AMENDED AND RESTATED SHARE AND ASSET PURCHASE AGREEMENT

Exhibit 2.1

EXECUTION COPY

AMENDED AND RESTATED

SHARE AND ASSET PURCHASE AGREEMENT

BY AND BETWEEN

ADVANCED ANALOGIC TECHNOLOGIES INCORPORATED,

AS PURCHASER,

AND

IPCORE TECHNOLOGIES CORPORATION,

AS SELLER

DATED AS OF OCTOBER 31, 2006

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*	Omitted pursuant to Item 601 of Regulation S-K. Advanced Analogic Technologies Incorporated agrees to supplementally furnish a copy of any omitted schedule to the Securities and Exchange Commission upon request.

 

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*	Omitted pursuant to Item 601 of Regulation S-K. Advanced Analogic Technologies Incorporated agrees to supplementally furnish a copy of any omitted schedule to the Securities and Exchange Commission upon request.

 

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AMENDED AND RESTATED

SHARE AND ASSET PURCHASE AGREEMENT

This AMENDED AND RESTATED SHARE AND ASSET PURCHASE AGREEMENT (“ Agreement ”) is made and entered into as of October 31, 2006 by and among Advanced Analogic Technologies Incorporated, a Delaware corporation (“ Purchaser ”) and IPCore Technologies Corporation, incorporated under the laws of the Cayman Islands (“ IPCore ”), Analog Power Semiconductor Corporation, incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of IPCore (“ AP Semi ”), Artlogic, Inc., a Japan KK and a wholly-owned subsidiary of IPCore (“ Artlogic ”), and IPCore Technologies USA, Inc., a California corporation and wholly-owned subsidiary of IPCore (“ IPCore USA, ” together with IPCore, and Artlogic (and, for purposes of Articles III and VI only, together with APSemi), “ Seller ”).

WITNESSETH:

The parties to this Agreement are parties to a Share and Asset Purchase Agreement dated September 3, 2006 (the “ Previous Agreement ”) and desire to amend and restate the Previous Agreement in its entirety and accept the rights and obligations created pursuant hereto in lieu of their rights and obligations under the Previous Agreement.

Subject to the provisions of this Agreement, the Purchaser desires to purchase directly or through one or more wholly-owned subsidiaries designated by Purchaser (the “ Purchaser Subs ”), and the Seller desires to sell, by itself and through those subsidiaries identified in this Agreement, (i) all of the issued and outstanding shares of capital stock of AP Semi, which is the parent of a wholly-owned subsidiary, Analogic Power Semiconductor (Shanghai) Co., Ltd., organized under the laws of the People’s Republic of China (“ AP Semi Shanghai ”) and (ii) substantially all of the assets (other than the Excluded Assets as defined below) held directly or indirectly by Seller solely for use in the analog power management semiconductor business of the Seller (and its Affiliates), including but not limited to that conducted under the name “Artlogic” and “IPCore USA” (such business, specifically excluding the Excluded Assets, collectively, the “ Business ”), for the consideration set forth below and the assumption of the Assumed Liabilities (as defined below), subject to the terms and conditions of this Agreement.

The Seller and the Purchaser desire that the Seller retain those assets defined as Excluded Assets herein and those liabilities defined as Excluded Liabilities herein.

When used in this Agreement, capitalized terms shall have the meanings specified herein. A table of defined terms is attached hereto as Appendix A .

NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which are acknowledged, and of the mutual covenants, agreements, representations and warranties contained herein, the parties agree as follows:

 

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ARTICLE I.

PURCHASE AND SALE

1.1 Purchase and Sale . At the Closing (as defined below), Seller shall grant, sell, convey, assign, transfer and deliver to Purchaser or to the Purchaser Subs designated in writing by Purchaser, upon and subject to the terms and conditions of this Agreement, (i) all of the issued and outstanding shares of AP Semi capital stock free and clear of all Liens (the “ AP Semi Capital Stock ”) (including all assets owned by AP Semi) and (ii) all right, title and interest in and to the Purchased Assets (as defined below) necessary for the conduct of the Business, free and clear of all Liens except Permitted Liens (as defined below) and Purchaser shall assume all Assumed Liabilities (as defined below).

1.2 Included Purchased Assets . The “ Purchased Assets ” shall mean the following assets, properties and rights of Seller to the extent owned or held or used by the Business as currently operated or Planned by Seller to be operated, except as otherwise set forth in Section 1.3 hereof:

(a) all machinery, equipment, tools, computers, servers, laptops, furniture, furnishings, goods and other tangible personal property of Artlogic and IPCore USA, and all leases of such tangible personal property leased by Seller, including as set forth on Schedule 1.2(a) ;

(b) all supplies and office materials of Artlogic and IPCore USA, including as set forth on Schedule 1.2(b) ;

(c) all computer software (including, but not limited to, documentation and related object and source codes) of Artlogic and IPCore USA;

(d) all rights or actions arising out of occurrences before the Closing, including without limitation all rights to sue and all rights under express or implied warranties relating to the Purchased Assets;

(e) all leases of the real property with respect to real property leased by Artlogic, as set forth on Schedule 1.2(e) ;

(f) all of mask sets listed on Schedule 8.10(a) hereto, together with all Owned Intellectual Property (defined below) associated therewith and all masks, designs, inventions, research and development, circuits and trade secrets associated with, or included in, the books and records of the Business, including all Owned Intellectual Property associated therewith;

(g) all trademarks, tradenames and all goodwill associated therewith of Artlogic, AP Semi and AP Semi Shanghai, including the right to bring actions and collect damages for the infringement thereof;

(h) the RMB equivalent of five hundred thousand U.S. Dollars (US$500,000) in cash held in a bank account of AP Semi Shanghai previously designated to Purchaser;

 

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(i) all material written or recorded information, files, records, data, plans, contracts and recorded knowledge, including, but not limited to, customer and supplier lists, related to the foregoing and to the Business; and

