.10 Code................................................................................................2 1.11 Distribution........................................................................................2 1.12 Distribution Date...................................................................................2 1.13 Employee Agreement..................................................................................2 1.14 ERISA...............................................................................................2 1.15 FMLA................................................................................................2 1.16 Health and Welfare Plans............................................................................2 1.17 Health Plans........................................................................................3 1.18 Leave of Absence Plans..............................................................................3 1.19 Liabilities.........................................................................................3 1.20 Nasdaq..............................................................................................3 1.21 Option..............................................................................................3 1.22 Participating Company...............................................................................3 1.23 Person..............................................................................................3 1.24 Plan................................................................................................3 1.25 Registration Date...................................................................................4 1.26 Roxio...............................................................................................4 1.27 Roxio Business......................................................................................4 1.28 Roxio Group.........................................................................................4 1.29 Roxio Employee......................................................................................4 1.30 Separation..........................................................................................4 1.31 Separation Agreement................................................................................4 1.32 Separation Date.....................................................................................4 1.33 Stock Plan..........................................................................................4 1.34 Stock Purchase Plan.................................................................................4 1.35 Subsidiary..........................................................................................4 1.36 Supplemental Short-Term Disability Plan.............................................................5 1.37 Voluntary Short-Term Disability Plan................................................................5 1.38 401(k) Plan.........................................................................................5
-i- TABLE OF CONTENTS (CONTINUED)
Page ---- ARTICLE II GENERAL PRINCIPLES.........................................................................................5 2.1 Liabilities.........................................................................................5 2.2 Establishment of Roxio Plans........................................................................5 2.3 Roxio Under No Obligation to Maintain Plans.........................................................6 2.4 Roxio's Participation in Adaptec Plans..............................................................6 2.5 Terms of Participation by Roxio Employees in Roxio Plans............................................6 2.6 Foreign Plans.......................................................................................7 ARTICLE III DEFINED CONTRIBUTION PLAN.................................................................................7 3.1 401(k) Plan.........................................................................................7 ARTICLE IV HEALTH AND WELFARE PLANS...................................................................................8 4.1 Health Plans as of the Distribution Date............................................................8 4.2 Health Plans through the Distribution Date..........................................................8 4.3 Group Life Plan.....................................................................................9 4.4 Accidental Death & Dismemberment Plan...............................................................9 4.5 Disability Plans....................................................................................9 4.6 Business Travel Accident Insurance..................................................................9 4.7 Section 125 Plans...................................................................................9 4.8 COBRA...............................................................................................9 4.9 Workers' Compensation Plan.........................................................................10 4.10 Leave of Absence Plans.............................................................................10 ARTICLE V EQUITY AND OTHER COMPENSATION..............................................................................10 5.1 Bonus and Retention Plans..........................................................................10 5.2 Adaptec Options....................................................................................10 5.3 Stock Purchase Plan................................................................................11 5.4 Stock Plan.........................................................................................11 ARTICLE VI ADMINISTRATIVE PROVISIONS.................................................................................11 6.1 Sharing of Participant Information.................................................................11 6.2 Costs and Expenses.................................................................................11 ARTICLE VII EMPLOYMENT-RELATED MATTERS...............................................................................11 7.1 Employee Agreements................................................................................11 7.2 Terms of Roxio Employment..........................................................................13 7.3 Non-Solicitation of Employees......................................................................13 7.4 Employment of Employees with United States Work Visas..............................................13 7.5 Employment Litigation..............................................................................13
-ii- TABLE OF CONTENTS (CONTINUED)
Page ---- ARTICLE VIII GENERAL PROVISIONS......................................................................................13 8.1 Effect if Separation and/or Distribution Does Not Occur............................................13 8.2 Relationship of Parties............................................................................14 8.3 Governing Law......................................................................................14 8.4 Assignment.........................................................................................14 8.5 Severability.......................................................................................14 8.6 Interpretation.....................................................................................14 8.7 Amendment..........................................................................................14 8.8 Termination........................................................................................14 8.9 Conflict...........................................................................................15 8.10 Counterparts.......................................................................................15 8.11 Dispute Resolution.................................................................................15
-iii- EMPLOYEE MATTERS AGREEMENT This EMPLOYEE MATTERS AGREEMENT (the "Agreement") is entered into on May 5, 2001, between Adaptec, Inc., a Delaware corporation, and Roxio, Inc., a Delaware corporation. Capitalized terms used herein (other than the formal names of Adaptec Plans (as defined below) and related trusts of Adaptec) and not otherwise defined, shall have the respective meanings assigned to them in Article I or as they may be defined elsewhere in this Agreement. WHEREAS, the Board of Directors of Adaptec has determined that it is in the best interests of Adaptec and its shareholders to separate Adaptec's existing businesses into two (2) independent businesses, Adaptec and Roxio; and WHEREAS, in furtherance of the foregoing, Adaptec and Roxio have agreed to enter into this Agreement to allocate between them Assets, Liabilities and responsibilities with respect to certain employee compensation, benefit plans, programs and arrangements, and certain employment matters; NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows: ARTICLE I DEFINITIONS Wherever used in this Agreement, the following terms shall have the meanings indicated below or as such term may be defined elsewhere in this Agreement, unless a different meaning is plainly required by the context. The singular shall include the plural, unless the context indicates otherwise. Headings of sections are used for convenience of reference only, and in case of conflict, the text of this Agreement, rather than such headings, shall control: 1.1 ADAPTEC. "Adaptec" means the Adaptec Business and the Adaptec Group. 1.2 ADAPTEC BUSINESS. "Adaptec Business" has the meaning set forth in Section 6.1 of the Separation Agreement. 1.3 ADAPTEC GROUP. "Adaptec Group" has the meaning set forth in Section 6.2 of the Separation Agreement. 1.4 ADAPTEC EMPLOYEE. "Adaptec Employee" means an individual who is: (a) on the Separation Date actively employed by, or on leave of absence from, Adaptec (b) an employee or among a group of employees designated as Adaptec Employees by Adaptec and Roxio, by mutual agreement; or (c) an employee of Adaptec or Roxio who, prior to the Distribution Date, is on, or begins, a company approved leave of absence until the earlier of (i) the employee's termination of employment, (ii) the passage of six months as measured from the employee's last day of active work, or (iii) the employee is medically released to return to work. Notwithstanding the -1- foregoing, in the event an employee begins an approved leave of absence prior to the Distribution Date, and the employee has been designated a Roxio Employee prior to such leave of absence, then such employee shall be deemed to be an Adaptec Employee during such leave of absence. Upon the expiration of such leave of absence, such employee's employment with Adaptec shall be terminated. 1.5 AFFILIATE. "Affiliate" means, with respect to any specified Person, any entity that Controls, is Controlled by, or is under common Control with such Person. For this purpose, "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by control, or otherwise. 1.6 AGREEMENT. "Agreement" means this Employee Matters Agreement, including all the Schedules hereto, if any, and all amendments made hereto from time to time. 1.7 ANCILLARY AGREEMENTS. "Ancillary Agreements" has the meaning set forth in Section 2.1 of the Separation Agreement. 1.8 CALIFORNIA STATE DISABILITY INSURANCE. "California State Disability Insurance" means the disability insurance made available and administered by the State of California to employers and employees. 1.9 COBRA. "COBRA" means the continuation coverage requirements for "group health plans" under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time, and as codified in Code Section 4980B and ERISA Sections 601 through 608. 1.10 CODE. "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.11 DISTRIBUTION. "Distribution" has the meaning set forth in the Recitals of the Separation Agreement. 1.12 DISTRIBUTION DATE. "Distribution Date" has the meaning set forth in Section 6.13 of the Separation Agreement. 1.13 EMPLOYEE AGREEMENT. "Employee Agreement" has the meaning set forth in Section 8.1 hereof. 1.14 ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.15 FMLA. "FMLA" means the Family and Medical Leave Act of 1993, as amended from time to time. 1.16 HEALTH AND WELFARE PLANS. "Health and Welfare Plans," when immediately preceded by "Adaptec," means the Adaptec Health Plans, the Adaptec Code Section 125/Flexible -2- Spending Plan (the "Adaptec 125 Plan"), established and maintained by Adaptec for the benefit of eligible employees of Adaptec, and such other welfare plans or programs as may apply to such employees through the Distribution Date. When immediately preceded by "Roxio," Health and Welfare Plans means the Roxio Health Plans, the Roxio Code Section 125/Flexible Spending Plan (if applicable) (the "Roxio 125 Plan"), established and maintained by Roxio for the benefit of eligible employees of Roxio, and such other welfare plans or programs that Roxio may establish. 1.17 HEALTH PLANS. "Health Plans," when immediately preceded by "Adaptec," means the medical, HMO, vision, and dental plans and any similar or successor Plans. When immediately preceded by "Roxio," "Health Plans" means the medical, HMO, vision and dental plans that may be established by Roxio. 1.18 LEAVE OF ABSENCE PLANS. "Leave of Absence Plans," when immediately preceded by "Adaptec," means the personal, medical/disability, military, FMLA and other leave of absence programs that are offered, or may in the future be offered, from time to time under the personnel policies and practices of Adaptec. When immediately preceded by "Roxio," "Leave of Absence Plans" means the leave of absence programs that may be established by Roxio. 1.19 LIABILITIES. "Liabilities" means all debts, liabilities, guarantees, assurances, commitments, and obligations, whether fixed, contingent or absolute, asserted or unasserted, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due, whenever or however arising (including, without limitation, whether arising out of any Contract or tort based on negligence or strict liability) and whether or not the same would be required by generally accepted accounting principles to be reflected in financial statements or disclosed in the notes thereto. For this purpose, "Contract" means any contract, agreement, lease, license, sales order, purchase order, instrument or other commitment that is binding on any Person or any part of its property under applicable law. 1.20 NASDAQ. "Nasdaq" means the Nasdaq National Market. 1.21 OPTION. "Option," when immediately preceded by "Adaptec," means an option to purchase Adaptec common stock pursuant to an Adaptec Stock Plan. When immediately preceded by "Roxio," "Option" means an option to purchase Roxio common stock pursuant to a Roxio Stock Plan. 1.22 PARTICIPATING COMPANY. "Participating Company" means: (a) Adaptec; (b) any Person (other than an individual) that Adaptec has approved for participation in, has accepted participation in, and which is participating in, a Plan sponsored by Adaptec; and (c) any Person (other than an individual) which, by the terms of such Plan, participates in such Plan or any employees of which, by the terms of such Plan, participate in or are covered by such Plan. 1.23 PERSON. "Person" has the meaning as set forth in Section 6.22 of the Separation Agreement. 1.24 PLAN. "Plan" means any plan (including any of the health and welfare plans), policy, program, payroll practice, arrangement, contract, trust, insurance policy, or any agree- -3- ment or funding vehicle providing compensation or benefits to employees, former employees, directors or consultants of Adaptec or Roxio. 1.25 REGISTRATION DATE. "Registration Date" means the date on which the Form 10 Registration Statement (as defined in the Separation Agreement) is declared effective by the Securities and Exchange Commission. 1.26 ROXIO. "Roxio" means the Roxio Business and the Roxio Group. 1.27 ROXIO BUSINESS. "Roxio" Business" has the meaning as set forth in Section 6.28 of the Separation Agreement. 1.28 ROXIO GROUP. "Roxio" Group" has the meaning as set forth in Section 6.29 of the Separation Agreement. 1.29 ROXIO EMPLOYEE. "Roxio Employee" means any individual who: (a) is actively employed by Roxio on the Separation Date; (b) prior to the Distribution Date, moves to the employ of Roxio from the employ of Adaptec; (c) is an employee or group of employees designated as Roxio Employees by Adaptec and Roxio, by mutual agreement, (d) is an individual employed by Roxio on or after the Separation Date; provided, however, that (e) a Roxio Employee shall not mean to include an employee of Roxio, who, after the Separation Date but prior to the Distribution Date, begins a company approved leave of absence. 1.30 SEPARATION. "Separation" has the meaning set forth in the Recitals of the Separation Agreement. 1.31 SEPARATION AGREEMENT. "Separation Agreement" means the First Amended and Restated Master Separation and Distribution Agreement, dated as of February 28, 2001, of which this is Exhibit E thereto. 1.32 SEPARATION DATE. "Separation Date" has the meaning set forth in Section 1.1 of the Separation Agreement. 1.33 STOCK PLAN. "Stock Plan," when immediately preceded by "Adaptec," means any plan, program, or arrangement, other than the Stock Purchase Plan, pursuant to which employees, directors and consultants hold Options, Adaptec Restricted Stock, or other Adaptec equity incentives. "Stock Plan," when immediately preceded by "Roxio," means any plan, program, or arrangement, other than the Stock Purchase Plan, pursuant to which employees, directors and consultants hold Options, Roxio Restricted Stock, or other Roxio equity incentives. 1.34 STOCK PURCHASE PLAN. "Stock Purchase Plan," when immediately preceded by "Adaptec," means the Adaptec Employee Stock Purchase Plan. When immediately preceded by "Roxio," "Stock Purchase Plan" means the employee stock purchase plan to be established by Roxio. 1.35 SUBSIDIARY. "Subsidiary" has the meaning set forth in Section 6.32 of the Separation Agreement. -4- 1.36 SUPPLEMENTAL SHORT-TERM DISABILITY PLAN. Supplemental Short Term Disability Plan means the disability plan offered by Adaptec that is offered to eligible individuals that is not in lieu of, but is addition to, the benefits provided under the Adaptec Voluntary Short Term Disability Plan. 1.37 VOLUNTARY SHORT-TERM DISABILITY PLAN. The Voluntary Short-Term Disability Plan means the disability plan offered by Adaptec that is offered to eligible individuals that covers Adaptec Employees who are employed in California and that is offered in lieu of California State Disability Insurance. 1.38 401(K) PLAN. "401(k) Plan," when immediately preceded by Adaptec means the qualified retirement plan of Adaptec. When immediately preceded by Roxio, "401(k) Plan" shall mean the qualified retirement plan that Roxio shall establish, sponsor, and maintain effective as of the Distribution Date or such other date as Adaptec and Roxio may mutually agree. ARTICLE II GENERAL PRINCIPLES 2.1 LIABILITIES. Except as specified otherwise in this Agreement or as mutually agreed upon by Roxio and Adaptec from time to time, effective as of the Separation Date, Roxio shall pay to Adaptec an amount that equals twenty-five percent (25%) of Roxio's adjusted payroll charges during the time from the Separation Date up to the Distribution Date. Except as specified otherwise in this Agreement or as mutually agreed upon by Roxio and Adaptec, any Liability incurred with respect to Adaptec Plans by Roxio as a Participating Company up to the Distribution Date shall be borne solely by Adaptec, and any Liability incurred with respect to Roxio Plans, as then, or in the future, may be established, from the Distribution Date forward will be borne solely by Roxio. 2.2 ESTABLISHMENT OF ROXIO PLANS (a) HEALTH AND WELFARE PLANS. Effective as of the Distribution Date, Roxio shall have in place and will have adopted the Roxio Health and Welfare Plans. (b) 401(K) PLAN. Effective as of the Distribution Date (or such other date as Adaptec and Roxio may mutually agree), Roxio shall establish, or cause to be established, a separate trust, which is intended to be tax-qualified under Code Section 401(a), to be exempt from taxation under Code Section 501(a)(1), and to form the Roxio 401(k) Plan. (c) EQUITY AND OTHER COMPENSATION. Except as specified otherwise in this Agreement, effective on or before the Separation Date (or such other date(s) as Adaptec and Roxio may mutually agree), Roxio shall adopt the Roxio Stock Plans. Effective on or before the Registration Date (or such other date as Adaptec and Roxio may mutually agree), Roxio shall adopt the Roxio Stock Purchase Plan. -5- (d) OTHER PLANS. Except as otherwise specified in this Agreement, effective as of the Distribution Date Roxio shall adopt certain Roxio Plans that are specifically tied to its payroll practices, including, without limitation, such Plans that Roxio deems appropriate. 2.3 ROXIO UNDER NO OBLIGATION TO MAINTAIN PLANS. Except as specified otherwise in this Agreement, nothing in this Agreement shall preclude Roxio, at any time after the Distribution Date, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Roxio Plan, any benefit under any Roxio Plan or any trust, insurance policy or funding vehicle related to any Roxio Plans, or any employment or other service arrangement with Roxio Employees, consultants or vendors (to the extent permitted by law). 