ASSET PURCHASE AGREEMENT

Exhibit 10.8

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (“ Agreement ”) is entered into as of May 25, 2005 (the “ Execution Date ”), by and between Microtune (Texas), L.P., a Texas limited partnership (“ Microtune L.P. ” or “ Buyer ”), Microtune, Inc., a Delaware corporation (“ Microtune ”), Three-Five Systems Pacific, Inc., a corporation duly organized under the laws of the Republic of the Philippines (“ TFS” ), and Three-Five Systems, Inc., a Delaware corporation (“ Seller ” and, together with TFS, the “ TFS Entities ”). TFS, Seller, Buyer and Microtune are each sometimes referred to herein as a “ Party ” and together as the “ Parties .”

BACKGROUND

WHEREAS, TFS, Microtune L.P. and NSF RF-Technologies (Phils.), Inc., a corporation duly organized under the laws of the Republic of the Philippines (“ NSF ”), entered into that certain Asset Purchase Agreement dated as of March 27, 2003 (the “ 2003 Purchase Agreement ”), whereby, among other things, TFS (i) subleased from NSF certain real property located at the Granville Industrial Complex, Carmona, Cavite, Republic of the Philippines (the “ Premises ”), and (ii) purchased from Microtune L.P. and NSF certain equipment, inventory, raw materials, and other personal property in connection with operating a manufacturing facility on the Premises (the “ Facility ”);

WHEREAS, in connection with the execution of the 2003 Purchase Agreement, Seller and Microtune entered into that certain TFS Manufacturing Agreement dated as of March 27, 2003 (the “ TFS Manufacturing Agreement ” and, together with the 2003 Purchase Agreement, the “ 2003 Transactions ”), whereby Microtune agreed to purchase certain electronic assemblies from Seller;

WHEREAS, in connection with and as a condition to the execution of this Agreement, Seller is entering into that certain Memorandum of Agreement dated as of the date hereof with Ionics EMS, Inc., a Philippine corporation (“ Ionics ”) (the “ TFS/Ionics Purchase Agreement ”), whereby Seller is selling, assigning, transferring and conveying to Ionics certain equipment, certain land rights and building structures located thereon;

WHEREAS, in connection with and as a condition to the consummation of the transactions contemplated by this Agreement, the Parties are entering into that certain Termination and Mutual Release dated as of the Closing Date in the form attached hereto as Exhibit A (the “ Termination and Mutual Release ”), whereby the Parties will terminate the TFS Manufacturing Agreement and release each other from any Liabilities, Obligations or Claims (as defined in the Termination and Mutual Release), including, but not limited to, any Liabilities, Obligations or Claims arising in connection with the TFS Manufacturing Agreement, the 2003 Purchase Agreement and all other agreements and understandings related to the 2003 Transactions, and any Liabilities, Obligations or Claims arising in connection with any other transactions between the Parties, except to the extent such Liabilities, Obligations or Claims are specifically contemplated by, or arise in connection with, this Agreement;

WHEREAS, in connection with and as a condition to the consummation of the transactions contemplated by this Agreement and the TFS/Ionics Purchase Agreement and the

termination of the TFS Manufacturing Agreement, Buyer and Ionics are entering into that certain Manufacturing Agreement dated as of the date hereof (the “ Ionics Manufacturing Agreement ”), whereby Microtune L.P. is agreeing to purchase certain electronic assemblies from Ionics; and

WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain inventory, raw materials, work in process and finished goods on the terms and conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer agree as follows:

