10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission file number: 000-50812

MULTI-FINELINE ELECTRONIX, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-3947402
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3140 East Coronado Street Anaheim, California	92806
(Address of principal executive offices)	(Zip code)

(714) 238-1488

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per share	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    ¨	Accelerated filer    x
Non-accelerated filer    ¨  (Do not check if a smaller reporting company)	Smaller reporting company    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of Common Stock held by non-affiliates of the registrant (based upon the closing sale price of the NASDAQ Global Select Market on March 31, 2008) was $98,380,308. Shares held by each executive officer, director and by each person that owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of November 30, 2008 was 25,113,626.

DOCUMENTS INCORPORATED BY REFERENCE

Items 10 (as to directors and Section 16(a) Beneficial Ownership Reporting Compliance), 11, 12 (as to Beneficial Ownership), 13 and 14 of Part III incorporate by reference information from the registrant’s proxy statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the registrant’s 2009 Annual Meeting of Stockholders expected to be held in March 2009.

Multi-Fineline Electronix, Inc.

Index

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	12
Item 2.	Properties	23
Item 3.	Legal Proceedings	23
Item 4.	Submission of Matters to a Vote of Security Holders	23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Consolidated Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 8.	Financial Statements and Supplementary Data	43
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	72
Item 9A.	Controls and Procedures	72
Item 9B.	Other Information	73
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	74
Item 11.	Executive Compensation	75
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	75
Item 13.	Certain Relationships, Related Transactions, and Director Independence	76
Item 14.	Principal Accountant Fees and Services	76
PART IV
Item 15.	Exhibits, Financial Statement Schedules	77
	Signatures	79

Part I

Item 1. Business

Overview

This Annual Report on Form 10-K (“Annual Report”), contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The forward-looking statements are contained principally in Item 1—”Business,” Item 1.A—”Risk Factors” and Item 7—”Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such forward-looking statements include any expectation of earnings, revenues or other financial items; any statements regarding the use of working capital, anticipated growth strategies and the development of and applications for new technology; factors that may affect our operating results; statements concerning new products or services; statements related to future economic conditions or performance; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” or “will,” and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed under Item 1.A. “Risk Factors” in this Annual Report. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

We are one of the world’s largest producers of flexible printed circuits and flexible circuit assemblies. With facilities in Anaheim, California; Suzhou, China; Pontian, Malaysia; and Singapore, we offer a global service and support base for the design and manufacture of flexible interconnect solutions.

We are a global provider of high-quality, technologically advanced flexible printed circuits and value-added component assembly solutions to the electronics industry. We believe that we are one of a limited number of manufacturers that has the ability to offer a seamless, integrated flexible printed circuit and assembly solution from design and application engineering and prototyping through high-volume fabrication, component assembly and testing. We target our solutions within the electronics market and, in particular, we focus on applications where flexible printed circuits facilitate human interaction with an electronic device and are the enabling technology in achieving a desired size, shape, weight or functionality of the device. Current applications for our products include mobile phones, smart mobile devices, consumer products, portable bar code scanners, personal digital assistants, computer/storage devices and medical devices. We provide our solutions to original equipment manufacturers (“ OEMs”) such as Motorola, Inc. and Sony Ericsson Mobile Communications and to electronic manufacturing services (“EMS”) providers such as Foxconn Electronics, Inc., Tech Full, and Flextronics International Ltd.

Our growth has been due, in part, to our early supplier involvement allowing our engineers to gain an understanding of the application and use of the customers’ circuits. This knowledge allows our engineers to utilize their expertise in flex circuit design and assist in the selection of materials and technologies to provide a high quality and cost effective product. Vertically integrated flex circuit manufacturing, assembly, and tooling operations have allowed us to offer superior lead time support to facilitate “quick turn” customer requirements.

We were incorporated as Multi-Fineline Electronix, Inc. in California in October 1984. In connection with our initial public offering, we reincorporated as Multi-Fineline Electronix, Inc. in Delaware on June 4, 2004. References in this Annual Report to “we,” “our,” “us”, the “Company” and “MFLEX” refer to Multi-Fineline Electronix, Inc. and our consolidated subsidiaries: Multi-Fineline Electronix (Suzhou) Co., Ltd., or MFC1;

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Multi-Fineline Electronix (Suzhou No. 2) Co. Ltd., or MFC2; MFLEX Cayman Islands, Inc.; Multi-Fineline Electronix Singapore Pte. Ltd.; Multi-Fineline Electronix Malaysia Sdn. Bhd., or MFM; and Aurora Optical, Inc., except where it is made clear that the term means only the parent company.

Industry Background

We believe that the global market for flexible printed circuits will continue to grow over the coming years as consumers continue to demand smaller, more functional devices. Given inherent design and cost advantages of flexible printed circuits, they quickly are becoming a favored solution for electronics manufacturers who are striving to increase the features and functionality of electronic devices while optimizing the size, shape and weight of such devices. Asia is one of the largest and fastest growing markets for flexible printed circuits, largely because of two trends that occurred in the early 1990s—the outsourcing by OEMs of their manufacturing needs and the shifting of manufacturing facilities from the United States to Asian countries.

Historically, electronics manufacturers have relied upon rigid printed circuit boards to provide the electrical interconnections between the components in electronics devices. Rigid printed circuit boards consist of a board that contains multiple transistors, microprocessors and other components that are connected by copper wires embedded on the circuit board. Given that the rigid printed circuit boards cannot bend or twist, they inherently limit the design options available to engineers. For example, in order to design and build “flip-phone” style mobile phones, engineers had to create a method to connect the rigid printed circuit board in the base of the phone with the rigid printed circuit board in the screen. Copper wires could not be used because they are subject to failure as a result of stress from the constant bending and flexing of the wires; therefore, design engineers had to look to new materials to provide a means of electrical interconnection between the various components of the device.