2.4 ROXIO'S PARTICIPATION IN ADAPTEC PLANS. (a) PARTICIPATION IN ADAPTEC PLANS. Except as specified otherwise in this Agreement or as Adaptec and Roxio may mutually agree, Roxio shall, until the Distribution Date, continue to be a Participating Company in the Adaptec Plans. (b) ADAPTEC'S GENERAL OBLIGATIONS AS PLAN SPONSOR. To the extent that Roxio is a Participating Company in any Adaptec Plan, Adaptec shall continue to administer, or cause to be administered, in accordance with its terms and applicable law, such Adaptec Plan, and shall have the sole and absolute discretion and authority to interpret the Adaptec Plan, as set forth therein. Notwithstanding the foregoing, Adaptec may at any time amend, merge, modify, terminate, eliminate, reduce, or otherwise alter any Adaptec Plan to the extent permitted by law and the terms of such Adaptec Plan. (c) ROXIO'S GENERAL OBLIGATIONS AS PARTICIPATING COMPANY. Roxio shall perform, with respect to its participation in the Adaptec Plans, the duties of a Participating Company as set forth in each such Plan or any procedures adopted pursuant thereto, including (without limitation): (i) assistance in the administration of claims, to the extent requested by the claims administrator of the applicable Adaptec Plan; (ii) full cooperation with Adaptec Plan auditors, benefit personnel and benefit vendors; (iii) preservation of the confidentiality of all financial arrangements Adaptec has or may have with any vendors, claims administrators, trustees, service providers or any other entity or individual with whom Adaptec has entered into an agreement relating to the Adaptec Plans; and (iv) preservation of the confidentiality of participant information (including, without limitation, health information in relation to leaves) to the extent not specified otherwise in this Agreement. (d) TERMINATION OF PARTICIPATING COMPANY STATUS. Except as specified otherwise in this Agreement or as mutually agreed upon by Roxio and Adaptec, effective as of the Distribution Date, Roxio shall automatically cease to be a Participating Company in any and all Adaptec Plans. 2.5 TERMS OF PARTICIPATION BY ROXIO EMPLOYEES IN ROXIO PLANS (a) Non-Duplication of Benefits. Except as specified otherwise in this Agreement or as mutually agreed upon by Roxio and Adaptec, effective as of the Distribution -6- Date, Adaptec and Roxio shall agree on methods and procedures, including amending the respective Plan documents, to prevent Roxio Employees from receiving duplicate benefits from the Adaptec Plans and the Roxio Plans, except as may be set forth in Section 5.3 and Section 5.4 of this Agreement. (b) SERVICE CREDIT. Except as specified otherwise in this Agreement, with respect to Roxio Employees, Roxio shall make reasonable efforts to provide that all service and all other benefit-affecting determinations that, as of the Distribution Date, were recognized under the corresponding Adaptec Plan shall, as of the Distribution Date, receive full recognition and credit and be taken into account under such Roxio Plan to the same extent as if such items occurred under such Roxio Plan, except to the extent that duplication of benefits would result. 2.6 FOREIGN PLANS. Roxio and Adaptec each intend that the matters, issues or Liabilities relating to, arising out of, or resulting from foreign plans and non-U.S.-related employment matters be handled in a manner that is in compliance with the requirements of applicable local law. ARTICLE III DEFINED CONTRIBUTION PLAN 3.1 401(K) PLAN (a) 401(K) PLAN TRUST. Effective as of the Distribution Date (or such other date as Adaptec and Roxio may mutually agree), Roxio shall establish, or cause to be established, a separate trust, which is intended to be tax-qualified under Code Section 401(a), to be exempt from taxation under Code Section 501(a)(1), and to form the Roxio 401(k) Plan. (b) 401(K) PLAN: ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS. Effective as of the Distribution Date (or such other date as Adaptec and Roxio may mutually agree): (i) the Roxio 401(k) Plan shall assume and be solely responsible for all Liabilities relating to, arising out of, or resulting from Roxio Employees under the Adaptec 401(k) Plan; and (ii) Adaptec shall cause the accounts of the Roxio Employees under the Adaptec 401(k) Plan that are held by its related trust to be transferred to the Roxio 401(k) Plan and its related trust, and Roxio shall cause such transferred accounts to be accepted by such Plan and its related trust. Roxio and Adaptec each agree to use their reasonable best efforts to accomplish this 401(k) Plan and related trust spin-off. (c) NO DISTRIBUTION TO ROXIO EMPLOYEES. The Adaptec 401(k) Plan and the Roxio 401(k) Plan shall provide that no distribution of account balances shall be made to any Roxio Employee on account of Roxio ceasing to be an Affiliate of Adaptec as of the Distribution Date. -7- ARTICLE IV HEALTH AND WELFARE PLANS 4.1 HEALTH PLANS AS OF THE DISTRIBUTION DATE. (a) ROXIO HEALTH PLANS. As of the Distribution Date (or such other date(s) as Adaptec and Roxio may mutually agree), Roxio shall have established Roxio Health Plans that will provide coverage for Roxio Employees (and their eligible dependents). Effective as of the last day of the month in which the Distribution Date occurs, Roxio Employees shall cease to be covered under the Adaptec Health Plans, and Roxio shall be solely responsible for (i) all Liabilities incurred with respect to such Roxio Health Plans; and (ii) the administration of the Roxio Health Plans, including, without limitation, the payment of all employer-related costs in establishing and maintaining the Roxio Health Plans, and for the collection and remittance of employee premiums from such date forward. (b) PENDING TREATMENTS. Notwithstanding Subsection 4.1(a) above, all courses of treatment that have begun prior to the Distribution Date with respect to Roxio Employees (or their eligible dependents) under the applicable Adaptec Health Plan shall be provided without interruption under the applicable Adaptec Health Plan until the earlier of: (i) such course of treatment is concluded or discontinued or (ii) ninety (90) days from the date medical attention was first received with respect to such course of treatment ("Uninterrupted Treatment"). For purposes of this Section 4.1(b) only, courses of treatment means that a Roxio Employee, prior to the Distribution Date, has received, and at the Distribution Date is still receiving, medical treatment for a specific illness or injury and such Uninterrupted Treatment is applicable only to that specific illness or injury. (c) VENDOR ARRANGEMENTS. If requested by Roxio and if agreed to by Adaptec, Adaptec shall use reasonable efforts in assisting Roxio to procure, effective as of the Distribution Date (or such other date(s) as Adaptec and Roxio may mutually agree), Roxio Health Plans. (d) NO STATUS CHANGE. The transfer or other movement of employment between Adaptec to Roxio at any time upon or before the Distribution Date shall neither constitute nor be treated as a "status change" or termination of employment under the Adaptec Health Plans or the Roxio Health Plans. 4.2 HEALTH PLANS THROUGH THE DISTRIBUTION DATE.. Except as otherwise agreed by Adaptec and Roxio, for the period beginning with the Separation Date and ending on the last day of the month in which the Distribution Date falls (or such other period as Adaptec and Roxio may mutually agree), Roxio Employees shall continue to participate in the Adaptec Health Plans. Adaptec shall administer and be responsible for claims incurred under the Adaptec Health Plans by Roxio Employees until the last day of the month in which the Distribution Date occurs, subject to the limitations as set forth in Section 4.1(b). Any determination made or settlements entered into by Adaptec with respect to such claims shall be final and binding. Adaptec shall retain financial and administrative ("run-out") Liability and all related obligations and responsi- -8- bilities for all claims incurred by Roxio Employees until the last day of the month in which the Distribution Date occurs, subject to the limitations as set forth in Section 4.1(b). 4.3 GROUP LIFE PLAN. Roxio shall, until the Distribution Date (or such other date as Adaptec and Roxio may mutually agree), continue to be a Participating Company in any Adaptec group life insurance plan or arrangement. 4.4 ACCIDENTAL DEATH & DISMEMBERMENT PLAN. Roxio shall, until the Distribution Date (or such other date as Adaptec and Roxio may mutually agree), continue to be a Participating Company in the Adaptec accidental death & dismemberment Plan. 4.5 DISABILITY PLANS. (a) SHORT-TERM DISABILITY PLAN. Roxio shall, until the Distribution Date (or such other date as Adaptec and Roxio may mutually agree), continue to be a Participating Company in the Adaptec Supplemental Short-Term Disability Plan. With respect to Roxio Employees who are employed in California, said employees will be covered by California State Disability Insurance in lieu of being eligible to receive benefits under the Adaptec Voluntary Short-Term Disability Plan. (b) LONG-TERM DISABILITY PLAN. Roxio shall, until the Distribution Date (or such other date as Roxio and Adaptec may mutually agree), continue to be a Participating Company in the Adaptec long-term disability plan. 4.6 BUSINESS TRAVEL ACCIDENT INSURANCE. Roxio shall, until the Distribution Date (or such other date as Roxio and Adaptec may mutually agree), continue to be a Participating Company in the Adaptec business travel accident insurance Plan. 4.7 SECTION 125 PLANS. (a) CAFETERIA PLAN. Roxio shall, until the Distribution Date (or such other date as Roxio and Adaptec may mutually agree), continue to be a Participating Company in the Adaptec 125 Plan. Effective as of the Distribution Date, Roxio may establish, in its sole discretion, a Roxio 125 Plan for the benefit of Roxio Employees. (b) FLEXIBLE SPENDING ACCOUNT PLAN. Until the Distribution Date, Roxio shall continue to be a Participating Company in the health care spending account and dependent care spending account (the "Adaptec Flexible Spending Accounts") of the Adaptec 125 Plan. Effective as of the Distribution Date, Roxio shall cause to be implemented and shall sponsor a Roxio health care spending account and dependent care spending account (the "Roxio Flexible Spending Accounts") for the benefit of Roxio Employees that is substantially similar to that of the Adaptec Flexible Spending Accounts. 4.8 COBRA. Adaptec shall be responsible for providing COBRA continuation coverage (for the applicable period of time as required by law) to Roxio Employees and their eligible dependents who become eligible for such coverage prior to the Distribution Date. Effective as of the Distribution Date, Roxio shall be responsible for providing COBRA -9- continuation coverage to Roxio Employees and their eligible dependents who become eligible for such coverage on and following the Distribution Date. 4.9 WORKERS' COMPENSATION PLAN. Effective as of the Separation Date, or such other date as Adaptec and Roxio may mutually agree, Adaptec shall establish a workers' compensation plan for the benefit of Roxio Employees (the "Separation Date Workers' Compensation Plan"). Effective as of the Distribution Date, Roxio shall establish, terminate or renegotiate the terms of the Separation Date Workers' Compensation Plan. Any Liabilities that accrue under the Separation Date Workers' Compensation Plan from the time of implementation of the Separation Date Workers' Compensation Plan to the Distribution Date shall be liabilities of Adaptec. Any Liabilities that accrue under the Separation Date Workers' Compensation Plan from the Distribution Date shall be Liabilities of Roxio. 4.10 LEAVE OF ABSENCE PLANS. Until the Distribution Date, Roxio Employees shall continue to be eligible to participate in the Leave of Absence Plans of Adaptec, subject to Section 4.5 (a) of this Agreement. Effective as of the Distribution Date, Roxio Employees shall not be eligible to participate in the Adaptec Leave of Absence Plans. ARTICLE V EQUITY AND OTHER COMPENSATION 5.1 BONUS AND RETENTION PLANS. (a) Effective at the Separation Date (or such other date as Roxio and Adaptec may mutually agree), Roxio shall cease to continue to be a Participating Company in applicable Adaptec bonus plans that Roxio Employees were eligible to receive awards under prior to the Separation Date. In Roxio's sole and absolute discretion it may establish a Roxio bonus plan on or after the Separation Date, and any award earned or accrued under such plan (as is applicable) shall be the sole responsibility of Roxio. (b) CEQUADRANT AND WILDFILE RETENTION PLANS. Roxio will assume, administer and be responsible for payments under the Cequadrat retention plan and the Wildfile retention Plan upon and following the Separation Date. Any award earned and payable under the Cequadrant and Wildfile retention Plans prior to the Separation Date shall be the responsibility of and payable by Adaptec. Any award that is earned and payable pursuant to the Cequadrant and Wildfile retention Plans following the Separation Date shall be the responsibility of and payable by Roxio. 5.2 ADAPTEC OPTIONS. (a) NO OPTION ASSUMPTION BY ROXIO. Each outstanding Adaptec Option held by Roxio Employees, whether vested or unvested, shall not be assumed by Roxio and shall remain subject to the terms and conditions of the Adaptec option plan under which such options were granted. -10- (b) CERTAIN NON-U.S. OPTIONEES. Except as may otherwise be agreed upon by Adaptec and Roxio this Section 5.2 shall govern the treatment of Adaptec Options held by non-U.S. Roxio Employees. 5.3 STOCK PURCHASE PLAN. Through the Distribution Date, Roxio Employees shall continue to be eligible for participation in the Adaptec Stock Purchase Plan. Effective on or before the Distribution Date (or such other date as Adaptec and Roxio may mutually agree), Roxio shall establish and sponsor a Stock Purchase Plan for the benefit of Roxio Employees. Effective as of the Distribution Date, Roxio Employees shall cease to be eligible to participate in and to have any further payroll deductions withheld pursuant to the Adaptec Stock Purchase Plan. 5.4 STOCK PLAN. Through the Distribution Date, Roxio Employees shall continue to be eligible for participation in the Adaptec Stock Plan. Effective on or before the Registration Date (or such other date as Adaptec and Roxio may mutually agree), Roxio shall establish and sponsor a Stock Plan for the benefit of Roxio Employees, directors and consultants. ARTICLE VI ADMINISTRATIVE PROVISIONS 6.1 SHARING OF PARTICIPANT INFORMATION. Adaptec and Roxio shall share, or cause to be shared, all participant information that is necessary or appropriate for the efficient and accurate administration of each of the Adaptec Plans and the Roxio Plans during the respective periods applicable to such Plans as Roxio and Adaptec may mutually agree. Adaptec and Roxio and their respective authorized agents shall, subject to applicable laws of confidentiality and data protection, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other party or its agents, to the extent necessary or appropriate for such administration. 6.2 COSTS AND EXPENSES. Roxio shall bear all costs and expenses, including but not limited to legal and actuarial fees, incurred from and after the Distribution Date in the design, drafting and implementation of any and all plans and compensation structures which it establishes or creates and the amendment of its existing plans or compensation structures. ARTICLE VII EMPLOYMENT-RELATED MATTERS 7.1 EMPLOYEE AGREEMENTS. DEFINITION. As used in this Section 7.1, "Employee Agreement" means Adaptec's Employee Information Agreements and corresponding agreements in foreign countries executed by each Adaptec employee. (a) SURVIVAL OF ADAPTEC EMPLOYEE AGREEMENT OBLIGATIONS AND ADAPTEC'S COMMON LAW RIGHTS. All former Adaptec employees transferred to Roxio as of the Separation -11- Date shall remain bound by the Adaptec Employee Agreements as if such employees had been terminated by Adaptec as of the Separation Date; PROVIDED, HOWEVER, that none of the following acts committed by former Adaptec employees within the scope of their Roxio employment shall constitute a breach of such Adaptec Employee Agreements: (i) the use or disclosure of Confidential Information (as that term is defined in the former Adaptec employee's Adaptec Employee Agreement) for or on behalf of Roxio, if such disclosure is consistent with the license rights granted to Roxio and restrictions imposed on Roxio by this Agreement or any other Ancillary Agreement or any other agreement between the parties. Further, Adaptec retains any rights it has under statute or common law with respect to actions by its former employees to the extent such actions are inconsistent with the rights granted to Roxio and restrictions imposed on Roxio under this Agreement, any other Ancillary Agreement or any other agreement between the parties. (b) ASSIGNMENT, COOPERATION FOR COMPLIANCE AND ENFORCEMENT. (i) Adaptec retains all rights under the Adaptec Employee Agreements of all former Adaptec employees necessary to permit Adaptec to protect the rights and interests of Adaptec, but hereby transfers and assigns to Roxio its rights under the Adaptec Employee Agreements of all former Adaptec employees to the extent required to permit Roxio to enjoin, restrain, recover damages from or obtain specific performance of the Adaptec Employee Agreements or obtain other remedies against any employee who breaches his/her Adaptec Employee Agreement, and to the extent necessary to permit Roxio to protect the rights and interests of the Roxio Business on the Separation Date. (ii) Adaptec and Roxio agree, at their own respective cost and expense, to use their reasonable efforts to cooperate as follows: (A) Roxio shall advise Adaptec of: (1) any violation(s) of the Adaptec Employee Agreement by former Adaptec employees, and (2) any violation(s) of the Roxio Employee Agreement which affect Adaptec's rights; and (B) Adaptec shall advise Roxio of any violations of the Adaptec Employee Agreement by current or former Adaptec employees which affect Roxio's rights; PROVIDED, HOWEVER, that the foregoing obligations shall only apply to violations which become known to an attorney within the legal department of the party obligated to provide notice thereof. (iii) Adaptec and Roxio each may separately enforce the Adaptec Employee Agreements of former Adaptec employees to the extent necessary to reasonably protect their respective interests, PROVIDED, HOWEVER, that (x) Roxio shall not, prior to the Distribution Date, commence any litigation relating thereto without first consulting with Adaptec's General Counsel or his/her designee and (y) Adaptec shall not, prior to the Distribution Date, commence any litigation relating thereto against any former Adaptec employee who is at the time a Roxio employee without first consulting with Roxio's Chief Executive Officer or his/her designee. (iv) Adaptec and Roxio understand and acknowledge that matters relating to the making, performance, enforcement, assignment and termination of employee agreements are typically governed by the laws and regulations of the national, federal, state or local governmental unit where an employee resides, or where an employee's services are -12- rendered, and that such laws and regulations may supersede or limit the applicability or enforceability of this Section 7.1. In such circumstances, Adaptec and Roxio agree to take action with respect to the employee agreements that best accomplishes the parties' objectives as set forth in this Section 7.1 and that is consistent with applicable law. 7.2 TERMS OF ROXIO EMPLOYMENT. At or before the Separation Date, Roxio Employees shall be required to execute a new agreement regarding confidential information and proprietary developments, if such form is required at the sole and absolute discretion of Roxio. In addition, nothing in this Agreement shall be construed to change the at-will status of the employment of any of the employees of Adaptec or Roxio. 7.3 NON-SOLICITATION OF EMPLOYEES. Adaptec and Roxio each agree that, effective as of the Distribution Date, Adaptec and Roxio shall not solicit or recruit, without the other party's express written consent, the other party's employees for a period of one (1) year following the Distribution Date. To the extent this prohibition is waived by way of each party's express written consent, any recruitment efforts by either Adaptec or Roxio during the period of one (1) year after the Distribution Date shall be coordinated with appropriate management personnel, as Adaptec and Roxio shall mutually agree, of Adaptec or Roxio. Notwithstanding the foregoing, this prohibition on solicitation does not apply to actions taken by a party either: (a) solely as a result of an employee's affirmative response to a general recruitment effort carried out through a public solicitation or general solicitation, or (b) as a result of an employee's initiative. 