(j) to the extent not otherwise included in Section 1.2(a) through (h) above or excluded in Section 1.3 below, with respect to all other assets of Seller necessary for the conduct of the Business as of the date hereof, Purchaser and Seller hereby covenant that to the extent any such assets are owned by IPCore Shanghai immediately as of the Closing, all such assets shall be transferred to a designated subsidiary of Purchaser, which shall be an entity organized under the laws of the People’s Republic of China, immediately following the Closing for the additional consideration to be paid by Purchaser to Seller upon such transfer of $1 or such other minimal consideration as permissible under PRC law, with the equivalent amount of such consideration deducted from the Escrow Amount (defined below) after other deductions under the Escrow Amount have been made and, to the extent the aggregate amount of such consideration paid by Purchaser exceeds the Escrow Amount after other deductions from the Escrow Amount are made, the Seller shall indemnify the Purchaser for such excess in full.

(k) “ Planned ” means an approved plan intended for actual implementation within twelve months from the date hereof or a plan which has been articulated in a business plan, annual budget or management presentation presented or provided to the Purchaser in connection with the transactions contemplated hereby.

1.3 Excluded Assets . The following assets, properties and rights (collectively, the “ Excluded Assets ”) are not intended to and shall not be sold, assigned, transferred or conveyed to Purchaser hereunder and such assets shall not be deemed to be “Purchased Assets” hereunder: (a) (other than with respect to the Subsidiaries) Seller’s charter, qualifications to conduct business as a foreign entity, arrangements with registered agents related to foreign qualifications, taxpayer and other identification numbers, seals, minute books, equity transfer books and other documents related to the organization, maintenance and existence of Seller or its Affiliates as corporations (b) all real property owned by Seller; (c) personal assets of Sellers’ employees or other individuals affiliated with Seller, whether located on Seller’s premises or otherwise; (d) rights under this Agreement and the additional agreements contemplated hereby; (e) Purchased Assets sold in the ordinary course of business; (f) cash and cash equivalents, except as specified in Section 1.2 above; (g) insurance policies relating to the Business; (h) those certain assets set forth on Schedule 1.3 attached hereto; and (i) assets owned by IPCore Shanghai, IPCore USA or ArtLogic not otherwise included in the Purchased Assets.

1.4 T ransfer of Title to the Purchased Assets . Seller (and its Affiliates) shall sell, convey, transfer and assign the Purchased Assets to Purchaser or Purchaser Subs at the Closing by means of bills of sale, assignments, endorsements, certificates and such other instruments of transfer as shall be necessary and appropriate to vest title to the Purchased Assets, free and clear of any liens, mortgages, pledges and similar encumbrances, except Permitted Liens, in Purchaser or Purchaser Subs as and to the extent provided in this Agreement or in the Schedules hereto.

 

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1.5 Purchase Price . The consideration for the AP Semi Capital Stock and the Purchased Assets shall be the assumption of all debts, obligations, contracts and liabilities of Seller (or any prior owner of all or part of the Business or the Purchased Assets) of any kind character or description (whether known or unknown, accrued, absolute, contingent or otherwise) to the extent relating to or arising out of the conduct of the Business or the Purchased Assets, except for the Excluded Liabilities, but including, but not limited to, those liabilities as set forth on Schedule 1.5 attached hereto and in Article VII below (collectively, with the liabilities and obligations set forth in the preceding clauses of this Section 1.5, the “ Assumed Liabilities ”), plus the payment of the Purchase Price (as defined in this paragraph). The purchase price for the AP Semi Capital Stock and Purchased Assets (the “ Purchase Price ”) will be twenty-one million five hundred thousand U.S. Dollars (US$21,500,000), subject to the provisions of this Agreement.

To the extent not otherwise included in Section 1.5 above or excluded in Section 1.9 below, with respect to all other Liabilities of Seller to the extent relating to or arising out of the conduct of the Business or the Purchased Assets as of the date hereof, Purchaser and Seller hereby covenant that to the extent any such Liabilities are held by IPCore Shanghai, ArtLogic or IPCore USA immediately as of the Closing, all such Liabilities shall be transferred to Purchaser, or a designated subsidiary of Purchaser, immediately following the Closing or as soon as practicable thereafter.

1.6 Payment of Purchase Price . The Purchase Price shall be paid as follows:

(a) Seller Component . Twenty million one hundred thousand U.S. Dollars (US$20,100,000), to be paid to IPCore in cash at Closing, subject to Section 2.3(c); and

(b) Employee Component . One million four hundred thousand U.S. Dollars (US$1,400,000), to be paid to the Hired Employees (the “ Employee Component ”). Purchaser will cause fifty percent (50%) of the Employee Component to be paid to the Hired Employees by check or wire within 48 hours of the Closing as set forth on Schedule 1.6(b) , less applicable withholding, by paying (i) to IPCore an aggregate amount of cash at Closing equal to three hundred twenty three thousand one hundred ninety four U.S. Dollars (US$323,194) (the “ IPCore Employee Payment ”), representing the applicable initial portion of the Employee Component to be further distributed by IPCore to certain Hired Employees in the amounts specified on Schedule 1.6(b) and (ii) the remaining portion of the first fifty percent (50%) of the Employee Component, as specified on Schedule 1.6(b) , directly or through Purchaser’s subsidiaries; provided, however, that such payments shall only be paid within 48 hours of the Closing to those Hired Employees who have returned payment instructions and executed employment documentation to Purchaser and such other Hired Employees shall be paid upon their delivery to the Purchaser of payment instructions and executed employment documentation or as determined by Purchaser. Amounts remaining unpaid pursuant to the preceding clause for 60 days shall, without resulting in any forfeiture by the associated Hired Employee, be deposited with, and added to, the Employee Escrow Amount. Prior to the Closing, Purchaser may revise Schedule 1.6(b) , in good faith and in consultation with Seller, in order to update the allocation of the Employee Component among Hired Employees. On the one-year anniversary of the Closing, such Hired Employees who remain employees of Purchaser on such date (and such Hired Employees who have been terminated without Cause or who have resigned with

 

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Good Reason) shall be paid the applicable portion of the remaining Employee Component in cash as set forth on Schedule 1.6(b) , less applicable withholding. Any portion of the remaining Employee Component allocated to Hired Employees who do not remain employees of Purchaser on the one-year anniversary of the Closing and who have not been terminated without Cause or have not resigned with Good Reason shall be (each as defined below) shall be divided between Purchaser and IPCore promptly following such one-year anniversary as follows: (i) fifty percent (50%) of such aggregate amount shall be retained by Purchaser and (ii) fifty percent (50%) of such aggregate amount shall be paid to IPCore.

