8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 5, 2004

APPLIED MICRO CIRCUITS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

000-23193	94-2586591
(Commission File No.)	(IRS Employer Identification No.)

6290 Sequence Drive

San Diego, California 92121

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (858) 450-9333

Item 2. Acquisition or Disposition of Assets

On May 5, 2004, Applied Micro Circuits Corporation, a Delaware corporation (“AMCC”) acquired from International Business Machines Corporation (“IBM”) pursuant to an asset purchase agreement certain tangible and intellectual property assets (including certain copyrights and know-how) associated with IBM’s 400 series of embedded PowerPC^® standard products.

In addition, AMCC and IBM entered into certain other agreements, including a custom sales agreement, an intellectual property license agreement, patent license agreement, PowerPc license agreement and core connect bus license agreement (collectively with the asset purchase agreement, the “Operative Agreements”). Under the terms of the Operative Agreements, the aggregate purchase price for the assets was $235,000,000 in cash and was paid out of AMCC’s general corporate funds. The foregoing description of the acquisition is qualified in its entirety by reference to the Operative Agreements, copies of which are attached as exhibits to this Report under Item 7 and are incorporated herein by reference.

On May 5, 2004, AMCC issued a press release in connection with the transaction. The press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits

(a) Financial Statements of Business Acquired.

Financial statements required by this item shall be filed by amendment not later than 60 days after the date this Current Report on Form 8-K is required to be filed.

(b) Pro Forma Financial Information.

Pro forma financial information required by this item shall be filed by amendment not later than 60 days after the date this Current Report on Form 8-K is required to be filed.

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(c) Exhibits

2.1	*Asset Purchase Agreement dated April 12, 2004 by and between Applied Micro Circuits Corporation and International Business Machines Corporation.
2.2	Amendment No. 1 to Asset Purchase Agreement dated May 5, 2004 by and between Applied Micro Circuits Corporation and International Business Machines Corporation.
2.3	*First Amended and Restated ASIC Attachment No. 5 to Custom Sales Agreement No. 001006, between International Business Machines Corporation and Applied Micro Circuits Corporation, effective May 5, 2004.
2.4	*Intellectual Property Agreement dated as of April 10, 2004, between International Business Machines Corporation and Applied Micro Circuits Corporation.
2.5	*Amendment dated May 3, 2004 to the Intellectual Property Agreement dated as of April 10, 2004 between International Business Machines Corporation and Applied Micro Circuits Corporation.
2.6	*CoreConnect™ BUS License Agreement between International Business Machines Corporation and Applied Micro Circuits Corporation, effective May 5, 2004.
2.7	*Power PC License Agreement between International Business Machines Corporation and Applied Micro Circuits Corporation, effective May 5, 2004.
2.8	*Amendment dated May 5, 2004 to the Power PC License Agreement between International Business Machines Corporation and Applied Micro Circuits Corporation.
2.9	*Patent License Agreement dated April 10, 2004 between International Business Machines Corporation and Applied Micro Circuits Corporation.
99.1	Press Release, dated May 5, 2004.

* Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Commission.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	APPLIED MICRO CIRCUITS CORPORATION
Dated: May 19, 2004	By:	/s/    STEPHEN M. SMITH
		Stephen M. Smith
		Senior Vice President Finance, Chief Financial Officer, Chief Accounting Officer, Secretary and Treasurer

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Exhibit Index

2.1	*Asset Purchase Agreement dated April 12, 2004 by and between Applied Micro Circuits Corporation and International Business Machines Corporation.
2.2	Amendment No. 1 to Asset Purchase Agreement dated May 5, 2004 by and between Applied Micro Circuits Corporation and International Business Machines Corporation.
2.3	*First Amended and Restated ASIC Attachment No. 5 to Custom Sales Agreement No. 001006, between International Business Machines Corporation and Applied Micro Circuits Corporation, effective May 5, 2004.
2.4	*Intellectual Property Agreement dated as of April 10, 2004, between International Business Machines Corporation and Applied Micro Circuits Corporation.
2.5	*Amendment dated May 3, 2004 to the Intellectual Property Agreement dated as of April 10, 2004 between International Business Machines Corporation and Applied Micro Circuits Corporation.
2.6	*CoreConnect™ BUS License Agreement between International Business Machines Corporation and Applied Micro Circuits Corporation, effective May 5, 2004.
2.7	*Power PC License Agreement between International Business Machines Corporation and Applied Micro Circuits Corporation, effective May 5, 2004.
2.8	*Amendment dated May 5, 2004 to the Power PC License Agreement between International Business Machines Corporation and Applied Micro Circuits Corporation.
2.9	*Patent License Agreement dated April 10, 2004 between International Business Machines Corporation and Applied Micro Circuits Corporation.
99.1	Press Release, dated May 5, 2004.

* Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Commission.

EX-2.1

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 2.1

ASSET PURCHASE AGREEMENT

between

Applied Micro Circuits Corporation

(as “Buyer”),

and

International Business Machines Corporation,

(as “Seller”)

Dated: April     , 2004

TABLE OF CONTENTS

Article I.	Purchase and Sale of Assets	6
1.1.	Transferred Assets and Transferred Contracts	6
1.2.	Excluded Assets	6
1.3.	Consideration	6
1.4.	Assumed Liabilities	7
Article II.	Closing	7
2.1.	Closing Date	7
2.2.	Closing Statement	8
Article III.	Tax Matters	8
3.1.	Allocation of Purchase Price	8
3.2.	Filing of Returns and Payment of Taxes	9
3.3.	Refunds and Credits	9
3.4.	Transfer Taxes	9
Article IV.	Additional Covenants and Agreements	10
4.1.	Employees and Employee Benefits	10
4.2.	Further Action	11
4.3.	Post Closing Payments	12
4.4.	Consents, Novations and Subcontracted Work	12
4.5.	Product Warranty Services	13
4.6.	Excluded Liabilities	13
4.7.	Provision of Omitted Assets	13
4.8.	Permitted Liens	13
4.9.	Seller Conduct Prior to the Closing Date	14
4.10.	Financial Data	14
Article V.	Representations and Warranties of Buyer	14
5.1.	Incorporation	14
5.2.	Authority	15

ii

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

5.3.	No Conflict	15
5.4.	Governmental Consents	15
5.5.	No Broker	15
Article VI.	Representations and Warranties of Seller	16
6.1.	Incorporation	16
6.2.	Authority	16
6.3.	No Conflict	16
6.4.	Governmental Consents	16
6.5.	No Broker	17
6.6.	Title to Personal Property	17
6.7.	Litigation	17
6.8.	No Rights In Others To Transferred Assets	17
6.9.	Contracts	17
6.10.	Warranties	17
6.11.	Other Information	17
6.12.	Transferred Contract Consents	18
6.13.	Taxes	18
6.14.	Inventory	18
6.15.	Regular Employees	18
Article VII.	Conditions to Buyer’s Obligations	18
7.1.	Representations and Warranties	18
7.2.	Consents, Approvals and Injunctions	18
7.3.	Governmental Rule	19
7.4.	Operative Agreements	19
7.5.	Closing Documents	19
7.6.	Proceedings	19
7.7.	Audit Findings - Revenue	19
7.8.	Audit Findings – Other	20
7.9.	Audit Delivery	20
Article VIII.	Conditions to Seller’s Obligations	20
8.1.	Payment of Purchase Price	20
8.2.	Representations and Warranties	20

iii

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

8.3.	Consents, Approvals and Injunctions	20
8.4.	Governmental Rule	21
8.5.	Operative Agreements	21
8.6.	Closing Documents	21
8.7.	Proceedings	21
Article IX.	General Matters	21
9.1.	Survival of Representations and Warranties	21
9.2.	Limitation of Liability	22
9.3.	Public Announcements	22
9.4.	Costs	22
9.5.	[*]	23
9.6.	Modification and Waiver	23
9.7.	Governing Law	23
9.8.	Notices	23
9.9.	Bulk Sales	24
9.10.	Assignment	24
9.11.	Counterparts	24
9.12.	No Third Party Beneficiaries	24
9.13.	Entire Agreement	24

Schedules:

Schedule A	Additional Permitted Liens
Schedule 1.1	Transferred Assets
Schedule 1.4	Assumed Liabilities
Schedule 3.1	Allocation of Purchase Price
Schedule 4.1(a)(1)	Regular Employees by Serial Number
Schedule 4.1(a)(3)	Specified Employees for Voluntary Offers
Schedule 4.4	Required Consents to Assignment/Novation
Schedule 6.7	Litigation
Schedule 6.13	Taxes

iv

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibits:

Exhibit A	Assignment and Assumption Agreement
Exhibit B	Bill of Sale
Exhibit C	Schedule of Disclosures and Exceptions
Exhibit D	Financial Data

v

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the “Agreement”), executed and dated as of April     , 2004, by and between Applied Micro Circuits Corporation, a Delaware corporation (“Buyer”), and International Business Machines Corporation, a New York corporation (“Seller” or “IBM”).

W  I  T  N  E  S  S  E  T  H:

WHEREAS, Seller wishes to sell certain Transferred Assets (as defined herein) and assign certain Transferred Contracts used in the development and sale of certain IBM PowerPC embedded 4xx-based standard products; and

WHEREAS, Buyer wishes to purchase from Seller, and Seller wishes to sell and transfer to Buyer, the Transferred Assets and the Transferred Contracts for the Purchase Price and subject to the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises set forth above and the respective covenants, agreements, representations and warranties hereinafter set forth, Buyer and Seller hereby agree as follows:

Definitions.

Certain Definitions. As used in this Agreement, the following terms shall have the meanings specified below.

“Affiliate” shall mean, as to any Person, any other Person which is controlling, controlled by or under common control with such Person.

“Allocation Statements” shall have the meaning set forth in Section 3.1.

“Assumed Liabilities” shall have the meaning set forth in Section 1.4.

“Assumption Agreement” shall mean the Assignment and Assumption Agreement in the form set out in Exhibit “A” to be entered into by the Buyer and the Seller on the Closing Date and by which Buyer assumes the Assumed Liabilities.

“Bill of Sale” shall mean the Bill of Sale in the form set out in Exhibit “B” to be entered into by the Buyer and Seller on the Closing Date.

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Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

“Burdensome Condition” shall mean any action taken, or credibly threatened, by or before any Governmental Authority or other Person to challenge the legality of the transactions contemplated by the Operative Agreements or that would otherwise deprive a Party of the material benefit of any such transaction, including (i) the pendency of an investigation by a Governmental Authority (formal or informal), (ii) the institution of any litigation, or threat thereof, (iii) an order by a Governmental Authority of competent jurisdiction preventing consummation of the transactions contemplated by the Operative Agreements or placing material conditions or limitations upon such consummation, or (iv) the issuance of any subpoena, civil investigative demand or other request for documents or information relating to such transactions which request is unreasonably burdensome in the reasonable judgment of the applicable Person.

“Closing” shall have the meaning set forth in Section 2.1.

“Closing Date” shall have the meaning set forth in Section 2.1.

“Closing Statement” shall have the meaning set forth in Section 2.2.

“Code” shall have the meaning set forth in Section 3.1.

“Confidentiality Agreement” shall mean that agreement providing for confidentiality between Buyer and Seller regarding the transaction contemplated herein dated March 5, 2004.

“CoreConnect Bus License Agreement” shall mean the agreement so entitled between Buyer and Seller entered into on the Date of Execution.

“Custom Sales Agreement” shall mean the agreement entitled Custom Sales Agreement dated December 20, 2002 between the Seller and Buyer and ASIC Attachment No. 5 entered into on the Date of Execution.

“Date of Execution” shall mean the date this Agreement and the other Operative Agreements identified for signature in accordance with their terms on that date are signed.

“Design Kit License Agreement” shall mean the agreement entitled IBM Design Kit License Agreement between the Seller and Buyer and all attachments thereto entered into on the Date of Execution.

“Disclosure Schedule” shall have the meaning set forth in the Schedule of Disclosures and Exceptions to this Agreement.

“Effective Date” shall mean the time the Closing has been completed.

“Final Determination” shall mean (i) in respect of U.S. Federal income taxes a “determination” as defined in Section 1313(a) of the Code or the execution of an Internal

2

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Revenue Service Form 870-AD, and (ii) in respect of Taxes other than U.S. Federal income taxes, any final determination of liability in respect of a Tax which determination, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise (including by reason of the expiration of a statute of limitations or a period for the filing of claims for refunds, amended returns or appeals from adverse determinations).

“Governmental Authority” shall mean any applicable Federal, state, local or foreign court, governmental or administrative agency or commission or other governmental agency, authority, instrumentality or regulatory body of competent jurisdiction.

“Governmental Rule” shall mean any applicable statute, law, treaty, rule, code, ordinance, regulation or order of any Governmental Authority or any judgment, decree, injunction, writ, order or like action of any Federal, state, local or foreign court, governmental or administrative agency or commission, or other governmental agency, authority, instrumentality or regulatory body, arbitrator or other judicial tribunal of competent jurisdiction.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“In Scope Products” shall have the meaning ascribed to it under the Patent License Agreement.

“Intellectual Property Agreement” shall mean the agreement so entitled between the Buyer and Seller, entered into on the Date of Execution.

“Liens” shall mean pledges, claims, liens, charges, encumbrances and security interests of any kind whatsoever.

“Limitation Amount” shall have the meaning set forth in Section 9.2.

“Operative Agreements” shall mean this Agreement, the Intellectual Property Agreement, Patent License Agreement, CoreConnect Bus License Agreement, Design Kit License Agreement, POWERPC License Agreement, the Custom Sales Agreement, the Transition Services Agreement, the Bill of Sale, and the Assumption Agreement.

“Parties” shall mean Buyer and Seller.

“Party” shall mean Buyer or Seller, as applicable.

“Patent License Agreement” shall mean the agreement so entitled between the Buyer and the Seller, entered into on the Date of Execution.

“Permitted Liens” shall mean: (i) Liens for Taxes, assessments and governmental charges due and being contested in good faith by Seller; (ii) any Liens, that individually or in the aggregate, are not substantial in character or amount or do not materially

3

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

adversely affect the value of the Transferred Assets; (iii) Liens for Taxes either not due and payable or due but for which notice of assessment has not been given, or which may thereafter be paid without penalty; (iv) any statutory Liens claimed or held by any Governmental Authority that have not at the time been filed or registered against title to the Transferred Assets or that relate to obligations that are not due or delinquent; (v) any imperfections of title or similar Liens, if any, which imperfections of title or similar Liens do not materially impair the use of the assets to which they relate; (vi) Liens created or granted by Buyer or otherwise arising in respect of claims against the Buyer (and not the Seller); and (vii) any Liens described on Schedule A.

“Person” shall mean any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Authority or other entity, and shall include any successor (by merger or otherwise) of such entity.

“POWERPC License Agreement” shall mean the agreement so entitled between the Buyer and the Seller, entered into on the Date of Execution.

“Pre-Closing Tax Period” shall have the meaning set forth in Section 3.2.

“Purchase Price” shall have the meaning set forth in Section 1.3.

“Regular Employees” shall have the meaning set forth in Section 4.1.

“Specified Employees” shall have the meaning set forth in Section 4.1.

“Subcontracted Work” shall have the meaning set forth in Section 4.4.

“Subsidiary” of any Person shall mean a corporation, company, or other entity (i) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, limited liability company, joint venture or unincorporated association), but more than fifty percent (50%) of whose ownership interest representing the right to direct, or cause the direction of, the management or policies of such entity is, now or hereafter owned or controlled, directly or indirectly, by such Person, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists.

“Tax” or “Taxes” shall mean all taxes, imposts, duties, withholdings, charges, fees, levies, or other assessments imposed by any Governmental Authority or taxing authority, whether domestic or foreign (including but not limited to, income, excise, property, sales, use, transfer, conveyance, payroll or other employment related tax, license and registration fees, ad valorem, value added, withholding, social security, national insurance (or other similar contributions or payments), franchise, severance or estimated severance, stamp taxes, taxes based upon or measured by capital stock, net worth or gross receipts and other taxes), together with all interest, fines, penalties and additions attributable to or imposed with respect to such amounts and any obligations under any agreement or arrangements with any Person with respect to such amounts.

4

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

“Tax Returns” shall have the meaning set forth in Section 3.2.

“Transferred Assets” shall mean such tangible personal property listed on Schedule 1.1 to this Agreement, subject to Section 1.1, as the same may be depleted or augmented prior to the Closing Date while being managed in the ordinary course of Seller’s business.

“Transferred Contracts” shall mean those contracts and agreements (including purchase orders, if any) set forth in Schedule 1.4 designated to be assigned to Buyer, subject to Section 4.4.

“Transition Services Agreement” shall mean the agreement and all annexes thereto so entitled between Buyer and Seller entered into on the Date of Execution.

5

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Article I. Purchase and Sale of Assets.

1.1 Transferred Assets and Transferred Contracts. Upon the terms and subject to the conditions hereof, as of the Closing Date, Seller hereby sells, transfers, conveys, assigns and delivers to Buyer, and Buyer hereby purchases and accepts from Seller, all right, title and interest of Seller in and to the (i) Transferred Assets and (ii) the rights and benefits associated with the Transferred Contracts (subject to the provisions of Section 4.4). The Transferred Assets and the Transferred Contracts (subject to Section 4.4 and any obligations of confidentiality) will be made available on the Closing Date, where then located as identified by Seller to Buyer in writing, it being understood and agreed that for (a) any equipment on loan to a customer or supplier and located at a customer’s or supplier’s facility, such equipment will remain at the customer’s or supplier’s facility pursuant to, and in accordance with, the terms and conditions of the applicable loan agreement between Seller and customer and (b) for all Transferred Assets other than those in the foregoing subsection (a), Seller will, on the Effective Date, ship such Transferred Assets to the Buyer.

1.2 Excluded Assets. Notwithstanding anything to the contrary in this Agreement, any assets which are not Transferred Assets or Transferred Contracts will be retained by Seller and are excluded from the transaction, including (i) any interest in any contractual arrangement with any Affiliate of Seller, (ii) any interests of Seller in real property or any fixtures, and (iii) all accounts receivables in respect of goods or services to the extent shipped or provided by Seller or Seller’s Affiliates, directly or indirectly, prior to 11:59 p.m. ( Eastern Standard Time ) on the Closing Date. All intellectual property matters related to this transaction are addressed exclusively in the Intellectual Property Agreements and no intellectual property matters are included in the subject matter of this Agreement.

1.3 Consideration. The purchase price to be paid by Buyer to Seller for the Transferred Assets (including any finished goods inventory having a value, as determined by using the unit prices set forth in the Custom Sales Agreement, of up to [*]), the Transferred Contracts, the matters set forth in the Intellectual Property Agreements and the Assumed Liabilities shall be [*] (the “Purchase Price”), it being understood that the Parties will make such necessary financial adjustments pursuant to Section 2.2 if the value of the finished goods inventory actually transferred to Buyer is either less or more then [*] (such amount, referred to as the “Inventory Baseline”). On the Closing Date, Buyer shall pay to Seller the Purchase Price by electronic funds transfer, such sum in immediately available funds. All payments shall be made in United States dollars. The portion of the Purchase Price attributable to the agreements other than the Intellectual Property Agreement shall be paid to the following account:

[*]

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Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

The consideration for the Intellectual Property Agreements shall be paid to the following account:

[*]

1.4 Assumed Liabilities. Upon the terms and subject to the conditions hereof, as of the Closing, Seller will assign and transfer to Buyer, and Buyer will accept and assume, and thereafter shall fully perform and discharge, on a timely basis and in accordance with their respective terms and conditions, only (a) the liabilities, obligations and commitments of Seller listed on Schedule 1.4 hereto (including the Transferred Contracts) but only to the extent such obligations (i) do not arise from or relate to any breach by Seller of any provision of any of such Transferred Contracts and (ii) do not arise from or relate to any event, circumstance or condition occuring or existing on or prior to the Closing Date that, with notice or lapse of time, would constitute or result in a breach of any of such Transferred Contracts, (b) any warranty obligations of Seller for any In Scope Products sold, by Seller to any customers or distributors prior to Closing, including but not limited to, those warranty obligations listed in Schedule 1.4 hereto, and (c) the existing software maintenance obligations of Seller listed in Schedule 1.4 with respect to software licensed, by Seller prior to Closing, in connection with any In Scope Product, it being understood, in the case of (a) and (b) above, and subject to Section 4.5, that Buyer shall perform such warranty or maintenance service obligations on behalf of and for Seller and Buyer will have no direct obligation or liability to Seller’s customers or distributors on account of such warranty or maintance obligations of the Seller or its Affiliates. (collectively, subsections (a), (b), (c) referred to as the “Assumed Liabilities”). Except for the Assumed Liabilities, Buyer is not assuming any liability, obligation or commitment of any nature of Seller related to Seller’s or its Affiliates’ operations or sales of the In Scope Product prior to the Closing date, and any such liability, obligation or commitment of the Seller or its Affiliates shall be an Excluded Liability. For purposes of this Agreement, all liabilities of Seller and any of its Affiliates not expressly listed in the definition of Assumed Liabilities, or expressly excluded from the definition of Assumed Liabilities under subsections (i) and (ii) of this Section 1.4, are referred to as “Excluded Liabilities.”