To address this need, companies such as MFLEX began to design flexible printed circuits and flexible printed circuits containing components, or component assemblies, to serve as electrical interconnections. These flexible printed circuits can twist, bend and flex in a device with less risk of failure while connecting the components of the device. In addition to these functionality advantages, flexible printed circuits and component assemblies enable OEMs, EMS providers and display manufacturers to design and construct modular components that can be incorporated into the final product, which in turn reduces the complexity of the assembly of the final product, reduces the manufacturing costs and facilitates human interaction with the electronic device. As a result, manufacturers can reduce the number of assembly operations required for a product and improve the efficiency of their supply chains.

We believe that the overall market for flexible printed circuits and component assemblies is poised for substantial growth over the next several years as a result of favorable technological and market developments, including:

• Miniaturization, Portability and Complexity of Electronic Devices. As electronic devices become more powerful, complex and compact, product size becomes a principal design limitation. From an engineering standpoint, flexible printed circuits possess enhanced heat dissipation properties because they are thinner than rigid printed circuit boards and provide higher signal integrity interconnection. They also enable faster operating speeds because the components can be placed closer together and can serve as a medium for analog and digital devices. As a result, the electronics industry has relied increasingly upon flexible printed circuits and component assemblies. For example, the placement of chips and liquid crystal displays directly on the flexible printed circuit enables OEMs to increase functionality and improve packaging characteristics while managing time-to-market for their products in an overall cost-effective manner. Moreover, as electronics companies develop increased functionality for semiconductors, the traditional packaging and mounting technologies are becoming obsolete.

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• Outsourcing. Electronics companies increasingly are relying upon outsourcing to technically qualified, strategically located manufacturing partners that provide integrated, end-to-end flexible printed circuit and component assembly solutions comprised of design and application engineering, prototyping and competitive high-volume production services. By employing these end-to-end manufacturers, electronics companies are able to reduce time-to-market, avoid product delays, reduce manufacturing costs, minimize logistical problems and focus on their core competencies.

• Expanding Markets and Flexible Component Demand. The global demand for wireless communication products and the complexity of wireless devices increasingly are driving the demand for more complex flexible printed circuits and component assemblies. Electronics companies have discovered that they can increase the functionality of flexible printed circuits and reduce the number of required interconnects by mounting components, such as connectors, switches, resistors, capacitors, light emitting devices, integrated circuits and optical sensors, to the flexible printed circuits. We believe that the application of flex assemblies in wireless devices is expanding rapidly, which could result in significantly more flex assemblies per device than have been used in previous-generation wireless applications.

Competitive Strengths

We are a leading global provider of high-quality, technologically advanced flexible printed circuit and component assembly solutions to the electronics industry. We believe our competitive strengths include:

• Our Seamless and Efficient End-to-End Solution for Flexible Printed Circuit Applications. We provide a seamless, integrated end-to-end flexible printed circuit solution for our customers, ranging from design and application engineering, prototyping and high-volume manufacturing to turnkey component assembly and testing. By relying on a single provider for their flexible printed circuit requirements, our customers can benefit from opportunities for more robust product designs and process optimization during the development phase. This, in turn, frequently leads to production cost savings and quicker time-to-market. Our operations possess the expertise and capabilities to provide a seamless, integrated end-to-end solution that provides our customers with the ability to leverage any one or more of our facilities to meet their global requirements.

• Our Design and Application Engineering Expertise Supports Our Strong Customer Relationships. Our expertise in designing and manufacturing flexible printed circuits and component assemblies has enabled us to become a partner to our customers at the earliest stages of product development. We employ our design and application engineers as part of our sales process; therefore, our customers rely on us to assist them in the early design phase of their products. Early design participation enables us to gain intricate knowledge of our customers’ products and thereby provide value-added engineering support to them. Early design participation also enables our customers to achieve lower production costs through better product design and utilization of our flexible printed circuit assembly expertise. In addition, this process fosters strong relationships with our customers, often resulting in their reliance on our products and engineering support for the life of the specific application and subsequent generations of similar applications.

• Our Manufacturing Capabilities. We maintain manufacturing facilities in the United States, Malaysia and China. Our U.S. operations primarily provide design and application engineering and prototype manufacturing, while our Chinese operations are organized to concentrate on ramping up production of new products from prototype stage to high volume, while allowing us to consolidate the labor intensive aspects of high-volume manufacturing in a cost-efficient environment. Our Malaysian operations are still in the start-up phase and we expect to transfer some of our high-mix assembly business to this facility. We are also continuing to enhance our design and application engineering capabilities in China to best position us to provide an integrated end-to-end solution to the emerging domestic electronics markets in China and other parts of Asia. Since 2000, we have expanded our manufacturing capacity in China by acquiring additional and technologically advanced machinery, and by expanding our

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manufacturing facilities. Our ongoing attention to integrating the manufacturing processes between our facilities allows us to improve our product yields, streamline our customers’ supply chains, shorten our customers’ time to the market and lower the overall costs of our products. Furthermore, with the expansion of our manufacturing facilities and the capital equipment addition at our second manufacturing facility in China, MFC2, which became operational in October 2006, and with further expansion to satellite facilities during fiscal 2008, we increased our manufacturing capacities substantially in China, which enabled us to take on additional high-volume manufacturing programs. While we believe our Chinese manufacturing facilities benefit the company, they do subject us to additional risks inherent in international business, including those detailed under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.”

• Our Forward Integration in the Value Chain. We have implemented a strategy of upward integration focusing on the value-added services that we provide to our customers—design and application engineering and component assembly—rather than only concentrating on acquiring the capabilities to produce the materials used to manufacture flexible printed circuits. By employing suppliers to provide us with raw materials, we have avoided unnecessary capital equipment and research and development costs and have focused more intensely on the integral steps in the manufacturing process, from design and prototyping to high-volume manufacturing and component assembly. The result of this strategy has been superior design and application engineering expertise, strong customer relationships and yearly sequential net sales growth.

• Our Management Experience and Expertise. Many members of our management team have been with us for 12 plus years. During that time, our executive management has made a number of critical, strategic decisions that successfully managed our growth and profitability, including pursuing a strategy of deploying our design and application engineers at the early stages of a customer’s product designs; responding to the trend of OEM outsourcing; identifying China’s manufacturing capabilities; creating a seamless, integrated end-to-end solution in each of our U.S. and Chinese operations to serve the needs of multinational OEMs, EMS providers and display manufacturers; and adopting a forward integration strategy in order to focus on the engineering and assembly needs of our customers.

