MERGER AGREEMENT PICOTRONIX

Agreement and Plan of Merger

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ADVANCED PHOTONIX INC | MICHIGAN ACQUISITION SUB, LLC | PICOTRONIX, INC.

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Title: MERGER AGREEMENT PICOTRONIX
Governing Law: Michigan Date: 3/14/2005
Industry: Semiconductors Law Firm: Dornbush Schaeffer Strongin & Weinstein, LLP,Miller, Canfield, Paddock and Stone, PLC Sector: Technology

MERGER AGREEMENT PICOTRONIX, Parties: advanced photonix inc , michigan acquisition sub llc , picotronix inc.

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

ADVANCED PHOTONIX, INC.,

MICHIGAN ACQUISITION SUB, LLC,

PICOTRONIX, INC.,

ROBIN RISSER, &

STEVEN WILLIAMSON

Dated as of March 8, 2005

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Article 1 CERTAIN DEFINITIONS....................................................................................1

Article 2 THE MERGER.............................................................................................4

2.1 The Merger.....................................................................................4

2.2 Consent of Stockholders........................................................................4

2.3 Effective Time; Closing........................................................................4

2.4 Effect of the Merger...........................................................................5

2.5 Articles of Organization; Operating Agreement..................................................5

2.6 Merger Consideration...........................................................................5

2.7 Withholding Taxes..............................................................................6

2.8 Stockholder Loans..............................................................................6

2.9 Shares Subject to Repurchase...................................................................6

2.10 No Assumption of Company Options...............................................................6

2.11 Subsequent Parties.............................................................................6

Article 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.....................................7

3.1 Organization of the Company....................................................................7

3.2 Company Capital Structure......................................................................7

3.3 Subsidiaries...................................................................................8

3.4 Authority......................................................................................8

3.5 No Conflict....................................................................................9

3.6 Consents.......................................................................................9

3.7 Company Financial Statements..................................................................10

3.8 No Undisclosed Liabilities....................................................................10

3.9 No Changes....................................................................................10

3.10 Tax Matters...................................................................................12

3.11 Restrictions on Business Activities...........................................................13

3.12 Title to Properties; Absence of Liens and Encumbrances; Condition of Equipment;

Customer Information..........................................................................14

3.13 Intellectual Property.........................................................................15

3.14 Agreements, Contracts and Commitments.........................................................19

3.15 Interested Party Transactions.................................................................19

3.16 Governmental Authorizations...................................................................20

3.17 Litigation....................................................................................20

3.18 Accounts Receivable...........................................................................20

3.19 Minute Books..................................................................................20

3.20 Environmental Matters.........................................................................20

3.21 Brokers and Finders; Fees.....................................................................22

3.22 Employee Benefit Plans and Compensation.......................................................22

3.23 Insurance.....................................................................................26

3.24 Foreign Corrupt Practices Act.................................................................27

3.25 Complete Copies...............................................................................27

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Article 4 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.........................................27

4.1 Ownership of Company Capital Stock............................................................27

4.2 Absence of Claims by the Stockholders.........................................................27

4.3 No Conflict...................................................................................27

4.4 Authority.....................................................................................27

4.5 Securities Law Matters........................................................................28

Article 5 REPRESENTATIONS AND WARRANTIES OF API.................................................................29

5.1 Organization, Standing and Power..............................................................29

5.2 Authority.....................................................................................29

5.3 No Conflict...................................................................................30

5.4 Consents......................................................................................30

5.5 Litigation....................................................................................30

5.6 Securities Compliance.........................................................................30

5.7 Brokers or Finders............................................................................30

5.8 API Stock.....................................................................................31

5.9 Entity Classification.........................................................................31

Article 6 COMPANY CONDUCT PRIOR TO THE CLOSING DATE.............................................................31

6.1 Conduct of Business of the Company............................................................31

6.2 No Solicitation...............................................................................33

6.3 Disclosure of Solicitation....................................................................34

6.4 Injunctive Relief.............................................................................34

6.5 Procedures for Requesting API Consent.........................................................34

Article 7 ADDITIONAL AGREEMENTS.................................................................................35

7.1 Termination of Options .......................................................................35

7.2 Due Diligence.................................................................................35

7.3 Confidentiality...............................................................................35

7.4 Expenses......................................................................................36

7.5 Public Disclosure.............................................................................36

7.6 Consents......................................................................................36

7.7 FIRPTA Compliance.............................................................................36

7.8 Reasonable Efforts............................................................................36

7.9 Notification of Certain Matters...............................................................37

7.10 Additional Documents and Further Assurances...................................................37

7.11 Closing Date Balance Sheet....................................................................37

7.12 Statement of Expenses.........................................................................37

7.13 Proprietary Information and Inventions Assignment Agreement...................................37

7.14 Release of Liens..............................................................................37

7.15 Stockholder Information.......................................................................37

7.16 DP1 Debt......................................................................................38

</TABLE>

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Article 8 CONDITIONS TO THE CLOSING.............................................................................38

8.1 Conditions to Obligations of API, the Sub, the Company and the Stockholders...................38

8.2 Conditions to the Obligations of API and the Sub..............................................38

8.3 Conditions to Obligations of the Company and Stockholders.....................................41

Article 9 INDEMNITY.............................................................................................42

9.1 Survival of Representations and Warranties....................................................42

9.2 Stockholders Indemnification..................................................................42

9.3 API Indemnification...........................................................................43

9.4 Deductibles...................................................................................43

9.5 Claims for Indemnification; Objections to Claims..............................................44

9.6 Claims Among the Parties......................................................................44

9.7 Third-Party Claims............................................................................46

9.8 Stockholder Representative....................................................................47

9.9 Maximum Payments; Remedy; Method of Payment...................................................48

9.10 API's Right of Offset.........................................................................48

Article 10 TERMINATION, AMENDMENT AND WAIVER....................................................................49

10.1 Termination...................................................................................49

10.2 Effect of Termination.........................................................................50

10.3 Amendment.....................................................................................50

10.4 Extension; Waive..............................................................................50

Article 11 GENERAL PROVISIONS...................................................................................51

11.1 Notices.......................................................................................51

11.2 Interpretation................................................................................52

11.3 Counterparts..................................................................................52

11.4 Entire Agreement; Assignment..................................................................52

11.5 Severability..................................................................................52

11.6 Other Remedies................................................................................52

11.7 Governing Law.................................................................................52

11.8 Rules of Construction.........................................................................52

</TABLE>

iii

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EXHIBITS

Exhibit A Certificates of Merger

Exhibit B Form of API Promissory Note

Exhibit C Form of Security Agreement

Exhibit D Form of Note for API Loan

Exhibit D-1 Form of Security Agreement

Exhibit E Form of Intercreditor Agreement

Exhibit F Form of Risser Employment Agreement

Exhibit G Form of Williamson Employment Agreement

SCHEDULES

Schedule 2.1 List of Stockholders and Company Common Stock Held

Schedule 6.1 Conduct of Business Exceptions

Schedule 8.2.3 Liens to be Released

<PAGE>

THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered

into as of March 8th, 2005 by and among ADVANCED PHOTONIX, INC., a Delaware

corporation ("API"), Michigan Acquisition Sub, LLC, a Delaware limited liability

company and a wholly-owned subsidiary of API (the "Sub"), PICOTRONIX, INC., a

Michigan corporation, doing business as Picometrix, Inc. (the "Company"), ROBIN

RISSER ("Risser"), STEVEN WILLIAMSON ("Williamson" and together with Risser, the

"Stockholders").