Article II. Closing.

2.1 Closing Date. (a) Subject to the conditions set forth in Articles VII and VIII below, the closing of the transaction provided for in this Agreement (the “Closing”) shall take place at the offices of Seller on the first business day following the satisfaction or waiver of all other conditions set forth in Articles VII and VIII, or at such other time or on such other date as may be agreed by Seller and Buyer (the “Closing Date”). All transactions provided for herein to occur on and as of the Closing Date shall be deemed to have occurred simultaneously and to be effective as of 11:59 p.m. (Eastern Standard Time) on the Closing Date. Notwithstanding anything to the contrary contained in any of the Operative Agreements, none of the Operative Agreements (other than this Agreement) shall become effective unless and until a Closing is consummated.

7

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

(b) If the Closing is not completed by June 15, 2004, Seller shall have the right at any time thereafter (but prior to Closing) to terminate the Agreement (and all Operative Agreements and attachments thereto, as well as the Business Sale Agreement), upon prior written notice to the Buyer, for any reason or no reason; if the Closing is not completed by August 15, 2004, Buyer shall have the right at any time thereafter (but prior to Closing) to terminate the Agreement (and all Operative Agreements and attachments thereto, as well as the Business Sale Agreement), upon written notice to the Seller, for any reason or no reason; provided however, in both cases, that the right to terminate this Agreement under this Section 2.1(b) shall not be available to any Party whose action or failure to act has been a prinicpal cause of or resulted in the failure of the Closing to occur on or before such date and such action or failure to act constitutes a breach of the Agreement.

2.2 Closing Statement. Within [*] after Closing, Seller will prepare and deliver to Buyer a closing statement for the inventory and test equipment that constitute the Transferred Assets (the “Closing Statement”), as of the Closing Date. The purpose of the Closing Statement is to correctly reflect any changes in the Inventory Baseline and the listing of such physical assets between the Date of Execution and the Closing. For purposes of the Closing Statement, each unit of finished goods inventory will be assigned the price ascribed to it in the Custom Sales Agreement and each piece of test equipment will be assigned its net book value on the books of the Seller as of the Closing Date. The Closing Statement shall become final and binding upon the Parties unless Buyer gives written notice of its disagreement of such items included on or excluded from the Closing Statement within [*] following Buyer’s receipt of the Closing Statement. Any such notice shall specify in reasonable detail the nature of any disagreement so asserted. In the event that the Closing Statement (as finally resolved) indicates an error in the Purchase Price, within [*] of such statement becoming final, such error shall be corrected by either (i) Seller providing a credit to Buyer under the Custom Sales Agreement in the event that Buyer overpaid at the Closing or (ii) Buyer tendering a check to Seller in the event that Buyer underpaid at the Closing.

Article III. Tax Matters.

3.1 Allocation of Purchase Price. Except as otherwise required pursuant to a Final Determination, Buyer and Seller agree to act in accordance with the allocations of the Purchase Price set forth in Schedule 3.1 (the “Allocation Statements”) for all Tax purposes, including for purposes of any returns, including any forms or reports (including IRS Form 8594) required to be filed pursuant to Section 1060 of the relevant version of the Internal Revenue Code (the “Code”) or any comparable provision of local, state or foreign law, to refrain from taking any position inconsistent with any such return or the Allocation Statements, and to cooperate in the preparation of any such Section 1060 or comparable forms or reports and to timely file such Section 1060 or comparable forms or reports in the manner required by applicable law.

[*] shall prepare the Form 8594 under Section 1060 of the Code based on the Allocation Statements and deliver such form and all documentation used in the preparation and support of such form to [*] within [*] after the Closing Date.

8

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Buyer and Seller shall, and shall cause their respective Affiliates to cooperate with respect to Tax matters.

3.2 Filing of Returns and Payment of Taxes. [*] shall prepare and file, or cause to be prepared and filed, with the appropriate authorities all Tax returns, reports and forms (herein “Tax Returns”) and shall pay, or cause to be paid, when due all Taxes relating to the Transferred Assets attributable to any taxable period which ends on or prior to the Closing Date (herein “Pre-Closing Tax Period”). [*] shall prepare and file, or cause to be prepared and filed, with the appropriate authorities all Tax Returns, and shall pay, or cause to be paid, when due all Taxes relating to the Transferred Assets attributable to taxable periods which are not part of the Pre-Closing Tax Period. If, in order to properly prepare its Tax Returns for Governmental Authorities, it is necessary that a party be furnished with additional information, documents or records relating to the Transferred Assets, both Seller and Buyer agree to use reasonable efforts to furnish or make available such then existing, non-privileged information at the recipient’s request, cost and expense provided, however, that no party shall be entitled to review or examine the Tax Returns of any other party.

For purposes of this Section 3.2, in the case of any taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the Taxes for the Pre-Closing Tax Period shall be computed as if the Pre-Closing Tax Period ended as of the close of business on the Closing Date and the amount of Taxes for taxable periods that are not party of the Pre-Closing Tax Period shall be the excess, if any, of (x) the Taxes for the Straddle Period over (y) the Taxes for the Pre-Closing Tax Period.

3.3 Refunds and Credits. Any refunds and credits attributable to the Pre-Closing Tax Period shall be for the account of the [*] and any refunds and credits attributable to the period that is not part of the Pre-Closing Tax Period shall be for the account of the [*].

3.4 Transfer Taxes. All Taxes that are transfer, documentary, sales, use, registration, value-added or real estate transfer taxes, or any similar taxes and related fees incurred in connection with this Agreement and the other Operative Agreements and the transactions contemplated hereby and thereby shall be borne [*]. To the extent legally able to do so, Buyer and Seller shall cooperate with each other to obtain exemptions from such Taxes, provided that neither Party shall be obligated to seek any exemption that would require any governmental audit of its books and records.

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Article IV. Additional Covenants and Agreements

4.1 Employees and Employee Benefits.

(a) Schedule 4.1(a)(1) contains a list of certain employees employed by Seller as of the date hereof in connection with the Transferred Assets (the “Regular Employees”) Seller will provide an updated list of Regular Employees as of the Closing in the event that any Regular Employee’s employment with Seller is terminated prior to the Closing for any reason. Buyer shall employ the Employees who accept employment with Buyer, effective as of the Closing Date.

(b) Immediately after the date hereof, Seller shall provide Buyer with such reasonable access to the Regular Employees for the purpose of Buyer making offers of employment to such Regular Employees. Buyer may, in its sole discretion, and Seller shall cooperate in Buyer’s efforts to, make offers of employment to any or all of the Regular Employees. Seller agrees that, concurrent with the Closing, Seller shall terminate the employment with Seller of all Regular Employees who will be made an offer of employment by Buyer. As soon as reasonably practicable, Seller shall communicate such intent to terminate such Regular Employees. Buyer hereby agrees to employ the Regular Employees who accept employment with Buyer, effective as of the Closing Date. The Regular Employees who begin their employment with Buyer shall be employed by Buyer in accordance with the terms and conditions set forth in subsections 4.1(c), 4.1(d), and 4.1(e) below.

(c) Effective upon the Closing, Buyer agrees that it will employ the Regular Employees who accept employment with Buyer in the same functional disiplines and at no less than their then current respective base salaries. All Regular Employees will be entitled to participate in Buyer’s employee benefit plans, commissions, and bonus plans at the same level and manner as similarly- situated employees of Buyer. Buyer shall make new hire stock option grants available to all Regular Employees in accordance with Buyer’s normal grant guidelines. Prior periods of employment with the Seller (herein “Service Credit”) will be considered as employment with the Buyer for all employment purposes with the Buyer including the calculation of severance pay, seniority and benefits eligibility, including vacation. Buyer has summarized its planned benefit terms to Seller, as reasonably approximated by the document entitled “United States Terms and Conditions Comparative Analysis” dated April 7, 2004. Buyer shall implement the following severance pay practice for the Regular Employees: if, within the first [*] after Closing, a Regular Employee is involuntarily severed without Cause from full time employment with Buyer, such Regular Employee shall receive the greater [*] of severance pay for each [*] of service, with a minimum of [*] and a maximum of [*] or Buyer’s separation pay. Each week of severance pay will be an amount equal to one week of such Regular Employee’s total base cash salary from Buyer for employment. Notwithstanding the foregoing, no Regular Employee who is terminated will be entitled to receive any severance or other payments or benefits unless such employee executes and delivers to Buyer a full and complete release of claims in form and substance reasonably acceptable to Buyer. Nothing contained in this Agreement shall be construed to in any way limit or prevent Buyer from terminating any Regular Employee at any time for Cause or for reasons related to poor performance or conditions of employment and in the event of any such termination, such Regular Employee shall not be entitled to any of the severance or employment benefits set forth above. For the purposes of this paragraph, “Cause” as used herein means termination for the following reasons: (i) theft, dishonesty or falsification of records of Buyer or its affiliates; (ii) improper disclosure of Buyer or its Affiliates confidential

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information; (iii) employee’s failure or inability to perform any reasonably assigned duties after written notice from Buyer of, and a reasonable opportunity to cure, such failure or inability; (iv) employee’s conviction of any criminal act which impairs his ability to perform his duties as an employee of Buyer, (v) employee’s violation of Buyer’s rules and policies of employment, (vi) employee’s repeated failure to follow Buyer’s reasonable instructions or directions.

(d) Buyer shall be responsible as of Closing for all liabilities, salaries, benefits and similar employer obligations for such matters that arise out of facts or circumstances that soley occur after the Closing Date for all Regular Employees. Upon separation from Seller, Regular Employees will be paid by Seller for vacation accrued, plus previously deferred vacation, less vacation taken.

(e) Buyer shall be responsible for liabilities with respect to the termination of any Regular Employees by Buyer after the Closing, including without limitation, health care continuation coverage with respect to plans established or maintained by Buyer after the Closing.

(f) Buyer agrees that, for a period of [*] from the Closing Date, it will not, without the Seller’s written consent, solicit for employment any [*], provided, however, nothing shall prohibit Buyer from soliciting any of the Specified Employees or any subcontractor of Seller who is not an employee of Seller. [*] agrees that, for a period of [*] from the Closing Date, it will not, without the Buyer’s written consent, solicit for employment any [*]. Nothwithstanding anything in this subsection (f) above, the term “solicit for employment” shall not include general employment advertising or the use of any independent employement agencies or search firm not specifically directed to employees of the other Party.

(g) In addition, Buyer and Seller have identified Specified Employees in Schedule 4.1(a)(3) whom will be made available to Buyer for a personal interview. Immediately after the date hereof, Seller shall provide Buyer with access to the Specified Employees for the purpose of Buyer making offers of employer to such employees. For any Specified Employee willing to undertake such interview, then, notwithstanding anything to the contrary contained in Section 4.1(f), Buyer shall have the right, but not the obligation, to make a voluntary offer of employment with Buyer to any such Specified Employee. Any Buyer employment offers to Specified Employees shall occur no later than [*] after the Closing. Seller is hereby released from any obligations to Buyer from Seller, for services or other matters under the Operative Agreements, which were to be performed by any Specified Employee who accepts employment with Buyer. In the event that a Specified Employee performing services under the Transition Services Agreement becomes an employee of Buyer, then the amount that was being paid by Buyer to Seller under the Transition Services Agreement for such employee’s services shall be eliminated from all future amounts due from Buyer to Seller under the Transition Services Agreement (such amounts being calculated on a pro-rata basis and at the same rate on a per person basis as is being charged to Buyer in the Transition Services Agreement for such person).

4.2 Further Action. The Parties each agree to execute and deliver after the Closing Date such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable, in the opinion of the Parties’ counsel, in order to consummate or implement expeditiously the transactions contemplated hereby.

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4.3 Post-Closing Payments. The Parties acknowledge that, for a period of [*] after the Closing Date, Seller may make payments to third parties on behalf of Buyer associated with the Transferred Assets and Assumed Liabilities. Buyer agrees to reimburse Seller for such payments [*] receipt of an invoice from Seller provided [*]. Seller shall invoice Buyer monthly on the fifth (5th) day of each month. If Buyer disputes such invoice on the basis that such payment did not relate to the Transferred Assets or the Assumed Liabilities, Buyer shall, within [*] of receiving such invoice, give notice to Seller of such dispute and the Parties shall attempt to immediately resolve such dispute. All amounts payable by Buyer to Seller pursuant to this Section 4.3, shall be paid in immediately available funds in U.S. dollars to Seller’s account set forth in Section 1.3.

Any payments to third parties on behalf of Buyer associated with the Transferred Assets and Assumed Liabilities after the expiration of the [*] period require Buyer’s prior written consent.

4.4 Consents, Novations and Subcontracted Work. Buyer and Seller shall use reasonable efforts to obtain, as soon as practicable, all requisite consents to transfers, assignments and novations, as the case may be, of all of the Transferred Assets, Transferred Contracts and the Assumed Liabilities. Buyer shall cooperate with Seller (including, where necessary, entering into appropriate instruments of assumption as shall be agreed upon) to have Seller released from all liability to the contract counterparty with respect to the Assumed Liabilities, and the Parties will each solicit such releases concurrently, in a manner acceptable to the Parties, with the solicitation of consents from third parties to the transfer, assignment and novation of the Transferred Assets, Transferred Contracts, and the Assumed Liabilities; provided, that neither Party shall be required to grant any additional consideration to any third party in order to obtain any such consent, novation, assignment or release. For any Assumed Liabilities for which Seller has any secondary liability to third parties, Buyer shall, upon prior written notice from Seller, provide Seller reasonable access and information in order for Seller to ascertain continuing compliance by Buyer with all contract terms and conditions applicable thereto. The consents to transfers, assignments and novations identified by the Parties as of the Date of Execution, if any, are listed on Schedule 4.4. If any such required consents and novations can be secured with the incurring of reasonable costs, Seller agrees to pay any such costs (excluding those of the Buyer). Where a Transferred Contract has not been assigned to Buyer on the Closing Date, the Parties agree to enter into such other arrangements, effective on the Closing Date, with respect to the underlying rights and obligations as shall permit Buyer to perform the obligations of Seller thereunder, as a subcontractor or otherwise, and Buyer to obtain the material benefit thereof (the “Subcontracted Work”) or to have Seller perform the obligations and have the Buyer receive the material benefit thereof without regard to any costs or expenses incurred by the Seller in connection thereto other than (i) any costs or expenses to which Seller is entitled to payment or reimbursement under any of the other Operative Agreements or (ii) costs and expenses that would have been incurred by the Buyer had the applicable Transferred Contract been assigned to the Buyer on the Closing Date ; and until the requisite consents and novations are obtained, such obligations will not be deemed to be included in the Assumed Liabilities and nothing contained herein will be deemed to create an obligation or relationship

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that would constitute a breach of the contract underlying such rights and obligations. For the avoidance of doubt, “material benefit” as used in this Section 4.4 shall expressly include any payments received by Seller under the Transferred Contracts after the Closing Date for any products shipped under the Transferred Contracts after the Closing Date (i) directly by Buyer or (ii) by Seller on behalf of Buyer using inventory, including that listed on Schedule 1.1, provided, directly or indirectly, by Buyer. Buyer agrees to diligently perform and discharge the obligations of Seller in connection with the Subcontracted Work directly, or indirectly through Seller, as applicable and to the extent that consents to transfer, assignment and novation are obtained after the Closing, the Parties agree that such obligations will no longer be considered to be Subcontracted Work after such time, but will instead be deemed to be Assumed Liabilities for all purposes of this Agreement.

4.5 Product Warranty Services. Seller shall pay Buyer within [*] after receipt of invoice from Buyer, for the actual reasonable cost of (a) warranty services performed by Buyer with respect to In Scope Products sold by Seller or its Affiliates prior to the Closing Date and (b) software maintenance services performed by Buyer with respect to any software maintenance obligations of Seller listed in Schedule 1.4 with respect to software licensed by Seller prior to the Closing Date. Within [ *] after the Closing Date, Buyer and Seller shall establish a reasonable mutually agreeable process pursuant to which Buyer shall provide such warranty services, it being understood that [*] . At a minimum, such process shall address establishing warranty run rates and failure rate expectations for each product. In addition, neither Buyer’s obligation to provide such warranty services, nor Seller’s obligation to pay for such warranty services, shall cover claims occurring after the maximum applicable warranty period.

4.6 Excluded Liabilities. Seller acknowledges and agrees that Seller shall retain responsibility for the Excluded Liabilities and that neither Buyer nor any of Buyer’s Affiliates shall have any liability or obligation for any such Excluded Liabilities.

4.7 Provision of Omitted Assets. If prior to June 30, 2004 the Buyer or Seller believes that certain tangible assets and material contracts (other than any vendor contracts, distributor contracts, or any contracts regarding intellectual property matters) that are exclusively or primarily used, or product information that Seller has the legal right to transfer and would not prejudice Seller with any third party that is exclusively used, in the sale of the In Scope Products as of the Closing Date were omitted from Schedule 1.1 or Schedule 1.4, respectively, then the Parties will work in good faith to agree upon such omitted assets (the “Omitted Assets”). Once identified and agreed to, the Parties will use reasonable efforts to locate and/or prepare such items and, subject to Section 4.4, amend the necessary documents and the Seller shall, at its sole expense, promptly deliver (or transfer in the case of any contracts) such Omitted Assets to Buyer so as to remedy such error or omission. So long as there is no dispute as to whether a particular asset is an Omitted Asset, and the Parties have amended the necessary documents and the Seller has promptly transferred to Buyer such Omitted Assets, Seller shall have no further obligation or liability to Buyer regarding such Omitted Assets.

4.8 Permitted Liens. Seller shall reimburse Buyer for the actual reasonable costs incurred by Buyer to discharge any Permitted Lien existing as of the Closing Date that adversely affects the value or Buyer’s use of a Transferred Asset; provided, however, that Buyer must first

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give Seller at least [*] prior written notice of Buyer’s intention to discharge the Permitted Lien and an opportunity for Seller, at its option and expense, to attempt to discharge the underlying Permitted Lien during such [*] period; provided further that Seller shall have no obligation under this Section 4.8 to discharge any Lien that is created or granted by Buyer.

4.9 Seller Conduct Prior to the Closing Date. During the period between the Date of Execution to the Closing Date or termination of the Agreement, except as contemplated under this Agreement or required by applicable law or with the prior written consent of Buyer, Seller shall use commercially reasonable efforts to (i) maintain, in a manner consistent with Seller’s past practices, the Transferred Assets (including finished goods inventory) and (ii) preserve all customer relationships under the Transferred Contracts.

4.10. Financial Data Covenant. For the assets and liabilities being transferred pursuant to this Agreement, Seller shall deliver to Buyer financial data in the form set forth in Exhibit D to this Agreement (the “Financial Data”) as soon as it is reasonably available from Seller and the audit for 2003 has been performed by PricewaterhouseCoopers LLP (PwC).

Seller shall retain PwC to audit the Financial Data, the purpose of which is to issue a report with respect thereto.

Seller will exercise commercially reasonable efforts to cause PwC to deliver the results of its audit of the Financial Data as soon as practicable following the initiation of the audit by PwC.

In the event that Buyer is required by the rules and regulations of the SEC to file financial statements for the acquired assets for additional 12 month periods ending December 31, 2001 and December 31, 2002, Seller and Buyer will cooperate, at the Buyer’s sole expense, to have such financial information audited by Seller’s independent accountants as expeditiously as possible.

Seller will also provide to Buyer unaudited information of the type set for on Exhibit D, for the three month quarter ending March 31, 2004, which will not be part of the PwC audit.

Article V. Representations and Warranties of Buyer

Buyer hereby represents and warrants, as of the date of the Agreement and of the Closing Date, to Seller as follows:

5.1 Incorporation. Buyer is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to own its properties and conduct its business.

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5.2 Authority. Buyer has the requisite corporate power and authority to execute and deliver each of the Operative Agreements and to perform its obligations under each such agreement. Each of the Operative Agreements has been duly and validly authorized, executed and delivered by Buyer and constitutes the valid and binding agreement of Buyer in accordance with its respective terms. No other corporate proceedings on the part of Buyer are necessary to authorize the Operative Agreements and the transactions contemplated thereby.

5.3 No Conflict. The execution and delivery by Buyer of each of the Operative Agreements does not, and the performance of its obligations thereunder, will not:

(a) conflict with, or result in a breach of, any of the provisions of Buyer’s articles of incorporation or by-laws;

(b) breach, violate or contravene any Governmental Rule, or create any right of termination or acceleration or encumbrance, that, singly or in the aggregate, would have a material adverse effect on the authority or ability of Buyer to perform its obligations under this Agreement, the Confidentiality Agreement, the Custom Sales Agreement, the Intellectual Property Agreements, and the Assumption Agreement or the Assumed Liabilities; and

(c) conflict in any respect with, or result in a breach of or default under, any contract, license, franchise, permit or any other agreement or instrument to which Buyer is a Party or by which Buyer or any of its properties may be affected or bound that, singly or in the aggregate, would have a material adverse effect on the authority or ability of Buyer to perform its obligations under this Agreement, the Confidentiality Agreement, the Custom Sales Agreement, the Intellectual Property Agreements, and the Assumption Agreement or the Assumed Liabilities.