Business Strategy

Our objective is to continue to expand our product offering to become a global provider of electronic products packaging technology and manufacturing by using our core technologies of high-quality, technologically advanced flexible printed circuits and assemblies as the essential ingredients. To achieve our objective, we intend to pursue the following strategies:

• Provide an Integrated Solution to Our Customers. We intend to maintain our leadership in providing a complete end-to-end solution to our customers that includes design and application engineering, prototyping, high-volume manufacturing, materials acquisition, component assembly and testing. In addition, we intend to leverage our value-added services—design and application engineering and turnkey component assembly—to help solve our customers’ product design challenges and to provide our customers with flexible printed circuit solutions designed and manufactured to maximize the reliability and functionality of their end products. By focusing on customers’ product applications and providing them with a seamless, integrated and cost-efficient flexible printed circuit and component assembly solution, we believe that we can continue to grow our market share by eliminating the need of our customers to negotiate with multiple vendors and reducing the time-to-market for their products.

• Support the Development of Applications for Flexible Printed Circuit Technology in New Markets. We believe that flexible printed circuit technology provides a cost-effective solution to improving the functionality and packaging of electronic devices. We believe that the trend towards miniaturization will continue to drive the growth of flexible printed circuits in many industries that we currently do not serve. To address these new market opportunities, we will continue our efforts to research, develop and market new applications for flexible printed circuits and component assemblies. We believe that our

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design and application engineering and manufacturing capabilities, coupled with our flexible printed circuit assembly expertise, will enable us to effectively target additional high-volume flexible printed circuit applications in various markets of the electronics industry, including the camera cell phone and charger markets, where size, shape and weight are primary drivers of product development.

• Expand Our Existing Expertise in the Design and Manufacture of Flexible Printed Circuit Technology. By expanding our market share in existing markets, penetrating new markets and partnering with customers in the early stage design of their products, we will continue to expand our engineering and manufacturing expertise and capabilities for applications and functionality for electronic product packaging technology and assist our customers in developing more efficient manufacturing processes for their products. We believe that we will be able to continue to capture additional market share in the sectors we serve and attract companies from other markets of the electronics industry by utilizing our expertise in design and application engineering to expand product designs and applications for flexible printed circuit solutions in conjunction with our high-volume, cost-effective manufacturing capabilities.

• Diversify Our End Customers. We primarily serve the wireless sector. We plan to leverage our internal sales force comprised entirely of design and application engineers with our existing outside non-exclusive sales representatives to attract new customers in the wireless sector, as well as in other sectors of the electronics industry where functionality and packaging size dictate the need for flexible printed circuits and component assemblies.

• Increase Manufacturing Capacity and Capabilities. We intend to continue to improve our manufacturing capabilities and cost reduction efforts by transitioning our Anaheim, California facility to a research and development and prototype facility. This transition will allow us to concentrate on expanding our engineering capabilities and manufacturing facilities in China, while enhancing capabilities and innovation at our Anaheim facilities. In addition, MFC2 has been specifically designed and equipped for complex programs, which are flexible printed circuits with smaller features, and a high density of components and interconnection. This capability allows us to offer our customers an efficient, technologically advanced manufacturing process for complex flexible printed circuit fabrication. In fiscal 2008, we announced our plan to begin construction on our third manufacturing facility in Suzhou, China (MFC3), which would allow us to transition the operations of our original China facility, MFC1, to a new state-of-the-art flex fabrication facility which we expected to go on line in late fiscal year 2009, or during the first half of fiscal year 2010. Given the current economic environment we have made the decision to modify our original plans for the new MFC3 manufacturing facility, and manage development of these expansion activities and requisite capital expenditures in discrete phases.

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Products

Our design and application engineering expertise enables us to offer flexible printed circuit and value-added component assembly solutions for a wide range of electronic applications. We offer products in a broad range of markets, including mobile phones and smart mobile devices, portable consumer products, portable bar code scanners, computer/data storage and medical devices. Representative OEM customers and their end products that incorporate our flexible printed circuit products include the following:

OEM Customer	Product Category	Representative Application
Motorola, Inc.	Wireless	Flexible printed circuit component assemblies utilized in keypads, hinges and displays
Motorola, Inc.	Industrial	Flexible printed circuit component assemblies for bar code scanners and terminals
Apple Inc.	Consumer Products	Flexible printed circuit component assemblies for portable music storage/player devices and cellular phones/SMART phones
International Business Machines Corporation	Computer/data storage	Flexible printed circuit in data storage device
GE Healthcare	Medical applications	Flexible printed circuit in diagnostic equipment

Flexible Printed Circuits. Flexible printed circuits, which consist of copper conductive patterns that have been etched or printed while affixed to flexible substrate materials such as polyimide or polyester, are used to provide connections between electronic components and as a substrate to support these electronic devices. The circuits are manufactured by subjecting the base materials to multiple processes, such as drilling, screening, photo imaging, etching, plating and finishing. We produce a wide range of flexible printed circuits, including single-sided, double-sided, multi-layer (with and without gaps between layers) and rigid-flex. Single-sided flexible printed circuits, which have an etched conductive pattern on one side of the substrate, are normally less costly and more flexible than double-sided flexible printed circuits because their construction consists of a single patterned conductor layer. Double-sided flexible printed circuits, which have conductive patterns or materials on both sides of the substrate that are interconnected by a drilled or copper-plated hole, can provide either more functionality than a single-sided flexible printed circuit by containing conductive patterns on both sides, or greater shielding of components against electromagnetic interference than a single-sided flexible printed circuit by covering one side of the circuit with a shielding material rather than a circuit pattern. Multi-layer and rigid-flex printed circuits, which consist of layers of circuitry that are stacked and then laminated, are used where the complexity of the design demands multiple layers of flexible printed circuitry. If some of the layers of circuitry are rigid printed circuit material, the product is known as a rigid-flex printed circuit. Gapped flexible printed circuits, which consist of layers of circuitry that are stacked and separated in some parts of the circuit, and laminated in other parts of the circuit, are used where the complexity of the design demands multiple layers of flexible printed circuitry but the flexibility of a single-sided flexible printed circuit in some parts of the circuit.