(c) For purposes of this Section 1.6, “ Cause ” means an employee’s insubordination to an officer of the employer or refusal to follow the lawful instructions of such officer; fraud, dishonesty or intentional violation of any published rule or policy of the employer; breach of a duty of loyalty to the employer; conviction of a felony (or the equivalent) in any jurisdiction; or participation in or engaging in any activity or action of such a character or nature that an executive officer of the employer reasonably determines that it would be detrimental to the employer for such employee to continue to be employed by or associated with the employer. For purposes of this Section 1.6, “ Good Reason ” means the relocation of the employee’s principal place of employment to a location more than thirty (30) miles from the employee’s current place of employment; or the reassignment of such employee to duties materially inconsistent with such employee’s rank or status without such employee’s consent.

1.7 Escrow .

(a) Purchaser shall deposit into an escrow fund (the “ Escrow Fund ”) an amount of cash equal to ten percent (10%) of the Purchase Price (the “ Escrow Amount ”). The Escrow Amount shall be held and distributed pursuant to the provisions of an escrow agreement (the “ Escrow Agreement ”) to be executed pursuant to Section 8.11.

(b) Purchaser shall deposit into a second escrow fund (the “ Employee Escrow Fund ”) an amount of cash equal to fifty percent (50%) of the Employee Component (the “ Employee Escrow Amount ”). The Escrow Amount shall be held and distributed pursuant to the provisions of an escrow agreement (the “ Employee Escrow Agreement ”) to be executed pursuant to Section 8.11.

1.8 Allocation of Purchase Price . The Purchase Price as finally determined shall be allocated among the AP Semi Capital Stock and Purchased Assets acquired hereunder in accordance with an allocation schedule to be prepared by Purchaser and provided to Seller for Seller’s reasonable review and reasonable opportunity to comment. Purchaser will engage a professional tax advisor on the PRC tax law compliance of such price allocation. Seller and Purchaser each hereby covenant and agree that it will not take a position on any income tax return or financial statement, before any governmental agency charged with the collection of any income tax, any auditor, the SEC or regulatory agency or in any judicial proceeding that is in any way inconsistent with such schedule. To the extent any part of such price allocation is unenforceable or otherwise invalidated pursuant to PRC laws or tax review proceedings by PRC tax authorities, both parties will convene for an alternate approach for price allocation in compliance with the PRC law and tax review proceedings.

 

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1.9 Excluded Liabilities . Seller, without any responsibility or liability of or recourse to Purchaser or any of Purchaser’s directors, stockholders, officers, employees, agents, consultants, attorneys, representatives, affiliates, successors or assigns, or to Purchaser Subs or any of Purchaser Subs’ directors, stockholders, officers, employees, agents, consultants, attorneys, representatives, affiliates, successors or assigns, shall absolutely and irrevocably retain all obligations and liabilities relating to the Seller, the Business or the Purchased Assets listed on Schedule 1.9 (the “ Excluded Liabilities ”).

From and after the Closing Date, Seller shall retain and be solely responsible for all Benefits Liabilities (as defined in Section 3.30(a)) under its Benefits Plans whether incurred before, on or after the Closing, except as provided in Article VII below.

1.10 Transfer Taxes . Purchaser shall bear and pay all sales, use, business, transfer and value added taxes (or other similar taxes) arising out of the organization by the Seller of the Purchased Assets into a separable business and the transfer of the Purchased Assets to Purchaser pursuant hereto (the “ Transfer Taxes ”); provided, however, that Purchaser shall not be responsible for more than $100,000 in the aggregate for such Transfer Taxes; provided, further, that Seller shall provide Purchaser with its calculations of the amount of Transfer Taxes due prior to Purchaser’s payment of such Transfer Taxes. Subject to the foregoing, (i) to the extent permitted by applicable law, Seller shall cooperate fully with Purchaser in minimizing such Transfer Taxes and (ii) to the extent any tax authority provides notice to Seller of an audit of the Transfer Taxes, Purchaser shall promptly assume responsibility for such audit and shall bear and pay when due any additional Transfer Taxes (plus interest and penalties determined to be due thereon).

1.11 Bulk Transfer Laws . Purchaser and Seller shall waive, to the fullest extent permitted by applicable law, any and all bulk transfer or similar laws that may apply to the transactions contemplated by this Agreement.

ARTICLE II.

CLOSING; ITEMS TO BE DELIVERED; AND FURTHER ASSURANCES

2.1 Closing, Date and Place . The closing of the purchase and sale contemplated hereby (the “ Closing ”) will take place at such time as the parties shall mutually agree at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304, at which time this Agreement and the associated documents, certificates and agreements shall be executed and delivered. The date upon which the closing occurs is referred to herein as the “ Closing Date .”

