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 July 2, 2010

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 0-15071

ADPT Corporation

(Exact name of Registrant as specified in its charter)

DELAWARE	94-2748530
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
691 S. MILPITAS BLVD., MILPITAS, CALIFORNIA	95035
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (408) 945-8600

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  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one).

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of ADPT’s common stock outstanding as of August 4, 2010 was 120,324,013.

TABLE OF CONTENTS

Part I.	Financial Information
	Item 1.	Financial Statements:	3
		Unaudited Condensed Consolidated Statements of Operations	3
		Unaudited Condensed Consolidated Balance Sheets	4
		Unaudited Condensed Consolidated Statements of Cash Flows	5
		Notes to Unaudited Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
	Item 4.	Controls and Procedures	31
Part II.	Other Information
	Item 1A.	Risk Factors	31
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
	Item 6.	Exhibits	37
	Signatures		38

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ADPT Corporation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three-Month Period Ended
	July 2, 2010			July 3, 2009
	(in thousands, except per share amounts)
Net revenues	$	4,112		$	1,714
Cost of revenues (inclusive of amortization and impairment of acquisition-related intangible assets)		14,852			1,477
Gross profit (loss)		(10,740	)		237
Operating expenses:
Research and development		5,300			4,692
Selling, marketing and administrative		3,994			4,485
Amortization of acquisition-related intangible assets		1,077			325
Restructuring charges		2,289			149
Impairment of long-lived assets		4,838			—
Total operating expenses		17,498			9,651
Loss from continuing operations		(28,238	)		(9,414	)
Interest and other income, net		1,671			2,643
Loss from continuing operations before income taxes		(26,567	)		(6,771	)
Benefit from income taxes		7,353			2,183
Loss from continuing operations, net of taxes		(19,214	)		(4,588	)
Discontinued operations, net of taxes
Income (loss) from discontinued operations, net of taxes		(662	)		4,742
Gain on disposal of discontinued operations, net of taxes		10,746			440
Income from discontinued operations, net of taxes		10,084			5,182
Net income (loss)	$	(9,130	)	$	594
Basic and diluted income (loss) per share:
Loss from continuing operations, net of taxes	$	(0.16	)	$	(0.04	)
Income from discontinued operations, net of taxes	$	0.08		$	0.04
Net income (loss)	$	(0.08	)	$	0.00
Shares used in computing income (loss) per share:
Basic and diluted		119,675			119,284

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

3

ADPT Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	July 2, 2010		March 31, 2010
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	47,595	$	63,948
Marketable securities		342,051		311,399
Restricted cash		4,107		—
Accounts receivable, net		1,094		7,528
Inventories, net		244		2,342
Prepaid expenses and other current assets		10,595		13,623
Total current assets		405,686		398,840
Property and equipment, net		6,025		11,353
Other intangible assets, net		—		16,029
Other long-term assets		2,761		2,854
Total assets	$	414,472	$	429,076
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,721	$	9,188
Accrued and other liabilities		5,252		12,271
3/4% Convertible Senior Subordinated Notes due 2023		346		346
Total current liabilities		15,319		21,805
Other long-term liabilities		4,444		4,755
Deferred income taxes		4,813		4,813
Total liabilities		24,576		31,373
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock		119		119
Additional paid-in capital		204,691		203,229
Accumulated other comprehensive income, net of taxes		4,147		4,286
Retained earnings		180,939		190,069
Total stockholders’ equity		389,896		397,703
Total liabilities and stockholders’ equity	$	414,472	$	429,076

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4

ADPT Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three-Month Period Ended
	July 2, 2010			July 3, 2009
	(in thousands)
Cash Flows From Operating Activities:
Net income (loss)	$	(9,130	)	$	594
Less: income from discontinued operations, net of taxes		10,084			5,182
Loss from continuing operations, net of taxes		(19,214	)		(4,588	)
Adjustments to reconcile loss from continuing operations, net of taxes, to net cash provided by (used in) operating activities:
Stock-based compensation expense		234			617
Inventory-related charges (credit)		100			(5	)
Depreciation and amortization		11,194			2,149
Impairment of long-lived assets		10,171			—
Changes in assets and liabilities		(17,705	)		(1,030	)
Net Cash Used in Operating Activities of Continuing Operations		(15,220	)		(2,857	)
Net Cash Provided by Operating Activities of Discontinued Operations		198			7,456
Net Cash Provided by (Used in) Operating Activities		(15,022	)		4,599
Cash Flows From Investing Activities:
Purchases of intangible assets (installment payments)		(281	)		—
Purchases of property and equipment		—			(37	)
Purchases of marketable securities		(86,995	)		(59,569	)
Sales of marketable securities		35,953			36,067
Maturities of marketable securities		19,361			8,375
Net Cash Used in Investing Activities of Continuing Operations		(31,962	)		(15,164	)
Net Cash Provided by (Used in) Investing Activities of Discontinued Operations		29,238			(124	)
Net Cash Flow Used in Investing Activities		(2,724	)		(15,288	)
Cash Flows From Financing Activities:
Repurchases of long-term debt		—			(60	)
Proceeds from issuance of common stock		1,509			2
Net Cash Provided by (Used in) Financing Activities of Continuing Operations		1,509			(58	)
Net Cash Provided by (Used in) Investing Activities of Discontinued Operations		—			—
Net Cash Provided by (Used in) Financing Activities		1,509			(58	)
Effects of Foreign Currency on Cash and Cash Equivalents		(116	)		827
Net Decrease in Cash and Cash Equivalents		(16,353	)		(9,920	)
Cash and Cash Equivalents at Beginning of Period		63,948			111,724
Cash and Cash Equivalents at End of Period	$	47,595		$	101,804

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

5

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

In the opinion of management, the accompanying Unaudited Condensed Consolidated Interim Financial Statements (“Consolidated Financial Statements”) of ADPT Corporation and its wholly-owned subsidiaries (collectively, “ADPT” or the “Company”) have been prepared on a consistent basis with the March 31, 2010 audited consolidated annual financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth therein. The Consolidated Financial Statements have been prepared in accordance with the regulations of the Securities and Exchange Commission (the “SEC”) and, therefore, omit certain information and footnote disclosure necessary to present the statements in accordance with accounting principles generally accepted in the United States of America. These 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 fiscal year ended March 31, 2010, which was filed with the SEC on May 27, 2010. The results of operations for the first quarter of fiscal 2010 are not necessarily indicative of the results to be expected for the entire fiscal year.

Certain reclassifications have been made to prior period reported amounts to conform to the current period presentation, including the Company’s disclosures surrounding discontinued operations as discussed further in Note 4, and Notes 7 and 11 to the Consolidated Financial Statements. The discontinued operations included the reclassification of the Company’s financial statements and related disclosures for all periods presented, except for the historical Unaudited Condensed Consolidated Balance Sheets. These reclassifications had no impact on net income (loss), total assets or total stockholders’ equity. Unless otherwise indicated, the Notes to the Consolidated Financial Statements relate to the discussions of the Company’s continuing operations.

2. Recent Accounting Pronouncements

There were no additional accounting pronouncements recently issued in the first quarter of fiscal 2011 which are applicable to the Company or may be considered material to the Company. For a complete discussion of the impact of recently issued accounting pronouncements, please refer to Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

3. Employee Stock Benefit Plans

Stock-Based Compensation

The Company measured and recognized compensation expense for all stock-based awards made to its employees and directors, including employee stock options and other stock-based awards, based on estimated fair values using a straight-line amortization method over the respective requisite service period of the awards and adjusted it for estimated forfeitures. In May 2010, the Compensation Committee of the Board of Directors modified all employees’ unvested stock-based awards, including stock options, restricted stock awards and restricted stock units (none of which affect the Company’s Interim President and Chief Executive Officer (“CEO”)). The modification of the unvested stock-based awards was effective the earlier of (1) June 8, 2010, the date the Company consummated the Asset Purchase Agreement (the “Purchase Agreement”) with PMC-Sierra, Inc. (“PMC-Sierra”) for the sale of certain assets related to the Company’s business of providing data storage hardware and software solutions and products (the “DPS Business”) and PMC-Sierra assumed certain liabilities related to the DPS Business or (2) the date in which an employee was involuntarily terminated (other than for cause) as part of the actions the Company took related to its sale of the DPS Business. The modifications included the acceleration of unvested stock-based awards and a settlement of unvested stock-based awards in the form of a fixed cash payment, resulting in total stock-based compensation expense of $0.2 million and cash compensation expense of $1.2 million, respectively, for the first quarter of fiscal 2011.

6

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

Stock-based compensation expense included in the Unaudited Condensed Consolidated Statements of Operations for the first quarters of fiscal 2011 and 2010 was as follows:

	Three-Month Period Ended
	July 2, 2010 (1)		July 3, 2009
	(in thousands)
Stock-based compensation expense by caption:
Research and development	$	72	$	124
Selling, marketing and administrative		162		493
Stock-based compensation expense effect on loss from continuing operations, net of taxes	$	234	$	617
Stock-based compensation expense by type of award:
Stock options	$	165	$	199
Restricted stock awards and restricted stock units		69		418
Stock-based compensation expense effect on loss from continuing operations, net of taxes	$	234	$	617

(1) The stock-based compensation expense recorded in the first quarter of fiscal 2011 in the table above excluded the cash compensation expense of $1.2 million paid to employees related to the settlement of unvested stock-based awards in the form of a fixed cash payment.

Stock-based compensation expense in the table above does not reflect any significant income taxes, which is consistent with the Company’s treatment of income or loss from its U.S. operations. For the first quarters of fiscal 2011 and 2010, there were no income tax benefits realized for the tax deductions from option exercises of the stock-based payment arrangements. In addition, there were no stock-based compensation costs capitalized as part of an asset in the first quarters of fiscal 2011 and 2010 as the amounts were not material. As of July 2, 2010, the Company has no remaining unamortized stock-based compensation expense due to the recognition of all stock-based compensation expense as a result of the modifications made in the first quarter of fiscal 2011.

Valuation Assumptions

The Company used the Black-Scholes option pricing model for determining the estimated fair value for stock options and stock-based awards. The fair value of the Company’s outstanding stock options and other stock-based awards granted in the first quarter of fiscal 2010 was estimated using the following weighted-average assumptions:

	Three-Month Period Ended
	July 3, 2009
Expected life (in years)		4.95
Risk-free interest rates		2.01	%
Expected volatility		46	%
Dividend yield		—
Weighted average fair value:
Stock options	$	1.21
Restricted stock	$	2.62

No grants were made in the first quarter of fiscal 2011 for stock options and other stock-based awards.

Stock Benefit Plans

The Company grants stock options and other stock-based awards to employees, directors and consultants under two equity incentive plans, the 2004 Equity Incentive Plan and the 2006 Director Plan. In addition, the Company has minimal outstanding options issued under equity plans that it assumed in connection with its previous acquisitions. For a complete discussion of these plans, please refer to Note 9 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

7

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

As of July 2, 2010, the Company had an aggregate of 19.1 million shares of its common stock reserved for issuance under its 2004 Equity Incentive Plan, of which 3.2 million shares were subject to outstanding options and other stock awards and 15.9 million shares were available for future grants of options and other stock awards. As of July 2, 2010, the Company had an aggregate of 1.0 million shares of its common stock reserved for issuance under its 2006 Director Plan, of which 0.4 million shares were subject to outstanding options and other stock awards and 0.6 million shares were available for future grants of options and other stock awards. As of July 2, 2010, the Company had minimal shares of common stock reserved that are subject to outstanding options under assumed plans in connection with its previous acquisitions.

Stock Benefit Plans Activities

Equity Incentive Plans: A summary of option activity under all of the Company’s equity incentive plans as of July 2, 2010 and changes during the first quarter of fiscal 2011 were as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	(in thousands, except exercise price and contractual terms)
Outstanding at March 31, 2010	4,882		$	4.05
Granted	—			—
Exercised	(526	)		2.87
Forfeited	(1	)		3.87
Expired	(824	)		4.67
Outstanding at July 2, 2010	3,531		$	4.08	3.74	$	10
Options vested and expected to vest at July 2, 2010	3,531		$	4.08	3.74	$	10
Options exercisable at July 2, 2010	3,465		$	4.10	3.64	$	10

The aggregate intrinsic value is calculated as the difference between the price of the Company’s common stock on The NASDAQ Global Market and the exercise price of the underlying awards for the 26,119 shares subject to options that were in-the-money at July 2, 2010. During the first quarters of fiscal 2011 and 2010, the aggregate intrinsic value of options exercised under the Company’s equity incentive plans were minimal, determined as of the date of option exercise. The Company expects the future activity related to its stock benefit plans to be minimal by March 31, 2011 and the activity is expected to consist primarily of forfeited options if the options are unexercised 90 days after an employees’ termination date, and to a lesser extent, option exercises.

Restricted Stock: Restricted stock awards and restricted stock units (collectively, “restricted stock”) were granted under the Company’s 2004 Equity Incentive Plan and 2006 Director Plan. The Company’s right to repurchase shares of restricted stock awards lapses upon vesting, at which time the shares of restricted stock awards are released to the employees or directors. Restricted stock units are converted into common stock upon vesting and are subsequently released to the employees or directors. Upon the vesting of restricted stock, the Company primarily uses the net share settlement approach, which withholds a portion of the shares to cover the applicable taxes. As of July 2, 2010, there were 73,334 shares of service-based restricted stock awards and 5,418 shares of restricted stock units outstanding. The cost of these awards, determined to be the fair market value of the shares at the date of grant, was expensed ratably over the period the restrictions lapse; however, the expense was accelerated in the first quarter of fiscal 2011 due to the modifications made during the current fiscal quarter. For a complete discussion on how the restrictions generally lapsed for restricted stock, please refer to Note 9 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

8

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

A summary of activity for restricted stock as of July 2, 2010 and changes during the first quarter of fiscal 2011 was as follows:

	Shares		Weighted  Average Grant-Date Fair Value
	(in thousands, except weighted average grant-date fair value)
Non-vested restricted stock at March 31, 2010	1,718		$	3.01
Awarded	—			—
Vested	(371	)		3.28
Forfeited	(1,268	)		2.91
Non-vested restricted stock at July 2, 2010 (1)	79		$	3.23

(1) At July 2, 2010, non-vested restricted stock represents those issued under the 2006 Director Plan, in which the restrictions generally lapse one year from the date of grant for non-employee directors; however, the restricted stock will vest immediately if the non-employee director ceases to serve on the Company’s Board of Directors for any reason.

All restricted stock was awarded at the par value of $0.001 per share. The Company expects the future restricted stock activity related to its stock benefit plans to be minimal.

Common Stock Repurchase Program

In July 2008, the Company’s Board of Directors authorized a stock repurchase program to purchase up to $40 million of the Company’s common stock. No common stock repurchases occurred during the first quarter of fiscal 2011. As of July 2, 2010, $35.9 million remained available for repurchase under the authorized stock repurchase program.

Warrants

In June 2004, the Company issued a warrant to International Business Machines Corporation to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $8.13 per share; however, the warrant expired unexercised in June 2009. For further discussion on this warrant, please refer to Note 16 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

4. Business Dispositions

DPS Business:

On June 8, 2010, the Company consummated a transaction with PMC-Sierra in which PMC-Sierra purchased certain assets related to the DPS Business and PMC-Sierra assumed certain liabilities of the Company related to the DPS Business. The transaction was pursuant to the Purchase Agreement entered into by PMC-Sierra and ADPT on May 8, 2010. The purchase price for the DPS Business was $34.3 million, of which $29.3 million was received by the Company upon the closing of the transaction and the remaining $5.0 million is being withheld in an escrow account (“DPS Holdback”) to secure potential indemnification obligations pursuant to the Purchase Agreement with PMC-Sierra. The DPS Holdback is to be released to the Company on June 8, 2011, one year after the consummation of the sale of the Company’s DPS Business, except for funds necessary to provide for any pending or satisfied claims and will be recognized as contingent consideration in discontinued operations when received. Under the Purchase Agreement, PMC-Sierra purchased substantially all accounts receivable and inventory related to the DPS Business and certain fixed assets and intellectual property (other than the Company’s non-core patents for which PMC-Sierra received a perpetual non-exclusive royalty free license). Included in the intellectual property assigned to PMC-Sierra was the Company’s former brand name, Adaptec. In addition, certain contracts were assigned to PMC-Sierra. PMC-Sierra has also assumed the obligations for certain of the Company’s leased facilities, primarily related to international sites used in the DPS Business, certain employee retention obligations, certain obligations related to a defined benefit retirement plan at one of the foreign subsidiaries and support and service liabilities. Expenses incurred in the transaction primarily included approximately $3.4 million for commissions and legal and accounting fees. The Company recorded a gain of $10.5 million, net of taxes of $6.8 million, on the disposal of the DPS business in the first quarter of fiscal 2011 in “Gain on disposal of discontinued operations, net of taxes,” in the Unaudited Condensed Consolidated Statements of Operations.

9

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

On June 8, 2010, the Company also entered into a transition service agreement with PMC-Sierra, in which the Company will provide certain services required for the operation of the DPS Business through December 2010 and the direct costs associated with providing these services will be reimbursed by PMC-Sierra. As a result of the transition service agreement, cash of $4.1 million was received on behalf of PMC-Sierra upon collection of accounts receivable and was classified as “Restricted Cash” and included in “Accounts payable” on the Company’s Unaudited Condensed Consolidated Balance Sheets at July 2, 2010.

Net revenues and the components of income (loss) related to the DPS Business included in discontinued operations, were as follows:

	Three-Month Period Ended
	July 2, 2010			July 3, 2009
	(in thousands)
Net revenues	$	11,725		$	20,024
Income from discontinued operations before income taxes		253			4,854
Provision for income taxes		(915	)		(112	)
Income (loss) from discontinued operations, net of taxes	$	(662	)	$	4,742

The components of net assets, at the time of the sale of the DPS Business, were as follows:

	July 2, 2010
	(in thousands)
Inventories	$	3,817
Accounts receivable, net		6,437
Prepaids and other current assets		180
Total current assets of discontinued operations		10,434
Property and equipment, net		858
Total assets of discontinued operations		11,292
Accrued and other liabilities		(1,746	)
Total current liabilities of discontinued operations		(1,746	)
Other long-term liabilities		(956	)
Total liabilities of discontinued operations		(2,702	)
Net assets of discontinued operations	$	8,590

Snap Server Network Attached Storage (“NAS”) Business:

On June 27, 2008, the Company entered into an asset purchase agreement with Overland Storage, Inc. (“Overland”) for the sale of the Snap Server NAS Business for $3.3 million, of which $2.1 million was received by the Company upon the closing of the transaction and the remaining $1.2 million was to be received on the 12 month anniversary of the closing of the transaction pursuant to a promissory note issued to the Company. In the first quarter of fiscal 2010, the Company amended the promissory note agreement with Overland, which allowed Overland to pay the Company the remaining $1.2 million receivable plus accrued interest over time through March 31, 2010; however, the Company received the final payment from Overland in the first quarter of fiscal 2011. As a result, in the first quarters of fiscal 2011 and 2010, the Company recorded a gain of $0.1 million and $0.4 million, respectively, in “Gain on disposal of discontinued operations, net of taxes,” in the Unaudited Condensed Consolidated Statements of Operations. For further discussion on the sale of the Snap Server NAS Business, please refer to Note 3 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

5. Marketable Securities

The Company’s investment policy focuses on three objectives: to preserve capital, to meet liquidity requirements and to maximize total return. The Company’s investment policy establishes minimum ratings for each classification of investment when purchased and investment concentration is limited to minimize risk. The policy also limits the final maturity on any investment and the overall duration of the portfolio. Given the overall market conditions, the Company regularly reviews its investment portfolio to ensure adherence to its investment policy and to monitor individual investments for risk analysis and proper valuation.

10

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

The Company’s portfolio of marketable securities at July 2, 2010 was as follows:

	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Available-for-Sale Marketable Securities:
Short-term deposits	$	13,217		$	—	$	—		$	13,217
United States government securities		41,767			455		—			42,222
Government agencies		92,312			877		(1	)		93,188
Mortgage-backed securities		41,242			406		(37	)		41,611
State and municipalities		1,065			2		—			1,067
Corporate obligations		171,788			1,527		(67	)		173,248
Asset-backed securities		5,090			55		—			5,145
Total available-for-sale securities		366,481			3,322		(105	)		369,698
Amounts classified as cash equivalents		(27,647	)		—		—			(27,647	)
Amounts classified as marketable securities	$	338,834		$	3,322	$	(105	)	$	342,051

The Company’s portfolio of marketable securities at March 31, 2010 was as follows:

	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Available-for-Sale Marketable Securities:
Short-term deposits	$	16,739		$	—	$	—		$	16,739
United States government securities		41,058			156		(15	)		41,199
Government agencies		92,795			905		(34	)		93,666
Mortgage-backed securities		42,309			559		(55	)		42,813
State and municipalities		1,065			—		(2	)		1,063
Corporate obligations		136,934			1,675		(18	)		138,591
Asset-backed securities		7,791			119		—			7,910
Total available-for-sale securities		338,691			3,414		(124	)		341,981
Amounts classified as cash equivalents		(30,582	)		—		—			(30,582	)
Amounts classified as marketable securities	$	308,109		$	3,414	$	(124	)	$	311,399

Sales of marketable securities resulted in gross realized gains of $0.1 million and $0.2 million during the first quarters of fiscal 2011 and 2010, respectively. Sales of marketable securities resulted in gross realized losses of $0.4 million and $0.1 million during the first quarters of fiscal 2011 and 2010, respectively.

The following table summarizes the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities, aggregated by type of investment instrument and length of time that individual securities have been in a continuous unrealized loss position, at July 2, 2010:

	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Government agencies	$	2,502	$	(1	)	$	—	$	—	$	2,502	$	(1	)
Mortgage-backed securities		7,561		(37	)		—		—		7,561		(37	)
Corporate obligations		28,360		(67	)		—		—		28,360		(67	)
Total	$	38,423	$	(105	)	$	—	$	—	$	38,423	$	(105	)

11

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

The following table summarizes the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities, aggregated by type of investment instrument and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2010:

	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
United States government securities	$	4,957	$	(15	)	$	—	$	—	$	4,957	$	(15	)
Government agencies		23,322		(34	)		—		—		23,322		(34	)
Mortgage-backed securities		7,702		(55	)		—		—		7,702		(55	)
Corporate obligations		1,064		(2	)		—		—		1,064		(2	)
Asset-backed securities		16,038		(18	)		—		—		16,038		(18	)
Total	$	53,083	$	(124	)	$	—	$	—	$	53,083	$	(124	)

The Company’s investment portfolio consists of both corporate and government securities that generally mature within three years. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As yields increase, those securities purchased with a lower yield-at-cost show a mark-to-market unrealized loss. All unrealized losses are due to liquidity challenges and changes in interest rates and bond yields. The Company has considered all available evidence and determined that the marketable securities in which unrealized losses were recorded in the first quarters of fiscal 2011 and 2010 were not deemed to be other-than-temporary. The Company holds its marketable securities as available-for-sale and marks them to market. The Company expects to realize the full value of all its marketable securities upon maturity or sale, as the Company has the intent and ability to hold the securities until the full value is realized. However, the Company cannot provide any assurance that its invested cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require the Company to record an impairment charge that could adversely impact its financial results.

The amortized cost and estimated fair value of investments in available-for-sale debt securities at July 2, 2010 and March 31, 2010, by contractual maturity, were as follows:

	July 2, 2010				March 31, 2010
	Cost		Estimated Fair Value		Cost		Estimated Fair Value
	(in thousands)
Mature in one year or less	$	171,753	$	173,004	$	154,314	$	155,728
Mature after one year through three years		190,358		192,331		184,060		185,934
Mature after three years		4,370		4,363		317		319
Total	$	366,481	$	369,698	$	338,691	$	341,981

The maturities of asset-backed and mortgage-backed securities were estimated primarily based upon assumed prepayment forecasts utilizing interest rate scenarios and mortgage loan characteristics.

6. Fair Value Measurements

Fair value is defined as the price that would be received for selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard surrounding fair value measurements establishes a fair value hierarchy, consisting of three levels, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilized levels 1 and 2 to value its financial assets on a recurring basis. Level 1 instruments use quoted prices in active markets for identical assets or liabilities, which include the Company’s cash accounts, short-term deposits and money market funds as these specific assets are liquid. Level 1 instruments also include United States government securities, government agencies, state and municipalities, and substantially all mortgage-backed securities as these securities are backed by the federal government and traded in active markets frequently with sufficient volume. Level 2 instruments use quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities and include corporate obligations and asset-backed securities as similar or identical instruments can be found in active markets. At both July 2, 2010 and March 31, 2010, the Company did not have any financial assets utilizing level 3 to value its financial assets on a recurring basis. Level 3 is supported by little or no market activity and requires a high level of judgment to determine fair value.

12

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

Financial assets measured at fair value on a recurring basis at July 2, 2010 and March 31, 2010 were as follows:

	Total		July 2, 2010				Total		March 31, 2010
			Fair Value Measurements At Reporting Date Using						Fair Value Measurements At Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)				Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
	(in thousands)
Cash, including short-term deposits (1)	$	33,165	$	33,165	$	—	$	50,105	$	50,105	$	—
United States government securities (2)		42,222		42,222		—		41,199		41,199		—
Government agencies (3)		93,188		93,188		—		93,666		93,666		—
Mortgage-backed securities (3)		41,611		40,738		873		42,813		41,696		1,117
State and municipalities (3)		1,067		1,067		—		1,063		1,063		—
Corporate obligations (4)		173,248		—		173,248		138,591		—		138,591
Asset-backed securities (3)		5,145		—		5,145		7,910		—		7,910
Total	$	389,646	$	210,380	$	179,266	$	375,347	$	227,729	$	147,618

(1) At July 2, 2010, the Company recorded $33,049,000 and, $116,000 within “Cash and cash equivalents,” and “Marketable securities,” respectively. At March 31, 2010, the Company recorded $50,100,000 and $5,000 within “Cash and cash equivalents” and “Marketable securities,” respectively.

(2) At July 2, 2010, the Company recorded $42,222,000 within “Marketable securities.” At March 31, 2010, the Company recorded $4,099,000 and $37,100,000 within “Cash and cash equivalents” and “Marketable securities,” respectively.

(3) Recorded within “Marketable securities.”

(4) At July 2, 2010, the Company recorded $14,546,000 and $158,702,000 within “Cash and cash equivalents” and “Marketable securities,” respectively. At March 31, 2010, the Company recorded $9,749,000 and $128,842,000 within “Cash and cash equivalents” and “Marketable securities,” respectively.

At July 2, 2010, the Company utilized level 3, which is categorized as significant unobservable inputs, to value its non-financial assets on a non-recurring basis. The non-financial assets related to the Company’s non-controlling interest in certain non-public companies through two venture capital funds, Pacven Walden Ventures V Funds and APV Technology Partners II, L.P. Pacven Walden Ventures V Funds invests in technology companies worldwide, primarily in the communications, electronics, information technology services, internet, software, life sciences and semiconductor industries. APV Technology Partners II, L.P. invests in technology companies that are privately-held, which are organized in the United States. At July 2, 2010 and March 31, 2010, the carrying value of such investments aggregated $1.2 million for each period, and was included within “Other Long Term Assets” on the Unaudited Condensed Consolidated Balance Sheets. The Company regularly monitors these investments by recording these investments based on quarterly statements the Company receives from each of the funds. The statements are generally received one quarter in arrears, as more timely valuations are not practical. The statements reflect the net asset value, which the Company uses to determine the fair value for these investments, which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company. Assumptions used by the Company due to lack of observable inputs may impact the fair value of these equity investments in future periods. In the event that the carrying value of its equity investments exceeds their fair value, or the decline in value is determined to be other-than-temporary, the carrying value is reduced to its current fair value, which is recorded in “Interest and Other Income, Net,” in the Unaudited Condensed Consolidated Statements of Operations. At both March 31, 2010 and 2009, there were no transfers in or out of level 3 related to the Company’s two venture capital funds.

13

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

7. Balance Sheet Details

Inventories, Net

The components of inventories, net at July 2, 2010 and March 31, 2010 were as follows:

	July 2, 2010		March 31, 2010
	(in thousands)
Raw materials	$	—	$	8
Work-in-process		—		393
Finished goods		244		1,941
Inventories, net	$	244	$	2,342

Accrued and Other Liabilities

The components of accrued and other liabilities at July 2, 2010 and March 31, 2010 were as follows:

	July 2, 2010		March 31, 2010
	(in thousands)
Tax-related	$	871	$	1,075
Restructuring-related		953		618
Accrued compensation and related taxes		1,605		4,637
Deferred margin		—		2,717
Obligations under software license agreement		772		1,053
Other		1,051		2,171
Accrued and other liabilities	$	5,252	$	12,271

Other Long-Term Liabilities

The components of other long-term liabilities at July 2, 2010 and March 31, 2010 were as follows:

	July 2, 2010		March 31, 2010
	(in thousands)
Tax-related	$	3,680	$	3,656
Restructuring-related		63		165
Other		701		934
Other long-term liabilities	$	4,444	$	4,755

8. Long-lived Assets

Intangible Assets, Net

The components of intangible assets, net, at July 2, 2010 and March 31, 2010 were as follows:

	July 2, 2010							March 31, 2010
	Gross Carrying Amount		Impairment/ Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in thousands)
Acquisition-related intangible assets:
Patents, core and existing technologies	$	18,800	$	(18,800	)(1)	$	—	$	34,348	$	(21,501	)	$	12,847
Customer relationships		3,900		(3,900	)(2)		—		4,233		(2,391	)		1,842
Trade names		—		—			—		674		(674	)		—
Backlog		340		(340	)		—		340		(340	)		—
Subtotal		23,040		(23,040	)		—		39,595		(24,906	)		14,689
Intellectual property assets and warrants		—		—			—		26,992		(26,992	)		—
Software license		1,755		(1,755	)		—		1,755		(415	)		1,340
Intangible assets, net	$	24,795	$	(24,795	)	$	—	$	68,342	$	(52,313	)	$	16,029

(1) Accumulated amortization at July 2, 2010 included impairment charges of $5,333,000, which was recorded within “Cost of revenues” in the Unaudited Condensed Consolidated Statements of Operations in the first quarter of fiscal 2011.

(2) Accumulated amortization at July 2, 2010 included impairment charges of $764,000, which was recorded within “Impairment of long-lived assets” in the Unaudited Condensed Consolidated Statements of Operations in the first quarter of fiscal 2011.

14

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

The decrease of the gross carrying amount and the associated accumulated amortization for certain related intangible assets from March 31, 2010 to July 2, 2010 was a result of PMC-Sierra acquiring the DPS Business. In the first quarter of fiscal 2011, the Company also changed the amount to be amortized prospectively related to net book value of its remaining intangible assets of $16.0 million at March 31, 2010 based upon the pattern in which economic benefits of the assets were realized. The remaining useful life of its intangible assets related to patents, core and existing technologies, and customer relationships changed from 40 months and 16 months, respectively, to approximately 5.25 months for each intangible asset, resulting in an increase in the total quarterly amortization by $7.3 million. This was based on the Company’s evaluation either to pursue the sale or to wind down and dispose of its products and associated technology obtained from its acquisition of Aristos Logic (“Aristos Business”), in either case by September 2010, after entering into a Purchase Agreement with PMC-Sierra. The amortization of the patents, core and existing technologies, and customer relationships was recorded in “Cost of revenues” and “Amortization of acquisition-related intangible assets,” respectively, in the Unaudited Condensed Consolidated Statements of Operations. The remaining useful life of the Company’s intangible assets related to a software license agreement with Synopsys, Inc. changed from 15.5 months to 2 months reflecting a change in the quarterly amortization by $1.2 million, as the Company ceased using the license in May 2010 in connection with actions taken under its fiscal 2011 restructuring plan. The amortization of the software license agreement was recorded in “Research and development” in the Unaudited Condensed Consolidated Statements of Operations. Amortization of intangible assets, net was $9.9 million and $1.3 million in the first quarters of fiscal 2011 and 2010, respectively.

Impairment Review

In June 2010, the Company made a decision to wind down its Aristos Business and notified its customers that final shipments would occur by September 2010. The Company also anticipates putting its building up for sale in the third or fourth quarter of fiscal 2011. As a result of these additional actions, the Company evaluated the carrying value of its long-lived assets at July 2, 2010 and determined that the carrying value of such assets may not be fully recoverable. The Company then measured the impairment loss and recognized the amount in which the carrying value exceeded the estimated fair value by recording an impairment charge of $10.2 million in the first quarter of fiscal 2011, of which $5.4 million and $4.8 million were reflected in “Cost of revenues” and “Impairment of long-lived assets,” respectively, in the Unaudited Condensed Consolidated Statements of Operations. Of the $10.2 million impairment charge of its long-lived assets, $6.1 million related to the write-off of intangible assets and the remaining $4.1 million related to the reduction of the carrying value of its property and equipment, net, to its estimated fair value. The estimated fair value was based on the market approach and considered the perspective of market participants using or exchanging the Company’s long-lived assets. The estimation of the impairment involved assumptions that require judgment by the Company. The Company will continue to evaluate the remaining useful life of its property and equipment, net, of $6.0 million at July 2, 2010 to determine if the useful life needs to be reduced, and if reduced, the amounts depreciated prospectively would increase during each reporting period.

9. Commitments and Contingencies

Operating Lease Obligations

The Company leases certain office facilities and equipment under operating lease agreements that expire at various dates through fiscal 2012. As of July 2, 2010, future minimum lease payments and future sublease income under non-cancelable operating leases and subleases were as follows:

	Future Minimum Lease Payments		Future Lease/Sublease Income
	(in thousands)
2011 (remaining nine months)	$	1,207	$	1,003
2012		733		797
2013		—		91
2014		—		—
Total	$	1,940	$	1,891

15

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

Purchase Obligations

Purchase obligations relate to the Company’s contractual commitments to purchase goods or services. At July 2, 2010, the Company’s purchase obligations aggregated $3.0 million, which was based on the Company’s current needs and the Company’s expectations that its vendors will fulfill these orders or services in fiscal 2011.