The Boards of Directors of each of API and the Company and the sole member

of Sub have determined that it is in the best interests of each company and its

respective stockholders and owners that API acquire the Company through the

statutory merger of the Company with and into the Sub (the "Merger") and, in

furtherance thereof, have approved the Merger.

The Board of Directors of the Company unanimously approved the Merger and

has recommended that the Stockholders approve the Merger as required by Section

703a of the Michigan Business Corporation Act, as amended (the "MBCA").

Pursuant to the Merger, among other things, all of the issued and

outstanding Company Capital Stock shall be converted into the right to receive

the Merger Consideration (as the terms Company Capital Stock and Merger

Consideration are hereinafter defined).

The Stockholders own all of the issued and outstanding capital stock of the

Company, and by their signatures below, hereby approve the Merger.

API, the Company and the Stockholders intend for the Merger to qualify as a

reorganization under Section 368(a)(1)(A) of the Code.

NOW, THEREFORE, in consideration of the mutual agreements, covenants and

other promises set forth herein, the mutual benefits to be gained by the

performance thereof, and for other good and valuable consideration, the receipt

and sufficiency of which are hereby acknowledged and accepted, the parties

hereby agree as follows:

Article 1

CERTAIN DEFINITIONS

Capitalized terms used herein and not otherwise defined shall have the

following meanings:

1.1 "Bloomberg" means Bloomberg Financial Markets.

1.2 "Closing Date" means that term as it is defined in Section 2.3 hereof.

1.3 "Market Price" means $1.66, being the price of API's Class A Common

Stock as of the close of business on the business day immediately preceding the

date hereof.

<PAGE>

1.4 "Code" means the Internal Revenue Code of 1986, as amended.

1.5 "Coherent Debt" means the indebtedness in the original principal amount

of $6 million issued by the Company to Coherent, Inc. (a) as evidenced by (i)

that certain Loan Agreement, dated as of August 28, 2002, and (ii) that certain

Promissory Note (the "Original Note") made by the Company in favor of Coherent,

Inc. in the original principal amount of $6 million, and (b) secured pursuant to

that certain Security Agreement, dated as of August 28, 2002, all as

subsequently assigned by Coherent, Inc. to DP1, LLC ("DP1") pursuant to that

certain Assignment and Assumption Agreement, dated as of September 30, 2004,

among the Company, Coherent, Inc. and DP1 which assignment resulted in the

Original Note being replaced by that certain Amended and Restated Promissory

Note dated as of September 30,2004, in the initial aggregate principal amount of

$4,000,000 made by the Company in favor of DP1 (the "DP1Debt").

1.6 "Company Capital Stock" means, collectively, the Company's Class A,

non-voting Common Shares and the Company's Class B, voting Common Shares.

1.7 "Company Options" means all options to acquire the Company's Class A

Common Stock issued and outstanding under the Plan.

1.8 "Company Unvested Common Stock" means any shares of Company Common

Stock that are subject to unvested Company Options or are subject to a

repurchase option in favor of the Company, risk of forfeiture or other condition

under any applicable stock restriction agreement or other agreement with the

Company.

1.9 "Estimated Third Party Expenses" means the amount of Third Party

Expenses (as defined in Section 7.4 hereof) paid or payable by the Company,

estimated by the Company in good faith and based on reasonable assumptions as of

the Closing Date or other relevant date.

1.10 "GAAP" means accounting principles generally accepted in the United

States consistently applied.

1.11 "Knowledge" or "Known" means, with respect to the Company or the

Stockholders, the actual knowledge of the Stockholders.

1.12 "Lien" means any lien, pledge, charge, claim, mortgage, security

interest or other encumbrance of any sort.

1.13 "Material Adverse Effect" means any change, event or effect that is

materially adverse to the business, assets (whether tangible or intangible),

condition (financial or otherwise), prospects or results of operations of the

Company and its subsidiaries, taken as a whole, other than any such change,

event or effect that results or arises from: (a) changes or conditions affecting

the industry in which the Company markets its products and services generally,

except to the extent such changes or conditions disproportionately affect the

Company and its subsidiaries, taken as a whole; or (b) changes in general

economic, regulatory or political conditions, except to the extent such changes

or conditions disproportionately affect the Company and its subsidiaries, taken

as a whole.

<PAGE>

1.14 "Ordinary Course of Business" means an action taken by a Person only

if:

1.14.1 such action is consistent with the past practices of such

Person and is taken in the ordinary course of the normal day-to-day

operations of such Person;

1.14.2 such action is not required to be authorized by the board of

directors of such Person (or by any Person or group of Persons exercising

similar authority); and

1.14.3 such action is similar in nature and magnitude to actions

customarily taken, without any authorization by the board of directors (or

by any Person or group of Persons exercising similar authority), in the

ordinary course of the normal day-to-day operations of other Persons that

are in the same line of business as such Person.

1.15 "Person" means any individual, corporation (including any non-profit

corporation), general or limited partnership, limited liability company, joint

venture, estate, trust, association, organization, labor union or other entity.

1.16 "Plan" means the Picometrix, Inc. 2000 Incentive Stock Option Plan, as

amended.

1.17 "Prime Rate" means as of a particular date, the prime rate of interest

as published on that date in The Wall Street Journal (Eastern Edition), and

generally defined therein as "the base rate on corporate loans posted by at

least 75% of the nation's 30 largest banks." If The Wall Street Journal is not

published on a date for which the Prime Rate must be determined, the Prime Rate

shall be the prime rate published in The Wall Street Journal on the

nearest-preceding date on which The Wall Street Journal was published.

1.18 "Pro Rata Portion" means, with respect to each Stockholder (or each

share of Company Capital Stock), an amount equal to the quotient obtained by

dividing (a) a number of shares of Company Capital Stock owned by such

Stockholder as at the Closing Date (or such share of Company Capital Stock), by

(b) the aggregate number of shares of Company Capital Stock issued and

outstanding immediately prior to the Closing Date.

1.19 "Related Agreements" means and includes any of the Agreements and

promissory notes attached hereto as an Exhibit or any other agreement that the

parties may enter in to in connection with the consummation of the transactions

contemplated hereby.

1.20 "Stockholder" means any holder of any Company Capital Stock.

1.21 "Stockholder Representative" means the representative of the

Stockholders for certain purposes under this Agreement, who shall be a

Stockholder and shall initially be Risser.