2.2 Items to be Delivered at Closing . At the Closing, and subject to the terms and conditions herein contained, the Seller shall deliver to the Purchaser or to the Purchaser Subs designated in writing by Purchaser the following:

(a) the Bills of Sale attached hereto as Exhibit A ; and

 

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(b) all of the current or surviving agreements, contracts, commitments, leases, plans, bids, quotations, proposals, instruments, computer programs and software, data bases whether in the form of computer tapes or otherwise, related object and source codes, manuals and guidebooks, price books and price lists, customer and subscriber lists, supplier lists, sales records, files, correspondences, legal opinions, rulings issued by governmental entities, and other documents, books, records, papers, files, office supplies and data belonging to Seller which are part of the Purchased Assets and Business and such documents and records as may be reasonably necessary to verify the unencumbered legal title to and possession of the Purchased Assets by Seller; and simultaneously with such delivery, all such reasonable steps as appropriate for Seller will be taken as may be required to put Purchaser in actual possession and operating control of the Purchased Assets.

2.3 Closing Payment . At the Closing, and subject to the terms and conditions herein contained, the Purchaser shall:

(a) pay to IPCore and its affiliates pursuant to Schedule 2.3 (1) the Seller Component less the Escrow Amount and (2) the IPCore Employee Payment by transfer of immediately available funds to an account, or accounts, designated in writing by IPCore;

(b) subject to Section 1.6(b), pay to the Hired Employees the amounts set forth on Schedule 1.6(b) ; and

(c) deposit the Escrow Amount into the Escrow Account in accordance with the terms of the Escrow Agreement and deposit the Employee Escrow Amount into the Employee Escrow Account in accordance with the terms of the Employee Escrow Agreement.

2.4 F urther Assurances . Seller from time to time after the Closing, at Purchaser’s request, will execute, acknowledge and deliver to Purchaser or Purchaser Subs such other instruments of conveyance and transfer and will take such other actions and execute and deliver such other documents, certifications and further assurances as Purchaser or Purchaser Subs may reasonably require in order to vest more effectively in Purchaser or Purchaser Subs, or to put Purchaser or Purchaser Subs more fully in possession of, the AP Semi Capital Stock or any of the Purchased Assets, or to better enable Purchaser or Purchaser Subs to complete, perform or discharge any of the liabilities or obligations assumed by Purchaser or Purchaser Subs at the Closing. Each of the parties hereto will cooperate with the other and execute and deliver to the other parties hereto such other instruments and documents and take such other actions as may be reasonably requested from time to time by any other party hereto as necessary to carry out, evidence and confirm the intended purposes of this Agreement.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF SELLER

The Seller (and specifically each and every separate Seller entity transferring stock or assets hereunder, jointly and severally) hereby represents and warrants to Purchaser that as of the date hereof and the date of the Closing, except as set forth on the Seller Disclosure Schedule supplied to

 

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Purchaser by Seller, each of which exceptions shall specifically identify the relevant subsection hereof to which it relates unless reasonably apparent from the context:

3.1 Corporate Status . IPCore is a corporation duly organized, validly existing and in good standing under the laws of the Cayman Islands and has full power and authority to own the Purchased Assets to the extent owned by it and to conduct the Business as currently conducted by it. AP Semi is a wholly-owned subsidiary of IPCore, is a corporation duly organized, validly existing and in good standing under the laws of the Cayman Islands and has full power and authority to own and operate its properties and to conduct its business as it is currently conducted and currently Planned by it to be conducted. AP Semi Shanghai (together with AP Semi, the “ Subsidiaries ”) is a wholly-owned subsidiary of AP Semi, is a company duly organized, validly existing and in good standing under the laws of China and has full power and authority to own and operate its properties and to conduct its business as it is currently conducted and currently Planned by it to be conducted. Artlogic is a corporation duly organized, validly existing and in good standing under the laws of Japan and has full power and authority to own the Purchased Assets owned by it and to carry on the Business as it is currently conducted by it. IPCore USA is a corporation duly organized, validly existing and in good standing under the laws of California and has full power and authority to own the Purchased Assets owned by it and to carry on the Business as it is currently conducted by it. Seller and each of the Subsidiaries are qualified to do business and are in good standing in each jurisdiction in they are located or in which they operate, all of which jurisdictions are listed on the Seller Disclosure Schedule, except where the lack of any such qualification and good standing, individually or in the aggregate, would not cause a Material Adverse Effect (as hereinafter defined). “ Material Adverse Effect ” shall mean a material adverse effect on the financial condition, financial prospects or results of operations of the Business as a whole, except that an effect resulting from any of the following shall not be considered when determining such effect: (i) any change in national or international political, security, economic, business, legal, currency exchange or market conditions generally or in the technology or geographic markets served by the business, excluding in the case of the above clause any change which materially disproportionately affects the business, (ii) any change resulting from the announcement or pendency of the transaction contemplated herein, including, without limitation, any renegotiation or cancellation of orders by existing customers of the Business that is primarily attributable to the transactions contemplated by this Agreement or the impact of any such renegotiation or cancellation on the Business’s results of operations, except to the extent that any such renegotiation or cancellation results from the failure of the Seller to use commercially reasonable efforts to preserve such customer relationships, (iii) the Purchaser’s failure to offer employment to any of Seller’s employees engaged in the Business and (iv) Purchaser withholding its consent for any matter pursuant to Article VI hereof, unless the withholding of such consent would not reasonably be expected to cause a material adverse effect on the financial condition or results of operations of the Business as a whole; provided, however, that effects resulting from acts of terrorism, natural disasters or contagions that affect the regions in which the employees or customers of the Business are principally located shall be considered when determining whether or not a material adverse effect has occurred.

3.2 A uthorization . Seller has all requisite power and authority to enter into, execute and deliver this Agreement, and each other agreement, the execution and delivery of which is

 

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contemplated by this Agreement, to which it is a party (the “ Seller Ancillary Agreements ”) and to perform its obligations and consummate the transactions contemplated hereby and thereby in accordance with the terms hereof and thereof (including, without limitation, to deliver the Owned Intellectual Property Rights (defined below) included within the Purchased Assets, subject to all other provisions of this Agreement). All proceedings required to be taken by or on the part of Seller to authorize Seller to enter into and carry out this Agreement and each Seller Ancillary Agreement have been duly and properly taken. This Agreement has been duly executed and delivered by Seller and is valid and enforceable against Seller in accordance with its terms. At the Closing, each Seller Document will be duly executed and delivered by Seller, and when so executed each Seller Document will be valid and enforceable against Seller in accordance with its terms.