7.4 EMPLOYMENT OF EMPLOYEES WITH UNITED STATES WORK VISAS. Roxio Employees with U.S. work visas authorizing them to work for Roxio will continue to hold work authorization for Roxio after the Separation Date. Roxio will request amendments to the nonimmigrant visa status of Roxio Employees with U.S. work visas authorizing them to work for Adaptec so that such employees may, pursuant to the amended work visas, provides services to Roxio. 7.5 EMPLOYMENT LITIGATION. CLAIMS. Roxio shall have sole responsibility for all employment-related claims regarding Roxio Employees that arise out of facts, acts or omissions occurring on or after the Distribution Date relating to, arising out of, or resulting from their employment with Roxio. Adaptec shall have sole responsibility for all employment-related claims by or regarding Adaptec employees and for all employment-related claims by or regarding Roxio Employees that arise out of facts, acts or omissions occurring prior to the Distribution Date. ARTICLE VIII GENERAL PROVISIONS 8.1 EFFECT IF SEPARATION AND/OR DISTRIBUTION DOES NOT OCCUR. If the Separation, Registration and/or Distribution does not occur, then all actions and events that are, under this Agreement, to be taken or occur effective as of the Separation Date, Registration Date and/or Distribution Date, or otherwise in connection with the Separation, Registration and/or Distribution, shall not be taken or occur except to the extent specifically agreed by Roxio and Adaptec. -13- 8.2 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed or construed by the parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the parties, the understanding and agreement being that no provision contained herein, and no act of the parties, shall be deemed to create any relationship between the parties other than the relationship set forth herein. 8.3 GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the Law of the State of California without regard to the principles of conflicts of Laws thereunder, to the extent not preempted by the Employee Retirement Income Security Act of 1974. 8.4 ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may be enforced separately by Adaptec and Roxio. Neither party may assign this Agreement or any rights or obligations hereunder, without the prior written consent of the other party, and any such assignment shall be void; provided, however, either party may assign this Agreement to a successor entity in conjunction with such party's reincorporation. 8.5 SEVERABILITY. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible and in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the fullest possible extent. 8.6 INTERPRETATION. The headings contained in this Agreement and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Schedule but not otherwise defined therein shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article, Section or Schedule, such reference shall be to an Article of, Section of, or Schedule to this Agreement unless otherwise indicated. 8.7 AMENDMENT. The Board of Directors of Roxio and Adaptec may mutually agree to amend the provisions of this Agreement at any time or times, for any reason, either prospectively or retroactively, to such extent and in such manner as the Boards mutually deem advisable. Each Board may delegate its amendment power, in whole or in part, to one or more Persons or committees as it deems advisable. No change or amendment will be made to this Agreement, except by an instrument in writing signed by authorized individuals. 8.8 TERMINATION. This Agreement may be terminated and the Distribution abandoned at any time up to and prior to the Distribution Date by and in the sole discretion of Adaptec -14- without the approval of Roxio. In the event of termination pursuant to this Section, no party shall have any liability of any kind to the other party. 8.9 CONFLICT. This Agreement is not intended to address, and should not be interpreted to address, the matters expressly covered by the Separation Agreement and/or the other Ancillary Agreements. 8.10 COUNTERPARTS. This Agreement, including the Schedules hereto (if applicable) and the other documents referred to herein, may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement. 8.11 DISPUTE RESOLUTION. Any and all controversies, disputes or claims arising out of, relating to, in connection with or resulting from this Agreement (or any amendment thereto or any transaction contemplated hereby or thereby), including as to its existence, interpretation, performance, non-performance, validity, breach or termination, including any claim based on contract, tort, statute or constitution and any claim raising questions of law, whether arising before or after termination of this Agreement, shall be deemed a Dispute as defined in the Separation Agreement and shall be resolved exclusively by, in accordance with, and subject to the limitations set forth in the Separation Agreement. -15- IN WITNESS WHEREOF, each of the parties have caused this Employee Matters Agreement to be executed on its behalf by its officers thereunto duly authorized on the day and year first above written. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------- -------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog ---------------------------- ------------------------------ Title: President, Title: President and Chief Executive Officer Chief Executive Officer ---------------------------- ----------------------------- [SIGNATURE PAGE TO EMPLOYEE MATTERS AGREEMENT] EX-2.9 11 a2056442zex-2_9.txt EXHIBIT 2.9 Exhibit 2.9 EXECUTION COPY TAX SHARING AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. MAY 5, 2001 TABLE OF CONTENTS
PAGE 1. Allocation of Tax Liability...........................................2 2. Payment of Allocated Tax..............................................3 3. Refunds...............................................................3 4. Allocation of Minimum Tax Credits.....................................3 5. Carryback of Post-Distribution Tax Attributes of Roxio................3 6. Conduct of Tax Contests...............................................4 7. Redetermined Tax Liabilities..........................................4 8. Retention of and Access to Records; Cooperation and Assistance........4 9. Preparation of Tax Returns; Estimated Payments........................5 10. Indemnification.......................................................6 11. Gross-Up for Taxes on Required Payments...............................6 12. Confidentiality of Documents and Information..........................6 13. Allocation of Taxes of Foreign Subsidiaries...........................7 14. Dispute Resolution....................................................7 15. Limitation of Liability...............................................8 16. Entire Agreement......................................................8 17. Governing Law.........................................................8 18. Notices...............................................................8 19. Counterparts..........................................................9 20. Binding Effect; Assignment............................................9 21. Severability.........................................................10 22. Waiver of Breach.....................................................10 23. Amendment and Execution..............................................10 24. Authority............................................................10 25. Descriptive Headings.................................................11 26. Gender and Number....................................................11 27. Additional Assurances................................................11 28. Force Majeure........................................................11
-i- TAX SHARING AGREEMENT This Tax Sharing Agreement, dated May 5, 2001, is by and between Adaptec, Inc. ("Adaptec"), a Delaware corporation, and Roxio, Inc., a Delaware corporation ("Roxio"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in that certain First Amended and Restated Master Separation and Distribution Agreement between the parties hereto, dated as of February 28, 2001. RECITALS A. Concurrently with the execution of this agreement, Adaptec is transferring to Roxio all of the assets owned by Adaptec related to its software products business. In consideration, Roxio will assume Adaptec's liabilities related to that business and also issue stock to Adaptec, which will constitute all of the Roxio stock then outstanding. At the same time, Adaptec Mfg. (S) Pte., Ltd., a subsidiary of Adaptec organized under the laws of Singapore, ("AMS") will transfer to Roxio CI, Ltd., a Cayman Island corporation, ("RCI") all of the assets owned by AMS related to the software products business. In consideration, RCI will assume the liabilities of AMS related to that business and also issue stock to AMS, which will constitute all of the RCI stock then outstanding. B. The transfer of software products business assets to Roxio and RCI will be made in preparation for a distribution by Adaptec to its shareholders of the stock of Roxio (the "Distribution"). Prior to the Distribution, AMS will distribute to Adaptec the stock of RCI, and Adaptec will contribute the RCI stock to Roxio. C. Until the Distribution, Roxio will be a member of the affiliated group of corporations of which Adaptec is the common parent (the "Adaptec Group"). During that period, Roxio will join other members of the group in filing consolidated federal income tax returns and may also join in filing consolidated, combined or unitary returns under the tax laws of some states. D. Adaptec and Roxio would like to allocate responsibilities for certain tax matters. In particular, the parties would like to provide for the payment by Roxio of its share of tax liabilities determined on a consolidated, combined, or unitary basis. The parties would also like to provide and fix the responsibilities for certain administrative matters, such as (1) the preparation and filing of tax returns for periods beginning before the date of the Distribution (the "Distribution Date"), (2) the payment of taxes shown to be due and payable on those returns (as well as any estimated or advance payments required before the filing of those returns), (3) the retention, maintenance and provision of access to all records necessary to prepare and file appropriate tax returns, and (4) the conduct of audits, examinations, and proceedings that could result in a redetermination of tax liabilities for periods beginning before the Distribution Date. AGREEMENT To accomplish the purposes described above, Adaptec and Roxio agree as follows: 1. Allocation of Tax Liability (a) REGULAR FEDERAL INCOME TAX. If the consolidated federal income tax liability of the Adaptec Group for any taxable year during which Roxio is a member of the group is determined on a regular tax basis, the amount of federal income taxes allocable to Roxio shall be determined using the method described in section 1.1502-32(b)(3)(iv)(D) of the Treasury regulations. Thus, Roxio shall be required to pay for any reduction in its separate company liability because of the absorption of losses, credits or other tax attributes of other members. Conversely, Roxio shall be entitled to compensation to the extent that the absorption of its losses, credits, or other tax attributes reduces the group's consolidated federal income tax liability. (b) Federal Alternative Minimum Tax (i) GENERAL RULE. If the Adaptec Group pays alternative minimum tax ("AMT") for any taxable year during which Roxio is a member of the group, Roxio's share of the group's consolidated federal income taxes shall equal its share of the group's consolidated AMT, determined under section 1(b)(ii), with the adjustments provided in Section 1(b)(iii) to reflect the absorption of losses, credits and other tax attributes. (ii) ROXIO'S SHARE OF CONSOLIDATED AMT. Roxio's share of the group's consolidated AMT for any year shall equal the excess, if any, of (A) the total consolidated AMT, over (B) the consolidated AMT for the year computed by excluding Roxio's items of income, gain, deduction and loss, and Roxio's credits. (iii) ADJUSTMENTS FOR ABSORPTION OF TAX ATTRIBUTES. Roxio's share of the group's consolidated AMT shall be adjusted to reflect the absorption of losses, credits, or other tax attributes, based on principles similar to those underlying the method of allocating regular federal income taxes described in section 1.1502-32(b)(3)(iv)(D) of the Treasury regulations. If, for any taxable year, the regular tax attributes allocable to members other than Roxio that can be carried forward to the next taxable year are less than those carryforwards would have been if Roxio had not been a member of the group, then Roxio's share of the group's consolidated federal income tax liability shall be increased to reflect the incremental absorption of the tax attributes of other members. Conversely, if Roxio's regular tax attributes are used to offset taxable income of other members, or tax liability attributable to such income, then Roxio's share of the group's consolidated federal income tax liability shall be decreased to reflect the use of Roxio's tax attributes. The amount of the adjustment for absorbed losses shall equal the product of the absorbed losses and the highest marginal regular federal income tax rate in effect for the year in which the losses are absorbed. If the adjustment described in this Section 1(b)(iii) exceeds the amount determined in Section 1(b)(ii), Roxio shall be entitled to receive the amount of such excess pursuant to Section 2. -2- (c) OTHER TAXES. Roxio's share of taxes other than federal income taxes that are determined on a consolidated, combined, or unitary basis shall be determined by applying the principles underlying the allocation method described in section 1.1502-32(b)(3)(iv)(D) of the Treasury regulations. Thus, Roxio's share of the taxes will generally equal the tax liability that Roxio would have had if it had filed a separate return for the relevant period. Roxio shall be required to pay Adaptec to the extent that Roxio's separate company liability is reduced by the absorption of losses, credits or other tax attributes of other members. Conversely, Adaptec shall compensate Roxio to the extent that the absorption of Roxio's losses, credits, or other tax attributes reduces the combined tax liability. 2. PAYMENT OF ALLOCATED TAX. Roxio shall pay to Adaptec Roxio's share of any tax payment made with the filing of a tax return within 30 days after filing. Within that same period, Adaptec shall make to Roxio any payments required as a result of benefits realized by Adaptec or other members of the Adaptec Group from the use of Roxio's tax attributes. 3. REFUNDS. If Adaptec receives a refund because of an overpayment of taxes shown on a tax return, as originally filed, Adaptec shall pay to Roxio that portion of the refund, if any, equal to the excess of (i) the payments made by Roxio to Adaptec pursuant to Section 9(b) in respect of estimated taxes for the taxable year covered by the return over (ii) Roxio's share of the tax liability reported on the return, allocated as provided in Section 1. 4. ALLOCATION OF MINIMUM TAX CREDITS. No portion of the consolidated minimum tax credit of the Adaptec Group shall be allocated to Roxio when Roxio leaves the group. If the Treasury Department issues regulations that require the allocation to Roxio of a portion of the group's consolidated minimum tax credit, Roxio shall be required to pay to Adaptec the amount of the credit so allocated. 5. CARRYBACK OF POST-DISTRIBUTION TAX ATTRIBUTES OF ROXIO. If, for any taxable period beginning on or after the Distribution Date, Roxio recognizes a loss, credit, or similar tax attribute that, under applicable law, can or must be carried back to a taxable period during which Roxio joined one or more other members of the Adaptec Group in filing consolidated, combined or unitary returns, Adaptec shall, at Roxio's expense, file appropriate refund claims within a reasonable period after being requested by Roxio. Adaptec shall promptly remit to Roxio any refunds received with respect to any tax attribute so carried back. 6. CONDUCT OF TAX CONTESTS (a) SEPARATE ROXIO CLAIMS. Roxio shall have sole and complete authority to contest any claim by a taxing authority arising from an examination of a return that includes only Roxio (a "Separate Roxio Claim"). (b) GROUP CLAIMS. Except as provided in Section 6(a), Adaptec shall be entitled to control the contest of any claim by a taxing authority arising from an examination of any return -3- filed by one or more members of the Adaptec Group. Roxio shall have no right to participate in the contest of a claim to which this Section 6(b) applies (a "Group Claim"). (c) COOPERATION. Adaptec and Roxio shall each provide the assistance reasonably requested by the other in conducting any tax contest, including execution of any powers of attorney or other appropriate documentation, attendance of administrative or judicial proceedings as requested, performance of necessary computations, and, subject to the confidentiality provisions of Section 12, provision of access to or furnishing books, records, tax returns, and supporting work papers. 7. Redetermined Tax Liabilities (a) SEPARATE ROXIO CLAIMS. If a redetermination of taxes results from a Separate Roxio Claim, Roxio shall pay any resulting increase in tax liability and shall be entitled to receive any refunds related to a decrease in tax liability attributable to the claim (b) GROUP CLAIMS. Any tax deficiency arising from a Group Claim shall be paid to the relevant taxing authority by Adaptec, and Adaptec shall be entitled to receive any tax refund arising from the contest of the Group Claim. Except as provided in the following sentence, Adaptec shall have no right to reimbursement from Roxio for any portion of a deficiency and shall have no obligation to pay any portion of a refund to Roxio. Roxio shall be required to reimburse Adaptec for that portion of a deficiency resulting from a reduction of a loss, credit or similar tax attribute of Roxio that was carried back from a post-Distribution period pursuant to Section 5. 8. Retention of and Access to Records; Cooperation and Assistance (a) RETENTION OF AND ACCESS TO RECORDS. Each party shall retain all tax returns for periods beginning before the Distribution Date, together with all related reports, work papers, schedules or other documents or computer files, and, subject to the confidentiality provisions of Section 12, shall make these documents or files available to the other upon request. Neither party shall dispose of any of these documents or files without the other's permission. (b) COOPERATION AND ASSISTANCE. Subject to the confidentiality provisions of Section 12, Adaptec and Roxio shall provide each other with such cooperation, assistance, and information as either of them may reasonably request of the other with respect to the filing with any taxing authority of any tax return, amended return, claim for refund, or other document. With respect to any return for a period beginning before the Distribution that includes Roxio and at least one other member of the Adaptec Group (a "Pre-Distribution Group Return"), such assistance shall include the timely submission by Roxio to Adaptec of pro forma tax returns for Roxio. Roxio's obligations under this paragraph 9(b) shall include the submission of a pro forma return for the tax period of Roxio that will end on the Distribution Date. 9. Preparation of Tax Returns; Estimated Payments -4- (a) FILING OF RETURNS. Adaptec shall prepare and timely file all tax returns of the Adaptec Group other than returns that include only Roxio. Within 45 days after the close of each taxable period (including, if applicable, the period that ends on the Distribution Date), Roxio shall, subject to the confidentiality provisions of Section 12: (1) furnish to Adaptec draft tax returns for Roxio and all supporting information and documentation useful in preparing the relevant consolidated, combined, or unitary return; (2) allow Adaptec access at any reasonable time after the Distribution Date to all tax returns of Roxio and supporting papers for those returns; and (3) furnish to Adaptec such additional tax information and documents as Adaptec may reasonably request. Roxio shall cooperate in connection with the preparation of any consolidated, combined or unitary returns that it joins in filing with one or more other members of the Adaptec Group. Adaptec shall be responsible for any payments to the applicable taxing authorities required in connection with those returns. Adaptec may provide services to assist Roxio in fulfilling its obligations under this Section 9(a), but only to the extent provided in a separate transitional services agreement between the parties. Except as expressly provided in a separate agreement between the parties, Adaptec shall have no obligation in connection with the preparation or filing of tax returns by Roxio. (b) ESTIMATED PAYMENTS. Adaptec shall make all estimated payments to any taxing authorities required in connection with consolidated, combined or unitary returns of members of the Adaptec Group, and all payments required in connection with requests for extensions of time to file those returns. After making such a payment, Adaptec shall promptly notify Roxio of any portion of the payment that Adaptec believes in good faith to be attributable to Roxio's share of the aggregate tax liability, as determined under Section 1. Within 10 days after receipt of such notice, Roxio shall pay such amount to Adaptec or advise Adaptec of the basis for its disagreement. 