Legal Proceedings

The Company is a party to litigation matters and claims, including those related to intellectual property, 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 impact on its financial position, results of operations or cash flows. However, because of the nature and inherent uncertainties of litigation, should the outcome of these actions be unfavorable, the Company’s business, financial condition, results of operations and cash flows could be materially and adversely affected.

10. Restructuring Charges

In June 2010, the Company completed its actions and notified affected employees of the termination of their employment, primarily in engineering and general administrative functions, in connection with a restructuring plan adopted on May 6, 2010, with expected restructuring charges of $3.9 million. The execution of this restructuring plan was substantially contingent upon the sale of the Company’s DPS Business to PMC-Sierra, which transaction was consummated on June 8, 2010, and is intended to allow the Company to reduce its operating expenses following such sale. Certain of the employees notified are expected to continue to provide services through December 2010 in connection with the transition services the Company is providing to PMC-Sierra, and to a lesser extent, through January 2011 to assist in corporate matters. The Company expects to incur severance and related benefits charges of $3.7 million associated with this restructuring plan, of which $2.3 million was recorded in the first quarter of fiscal 2011. The Company also continues to consolidate its facilities and expects to incur a net estimated loss of $0.2 million in the second quarter of fiscal 2011 upon vacating a facility in California.

All expenses, including adjustments, associated with the Company’s restructuring plans are included in “Restructuring charges” in the Unaudited Condensed Consolidated Statements of Operations. For a complete discussion of all restructuring actions that were implemented prior to fiscal 2011, which were to bring our operational expenses to appropriate levels relative to our net revenues, while simultaneously implementing extensive company-wide expense-control programs, please refer to Note 11 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

The activity in the restructuring accrual for all outstanding plans was as follows for the first quarter of fiscal 2011:

	Severance and Benefits			Other Charges			Total
	(in thousands)
Accrual balance at March 31, 2010	$	80		$	703		$	783
Fiscal 2011 Restructuring Plan charges (1)		2,849			—			2,849
Cash paid		(2,414	)		(202	)		(2,616	)
Accrual balance at July 2, 2010	$	515		$	501		$	1,016

(1) The total fiscal 2011 restructuring plan charges included amounts of $560,000 classified as discontinued operations in the first quarter of fiscal 2011, which was reflected in income (loss) from discontinued operations, net of taxes, on the Unaudited Condensed Consolidated Statements of Operations.

The Company anticipates that the remaining restructuring severance and benefits accrual balance of $0.5 million at July 2, 2010 will be substantially paid out by the fourth quarter of fiscal 2011 while the remaining restructuring other charges balance of $0.5 million, relating to lease obligations, will be paid out through the third quarter of fiscal 2012. Of the remaining restructuring accrual balance at July 2, 2010, $0.9 million was reflected in “Accrued and other liabilities” and $0.1 million was reflected in “Other long-term liabilities” in the Unaudited Condensed Consolidated Balance Sheets.

16

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

The activity in the restructuring accrual for all outstanding plans was as follows for the first quarter of fiscal 2010:

	Severance and Benefits			Other Charges			Total
	(in thousands)
Accrual balance at March 31, 2009	$	1,086		$	1,803		$	2,889
Accrual Adjustments		—			149			149
Cash paid		(1,044	)		(403	)		(1,447	)
Accrual balance at July 3, 2009	$	42		$	1,549		$	1,591

11. Interest and Other Income, Net

The components of interest and other income, net, for the first quarters of fiscal 2011 and 2010 were as follows:

	Three-Month Period Ended
	July 2, 2010		July 3, 2009
	(in thousands)
Interest income, net	$	1,500	$	2,473
Realized currency transaction gains		90		235
Other		81		(65	)
Interest and other income, net	$	1,671	$	2,643

12. Income Taxes

The Company recorded tax benefits of $7.4 million and $2.2 million for the first quarters of fiscal 2011 and 2010, respectively. Income tax provisions for interim periods are based on the Company’s estimated annual income tax rate for entities that were profitable. Entities that had operating losses with no tax benefit were excluded. The estimated annual tax for the first quarters of fiscal 2011 and 2010 includes foreign taxes related to the Company’s foreign subsidiaries and certain state minimum taxes. Interest is accrued on prior years’ tax disputes and refund claims as a discrete item each period. Although the Company believes its tax estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in its Consolidated Financial Statements and may cause a higher effective tax rate that could materially affect its income tax provision, results of operations or cash flows in the period or periods for which such determination is made.

In the first quarter of fiscal 2011, the Company’s tax benefit was associated with losses incurred from continuing operations that were offset against income and taxes recorded in discontinued operations. This was partially offset by state minimum taxes and foreign taxes related to its foreign subsidiaries. In the first quarter of fiscal 2010, the Company’s tax benefit included discrete tax benefits of $2.6 million due to reaching final settlement with the Singapore Tax Authorities for fiscal year 2001, reflecting the reversal of previously accrued liabilities and refunded tax amounts.

As of July 2, 2010, the Company’s total gross unrecognized tax benefits were $23.9 million, of which $4.4 million, if recognized, would affect the effective tax rate. There have been no material changes to the Company’s total gross unrecognized tax benefits from March 31, 2010.

The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates or formerly operated. As of July 2, 2010, fiscal years 2004 onward remained open to examination by the U.S. taxing authorities and fiscal years 1999 onward remained open to examination in various foreign jurisdictions. U.S. tax attributes generated in fiscal years 2004 onward also remain subject to adjustment in subsequent audits when they are utilized.

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company conducts or formerly conducted business. Management believes that it is not reasonably possible that the gross unrecognized tax benefits will change significantly within the next 12 months; however, tax audits remain open as discussed further below and the outcome of any tax audits are inherently uncertain, which could change this judgment in any given quarter.

17

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

The Company has concluded its negotiations with the Internal Revenue Service (the “IRS”) with regard to tax disputes for the Company’s fiscal years 1994 through 2006. In fiscal 2009, the IRS issued a No Change Report indicating no change to the Company’s tax liability; however, the IRS continues to have the ability to adjust tax attributes relating to these years in subsequent audits. The Company believes that it has provided sufficient tax provisions for these years and that the ultimate outcome of any future IRS audits that include the tax attributes will not have a material adverse impact on its financial position or results of operations in future periods. The tax authorities in the foreign jurisdictions in which the Company operates or formerly operated continue to audit its tax returns for fiscal years subsequent to 1999. The potential outcome of these audits is uncertain and could result in material tax provisions or benefits in future periods. However, the Company cannot predict with certainty how these matters will be resolved and whether the Company will be required to make additional tax payments and believes that it has provided sufficient tax provisions for the tax exposures in such foreign jurisdictions.

13. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share gives effect to all potentially dilutive common shares outstanding during the period, which include certain stock–based awards and warrants, calculated using the treasury stock method, and convertible notes which are potentially dilutive at certain earnings levels, and are computed using the if-converted method.

A reconciliation of the numerator and denominator of the basic and diluted income (loss) per share computations for continuing operations, discontinued operations and net income (loss) was as follows:

	Three-Month Period Ended
	July 2, 2010			July 3, 2009
	(in thousands, except per share amounts)
Numerators:
Loss from continuing operations, net of taxes - basic and diluted	$	(19,214	)	$	(4,588	)
Income from discontinued operations, net of taxes - basic and diluted		10,084			5,182
Net income (loss) - basic and diluted	$	(9,130	)	$	594
Denominators:
Weighted average shares outstanding - basic and diluted		119,675			119,284
Basic and diluted income (loss) per share:
Loss from continuing operations, net of taxes	$	(0.16	)	$	(0.04	)
Income from discontinued operations, net of taxes	$	0.08		$	0.04
Net income (loss)	$	(0.08	)	$	0.00

Diluted loss per share for the first quarters of fiscal 2011 and 2010 was based only on the weighted-average number of shares outstanding during each of the periods, as the inclusion of any common stock equivalents would have been anti-dilutive. As a result, the same weighted-average number of common shares outstanding during each of the periods was used to calculate both the basic and diluted earnings per share. The weighted-average number of common shares used to calculate the diluted earnings per share for loss from continuing operations, net of taxes, during each of the periods was also used to compute all other reported diluted earnings per share, even though it could result in anti-dilution. The potential common shares excluded for the first quarters of fiscal 2011 and 2010 were as follows:

	Three-Month Period Ended
	July 2, 2010	July 3, 2009
	(in thousands)
Outstanding stock options	4,395	4,963
Outstanding restricted stock	1,119	9
Warrants	—	489
3/4% Convertible Senior Subordinated Notes due 2023	30	35

18

ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

14. Comprehensive Income (Loss)

The Company’s comprehensive income (loss), net of taxes, which consisted of net income (loss) and the changes in net unrealized gains (losses) on marketable securities and foreign currency translation adjustments, net of taxes, was as follows:

	Three-Month Period Ended
	July 2, 2010			July 3, 2009
	(in thousands)
Net income (loss)	$	(9,130	)	$	594
Net unrealized gains (losses) on marketable securities, net of taxes		(72	)		1,530
Foreign currency translation adjustment, net of taxes		(67	)		752
Comprehensive income (loss), net of taxes	$	(9,269	)	$	2,876

The Company has considered all available evidence and determined that the marketable securities in which unrealized losses were recorded in the first quarters of fiscal 2011 and 2010 were not deemed to be other-than-temporary. The Company holds its marketable securities as available-for-sale and marks them to market. The Company expects to realize the full value of all its marketable securities upon maturity or sale, as the Company has the intent and ability to hold the securities until the full value is realized. However, the Company cannot provide any assurance that its invested cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require the Company to record an impairment charge that could adversely impact its financial results.

The components of accumulated other comprehensive income, net of taxes, at July 2, 2010 and March 31, 2010 were as follows:

	July 2, 2010		March 31, 2010
	(in thousands)
Unrealized gains on marketable securities, net of taxes	$	1,858	$	1,930
Foreign currency translation, net of taxes		2,289		2,356
Accumulated other comprehensive income, net of taxes	$	4,147	$	4,286

15. Guarantees

Indemnification Obligations

The Company has entered into agreements with PMC-Sierra that include certain indemnification obligations related to the sale of the DPS Business. The Company also has an agreement with a customer that includes intellectual property indemnification obligations. These indemnification obligations generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party claims. In each of these circumstances, payment by the Company is conditional on the other party making a claim pursuant to the procedures specified in the particular agreements, which procedures typically allow the Company to challenge the other party’s claims. Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by it under these agreements. In addition, the Company has agreements whereby it indemnifies its directors and certain of its officers for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. These indemnification agreements are not subject to a maximum loss clause; however, the Company maintains a director and officer insurance policy which may cover all or a portion of the liabilities arising from its obligation to indemnify its directors and officers. It is not possible to make a reasonable estimate of the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, the Company has not incurred significant costs to defend lawsuits or settle claims related to such agreements and no amount has been accrued in the accompanying Consolidated Financial Statements with respect to these indemnification guarantees.

Product Warranty

The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to sales. The estimated future warranty obligations related to product sales are recorded in the period in which the related revenue is recognized. The estimated future warranty obligations are affected by sales volumes, product failure rates, material usage and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage or replacement costs differ from the Company’s estimates, revisions to the estimated warranty obligations would be required; however, the Company made no adjustments to pre-existing warranty accruals in the first quarters of fiscal 2011 and 2010. Substantially all of the Company’s product warranty liability transferred to PMC-Sierra upon the sale of the DPS Business, except those amounts associated with the Company’s Aristos Business.

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ADPT Corporation

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(unaudited)

A reconciliation of the changes to the Company’s warranty accrual for the first quarters of fiscal 2011 and 2010 was as follows:

	Three-Month Period Ended
	July 2, 2010			July 3, 2009
	(in thousands)
Balance at beginning of period	$	310		$	400
Warranties provided		2			176
Actual costs incurred		(32	)		(181	)
Warranty obligations transferred with discontinued operations		(275	)		—
Balance at end of period	$	5		$	395

16. Settlement with Steel Partners, LLC and Steel Partners II, L.P.

Warren G. Lichtenstein, Steel Partners, LLC and Steel Partners II, L.P. (collectively, “Steel Partners”) became a 5% stockholder of the Company in March 2007. Jack L. Howard, John J. Quicke and John Mutch were nominated for election at the 2007 Annual Meeting of Stockholders. At such time, both Mr. Howard and Mr. Quicke were deemed to be affiliates of Steel Partners under the rules of the Securities Exchange Act of 1934, as amended; however, Mr. Mutch was not deemed to be an affiliate of Steel Partners at such time. Messrs. Howard, Quicke and Mutch continue to serve on the Company’s Board of Directors and Mr. Quicke currently serves as the Interim President and CEO of the Company. Each of the three directors, including the two directors who are deemed affiliates of Steel Partners, are compensated with equity awards or equity-based awards in amounts that are consistent with the Company’s Non-Employee Director Compensation Policy. In addition, in fiscal 2010, the Company agreed to pay Mr. Quicke $30,000 per month, effective, January 4, 2010, in connection with his role as Interim President and CEO, in addition to the compensation he receives as a non-executive board member. In June 2010, the Company agreed to pay Mr. Quicke a cash bonus of $0.5 million in connection with his efforts to consummate the sale of the DPS Business to PMC-Sierra, half of which was payable immediately and the other half is payable on December 31, 2010, upon substantially realizing the benefit from the sale and the Company’s effective transition following the disposition of the DPS Business. The Company has accrued $0.3 million of this discretionary bonus in the first quarter of fiscal 2011. As of July 2, 2010, Steel Partners beneficially owned approximately 25.1% of the Company’s common stock.

17. Segment Information and Significant Customers

Since the sale of its Snap Server NAS business in June 2008, the Company has operated in one segment. The Company had provided enterprise-class external storage products, including ASICs and software, directly to Original Equipment Manufacturers (“OEMs”) and Original Design Manufacturers that supply OEMs. The Company considers all of its products to be similar in nature and function. The Company does not derive any amount of revenue from services or support. With the Company’s decision to wind down its Aristos Business by September 2010, the Company’s business is expected to consist primarily of capital redeployment and identification of new, profitable business operations in which it can utilize its existing working capital and maximize the use of the Company’s net operating losses in the future.

The Company currently has three customers in its Aristos Business that account for its net revenues in continuing operations. In the first quarter of fiscal 2011, International Business Machines Corporation and Apple Inc. accounted for 74% and 21%, respectively, of the Company’s total net revenues. In the first quarter of fiscal 2010, Apple Inc. accounted for 100% of the Company’s total net revenues.

18. Supplemental Disclosure of Cash Flows

	Three-Month Period Ended
	July 2, 2010			July 3, 2009
	(in thousands)
Non-cash investing and financing activities:
Unrealized gains (losses) on available-for-sale securities	$	(72	)	$	1,530

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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, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding our business, including, but not limited to, the wind down of our Aristos products and associated technology, anticipated sale of our building and realizing the value of our remaining patent portfolio; our ability to deploy our capital in a manner that maximizes stockholder value; general economic conditions; failure to achieve our operational objectives; ability to reduce our operating costs; the ability to identify suitable acquisition candidates or business and investment opportunities; adverse changes to our operating results and financial condition resulting from the disposition of certain data storage business assets; the possibility of being deemed an investment company under the Investment Company Act of 1940, as amended, which may make it difficult for us to complete future business combinations or acquisitions; the inability to realize the benefits of our net operating losses; the potential need to record additional impairment charges for long-lived assets or marketable securities based on current market conditions; the amount by which we expect to reduce our annual operating expenses due to the fiscal 2011 restructuring plan and our expected liquidity in future periods. 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 except as required by law, we assume no obligation to update any such forward-looking statements, except as may otherwise be required by law.

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 “Risk Factors” section and elsewhere in this document and in our Annual Report on Form 10-K. In evaluating our business, current and prospective investors should consider carefully these factors in addition to the other information set forth in this report.

While management believes that the discussion and analysis in this report is adequate for a fair presentation of the information presented, we recommend that you read this discussion and analysis in conjunction with our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

Basis of Presentation

On June 22, 2010, we changed our name to ADPT Corporation, or ADPT, through a merger of ADPT, a wholly-owned subsidiary of Adaptec Inc., into Adaptec Inc.

On June 8, 2010, we consummated a transaction with PMC-Sierra, Inc., or PMC-Sierra, in which PMC-Sierra purchased certain assets related to our business of providing data storage hardware and software solutions and products, or the DPS Business, and PMC-Sierra assumed certain of our liabilities related to the DPS Business. The transaction was pursuant to an Asset Purchase Agreement, or the Purchase Agreement, entered into by PMC-Sierra and ADPT on May 8, 2010. Accordingly, we reclassified the financial statements and related disclosures for all periods presented, except for the historical Unaudited Condensed Consolidated Balance Sheets, to reflect this business as discontinued operations. These reclassifications had no impact on net income (loss), total assets or total stockholders’ equity. Unless otherwise indicated, the following discussion pertains only to our continuing operations.

Overview

We continue to explore all strategic alternatives to maximize stockholder value. With the consummation of the sale of the DPS Business to PMC-Sierra, which included positions offered by PMC-Sierra to approximately half of our employees, we took further actions and notified our remaining employees throughout our fiscal quarter. A limited number of these employees will be retained temporarily to assist with the transition services we are providing to PMC-Sierra through December 2010, provide customer support related to our products and associated technology obtained from our acquisition of Aristos Logic, or the Aristos Business, or handle corporate matters, including the ongoing exploration of strategic alternatives.

In connection with the sale of the DPS Business, our Compensation Committee of the Board of Directors modified all employees’ unvested stock-based awards, including stock options, restricted stock awards and restricted stock units (none of which affect our Interim President and Chief Executive Officer) in May 2010. The modifications included the acceleration of unvested stock-based awards and a settlement of unvested stock-based awards in the form of a fixed cash payment.

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In May 2010, at the time we entered into the Purchase Agreement with PMC-Sierra, we evaluated either to pursue the sale of the Aristos Business or to wind down and dispose of the Aristos Business, in either case by September 2010. As a result of these actions, we changed the remaining useful life of our intangible assets which materially affected the amounts to be amortized prospectively based on the net book value at March 31, 2010. In June 2010, we decided to wind down our Aristos Business. We have notified our existing customers and anticipate fulfilling their orders by September 2010. With no current business to support in the future, we anticipate putting our building up for sale in the third or fourth quarter of fiscal 2011. As a result of these additional actions, we evaluated the carrying value of our long-lived assets at July 2, 2010 and determined that the carrying value of such assets may not be fully recoverable and recorded an impairment charge of $10.2 million in the first quarter of fiscal 2011.

We will continue to wind down our remaining business in the next several quarters, which includes evaluating and terminating agreements and realizing value from our remaining patent portfolio. We sold a portion of our patents and recognized $0.9 million, net of costs, in the first quarter of fiscal 2011 and recorded the gain within discontinued operations.

We remain committed to providing value to all of our stockholders and will aggressively pursue opportunities to deploy the cash and liquid assets on hand to create value for our stockholders, including exploring acquisitions of businesses, engaging in stock buybacks, paying cash dividends, or any combination thereof. Going forward, our business is expected to consist of capital redeployment and identification of new, profitable business operations in which we can utilize our existing working capital and maximize the use of our net operating losses, or NOLs.

Results of Operations.

The following table sets forth the items in the Unaudited Condensed Consolidated Statements of Operations as a percentage of net revenues (references to notes in the footnotes to this table are to the Notes to Unaudited Condensed Consolidated Financial Statements appearing in this report):

	Three-Month Period Ended
	July 2, 2010		July 3, 2009 (1)
Net revenues	100	%	100	%
Cost of revenues (inclusive of amortization and impairment of acquisition-related intangible assets) (2) (5)	361		86
Gross margin	(261	)	14
Operating expenses:
Research and development (2) (3)	129		274
Selling, marketing and administrative (3)	97		262
Amortization of acquisition-related intangible assets (2)	26		19
Restructuring charges (4)	56		8
Impairment of long-lived assets (5)	118		—
Total operating expenses	426		563
Loss from continuing operations	(687	)	(549	)
Interest and other income, net	41		154
Loss from continuing operations before income taxes	(646	)	(395	)
Benefit from income taxes	179		127
Loss from continuing operations, net of taxes	(467	)	(268	)
Discontinued operations, net of taxes
Income (loss) from discontinued operations, net of taxes	(16	)	277
Gain on disposal of discontinued operations, net of taxes	261		26
Income from discontinued operations, net of taxes	245		303
Net income (loss)	(222	)%	35	%

The following actions affect the comparability of the data for the periods presented in the above table:

(1) Prior period information has been reclassified to conform to the current period presentation. The reclassifications for discontinued operations had no impact on net income (loss).

(2) In the first quarter of fiscal 2011, the remaining useful life of our intangible assets was changed, which materially impacted the amounts amortized in the first quarter of fiscal 2011, to reflect the pattern in which the economic benefits of the assets were realized.

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(3) In the first quarter of fiscal 2011, we recorded stock-based compensation expense of $0.2 million and cash compensation expense of $1.2 million, which reflected the acceleration of unvested stock-based awards and a settlement of unvested stock-based awards in the form of a fixed cash payment, respectively, based on the modifications approved by the Compensation Committee of the Board of Directors.

(4) In the first quarter of fiscal 2011, we implemented a restructuring plan and incurred restructuring charges of $2.3 million.

(5) In the first quarter of fiscal 2011, we recorded an impairment charge of $10.2 million related to our long-lived assets, of which $5.4 million was recorded within “Cost of revenues” and $4.8 million was recorded within “Impairment of long-lived assets.”

Net Revenues.

	Three-Month Period Ended
	July 2, 2010		July 3, 2009		Percentage Change
	(in millions, except percentages)
Net Revenues	$	4.1	$	1.7	140	%

Net revenues increased by $2.4 million in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010, primarily due to the recognition of deferred revenue based on final acceptance and release of support and maintenance obligations that was received from our customer. We expect revenues to remain flat next quarter as we continue to wind down the Aristos Business by September 2010.

We currently have three customers in our Aristos Business that account for our net revenues in continuing operations. In the first quarter of fiscal 2011, International Business Machines Corporation, and Apple Inc., accounted for 74% and 21%, respectively, of our total net revenues. In the first quarter of fiscal 2010, Apple Inc. accounted for 100% of our total net revenues.

Gross Margin.

	Three-Month Period Ended
	July 2, 2010			July 3, 2009			Percentage Change
	(in millions, except percentages)
Gross Profit (Loss)	$	(10.7	)	$	0.2		n/a
Gross Margin		(261	)%		14	%	n/a

The decrease in gross margin in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 was primarily due to the increase in the amortization of acquisition-related intangible assets of $6.6 million related to the core and existing technologies purchased from the acquisition of Aristos Logic, or Aristos, and was then further impacted by an impairment charge related to these intangible assets of $5.4 million. The remaining useful life of these intangible assets was changed prospectively based upon our evaluation either to pursue the sale or wind down and dispose of the Aristos Business, in either case by September 2010, which reflected the pattern in which the economic benefits of the assets were realized. The impairment of these intangible assets resulted from our review of long-lived assets and determined that indicators were present in which the carrying value of such assets may not be fully recoverable. In addition, our standard product contributions declined from the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 due to the mix in revenue from our customers.

Research and Development Expense.

	Three-Month Period Ended
	July 2, 2010		July 3, 2009		Percentage Change
	(in millions, except percentages)
Research and Development Expense	$	5.3	$	4.7	13	%

The increase in research and development expense in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 was primarily due to the increase in the amortization of our intangible assets of $1.3 million related to a software license agreement we have with Synopsys, Inc., which was entered into in July 2009. The remaining useful life of this intangible asset was changed prospectively as we ceased using the license in May 2010 in connection with actions taken under our fiscal 2011 restructuring plan, which reflected the pattern in which the economic benefits of the assets were realized. In addition, we modified and settled certain unvested stock-based awards in the form of a fixed cash payment, resulting in cash compensation expense of $0.7 million in the first quarter of fiscal 2011. This was partially offset by reductions in our workforce due to a restructuring plan we implemented in the first quarter of fiscal 2011 and, to a lesser extent, departure of former employees who joined PMC-Sierra in connection with the sale of the DPS Business, which resulted in a 56% decrease in our average headcount for employees engaged in research and development functions.

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Selling, Marketing and Administrative Expense.

	Three-Month Period Ended
	July 2, 2010		July 3, 2009		Percentage Change
	(in millions, except percentages)
Selling, Marketing and Administrative Expense	$	4.0	$	4.5	(11	)%

The decrease in selling, marketing and administrative expense in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 was primarily a result of reductions in our workforce and infrastructure spending due to the restructuring plan we implemented in fiscal 2010 and, to a lesser extent, departure of former employees who joined PMC-Sierra in connection with the sale of the DPS Business, which resulted in a 42% decrease in our average headcount for employees engaged in selling, marketing and administrative functions. This was partially offset by cash compensation expense of $0.5 million related to the modification and settlement of certain unvested stock-based awards in the form of a fixed cash payment and $0.3 million related to a discretionary bonus offered to Mr. Quicke, our Interim President and Chief Executive Officer.

Amortization of Acquisition-Related Intangible Assets.

	Three-Month Period Ended
	July 2, 2010		July 3, 2009		Percentage Change
	(in millions, except percentages)
Amortization of Acquisition-Related Intangible Assets	$	1.1	$	0.3	231	%

The increase in amortization of acquisition-related intangible assets in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 was due to the increase in the amortization of acquisition-related intangible assets of $0.8 million related to customer relationships purchased from the acquisition of Aristos. The remaining useful life of these intangible assets were changed prospectively based upon our evaluation either to pursue the sale or wind down and dispose of the Aristos Business, in either case by September 2010, which reflected the pattern in which the economic benefits of the assets were realized. The amortization of our intangible assets related to core and existing technologies was reflected in “Cost of revenues” in the Unaudited Condensed Consolidated Statements of Operations.

Restructuring Charges.

	Three-Month Period Ended
	July 2, 2010		July 3, 2009		Percentage Change
	(in millions, except percentages)
Restructuring Charges	$	2.3	$	0.1	1,436	%

All expenses, including adjustments, associated with our restructuring plans are included in “Restructuring charges” in the Unaudited Condensed Consolidated Statements of Operations. For a complete discussion of all restructuring actions that were implemented prior to fiscal 2011, which were to bring our operational expenses to appropriate levels relative to our net revenues, while simultaneously implementing extensive company-wide expense-control programs, please refer to Note 11 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

In June 2010, we completed our actions and notified affected employees of the termination of their employment, primarily in engineering and general administrative functions, in connection with a restructuring plan adopted on May 6, 2010, with expected restructuring charges of $3.9 million. The execution of this restructuring plan was substantially contingent upon the sale of our DPS Business to PMC-Sierra, which transaction was consummated on June 8, 2010, and is intended to allow us to reduce our operating expenses following such sale. Certain of the employees notified are expected to continue to provide services through December 2010 in connection with the transition services we are providing to PMC-Sierra, and to a lesser extent, through January 2011 to assist in corporate matters. We expect to incur severance and related benefits charges of $3.7 million associated with this restructuring plan, of which $2.3 million was recorded in the first quarter of fiscal 2011. We also continue to consolidate our facilities and expect to incur a net estimated loss of $0.2 million in the second quarter of fiscal 2011 upon vacating a facility in California.

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Impairment of Long-lived Assets.

	Three-Month Period Ended
	July 2, 2010		July 3, 2009		Percentage Change
	(in millions, except percentages)
Impairment of Long-lived Assets	$	4.8	$	—	100	%

We performed our review of long-lived assets and determined that indicators were present in the first quarter of fiscal 2011 in which the carrying value of such assets may not be fully recoverable. Based on our assessment, we recorded an impairment charge of $4.8 million in the first quarter of fiscal 2011 to write-off our intangible assets related to customer relationships and to reduce the carrying value of our property and equipment, net, to the estimated fair value based upon the market approach and considered the perspective of market participants using or exchanging our long-lived assets. The write-off of our intangible assets related to core and existing technologies was reflected in “Cost of revenues” in the Unaudited Condensed Consolidated Statements of Operations. See Note 8 to the Unaudited Condensed Consolidated Financial Statements for further discussions regarding the impairment of our long-lived assets.

Interest and Other Income, Net.

	Three-Month Period Ended
	July 2, 2010		July 3, 2009			Percentage Change
	(in millions, except percentages)
Interest and Other Income, Net:
Interest income, net	$	1.5	$	2.5		(39	)%
Realized currency transaction gains		0.1		0.2		(62	)%
Other		0.1		(0.1	)	n/a
Total Interest and Other Income, Net	$	1.7	$	2.6		(37	)%

The decrease in interest and other income, net, in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 was primarily due to lower interest earned on our cash, cash equivalents and marketable securities’ balances.

Income Taxes.

	Three-Month Period Ended
	July 2, 2010		July 3, 2009		Percentage Change
	(in millions, except percentages)
Benefit From Income Taxes	$	7.4	$	2.2	237	%

Income tax provisions for interim periods are based on our estimated annual income tax rate for entities that were profitable. Entities that had operating losses with no tax benefit were excluded. The estimated annual tax for the first quarters of fiscal 2011 and 2010 includes foreign taxes related to our foreign subsidiaries and certain state minimum taxes. Interest is accrued on prior years’ tax disputes and refund claims as a discrete item each period. Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in its Unaudited Condensed Consolidated Financial Statements and may cause a higher effective tax rate that could materially affect our income tax provision, results of operations or cash flows in the period or periods for which such determination is made.

In the first quarter of fiscal 2011, our tax benefit was associated with losses incurred from continuing operations that was offset against income and taxes recorded in discontinued operations. This was partially offset by state minimum taxes and foreign taxes related to our foreign subsidiaries. In the first quarter of fiscal 2010, our tax benefit included discrete tax benefits of $2.6 million due to reaching final settlement with the Singapore Tax Authorities for fiscal year 2001, reflecting the reversal of previously accrued liabilities and refunded tax amounts.

As of July 2, 2010, our total gross unrecognized tax benefits were $23.9 million, of which $4.4 million, if recognized, would affect the effective tax rate. There have been no material changes to our total gross unrecognized tax benefits from March 31, 2010.

We are subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which we operate or formerly operated. As of July 2, 2010, fiscal years 2004 onward remained open to examination by the U.S. taxing authorities and fiscal years 1999 onward remained open to examination in various foreign jurisdictions. U.S. tax attributes generated in fiscal years 2004 onward also remain subject to adjustment in subsequent audits when they are utilized.

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The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses our tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which we conduct or formerly conducted business. Management believes that it is not reasonably possible that the gross unrecognized tax benefits will change significantly within the next 12 months; however, tax audits remain open as discussed further below and the outcome of any tax audits are inherently uncertain, which could change this judgment in any given quarter.

We have concluded our negotiations with the Internal Revenue Service, or IRS, with regard to tax disputes for our fiscal years 1994 through 2006. In fiscal 2009, the IRS issued a No Change Report indicating no change to our tax liability; however, the IRS continues to have the ability to adjust tax attributes relating to these years in subsequent audits. We believe that we have provided sufficient tax provisions for these years and that the ultimate outcome of any future IRS audits that include the tax attributes will not have a material adverse impact on its financial position or results of operations in future periods. The tax authorities in the foreign jurisdictions in which we operate or formerly operated continue to audit our tax returns for fiscal years subsequent to 1999. The potential outcome of these audits is uncertain and could result in material tax provisions or benefits in future periods. However, we cannot predict with certainty how these matters will be resolved and whether we will be required to make additional tax payments and believe that we have provided sufficient tax provisions for the tax exposures in such foreign jurisdictions.

Discontinued Operations.

	Three-Month Period Ended
	July 2, 2010		July 3, 2009		Percentage Change
	(in millions, except percentages)
Income From Discontinued Operations, Net of Taxes	$	10.1	$	5.2	95	%

The change in discontinued operations in the first quarter of fiscal 2011 compared to the first quarter of fiscal 2010 was primarily attributable to the gain of $10.5 million, net of taxes of $6.8 million, on the sale of the DPS Business to PMC-Sierra, which was consummated in June 2010, and was recorded in “Gain on disposal of discontinued operations, net of taxes,” in the Unaudited Condensed Consolidated Statements of Operations. We also incurred “Income (loss) from discontinued operations, net of taxes” of $(0.7) million and $4.7 million in the first quarters of fiscal 2011 and 2010, respectively, related to the DPS Business.

Liquidity and Capital Resources

Key Components of Cash Flows

Working Capital:

Our principal source of liquidity is cash on hand. We focus on managing the critical components of working capital, which primarily include payables and short-term debt. Our working capital at July 2, 2010 and March 31, 2010 was $390.4 million and $377.0 million, respectively. The increase in working capital at July 2, 2010 compared to March 31, 2010 of $13.3 million was attributable to the proceeds received of $29.3 million in connection with the consummation of the sale of the DPS Business to PMC-Sierra and a net decrease in accounts payables and accrued liabilities of $6.5 million as we made payments to our suppliers and employees related to compensation matters, which included payments made under our restructuring plans and the settlement of unvested stock-based awards in the form of a fixed cash payment. This was offset by decreases in accounts receivable of $6.4 million and inventory of $2.1 million as PMC-Sierra acquired substantially all assets related to the DPS Business and a decrease in prepaid expenses and other current assets of $3.0 million primarily related to a tax refund received by the IRS and the release of non-cash deferred costs in association with the recognition of deferred revenue in the first quarter of fiscal 2011.

Operating Activities: Net cash used in operating activities was $15.0 million in the first quarter of fiscal 2011 compared to cash provided by operating activities of $4.6 million in the first quarter of fiscal 2010. The decline in operating activities was primarily due to a decrease in operating activities from discontinued operations of $7.3 million and changes in assets and liabilities of $16.7 million, which was driven by the sale of the DPS Business to PMC-Sierra as PMC-Sierra purchased substantially all accounts receivable and inventory and certain fixed assets related to the DPS Business while we retained substantially all liabilities.