1.22 "Taxes" means (a) any and all federal, state, local and foreign taxes,

assessments and other governmental charges, duties, impositions and liabilities,

including taxes based upon or measured by gross receipts, income, profits,

sales, use and occupation, and value added, ad valorem, transfer, franchise,

withholding, payroll, recapture, employment, excise and property taxes as well

as public imposts, fees and social security charges (including, without

limitation, health, unemployment and pension insurance), together with all

<PAGE>

interest, penalties and additions imposed with respect to such amounts, (a) any

liability for the payment of any amounts of the type described in Section

3.10.11 hereof as a result of being a member of an affiliated, consolidated,

combined or unitary group for any period, and (b) any liability for the payment

of any amounts of the type described in the forgoing clauses (a) or (b) as a

result of any express or implied obligation to indemnify any other Person or as

a result of any obligation under any agreement or arrangement with any other

Person with respect to such amounts and including any liability for taxes of a

predecessor entity.

Article 2

THE MERGER

2.1 The Merger. At the Effective Time (as defined in Section 2.3 hereof)

and subject to and upon the terms and conditions of this Agreement and the

provisions of Chapter 7 of the MBCA and Subchapter IX of the Delaware General

Corporation Law, as amended the "DGCL"), the Company shall be merged with and

into the Sub, the separate corporate existence of the Company, shall cease, the

Sub shall succeed to all rights, assets, liabilities, properties, privileges,

powers, franchises and obligations of the Company in accordance with the MBCA

and the DGCL, and the Sub shall continue as the surviving entity and as a

wholly-owned subsidiary of API. The Sub, as surviving entity after the Merger,

is sometimes referred to hereinafter as the "Surviving Entity."

2.2 Consent of Stockholders. The Stockholders own all of the issued and

outstanding capital stock of the Company, and by execution of this Agreement, do

hereby consent to the Merger and approve this Agreement for purposes of Section

703a of the MBCA and do further hereby waive the dissenters' rights without a

meeting for purposes of Section 764(2) of the MBCA.

2.3 Effective Time; Closing. Unless this Agreement is earlier terminated

pursuant to Section 10.1 hereof, the closing of the Merger (the "Closing") will

take place as promptly as practicable after the execution and delivery hereof by

the parties hereto and satisfaction or waiver of the conditions set forth in

Article 8 hereof (other than those conditions which, by their terms, are to be

satisfied or waived at Closing), at 10:00 a.m., local time, at the offices of

API, unless another time or place is mutually agreed upon in writing by parties

hereto. The date upon which the Closing actually occurs shall be referred to

herein as the "Closing Date." On the Closing Date, the parties hereto shall

cause the Merger to be consummated by filing Certificates of Merger in

substantially the forms attached hereto as Exhibit A (the "Certificates of

Merger"), with the Michigan Department of Labor and Economic Growth (the

"Department") and with the Secretary of State of the State of Delaware (the

"Secretary"), in accordance with the applicable provisions of Michigan and

Delaware law (the time that the latter of such filings has been endorsed by both

the Department or the Secretary, as applicable, shall be referred to herein as

the "Effective Time").

<PAGE>

2.4 Effect of the Merger. At the Effective Time, the effect of the Merger

shall be as provided in the applicable provisions of Michigan and Delaware law.

Without limiting the generality of the foregoing, and subject thereto, at the

Effective Time, except as otherwise agreed to pursuant to the terms of this

Agreement, all of the property, rights, privileges, powers and franchises of the

Company and Sub shall vest in the Surviving Entity, and all debts, liabilities

and duties of the Company and Sub shall become the debts, liabilities and duties

of the Surviving Entity.

2.5 Articles of Organization; Operating Agreement.

2.5.1 Unless otherwise determined by API prior to the Effective Time,

the articles of organization of the Surviving Entity shall be the articles

of organization of the Sub as in effect as in effect immediately prior to

the Effective Time and until thereafter amended in accordance with Michigan

Law and as provided in such articles of incorporation; provided, however,

that the articles of organization of the Sub shall be amended as at the

Effective Time to change the name of the Surviving Entity to Picometrix,

LLC.

2.5.2 Unless otherwise determined by API prior to the Effective Time,

the operating agreement of the Surviving Entity shall be the operating

agreement of the Sub as in effect immediately prior to the Effective Time

and until thereafter amended as provided therein and in accordance with

Delaware Law; provided, however, that the operating agreement of the Sub

shall be amended as at the Effective Time to reflect the change of the name

of the Surviving Entity to Picometrix, LLC.

2.6 Merger Consideration. At the Effective Time, by virtue of the Merger

and without any action on the part of Sub, the Company or the Stockholders, each

outstanding share of Company Capital Stock, upon the terms and subject to

conditions set forth in this Section 2.6 and throughout this Agreement, will be

cancelled and extinguished and be converted automatically into the right to

receive, upon surrender of the certificate representing such shares of Company

Capital Stock the following described consideration (the "Merger

Consideration"):

2.6.1 each Stockholder's Pro Rata Portion of $3,500,000 (the "Cash

Payment"), to be paid by wire transfer of immediately available funds to

such account or accounts as such as may be designated to API in writing by

the Stockholders not less than one (1) business day prior to the Closing.

2.6.2 one or more certificates for each Stockholder's Pro Rata Portion

of 2,575,000 shares of API's Class A Common Stock (the "Stock

Consideration").

2.6.3 A promissory note in the form attached hereto as Exhibit B in an

original principal amount for each Stockholder equal to such Stockholder's

Pro Rata Portion of $2,900,500 (each an "API Promissory Note" and,

collectively, the "API Promissory Notes").

<PAGE>

2.7 Withholding Taxes. API, on behalf of the Surviving Entity, shall be

entitled to deduct and withhold from the Cash Payment due to each Stockholder

(or if the Stockholder's Pro Rata Portion of the Cash Payment is insufficient

for such purpose, any other consideration payable to such Stockholder hereunder)

such amounts as may be required to be deducted or withheld therefrom by the

Surviving Entity under any provision of federal, state, local or foreign tax law

or under any other applicable legal requirement; provided, however, prior to

Closing, API shall give the Company notice of its determination that such

deductions and withholdings are required. To the extent such amounts are so

deducted or withheld, such amounts shall be treated for all purposes under this

Agreement as having been paid to the Person to whom such amounts would otherwise

have been paid; provided, however, that if any such amounts are not paid over to

the appropriate governmental entity within ninety (90) days following the

Closing Date, API shall immediately thereafter pay such amounts over to the

Stockholder from whom they were withheld.

2.8 Stockholder Loans. In the event that either Stockholder has outstanding

loans from the Company as of the Closing Date, the amount of the Cash Payment

(or if the Stockholder's Pro Rata Portion of the Cash Payment is insufficient

for such purpose, any other consideration) payable hereunder to such Stockholder

shall be reduced by an amount equal to the outstanding principal of, and accrued

interest on, such any such loan as of the Closing Date. Such loans shall be

deemed satisfied as to the amount by which the consideration is reduced pursuant

to this Section.