Flexible Printed Circuit Assemblies. Flexible printed circuits can be enhanced by attaching electronic components, such as connectors, switches, resistors, capacitors, light emitting devices, integrated circuits, cameras and optical sensors, to the circuit. The reliability of flexible printed circuit component assemblies is dependent upon proper assembly design and the use of appropriate fixtures. Connector selection is also important in determining the signal integrity of the overall assembly—a factor which is very important to devices that rely upon high system speed to function properly. We are one of the pioneers in attaching connectors and components to flexible printed circuits and have developed the expertise and technology to mount a full range of electronic devices, from ordinary passive components to advanced and sophisticated surface mount components.

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Customers

Our customers include leading OEMs, EMS providers and display manufacturers in a variety of sectors of the electronics industry. These sectors include mobile phones and smart mobile devices, portable consumer products, portable bar code scanners, computer/data storage and medical devices. Our expertise in flexible printed circuit design and component assembly enables us to assist our customers in resolving their design challenges through our design and assembly techniques, which frequently results in the customer placing our product designs on the customers’ design specifications and can enhance the likelihood of us becoming the main provider for flexible printed circuits and component assembly included in that product. Achieving status as a main provider to an OEM for a high-volume program can enable us to build strong customer relationships with respect to existing products and any future product that requires the use of flexible printed circuits and component assemblies.

We generally work with OEMs in the design of their products, and the OEMs subsequently either purchase our products directly or instruct the EMS providers and display manufacturers to purchase our products to be incorporated into the OEM’s product. Some examples of EMS providers we sell to include Foxconn and Flextronics. Our relationships with EMS providers and display manufacturers normally are directed by the OEMs; therefore, it is typically the OEMs that negotiate product pricing and volumes directly with us, even though the purchase orders come from the EMS providers. During fiscal year 2008, Sony Ericsson Mobile Communications (USA) Inc. (“Sony Ericsson”) became our largest customer. In the fiscal years ended September 30, 2008, 2007 and 2006, we sold products to be incorporated into Sony Ericsson’s products to approximately 15, eight and six Sony Ericsson subcontractors, which aggregated to 45%, 25% and 5% of our net sales (including direct sales to Sony Ericsson amounting to 1%, 0% and 1%), respectively. In addition, Motorola and its subcontractors have historically been large customers. In the fiscal years ended September 30, 2008, 2007 and 2006, we sold products to be incorporated into Motorola’s products to approximately 49, 30 and 52 Motorola subcontractors, which aggregated to 20%, 57% and 85% of our net sales (including direct sales to Motorola amounting to 18%, 46% and 71%), respectively.

Our net sales fluctuate from quarter to quarter as a result of changes in demand for our products. Over recent years, we have experienced a strong first fiscal quarter, followed by reduced net sales in the second fiscal quarter, as a result of partial seasonality of our major customers and the markets that we serve. Our major customers provide consumer-related products that generally experience their highest sales activity during the calendar year-end holiday season; therefore, we typically experience a decline in our second fiscal quarter sales as this holiday period ends. However, this pattern may not continue. Our net sales and operating results have fluctuated significantly from period-to-period in the past and are likely to do so in the future.

Our facilities in the United States and China enable us to manufacture products for shipment anywhere in the world. For both the fiscal years ended September 30, 2008 and 2007, we derived 9% of our net sales in the United States and 91% of our net sales outside the United States. For the fiscal year ended September 30, 2006, we derived 29% of our net sales in the United States and 71% of our net sales outside the United States.

For the fiscal year ended September 30, 2008, 22% of our net sales were shipped to Hong Kong, 26% of our net sales were shipped to China, 28% of our net sales were shipped to Malaysia and 14% of our net sales were shipped to North America (including Canada and Mexico). For the fiscal year ended September 30, 2007, 25% of our net sales were shipped to Hong Kong, 36% of our net sales were shipped to China, 1% of our net sales were shipped to Japan, 13% of our net sales were shipped to Malaysia and 18% of our net sales were shipped to North America. For the fiscal year ended September 30, 2006, 10% of our net sales were shipped to Hong Kong, 51% of our net sales were shipped to China, 1% of our net sales were shipped to Japan, 2% of our net sales were shipped to Malaysia and 29% of our net sales were shipped to North America.

For the fiscal years ended September 30, 2008, 2007 and 2006, we had long-lived assets of $20.4 million, $20.4 million and $20.5 million, respectively, in the United States; $139.9 million, $113.4 million and $74.8 million, respectively, in China; and $0.1 million, $0 and $0, respectively, in Singapore.

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Sales and Marketing

We sell our products primarily through our in-house design and application engineers, who meet regularly with our customers and potential customers to assist in the initial design of the proposed products and to provide suggestions on how our flexible printed circuit solutions can enhance product design. By utilizing market and product teams in each sector of the electronics industry that we target, we have successfully expanded our market penetration by leveraging our design and application engineers within each of these teams.

We engage the services of eight non-exclusive sales representatives to interact with customers and potential customers on our behalf. Seven of these sales representatives are located throughout the United States. We also have one sales representative in Korea. We rely on these sales representatives to initiate contact with potential customers and provide leads to our internal sales and marketing teams, as well as to create, build and maintain our customer relationships and assist in the resolution of contractual disputes.

As of September 30, 2008, our backlog, which constitutes customer orders placed with us that we believe to be firm but that have not yet shipped, was $159.5 million. We expect to ship this entire backlog during fiscal year 2009. We cannot guarantee that our customers will not cancel any or all of the orders in our backlog. Our current backlog also is not indicative of our future operating results. As of September 30, 2007 and 2006, our backlog was $164.1 million and $141.6 million, respectively.

Technology

We are a global provider of single, double-sided, multi-layer and air-gapped flexible printed circuit technology and component assemblies. Our process technology includes proprietary processes and chemical recipes, which coupled with our design expertise, unique customized fixtures and tooling and manufacturing experience, enables us to deliver high-unit volumes of complex flexible printed circuits and component assemblies at cost-effective yields.