10. Indemnification (a) INDEMNITY OBLIGATIONS OF ADAPTEC. Adaptec shall indemnify Roxio and hold Roxio harmless from and against: (i) any liability, cost, or expense arising out of the fraudulent or negligent preparation by Adaptec of any information, workpapers, documents, or other items used in the preparation of, or presented in, any return, amended return, or claims for refund; and (ii) any tax liability, and related cost or expense, incurred or paid by Roxio in excess of that portion of the tax liability allocated to Roxio under this Agreement. (b) INDEMNITY OBLIGATIONS OF ROXIO. Roxio shall indemnify Adaptec and hold it harmless from and against any taxes, and related interest and penalties, resulting from (i) the application to the Distribution of section 355(e) of the Internal Revenue Code (the "Code") by reason of an acquisition of Roxio stock; or (ii) the failure of the Distribution to qualify for nonrecognition treatment under section 355(c) of the Code, if such failure results from (A) a failure by Roxio to continue its -5- active trade or business after the Distribution, (B) the treatment of the Distribution as a device for the distribution of earnings and profits, within the meaning of section 355(a)(1)(B) of the Code, because of one or more repurchases by Roxio of its stock, or (C) any other act or omission by Roxio. 11. GROSS-UP FOR TAXES ON REQUIRED PAYMENTS. If the receipt or accrual of any payment required by this Agreement is subject to any tax, the payor shall pay an additional amount so that the total amount received by the payee, net of any applicable taxes, equals the amount of the required payment. 12. CONFIDENTIALITY OF DOCUMENTS AND INFORMATION. Any documents or information provided pursuant to this Agreement in connection with a tax contest or filing with a tax authority shall be provided or disclosed by the recipient only to those of its employees responsible for any tax contest or filing or to attorneys or accountants advising the recipient on these matters. Any wider dissemination of these documents or this information shall be allowed only if required by law or authorized by the party providing the documents or information. 13. ALLOCATION OF TAXES OF FOREIGN SUBSIDIARIES. If any foreign affiliate of Adaptec engaged in the software products business is required to join in the filing of a consolidated, combined, or unitary return for a period beginning before the Distribution Date with at least one affiliate of Adaptec that is not engaged in the software products business, the allocation of tax liability between those corporations shall be made by applying principles similar to those adopted by this Agreement. The parties agree to apply consistent allocation methods in allocating the earnings and profits of AMS between AMS and RCI pursuant to section 1.312-10(a) of the Treasury regulations. 14. DISPUTE RESOLUTION. Resolution of any and all Disputes arising from or in connection with this Agreement shall be exclusively governed by and settled in accordance with the provisions of this Section 14. (a) Negotiation. The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through informal negotiation between appropriate representatives from each of Adaptec and Roxio. If at any time either party feels that such negotiations are not leading to a resolution of the Dispute, such party may send a notice to the other party describing the Dispute and requesting a meeting of the senior executives from each party. Within ten (10) business days after such notice is given, each party shall select appropriate senior executives (e.g., director or V.P. level) of each party who shall have the authority to resolve the matter and shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. During the course of negotiations under this Section 14(a), all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations will be left to the discretion of the designated negotiating senior executives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within thirty -6- (30) days after the first meeting of the negotiating senior executives, either party may commence litigation with respect to the Dispute. However, except as provided below in Section 14(b), neither party shall commence litigation against the other party to resolve the Dispute (i) until the parties try in good faith to settle the Dispute by negotiation for at least thirty (30) days after the first meeting of the negotiating senior executives or (ii) until forty (40) days after notice of a Dispute is given by either party to the other party, whichever occurs first. (b) PROCEEDINGS. Any Dispute regarding the following is not required to be negotiated prior to seeking relief from a court of competent jurisdiction: breach of any obligation of confidentiality; infringement, misappropriation, or misuse of any intellectual property right; or any other claim where interim relief from the court is sought to prevent serious and irreparable injury to a party. However, the parties shall make a good faith effort to negotiate such Dispute, according to Section 14(a), while such court action is pending. (c) CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Section 14 with respect to all matters not subject to such dispute, controversy or claim. 15. Limitation of Liability. IN NO EVENT SHALL EITHER PARTY OR ITS SUBSIDIARIES BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 16. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. 17. Governing Law. This Agreement shall be construed in accordance with and all Disputes hereunder shall be governed by the laws of the State of California, excluding its conflict of law rules and the United Nations Convention on Contracts for the International Sale of Goods. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California, San Jose Division, shall have jurisdiction and venue over all Disputes between the parties that are permitted to be brought in a court of law pursuant to Section 14 above. 18. Notices. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) Business Day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one (1) Business Day after being deposited with a nationally recognized overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of: -7- IF TO ADAPTEC, INC.: Adaptec, Inc. 691 S. Milpitas Blvd. Milpitas, CA 95035 Attention: Vice President and General Counsel Facsimile No.: (408) 957-7137 with a copy to: Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Attention: Henry P. Massey, Jr. Facsimile No.: 650-493-6811 IF TO ROXIO, INC.: Roxio, Inc. 461 South Milpitas Blvd. Milpitas, CA 95035 Attention: William Christopher Gorog Facsimile No.: (408) 957-7963 with a copy to: Gray Cary Ware & Freidenrich LLP 400 Capitol Mall, Suite 2400 Sacramento, CA 95814 Attention: Kevin A. Coyle Facsimile No.: 916-930-3201 Adaptec and Roxio may substitute a different address or facsimile number, from time to time, if such substitute is provided to the intended notice recipient in writing by notice given in the manner provided in this Section 18. 19. Counterparts. This Agreement may be executed in counterparts via facsimile or otherwise, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. 20. Binding Effect; Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may be enforced separately by each member of the Adaptec Group and each member of the Roxio Group. -8- Except as herein specifically provided to the contrary, neither party may assign this Agreement or any rights or obligations hereunder, without the prior written consent of the other party, and any such assignment shall be void; provided, however, either party (or its permitted successive assignees or transferees hereunder) may assign or transfer this Agreement as a whole without consent to an entity that succeeds to all or substantially all of the business or assets of such party to which this Agreement relates. 21. Severability. The parties hereto have negotiated and prepared the terms of this Agreement in good faith with the intent that each and every one of the terms, covenants and conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Agreement, to the extent possible consistent with its purposes, to conform to law. 22. Waiver of Breach. The waiver by either party hereto of a breach or violation of any provision of this Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. 23. Amendment and Execution. This Agreement and amendments hereto shall be in writing and executed in multiple copies via facsimile or otherwise on behalf of Adaptec and Roxio by their respective duly authorized officers and representatives. Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument. 24. Authority. Each of the parties hereto represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other actions, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. 25. Descriptive Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. -9- 26. Gender and Number. Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine and neuter, and the number of all words herein shall include the singular and plural. 27. Additional Assurances. Except as may be specifically provided herein to the contrary, the provisions of this Agreement shall be self-operative and shall not require further agreement by the parties; provided, however, at the request of either party, the other party shall execute such additional instruments and take such additional acts as are reasonable, and as the requesting party may reasonably deem necessary, to effectuate this Agreement. 28. Force Majeure. Neither party shall be liable or deemed to be in default for any delay or failure in performance under this Agreement or other interruption of service deemed to result, directly or indirectly, from acts of God, civil or military authority, acts of public enemy, war, accidents, explosions, earthquakes, floods, failure of transportation, strikes or other work interruptions by either party's employees, or any other similar cause beyond the reasonable control of either party unless such delay or failure in performance is expressly addressed elsewhere in this Agreement. -10- WHEREFORE, the parties have signed this Tax Sharing Agreement effective as of the date first set forth above. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------- -------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog ---------------------------- ------------------------------ Title: President, Title: President and Chief Executive Officer Chief Executive Officer ---------------------------- ----------------------------- [SIGNATURE PAGE TO TAX SHARING AGREEMENT] EX-2.10 12 a2056442zex-2_10.txt EXHIBIT 2.10 EXHIBIT 2.10 REAL ESTATE MATTERS AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. MAY 5, 2001 TABLE OF CONTENTS
PAGE ARTICLE I PROPERTY..................................................................1 Section 1.1 Leased Property.................................................1 Section 1.2 Shared Properties...............................................1 Section 1.3 Building 5......................................................2 Section 1.4 Obtaining the Lease Consents....................................2 Section 1.5 Occupation by Roxio.............................................3 Section 1.6 Obligation to Complete..........................................4 Section 1.7 Form of Transfer................................................5 Section 1.8 Casualty; Lease Termination.....................................6 Section 1.9 Tenant's Fixtures and Fittings..................................6 Section 1.10 Adjustments.....................................................6 Section 1.11 Costs...........................................................6 ARTICLE II MISCELLANEOUS............................................................6 Section 2.1 Limitation of Liability.........................................6 Section 2.2 Entire Agreement................................................7 Section 2.3 Governing Law...................................................7 Section 2.4 Termination.....................................................7 Section 2.5 Notices.........................................................7 Section 2.6 Counterparts....................................................7 Section 2.7 Binding Effect; Assignment......................................8 Section 2.8 Severability....................................................8 Section 2.9 Failure or Indulgence Not Waiver; Remedies Cumulative...........8 Section 2.10 Amendment.......................................................8 Section 2.11 Authority.......................................................8 Section 2.12 Interpretation..................................................9 Section 2.13 Disputes........................................................9 ARTICLE III DEFINITIONS............................................................10
REAL ESTATE MATTERS AGREEMENT This Real Estate Matters Agreement (this "AGREEMENT") is entered into on May 5, 2001 between Adaptec, Inc., a Delaware corporation ("ADAPTEC"), and Roxio, Inc., a Delaware corporation ("ROXIO"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Separation Agreement (as defined below). RECITALS WHEREAS, Adaptec has transferred or will transfer to Roxio effective as of the Separation Date, substantially all of the business and assets of the Roxio Business owned by Adaptec in accordance with the First Amended and Restated Master Separation and Distribution Agreement dated as of February 28, 2001 between Adaptec and Roxio (the "SEPARATION AGREEMENT"). WHEREAS, the parties desire to set forth certain agreements regarding real estate matters. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows: ARTICLE I PROPERTY SECTION 1.1 LEASED PROPERTY Adaptec shall assign or cause its applicable Subsidiary to assign, and Roxio shall accept and assume, or cause its applicable Subsidiary to accept and assume, Adaptec's or its Subsidiary's interest in the Leased Properties, subject to the other provisions of this Agreement and (to the extent not inconsistent with the provisions of this Agreement) the terms of the Separation Agreement and the other Ancillary Agreements. Such assignment shall be completed on the later of: (i) the Separation Date; and (ii) the earlier of (A) the fifth (5th) business day after the relevant Lease Consent has been granted and (B) the date agreed upon by the parties in accordance with Section 1.6(a) below. SECTION 1.2 SHARED PROPERTIES Adaptec shall grant or cause its applicable Subsidiary to grant to Roxio or its applicable Subsidiary a license to occupy those parts of the Shared Properties identified in Section B of Schedule 1 of this Agreement currently occupied by Roxio or its applicable Subsidiary and Roxio shall accept or cause its applicable Subsidiary to accept the same, subject to the other provisions of this Agreement and (to the extent not inconsistent with the provisions of this Agreement) the terms of the Separation Agreement and the other Ancillary Agreements. Such license shall be completed on the Separation Date. SECTION 1.3 BUILDING 5 Adaptec shall grant to Roxio a lease of those portions of Building 5 identified in Section C of Schedule 1 of this Agreement and Roxio shall accept the same, subject to the other provisions of this Agreement and (to the extent not inconsistent with the provisions of this Agreement) the terms of the Separation Agreement and the other Ancillary Agreements. Such lease shall be completed on the Separation Date. SECTION 1.4 OBTAINING THE LEASE CONSENTS (a) Adaptec confirms that, with respect to each Leased Property, an application has been made or will be made by the Separation Date to the relevant Landlord for the Lease Consents required with respect to the transactions contemplated by this Agreement. (b) Adaptec will use its reasonable commercial efforts to obtain the Lease Consents as to each Leased Property, but Adaptec shall not be required to commence judicial proceedings for a declaration that a Lease Consent has been unreasonably withheld or delayed, nor shall Adaptec be required to pay any consideration in excess of that required by the Relevant Lease or that which is typical in the open market to obtain the relevant Lease Consent. Roxio shall cooperate as reasonably requested by Adaptec to obtain the Lease Consents. (c) Roxio and Adaptec will promptly satisfy or cause their applicable Subsidiaries to satisfy the lawful requirements of the Landlord, and Roxio will take or cause its applicable Subsidiary to take all steps to assist Adaptec in obtaining the Lease Consents as to each Leased Property, including, without limitation: (i) if properly required by the Landlord, entering into an agreement with the relevant Landlord to observe and perform the tenant's obligations contained in the Relevant Lease throughout the remainder of the term of the Relevant Lease, subject to any statutory limitations of such liability; (ii) if properly required by the Landlord, providing a guarantee, surety or other security (including, without limitation, a security deposit) for the obligations of Roxio or its applicable Subsidiary as tenant under the Relevant Lease, and otherwise taking all steps which are reasonably necessary and which Roxio or its applicable Subsidiary is reasonably capable of doing to meet the lawful requirements of the Landlord so as to ensure that the Lease Consents are obtained; and (iii) using all reasonable commercial efforts to assist Adaptec with obtaining the Landlord's consent to the release of any guarantee, surety or other security which Adaptec or its Subsidiary may have previously provided to the Landlord and, if required, offering the same or equivalent security to the Landlord in order to obtain such release. Notwithstanding the foregoing, (1) except with respect to guarantees, sureties or other security referenced in Section 1.4(c)(ii) above, Roxio shall not be required to obtain a release of any obligation entered into by Adaptec or its Subsidiary with any Landlord or other third party with -2- respect to any Property and (2) Roxio shall not communicate or permit its applicable Subsidiary to communicate directly with any of the Landlords unless Roxio can show Adaptec reasonable grounds for doing so. (d) If, with respect to any Leased Properties, Adaptec and Roxio are unable to obtain a release by the Landlord of any guarantee, surety or other security which Adaptec or its Subsidiary has previously provided to the Landlord, Roxio shall indemnify, defend, protect and hold harmless Adaptec and its Subsidiary from and after the Separation Date against all losses, costs, claims, damages, or liabilities incurred by Adaptec or its Subsidiary as a result of Roxio's occupancy of the Leased Property with respect to such guarantee, surety or other security. SECTION 1.5 OCCUPATION BY ROXIO (a) Subject to compliance with Section 1.5(b) below, in the event that the Actual Completion Date for any Leased Property does not occur on the Separation Date, Roxio or its applicable Subsidiary shall, commencing on the Separation Date, be entitled to occupy the relevant Property as a licensee upon the terms and conditions contained in Adaptec's Lease. Such license shall not be revocable prior to the date for completion as provided in Section 1.1(a) unless an enforcement action or forfeiture by the relevant Landlord due to Roxio or its applicable Subsidiary's occupation of the Property constituting a breach of Adaptec's Lease cannot, in the reasonable opinion of Adaptec, be avoided other than by requiring Roxio or its applicable Subsidiary to immediately vacate the relevant Property, in which case Adaptec may by notice to Roxio immediately require Roxio or its applicable Subsidiary to vacate the relevant Property. Roxio will be responsible for all costs, expenses and liabilities incurred by Adaptec or its applicable Subsidiary as a consequence of such occupation, except for any losses, claims, costs, demands and liabilities incurred by Adaptec or its Subsidiary as a result of any enforcement action taken by the Landlord against Adaptec or its Subsidiary with respect to any breach by Adaptec or its Subsidiary of the Relevant Lease in permitting Roxio or its applicable Subsidiary to so occupy the Property without obtaining the required Lease Consent, for which Adaptec or its Subsidiary shall be solely responsible. Neither Roxio nor its applicable Subsidiary shall be entitled to make any claim or demand against, or obtain reimbursement from, Adaptec or its applicable Subsidiary with respect to any costs, losses, claims, liabilities or damages incurred by Roxio or its applicable Subsidiary as a consequence of being obliged to vacate the Property or in obtaining alternative premises, including, without limitation, any enforcement action which a Landlord may take against Roxio or its applicable Subsidiary. (b) In the event that the Actual Completion Date for any Leased Property does not occur on the Separation Date, whether or not Roxio or its applicable Subsidiary occupies a Property as licensee as provided in Section 1.5(a) above, Roxio shall, effective as of the Separation Date, (i) pay or cause its applicable Subsidiary to pay Adaptec all rents, service charges, insurance premiums and other sums payable by Adaptec or its applicable Subsidiary under any Relevant Lease, (ii) observe or cause its applicable Subsidiary to observe the tenant's covenants, obligations and conditions contained in Adaptec's