2.9 Shares Subject to Repurchase. If any shares of Company Capital Stock

issued and outstanding immediately prior to the Closing Date are subject to a

repurchase option, risk of forfeiture or other condition under any applicable

stock restriction agreement or other agreement with the Company, then the

Company shall repurchase such shares of Company Capital Stock and cause the same

to be cancelled not later than the close of business as at the day prior to the

Closing.. On or before the Closing, the Company shall cause each holder of

Company Capital Stock to have waived and amended all rights regarding

acceleration or lapsing of repurchase rights upon a change of control,

termination without cause or constructive termination, to the extent such

provisions exist.

2.10 No Assumption of Company Options. API shall not assume any outstanding

Company Options (whether vested or unvested), including any outstanding Company

Options issued under the Plan. Prior to the Closing, the Company shall take all

actions necessary to effect the termination, effective no later than the

Closing, of all Company Options (whether vested or unvested) outstanding under

the Plan, including, without limitation, the giving of any notice required under

any agreements relating to the stock options.

2.11 Subsequent Parties. The Company and the Shareholders shall use their

commercially reasonable best efforts to cause any Person acquiring capital stock

of the Company between the date hereof and the Closing to become a party to this

Agreement (and a Stockholder hereunder) by executing and delivering a copy of

this Agreement, whereupon Schedule 2.1 shall be amended to include the share

ownership and other data relevant to such Person.

<PAGE>

Article 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

AND THE STOCKHOLDERS

Except as set forth on that section of the "Disclosure Schedule"

corresponding to the relevant subsection of this Article 3 delivered by the

Company to API as of the date hereof, the Company and the Stockholders hereby

represent and warrant to API as of the date of this Agreement, and as of the

date of the Closing, as hereinafter set forth in this Article 3. The section

numbers in the Disclosure Schedule correspond to the Section numbers in this

Article 3; provided, however, that any information disclosed in the Disclosure

Schedule under any such Section shall be deemed to be disclosed and incorporated

in any other Section of this Agreement and the Disclosure Schedule where such

disclosure would be appropriate and reasonably apparent without further inquiry

or investigation and without reference to any imputed or actual knowledge of

API, except as expressly set forth herein and/or in the Disclosure Schedule. The

disclosure of any particular fact or time in the Disclosure Schedule shall not

be deemed any admission as to whether the fact or item disclosed is "material"

or would constitute a Material Adverse Effect.

3.1 Organization of the Company. The Company is a corporation duly

organized and validly existing in good standing under the laws of the State of

Michigan. The Company has the corporate power to own its properties and to carry

on its business as currently conducted and as currently contemplated to be

conducted. The Company is duly qualified or licensed to do business and in good

standing as a foreign corporation in each jurisdiction in which it is required

to be so qualified or licensed except where the failure to be so qualified or

licensed could not reasonably be expected to have a Material Adverse Effect. The

Company has delivered to API a true and correct copy of its articles of

incorporation and bylaws, each as amended to date and in full force and effect

on the date hereof (collectively, the "Charter Documents"). Section 3.1 of the

Disclosure Schedule lists the directors and officers of the Company as of the

date hereof. The operations now being conducted by the Company are not now and

have never been conducted by the Company under any other name; provided,

however, that the Company operates under the assumed name of "Picometrix, Inc."

Section 3.1 of the Disclosure Schedule also lists every state or foreign

jurisdiction in which the Company has employees or facilities or otherwise

carries on business.

3.2 Company Capital Structure.

3.2.1 As of the date hereof, the authorized capital stock of the

Company consists of 2,520,000 shares of Class A Common Stock, none of which

are issued and outstanding, and 15,480,000 shares of Class B Common Stock,

all of which are issued and outstanding. The Company Capital Stock is held

by the Persons with the domicile addresses and in the amounts set forth in

Schedule 2.1. All outstanding shares of Company Capital Stock are duly

authorized, validly issued, fully paid and non-assessable and not subject

to preemptive rights created by statute, the Charter Documents, or any

agreement to which the Company is a party or by which it is bound, and have

been issued in compliance with federal and state securities laws, except

where the failure to have complied with such laws could not reasonably be

expected to have a Material Adverse Effect. There are no declared or

accrued but unpaid dividends with respect to any shares of Company Capital

Stock. As of the date hereof, there are fewer than 35 shareholders of

record of Company Capital Stock and, to the Knowledge of the Company, there

are fewer than 35 beneficial owners of the Company Capital Stock.

<PAGE>

3.2.2 Except for the Plan, the Company has never adopted, entered

into, sponsored or maintained any stock option plan or any other plan or

agreement (whether written or oral, formal or informal) providing for

equity compensation to any Person. The Company has reserved 2,520,000

shares of Class A Common Stock for issuance to employees and directors of,

and consultants to, the Company upon the issuance of stock or the exercise

of options or other grants under the Plan. The Company has granted options

to purchase 1,238,000 shares of Class A Common Stock under the Plan.

Section 3.2.2 of the Disclosure Schedule sets forth for each outstanding

Company Option or other grant made under the Plan, the name of the grantee,

the domicile address of such grantee, the number of shares of Class A

Common Stock issuable upon the exercise of such Company Option or other

grant, the exercise price of such Company Option or other material terms

thereof, the vesting schedule for such Company option or grant, including

the extent vested to date, and whether such option is a non-statutory

option or intended to qualify as an incentive stock option as defined in

Section 422 of the Code.

3.2.3 Except for the Company Options and as provided in the Plan and

except as set forth in Section 3.2.3 of the Disclosure Schedule with

respect to the conversion rights of the Michigan Economic Development

Corporation in respect of certain indebtedness issued to such entity by the

Company, there are no options, warrants, calls, rights, convertible

securities, commitments or agreements of any character, written or oral, to

which the Company is a party or by which it is bound obligating the Company

to issue, deliver, sell, repurchase or redeem, or cause to be issued,

delivered, sold, repurchased or redeemed, any shares of the capital stock

of the Company or obligating the Company to grant, extend, accelerate the

vesting of, change the price of, otherwise amend or enter into any such

option, warrant, call, right, commitment or agreement. There are no

outstanding or authorized stock appreciation, phantom stock, profit

participation or other similar rights with respect to the Company. There

are no voting trusts, proxies, or other agreements or understandings with

respect to the voting stock of the Company to which the Company or any

Stockholder is a party or of which the Company or any Stockholder has

Knowledge.

3.2.4 Section 3.2.4 of the Disclosure Schedule sets forth the

outstanding principal, accrued interest and applicable rate of interest of

all outstanding loans from any Stockholder to the Company.