Design Technology. The flexible printed circuits we manufacture are designed specifically for each application, frequently requiring significant joint design activities with the customer at the start of a project. We have developed design methodologies that solve difficult interconnection problems and save our customers time and money. We design and mass produce flexible printed circuits that range from single-sided circuits to more complex double-sided, multi-layer (with and without gaps between layers) and rigid-flex circuits. We continually are investing in and improving our computer-based design tools to more quickly design new flexible printed circuits, enhance cooperative design and communication with our customers and more closely integrate design and application engineering to our prototyping and manufacturing process.

Circuit Fabrication Technology. We have extensive experience producing fine-line flexible printed circuits and have developed manufacturing processes that are designed to deliver high-unit volumes at cost-effective yields. In the flexible printed circuit industry, fine-line flexible printed circuits are easier to construct as the thickness of the copper decreases; however, as the thickness of the copper decreases, the cost of fabrication increases. We have developed a manufacturing process to pattern plate in selective regions of the circuitry pattern, such as around the holes used to connect the two sides of a double-sided flexible printed circuit. In addition, the normal manufacturing technology, by itself, has been improved with new equipment which enables thicker, less expensive copper to be etched down precisely enough to form fine-line circuitry. The combination of these two processes allows us to achieve finer patterns without a substantial increase in costs and with generally acceptable yields.

In addition to fine-line techniques, we have developed a proprietary process using ultraviolet lasers to drill 0.003 inch diameter holes, known as micro-vias, for the connection of circuits on the reverse side of the substrate. The combination of the fine-lines and micro-vias are part of the new high-density interconnect technology that is one of our competitive strengths.

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Component Assembly and Test Technology. Our component assembly and test technology involve the arrangement of the circuits on a panel to minimize material waste and facilitate requirements for component assembly, such as placing tooling holes, optical locators for vision-based machines, test points and pre-cut zones to allow part removal without compromising the integrity of the components. We assemble passive electrical and various mechanical components, including capacitors, resistors, integrated circuits, connectors, stiffeners, diodes and other devices to flexible printed circuits. We also perform advanced assembly of integrated circuit devices, as well as the functional testing of these flexible printed circuit component assemblies. Assembling these components directly onto the flexible printed circuit increases performance and reduces space, weight and cost.

Intellectual Property

Our success will depend in part on our ability to protect our intellectual property. Our intellectual property relates to proprietary processes and know-how covering methods of designing and manufacturing flexible printed circuits, attaching components, optical and photonic designs, process technology for circuit manufacturing, and embedded magnetics for chargers. We regularly require our employees to enter into confidentiality agreements and assignment of invention agreements to protect our intellectual property. In addition, we consider filing patents on our inventions that are significant to our business, although none of our existing patents or patent applications pertain to inventions that are significant to our current business. We also pursue trademarks where applicable and appropriate.

In the future, we may encounter disputes over rights and obligations concerning intellectual property. We believe that our design and manufacturing processes do not infringe the intellectual property rights of any third party; however, we cannot assure you that we will prevail in any intellectual property dispute.

Suppliers

We purchase raw circuit materials, process chemicals and various components from a limited number of outside sources, including E.I. DuPont de Nemours & Co., Mitsui Plastics, ITT, Inc and from two of our OEM customers, Sony Ericsson and Motorola. For components, we normally make short-term purchasing commitments to key suppliers for specific customer programs. These commitments are usually made for three to 12-month periods. These suppliers agree to cooperate with us in engineering activities, as required, and in some cases maintain a local inventory to provide shorter lead times and reduced inventory levels for us. In most cases, suppliers are approved and often dictated by our customers. For process chemicals, certain copper and polyimide laminate materials and certain specialty chemicals used in our manufacturing process, we rely on a limited number of key suppliers. Alternate chemical products are available from other sources, but process chemical changes often require approval by our customers and requalification of the processes, which could take weeks or months to complete. We seek to mitigate these risks by identifying stable companies with leading technology and delivery capabilities and by attempting to qualify at least two suppliers for all critical raw materials and components.

Competition

The flexible printed circuit market is competitive, with a variety of large and small companies offering design and manufacturing services. The flexible printed circuit market is differentiated by customers, applications and geography, with each niche requiring specific combinations of complex packaging and interconnection. We believe that our ability to offer an integrated, end-to-end flexible printed circuit solution has enabled us to compete favorably with respect to design capabilities; product performance, reliability and consistency; price; customer and application support; and resources, equipment and expertise in component assembly on flexible printed circuits.

We compete on a global level with a number of leading Asian providers, such as Flextronics, Young Poong Electronics (Interflex), Foxconn Electronics, Inc., Global Flex Holdings Ltd., Sumitomo Bakelite, and Fujikura Ltd., and with domestic providers. We expect others to enter the market in the Asian region because of government subsidies and lower labor rates available there.

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We believe that our technology leadership and capabilities in designing and manufacturing flexible printed circuits and component assemblies have enabled us to build strong partnerships and customer relationships with many companies. We believe that customers typically rely upon a limited number of vendors’ designs for the life of specific applications and, to the extent possible, subsequent generations of similar applications. Accordingly, it is difficult to achieve significant sales to a particular customer for any application once a different vendor has been selected to design and manufacture a specific flexible printed circuit. This market paradigm may provide a barrier to our competitors in the markets in which we compete; however, it may also present an obstacle to our entry into other markets. Any expansion of existing products or services could expose us to new competition.

Employees

As of November 30, 2008, we employed approximately 17,400 full-time employees and 800 contract employees, including approximately 250 full-time employees in the United States, 17,000 full-time employees and 750 contract employees in China, and 100 full-time employees and 50 contract employees in other locations. However, we have experienced a decrease in our employee base in China from approximately 20,800 in September 2008, mainly as a result of attrition and our decision not to hire new employees at the same rate as we have in the recent past. In addition, we expect our employee base in China to diminish further over the next several months to approximately 14,000 to 15,000 employees. We expect this reduction in employees will come through attrition in the employee base which we normally experience, for which we do not intend to hire new employees at the same rate as we have typically hired in the recent past, coupled with a possible lay-off of employees in China. We have never had a work stoppage. We consider our employee relations to be good.

