ASSET PURCHASE AGREEMENT

Exhibit 2.1

CONFIDENTIAL TREATMENT REQUESTED:

INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED
AND IS NOTED WITH “[REDACTED]”. AN UNREDACTED VERSION OF THIS DOCUMENT HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION ___

ASSET PURCHASE AGREEMENT

By and Among

DII Taiwan Corporation Ltd.,

APD Semiconductor, Inc.

and

Certain Shareholders Thereof

October 18, 2006

TABLE OF CONTENTS

EXHIBITS

ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and effective as of October 18, 2006, by and among DII Taiwan Corporation Ltd., a Taiwan corporation (“ Buyer ”), APD Semiconductor, Inc., a California corporation (“ APD ”), and those Persons whose names appear on the signature pages of this Agreement under the heading “Shareholders” (collectively, the “ Shareholders ”). All capitalized terms used in this Agreement, unless otherwise defined in this Agreement, shall have the meaning set forth on Annex A .

RECITALS

     A. The Shareholders are the beneficial and record owners of all the issued and outstanding shares of the capital stock of APD (collectively, the “ Shares ”).

     B. APD desires to sell to Buyer, and Buyer desires to purchase from APD, substantially all the assets of APD, upon the terms and subject to the conditions set forth herein.

AGREEMENT

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and sufficiency of which hereby is acknowledged, the parties agree as follows:

ARTICLE I

PURCHASE AND SALE OF ASSETS

     1.01 Purchase and Sale of Assets .

          (a) On the terms and subject to the conditions of this Agreement, on the Closing Date, APD shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from APD, free and clear of all Encumbrances, all assets, properties and rights of every kind and description, wherever located, tangible and intangible, and whether or not reflected on the books and records of APD, which are related to, necessary for, or used by APD in connection with, the business of APD, other than the Excluded Assets (collectively, the “ Assets ”). The Assets shall include, but not be limited to:

     (i) all inventory, including all raw materials, work-in-process and finished goods, including, but not limited to, those set forth on Schedule 1.01(a)(i) (collectively, the “ Inventory ”);

     (ii) all accounts and notes receivable and other rights to receive payments, including, but not limited to, those set forth on Schedule 1.01(a)(ii) (collectively, the “ Accounts Receivable ”);

     (iii) all machinery, equipment, furniture, computer equipment, fixtures, leasehold improvements, supplies, spare parts, tools and other tangible personal property, including, but not limited to, those set forth on Schedule 1.01(a)(iii) (collectively, the “ Equipment ”);

     (iv) all Intellectual Property, including, but not limited to, all Marks, Patents, Copyrights, Software, Proprietary Rights, In-Licenses and Out-Licenses set forth on Schedule 1.01(a)(iv) ;

     (v) all right, title and interest in, to or under any Contract set forth in Schedule 1.01(a)(v) (collectively, the “ Acquired Contracts ”) ;

     (vi) all goodwill and other general intangibles associated with the business of APD and the Intellectual Property;

     (vii) all known and unknown, liquidated or unliquidated, contingent or fixed rights or Actions of every nature and kind which APD has or may have against any third party relating to the Assets, including, but not limited to, those set forth on Schedule 1.01(a)(vii) ;

     (viii) all books and records relating to the business of APD, the Assets or the Assumed Liabilities, including, but not limited to, customer and supplier lists, customer and supplier files, catalogues, brochures, sales literature, promotional material, business records, accounting records, financial records, tax records and computer software;

     (ix) to the extent transferable by APD to Buyer, all Permits, including, but not limited to, those set forth on Schedule 1.01(a)(ix) ;

     (x) all Actions, credits, rights of setoff of any kind, and all rights under and pursuant to all indemnities, warranties, representations and guarantees made by suppliers, manufacturers, contractors or other third parties arising before, on or after the Closing Date and relating to the Assets or any Assumed Liabilities, and the right to collect damages or proceeds in connection therewith;

     (xi) all goods and services and all other economic benefits to be received subsequent to the Closing Date which arise out of deposits, prepayments or payments by APD prior to the Closing Date; and

     (xii) all other assets, properties and rights reflected on the Financial Statements.