Lease and (iii) indemnify, defend, protect and hold harmless Adaptec and its applicable Subsidiary from and against all losses, costs, claims, damages and liabilities arising on account of any breach thereof by Roxio or its applicable Subsidiary. (c) Adaptec shall supply promptly to Roxio copies of all invoices, demands, notices and -3- other communications received by Adaptec or its applicable Subsidiaries or agents in connection with any of the matters for which Roxio or its applicable Subsidiary may be liable to make any payment or perform any obligation pursuant to Section 1.5(a) or (b), and shall, at Roxio's cost, take any steps and pass on any objections which Roxio or its applicable Subsidiary may have in connection with any such matters. Roxio shall promptly supply to Adaptec any notices, demands, invoices and other communications received by Roxio or its applicable Subsidiary or agents from any Landlord while Roxio or its applicable Subsidiary occupies any Property without the relevant Lease Consent. SECTION 1.6 OBLIGATION TO COMPLETE (a) If, with respect to any Leased Property, at any time the relevant Lease Consent is formally and unconditionally refused in writing, Adaptec and Roxio shall commence good faith negotiations and use commercially reasonable efforts to determine how to allocate the applicable Property, based on the relative importance of the applicable Property to the operations of each party, the size of the applicable Property, the number of employees of each party at the applicable Property and the potential risk and liability to each party in the event an enforcement action is brought by the applicable Landlord. Such commercially reasonable efforts shall include consideration of alternate structures to accommodate the needs of both parties and the allocation of the costs thereof, including entering into amendments of the size, term or other terms of the Relevant Lease, restructuring a proposed lease assignment to be a sublease and relocating one party. If the parties are unable to agree upon an allocation of the Property within fifteen (15) days after commencement of negotiations between the parties as described above, then either party may, by delivering written notice to the other, require that the matter be referred to the Chief Financial Officers of both parties. In such event, the Chief Financial Officers shall use commercially reasonable efforts to determine the allocation of the Property, including having a meeting or telephone conference within ten (10) days thereafter. If the parties are unable to agree upon the allocation of an applicable Property within fifteen (15) days after the matter is referred to the Chief Financial Officers of the parties as described above, the disposition of the applicable Property and the risks associated therewith shall be allocated between the parties as set forth in subparts (b) and (c) of this section below. (b) If, with respect to any Leased Property, the parties are unable to agree upon the allocation of a Property as set forth in Section 1.6(a), Adaptec may by written notice to Roxio elect to apply to the relevant Landlord for consent to sublease all of the relevant Property to Roxio or its applicable Subsidiary for the remainder of the Relevant Lease term less three (3) days at a rent equal to the rent from time to time under the Relevant Lease, but otherwise on substantially the same terms and conditions as the Relevant Lease. If Adaptec makes such an election, until such time as the relevant Lease Consent is obtained and a sublease is completed, the provisions of Section 1.5 will apply and, on the grant of the Lease Consent required to sublease the Leased Property in question, Adaptec shall sublease or cause its applicable Subsidiary to sublease to Roxio or its applicable Subsidiary the relevant Property which sublease shall be for the term and rent set forth in the Relevant Lease and otherwise on the terms of the Relevant Lease. (c) If the parties are unable to agree upon the allocation of a Property as set forth in Section 1.6(a) and Adaptec does not make an election pursuant to Section 1.6(b) above, Adaptec may elect by written notice to Roxio to require Roxio or its applicable Subsidiary to vacate the relevant -4- Property immediately or by such other date as may be specified in the notice served by Adaptec (the "NOTICE DATE"), in which case Roxio shall vacate or cause its applicable Subsidiary to vacate the relevant Property on the Notice Date but shall indemnify Adaptec and its applicable Subsidiary from and against all costs, claims, losses, liabilities and damages in relation to the relevant Property arising from and including the Separation Date to and including the later of the Notice Date and date on which Roxio or its applicable Subsidiary vacates the relevant Property, except for any costs, losses, damages, claims and liabilities incurred by Adaptec or its Subsidiary with respect to any enforcement action taken by the Landlord against Adaptec or its Subsidiary with respect to any breach by Adaptec or its Subsidiary of the Relevant Lease in permitting Roxio or its applicable Subsidiary to so occupy the Property without obtaining the required Lease Consent. Neither Roxio nor its applicable Subsidiary shall be entitled to make any claim or demand against or obtain reimbursement from Adaptec or its applicable Subsidiary with respect to any costs, losses, claims, liabilities or damages incurred by Roxio or its applicable Subsidiary as a consequence of being obliged to vacate the Property or obtaining alternative premises, including, without limitation, any enforcement action which a Landlord may take against Roxio or its applicable Subsidiary. SECTION 1.7 FORM OF TRANSFER (a) The assignment to Roxio or its applicable Subsidiary of each relevant Leased Property shall be in substantially the form attached in Schedule 2, with such amendments which in the reasonable opinion of Adaptec are necessary with respect to a particular Property, including, without limitation, in all cases where a relevant Landlord has required a guarantor or surety to guarantee the obligations of Roxio or its applicable Subsidiary contained in the relevant Lease Consent or any other document which Roxio or its applicable Subsidiary is required to complete, the giving of such guarantee by a guarantor or surety, and the giving by Roxio or its applicable Subsidiary and any guarantor or surety of Roxio or its applicable Subsidiary's obligations of direct obligations to Adaptec or third parties where required under the terms of any of the Lease Consent or any covenant, condition, restriction, easement, lease or other encumbrance to which the Property is subject. Such amendments shall be submitted to Roxio for approval, which approval shall not be unreasonably withheld or delayed. (b) The licenses to be granted by Adaptec or its applicable Subsidiary to Roxio or its applicable Subsidiary, with respect to the Shared Properties shall be at the rental rates and terms set forth in Section B of Schedule 1 hereof. The license shall be substantially in the form of the License Form attached hereto as Schedule 3, with such amendments as are, in the reasonable opinion of Adaptec, necessary with respect to a particular Property. Such amendments shall be submitted to Roxio for approval, which approval shall not be unreasonably withheld. (c) The lease to be granted to Roxio with respect to Building 5 shall be at a monthly rental rate per rentable square foot, full service gross, of (i) $2.61 for the first year of the term, (ii) $2.69 for the second year of the term, (iii) $2.77 for the third year of the term, (iv) $2.85 for the fourth year of the term and (v) $2.93 for the fifth year of the term, and be for a five (5) year term commencing on the Separation Date. The lease shall commence in accordance with the schedule set forth in Section C of Schedule 1 hereof. Such lease shall be substantially in the form of the lease form attached hereto as Schedule 4 and shall include such amendments which in the reasonable opinion of Adaptec are necessary with respect to a particular Property. Such amendments shall be submitted to -5- Roxio for approval, which approval shall not be unreasonably withheld or delayed. In connection with such lease, Adaptac shall grant to Roxio a revocable license to use the cafeteria and fitness center in the complex containing Building 5 in the form attached hereto as Schedule 5. SECTION 1.8 CASUALTY; LEASE TERMINATION The parties hereto shall grant and accept assignments, leases or licenses of the Properties as described in this Agreement, regardless of any casualty damage or other change in the condition of the Properties. In addition, subject to Adaptec's obligations in Section 5.5 of the Separation Agreement, in the event that Adaptec's Lease with respect to a Leased Property or a Shared Property is terminated prior to the Separation Date, (a) Adaptec or its applicable Subsidiary shall not be required to assign or license such Property, (b) Roxio or its applicable Subsidiary shall not be required to accept an assignment or license of such Property and (c) neither party shall have any further liability with respect to such Property hereunder. SECTION 1.9 TENANT'S FIXTURES AND FITTINGS The provisions of the Separation Agreement and the other Ancillary Agreements shall apply to any trade fixtures and personal property located at each Property. The licenses as to the Shared Properties shall include the rental of the furniture at such Properties. SECTION 1.10 ADJUSTMENTS Adaptec and Roxio each acknowledge and agree that Additional Properties may be acquired by Adaptec prior to the Separation Date. Such Additional Properties shall be treated hereunder as Leased Properties or Shared Properties by mutual agreement of the parties based on whether the Additional Property was acquired by or for the Roxio Business or Adaptec's other businesses. In the event that the parties are unable to agree by the Separation Date as to how any Additional Property is to be treated, the matter shall be determined in accordance with the procedure set forth in Section 1.6(a) above. Following agreement or determination with respect to the Additional Properties, the parties shall enter into and complete all such documents as may be required to give effect to such agreement or determination as provided herein. SECTION 1.11 COSTS Adaptec shall pay all reasonable costs and expenses incurred in connection with obtaining the Lease Consents, including, without limitation, Landlord's consent fees and attorneys' fees and any costs and expenses relating to re-negotiation of Adaptec's Leases. ARTICLE II MISCELLANEOUS SECTION 2.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL ANY MEMBER OF THE ADAPTEC GROUP OR ROXIO GROUP BE LIABLE TO ANY OTHER MEMBER OF THE ADAPTEC GROUP OR ROXIO GROUP FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, -6- INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THE INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT. SECTION 2.2 ENTIRE AGREEMENT. This Agreement, the Separation Agreement, the other Ancillary Agreements and the Exhibits and Schedules referenced or attached hereto and thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. SECTION 2.3 GOVERNING LAW. This Agreement shall be governed and construed and enforced in accordance with the laws of the State of California as to all matters regardless of the laws that might otherwise govern under the principles of conflicts of laws applicable thereto. SECTION 2.4 TERMINATION. This Agreement, the Separation Agreement and all Ancillary Agreements may be terminated and the Distribution abandoned at any time prior to the Separation Date by and in the sole discretion of Adaptec without the approval of Roxio. This Agreement may be terminated at any time after the Separation Date and before the Distribution Date by mutual consent of Adaptec and Roxio. In the event of termination pursuant to this Section, no party shall have any liability of any kind to the other party. SECTION 2.5 NOTICES. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) business day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one (1) business day after being deposited with an overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of, in the case of Adaptec, General Counsel or, in the case of Roxio, its Chief Executive Officer, at the address of its principal executive office or such other address as a party may request by notifying the other in writing. SECTION 2.6 COUNTERPARTS. This Agreement, including the Schedules and Exhibits hereto, and the other documents referred to herein, may be executed in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. SECTION 2.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. This Agreement may not be assigned by any party hereto. This Agreement may be enforced separately by each member of the Adaptec Group and each member of the Roxio Group. -7- SECTION 2.8 SEVERABILITY. If any term or other provision of this Agreement or the Schedules or Exhibits attached hereto is determined by a non-appealable decision by a court, administrative agency or arbitrator to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the fullest extent possible. SECTION 2.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of either party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement or the Exhibits or Schedules attached hereto are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 2.10 AMENDMENT. No change or amendment will be made to this Agreement except by an instrument in writing signed on behalf of each of the parties to such agreement. SECTION 2.11 AUTHORITY. Each of the parties hereto represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other action, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. SECTION 2.12 INTERPRETATION. The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table or contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article or a Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. SECTION 2.13 DISPUTES. Any Disputes that arise under this Agreement shall be resolved in accordance with the provisions of Section 5.7 of the Separation Agreement. -8- ARTICLE III DEFINITIONS The following terms, as used herein, shall have the following meanings: ACTUAL COMPLETION DATE means, with respect to each Property, the date upon which completion of the assignment or lease of that Property actually takes place. ADAPTEC'S LEASE means, in relation to each Property, the lease(s) or sublease(s) or license(s) under which Adaptec or its applicable Subsidiary holds such Property and any other supplemental document completed prior to the Actual Completion Date. ADDITIONAL PROPERTIES means any leased properties acquired by Adaptec after the date of the Separation Agreement and before the Separation Date. BUILDING 5 means that certain building located on Adaptec's campus at Milpitas, California, known as Building 5, with a street address of 461 South Milpitas Boulevard, Milpitas, California, as set forth in Section C of Schedule 1 of this Agreement. LANDLORD means the landlord under Adaptec's Lease, and its successors and assigns, and includes the holder of any other interest which is superior to the interest of the landlord under Adaptec's Lease. LEASE CONSENTS means all consents, waivers or amendments required from the Landlord or other third parties under the Relevant Leases to assign the Relevant Leases to Roxio or its applicable Subsidiary. LEASED PROPERTIES means those Properties in Section A of Schedule 1 of this Agreement. LICENSE FORM means the form license attached hereto as Schedule 3. PROPERTY means the Leased Properties, the Shared Properties and Building 5. RELEVANT LEASES means those of Adaptec's Leases with respect to which the Landlord's consent is required for assignment or sublease to a third party or which prohibit assignments or subleases. SHARED PROPERTIES means those Properties listed in Section B of Schedule 1 of this Agreement. -9- IN WITNESS WHEREOF, each of the parties has caused this Real Estate Matters Agreement to be executed on its behalf by its officers thereunto duly authorized on the day and year first above written. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------- ---------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog ---------------------------- ------------------------------- Title: President, Chief Executive Title: President and Chief Executive Officer Officer ---------------------------- ------------------------------- [SIGNATURE PAGE TO REAL ESTATE MATTERS AGREEMENT] EX-2.11 13 a2056442zex-2_11.txt EXHIBIT 2.11 Exhibit 2.11 EXECUTION COPY MANUFACTURING SERVICES AGREEMENT BETWEEN ADAPTEC, INC. AND ROXIO, INC. EFFECTIVE AS OF MAY 5, 2001 MANUFACTURING SERVICES AGREEMENT TABLE OF CONTENTS
PAGE ARTICLE 1 DEFINITIONS.........................................................1 1.1 ANCILLARY AGREEMENTS.................................................1 1.2 COMPONENTS INVENTORY.................................................1 1.3 CONFIDENTIAL INFORMATION.............................................1 1.4 CUSTOMER.............................................................2 1.5 DELIVER, DELIVERED OR DELIVERY.......................................2 1.6 DELIVERY POINT.......................................................2 1.7 FINISHED GOODS INVENTORY.............................................2 1.8 GUIDELINES...........................................................2 1.9 INVENTORY............................................................2 1.10 LEAD TIME............................................................2 1.11 MASTER SEPARATION AND DISTRIBUTION AGREEMENT.........................2 1.12 MINIMUM ORDER SIZE...................................................2 1.13 PACKAGING SPECIFICATIONS.............................................2 1.14 PRODUCT..............................................................3 1.15 QUARTERLY REVIEW MEETING.............................................3 1.16 ROXIO DOCUMENTATION..................................................3 1.17 ROXIO TECHNOLOGY.....................................................3 1.18 ROXIO WAREHOUSE......................................................3 1.19 SERVICE FEE..........................................................3 1.20 SERVICE ORDERS.......................................................3 1.21 SERVICES.............................................................3 1.22 SPECIFICATIONS.......................................................3 1.23 STANDARD COST........................................................3 1.24 WORK IN PROCESS......................................................4 ARTICLE 2 TERM OF AGREEMENT...................................................4 ARTICLE 3 PERFORMANCE OF SERVICES..............................................4 3.1 RETENTION............................................................4 3.2 PERFORMANCE OF SERVICES..............................................4 3.3 LEAD TIME; RESCHEDULING; ALLOCATION..................................4 3.4 PROVISION OF ROXIO DOCUMENTATION AND ROXIO TECHNOLOGY................4 3.5 PACKAGING............................................................5 3.6 MEETINGS.............................................................5 3.7 CONTRACTORS..........................................................5 ARTICLE 4 SERVICE FEES.........................................................5 ARTICLE 5 FORECASTS, ORDERING AND ADJUSTMENTS.................................6 5.1 FORECASTS............................................................6 5.2 SERVICE ORDERS.......................................................6 5.3 SERVICE ORDER ADJUSTMENTS............................................6 5.4 LIABILITY FOR INVENTORY..............................................6 5.5 AGREEMENT CONTROLS...................................................7 ARTICLE 6 DELIVERY, CARRIER & RISK OF LOSS....................................7 6.1 DELIVERY OF PRODUCT; RISK OF LOSS....................................7 6.2 SHIPMENT.............................................................7 ARTICLE 7 PAYMENTS............................................................8 ARTICLE 8 QUALITY AND INSPECTION..............................................8 8.1 ADAPTEC'S PROCESS....................................................8 8.2 ROXIO INSPECTION.....................................................8 -i- ARTICLE 9 ACCEPTANCE AND REJECTION OF PRODUCTS................................8 ARTICLE 10 WARRANTY...........................................................9 10.1 MATERIALS AND WORKMANSHIP............................................9 10.2 WARRANTY REPLACEMENT.................................................9 10.3 RMA PROCEDURES.......................................................9 10.4 NO LIABILITY.........................................................9 10.5 DISCLAIMER OF WARRANTIES.............................................9 ARTICLE 11 PRODUCT CHANGES...................................................10 11.1 ON ADAPTEC'S NOTICE.................................................10 11.2 AT ROXIO'S REQUEST..................................................10 11.3 CHANGE MANAGEMENT...................................................10 ARTICLE 12 OWNERSHIP OF ROXIO TECHNOLOGY.....................................10 ARTICLE 13 INTELLECTUAL PROPERTY INDEMNITY...................................10 ARTICLE 14 GENERAL INDEMNITY.................................................11 ARTICLE 15 TERMINATION.......................................................11 15.1 TERMINATION WITHOUT CAUSE...........................................11 15.2 EFFECT OF TERMINATION WITHOUT CAUSE.................................11 15.3 TERMINATION FOR DEFAULT.............................................11 15.4 EFFECT OF TERMINATION IN GENERAL....................................12 15.5 TRANSITION ASSISTANCE...............................................12 ARTICLE 16 CONFIDENTIALITY...................................................13 ARTICLE 17 LIMITATION OF LIABILITY...........................................13 ARTICLE 18 DISPUTE RESOLUTION................................................13 ARTICLE 19 GENERAL...........................................................14 19.1 NOTICES.............................................................14 19.2 ASSIGNMENT..........................................................14 19.3 DAMAGE LIMITATION...................................................15 19.4 ALLOCATION OF RISK..................................................15 19.5 EXPORT CONTROL......................................................15 19.6 WAIVER..............................................................15 19.7 GOVERNING LAW.......................................................15 19.8 DESCRIPTIVE HEADINGS................................................15 19.9 SEVERABILITY........................................................16 19.10 FORCE MAJEURE....................................................16 19.11 ENTIRE AGREEMENT.................................................16 19.12 CONFLICTING AGREEMENTS...........................................16 19.13 CONTROLLING DOCUMENT.............................................16 19.14 RELATIONSHIP.....................................................17 19.15 AMENDMENT AND EXECUTION..........................................17