1. Sale and Purchase of Assets .

(a) Assets . On and as of the Closing Date (as defined below), subject to the terms and conditions of this Agreement, Seller shall sell, assign, transfer and convey to Buyer, and Buyer shall purchase and acquire from Seller, all of Seller’s right, title and interest in and to the Assets, being more particularly described as (a) all of the inventory, raw materials, work in process and finished goods pursuant to Buyer purchase orders as set forth on Schedule 1 hereto, such schedule to be supplied prior to or on the Closing Date (the “ Inventory ”), and (b) all books, records, manuals, files, data and papers, whether in hard copy, computer format or otherwise, used or held for use by Seller or any of its affiliates or subsidiaries directly connected to the Assets (the “ Books and Records ” and, together with the Inventory, the “ Assets ”). “Books and Records” shall in no event include the MRP system or data contained therein, the general ledgers, financial statements, or other books and records related to the operations of Seller as opposed to those specific documents which are directly connected with the Assets. All of Seller’s right, title and interest in and to inventory purchases made by Seller at or prior to the Closing Date pursuant to Buyer purchase orders, which are still in transit on the Closing Date or are scheduled to ship within five (5) business days after the Closing Date (“ Transit Inventory ”), shall be purchased by Buyer and included in Schedule 1 to the extent documentation reasonably acceptable to Buyer is presented as of the Closing Date evidencing that such Transit Inventory has actually been shipped or is scheduled to be shipped within five (5) business days after the Closing Date in the ordinary course of business. That portion of the TFS Payables (as defined below), which is created by the purchase by Seller of Transit Inventory shall be paid by Buyer as provided in Section 13 hereof.

(b) Bill of Sale . On the Closing Date Seller shall evidence the transfer of ownership of the Assets to Buyer by delivering to Buyer a Bill of Sale (the “ Bill of Sale ”), in substantially the form attached hereto as Exhibit B .

2. Possession of the Assets . Subject to the terms and conditions of this Agreement, the TFS Entities shall transfer possession of the Assets to Buyer on the Closing Date.

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3. Asset Transaction . Buyer shall not assume any liabilities or obligations of the TFS Entities, except for obligations arising after the Closing Date pursuant to the terms of this Agreement.

4. Taxes and Assessments . All taxes and assessments levied against the Inventory (“ Taxes ”) for all tax years prior to the Closing Date shall be paid in full by Seller or TFS, as applicable, on or before the Closing Date. All Taxes levied for the tax year in which the Closing Date occurs shall be prorated between Seller or TFS, as applicable, and Buyer as of the Closing Date based on the number of calendar days in the tax year in which the Closing Date occurs and the most recently available tax and assessment statements. Buyer shall pay all Taxes levied for the tax year after the Closing Date and thereafter.

5. Purchase Price .

(a) Assets . In consideration of the sale of the Assets, Buyer shall pay Seller the Purchase Price (as defined below).

(b) Payments Due to Seller . Except as otherwise provided in this Agreement, all payments due to Seller pursuant to this Agreement shall be made on the Closing Date by wire transfer of immediately available funds according to instructions provided to Buyer by Seller.

(c) Calculation of Purchase Price . The “ Purchase Price ” shall be the amount calculated as follows:

(i) Seller or TFS, as applicable, shall provide to Buyer all reasonable information regarding the Inventory, access to Seller’s vendors and access to the Inventory prior to the Closing Date.

(ii) A physical count (the “ Inventory Count ”) of the Inventory designated for inventory pursuant to Section 1(a) above shall be made by Buyer and Seller on or before the Closing Date. Buyer and Seller shall attempt in good faith to resolve any disputes respecting quantity or pricing which may arise during the Inventory Count.

(iii) For purposes of conducting the Inventory Count, the portion of the Purchase Price attributable to (1) “work in process” shall be based on the prorated cost of functional “work in process” relative to the status of the “work in process” in the production line and for which Seller has received existing purchase orders from Buyer; (2) raw materials shall be based on the actual cost paid by Seller for such raw materials, including freight and other costs paid at the request of Buyer and supported by existing purchase orders from Buyer; and (3) the finished goods shall be based solely on those finished goods for which Seller has received existing purchase orders from Buyer. Notwithstanding anything to the contrary contained herein, any item of Inventory that (1) has a date code greater than nine (9) months prior to the Closing Date, (2) is not included in its original packaging materials, (3) is damaged or otherwise fails to meet the requisite quality standards and specifications, or (4) was purchased directly from an unauthorized supplier thereof shall be considered obsolete inventory (collectively, “ Obsolete Inventory”) . The value of such Obsolete Inventory shall be determined by the Parties, negotiating in good faith, and the Purchase Price shall be adjusted accordingly. If the parties are

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unable to agree on the value of the Obsolete Inventory, it shall remain the property of Seller and shall not be Inventory included in Schedule 1.

6. RMA, Contingent Liabilities, Vendor Managed Inventory (“VMI”), Consigned Equipment and Termination and Mutual Release, and Seller Payables to Buyer .