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Investing Activities: Net cash used in investing activities was $2.7 million and $15.3 million in the first quarters of fiscal 2011 and 2010, respectively. In the first quarter of fiscal 2011, we received proceeds from the sale of our DPS Business to PMC-Sierra of $29.3 million. We utilized cash for the net purchases of marketable securities of $31.7 million and $15.1 million in the first quarters of fiscal 2011 and 2010, respectively. We continue to manage our cash through interest-bearing accounts. We minimized our purchasing of property and equipment, net, from the first quarter of fiscal 2010 to the first quarter of fiscal 2011 as we continued to focus on cost control programs. We also made our installment payment of $0.3 million in the first quarter of fiscal 2011 related to a software license agreement we have with Synopsys Inc., which was entered into in July 2009 for $1.8 million.

Financing Activities: Net cash provided by financing activities in the first quarter of fiscal 2011 was $1.5 million compared to cash used in financing activities of $0.1 million in the first quarter of fiscal 2010. In the first quarter of fiscal 2011, we received proceeds from the issuance of common stock under our equity compensation programs primarily due to the exercises following the acceleration of employees’ unvested stock options and a portion of these stock options had exercise prices below the current market value of our common stock. In the first quarter of fiscal 2010, we repurchased less than $0.1 million in principal amount of our 3/4% Convertible Subordinated Notes due in 2023, or 3/4% Notes.

Common Stock Repurchase Program

In July 2008, our Board of Directors authorized a stock repurchase program to purchase up to $40 million of our common stock. No common stock repurchases occurred during the first quarter of fiscal 2011. As of July 2, 2010, $35.9 million remained available for repurchase under the authorized stock repurchase program.

Liquidity and Capital Resource Requirements

At July 2, 2010, we had $389.6 million in cash, cash equivalents and marketable securities, of which approximately $3.3 million was held by our foreign subsidiaries whose functional currencies are the local currencies of the jurisdictions in which they operate. Our available-for-sale securities included short-term deposits, corporate obligations, commercial paper, municipal bonds, United States government securities, government agencies, and other debt securities related to mortgage-back and asset-backed securities, and were recorded on our Unaudited Condensed Consolidated Balance Sheets at fair market value, with their related unrealized gain or loss reflected as a component of “Accumulated other comprehensive income, net of taxes” in stockholders’ equity.

Our investment policy focuses on three objectives: to preserve capital, to meet liquidity requirements and to maximize total return. Our investment policy establishes minimum ratings for each classification of investments when purchased and investment concentration is limited to minimize risk. The policy also limits the final maturity on any investment and the overall duration of the portfolio. Given the overall market conditions, we regularly review our investment portfolio to ensure adherence to our investment policy and to monitor individual investments for risk analysis and proper valuation.

In the first quarters of fiscal 2011 and 2010, we did not recognize a material loss on our securities as the unrealized losses incurred were not deemed to be other-than-temporary. We hold our marketable securities as available-for-sale and marks them to market. We expect to realize the full value of all our marketable securities upon maturity or sale, as we have the intent and ability to hold the securities until the full value is realized. However, we cannot provide any assurance that our invested cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require us to record an impairment charge that could adversely impact our financial results.

In addition, we maintain our cash, cash equivalents and marketable securities with certain financial institutions, in which our balances exceed the limits that are insured by the Federal Deposit Insurance Corporation. If the underlying financial institutions fail or other adverse conditions occur in the financial markets, our cash balances may be impacted.

We may in the future make acquisitions of businesses, and we may be required to use a significant portion of our available cash balances for such acquisitions or for working capital needs thereafter.

In the fourth quarter of fiscal 2005, we repatriated $360.6 million of undistributed earnings from Singapore to the United States and incurred a tax liability of $17.6 million. The repatriated amounts were used to fund a qualified Domestic Reinvestment Plan, as required by the American Jobs Creation Act of 2004. We believe we have met the total spending requirements of the Domestic Reinvestment Plan based on our actual spending through fiscal 2009; therefore, no further tax liabilities are expected to be incurred related to this distribution. However, fiscal years 2004 onward remain open to examination by the U.S. taxing authorities. As a result, we may incur additional tax liabilities related to this distribution until fiscal years 2004 through 2009 are closed by the U.S. taxing authorities.

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We have invested in technology companies through two venture capital funds, Pacven Walden Ventures V Funds and APV Technology Partners II, L.P. At July 2, 2010 and March 31, 2010, the carrying value of such investments aggregated $1.2 million for each period, which were based on quarterly statements we receive from each of the funds. The statements are generally received one quarter in arrears, as more timely valuations are not practical. The statements reflect the net asset value, which we use to determine the fair value for these investments, which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company. The assumptions we use due to lack of observable inputs may impact the fair value of these equity investments in future periods. While we have seen some improvement in global economic conditions, any adverse changes in equity investments and current market conditions may require us to record an impairment charge against all or a portion of these equity investments in the future.

We believe that our cash balances and the expected cash flows generated by operations and available sources of equity will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. The consummation of the sale of the DPS Business may materially change our operations, including our anticipated cash needs as we intend to explore strategic alternatives to maximize stockholder value going forward, including deploying the proceeds received for the DPS Business and our other assets in seeking business acquisition opportunities and other actions to redeploy our capital. In addition, should the scale of potential opportunities, prevailing economic conditions and/or financial, business and other factors beyond our control adversely affect our estimates of our future cash requirements, we could be required to fund our cash requirements by alternative financing. In these instances, we may seek to raise such additional funds through public or private equity or debt financings or from other sources. We may not be able to obtain adequate or favorable financing at that time. Any equity financing we obtain may dilute existing ownership interests, and any debt financing could contain covenants that impose limitations on the conduct of our business. There can be no assurance that additional financing, if needed, would be available on terms acceptable to us or at all.

Commitments and Contingencies

Legal Proceedings

We are a party to litigation matters and claims, including those related to intellectual property, which are normal in the course of our operations, and while the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse impact on our financial position, results of operations or cash flows. However, because of the nature and inherent uncertainties of litigation, should the outcome of these actions be unfavorable, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

Convertible Subordinated Notes

In the first quarter of fiscal 2010, we repurchased less than $0.1 million in principal amount of our 3/4% Notes on the open market. At July 2, 2010, we had a remaining liability of $0.3 million of aggregate principal amount related to our 3/4% Notes that are due in December 2023. Each remaining holder of the 3/4% Notes may require us to purchase all or a portion of our 3/4% Notes on December 22, 2013, on December 22, 2018 or upon the occurrence of a change of control (as defined in the indenture governing the 3/4% Notes) at a price equal to the principal amount of 3/4% Notes being purchased plus any accrued and unpaid interest and we may redeem some or all of the 3/4% Notes for cash at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued interest to, but excluding, the redemption date. We may seek to make open market repurchases of the remaining balance of our 3/4% Notes within the next twelve months (See Note 8 to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010 for a detailed discussion of our debt and equity transactions).

Indemnification Obligations

We have entered into agreements with PMC-Sierra that include certain indemnification obligations related to the sale of the DPS Business. The Company also has an agreement with a customer that includes intellectual property indemnification obligations. These indemnification obligations generally require us to compensate the other party for certain damages and costs incurred as a result of third party claims. In each of these circumstances, payment by us is conditional on the other party making a claim pursuant to the procedures specified in the particular agreements, which procedures typically allow us to challenge the other party’s claims. Further, our obligations under these agreements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by it under these agreements. In addition, we have agreements whereby we indemnify our directors and certain of our officers for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. These indemnification agreements are not subject to a maximum loss clause; however, we maintain a director and officer insurance policy which may cover all or a portion of the liabilities arising from our obligation to indemnify our directors and officers. It is not possible to make a reasonable estimate of the maximum potential amount of future payments under these or similar agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, we have not incurred significant costs to defend lawsuits or settle claims related to such agreements and no amount has been accrued in the accompanying Unaudited Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

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Contractual Obligations

Our contractual obligations at July 2, 2010 are as follows:

Contractual Obligations	Payments Due By Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Short-term debt (1)	$	349	$	349	$	—	$	—	$	—
Operating lease obligations (2)		1,940		1,207		733		—		—
Purchase obligations (3)		2,990		2,990		—		—		—
Other long-term liabilities (4)		701		—		—		—		701
Tax obligations (5)		3,679		—		3,679		—		—
Total	$	9,659	$	4,546	$	4,412	$	—	$	701

(1) Short-term debt includes anticipated interest payments on our 3/4% Notes that are not recorded on our Unaudited Condensed Consolidated Balance Sheets. As we will seek to make open market repurchases of the remaining balance of our 3/4% Notes within the next twelve months, we have continued to classify the 3/4% Notes as short-term obligations, due less than one year. Any future repurchases of our 3/4% Notes would reduce anticipated interest and/or principal payments.

(2) Operating lease obligations include amounts recorded in “Accrued and other liabilities” and “Other long-term liabilities” on our Consolidated Balance Sheets of $0.4 million and $0.1 million, respectively, related to the consolidation of our facilities associated with our restructuring plans, which represented the estimated net loss.

(3) For the purposes of this table, contractual obligations for the purchase of goods or services are defined as agreements that are enforceable, non-cancelable and legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current needs and are fulfilled by our vendors within short time horizons. The expected timing of payment of the obligations discussed above was estimated based on information available to us as of July 2, 2010. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

(4) Other long-term liabilities included a defined benefit retirement plan at one of our foreign subsidiaries that we acquired in fiscal 2004. The liability is calculated in accordance with statutory government plans.

(5) Tax obligations relate to liabilities for uncertain tax positions, which were reflected in “Other long-term liabilities.” The timing of any payments which could result from the unrecognized tax benefits will depend upon a number of factors. Management believes that it is not reasonably possible that the net unrecognized tax benefits will change significantly within the next 12 months. For the purposes of this table, we have disclosed the gross unrecognized tax benefits in the “one to three years” column based on our estimate on the timing of payment for the remaining tax obligations.

Recent Accounting Pronouncements

There were no additional accounting pronouncements recently issued in the first quarter of fiscal 2011 which are applicable to us or may be considered material to us. For a complete discussion of the impact of recently issued accounting pronouncements, please refer to Note 1 to the Notes of the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year-ended March 31, 2010.

Critical Accounting Policies

Our critical accounting policies have not changed from our fiscal year ended March 31, 2010. For a complete description of what we believe to be the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our Unaudited Condensed Consolidated Financial Statements, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.

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Impairment Review

In June 2010, we made a decision to wind down our Aristos Business and notified its customers that final shipments would occur by September 2010. We also anticipate putting our building up for sale in the third or fourth quarter of fiscal 2011. As a result of these additional actions, we evaluated the carrying value of our long-lived assets at July 2, 2010 and determined that the carrying value of such assets may not be fully recoverable. We then measured the impairment loss and recognized the amount in which the carrying value exceeded the estimated fair value by recording an impairment charge of $10.2 million in the first quarter of fiscal 2011, of which $5.4 million and $4.8 million were reflected in “Cost of revenues” and “Impairment of long-lived assets,” respectively, in the Unaudited Condensed Consolidated Statements of Operations. Of the $10.2 million impairment charge of our long-lived assets, $6.1 million related to the write-off of intangible assets and the remaining $4.1 million related to the reduction of the carrying value of our property and equipment, net, to its estimated fair value. The estimated fair value was based on the market approach and considered the perspective of market participants using or exchanging our long-lived assets. The estimation of the impairment involved assumptions that require judgment by us. We will continue to evaluate the remaining useful life of our property and equipment, net, of $6.0 million at July 2, 2010 to determine if the useful life needs to be reduced, and if reduced, the amounts depreciated prospectively would increase during each reporting period.

Dispositions

DPS Business

On June 8, 2010, we consummated a transaction with PMC-Sierra in which PMC-Sierra purchased certain assets related to our DPS Business and PMC-Sierra assumed certain of our liabilities related to the DPS Business. The transaction was pursuant to the Purchase Agreement entered into by PMC-Sierra and ADPT on May 8, 2010. The purchase price for the DPS Business was $34.3 million, of which $29.3 million was received by us upon the closing of the transaction and the remaining $5.0 million is being withheld in an escrow account, or DPS Holdback, to secure potential indemnification obligations pursuant to the Purchase Agreement with PMC-Sierra. The DPS Holdback is to be released to us on June 8, 2011, one year after the consummation of the sale of our DPS Business, except for funds necessary to provide for any pending or satisfied claims and will be recognized as contingent consideration in discontinued operations when received. Under the Purchase Agreement, PMC-Sierra purchased substantially all accounts receivable and inventory related to the DPS Business and certain fixed assets and intellectual property (other than our non-core patents for which PMC-Sierra received a perpetual non-exclusive royalty free license). Included in the intellectual property assigned to PMC-Sierra was our former brand name, Adaptec. In addition, certain contracts were assigned to PMC-Sierra. PMC-Sierra has also assumed the obligations for certain of our leased facilities, primarily related to international sites used in the DPS Business, certain employee retention obligations, certain obligations related to a defined benefit retirement plan at one of the foreign subsidiaries and support and service liabilities. Expenses incurred in the transaction primarily included approximately $3.4 million for commissions and legal and accounting fees. We recorded a gain of $10.5 million, net of taxes of $6.8 million, on the disposal of the DPS business in the first quarter of fiscal 2011 in “Gain on disposal of discontinued operations, net of taxes,” in the Unaudited Condensed Consolidated Statements of Operations.

On June 8, 2010, we also entered into a transition service agreement with PMC-Sierra, in which we will provide certain services required for the operation of the DPS Business through December 2010 and the direct costs associated with providing these services will be reimbursed by PMC-Sierra. As a result of the transition service agreement, cash of $4.1 million was received on behalf of PMC-Sierra upon collection of accounts receivable and was classified as “Restricted Cash” and included in “Accounts payable” on our Unaudited Condensed Consolidated Balance Sheets at July 2, 2010.

Snap Server Network Attached Storage Business

On June 27, 2008, we entered into an asset purchase agreement with Overland Storage, Inc., or Overland, for the sale of the Snap Server NAS Business for $3.3 million, of which $2.1 million was received by us upon the closing of the transaction and the remaining $1.2 million was to be received on the 12 month anniversary of the closing of the transaction pursuant to a promissory note issued us. In the first quarter of fiscal 2010, we amended the promissory note agreement with Overland, which allowed Overland to pay us the remaining $1.2 million receivable plus accrued interest over time through March 31, 2010; however, we received the final payment from Overland in the first quarter of fiscal 2011. As a result, in the first quarters of fiscal 2011 and 2010, we recorded a gain of $0.1 million and $0.4 million, respectively, in “Gain on disposal of discontinued operations, net of taxes,” in the Unaudited Condensed Consolidated Statements of Operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

For financial market risks related to changes in interest rates, equity price and foreign currency exchange rates, reference is made to Item 7A: “Quantitative and Qualitative Disclosures About Market Risk” contained in Part II of our Annual Report on Form 10-K for the fiscal year ended March 31, 2010. Our exposure to market risk has not changed materially since March 31, 2010.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Interim Chief Executive Officer, or CEO, and our Chief Financial Officer, or CFO, we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Interim CEO and our CFO have concluded that the design and operation of our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission, or SEC, rules and forms and (ii) is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

A control system, no matter how well conceived and operated, can only provide reasonable assurance that the objectives of the control system are met. Because of these inherent limitations, no evaluation of our disclosure controls and procedures or our internal control over financial reporting will provide absolute assurance that misstatements due to error or fraud will not occur.

PART II. OTHER INFORMATION

Item 1A. Risk Factors.

Our business faces significant risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our results of operations and financial condition. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could suffer, and the trading price of our common stock could decline.

Our delisting from The NASDAQ Global Market may decrease the liquidity of our common stock. On July 27, 2010, we received a letter from the staff of the NASDAQ Listing Qualifications Department informing us that it believes that we no longer have an operating business and are a “public shell,” and as such no longer meet the NASDAQ’s listing requirements. As a result of such determination, our shares were delisted from The NASDAQ Global stock market on August 5, 2010, and on the same date commenced trading on Pink Sheets. Broker-dealers often decline to trade in Pink Sheet stocks given that the market for such securities is often limited, the stocks are more volatile, and the risk to investors is greater than with stocks listed on national securities exchanges. Consequently, selling our common stock may be difficult because smaller quantities of shares may be bought and sold, transactions may be delayed and securities analyst and news media coverage of our Company may be reduced. These factors may result in lower prices and larger spreads in the bid and ask prices for shares of our common stock, as well as lower trading volume.

We may be considered a “shell company” under federal securities laws and may become subject to more stringent reporting requirements. Under Rule 405 of the Securities Act and Exchange Act Rule 12b-2, a shell company is defined as an entity that has no or nominal operations and either (a) no or nominal assets; (b) assets consisting solely of cash and cash equivalents; or (c) assets consisting of any amount of cash and cash equivalents and nominal other assets. Depending on our future activities and operations, we may be deemed a “shell company” under the federal securities laws and regulations. The Securities and Exchange Commission’s rules prohibit the use of Form S-8 for the registration of shares under equity incentive plans by a shell company and require a shell company to file a Form 8-K to report the same type of information that would be required if it were filing to register a class of securities under the Exchange Act whenever the shell company is reporting the event that caused it to cease being a shell company. Being a shell company may adversely impact our ability to offer our stock to officers, directors and consultants, and thereby make it more difficult to attract and retain qualified individuals to perform services for us, and will likely increase the costs of registration compliance following the completion of a business combination.

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Depending on our future activities and operations, we may be deemed an investment company, which could impose on us burdensome compliance requirements and restrict our activities, which may make it difficult for us to complete future business combinations or acquisitions. The Investment Company Act of 1940, as amended, or the Investment Company Act, requires registration, as an investment company, of companies that are engaged primarily in the business of investing, reinvesting, owning, holding or trading securities. Generally, companies may be deemed investment companies under the Investment Company Act if they are viewed as engaging in the business of investing in securities or they own investment securities having a value exceeding 40% of certain assets. Depending on our future activities and operations, we may become subject to the Investment Company Act. While Rule 3a-2 of the Investment Company Act provides an exemption that allows companies that may be deemed investment companies but that have a bona fide intent to engage primarily in a business other than that of investing in securities up to one year to engage in such other business activity, we may not qualify for this or any other exemption under the Investment Company Act. If we are deemed to be an investment company under the Investment Company Act, we may be subject to certain restrictions that may make it difficult for us to complete a business combination, including:

• restrictions on the nature of and custodial requirements for holding our investments; and

• restrictions on our issuance of securities which may make it difficult for us to complete a business combination.

In addition, we may have imposed upon us burdensome requirements, including:

• registration as an investment company;

• adoption of a specific form of corporate structure; and

• reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.

If we become subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional costs and expenses. There can be no assurance that we will not be deemed to be an investment company, as defined under Sections 3(a)(1)(A) and (C) of the Investment Company Act or that we will qualify for the exemption under Rule 3a-2 of the Investment Company Act.

If our common stock becomes subject to the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in our securities may be adversely affected. Our common stock may become a “penny stock” pursuant to Rule 3a51-1 of the Exchange Act. Broker-dealer practices in connection with transactions in penny stocks are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are defined as equity securities with a price of less than $5.00 per share, with certain exemptions. The penny stock rules require a broker-dealer, prior to purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure document that provides information about penny stocks and the risks associated with the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer account. In addition, the penny stock rules generally require that, prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market of a stock that becomes subject to the penny stock rules.

There may be risks associated with acquisitions and investments, including our decisions to sell, write-off or dispose of our remaining operating assets. As part of our business strategy, we seek to identify new acquisition and investment opportunities. Acquisitions involve numerous risks, including difficulties in the assimilation of the operations and products or services of the acquired companies, the expenses incurred in connection with the acquisition and subsequent integration of operations and products or services and the potential loss of key employees of the acquired company. There can be no assurance that we will successfully identify, complete or integrate any future acquisitions or investments or that completed acquisitions or investments will contribute favorably to our operations and future financial condition. In addition, we may be subject to certain risks and liabilities based on our decision to wind down our Aristos products or other current operating assets, including requirements under existing contracts with customers for our Aristos Business, and possible disposition of our remaining patent portfolio and real estate assets. There can be no assurance that we will be able to successfully wind down our Aristos products and fulfill all of our contractual obligations with customers of such products, or successfully dispose of or redeploy our remaining patent portfolio and real estate assets, which may result in an adverse effect on our financial condition and stock price.

There can be no assurance that we will be able to identify suitable acquisition candidates or business and investment opportunities. We have incurred recurring operating losses related to our operations since 2001 (other than during 2004). We are exploring strategic alternatives and seeking to identify new business acquisition opportunities in which we may utilize our NOLs. There is no guarantee that we will be able to identify such new business acquisition opportunities or strategic alternatives in which we may redeploy our assets and the proceeds from the sale of the DPS Business. If we are unable to identify new business opportunities or acquire suitable acquisition candidate(s), we may continue to incur operating losses and negative cash flows, and our results of operations and stock price may suffer.

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Our stockholders may be subject to the broad discretion of management. We have limited operating assets, and our business strategy involves identifying new business and investment opportunities. Our stockholders may not have an opportunity to evaluate the specific merits or risks of any such proposed transactions or investments. As a result, our stockholders may depend on the broad discretion and judgment of management and our Board of Directors in connection with the application of our capital and the selection of acquisition or investment targets. There can be no assurance that determinations ultimately made by us will permit us to achieve profitable operations.

We will incur significant costs in connection with our evaluation of new business opportunities and suitable acquisition candidates. Our management intends to identify, analyze and evaluate potential new business opportunities, including possible acquisition and merger candidates. We will incur significant costs, such as due diligence and legal and other professional fees and expenses, as part of these efforts. Notwithstanding these efforts and expenditures, we cannot give any assurance that we will identify an appropriate new business opportunity, or any acquisition opportunity, in the near term, or at all.

Failure to successfully identify and enter into a new line of business or identify possible acquisition candidates could cause our stock price to decline. We expect to actively pursue new lines of business operations and to explore all strategic alternatives to maximize stockholder value going forward, including deploying the proceeds from the sale of our DPS Business and our other assets in seeking business acquisition opportunities and other actions to redeploy our capital, while we manage our remaining operations. In relation to pursuing such strategic alternatives and new business acquisition opportunities, our stock price may decline due to any or all of the following potential occurrences:

• we may not be able to identify a profitable new line of business or deploy successfully our resources to operate profitably in such line of business;

• we may not be able to find suitable acquisition candidates or may not be able to acquire suitable candidates within the limits of our financial resources;

• we may not be able to effectively utilize our existing net operating losses, or NOLs, to offset future earnings;

• we may have difficulty retaining our key remaining employees or employees of acquired businesses; and

• we may have difficulty retaining our Board of Directors or attracting suitable qualified candidates should a current director resign.

We may issue a substantial amount of our common stock in the future which could cause dilution to our stockholders and otherwise adversely affect our stock price. Our current primary business strategy is to make acquisitions. While we may make acquisition(s) in whole or in part with cash, as part of such strategy, we may issue additional shares of common stock as consideration for such acquisitions. These issuances could be significant. To the extent that we make acquisitions and issue our shares of common stock as consideration, our existing stockholders’ equity interest may be diluted. Any such issuance will also increase the number of outstanding shares of common stock that will be eligible for sale in the future. Persons receiving shares of our common stock in connection with these acquisitions may be more likely to sell off their common stock, which may influence the price of our common stock. In addition, the potential issuance of additional shares in connection with anticipated acquisitions could lessen demand for our common stock and result in a lower price than might otherwise be obtained. We may issue common stock in the future for other purposes as well, including in connection with financings, for compensation purposes, in connection with strategic transactions or for other purposes.

We will likely have no operating history in our new line of business, which is yet to be determined, and therefore we will be subject to the risks inherent in establishing a new business. We have not identified what our new line or lines of business will be and, therefore, we cannot fully describe the specific risks presented by such business. It is likely that we will have had no operating history in the new line of business, and it is possible that any company we may acquire will have a limited operating history in its business. Accordingly, there can be no assurance that our future operations will generate operating or net income, and as such our success will be subject to the risks, expenses, problems and delays inherent in establishing a new line of business for us. The ultimate success of such new business cannot be assured.

We may be unable to realize the benefits of our NOLs. NOLs may be carried forward to offset federal and state taxable income in future years and eliminate income taxes otherwise payable on such taxable income, subject to certain limits and adjustments. Based on current income tax rates, our NOLs and other carry-forwards could provide a benefit to us, if fully utilized, of significant future tax savings. However, our ability to use these tax benefits in future years will depend upon our ability to comply with the rules relating to the preservation and use of NOLs and the amount of our otherwise taxable income. If we do not have sufficient taxable income in future years to use the tax benefits before they expire, we will lose the benefit of these NOLs permanently. Consequently, our ability to use the tax benefits associated with our NOLs will depend significantly on our success in identifying suitable new business opportunities and acquisition candidates that maximize our NOLs, and once identified, successfully becoming established in this new business line or consummating such an acquisition.

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Additionally, if we underwent an ownership change, the NOLs would be subject to an annual limit on the amount of the taxable income that may be offset by our NOLs generated prior to the ownership change. If an ownership change were to occur, we may be unable to use a significant portion of our NOLs to offset taxable income.

The amount of NOLs that we have claimed has not been audited or otherwise validated by the U.S. Internal Revenue Service, or the IRS. The IRS could challenge our calculation of the amount of our NOLs, and our determinations as to when a prior change in ownership occurred, and other provisions of the Internal Revenue Code, may limit our ability to carry forward our NOLs to offset taxable income in future years. If the IRS was successful with respect to any such challenge, the potential tax benefit of the NOLs to us could be substantially reduced.

The cost-effective wind down of our operations depends on the efforts of our workforce, the loss of whom could affect the transformation and success of our business. To be successful in the efficient wind down of our operations, we must retain a group of our remaining employees as we fulfill certain transition services to PMC-Sierra, Inc., or PMC-Sierra and as we proceed with winding down our Aristos Business. Each of our employees is an “at-will” employee, and, as a result, any of our employees could terminate their employment with us at any time without penalty. Therefore, we have implemented retention plans in an effort to retain these employees. The loss of any employees key to an effective wind down could have a significant impact on the success of the wind down of our operations, including having an adverse effect on, and increase the cost of, providing transition services to PMC-Sierra.

We will likely incur significant restructuring expenses in the near future. In May 2010, we adopted a restructuring plan involving the termination of certain employees, the last of whom was notified in June 2010. We have recorded $2.3 million related to one-time severance benefits in the first quarter of fiscal 2011; however, we expect to record additional restructuring expense of $1.6 million during the next several quarters, primarily related to one-time severance benefits. Certain of the employees notified are expected to continue to provide services through December 2010 in connection with the transition services we are providing to PMC-Sierra, and to a lesser extent, through January 2011 to assist in corporate matters. However, we could encounter delays in executing our restructuring plan, which could cause further disruption and additional unanticipated expense in the near future. Further, our restructuring plan could result in a potential adverse effect on employee capabilities that could harm our efficiency and our ability to act quickly and effectively.

If the carrying value of our long-lived assets is not recoverable, an impairment loss must be recognized which would adversely affect our financial results. Certain events or changes in circumstances would require us to assess the recoverability of the carrying value amount of our long-lived assets. As a result of our decision to wind down our Aristos Business and our anticipation in putting our building up for sale after completion of our final shipments to our customers through September 2010, we evaluated the carrying value of our long-lived assets at July 2, 2010 and determined that the carrying value of such assets may not be fully recoverable. As a result, we recorded an impairment charge of $10.2 million in the first quarter of fiscal 2011 to write-off our intangible assets and reduce the carrying value of our property and equipment, net, to the estimated fair value, which was based on the market approach and considered the perspective of market participants using or exchanging our long-lived assets. We will continue to evaluate the remaining useful life of our property and equipment, net, of $6.0 million at July 2, 2010 to determine if the useful life needs to be reduced, and if reduced, the amounts depreciated prospectively would increase during each reporting period. If the remaining useful life of our long-lived assets shortens, we will be required to record higher depreciation expense in future periods which may have a material impact on our operating results. We may also be required to record additional impairment charges for our long-lived assets in the future if certain events or changes in circumstances arise.

We hold non-controlling interests in privately held venture funds, and if these venture funds face financial difficulties in their operations, our investments could be impaired. We continue to hold non-controlling interest in privately held venture funds. At July 2, 2010 and March 31, 2010, the carrying value of such investments aggregated $1.2 million for each period. These investments are inherently risky because these venture funds invest in companies that may still be in the development stage or depend on third parties for financing to support their ongoing operations. In addition, the markets for the technologies or products of these companies 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, the venture funds’ investments in these companies may be impaired, which in turn, could result in impairment of our investment in these venture funds. For example, in fiscal 2009, the value of our non-controlling interest in privately held venture funds declined resulting in a recorded charge of $0.4 million. The carrying value of these investments is based on quarterly statements we receive from the funds. The statements are generally received one quarter in arrears, as more timely valuations are not practical. The statements reflect the net asset value, which we use to determine the fair value for these investments, which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company. The assumptions we use due to lack of observable inputs may impact the fair value of these equity investments in future periods. While we have seen some improvement in global economic conditions, any adverse changes in equity investments and current market conditions may require us to record an impairment charge against all or a portion of the investments in the future. Such an action would adversely affect our financial results.

34

We may sustain losses in our investment portfolio due to adverse changes in the global credit markets. Global economic conditions have been challenged in the past by slowing growth and the sub-prime debt devaluation crisis, causing worldwide liquidity and credit concerns. While the liquidity and credit concerns have passed and we have seen some improvement in global economic conditions, any adverse change in global economic conditions may adversely impact our financial results. A substantial portion of our assets consists of investments in marketable securities that we hold as available-for-sale and we mark them to market. While there has been a decline in the trading values of certain of the securities in which we have invested, we have not recognized a material loss on our securities as the unrealized losses incurred were not deemed to be other-than-temporary. We expect to realize the full value of all our marketable securities upon maturity or sale, as we have the intent and ability to hold the securities until the full value is realized. However, we cannot provide any assurance that our invested cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require us to record an impairment charge that could adversely impact our financial results.

If the financial institutions that maintain our cash, cash equivalents and marketable securities, experience financial difficulties, which is more likely in the current weakened state of the economy, our cash balances may be adversely impacted. We maintain our cash, cash equivalents and marketable securities with certain financial institutions in which our balances exceed the limits that are insured by the Federal Deposit Insurance Corporation. If the underlying financial institutions fail or other adverse conditions occur in the financial markets, our cash balances may be impacted.

We may be required to pay additional income taxes which could negatively affect our results of operations and financial position. Our tax provision continues to reflect judgment and estimation regarding components of the settlement such as interest calculations and the application of the settlements to foreign, state and local taxing jurisdictions. Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in our Consolidated Financial Statements and may cause a higher effective tax rate that could materially affect our income tax provision, results of operations or cash flows in the period or periods for which such determination is made. In fiscal 2009, the IRS concluded its audit of our federal income tax returns for the fiscal 2004 through 2006 audit cycle. The IRS issued a No Change Report indicating no change to our tax liability; however, the IRS continues to have the ability to adjust tax attributes relating to these years in subsequent audits. We believe that we have provided sufficient tax provisions for these years and that the ultimate outcome of any future IRS audits that include the tax attributes will not have a material adverse impact on our financial position or results of operations in future periods. While the tax authorities in the foreign jurisdictions in which we operate or formerly operated continue to audit our tax returns for fiscal years subsequent to 1999, the potential outcome of these audits is uncertain and could result in material tax provisions or additional tax payments in future periods.

We may be subject to a higher effective tax rate that could negatively affect our results of operations and financial position. We are subject to income and other taxes in the United States and in the foreign taxing jurisdictions in which we formerly operated. The determination of our worldwide provision for income taxes and current and deferred tax assets and liabilities requires judgment and estimation and is subject to audit and redetermination by the taxing authorities. Although we believe our tax estimates are reasonable, the following factors could cause our effective tax rate to be materially different than tax amounts recorded in our Consolidated Financial Statements:

• the jurisdiction in which profits were determined to be earned and taxed;

• adjustments to estimated taxes upon finalization of various tax returns;

• changes in available tax credits;

• changes in share-based compensation expense;

• changes in tax laws, the interpretation of tax laws either in the United States or abroad or the issuance of new interpretative accounting guidance related to uncertain transactions and calculations where the tax treatment was previously uncertain; and

• the resolution of issues arising from tax audits with various tax authorities.

The factors noted above may cause a higher effective tax rate that could materially affect our income tax provision, results of operations or cash flows in the period or periods for which such determination is made.

Third parties may assert infringement claims against us, which may be expensive to defend and could divert our resources. From time to time, third parties assert exclusive patent, copyright and other intellectual property rights to technologies that were formerly key to our business, and we expect to continue to receive such claims in the future. We cannot assure you that third parties will not assert other infringement claims against us, directly or indirectly, in the future, that assertions by third parties will not result in costly litigation or that we would prevail in such litigation. These claims may be asserted in respect of intellectual property that we own or formerly owned, or that we formerly licensed from others. Intellectual property litigation, regardless of the outcome, could result in substantial costs to us and diversion of our resources and management time and attention, and could adversely affect our business and financial results.

35

We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our management’s time and attention. From time to time we are subject to litigation or claims that could negatively affect our business operations and financial position. Such disputes 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 actual results or events differ materially from those contemplated by us in making estimates and assumptions, our reported financial condition and results of operations for future periods could be materially affected. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Unaudited Condensed Consolidated Financial Statements and accompanying notes. For example, we have identified key accounting estimates in our Critical Accounting Policies included in “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended March 31, 2010, which include revenue recognition, cash, cash equivalents and marketable securities valuation, inventory, impairment of long-lived assets and income taxes. Furthermore, Note 1 to the Consolidated Financial Statements included in “Item 8: Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010 describes the significant accounting policies essential to preparing our Consolidated Financial Statements. The preparation of these financial statements requires estimates and assumptions that affect the reported amounts and disclosures. Although we believe that our judgments and estimates are appropriate and correct, actual future results may differ materially from our estimates.

Future changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse unexpected revenue fluctuations and affect our reported results of operations. A change in accounting standards or practices or a change in existing taxation rules or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and taxation rules and varying interpretations of accounting pronouncements and taxation practices have occurred and may occur in the future.