-ii- MANUFACTURING SERVICES AGREEMENT This MANUFACTURING SERVICES AGREEMENT ("Agreement") is made by and between Adaptec Manufacturing Singapore on its own behalf and on behalf of each of its parent, Adaptec, Inc. and its majority owned subsidiaries, exclusive of Roxio, Inc. ("Adaptec"), and Roxio, Inc., a Delaware corporation, on its own behalf and on behalf of each of its majority owned subsidiaries ("Roxio"), and is effective as of 12:01 a.m. Pacific Standard Time, May 5, 2001 (the "Separation Date"). RECITALS WHEREAS, the Boards of Directors of each of Adaptec and Roxio have determined that it is appropriate and desirable for Adaptec to contribute and transfer to Roxio, and for Roxio to receive and assume, directly or indirectly, substantially all of the assets and liabilities currently associated with the Roxio Business and the stock, investments or similar interests currently held by Adaptec in subsidiaries and other entities that conduct such business (the "Separation"); WHEREAS, Adaptec has caused Roxio to be incorporated in order to effect the Separation and Adaptec currently owns all of the issued and outstanding capital stock of Roxio; and WHEREAS, the parties desire that Adaptec perform certain services for Roxio with respect to the products manufactured by the Roxio Business prior to the Separation and such additional products as the parties may from time to time agree. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS 1.1 ANCILLARY AGREEMENTS. "Ancillary Agreements" shall have the meaning set forth in the Master Separation and Distribution Agreement. 1.2 COMPONENTS INVENTORY. "Components Inventory" means the inventory of raw material and other Product components consistent with Roxio's forecast, as provided in Section 5.1. 1.3 CONFIDENTIAL INFORMATION. "Confidential Information" shall have the meaning set forth in the Master Confidential Disclosure Agreement between Adaptec and Roxio. 1.4 CUSTOMER. "Customer" means Roxio's customer who is purchasing a Product and who is identified in the Service Order or in a subsequent written communication from Roxio designating the "ship to" point. 1.5 DELIVER, DELIVERED OR DELIVERY. "Deliver, Delivered or Delivery" means the delivery by Adaptec of the Products manufactured pursuant to a particular Service Order to the Delivery Point for shipment or pull in accordance with Roxio's instructions, as provided in accordance with the Guidelines. 1.6 DELIVERY POINT. "Delivery Point" means (a) the San Francisco Bay Area, with respect to Products destined for shipment to a location in the Americas, including the United States, Canada, Mexico and South America; (b) Singapore, with respect to Products destined for shipment to a location outside the United States; and (c) the Roxio Warehouse, with respect to Products to be held at the Roxio Warehouse for pull by the Customer. 1.7 FINISHED GOODS INVENTORY. "Finished Goods Inventory" means the inventory of completed goods consistent with the outstanding Service Orders. 1.8 GUIDELINES. "Guidelines" means the written guidelines provided by Adaptec to Roxio, as may be amended from time to time upon the agreement of the parties, with respect to (a) the placement of Service Orders and adjustments thereto, and (b) the provision of forecasts. 1.9 INVENTORY. "Inventory" means the Components Inventory, Work in Process and Finished Goods Inventory. 1.10 LEAD TIME. "Lead Time" means the minimum amount of time prior to the requested Delivery of a Product that a Service Order must be provided to Adaptec to initiate the performance of Services. The Lead Time as of the Separation Date is eleven (11) days. 1.11 MASTER SEPARATION AND DISTRIBUTION AGREEMENT. "Master Separation and Distribution Agreement" means the First Amended and Restated Master Separation and Distribution Agreement dated February 28, 2001 between Adaptec and Roxio. 1.12 MINIMUM ORDER SIZE. "Minimum Order Size" means the minimum quantity of each type of Product for which Services may be initiated, as specified in EXHIBIT A. 1.13 PACKAGING SPECIFICATIONS. "Packaging Specifications" means the packaging process and format to be agreed upon by the parties with respect to each Product and set forth in the applicable specification. 1.14 PRODUCT. "Product" means a completed product to be manufactured as a result of the Services, initially as set forth in EXHIBIT A, as it may be amended in accordance with Article 5 from time to time. 1.15 QUARTERLY REVIEW MEETING. "Quarterly Review Meeting" shall mean a meeting between Roxio and Adaptec for the purpose of reviewing production, forecasts, fees, inventory liability and related matters. 1.16 ROXIO DOCUMENTATION. "Roxio Documentation" means the Specifications, Packaging Specifications, approved Bill of Materials ("BOM"), artwork, -2- manuals, Golden Master and related documentation and materials to be provided to Adaptec by Roxio with respect to the Products. 1.17 ROXIO TECHNOLOGY. "Roxio Technology" means technical information specific to the Products, including the Roxio Documentation and software code. 1.18 ROXIO WAREHOUSE. "Roxio Warehouse" means the Roxio Warehouse in the Netherlands. 1.19 SERVICE FEE. "Service Fee" means the fee to be charged Roxio by Adaptec to perform Services with respect to each Product, initially as set forth in EXHIBIT A, or determined in Article 4. 1.20 SERVICE ORDERS. "Service Orders" means written or electronically transmitted Service Orders for Products placed by Roxio with Adaptec in accordance with the Guidelines, including the description, quantity, Customer, Delivery Point, requested Delivery date, ship to point and other relevant information relating to the order and shipment. 1.21 SERVICES. "Services" means the operations services performed by Adaptec hereunder with respect to the Products, including procurement, demand fulfillment, planning, forecasting, manufacturing, packaging, shipping, receiving, internal warehousing, invoicing and engineering/document control. 1.22 SPECIFICATIONS. "Specifications" means the respective specifications for each Product provided by Roxio. 1.23 STANDARD COST. "Standard Cost" means the standard cost of performing Services with respect to a component or Product, as set forth in Adaptec's SAP system, at the Separation Date or such later date as a Service Fee with respect to a Product may be determined in accordance with Article 4. 1.24 WORK IN PROCESS. "Work in Process" means Adaptec's inventory of partially completed Products consistent with Roxio's outstanding Service Orders. ARTICLE 2 TERM OF AGREEMENT The term of this Agreement ("Term") shall commence on the Separation Date and shall continue for a period of twelve (12) months, subject to earlier termination as provided in Article 15. ARTICLE 3 PERFORMANCE OF SERVICES -3- 3.1 RETENTION. Roxio hereby retains Adaptec to perform the Services in accordance with the terms and conditions of this Agreement and Adaptec hereby consents to such retention. 3.2 PERFORMANCE OF SERVICES. During the Term, Adaptec shall use reasonable commercial efforts to perform the Services in accordance with the terms of this Agreement. Additional Products may be added to this Agreement upon the parties' mutual written agreement with respect to the Product, and its Service Fee and other relevant Product-specific terms and conditions. Services shall not be performed after the Separation Date with respect to any Product that has not been fully production released by Roxio. Adaptec will initiate Services with respect to a Product upon receipt of a Service Order. 3.3 LEAD TIME; RESCHEDULING; ALLOCATION. Adaptec shall use reasonable commercial efforts to accept and perform any Service Order placed in accordance with the terms and conditions of this Agreement, including the applicable Lead Times (which may be revised by Adaptec from time to time upon notice to Roxio). Adaptec may, at its sole discretion, allocate its capacity among Adaptec's customers, but will provide Roxio with priority equivalent to that given to customers purchasing similar services, in similar quantities, using similar processes or materials. 3.4 PROVISION OF ROXIO DOCUMENTATION AND ROXIO TECHNOLOGY. As soon as required after the Separation Date, Roxio will deliver to Adaptec the Roxio Documentation for each Product. Subject to the terms and conditions of this Agreement, Roxio grants to Adaptec and any subcontractor retained by Adaptec in connection with the performance of Adaptec's obligations under this Agreement, during the Term of this Agreement, a non-exclusive, non-transferable license to use the Roxio Technology solely to the extent required to perform the Services. Roxio shall retain all right, title and interest in and to the Roxio Documentation and Roxio Technology. 3.5 PACKAGING. Adaptec will package each Product substantially in accordance with the applicable Packaging Specification, as it may be amended from time to time upon agreement of the parties and subject to approval of the respective engineering organizations of the parties. 3.6 MEETINGS. Commencing on the Separation Date and during the Term, Roxio shall schedule a Quarterly Review Meeting to occur in the second week of each calendar quarter and will prepare the agenda for discussion. In addition, either party may request additional meetings from time to time to address additional issues or problems that have arisen. Each party shall use reasonable efforts to have appropriate personnel attend such meetings in order to conduct a thorough operations review in accordance with the agenda. 3.7 CONTRACTORS. Adaptec may retain third parties ("Contractors") and subsidiary companies ("Subsidiaries") to furnish services to it in connection with the performance of its obligations hereunder and permit such Contractors and Subsidiaries to have access to Roxio's Confidential Information, but only to the extent and insofar as reasonably required in connection with the performance of Adaptec's obligations under this Agreement; provided that all such Contractors and Subsidiaries shall be required by Adaptec to execute a -4- written agreement that (a) is sufficient to secure compliance by such Contractors and Subsidiaries with Adaptec's obligation of confidentiality concerning Confidential Information set forth in Article 16; (b) acknowledges the Contractor's or Subsidiary's obligation to assign all work product in connection with performance hereunder; and (c) assigns to Roxio all Intellectual Property Rights concerning any Roxio Technology. Roxio, upon request, may review such agreements at any time before or after execution by such Contractors and Subsidiaries to ensure compliance with this Agreement. ARTICLE 4 SERVICE FEES Subject to the terms and conditions of this Agreement, Adaptec agrees initially to perform the Services for the respective Service Fees set forth on EXHIBIT A. Any Service Fee which is not set forth on EXHIBIT A initially will be set at the Standard Cost with respect to the Product at the time of production release, plus ten percent (10%). All Service Fees shall be reviewed at the Quarterly Review Meeting and shall be adjusted such that they are approximately equivalent to the Standard Cost with respect to the Product, plus ten percent (10 %). Unless otherwise agreed to in writing by Adaptec, all Service Fees are exclusive of transportation and insurance from Adaptec's Singapore facilities to the Delivery Point, and all taxes, duties and assessments (except taxes levied against Adaptec's net income), including state and local use, sales property and similar taxes (collectively, "Taxes"). Roxio agrees to pay all Taxes, unless Roxio has provided Adaptec with (i) an exemption resale certificate in the appropriate form for the jurisdiction of Roxio's place of business and any jurisdiction to which Product is to be directly shipped hereunder, or (ii) written evidence that such sale is otherwise exempt from such taxes. In the event Adaptec is required to pay any Tax or transportation or insurance charges, Roxio shall reimburse Adaptec the amount of the Tax or charge plus five percent (5%). Where applicable, Taxes shall appear as separate items on Adaptec's invoice. ARTICLE 5 FORECASTS, ORDERING AND ADJUSTMENTS 5.1 FORECASTS. Roxio will provide Adaptec, on the Separation Date, and thereafter, in accordance with the Guidelines, a monthly forecast of Roxio's requirements for Services covering the remainder of the Term. Such forecasts shall represent and reflect Roxio's good faith expectations of its requirements based upon customer demand. Roxio acknowledges that Adaptec will use forecasts for material and manufacturing planning purposes in connection with the Services and, further, that Adaptec will purchase Components Inventory required for the Services in accordance with such forecast. 5.2 SERVICE ORDERS. Roxio shall place Service Orders with Adaptec in accordance with the Guidelines to initiate the performance of Services by Adaptec. Each Service Order (a) will be issued by Roxio in accordance with the applicable Lead Time(s), which initially shall be eleven (11) days and (b) will be at least the Minimum Order Size for that Product as specified in EXHIBIT A. Adaptec shall use reasonable efforts to perform the Services in accordance with the Service Order. Roxio recognizes that its placement of Service Orders in -5- accordance with the Guidelines is a material term of this Agreement, and acknowledges its obligation to adjust its forecast such that no Product purchases are forecast for any period during which Roxio will not be able to place Service Orders in accordance with the Guidelines. 5.3 SERVICE ORDER ADJUSTMENTS. Roxio may not cancel any Products for which a Service Order has been received by Adaptec. Roxio can change the "ship to" location and/or the scheduled Delivery date until 72 hours prior to the expected shipping date; however, such adjustment may be subject to additional costs or charges. Roxio may not modify a Service Order within 72 hours of the scheduled shipping date, without Adaptec's prior consent. Any requests to modify a Service Order within 72 hours of the scheduled shipping date shall be directed to Adaptec's manager of demand fulfillment, or his or her designee, and will be handled on a case by case basis. 5.4 LIABILITY FOR INVENTORY. Roxio shall be liable to purchase all Inventory purchased to forecast or built to a Service Order for which Delivery of the relevant Product has not been taken upon the expiration of the Term, or in the event of termination by Roxio pursuant to Section 15.1 or termination by Adaptec pursuant to Section 15.3. Adaptec shall invoice Roxio for such Inventory promptly upon determining the amount of the claim. Upon full payment for such Inventory and receipt of "ship to" Delivery Point instructions, the Inventory shall be Delivered to Roxio. Unless otherwise agreed by the parties, shipping and insurance costs from Adaptec's Inventory location to the "ship to" Delivery Point will be paid by Adaptec and reimbursed by Roxio Roxio will be billed for the charges at the rate of actual shipping and insurance costs plus five percent (5%). In the event payment is not made or shipping instructions are not received within thirty (30) days of Adaptec's invoice, Adaptec may scrap the affected Inventory without further liability to Roxio. In addition, the parties shall review Inventory at the Quarterly Review Meeting and shall identify and agree upon any Inventory, which is obsolete, which may be scrapped by Adaptec promptly thereafter. The scrapping of such Inventory pursuant to this Section 5.4, shall not affect Roxio's obligation to pay for such Inventory. 5.5 AGREEMENT CONTROLS. Except for the identification of Products, quantities and other matters necessary to be specified by a Service Order, the terms governing the performance of Services will be governed by the terms and conditions of this Agreement. In the case of conflict between this Agreement and any Service Order, invoice, acknowledgement or similar document, the terms of this Agreement will prevail. Any remedies at law or equity not specifically disclaimed or modified by this Agreement remain available to both parties. ARTICLE 6 DELIVERY, CARRIER & RISK OF LOSS 6.1 DELIVERY OF PRODUCT; RISK OF LOSS. All Products manufactured hereunder shall be Delivered (a) FOB Adaptec's warehouse in the San Francisco Bay Area, with respect to orders destined for shipment to a location in the Americas, including the United States, Canada, Mexico and South America; (b) EX WORKS Singapore, with respect to orders destined for shipment to a location outside the United States; and (c) FOB the Roxio Warehouse, with respect to orders to be held at the Roxio Warehouse for pull by a Customer. Risk of loss shall transfer (a) upon delivery to the carrier at Adaptec's warehouse in the San Francisco Bay Area, -6- with respect to orders destined for shipment to a location in the Americas, including the United States, Canada, Mexico and South America; (b) upon the carrier's taking possession in Singapore, with respect to orders destined for shipment to a location outside the United States; and (c) upon receipt at the Roxio Warehouse, with respect to orders to be held at the Roxio Warehouse for pull by a Customer. All quoted Delivery dates are estimates only and Adaptec shall not be liable for any failure to meet a quoted Delivery date. 6.2 SHIPMENT. Unless otherwise agreed by the parties, shipping and insurance costs from Adaptec's Singapore facility to the Delivery Point will be paid by Adaptec and reimbursed by Roxio. Roxio will be billed for the charges on a monthly basis at the rate of actual shipping and insurance costs plus five percent (5%). Adaptec will select the carrier. In no event shall Adaptec be liable for any delay in delivery, or assume any liability in connection with shipment, nor shall the carrier be deemed an agent of Adaptec. All claims for damages must be filed with the carrier. Shipments may be made in installments. Unless otherwise agreed in writing or as set forth in the Packaging Specification, all Products will be packed and shipped in accordance with Adaptec's normal practices. ARTICLE 7 PAYMENTS Upon completion of the Services specifically relating to the manufacture and shipment of Products, as evidenced by shipment of the Product from Adaptec's Singapore facility, Adaptec will send an invoice to Roxio identifying the Service Order, and confirming the quantity and description of all Products that have been shipped. Roxio will pay invoices for the Services, or such other invoices as are issued under this Agreement, including invoices for scrapped Inventory, cancellation charges, shipping costs, inspection expenses, Product modifications and transition assistance, within thirty (30) days of receipt. Payment of invoices shall be made to Adaptec. Payment does not constitute final acceptance of the Services or resulting Products and is subject to adjustments for errors, shortages and defects in the Products. Performance of the Services shall at all times be subject to the approval of Adaptec's credit department and Adaptec may at any time decline to perform any Services, or Deliver any Products, except upon receipt of payment, or upon terms and conditions or security satisfactory to Adaptec. Adaptec will provide Roxio with credit terms in accordance with the credit policies established by its credit department. ARTICLE 8 QUALITY AND INSPECTION 8.1 ADAPTEC'S PROCESS. Adaptec will manufacture and inspect the Products in accordance with its general process and quality procedures. 