3.3 Subsidiaries. The Company does not have any subsidiaries.

3.4 Authority. The Company has all requisite power and authority and each

Stockholder has capacity to enter into this Agreement and any Related Agreements

to which such Stockholder is a party, and to consummate the transactions

contemplated hereby and thereby. The execution and delivery of this Agreement

and any Related Agreements to which the Company or either of the Stockholders is

a party and the consummation of the transactions contemplated hereby and thereby

have been duly authorized by all necessary corporate action on the part of the

Company and no further action is required on the part of the Company or the

Stockholders to authorize the Agreement and any Related Agreements to which the

Company or either of the Stockholders is a party or to consummate the

transactions contemplated hereby and thereby. The Board of Directors of the

Company has unanimously approved this Agreement. This Agreement and each of the

Related Agreements to which the Company and/or either of the Stockholders is a

party have been duly executed and delivered by the Company and each of the

Stockholders, as the case may be, and assuming the due authorization, execution

and delivery by the other parties hereto and thereto, constitute the valid and

binding obligations of the Company and each of the Stockholders, enforceable

against each such party in accordance with their respective terms, except as

such enforceability may be subject to the laws of general application relating

to bankruptcy, insolvency, and the relief of debtors and rules of law governing

specific performance, injunctive relief, or other equitable remedies.

<PAGE>

3.5 No Conflict. Except as set forth in Section 3.5 of the Disclosure

Schedule (including, without limitation, the United States Government contracts

discussed in such Section that will be novated upon consummation of the

transactions contemplated hereby), the execution and delivery by the Company of

this Agreement and the consummation of the transactions contemplated hereby,

will not conflict with or result in any violation of or default under (with or

without notice or lapse of time, or both) or give rise to a right of

termination, cancellation, modification or acceleration of any obligation or

loss of any benefit (each, a "Conflict") under (a) any provision of the Charter

Documents, (b) any mortgage, indenture, lease, contract, covenant or other

agreement, instrument or commitment, permit, concession, franchise or license

(each a "Contract" and collectively the "Contracts") to which the Company or any

of the Company's properties or assets (whether tangible or intangible) are

subject, or (c) any judgment, order, decree, statute, law, ordinance, rule or

regulation applicable to, the Company or any or any of the Company's properties

(whether tangible or intangible) or assets. To the Knowledge of the Company, it

has not breached, violated or defaulted under, or received notice that it has

breached, violated or defaulted under, any of the terms or conditions of any

Contract, nor is the Company or either Stockholder aware of the occurrence of

any such default or of any event that would constitute such a breach, violation

or default with the lapse of time, giving of notice or both.

3.6 Consents.

3.6.1 Except as set forth in Section 3.6 of the Disclosure Schedule

and excepting all Contracts between the Company and the United States

Government or its instrumentalities set forth in Section 3.5 of the

Disclosure Schedule that will be novated upon or after consummation of the

transactions contemplated hereby, to the Knowledge of the Company, no party

obligated to the Company pursuant to any Contract is in default thereunder.

Section 3.6 of the Disclosure Schedule sets forth all necessary consents,

waivers and approvals of parties to any Contracts to which the Company is a

party or any of its properties or assets (whether tangible or intangible)

are subject (collectively, the "Third Party Consents") as are required

thereunder in connection with the transactions contemplated hereby, or for

any such Contract to remain in full force and effect without limitation,

modification or alteration after the Closing Date so as to preserve all

rights of, and benefits to, the Company under such Contracts from and after

the Closing Date. Following the Closing Date, assuming all Third Party

Consents shall have been obtained, the Company will be permitted to

exercise all of its rights under the Contracts without the payment of any

additional amounts or consideration other than ongoing fees, royalties or

payments which the Company would otherwise be required to pay pursuant to

the terms of such Contracts had the transactions contemplated by this

Agreement not occurred.

3.6.2 No consent, notice, waiver, approval, order or authorization of,

or registration, declaration or filing with any court, administrative

agency or commission or other federal, state, county, local or other

foreign governmental authority, instrumentality, agency or commission

(each, a "Governmental Entity") is required by, or with respect to, the

Company or the Stockholders in connection with the execution and delivery

of this Agreement and any Related Agreement to which the Company or a

Stockholder is a party or the consummation of the transactions contemplated

hereby and thereby, except for such consents, notices, waivers, approvals,

orders, authorizations, registrations, declarations and filings as may be

required under applicable securities laws, or as provided in Section 3.6 of

the Disclosure Schedule with respect to certain contracts with the United

States Government or its instrumentalities.

<PAGE>

3.7 Company Financial Statements. Section 3.7 of the Disclosure Schedule

sets forth the Company's (a) audited financial statements for the twelve (12)

months ended December 31, 2003 (the "Year-End Financials"), and (b) an unaudited

consolidated balance sheet (the "Interim Balance Sheet") as of December 31, 2004

(the "Interim Balance Sheet Date"), and the related unaudited statement of

income, cash flow and stockholders' equity for the twelve months then ended

(collectively, the "Interim Financials"; together with the Year-End Financials,

the "Financials"). The Financials have been prepared in accordance with GAAP

consistently applied on a consistent basis throughout the periods indicated and

consistent with each other (except that the unaudited Interim Financials are

subject to normal year-end adjustments that are not material in amount or

significance in any individual case or in the aggregate and do not contain

footnotes and other presentation items that may be required by GAAP). The

Financials present fairly the Company's financial condition, operating results

and cash flows as of the dates and during the periods indicated therein, subject

in the case of the Interim Financials to normal year-end adjustments, which are

not material in amount or significance in the aggregate.

3.8 No Undisclosed Liabilities. Except as otherwise disclosed in Section

3.8 of the Disclosure Schedule, the Company has no liability, indebtedness,

obligation, expense, claim, deficiency, guaranty or endorsement of any type,

whether accrued, absolute, contingent, matured, unmatured or other (whether or

not required to be reflected in financial statements in accordance with GAAP),

which individually or in the aggregate (a) is not reflected in the Interim

Balance Sheet, or (b) has not arisen in the Ordinary Course of Business since

the Interim Balance Sheet Date.

3.9 No Changes. Since the Interim Balance Sheet Date and except as set

forth in Section 3.9 of the Disclosure Schedule and other than in the Ordinary

Course of Business, there has not been, occurred or arisen any:

3.9.1 amendments or changes to the Charter Documents;

3.9.2 capital expenditure or commitment by the Company exceeding

$100,000 individually or $250,000 in the aggregate;

3.9.3 payment, discharge or satisfaction, in any amount in excess of

$100,000 in any one case, or $250,000 in the aggregate, of any claim,

liability or obligation (absolute, accrued, asserted or unasserted,

contingent or otherwise), other than payment, discharge or satisfaction in

the Ordinary Course of Business of liabilities;

3.9.4 destruction of, damage to, or loss of any material assets

(whether tangible or intangible), material business or material customer of

the Company (whether or not covered by insurance);

3.9.5 change in accounting methods or practices (including any change

in depreciation or amortization policies or rates) by the Company other

than as required by GAAP;

3.9.6 change in any material election in respect of Taxes, adoption or

change in any accounting method in respect of Taxes, agreement or

settlement of any claim or assessment in respect of Taxes, or extension or

waiver of the limitation period applicable to any claim or assessment in

respect of Taxes;

3.9.7 revaluation by the Company of any of its assets (whether

tangible or intangible);