We do not have employment agreements with any of our executive officers. We have entered into employment agreements with substantially all of our employees in China. In general, these employment agreements provide for either a one or two-year term.

In addition, we believe that a small number of our employees in China have formed a trade union committee which has proposed that we enter into a collective bargaining agreement. At this time, we are not a party to, nor do we intend to enter into, a collective bargaining agreement with these or any of our other employees at any of our facilities in China. We are not aware that the committee represents any employee other than the employees who actually are members of the committee. Further, we have agreed that in the event a workers’ union capable of negotiating and entering into a collective bargaining agreement is formed at our facility in Malaysia, that we will enter into such an agreement on terms no less favorable to the employees than those they enjoyed under an agreement with their previous employer. We presently do not believe that we will experience any material harm to our business if we do or do not enter into any such collective bargaining agreements.

Environmental Controls

Flexible printed circuit manufacturing requires the use of chemicals. As a result, we are subject to a variety of environmental laws relating to the storage, discharge, handling, emission, generation, manufacture, use and disposal of chemicals, solid and hazardous waste and other toxic and hazardous materials used to manufacture our products in the United States and China. As of September 30, 2008 and 2007, we reserved $203,000 and $135,000 of restricted cash, at the direction of the County of Orange, California, to finance estimated environmental clean-up costs in the event that we vacate our Anaheim facilities; otherwise, our review of our facilities suggests that no material remediation costs will be required. However, given the uncertainties associated with environmental contamination, there can be no assurance that such costs will not harm our business, financial condition or results of operations.

We believe we have been operating our facilities in substantial compliance in all material respects with existing environmental laws and regulations. However, we cannot predict the nature, scope or effect of legislation or regulatory requirements that could be imposed or how existing or future laws or regulations will be administered or interpreted with respect to products or activities to which they have not previously been applied. For this reason, we implemented procedures designed to minimize the negative impacts and reduce potential financial risks arising from environmental issues. Compliance with more stringent laws or regulations, or more

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vigorous enforcement policies of regulatory agencies could require substantial expenditures by us and could harm our business, results of operations and financial condition. We do not anticipate any material amount of environmental-related capital expenditures in fiscal year 2009.

Available Information

We file reports with the Securities and Exchange Commission (“SEC”). We make available on our website under “Investor Relations,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such materials with or furnish them to the SEC. Our website address is www.mflex.com. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

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Item 1A. Risk Factors

FACTORS THAT MAY AFFECT OUR OPERATING RESULTS

Our business, financial condition, operating results and cash flows can be impacted by a number of factors, including but not limited to those set forth below, any of which could cause our results to be adversely impacted and could result in a decline in the value or loss of your investment in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business.

We are heavily dependent upon the wireless industry, including the handset market, and any downturn in this industry may reduce our net sales.

For the fiscal years ended September 30, 2008, 2007 and 2006, 91%, 92% and 91%, respectively, of our net sales were derived from sales to companies that provide products or services to the wireless industry. In general, the wireless industry is subject to economic cycles and periods of slowdown. Intense competition, relatively short product life cycles and significant fluctuations in product demand characterize the industry as a whole. The wireless industry is also generally subject to rapid technological change and product obsolescence. Fluctuations in demand for our products as a result of periods of slowdown in the wireless market or discontinuation of products or modifications developed in connection with next generation products could reduce our net sales.

We depend on a limited number of key customers for significant portions of our net sales and if we lose business with any of these customers, our net sales could decline substantially.

For the past several years, a substantial portion of our net sales has been derived from products that are incorporated into products manufactured by or on behalf of a limited number of key customers and their subcontractors, including Apple Inc., Motorola, Inc., Research in Motion LTD and Sony Ericsson. In the fiscal years ended September 30, 2008, 2007 and 2006 approximately 95%, 93% and 90% respectively, of our net sales were to these four customers in the aggregate. In addition, 45%, 57% and 86% of our net sales in each of the fiscal years ended September 30, 2008, 2007 and 2006, respectively, were to one customer (not the same customer in each of the three years). The loss of one of these major customers or a significant reduction in sales to any of them would seriously harm our business. For example, our net sales in fiscal year 2007 were impacted by a significant decline in net sales of 33% to Motorola compared to the prior year. Although we are continuing our efforts to reduce dependence on a limited number of customers, net sales attributable to a limited number of customers and their subcontractors are expected to continue to represent a substantial portion of our business for the foreseeable future.

We will have difficulty selling our products if customers do not design our flexible printed circuit products into their product offerings or our customers’ product offerings are not commercially successful.

We sell our flexible printed circuit products directly or indirectly to OEMs, who include our products and component assemblies in their product offerings. We must continue to design our products into our customers’ product offerings in order to remain competitive. However, our OEM customers may decide not to design our products into their product offerings in the future. If an OEM selects one of our competitors to provide a product instead of us or switches to alternative technologies developed or manufactured by one or more of our competitors, it becomes significantly more difficult for us to sell our products to that OEM because changing component providers after the initial production runs begin involves significant cost, time, effort and risk for the OEM. Even if an OEM designs one of our products into its product offering, the product may not be commercially successful, we may not receive any orders from that manufacturer, the OEM may qualify additional vendors for the product or we could be undercut by a competitor’s pricing. Additionally, if an OEM selects one or more of our competitors, they may rely upon such competitors for the life of specific offering and, to the extent possible, subsequent generations of similar offerings. Any of these events would result in fewer sales and reduced profits for us.

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Our customers have in the past and likely will continue to cancel their orders, change production quantities, delay production or qualify additional vendors, any of which could reduce our net sales and/or increase our expenses.

Substantially all of our sales are made on a purchase order basis, and we are not always able to predict with certainty the number of orders we will receive or the timing or magnitude of the orders. Our customers may cancel, change or delay product purchase orders with little or no advance notice to us for a variety of reasons, including changes in their prospects, the success of their products in the market, reliance on a new vendor and the overall economic forecast. In general, we do not have long-term contractual relationships with our customers that require them to order minimum quantities of our products, and our customers may decide to use another manufacturer or discontinue ordering from us in their discretion. As a result of these factors, we are not always able to forecast accurately the net sales that we will make in a given period.