8.2 ROXIO INSPECTION. Roxio, or its representative (which must be reasonably acceptable to Adaptec), will be entitled to inspect the Products and their manufacturing process at the manufacturing facilities of Adaptec or its Subcontractor, or at Adaptec's warehouse, prior to Delivery and during the course of Adaptec's performance of Services. Such inspection shall -7- be solely for the purpose of reviewing the quality of such Products and processes. Any such inspection shall be subject to reasonable prior written notice given to Adaptec by Roxio and to the execution of a reasonable form of non-disclosure agreement by Roxio and any approved representative. Adaptec shall not be responsible for any delay in Delivery or shipment of the affected Products that results from the inspection, and Roxio shall bear all costs of the inspection. In the event Adaptec bears any costs as a consequence of the inspection, Roxio shall reimburse Adaptec for its actual expenses, plus five percent (5%). ARTICLE 9 ACCEPTANCE AND REJECTION OF PRODUCTS Any Product Delivered hereunder shall be deemed accepted by Roxio unless Adaptec receives written notice of a defect or non-conformity with respect to such Product within thirty (30) days of shipment from the Delivery Point to Roxio or its Customer, or, if shipped to the Roxio Warehouse, within thirty (30) days of receipt at the Roxio Warehouse. In the event a Product appears not to conform to the Specifications or a shipment does not conform to the requirements of a Service Order, Roxio shall promptly notify the appropriate Adaptec contact, as identified to Roxio by Adaptec from time to time, specifying the non-conformity and requesting a Return Material Authorization ('RMA") number for Product return. Adaptec will issue a RMA number within 48 hours of Roxio's request. This RMA number must be referenced on all paperwork and shipping containers with respect to the returned Product. Upon receipt of receipt of the Product, Adaptec will be afforded a reasonable opportunity to inspect it to validate non-conformance. No Product shall be returned to Adaptec without compliance with the foregoing RMA procedures. ARTICLE 10 WARRANTY 10.1 MATERIALS AND WORKMANSHIP. Adaptec makes no warranty with respect to the Services or the results thereof, except that Adaptec warrants, to Roxio only, that the media upon which the Products are reproduced will, for a period of ninety (90) days commencing on the date of Delivery or pull from the Roxio Warehouse, whichever is later ("Warranty Period"), be free from defects in material and workmanship. 10.2 WARRANTY REPLACEMENT. If any Product is found to breach the warranty specified in Section 10.1 during the Warranty Period, Roxio may return, or direct its Customer to return, the Product to Adaptec, and Adaptec shall, at Adaptec's option and expense, promptly (a) replace such defective Product and return the replacement unit to Roxio, or (b) refund or credit to Roxio the Service Fee paid for the defective Product. The foregoing shall constitute Roxio's sole remedy and Adaptec's sole obligation with respect to any breach of warranty under this Agreement. 10.3 RMA PROCEDURES. All returns of the Products made by Roxio or its Customers shall comply with the RMA Procedures then in effect. -8- 10.4 NO LIABILITY. Adaptec shall have no liability or obligation to Roxio under this Article 10 with respect to any Products which have been subjected to abuse, misuse, improper use, negligence, accident, alteration, repair or rework performed by unauthorized parties. 10.5 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 10.1, THE SERVICES ARE PERFORMED AND THE PRODUCTS ARE PROVIDED "AS IS" AND ADAPTEC MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT. ARTICLE 11 PRODUCT CHANGES 11.1 ON ADAPTEC'S NOTICE. In no event shall Adaptec make any modification to a Product or its packaging without Roxio's prior written approval, which shall not unreasonably be withheld or delayed. 11.2 AT ROXIO'S REQUEST. Should Roxio desire modifications in a Product or its packaging, Roxio shall submit its request to Adaptec in writing, and Adaptec shall use reasonable commercial efforts to respond to such request in writing within five (5) business days, setting forth the impact of such proposed change on the performance of the Services and the relevant Service Fee with respect to the Products. Any change necessary for proper functioning of the Products will be implemented by Adaptec as soon as possible. Unless the parties agree otherwise, requested changes will not affect the Products already scheduled or rescheduled for Delivery as of the date Adaptec receives such request. Roxio shall be responsible for payment for any Inventory, which is made obsolete as a consequence of the implementation of the change. 11.3 CHANGE MANAGEMENT. All changes to a Product shall be subject to Adaptec's standard change management procedure. ARTICLE 12 OWNERSHIP OF ROXIO TECHNOLOGY Roxio owns the Roxio Technology. Nothing in this Agreement shall limit the ability of Adaptec to produce products or portions of products which are similar to the Products for customers other than Roxio, either during the term of this Agreement or after its termination, provided that in doing so, Adaptec does not infringe Roxio's intellectual property rights. or use Roxio Technology or Roxio Confidential Information. ARTICLE 13 INTELLECTUAL PROPERTY INDEMNITY -9- Roxio shall, at its expense and at Adaptec's request, defend any claim or action brought against Adaptec, and Adaptec's subsidiaries, affiliates, directors, officers, employees, agents and independent contractors, to the extent it is based on a claim that the Roxio Documentation, the Product or any third party intellectual property incorporated in Product at the direction of Roxio, infringes any patent, copyright, mask work right or other intellectual property right, or misappropriates any trade secret, of a third party ("Claim"). Roxio shall pay all costs of defense and settlement, together with any judgment which may be finally awarded; provided: (a) Adaptec gives Roxio reasonably prompt notice in writing of any such suit and permits Roxio, through counsel of its choice, to defend and/or settle such Claim; and (b) Adaptec provides Roxio information, assistance and authority, at Roxio's expense, to enable Roxio to defend such Claim. Roxio shall not be responsible for any settlement made by Adaptec without Roxio's written permission. ARTICLE 14 GENERAL INDEMNITY Each party hereto (the "Indemnifying Party") shall, at its own expense, defend the other party, and its subsidiaries, affiliates, directors, officers, employees, agents and independent contractors (collectively, the "Indemnified Party"), from and against any and all loss, cost, liability or expense (including costs and reasonable fees of attorneys and other professionals) arising out of or in connection with the negligence of the Indemnifying Party's agents and employees. Such indemnity shall include claims brought with respect to the defective design or code of the Product for which Roxio shall be the indemnifying party. The Indemnifying Party shall pay all costs of defense and settlement, together with any judgment which may be finally awarded; provided: (a) the Indemnified Party gives the Indemnifying Party reasonably prompt notice in writing of any such suit and permits the Indemnifying Party, through counsel of its choice, to defend and/or settle such Claim; and (b) the Indemnified Party provides the Indemnifying Party information, assistance and authority, at the Indemnifying Party's expense, to enable the Indemnifying Party to defend such Claim. The Indemnifying Party shall not be responsible for any settlement made by the Indemnified Party without the Indemnifying Party's written permission. ARTICLE 15 TERMINATION 15.1 TERMINATION WITHOUT CAUSE. Roxio may, for any reason or for no reason whatsoever, terminate this Agreement, in whole, or in part, upon two (2) months advance notice to Adaptec. 15.2 EFFECT OF TERMINATION WITHOUT CAUSE. In the event Roxio terminates this Agreement pursuant to Section 15.1, Adaptec may submit a written claim for Inventory in accordance with Section 5.4. -10- 15.3 TERMINATION FOR DEFAULT. Either party may suspend its performance and/or terminate this Agreement immediately upon written notice at any time if: (a) The other party is in material breach of any warranty, term, condition or covenant of this Agreement other than those contained in Article 16 and fails to cure that breach within thirty (30) days after written notice of that breach and of the first party's intention to suspend its performance or terminate; (b) The other party is in material breach of any warranty, term, condition or covenant of Article 16; or (c) The other party: (i) becomes insolvent; (ii) admits in writing its insolvency or inability to pay its debts or perform its obligations as they mature; or (iii) makes a general assignment for the benefit of creditors. 15.4 EFFECT OF TERMINATION IN GENERAL. The following terms apply to any termination under this Agreement, including without limitation, termination for convenience and for default: (a) Immediately upon any termination of this Agreement, Adaptec shall, to the extent and at the times specified by Roxio, stop all work on outstanding Service Orders, incur no further direct cost, and protect all property in which Roxio has or may acquire an interest pursuant to this Article 15. (b) Immediately upon any termination of this Agreement, each party will return to the other party or, pursuant to the other party's written instructions, destroy all materials in its possession containing Confidential Information of the other party. Returned Confidential Information materials shall be shipped freight collect. In addition Adaptec shall immediately deliver to Roxio any and all Roxio Technology, Roxio Documentation or other property of Roxio within Adaptec's possession or control. Notwithstanding the foregoing, Adaptec shall have no obligation to deliver any Inventory until and unless it has been paid for by Roxio. (c) If this Agreement is terminated by Adaptec pursuant to Section 15.3, then Adaptec may submit a claim for Inventory in accordance with Section 5.4. (d) Notwithstanding any termination of this Agreement, the provisions of Sections 5.4, 7, 9, 10, 12, 13, 14, 16, 17, 18 and the relevant sections of Articles 15 and 19 shall remain in effect. 15.5 TRANSITION ASSISTANCE. Upon expiration or earlier termination of this Agreement by Roxio pursuant to Sections 15.1 or 15.3, Adaptec shall deliver to Roxio, or to Roxio's agent, as Roxio may direct, a copy of the Roxio Documentation applicable to each Product in order to assist in the transfer of the performance of the Services to Roxio or its designated third party manufacturer. Such Roxio Documentation shall, as applicable, be in compiled, electronic form. Additionally, subject to the mutual agreement of the parties with -11- respect to scheduling and compensation to Adaptec, Adaptec shall provide such technical assistance to Roxio or Roxio's designated third party manufacturer, as Roxio may reasonably request in connection with such transfer. ARTICLE 16 CONFIDENTIALITY Each party will protect the other's Confidential Information in accordance with the terms of the Master Confidential Disclosure Agreement. ARTICLE 17 LIMITATION OF LIABILITY EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, AND EXCEPT AS SET FORTH IN ARTICLES 13 AND 14, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER OR ANY OTHER PERSON FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS OR DAMAGES TO THE OTHER PARTY'S BUSINESS REPUTATION HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER IN AN ACTION FOR CONTRACT, STRICT LIABILITY OR TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THE FIRST PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY. ARTICLE 18 DISPUTE RESOLUTION Resolution of any and all disputes arising from or in connection with this Agreement ("Disputes") shall be exclusively governed by and settled in accordance with the provisions of this Article 18. (a) The parties shall make a good faith attempt to resolve any Dispute arising out of or relating to this Agreement through informal negotiation between appropriate representatives or each of Adaptec and Roxio. If at any time either party feels that such negotiations are not leading to a resolution of the Dispute, such party may send a notice to the other party describing the Dispute and requesting a meeting of the senior executives from each party. Within ten (10) business days after such notice of a Dispute is given, each party shall select appropriate senior executives (e.g. director or V.P. level) of each party who shall have the authority to resolve the matter and shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. During the course of negotiations under this Section 18 (a), all reasonable requests made by one party to the other for information, including requests for copies of relevant documents, will be honored. The specific format for such negotiations -12- will be left to the discretion of the designated negotiating senior executives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other party. In the event that any Dispute arising out of or related to this Agreement is not settled by the parties within thirty (30) days after the first meeting of the negotiating senior executives, either party may commence litigation with respect to the Dispute. However, except as provided below in Section 18 (b), neither party shall commence litigation against the other party to resolve the Dispute (i) until the parties try in good faith to settle the Dispute by negotiation for at least thirty (30) days after the first meeting of the negotiating senior executives, or (b) until forty (40) days after notice of a Dispute is given by either party to the other party, whichever occurs first. (b) Any Dispute regarding the following is not required to be negotiated prior to seeking relief from a court of competent jurisdiction: breach of any obligation of confidentiality; infringement, misappropriation, or misuse of any intellectual property right; or any other claim where interim relief from the court is sought to prevent serious and irreparable injury to a party. However, the parties to the Dispute shall make a good faith effort to negotiate such Dispute, according to the above procedures, while such court action is pending. ARTICLE 19 GENERAL 19.1 NOTICES. Any notice, demand, offer, request or other communication required or permitted to be given by either party pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one (1) Business Day after being delivered by facsimile (with electronic receipt of appropriate confirmation), (iv) one (1) Business Day after being deposited with a nationally recognized overnight courier service or (v) four (4) days after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the attention of: If to Adaptec: Adaptec, Inc. 691 S. Milpitas Boulevard Milpitas, California 95035 Attention: Vice President, Operations cc: Vice President and General Counsel If to Roxio: Roxio, Inc. 461 S. Milpitas Boulevard Milpitas, California 95035 Attention: William Christopher Gorog -13- 19.2 ASSIGNMENT. Neither party shall assign any of its rights or privileges hereunder without the prior written consent of the other party; provided, however, that Adaptec may subcontract the performance of any or all of the Services without Roxio's consent, subject to Adaptec's compliance with the provisions of Section 3.6. Any attempt at assignment in derogation of the foregoing shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto, their subsidiaries, and their respective successors and assigns. 19.3 DAMAGE LIMITATION. INDEPENDENTLY OF ANY OTHER REMEDY LIMITATION HEREOF AND NOTWITHSTANDING ANY FAILURE OF THE ESSENTIAL PURPOSE OF ANY SUCH LIMITED REMEDY, THE PARTIES AGREE THAT IN NO EVENT SHALL ADAPTEC BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND UNDER THIS AGREEMENT. 19.4 ALLOCATION OF RISK. The parties acknowledge and affirm that the sections on limitation of liability, warranties and disclaimer of warranties and damage limitation in this Agreement allocate the risks between the parties. This allocation is reflected in the pricing of the Products and is an essential element of the basis of the bargain between the parties. 19.5 EXPORT CONTROL. (a) REPRESENTATION. Roxio agrees to comply strictly and fully with all export controls imposed on the Products and the Roxio Technology by any country or organization in whose jurisdiction Roxio operates or does business. Roxio will not knowingly, export or re-export any Product to any country prohibited under United States Export Administration Regulations ("EAR"), without first obtaining a valid license to so export or re-export the Products. (b) RESPONSIBILITY. Except as otherwise agreed in writing between the parties, all export permits, import certificates, insurance, duty, customs clearance charges and/or licenses and related costs from the Delivery Point will be Roxio's responsibility. Adaptec shall not be required to ship any Product if it believes that such shipment may violate any applicable EAR. Roxio will promptly inform Adaptec of any change in any Product, which may affect its export status, including any change , which may affect its EAR Export Commerce Control Number or License designator, after the Separation Date. 19.6 WAIVER. The waiver by either party hereto of a breach or violation of any provision of this Agreement shall be made only in a writing signed by the party making such waiver, and shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. 19.7 GOVERNING LAW. This Agreement shall be construed in accordance with and all Disputes hereunder shall be governed by the laws of the State of California, excluding its conflict of law rules and the United Nations Convention on Contracts for the International Sale of Goods. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California, San Jose Division, shall have jurisdiction and venue over all Disputes between the parties that are permitted to be brought in a court of law pursuant to Section 18.7 above. -14- 19.8 DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. 19.9 SEVERABILITY. The parties hereto have negotiated and prepared the terms of this Agreement in good faith with the intent that each and every one of the terms, covenants and conditions herein be binding upon and inure to the benefit of the respective parties. Accordingly, if any one or more of the terms, provisions, promises, covenants or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, such provision shall be as narrowly construed as possible, and each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. To the extent this Agreement is in violation of applicable law, then the parties agree to negotiate in good faith to amend the Agreement, to the extent possible consistent with its purposes, to conform to law. 19.10 FORCE MAJEURE. Neither of the parties shall be deemed to be in default of this Agreement to the extent any failure to perform hereunder is a result of conditions beyond the other party's reasonable control, including but not limited to, acts of God, war, strikes, fires, floods, earthquakes, work stoppages and embargoes, material shortages, subcontractor delays, acts of any governmental entity, equipment or other facilities failures (which delays or failures are beyond the reasonable control, without negligence, of the defaulting party), and neither party shall have the right to terminate this Agreement for any such delay or default on the part of the other party. 19.11 ENTIRE AGREEMENT. This Agreement, the Master Separation and Distribution Agreement and the other Ancillary Agreements and the Exhibits and Schedules referenced or attached hereto and thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. This Agreement shall prevail in the event of any conflicting terms or legends which may appear on any portion of the Assigned Technology or the Licensed Technology. 19.12 CONFLICTING AGREEMENTS. In the event of a conflict between this Agreement and the Master Separation and Distribution Agreement or any Ancillary Agreement executed in connection herewith, the provisions of this Agreement shall prevail. 19.13 CONTROLLING DOCUMENT. All Service Orders for the Products shall be governed by this Agreement. Any additional, inconsistent or conflicting clauses in any order, release, acceptance or other written correspondence between the parties shall be considered null and void, unless expressly executed by duly authorized representatives of both parties. -15- 19.14 RELATIONSHIP. The parties are independent contractors. Nothing contained herein and no action taken pursuant hereto shall constitute the parties as joint ventures or the agents of the other party for any purpose or in any sense whatsoever. 19.15 AMENDMENT AND EXECUTION. This Agreement and amendments hereto shall be in writing and executed in multiple copies via facsimile or otherwise on behalf of Adaptec and Roxio by their respective duly authorized officers or representatives. Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -16- EXHIBIT A (CONTINUED) IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the Separation Date. ADAPTEC, INC. ROXIO, INC. By: /s/ Robert N. Stephens By: /s/ Wm. Christopher Gorog ------------------------------- -------------------------------- Name: Robert N. Stephens Name: Wm. Christopher Gorog ---------------------------- ------------------------------ Title: President, Title: President and Chief Executive Officer Chief Executive Officer ---------------------------- ----------------------------- [SIGNATURE PAGE TO MANUFACTURING AGREEMENT] EX-2.12 14 a2056442zex-2_12.txt EXHIBIT 2.12 Exhibit 2.12 EXECUTION COPY INTERNATIONAL ASSET TRANSFER AGREEMENT BETWEEN Adaptec Mfg (S) Pte Ltd AND ROXIO CI LTD. DATED THIS 5th DAY OF May 2001 TABLE OF CONTENTS 1. DEFINITIONS & INTERPRETATION .................................... 1 2. TRANSFER OF TECHNOLOGY .......................................... 3 3. CONSIDERATION ................................................... 4 4. COMPLETION ...................................................... 4 5. REPRESENTATIONS AND WARRANTIES .................................. 5 6. DURATION OF THIS AGREEMENT ...................................... 5 7. ASSIGNMENT ...................................................... 5 8. COSTS AND EXPENSES .............................................. 5 9. NOTICES ......................................................... 5 10. PREVIOUS AGREEMENTS AND AUTHORITY ............................... 6 11. REMEDIES ........................................................ 6 12. SEVERANCE ....................................................... 6 13. ARBITRATION AND APPLICABLE LAW .................................. 6