5.4 Governmental Consents. Other than compliance with the HSR Act pre-notification requirements, if required, no material consent, approval or authorization of, or designation, declaration or filing with, any Governmental Authority on the part of Buyer is required in connection with the execution or delivery by Buyer of this Agreement, the Intellectual Property Agreements, or the Assumption Agreement, or the consummation by Buyer of the transactions contemplated by any of the foregoing.

5.5 No Broker. Other than Credit Suisse First Boston, LLC, Buyer has not engaged any corporation, firm or other Person who is entitled to any fee or commission as a finder or a broker in connection with the negotiation of the Operative Agreements or the consummation of the transactions contemplated thereby, and Buyer shall be responsible for all liabilities and claims (including costs and expenses of defending against same) arising in connection with any claim by a finder or broker that it acted on behalf of Buyer in connection with the transactions contemplated thereby.

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Article VI. Representations and Warranties of Seller

Except as set forth on the disclosure schedule delivered by Seller to Buyer (the “Disclosure Schedule”), Seller hereby represents and warrants, as of the date of the Agreement and of the Closing Date, to Buyer as follows:

6.1 Incorporation. Seller is a duly incorporated and validly existing corporation in good standing under the laws of the State of New York, with all requisite corporate power and authority to own its properties and conduct its business, and is duly qualified in each jurisdiction in which its ownership of property requires such qualification except where the failure to so qualify would not have a material adverse effect upon the Transferred Assets.

6.2 Authority. Seller has the requisite corporate power and authority to execute and deliver the Operative Agreements and to perform its obligations under each of the foregoing. Each of the Operative Agreements has been duly and validly authorized, executed and delivered by Seller and constitutes the valid and binding agreement of Seller in accordance with its respective terms. No other corporate proceedings on the part of Seller are necessary to authorize the Operative Agreements and the transactions contemplated by any of the foregoing.

6.3 No Conflict. The execution and delivery by Seller of each of the Operative Agreements does not, and the performance by Seller of its obligations thereunder will not:

(a) conflict with, or result in a breach of, any of the provisions of its Articles of Incorporation or By-laws;

(b) breach, violate or contravene any Governmental Rule, or create any right of termination or acceleration or encumbrance, that, singly or in the aggregate, would have a material adverse effect on (i) its authority or ability to perform its obligations under this Agreement, the Confidentiality Agreement, the Custom Sales Agreement, the Intellectual Property Agreements, the Assumption Agreement or the Bill of Sale; or (ii) the Transferred Assets; and

(c) conflict in any respect with, or result in a breach of or default under, any contract, license, franchise, permit or any other agreement or instrument to which it is a party or by which it or any of the Transferred Assets may be bound that, singly or in the aggregate, would have a material adverse effect on (i) its authority or ability to perform its obligations under this Agreement, the Confidentiality Agreement, the Custom Sales Agreement, the Intellectual Property Agreements, the Assumption Agreement or the Bill of Sale; or (ii) the Transferred Assets (except for agreements and instruments that require the consent or approval of a third party for the transactions contemplated by this Agreement).

6.4 Governmental Consents. Other than compliance with the HSR Act pre-notification requirements, if required, no material consent, approval or authorization of, or designation, declaration or filing with, any Governmental Authority on the part of Seller is required in connection with the execution or delivery by Seller of the Operative Agreements or the consummation by Seller of the transactions contemplated by any of the foregoing.

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6.5 No Broker. Seller has engaged no corporation, firm or other Person who is entitled to any fee or commission as a finder or a broker in connection with the negotiation of the Operative Agreements or the consummation of the transactions contemplated thereby, and Seller shall be responsible for all liabilities and claims (including costs and expenses of defending against same) arising in connection with any claim by a finder or broker that it acted on behalf of Seller in connection with the transactions contemplated thereby.

6.6 Title to Personal Property. Seller has good and marketable title to all tangible personal property listed on Schedule 1.1 hereto, free and clear of any Liens other than Permitted Liens. At the Closing, Seller will transfer to the Buyer good and marketable title to all Transferred Assets, free and clear of any Liens other than Permitted Liens.

6.7 Litigation. Except as disclosed on Schedule 6.7, there are no actions, suits, proceedings or investigations pending or, to Seller’s knowledge, threatened in a writing to Seller against or directly affecting the Transferred Assets, at law or in equity, including any administrative proceedings or condemnation actions with any regulatory authority, which in the aggregate would have a material adverse effect on the Transferred Assets. There is no existing default by Seller with respect to any judgment, order, writ, injunction or decree of any Governmental Authority or arbitrator that materially adversely affects the Transferred Assets.

6.8 No Rights In Others To Transferred Assets. Neither Seller nor any Affiliate of Seller is party to any outstanding contracts or other arrangements giving any Person any present or future right to require Seller to transfer to any Person any ownership or possessory interest in, or to grant any lien on, any of the Transferred Assets, other than pursuant to this Agreement.

6.9 Contracts. Schedule 1.4. contains a true and complete list of all Transferred Contracts, including all modification and amendments thereto.. Seller has performed or is performing all material obligations required to be performed by it under such contracts and is not (with or without notice, lapse of time or both) in breach or default in any material respect thereunder; and, to the knowledge of Seller, no other party to any of such contracts is (with or without notice, lapse of time or both) in breach or default in any material respect thereunder. All Transferred Contracts are in full force and effect and are enforceable in accordance with their terms (subject to any rules of bankruptcy or other equitable principles) and [*], Seller has not received any notice or other written communication from the contracting party that Seller is in possible breach or default of any obligation thereunder.

6.10 WARRANTIES. [*]

6.11 Other Information. This Agreement, the Exhibits, Appendices and Schedules hereto, as each may be amended prior to the Closing, and all certificates delivered to Buyer and its representatives from Seller at Closing in connection with this Agreement do not and will not contain any untrue statement of any material fact and do not and when delivered will not omit to state a material fact necessary to make the statement herein or therein not misleading.

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6.12 Transferred Contract Consents. Schedule 4.4 sets forth a correct and complete list of all the Transferred Contracts that require third party consent to transfer or otherwise assign to Buyer.

6.13. Taxes. Except as disclosed on Schedule 6.13., Seller has timely filed within the time period for filing or any extension granted with respect thereto, all Tax returns which it is required to file relating or pertaining to any and all Taxes attributable to or levied upon the Transferred Assets with respect to the Pre-Closing Tax Period and has paid any and all Taxes it is required to pay in connection with the taxable period to which such Tax returns relate. There are (and as of immediately following the Closing there will be) no liens for Taxes on the Transferred Assets, other than Permitted Liens, and no action, proceeding or, to the knowledge of Seller, investigation has been instituted against Seller which would give rise to any such lien, other than Permitted Liens. Seller has no knowledge of any claims asserted or threatened with respect to any Taxes. None of the Transferred Assets are treated as “tax-exempt use property” within the meaning of Section 168(b) of the Code.

6.14 Inventory On the Closing Date, the inventory included in the Transferred Assets as set forth in Schedule 1.1 is of such a quality to be useable and saleable by Seller in the ordinary course of business. [*]

6.15 Regular Employees All of the Regular Employees are active employees as of the date hereof and none of such employees are, as of the date hereof, on sick leave, leave of absence or other similar leave.

Article VII. Conditions to Buyer’s Obligations

The obligation of Buyer to consummate the transactions contemplated herein is subject to the satisfaction (or waiver by Buyer) of the conditions set forth below in this Article.

7.1 Representations and Warranties. Subject to Section 9.2, the representations and warranties of Seller made in this Agreement shall be true and correct in all material respects as of the Date of Execution and as of the Closing Date with the same effect as if made at and as of the Closing Date, except to the extent such representations and warranties expressly relate to an earlier time. Seller shall have performed in all material respects its respective covenants and agreements contained in this Agreement and the other Operative Agreements required to be performed at or prior to the Closing.

7.2 Consents, Approvals and Injunctions.

(a) Seller shall have obtained or made all consents, approvals, orders, licenses, permits and authorizations of, and registrations, declarations and filings with, any Governmental Authority or any other Person required to be obtained or made by or with respect to the Transferred Assets in connection with the execution, delivery and performance of this Agreement.

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(b) No injunction, order or decree of any Governmental Authority shall be in effect as of the Closing, and no lawsuit, claim, proceeding or investigation shall be pending or threatened by or before any Governmental Authority as of the Closing, which would restrain, prohibit or make unlawful the transfer of the Transferred Assets or Assumed Liabilities.

(c) No action or proceeding challenging the transactions or any provision of this Agreement or the other Operative Agreements shall be pending or threatened against any party.

(d) No Burdensome Condition shall exist with respect to Buyer in connection with the transactions contemplated by the Operative Agreements. All waiting periods under HSR shall have expired or been terminated.

7.3 Governmental Rule. No Governmental Rule shall have been instituted, issued or proposed to restrain, enjoin or prevent the transfer of the Transferred Assets as contemplated hereby or to invalidate, suspend or require modification of any material provision of any Operative Agreement.

7.4 Operative Agreements. Seller shall have entered into each of the Operative Agreements to be executed by it and each such Operative Agreement shall be in full force and effect without breach thereunder.

7.5 Closing Documents. Seller shall have delivered to Buyer the following documents:

(a) a certificate of Seller, dated the Closing Date, to the effect that Seller’s representations and warranties in this Agreement are true and correct and that all actions required to be taken by Seller prior to the Closing have been duly taken; and

(b) a certificate of the secretary or assistant secretary of Seller, dated the Closing Date, as to the continued existence of Seller.

7.6 Proceedings. All corporate and legal proceedings taken by Seller in connection with the execution of the Operative Agreements and the transfer of the Transferred Assets shall be reasonably satisfactory in form and substance to Buyer and its counsel, and Buyer shall have received all such certified or other copies of all such documents as it shall have reasonably requested.

7.7 Audit Finding- Revenue. The PwC audit report described in Section 4.10 shall include a minimum of $48.6 million of revenue, as reported in accordance with U.S. generally accepted accounting prinicples, for the 12 month period ending December 31, 2003.

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Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

7.8 Audit Finding - Other. The amount of the “Excess/(Deficiency) of Net Sales, Direct Costs of Goods Sold and Allocated SG&A” reflected in the Statement of Net Sales, Direct Costs of Goods Sold and Allocated SG&A delivered to the Buyer pursuant to Section 4.10 shall be no more than [*]

7.9 Audit Delivery. PwC shall have completed its audit of the Financial Data and shall have issued its report; such audit report shall have been delivered to the Seller and Seller shall have delivered such audit report to Buyer. Such audit report shall, based upon the data set forth in Exhibit D, include addressing, for the 12 months ending December 31, 2003, (i) a statement of assets acquired and liabilities assumed (based on historical cost or based on the allocation of the purchase price for such assets and liabilities as of the acquisition date), (ii) an operating statement which would reflect a revenue line item, a direct cost of goods sold line item and an allocated SG&A line item, and (iii) footnote disclosure setting forth the reasons for the presentation and the nature of the omitted expenses and a description of how the financial statements presented are not indicative of the financial condition or results or operations of the acquired business going forward and footnote disclosure stating that there is no separate information available related to the operating, investing and financing cash flows of the PowerPC 4xx product line.

Article VIII. Conditions to Seller’s Obligations.

The obligations of Seller to consummate the transactions contemplated herein shall be subject to the satisfaction (or waiver by Seller) of the conditions set forth below in this Article.

8.1 Payment of Purchase Price. The payment of the Purchase Price in the manner specified in Section 1.3, and any other consideration set forth in Section 1.3 or the other Operative Agreements due at Closing.

8.2 Representations and Warranties. The covenants, agreements, representations and warranties of Buyer made in this Agreement shall be true and correct in all material respects as of the Date of Execution and as of the Closing Date with the same effect as if made at and as of the Closing Date.

8.3 Consents, Approvals and Injunctions.

(a) Buyer shall have obtained or made all consents, approvals, orders, licenses, permits and authorizations of, and registrations, declarations and filings with, any Governmental Authority or any other Person required to be obtained or made by or with respect to Buyer in connection with the execution and delivery of this Agreement and the other Operative Agreements and the Closing.

20

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

(b) No injunction, order or decree of any Governmental Authority shall be in effect as of the Closing, and no lawsuit, claim, proceeding or investigation shall be pending or threatened by or before any Governmental Authority as of the Closing, which would restrain, prohibit or make unlawful the transfer of the Transferred Assets or the Assumed Liabilities or invalidate or suspend any provision of the Operative Agreements.

(c) No Burdensome Condition shall exist with respect to Seller in connection with the transactions contemplated by the Operative Agreements

(d) All waiting periods under the HSR Act shall have expired or been terminated.

8.4 Governmental Rule. No Governmental Rule shall have been instituted, issued or proposed to restrain, enjoin or prevent the transfer of the Transferred Assets as contemplated hereby or to invalidate, suspend or require modification of any material provision of any Operative Agreement.

8.5 Operative Agreements. Buyer shall have entered into each of the Operative Agreements to be executed by it and each such Operative Agreement shall be in full force and effect without breach thereunder.

8.6 Closing Documents. Buyer shall have delivered to Seller the following documents:

(a) a certificate of an authorized signatory of Buyer, dated the Closing Date, to the effect that Buyer’s representations and warranties in this Agreement are true and correct and that all actions required to be taken by Buyer prior to the Closing have been duly taken; and

(b) a certificate of the secretary of Buyer, dated the Closing Date, as to the continued existence of Buyer, certifying the attached copy of the By-laws of Buyer, the authorization of the execution, delivery and performance of the Operative Agreements and the resolutions adopted by the Board of Directors of Buyer authorizing the actions to be taken by Buyer under the Operative Agreements.

8.7 Proceedings. All corporate and legal proceedings taken by Buyer in connection with the transactions contemplated by the Operative Agreements and all documents and papers relating to such transactions shall be reasonably satisfactory in form and substance to Seller and its counsel, and Seller shall have received all such certified or other copies of all such documents as it shall have reasonably requested.

Article IX. General Matters.

9.1 Survival of Representations and Warranties. All representations and warranties made by the Parties in this Agreement or in any schedule, document, certificate or

21

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

other instrument delivered by or on behalf of the Parties pursuant to this Agreement shall survive the Closing for a period of [*] after the Closing Date; provided, however, that all representations and warranties relating to the Assumed Liabilities shall survive the Closing Date until [*].

9.2 Limitation of Liability. Notwithstanding anything to the contrary set forth in the Operative Agreements, unless this section is specifically excluded from application to a specific Operative Agreement or provision in an Operative Agreement, Seller shall not be liable for any amounts with respect to the breach of an Operative Agreement unless and until such amounts shall exceed in the aggregate [*] (the “Limitation Amount”) [*]. Notwithstanding anything to the contrary set forth in the Operative Agreements, unless this section is specifically excluded from application to a specific Operative Agreement or provision in an Operative Agreement, in no event shall Seller’s liability for any causes of action arising out of, or related to, any or all of the Operative Agreements exceed [*] in the aggregate.

Neither Seller nor Buyer shall be responsible for any indirect, incidental, punitive, special or consequential damages whatsoever, including but not limited to loss of profits ( except to the extent such loss of profits are determined by a court of competent jurisdiction to constitute direct damages) or goodwill, even if advised of the possibility of such damages.

Nothing contained in this Section 9.2 shall be construed as prohibiting or preventing either party from asserting any claims such party may have against the other in equity, including any claims of specific performance.

9.3 Public Announcements. The Confidentiality Agreement between the Seller and Buyer continues to apply, and the Operative Agreements as well as the proposed transaction are subject to and confidential under that Confidentiality Agreement. For [*] after the Closing Date, all public announcements in the form of a press release relating to the Operative Agreements or the transactions contemplated hereby shall be made only after consultation between the Parties, except for disclosures by either Party that in the opinion of counsel for such Party are necessary and proper under applicable law, rule or regulation (but only after the disclosing Party has taken all reasonable steps to advise the other Party about the Party’s intention to make, and the proposed contents of, such disclosures). Any direct disclosures to customers in connection with commercial relationships shall not reveal the consideration specified in Section 1.3 of this Agreement. Notwithstanding the foregoing, either Party shall have the right, in its sole discretion, to make such disclosures as it may deem necessary or advisable to any Governmental Authority. In the event of a breach or anticipatory breach of this Section 9.3. by either Party, the other Party shall be entitled, in addition to any and all other remedies available at law or in equity, to preliminary and permanent injunctive relief and specific performance without proving damages.

9.4 Costs. Each Party shall be responsible for the costs and expenses incurred by it in the negotiation, execution and delivery of the Operative Agreements and, except as otherwise provided elsewhere in such agreements, the consummation of the transactions contemplated

22

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

hereby. If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, reasonable costs, and reasonable disbursements (in addition to any other relief to which the prevailing party may be entitled).

9.5 [*]

9.6 Modification and Waiver. No modification or waiver of any provision of this Agreement and no consent by either Party to any departure therefrom shall be effective unless in a writing referencing the particular section of this Agreement to be modified or waived and signed by a duly authorized signatory of each Party, and the same will only then be effective for the period and on the conditions and for the specific instances and purposes specified in such writing.

9.7 Governing Law. This Agreement has been delivered at and shall be deemed to have been made at [*], and shall be interpreted, and the rights and liabilities of the Parties hereto determined, exclusively in accordance with the laws of the State of [*] applicable to agreements executed, delivered and performed within such State, without regard to the principles of conflicts of laws thereof. Each of the Parties hereby: (i) waives trial by jury, (ii) waives any objection to [*] venue of any action instituted hereunder, and (iii) consents to the granting of such legal or equitable relief as is deemed appropriate by any aforementioned court.

9.8 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given and shall be effective (a) when delivered by messenger or courier, or (b) five (5) days after deposit for mailing by registered or certified mail, postage prepaid, return receipt requested, when also transmitted by telecopy as follows:

(a)	if to Seller, to:
	International Business Machines Corporation
	New Orchard Road
	Armonk, New York 10504
	Attention:	David L. Johnson
		Vice President, Corporate Development
	Telecopy:	(914) 499-7803
	with a copy at the same address to:
	Attention:	Greg C. Bomberger, Esq.
	Telecopy:	914-499-7392
(b)	if to Buyer, to:
	Applied Micro Circuits Corporation

23

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

6290 Sequence Druive
San Diego, CA 92191
Attention:	General Counsel
Telecopy:	858-535-6800
with a copy to:
Paul, Hastings, Janofsky & Walker
3579 Valley Centre Drive
San Diego, CA 92130
Attention:	Carl R. Sanchez, Esq.
Telecopy:	858-720-2555

or to such Person or address as the Parties shall hereafter designate to the other from time to time by similar written notice.

9.9 Bulk Sales. Buyer hereby waives compliance by Seller with any applicable bulk sales or similar laws. Buyer shall discharge the Assumed Liabilities in accordance with their terms and Buyer agrees that Seller shall have no liability for any failure of Buyer to discharge the Assumed Liabilities in accordance with their terms.

9.10 Assignment. This Agreement shall be binding upon, and inure to the benefit of, and be enforceable by, the successors and assigns of the Parties; provided, that, no Party may assign its obligations, rights or privileges, in whole or in part, hereunder without the prior written consent of the other Party.

9.11 Counterparts. This Agreement may be executed by the Parties in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Confirmed facsimile signatures shall have the same effect as original signatures for the purpose of executing this Agreement. Each such counterpart 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.

9.12 No Third Party Beneficiaries. This Agreement is for the sole benefit of the Parties and their permitted successors and assigns and nothing herein expressed or implied shall give or be construed to give any Person, other than the Parties and such permitted successors and assigns, any legal or equitable rights hereunder.

9.13 Entire Agreement. This Agreement, together with the other Operative Agreements, comprise the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and representations, oral

24

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

or written, between Buyer and Seller relating hereto and thereto. The Parties agree and acknowledge that the parties have an existing commercial relationship and that nothing in the Operative Agreements shall be construed to impair or limit the rights of the Parties under any other existing agreements between the Parties, and that nothing under any other existing agreements between the Parties shall be construed to impair or limit the rights of the Parties under the Operative Agreements.

THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK

25

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized signatories as of the date and year first above written.

INTERNATIONAL BUSINESS MACHINES CORPORATION		APPLIED MICRO CIRCUITS CORPORATION
By:	/s/ David L. Johnson	By:	/s/ David Rickey
Name:	David L. Johnson	Name:	David Rickey
Title:	Vice President, Corporate Development	Title:	Chairman, President and CEO

26

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-2.2

Exhibit 2.2

AMENDMENT NO. 1

TO ASSET PURCHASE AGREEMENT

This AMENDMENT NO. 1 (the “Amendment”) to the existing Asset Purchase Agreement dated April     , 2004 is made and entered into as of May 5, 2004 by and between International Business Machines Corporation, a New York corporation (“Seller”) and Applied Micro Circuits Corporation, a Delaware corporation (“Buyer”).

WHEREAS, Seller and Buyer entered into an Asset Purchase Agreement dated April     , 2004 (the “Asset Purchase Agreement”);

WHEREAS, Seller and Buyer now wish to amend the Asset Purchase Agreement to (a) insert the date of the Asset Purchase Agreement and (b) update Schedules 1.1, 1.4, 3.1, and 4.4,

WHEREAS, the amendments set forth below refer to the original page numbers or schedules to the Asset Purchase Agreement that are to be amended or modified by this Amendment;

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

1.) Capitalized Terms. Capitalized terms not otherwise defined herein have the meanings assigned to them in the Asset Purchase Agreement.