          (b) APD may retain one copy of any Acquired Contract or any books and records described in Section 1.01(a)(viii) to the extent such copy is required to be retained by applicable law or is necessary for purposes of financial reporting, tax or legal defense; provided , however, that any such copy shall be subject to Section 6.04 of this Agreement.

     1.02 Excluded Assets . Notwithstanding anything to the contrary contained in Section 1.01, APD shall not sell, convey, transfer, assign or deliver to Buyer, and Buyer shall not purchase or acquire from APD, those assets of APD expressly identified on Schedule 1.02 (collectively, the “ Excluded Assets ”).

     1.03 Assumed Liabilities.

          (a) Except as expressly set forth in this Section 1.03, Buyer shall acquire the Assets free and clear of all Encumbrances, and shall not assume or be obligated to perform any Liability of APD, whether or not such Liability arises out of or in connection with the business of APD or the sale of the Assets by APD to Buyer hereunder. APD agrees that it shall remain liable for, and shall pay, perform, discharge or otherwise satisfy in accordance with their respective terms, any and all Liabilities related to the business of APD or the Assets, except for the Assumed Liabilities.

          (b) On the Closing Date, Buyer shall assume, and thereafter shall pay, perform, discharge or otherwise satisfy in accordance with their respective terms, the following Liabilities related to the business of APD or the Assets (collectively, the “ Assumed Liabilities ”):

     (i) all indebtedness of APD as of the Closing Date to any bank or any shareholder; provided , however, that the amount of indebtedness assumed by Buyer under this clause (i) shall not exceed U.S. $5,100,000;

     (ii) the trade accounts payable of APD as of the Closing Date, to the extent that such amounts were incurred in the ordinary course of business; provided , however, that the amount of trade accounts payable assumed by Buyer under this clause (ii) shall not exceed U.S. $500,000;

     (iii) all obligations and Liabilities under the Acquired Contracts to the extent that such obligations and Liabilities arise after the Closing Date (and expressly excluding any obligation or Liability arising or accrued on or prior to the Closing Date except as expressly set forth in this Section 1.03(b)).

          (c) The term “Assumed Liabilities” shall not include, and Buyer shall not assume or be responsible for, any Liability not expressly set forth in Section 1.03(b), including, but not limited to, the following:

     (i) any Liability of APD to any current or former Affiliate, officer, director, shareholder, employee, independent contractor or agent of APD;

     (ii) any Liability associated with or relating to any compensation or benefit of any person set forth in clause (i), including, but not limited to, any liability in respect of salary, bonus, severance or workers’ compensation;

     (iii) any Liability associated with or relating to any Excluded Asset;

     (iv) any Liability associated with or relating to APD’s issuance or endorsement of any check, note, draft or instrument;

     (v) any Liability associated with or related to any Benefit Plan, program or arrangement;

     (vi) any income, property, franchise, sales, use. transfer, gains or other tax, or any filing requirement or obligation with respect thereto, arising out of or relating to the sale of the Assets by APD to Buyer under this Agreement, or any transaction of APD prior to or subsequent to the date of this Agreement, all of which taxes shall be paid timely when due by APD;

     (vii) any Liabilities associated with or relating to any Action relating to the Assets or arising out of events prior to the Closing Date;

     (viii) any warranty claims associated with or relating to products sold on or prior to the Closing Date;

     (ix) any obligation or Liability associated with or relating to any Contract other than an Acquired Contract; or

     (x) any obligation or Liability associated with or relating to any Acquired Contract to the extent that such obligation or Liability arises or is accrued on or prior to the Closing Date, except as expressly set forth in Section 1.03(b).