-i- THIS AGREEMENT is made on the 5th day of May, 2001("the Effective Date"), BETWEEN (1) Adaptec Mfg (S) Pte Ltd (Regn No. 00121/1987-N) ("AMS"), a company incorporated in the Republic of Singapore with its registered office at No. 2 Chai Chee Drive, Singapore 4690443); AND (2) Roxio Cl Ltd. (Regn No. 103240) ("RCI"), a company incorporated in the Cayman Islands with its registered office at Offices of Walkers, Walker House, PO Box 265GT, Mary Street, George Town, Grand Cayman, Cayman Islands, B.W.I. WHEREAS (A) AMS is a private limited company incorporated in the Republic of Singapore and has at the date hereof the authorised share capital and issued and paid-up share capital as set out in Schedule 1. (B) RCI is currently a 100% owned subsidiary of AMS and has at the date hereof the authorised share capital and issued and paid-up share capital as set out in Schedule 2. (C) AMS is desirous of transferring certain technology and rights (hereinafter referred to as the "RCI Technology"), equity interests as set out in Schedule 3, and cash consideration to its subsidiary, RCI, and in consideration therefor, RCI shall issue one hundred (100) ordinary share of US$1/- in its capital to AMS as set out in Schedule 4 upon the terms and subject to the conditions contained in this Agreement. IT IS HEREBY AGREED as follows:- 1. DEFINITIONS & INTERPRETATION In this Agreement: 1.1 the following words and expressions shall have the following meanings:- "CASH CONSIDERATION" shall mean the sum of Twenty Million Dollars (US$20,000,000) to be paid by check or wire transfer; "COMPLETION DATE" means May 5, 2001 or such other date as the parties hereto may agree in writing; -1- "CONSIDERATION SHARES" means one hundred (100) ordinary share of US$1/- in the capital of RCI credited as fully paid up to be allotted and issued by RCI to AMS as set out against its name in Schedule 4; "DIRECTORS" means the directors (including their alternates) for the time being of AMS and RCI and "Director" shall mean any of them; "SHAREHOLDERS" means the persons who are registered for the time being as holders of the shares in the Register of Members of RCI and AMS. "US$" means United States dollar. "RCI TECHNOLOGY" means the technology acquired by AMS under the Prior Agreements and currently held by AMS, which relates to the RCI Business and does not relate primarily to the business of AMS or Adaptec, Inc. "RCI BUSINESS" means (a) the business and operations of Adaptec, Inc. currently operated as the Software Products Group, as described in the Roxio, Inc. Form 10, including, without limitation, the business and operation responsible for developing, marketing, and selling the following products (i) Easy CD Creator, (ii) GoBack, (iii) SoundStream, (vi) Toast, (v) Jam, (vi) TakeTwo and (vii) WinOnCD and (b) except as otherwise expressly provided herein, any terminated, divested or discontinued businesses or operations that at the time of termination, divestiture or discontinuation primarily related to the business of the Software Products Group or Roxio, Inc., as conducted on the Separation Date (as defined in the First Amended Master Separation and Distribution Agreement between Adaptec, Inc. and Roxio, Inc.). "PRIOR AGREEMENTS" means the Technology Research and Development Cost and Risk Sharing Agreement by and between Adaptec, Inc. and AMS, dated September 1, 1995, as amended, and the R&D Services Agreement by and between AMS and CeQuadrat GmbH, dated July 8, 1999. EQUITY INTEREST" means all of the equity interest held by AMS in CG1 Verwaltungsgesellschaft GmbH. -2- 1.2. Any reference to "completion" shall mean completion of the transfer of the RCI Technology, Equity Interest as set out in Schedule 3 and the Cash Consideration, and the allotment of the ordinary shares in the share capital of Roxio Cl, Ltd in consideration thereof. 1.3 References to Recitals and Clauses are to recitals and clauses of this Agreement, and "Agreement" shall mean this Agreement. 1.4 The headings in this Agreement are for convenience only and shall not affect the interpretation hereof. 1.5 Where applicable, words importing the singular include the plural and vice versa, words importing any gender include every gender, references to persons include bodies corporate and unincorporate and references to time shall mean Singapore time. 2. TRANSFER OF TECHNOLOGY 2.1 Subject to the terms and conditions of this Agreement, AMS hereby transfers, grants, conveys and assigns to RCI all of its right, title and interest in and to the RCI Technology, the Equity Interest and the Cash Consideration, free from any charges, liens and other encumbrances placed thereon by AMS, exclusive of encumbrances which are agreements with subcontractors to manufacture product for AMS or agreements granting reproduction or distribution rights to (a) OEMs, VARs or similarly situated licensees, or (b) customers with respect to technology which has been escrowed for purposes of ensuring that such customers are provided continued support for the technology in the event of (i) the insolvency of AMS or (ii) the material breach of AMS under its agreement with such customers (collectively, "Permitted Licenses"), and with all rights, benefits and entitlements now or hereafter attaching to such RCI Technology and to such Equity Interest. 2.2 Subject to the terms and conditions of this Agreement, RCI hereby agrees to issue to AMS the Consideration Shares free from all charges, liens and other encumbrances and with all rights, benefits and entitlements now or hereafter attaching thereto. 2.3 AMS hereby assigns all of its rights in the Permitted Licenses to RCI. 2.4 RCI is not obliged to complete the allotment of the Consideration Shares unless the transfer of the RCI Technology, Equity Interest and the Cash Consideration is completed simultaneously with such allotment. 2.5 AMS covenants that AMS will, without demanding any further consideration therefor, at the request and expense of RCI (except for the value of the time of AMS employees), do (and cause its subsidiaries to do) all lawful and just acts that may be or become necessary for evidencing, maintaining, recording and perfecting RCI's rights to such RCI Technology and the Equity Interest as of the Effective Date, including but not limited to, execution and acknowledgement of (and causing its subsidiaries to execute and acknowledge) assignments and other instruments in a form reasonably required by RCI to evidence the -3- conveyances herein in all jurisdictions in which such RCI Technology and Equity Interest exist. 2.6 If, after the Separation Date, it is found that the RCI Technology does not include certain technology used before the Effective Date and intended for use by Roxio, Inc. or RCI in the day to day conduct of its business as contemplated in this Agreement or in the Ancillary Agreements, and such technology is not otherwise provided to RCI under the this Agreement, AMS will provide RCI such technology under the assignments granted in this Agreement to the extent it is able to do so, but only to the extent such technology is reasonably necessary for Roxio, Inc. or RCI to accomplish such day to day operation of its business. 2.7 AMS hereby acknowledges and affirms the transfer and licensing of that certain technology and those certain intellectual property rights transferred and licensed under the Master Technology Ownership and License Agreement and the Master Patent Ownership and License Agreement, by and between Roxio, Inc. and Adaptec, Inc., and hereby consents to such transfer and licensing to the extent it may have an interest in the technology and rights transferred and licensed thereunder. 3. CONSIDERATION 3.1 The consideration for the allotment of Consideration Shares shall be the net book value of the RCI Technology and Equity Interest held by AMS, together with the Cash Consideration. 3.2 The consideration for the Consideration Shares shall be satisfied in whole by the allotment and issue by RCI of the Consideration Shares, credited as fully paid up to RCI as set out in Schedule 3. 3.3 The Consideration Shares shall be allotted and issued on terms that they will rank PARI PASSU in all respects with the existing ordinary shares in the capital of RCI at the date of allotment. 4. COMPLETION 4.1 Subject as hereafter provided, completion shall take place at the office of AMS or such other place as the parties hereto may agree in writing on the Completion Date. 4.2 RCI shall, in consideration of the mutual covenants set out hereinbefore, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, duly execute in favour of AMS the share certificates in respect of the Consideration Shares. 4.3 RCI shall: (a) prior to or on completion, procure the necessary approval of its Directors/Shareholders in accordance with the requirements of the Laws of Cayman Islands to its entry into this Agreement for the allotment and issue -4- of the Consideration Shares credited as fully paid-up by AMS as set out in Schedule 3 as consideration for the aforesaid allotment; (b) on completion, issue to AMS the Consideration Shares as set out in Schedule 4; (c) on completion, deliver to AMS, the relative share certificate relating to the Consideration Shares; and (d) on completion, deliver to AMS such waivers, consents, approvals and other documents as may be necessary to enable AMS to be registered as the holder of the Consideration Shares. 5. REPRESENTATIONS AND WARRANTIES 5.1 AMS represents and warrants that, other than the Permitted Licenses, it has granted no license under any of the RCI Technology. 5.2 AMS and RCI each respectively represents and warrants that it has the authority to enter into this Agreement and to grant the rights that it respectively grants in it. 6. DURATION OF THIS AGREEMENT All provisions of this Agreement shall not, so far as they have not been performed at completion, be in any respect extinguished or affected by completion or by any other event or matter whatsoever and shall continue in full force and effect. 7. ASSIGNMENT RCI may assign this Agreement or any technology or right respectively assigned or granted under it. 8. COSTS AND EXPENSES All costs and expenses (including without limitation, legal or other professional fees, taxes and stamp duties) incurred in the preparation, negotiation and execution of this Agreement and related documents shall (whether or not there is completion), be borne by the respective parties accordingly. 9. NOTICES Any notice or request to be given, made or served for any purpose under this Agreement shall be in writing and given, made or served by sending the same by prepaid post or delivering it by hand or sending it by facsimile transmission addressed to the parties at their respective addresses or facsimile numbers, respectively, set out on the execution page or as shall have been notified (in accordance with this Clause) to the other party hereto for the purposes of this Clause and shall be deemed to have been duly served (if by hand or made by facsimile transmission) immediately or (if served by post) 7 days after posting and in proving the same it shall be sufficient to show that the transmission report confirming receipt or the envelope containing the same was duly transmitted, addressed, stamped and posted (as the case may be). -5- 10. PREVIOUS AGREEMENTS AND AUTHORITY 10.1 ENTIRE AGREEMENT : This Agreement and the documents referred to herein state the entire agreement, whether oral or in writing, between or among all or any of the parties hereto with respect to the RCI Technology. The rights of AMS to grant licenses or sublicenses under the RCI Technology is hereby terminated. 10.2 AMENDMENTS : No amendment or variation of this Agreement shall be effective unless in writing and signed by or on behalf of each of the parties hereto. 10.3 AUTHORITY : Each party represent and warrants that as of the Completion Date it has the full legal right, power and authority to enter into and perform this Agreement. 11. REMEDIES No remedy conferred by any of the provisions of this Agreement is intended to be exclusive of any other remedy which is otherwise available at law, in equity, by statute or otherwise, and each and every other remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity, by statute or otherwise. The election of any one or more of such remedies by any of the parties hereto shall not constitute a waiver by such party of the right to pursue any other available remedies. 12. SEVERANCE If any provision of this Agreement or part thereof is rendered void, illegal or unenforceable by any legislation to which it is subject, it shall be rendered void, illegal or unenforceable to that extent and no further. 13. ARBITRATION AND APPLICABLE LAW 13.1 Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of Singapore International Arbitration Centre ("SIAC Rules") for the time being in force, which rules are deemed to be incorporated by reference to this clause. -6- IN WITNESS WHEREOF this Agreement has been entered into the day and year first above written. SIGNED by ) /s/ Dana E. Miles ) for and on behalf of ) ADAPTEC MFG (S) PTE LTD ) in the presence of:- ) /s/ Kim Brandt ) SIGNED by ) /s/ Wm. Christopher Gorog ) for and on behalf of ) ROXIO CL LTD. ) in the presence of:- ) /s/ Kevin A. Coyle ) For purposes of the transfers provided to Roxio CI Ltd. hereunder, Adaptec, Inc. as a party to the Technology Research and Development Cost and Risk Sharing Agreement by and between Adaptec, Inc. and AMS, dated September 1, 1995, hereby acknowledges and affirms this Agreement as if a party hereto. SIGNED by ) /s/ Robert N. Stephens ) for and on behalf of ) ADAPTEC, INC. ) in the presence of:- ) /s/ Dana E. Miles ) [SIGNATURE PAGE TO INTERNATIONAL ASSET TRANSFER AGREEMENT] EX-2.13 15 a2056442zex-2_13.txt EXHIBIT 2.13 [Adaptec Letterhead] EXHIBIT 2.13 Thomas J. Shea Senior Vice President and Chief Operating Officer Roxio, Inc. 460 South Milpitas Boulevard Milpitas, CA 95131 Dear Tom: This letter of agreement ("Letter of Agreement") confirms the agreement of Adaptec. Inc. ("Adaptec") and Roxio, Inc. ("Roxio") with respect to certain Assigned Trademarks, with respect to certain Assigned Technology that is the ReZoom product, and with respect to certain Assigned patents. For the sum of $1.00, and other good and valuable consideration to be received by Roxio in connection with the Separation, Roxio agrees as follows: RECONVEYANCE OF CERTAIN ASSIGNED TECHNOLOGY Effective immediately after Separation, Roxio hereby grants, reconveys and assigns to Adaptec, by execution hereof (or, where appropriate or required, by execution of separate instruments of assignment), all its right, title and interest in and to the Assigned Technology that is or directly relates to the ReZoom product including, without limitation, documentation and object code for the ReZoom product and the source code files set forth on EXHIBIT A, to the extent such Assigned Technology was conveyed to Roxio under the Master Technology Ownership and License Agreement (the "Reconveyed Technology"), and its Intellectual property Rights therein, to be held and enjoyed by Adaptec, its successors and assigns. Roxio further covenants that Roxio will, without demanding any further consideration therefor, at the request and expense of Adaptec (except for the value of the time of Roxio employees), do all lawful and just acts that may be or become necessary for evidencing, maintaining, recording and perfecting Adaptec's rights to such Reconveyed Technology and its Intellectual Property Rights therein, including but not limited to, execution and acknowledgement of assignments and other instruments in a form reasonably required by Adaptec for each Copyright and Database jurisdiction. RECONVEYANCE OF CERTAIN ASSIGNED TRADEMARKS Effective immediately after Separation, Roxio hereby grants, reconveys and assigns to Adaptec, by execution hereof (or, where appropriate or required, by execution of separate instruments of assignment), all its right, title and interest in and to the Assigned Trademarks set forth on EXHIBIT B (the "Reconveyed Trademarks"), together with the goodwill of the business symbolized by the Reconveyed Trademarks. Roxio further covenants that Roxio will, without demanding any further consideration therefor, at the request and expense of Adaptec (except for the value of the time of Roxio employees), do all lawful and just acts that may be or become necessary for evidencing, maintaining, recording and perfecting Adaptec's rights to such Reconveyed Trademarks, including but not limited to, execution and acknowledgement of assignments and other instruments in a form reasonably required by Adaptec for each Trademark jurisdiction. RECONVEYANCE OF CERTAIN ASSIGNED PATENTS Effective immediately after Separation, Roxio hereby grants, conveys and assigns to Adaptec, by execution hereof (or, where appropriate or required, by execution of separate instruments of assignment), all its right, title and interest in and to the Assigned Patents set forth on EXHIBIT C ("Reconveyed Patents"), to be held and enjoyed by Adaptec, its successors and assigns. Roxio further grants, conveys and assigns to Adaptec all its right, title and interest in and to any and all causes of action and rights of recovery for past infringement of the Reconveyed Patents and the right to claim priority from the Reconveyed Patents. Roxio will, without demanding any further consideration therefor, at the request and expense of Adaptec (except for the value of the time of Roxio employees), do all lawful and just acts, that may be or become necessary for prosecuting, sustaining, and obtaining continuations, continuations-in-part and divisionals of, or reissuing or re-examining, said Reconveyed Patents and for evidencing, maintaining, recording and perfecting Adaptec's rights to said Reconveyed Patents, including but not limited to execution and acknowledgement of assignments and other instruments in a form reasonably required by Adaptec for each Patent jurisdiction. LICENSE TO ROXIO Effective after Separation and immediately upon the grant, conveyance and assignment of the Reconveyed Patents by Roxio to Adaptec, and in consideration of the above agreements by Roxio, Adaptec hereby grants to Roxio a nonexclusive, irrevocable, fully paid-up, worldwide license, without the right to grant sublicenses except as described in this paragraph, under the Reconveyed Patents to make (including the right to practice methods, processes and procedures), have made, use, lease, sell, offer for sale and import: (a) any products and services that are commercially released by Roxio prior to or on the Separation Date that embody or are made in accordance with any invention of the Reconveyed Patents ("Current Roxio Products"); and (b) products or services containing functionality (i) embodied in a Current Roxio Product, and (ii) embodying or made in accordance with any invention(s) of the Reconveyed Patents, provided that this license shall not extend to any functionality or feature of the product or service not embodied in a Current Roxio Product. The licenses granted in this paragraph shall include the right of Roxio to sublicense its Subsidiaries. Each sublicensed Subsidiary shall be bound by the terms and conditions of the Master Patent Ownership and License Agreement as if it were named in the place of Roxio. Any sublicense granted to a Subsidiary under the Reconveyed Patents shall terminate on the date such Subsidiary ceases to be a Subsidiary. CERTAIN DEFINITIONS Capitalized terms in this Letter of Agreement, which are not otherwise defined, shall have the meaning set forth in the Master Separation and Distribution Agreement, Master Technology Ownership and License Agreement and the Master Patent Ownership and License Agreement. If the foregoing correctly reflects your understanding, please execute this Letter of Agreement where provided below. Sincerely, ADAPTEC, INC. /s/ Robert N. Stephens - ---------------------- AGREED AND ACKNOWLEDGED: ROXIO, INC. By: /s/ Thomas J. Shea ------------------ Thomas J. Shea -----END PRIVACY-ENHANCED MESSAGE-----