2.) Date of Asset Purchase Agreement. In the first full paragraph on page one (1) of the Agreement, the date “April     , 2004” should be deleted and replaced with “April 12, 2004”.

3.) Schedule 1.1. Schedule 1.1 of the Asset Purchase Agreement is hereby deleted in its entirety and the attached Schedule 1.1 substituted in its place and stead.

4.) Schedule 1.4. Schedule 1.4 of the Asset Purchase Agreement is hereby deleted in its entirety and the attached Schedule 1.4 substituted in its place and stead.

5.) Schedule 3.1. Schedule 3.1 of the Asset Purchase Agreement is hereby deleted in its entirety and the attached Schedule 3.1 substituted in its place and stead.

6.) Schedule 4.4. Schedule 4.4 of the Asset Purchase Agreement is hereby deleted in its entirety and the attached Schedule 4.4 substituted in its place and stead.

7.) Except as set forth in this Amendment, all other terms and conditions of the Asset Purchase Agreement shall remain in full force and effect, it being understood and agreed that in the event of a conflict or inconsistency between the terms of the Asset Purchase Agreement and this Amendment, the provisions of this Amendment shall control and prevail.

1

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

INTERNATIONAL BUSINESS MACHINES CORPORATION		APPLIED MICRO CIRCUITS CORPORATION
By:	/s/ David L. Johnson	By:	/s/ David Rickey
	Name: David L. Johnson		Name: David Rickey
	Title: Vice President, Corporate Development		Title: Chairman, President and CEO

2

EX-2.3

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 2.3

First Amended and Restated ASIC Attachment No. 5

To Custom Sales Agreement No. 001006

When signed by the parties where provided below, this First Amended and Restated Attachment shall be incorporated into Custom Sales Agreement No. 001006 as First amended and Restated Attachment No. 5 effective on the Closing Date as defined in the Asset Purchase Agreement (“APA”). This First Amended and Restated No. 5 shall replace Attachment No. 5 in its entirety. Attachments are governed by the terms and conditions of the Base Agreement. Contemporaneously with the execution of this Attachment, Customer and IBM or its subsidiaries are executing an APA, an Intellectual Property Agreement (“IPA”), a Design Kit License Agreement (“DKLA”), a Patent License Agreement (“PLA”), a PowerPC License Agreement (“PPCLA”) and a Core Connect Bus License Agreement (“CCLA”) and ancillary documents, (collectively, the “Operative Agreements”). Upon consummation of the transactions contemplated under the Operative Agreements, IBM will, among other things, assign or license to Customer certain technology and certain rights to certain integrated circuits which have been previously developed or which are currently under development by IBM or its subsidiaries.

Definitions

“ASIC(s)” shall mean application specific integrated circuits, as more fully defined in the Intellectual Property Agreement, as entered into on the Closing Date.

“ASSP(s)” shall mean application specific standard products, as more fully defined in the Intellectual Property Agreement, as entered into on the Closing Date.

“At Shipment of Prototypes” (“ASP”) shall mean the date of shipment of Prototypes to Customer.

“IBM Deliverables” shall mean the information, materials and tools supplied to Customer by IBM, as set forth in Part B of this Attachment, including, without limitation, IBM Design Kits, ASIC tool kits, and Prototype devices.

“IBM Design Kits” shall mean any IBM computer aided design software and data (including libraries) provided to Customer and supported by IBM for the purpose of designing or testing ASIC designs, as updated and enhanced from time to time.

“Initial ASIC Design Review Checklist” (“IDR”) shall mean a report in form and content as regularly used by IBM to make a preliminary assessment of the feasibility of Customer’s proposed Product design.

“Milestones” shall mean completion of the criteria specified in the (i) initial design review (“IDR Milestone”), (ii) pre-layout and timing analysis (“RTL Milestone”), and (iii) the release to manufacturing (“RTM Milestone”) stages of work and the NRE payment milestones (“Payment Milestones”) set forth in this Attachment.

“NRE” shall mean non-recurring engineering Services.

“Prototype Acceptance” shall mean Customer’s written approval of the Prototypes.

“Release to Layout Checklist” (“RTL”) shall mean a performance approval report in form and content as regularly used by IBM to document completion of the pre-layout Level Sensitive Scan Design (“LSSD”) and timing analysis.

“Release to Manufacturing Checklist” (“RTM”) shall mean a performance approval report in form and content as regularly used by IBM to document the design review milestone at the completion of the post-layout timing analysis.

“Risk Product” shall mean Product ordered by Customer prior to Prototype Acceptance. All terms and conditions for Risk Product are the same as for Product, except for terms and conditions regarding cancellation and warranty.

“Speed Binning”, “Performance Binning” and “Speed Sorting” are interchangeable terms used throughout this agreement and shall mean testing a device to determine its maximum speed performance rating in megahertz and marking the device or otherwise identifying the speed to the Customer.

Unique Terms and Conditions

The following terms and conditions are applicable to this Attachment only. Referring to the Base Agreement:

(a) Modify the following terms and conditions:

The Base Agreement to which this Attachment is made a part contains an incorporation clause, which shall not be read to preclude the provision of Section 9.2 of the APA applying to this Agreement.

Delete Section 11.2 in its entirety and replace with the following:

IBM’s liability for any and all causes or conditions under this Agreement, regardless of the basis on which Customer may be entitled to claim damages from IBM (including, fundamental breach, negligence, misrepresentation, or any other contract or tort claim, shall be limited as stated in Section 9.2 of the APA. Nothing contained in this Section 11.2 shall be construed as prohibiting or preventing either party from asserting any claims such party may have against the other in equity, including any claims of specific performance.

Delete Section 12.1 in its entirety and replace it with the following:

12.1 IBM Warranty for Product and Risk Product

12.1.1 Product:

[*]

12.1.2 Risk Product:

[*]

Delete Section 17.1 in its entirety and replace it with the following:

17.1 Either Party hereto shall be excused from the fulfillment of any obligation, except for payment obligations under this Agreement for so long as such fulfillment may be hindered or prevented by any circumstances of force majeure such as but not limited to acts of God, war, riot, strike, lockout, labor unrest, fire, flood, other natural catastrophe, national or local government regulations or any other circumstance outside its control, provided that the Party seeking to be excused shall make reasonable efforts to minimize the hindrance of such non-fulfillment to the other party.

Add the following terms to Section 10:

10.4. Notwithstanding anything in this Attachment or in the Base Agreement to the contrary, the intellectual property and materials as assigned and/or licensed to Customer by IBM on the Closing Date in the IPA, DKLA, PPCLA and CCLA (collectively, the “IBM IP”) shall not be considered as being provided by Customer for purposes of Section 10.2.1 of the Base Agreement, and the provisions of Section 10.3 of the Base Agreement shall not apply to a cause of action based on such IBM IP as incorporated into any In Scope Product or any other Product in the event such In Scope Product or other Product becomes subject to a claim pursuant to Section 10.3 to the extent solely of such IBM IP.

1.0 Term

The term of this Attachment expires on March 31, 2008.

2.0 Scope of Work

2.1 IBM will provide the Services identified in Section 8 and manufacture the Product(s) identified in Part A of this Attachment. This Attachment will include future successor or derivative Products only as agreed to in writing by the parties.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

2.2 Customer will provide IBM with the Customer’s Items and cooperate with IBM to enable IBM to manufacture Product and to perform Services in accordance with this Agreement.

3.0 ASIC Design and Development Methodology

3.1 IBM’s ASIC development checklists shall document the development of each of Customer’s Product design(s).

3.1.1 The IDR will be used to make a preliminary feasibility assessment of Customer’s proposed Product design(s) and to advise Customer of ASIC design issues to ensure that Customer’s design(s) will conform to IBM design requirements.

3.1.2 The RTL shall include, expressly or by specific incorporation, the design information for each Product required by Customer to successfully enable IBM to place, route, perform static timing analysis and analyze LSSD testability for Customer’s Product design data. Customer’s signature on the RTL shall record Customer’s acknowledgment of satisfactory completion of all work on such Product through such Milestone.

3.1.3 Customer’s signature on the RTM shall record Customer’s acknowledgment of satisfactory completion of all work on such Product through the RTM Milestone. To the extent that the RTM varies from the RTL, the RTM shall govern.

3.1.4 Customer’s signature on the RTL and RTM checklists shall not be unreasonably withheld.

3.2 Any data relating to a Product design that Customer is to furnish to IBM must be compatible with IBM design tools, with which IBM will verify all design and engineering work.

4.0 Change Control

4.1 Any changes to the Services or Product design requested by Customer (e.g., netlist slips, additional netlists above standard IBM ASIC Design Methodology, need for more than one IDR, and/or Engineering Change Orders (“ECOs”)) may impact IBM’s schedules and may also result in additional NRE charges and/or an increase in price for Products, Risk Products, and Prototypes. ECOs are defined as Customer initiated functional changes that add, delete, reconnect, or change logic in the existing design. The extent (size of change) and timing of the ECO determines how it is handled by IBM. These changes to the Services or Product will be managed between Customer and IBM using IBM’s ECO/Netlist Change Form. Should IBM submit an ECO/Netlist Change Form to Customer setting forth the probable effect of such requested change on schedule, Customer will be requested to analyze the ECO and sign the ECO/Netlist Change Form where indicated to acknowledge its agreement with the changes. IBM reserves the right to stop work until agreement is reached by the parties with respect to such change. IBM will require a purchase order from Customer for all additional NRE Services resulting from the change before IBM will start work. IBM shall not proceed with any change until authorized in writing by Customer. The parties shall promptly amend this Attachment to incorporate any agreed changes.

4.2 IBM may implement engineering changes required to satisfy governmental standards, for health or safety reasons or to comply with any applicable environmental laws, rules, regulations, orders, decisions, or decrees (“Mandatory Engineering Changes”), provided that IBM provides Customer with written notice of each Mandatory Engineering Change promptly upon its determination that such Mandatory Engineering Change is necessary. IBM may not make changes other than Mandatory Engineering Changes that would impact the fit, form, function or reliability of any Product without the prior written consent of Customer, such consent not to be unreasonably withheld or delayed.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

5.0 Supply Commitment and Forecasts and Orders

[*]

6.0 Orders

6.1 Customer will request delivery of Products by issuing written purchase orders to IBM. Purchase orders for Product shall only specify:

a) Customer’s purchase order number;

b) Customer’s tax status - exempt or non-exempt;

c) ship to location - complete address;

d) bill to location - complete address;

e) order from location - complete address;

f) shipping instructions, including preferred carrier and carrier account number;

g) the agreement number of this Agreement;

h) name of Customer contact;

i) Product part numbers and quantities being ordered (in increments of the Minimum Order Quantity (“MOQ”);

j) the Product’s applicable unit price; and

k) requested shipment dates.

6.2 Customer will request NRE (which includes Prototypes) by issuing written purchase orders to IBM. Purchase orders for NRE shall only specify:

a) items a through h above;

b) Prototype part numbers and the Milestone(s) to which the purchase order applies; and

c) the applicable price for the NRE.

7.0 Delivery

7.1 The Purchase Order Lead Time for the Products and/or Services, after receipt of Customer’s purchase order or all Items, whichever is received later, is as set forth in Section 1.2 of Part A of this Agreement.

7.2 Rescheduling Rights and Buy All Quantities:

7.2.1 Customer may reschedule a Shipment Date up to [*] provided: (i) Customer sends IBM written notice of the request to reschedule; (ii) the notice is received by IBM more than [*] prior to the Shipment Date; and (iii) the rescheduled Shipment Date is within [*] after the original Shipment Date. If the foregoing requirements are met, no cancellation charge will be imposed by IBM in connection with the rescheduling. Unless otherwise agreed by the parties, once a Shipment Date has been rescheduled [*], the new Shipment Date is firm and cannot be rescheduled by Customer.

[*]

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

7.3 Delayed Delivery

[*]

8.0 NRE Pricing

[*]

9.0 Prototype, Risk Product, and Product Prices:

9.1 Prototype pricing:

Subject to availability, as determined by IBM, Customer may order additional Prototypes from the first Prototype lot (in excess of the Prototypes included in the Standard NRE charge), provided that IBM receives Customer’s purchase order for such additional Prototypes at least [*] prior to the scheduled RTM signoff.

Each Prototype in excess of the number of Prototypes included in the Standard NRE charge shall cost [*] the applicable production unit Product price.

9.2 Risk Product pricing:

[*]

9.3 Product unit pricing:

[*]

10.0 Minimum Order Quantity/Minimum Ship Pack Quantities

Minimum Order Quantity – [*]

Minimum Ship Pack Quantity – [*]

The foregoing with respect to MOQs and SPQs, does not apply to Customer’s obligation to Buy All Quantities set forth in Section 7.2.

11.0 Cancellation Charges

11.1 NRE Cancellation Charge:

If Customer cancels a purchase order for NRE or otherwise cancels NRE, then IBM may cease work in connection with the Product. [*]

11.2 Product Cancellation Charge:

In accordance with Section 4.2 of the Base Agreement, the following charges will apply for any cancelled Customer order for Product or any portion thereof. The “Cancellation Charge” referred to below is the percentage to be applied to the applicable prices stated above in Section 9.3 of this Attachment.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

If Customer cancels a purchase order more than [*] ahead of the Purchase Order Lead Times specified in Part A and IBM has already started the wafers to fill such purchase order, [*]

Cancellation Notice Received by IBM	Cancellation Charge
[*]

11.3 Risk Product Cancellation Charge:

The following charges will apply for any cancelled Customer order for Risk Product or any portion thereof. The “Cancellation Charge” referred to below is the percentage to be applied to the applicable prices stated above in Sections 9.2 and 9.3 of this Attachment.

Cancellation Notice Received by IBM	Cancellation Charge
[*]

12.0 Discontinuance

[*]

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

13.0 Coordinators/Notices

Pursuant to Section 14 of the Base Agreement, any notices hereunder shall be given to the Contract Coordinators stated below.

Technical Coordinators:

Customer: [*]	IBM: [*]
Phone: [*]	Phone: [*]
Fax: [*]	Fax: [*]
Email: [*]	Email: [*]

Contract Coordinators:

Customer: Address:	[*] AMCC 6290 Sequence Drive San Diego, CA 92121	IBM:	WW Contracts & Business Practices IBM Microelectronics 1000 River Street Mail Drop 965-3B Essex Junction, VT 05452 Name: [*] Phone: [*] Fax: [*] Email: [*]
Phone:	[*]
Fax:	[*]
Email:	[*]

Accepted and Agreed To:

Applied Micro Circuits Corporation		International Business Machines Corporation
By:	/s/ David Rickey	By:	/s/ John G. Beiswenger
Name:	David Rickey	Name:	John G. Beiswenger
	Please print or type name
Title:	Chairman, President and CEO Please print or type title	Title: Exec. Mgr., MD WW Contracts & Business Practices, IBM Technology Group
Date:	May 5, 2004	Date:	May 4, 2004

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-2.4

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 2.4

Agreement Reference Number                            

INTELLECTUAL PROPERTY AGREEMENT

dated as April 10, 2004, between

INTERNATIONAL BUSINESS MACHINES

CORPORATION, a New York corporation

(hereinafter called “SELLER”), and APPLIED

MICRO CIRCUITS CORPORATION, a

corporation of Delaware (hereinafter called

“BUYER”)

WHEREAS, SELLER and BUYER have executed concurrently herewith an “Asset Purchase Agreement” (“APA”), and other ancillary agreements identified herein as the “Operative Agreements” for the purpose of conveying certain assets and licensing certain intellectual property from SELLER to BUYER in a divestiture and acquisition transaction (the “Transaction”) associated with SELLER’s standard products development operations.

WHEREAS, following the “Closing” (as defined in the APA) of the Transaction, BUYER desires to utilize certain of SELLER’s technical information, know-how, trade secrets, and copyrighted works associated with SELLER’s standard products development operations;

NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, SELLER and BUYER agree as follows:

Section 1.0 Definitions

[*]

“Assigned Product Copyrights” shall mean, and be limited to, SELLER’s copyright interest in and to the works of authorship that are listed on Exhibit A, as the same are in existence as of the Effective Date. Notwithstanding the foregoing, the term “Assigned Product Copyrights” shall not include any copyright interest in third party information, Licensed Product Information, Excluded Information, or Portions, even if such works of authorship are contained in or a part of the works of authorship listed in Exhibit A.

“BUYER Evaluation Board” shall mean, and be limited to, a board which is solely designed for and which functions to provide product functionality for a particular Buyer Licensed Product where such board is solely intended to be used by a customer or potential customer of the particular BUYER Licensed Product to test software designed for use on the particular BUYER Licensed Product.

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“BUYER Licensed Product” shall mean an [*].

[*]

“Confidentiality Agreement” shall mean that certain agreement relating to the exchange of confidential information between SELLER and BUYER, the same such agreement being executed between SELLER and BUYER on or about March 19, 2004.

“Confidential Information” shall mean any and all technical and business information including in: (a) the Deliverable Items, and (b) any other information supplied by the SELLER to the BUYER pursuant to this Agreement and marked with an indication that it is SELLER confidential information or the third party confidential information. The term “Confidential Information” does not include:

(1) any information that BUYER already possesses without obligation of confidentiality;

(2) any information BUYER rightfully receives from another without obligation of confidentiality;

(3) any information that is, or becomes, publicly available without breach of this Agreement;

(4) any information independently developed by employees of BUYER (without use of Confidential Information); or

(5) any information inherently disclosed in the use, lease, sale, or other distribution of, available BUYER Licensed Products, or publicly available supporting documentation therefore by or for BUYER.

“Deliverable Items” shall mean the items identified in Exhibits A, B, C, and D.

[*]

“Effective Date” shall mean the Closing Date as set forth in the APA.

“Employees” shall mean those persons employed by SELLER to work on standard products.

“EULA” shall mean End User License Agreement which restricts the further use and distribution of Licensed Product Software and Licensed Product Information.

[*]

“Incidental Information” shall mean all or any information concerning a part or Portions of any Assigned Product Copyrights (software and/or hardware), system, service, information, documentation, mask, or intellectual property that was not originally conceived, developed, or reduced to practice as part of the Assigned Product Copyrights developed by one or more Employees, but was integrated with the Assigned Product Copyright as of the Effective Date.

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[*]

“In Scope Products” shall mean the [*] listed in Exhibit H.

“Licensed Evaluation Board Information” shall mean, and be limited to, SELLER’s know-how, copyrightable information, documentation, business information, engineering and other technical information that are listed in Exhibit C as the same are in existence as of the Effective Date. Notwithstanding the foregoing, the term “Licensed Evaluation Board Information” shall not include Excluded Information even if such know-how or information is contained in the documents or expressly disclosed by the items listed in Exhibit C. Also, the Licensed Evaluation Board Information shall be deemed to be Confidential Information of SELLER, even if not labeled as such.

“Licensed Product Information” shall mean, and be limited to, SELLER’s know-how, copyrightable information, data, software, scripts, documentation, business information, engineering, test program, and other technical information that are listed in Exhibit B as the same are in existence as of the Effective Date. Notwithstanding the foregoing, the term “Licensed Product Information” shall not include Excluded Information (other than Incidental Information) even if such know-how or information is contained in the documents or expressly disclosed by the items listed in Exhibit B. Also, Licensed Product Information shall be deemed to be Confidential Information of SELLER, even if not labeled as such.

“Licensed Product Software” shall mean the software programs identified in Exhibit D. The term “Licensed Product Software” shall not include any third party software or third party information, even if embedded in or included as part of the software programs listed in Exhibit D. Also, the Licensed Product Software shall be deemed Confidential Information of SELLER, even if not labeled as such.

“Object Code” shall mean computer programming code, substantially or entirely in binary form, which is intended to be directly executable by a computer after suitable processing but without the intervening steps of compilation or assembly.

[*]

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“Source Code” shall mean computer programming code, other than Object Code, and related source code level system documentation, comments and procedural code, such as job control language, which may be printed out or displayed in human readable form.

“Subsidiary” shall mean a corporation, company or other entity now or in the future:

(a) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by a party hereto, or

(b) which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, but more than fifty percent (50%) of whose ownership interest representing the right to make the decisions for such corporation, company or other entity is now or hereafter, owned or controlled, directly or indirectly, by a party hereto,

but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists.

Section 2.0 Deliverables

2.1 SELLER will make accessible to BUYER [*] of each of the Deliverable Items on the Effective Date. Each Deliverable Item will be made accessible either by electronic access or as a tangible media. If access is provided electronically, such access may be established by SELLER opening an access channel to personnel identified as authorized by BUYER, and leaving that channel open for [*] in such a way that the Deliverable Items may be downloaded by BUYER. Access may include for example the delivery of 20 Gigabyte 8mm tape with a copy of the Deliverable Items to BUYER. If access is provided physically, such access may be established by SELLER’s physical delivery of the copy, in usable form. Once the Deliverable Items have been made accessible, SELLER shall be deemed to have delivered to BUYER, and BUYER shall be deemed to have accepted, the Deliverable Items, and SELLER shall have no further obligation to make accessible any such document or other item except as hereafter set forth in this Section 2.1. If, not later than [*] after the Effective Date, BUYER provides written notice to SELLER reasonably demonstrating that there are specific documents or other items: (i) which are within the scope of the assignments and licenses granted to BUYER herein; and (ii) which cannot be located (or in the case of remotely stored computer files, made accessible); and SELLER substantiates such notice, then SELLER agrees to provide a backup copy, if available, of such specific documents or other items without additional charge to BUYER.