     1.04 Purchase Price.

          (a) As payment in full for the Assets, Buyer shall:

     (i) pay to APD, on the Closing Date, in U.S. dollars an amount equal to (x) U.S. $7,000,000 less (y) the value of the Assumed Liabilities described in Section 1.03(b)(i);

     (ii) pay to APD, within five (5) Business Days after the determination thereof pursuant to Section 1.04(b), in U.S. dollars an amount equal to (x) the value of the Inventory as of the Closing Date determined as provided in Section 1.04(b) plus (y) the value of the Accounts Receivable as of the Closing Date determined as provided in Section 1.04(b) less (z) the value of the Assumed Liabilities described in Section 1.03(b)(ii) and determined as provided in Section 1.04(b);

     (iii) assume, and pay, perform, discharge or otherwise satisfy in accordance with their respective terms, the Assumed Liabilities; and

     (iv) pay to APD, on each Earnout Date, in U.S. dollars an amount with respect to each Covered Product equal to the following percent of the net sales realized by Buyer from the sale of that Covered Product in the fiscal year immediately preceding that Earnout Date, determined as provided in Section 1.04(c):

[REDACTED]

          (b) (i) Within 60 calendar days after the Closing Date, Buyer shall prepare and deliver to APD a statement setting forth Buyer’s determination of the amount described in Section 1.04(a)(ii) (the “ Working Capital Statement ”). The Working Capital Statement shall be prepared in accordance with Schedule 1.04(b) .

     (ii) If APD disagrees with the determination of the amount described in Section 1.04(a)(ii) as shown on the Working Capital Statement, APD shall notify Buyer in writing of such disagreement within 30 calendar days after delivery of the Working Capital Statement, which notice shall describe the nature of any such disagreement in reasonable detail (including the specific items involved and the dollar amount of each such disagreement) and provide reasonable supporting documentation for each such disagreement. After the end of such 30 calendar day period, neither Buyer nor APD may introduce additional disagreements with respect to any item in the Working Capital Statement or increase the amount of any disagreement, and any item not so identified shall be deemed to be agreed to by Buyer and APD and will be final and binding upon Buyer and APD. During the 30 calendar day period of its review, APD shall have access to any documents, schedules or workpapers used in the preparation of the Working Capital Statement.

     (iii) Buyer and APD agree to negotiate in good faith to resolve any disagreement properly identified by APD to Buyer pursuant to Section 1.04(b)(ii). If Buyer and APD are unable to resolve all such disagreements within 30 calendar days after delivery to APD of written notice of such disagreement, then such disagreements shall be submitted for final and binding resolution to an independent auditor mutually agreeable to Buyer and APD (the “ Arbitrator ”). If Buyer and APD are unable to mutually agree on the Arbitrator, the Arbitrator will be selected by lot from a list of four nationally or regionally recognized accounting firms after eliminating one firm designated as objectionable by each of Buyer and APD. The Arbitrator will only consider those items and amounts set forth in the Working Capital Statement as to which Buyer and APD have disagreed within the time periods and on the terms specified above and must resolve the matter in accordance with the terms and provisions of this Agreement. The Arbitrator shall deliver to Buyer and APD, as promptly as practicable and in any event within 90 calendar days after its appointment, a written report setting forth the resolution of any such disagreement determined in accordance with the terms of this Agreement. The Arbitrator shall select as a resolution the position of either Buyer or APD for each item of disagreement and may not impose an alternative resolution. The Arbitrator shall make its determination based exclusively on presentations and supporting material provided by Buyer and APD and not pursuant to any independent review. The determination of the Arbitrator shall be final and binding upon Buyer and APD. The fees, expenses and costs of the Arbitrator shall be shared equally by Buyer and APD. Other than such fees and expenses of the Arbitrator, Buyer and APD shall each be responsible for their own costs

and expenses incurred in connection with any actions taken pursuant to this Section 1.04(b).

     (iv) The parties shall cooperate with each other in connection with, shall furnish to each other all such information as may be reasonably requested by a party, and shall provide the other parties and their representatives reasonable access to books and records and relevant personnel during the preparation of the Working Capital Statement and during the resolution of any disputes that may arise under this Section 1.04(b).

     (v) The purpose of this Section 1.04(b) is to determine the amount described in Section 1.04(a)(ii). Accordingly, any adjustment pursuant to this Section 1.04(b) shall not be deemed to be an indemnification by APD pursuant to Section 7.01, nor preclude Buyer from exercising any indemnification rights pursuant to Section 7.01.