<PAGE>

3.9.8 declaration, setting aside or payment of a dividend or other

distribution (whether in cash, stock or property) in respect of any Company

Common Stock, or any split, combination or reclassification in respect of

any shares of Company Common Stock, or any issuance or authorization of any

issuance of any other securities in respect of, in lieu of or in

substitution for shares of Company Common Stock, or any direct or indirect

repurchase, redemption, or other acquisition by the Company of any shares

of Company Common Stock (or options, warrants or other rights convertible

into, exercisable or exchangeable therefor), except in accordance with the

agreements evidencing Company Options;

3.9.9 except merit increases and bonus payments made in the Ordinary

Course of Business or as required under existing employment agreements,

increase in the salary or other compensation payable or to become payable

by the Company to any of its officers, directors, employees or advisors, or

the declaration, payment or commitment or obligation of any kind for the

payment (whether in cash or equity) by the Company of a severance payment,

termination payment, bonus or other additional salary or compensation to

any such Person;

3.9.10 agreement, contract, covenant, instrument, lease, license or

commitment to which the Company is a party or by which it or any of its

assets (whether tangible or intangible) are bound that is in excess of

$100,000 in any one case, or any termination, extension, amendment or

modification of the terms of any agreement, contract, covenant, instrument,

lease, license or commitment to which the Company is a party or by which it

or any of its assets are bound that is in excess of $100,000 in any one

case;

3.9.11 sale, lease, license or other disposition of any of the assets

(whether tangible or intangible) or properties of the Company, including,

without limitation, the sale of any accounts receivable of the Company, or

any creation of any security interest in such assets or properties other

than the sale, lease, license, or other disposition of inventory in the

Ordinary Course of Business;

3.9.12 loan by the Company to any Person, incurring by the Company of

any indebtedness, guaranteeing by the Company of any indebtedness, issuance

or sale of any debt securities of the Company or guaranteeing of any debt

securities of others, except for advances to employees for travel and

business expenses in the Ordinary Course of Business;

3.9.13 waiver or release of any right or claim of the Company having a

value in excess of $100,000, including any write-off or other compromise of

any account receivable of the Company;

3.9.14 commencement or settlement of any lawsuit by or against the

Company; or

3.9.15 agreement by the Company, or any officer or employees on behalf

of the Company, to do any of the things described in the preceding

subsections of this Section, other than negotiations with API and its

representatives regarding the transactions contemplated by this Agreement

and the Related Agreements.

<PAGE>

3.10 Tax Matters. Except as set forth in Section 3.10 of the Disclosure

Schedule:

3.10.1 As of the Closing Date, the Company will have (a) prepared and

timely (excepting permitted extensions that are timely filed) filed

all required federal, state, local and foreign returns, estimates, information

statements and reports (collectively, the "Returns") relating to any and all

Taxes concerning or attributable to the Company or its operations and such

returns will, to the Knowledge of the Company, be true and correct and completed

in accordance with applicable law, and (b) timely paid all Taxes it is required

to pay as evidenced by the Returns.

3.10.2 As of the Closing Date, the Company will have withheld with

respect to its employees (and timely paid over to the appropriate taxing

authority) all federal, state and foreign income taxes and social security

charges and similar fees, Federal Insurance Contribution Act, Federal

Unemployment Tax Act and other Taxes required to be withheld (and so paid).

3.10.3 To its Knowledge, the Company is not delinquent in the payment

of any Tax. The Company has not received any notice not is it otherwise

aware that there is any Tax deficiency outstanding, assessed or proposed

against the Company. The Company has not executed any waiver of any statute

of limitations on, or extending the period for, the assessment or

collection of any Tax.

3.10.4 Excepting an ongoing audit being conducted by the State of

Michigan in respect of Michigan sales and use, withholding and Single

Business Tax for the calendar years 1999 through 2003, no audit or other

examination of any Return of the Company is presently in progress, nor has

the Company been notified of any request for such an audit or other

examination.

3.10.5 To its Knowledge, the Company does not have any liabilities for

unpaid federal, state, local or foreign Taxes which have not been accrued

or reserved on the Interim Balance Sheet, whether asserted or unasserted,

contingent or otherwise. The Company has not incurred any liability for

Taxes since the date of the Interim Balance Sheet other than in the

Ordinary Course of Business.

3.10.6 The Company has made available to API or its legal counsel,

copies of all foreign, federal, state and local income, payroll and

unemployment Returns and all state and local property and sales and use

Returns for the Company that have been filed for three full fiscal years

preceding the date hereof.

3.10.7 There are no Liens on the assets of the Company relating to or

attributable to Taxes other than Liens for Taxes not yet due and payable.

<PAGE>

3.10.8 The Company has no Knowledge of any basis for the assertion of

any claim relating or attributable to Taxes that, if adversely determined,

would result in any Lien on the assets of the Company.

3.10.9 None of the Company's assets is treated as "tax-exempt use

property," within the meaning of Section 168(h) of the Code.

3.10.10 The Company has not filed any consent agreement under Section

341(t) of the Code or agreed to have Section 341(t)(4) of the Code apply to

any disposition of a subsection (t) asset (as defined in Section 341(t)(4)

of the Code) owned by the Company.

3.10.11 The Company has (a) never been a member of an affiliated group

(within the meaning of Code ss.1504(a)) filing a consolidated federal

income Tax Return, (b) never been a party to any Tax sharing,

indemnification or allocation agreement, (c) no liability for the Taxes of

any Person (other than Company or any of its subsidiaries) under Treasury

Regulation ss.1.1502-6 (or any similar provision of state, local or foreign

law), as a transferee or successor, by contract or agreement, or otherwise

and (d) never been a party to any joint venture, partnership or other

arrangement that could be treated as a partnership for Tax purposes.

3.10.12 The Company has not been, at any time, a "United States Real

Property Holding Corporation" within the meaning of Section 897(c)(2) of

the Code.

3.10.13 No adjustment relating to any Return filed by the Company has

been proposed formally or, to the Knowledge of the Company or any

Stockholder, informally by any tax authority to the Company or any

representative thereof.

3.10.14 There is no contract, agreement, plan or arrangement to which

the Company is a party, including, without limitation, the provisions of

this Agreement, covering any employee or former employee of the Company,

which, individually or collectively, could give rise to the payment of any

amount that would not be deductible pursuant to Sections 2800, 404 or

162(m) of the Code.

3.11 Restrictions on Business Activities. Except as set forth in Section

3.11 of the Disclosure Schedule, there is no agreement (non-competition or

otherwise), commitment, judgment, injunction, order or decree to which the

Company is a party or otherwise binding upon the Company which has or may

reasonably be expected to have the effect of prohibiting or impairing any

business practice of the Company, any acquisition of property (tangible or

intangible) by the Company, the conduct of business by the Company, or otherwise

limiting the freedom of the Company to engage in any line of business or to

compete with any Person. Without limiting the generality of the foregoing and

except as set forth in Section 3.11 of the Disclosure Schedule, the Company has

not entered into any agreement under which the Company is restricted from

selling, licensing, manufacturing or otherwise distributing any of its

technology or products or from providing services to customers or potential

customers or any class of customers, in any geographic area, during any period

of time, or in any segment of the market.

<PAGE>

3.12 Title to Properties; Absence of Liens and Encumbrances; Condition of

Equipment; Customer Information.