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2.2 SELLER shall have no obligation under this Agreement, at any time, to:

(a) provide any technology transfer support, assistance, training, or consultation to BUYER or any third party with respect to the subject matter hereof; or

(b) provide any improvements, enhancements, or updates with respect to the subject matter hereof.

2.3 If after the Effective Date, SELLER or BUYER learns of parts or items provided to BUYER that are not parts or items of the Deliverable Items, BUYER shall promptly deliver such parts or items to SELLER. BUYER shall not be entitled to exercise any right of retention of any such parts or items under this Section 2.3. Notwithstanding anything to the contrary contained herein, BUYER’s sole obligation, with regard to such items provided to BUYER that are not parts or items of the Deliverable Items, shall be the prompt return of such items to SELLER and adherence to the confidentiality provisions of Section 10.

2.4 BUYER hereby acknowledges that the certain of the Deliverable Items are products that are under development, and as such the Deliverable Items associated with such products or building blocks that are made accessible shall be accessible in such state of development that such Deliverable Items exist within the custody and control of SELLER’s standard product operation, on the Effective Date. Accordingly, BUYER recognizes that the Deliverable Items relating to such products are incomplete, and the products themselves are unproven in terms of their commercial viability.

2.5 SELLER and BUYER recognize and understand that certain of the Deliverable Items are integrated with third party information, such items are specifically referenced in Exhibits A and B. Said third party information was obtained under agreements that prohibit SELLER from transferring said third party information to BUYER under this Agreement, without the appropriate consent and/or license. Therefore, except as provided in Section 4.4 of the APA SELLER shall not deliver the Deliverable Items listed in the relevant Exhibits until BUYER has secured the appropriate agreement with the appropriate third party and SELLER receives written authorization to transfer said third party information to the BUYER from the respective third party on or before June 30, 2004. In the event BUYER does not obtain consent from such third party, on or before June 30, 2004, SELLER shall deliver to BUYER the Deliverable Items containing only SELLER information and delivery shall be complete. Except as provided in Section 4.4 of the APA, SELLER shall have no obligation to deliver to BUYER any Deliverable Items containing said third party information for which delivery permission has not been obtained. Third party information not requiring written consent to transfer will be transferred to BUYER upon presentation of evidence that the BUYER has acquired the appropriate rights and/or license on or before June 30, 2004.

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Section 3.0 Assignments

3.1 Subject to all rights granted to others prior to the Effective Date and SELLER’s reservation of rights as set forth in Sections 3.2 and 3.3, SELLER on behalf of itself and its Subsidiaries, hereby irrevocably (subject to Section 6.2) transfers and assigns to BUYER all of SELLER’s and its Subsidiaries’ right, title and interest in and to any and all copyright ownership interest SELLER may have throughout the world in the Assigned Product Copyrights.

3.2 SELLER hereby reserves and retains, for the benefit of itself and its Subsidiaries, successors, and assigns, under the Assigned Product Copyrights, [*]

3.3 SELLER hereby reserves and retains, for the benefit of itself and its Subsidiaries, successors, and assigns, under the Assigned Product Copyrights, [*]. Residuals shall mean the information, ideas, concepts, know-how, or techniques, which are contained in any matter covered by the Assigned Product Copyrights and retained in the unaided memories of SELLER’s employees who have had rightful access to such matter at any time prior to the Effective Date, subject to an obligation to treat confidential information in accordance with Section 10. The term of such reserved license shall be from the Effective Date until the expiration of the last to expire of the Assigned Product Copyrights.

For the avoidance of misunderstanding, SELLER shall retain ownership of SELLER’s copyright interests in any and all Portions.

3.4 Notwithstanding any other provision in this Agreement, the rights assigned by the SELLER to the BUYER in this Section 3.0 shall become effective only upon SELLER’s receipt of the consideration specified in Section 5.0.

Section 4.0 License Grants

4.1 Subject to Section 6.2, SELLER, on behalf of itself and its Subsidiaries, hereby grants to BUYER a [*]

4.2 Subject to Section 6.2, SELLER, on behalf of itself and its Subsidiaries, hereby grants to BUYER a [*]

4.3 Subject to Section 6.2, SELLER, on behalf of itself and its Subsidiaries, hereby grants to BUYER a [*]

4.4 Intentionally left blank.

4.5 The licenses granted in Sections 4.1(b), 4.2(d), and 4.3(b) to BUYER for the purpose of having BUYER Licensed Products made by another manufacturer:

(a) shall only apply when the specifications for such BUYER Licensed Products were created by or for BUYER or its Subsidiaries (either solely or jointly with one or more third parties), or were provided in whole or in a majority portion by SELLER or its Subsidiaries and provided to BUYER;

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(b) shall not apply to (i) any methods used, or (ii) any products in the form manufactured or marketed, by said another manufacturer prior to BUYER’s or SELLER’s furnishing of said specifications;

(c) shall only be under that portion of the Licensed Product Information, Licensed Product Software or Licensed Evaluation Board Information for which the use by said another manufacturer is necessitated by compliance with such specifications;

(d) shall not apply to any information or items generated or outputted by simulation tools or GDSII files; and

(e) shall only apply to the extent that any information embodied in materials provided to said another manufacturer is provided under a written agreement and is made subject to the confidentiality terms and conditions in Section 10 of this Agreement.

4.6 Subject to section 4.2, BUYER may sublicense the Licensed Product Software identified in Exhibit D Section I to customers, contractors of BUYER solely for designing or developing BUYER Licensed Products, and value-added resellers of BUYER Licensed Product (the “Recipient”), provided that:

(a) such sublicense shall not include the right to further distribute the Source Code;

(b) such sublicense shall not include the right to further sublicense others;

(c) Buyer agrees to use same efforts provided herein to protect the confidentiality of SELLER’s confidential information;

(d) the field of such sublicense shall be within the field set forth in Section 4.2;

(e) such sublicense shall be accompanied by and bound by an EULA;

(f) such sublicense shall only permit distribution of the Object Code version of such Licensed Product Software in conjunction with BUYER Licensed Product;

(g) such sublicense shall include confidentiality provisions materially equivalent to those contained in this Agreement;

(h) the sublicense granted to the Recipient prior to the termination of this Agreement shall survive termination, provided however that Recipient is not in breach of the sublicense granted under this Section 4.6 ; and

(i) each sublicense shall be in writing and signed by the Recipient.

4.7 No license, immunity, ownership interest, or other right is granted, assigned, or otherwise conveyed under this Agreement, either directly or indirectly, by implication, estoppel or otherwise, to BUYER with respect to any patent and/or patent application, (regardless of whether a license under the patents of IBM may be necessary to practice the rights granted in licenses and assignments granted hereunder) utility model, trade name, or trademark of SELLER. Except as specifically granted in Sections 3.0 and 4.0, no assignment, license, immunity, or other right is granted, either directly or indirectly, by implication, estoppel or otherwise, to BUYER with respect to any copyrights, trade secrets, computer programs, know-how, mask works or other intellectual property rights of SELLER.

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4.8 Nothing in this Agreement shall be construed as granting BUYER, either directly or by implication or estoppel or otherwise, any intellectual property rights (including copyrights, mask works, trade secret, know-how, patent, patent applications, patentable inventions, inventions or other intellectual property rights) with respect to:

[*]

even if such method or process information is contained in information or expressly disclosed by the other items provided to BUYER.

4.9 The parties hereto acknowledge that POWER PC Information has been expressly excluded from any of the information licensed to BUYER pursuant to this Section 4.9, even if the same POWER PC Information has been included in the materials constituting the assigned copyrights. Any rights and obligations BUYER may have with regard to POWER PC Information are set forth in the POWER PC License Agreement.

4.10 Notwithstanding any other provision in this Agreement, the license rights granted by the SELLER to the BUYER in this Section 4 shall only become effective upon SELLER’s receipt of the consideration specified in Section 5.0.

4.11 Subject to Section 4.10, the licenses granted herein shall include the right of BUYER to grant sublicenses to its Subsidiaries existing on or after the Effective Date. No sublicense shall be broader in any respect at any time during the life of this Agreement than the license held by BUYER.

4.12 A sublicense granted to a Subsidiary shall terminate on the earlier of:

(a) the date such Subsidiary ceases to be a Subsidiary; and

(b) the date of termination of the license granted herein.

Section 5.0 Consideration

5.1 In consideration for the assignments and licenses set forth in this Agreement, BUYER shall pay to SELLER, at Closing, the amount attributable to intellectual property rights and specified in Section 1.3 of the Asset Purchase Agreement, no portion of which shall be refundable.

5.2 [*] shall bear and pay all taxes (including, without limitation, sales and value added taxes and other similar taxes) imposed by any national, provincial or local government of any country in which BUYER is doing business as a result of the existence of this Agreement or the exercise of rights hereunder other than taxes on the income, assets, facilities or personnel of SELLER and its Subsidiaries.

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Section 6.0 Term; Termination and Assignability

6.1 The rights and obligations under this Agreement shall remain in effect unless and until terminated in accordance with this Section 6; provided however, if there is no Closing, this Agreement shall be null and void ab initio and have no legal force or effect.

6.2 SELLER shall have the right to terminate any or all licenses granted to BUYER under this Agreement, in whole or in part, if:

(a) BUYER fails at any time to make any payment required herein or in the APA; or

(b) BUYER intentionally and materially breaches any term or condition relating to intellectual property misuse or confidentiality provisions under this Agreement, and if BUYER does not cure such breach within [*] after written notice from SELLER to BUYER specifying the nature of such breach (“Cure Period”) or, if such breach is not curable, the BUYER fails to take reasonable corrective steps during the Cure Period to prevent further occurrences of such material breach.

6.3 In addition, in the event that BUYER engages in or suffers any of the following events of default:;

(a) becomes insolvent, is dissolved or liquidated, files or has filed against it a petition in bankruptcy, dissolution, or liquidation or similar action filed by or against it, is adjudicated as bankrupt, or has a receiver appointed for its business; or

(b) has all or a substantial portion of its capital stock or assets expropriated or attached by any government entity;

(c) then BUYER shall promptly notify SELLER in writing that such event has occurred. If any default as specified above in this Section 6.3 is not cured, or an acceptable plan for such cure is not proposed within [*] after written notice from SELLER specifying the nature of the default, SELLER shall have the right to terminate this Agreement, subject to Section 6.5, by giving written notice of termination to BUYER.

6.4 If BUYER is acquired by a third party, thereby becoming a Subsidiary of the third party, if BUYER notifies SELLER in writing prior to said acquisition, BUYER may retain its rights hereunder so long as such acquiring third party accepts the obligations of this Agreement and unless one of the following applies (in which case the Agreement will terminate):

(a) SELLER has an unresolved intellectual property dispute with said third party;

(b) SELLER has ongoing litigation with said third party in which the claim is for injunctive relief or specific performance or damages in excess of [*].

6.5 Except as expressly permitted herein, neither BUYER nor SELLER shall assign or sublicense any of its rights or privileges hereunder without the other party’s prior written consent, which shall not be unreasonably withheld. Any attempted act in derogation of the foregoing shall be considered void. However, a party which undergoes reorganization may assign such rights and delegate its obligations to its legal successor, provided that after the reorganization, the successor and its Subsidiaries will have essentially the same assets as such party and its

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Subsidiaries had prior to the reorganization. Notwithstanding the foregoing, BUYER shall have the right to assign this Agreement only in its entirety to a Subsidiary of BUYER, so long as such assignment is made subject to the terms and conditions of this Agreement and provided that Buyer shall guarantee full performance of this Agreement by such Subsidiary.

6.6 No failure or delay on the part of SELLER in exercising its right of termination hereunder for any one or more causes shall be construed to prejudice its right of termination for such causes or any other or subsequent causes.

6.7 Upon termination of this Agreement, or the licenses granted by SELLER hereunder, BUYER shall promptly return to SELLER or destroy all tangible information containing SELLER’s Confidential Information or third party Confidential Information for which SELLER has responsibility, and shall promptly certify to SELLER such return or destruction, except that which is required for BUYER or its licensed Subsidiaries to continue to provide support to their customers of BUYER Licensed Products for so long as BUYER or its Subsidiary is providing such support, which SELLER Confidential Information shall be returned promptly after BUYER and its Subsidiaries ceases providing such support. No termination of this Agreement or any license granted hereunder shall relieve BUYER of any obligation or liability accrued hereunder prior to such termination. If this Agreement is terminated as a result of the exercise of SELLER’s right under 6.2(a), then all assignments granted by SELLER in Section 3 shall automatically revert to SELLER, and BUYER shall promptly return to SELLER or, at SELLER’s option destroy, all tangible information contained in the copyrightable materials covered by such assignments.

6.8 Notwithstanding the foregoing, to the extent that BUYER has any sales obligations that pertain to BUYER Licensed Products, and it is contractually bound to perform such obligations as of the effective date of termination (“Termination Date”) of this agreement, for a period of 120 days after the Termination Date BUYER shall be entitled to continue to utilize the Licensed Product Software, Licensed Product Information and Licensed Evaluation Board Information pursuant to the license set forth herein, solely as necessary to fulfill such contractual obligations. BUYER shall take all reasonable steps to clearly indicate to the marketplace that it will not accept any new orders or any other contractual commitments to supply any products, services, or materials that pertain to the licensed technology (including, by way of example and not limitation, deleting such products or services from its web sites and other portals, and discontinuing related marketing and sales activities), and it shall not accept or otherwise perform on any such new orders, either from new customers or those for whom it is fulfilling such contractual commitments after the Notification Date.

Section 7.0 Representations and Warranties

7.1 SELLER represents and warrants that it has the full right and power to grant the assignments and licenses set forth in Section 3 and 4, provided however, that SELLER makes no representations or warranties with respect to any infringement of patents or other intellectual property rights of third parties other than that stated in Section 7.2.

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7.2 SELLER represents and warrants that [*] (which is the department responsible for the intellectual property affairs of the SELLER’s [*] located in [*]) and with the exception of the assertions from [*] in a letter addressed to SELLER dated June 13, 2003, for the period beginning [*] prior to the Effective Date until the Effective Date, SELLER has not received from any third party any written claim alleging SELLER’s infringement of any intellectual property rights relative to the In Scope Products.

7.3 SELLER represents and warrants that, to the knowledge of [*], Exhibit G of this Agreement identifies 3rd party licenses needed for the sale of In Scope Products listed in Exhibit H.

7.4 Except for the agreements with [*] listed in Exhibit G, SELLER represents and warrants that, to the knowledge of [*], SELLER is not aware of any contractual restrictions preventing BUYER after Closing: (i) from selling In Scope Products to any third party or (ii) obligating BUYER to pay any royalties to any third party.

[*]

Section 8 Communications

8.1 Any notice or other communication required or permitted to be made or given to either party hereto pursuant to this Agreement shall be in English and shall be sent to such party by facsimile with confirmation of receipt, or by registered airmail (except that registered or certified mail may be used where delivery is in the same country as mailing), postage prepaid, addressed to it at its address set forth below, or to such other address as it shall designate by written notice given to the other party. Notices and other communications shall be effective upon mailing or facsimile transmittal:

For SELLER:	For BUYER:
[*]	[*]
IBM Corporation
North Castle Drive, [*]	Applied Micro Circuits Corporation
Armonk, NY 10504-1785	6290 Sequence Drive
United States of America	San Diego, CA 92121
	United States of America
Facsimile: [*]	Facsimile: [*]

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8.2 An Agreement Reference Number will be assigned to this Agreement upon execution. This number should be included in all communications, including wire transfer payments, letters, faxes and e-mail messages.

Section 9. Applicable Law

9.1 This Agreement has been delivered at and shall be deemed to have been made in [*], and all matters arising from or relating in any manner to the subject matter of this Agreement shall be interpreted, and the rights and liabilities of the Parties determined, in accordance with the laws of the State of [*] applicable to agreements executed, delivered and performed within such State, without regard to the principles of conflicts of laws thereof.

9.2 The parties hereby expressly waive any rights to a jury trial and agree that any proceedings hereunder shall be tried by a judge without a jury. Each party agrees to accept service of process by registered or certified mail.

Section 10.0 Confidentiality

10.1 Except as BUYER may be expressly authorized to disclose Confidential Information to certain third parties in accordance with the provisions of Section 4, for a period of ten (10) years from the Effective Date, BUYER agrees to use the same degree of care and discretion, but at least a reasonable level of care and discretion, to avoid any disclosure, publication, or dissemination of any part or all of the Confidential Information outside of BUYER, as BUYER employs with information of its own which it regards as confidential and which it does not desire to publish, disclose or disseminate. If any Confidential Information of a third party requires a different standard of care or different period of confidentiality from that specified above, BUYER agrees to protect such third party’s Confidential Information in accordance with the terms of the agreement under which such information was disclosed. SELLER does not expect to receive, nor does it wish to receive, any confidential information belonging to BUYER in connection with the activities contemplated by this Agreement. Accordingly, any information provided to SELLER by BUYER in connection with the activities contemplated by this Agreement shall be considered non-confidential.

10.2 Disclosure of Confidential Information shall not be precluded, if such disclosure is:

(a) in response to a valid order of a court or other governmental body; provided, however, that BUYER shall first have given notice to SELLER and made a reasonable effort to obtain a protective order requiring that the information and/or documents so disclosed be used only for the purposes for which the order was issued;

(b) otherwise required by law; or

(c) necessary to establish rights under this Agreement (but only to the extent necessary to do so).

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10.3 The confidentiality provisions of this Agreement shall supercede and take precedence over any conflicting provisions contained in the Confidentiality Agreement.

Section 11. Miscellaneous

11.1 Nothing contained in this Agreement shall be construed as conferring on either party any license or other right to copy any of the designs of the products of the other party.

11.2 Nothing contained in this Agreement shall be construed as conferring any right to use in advertising, publicity, or other promotional activities any name, trade name, trademark, trade dress or other designation of either party hereto (including any contraction, abbreviation or simulation of any of the foregoing), save as expressly stated herein. Each party hereto agrees not to use or refer to this Agreement or any provision hereof in any promotional activity without the express written approval of the other party.

11.3 BUYER agrees not to export or re-export, or cause to be exported or re-exported, any technical data received hereunder, or the direct product of such technical data, to any country or person which, under the laws of the United States, are or may be prohibited from receiving such technical data or the direct product thereof.

11.4 SELLER shall not have any obligation hereunder to institute any action or suit against third parties for infringement or misappropriation of any licensed copyrights or licensed know-how or to defend any action or suit brought by a third party which challenges or concerns the enforceability or validity thereof.

11.5 The headings of the several Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

11.6 If any Section of this Agreement is found by competent authority to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such Section in every other respect and the remainder of this Agreement shall continue in effect so long as the Agreement still expresses the intent of the parties. If the intent of the parties cannot be preserved, this Agreement shall be either renegotiated or terminated.

11.7 The parties acknowledge that damages would be an inadequate remedy for any material breach of the confidentiality provisions of this Agreement or the Confidentiality Agreement. Therefore, each party agrees that its obligations hereunder may be specifically enforceable and each party agrees the other party may be entitled to an injunction, restraining order or other equitable relief from any court of competent jurisdiction, restraining the other party from committing any violations of the confidentiality provisions of this Agreement.

11.8 WITH THE EXCEPTION OF ANY DAMAGES RESULTING FROM INTENTIONAL MISUSE OF THE LICENSED INTELLECTUAL PROPERTY BY BUYER OR INTENTIONAL BREACH OF THE CONFIDENTIALITY OBLIGATIONS

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BY BUYER, NEITHER PARTY SHALL BE LIABLE, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR GOODWILL, BUSINESS INTERRUPTIONS OR CLAIMS OF CUSTOMERS, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

11.9 Except as permitted by the prior written consent of the other party, each party agrees to protect the terms and conditions of this Agreement in accordance with the obligations set forth in the Confidentiality Agreement as such obligations would be applicable to the other party’s confidential “Information.” This obligation is subject to the following additional exceptions:

(a) disclosure is permissible if required by government or court order, provided the party required to disclose first gives the other prior written notice to enable it to seek a protective order;

(b) disclosure is permissible if otherwise required by law;

(c) disclosure is permissible if required to enforce rights under this Agreement;

(d) each party may use similar terms and conditions in other agreements; and

(e) each party may disclose this Agreement or its contents to the extent reasonably necessary, on a confidential basis, to its accountants, attorneys, financial advisors, its present or future providers of venture capital and/or potential financial investors in such party, provided that the terms of this Agreement may not be disclosed to strategic investors of either party.