          (c) The amounts described in Section 1.04(a)(iv) shall be based on the net sales and the average gross profit margin realized by Buyer from the sale of each Covered Product, which factors shall be determined by Buyer in accordance with the standards set forth on Schedule 1.04(c) . The determination of such factors by Buyer shall be final and binding upon Buyer and APD. Each payment pursuant to Section 1.04(a)(iii) shall be accompanied by a written statement setting forth for each Covered Product the calculation of such payment in reasonable detail.

ARTICLE II

CLOSING

     2.01 Closing .

          (a) The consummation of the transactions contemplated by Article I (the “ Closing ”) shall take place on the Closing Date at the offices of Buyer, 3050 East Hillcrest Drive, Westlake Village, California 91362, or such other place as may be mutually agreed to in writing by Buyer and APD. The Closing shall be deemed effective as of the close of business on the Closing Date.

          (b) The Closing Date shall occur five (5) Business Days following the date upon which the conditions set forth in Article V have been satisfied, or such earlier or later date as may be mutually agreed to in writing by Buyer and APD (such date being referred to herein as the “ Closing Date ”).

          (c) All payments required under Section 1.04 shall be made in next day funds by wire transfer to such account as APD may designate in writing not less than two (2) Business Days before such payment.

     2.02 Deliveries by APD . At or prior to the Closing, APD shall deliver to Buyer the following:

     (i) copies of the resolutions of the Board of Directors and the shareholders of APD authorizing the transactions set forth herein, certified by the Secretary of APD;

     (ii) all endorsements, licenses, bills of sale, assignments, instruments of title, consents by third parties and other documents as may be necessary, or as Buyer may reasonably request, to effectively convey to Buyer and vest in Buyer good, clear and marketable title to all of the Assets, all in proper form for filing, registration or recording and in form and substance reasonably satisfactory to Buyer and its counsel;

     (iii) full possession of all the Assets, including, but not limited to, the originals of all agreements, instruments, documents, deeds, books, records, files and other data and information that constitute part of the Assets (collectively, the “ Records ”);

     (iv) a copy of the certificate of incorporation of APD certified as of a recent date by the Secretary of State of California;

     (v) a certificate of good standing of APD issued as of a recent date by the Secretary of State of the State of California; and

     (vi) such other documents and instruments as may be necessary to effect the transactions contemplated by this Agreement.

     2.03 Buyer’s Deliveries at Closing . At or prior to the Closing, Buyer shall deliver to APD the following:

     (i) the amount set forth in Section 1.04(a)(i);

     (ii) executed copy of a License Agreement between Buyer and APD or its assignee in the form attached as Exhibit A ; provided , however, that any such assignee shall be controlled by a majority of the current shareholders of APD;

     (iii) executed copy of an Assignment and Assumption Agreement in the form attached as Exhibit B ; and

     (iv) such other documents and instruments as may be necessary to effect the transactions contemplated by this Agreement.

     2.04 Delivery of Assets .

          (a) Delivery of possession of the Assets shall be deemed to have occurred for all purposes at the close of business on the Closing Date, and all risk of loss, whether or not covered by insurance, shall be on APD until such date and on Buyer thereafter.

          (b) As soon as practicable after the Closing Date, Buyer shall remove from APD’s premises all Assets located thereon, and until so removed, APD shall keep such Assets segregated and identified as the property of Buyer, and shall cooperate in the removal of the same at the cost and expense of Buyer.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF APD AND THE SHAREHOLDERS

     APD and each of the Shareholders, jointly and severally, hereby represent and warrant to Buyer that the statements contained in this Article II are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article II):

     3.01 Corporate Existence and Qualification . APD is a corporation duly organized, validly existing and in good standing under the laws of the State of California; has the requisite power to own, manage, lease, hold and operate its properties and assets and to carry on its business as and where such properties and assets are presently located and such business is presently conducted; and is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its assets or the nature of its business requires such qualification, except where the failure to so qualify or to be in good standing would not have a material adverse effect on its business, operations, properties, prospects or condition (financial or otherwise) or the Assets (a “ Material Adverse Effect ”). APD is qualified as a foreign corporation and is in good standing in each jurisdiction set forth in Schedule 3.01 attached hereto.