In addition, we are increasingly being required to purchase materials, components and equipment before a customer becomes contractually committed to an order so that we may timely deliver the expected order to the customer. We may increase our production capacity, working capital and overhead in expectation of orders that may never be placed, or, if placed, may be delayed, reduced or canceled. As a result, we may be unable to recover costs that we incur in anticipation of orders that are never placed, such as costs associated with purchased raw materials, components or equipment. Delayed, reduced or canceled orders could also result in write-offs of obsolete inventory and the underutilization of our manufacturing capacity if we decline other potential orders because we expect to use our capacity to produce orders that are later delayed, reduced or canceled.

Our industry is extremely competitive, and if we are unable to respond to competitive pressures we may lose sales and our market share could decline.

We compete primarily with large flexible printed circuit board manufacturers located throughout Asia, including Taiwan, China, Korea, Japan and Singapore. We believe that the number of companies producing flexible printed circuit boards has increased materially in recent years and may continue to increase. Certain EMS providers have developed or acquired their own flexible printed circuit manufacturing capabilities or have extensive experience in electronics assembly, and in the future may cease ordering products from us or even compete with us on OEM programs. In addition, the number of customers in the market has been decreasing through consolidation and otherwise. Furthermore, many companies in our target customer base are moving the design and manufacturing of their products to ODMs in Asia. These factors make our industry extremely competitive. We believe that one of our principal competitive advantages is our ability to interact closely with our customers throughout the design and engineering process. If we are not successful in maintaining or establishing close relationships with customers in markets in which we compete, we may not be able to grow or maintain our market share or net sales.

Our products and their terms of sale are subject to various pressures from our customers and competitors, any of which could harm our gross profits.

Our selling prices are affected by changes in overall demand for our products, changes in the specific products our customers buy, pricing of competitors’ products and our products’ life cycles. In addition, from time to time we may elect to reduce the price of certain programs we produce in order to gain additional orders on those programs. A typical life cycle for one of our products begins with higher prices when the product is introduced and decreasing prices as it matures. To offset price decreases during a product’s life cycle, we rely primarily on higher sales volume and improving our manufacturing yield and productivity to reduce a product’s cost. If we cannot reduce our manufacturing costs as prices decline during a product’s life cycle, or if we are required to pay liquidated damages to a customer due to a breach of contract or other claim, including due to quality or delivery issues, our cost of sales may increase, which would harm our profitability.

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In addition, our key customers and their subcontractors are able to exert significant pricing pressure on us and often require us to renegotiate the terms of our arrangements with them, including liability and indemnification thresholds and payment terms, among other terms. Changes in contract terms, the extension of payment terms and regular price reductions may result in lower gross margins for us. These trends make it more difficult to compete effectively and put increased pressure on our pricing.

Significant product failures could harm our reputation and our business.

Continued improvement in manufacturing capabilities, quality control, material costs and successful product testing capabilities are critical to our growth. Our efforts to monitor, develop, modify and implement stringent testing and manufacturing processes for our products may not be sufficient. If any flaw in the design, production, assembly or testing of our products were to occur, we could experience a rate of failure in our products that would result in significant delays in product shipments, cancellation of orders, substantial penalties from our customers and their customers, substantial repair or replacement costs, an increased return rate for our products and potential damage to our reputation.

Problems with manufacturing yields could result in higher operating costs and could impair our ability to meet customer demand for our products.

We could experience low manufacturing yields due to, among other things, design errors, manufacturing failures in new or existing products, the inexperience of new employees, or the learning curve experienced during the initial and ramp up stages of new product introduction. If we cannot achieve expected yields in the manufacture of our products, we may incur higher per unit costs, reduced product availability and may be subject to substantial penalties by our customers. In addition, reduced yields can significantly harm our gross margins, resulting in lower profitability or even losses.

We must develop new technology and manufacture new products and product features in order to remain competitive, and we may not be able to do so successfully.

Our long-term strategy relies in part on supporting technological advances and developing and manufacturing new products and product features to meet our customers’ needs, including new products such as rigid flex and our charger products. However, any new technology and products developed by us may not be selected by existing or potential customers. Our customers could decide to switch to alternative technologies, adopt new or competing industry standards with which our products are incompatible or fail to adopt standards with which our products are compatible. If we choose to focus on new technology or a standard that is ultimately not accepted by the industry and/or does not become the industry standard, we may be unable to sell those products. If we are unable to obtain customer qualifications for new products or product features, cannot qualify our products for high-volume production quantities or do not execute our operational and strategic plans for new products in a timely manner, our net sales may decrease. In addition, we may incur higher manufacturing costs in connection with new technology, products or product features, as we may be required to replace, modify, design, build and install equipment, all of which would require additional capital expenditures.

If we are unable to attract or retain personnel necessary to operate our business, our ability to develop and market our products successfully could be harmed.

We believe that our success is highly dependent on our current executive officers and management team. We do not have an employment contract with Reza Meshgin, our president and chief executive officer, or any of our other key personnel, and their knowledge of our business and industry would be extremely difficult to replace. The loss of any key employee or the inability to attract or retain qualified personnel, including engineers, sales and marketing personnel, management or finance personnel could delay the development and introduction of our products, harm our reputation or otherwise damage our business.

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Furthermore, we have experienced a significant and growing employee turnover rate in our facilities in China, due at least in part to an increase in the number of manufacturers in Suzhou, China and the surrounding areas. A large number of our employees work in our facilities in China, and our costs associated with hiring (and increasingly, with re-hiring) these employees have increased significantly over the past several years. The high turnover rate and our difficulty in retaining employees have resulted in an increase in our expenses related to recruitment and training of qualified employees. Although our current intention is to slow down hiring of new employees in these facilities until market conditions improve, a continuation of this trend if we need to hire additional employees could result in even higher costs for us. We have made plans to establish additional manufacturing facilities in Malaysia and we cannot predict whether or to what extent this trend will also be present in our Malaysia operations.

