Adaptec 2006 Annual Report Download - page 82

Table of Contents
which was in the early stage of development, and two projects were next-generation Tachyon projects in later stages of development. The value assigned to
IPR&D was calculated using the income approach by determining cash flow projections related to the identified projects. The assumptions included information
on revenues from existing products and future expected trends for each technology, with an estimated useful life of 5 to 9 years. The rates used to discount the
net cash flows to their present values were based upon a weighted average cost of capital of 19%. The discount rate was determined after consideration of market
rates of return on debt and equity capital and the risk associated with achieving forecasted sales related to the assets acquired.
The fair value, expected costs to complete, and anticipated completion date for each project is as follows:
(in thousands)
Estimated
fair value
Expected
costs to complete
Expected
completion date
Next generation Tachyon products $ 9,400 $ 800 2007
Multi-protocol storage controller 5,400 10,000 2007
Total in-process research and development $ 14,800
Passave Inc.
On May 4, 2006, the Company acquired Passave, Inc. (“Passave”), a privately held Delaware corporation, pursuant to the Agreement and Plan of Merger (the
“Merger Agreement”), dated April 4, 2006, among the Company, a newly formed direct wholly-owned subsidiary of the Company (“Merger Sub”), Passave, and
a representative of certain securityholders of Passave. Under the terms of the Merger Agreement, the Company issued shares of its common stock and assumed
stock options, and incurred merger costs having a total value of $304.0 million for all of the outstanding capital stock, warrants and outstanding stock options of
Passave. Of this amount, $257.5 million was allocated to the purchase price, and $46.5 million related to unvested stock and stock options of Passave which will
be recorded as stock-based compensation over the requisite service period in accordance with FAS 123(R). The fair value of options assumed was calculated
using a lattice-binomial method. Of the consideration received by stockholders of Passave, approximately 10% is being held in escrow to satisfy certain
indemnification and other obligations. The Company and the securityholders of Passave have each agreed to indemnify the other for, among other things,
breaches of representations, warranties and covenants of the Company and Passave in the Merger Agreement. These financial statements include the results of
operations of Passave from the acquisition date.
PMC purchased Passave due to its market share leadership in Passive Optical Networking solutions. This acquisition fits with PMC’s strategic intent to address
the high-growth Fiber Access market and is aligned with PMC’s developments in Customer Premises Equipment. The preliminary purchase price is:
80
Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