Changes in securities laws and regulations have increased and may continue to increase our costs. Changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules promulgated by the SEC, have increased and may continue to increase our expenses as we devote resources to respond to their requirements. In particular, we incurred additional administrative expense to implement Section 404 of the Sarbanes-Oxley Act, which requires management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting.

The Sarbanes-Oxley Act has increased, and the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act will continue to increase, the scope, complexity and cost of our corporate governance, reporting and disclosure practices. We also expect these developments may make it more difficult and more expensive for us to obtain director and officer liability insurance in the future, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.

Internal control deficiencies or weaknesses that are not yet identified could emerge. Over time we may identify and correct deficiencies or weaknesses in our internal control over financial reporting and, where and when appropriate, report on the identification and correction of these deficiencies or weaknesses. However, the internal control procedures can provide only reasonable, and not absolute, assurance that deficiencies or weaknesses are identified. Deficiencies or weaknesses that are not yet identified could emerge, and the identification and corrections of these deficiencies or weaknesses could have a material impact on our results of operations.

Internal control issues that appear minor now may later become material weaknesses. We are required to publicly report on deficiencies or weaknesses in our internal control over financial reporting that meet a materiality standard as required by law and related regulations and interpretations. Management may, at a point in time, accurately categorize a deficiency or weakness as immaterial or minor and therefore not be required to publicly report such deficiency or weakness. Such determination, however, does not preclude a change in circumstances such that the deficiency or weakness could, at a later time, become a material weakness that could have a material impact on our results of operations.

Manmade problems such as computer viruses or terrorism may disrupt our operations and harm our operating results. Despite our implementation of network security measures, our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems. Any such event could have an adverse effect on our business, operating results, and financial condition. In addition, the effects of war or acts of terrorism could have an adverse effect on our business, operating results, and financial condition. In addition, as a company with headquarters and significant operations located in the United States, we may be impacted by actions against the United States. We are predominantly uninsured for losses and interruptions caused by terrorist acts and acts of war.

36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

In July 2008, our Board of Directors authorized a stock repurchase program to purchase up to $40 million of our common stock. No common stock repurchases occurred during the first quarter of fiscal 2011. We have repurchased approximately $4.1 million in shares of our common stock in the open market through July 2, 2010. As of July 2, 2010, $35.9 million remained available for repurchase under the authorized stock repurchase program.

In the first quarter of fiscal 2011, we withheld 0.1 million shares to cover the applicable taxes, relating to the vesting of shares of restricted stock. The average price per share of the shares withheld was $3.02. The shares withheld for tax purposes are not considered common stock repurchases under our authorized plan.

Item 6. Exhibits.

Exhibit No.	Exhibit	Form	File No.	Filing Date	Exhibit No. as Filed	Filed with this  10-Q
2.1	Asset Purchase Agreement between the Company and PMC-Sierra, Inc.					X
2.2	Amended Asset Purchase Agreement between the Company and PMC-Sierra, Inc.					X
3.1	Certificate of Ownership and Merger filed with the Delaware Secretary of State on June 22, 2010	8-K	000-15071	June 25, 2010	3.1
10.1	Separation Agreement of Mary L. Dotz, effective July 16, 2010.					X
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X

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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 hereunto duly authorized.

ADAPTEC, INC.
By:	/s/ JOHN J. QUICKE
	John J. Quicke Interim President and Chief Executive Officer (principal executive officer)	Date: August 11, 2010
By:	/s/ MARY L. DOTZ
	Mary L. Dotz Chief Financial Officer (principal financial officer)	Date: August 11, 2010

38

EXHIBIT INDEX

Exhibit No.	Exhibit	Form	File No.	Filing Date	Exhibit No. as Filed	Filed with this  10-Q
2.1	Asset Purchase Agreement between the Company and PMC-Sierra, Inc.					X
2.2	Amended Asset Purchase Agreement between the Company and PMC-Sierra, Inc.					X
3.1	Certificate of Ownership and Merger filed with the Delaware Secretary of State on June 22, 2010	8-K	000-15071	June 25, 2010	3.1
10.1	Separation Agreement of Mary L. Dotz, effective July 16, 2010.					X
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X

39

EX-2.1

Exhibit 2.1

ASSET PURCHASE AGREEMENT

by and among:

ADAPTEC, INC.,

and

PMC-SIERRA, INC.

Dated as of May 8, 2010

Table of Contents

			Page
ARTICLE I DEFINITIONS			1
ARTICLE II SALE AND PURCHASE OF ASSETS AND ASSUMPTION OF CERTAIN LIABILITIES			11
	2.1	Sale and Purchase of Assets	11
	2.2	Excluded Assets	13
	2.3	Assumption of Liabilities	15
	2.4	Purchase Price	17
	2.5	Allocation	17
	2.6	Closing	17
	2.7	Delivery to Buyer	17
	2.8	Delivery to Seller	18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER			19
	3.1	Corporate Status	19
	3.2	Subsidiaries	19
	3.3	Due Authorization	20
	3.4	No Conflict; Consents	20
	3.5	Government Authorizations	20
	3.6	Title to Purchased Assets and Related Matters	21
	3.7	Real Property Leases	21
	3.8	Inventory	22
	3.9	Material Contracts	22
	3.10	SEC Filings; Financial Statements	24
	3.11	Legal Proceedings; Litigation	24
	3.12	Intellectual Property	25
	3.13	Employees	28
	3.14	Environmental Matters	29
	3.15	Insurance Policies	30
	3.16	Taxes	30
	3.17	Accounts Receivable	31
	3.18	Product Warranty	31
	3.19	Brokers or Finders	31
	3.20	Foreign Corrupt Practices Act	31
	3.21	Employee Benefits	32
	3.22	Customers and Suppliers	34
	3.23	Absence of Certain Changes	34
	3.24	Export Controls	36
	3.25	Full Disclosure	36
	3.26	Exclusive Representations and Warranties	37
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER			37
	4.1	Corporate Status	37
	4.2	Due Authorization	37
	4.3	No Conflicts	38
	4.4	Availability of Funds	38

Table of Contents

(continued)

			Page
	4.5	Brokers or Finders	38
	4.6	Exclusive Representations and Warranties	38
ARTICLE V COVENANTS OF SELLER			38
	5.1	Operation of the Business	38
	5.2	Access	41
	5.3	Notification of Certain Matters	42
	5.4	Non-Competition; Non-Solicitation	42
	5.5	No Solicitation of Transactions by Seller	43
ARTICLE VI FURTHER COVENANTS			44
	6.1	Confidentiality	44
	6.2	Employment of Employees by Buyer	44
	6.3	Bulk Sale Laws	47
	6.4	Expenses	47
	6.5	Public Announcements	48
	6.6	Use of Name	48
	6.7	Governmental and Other Authorizations; Notices and Consents	48
	6.8	Insurance	49
	6.9	Cooperation and Further Assurances	49
	6.10	No Retention	50
	6.11	Removal of Third Party Non-Transferred Materials	50
ARTICLE VII TAX MATTERS			50
	7.1	Tax Returns	50
	7.2	Transfer Taxes	51
	7.3	Proration	51
ARTICLE VIII CONDITIONS PRECEDENT TO THE TRANSACTIONS			51
	8.1	Conditions to Each Party’s Obligations	51
	8.2	Conditions to Obligations of Buyer	52
	8.3	Conditions to Obligations of Seller	53
ARTICLE IX INDEMNIFICATION; SURVIVAL			53
	9.1	By Seller	53
	9.2	By Buyer	54
	9.3	Limitation of Liability	54
	9.4	Procedure for Claims	55
	9.5	Third Party Claims	57
	9.6	Purchase Price Adjustment	58
	9.7	Payment of Indemnification Claims	58
	9.8	Release of Remaining Escrow Amount	58
	9.9	Survival of Representations, Warranties and Covenants	58
ARTICLE X TERMINATION			59
	10.1	Grounds for Termination	59
	10.2	Effect of Termination	60

-ii-

Table of Contents

(continued)

			Page
ARTICLE XI MISCELLANEOUS			60
	11.1	Contents of Agreement, Amendment, Parties in Interest, Assignment, Etc.	60
	11.2	Interpretation	61
	11.3	Notices	61
	11.4	Governing Law; Consent to Jurisdiction; Consent To Service Of Process	62
	11.5	Counterparts	63
	11.6	Specific Performance	63
	11.7	No Third Party Beneficiaries	63
	11.8	Schedules and Exhibits	63
	11.9	Severability	63
	11.10	Effect of Investigation	64

-iii-

EXHIBITS
Exhibit A	Form of Bill of Sale
Exhibit B	Form of Assignment and Assumption
Exhibit C	Form of Transition Services Agreement
Exhibit D	Form of License Agreement
Exhibit E	Form of Escrow Agreement
SCHEDULES
1.1(a)	Employees
1.1(b)	Retention Agreements
1.1(c)	Seller Knowledge Individuals
1.1(d)	The Selling Subsidiaries
1.1(e)	Identified Employees
1.1(f)	Scheduled Aristos Agreement
2.1(b)	Fixed Assets
2.1(c)	Assumed Contracts
2.1(d)	Owned Business IP
2.1(e)	Leases
2.1(h)	Website Data and Content
2.1(i)	Governmental Authorizations
2.1(j)	Excluded Accounts Receivables
2.1(l)	Non-transferred Pre-Paid Expenses and Deposits
2.1(m)	Assumed Employee Plans
2.2(b)	Excluded Intellectual Property Rights
2.2(h)	Aristos Patents
2.2(r)	Excluded Assets
2.3(a)(ii)	EOL Products
2.3(a)(vi)	Severance Agreements
2.3(a)(x)	Scheduled Liabilities
6.2(e)	Severance Benefits
6.7(d)	Third Party Consents
8.2(e)	Required Consents
DISCLOSURE SCHEDULE
3.4(a)	No Conflicts
3.4(b)	Required Consents
3.6(a)	Title Exceptions
3.6(b)	Sufficiency
3.7	Modifications of Leases
3.9(a)	Defaults, etc. Under Assumed Contracts
3.9(b)	Material Contracts
3.11	Litigation
3.12(b)(i)	Licensed Business IP
3.12(b)(ii)	Conflicts with Transferred Licenses
3.12(b)(iii)	Rights; License Fees

-i-

3.12(d)	Open Source Software; Software
3.12(e)	Third-Party Licenses; Licensed-Out Rights
3.12(f)	Infringement/Misappropriation of Third Party Rights
3.12(g)	Encumbrances on Seller Rights
3.12(h)	IP Claims or Proceedings
3.12(j)	Excluded Patents Proceedings
3.13(a)	Employees, Consultants
3.13(c)	Employees on Leave
3.13(d)	Violations of Employment Law
3.13(e)	Employees under Contract
3.13(g)(i)	Key Employees
3.13(g)(ii)	Key Employees Notices
3.13(h)	Employees not “at will”
3.15	Insurance
3.16(a)	Unresolved Tax Issues
3.17	Accounts Receivable
3.18	Product Warranty
3.19	Broker Fees
3.21(a)	Benefit Plans
3.21(b)	Pension Liability
3.21(c)	ERISA Plans
3.21(f)	Employee Plan Liability
3.21(g)	Employee Payments
3.22(a)	Customers and Suppliers
3.22(b)	Customer Termination
3.23	Material Changes
3.24	Export Controls

-ii-

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into on May 8, 2010, by and among ADAPTEC, INC., a Delaware corporation (“Seller”) and PMC-SIERRA, INC., a Delaware corporation (“Buyer”). Certain terms are used herein as defined below in Article I or elsewhere in this Agreement.

RECITALS

WHEREAS, Seller is in the business of providing data storage hardware and software solutions and products including ASICs, HBAs, RAID controllers, Adaptec RAID software, Adaptec RAID code (ARC), storage management software including Adaptec Storage Manager (ASM), option ROM BIOS, command line interface (CLI), storage virtualization software, and other solutions that span SCSI, SAS, and SATA interface technologies, and that optimize the performance of both hard disk and solid state drives (the “Business”); provided, that for purposes of clarity, the Business shall exclude the Aristos Business.

WHEREAS, subject to the terms and conditions set forth herein, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, certain assets used in connection with the Business; and

WHEREAS, Seller is willing to provide to Buyer, and Buyer is willing to provide to Seller, certain transition services on the terms and subject to the conditions of a transition services agreement to be executed by the parties pursuant to this Agreement.

WITNESSETH

NOW, THEREFORE, in consideration of the foregoing premises, which are incorporated herein by reference, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

ARTICLE I

DEFINITIONS

For convenience, certain terms used in more than one part of this Agreement are listed in alphabetical order and defined or referred to below (such terms, as well as any other terms defined elsewhere in this Agreement, shall be equally applicable to both the singular and plural forms of the terms defined).

“Accounts Receivable” means all trade accounts receivable and other rights to payment from customers related exclusively to the Business and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or Products sold or services rendered to customers related exclusively to the Business.

“Acquisition Proposal” means any offer, proposal, inquiry or indication of interest made by any Person other than Buyer or its Affiliates relating to (i) any merger, consolidation, business combination, sale, license involving or other disposition of any of the Purchased Assets pursuant to one or more related or unrelated transactions, (ii) a sale of 50% or more of the outstanding shares of capital stock of Seller (including by way of a tender offer or otherwise), involving one or more third parties (other than Buyer and its Affiliates) or (iii) any transaction which is similar in form, substance or purpose to any of the foregoing transactions.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. The term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning set forth in the Preamble.

“Agreed Portion of Damages” has the meaning set forth in Section 9.4(b)(ii).

“Aristos” means Aristos Logic Corporation, a Delaware corporation and wholly-owned subsidiary of Seller.

“Aristos Assets” means all assets (i) owned by Aristos or related to, and used in, the Aristos Business and (ii) not used in or held for use in the Business.

“Aristos Business” means the development, manufacture, sale and support of the silicon, software and board-level products for RAID storage sold by Aristos as of the date hereof under the Aristos brand name.

“Asserted Damages Amount” has the meaning set forth in Section 9.4(a).

“Assignment and Assumption Agreement” has the meaning set forth in Section 2.7(b).

“Assumed Contracts” has the meaning set forth in Section 2.1(c).

“Assumed Employee Plans” has the meaning set forth in Section 2.1(m).

“Assumed Liabilities” has the meaning set forth in Section 2.3(a).

“Automatic Transferred Employees” means those Employees where local Legal Requirements, including but not limited to the Transfer Regulations, provide for an automatic transfer of employees upon the transfer of a business as a going concern and such transfer occurs by operation of Legal Requirements other than the Identified Employees.

“Base Salary” means the annual base salary for non-sales Employees and target annual earnings for sales Employees. Base Salary does not include any bonuses, overtime, incentive pay, commissions (other than target commissions), compensation associated with employee stock options, fringe benefits, shift premiums, shift differentials, car allowance, reimbursements, expense allowances or any other irregular payments.

2

“Bill of Sale” has the meaning set forth in Section 2.7(a).

“Breach” means (a) any breach of, or inaccuracy in, any representation or warranty, (b) any breach or violation of, default under, failure to perform, failure to comply with or failure to notify, or noncompliance with, any covenant, agreement or obligation, or (c) any one or more other occurrences, circumstances, conditions or other events the existence of which, individually or together, whether unconditionally or with the passing of time or the giving of notice, or both, would (i) constitute a breach, violation, default, failure or noncompliance referred to in clauses (a) and (b) of this paragraph, (ii) permit any Person to accelerate any monetary obligation, (iii) permit any Person to abridge, delay, condition, terminate, revoke, rescind or cancel any right, license, Liability, debt, power, authority, privilege or obligation, or (iv) require, or permit any Person to require, the payment of a monetary penalty or liquidated damages.

“Business” has the meaning set forth in the Recitals.

“Business Day” means any day other than (i) a Saturday or Sunday, and (ii) a day on which banks in the city of New York, New York are closed.

“Buyer” has the meaning set forth in the Preamble.

“Buyer Indemnitee” has the meaning set forth in Section 9.1.

“Buyer Plans” has the meaning set forth in Section 6.2(e).

“CERCLA” has the meaning set forth in Section 3.14.

“Clean Air Act” has the meaning set forth in Section 3.14.

“Closing” has the meaning set forth in Section 2.6.

“Closing Accounts Receivable” has the meaning set forth in Section 3.17.

“Closing Date” has the meaning set forth in Section 2.6.

“COBRA” has the meaning set forth in Section 3.21(d).

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

“Commencement Date” has the meaning set forth in Section 5.4(a).

“Confidentiality Agreement” has the meaning set forth in Section 6.1.

“Contract” will mean any written, oral, implied or other agreement, contract, understanding, arrangement, instrument, lease, license, note, bond, indenture, loan, guaranty, option, indemnity, representation, warranty, deed, assignment, power of attorney, certificate, purchase order, work order, insurance policy, benefit plan, commitment, covenant, assurance or undertaking of any nature, including all amendments thereto.

3

“Copyrights” means worldwide (i) registered copyrights in published or unpublished works, mask work rights and similar rights, mask work registrations, and copyright applications for registration, including any renewals thereof, and (ii) copyrightable works and other rights of authorship in published or unpublished works.

“Damages” means any actual loss, liability, claim, damage, deficiency, judgment, interest, fine, penalty, assessment, award, costs, or expense, whether or not involving a Third Party Claim, but shall not include lost profits or consequential damages.

“Disclosure Schedule” means the disclosure schedule dated as of the date hereof regarding this Agreement that has been provided by Seller to Buyer.

“Employee Plans” has the meaning set forth in Section 3.21(a).

“Employees” means (i) the employees of Seller or the Selling Subsidiaries, including employees on temporary leave of absence, including family medical leave, military leave, temporary disability or sick leave, and employees on long-term disability leave, that are primarily engaged in providing services to the Business and set forth on Schedule 1.1(a) and (ii) each other employee of Seller and/or the Selling Subsidiaries that Seller and Buyer have mutually agreed to prior to the Closing Date or whose transfer to Buyer and its Subsidiaries is required by applicable Legal Requirements.

“Encumbrance” means any charge, claim, community or other marital property interest, condition, equitable interest, lien, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, infringement, interference, preemptive right, right of first option, right of first refusal or similar restriction with respect to any property or asset, including any restriction on use, voting (in the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership.

“Environmental Laws” has the meaning set forth in Section 3.14.

“EOL Products” means any Products of Seller, or its Affiliates, for which the last time buy period expired on or prior to the Closing Date.

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

“ERISA Affiliate” has the meaning set forth in Section 3.21(a).

“Escrow Agent” has the meaning set forth in Section 2.4.

“Escrow Agreement” has the meaning set forth in Section 2.4.

“Escrow Amount” means an amount in cash equal to $5,000,000.

“Escrow Expiration Date” has the meaning set forth in Section 9.8.

“Escrow Fund” has the meaning set forth in Section 2.4.

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

“Excluded Assets” has the meaning set forth in Section 2.2.

“Excluded Liabilities” has the meaning set forth in Section 2.3(b).

“Excluded Patents” has the meaning set forth in Section 2.2(b).

“Fixed Assets” means all machinery, equipment, tools, furniture, office equipment, computer hardware, supplies, materials, vehicles and other items of tangible personal property (other than Inventory) of every kind owned or leased (wherever located and whether or not carried in the Records of the Business) in connection with the Business, together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component part thereof and all maintenance Records and other documents relating thereto to the extent existing on the Closing Date.

“GAAP” means generally accepted accounting principles for financial reporting in the United States, applied on a consistent basis.

“Governmental Authority” means any (i) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature, (ii) federal, state, local, municipal, foreign or other government, (iii) governmental or quasi-Governmental Authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, Representative, organization, unit, body or entity and any court or other tribunal), (iv) international or multi-national organization or body, or (v) individual, entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or Taxing authority or power of any nature.

“Governmental Authorizations” has the meaning set forth in Section 3.5.

“Hazardous Substances” or “Hazardous Substance” shall mean any substance regulated under any of the Environmental Laws, including, without limitation, any substance which is: (A) petroleum, asbestos or asbestos-containing material, urea formaldehyde or polychlorinated biphenyls; (B) a “hazardous substance,” “pollutant” or “contaminant” (as defined in Sections 101(14), and (33) of CERCLA or the regulations designated pursuant to Section 102 of CERCLA), including any element, compound, mixture, solution or substance that is or may be designated pursuant to Section 102 of CERCLA; (C) listed in the United States Department of Transportation Hazardous Material Tables, 49 C.F.R. §172.101; (D) defined, designated or listed as a “Hazardous Waste” pursuant to the RCRA or (E) listed as a “Hazardous Air Pollutant” under Section 112 of the Clean Air Act.

“Indemnification Demand” has the meaning set forth in Section 9.4(a).

“Indemnified Party” has the meaning set forth in Section 9.4(a).

“Indemnifying Party” shall mean any Person required to provide indemnification pursuant to Article IX.

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“Identified Employees” means the Employees listed on Schedule 1.1(e).

“Insurance Policies” means all policies of fire, liability, product liability, workers’ compensation, health and other forms of insurance presently in effect with respect to the Business or Purchased Assets.

“Intellectual Property Rights” means Patents, Trademarks, Copyrights, Other IP Rights, Software, and Proprietary Information, and includes any rights to exclude others from using or appropriating any of the foregoing, including without limitation the rights to sue for and remedies against past, present or future infringements, violations, or misappropriations of any or all of the foregoing and rights of priority and protection of interests therein, and any other proprietary, intellectual property or other rights relating to any or all of the foregoing anywhere in the world.

“Inventory” means inventory, wherever located (including in transit where title has passed to Seller), primarily used or useable exclusively in the Business including inventory, inventory consigned to third parties, merchandise, goods and other personal property that are held by or on behalf of the Business for sale or lease or are furnished or are to be furnished under a service contract, or that constitute raw materials, work in process, finished goods, returned goods, spare parts, or materials or supplies of any kind, nature or description, including Inventory related to any EOL Products.

“IRS” means the United States Internal Revenue Service.

“Key Employees” has the meaning set forth in Section 3.13(g).

“Leases” has the meaning set forth in Section 2.1(e).

“Leased Real Property” has the meaning set forth in Section 3.7.

“Legal Requirement(s)” means any federal, state, local, municipal, foreign, international, multi-national or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, ruling, directive, pronouncement, requirement, specification, determination, decision, opinion or interpretation issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Authority.

“Liability” means any liability or obligation of any kind, character or description, whether known or unknown, absolute or contingent, matured or unmatured, disputed or undisputed, secured or unsecured, conditional or unconditional, accrued or unaccrued, liquidated or unliquidated, vested or unvested, joint or several, due or to become due, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on financial statements.

“License Agreement” means that certain license agreement by and between Seller and Buyer to be entered into as of the date hereof, substantially in the form attached hereto as Exhibit D.

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“Licensed Business IP” means all Intellectual Property Rights (i) not owned by Seller or any of the Selling Subsidiaries and (ii) used or held for use in the conduct of the Business.

“Licensed Software” has the meaning set forth in Section 3.12(d).

“Material Adverse Effect” means any event or circumstance that, individually or in the aggregate, has had or caused, or would reasonably be expected to have or cause, a material adverse effect on the condition (financial or otherwise), assets (including intangible assets), Liabilities or operations of the Business, Purchased Assets or Assumed Liabilities, but excludes any state of facts, event, change or effect caused by events, changes or developments relating to (i) changes or conditions affecting the computer storage industry generally to the extent any such changes or conditions do not have a materially disproportionate impact on the Business, Purchased Assets or Assumed Liabilities; (ii) changes in economic, regulatory or political conditions in the United States generally that do not have a materially disproportionate impact on the Business, Purchased Assets or Assumed Liabilities as compared to other companies generally in the computer storage industry; (iii) acts of terrorism, war or natural disasters; (iv) any failure by Seller to meet any internal or external projections, forecasts or estimates of revenues or earnings, in and of itself, for any period ending on or after the date hereof (it being understood that the underlying change, effect, event, occurrence or development giving rise to or contributing to such failure shall be taken into account except for such underlying events, changes, effects, or developments provided in clauses (i), (ii), and (iii) above); or (v) the execution, announcement or pendency of this Agreement or the transactions contemplated hereby, including the impact thereof on the Business or relationships, contractual or otherwise, with customers, vendors or employees.

“Material Contract” has the meaning set forth in Section 3.9(b).

“Open Source Software” means (A) Software that requires as a condition of use, modification or distribution that such Software or other Software incorporated into, derived from, combined with, or distributed with such Software: (i) be disclosed or distributed in source code form; (ii) be licensed to other users to enable making of derivative works; or (iii) be redistributable at no charge; and (B) Software licensed or distributed under any of the following licenses or distribution models, or licenses or distribution models similar to any of the following: (t) GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL); (u) the Artistic License (e.g., PERL); (v) the Mozilla Public License; (w) the Netscape Public License; (x) the Sun Community Source License (SCSL); (y) the Sun Industry Source License (SISL); and (z) the Apache Software License.

“Order” means any decree, order, judgment, writ, award, injunction, rule or consent of or by a Governmental Authority.

“Ordinary Course of Business” means, with respect to any action by any Person, that such action (i) is consistent in nature, scope, quality, frequency and magnitude with the past customs and practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person, and (ii) does not require authorization by the board of directors or shareholders of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature.

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“Other IP Rights” means worldwide (i) Internet domain names; (ii) website content; (iii) toll-free telephone numbers; and (iv) moral rights and publicity rights; in each case, to the extent the same does not comprise or is not protected by Copyrights, Patents or Trademarks.

“Outside Date” has the meaning set forth in Section 10.1(b).

“Owned Business IP” means all Intellectual Property Rights (i) owned by Seller or any of the Selling Subsidiaries and (ii) used or held for use in the conduct of the Business.

“Patents” means worldwide patents, patent applications, invention disclosures, and other rights of invention, and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof and all reexamined patents or other applications or patents claiming the benefit of any of the foregoing.

“Permitted Encumbrances” means Encumbrances that are (i) mechanics’, carriers’, workers’, warehouseman’s, materialman’s, repairman’s or other Encumbrances arising or incurred in the Ordinary Course of Business with respect to charges not yet due and payable, (ii) Encumbrances for Taxes which are not yet due and payable, or (iii) any minor imperfection of title or similar Encumbrance which does not materially impair the value of the property subject to such Encumbrance or the use of such property.

“Person” or “Persons” means any individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture or other entity or a Governmental Authority.

“Pre-Closing Period” has the meaning set forth in Section 5.1(a).

“Proceeding” means any action, appeal, petition, plea, charge, complaint, claim, governmental audit, suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal, whether public, private or otherwise, whether at law or in equity), demand, litigation, arbitration, mediation, hearing, inquiry, investigation, audit or similar event, occurrence, or other proceeding, in each case commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Authority, arbitrator or mediator.

“Products” means any and all (a) hardware and Software that is or has been pre-released or commercially released by Seller or any of the Selling Subsidiaries relating to the Business, (b) any similar Products under development by Seller or any of the Selling Subsidiaries relating to the Business as of the date of the Agreement, and (c) all documentation, technical specifications, bills of materials and other engineering and manufacturing documentation, packaging materials, promotional materials, quality- assurance and testing materials, support materials and training materials and the like relating to any of the foregoing, to the extent existing on the Closing Date.

“Proprietary Information” means worldwide trade secrets and confidential or proprietary business information, technical information, inventions and discoveries (whether or not patentable and whether or not reduced to practice) and improvements thereto, know-how, processes, developments, designs, techniques, marketing and purchasing strategies, plans, schematics, drawings, blue prints, formulae, formulas, patterns, compilations, databases, specifications, research and development information, technical data, inventions, concepts, ideas, devices, methods, processes, and other proprietary or confidential information, whether business, technical or otherwise, customer and supplier lists and related information, pricing and cost information, Product roadmaps and financial, business and marketing plans.

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“Purchase Price” has the meaning set forth in Section 2.4.

“Purchased Assets” has the meaning set forth in Section 2.1.

“Purchased Business IP” has the meaning set forth in Section 2.1(d).

“RCRA” has the meaning set forth in Section 3.14.

“Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

“Related Agreements” means the Bill of Sale, the Assignment and Assumption Agreement, the Transition Services Agreement, the License Agreement, and the Escrow Agreement.

“Representatives” means, with respect to a Person that is an entity, such Person’s stockholders, members, partners, directors, officers, managers, employees, agents, accountants, attorneys, successors, assigns and other representatives.

“Response” has the meaning set forth in Section 9.4(b).

“Retention Agreements” means the agreements set forth on Schedule 1.1(b) entered into by and between Seller and individual Employees in connection with the sale process contemplated herein.

“Scheduled Aristos Agreement” means the agreement set forth on Schedule 1.1(f).

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller” has the meaning set forth in the Preamble.

“Seller Financials” has the meaning set forth in Section 3.10.

“Seller Indemnitee” has the meaning set forth in Section 9.2.

“Seller’s Knowledge” means, with respect to any particular fact, the actual knowledge of any individual set forth on Schedule 1.1(c) after reasonable inquiry.

“Seller SEC Reports” has the meaning set forth in Section 3.10.

“Selling Subsidiaries” means the Subsidiaries of Seller specified on Schedule 1.1(d).

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“Software” means any computer program or other software (irrespective of the type of hardware for which it is intended), including firmware and other software embedded in hardware devices, whether in the form of source code, assembly code, script, interpreted language, instruction sets or binary or object code (including compiled and executable programs), including any library, component or module of any of the foregoing.

“Subsidiary” means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors.

“Survival Expiration Date” has the meaning set forth in Section 9.9(a).

“Tax” means (i) any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and (ii) any liability for the payment of any amounts of the type described in (i) as a result of being a member of an affiliated, consolidated, combined, unitary or other group for any taxable period.

“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Third Party Claim” has the meaning set forth in Section 9.5(a)(i).

“Third-Party Licenses” has the meaning set forth in Section 3.12(e).

“Third Party Non-Transferred Materials” means any third party confidential or proprietary information, technology, software (other than Open Source Software), documentation or other materials subject to Intellectual Property Rights that are (i) licensed to Seller or any of the Selling Subsidiaries and (ii) not included in the Assumed Contracts.

“Trademarks” means worldwide (i) registered trademarks and service marks and registrations, applications, and renewals for such registrations, (ii) unregistered trademarks and service marks, trade names, fictitious business names, corporate names, trade dress, logos, Product names and slogans, including any common law trademark rights; and in each case together with the goodwill associated therewith.

“Transactions” has the meaning set forth in Section 8.2(h).

“Transfer Regulations” means the Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the member states relating to the safeguarding of employees’ rights in the event of transfers of undertakings, business or parts of businesses (and its amendments) (collectively, the “Acquired Rights Directive”) and the legislation and regulations of any EU Member State implementing such Acquired Rights Directive.

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“Transfer Taxes” means all federal, state, local or foreign sales, use, transfer, real property transfer, mortgage recording, real property gains, stamp duty, capital, value-added, goods and services, or similar taxes that may be imposed in connection with the direct or indirect transfer of the Purchased Assets or the Business, assumption of the Assumed Liabilities, in each case, together with any interest, additions to tax or penalties with respect thereto and any interest in respect of such additions to tax or penalties.

“Transferred Employees” has the meaning set forth in Section 6.2(b).

“Transferred Licenses” has the meaning set forth in Section 3.12(b).

“Transition Services Agreement” has the meaning set forth in Section 2.7(d).

“WARN Act” has the meaning set forth in Section 6.2(n).

ARTICLE II

SALE AND PURCHASE OF ASSETS

AND ASSUMPTION OF CERTAIN LIABILITIES

2.1 Sale and Purchase of Assets

Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell, transfer, convey, assign and deliver (or cause to be sold, transferred, conveyed, assigned and delivered) to Buyer (or its designated Affiliate), free and clear of all Encumbrances and Liabilities (other than the Assumed Liabilities and Permitted Encumbrances that (i) secure the Assumed Liabilities or (ii) constitute minor imperfections of title which do not materially impair the value of the Purchased Assets or the use of the Purchased Assets), and Buyer shall purchase, acquire and accept, all the right, title and interest of Seller and the Selling Subsidiaries in and to all the assets currently used in the operation of the Business other than the Excluded Assets (collectively, the “Purchased Assets”), including the following:

(a) all Inventory;

(b) all Fixed Assets specified on Schedule 2.1(b);

(c) all Contracts specified on Schedule 2.1(c) (collectively, the “Assumed Contracts”); provided, however, that Assumed Contracts shall not include any amendment to an Assumed Contract if (i) a full and complete copy of such amendment has not been provided to Buyer prior to the date hereof, and (ii) Buyer provides written notice to Seller that such amendment shall not be assumed;

(d) the Owned Business IP and all electronic and tangible embodiments and copies of the Owned Business IP and Products existing on the date hereof, including the items specified on Schedule 2.1(d), the Licensed Business IP, the Transferred Licenses, and the licenses of the Excluded Patents granted under the License Agreement (collectively, the “Purchased Business IP”); provided, that for the sake of clarity the Purchased Business IP shall exclude: (A) the Intellectual Property Rights specified on Schedule 2.2(b), (B) Open Source Software licenses, (C) the Excluded Patents, and (D) generally available off-the-shelf microcomputer and work station software;

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(e) all rights and interests under the real estate leases specified on Schedule 2.1(e) (including all exhibits thereto and all amendments thereto specified therein, the “Leases”);

(f) all manuals, notes, reports, documentation, drawings, flow charts, specifications, templates, files (whether electronic or otherwise but excluding any Software-related files), diagrams, work papers, programmers’ notes or other data, information or materials necessary for the proper use of any of the Purchased Assets (including with respect to developing, maintaining, testing, enhancing, supporting or correcting defects in any of the Purchased Assets) (including all copies thereof), to the extent existing on the Closing Date;

(g) all goodwill associated with the Business or the Purchased Assets, together with the right to represent to third parties that Buyer is the successor to or acquirer of the Business;

(h) except as provided in Section 2.2(i), all existing, whether in electronic form, written or printed, books, records, ledgers, files, papers, documents, correspondence, lists, advertising and promotional materials, studies, reports, operating data, pricing lists, business plans and other materials, customer information, including customer data, records and specifications, and supplier lists and contact information used by Seller or the Selling Subsidiaries in connection with the Business or Seller’s or the Selling Subsidiaries’ ownership, maintenance, use and/or exploitation of the Purchased Assets up until the Closing, and the data, content, graphics, text, databases and other materials (but not Seller’s computer systems and the computer hardware upon which such information resides) related to the Business on Seller’s websites listed on Schedule 2.1(h) or otherwise stored or accessible on the computer systems and the computer hardware of Seller or any of the Selling Subsidiaries;

(i) all transferable Governmental Authorizations, and all pending applications therefore or renewals thereof, owned or held by Seller associated exclusively with the Business or the Purchased Assets, including those listed on Schedule 2.1(i);

(j) except as set forth on Schedule 2.1(j), all Accounts Receivable generated on or before the Closing (other than intercompany accounts receivables);

(k) all claims (including claims for past infringement or misappropriation of Purchased Business IP) and causes of action of Seller and the Selling Subsidiaries against other Persons relating to the Business or the Purchased Assets (regardless of whether or not such claims and causes of action have been or could have been asserted by Seller or any of the Selling Subsidiaries), and, to the extent assignable, all rights of indemnity, warranty rights, rights of contribution, rights to refunds, rights of reimbursement and other rights of recovery possessed by Seller or any of the Selling Subsidiaries relating to the Business or the Purchased Assets (regardless of whether such rights are currently exercisable);

(l) except as set forth in Schedule 2.1(l), all prepaid expenses, deposits, component sales receivables, royalty receivables, and rebate receivables to the extent used by Seller or held by Seller for use in connection with the Business or related to Assumed Liabilities; and

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(m) the Employee Plans set forth on Schedule 2.1(m) to the extent relating to Transferred Employees (the “Assumed Employee Plans”) together with all rights to the assets (other than cash) of, or assets (other than cash) designated to be used for the satisfaction of Liabilities under, the Assumed Employee Plans.