11.10 This Agreement will not be binding upon the parties until it has been signed herein below by or on behalf of each party, in which event it shall be effective as of the Effective Date. No amendment or modification hereof shall be valid or binding upon the parties unless made in writing and signed as aforesaid. This Agreement embodies the entire understanding of the parties with respect to the subject matter hereof and merges all prior discussions between them, and neither of the parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to the subject matter hereof other than as expressly provided herein.

-14-

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXECUTION COPY

Notwithstanding any other term or provision of the APA or any other Operative Agreement, any other agreement relating to the Transaction or the subject matter thereof, or any exhibit or attachment to any of the aforesaid, but except for the monetary consideration specified in Section 1.3 of the Asset Purchase Agreement, this Agreement and its Exhibits A through H are the sole and exclusive statement of the understanding of the parties with respect to the assignment or licensing to BUYER of SELLER copyrights, and rights under SELLER know-how and other technical information, and SELLER’s reserved rights thereunder.

11.11 Notwithstanding anything to the contrary contained herein, the parties agree that Sections 1.0, 2.3, 3.0 (subject to Section 5.0), 6.7, 6.8, 8.0, 9.0 10 and 11 of this Agreement shall survive the termination of this Agreement or the termination of any licenses granted hereunder.

11.12 This Agreement may be executed by the parties hereto in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Confirmed facsimile signatures shall have the same effect as original signatures for the purpose of executing this Agreement. Each such counterpart 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.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly signed as of the date first written above.

Agreed to: APPLIED MICRO CIRCUITS CORPORATION		Agreed to: INTERNATIONAL BUSINESS MACHINES CORPORATION
By:	/s/ David Rickey	By:	/s/ Kevin Carswell
Name:	David Rickey		Kevin Carswell
Title:	Chairman, President and CEO		VP, Semiconductor
			Products & Development
Date:	April 12, 2004	Date:	April 12, 2004
		By:	/s/ Gerald Rosenthal
			Gerald Rosenthal
			Vice President
		Date:	April 12, 2004

-15-

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-2.5

Exhibit 2.5

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXECUTION COPY License Ref. No. L044568

AMENDMENT dated May 3, 2004 to the Intellectual Property Agreement dated as April 10, 2004, (hereinafter called the “IPA”) between INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation (hereinafter called “SELLER”), and APPLIED MICRO CIRCUITS CORPORATION, a corporation of Delaware (hereinafter called “BUYER”)

Whereas SELLER has identified errors in the IPA that require clarification;

In consideration of the premises and covenants herein contained, SELLER and BUYER hereby amend the IPA as follows:

1) In the definition section, delete the definition for “Licensed Product Information” and replace it with the following:

—”Licensed Product Information” shall mean, and be limited to, SELLER’s know-how, copyrightable information, data, software, scripts, documentation, business information, engineering, test program, and other technical information that are listed in Exhibit B as the same are in existence as of the Effective Date. Notwithstanding the foregoing, the term “Licensed Product Information” shall not include Excluded Information (except as provided below) even if such know-how or information is contained in the documents or expressly disclosed by the items listed in Exhibit B. The parties agree that (i) Licensed Product Information with respect to [*] specifically includes all [*] information contained therein and (ii) Licensed Product Information with respect to all items listed in Exhibit B specifically includes all Incidental Information. Also, Licensed Product Information shall be deemed to be Confidential Information of SELLER, even if not labeled as such.—

2) In Section 2.1

First line after BUYER insert:

—or BUYER’s Subsidiary—

3) In Section 3.2

At the end of the last paragraph, last sentence after the word “Furthermore” insert:

—except as provided in subsections 3.2 (a) and (e) of this Agreement,—

4) In Exhibit A

[*]

5) In Exhibit B

Insert, in a new line immediately following [*]:

[*]

This Amendment shall be effective as of the Closing Date.

Except as amended by this Amendment, all the rights, obligations and liabilities of the parties under the IPA shall otherwise remain in full force and effect as set out therein.

Agreed to:	Agreed to:
APPLIED MICRO CIRCUITS	INTERNATIONAL BUSINESS
CORPORATION	MACHINES CORPORATION

By: /s/ David Rickey	By:	Kevin Carswell
Name: David Rickey		Kevin Carswell
Title: Chairman, President and CEO		VP, Semiconductor
		Products & Development
Date: May 5, 2004	Date:	May 5, 2004
	By:	/s/ Gerald Rosenthal
		Gerald Rosenthal
		Vice President
	Date:	May 3, 2004

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

2

EX-2.6

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 2.6

Execution Copy

CoreConnect^TM BUS LICENSE AGREEMENT

between

INTERNATIONAL BUSINESS MACHINES CORPORATION

and

APPLIED MICRO CIRCUITS CORPORATION

Execution Copy Agreement No.:                    

This CoreConnect Bus License Agreement is made and entered into as of the Effective Date, by and between International Business Machines Corporation (“IBM”) and Applied Micro Circuits Corporation (“LICENSEE”).

SECTION 1 - DEFINITIONS

1.1 “Agreement” means the terms and conditions of this CoreConnect Bus License Agreement together with any exhibits or attachments hereto which are incorporated herein by reference.

1.2 [*]

1.3 [*]

1.4 [*]

1.5 [Reserved]

1.6 [*]

1.7 [*]

1.8 “Effective Date” means the Closing Date as defined in the Asset Purchase Agreement entered into on even date herewith.

1.9 “IBM Confidential Information” means all information/items identified by IBM as confidential relating to IBM’s past, present and future research, development and business activities including, but not limited to, CoreConnect Bus Structures.

1.10 [*]

1.11 (Reserved)

1.12 “Licensee Product” means any Integrated Circuit or licensable design produced by or for LICENSEE and having a CoreConnect Bus Structure included in all or any portion of its design.

1.13 “Manufacturing Test” means the tests that are applied to an IC as part of the IC manufacturing process to ensure that there are no manufacturing defects.

1.14 “Party(ies)” means LICENSEE and/or IBM as the case may be.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy Agreement No.:                    

1.15 “Subsidiary” means a corporation, company or other entity now or in the future:

(a) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by a Party hereto, or

(b) which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, but more than fifty percent (50%) of whose ownership interest representing the right to make the decisions for such corporation, company or other entity is now or hereafter, owned or controlled, directly or indirectly, by a Party hereto,

but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists.

1.16 [*]

SECTION 2 - CONFIDENTIAL INFORMATION

2.1 For a period of [*] from the date of disclosure, LICENSEE agrees to use the same degree of care and discretion to avoid disclosure, publication or dissemination of IBM Confidential Information outside of LICENSEE as it uses with its own similar information that it does not wish to disclose, publish or disseminate, but no less than a reasonable degree of care and discretion. LICENSEE may use IBM Confidential Information for the sole purpose of effectuating the provisions of this Agreement, and for no other purpose.

2.2 LICENSEE may disclose IBM Confidential Information to: its employees and consultants, subcontractors and customers who have a need to know; and anyone else with IBM’s prior written consent. Before disclosure to any of the above parties, LICENSEE agrees to have a written agreement with such party sufficient to require it to treat Confidential Information in accordance with this Agreement.

2.3 Notwithstanding any other provisions of this Agreement, the nondisclosure and use obligations specified herein shall not apply to any IBM Confidential Information which:

2.3.1 is already in the possession of LICENSEE without obligation of confidence;

2.3.2 is independently developed (without use of IBM Confidential Information) by employees of LICENSEE;

2.3.3 becomes publicly available without breach of this Agreement;

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy Agreement No.:                    

2.3.4 is rightfully received by LICENSEE from a third party not under an obligation of confidentiality;

2.3.5 is released for disclosure by IBM; or

2.3.6 is inherently disclosed in the use, lease, sale, or other distribution of, any available product or service or publicly available supporting documentation therefor by or for LICENSEE.

2.4 Disclosure of IBM Confidential Information shall not be precluded if such disclosure is:

2.4.1 in response to a valid order of a court or other governmental body; provided, however, that LICENSEE shall first promptly provide IBM notice of the order and make a commercially reasonable effort to obtain a protective order requiring that the IBM Confidential Information so disclosed be used only for the purposes for which the order was issued; or

2.4.2 otherwise required by law; or

2.4.3 necessary to establish LICENSEE’s rights under this Agreement.

2.5 If any IBM Confidential Information falls under an exception set forth in Sections 2.3.1 through 2.3.6, LICENSEE shall not disclose that IBM was the source of that IBM Confidential Information.

SECTION 3 - INTELLECTUAL PROPERTY AND ARCHITECTURAL COMPLIANCE

3.1 IBM hereby grants to LICENSEE a [*].

3.2 (Reserved)

3.3 LICENSEE understands and agrees that no license, immunity or other right is granted herein to LICENSEE, directly or by implication, estoppel or otherwise, with respect to any patents, proprietary information, know-how, mask works, copyrights or other intellectual property rights, except as specifically provided in Section 3.1, and that no additional licenses, immunity or other rights shall arise from the consummation of this Agreement or from any acts, statements or dealing leading to such consummation.

3.4 The license granted by IBM to LICENSEE in Section 3.1 do not include the right of LICENSEE to modify the CoreConnect Bus Structures, other than for the sole purpose of making the minimum changes necessary to perform Technology Mapping and Manufacturing Test unless LICENSEE obtains IBM’s prior written approval to make additional modifications. LICENSEE hereby agrees to provide any modifications to IBM and hereby grants to IBM a [*]. For avoidance of doubt, LICENSEE may create extensions to the CoreConnect Bus Structures, so long as (i) the extensions do not modify the underlying CoreConnect Bus Structures and (ii) LICENSEE does not market such extensions as the CoreConnect Bus Structures.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy Agreement No.:                    

3.5 (Reserved)

3.6 LICENSEE agrees to reference the CoreConnect Bus Structures as the property of IBM on its sales literature, advertising, presentation materials, press materials and exhibits for Licensee Products.

3.7 None of the licenses granted by IBM to LICENSEE include any assurances as to non-infringement of third party intellectual property, including (but not limited to) third party patents, copyrights, trade secrets, trademarks and mask works. LICENSEE acknowledges that in order for it to manufacture and sell Licensee Products, it may be necessary for LICENSEE to obtain patent licenses from other parties, and the obtaining of such licenses shall be LICENSEE’s sole responsibility and shall be at LICENSEE’s sole expense. Moreover, IBM makes no representation as to the need for such licenses or their availability.

3.8 LICENSEE agrees to create a CoreConnect Test Suite, which include tests for each feature of CoreConnect that the Licensee implemented in its Licensed Product, using any combination of CoreConnect Test Generator tests and Licensee developed tests and to use its best efforts to ensure that any and all Licensee Products, including those previously tested in LICENSEE’s testing protocol, achieve CoreConnect Compliance prior to any shipment of such Licensee Product(s). The CoreConnect Test Suite must be run with the appropriate PLB, OPB, and DCR monitors attached to the CoreConnect Bus Structures. If a Licensee Product fails to achieve CoreConnect Compliance then LICENSEE shall not label or describe the failed Licensee Product as being compliant with the CoreConnect Bus Structures. Despite the exercise of LICENSEE’s best efforts to ensure that a Licensee Product achieve CoreConnect Compliance, if a Licensee Product inadvertently fails to achieve CoreConnect Compliance and business conditions don’t allow for correction of the design of such failed Licensee Product, then LICENSEE and/or LICENSEE’s customer may ship the Licensee Product (under the above labeling restriction) but LICENSEE agrees to achieve CoreConnect Compliance on the next design of the failed Licensee Product. The Parties intend that shipment of Licensee Products which fail to achieve CoreConnect Compliance shall be an infrequent occurrence. If LICENSEE is experiencing a fundamental problem in achieving CoreConnect Compliance for a Licensee Product, upon request by LICENSEE, IBM agrees to review LICENSEE’s design implementation and permit a variance from CoreConnect Compliance where in IBM’s sole discretion, such variance is appropriate. If LICENSEE’s failure to achieve CoreConnect Compliance for a Licensee Product results from errors in the CoreConnect Test Suite, then LICENSEE may ship Licensee Products which failed to achieve CoreConnect Compliance because of such errors and may designate them as being CoreConnect compliant.

3.9 At IBM’s expense, no more frequently than once every [*] period, IBM, through an independent technical auditor of IBM’s choice, acceptable to LICENSEE, shall have the right to

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy Agreement No.:                    

audit LICENSEE’s testing procedures for achieving CoreConnect Compliance for Licensee Products. The auditor shall deliver a report to IBM of the results of the audit. If the auditor finds that LICENSEE’s testing procedures are unacceptable when compared to industry standards, then LICENSEE agrees to cure any defects uncovered by the audit within sixty (60) days.

3.10 LICENSEE hereby grants to IBM the right to publicize in IBM’s sales literature, advertising, presentation materials, press materials, exhibits and web pages, the fact that LICENSEE has obtained the license rights to the CoreConnect Bus Structures granted herein.

SECTION 4 - CORECONNECT BUS USER’S GROUP

IBM may form a CoreConnect Bus User’s Group. In the event IBM forms such a group, LICENSEE hereby agrees to join the CoreConnect Bus User’s Group. The CoreConnect Bus User’s Group will, inter alia, collect CoreConnect Bus performance feedback from licensees of the CoreConnect Bus Structures and discuss improvements to the CoreConnect Bus Structures. LICENSEE hereby grants to IBM a [*] license to any such improvements made by LICENSEE and adopted by IBM as part of the CoreConnect Bus Structures, with the unrestricted right to grant sublicenses thereunder.

SECTION 5 - TERM AND TERMINATION

5.1 The term of this Agreement shall begin on the Effective Date, and unless previously terminated as hereinafter set forth, shall remain in force indefinitely.

5.2 IBM shall have the right to immediately terminate this Agreement, including the revocable licenses granted herein, with cause by giving written notice of termination to LICENSEE, upon the happening of any of the following events:

5.2.1 LICENSEE fails at any time to make any payment required in the Asset Purchase Agreement; or

5.2.2 An intentional and material breach by either Party of any of its obligations under Sections 3.1 and 3.8 this Agreement, if such material breach is not cured within [*] after receipt of a written notice from the nonbreaching Party specifying such material breach (the “Cure Period”), or, if such breach is not curable, the breaching Party’s failure to take reasonable corrective steps during the Cure Period to prevent further occurrences of such material.

5.3 LICENSEE may terminate this Agreement without cause by giving [*] written notice of termination to IBM.

5.4 Sections 2, 3.4, 3.7, the license grant set forth in Section 4, 5.4, 5.5, 5.6, 6, 7, 8, 9, 10 and 11 shall survive and continue after any termination or expiration of this Agreement.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy Agreement No.:                    

5.5 Promptly after termination of this Agreement, LICENSEE shall return to IBM any IBM Confidential Information in LICENSEE’s possession, except that which is required for LICENSEE or its Subsidiaries to continue to provide support to their customers of Licensee Products for so long as LICENSEE or its Subsidiary is providing such support. LICENSEE will promptly return any IBM Confidential Information to IBM after BUYER and its Subsidiaries cease providing such support.

5.6 The licenses granted herein to LICENSEE shall terminate upon any termination or expiration of this Agreement and IBM agrees to use commercially reasonable efforts to cease referring to LICENSEE as a licensee of the CoreConnect Bus Structures, however, LICENSEE may use the CoreConnect Bus Structures as permitted under Section 5.5 and to the extent that LICENSEE has any sales obligations that pertain to Licensed Products, and it is contractually bound to perform such obligations as of the effective date of termination of this Agreement (“Termination Date”), for a period of [*] after the Termination Date, LICENSEE shall be entitled to continue to utilize the CoreConnect Bus Structures pursuant to the license set forth herein, solely as necessary to fulfill such contractual obligations.

SECTION 6 - REPRESENTATIONS AND WARRANTIES

6.1 [*]

6.2 [*]

Section 7 - INTELLECTUAL PROPERTY INDEMNIFICATION

LICENSEE agrees to indemnify IBM, its officers, agents and employees from and against any and all claims, damages, liabilities (including settlements entered into in good faith), suits, actions, judgments, penalties and taxes, civil and criminal, and all costs and expenses (including without limitation reasonable attorneys’ fees) incurred in connection therewith, arising out of any claim i) that the Licensee Product infringes a patent or copyright of a third party or misappropriates a trade secret of a third party, ii) based on any defect (whether obvious or hidden) in any Licensee Product that is licensed, manufactured or sold by LICENSEE, iii) based on any act, omission, neglect or default of LICENSEE or its agents on or in connection with the license, manufacture, sale, distribution, promotion, or marketing of Licensee Products; and/or iv) based on LICENSEE’s failure to comply with applicable laws with respect to the license, manufacture, sale, distribution, possession or use of any Licensee Product and defend IBM against any such claim at LICENSEE’s expense; PROVIDED THAT (1) IBM promptly notifies LICENSEE, in writing, of the charge or claim; and (2) IBM allows LICENSEE to control, and cooperates with LICENSEE in the defense and any related settlement action, upon the written request of LICENSEE. LICENSEE shall have no liability to IBM and this indemnity shall not apply to any such claim or judgment to the extent that any such claim or judgment is based on the CoreConnect Bus Structures.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy Agreement No.:                    

SECTION 8 - LIMITATION OF REMEDIES

8.1 In no event shall either Party be liable to the other Party for special, indirect, punitive or incidental damages, or for any lost profits, lost savings or any other consequential damages, regardless of whether the claim is for breach of contract, warranty, tort (including negligence), failure of a remedy to accomplish its purpose or otherwise, even if such Party has been advised of the possibility of such damages.

SECTION 9 - NOTICES

9.1 Any notice or other communication required or permitted to be made or given to either Party hereto pursuant to this Agreement shall be sent to such Party by facsimile, or by certified or registered mail, postage prepaid, addressed to the person named below and shall be deemed to have been made, given or provided on the date of facsimile transmission or mailing:

IBM:
	IBM Corporation
	2455 South Road
	[*]
	Poughkeepsie, NY 12601
	Phone: [*]
	Fax: [*]
With a copy to:
	IBM Corporation
	2070 Route 52
	Hopewell Junction, NY 12533
	Phone: [*]
	Fax: [*]
	Attention: Counsel
	Microelectronics Division
LICENSEE:	Applied Micro Circuits Corporation
	6290 Sequence Drive
	San Diego, CA 92121
	Phone: [*]
	Fax: [*]
	Attention: [*]

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy Agreement No.:                    

9.2 A Party hereto may change its address for the purposes of this Section 9 by giving prompt written notice of such change of address to the other Party in the manner herein provided.

SECTION 10 - MISCELLANEOUS

10.1 Except as set forth in Section 3 of this Agreement, nothing contained in this Agreement shall be construed as conferring any right to use in advertising, publicity or other promotional activities any name, trade name, trademark or other designation of any Party hereto (including any contraction, abbreviation or simulation of any of the foregoing).

10.2 Each Party hereto agrees that the other Party may disclose to others the existence of this Agreement.

10.3 Neither this Agreement nor any activities hereunder will impair any right of IBM or LICENSEE to design, develop, manufacture, market, service or otherwise deal in, directly or indirectly, any products or services. Nothing herein requires either Party to develop any particular product or to continue to market or to refrain from continuing to market any particular product(s). Each Party is free, in its sole discretion, to make its own decisions with respect to the development or discontinuation of the products it develops and the manner in which it markets its products and services. Each Party may pursue activities independently with any third party even if similar to the activities under this Agreement.

10.4 Each Party to this Agreement is an independent contractor and is not an agent of the other Party for any purpose whatsoever. Neither Party will make any warranties or representations on the other Party’s behalf, and it will not assume or create any obligation on the other Party’s behalf.

10.5 Except as expressly permitted herein, neither Party shall assign or sublicense any of its rights or privileges hereunder without the other Party’s prior written consent, which shall not be unreasonably withheld. Any attempted act in derogation of the foregoing shall be considered void. However, a Party which undergoes reorganization may assign such rights and delegate its obligations to its legal successor, provided that after the reorganization, the successor and its Subsidiaries will have essentially the same assets as such party and its Subsidiaries had prior to the reorganization. Notwithstanding the foregoing, LICENSEE shall have the right to assign this Agreement to a Subsidiary of LICENSEE, so long as such assignment is made subject to the terms and conditions of this Agreement.

10.6 LICENSEE will comply with all applicable federal, state and local laws, regulations and ordinances of the U.S. Government including, but not limited to, the regulations of the U.S. Government authorities relating to the export of commodities and technical data insofar as they relate to activities under this Agreement. LICENSEE agrees that products, design information, test results and any other technical data provided under this Agreement may be subject to restrictions under the export control laws and regulations of the United States of America,

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy Agreement No.:                    

including but not limited to the U.S. Export Administration Act and the U.S. Export Administration Regulations. LICENSEE shall not export any product, design information or other technical data without appropriate government documents and approvals.

10.7 This Agreement will not be binding upon the Parties until the Effective Date. This Agreement constitutes the entire Agreement between the Parties with respect to the subject matter hereof and shall supersede all previous communications, representations, understandings and agreements, whether oral or written, between the Parties or any officer or representative thereof with respect to the subject matter of this Agreement. No amendment or modification of this Agreement shall be valid or binding upon the Parties unless made in writing and signed on behalf of each Party by their respective representatives thereunto duly authorized. The requirement of written form may only be waived in writing.