3.3 Validity of Contemplated Transactions . The execution, delivery and performance of this Agreement by Seller does not and will not violate, conflict with or result in the breach of any term, condition or provision of, or require the consent of any other Person under (a) any existing law, ordinance, or governmental rule or regulation to which Seller or a Subsidiary is subject, (b) any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority related to the AP Semi Capital Stock or Purchased Assets which is applicable to Seller or a Subsidiary, (c) the charter documents of Seller or a Subsidiary or any securities issued by Seller or Subsidiary, or (d) (other than as would not reasonably be expected to result in a Material Adverse Effect) any mortgage, indenture, agreement, contract (including any Material Contract as defined below), commitment, lease, plan, Authorization (defined below), or other instrument, document or understanding, oral or written, to which Seller or a Subsidiary is a party, by which Seller or a Subsidiary may have rights or by which the AP Semi Capital Stock or any of the Purchased Assets may be bound or affected, or give any party with rights thereunder the right to terminate, modify, accelerate or otherwise change the existing rights or obligations of Seller or a Subsidiary thereunder. All government approval, license, permit, consent, registration, filing or authorization that are requisite for the execution, delivery and performance of this Agreement and its contemplated transactions have been obtained without reservations, restrictions or conditions and without being subsequently suspended, revoked, modified, varied or refused to renew. Except as aforesaid, no authorization, approval or consent of, and no registration or filing with, any governmental or regulatory official, body or authority is required in connection with the execution, delivery or performance of this Agreement by Seller, the failure or absence of which authorization, approval, consent, registration or filing would not reasonably be expected to result in a Material Adverse Effect.

Schedule 3.3 sets forth each agreement or other instrument binding upon Seller or the Subsidiaries requiring a consent or other action by any Person as a result of the execution, delivery and performance of this Agreement, except such consents or actions as would not, individually or in the aggregate, have a Material Adverse Effect if not received or taken by the Closing Date (the “ Required Consents ”).

3.4 Capital Structure . The authorized capital stock of AP Semi consists of 100,000,000 ordinary shares, par value US$0.001 each, of which 3,000 shares were issued and outstanding as of the date hereof. All outstanding shares of AP Semi Capital Stock are duly authorized, validly issued,

 

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fully paid and non-assessable, and are not subject to preemptive rights or rights of first refusal created by statute, the charter documents of AP Semi or any agreement to which AP Semi is a party or by which it is bound. Except as set forth on Schedule 3.4 , there are no options, warrants, calls, rights, commitments, agreements or arrangements of any character to which AP Semi is a party or by which AP Semi is bound relating to the issued or unissued capital stock of AP Semi or obligating AP Semi to grant, extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. The Seller is the sole legal and beneficial owner of all the outstanding AP Semi Capital Stock and has good and valid title to all such shares free and clear of all Liens or encumbrances and such AP Semi Capital Stock is to be sold pursuant to this Agreement. None of such shares of AP Semi Capital Stock is subject to any Liens or to any rights of first refusal of any kind, and Seller has not granted any rights to purchase such shares of AP Semi Capital Stock to any other Person. Seller has the sole right to transfer such AP Semi Capital Stock to Purchaser. Such AP Semi Capital Stock constitutes all of the issued and outstanding AP Semi Capital Stock and Seller has no other rights to acquire AP Semi Capital Stock. Upon Closing, Purchaser will receive good title to such AP Semi Capital Stock, subject to no Liens retained, granted or permitted by Seller, AP Semi or any other Person.

3.5 Financial Statements . The Seller has furnished to the Purchaser a copy of (i) the management accounting reports relating to the Business, the unaudited balance sheets of the Subsidiaries as of December 31, 2005 and the unaudited statements of operations of the Subsidiaries for the fiscal year then ended, and (ii) the management accounting reports relating to the Business, the unaudited balance sheets of the Subsidiaries at June 30, 2006 (the “ Interim Balance Sheet ”) and the related statements of operations for the six-month period then ended (collectively, the “ Seller Financial Statements ”). The “ Interim Balance Sheet Date ” shall be June 30, 2006. The Seller Financial Statements are complete and correct in all material respects, are in accordance with the books and records of the Seller and present fairly the financial condition and results of operations of the Seller and the Subsidiaries, at the dates and for the periods indicated, have been prepared in accordance with generally accepted accounting principles of Hong Kong, as consistently applied (“ GAAP ”), except that the Seller Financial Statements may not be in accordance with GAAP as indicated in the notes thereto or because of the absence of notes normally contained therein and subject to normal year-end audit adjustments which in the aggregate shall not cause a Material Adverse Effect.

3.6 No Third Party Options . Other than Permitted Liens, there are no existing agreements, options, commitments or rights with, of or to any person to acquire any of the Purchased Assets or any interest therein.

3.7 Accounts Receivable . The accounts receivable of Seller arising from the Business as set forth on the Interim Balance Sheet or arising since the date thereof (collectively, the “ Receivables ”) represent amounts due to the Business that have arisen solely out of bona fide sales and deliveries of goods, performance of services and other business transactions in the ordinary course of business consistent with past practice; the Receivables (i) are not subject to valid defenses, set-offs or counterclaims, and (ii) are collectible within 120 days after billing at the full recorded amount thereof less the recorded allowance for collection losses on the Interim Balance Sheet plus

 

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an additional allowance for Receivables arising since the date of the Interim Balance Sheet, in an amount consistent with the past practice of the Company in ordinary course. The allowance for collection losses set forth on the Interim Balance Sheet, and such additional amount described in the foregoing sentence, have been determined in accordance with GAAP.