     3.02 Authority, Approval and Enforceability . This Agreement has been duly authorized, executed and delivered by APD and each of the Shareholders, and APD and each of the Shareholders has all requisite power and authority to execute and deliver this Agreement and all Collateral Agreements executed and delivered or to be executed and delivered in connection with the transactions contemplated hereby, to consummate the transactions contemplated hereby and by the Collateral Agreements, and to perform its obligations hereunder and under the Collateral Agreements. The execution and delivery of this Agreement and the Collateral Agreements and the performance of the transactions contemplated hereby and thereby have been duly and validly authorized and approved by all corporate action necessary on behalf of APD and each of the Shareholders. This Agreement and each Collateral Agreement to which APD or a Shareholder is a party constitutes, or upon execution and delivery will constitute, the legal, valid and binding obligation of such party, enforceable in accordance with its terms.

     3.03 Conflicts . The execution and delivery by APD and each of the Shareholders of this Agreement and each Collateral Agreement, and the performance by it of its obligations hereunder and thereunder, does not and will not (with or without the giving of notice or passage of time):

     (i) violate, or conflict with or result in the breach of any provision of the certificate of incorporation or bylaws of APD or such Shareholder;

     (ii) violate of any Legal Requirements applicable to APD or such Shareholder, or require a registration, filing, application, notice, consent, approval, order, qualification, authorization, designation, declaration or waiver with, to or from any Governmental Authority;

     (iii) require a consent, approval or waiver from, or notice to, any party to a Contract to which APD or such Shareholder is a party, or result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of material obligations, loss of material benefit or increase in any material Liabilities or fees under, or create in any party the right to terminate, cancel or modify, any Acquired Contract; or

     (iv) result in the creation of any Encumbrance upon any Asset.

     3.04 No Proceedings . No suit, action or other proceeding is pending or, to the Knowledge of APD or any of the Shareholders, threatened before any Governmental Authority seeking to restrain APD or any of the Shareholders or prohibit their entry into this Agreement or prohibit the Closing, or seeking damages against APD or any of the Shareholders or their properties as a result of the consummation of this Agreement.

     3.05 Financial Statements.

          (a) Schedule 3.05 contains true and complete copies of (i) the unaudited consolidated balance sheet of APD as of August 31, 2006 and (ii) the unaudited consolidated statements of income and cash flows of APD for the eight-month period ending on August 31, 2006 (collectively, the “ Financial Statements ”). The Financial Statements (i) are in accordance with the books and records of APD; (ii) disclose all the assets and reflect or reserve all Liabilities of APD as of the date thereof; (iii) present fairly the financial condition and results

of operations of APD on a consolidated basis as of the respective dates and for the respective periods thereof; and (iv) have been prepared on a consistent basis throughout the periods indicated and in accordance with generally accepted accounting principles in the United States and APD’s normal practices.

          (b) APD maintains accurate books and records reflecting its assets and liabilities and maintains proper and adequate internal accounting controls which provide assurance that (i) transactions are executed with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of the consolidated financial statements of APD and to maintain accountability for APD’s consolidated assets; (iii) access to APD’s assets is permitted only in accordance with management’s authorization; (iv) the reporting of APD’s assets is compared with existing assets at regular intervals; and (v) accounts, notes, and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis.

          (c) There are no (i) significant deficiencies or material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect APD’s ability to record, process, summarize and report financial data or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in APD’s internal controls. Neither APD nor any director, officer, employee, auditor, accountant or representative of APD has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of APD or its internal accounting controls, including any complaint, allegation, assertion or claim that APD has engaged in questionable accounting or auditing practices.

     3.06 Compliance with Laws . APD is and has been in compliance with any and all Legal Requirements applicable to the business of APD, and has all Permits necessary to own or operate the Assets and to conduct its business as now being conducted. Neither APD nor any Shareholder has received any notice to the effect that, or otherwise been advised that, APD is not in compliance with any Legal Requirement, and neither APD nor any Shareholder is aware of any existing circumstance which could result in the violation of any Legal Requirement.