Notwithstanding the foregoing, to the extent that the assignment hereunder of any of the Assumed Contracts shall require the consent of any other party (or in the event that any of the same shall be nonassignable), neither this Agreement nor any action taken pursuant to its provisions shall constitute an assignment or an agreement to assign if such assignment or attempted assignment would constitute a Breach thereof or result in the loss or diminution thereof; provided, however, that Seller shall use all commercially reasonable efforts to obtain consents or approvals from third parties as may be necessary to complete any transfer of any Assumed Contract listed on Schedule 6.7(d); provided, further, that if any consent required for the assignment of any Assumed Contract is not obtained, Seller shall cooperate with Buyer in any reasonable arrangement designed to provide for Buyer the benefits of any such Assumed Contract including, without limitation, enforcement, for the account and benefit of Buyer, of any and all rights of Seller against any other Person with respect to any such Assumed Contract; and provided, that for the sake of clarity, Seller shall make use of its existing resources, employees (to the extent not transferred to Buyer) and other Representatives to obtain such consents or approvals from third parties or to provide Buyer with a reasonable alternative arrangement but in no event shall Seller be required to make any payment or transfer fee to any third party (other than payments in arrears required under such Assumed Contract or payments required in connection with the cure of any Breach under such Assumed Contract) in order to obtain such consent or approval.

2.2 Excluded Assets

Seller shall not sell, transfer, convey, assign or deliver, and shall retain, the following assets all of which shall not be included in the definition of the Purchased Assets (the “Excluded Assets”):

(a) all cash, cash equivalents, marketable securities, and other short term investments of Seller or any Affiliates thereof;

(b)(A) the Intellectual Property Rights specified on Schedule 2.2(b), (B) Open Source Software licenses, (C) the non-core Patents owned by Seller or any of the Selling Subsidiaries subject to the License Agreement (the “Excluded Patents”), and (C) generally available off-the-shelf microcomputer and work station software;

(c) those rights relating to deposits and prepaid expenses and claims for refunds and rights to offset in respect thereof specified on Schedule 2.1(l);

(d) all Insurance Policies and rights thereunder (other than the Insurance Policies listed in Schedule 2.1(c));

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(e) all Contracts other than the Assumed Contracts;

(f) all real estate leases not specified on Schedule 2.1(e);

(g) all Governmental Authorizations other than those required to be transferred to Buyer pursuant to Section 2.1(i);

(h) all Aristos Assets, including any Patents originally owned by Aristos, assigned to Seller and listed on Schedule 2.2 (h);

(i) all personnel Records, financial Records and other Records that Seller or the Selling Subsidiaries are required by law to retain in its possession (provided that, to the extent permitted by law, Seller will make copies thereof available to Buyer upon its request);

(j) any refunds, claims for refunds, credits, carryforwards or other benefits (or rights thereto) relating to Taxes imposed on or with respect to the Business or the Purchased Assets of Seller for any period prior to the Closing;

(k) Seller’s articles or certificates of incorporation, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance and existence of Seller as a corporation or limited company;

(l) any equity interests or other ownership interests of Seller in any Subsidiary thereof;

(m) all rights in connection with and assets of the Employee Plans other than the Assumed Employee Plans;

(n) all intercompany accounts receivables;

(o) all rights of Seller under this Agreement and the Related Agreements;

(p) all Fixed Assets not specified on Schedule 2.1(b);

(q) the Accounts Receivable listed on Schedule 2.1(j);

(r) the assets of Seller specified on Schedule 2.2(r); and

(s) Third Party Non-Transferred Materials.

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2.3 Assumption of Liabilities

(a) Upon and subject to the terms and conditions set forth in this Agreement, at the Closing, Buyer will (or will cause its designated Affiliate to) assume and agree to pay, perform, and discharge only the Liabilities of Seller and the Selling Subsidiaries that are set forth below (collectively the “Assumed Liabilities”):

(i) any and all Liabilities under any Assumed Contract or Lease first arising after the Closing Date; provided, however, that in no event shall Buyer assume any Liability resulting from a Breach that occurred on or prior to the Closing Date unless Buyer continues such Breach following the Closing Date, in which case, Buyer shall assume the Liability resulting from Buyer’s Breach occurring after the Closing (but without prejudice to any Buyer Indemnitee’s rights under Section 9.1(i) and 9.1(ii) hereof or with respect to fraud for any Breach by Seller of its representations and warranties contained herein) and Seller shall retain the Liability resulting from a Breach that occurred on or prior to the Closing; and provided, further, that for purposes of this Agreement, unless such obligation is expressly addressed otherwise in this Agreement, an obligation to make a payment under an Assumed Contract or Lease in accordance with the terms of such Assumed Contract or Lease, as the case may be, and not resulting from any Breach thereof on or prior to the Closing Date, shall be deemed to first arise under such Assumed Contract or Lease after the Closing Date only to the extent such payment obligation first becomes due after the Closing Date;

(ii) any and all Liabilities related to the support, maintenance, warranty (repair and replacement), sell-through programs, price protection policies, distributor reporting programs, cooperative advertising and marketing development programs, distributor price discounts, stock rotation, and other distributor or OEM return obligations of the Business arising out of sales of Products (including the EOL Products set forth on Schedule 2.3(a)(ii)) made in the conduct of the Business prior to the Closing Date;

(iii) any and all Liabilities for Taxes specifically assumed by Buyer pursuant to Section 7.2;

(iv) Liabilities of Seller arising after the Closing Date pursuant to purchase orders with suppliers entered into in compliance with the requirements of Section 5.1 open as of the Closing and related solely to the Business;

(v) any and all Liabilities, obligations and commitments arising from and after the Closing relating to maintenance, renewal, prosecution, issuance, opposition, attorney, assignment, recording, and/or other fees relating to the Purchased Business IP transferred hereunder;

(vi) all payments due to Transferred Employees under the Retention Agreements;

(vii) all Liabilities associated with the packaging, shipment and delivery of any Fixed Assets specified on Schedule 2.1(b) from Seller to Buyer after the Closing, including any export taxes directly related to the shipment or moving of any such items outside of the particular jurisdiction where such items are located;

(viii) any and all Liabilities with respect to Transferred Employees under the Assumed Employee Plans; and

(ix) any and all Liabilities of Seller specified on Schedule 2.3(a)(ix).

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(b) Buyer shall not assume or be otherwise liable, and Seller or the applicable Selling Subsidiary will be responsible, for any and all Liabilities of Seller and the Selling Subsidiaries (whether or not relating to the Business) other than the Assumed Liabilities (the “Excluded Liabilities”). The Excluded Liabilities include, without limitation:

(i) any Liability for Taxes (other than Transfer Taxes specifically assumed by Buyer under Section 2.3(a));

(ii) any Liability under or related to any real estate lease other than the Leases or under or related to any Contract other than the Assumed Contracts, including, without limitation, any Liability under or related to credit facilities or other indebtedness of Seller and any security interest related thereto;

(iii) any environmental or safety Liabilities resulting from Seller’s or the Selling Subsidiaries’ operation of the Business, Seller or the Selling Subsidiaries’ leasing, ownership or operation of any real property or otherwise;

(iv) any Liability resulting from the compliance or noncompliance by Seller or any of the Selling Subsidiaries with any Legal Requirement or Order of any Governmental Authority;

(v) any intercompany accounts payables;

(vi) any Liability of Seller or the Selling Subsidiaries under this Agreement or any Related Agreement;

(vii) any Liability arising out of the employment or termination of any Employee (other than a Transferred Employee), whether before or after the Closing, including, without limitation, severance pay and accrued and unused vacation;

(viii) any Liability arising out of or related to (1) the employment of any Transferred Employee arising from or relating to the period prior to the Closing, (2) the termination of employment with Seller or any of the Selling Subsidiaries of any Transferred Employee, including, without limitation, severance pay in connection with any voluntary termination and (3) the accrued and unused vacation of Transferred Employees as of the Closing;

(ix) any Liability relating to Excluded Assets; and

(x) any Liability related to the fees disclosed on Schedule 3.19 of the Disclosure Schedule.

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2.4 Purchase Price

Upon and subject to the terms and conditions set forth in this Agreement, at the Closing, Buyer will pay to Seller, by check or by wire transfer of immediately available funds, (i) an amount in cash equal to Thirty-Four Million Two Hundred Fifty Thousand Dollars ($34,250,000.00) (the “Purchase Price”) less the Escrow Amount, and (ii) pay into escrow an amount in cash equal to the Escrow Amount (such deposit to constitute the “Escrow Fund”) as security for Seller’s indemnification obligations pursuant to the provisions of Article IX hereof and the provisions of the Escrow Agreement between Buyer, Seller and U.S. Bank National Association as escrow agent (the “Escrow Agent”) substantially in the form attached hereto as Exhibit E (the “Escrow Agreement”); provided, however, that all or a portion of the distribution of the Escrow Amount may be delayed, and such amount may be reduced, pursuant to the provisions of Article IX and the Escrow Agreement.

2.5 Allocation

Following the Closing Date, Buyer will prepare and deliver to Seller a schedule allocating the Purchase Price in a manner consistent with Section 1060 of the Code and the regulations promulgated thereunder. Seller will have the right to raise reasonable objections to the allocation within fifteen (15) days following Buyer’s delivery of the allocation, and Buyer and Seller will negotiate in good faith to resolve any such dispute. Except as may be required by a “determination” (within the meaning of Section 1313(a) of the Code or any similar state or local Tax provision), neither Seller nor Buyer shall file any Tax Return or, without the consent of the other (such consent not to be unreasonably withheld, conditioned or delayed), take a position with the IRS or any other Governmental Authority that is inconsistent with the Allocation as agreed to by Buyer and Seller, or in the event an agreement cannot be reached, as proposed by Buyer. If the Allocation is disputed by any Governmental Authority, the party receiving notice of such dispute shall promptly notify the other Party hereto. Seller and Buyer agree to cooperate in good faith in responding to any such challenge to preserve the effectiveness of the Allocation.

2.6 Closing

Unless this Agreement shall have been terminated and the transactions contemplated herein abandoned pursuant to Article X, and subject to the satisfaction of the conditions set forth in Article VIII, the closing shall take place as promptly as practicable after satisfaction or waiver of such conditions, at 11:00 AM pacific time, at the offices of Olshan, Grundman, Frome, Rosenzweig & Wolosky LLP, unless the parties hereto agree in writing to another date, time or place; provided, however, that Buyer shall have no obligation to close prior to the thirty-first (31^st) day after the date of this Agreement or during the final two (2) weeks of any fiscal quarter of Buyer. The date on which the closing occurs is referred to herein as the “Closing” or the “Closing Date.”

2.7 Delivery to Buyer

At the Closing, Seller shall deliver to Buyer:

(a) a duly executed Bill of Sale substantially in the form attached hereto as Exhibit A (the “Bill of Sale”);

(b) a duly executed Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit B (the “Assignment and Assumption Agreement”);

(c) duly executed assignment and assumption agreements with respect to each of the Leases in form and substance satisfactory to Buyer;

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(d) a duly executed Transition Services Agreement substantially in the form attached hereto as Exhibit C (the “Transition Services Agreement”);

(e) duly executed assignments of all Patents, Trademarks, Other IP Rights, and Copyrights, and all applications and disclosures therefor and all other Intellectual Property Rights included among the Purchased Business IP;

(f) executed copies of any consents set forth on Schedule 8.2(e), except to the extent waived by Buyer;

(g) a duly executed License Agreement;

(h) a certificate signed by an officer of Seller certifying on behalf of Seller, in his or her capacity as an officer of Seller and not in his or her individual capacity, as to the fulfillment of the conditions set forth in Sections 8.2(a), (b), (e)(i), (f) and (h), provided, that for the sake of clarity, the liability of Seller for any inaccuracy in or Breach of this certificate shall be included in the aggregate liability limitation of Seller set forth in Section 9.3(a);

(i) all business Records and other documents containing or relating to the Purchased Assets (or otherwise make such Records and documents available to Buyer) other than such Records to be retained by Seller or the Selling Subsidiaries under Section 2.2(i);

(j) possession of the Purchased Assets, free and clear of all Encumbrances (other than Permitted Encumbrances that (i) secure the Assumed Liabilities or (ii) constitute minor imperfections of title which do not materially impair the value of the Purchased Assets or the use of the Purchased Assets);

(k) a duly executed Escrow Agreement;

(l) such additional instruments of sale, transfer, conveyance, assignment and confirmation as Buyer may reasonably request in order to transfer, convey and assign to Buyer, and to confirm Buyer’s title to, all of the Purchased Assets free and clear of all Encumbrances (except for Permitted Encumbrances), to put Buyer in actual possession and control of the Purchased Assets and to assist Buyer in exercising all rights with respect thereto.

2.8 Delivery to Seller

At the Closing, Buyer shall deliver to Seller:

(a) the Purchase Price (less the Escrow Amount, which shall be delivered to the Escrow Agent pursuant to the Escrow Agreement);

(b) a duly executed Assignment and Assumption Agreement;

(c) duly executed assignment and assumption agreements with respect to each of the Leases;

(d) a duly executed Transition Services Agreement;

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(e) a duly executed License Agreement;

(f) a certificate signed by an officer of Buyer certifying on behalf of Buyer, in his or her capacity as an officer of Buyer and not in his or her individual capacity, as to the fulfillment of the conditions set forth in Section 8.3(a) and Section 8.3(b);

(g) duly executed instruments of assignment and assumption and other instruments where required to effect Buyer’s assumption of the Assumed Liabilities;

(h) a duly executed Escrow Agreement; and

(i) such other certificates, documents and instruments as may reasonably be requested by Seller to carry out the purposes or intent of this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer that the statements contained in this Article III are true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing Date:

3.1 Corporate Status

Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Seller has all requisite corporate power and authority to (i) carry on the Business as currently conducted, (ii) to own or lease and operate the Purchased Assets owned or leased by it, and (iii) to perform its obligations under all Assumed Contracts to which it is a party. Seller is duly qualified to do business and is in good standing as a foreign corporation (in any jurisdiction that recognizes such concept) in each jurisdiction where the ownership or operation of the Purchased Assets or the operation or conduct of the Business requires such qualification, except where the failure to be so qualified or in good standing individually or in the aggregate has not had a Material Adverse Effect or is or would reasonably be expected to prevent or impair in any material respect the ability of Seller to perform its obligations under this Agreement or any Related Agreement. Seller is not in violation of any of its charter documents, as amended to date. Seller has delivered or made available to Buyer true, complete and correct copies of its certificate of incorporation and bylaws as in effect on the date of this Agreement.

3.2 Subsidiaries

No Subsidiary of Seller other than the Selling Subsidiaries conducts any business, owns or has any interest in any assets (other than cash or cash equivalents) or rights (including any Intellectual Property Rights) or claims or causes of action against any other Person, has any employees or contractors or is in any way, either directly or indirectly, involved in, or retains any right, authorization or approval, or is a party to any Contract, related to the Business.

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3.3 Due Authorization

The execution, delivery and performance by Seller of this Agreement and each other Related Agreement to which it is a party and the consummation of the transactions contemplated hereby and thereby by Seller are within the corporate powers of Seller. This Agreement and the Related Agreements, and all the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of Seller. Each of this Agreement and the other Related Agreements to which Seller is a party constitutes a valid and binding agreement of Seller enforceable in accordance with its terms, except as such enforceability may be subject to the effects of bankruptcy, insolvency, reorganization, moratorium or other Legal Requirements relating to or affecting the rights of creditors, and general principles of equity.

3.4 No Conflict; Consents

Except as set forth on Schedule 3.4(a) of the Disclosure Schedule, the execution and delivery of this Agreement by Seller does not, and the performance of the terms of this Agreement and each Related Agreement by Seller will not, directly or indirectly (with or without notice or lapse of time): (i) Breach any provision of any of the organizational documents of Seller, (ii) Breach or, to Seller’s Knowledge, give any Governmental Authority or other Person the right to challenge any of the transactions contemplated by this Agreement or any Related Agreement, or to exercise any remedy or obtain any relief under or result in the loss of any benefit under, any Legal Requirement, Order or Contract to which Seller, the Business or any of the Purchased Assets may be subject; (iii) contravene, conflict with or result in a material violation or Breach of any of the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, or result in the loss of any benefit under, any Governmental Authorization that is held by Seller and that relates to the Purchased Assets or to the Business; (iv) Breach any Assumed Contract; or (v) result in the imposition or creation of any Encumbrance (except for any Permitted Encumbrance) upon or with respect to any of the Purchased Assets. Except for the consents and filings specified in Schedule 3.4(b) of the Disclosure Schedule, or consents the failure of which to obtain would not, individually or in the aggregate, reasonably be expected to be material to the Business, the Purchased Assets or Assumed Liabilities, no consent, filing with or approval from, or notice to, any Governmental Authority or any other Person is required to be obtained or made by Seller in connection with the execution, delivery and performance of this Agreement. No Breach of, or event giving rise to any right of termination, amendment or cancellation of any Governmental Authorizations material to the Business, Purchased Assets or Assumed Liabilities has occurred.

3.5 Government Authorizations

Except as set forth on Schedule 2.1(i), there are no material licenses, permits, approvals, grants or other authorizations issued to Seller or any of the Selling Subsidiaries by a Governmental Authority that governs or regulates Seller in respect of the Business, any Purchased Assets, any Products included in Inventory or the Assumed Liabilities (i) pursuant to which Seller or any of the Selling Subsidiaries currently operates or holds any interest in any of the Purchased Assets or the Assumed Liabilities or (ii) which are required for the operation of the Business as it is currently operated by Seller and the Selling Subsidiaries (including the design, development, manufacture, sale, promotion, export, import, distribution or provision of the Products included in Inventory) or the holding of any such interest (collectively, the “Governmental Authorizations”). All Governmental Authorizations included in the Purchased Assets, if any, are in full force and effect and constitute all Governmental Authorizations required to permit Seller and the Selling Subsidiaries to operate or conduct the Business as currently conducted or to hold any interest in the Purchased Assets except to the extent the failure to be in full force and effect would not be material to the Business, Purchased Assets or Assumed Liabilities.

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3.6 Title to Purchased Assets and Related Matters

(a) Except as set forth on Schedule 3.6(a) of the Disclosure Schedule, Seller has good and marketable title to each of the Purchased Assets and the valid and enforceable right to receive and/or use each of the Purchased Assets free and clear of all Encumbrances (except for Permitted Encumbrances). The delivery to Buyer of the instruments of transfer of ownership contemplated by this Agreement will, at the Closing, vest good and marketable title to, or the valid and enforceable right to receive and/or use, each such Purchased Asset in Buyer, free and clear of all Encumbrances (except for Permitted Encumbrances), except as set forth on Schedule 3.6(a) of the Disclosure Schedule. Other than for sales or licenses of Inventory in the Ordinary Course of Business, neither Seller nor any of the Selling Subsidiaries have entered into any Contract with respect to the sale or other disposition of any of the Purchased Assets.

(b) With the exception of the assets set forth on Schedule 3.6(b) of the Disclosure Schedule, the Purchased Assets comprise all of the assets, properties and rights currently used to conduct the Business and are sufficient to conduct the Business from and after the Closing in the Ordinary Course of Business as presently conducted by Seller and the Selling Subsidiaries.

3.7 Real Property Leases

Seller has made available to Buyer true, correct and complete copies of the Leases. With respect to the Leases, and except as set forth on Schedule 3.7 of the Disclosure Schedule, the Leases have not been modified or amended by any written or, to Seller’s Knowledge, any oral agreement and are in full force and effect and are valid and subsisting; neither Seller nor any Person on behalf of Seller has received any written notice of cancellation or termination from any landlord under any of the Leases; Seller is not in default in any material respect under the terms of any of the Leases; to Seller’s Knowledge, no lessor under any of the Leases is in default under the terms of any such Leases; Seller has paid or accrued their monthly rental, additional rent and all other monetary obligations due under each of the Leases through the last day of the month of this Agreement; no ongoing dispute exists with any landlord concerning the payment of rent or Seller’s performance of any of their obligations under the Leases; Seller has not assigned or otherwise transferred its rights under any of the Leases, nor has Seller sublet or permitted any other Person to occupy all or any portion of the leased premises. Each Lease is legal, valid, binding, enforceable and in full force and effect and constitutes the sole and entire agreement between the lessor thereunder and Seller respecting the premises leased thereunder (the “Leased Real Property”).

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3.8 Inventory

All items included in the Inventory consist of a quality and quantity usable and are in good and marketable condition and, with respect to finished goods, saleable in the Ordinary Course of Business, except for those items for which adequate reserves have been reflected in the balance sheet included in the Seller Financials filed with the SEC on February 3, 2010 for obsolete, excess, damaged, slow-moving or otherwise unusable inventory, which reserves were calculated in a manner consistent with past practice in accordance with GAAP consistently applied. The Inventory and open purchase orders with suppliers constitute sufficient quantities for the normal operation of the Business as presently conducted by Seller and the Selling Subsidiaries.

3.9 Material Contracts

(a) Seller has made available to Buyer a correct and complete copy (including exhibits, schedules, annexes and in each case, together with all amendments thereto) of each written Material Contract to which Seller or the Selling Subsidiaries is a party and which relate to the Business. Except as set forth in Schedule 3.9(a) of the Disclosure Schedule, (A) each Assumed Contract is a valid and binding agreement of Seller, enforceable against Seller and, to Seller’s Knowledge, the other parties thereto in accordance with its terms, and is in full force and effect; (B) subject to receipt of the consents set forth in Schedule 3.4(b), and assuming that no amendments or modifications have been agreed to by Buyer prior to Closing, each Assumed Contract will continue to be a valid and binding agreement and in full force and effect on terms identical in all material respects immediately following the consummation of the transactions contemplated by this Agreement; (C) Seller is not, and to Seller’s Knowledge, no party other than Seller is, in material Breach, and no event has occurred which with notice or lapse of time would constitute a material Breach, under any Assumed Contract; (D) Seller has not, and to Seller’s Knowledge, no party other than Seller has repudiated any provision of any Assumed Contract. There are, to Seller’s Knowledge, no oral agreements or oral amendments to the foregoing written agreements, including, for example, with respect to returns or price protection

(b) Schedule 3.9(b) of the Disclosure Schedule lists all Contracts (each Contract required to be listed in Schedule 3.9(b) of the Disclosure Schedule, a “Material Contract,” and collectively, the “Material Contracts”) relating to the Business to which Seller or any of the Selling Subsidiaries is a party and that are:

(i) Contracts providing for severance, retention, change in control or other similar payments relating to the Employees;

(ii) Contracts establishing any joint venture, partnership, strategic alliance, licensing arrangement, sharing of profits or other material collaboration;

(iii) Contracts that limit, or purport to limit, the ability of Seller or, after the consummation of the transactions contemplated hereby, Buyer, to compete in any line of business or with any Person or in any geographic area or during any period of time or that require Seller or, after the consummation of the transactions contemplated hereby, Buyer, to deal exclusively with a given Person in respect of a given matter;

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(iv) Contracts for the sale of any Purchased Assets (other than Inventory and Products in the Ordinary Course of Business) or the grant of any preferential rights to purchase any Purchased Assets or requiring the consent of any party to the transfer thereof;

(v) Contracts related to an acquisition or sale of assets or other acquisition, divestiture, merger or similar transaction, in each case, involving consideration in excess of $5,000,000 and entered into during the five (5) years prior to the date hereof and containing representations, covenants, indemnities or other obligations that are still in effect;

(vi) Contracts relating to the incurrence, assumption or guarantee of any Liability or imposing an Encumbrance on any of the Purchased Assets, including indentures, guarantees, loan or credit agreements, sale and leaseback agreements, purchase money obligations incurred in connection with the acquisition of property, mortgages, pledge agreements, security agreements, or conditional sale or title retention agreements;

(vii) Contracts (or any group of related contracts) resulting in revenues or receipts to Seller and any of the Selling Subsidiaries in excess of $250,000 annually or $1,000,000 in the aggregate;

(viii) Contracts (or any group of related contracts) resulting in expenditures or payment obligations of more than $100,000 annually or $250,000 in the aggregate;

(ix) royalty Contracts, licenses or any other Contracts relating to any Intellectual Property Rights (excluding licenses pertaining to “off-the-shelf” commercially available Software used pursuant to shrink-wrap or click-through license agreements on reasonable terms for a licensee fee of no more than $100,000);

(x) Contracts (i) with material suppliers, distributors or sales representatives, or (ii) providing for the manufacture of Products;

(xi) material Contracts with independent contractors or consultants (or similar arrangements) that are not cancelable without penalty or further payment and without more than thirty (30) days’ notice; and

(xii) other Contracts in effect as of the date of this Agreement to which Seller is a party and that are material to the conduct of the Business, or the use or operation of the Purchased Assets or the Assumed Liabilities, as presently conducted.

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3.10 SEC Filings; Financial Statements

Seller has filed or furnished all registration statements, reports, schedules and other documents required to be filed or furnished by it or any of the Selling Subsidiaries with the SEC since December 31, 2007 (collectively, including any amendments thereto, the “Seller SEC Reports”). As of their respective filing dates (or, if amended, as of the date of such amendment), the Seller SEC Reports were prepared in accordance with, and complied in all material respects with, the requirements of the Exchange Act and the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder, and none of the Seller SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading, except to the extent corrected by a Seller SEC Report filed subsequently (but prior to the date hereof). Seller has made available to Buyer complete and correct copies of all amendments and modifications effected prior to the date of this Agreement that have not yet been filed by Seller with the SEC but which are required to be filed. Each of the financial statements (including the related notes and schedules) of the Seller included in, or incorporated by reference into, the Seller SEC Reports (the “Seller Financials”) complies in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP (except, in the case of unaudited financial statements, as permitted by applicable rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of Seller and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations for the periods then ended (subject, in the case of unaudited financial statements, to normal year-end audit adjustments and the absence of footnotes). Seller has no current intention to correct or restate, and to Seller’s Knowledge, there is not any basis to correct or restate any of the Seller Financials. Seller has not had any disagreement with any of its auditors regarding material accounting matters or policies during any of its past three (3) full fiscal years or during the current fiscal year-to-date.

3.11 Legal Proceedings; Litigation

Seller and the Selling Subsidiaries are in compliance in all material respects with all applicable Legal Requirements affecting the business, operations, assets and properties of the Business, Purchased Assets and Assumed Liabilities. Except as set forth in Schedule 3.11 of the Disclosure Schedule, there is no action, suit, claim, Proceeding or government inquiry of any nature pending or, to Seller’s Knowledge, threatened against Seller or any of the Selling Subsidiaries (i) with respect to the Business, the Purchased Assets, Assumed Liabilities or any Transferred Employee, or (ii) that challenges Seller’s ability to enter into this Agreement or any Related Agreement or consummate the transactions contemplated hereby or thereby. No Governmental Authority has at any time challenged or questioned the legal right of Seller or the Selling Subsidiaries to conduct the Business as presently or previously conducted by Seller or the Selling Subsidiaries.

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3.12 Intellectual Property

(a) Intellectual Property Rights. Schedule 2.1(d) sets forth a true and complete list of all registered and material unregistered Owned Business IP (other than unregistered copyrightable works and other unregistered rights of authorship in published or unpublished works), including but not limited to: (i) for each Patent and Patent application, the Patent number or the Patent application number, as applicable; (ii) for each registered Trademark and Trademark application, the registration number or the Trademark application serial number, as applicable, and the class of goods covered; and (iii) for each registered Copyright or Copyright application, the registration number or the Copyright application number, as applicable.

(b) Licensed Intellectual Property Rights. Schedule 3.12(b)(i) of the Disclosure Schedule sets forth a true and complete list of all Contracts pursuant to which third party Intellectual Property Rights are licensed to Seller or any of the Selling Subsidiaries as part of or in connection with the Licensed Business IP (the “Transferred Licenses”). Except as set forth in Schedule 3.12(b)(ii) of the Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not violate, result in the breach of, give rise to any right of modification, cancellation, termination, acceleration or suspension of, or require the authorization of, exemption by or consent of any Person under, any of the Transferred Licenses. Except as set forth in Schedule 3.12(b)(iii) of the Disclosure Schedule, (i) immediately following the Closing Date, the Buyer will be permitted to exercise all of the Seller’s and the Selling Subsidiaries’ rights under all Transferred Licenses, to the same extent the Seller and the Selling Subsidiaries would have been able to had the transactions contemplated by this Agreement not occurred and without being required to pay any additional amounts or consideration other than fees, royalties or payments which the Seller would otherwise be required to pay had such transactions not occurred; and (ii) all licensing fees, royalties and payments that have become due have been paid by Seller in connection with the Licensed Business IP.

(c) Business Intellectual Property Rights. The Purchased Business IP includes all of the Intellectual Property Rights used to conduct the Business as currently conducted and currently proposed to be conducted with respect to the Products under development as of the date of this Agreement.

(d) Software. Schedule 3.12(d) of the Disclosure Schedule contains a true and complete list of all (i) Open Source Software that is included in or used in connection with the Products sold or licensed by Seller or any of the Selling Subsidiaries; and (ii) Software (other than Open Source Software) that is used or held for use in the Business or has been licensed or provided by Seller or any of the Selling Subsidiaries to any Person (the “Licensed Software”); and (iii) Persons that have been provided or who may be provided pursuant to a source code escrow arrangement a copy of the Licensed Software source code. The Licensed Software performs substantially in accordance with the documentation and other written user materials related to the Licensed Software. To the best of Seller’s Knowledge, the Licensed Software does not contain any “virus,” “Trojan horse” or other Software routine or hardware component that is designed to permit unauthorized access to or disable or erase any Software, hardware, systems, networks, or data without the consent of the user. The Seller has delivered or will deliver to Buyer true and correct copies of all such Licensed Software, and all user and technical documentation related thereto in its possession.

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(e) Licensed-Out Rights. Schedule 3.12(e) of the Disclosure Schedule contains a true and complete list of all licenses, license agreements or other Contracts in which Seller or any of the Selling Subsidiaries has licensed or granted rights to any Owned Business IP or Licensed Business IP to any third parties (collectively, “Third-Party Licenses”), excluding non-exclusive licenses granted by Seller in the Ordinary Course of Business pursuant to a Seller standard form of outbound license agreement in substantially one of the forms provided to Buyer (the “Standard Outbound License”). Except as described in Schedule 3.12(e) of the Disclosure Schedule, neither Seller nor any of the Selling Subsidiaries has sold, transferred, assigned, licensed, sub-licensed, restricted or encumbered any Owned Business IP or Licensed Business IP, whether orally or in writing, excluding non-exclusive licenses granted by Seller in the Ordinary Course of Business pursuant to a Standard Outbound License. Seller has made available to Buyer true and complete copies of all Third-Party Licenses and the forms of Standard Outbound Licenses.

(f) No Infringement / Misappropriation of Third-Party Rights. Except as described in Schedule 3.12(f) of the Disclosure Schedule, neither the conduct of the Business nor any Products have infringed upon, violated or misappropriated any Intellectual Property Rights of any third party, and neither Seller nor any of the Selling Subsidiaries has received any written or, to Seller’s Knowledge, oral charge, complaint, claim, demand, notice or other communication alleging that the Business or Products, infringe, misappropriate or violate any Intellectual Property Rights of any third party (including any demand or claim that Seller or any of the Selling Subsidiaries must license or refrain from using any Intellectual Property Rights of any third party in relation to the Business). Except as described in Schedule 3.12(f) of the Disclosure Schedule, no third party nor any current or former Representatives of Seller has, to Seller’s Knowledge, infringed upon, violated, or misappropriated any Purchased Business IP. Notwithstanding the above, the representation in the preceding sentence of this paragraph will not cover any Open Source Software licensed to Seller or use thereof.