3.8 Permits . Except as would not cause a Material Adverse Effect, the Seller and the Subsidiaries have all franchises, permits, licenses, and any similar authority necessary for the conduct of the Business as now being conducted by each of them. The Seller and the Subsidiaries are not in default in any material respect under any franchises, permits, licenses or other similar authority.

3.9 I nventory . Seller has no material inventory relating to the Business except as noted on the Interim Balance Sheet or the Seller Disclosure Schedule. Seller is not under any liability or obligation with respect to the return of inventory relating to the Business in the possession of wholesalers, retailers or other customers.

3.10 Absence of Undisclosed Liabilities . Seller has no material Liabilities with respect to the Purchased Assets and the Subsidiaries have no material Liabilities except:

(a) those liabilities or obligations set forth in the Seller Financial Statements;

(b) those liabilities set forth on the Seller Disclosure Schedule;

(c) Permitted Liens;

(d) liabilities arising in the ordinary course of business under any Material Contract; or

(e) those liabilities or obligations incurred, consistent with past business practice, in or as a result of the ordinary course of business since the Interim Balance Sheet Date.

For purposes of this Agreement, the term “ Liabilities ” shall include, without limitation, any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known or unknown, matured or unmatured, absolute or contingent, asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured or unsecured.

3.11 Litigation . There is no action, suit, proceeding, or investigation pending or, to the knowledge of Seller, currently threatened against the Seller, the Subsidiaries or otherwise affecting the Purchased Assets or the Business including, but not limited to, any of the foregoing that questions the validity of this Agreement or any of the Seller Ancillary Agreements, or the right of the Seller to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or that might have a Material Adverse Effect, either individually or in the aggregate, or result in any material change in the current equity ownership of the Seller or the Subsidiaries with respect to shares of capital stock to be transferred by Seller and shares of capital stock of AP Semi

 

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Shanghai, nor is the Seller aware of any basis for any of the foregoing. To the knowledge of Seller, there is no action, suit, proceeding, or investigation pending or currently threatened involving the prior employment of any of the Seller’s or Subsidiaries’ employees relating to the Purchased Assets or the Business, their use in connection with the Business of any information or techniques allegedly proprietary to any of their former employers, their obligations under any agreements with prior employers, or negotiations by the Seller or the Subsidiaries with potential backers of, or investors in, the Seller, the Subsidiaries or the Business. Each of Seller and the Subsidiaries is not a party to or, to the Seller’s knowledge, named in or subject to any order, writ, injunction, judgment, or decree of any court, government agency, or instrumentality relating to the Business, the Purchased Assets or the Subsidiaries. There is no action, suit, proceeding or investigation by the Seller or the Subsidiaries and relating to the Purchased Assets, the Business or the Subsidiaries currently pending or that the Seller or the Subsidiaries currently intends to initiate that would cause a Material Adverse Effect.

3.12 Books of Account . The books, records and accounts of Seller maintained with respect to the Business and the business of the Subsidiaries in all material respects accurately and fairly reflect, in reasonable detail, the transactions and the assets and liabilities of Seller with respect to the Business and the business of the Subsidiaries. Seller has not engaged in any material respect in any transaction with respect to the Business or the business of the Subsidiaries, maintained any bank account for the Business or the business of the Subsidiaries or used any of the funds of Seller in the conduct of the Business or the business of the Subsidiaries, in each case in excess of US$40,000, except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of the Business and the business of the Subsidiaries.

3.13 Existing Condition . Other than as set forth on Schedule 3.13 , since the Interim Balance Sheet Date, Seller with respect to the Business and the business of the Subsidiaries has not, and the Subsidiaries have not:

(a) incurred any liabilities, other than liabilities incurred in the ordinary course of business consistent with past practice, or discharged or satisfied any lien or encumbrance, or paid any liabilities, other than in the ordinary course of business consistent with past practice, or failed to pay or discharge when due any liabilities of which the failure to pay or discharge has caused or will cause a Material Adverse Effect;

(b) sold, encumbered, assigned or transferred assets or properties exceeding $40,000 in the aggregate, except for the sale of inventory in the ordinary course of business consistent with past practice;

(c) created, incurred, assumed or guaranteed any indebtedness for money borrowed, or mortgaged, pledged or subjected any of its Purchased Assets or the assets of the Subsidiaries to any mortgage, lien, pledge, security interest, conditional sales contract or other encumbrance of any nature whatsoever, except for Permitted Liens (defined below);

 

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(d) made or suffered any amendment or termination of any Material Contract, or cancelled, modified or waived any substantial debts or claims held by it or waived any rights of substantial value, whether or not in the ordinary course of business;

(e) declared, set aside or paid any dividend or made or agreed to make any other distribution or payment in respect of its capital shares or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or acquire any of its capital shares;

(f) suffered any damage, destruction or loss, whether or not covered by insurance, (i) causing a Material Adverse Effect or (ii) of any item or items carried on its books of account individually or in the aggregate at more than $40,000, or suffered any repeated, recurring or prolonged shortage, cessation or interruption of supplies or utility or other services required to conduct its business and operations;

(g) suffered any Material Adverse Effect;

(h) received notice or had knowledge of any actual or threatened labor trouble, strike or other occurrence, event or condition of any similar character which has had or might have a Material Adverse Effect;

(i) made commitments or agreements for capital expenditures or capital additions or betterments exceeding in the aggregate $40,000 except such as may be involved in ordinary repair, maintenance or replacement of its assets;

(j) increased the salaries or other compensation of, or made any advance (excluding advances for ordinary and necessary business expenses) or loan to, any of its employees or made any increase in, or any addition to, other benefits to which any of its employees may be entitled;

(k) changed any of the accounting principles followed by it or the methods of applying such principles; or

(l) entered into any transaction other than in the ordinary course of business consistent with past practice.