(a) The Parties agree that Buyer shall reduce the Microtune Payables pursuant to Section 13 hereof by Twenty-Five Thousand Dollars (US $25,000) to account for the return of any materials to Buyer as a result of a defect in manufacturing or materials (“ Returned Materials Allowance ”).

(b) As part of the Inventory Count, the Parties agree to conduct a physical count of the Vendor Managed Inventory (“VMI”). The Parties further agree that to the extent the VMI on the last day of the month prior to the Closing Date is less than the VMI as of the last agreed upon reconciliation the difference shall be deducted from the Microtune Payables pursuant to Section 13 hereof.

(c) Subject to the terms and conditions of this Agreement, Seller shall deliver to Buyer on the Closing Date any equipment in the TFS Entities’ possession consigned by Buyer in connection with the TFS Manufacturing Agreement (“ Consigned Equipment ”), and the Microtune Payables shall be reduced pursuant to Section 13 hereof by Fifty Thousand Dollars (US $50,000) to compensate for any deficiency in calibration of the Consigned Equipment.

(d) The Parties agree that Buyer shall reduce the Microtune Payables pursuant to Section 13 hereof by Two Hundred Thousand Dollars (US $200,000) in exchange for Buyer’s and Microtune’s release of Seller and TFS as provided in Exhibit A.

(e) The Parties agree that Buyer shall reduce the Microtune Payables pursuant to Section 13 hereof by the amount of any trade receivables of Buyer due from Seller on the Closing date.

7. Risk of Loss; Casualty Loss or Damage .

(a) Risk of loss of each of the Assets shall be borne by Seller until the Closing Date, and shall transfer to Buyer upon the closing of the transactions described in or contemplated by this Agreement.

(b) In the event of any casualty loss or damage to any of the Assets between the date of this Agreement and the Closing Date, the Purchase Price shall be reduced by the portion of the Purchase Price allocated for such assets. In such event, all insurance proceeds received in connection with such casualty loss or damage shall be for the sole account of Seller, and Buyer shall have no claim whatsoever to the same.

8. Closing Date; Deliveries . Subject to the terms and conditions of this Agreement, on June 1, 2005, or such later date as the Parties may mutually agree (the “ Closing Date ”):

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(a) Buyer and Microtune Deliveries to the TFS Entities . Buyer and Microtune shall deliver or cause to be delivered to the TFS Entities the following instruments:

(b) TFS Entities Deliveries to Buyer and Microtune . The TFS Entities shall deliver or cause to be delivered to Buyer and Microtune the following instruments:

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9. Buyer’s and Microtune’s Conditions Precedent . Neither Buyer nor Microtune shall be obligated to consummate the transactions contemplated by this Agreement unless each of the following conditions are satisfied as of the Closing Date:

(a) All of the TFS Entities’ representations and warranties set forth in this Agreement shall be true and correct in all material respects as if made on the Closing Date, and the TFS Entities shall have performed each covenant and obligation of the TFS Entities to be performed hereunder on or before the Closing Date;

(b) There shall have been no order or preliminary or permanent injunction entered in any action or proceeding before any United States federal or state court or any foreign court of competent jurisdiction or any governmental authority that has jurisdiction over the enforcement of any applicable laws making illegal or prohibiting the consummation of the transactions contemplated by this Agreement;

(c) No action, suit, or proceeding shall be pending before any court or quasi-judicial court or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (i) legally prevent consummation of the transactions contemplated by this Agreement, or (ii) cause the transactions contemplated by this Agreement to be rescinded following consummation;

(d) The TFS Entities shall have obtained all necessary certificates, consents and approvals required by any governmental authority for the consummation of the transactions contemplated by this Agreement;

(e) The TFS Entities shall have obtained all necessary third-party consents and approvals required for the transfer to Ionics of the Supplier Purchase Orders;

(f) The TFS Entities shall have delivered, performed, observed and complied in all material respects with all of the items, instruments, documents, covenants, agreements and conditions required by this Agreement to be delivered, performed, observed and complied with by the TFS Entities on or before the Closing Date;

(g) There shall not have occurred since the Execution Date any material adverse change in the condition of the Assets;

(h)