(g) No Encumbrances. Except as set forth on Schedule 3.12(g) of the Disclosure Schedule:

(i) Seller owns all right, title and interest in and to (subject to non-exclusive licenses granted by Seller in association with the sale of Products in the Ordinary Course of Business pursuant to a Standard Outbound License) all Owned Business IP and Seller has a valid, in-effect and written right and license to use (subject to any applicable license terms), all other Purchased Business IP;

(ii) all rights of Seller to the Purchased Business IP are free and clear of all Encumbrances (other than Permitted Encumbrances); and all former and current members of management, employees, agents, consultants, and independent contractors of Seller or the Selling Subsidiaries who developed materials or technology subject to Intellectual Property Rights have assigned to Seller all of their Intellectual Property Rights relating to or employed in the Products or Business;

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(iii) No Person other than the Seller has an ownership interest in or exclusive rights to any improvements made to any Products

(iv) all registrations with and applications to Governmental Authorities in respect of the Purchased Business IP are valid and subsisting and Seller has taken all actions required to maintain their validity, enforceability and subsistence;

(v) Seller and the Selling Subsidiaries have taken commercially reasonable steps to maintain in confidence the Proprietary Information related to the Owned Business IP, including without limitation (A) any personally identifiable information of actual and potential customers and users and (B) the source code form of Software included in the Owned Business IP;

(vi) no government funding, facilities of a university, college, other educational institution or research center, or funding from any third party was used in the development of any Owned Business IP;

(vii) to Seller’s Knowledge, Seller has delivered to Buyer before the execution of this Agreement or will deliver to Buyer all relevant materials and documentation in its possession with respect to any Owned Business IP and Licensed Business IP; and

(viii) neither the Seller nor any of the Selling Subsidiaries has made any submission to any standards body or standards organization that would obligate Seller, any of the Selling Subsidiaries or Buyer to grant licenses to any person under any Intellectual Property Rights.

(h) No Claims or Proceedings. Except as set forth on Schedule 3.12(h) of the Disclosure Schedule, there has not been, and currently are, no written charges, claims, demands, notices, or other communications in writing, or, to Seller’s Knowledge, threatened charges, claims, written demands or communications other than in written form, to Seller or any of the Selling Subsidiaries of any Person pertaining to, or any Proceedings involving Seller or any of the Selling Subsidiaries that are pending before any court, tribunal (including the U.S. Patent and Trademark Office or equivalent authority anywhere in the World) or threatened in writing, or, to Seller’s Knowledge, threatened other than in written form, including any interferences, oppositions, reexaminations, reissue proceedings, cancellations or other contested Proceedings, which challenge the rights, statements, or actions of Seller or any of the Selling Subsidiaries in respect of any Purchased Business IP.

(i) IT Systems. To Seller’s Knowledge, there has been no unauthorized access to or use of the computers, Software, computer systems, servers, network equipment, communication systems, or any other information technology used in the Business.

(j) Excluded Patents. Seller and the Selling Subsidiaries are the sole owner of the Excluded Patents and have all right, title and claims, interest and privileges arising from such ownership and neither Seller nor any of the Selling Subsidiaries has licensed, transferred or otherwise granted any rights that are inconsistent with the rights granted to Buyer under the License Agreement. Except as set forth on Schedule 3.12(j), the Excluded Patents have not been subject to any action or Proceeding concerning their validity, enforceability, inventorship or ownership.

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3.13 Employees

(a) Schedule 3.13(a) of the Disclosure Schedule contains a complete and accurate list of the following information for each employee, independent contractor, consultant and agent related to the Business, including Persons employed by the Selling Subsidiaries to be transferred to Buyer pursuant to the terms set forth in this Agreement: employer; name; job title; classification as employee or independent contractor and overtime classification; date of hiring or engagement; date of commencement of employment or engagement; Base Salary and other current compensation paid or payable; any change in compensation since December 31, 2009; and service credited for purposes of vesting and eligibility to participate under any Employee Plan, or any other employee benefit plan.

(b) To Seller’s Knowledge, each Employee is in compliance with all applicable visa and work permit requirements.

(c) Schedule 3.13(c) of the Disclosure Schedule states the Employees who are currently on a leave of absence and the type of leave.

(d) Except as set forth on Schedule 3.13(d) of the Disclosure Schedule, each of Seller and the Selling Subsidiaries (i) has complied in all material respects with all applicable federal, state, foreign, and local laws, rules, and regulations relating to the employment of labor (including provisions thereof relating to wages, hours, equal opportunity, immigration, collective bargaining, the classification of employees and consultants, and the payment of social security and other Taxes) and employment practices (including terms and conditions of employment, wages and hours); (ii) is not liable for any arrears of wages or any Taxes or any penalty for failure to comply with any applicable federal, state, foreign, and local laws, rules, and regulations relating to the employment of labor; (iii) is not liable for any payment to any trust or other fund or to any Governmental Authority with respect to unemployment compensation benefits, social security, or other benefits for employees or former employees; and (iv) is not aware that it has any labor relations problems (including any union organization or decertification activities, threatened or actual strikes or work stoppages or material grievances) or any complaint, lawsuit or other proceeding pending or, to Seller’s Knowledge, threatened in any forum by or on behalf of any present or former employee, any applicant for employment or classes of the foregoing alleging breach of any express or implied contract of employment, any applicable law governing employment or the termination thereof or other discriminatory, wrongful or tortuous conduct in connection with the employment relationship.

(e) Schedule 3.13(e) of the Disclosure Schedule identifies all employees and independent contractors related exclusively to the Business under contract with Seller or any of the Selling Subsidiaries. Seller represents it has provided Buyer with copies of all such contracts (with personal data redacted to the extent required by applicable Law).

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(f) To Seller’s Knowledge, no officer, agent, employee, consultant, or contractor of Seller or any of the Selling Subsidiaries is bound by any Contract that purports to limit the ability of such officer, agent, employee, consultant, or contractor (i) to engage in or continue or perform any conduct, activity, duties or practice relating to the Business or (ii) to assign to Seller or to any other Person any rights to any invention, improvement, or discovery. No former or current employee is a party to, or is otherwise bound by, any Contract that in any way adversely affected, affects, or will affect the ability of Seller or any of the Selling Subsidiaries or Buyer to conduct the Business as heretofore carried on by Seller and the Selling Subsidiaries.

(g) As of the date hereof, none of the key employees as set forth on Schedule 3.13(g)(i) of the Disclosure Schedule have (except as indicated on Schedule 3.13(g)(ii) of the Disclosure Schedule, the “Key Employees”) given notice or otherwise indicated in writing that he or she intends to terminate his or her employment with Seller or any of the Selling Subsidiaries.

(h) Except as set forth on Schedule 3.13(h) of the Disclosure Schedule, the employment of each Employee is terminable at will, and no such Employee is entitled to receive severance pay or other benefits from Seller or the Selling Subsidiaries following the termination of such Employee’s employment.

3.14 Environmental Matters

Seller has complied in all material respects with all Legal Requirements concerning or relating to industrial hygiene or the protection of health, safety and/or the environment and/or governing the use, handling, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling or release of Hazardous Substances, whether now existing or subsequently amended or enacted, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 as amended (“CERCLA”), the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., as amended (“RCRA”), the Federal Water Pollution Act, 33 U.S.C. §1251 et seq., as amended, the Clean Air Act, 42 U.S.C. §7401 et seq., as amended (“Clean Air Act”), the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §136 et seq., as amended, the Occupational Safety and Health Act of 1970, 29 U.S.C. §651 et seq., as amended, and the Safe Drinking Water Act, 42 U.S.C. §300 et seq., as amended, or regulations promulgated thereunder, and all applicable state and local environmental laws (collectively referred to as “Environmental Laws”), with respect to the Business except for such non-compliance as would not, individually or in the aggregate, have a Material Adverse Effect or is or would reasonably be expected to prevent or impair in any material respect the ability of Seller to perform its obligations under this Agreement or any Related Agreement. Seller has not engaged in or permitted any operations or activities upon any of the Leased Real Property for the purpose of or involving the treatment, storage, use, generation, release, discharge, emission, or disposal of any Hazardous Substances at the Leased Real Property, except in compliance with applicable Environmental Laws and, if legally required, the terms and conditions of any permit issued pursuant thereto, except as would not, individually or in the aggregate have a Material Adverse Effect or is or would reasonably be expected to prevent or impair in any material respect the ability of Seller to perform its obligations under this Agreement or any Related Agreement.

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3.15 Insurance Policies

Schedule 3.15 of the Disclosure Schedule sets forth a complete and correct list of all Insurance Policies currently in effect covering the Business, the assets comprising the Purchased Assets or Assumed Liabilities and the Employees. All premiums and other payments due from Seller or any of the Selling Subsidiaries under or on account of any policy have been paid, and Seller and the Selling Subsidiaries are otherwise in material compliance with the terms of such policies. Except as set forth on Schedule 3.15 of the Disclosure Schedule, there are no outstanding and pending claims under such policies relating to the Business. To Seller’s Knowledge, no event has occurred which limits or impairs the rights of Seller or any of the Selling Subsidiaries under any such policies.

3.16 Taxes

(a) Tax Returns Filed and Taxes Paid. To the extent related to the Business, the Purchased Assets or the Assumed Liabilities, Seller (i) has filed or will have filed, on a timely basis, all Tax Returns required to be filed by it under applicable Legal Requirements as of the Closing Date and all such Tax Returns were complete and correct in all material respects, (ii) has or will have timely paid all Taxes due on or prior to the Closing Date (whether or not reflected on such Tax Returns) related to the Business, the Purchased Assets and the Assumed Liabilities except for Taxes that are being contested in good faith and for which adequate reserves have been established on the Seller Financials, and (iii) to the extent such Taxes are not due on or prior to the Closing Date, but relate to any period on or prior to the Closing Date (whether or not the Tax period ends prior to, on, or after the Closing Date), has accrued or established appropriate reserves for such Taxes. Except as set forth on Schedule 3.16(a) of the Disclosure Schedule, (i) no unresolved issue has been raised in writing or otherwise by any Governmental Authority or by any third party in the course of any audit with respect to Taxes related to the Business, the Purchased Assets or the Assumed Liabilities; (ii) to Seller’s Knowledge, no Governmental Authority is asserting or threatening to assert against Seller any deficiency or claim for additional Taxes, or any adjustment of Taxes, related to the Business, the Purchased Assets or the Assumed Liabilities; and (iii) to Seller’s Knowledge, there are no pending or threatened audits or investigations for or relating to any Liability in respect of any Taxes related to the Business, the Purchased Assets or the Assumed Liabilities.

(b) Purchased Assets. Except for statutory liens for current Taxes not yet due and payable, there are no Encumbrances for Taxes on the Purchased Assets, including without limitation any Encumbrance in favor of the United States pursuant to Section 6321 of the Code for nonpayment of United States federal Taxes or any Encumbrance in favor of any state or local or foreign jurisdiction pursuant to any comparable provision of applicable law, under which transferee liability might be imposed upon Buyer as a buyer of the Purchased Assets pursuant to Section 6323 of the Code or any comparable provision of applicable law. No Purchased Asset is (i) property required to be treated as being owned by another Person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately prior to the Tax Reform Act of 1986, (ii) “tax-exempt use property” within the meaning of Section 168(h)(1) of the Code, (iii) “tax-exempt bond financed property” within the meaning of Section 168(g) of the Code, (iv) “limited use property” within the meaning of Revenue Procedure 76-30, or (v) subject to Section 168(g)(1)(A) of the Code.

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(c) Withholding. All Taxes that Seller is or was required by Legal Requirements to withhold, deduct or collect, including any Taxes withheld, deducted or collected in connection with amounts paid or owing to any Employee, independent contractor, creditor or other third party related to the Business, have been duly withheld, deducted and collected and, to the extent required, have been paid to the proper Governmental Authority or other Person. No portion of the Purchase Price is subject to any Tax withholding provision under any applicable Legal Requirement.

3.17 Accounts Receivable

The Accounts Receivable of Seller and the Selling Subsidiaries as of the Closing Date (the “Closing Accounts Receivable”) (a) are valid and genuine and have arisen solely out of bona fide sales and deliveries of goods, performance of services and other business transactions in the Ordinary Course of Business and, except to the extent listed on Schedule 3.17 of the Disclosure Schedule, neither Seller nor any of the Selling Subsidiaries has received written notice or, to Seller’s Knowledge, oral notice that they will not become collectible in full when due in the Ordinary Course of Business, and (b) are not subject to valid defenses, set-offs or counterclaims. All Closing Accounts Receivables are owned by Seller free and clear of all Encumbrances other than Permitted Encumbrances.

3.18 Product Warranty

Except as set forth in Schedule 3.18 of the Disclosure Schedule, to Seller’s Knowledge, each Product sold or delivered by Seller or any of the Selling Subsidiaries in conducting the Business has been in conformity with all product specifications, all express and implied warranties and all Legal Requirements. Neither Seller nor any of the Selling Subsidiaries has liability for replacement or repair of any Product sold or delivered by Seller or any of the Selling Subsidiaries or other damages in connection therewith other than as set forth in Schedule 3.18 of the Disclosure Schedule.

3.19 Brokers or Finders

Except as set forth on Schedule 3.19 of the Disclosure Schedule, neither Seller nor any of its Representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with the transactions contemplated by this Agreement.

3.20 Foreign Corrupt Practices Act

Neither Seller nor any of the Selling Subsidiaries nor, to Seller’s Knowledge, any other Persons acting on their behalf have, in connection with the operation of the Business, (i) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any other similar applicable foreign, federal or state law, (ii) used any corporate or other funds for unlawful contributions, payments, gifts or entertainment, or made any unlawful expenditures relating to political activity to government officials, candidates or members of political parties or organizations, or established or maintained any unlawful or unrecorded funds in violation of Section 30A of the Exchange Act, (iii) otherwise paid, accepted or received any unlawful contributions, payments, expenditures or gifts, or (iv) made, offered, or authorized any unlawful bribe, rebate, payoff, influence payment, kickback or other similar unlawful payment.

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3.21 Employee Benefits

(a) Schedule 3.21(a) of the Disclosure Schedule contains a complete list of all “employee benefit plans” as defined by Section 3(3) of ERISA, and all other bonus, incentive compensation, stock option, retention, retirement, deferred compensation, stock appreciation right, restricted stock award, restricted stock unit, equity or quasi-equity compensation, change-in-control, severance, layoff, salary continuation, health, life insurance, disability, accident, group insurance, vacation, holiday, sick-leave, fringe benefit or welfare plan, and any other employee compensation or benefit plan, agreement, policy, practice, commitment, contract or understanding (whether qualified or nonqualified, currently effective or terminated, written or unwritten) and any trust, escrow or other agreement related thereto that (i) is maintained or contributed to by Seller or the Selling Subsidiaries, or any other corporation or trade or business controlled by, controlling or under common control with Seller (within the meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA) (“ERISA Affiliate”) but, with respect to an ERISA Affiliate, only during the period of affiliation, or with respect to which Seller, the Selling Subsidiaries, or any ERISA Affiliate has or may have any liability, or (ii) provides benefits, or describes policies or procedures applicable to the Employees, or the dependents of any thereof, regardless of how (or whether) liabilities for the provision of benefits are accrued or assets are acquired or dedicated with respect to the funding thereof (collectively the “Employee Plans”). Seller has delivered or otherwise made available for inspection to Buyer true, correct and complete copies of the Employee Plans.

(b) Each Employee Plan has been maintained in accordance with its terms, and conforms to, and its administration and operation are in compliance in all material respects with ERISA, the Code and all applicable Legal Requirements. All payments due under or with respect to each Employee Plan have been made to date, and all liabilities incurred but not paid to date have been properly accrued. Subject to the assumptions and qualifications stated therein, Schedule 3.21(b) of the Disclosure Schedule sets forth for each Assumed Employee Plan that is a defined benefit plan, the amount, if any, of such accrued and unpaid liabilities which is shown in Schedule 3.21 (b) as the pension value of the accrued pension liabilities towards the active employees under applicable tax rules (“Teilwert der Anwartschaften gegenüber den tätigen Mitarbeitern”) as of December 31, 2009. Each of Seller and the Selling Subsidiaries has satisfied all applicable reporting and disclosure requirements under the Code and ERISA with respect to the Employee Plans.

(c) Except as disclosed in Schedule 3.21(c) of the Disclosure Schedule, neither Seller nor any of the Selling Subsidiaries, or any ERISA Affiliate has ever maintained, established, sponsored, participated in or contributed to or had any obligation to contribute to any Employee Plan that is a: (i) “pension plan” (within the meaning of Section 3(2) of ERISA) that is subject to Title IV of ERISA or Section 412 of the Code, (ii) “multiemployer plan” (within the meaning of Section 3(37)(A) of ERISA), (iii) “multiple employer plan” (within the meaning of Section 413(c) of the Code), (iv) “funded welfare plan” (within the meaning of Section 419 of the Code) or (v) any plan, program, policy, practice, agreement or other arrangement that is subject to the laws of a country other than the United States.

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(d) Seller, each of the Selling Subsidiaries and each ERISA Affiliate have, at all times, complied, and currently comply, in all material respects with the applicable continuation coverage requirements for their group health plans under Section 4980B(f) of the Code and Part 6 of Title I of ERISA (“COBRA”). Except for the continuation coverage requirements of COBRA, no Seller, any of the Selling Subsidiaries, or any ERISA Affiliate has any obligation or potential liability for continuation of medical, dental, life or disability coverage to Employees, former Employees or their respective dependents following termination of employment or retirement under any of the Employee Plans.

(e) Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS as to its tax-qualified status, and its accompanying trust has been determined to be exempt from taxation under Section 501(a) of the Code, or it is a standardized or nonstandardized prototype plan not required under IRS guidance to request a favorable determination letter and to Seller’s Knowledge, and there are no circumstances since the issuance of such letter that will or could jeopardize the qualified status of such plan or the tax-exempt status of its accompanying trust.

(f) Except as provided on Schedule 3.21(f) of the Disclosure Schedule or as otherwise expressly assumed in Section 2.3(a) of this Agreement, the transactions contemplated by this Agreement, will not, either alone or in combination with any other event or events, cause Buyer to incur any liabilities with respect to any Employee Plan, including, without limitation, any liability under Section 4980B of the Code. Other than as expressly provided in Section 2.3(a) of this Agreement, Buyer shall not assume or otherwise succeed to, by operation of law, contract or otherwise, any obligations of Seller, any of the Selling Subsidiaries or any ERISA Affiliate to any employees of Seller, any of the Selling Subsidiaries or any ERISA Affiliate or to any other Person rendering services in respect of the Business that are commonly provided by such employees and Buyer shall have no obligations to any such employee or other person. No event has occurred in connection with any Employee Plan that has, will or may reasonably result in any Liability for which Buyer may be responsible, whether by operation of law, by contract or otherwise, except as expressly provided in Section 2.3(a) of this Agreement.

(g) Except as set forth in Schedule 3.21(g) of the Disclosure Schedule, the transactions contemplated by this Agreement will not, either alone or in combination with any other event or events, (i) entitle any current or former employee or officer of Seller, or any of the Selling Subsidiaries to severance pay, unemployment compensation or any other payment, except as expressly provided in this Agreement, or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer, or (iii) result in any breach or violation of, or a default under, any Employee Plan.

(h) There are no payments that would fail to be deductible under Section 280G of the Code nor are any excise taxes under Section 4999 or 409A of the Code reimbursable under any of the Employee Plans.

(i) With respect to any Employee Plan that is subject to the laws of a jurisdiction other than the United States, said plans are in substantial compliance with the laws of such jurisdictions.

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3.22 Customers and Suppliers

(a) Schedule 3.22(a) of the Disclosure Schedule contains a list of the top twenty (20) customers, including distributors, if applicable, of the Business for each of the two (2) most recent fiscal years (listed in descending order based on the total dollar amount of net sales), showing the total dollar amount of net sales to each such customer shown during each such year. Except as indicated on Schedule 3.22(a) of the Disclosure Schedule, neither Seller nor any of the Selling Subsidiaries has any information, or is aware of any facts, indicating any of such customers intends to cease doing business with the Business or materially alter the amount of the business such customer is presently doing with the Business. Schedule 3.22(a) of the Disclosure Schedule also contains a list of all suppliers of the Business for each of the two (2) most recent fiscal years (listed in descending order based on the total amount paid to each such supplier during such period) from whom Seller or the Selling Subsidiaries have purchased in excess of $100,000 in products or services during the twelve (12) months before December 31, 2009.

(b) Since December 31, 2009, there has been no material change in the custom and practice (including with respect to quantity and frequency) of the course of business between Seller, any of the Selling Subsidiaries and any of (i) the customers of the Business that have generated sales in excess of $100,000 during the twelve (12) months before December 31, 2009 and (ii) the suppliers of the Business from whom Seller and the Selling Subsidiaries have purchased in excess of $100,000 in Products or services during the twelve (12) months before December 31, 2009. Except as set forth on Schedule 3.22(b) of the Disclosure Schedule, without limiting any of the foregoing, since December 31, 2009, none of Seller or any of the Selling Subsidiaries has received written or, to Seller’s Knowledge, oral notice that any customer or supplier listed on Schedule 3.22(a) of the Disclosure Schedule has terminated its relationship with Seller or any of the Selling Subsidiaries or materially reduced or changed the pricing or other terms of its business with Seller or any of the Selling Subsidiaries and no customer or supplier listed on Schedule 3.22(a) of the Disclosure Schedule has notified Seller or any of the Selling Subsidiaries in writing (or to Seller’s Knowledge, orally) that it intends to terminate or materially reduce or change the pricing or other terms of its business with Seller or any of the Selling Subsidiaries.

3.23 Absence of Certain Changes

Except as set forth in Schedule 3.23 of the Disclosure Schedule, since December 31, 2009, Seller and each of the Selling Subsidiaries, as applicable, has conducted the Business in the Ordinary Course of Business and, to Seller’s Knowledge, there has not been, occurred or arisen in respect of the Business, the Purchased Assets or the Assumed Liabilities any of the following:

(a) any Material Adverse Effect, or any event, occurrence, development or state of circumstances or facts which could reasonably be expected to result in a Material Adverse Effect;

(b) any creation or other incurrence of any Encumbrance (except for a Permitted Encumbrance) on any Purchased Asset;

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(c) any loss of any material distributor or supplier relationship with Seller or any of the Selling Subsidiaries that is related to the Business or any material adverse change in such relationship;

(d) any injunction issued or other applicable Legal Requirements prohibiting Seller or the Selling Subsidiaries from selling any Products in any jurisdiction;

(e) any loss of any direct customer of the Business which generated sales in excess of $100,000 during the twelve (12) months prior to the date hereof, or any notice by any such customer of its intention to terminate or materially change the terms of or the volume of purchases of Products from Seller or the Selling Subsidiaries;

(f) any transaction by Seller or the Selling Subsidiaries affecting the Business that is not in the Ordinary Course of Business, including without limitation any payment, discharge or satisfaction of any material claim or obligation of Seller or the Selling Subsidiaries or, to Seller’s Knowledge, oral agreement providing for contractual terms that are different from those stated in the Assumed Contracts;

(g) any labor dispute, other than routine individual grievances, or any activity or Proceeding by a labor union or representative thereof to organize any Employees, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to such Employees;

(h) any material damage, destruction or other casualty loss (whether or not covered by insurance) affecting the Business or any Purchased Asset;

(i) any award or payment by Seller or the Selling Subsidiaries of any bonuses to any of the Employees with respect to the current fiscal year, except to the extent accrued in the balance sheet included in the Seller Financials filed with the SEC on February 3, 2010 or entered into any employment, deferred compensation, severance or similar agreement (or amendment of such agreement) or any increase by Seller or the Selling Subsidiaries of the compensation payable or to become payable to any of the Employees or any increase of the coverage or benefits available under any severance pay, termination pay, vacation pay, company awards, salary continuation for disability, sick leave, deferred compensation, bonus or other incentive compensation, insurance, pension or other employee benefit plan, payment or arrangement made to, for or with any of the Employees, except for the Retention Agreements;

(j) any revocation of any Tax election or settlement of any controversy with a Governmental Authority with respect to the Business or the Purchased Assets;

(k) any failure to promptly pay and discharge current Liabilities except for Liabilities not material in amount that are disputed in good faith by appropriate proceedings;

(l) any cancellation or compromise of any debt or claim or any amendment, modification, cancellation, termination, relinquishment, waiver or release of any Assumed Contract or right except in the Ordinary Course of Business and which, individually or in the aggregate, would be material to the Business;

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(m) any grant of any license or sublicense of any rights under or with respect to any Owned Business IP or Licensed Business IP except non-exclusive licenses granted by Seller in the Ordinary Course of Business; or

(n) any Contract entered into by Seller or the Selling Subsidiaries to do any of the foregoing (other than negotiations with Buyer and its Representatives regarding the transactions contemplated hereby and by the other Related Agreements).

3.24 Export Controls

Except as set forth in Schedule 3.24 of the Disclosure Schedule, Seller and each of the Selling Subsidiaries has conducted its export transactions related to the Business, if any, at all times in material compliance with applicable Legal Requirements relating to export controls and regulations. Without limiting the foregoing, except as set forth in Schedule 3.24 of the Disclosure Schedule:

(a) No export licenses or other approvals are required to export Products;

(b) Seller and the Selling Subsidiaries have obtained all export licenses and other approvals required to export technologies with respect to Products;

(c) Seller and the Selling Subsidiaries are in compliance in all material respects with the terms of such applicable export licenses or other export approvals;

(d) there are no pending or, to Seller’s Knowledge, threatened claims against Seller or the Selling Subsidiaries with respect to such export licenses or other approvals; and

(e) no consents or approvals for the transfer to Buyer of any such export licenses, if any, are required.

To Seller’s Knowledge, Seller and the Selling Subsidiaries have never entered into a transaction or directly or indirectly exported, re-exported, diverted, transferred or made available for download products or any materials, items, or technology relating to the Business or related technical data or any direct product thereof in a material violation of the applicable Legal Requirements relating to export controls and regulations.

3.25 Full Disclosure

None of this Agreement (as modified by the Disclosure Schedule), any Related Agreement or any certificate delivered to Buyer pursuant to this Agreement by the Seller, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements contained herein or therein, in light of the circumstances under which it was made, not misleading. The Seller has delivered or made available to Buyer all written documents listed in the Disclosure Schedule (including any attachment thereto) or in any other Exhibit or Schedule called for by this Agreement. The Seller has not failed to disclose to Buyer in this Agreement or in the Disclosure Schedule any facts that to the actual knowledge of any individual set forth on Schedule 1.1(c) would reasonably be expected to have a Material Adverse Effect.

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3.26 Exclusive Representations and Warranties

Except for the representations and warranties contained in this Agreement (as modified by the Disclosure Schedule) or in any certificate, Related Agreement or in any other instrument or document delivered in connection herewith or therewith delivered by or on behalf of the Seller pursuant to this Agreement, the Seller makes no representation or warranties concerning the Seller, the Transactions, or otherwise concerning (i) any future revenues, costs, expenditures, cash flow, results of operations, financial condition or prospects that may result from the ownership of the Business or (ii) the condition of the real and personal property of the Business.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller that the following statements contained in this Article IV are true and correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing Date:

4.1 Corporate Status

Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware, with corporate power and authority to conduct its business as it is now being conducted and to perform all its obligations under this Agreement and each Related Agreement. Buyer is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it requires such qualification except where the failure to be so qualified or in good standing individually or in the aggregate has not had and would not be reasonably expected to impair in any material respect the ability of Buyer to perform its obligations under this Agreement or any Related Agreement.

4.2 Due Authorization

The execution, delivery and performance by Buyer of this Agreement and each other Related Agreement to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby by Buyer are within the corporate power, authority and legal capacity of Buyer and have been duly authorized by all necessary corporate action on the part of Buyer. Each of this Agreement and the other Related Agreements to which Buyer is a party constitutes a legal, valid and binding agreement of Buyer enforceable in accordance with its terms, except as such enforceability may be subject to the effects of bankruptcy, insolvency, reorganization, moratorium or other Legal Requirements relating to or affecting the rights of creditors, and general principles of equity.

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4.3 No Conflicts

The execution and delivery of this Agreement by Buyer does not, and the performance of the terms of this Agreement and each Related Agreement by Buyer will not, directly or indirectly (with or without notice or lapse of time): (i) Breach any provision of any of the organizational documents of Buyer, or (ii) except as would not reasonably be expected to have a material and adverse effect on the ability of Buyer to consummate the Transactions, (A) Breach or give any Governmental Authority or other Person the right to challenge any of the transactions contemplated by this Agreement or any Related Agreement, or to exercise any remedy or obtain any relief under or result in the loss of any benefit under, any Legal Requirement, Order or Contract to which Buyer may be subject; (B) contravene, conflict with or result in a material violation or Breach of any of the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, or result in the loss of any benefit under, any Governmental Authorization that is held by Buyer; or (C) Breach any Contract to which Buyer is a party. Except for the consents and filings specified in Schedule 3.4(b) of the Disclosure Schedule or the consents the failure of which to obtain would not, individually or in the aggregate, reasonably be expected to materially and adversely Buyer’s ability to consummate the Transactions and assuming the accuracy of the representations of Seller made in Section 3.4 of this Agreement, no consent, filing with or approval from, or notice to, any Governmental Authority or any other Person is required to be obtained or made by Buyer in connection with the execution, delivery and performance of this Agreement.

4.4 Availability of Funds

Buyer presently has and will have at Closing all funds in place necessary to pay and deliver to Seller the Purchase Price.

4.5 Brokers or Finders

Neither Buyer nor any of its Representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with the transactions contemplated by this Agreement for which Seller would have Liability.

4.6 Exclusive Representations and Warranties

Except for the representations and warranties contained in this Agreement or in any certificate, Related Agreement or in any other instrument or document delivered in connection herewith or therewith delivered by or on behalf of the Buyer pursuant to this Agreement, the Buyer makes no representation or warranties concerning the Buyer or the Transactions.

ARTICLE V

COVENANTS OF SELLER

5.1 Operation of the Business

(a) During the period between the signing of this Agreement and the Closing Date (the “Pre-Closing Period”), Seller shall (and shall cause each of the Selling Subsidiaries to), except to the extent that Buyer will otherwise consent in writing, carry on the Business in the Ordinary Course of Business and in compliance with all applicable Legal Requirements and all material Contracts related to the Business. Seller shall (and shall cause each of the Selling Subsidiaries to) use commercially reasonable efforts to (i) preserve intact its current business organization, (ii) maintain its relations and good will with all suppliers, customers, landlords, creditors, Employees and other Persons having business relationships with Seller and the Selling Subsidiaries in connection with the Business, and (iii) maintain, and make all necessary filings for the preservation of, the Purchased Business IP.

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(b) During the Pre-Closing Period, except as specifically provided in this Agreement, Seller shall (and shall cause the Selling Subsidiaries to) not, without the prior written consent of Buyer:

(i) acquire or agree to acquire any assets or securities of any business or assets which would be material to the Business;

(ii) encumber, sell, lease, license, abandon or otherwise dispose of or agree to sell, assign, transfer, lease, license and other dispose of any Purchased Assets (except to Buyer pursuant to the transactions contemplated hereby and except for non-exclusive licenses granted by Seller in the Ordinary Course of Business pursuant to a Standard Outbound License);

(iii) permit any of the Purchased Assets to become subject to any Encumbrance (other than Permitted Encumbrances);

(iv) cause any material write up or write down of any Inventory, other than in the Ordinary Course of Business;

(v) except as required by GAAP, make any change in accounting methods, principles or practices with respect to the Purchased Assets;

(vi) only to the extent related to the Business, the Purchased Assets or the Assumed Liabilities, make or change any material Tax election, adopt or change a material accounting method in respect of Taxes, enter into a Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement, settle or comprise a claim, notice, audit report or assessment in respect of Taxes, or consent to an extension or waiver of the statutory limitation period applicable to a claim or assessment in respect of Taxes, except as required by any Legal Requirement;

(vii) enter into any agreement, arrangement or transaction with any Affiliate of Seller with respect to the Business or any Purchased Assets;

(viii) (A) amend, modify, supplement or terminate any Assumed Contract or any other Material Contract other than in the Ordinary Course of Business, or (B) enter into, amend, modify or supplement any Contract, if such Contract would have been a Material Contract if it had been in existence on the date of this Agreement other than in the Ordinary Course of Business;

(ix) acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets (other than Inventory) that are material, individually or in the aggregate, to the Business;

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(x) settle, compromise, release or forgive any pending or threatened Proceeding relating to the Business, Purchased Assets, Assumed Liabilities or an Employee or waive any right thereto, but excluding (A) any such claim or right that relates solely to any Excluded Asset or Excluded Liability and (B) any such Proceeding seeking to challenge, restrain, prohibit or make illegal the consummation of the Transactions (other than any such Proceeding seeking (1) the recovery of damages from Buyer or any of its Affiliates or Representatives, (2) to prohibit or limit the exercise by Buyer or any Affiliate of Buyer of any material right pertaining to its ownership of any of the Purchased Assets or the operation of the Business after Closing or (3) to compel Buyer or any Affiliate of Buyer to dispose of or hold separate any material assets as a result of the Transactions);

(xi) transfer, assign, abandon, fail to maintain, license or permit to lapse any Purchased Business IP (except for non-exclusive licenses granted by Seller in the Ordinary Course of Business pursuant to Standard Outbound Licenses);

(xii) grant any severance or termination pay to any Employee other than as provided under an existing agreement or Employee Plan in accordance with the terms of such agreement or Employee Plan as currently in effect;

(xiii) enter into any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any Employee;

(xiv) materially increase benefits payable under any existing severance or termination pay policies or employment agreements;

(xv) materially increase compensation, bonus or other benefits payable to any Employee, other than as required by applicable Legal Requirements or pursuant to the terms of any Contract as in effect on the date hereof and disclosed in the Disclosure Schedule;

(xvi) terminate any Employee (other than for cause) or renew any employment agreement with such Employee;

(xvii) establish, adopt or amend any Employee Plan, make any changes in the compensation payable or to become payable to any Employee (other than normal recurring increases in the Ordinary Course of Business consistent with past practice), or become obligated to, or represent to any Person that it will, take any of the foregoing actions;

(xviii) recognize any labor union related to the Business or enter into any collective bargaining agreement related to the Business;

(xix) adopt a plan of complete or partial liquidation or dissolution of Seller related to the Business or resolutions providing for or authorizing such a liquidation or a dissolution of Seller;

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(xx) amend Seller’s organizational documents related to the Business;

(xxi) introduce any material change with respect to the operation of the Business or the Inventory, including any material change in the types, nature, composition or quality of Products or services, or, other than in the Ordinary Course of Business, make any change in product specifications or prices or terms of distributions of such Products;

(xxii) enter into any Contract, understanding or commitment that restrains, restricts, limits or impedes the ability of the Business, or the ability of Buyer, to compete with or conduct any business or line of business in any geographic area or solicit the employment of any persons;

(xxiii) change or modify its credit, collection or payment policies, procedures or practices related to the Business, including acceleration of collections or receivables (whether or not past due) or fail to pay or delay payment of payables or other liabilities related to the Business;

(xxiv) engage in any discount activity with customers of the Business that would reasonably be expected to accelerate to pre-Closing periods sales that would otherwise be expected to occur in post-Closing periods; or

(xxv) take any action that would make any of the representations or warranties of Seller untrue or incorrect or result in any of the conditions to the transactions set forth in this Agreement not to be satisfied, or prevent Seller from performing, or cause Seller not to perform, its covenants hereunder.