3.14 Title to Properties . Seller has good and valid title to all of its tangible properties and assets which would be included in the Purchased Assets if the Closing took place on the date hereof, including without limitation all properties and assets reflected in the Interim Balance Sheet that would be Purchased Assets (except for inventory sold since the date thereof in the ordinary course of business consistent with past practice), and each Subsidiary has good and valid title to all of its properties and assets, including, but not limited to, the assets listed on Schedule 3.14 hereto, free and clear of all mortgages, liens, pledges, security interests, charges, claims, restrictions and other encumbrances and defects of title of any nature whatsoever (collectively, “ Liens ”), except for (i) Liens for taxes, assessments and similar charges not yet due and payable or which are being contested in good faith, (ii) Liens disclosed in the Seller Disclosure Schedule in response to this

 

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Section, (iii) worker’s, carrier’s and materialman’s or similar liens arising or incurred in the ordinary course of business or that are not yet due and payable or are being contested in good faith, (iv) Liens disclosed in the Seller Financial Statements or the notes thereto or securing Liabilities reflected in the Seller Financial Statements or the notes thereto; and (v) other Liens that are immaterial in character, amount and extent, and which do not detract from the value or interfere with the present or Planned use of the Purchased Assets or the properties and assets of the Subsidiaries (all such Liens collectively, the “ Permitted Liens ”).

3.15 Condition of Tangible Purchased Assets . All buildings, structures, facilities, equipment and other material items of tangible property and assets which would be included in the Purchased Assets if the Closing took place on the date hereof and all buildings, structures, facilities, equipment and other material items of tangible property and assets of the Subsidiaries are, except as provided in the Seller Financial Statements, in good operating condition and repair, subject to normal wear and maintenance, and usable in the regular and ordinary course of business and conform to all applicable laws, ordinances, codes, rules and regulations, and Authorizations (as defined below) relating to their construction, use and operation. No person other than Seller owns any equipment or other tangible assets or properties situated on the premises in which the Purchased Assets are located, except for leased items disclosed in the Seller Disclosure Schedule, items described in Section 1.3 of this Agreement, and items of immaterial value. No person other than a Subsidiary owns any equipment or other tangible assets or properties situated on the premises of such Subsidiary or necessary to the operation of the business of such Subsidiary, except for leased items disclosed in the Seller Disclosure Schedule and items of immaterial value.

3.16 Compliance with Law; Authorizations . Except as would not cause a Material Adverse Effect, Seller and each Subsidiary has complied with each, and is not in violation of any, law, ordinance, or governmental or regulatory rule or regulation, whether U.S. federal, state, or local, PRC national, provincial, or municipal, or foreign, to which the Business, Purchased Assets or business of such Subsidiary are subject as of the date hereof (“ Regulations ”). Except as would not cause a Material Adverse Effect, Seller and each Subsidiary owns, holds, possesses or lawfully uses in the operation of the Business or the business of such Subsidiary, as applicable, all franchises, licenses, permits, easements, rights, applications, filings, registrations and other authorizations which are in any manner necessary for it to conduct the Business or the business of such Subsidiary, as applicable, as now or as and when previously conducted or for the ownership and use of the Purchased Assets owned or used by Seller in the conduct of the Business (“ Authorizations ”), free and clear of all liens, charges, restrictions and encumbrances and in compliance with all Regulations; provided, however, that no representation is made with respect to Authorizations that Seller or a Subsidiary may be required to obtain in the future. Neither Seller nor any Subsidiary is in default, nor has it received any notice of any claim of default, with respect to any such Authorization, which default or defaults, in either case, would be reasonably expected to result in a Material Adverse Effect. All such Authorizations are renewable by their terms or in the ordinary course of business without the need to comply with any special qualification procedures or to pay any amounts other than routine filing fees, except where the failure to obtain such renewals would not result in a Material Adverse Effect. None of such Authorizations will be adversely affected by consummation of the transactions contemplated hereby. No member, manager, director, officer, employee or

 

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former employee of Seller, a Subsidiary or any affiliates of Seller or a Subsidiary, or any other person, firm or corporation owns or has any proprietary, financial or other interest (direct or indirect) in any Authorization which Seller or a Subsidiary owns, possesses or uses in the operation of the Business or business of such Subsidiary, as applicable, as now or previously conducted, except as would not reasonably be expected to result in a Material Adverse Effect.

3.17 Transactions With Affiliates . No member, manager, director, officer or employee of Seller, or any member of his or her immediate family or any other of its, his or her affiliates, owns or has a five percent (5%) or more ownership interest in any corporation or other entity (including such persons as individuals) that is or was, since January 1, 2004, a party to, or in any property which is or was, since January 1, 2004, the subject of, any material contract, agreement or understanding, business arrangement or relationship with a Subsidiary or materially relating to the Business or the Purchased Assets.

3.18 Insurance; Surety Arrangements . The Purchased Assets, properties and operations of the Business and the assets, properties and operations each of the Subsidiaries are, prior to the Closing, insured under various policies of general property and liability and other forms of insurance, all of which are listed in the Seller Disclosure Schedule and made available to Purchaser. All such policies are in full force and effect in accordance with their terms, no notice of cancellation has been received, and, to Seller’s knowledge, there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a default thereunder. Seller reasonably believes such policies are in amounts which are adequate in relation to the Business and Purchased Assets of Seller and the assets, properties and operations of each Subsidiary. All premiums to date have been paid in full. Since January 1, 2004, neither Seller nor a Subsidiary has been refused any insurance, nor has its coverage been limited, by any insurance carrier to which it has applied for insurance or with which it has carried insurance. The Seller Disclosure Schedule also contains a true and complete description of all outstanding bonds and other surety arrangements issued or entered into in connection with the Business, Purchased Assets and liabilities of Seller or the business, assets and liabilities of a Subsidiary.