10.8 Any waiver by either Party of any breach of, or failure to enforce at any time, any of the provisions of this Agreement, shall not be construed as or constitute a continuing waiver of such provision, or a waiver of any other provision of this Agreement, nor shall it in any way affect the validity of this Agreement or any part thereof, or the right of either Party thereafter to enforce each and every provision of this Agreement.

10.9 If any provision of this Agreement is found by competent authority to be invalid, illegal or unenforceable in any respect for any reason, the availability, legality and enforceability of any such provision in every other respect and the remainder of this Agreement shall continue in effect so long as it still expresses the intent of the Parties. If it no longer expresses the intent of the Parties, the Parties will negotiate a satisfactory alternative to such provision; if, after reasonable efforts, such alternative cannot be found, this Agreement shall either be renegotiated or terminated.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy Agreement No.:                    

10.10 Either Party hereto shall be excused from the fulfillment of any obligation under this Agreement for so long as and to the extent such fulfillment may be hindered or prevented by any circumstance of force majeure, such as, but not limited to, acts of God, war whether declared or not, riot, lockout, fire, shortages of materials or transportation, power failures, national or local government regulations, or any other circumstances outside its control.

10.11 This Agreement may be executed in two (2) counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same agreement.

SECTION 11 - GOVERNING LAW AND JURISDICTION

This Agreement shall be construed, and the legal relations created herein between the Parties shall be determined, in accordance with the laws of the United States of America and, specifically, the State of [*], as if said Agreement were executed in, and to be fully performed within, the State of [*]. Any proceeding to enforce or to resolve disputes relating to this Agreement shall be brought before a court of competent jurisdiction in the State of [*] , including a Federal District Court, sitting within such State. In any such proceeding, neither Party shall assert that such a court lack jurisdiction over it or the subject matter of the proceeding. The Parties hereby expressly waive any right to a jury trial and agree that any proceeding hereunder shall be tried by a judge without a jury.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.

INTERNATIONAL BUSINESS CORPORATION		APPLIED MICRO CIRCUITS CORPORATION
By:	/s/ Kevin Carswell	By:	/s/ David Rickey
Name:	Kevin Carswell	Name:	David Rickey
Title:	IBM VP Semiconductor Products & Development	Title:	Chairman, President and CEO
Date:	April 12, 2004	Date:	April 12, 2004

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-2.7

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 2.7

Agreement No.: L044568B

POWER PC LICENSE AGREEMENT

between

INTERNATIONAL BUSINESS MACHINES CORPORATION

(AS SELLER)

and

APPLIED MICRO CIRCUITS CORPORATION

(AS BUYER)

This POWER PC License Agreement is made and entered into as of the Effective Date, by and between International Business Machines Corporation, incorporated under the laws of the State of New York (“SELLER”), and Applied Micro Circuits Corporation, incorporated under the laws of Delaware (“BUYER”). BUYER and SELLER are hereinafter jointly referred to as the “Parties” or individually as a “Party”.

SECTION 1 – DEFINITIONS

Capitalized terms used but not defined in this Agreement shall have the respective meanings assigned to them in the Intellectual Property Agreement or the Asset Purchase Agreement.

“Agreement” means the terms and conditions of this POWER PC License Agreement.

“Asset Purchase Agreement” means the agreement of the same name and of even date herewith between SELLER and BUYER.

“BUYER Confidential Information” means all information/items disclosed or delivered by BUYER to SELLER hereunder, and identified by BUYER as confidential relating to BUYER’s past, present, and future research, development and business activities including but not limited to the following information/items disclosed here under: any BUYER product plans and technology.

“Confidential Information” means BUYER Confidential Information or SELLER Confidential Information as the context requires.

“Derivative Work” means work which is based upon a preexisting copyrighted work, such as a revision, modification, translation, abridgment, condensation, expansion, compilation or any other form in which such preexisting work may be recast, transformed or adapted, and which, if prepared without authorization of the owner(s) of the copyright in such preexisting work, would constitute a copyright infringement.

“Embedded Applications” means all fields of use other than Personal Computers, Servers, or Game Consoles.

“Effective Date” means the Closing Date.

“Fragmentation” means the occurrence of a software industry development environment that may cause independent software vendors to develop divergent versions of their application programs or software development tools for a particular operating system as a result of differences in Integrated Circuit architecture, design or instructions.

“Game Console” means an electronic device designed primarily for running games.

“Intellectual Property Agreement” means the agreement of the same name and of even date herewith between SELLER and BUYER.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

[*]

“Party(ies)” means BUYER and SELLER.

“Personal Computer” means an electronic device that (a) contains a processor, permanent and temporary memory storage device, display and operating system, and (b) is capable as shipped or enabled by the manufacturer of executing personal productivity applications (such as word processing, spreadsheet, database, PIM, image editing, financial management).

[*]

“SELLER Confidential Information” means all information/items disclosed or delivered by SELLER to BUYER hereunder, and identified by SELLER as confidential, relating to SELLER’s past, present and future research, development and business activities including, but not limited to, the following information/items disclosed hereunder: all SELLER Technology, any SELLER product plans.

[*]

“Server” means an electronic device performing information processing functions that primarily provides shared applications, resources, information, or services to other systems or collections of systems or multiple end-users/clients through an internal or external communications connection or network, or through the Internet.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

“Subsidiary” means a corporation, company or other entity now or in the future :

(a) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by a Party hereto, or

(b) which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, but more than fifty percent (50%) of whose ownership interest representing the right to make the decisions for such corporation, company or other entity is now or hereafter, owned or controlled, directly or indirectly, by a Party hereto,

but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists.

[*]

“Third Party” or “Third Parties” means an entity other than the Parties or their Subsidiaries.

“$” shall mean United States dollars.

SECTION 2 – OWNERSHIP AND LICENSES

2.1 Ownership

2.1.1 SELLER retains ownership of all SELLER Technology. Nothing in this Agreement shall be deemed to transfer to BUYER any ownership interest in any intellectual property of SELLER, including but not limited to any copyrights, trade secrets, know-how, trademarks in the SELLER Technology or any patents, registrations or applications for protection of such intellectual property.

2.1.2 Nothing in this Agreement shall be deemed to transfer to SELLER any ownership interest in any intellectual property of BUYER, including but not limited to any copyrights, trade secrets, know-how, trademarks, patents, registrations or applications for protection of such intellectual property.

2.1.3 SELLER will provide BUYER with the SELLER Technology listed in Attachment 2 in accordance with the procedures set forth in Section 2.1 of the Intellectual Property Agreement.

2.2 SELLER hereby grants to BUYER and its Subsidiaries a [*]

2.2.2 SELLER hereby grants to BUYER and its Subsidiaries, subject to the obligations and limitations of Section 2.6, [*]

2.3 BUYER understands and agrees that no license, immunity or other right is granted herein to BUYER, directly or by implication, estoppel or otherwise, with respect to any patents, proprietary information, know-how, mask works, copyrights or other intellectual property rights, except as specifically provided in Section 2.2, and that no additional licenses,

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

immunity or other rights shall arise from the consummation of this Agreement or from any acts, statements or dealing leading to such consummation. For clarity, the licenses granted in Sections 2.2 and 2.4 do not include the right of BUYER to grant sublicenses to any Third Party other than BUYER’s Subsidiaries and contractors solely for designing and developing Licensed Products for BUYER. BUYER understands that any patent rights covering SELLER Technology that may be granted to BUYER by SELLER shall be covered by a separate patent license agreement between the Parties.

2.4 SELLER hereby grants to BUYER and its Subsidiaries a license under the POWER PC trademark for its use on Licensed Products, as set forth in Attachment 1.

2.5 Except as provided in Section 7, none of the licenses granted by SELLER to BUYER under this Agreement include any assurance as to non-infringement of Third Party intellectual property rights, including (but not limited to) Third Party patents, copyrights, trade secrets and mask work rights.

2.6 BUYER agrees that prior to making any Licensed Product, not manufactured by SELLER available to a Third Party or for use in a higher level of assembly, it will ensure, through a standard testing procedure, that such Licensed Product is either (i) POWER PC Compliant or (ii) only with respect to Derivative Works created pursuant to Section 2.2(b), is POWER PC Book E Compliant, and BUYER agrees to submit to SELLER the results of running such test, and, upon SELLER’s reasonable request, to allow SELLER to witness BUYER’s running of such test. SELLER agrees to evaluate such test results within a reasonable time after receipt of such test results and either to (a) grant certification or (b) notify BUYER of the specific reason(s) such certification is denied. SELLER agrees, in the event such certification is denied, to explain the evaluation results and, where appropriate, provide the data necessary for BUYER to rerun the tests at BUYER’s facility and/or allow an audit by SELLER of the testing procedures conducted at BUYER’s facility and/or, at SELLER’s option, conduct a design review of the relevant Licensed Product and recommend additional testing to obtain SELLER’s certification. It is further BUYER’s responsibility to ensure that any Derivative Works based on the POWER PC 440 will not lead to Fragmentation of the POWER PC Book E Architecture. BUYER further agrees that the allocated, preserved or reserved opcode space and the allocated, preserved or reserved bits in the control and status registers in the POWER PC Book E Architecture along with any special purpose register number and functionality must be defined and implemented in the same manner as those items are treated in the POWER PC 440.

2.6.1 In the event BUYER is unable to achieve POWER PC Compliance or POWER PC Book E Compliance for a Licensed Product, BUYER may engage the services of either SELLER or a Third Party to assist BUYER in achieving such POWER PC Compliance or POWER PC Book E Compliance for a Licensed Product. If BUYER elects to engage SELLER, and SELLER accepts such engagement, SELLER and BUYER shall define a statement of work for such engagement. SELLER’s terms and conditions will be at prevailing market rates.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

SECTION 3 – [RESERVED]

SECTION 4 – CONFIDENTIAL INFORMATION

4.1 For a period of [*] from the date of disclosure for SELLER Confidential Information and BUYER Confidential Information and with respect to SELLER Technology for a period of [*] from the date of disclosure, the receiving Party agrees to use the same degree of care and discretion to avoid disclosure, publication or dissemination of Confidential Information outside of the receiving Party as it uses with its own similar information that it does not wish to disclose, publish or disseminate subject to the following conditions:

4.1.1 BUYER may use SELLER Confidential Information for the sole purpose of effectuating the provisions of this Agreement, and for no other purpose. However, BUYER may use the “Residuals” of the SELLER Confidential Information for any purpose, subject to the obligation of confidentiality.

4.1.2 SELLER may use BUYER Confidential Information for the sole purpose of effectuating the provisions of this Agreement, and for no other purpose. However, SELLER may use the “Residuals” of the BUYER Confidential Information for any purpose, subject to the obligation of confidentiality.

4.1.3 “Residuals” means the ideas, concepts, know-how and techniques, related to the receiving Party’s business activities, which are contained in the disclosing Party’s Confidential Information and retained in the unaided memories of the receiving Party’s employees who have had rightful access to the disclosing Party’s Confidential Information pursuant to this Agreement.

4.2 Confidential Information will be disclosed either: in writing, by delivery of items; by initiation of access to Confidential Information, such as may be contained in a database; or by oral or visual presentation.

4.3 The disclosing Party agrees to: coordinate and control the disclosure of Confidential Information with the receiving Party’s coordinator; and mark tangible Confidential Information as SELLER Confidential Information or BUYER Confidential Information as the case may be. If Confidential Information is not so marked or is disclosed orally, the disclosing Party agrees to: identify Confidential Information as confidential at the time of disclosure, and provide the receiving Party written confirmation within [*] after disclosure. The receiving Party may disclose Confidential Information to: employees, consultants, contractors, subcontractors and customers of the receiving Party, its parent and Subsidiaries who have a need to know. Before disclosure to any of the above parties, the receiving Party agrees to have a written agreement with such party sufficient to require it to protect Confidential Information in accordance with this Agreement.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

4.4 Notwithstanding any other provisions of this Agreement, the nondisclosure and use obligations specified herein shall not apply to any Confidential Information which:

4.4.1 is already in the possession of the receiving Party or any of its Subsidiaries without obligation of confidence;

4.4.2 is independently developed by employees (without use of Confidential Information) of the receiving Party or any of its Subsidiaries;

4.4.3 becomes publicly available without breach of this Agreement;

4.4.4 is rightfully received by the receiving Party from a Third Party not under an obligation of confidentiality;

4.4.5 is released for disclosure by the disclosing Party with its written consent; or

4.4.6 is inherently disclosed in the use, lease, sale, or other distribution of, any available product or service or publicly available supporting documentation therefore by or for the receiving Party or any of its Subsidiaries.

4.5. Disclosure of Confidential Information shall not be precluded if such disclosure is:

4.5.1 in response to a valid order of a court or other governmental body; provided, however, that the receiving Party shall first promptly provide the disclosing Party notice of the order and make a reasonable effort to obtain a protective order requiring that the Confidential Information so disclosed be used only for the purposes for which the order was issued; or

4.5.2 otherwise required by law; or

4.5.3 necessary to establish the receiving Party’s rights under this Agreement.

4.6 If any Confidential Information falls under an exception set forth in Sections 4.4.1 through

4.4.6, the receiving Party shall not disclose that the disclosing Party hereto was the source of that Confidential Information.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

SECTION 5 – TECHNICAL COORDINATORS

5.1 Responsibilities

Work done under this Agreement, including day-to-day activities, shall be under the general direction of the Technical Coordinators who shall be responsible for managing the proper exchange of Information pursuant to Section 5.

5.2 Technical Coordinators

The Technical Coordinators for the Parties are:

For SELLER:	For BUYER:
[*]	[*]
Tel: [*]	Tel: [*]
Fax:	Fax: [*]

Each Party may change its Technical Coordinator at any time and from time to time during the term of this Agreement by notifying the Technical Coordinator for the other Party in writing at the designated address. Such change is effective upon receipt of the notice of change.

SECTION 6 – TERM AND TERMINATION

6.1 The term of Agreement shall begin on the Effective Date, and unless previously terminated as hereinafter set forth, shall remain in force and effect.

6.2 SELLER shall have the right to terminate this Agreement, including the licenses granted herein by giving written notice of termination to BUYER, upon the happening of any of the following events:

6.2.1 BUYER fails at any time to make any payment required in the Asset Purchase Agreement; or

6.2.2 An intentional and material breach by either Party of any of its obligations under Sections 2.2 and 2.6 this Agreement, including, for clarity, any intentional and material breach by BUYER which results in Fragmentation of the POWER PC Book E Architecture, if such material breach is not cured within [*] after receipt of a written notice from the nonbreaching Party specifying such material breach (the “Cure Period”), or, if such breach is not curable, the breaching Party’s failure to take reasonable corrective steps during the Cure Period to prevent further occurrences of such material breach.

6.3 If BUYER is acquired by a third party, thereby becoming a Subsidiary of the third party, if BUYER notifies SELLER in writing prior to said acquisition, BUYER may retain its rights hereunder so long as such acquiring third party accepts the obligations of this Agreement and unless one of the following applies (in which case the Agreement will terminate):

6.3.1 SELLER has an unresolved intellectual property dispute with said third party;

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

6.3.2 SELLER has ongoing litigation with said third party in which the claim is for injunctive relief or specific performance or damages in excess of [*].

6.4 Sections 1, 2.1, 2.3, 2.5, 4, 5, 6, 7, 8, 9, 10 and 11 shall survive and continue after any termination of this Agreement.

6.5 Promptly after termination of this Agreement, BUYER shall return to SELLER the SELLER Technology and any SELLER Confidential Information related thereto in BUYER’s possession, except that which is required for BUYER or its Subsidiaries to continue to provide support to their customers of Licensed Products for so long as BUYER or its Subsidiary is providing such support, which SELLER Technology and related SELLER Confidential Information shall be returned promptly after BUYER and its Subsidiaries ceases providing such support. Promptly after termination of this Agreement, SELLER and its Subsidiaries shall return to BUYER any BUYER Confidential Information in SELLER and its Subsidiaries’ possession.

6.6 The licenses granted herein to BUYER shall terminate upon any termination of this Agreement, provided that those license rights which are required to enable BUYER or its Subsidiaries to continue to provide support to their customers of Licensed Products as provided in Section 6.5 will remain in effect.

6.7 In addition, to the extent that BUYER has any sales obligations that pertain to Licensed Products, and it is contractually bound to perform such obligations as of the effective date of termination of this Agreement (“Termination Date”), for a period of [*] after the Termination Date, BUYER shall be entitled to continue to utilize the SELLER Technology pursuant to the license set forth herein, solely as necessary to fulfill such contractual obligations. BUYER shall take all reasonable steps to clearly indicate to the marketplace that it will not accept any new orders or any other contractual commitments to supply any products, services, or materials that pertain to the licensed technology (including, by way of example and not limitation, deleting such products or services from its web sites and other portals, and discontinuing related marketing and sales activities), and it shall not accept or otherwise perform on any such new orders, either from new customers or those for whom it is fulfilling such contractual commitments after the Termination Date.

SECTION 7 - REPRESENTATIONS AND WARRANTIES

7.1 SELLER represents and warrants that the POWER PC 403, 405 and 440 Hard Cores, delivered to BUYER hereunder will have achieved POWER PC Compliance respectively, at the time of delivery.

7.2 SELLER represents and warrants that it has the full right and power to grant the licenses set forth in Section 2, provided however, that SELLER makes no representations or warranties with respect to any infringement of patents or other intellectual property rights of Third Parties other than that stated in Section 7.3.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

7.3 SELLER represents and warrants that to the knowledge of [*] SELLER has not received from any third party any written claim alleging SELLER’s infringement of any intellectual property rights relative to the SELLER Designs.

7.4 Except as provided in Sections 7.1, 7.2 and 7.3, any item, including any products, services, information or technology furnished by one Party to the other Party, pursuant to this Agreement, are furnished “AS IS” without warranty of any kind. Any promise, affirmation, description or sample which might otherwise form a warranty under this Agreement is deemed not to have formed the basis of a warranty hereunder.

7.5 Except as provided in Section 7.3, neither Party warrants that any products, services or deliverable items provided to the other Party under this Agreement is free of infringement of Third Party intellectual property rights.

7.6 [*]

7.7 [*]

SECTION 8 - LIMITATION OF REMEDIES

8.1 In no event shall either Party be liable to the other Party for incidental damages, lost profits, lost savings or any other consequential damages, regardless of whether the claim is for breach of contract, warranty, tort (including negligence), failure of a remedy to accomplish its purpose or otherwise, even if such Party has been advised of the possibility of such damages.

8.2 Except as provided in Section 7, neither Party will be liable for any damages claimed by the other Party based on any Third Party claim.

8.3 In no event shall either Party’s aggregate liability to the other Party for direct damages resulting in connection with any claim or claims relating to this Agreement exceed the amount of [*], regardless of the form of action, provided that this limitation will not apply to (i) breach of confidentiality under Section 4, (ii) breach of the terms of Section 2, (iii) claims for death, bodily injury or damage to real property or tangible personal property for which the Party is legally liable, or (iv) breach of Section 7, which shall be covered under Section 9.2 of the Asset Purchase Agreement.

SECTION 9 - NOTICES

9.1 Any notice or other communication required or permitted to be made or given to either Party hereto pursuant to this Agreement shall be sent to such Party by facsimile with receipt of transmission, or by certified or registered mail, postage prepaid, addressed to the person named below and shall be deemed to have been made, given or provided on the date of facsimile transmission or mailing.

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

SELLER:
	IBM Corporation
	[*]
	With a copy to:
	IBM Corporation
	2070 Route 52
	Hopewell Junction, NY 12533
	Phone: [*]
	Attention: [*]
BUYER:	Applied Micro Circuits Corporation
	[*]
	Applied Micro Circuits Corporation
	6290 Sequence Drive
	San Diego, CA 92121
	Phone: [*]
	Fax: [*]

9.2 A Party hereto may change its address for the purposes of this Section 9 by giving written notice of such change of address to the other Party in the manner herein provided.

SECTION 10 – MISCELLANEOUS

10.1 Except as set forth in Attachment 1 hereto, nothing contained in this Agreement shall be construed as conferring any right to use in advertising, publicity or other promotional activities any name, trade name, trademark or other designation of any Party hereto (including any contraction, abbreviation or simulation of any of the foregoing).

10.2 Unless required by law or necessary to establish rights against the other Party hereunder, each Party agrees not to disclose to any Third Party the terms, conditions or subject matter of this Agreement without the prior written consent of the other Party.

10.3 Nothing contained in this Agreement shall be construed as conferring on either Party any license or other right to copy the exterior design of any product of the other Party.

10.4 Neither this Agreement nor any activities hereunder will impair any right of SELLER or BUYER to design, develop, manufacture, market, service or otherwise deal in, directly or indirectly, any products or services. Nothing herein requires either Party to develop any particular product or to continue to market or to refrain from marketing any particular product. Each Party is free, in its sole discretion, to make its own decisions with respect to the development or discontinuation of the products it develops and the manner in which it

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

markets its products and services. Each Party may pursue activities independently with any Third Party even if competitive with the activities under this Agreement. The Parties affirm that their respective pricing information relative to the subject matter of this Agreement shall not be discussed or exchanged by the Parties.