3.12.1 The Company does not own any real property, nor has the Company

ever owned any real property. The only leased real property of the Company

is its company headquarters located at 2925 Boardwalk, Ann Arbor, Michigan

48113-0243 (the "Leased Real Property"). The Company has provided API true,

correct and complete copies of the lease and all amendments thereto related

to the Leased Real Property (the "Lease"). The Lease is in full force and

effect and the landlord is not in default thereunder. The Company has not

received: any notice of a default, alleged failure to perform, or any

offset or counterclaim with respect to the Lease that has not been fully

remedied and withdrawn. Subject to the consent of the landlord, the Closing

will not affect the enforceability of the Lease or the continued use and

possession of the Leased Real Property for the conduct of the Company's

business as presently conducted. The Company currently occupies all of the

Leased Real Property for the operation of its business. There are no other

parties occupying, or with a right to occupy, the Leased Real Property.

3.12.2 To the Knowledge of the Company, the Leased Real Property is in

good operating condition and repair, free from structural, physical and

mechanical defects, is maintained in a manner consistent with the Lease,

and is structurally sufficient and otherwise suitable for the conduct of

the Company's business as presently conducted therein. To the Knowledge of

the Company, neither the operation of the Company on the Leased Real

Property nor the improvements thereon, violate in any material respect any

material applicable building code, zoning requirement or statute relating

to such Leased Real Property or operations thereon, and any such

non-violation is not dependent on any conditional use permit issued by the

City of Ann Arbor, Michigan.

3.12.3 The Company has not assigned, transferred, conveyed, mortgaged,

deeded in trust or encumbered any interest in the Leased Real Property.

3.12.4 The Company has not received any notice from any insurance

company of any defects or inadequacies in any Leased Real Property or any

part thereof that could materially and adversely affect the insurability of

such property or the premiums for the insurance thereof, nor has any notice

been given by any insurer of any such property requesting the performance

of any repairs, alterations or other work that has not been completed.

3.12.5 There are no outstanding written or oral contracts made by the

Company for any alterations or improvements on or to the Leased Real

Property that have not been fully paid, and the Company shall cause to be

discharged all mechanics' and materialmen's liens arising from any labor or

materials provided to, for, or at the request of the Company and furnished

to or for the Lease Real Property prior to the Closing.

3.12.6 The Company has good and valid title to, or, in the case of

leased properties and assets, valid leasehold interests in, all of its

tangible properties and assets, real, personal and mixed, including,

without limitation, the Leased Real Property, used or held for use in its

business, free and clear of any Liens, except (a) as reflected in the

Interim Balance Sheet, (b) Liens for Taxes not yet due and payable, and (c)

such imperfections of title and encumbrances, if any, which do not detract

from the value or interfere with the present use of the property subject

thereto or affected thereby.

<PAGE>

3.12.7 All items of equipment material to the operation of the Company

owned or leased by the Company are (a) adequate for the conduct of the

business of the Company as currently conducted, and (b) in good operating

condition, regularly and properly maintained, subject to normal wear and

tear.

3.12.8 The Company has sole and exclusive ownership, free and clear of

any Liens, of all of its customer lists, customer contact information,

customer correspondence and customer licensing and purchasing histories

relating to its current and former customers (the "Customer Information").

No Person other than the Company possesses any claims or rights with

respect to use of the Customer Information.

3.13 Intellectual Property.

3.13.1 For purposes of this Section, the following capitalized terms

shall have the following respective meanings:

(a) "Company Intellectual Property" means any and all

Intellectual Property and Intellectual Property Rights that are owned

by or exclusively licensed to the Company.

(b) "Intellectual Property" means proprietary (i) works of

authorship including, without limitation, computer programs, source

code, and executable code, whether embodied in software, firmware or

otherwise, architecture, documentation, designs, files, records, and

data, (ii) inventions (whether or not patentable), discoveries,

improvements, and technology, (iii) proprietary and confidential

information, trade secrets and know how, (iv) databases, data

compilations and collections and technical data, (v) logos, trade

names, trade dress, trademarks and service marks, (vi) registered

domain names, web addresses and sites, (vii) tools, methods and

processes, (viii) proprietary devices, prototypes, schematics,

breadboards, netlists, maskworks, test methodologies, verilog files,

emulation and simulation reports, test vectors and hardware

development tools, and (ix) any and all instances of the foregoing in

any form and embodied in any media.

rights associated with (i) patents and patent applications, (ii)

copyrights, copyright registrations and copyright applications,

"moral" rights and mask work rights, (iii) the protection of trade and

industrial secrets and confidential information, (iv) other

proprietary rights relating to intangible intellectual property, (v)

trademarks, trade names and service marks, and (vi) divisions,

continuations, renewals, reissuances and extensions of the foregoing

(as applicable).

(d) "Registered Intellectual Property" means Company Intellectual

Property that has been registered, filed, certified or otherwise

perfected or recorded with or by any state, government or other public

legal authority under authority of applicable statute or regulation.

<PAGE>

3.13.2 Section 3.13.2 of the Disclosure Schedule (a) lists all Company

Intellectual Property, and (b) lists any pending applications, proceedings

or actions before any court, tribunal (including the United States Patent

and Trademark Office (the "PTO") or equivalent authority anywhere in the

world) related to any of the Company Registered Intellectual Property. The

Company Intellectual Property constitutes all Intellectual Property

necessary to conduct its business as presently being conducted.

3.13.3 The Company has paid necessary registration, maintenance and

renewal fees in connection with the Registered Intellectual Property. The

Company has filed all necessary documents and certificates in connection

with the Registered Intellectual Property with the relevant patent,

foreign jurisdictions as the Company has elected to register the Registered

Intellectual Property, as the case may be, for the purposes of maintaining

the Registered Intellectual Property. Except as set forth in Section 3.13.3

of the Disclosure Schedule, there are no actions that must be taken by the

Company within sixty (60) days of the date hereof, including the payment of

any registration, maintenance or renewal fees or the filing of any

documents, applications or certificates for the purposes of maintaining,

perfecting or preserving or renewing any Registered Intellectual Property.

3.13.4 For each product, technology or service of the Company that

constitutes or includes Company Intellectual Property owned by the Company

that the Company has determined to make Registered Intellectual Property,

the Company has taken commercially reasonable measures to make such

elements of such Company Intellectual Property Registered Intellectual

Property.

3.13.5 In each case in which the Company has acquired ownership of any

Intellectual Property from any Person, the Company has obtained a valid and

enforceable assignment sufficient to irrevocably transfer all rights in

such Intellectual Property to the Company. Where appropriate, the Company

has recorded each such assignment with the relevant governmental

authorities, including the PTO, the U.S. Copyright Office or their

respective equivalents in any relevant foreign jurisdiction, as the case

may be.

3.13.6 Except as set forth in Section 3.13.6 of the Disclosure

Schedule and subject to any required consents set forth in Section 3.6 of

the Disclosure Schedule, all Company Intellectual Property will be fully

transferable, alienable or licensable by API without restriction and

without payment of any kind to any third party.