3.19 Contracts and Commitments .

(a) Other than contracts, agreements and commitments listed in the Seller Disclosure Schedule in reference to this Section, neither Seller nor a Subsidiary is a party to any of the following written or oral contracts, agreements, or commitments (“ Material Contracts ”):

(i) agreement, contract or commitment with any present or former employee or consultant or for the employment of any person, including any consultant, who is or was substantially engaged in the conduct of the Business or employed by such Subsidiary since July 1, 2003 (excluding the Seller’s standard form of employee nondisclosure and assignment of inventions agreement previously provided to Purchaser);

(ii) agreement, contract or commitment for the future purchase of, or payment for, supplies or products, or for the performance of services by a third party which supplies, products or services are material to the conduct of the Business or the business of such Subsidiary;

 

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(iii) agreement, contract or commitment to sell or supply material products or to perform material services in connection with the Business or the business of such Subsidiary;

(iv) distribution, dealer, representative or sales agency agreement, contract or commitment relating to the Business or the business of such Subsidiary;

(v) lease under which Seller is either lessor or lessee relating to the Purchased Assets or any property at which the Purchased Assets are located;

(vi) note, debenture, bond, equipment trust agreement, letter of credit agreement, loan agreement or other contract or commitment for the borrowing or lending of money relating to the Business or the business of such Subsidiary or agreement or arrangement for a line of credit or guarantee, pledge or undertaking of the indebtedness of any other person relating to the Business or the business of such Subsidiary;

(vii) agreement, contract or commitment for any charitable or political contribution relating to the Business or the business of such Subsidiary;

(viii) commitment or agreement for any capital expenditure or leasehold improvement relating to the Business or the business of such Subsidiary;

(ix) any indenture, agreement, contract, commitment, lease, plan, license, permit, authorization or other instrument, document or understanding, oral or written, or subject to any charter or other restriction or any judgment, order, writ, injunction, decree or award which could reasonably be expected in the future to cause a Material Adverse Effect, nor, to Seller’s knowledge, is any employee of Seller or a Subsidiary subject to any such agreement, contract or commitment;

(x) any material license, franchise, distributorship or other agreement which relates in whole or in part to any software, patent, trademark, trade name, service mark, copyright, any applications therefor, or to any patent disclosures awaiting filing determination, or to any ideas, technical assistance or other know-how of or used by Seller in the use of the Purchased Assets or such Subsidiary in the conduct of the Business or the business of such Subsidiary, except for any standard end-user license agreements and support/maintenance agreements entered into in the ordinary course of the Business or the business of such Subsidiary; or

(xi) material agreement, contract or commitment relating to the Business or the business of such Subsidiary not made in the ordinary course of business.

(b) Each of the Material Contracts is valid and enforceable in accordance with its terms; Each of the Subsidiaries and Seller are, and to Seller’s knowledge all other parties thereto are, in compliance with the provisions thereof; Neither of the Subsidiaries nor Seller is, and to Seller’s knowledge no other party thereto is, in default in the performance, observance or fulfillment of any material obligation, covenant or condition contained therein; and no event has occurred which with or without the giving of notice or lapse of time, or both, would constitute a default thereunder. Furthermore, Seller is not aware of any contractual requirement in any such agreement with which

 

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Seller, such Subsidiary or any other party thereto will be unable to comply. No written or oral agreement, contract or commitment described therein requires the consent of any party to its assignment in connection with the transactions contemplated hereby, except where the failure to obtain such assignment would not result in a Material Adverse Effect.

(c) The Seller Disclosure Schedule accurately discloses with respect to each of the Material Contracts any obligation or commitment of Seller to provide indemnification in excess of amounts payable to Seller with respect to infringements of proprietary rights or otherwise, except for standard provisions set forth in licensing agreements related to shrink-wrap or off-the-shelf software.

(d) Neither this Agreement nor the transactions contemplated by this Agreement, including, but not limited to, the assignment to Purchaser by operation of law or otherwise of any contracts or agreements to which the Seller or any of its Subsidiaries is a party, will result in: (i) Purchaser granting to any third party any right to or with respect to any Intellectual Property (that is not Owned Intellectual Property Rights (defined below)) owned by, or licensed to, it, (ii) Purchaser being bound by, or subject to, any non-compete or other material restriction on the operation or scope of its business, or (iii) Purchaser being obligated to pay any royalties or other material amounts, or offer any discounts, to any third party in excess of those payable by, or required to be offered by, any of them, respectively, in the absence of this Agreement or the transactions contemplated hereby.

3.20 Additional Information . The Seller Disclosure Schedule contains accurate lists and summary descriptions of the following:

(a) all material inventory, equipment and furniture of Seller included in the Purchased Assets as of the Interim Balance Sheet Date, specifying such items as are owned and such as are leased and, with respect to the owned property, specifying its aggregate cost or original value and the net book value as of Interim Balance Sheet Date and, with respect to the leased property as to which Seller is lessee, specifying the identity of the lessor, the rental rate and the unexpired term of the lease;

(b) all real property and interests in real property owned, leased or otherwise held by Seller in the conduct of the Business or upon which the Purchased Assets are located as of the Interim Balance Sheet Date, specifying which are owned and which are leased and, with respect to the leased property, specifying the identity of the lessor, the rental rate and the unexpired term of the lease; notwithstanding the foregoing, none of such real property or interests in real property are included as Purchased Assets;

(c) the name and address of every bank and other financial institution in which Seller or its affiliates maintain an account (whether checking, savings or otherwise), lock box or safe deposit box for the Business, and the account numbers and names of persons having signing authority or other access thereto;

 

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(d) to the knowledge of Seller, the name and address of each customer of the Business in the last two years (this information may be provided electronically);

(e) the names and titles of and current annual base salary or hourly rates for all employees of Seller engaged in the conduct of the Business, together with a statement of the full amount and nature of any other remuneration, whether in cash or kind, paid to each such person during the past or current fiscal year or payable to each such person in the future and the bonuses accrued for, the vacation and severance benefits to which, each such person is entitled; and

(f) all names under which Seller has conducted the Business during the last five years.

3.21 Intellectual Property .

(a) Definitions . For the Purposes of this Agreement, the following definitions will apply:

(i) “ Governmental Authority ” shall mean an