Adaptec 2007 Annual Report Download - page 79

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Table of Contents
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 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 123R. The fair value of options assumed was calculated using
a lattice-binomial method. 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 final purchase price was:
(in thousands)
PMC shares (19.3 million) $224,411
Vested Passave stock options assumed by PMC 30,135
Additional post-closing adjustment 2,275
Merger costs 2,950
Total consideration $259,771
The total purchase price was allocated to the fair value of assets acquired and liabilities assumed, and the excess of the purchase price over the net assets acquired
was recorded as goodwill, which for this acquisition is not deductible for tax purposes. The allocation was determined by management based on a third-party
valuation. Merger costs include investment banking fees, legal and accounting fees and other external costs directly related to the merger.
73
Source: PMC SIERRA INC, 10-K, February 22, 2008