10.5 Each Party to this Agreement is an independent contractor and is not an agent of or joint venturer with the other Party for any purpose whatsoever. Neither Party will make any warranties or representations on the other Party’s behalf, and it will not assume or create any obligation on the other Party’s behalf. Nothing herein shall be taken to constitute a partnership or joint venture between the Parties hereto.

10.6 Except as expressly permitted herein, neither BUYER nor SELLER shall assign or sublicense any of its rights or privileges hereunder without the other party’s prior written consent, which shall not be unreasonably withheld. Any attempted act in derogation of the foregoing shall be considered void. However, a party which undergoes reorganization may assign such rights and delegate its obligations to its legal successor, provided that after the reorganization, the successor and its Subsidiaries will have essentially the same assets as such party and its Subsidiaries had prior to the reorganization. Notwithstanding the foregoing, BUYER shall have the right to assign this Agreement to a Subsidiary of BUYER, so long as such assignment is made subject to the terms and conditions of this Agreement.

10.7 Each Party shall be responsible for compliance with all applicable laws, regulations and ordinances. In addition, unless authorized by appropriate government license or regulation, no Party and none of its agents or employees acting on behalf of said Party will export or re-export, directly or indirectly, any technology (including technical data or technical assistance), or its direct product of the other Party, or any process, product or service to any country specified in the applicable laws and regulations of the United States as a prohibited destination, including its foreign nationals. Upon request, each Party will advise the other of the countries then specified as prohibited destinations. As of the Effective Date the countries and nationals listed under the United States export laws and regulations that may require prior U.S. government authorization include: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Cambodia, Cuba, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Iran, Iraq, Laos, Latvia, Libya, Lithuania, Macao, Moldova, Mongolia, North Korea, People’s Republic of China, Romania, Russia, Sudan, Syria, Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and Vietnam.

10.8 Any waiver by either Party of any breach of, or failure to enforce at any time, any of the provisions of this Agreement, shall not be construed as or constitute a continuing waiver of such provision, or a waiver of any other provision of this Agreement, nor shall it in any way affect the validity of this Agreement or any part thereof, or the right of either Party thereafter to enforce each and every provision of this Agreement.

10.9 If any provision of this Agreement is found by competent authority to be invalid, illegal or unenforceable in any respect for any reason, the availability, legality and enforceability of any such provision in every other respect and the remainder of this Agreement shall

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

continue in effect so long as it still expresses the intent of the Parties. If it no longer expresses the intent of the Parties, the Parties will negotiate a satisfactory alternative to such provision; if, after reasonable efforts, such alternative cannot be found, this Agreement shall either be renegotiated or terminated.

10.11 No action, regardless of form, arising out of this Agreement, except for intellectual property actions or actions based on a breach of Section 7, may be brought by either Party more than [*] after the cause of action has arisen.

10.12 Either Party hereto shall be excused from the fulfillment of any obligation under this Agreement for so long as, and to the extent, such fulfillment may be hindered or prevented by any circumstance of force majeure, such as but not limited to, acts of God, war whether declared or not, riot, lockout, fire, shortages of materials or transportation, power failures, national or local government regulations, or any other circumstances outside its control.

10.13 [Reserved]

10.14 This Agreement may be executed by the Parties hereto in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Confirmed facsimile signatures shall have the same effect as original signatures for the purpose of executing this Agreement. Each such counterpart 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

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

SECTION 11 - GOVERNING LAW AND JURISDICTION

11.1 This Agreement shall be construed, and the legal relations created herein between the Parties shall be determined, exclusively in accordance with the laws of the United States of America and, specifically, the State of [*], without regard to conflicts of law, as if said Agreement were executed in, and to fully performed within, the State of [*]. Any proceeding to enforce or to resolve disputes relating to this Agreement shall be brought exclusively before a court of competent jurisdiction in the State of [*], including a Federal District Court, sitting within such State. In any such proceeding, neither Party shall assert that such a court lack jurisdiction over it or the subject matter of the proceeding. The Parties hereby expressly waive any right to a jury trial and agree that any proceeding hereunder shall be tried by a judge without a jury. Furthermore, this Agreement has been executed in English, and any translation of this Agreement into any other language shall in no manner whatsoever affect the content, meaning, or interpretation of the English originals.

11.2 This Agreement will not be binding upon the Parties until the Effective Date. This Agreement constitutes the entire Agreement between the Parties with respect to the subject matter hereof and shall supersede all previous communications, representations, understandings and agreements, whether oral or written, between the Parties or any officer or representative thereof with respect to the subject matter of this Agreement. No amendment or modification of this Agreement shall be valid or binding upon the Parties unless made in writing and signed on behalf of both Parties by their respective representatives thereunto duly authorized. The requirement of written form may only be waived in writing.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.

INTERNATIONAL BUSINESS MACHINES CORPORATION		APPLIED MICRO CIRCUITS CORPORATION
By:	/s/ Kevin Carswell	By:	/s/ David Rickey
Name:	Kevin Carswell	Name:	David Rickey
Title:	IBM VP Semiconductor Products & Development	Title:	Chairman, President and CEO
Date:	April 12, 2004	Date:	April 12, 2004

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-2.8

Exhibit 2.8

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXECUTION COPY License Ref. No. L044568B

AMENDMENT dated May 5, 2004 to the POWER PC License Agreement dated as of the Closing Date, (hereinafter called the “PPCLA”) between INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation (hereinafter called “SELLER”), and APPLIED MICRO CIRCUITS CORPORATION, a corporation of Delaware (hereinafter called “BUYER”)

Whereas SELLER has identified errors in the PPCLA that require clarification;

In consideration of the premises and covenants herein contained, SELLER and BUYER agree to amend the PPCLA as follows:

1) Attachment 2 is deleted and replaced with the following:

Attachment 2

[*]

This Amendment shall be effective as of the Closing Date.

Except as amended by this Amendment, all the rights, obligations and liabilities of the parties under the IPA shall otherwise remain in full force and effect as set out therein.

Agreed to:		Agreed to:
APPLIED MICRO CIRCUITS		INTERNATIONAL BUSINESS
CORPORATION		MACHINES CORPORATION
By	/s/ David Rickey	By	/s/ Kevin Carswell
Name:	David Rickey	Name:	Kevin Carswell
Title:	Chairman, President and CEO	Title:	IBM VP Semiconductor Products & Development
Date	May 5, 2004	Date	May 5, 2004

EX-2.9

Exhibit 2.9

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Execution Copy License Reference Number                            

Patent License Agreement

PATENT LICENSE AGREEMENT (“Agreement”) dated April 10, 2004 (“Agreement Date”) between INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation (“IBM”), and APPLIED MICROCIRCUITS CORPORATION (“LICENSEE”).

WHEREAS, IBM and LICENSEE have executed concurrently herewith an agreement entitled “Asset Purchase Agreement” (APA), and other Operative Agreements as defined in the APA, for the purpose of conveying certain assets and licensing certain intellectual property from IBM to LICENSEE in connection with a divestiture and acquisition transaction relating to standard products development operations;

WHEREAS, each of the parties (as “Grantee”) desires to acquire a [*] license under patents of the other party (as “Grantor”); and

NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, IBM and LICENSEE agree as follows:

Section 1. Definitions

“Effective Date” shall mean the Closing Date, as the same such term is defined in the APA.

“Grantee Licensed Product” shall mean IBM Licensed Product or LICENSEE Licensed Product, as the context requires.

“IBM Licensed Patents” shall mean [*].

Notwithstanding the foregoing, or any other provision of this Agreement or any other Operative Agreement, IBM Licensed Patents shall expressly exclude any [*].

IBM Licensed Patents shall include said [*].

“IBM Licensed Products” shall mean [*].

“IHS Product” shall mean an [*].

“Information Handling System” shall mean [*].

“Intellectual Property Agreement” (IPA) shall mean that certain agreement relating to the assigning and licensing of intellectual property by IBM to LICENSEE, the same such agreement being executed between IBM and LICENSEE on or about the date of the execution of this Agreement.

“Licensed Patents” shall mean either IBM Licensed Patents or LICENSEE Licensed Patents as the context indicates.

“LICENSEE Licensed Patents” shall mean [*].

Notwithstanding the foregoing, or any other provision of this Agreement or any other Operative Agreement, LICENSEE Licensed Patents shall expressly exclude [*].

LICENSEE Licensed Patents shall include said [*].

“Licensee Licensed Products” shall mean [*].

“Subsidiary” of a party hereto or of a third party shall mean a corporation, company or other entity:

(a) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by a party hereto or such third party, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists; or

(b) which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, but more than fifty percent (50%) of whose ownership interest representing the right to make the decisions for such corporation, company or other entity is now or hereafter, owned or controlled, directly or indirectly, by a party hereto or such third party, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists.

Section 2. Grants of Rights

2.1.1 IBM, as Grantor, on behalf of itself and its Subsidiaries grants to LICENSEE, as Grantee, a [*].

2.1.2 LICENSEE, as Grantor, on behalf of itself and its Subsidiaries grants to IBM, as Grantee, a [*].

2.2 The license granted in Sections 2.1.1(b) and 2.1.2(b) [*].

Unless Grantee informs Grantor to the contrary, [*]. In response to a written request identifying a product and a manufacturer, where such request shall not be made unless Grantor has placed such manufacturer on notice of infringement, Grantee shall in a timely manner inform, (to the extent permitted under Grantor’s agreement with said manufacturer), Grantor that such manufacturer is authorized by Grantee to manufacture such product pursuant to the license granted in Sections 2.1.1(b) and 2.1.2(b).

2.3 Except as expressly provided herein, no license or immunity is granted under this Agreement by either party, either directly or by implication, estoppel or otherwise to any third parties acquiring items or services from either party for the combination of such acquired items or services with other items or services (including items or services acquired from either party hereto) or for the use of such combination.

2

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

2.4 Subject to Section 2.5, the licenses granted herein shall include the right of each party to grant sublicenses to its Subsidiaries existing on or after the Agreement Date, which sublicenses may include the right of sublicensed Subsidiaries to sublicense other Subsidiaries of said party. No sublicense shall be broader in any respect at any time during the life of this Agreement than the license held at that time by the party that granted the sublicense.

2.5 A sublicense granted to a Subsidiary shall terminate on the earlier of:

(a) the date such Subsidiary ceases to be a Subsidiary; or

(b) the date of termination or expiration of the license of the party or Subsidiary that granted the sublicense.

If a Subsidiary ceases to be a Subsidiary and holds any patents under which a party hereto is licensed, such license shall continue for the term defined herein.

2.6 In the event that neither a party nor any of its Subsidiaries has the right to grant a license under any particular Licensed Patent of the scope set forth in Section 2, then the license granted herein under said Licensed Patent shall be of the broadest scope which said party or any of its Subsidiaries has the right to grant within the scope set forth above.

2.7 If, after the Agreement Date, a party or any of its Subsidiaries (“Acquiring Party”) either acquires an entity or acquires substantially all of the assets from an entity, and said entity is, immediately prior to the date of acquisition, licensed by the other party (“Licensor”) under one or more Licensed Patents through an existing agreement pursuant to which royalties or other payments are made by said entity to Licensor, then the license and other rights granted herein to the Acquiring Party with respect to said Licensed Patents shall apply to products manufactured or services rendered by said entity or through the use of said assets, provided that such royalties or other payments shall continue to be made by the Acquiring Party or said entity to the Licensor with respect to such products or services notwithstanding that the Acquiring Party may have been licensed for the same Licensed Products before the acquisition.

2.8 Notwithstanding anything said in Section 2 of this Agreement, no license or immunity is granted by Grantor to Grantee, or anyone working under the direction of Grantee, directly or by implication or estoppel or otherwise under any Grantor Licensed Patent to:

[*].

Section 3 Payment

3.1 The license rights granted by IBM to LICENSEE shall be considered fully paid up upon payment of all amounts due under the APA. The license rights granted by LICENSEE to IBM shall be considered fully paid up by IBM upon execution of this Agreement.

3.2 LICENSEE shall bear and pay all taxes (including, without limitation, sales and value added taxes and other similar taxes) imposed by any national, provincial or local government of any country in which LICENSEE is doing business as a result of the existence of this Agreement or the exercise of rights hereunder other than taxes on the income, assets, facilities or personnel of SELLER and its Subsidiaries.

3

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Section 4 Term of Agreement; Acquisition of a Party

4.1 The term of the licenses granted under this Agreement shall be from the Effective Date until the last to expire IBM Licensed Patent or LICENSEE Licensed Patent, unless earlier terminated under the provisions of this Agreement. For the avoidance of doubt however, unless there is a Closing, this Agreement shall be null and void ab initio and have no effect.

4.2 If LICENSEE is acquired by a third party, thereby becoming a Subsidiary of the third party, if LICENSEE notifies IBM in writing prior to said acquisition, LICENSEE may retain its rights hereunder so long as such acquiring third party accepts the obligations of LICENSEE under this Agreement and unless one of the following applies (in which case the Agreement will terminate upon such acquisition):

(a) IBM has an unresolved intellectual property dispute with said third party;

(b) IBM has ongoing litigation with said third party in which the claim is for injunctive relief, specific performance or damages in excess of [*].

4.3 If one party (the “Acquired Party”) is acquired by a third party such that it is no longer a separate legal entity, the license granted to the Acquired Party shall terminate as of the date of acquisition. The parties agree to negotiate in good faith with said third party in an attempt to enter into a new license.

4.4 IBM shall have the right to terminate this Agreement in its entirety if LICENSEE fails to make any payment due under the Asset Purchase Agreement. IBM’s termination of LICENSEE’s license or rights under this Agreement shall be effective upon written notice.

Section 5. Communication

5.1 Notices and other communications shall be sent by facsimile or by registered or certified mail to the following addresses and shall be effective upon mailing:

For IBM:	For LICENSEE:
[*]
IBM Corporation	[*]
North Castle Drive, [*]	Applied Micro Circuits Corporation
Armonk, NY 10504-1785	6290 Sequence Drive
United States of America	San Diego, CA 92121
	United States of America
Facsimile: [*]	Facsimile: [*]

5.2 A License Reference Number will be assigned to our agreement upon execution. This number should be included in all communications including wire transfer payments, royalty reports, tax credit certificates, letters, faxes and E-Mail messages.

4

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Section 6. Miscellaneous

6.1 Neither party shall assign or grant any right under any of its Licensed Patents unless such assignment or grant is made subject to the terms of this Agreement.

6.2 Neither party shall assign any of its rights (other than the right to receive payments) or delegate any of its obligations under this Agreement, without prior written consent from the other party. Any attempt to do so shall be void. However, a party which undergoes reorganization may assign such rights and delegate such obligations to its legal successor, provided that after the reorganization, the successor and its Subsidiaries will have essentially the same assets as such party and its Subsidiaries had prior to the reorganization.

6.3 Neither party shall use or refer to this Agreement or any of its provisions in any promotional activity.

6.4 Each party represents and warrants that it has the full right and power to grant the license set forth in Section 2.

6.5 Nothing contained in this Agreement shall be construed as conferring any rights by implication, estoppel or otherwise, under any non-patent intellectual property right, or any patents or patent applications, other than the Licensed Patents. Neither party is required hereunder to furnish or disclose to the other any technical or other information (including copies of Licensed Patents) except as specifically provided herein.

6.6 Neither party shall have any obligation hereunder to institute any action or suit against third parties for infringement of any of its Licensed Patents or to defend any action or suit brought by a third party which challenges or concerns the validity of any of its Licensed Patents. Neither party shall have any right to institute any action or suit against third parties for infringement of any of the other party’s Licensed Patents. Neither party, nor any of its Subsidiaries, is required to file any patent application, or to secure any patent or patent rights, or to maintain any patent in force.

6.7 Each party shall, upon a request from the other party sufficiently identifying any patent or patent application, inform the other party as to the extent to which said patent or patent application is subject to the licenses and other rights granted hereunder. If such licenses or other rights under said patent or patent application are restricted in scope, copies of all pertinent provisions of any contract or other arrangement creating such restrictions shall, upon request, be furnished to the party making such request, unless such disclosure is prevented by such contract, and in such event, a statement of the nature of such restriction shall be provided.

6.8 This Agreement shall not be binding upon the parties until it has been signed herein below by or on behalf of each party. No amendment or modification hereof shall be valid or binding upon the parties unless made in writing and signed as aforesaid, except that either party may amend its address in Section 5.1 by written notice to the other party.

5

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

6.9 If any section of this Agreement is found by competent authority to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of such section in every other respect and the remainder of this Agreement shall continue in effect so long as the Agreement still expresses the intent of the parties. However, if the intent of the parties cannot be preserved, this Agreement shall be either renegotiated or terminated.

6.10 This Agreement shall be construed, and the legal relations between the parties hereto shall be determined, in accordance with the law of the State of [*], USA, as such law applies to contracts signed and fully performed in [*].

6.11 The headings of sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

6.12 Until [*], each party, on behalf of itself and its Subsidiaries, agrees not to disclose any term or condition of this Agreement to any third party without the prior written consent of the other party. This obligation is subject to the following exceptions:

(a) disclosure is permissible if required by government or court order, provided the party required to disclose first gives the other prior written notice to enable it to seek a protective order;

(b) disclosure is permissible if otherwise required by law;

(c) disclosure is permissible if required to enforce rights under this Agreement;

(d) each party may use similar terms and conditions in other agreements;

(e) each party may disclose only the scope of the licenses and immunities granted hereunder (but not any financial terms) to the extent reasonably necessary, on a confidential basis, to its customers, potential customers, and other third parties with which it has a current or potential commercial relationship; and

(f) each party may disclose the terms and conditions of this Agreement to the extent reasonably necessary, on a confidential basis, to its accountants, attorneys, financial advisors, its present or future providers of venture capital and/or potential investors in or acquirers of such party.

6

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

The terms and conditions of the Confidentiality Agreement shall not apply to this Agreement.

6.13 This Agreement may be executed by the parties hereto in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Confirmed facsimile signatures shall have the same effect as original signatures for the purpose of executing this Agreement. Each such counterpart 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.

This Agreement and its Exhibit embodies the entire understanding of the parties with respect to the Licensed Patents, and replaces any prior oral or written communications between them.

Agreed to:		Agreed to:
Applied Micro Circuits Corporation		INTERNATIONAL BUSINESS MACHINES CORPORATION
By:	/s/ David Rickey	By:	/s/ Gerald Rosenthal
			Gerald Rosenthal
Name:	David Rickey		Vice President
Title:	Chairman, President and CEO
Date:	April 12, 2004	Date:	April 12, 2004

7

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-99.1

Exhibit 99.1

Press Release

Applied Micro Circuits Corporation Completes Acquisition of Intellectual Property and a Portfolio of PowerPC 400 Products

Wednesday May 5, 4:30 pm ET

SAN DIEGO, May 5 /PRNewswire-FirstCall/ — Applied Micro Circuits Corporation (Nasdaq: AMCC - News) today announced that it has completed the acquisition of intellectual property and a portfolio of products and other assets associated with IBM’s 400 series of embedded PowerPC^® standard products, in addition to a Power Architecture license. The PowerPC 400 series product line delivers performance and a rich mix of features for Internet, communication, data storage, consumer and imaging applications.

In connection with the completion of this transaction, AMCC expects to add approximately $10 million in revenue from today through the end of the June quarter and $20 million in revenue for the full September quarter. Additionally, the company expects this transaction to be slightly accretive to proforma net income for the current quarter.

AMCC also expects to record certain GAAP required acquisition related charges such as in-process R&D and amortization of intangible assets, however the magnitude and allocation of these amounts have not been determined.

This acquisition is expected to expand the company’s addressable market by $2.6 billion by calendar year 2007.

AMCC Overview

AMCC provides the essential building blocks for the communication, processing, transport and storage of information worldwide. AMCC’s corporate headquarters are located in San Diego, California. Sales and engineering offices are located throughout the world. For further information regarding AMCC, please visit our web site at http://www.amcc.com.

Forward-looking Statements and risk factors

This news release contains forward-looking statements, including statements regarding, the anticipated impact of this acquisition on AMCC, and AMCC’s product offerings and market position. Readers are cautioned that these forward-looking statements are predictions based only on current information and expectations that are inherently subject to change and future events or results may differ materially. Readers are referred to the documents filed by AMCC with the SEC, specifically the most recent reports on Form 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in these forward-looking statements. Among the important factors or risks that could cause actual results or events to differ materially from those in the forward-looking statements in this release are: risks associated with the successful integration of the PowerPC product line into AMCC’s business; risks associated with obtaining third party consents to assign certain contracts to AMCC related to the PowerPC product line; AMCC may not be able to retain all customers of the current PowerPC product line or current customers may reduce their demand for PowerPC products; risks associated with generating the revenues and gross margins expected from the acquisition of the PowerPC product line; AMCC may not be successful in retaining the key support of employees affiliated with the PowerPC product line; and the anticipated benefits of this acquisition may not be realized by AMCC. The information in this release is current as of the date of this release, but may not remain accurate as of any future date. AMCC does not undertake any duty to update the information provided in this release, except as otherwise required by law.

AMCC is a registered trademark of Applied Micro Circuits Corp. All other trademarks and registered trademarks are the property of their respective owners.

Source: Applied Micro Circuits Corporation