For the avoidance of doubt, Seller shall have the right to sell the Excluded Patents to a third party without prior written consent of Buyer, provided Seller grants a license to Buyer for the Excluded Patents pursuant to the License Agreement.

5.2 Access

Subject to applicable attorney-client privilege, attorney work product and confidentiality provisions, during the Pre-Closing Period, Seller shall, and shall cause the Selling Subsidiaries to, (i) afford Buyer and its authorized Representatives full access to all properties, facilities, personnel, books, Contracts, Records, documents and other information related to the Business, the Purchased Assets, the Assumed Liabilities and the Employees as Buyer and such Representatives may reasonably request, (ii) furnish to Buyer and its Representatives such financial and operating data and other information concerning the Business, the Purchased Assets, the Assumed Liabilities and the Employees as Buyer and its Representatives may reasonably request, and (iii) instruct its Representatives to fully cooperate with Buyer and Buyer’s Representatives in its investigation. All such information obtained by Buyer and such authorized Representatives pursuant to this Section 5.2 will be subject to the confidentiality provisions set forth in Section 6.1.

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5.3 Notification of Certain Matters

During the Pre-Closing Period, Seller will promptly notify Buyer of: (i) the discovery by Seller of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement and that caused or constitutes an inaccuracy in or Breach of any representation or warranty made by Seller in this Agreement; (ii) any event, condition, fact or circumstance that occurs or exists after the date of this Agreement and that would cause or constitute an inaccuracy in or Breach of any representation or warranty made by Seller in this Agreement if (x) such representation or warranty had been made as of the time of the occurrence, existence or discovery of such event, condition, fact or circumstance, or (y) such event, condition, fact or circumstance had occurred or existed on or prior to the date of this Agreement; (iii) any Breach of any covenant or obligation of Seller; (iv) any event, condition, fact or circumstance that would make the timely satisfaction of any of the conditions set forth in Article VIII impossible or unlikely, or (v) any Proceeding commenced, or to Seller’s Knowledge, threatened in writing against, relating to or involving or otherwise affecting Seller or any of the Selling Subsidiaries, as the case may be, that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.11 or that relates to the consummation of the transactions contemplated by this Agreement.

5.4 Non-Competition; Non-Solicitation

(a) For a period beginning on the Closing Date (the “Commencement Date”) until the date which is thirty-six (36) months after the Commencement Date, Seller will not, and will cause its Subsidiaries and Affiliates not to, directly or indirectly, own, acquire, manage, operate, control or participate in the ownership, management, operation or control of any business (other than (i) for the period beginning on the Commencement Date and ending on the six (6) month anniversary of the Commencement Date, the operation by Seller or Seller’s Affiliates of the Aristos Business as conducted on the date hereof and (ii) the performance by Seller or Seller’s Affiliates of Seller’s remaining supply and support obligations under the Scheduled Aristos Agreement in accordance with its terms as in effect on the date hereof), whether in corporate, proprietorship or partnership form or otherwise, that is engaged in, or otherwise competes with, the Business in the United States or in those other countries in which Buyer currently ships Product to customers either directly or through distributors. The parties hereto specifically acknowledge and agree that the remedy at law for any Breach of the foregoing may be inadequate and that Buyer, in addition to any other relief available to it, will be entitled to seek temporary and permanent injunctive relief without the necessity of proving actual damage or posting any bond whatsoever.

(b) For a period beginning on the Commencement Date until the date which is twenty-four (24) months after the Commencement Date, Seller will not, and shall cause its directors, officers, employees, Subsidiaries and Affiliates not to, without the written consent of Buyer, directly or indirectly, for its own account or on behalf of any other Person, (i) hire any person who is then an employee of Buyer or any of its Affiliates, or induce or attempt to induce any employee to leave his or her employment with Buyer or any of its Affiliates, including the Transferred Employees, and (ii) cause, induce or encourage any material actual or prospective client, customer, supplier or licensor of the Business (including any existing or former customer of Seller or its Subsidiaries and any Person that becomes a client or customer of the Business after the Closing) or any other Person who has a material business relationship with the Business, to terminate or modify any such actual or prospective relationship.

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(c) The parties hereto agree that, if any court of competent jurisdiction determines that a specified time period, a specified geographical area, a specified business limitation or any other relevant feature of this Section 5.4 is unreasonable, arbitrary or against public policy, then a lesser time period, geographical area, business limitation or other relevant feature which is determined by such court to be reasonable, not arbitrary and not against public policy may be enforced against the applicable party.

5.5 No Solicitation of Transactions by Seller

(a) Seller shall, and shall cause its respective Subsidiaries and respective Representatives to, immediately cease and cause to be terminated any discussions or negotiations with any Person conducted heretofore with respect to an Acquisition Proposal, and use their commercially reasonable efforts to obtain the return from all such Persons or cause the destruction of all copies of confidential information previously provided to such parties by Seller, its Subsidiaries, or any Representatives to the extent such confidential information remains confidential at such time. From the date hereof until the earlier of the termination of this Agreement in accordance with its terms or the Closing Date, Seller shall not, and shall cause its Subsidiaries and Representatives not to, directly or indirectly, (i) initiate, solicit, knowingly cause, knowingly encourage or knowingly facilitate (including by way of furnishing nonpublic information or assistance) any inquiries or the making of any proposal or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, (ii) conduct or engage in any discussions or negotiations with, disclose any non-public information relating to Seller or any of its Subsidiaries to, afford access to the business, properties, assets, books or records of Seller or any of its Subsidiaries to, or otherwise knowingly assist, participate in, facilitate or encourage any effort by, any third party that is seeking to make, or has made, any Acquisition Proposal, (iii) amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of Seller or any of its Subsidiaries, (iv) approve, endorse or recommend to the stockholders of Seller any Acquisition Proposal or (v) enter into an agreement in principle, letter of intent, term sheet, acquisition agreement, partnership agreement or other Contract with respect to an Acquisition Proposal. Without limiting the foregoing, Seller acknowledges and agrees that any violation of the foregoing restrictions by the Selling Subsidiaries or their Representatives shall be deemed a Breach of this Section 5.5 by Seller. Seller shall promptly advise Buyer, but in no event later than twenty-four (24) hours after receipt, of any Acquisition Proposal, the material terms and conditions of any such Acquisition Proposal (including any changes thereto) and the identity of the Person making any such Acquisition Proposal (and shall include with such notice copies of any written materials received from or on behalf of such Person relating to such Acquisition Proposal).

(b) In no event shall Section 5.5(a) prohibit or restrict Seller from engaging in any discussions, negotiations or information exchange, entering into or approving any Contract or otherwise supporting activity related exclusively to a sale, transfer or license of the Excluded Patents or the sale of the Aristos Business or Aristos Assets provided that any such transaction does not conflict with the transactions contemplated by this Agreement.

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ARTICLE VI

FURTHER COVENANTS

6.1 Confidentiality

The terms of the confidentiality agreement dated February 2, 2010 (the “Confidentiality Agreement”) between Buyer and Seller, are incorporated into this Agreement by reference and shall continue in full force and effect until the Closing, at which time the confidentiality obligations under the Confidentiality Agreement shall terminate. From and after the Closing Date, the Seller and its Affiliates and Representatives shall maintain in confidence and not use or disclose to any third party any confidential or proprietary information related to the Business, Purchased Assets, Assumed Liabilities and Transferred Employees; provided, that nothing in this Section 6.1 shall apply to information that is or becomes generally available to the public other than as a result of or in connection with a disclosure in breach of this Section 6.1. Each of the Seller and its Affiliates and Representatives that is in possession of any such confidential or proprietary information, shall promptly after Closing destroy or return to Buyer such information without retaining any copies thereof except for copies that such Person is required to retain by applicable Law. The Seller shall be responsible for ensuring the compliance of its Affiliates and Representatives with the obligations in this Section 6.1 applicable to them.

6.2 Employment of Employees by Buyer

(a) Automatic Transferred Employees shall not be terminated upon Closing and the rights, powers, duties, liabilities and obligations of Seller (or the relevant Subsidiary of Seller) to the employees in respect of the material terms of employment with the Automatic Transferred Employees in force immediately before Closing shall be transferred to Buyer in accordance with local Legal Requirements. Prior to the Closing, Seller shall, or shall cause the applicable Selling Subsidiary to, in accordance with applicable Legal Requirements (including Section 203 of the Employment Rights Act 1996 of the UK Parliament or any similar law of any other applicable jurisdiction), either: (A) (i) terminate the Identified Employees and (ii) use commercially reasonable efforts to enter into a “compromise agreement” that settles any outstanding liability to each such Identified Employee relating to such Identified Employee’s employment or its termination and waives any claim that each such Identified Employee has or may have arising out of his employment or its termination against Seller, the applicable Selling Subsidiary, Buyer and any Subsidiary of Buyer and to which Buyer or its applicable Subsidiary is a party or a third party beneficiary; and/or (B) (i) redeploy the Identified Employees such that any such redeployed Identified Employee is no longer assigned to the Business being acquired by Buyer under this Agreement, (ii) inform the redeployed Identified Employee in writing (in a form reasonably satisfactory to Buyer) of the full terms of the redeployment in good time prior to Closing, and (iii) use commercially reasonable efforts to procure such redeployed Identified Employee’s agreement in writing to such terms.

(b) With respect to Employees who are neither Automatic Transferred Employees nor Identified Employees, prior to the Closing Date, Buyer shall make offers of employment, contingent upon the Closing, to such Employees. Automatic Transferred Employees and Employees other than Identified Employees who accept Buyer’s offer of employment in accordance with Section 6.2(c) below, as of the effective date of their employment with Buyer, are referred to as “Transferred Employees.” Employment with Buyer of Transferred Employees shall be effective as of the close of business on the Closing Date.

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(c) Buyer agrees that offers of employment to each Employee who is neither an Automatic Transferred Employee nor an Identified Employee shall initially have: (i) a position with a Base Salary that is at least 95% of such Transferred Employee’s Base Salary as in effect on the date hereof as set forth on Schedule 3.13(a) of the Disclosure Schedule, (ii) substantially the same job duties and responsibilities and (iii) if such Employee is located in the United States, a work location within 25 miles of such Employee’s existing work location as in effect immediately prior to the Closing.

(d) As of the Closing Date, Buyer shall assume all Liabilities with respect to Transferred Employees under the Assumed Employee Plans.

(e) For the period commencing on the Closing Date and ending on the date twelve (12) months after the Closing Date, each Transferred Employee who remains employed by Buyer and/or one of its Subsidiaries shall participate in employee benefit plans, agreements, programs, policies and arrangements of Buyer and/or one of its Subsidiaries (the “Buyer Plans”) that are no less favorable in the aggregate than the Buyer Plans in which similarly situated employees of Buyer and/or its Subsidiaries participate. For the twelve (12) month period commencing on the Closing Date Buyer shall provide severance benefits to any Transferred Employee that are no less favorable than the severance benefits provided to such Transferred Employees immediately before the Closing Date and described in Schedule 6.2(e); provided, that in no event shall Transferred Employees be entitled to any severance benefits in connection with their voluntary termination of employment from Buyer or any Subsidiary of Buyer.

(f) For purposes of eligibility, vesting and benefit accrual under Buyer’s employee benefit plans, Buyer shall grant all Transferred Employees credit for their years of service with Seller or the Selling Subsidiaries and Affiliates prior to the Closing Date, to the same extent such service had been taken into account under the Employee Plans (other than under any equity or quasi-equity compensation plan or under a defined benefit pension plan either (i) in which no assets are transferred or for which no other compensation, including an adjustment to the Purchase Price, is received by Buyer pursuant to this Agreement or (ii) which would result in the duplication of benefits accrual for the same period of service).

(g) Seller shall retain responsibility for and continue to pay all medical, dental, life insurance, disability and other welfare plan expenses and benefits for each Transferred Employee with respect to claims incurred by such Transferred Employee or their covered dependents before the close of business on the Closing Date. Expenses and benefits with respect to claims incurred by Transferred Employees or their covered dependents from and after the close of business on the Closing Date shall be the responsibility of Buyer. For purposes of this Section 6.2(g) a claim is deemed incurred: in the case of medical or dental benefits, when the services that are the subject of the claim are performed; in the case of life insurance, when the death occurs; in the case of disability benefits, when the disability occurs; in the case of workers compensation benefits, when the event giving rise to the benefits occurs; and otherwise at the time the Transferred Employee or covered dependent becomes entitled to payment of a benefit (assuming all procedural requirements are satisfied and claims applications properly and timely completed and submitted).

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(h) Except as otherwise provided in Section 6.2(d) or as required by applicable Legal Requirements, as of the close of business on the Closing Date the Transferred Employees shall cease to accrue further benefits under the Employee Plans maintained by Seller and the Selling Subsidiaries and shall commence participation in the Buyer Plans. Promptly after the Closing, in accordance with HIPAA privacy rules, Seller shall transfer and Buyer shall accept the flexible spending account elections and accounts (maintained pursuant to Code Sections 105 and 129) of the Transferred Employees under Seller’s Code Section 125 plan flexible spending arrangement. Promptly after the Closing, Seller shall cause to be transferred to Buyer the aggregate net cash amount (determined immediately before the Closing) for contributions paid (but not yet reimbursed) by or on behalf of the Transferred Employees under Seller’s Code Section 125 plan flexible spending arrangement.

(i) With respect to any accrued but unused vacation time (including flexible time off and sick pay) as of the close of business on the Closing Date to which any Transferred Employee is entitled pursuant to Seller’s (and/or any of the Selling Subsidiaries’) vacation policy immediately before the Closing Date, to the extent permitted by law, Seller shall retain responsibility for and shall pay as soon as practicable following the Closing any accrued but unused vacation time payable to any Transferred Employee who is, or was, entitled to any accrued but unused vacation time payout on termination by Seller or the Selling Subsidiaries under local Legal Requirements. To the extent applicable Legal Requirements do not permit the payment by Seller of such accrued but unused vacation time, Buyer shall assume such accrued and unused vacation time of any Transferred Employee who is subject to such Legal Requirements and the aggregate value of such assumed vacation time shall be reimbursed by Seller to Buyer promptly following the Closing.

(j) Subject to Legal Requirements, prior to the Closing Date, Seller agrees to use reasonable best efforts to cooperate with Buyer in Buyer’s recruitment of Employees, including allowing and facilitating interviews and providing access to personnel files of the Employees. After the Closing Date, upon the reasonable request of Buyer and to the extent permitted by applicable Legal Requirements and subject to the confidentiality provisions of this Agreement, Seller shall make available to Buyer any records in their possession with respect to the Transferred Employees hired by Buyer.

(k) It is understood and agreed that (i) Buyer’s expressed intention to extend offers of employment as set forth in this Section 6.2 will not constitute any Contract or understanding (expressed or implied) of any obligation on the part of Buyer to a post-Closing employment relationship of any fixed term or duration or upon any terms or conditions other than those that Buyer may establish pursuant to individual offers of employment, and (ii) to the extent consistent with applicable Legal Requirements employment offered by Buyer is “at will” and may be terminated by Buyer or by a Transferred Employee at any time for any reason (unless Buyer in its sole discretion determines otherwise). Nothing in this Agreement will be deemed to prevent or restrict in any way the right of Buyer to terminate, reassign, promote or demote any of the Transferred Employees after the Closing or to change adversely or favorably the title, powers, duties, responsibilities, functions, locations, salaries, other compensation or terms or conditions of employment of such employees at any time for any reason. The Parties acknowledge and agree that all provisions contained in this Section 6.2 with respect to Employees are included for the sole benefit of the respective Parties and shall not create any right (i) in any other Person, including without limitation, any employees, former employees, any participant in any employee benefit plan, policy or arrangement maintained by Seller or any beneficiary thereof.

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(l) Seller shall be solely responsible for the payment of all wages and other remuneration due to Transferred Employees with respect to their services as Employees through the close of business on the Closing Date. Buyer shall be solely responsible for the payment of all wages and other remuneration due to Transferred Employees with respect to their services as Employees after the close of business on the Closing Date, plus all payments due under the Retention Agreements.

(m) Seller, the Selling Subsidiaries and Buyer shall comply with all obligations either under the Transfer Regulations or other applicable Legal Requirements in connection with the transfer of Employees from Seller and/or the Selling Subsidiaries to Buyer, including without limitation any obligations to notify and/or consult with Non-U.S. Employees or employee representatives, unions, works councils or other employee representative bodies, if any, and shall provide such information to the other Party as is required by that Party to comply with its notification and/or consultation obligations. Seller and Buyer agree and acknowledge that the employment relationships of the Transferred Employees are governed by the Legal Requirements of various jurisdictions and that the transfer of the Transferred Employees from Seller or the Selling Subsidiaries to Buyer as contemplated by this Section 6.2 is subject to different Legal Requirements depending on the jurisdiction by which the employment relationship of the respective Transferred Employee is governed.

(n) The parties agree to cooperate in good faith to determine whether any notification may be required under the Worker Adjustment and Retraining Notification Act of 1988, as amended (the “WARN Act”) as a result of the transactions contemplated by this Agreement. However, Seller shall retain full responsibility for compliance with those provisions of the WARN Act or any comparable provision of state or local law that are binding upon Seller under any such law and shall indemnify Buyer for any Liabilities related thereto.

6.3 Bulk Sale Laws

Buyer and Seller hereby waive compliance by Seller with any applicable bulk sale or bulk transfer laws of any jurisdiction in connection with the sale and transfer of the Purchased Assets to Buyer.

6.4 Expenses

Whether or not the Closing occurs, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring the costs or expenses.

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6.5 Public Announcements

During the Pre-Closing Period, Buyer and Seller shall consult with each other before issuing any press release, making any other public statement, or scheduling any press conference or conference call with investors or analysts, with respect to this Agreement or the transactions contemplated hereby and, except as may be required by applicable Legal Requirements or any listing agreement with or rule of any national securities exchange or association, shall not issue any such press release, make any such other public statement, or schedule any such press conference or conference call before such consultation.

6.6 Use of Name

Buyer shall grant Seller and its Affiliates, a non-exclusive, royalty-free right and license to use the name “Adaptec” and associated logos for a transition period of three (3) months following the Closing, to allow for the orderly removal of the name from signage, invoices and other assets used in the operation of the Purchased Assets and the Business, provided, that within ten (10) days following the end of this three (3) month transition period, Seller shall, and shall cause its Affiliates to, discontinue all use of the names “Adaptec” and associated logos included in the Purchased Assets, any confusingly similar names thereto, in any of their forms or spellings, including, without limitation, use in or on any Product or service offerings, websites, advertising materials, stationery, business cards, checks, purchase orders and acknowledgments, customer agreements and other contracts and business documents.

6.7 Governmental and Other Authorizations; Notices and Consents

(a) Seller and Buyer shall use their respective commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under any applicable Legal Requirement or otherwise to consummate the transactions contemplated by this Agreement and the Related Agreements as promptly as reasonably practicable; and (ii) obtain from any Governmental Authority any consents, licenses, permits, waivers, clearances, approvals, authorizations or orders required to be obtained or made, or avoid any Proceeding by any Governmental Authority, in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

(b) Seller and Buyer shall promptly inform each other of any material communication with, and any proposed understanding, undertaking or agreement with, any Governmental Authority regarding any application or filing to be made in connection with the transactions contemplated by this Agreement. Prior to participating in any meeting with any Governmental Authority in respect of any such filings, investigation or other inquiry, Seller shall give Buyer reasonable prior notice of such meeting and invite Representatives of Buyer to participate in the meeting with the Governmental Authority unless prohibited by such Governmental Authority. Seller shall coordinate and cooperate with Buyer in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of Seller in connection with all meetings and Proceedings under or relating to any such application or filing.

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(c) If any administrative or judicial Proceeding is instituted (or threatened to be instituted) by a Governmental Authority challenging the consummation of the transactions contemplated by this Agreement as violative of any applicable Law, each of Seller and Buyer shall, and shall cause their respective Affiliates to, cooperate with the other parties and use their commercially reasonable efforts to contest and resist, except insofar as Seller and Buyer may otherwise agree, any such Proceeding, including any Proceeding that seeks a temporary restraining order or preliminary injunction that would prohibit, prevent or restrict consummation of the transactions contemplated by this Agreement, provided, however, nothing in this Agreement shall require Buyer, nor permit Seller, to enter into any understanding, undertaking or agreement that would limit in any manner Buyer’s ability to operate the Business following the Closing in its absolute discretion, or require the sale, divestiture, or license of any of the Purchased Assets, or businesses of any of Buyer or Seller.

(d) Seller shall give any notices to third parties (including Governmental Authorities) and use commercially reasonable efforts to obtain any third party consents listed on Schedule 8.2(e) or otherwise disclosed on Schedule 6.7(d) of the Disclosure Schedule. Each party shall cooperate with the other to obtain all such consents.

(e) Notwithstanding anything set forth in this Agreement, nothing contained in this Agreement shall give Buyer, directly or indirectly, the right to control or direct the operations of Seller prior to the consummation of the transactions contemplated by this Agreement. Prior to the Closing, Seller shall exercise, consistent with the terms and conditions of this Agreement, control and supervision over its business operations.

6.8 Insurance Seller shall maintain its current insurance coverage under each insurance policy maintained by Seller with respect to the Business (including business interruption insurance or insurance otherwise covering loss of profits) or covering any Purchased Asset until the Closing Date. From and after the Closing, the Business and the Purchased Assets shall cease to be insured by Seller and/or the Selling Subsidiaries’ Insurance Policies.

6.9 Cooperation and Further Assurances

If at any time after the Closing Buyer determines it is advisable that any deeds, bills of sale, assignments, instruments, assurances or any other actions or things are necessary or desirable to consummate the transactions contemplated by this Agreement or any of the Related Agreements or vest, perfect or confirm of record or otherwise in Buyer its right, title or interest in, to or under any of the Purchased Assets or otherwise to carry out the purpose and intent of this Agreement (including, for the avoidance of doubt, the transfer to Buyer of any right, title and interest of any Subsidiary of Seller in, to or under any Purchased Asset), then the officers and directors of Seller shall as soon as reasonably practicable execute and deliver to Buyer, in the name and on behalf of Seller, all such deeds, bills of sale, instruments of conveyance, assignments, instruments and assurances and to take and do, in the name and on behalf of Seller or otherwise, all such other actions and things as may be reasonably requested by Buyer to consummate the transactions contemplated by this Agreement and the Related Agreements and to carry out the purpose and intent of this Agreement or as may be necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to and under the Purchased Assets.

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6.10 No Retention

(a) Upon Closing, neither Seller nor any of the Selling Subsidiaries shall retain copies in any form of any Products, Owned Business IP or Licensed Business IP included in the Purchased Assets or any tangible embodiments thereof and Seller and the Selling Subsidiaries shall cease all use of any of the foregoing; provided that Seller may (i) retain copies of technology specifically identified and licensed to Seller in the Transition Services Agreement and (ii) use certain Seller Trademark(s) consistent with its limited license rights under the Transition Services Agreement as contemplated by Section 6.6 of this Agreement. Upon Closing, Seller shall remove all data, content, graphics and other materials included within the Purchased Assets from the websites owned or controlled by Seller or any of the Selling Subsidiaries and no later than three (3) months following the Closing, Seller shall remove all references to Business products and services from such websites.

(b) For a period of five (5) years after the Closing, Seller’s counsel may retain copies of the Assumed Contracts solely for purposes of defending Seller or Buyer against third party claims, or claims brought by Buyer against Seller or the Selling Subsidiaries arising under such Assumed Contracts. Seller shall instruct its counsel to destroy such copies at the end of such five (5)-year period.

(c) Upon reasonable request by Seller and at Seller’s expense, from and after the Closing Buyer shall provide Seller with copies of any Records relating to the Business in Buyer’s possession and control that is required by Seller to comply with Seller’s Legal Requirements or in connection with Seller’s financial reporting obligations or Tax matters.

6.11 Removal of Third Party Non-Transferred Materials

Prior to the Closing, Seller shall use its commercially reasonable efforts to remove all Third Party Non-Transferred Material from all computer systems, hardware or other debt storage devices included in the Purchased Assets and from any Records included in the Purchased Assets.

ARTICLE VII

TAX MATTERS

7.1 Tax Returns

(a) Buyer and Seller agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Purchased Assets, the Business and the Assumed Liabilities as is reasonably necessary for the filing of all Tax Returns, and making of any election related to Taxes, the preparation for any audit by any taxing authority, and the prosecution or defense of any claim, suit or Proceeding relating to any Tax Return. Buyer and Seller will cooperate with each other in the conduct of any audit or other Proceeding related to Taxes involving the Business, the Purchased Assets or the Assumed Liabilities.

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7.2 Transfer Taxes

All Transfer Taxes required to be paid in connection with the transfer of the Purchased Assets from Seller to Buyer shall be split equally between Buyer and Seller and paid accordingly by each of them. Seller will prepare and timely file all Tax Returns required to be filed in connection with any such Transfer Taxes and provide copies of all such Tax Returns to Buyer; if Buyer is required by law to execute any such Tax Return, such Tax Return will be subject to the consent of Buyer, which consent will not be unreasonably withheld or delayed.

7.3 Proration

Buyer and Seller agree that personal property, real estate, occupancy, intangibles, and any other similar ad valorem Taxes, assessments and other charges, if any, on or with respect to the ownership, use, or business and operation of the Purchased Assets will be prorated as of the Closing Date, with Seller liable to the extent such items relate to any period on or prior to the Closing Date, and Buyer liable to the extent such items relate to periods subsequent to the Closing Date.

ARTICLE VIII

CONDITIONS PRECEDENT TO THE TRANSACTIONS

8.1 Conditions to Each Party’s Obligations

The respective obligations of Seller and Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction at or before the Closing Date of the following conditions, any or all of which may be waived in writing in whole or in part by Seller or Buyer, as the case may be, to the extent permitted by applicable Legal Requirements:

(a) No Order. No Governmental Authority will have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other Order (in each case, whether temporary, preliminary or permanent) which is in effect and which has the effect of making the Closing illegal or otherwise prohibiting consummation of the transactions contemplated by this Agreement.

(b) No Injunctions or Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other Order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Closing will be in effect, nor will any Proceeding brought by an administrative agency or commission or other Governmental Authority or instrumentality, domestic or foreign, seeking any of the foregoing be pending.

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8.2 Conditions to Obligations of Buyer

The obligation of Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction at or before the Closing Date of the following conditions, any of which may be waived, in writing, exclusively by Buyer:

(a) Representations and Warranties True. Each of the representations and warranties of Seller (i) in this Agreement shall be true and correct in all material respects (other than those representations and warranties that are qualified by their terms by reference to materiality or Material Adverse Effect, which representations and warranties shall be true and correct in all respects) as of the date of this Agreement and as of the Closing Date as though such representation and warranty were made on and as of the Closing Date, except for representations and warranties which address matters as of a particular date, in which case such representations will be true and correct as of such particular date.

(b) Performance. Seller will have performed and complied in all material respects with the covenants and agreements contained in this Agreement required to be performed or complied with by it on or prior to the Closing.

(c) Closing Deliverables. Buyer will have received from Seller the closing deliverables set forth in Section 2.7.

(d) Related Agreements. Buyer shall have received all other documents required under this Agreement and any of the Related Agreements.

(e) Governmental and Other Consents. (i) All filings with and other consents of any Governmental Authority required to be made or obtained in connection with the transactions contemplated by this Agreement and the Related Agreements shall have been made or obtained and shall be in full force and effect, and all waiting periods shall have expired or terminated; and (ii) each of the consents identified in Schedule 8.2(e) shall have been obtained and shall be in full force and effect.

(f) No Material Adverse Effect. Between the date of this Agreement and the Closing Date, no event shall have occurred or circumstance shall exist that has had a Material Adverse Effect.

(g) Release of Liens. Buyer shall have received evidence satisfactory to it of the release by any Person who held a security interest in the Purchased Assets of all Encumbrances on the Purchased Assets (other than any Permitted Encumbrances that (i) secure the Assumed Liabilities or (ii) constitute a minor imperfection of title which does not materially impair the value of the Purchased Assets or the use of the Purchased Assets).

(h) No Proceedings. No Governmental Authority and no other Person shall have commenced any Proceeding: (a) seeking to challenge, restrain, prohibit or make illegal the consummation of the transactions contemplated by this Agreement and the Related Agreements (the “Transactions”) or seeking the recovery of damages from Buyer or any of its Affiliates or Representatives in connection therewith; (b) seeking to prohibit or limit the exercise by Buyer or any Affiliate of Buyer of any material right pertaining to its ownership of any of the Purchased Assets or the operation of the Business after Closing; (c) that may have the effect of resulting in an Encumbrance on any Purchased Asset other than any Permitted Encumbrance that (i) secures the Assumed Liabilities or (ii) constitutes a minor imperfection of title which does not materially impair the value of the Purchased Assets or the use of the Purchased Assets; or (d) seeking to compel any of Seller any Selling Subsidiary, Buyer or any Affiliate of Buyer to dispose of or hold separate any material assets as a result of the Transactions. Notwithstanding the foregoing, if all Proceedings described above (if any) are settled or dismissed prior to the Outside Date, the condition set forth in this Section 8.2(h) shall be deemed to have been satisfied.

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(i) Legal Opinion. Buyer shall have received a legal opinion from Morris, Nichols, Arsht & Tunnell LLP, counsel to Seller, addressed to Buyer in the agreed form provided to Buyer prior to the date hereof.

(j) Employees. (i) At least 80% of the Key Employees shall have accepted Buyer’s offer of employment effective upon the Closing; and (ii) at least 75% of the Employees shall have accepted Buyer’s offer of employment effective upon the Closing and such acceptance shall not have been terminated or rescinded by such Employees as of the Closing.

8.3 Conditions to Obligations of Seller

The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the satisfaction at or before the Closing Date of the following conditions, any of which may be waived, in writing, exclusively by Seller:

(a) Representations and Warranties True. Each of the representations and warranties of Buyer (i) in this Agreement shall be true and correct in all material respects (other than those representations and warranties that are qualified by their terms by reference to materiality or Material Adverse Effect, which representations and warranties shall be true and correct in all respects) as of the date of this Agreement and as of the Closing Date as though such representation and warranty were made on and as of the Closing Date, except for representations and warranties which address matters as of a particular date, in which case such representations will be true and correct as of such particular date. Buyer shall deliver to Seller a certificate, signed by a duly authorized officer of Buyer and dated the Closing Date, to the effect that the conditions set forth in this Section 8.3(a) have been satisfied.

(b) Performance. Buyer will have performed and complied in all material respects with the covenants and agreements contained in this Agreement required to be performed or complied with by it on or prior to the Closing. Buyer shall deliver to Seller a certificate, signed by a duly authorized officer of Buyer and dated the Closing Date, to the effect that the conditions set forth in this Section 8.3(b) have been satisfied.

(c) Closing Deliverables. Seller will have received from Buyer the closing deliverables set forth in Section 2.8.

ARTICLE IX

INDEMNIFICATION; SURVIVAL

9.1 By Seller

From and after the Closing Date (but subject to Sections 9.3 and 9.9(a)), Seller will hold harmless and indemnify Buyer, its Subsidiaries and any of Buyer’s Representatives (each, a “Buyer Indemnitee”) from and against, and will compensate and reimburse each of the Buyer Indemnitees for, any Damages which are suffered or incurred by any of the Buyer Indemnitees or to which any of the Buyer Indemnitees may otherwise become subject (regardless of whether or not such Damages relate to any third-party claim) and which arise from or as a result of:

(i) any inaccuracy in or Breach of any representation or warranty made by Seller in this Agreement as of the date of this Agreement (in each case, after giving effect to any Material Adverse Effect or other materiality qualification or any similar qualification contained in such representation or warranty);

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(ii) any inaccuracy in or Breach of any representation or warranty made by Seller in this Agreement as if such representation or warranty was made on and as of the Closing Date, except for representations or warranties which address matters as of a particular date, in which case, as of such particular date, (in each case, after giving effect to any Material Adverse Effect or other materiality qualification or any similar qualification contained in such representation or warranty);

(iii) any Excluded Liability;

(iv) any Excluded Asset;

(v) any breach by Seller of, or failure by Seller to, perform any covenant, agreement or obligation of Seller contained in this Agreement or any Related Agreement;

(vi) any of the matters disclosed on Schedule 3.11 of the Disclosure Schedule; or

(vii) the transfer to Buyer or any of its Affiliates, whether pursuant to the Transfer Regulations or otherwise, in connection with the transactions contemplated hereby of any Identified Employee and the termination of employment of any such Identified Employee by Buyer or its Affiliate.

9.2 By Buyer

From and after the Closing Date (but subject to Section 9.3), Buyer will hold harmless and indemnify Seller, its Subsidiaries and Representatives (each, a “Seller Indemnitee”) from and against, and will compensate and reimburse Seller for, any Damages which are suffered or incurred by any of the Seller Indemnitees, or to which any of the Seller Indemnitees may otherwise become subject (regardless of whether or not such Damages relate to any third-party claim) and which arise from or as a result of (i) any Assumed Liability or (ii) any Breach by Buyer of, or failure by Buyer to, perform any covenant, agreement or obligation of Buyer contained in Section 6.2 of this Agreement.