     3.07 Litigation . There is no Action against APD pending or, to the Knowledge of APD or any of the Shareholders, threatened in any court or before or by any Governmental Authority, or before any arbitrator, and to the Knowledge of APD or any of the Shareholders, there is no basis for any such Action and there is no Court Order to which APD is subject.

     3.08 Assets of the Business . APD has and will have as of the Closing Date good and marketable title to the Assets, free and clear of any and all Encumbrances. The Assets and the rights conferred by the Acquired Contracts comprise all of the properties, assets and rights of APD which relate to the conduct of the business of APD as presently conducted and are adequate to conduct the business as presently conducted by APD. All of the Assets are in good condition and working order and are adequate for the uses to which they are being put; none of the tangible Assets is in need of maintenance or repair except for ordinary, routine maintenance and repairs; and all of the tangible Assets are and on the Closing Date will be in good operating condition and state of maintenance and repair, and will have been serviced and maintained, where applicable, substantially in accordance with manufacturer’s recommendations.

     3.09 Commitments.

          (a) Except as otherwise set forth on Schedule 3.09(a) , APD is not a party to or bound by any of the following, whether written or oral:

     (i) any Contract that cannot by its terms be terminated by APD with 90 days’ or less notice without penalty or whose term continues beyond one year after the date of this Agreement;

     (ii) any purchase commitment in excess of normal requirements or at prices in excess of prevailing market prices;

     (iii) any sales contract at prices below prevailing market prices or inventory prices plus selling costs;

     (iv) any Contract for capital expenditures by APD in excess of $10,000 per calendar quarter in the aggregate;

     (v) any lease or license with respect to any Assets, real or personal, whether as landlord, tenant, licensor or licensee;

     (vi) any agreement, Contract, indenture or other instrument relating to the borrowing of money or the guarantee of any obligation or the deferred payment of the purchase price of any asset;

     (vii) any partnership, joint venture or other similar agreement;

     (viii) any Contract with any Affiliate of APD relating to the provision of goods or services by or to APD;

     (ix) any agreement that purports to limit APD’s freedom to compete freely in any line of business or in any geographic area;

     (x) any asset purchase agreements, stock purchase agreements, and other acquisition or divestiture agreements and similar Contracts, including any Contracts relating to the sale, lease or disposal of any Assets (other than sales of Inventory in the ordinary course of business);

     (xi) any preferential purchase right, right of first refusal or similar agreement; and

     (xii) any other Contract that is material to the business of APD.

          (b) All of the Acquired Contracts are legal, valid, binding and in full force and effect, and are enforceable in accordance with their respective terms; APD has not been notified or advised by any party thereto of such party’s intention or desire to terminate or modify any Acquired Contract in any respect and neither APD nor, to the Knowledge of APD or any of the Shareholders, any other party thereto is in breach of any of the terms or covenants of

any Acquired Contract (or with notice or lapse of time or both, would be in breach of any Acquired Contract). Following the Closing, Buyer will be entitled to all of the benefits of APD under each Acquired Contract.

          (c) APD is not a party to or bound by any Contract or Contracts, the terms of which were arrived at by or otherwise reflect less than arm’s-length negotiations or bargaining.

     3.10 Insurance . Schedule 3.10 sets forth a complete and correct list of all insurance policies presently in effect that relate to APD or the Assets, all of which are in full force and effect.

     3.11 Inventories . The Inventory as of the Closing Date shall consist of items of a quality, condition and quantity consistent with normal seasonally-adjusted Inventory levels of APD, shall conform to published specifications, and shall be free of defects and be marketable and be saleable, at prevailing market prices not less than the book value thereof, in the ordinary and usual course of business for the purposes for which intended, except for items which have been written off or written down to net realizable value in the Financial Statements. The amount of such Inventory as reflected on the Financial Statements is based on actual physical counts and have been valued at the lower of cost or fair market value.

     3.12 Suppliers and Customers . Schedule 3.12 sets forth (i) the ten (10) largest suppliers of APD during each of calendar years 2005 and 2006; and (ii) the ten (10) largest customers of APD during each of calendar years 2005 and 2006. There exists no actual or threatened termination, cancellation or limitation of, or any modification or change in, APD’s business relationship with any customer or supplier, which termination, cancellation, limitation, modification or change could, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.