3.13.7 Except as set forth in Section 3.13.7 of the Disclosure

Schedule, each item of Company Intellectual Property is free and clear of

any Liens.

3.13.8 Except as set forth in Section 3.13.8 of the Disclosure

Schedule with respect to jointly owned Intellectual Property or other

Intellectual Property to which the Company does not have exclusive

Intellectual Property Rights, to the extent that any Company Intellectual

Property has been developed or created independently or jointly by any

Person other than the Company for which the Company has, directly or

indirectly, provided consideration for such development or creation, the

Company has a written agreement with such Person with respect thereto, and

the Company thereby has obtained ownership of, and is the exclusive owner

of, all such Intellectual Property therein and associated Intellectual

Property Rights by operation of law or by valid assignment, and has

required the waiver of all non-assignable rights, including without

limitation, all author or moral rights.

<PAGE>

3.13.9 Except as set forth in Section 3.13.9 of the Disclosure

Schedule, the Company has not (a) transferred ownership of, or granted any

exclusive license of or exclusive right to use, or authorized the retention

of any exclusive rights to use or joint ownership of, any Intellectual

Property Rights or, except in the Ordinary Course of Business of sales of

the Company's products, any Company Intellectual Property, to any other

Person, or (b) permitted Company's rights in such Company Intellectual

Property to lapse or to enter into the public domain.

3.13.10 Except as set forth in Section 3.13.8 of the Disclosure

Schedule with respect to jointly owned Intellectual Property or other

Intellectual Property to which the Company does not have exclusive

Intellectual Property Rights, all Intellectual Property (other than

off-the-shelf, readily available, non-customized software or hardware) used

in or necessary to the conduct of the Company's business as presently

conducted or currently contemplated to be conducted by the Company was

created solely by either (a) employees of the Company acting within the

scope of their employment who have validly and irrevocably assigned all of

their rights, including all Intellectual Property Rights therein, to the

Company, or (b) by third parties who have validly and irrevocably assigned

all of their rights, including all Intellectual Property Rights therein, to

the Company, and no third party owns or has any rights to any of the

Company Intellectual Property.

3.13.11 Other than (a) "shrink-wrap" and similar widely available

binary code and commercial end-user licenses and public or open technology,

and (b) other non-exclusive licenses of the Company's products to end-users

entered into in the Ordinary Course of Business, Section 3.13.11 of the

Disclosure Schedule lists all contracts, licenses and agreements by which

the Company has secured third-party Intellectual Property and Intellectual

Property Rights. Except as set forth in Section 3.13.11 of the Disclosure

Schedule, no third party that has licensed Intellectual Property or

Intellectual Property Rights to the Company has ownership rights or license

rights to improvements made by the Company in such licensed Intellectual

Property.

3.13.12 Other than (a) "shrink-wrap" and similar widely available

binary code and commercial end-user licenses and public or open technology,

and (b) other non-exclusive licenses of the Company's products to end-users

entered into in the Ordinary Course of Business, Section 3.13.12 of the

Disclosure Schedule lists all contracts, licenses and agreements between

the Company and any other Person wherein or whereby the Company has agreed

to, or assumed, any obligation or duty to warrant, indemnify, reimburse,

hold harmless, guaranty or otherwise assume or incur any obligation or

liability or provide a right of rescission with respect to the infringement

or misappropriation by such other Person of the Intellectual Property

Rights of such Person.

3.13.13 There are no contracts, licenses or agreements between the

Company and any other Person with respect to Company Intellectual Property

or other Intellectual Property used in and/or necessary to the conduct of

the business of the Company as it is currently conducted under which there

is any dispute regarding the scope of such agreement, or performance under

such agreement including with respect to any payments to be made or

received by the Company thereunder.

3.13.14 To the Knowledge of the Company, the operation of the business

of the Company as it is currently conducted, or is currently contemplated

to be conducted, by the Company, including, without limitation, the design,

development, use, import, branding, advertising, promotion, marketing,

manufacture and sale of any product, technology or service (including

products, technology or services currently under development) of the

Company does not infringe or misappropriate, and will not infringe or

misappropriate, any Intellectual Property Rights of any Person, violate any

right of any Person (including any right to privacy or publicity), and the

Company has not received notice from any Person claiming that such

operation or any act, any product, technology or service (including

products, technology or services currently under development) or

Intellectual Property of the Company infringes or misappropriates any

Intellectual Property Rights of any Person or constitutes unfair

competition or trade practices under the laws of any jurisdiction, nor does

the Company have Knowledge of any basis therefor.

<PAGE>

3.13.15 Except as set forth in Section 3.13.15 of the Disclosure

Schedule, neither this Agreement nor the transactions contemplated by this

Agreement, will result in (a) the Company granting to any third party any

right to or with respect to any Company Intellectual Property, (b) the

Company being bound by, or subject to, any non-compete or other material

restriction on the operation or scope of its business, or (c) the Company

being obligated to pay any royalties or other material amounts to either

third party in excess of those payable by the Company as of the date

hereof.

3.13.16 Except as set forth in Section 3.13.16 of the Disclosure

Schedule, to the Knowledge of the Company, no Person is infringing or

misappropriating any Company Intellectual Property.

3.13.17 The Company has taken all commercially reasonable steps to

protect the Company's rights in its own confidential information and trade

secrets or confidential information of any third party provided by any

other Person to the Company under an obligation of confidentiality. Without

limiting the foregoing, the Company has, and enforces to the extent

practicable, a policy requiring each employee, consultant, and contractor

to execute proprietary information, confidentiality and assignment

agreements pursuant to a standard form, and all such current and former

employees, consultants and contractors of the Company have executed such an

agreement in substantially the Company's standard form.

3.13.18 No Company Intellectual Property is subject to any proceeding

or outstanding decree, order, judgment or settlement agreement or

stipulation that restricts in any manner the use, transfer or licensing

thereof by the Company or may affect the validity, use or enforceability of

such Company Intellectual Property.

3.13.19 Except as required by law with respect to ownership of

Intellectual Property created, developed or reduced to practice using

funding from any Governmental Entity and as set forth in Section 3.13.2 of

the Disclosure Schedule, no government funding, facilities or resources of

a university, college, other educational institution or research center or

funding from third parties was used in the development of the Company

Intellectual Property, and no Governmental Entity, university, college,

other educational institution or research center has any claim or right in

or to the Company Intellectual Property.

<PAGE>

3.14 Agreements, Contracts and Commitments. Except as set forth in Section

3.14 of the Disclosure Schedule, the Company is not a party to, nor is it bound

by:

3.14.1 any fidelity or surety bond or completion bond;

3.14.2 any lease of Personal property having a value in excess of

$100,000 individually or $250,000 in the aggregate;

3.14.3 any agreements, contracts or commitments relating to capital

expenditures and involving future payment in excess of $100,000

individually or $250,000 in the aggregate;

3.14.4 any agreements, contracts or commitments relating to the

disposition or acquisition of assets or the acquisition of any interest in

any business ente

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