9.3 Limitation of Liability

(a) Except in the (i) case of fraud, (ii) indemnification claims under Section 9.1(iii), (iv), (vi) and (vii), or (iii) any inaccuracy in or Breach of any representation or warranty made in Sections 3.3, 3.4, and 3.6(b), the aggregate liability of Seller for indemnification claims under this Article IX, the Bill of Sale, and the Assignment Agreement, will not exceed the Escrow Amount.

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(b) Notwithstanding any provision of this Agreement to the contrary, except in the (i) case of fraud, (ii) indemnification claims under Section 9.1(iii), (iv), (vi) and (vii), or (iii) any inaccuracy in or Breach of any representation or warranty made in Sections 3.3, 3.4, and 3.6(b), no Buyer Indemnitee will be entitled to indemnification under this Article IX until the aggregate of all amounts due to Buyer Indemnitees under this Article IX exceeds $250,000, in which case the Buyer Indemnitees will be entitled to recover the full amount of the Damages suffered.

(c) Notwithstanding any provision of this Agreement to the contrary, no Seller Indemnitee will be entitled to indemnification under this Article IX until the aggregate of all amounts due to Seller Indemnitees under this Article IX exceeds $250,000, in which case the Seller Indemnitees will be entitled to recover the full amount of the Damages suffered.

(d) Notwithstanding anything to the contrary in this Agreement and except in the case of fraud, willful misconduct or criminal conduct, the parties agree that the indemnification provisions in this Article IX will constitute the sole and exclusive remedy for any losses, claims or disputes regarding this Agreement, the Bill of Sale, and the Assignment Agreement (except for claims for injunctive relief under Section 5.4 hereof).

(e) For the avoidance of doubt, if: (i) Seller notifies Buyer in accordance with the requirements of Section 5.3 of the discovery by Seller after the date of this Agreement of any event, condition, fact or circumstance that (A) existed prior to the date of this Agreement and (B) caused or constitutes an inaccuracy in or Breach of any representation or warranty made by Seller as of the date of this Agreement; (ii) such inaccuracy in or Breach of a representation or warranty made as of the date of this Agreement does not constitute fraud; and (iii) such event, condition, fact or circumstance causes or constitutes an inaccuracy in or Breach of any representation or warranty repeated by Seller as of the Closing because it was not disclosed in the Disclosure Schedule delivered to Buyer on the date of this Agreement, then such inaccuracy in or Breach of such representation or warranty repeated as of the Closing resulting from such failure of Seller to have disclosed such event, condition, fact or circumstance in the Disclosure Schedule on the date of this Agreement shall not be deemed to constitute fraud.

9.4 Procedure for Claims

(a) In order to seek indemnification under this Article IX, a Person entitled to indemnification under Section 9.1 or Section 9.2 (an “Indemnified Party”) will deliver, in good faith, a written demand (an “Indemnification Demand”) to Seller (in the case of Indemnification Demands from a Buyer Indemnitee) or Buyer (in the case of Indemnification Demands from a Seller Indemnitee) which contains (i) a description and the amount (the “Asserted Damages Amount”) of any Damages incurred or reasonably expected to be incurred by the Indemnified Party, (ii) a statement that the Indemnified Party is entitled to indemnification under this Article IX for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount of such Damages.

(b) Within thirty (30) days after delivery of an Indemnification Demand to Seller or Buyer (as the case may be), such party will deliver to the other of such parties a written response (the “Response”) in which the party providing the Response will:

(i) agree that the Indemnified Party is entitled to receive cash equal to all of the Asserted Damages Amount (subject to the limitations of Section 9.3);

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(ii) agree that the Indemnified Party is entitled to receive cash equal to part, but not all, of the Asserted Damages Amount (such portion, the “Agreed Portion of Damages”) (subject to the limitations of Section 9.3); or

(iii) dispute that the Indemnified Party is entitled to receive any of the Asserted Damages Amount.

(c) If the party providing a Response pursuant to Section 9.4(b) will (i) dispute that the Indemnified Party is entitled to receive any of the Asserted Damages Amount, or (ii) agree that the Indemnified Party is entitled to only the Agreed Portion of Damages, Seller and Buyer will attempt in good faith to agree upon the rights of the respective parties with respect to each of the indemnification claims that comprise the Asserted Damages Amount (or the portion of the Asserted Damages Amount not comprising the Agreed Portion of Damages). If Seller and Buyer should so agree, a memorandum setting forth such agreement will be prepared and signed by both such parties. If no such agreement can be reached after good faith negotiation within sixty (60) days after delivery of a Response, either Buyer or Seller may pursue whatever legal remedies may be available for recovery of the Asserted Damages Amount claimed.

(d) If a claim for indemnification is covered by insurance, such claim for indemnification shall be reduced by the amount actually received by Buyer from the insurance carrier (after deducting therefrom the amount of expenses incurred by Buyer in procuring such recovery, including any prospective or increased premiums or costs). Buyer shall make the reasonable commercial efforts necessary to pursue such insurance claim. However, Buyer may, concurrent with continuing to pursue such insurance claim, make a claim for indemnification to Seller pursuant to this Article IX and shall be entitled to receive payment on account of such claim pursuant to this Article IX regardless of whether or not the insurance carrier has already paid for the corresponding insurance claim. Once Seller pays the indemnification claim to Buyer, Buyer shall continue to pursue such insurance coverage or assign such claim to Seller and any monies received by Buyer at any time from any insurance carrier regarding such claim, shall be paid to Seller by Buyer up to the full indemnified claim amount previously paid by Seller (after deducting therefrom the amount of expenses incurred by Buyer in procuring such recovery, including any prospective or increased premiums or costs).

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9.5 Third Party Claims

(a) In the case that Seller is the Indemnifying Party:

(i) If Buyer receives notice of or otherwise becomes aware of any claim by a third-party (“Third Party Claim”) which Buyer reasonably expects would result in a indemnification claim under this Article IX, Buyer shall promptly notify Seller of such Third Party Claim; provided, however, that the failure to give prompt notice shall not affect the indemnification provided hereunder except to the extent Seller has been actually and materially prejudiced as a result of such failure. The notice of a Third Party Claim shall include, based on the information then available to Buyer, a summary in reasonable detail of the basis for the Third Party Claim and a reasonable estimate of the Damages. Seller shall, within ten (10) Business Days of receipt of such notice, notify Buyer whether Seller desires to undertake and conduct the defense of such Third Party Claim (provided that Seller may not assume the defense of a Third Party Claim (A) unless the then remaining amount of the Escrow Fund would be sufficient to cover all indemnification obligations reasonably expected to become payable in respect of the Third Party Claim and all other pending or unsatisfied claims made on the Escrow Fund or Seller otherwise provides reasonable assurance of its ability to satisfy all indemnification obligations reasonably expected to become payable in respect of the Third Party Claim, (B) if, in the reasonable opinion of counsel to Buyer, such Third Party Claim seeks any injunction, declaratory judgment or other non-monetary order or equitable relief against any Buyer Indemnitee, or (C) if the litigation or outcome of such Third Party Claim would reasonably be expected to materially impact Buyer or its business). Buyer hereby consents to Seller assuming the defense of the Third Party Claims referred to in Section 9.1(vi) subject to the terms and conditions of this Section 9.5.

(ii) If Seller assumes the defense of a Third Party Claim, notwithstanding any other provision of this Agreement, the Indemnifying Parties shall be liable for the full amount of all Damages incurred by the Buyer Indemnitee(s) arising out of or relating to such Third Party Claim (and, for the avoidance of doubt, without regard to any of the limitations provided for in this Article IX) and Seller shall take all actions necessary or appropriate to defend against the Third Party Claim. Buyer may, at its own expense, participate in the defense of any such Third Party Claim assumed by Seller and Seller shall in good faith take into account the views of Buyer.

(iii) If Seller assumes the defense of a Third Party Claim and in the reasonable opinion of counsel to the applicable Buyer Indemnitee, (x) there are or may be substantive legal defenses available to such Buyer Indemnitee that are different from or additional to those available to the Seller, or (y) a conflict of interest may arise between the positions of such Buyer Indemnitee and the Seller in conducting the defense of any such action that would make such separate representation advisable, the Buyer Indemnitee shall be entitled to select separate counsel to act on its behalf and the fees and expenses of such separate counsel shall be additional indemnifiable Damages under this Article IX; provided, however, that in no event shall Seller be required to pay fees and expenses under this indemnity for more than one firm of attorneys (in addition to local counsel) in any jurisdiction in any one legal action or group of related legal actions. If Seller does not assume the defense of a Third Party Claim, Seller may, at its own expense, participate in the defense of any such Third Party Claim and Buyer shall in good faith take into account the views of Seller; provided that, subject to clause (iv) below, Buyer shall have full control over the litigation, including settlement and compromise thereof.

(iv) Neither Seller nor Buyer may settle any matter (in whole or in part) without the consent of the other party, which consent shall not be unreasonably withheld, conditioned or delayed. Buyer may withhold consent to any settlement unless such settlement (A) includes a complete and unconditional release of the Buyer Indemnitee, (B) excludes any injunctive or non-monetary relief applicable to the Buyer Indemnitee, and (C) excludes any finding or admission of fault, liability or any violation of law.

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(b) In the case that Buyer is the Indemnifying Party:

(i) If Seller receives notice of or otherwise become aware of any Third Party Claim which Seller reasonably expects would result in an indemnification claim, Seller shall promptly notify Buyer of such Third Party Claim; provided, however, that the failure to give prompt notice shall not affect the indemnification provided hereunder except to the extent Buyer has been actually and materially prejudiced as a result of such failure. The notice of a Third Party Claim shall include, based on the information then available to Seller, a summary in reasonable detail of the basis for the Third Party Claim and a reasonable estimate of the Damages.

(ii) Buyer shall have full control over the litigation, including settlement and compromise thereof; provided, however, Buyer may not settle any matter (in whole or in part) without the consent of Seller, which consent shall not be unreasonably withheld, conditioned or delayed.

(iii) Seller may, at its own expense, participate in the defense of any such Third Party Claim assumed by Buyer and Buyer shall in good faith take into account the views of Seller.

9.6 Purchase Price Adjustment

Except as otherwise required under applicable Legal Requirements, all indemnification payments made pursuant to this Article IX will be treated as an adjustment to the Purchase Price. Buyer and Seller agree to cooperate in the preparation of a supplemental allocation of the Purchase Price as a result of any adjustment to the Purchase Price pursuant to the preceding sentence.

9.7 Payment of Indemnification Claims

Any amounts owed to Buyer following the resolution of a claim pursuant to Section 9.4 shall be satisfied first from the Escrow Fund. In the event the aggregate amount owed to Buyer following the resolution of all claims exceeds the Escrow Amount, Seller shall pay any remaining amounts owed to Buyer within five (5) Business Days following the resolution of such claim(s).

9.8 Release of Remaining Escrow Amount

The Escrow Amount shall be held by the Escrow Agent pursuant to the terms of the Escrow Agreement. In accordance with and subject to the terms of the Escrow Agreement, within ten (10) Business Days following the Survival Expiration Date (the “Escrow Expiration Date”), the Escrow Agent shall release and deliver to Seller the remaining Escrow Amount, if any (other than any portion of the Escrow Fund that is the subject of any outstanding claim or dispute).

9.9 Survival of Representations, Warranties and Covenants

(a) The representations and warranties made by Seller in this Agreement will survive the Closing and will expire twelve (12) months after the Closing Date (the “Survival Expiration Date”). Notwithstanding the foregoing, the representations and warranties of Seller made in Sections 3.3, 3.4 and 3.6(b) of this Agreement shall survive until the expiration of the applicable statute of limitations. The covenants of the parties to be performed after the Closing shall survive the Closing as contemplated herein.

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(b) Nothing contained in this Section 9.9 or elsewhere in this Agreement will limit any rights or remedy of any Buyer Indemnitee or any Seller Indemnitee for claims based on fraud.

(c) The representations and warranties made by Seller, and the covenants and obligations of Seller, and the rights and remedies that may be exercised by the Buyer Indemnitees, will not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, any of the Buyer Indemnitees or any of their Representatives.

(d) The covenants and obligations of Buyer, and the rights and remedies that may be exercised by the Seller Indemnitees, will not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, any of the Seller Indemnitees or any of their Representatives.

ARTICLE X

TERMINATION

10.1 Grounds for Termination

This Agreement may be terminated at any time prior to the Closing Date:

(a) By mutual written consent of Buyer and Seller;

(b) By either Buyer or Seller, if the Closing has not occurred by that date which is sixty (60) days following the date of this Agreement, which date may be extended from time to time by written agreement of Buyer and Seller (such date, as it may be extended, the “Outside Date”); provided, however, that the right to terminate this Agreement under this paragraph (b) of Section 10.1 shall not be available to a party if such failure to close results from such party breaching any of its covenants, representations or warranties in this Agreement; provided further, however, that in the event the Closing has not occurred by the Outside Date set forth above solely because the condition set forth in Section 8.2(h) has not been satisfied, then the Outside Date shall be further extended to that date which is ninety (90) days following the Outside Date set forth above;

(c) By Seller if Buyer shall have Breached any of its covenants hereunder in any material respect or if the representations and warranties of Buyer contained in this Agreement shall not be true and correct in all material respects, and in either event, which Breach or failure to be true and correct would result in the failure to satisfy one or more of the conditions set forth in Section 8.3 and if such Breach is subject to cure, Buyer has not cured such Breach within ten (10) Business Days of Seller’s written notice of an intent to terminate this Agreement; provided, however, that Seller shall not have this right to terminate if it is in material Breach of its representations, warranties and covenants under this Agreement or has otherwise failed in any material respect to perform its obligations under this Agreement;

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(d) By Buyer if Seller shall have Breached any of its covenants hereunder in any material respect or if the representations and warranties of Seller contained in this Agreement shall not be true and correct in all material respects, and in either event, which Breach or failure to be true and correct would result in the failure to satisfy one or more of the conditions set forth in Section 8.2 and if such Breach is subject to cure, Seller has not cured such Breach within ten (10) Business Days of Buyer’s written notice of an intent to terminate this Agreement; provided, however, that Buyer shall not have this right to terminate if it is in material Breach of its representations, warranties or covenants under this Agreement or has otherwise failed in any material respect to perform its obligations under this Agreement;

(e) By Buyer, if any event has occurred or circumstance has arisen, either individually or in the aggregate, since the date of this Agreement that has had a Material Adverse Effect; or

(f) By either Seller or Buyer, if there shall be in effect a final nonappealable order of a Governmental Authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; it being agreed that the parties hereto shall promptly appeal any adverse determination which is not nonappealable (and pursue such appeal with reasonable diligence).

10.2 Effect of Termination

If this Agreement is terminated pursuant to Section 10.1, this Section 10.2 and Sections 6.4, 11.1 and 11.4 shall survive the termination hereof, but the rights and obligations of the parties hereunder will otherwise terminate. In addition, with respect to Sections 10.1(c) and 10.1(d) only, either party may pursue any further legal or equitable remedies that may be available to it if such termination is based on a breach by the other party.

ARTICLE XI

MISCELLANEOUS

11.1 Contents of Agreement, Amendment, Parties in Interest, Assignment, Etc.

This Agreement, the Schedules and Exhibits attached hereto, and the Related Agreements referred to herein together embody the entire agreement and understanding of the parties concerning the subject matter contained herein, and supersedes any and all prior agreements and understandings between the parties, whether written or oral, other than the Confidentiality Agreement. No action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of either party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. No provision of this Agreement may be waived, modified or otherwise changed by any means, including, without limitation, any course of dealing, course of performance or trade usage, or oral evidence of any nature, except pursuant to a writing executed by the party against which enforcement of such waiver, modification or change is sought. The parties hereby acknowledge and agree that they have complied with the confidentiality provisions of the Assumed Contracts in connection with the negotiation of this Agreement and the transactions contemplated hereby and in no event shall either party have any claim to the contrary against the other, including any claim for indemnification under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the parties hereto. No party hereto shall assign this Agreement or any right, benefit or obligation hereunder, except as otherwise herein expressly provided.

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11.2 Interpretation

Unless the context of this Agreement clearly requires otherwise, (a) references to the plural include the singular, the singular the plural, (b) “or” has the inclusive meaning frequently identified with the phrase “and/or” and (c) “including” has the inclusive meaning frequently identified with the phrase “but not limited to” or “without limitation.” The Section and other headings contained in this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection, schedule and exhibit references are to this Agreement unless otherwise specified. Each accounting term used herein that is not specifically defined herein shall have the meaning given to it under GAAP. Unless otherwise expressly stated, all dollars specified in this Agreement shall be in United States dollars. The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

11.3 Notices

All notices that are required or permitted hereunder shall be in writing and shall be sufficient if personally delivered or sent by mail, facsimile message or national overnight courier or other delivery service, provided that notice by facsimile message shall only be effective if confirmed by at least one other method of notification provided for herein. Any notices shall be deemed given upon the earlier of the date when received at, or the third (3^rd) day after the date when sent by registered or certified mail or the day after the date when sent by facsimile message to the fax number set forth below or by national overnight courier to the address set forth below, unless such address or fax number is changed by notice to the other party hereto:

If to Buyer:

PMC-Sierra, Inc.

3975 Freedom Circle

Santa Clara, CA 95054

Attention: Alinka Flaminia, General Counsel

Telephone Number:	(408) 239-8000
Fax Number:	(408) 239-8166

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with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

525 University Ave, Suite 1100

Palo Alto, CA 94301

Attention: Kenton J. King & M. Amr Razzak

Telephone Number:	(650) 470-4500
Fax Number:	(650) 470-4570

If to Seller:

Adaptec, Inc.

691 S. Milpitas Blvd

Milpitas, CA 95035

Attention: John J. Quicke, Interim President and Chief Executive Officer

Telephone Number:	(408) 945-8600
Fax Number:	(408) 262-2533

with a copy to:

Olshan Grundman Frome Rosenzweig & Wolosky LLP

Park Avenue Tower

65 East 55^th Street

New York, NY 10022-1106

Attention: Steve Wolosky, Esq.

Telephone Number:	(212) 451-2230
Fax Number:	(212) 451-2222

11.4 Governing Law; Consent to Jurisdiction; Consent To Service Of Process

(a) This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without regard to its provisions concerning conflict of laws. Each of the parties hereto irrevocably appoints each and every of its officers as its attorneys upon whom may be served, by regular or certified mail at the address set forth in Section 11.3 hereof, any notice, process or pleading in any action or proceeding against it arising out of or in connection with this Agreement; and each hereby further agrees that any action or proceeding against it may be commenced and maintained in any court within the State of Delaware by service of process on any such officer, and that the courts of the State of Delaware shall have jurisdiction with respect to the subject matter hereof and the parties hereto.

(b) THE PARTIES ACKNOWLEDGE THAT THEY HAVE EACH IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO A JURY TRIAL WITH REGARD TO ANY DISPUTE OR CLAIM ARISING UNDER THIS AGREEMENT.

(c) Each party hereby consents to process being served by the other party to this Agreement in any suit, action or proceeding by the mailing of a copy thereof in accordance with the provisions of this Section 11.4.

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11.5 Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be binding as of the date first written above, and all of which shall constitute one and the same instrument. Each such copy shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. A facsimile copy of an executed original of this Agreement shall have the same force and effect as an executed original.

11.6 Specific Performance

The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties further agree that each party shall be entitled to an injunction or restraining order to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other right or remedy to which such party may be entitled under this Agreement, at law or in equity.

11.7 No Third Party Beneficiaries

No provision of this Agreement is intended to, or shall, confer any third party beneficiary or other rights or remedies upon any Person other than the parties hereto. Without limiting the generality of the foregoing, no provision of this Agreement shall create any third party beneficiary rights in any Employee or former Employee of Seller (including any beneficiary or dependent thereof) in respect of continued employment by Buyer or otherwise.

11.8 Schedules and Exhibits

All Exhibits and Schedules, including the Disclosure Schedule, referred to herein are intended to be and hereby are specifically made a part of this Agreement. The Schedules, including the Disclosure Schedule, shall consist of individual schedules, each of which shall be numbered and lettered in the same manner as the section or subsection of this Agreement to which such schedule relates. Disclosures made under one Schedule of the Disclosure Schedule or any other Schedule shall be deemed as disclosure relating to one or more other Schedules only if such disclosure is specifically cross-referenced in such other Schedules.

11.9 Severability

The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement in one jurisdiction shall not affect the enforceability of this Agreement in any other jurisdiction or of the remaining portions of this Agreement or any part thereof, all of which are inserted conditionally on their being valid in law, and, in the event that any one or more of the words, phrases, sentences, clause or sections contained in this Agreement shall be declared invalid in a jurisdiction, this Agreement shall be construed in so far as the laws of that jurisdiction are concerned, as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted and so as to effect as closely as possible the intent of the parties as contemplated in this Agreement. If such invalidity is caused by length of time or size of area, or both, the otherwise invalid provision will be considered to be reduced to a period or area which would cure such invalidity.

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11.10 Effect of Investigation

No information provided to or obtained by Buyer pursuant to Section 5.2, notice delivered to Buyer pursuant to Section 5.3 or any other investigation or knowledge acquired by Buyer, any other Buyer Indemnitee or any of their respective Representatives, whether before or after the execution hereof, shall (i) operate as a waiver with respect to or otherwise affect any representation, warranty, covenant or agreement made or given (as modified by the Disclosure Schedule delivered concurrently with the execution of this Agreement) by Seller or any condition to the obligations of Buyer, in each case, in this Agreement or any Related Agreement or in any other instrument or document delivered in connection herewith or therewith, or (ii) limit or otherwise affect the remedies available to Buyer hereunder (including, but not limited to, any Buyer Indemnitee’s right to seek indemnification pursuant to Article IX hereof).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

ADAPTEC, INC.
By:	/s/ JOHN J. QUICKE
Name:	John J. Quicke
Title:	Interim President and Chief Executive Officer
PMC-SIERRA, INC.
By:	/s/ GREGORY S. LANG
Name:	Gregory S. Lang
Title:	President & Chief Executive Officer

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EX-2.2

Exhibit 2.2

AMENDMENT TO

ASSET PURCHASE AGREEMENT

This Amendment to the Asset Purchase Agreement (this “Amendment”) is dated as of June 8, 2010, by and between Adaptec, Inc., a Delaware corporation (“Seller”), and PMC-Sierra, Inc., a Delaware corporation (“Buyer”).

WHEREAS, each of the parties hereto entered into that certain Asset Purchase Agreement, dated as of May 8, 2010 (the “Asset Purchase Agreement”); and

WHEREAS, each of the parties hereto now desires to amend the Asset Purchase Agreement as more particularly described herein.

NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Section 1. Definitions Used Herein. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth for such terms in, or incorporated by reference into, the Asset Purchase Agreement.

Section 2. Amendment.

(a) Schedule 1.1(a) to the Asset Purchase Agreement is hereby modified as described in Annex 1.1(a) hereto.

(b) Schedule 2.1(b) to the Asset Purchase Agreement is hereby modified as described in Annex 2.1(b) hereto.

(c) Schedule 2.1(c) to the Asset Purchase Agreement is hereby replaced in its entirety with Annex 2.1(c) hereto.

(d) Schedule 2.1(d) to the Asset Purchase Agreement is hereby modified as described in Annex 2.1(d) hereto.

(e) Schedule 2.1(e) to the Asset Purchase Agreement is hereby modified as described in Annex 2.1(e) hereto.

(f) Schedule 2.2(r) to the Asset Purchase Agreement is hereby modified as described in Annex 2.2(r) hereto.

(g) Schedule 3.12(b)(i) to the Asset Purchase Agreement is hereby replaced in its entirety with Annex 3.12(b)(i) hereto.

(h) Schedule 3.12(e) to the Asset Purchase Agreement is hereby replaced in its entirety with Annex 3.12(e) hereto.

(i) Schedule A to Exhibit D to the Asset Purchase Agreement is hereby replaced in its entirety with Schedule A hereto.

(j) Section 2.7(e) of the Asset Purchase Agreement is hereby amended by adding he following words at the end thereof and before the semicolon:

“substantially in the form attached hereto as Exhibit F”.

(k) Exhibit F is hereby attached to the Asset Purchase Agreement in the form attached hereto as Annex F.

(l) Section 6.10(a)(i) of the Asset Purchase Agreement is hereby replaced in its entirety with the following:

“(i) retain copies of technology specifically identified and licensed to Seller in the Transition Services Agreement and such other Records necessary for Seller to perform its obligations under the Transition Services Agreement”

Section 3. Miscellaneous.

(a) Effect; Ratification. The amendments set forth herein are effective solely for the purposes set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to, or an acknowledgment of, any amendment, waiver or modification of any other term or condition of the Asset Purchase Agreement or of any other instrument or agreement referred to therein or (ii) prejudice any right or remedy which any party hereto may now have or may have in the future under or in connection with the Asset Purchase Agreement, as amended hereby, or any other instrument or agreement referred to therein. Each reference in the Asset Purchase Agreement to “this Agreement,” “herein,” “hereof” and words of like import and each reference in the Related Agreements shall mean the Asset Purchase Agreement as amended hereby. This Amendment shall be construed in connection with and as part of the Asset Purchase Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Asset Purchase Agreement and each other instrument or agreement referred to therein, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

2

(b) Counterparts. This Amendment may be executed in any number of counterparts, each such counterpart constituting an original and all of which when taken together shall constitute one and the same instrument.

(c) Severability. Any provision contained in this Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Amendment in that jurisdiction or the operation, enforceability or validity of such provision in any other jurisdiction.

(d) Governing Law. The provisions of Section 11.4 of the Asset Purchase Agreement shall govern this Amendment.

(e) Headings. Titles and headings of sections of this Amendment are for convenience of reference only and shall not affect the construction of any provision of this Amendment.

(Signature Pages Follow)

3

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.

BUYER:	PMC-SIERRA, INC.
	By:	/s/ GREGORY S. LANG
	Name:	Gregory S. Lang
	Title:	President and Chief Executive Officer
SELLER:	ADAPTEC, INC.
	By:	/s/ JOHN J. QUICKE
	Name:	John J. Quicke
	Title:	Interim President and Chief Executive Officer

[Signature Page to Amendment to Asset Purchase Agreement]

EX-10.1

Exhibit 10.1

June 15, 2010

Mary Dotz

[Address]

Dear Mary,

After careful consideration of our future business, we need to make some difficult business decisions, one of which impacts your position. We regret to notify you that your position will be eliminated. Your last work date and termination date will be September 30, 2010. Your current health and dental benefits end on September 30, 2010. Upon your termination date, you will receive your final paycheck which will include payout of unused accrued vacation. After working through your termination date, you are eligible to receive the separation package outlined below.

Please sign and return the Separation Agreement and General Release below along with the exit paperwork to Adaptec Human Resources in the enclosed envelope no later than July 30, 2010.

SEPARATION AGREEMENT AND GENERAL RELEASE

1. Adaptec’s Consideration for Agreement: In exchange for the release and agreements described herein, Adaptec agrees as follows (as noted in your Employment Agreement):

a) On the latter of the eighth day following the date Adaptec receives a signed Agreement or the termination date, but no later than 30 days from your termination date, and provided that you have returned all Adaptec property, equipment, and assets, your severance payment will be processed in a one time lump sum payment equal to nine (9) months of your base payand a target bonus of $169,000, less legally mandated payroll deductions and withholdings. This payment is being given as consideration for this Agreement and is not otherwise due.

b) You also acknowledge that Adaptec stock option grants that have vested as of the termination date must be exercised within three (3) months of termination.

c) Beginning on October 1, 2010, you shall be entitled to continuation of your Adaptec health, vision, dental, and Employee Assistance Program (EAP) benefits pursuant to the Consolidated Omnibus Budget and Reconciliation Act (“COBRA”). You must submit completed COBRA Qualifying Event Notification enrollment forms directly to Benefit Concepts for coverage. Adaptec agrees to reimburse you for the premiums payments for those COBRA benefits for up to nine (9) months. (Send receipts to Kerstin Aiello in HR.)

d) You have until December 15, 2010 (2 ¹/2 months from your termination date) to sign up for your career search program valued up to $ 5,000 with Right Management Consultants. (pamphlet in folder)

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2. Your Consideration for Agreement: In consideration for the payments and undertakings described above, you individually and on behalf of your representatives, successors, and assigns, do hereby completely release and forever discharge Adaptec, its shareholders, employees, owners, officers and directors, Board Members, and all other representatives, agents, entities, subsidiaries, divisions, directors, attorneys, successors, and assigns from all claims, rights, demands, actions, obligations, and causes of action of any and every kind, nature and character, known or unknown, which you may now have, or have ever had, against them arising from or in any way connected with the employment relationship between the parties, any actions during the relationship or the termination thereof. This Release covers all statutory, common law, constitutional and other claims, including but not limited to: all “wrongful discharge” and “constructive discharge” claims; all claims relating to any contracts of employment, express or implied; any claims for defamation, misrepresentation, fraud, or breach of the covenant of good faith and fair dealing, express or implied; any claim for negligent or intentional infliction of emotional distress; any claim for negligence; any claims for attorney’s fees or costs; any tort claims of any nature; any claims under federal, state or municipal statute or ordinance; any claims under the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, 42 U.S.C. Section 1981, the Age Discrimination in Employment Act, the Older Workers’ Benefit Protection Act, the Americans With Disabilities Act, the Employee Retirement Income Security Act, the California Labor and Civil Codes, the California Constitution, Federal Rehabilitation Act of 1973, Federal Family and Medical Leave Act, the California Family Rights Act, the Worker Adjustment and Retraining Notification Act (WARN), CalWARN, and any other laws and regulations relating to employment, employment discrimination, and employment termination. This release is not intended to and does not include a release of any claims which, by law, cannot be released.

3. Wavier of Unknown Future Claims: You have read Section 1542 of the Civil Code of the State of California, which provides as follows:

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

You acknowledge that Section 1542 gives you the right not to release existing claims, of which you are not now aware, unless you voluntarily choose to waive this right. Having been so apprised, you hereby voluntarily waive the rights described in Section 1542, and elect to assume all risks for claims that now exist in your favor known or unknown, arising from the subject matter of this Agreement.

4. Confidentiality of Agreement: You agree that the existence, terms and conditions of this Agreement, including any and all references to any alleged underlying claims, are strictly confidential. You shall not disclose, discuss or reveal the existence or the terms of this Agreement to any persons, entities or organizations except to your spouse, attorney, financial advisor, or as required by court order.

5. Savings Clause: Should any of the provisions of this Agreement be determined to be invalid by a court or government agency of competent jurisdiction, it is agreed that such determination shall not affect the enforceability of the other provisions herein. California law shall govern the validity and interpretation of this Agreement.

6. Preparation of Agreement: Regardless of which party initially drafted this Agreement, it shall not be construed against any one party, and shall be construed and enforced as a mutually prepared Agreement.

7. Mandatory Arbitration Clause: You and Adaptec agree that any action to enforce the terms and conditions of this Agreement or for the breach of this Agreement shall be referred to final and binding arbitration. Any arbitration proceeding will be governed by the rules and procedures of the American Arbitration Association and the Federal Arbitration Act and the parties hereto expressly waive their rights, if any, to have any such matters heard by a court or jury, or administrative agency whether federal or state. The prevailing party in any arbitration to enforce this Agreement or remedy its breach will be entitled to costs and reasonable attorney’s fees incurred.

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8. Complete and Voluntary Agreement: This Agreement constitutes the entire understanding of the parties on the subjects covered. You expressly warrant that you have read and fully understand this Agreement; that you have had the opportunity to seek legal counsel of your own choosing and to have the terms of the Agreement fully explained to you that you are not executing this Agreement in reliance on any promises, representations or inducements other than those contained herein; and that you are executing this Release voluntarily, free of any duress or coercion. In addition, by signing this Agreement, you are confirming the following:

(a) You have been provided until July 30, 2010 in which to consider whether or not to sign this Agreement, and that, having been advised of that entitlement; you may elect to sign this Agreement at any time prior to or on that date.

(b) You may revoke your acceptance of this Agreement within seven (7) calendar days of signing it with respect to claims arising under the Age Discrimination in Employment Act (“ADEA Rescission Period”). To be effective, rescission must be in writing, delivered to Kerstin Aiello, Adaptec Inc., 691 South Milpitas Blvd, M/S 15, Milpitas, CA 95035, within the ADEA Rescission Period, or sent to Adaptec, at such address, by certified mail, return receipt requested, postmarked within the ADEA Rescission Period before the close of the ADEA Rescission Period.

(c) The consideration provided to you in this Agreement is in addition to any consideration that you would otherwise be entitled to receive; and

(d) You may submit any inquiries regarding the severance plan within one year of your separation from service, in writing, delivered to the Severance Plan Administrator, 691 South Milpitas Blvd, M/S 15, Milpitas, CA 95035 by certified mail, return receipt requested, and postmarked within the applicable period.

Cancellation of Agreement By Adaptec: If you exercise your right of rescission under Section 8 (b) of this Agreement, Adaptec will have the right to terminate this Agreement in its entirety.

If you choose to accept the terms of this Agreement, please sign on the line provided below and return the original in the enclosed self addressed envelope.

Sincerely,

John Quicke

Chief Executive Officer

I have read and understand the Agreement above and agree to be bound by its terms and conditions.

Agreed:
Dated: June 16, 2010	BY:	Mary Dotz	/	/s/ MARY DOTZ
		Print	/	(Signature)

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, John J. Quicke, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Adaptec, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ JOHN J. QUICKE
Date: August 11, 2010	John J. Quicke Interim Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mary L. Dotz, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Adaptec, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ MARY L. DOTZ
Date: August 11, 2010	Mary L. Dotz Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John J. Quicke, certify to the best of my knowledge based upon a review of the Quarterly Report on Form 10-Q of Adaptec, Inc. for the quarter ended July 2, 2010 (the “Form 10-Q”), that the Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Adaptec, Inc. for the quarterly periods covered by the Form 10-Q.

	By: /s/ JOHN J. QUICKE
Date: August 11, 2010	John J. Quicke Interim Chief Executive Officer

I, Mary L. Dotz, certify to the best of my knowledge based upon a review of the Form 10-Q, that the Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Adaptec, Inc. for the periods covered by the Form 10-Q.

	By: /s/ MARY L. DOTZ
Date: August 11, 2010	Mary L. Dotz Chief Financial Officer