     3.13 Products . Schedule 3.13 lists each product under development, developed, manufactured, licensed, distributed or sold by APD and any other products in which APD has any proprietary rights or beneficial interest (collectively, the “ Products ”).

     3.14 Transactions With Affiliates . Except as set forth on Schedule 3.14 and except for customary advances to employees consistent with past practices and payment of compensation for employment to employees, consistent with past practices, APD has not purchased, acquired or leased any property or services from, or sold, transferred or leased any property or services to, or loaned or advanced any money to, or borrowed any money from, or entered into or been subject to any management, consulting or similar agreement with, or engaged in any other significant transaction with any officer, director or shareholder of APD or any of their respective Affiliates. Except as set forth on Schedule 3.14 , no shareholder or other Affiliate of APD is indebted to APD for money borrowed or other loans or advances, and APD is not indebted to any shareholder or any such Affiliate.

     3.15 Operations Since August 31, 2006.

          (a) Since August 31, 2006, there has not been any change, circumstance or effect in or with respect to the Assets or the financial condition, results of operations or prospects of the business of APD, other than any changes, circumstances and effects arising in the ordinary course of business that have not had and would not have,

          individually or in the aggregate, a Material Adverse Effect, nor is any such change, circumstance or effect anticipated.

          (b) Since August 31, 2006, APD has conducted its business in the ordinary course, and APD has not:

     (i) conveyed, exchanged, sold, assigned, abandoned, leased (as lessor or lessee), transferred, licensed, or otherwise disposed of, in whole or in part, in a single transaction or series of related transactions, any Assets (including Intellectual Property) except for full consideration in the ordinary course of business;

     (ii) undertaken or committed to undertake capital expenditures;

     (iii) suffered any damage, destruction or casualty loss with respect to any property (whether or not covered by insurance);

     (iv) except as set forth on Schedule 3.20 , incurred or guaranteed any Indebtedness;

     (v) made any change in the accounting principles, methods, practices or policies;

     (vi) acquired or purchased any properties or assets that are, individually or in the aggregate, material to the business of APD (other than in the ordinary course of business), merged or consolidated with, or acquired all or substantially all of the assets of, or otherwise acquired, any Person, or made any investment in any Person;

     (vii) executed, terminated, cancelled, amended, modified or permitted to modify, amend, terminate, cancel or expire any Contract;

     (viii) created or suffered the imposition of any Encumbrance on any of the Assets;

     (ix) forgiven or cancelled any debt or claim or voluntarily waived any right of value, other than compromises of accounts receivable in the ordinary course of business;

     (x) entered into any intercompany transactions with any Affiliate of APD; or

     (xi) suffered any actual or threatened cancellations by customers or suppliers for the purchase or sale of goods or services;

     (xii) suffered any actual, or received notice of any planned, increases in prices of goods or services provided to it by suppliers or other third party vendors; or

     (xiii) accelerated receivables, delayed payables or liquidated inventory, except in accordance with prior practices;

     (xiv) authorized, approved, agreed or committed to do any of the actions described in clauses (i)-(xiii) above.

          (c) Since August 31, 2006, APD has operated its business in the ordinary course consistent with its past practice so as to preserve such business intact, to keep available to it the services of its employees, and to preserve its business and the goodwill of its suppliers, customers, distributors and others having business relations with it.

     3.16 Taxes . APD has filed or will have filed on a timely, complete and accurate basis all Tax Returns in connection with any Tax required to be filed by it, and APD has or will have timely paid all such Taxes shown thereon to be due. None of the Assets is subject to any lien in favor of the United States pursuant to Section 6321 of the Code for nonpayment of federal Taxes, or any lien in favor of any state, local or foreign Governmental Authority pursuant to any comparable provision of state, local or foreign law, under which transferee liability might be imposed upon Buyer as a buyer of such Assets pursuant to Section 6323 of the Code or any comparable provision of state, local or foreign law. No unresolved issue has been raised by any Governmental Authority in the course of any audit with respect to Taxes related to the Assets or the Assumed Liabilities. No Governmental Authority is now asserting or threatening to assert against APD any deficiency or claim for additional Taxes, or any adjustment of Taxes, related to the Assets or the Assumed Liabilities. There is no Action, audit, claim or investigation now pending or threatened with respect to any Tax with respect to the Assets or the Assumed Liabilities. There are no outstanding agreements extending the statutory period of limitation applicable to any claim for, or the period for the collection or assessment of, Taxes with respect to the Assets or the Assumed Liabilities. APD has duly and timely withheld from employee salaries, wages and other compensation and paid over to the appropriate taxing authorities all amounts required to be so withheld and paid over for all periods under all applicable laws. APD has collected all material sales and use Taxes required to be collection and has remitted, or will remit on a timely basis, such amounts to the appropriate taxing authority, or has been furnished properly completed exemption certificates and has maintained all such records and supporting documents in the manner required by all applicable sales and use Tax statutes and regulations.

     3.17 Permits . Each Permit is valid, binding and in full force and effect, and APD is not in violation of or default thereunder, and, to the Knowledge of APD and each of the Shareholders, no suspension or cancellation of any such Permit is threatened.

     3.18 Intellectual Property.

          (a) Schedule 1.01(a)(iv) contains a list of all Marks, Patents, Copyrights, Software, Proprietary Rights, In-Licenses and Out-Licenses owned or used by APD as of the date of this Agreement, and such Marks, Patents, Copyrights, Software, Proprietary Rights, In-Licenses and Out-Licenses are adequate to conduct the business of APD as presently conducted.

          (b) APD: (i) owns the entire and exclusive right, title and interest in and to all Intellectual Property, except for U.S. Patent No. 6,537,860 (the “860 Patent”), free and

clear of Encumbrances or adverse claims of ownership, including, but not limited to, claims from current or former employees and contractors; and (ii) APD co-owns the “860 Patent” with Fujifilm Microdevices Company, Ltd., with which APD jointly owns the entire right, title and interest in and to the “860 Patent,” free and clear of Encumbrances or adverse claims of ownership, including, but not limited to, claims from current or former employees and contractors.

          (c) To the Knowledge of APD and each of the Shareholders, all items set forth on Schedule 1.01(a)(iv) with a status of “Granted” are valid and in force, all items set forth on Schedule 1.01(a)(iv) with a status of “Pending” are not abandoned, and all items set forth on Schedule 1.01(a)(iv) with a status of “Abandoned” are abandoned.

          (d) (i) During the previous three (3) years, no material Action has been taken or, to the Knowledge of APD or any of the Shareholders, threatened, (A) alleging that the conduct of its business or any Intellectual Property infringes on or misappropriates the Intellectual Property of another Person; or (B) challenging the ownership or validity of the Intellectual Property; (ii) no material Action is pending with respect to any Intellectual Property; and (iii) to the Knowledge of APD and each of the Shareholders, there is no valid basis for any Action described in this Section 3.18.

          (e) APD has taken all necessary steps to protect the proprietary nature of the Intellectual Property and to maintain in confidence all trade secrets and confidential Intellectual Property.

     3.19 Environmental Matters . Except as set forth on Schedule 2.15 :

          (a) For purposes of this Section, the term “Company” shall include (i) all Affiliates of APD (except any Person who is an Affiliate of APD solely as a result of the ownership of Shares), (ii) all partnerships, joint ventures and other entities or organizations in which APD was at any time or is a partner, joint venturer, member or participant and (iii) all predecessor or former corporations, partnerships, joint ventures, organizations, businesses or other entities, whether in existence as of the date hereof or at any time prior to the date hereof, the assets or obligations of which have been acquired or assumed by APD or to which APD has succeeded.

          (b) The facilities of Company have been maintained in compliance with all Legal Requirements which (i) regulate or relate to the protection or clean-up of the environment; the use, treatment, storage, transportation, handling, disposal or release of Hazardous Substances; the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources; or the health and safety of persons or property, including, without limitation, protection of the health and safety of employees; or (ii) impose liability with respect to any of the foregoing, including, without limitation, the Air Pollution Control and Emissions Criteria for the Semiconductor Manufacturing Industry