We must continue to be able to procure raw materials and components on commercially reasonable terms to manufacture our products profitably.

Generally we do not maintain a large surplus stock of raw materials or components for our products because the specific assemblies are uniquely applicable to the products we produce for our customers; therefore, we rely on short-term supply contracts with third-party suppliers to provide these raw materials and components in a timely fashion and on commercially reasonable terms. In addition, we are often required by our customers to seek components from a limited number of suppliers that have been pre-qualified by the customer. However, from time to time we have experienced shortages of the components and raw materials used in the fabrication of our products. For example, during one such shortage of flexible printed circuit materials we had to qualify an additional supplier in order to maintain the delivery of our largest production run, and during certain quarters of fiscal 2006 we experienced component shortages which resulted in delayed shipments to customers. We expect that these delays could occur in future periods. We may not be successful in managing any shortage of raw materials or components that we may experience in the future, which could adversely affect our relationships with our customers and result in a decrease in our net sales. Component shortages could also increase our cost of goods sold because we may be required to pay higher prices for components in short supply. In addition, suppliers of certain of our components may consider us too small of a customer to sell to directly, and could require us to buy through distributors, increasing the cost of such components to us.

Our manufacturing and shipping costs may also be impacted by fluctuations in the cost of oil and gas. Any fluctuations in the supply or prices of these commodities could have an adverse effect on our profit margins and financial condition.

Our global operations expose us to additional risk and uncertainties.

We have operations in a number of countries, including the United States, China, Malaysia and Singapore. Our global operations may be subject to risks that may limit our ability to operate our business. We manufacture the bulk of our products in China and Malaysia and sell our products globally, which exposes us to a number of risks that can arise from international trade transactions, local business practices and cultural considerations, including:

• political unrest, terrorism and economic instability;

• restrictions on our ability to repatriate earnings;

• unexpected changes in regulatory requirements and uncertainty related to developing legal and regulatory systems related to economic and business activities;

• import-export regulations;

• difficulties in enforcing agreements and collecting receivables;

• limited intellectual property protection;

• longer payment cycles;

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• currency exchange fluctuations;

• inadequate local infrastructure and disruptions of service from utilities or telecommunications providers, including electricity shortages;

• transportation delays and difficulties of managing international distribution channels;

• difficulties in staffing foreign subsidiaries;

• potentially adverse tax consequences;

• differing employment practices and labor issues;

• the occurrence of natural disasters or other acts of force majeure; and

• public health emergencies such as SARS and avian flu.

We also face risks associated with currency exchange and convertibility, inflation and repatriation of earnings as a result of our foreign operations. In some countries, economic, monetary and regulatory factors could affect our ability to convert funds to U.S. dollars or move funds from accounts in these countries. We are also vulnerable to appreciation or depreciation of foreign currencies against the U.S. dollar. Although we have significant operations in Asia, a substantial portion of transactions are denominated in U.S. dollars, including approximately 97% of the total shipments made to foreign manufacturers during fiscal year 2008. The balance of our net sales is denominated in Chinese Renminbi (“RMB”). As a result, if appreciation against the U.S. dollar were to increase, it would result in an increase in the cost of our business expenses in China. Further, downward fluctuations in the value of foreign currencies relative to the U.S. dollar may make our products less price competitive than local solutions. We do not currently engage in currency hedging activities to limit the risks of currency fluctuations.

In addition, our activities in China are subject to administrative review and approval by various national and local agencies of China’s government. Given the changes occurring in China’s legal and regulatory structure, we may not be able to secure required governmental approval for our activities, which could impede our ability to operate our business.

We are in the process of restructuring our operations and increasing our manufacturing capacity, and we may have difficulty managing these changes.

We have been engaged in a number of manufacturing expansion projects, including a new MFC3 manufacturing facility, the addition of satellite facilities in Suzhou, China and the establishment of manufacturing functions in Malaysia. In addition, we have been engaged in an international restructuring effort to transition various business functions to our offices in Singapore, in order to better align these activities with our international operations. Although we have made the decision to modify our original plans for the new MFC3 manufacturing facility given the current economic environment, and manage development of these expansion activities and requisite capital expenditures in discrete phases, these efforts require significant investment by us, and have in the past and could continue to result in increased expenses and inefficiencies and reduced gross margins. For example, during fiscal 2008 we incurred a one-time tax expense of approximately $7.3 million in connection with the transition of technology, although we expect to be able to obtain favorable tax treatment in future years.

Our management team may have difficulty managing our manufacturing expansion projects or otherwise managing any growth in our business that we may experience. Risks associated with managing expansion and growth may include those related to:

• managing multiple, concurrent major manufacturing expansion projects in China and Malaysia;

• hiring and retaining employees, particularly in China and Malaysia;

• accurately predicting any increases or decreases in demand for our products and managing our manufacturing capacity appropriately;

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• managing increased employment costs and scrap rates often associated with periods of growth;

• implementing, integrating and improving operational and financial systems, procedures and controls, including our computer systems;

• construction delays, equipment delays or shortages, labor shortages and disputes and production start-up problems;

• cost overruns and charges related to our expansion activities; and

• managing expanding operations in multiple locations and multiple time zones.

Our management team may not be effective in expanding our manufacturing facilities and operations, and our systems, procedures and controls may not be adequate to support such expansion. Any inability to manage our growth may harm our profitability and growth.

WBL Corporation Limited beneficially owns 59% of our outstanding common stock and is able to exert influence over us and our major corporate decisions.

WBL Corporation Limited, together with its affiliates and subsidiaries (“Wearnes”) beneficially owns 59% of our outstanding common stock and we expect to be a principal subsidiary of Wearnes for the foreseeable future. As a result of this ownership interest and the resulting influence over the composition of our board of directors, Wearnes has influence over our management, operations and potential significant corporate actions. For example, so long as Wearnes continues to control more than a majority of our outstanding common stock, it will have the ability to control who is elected to our board of directors each year. In addition, for so long as Wearnes effectively owns at least one-third of our voting stock, it has the ability, through a stockholders agreement with us, to approve the appointment of any new chief executive officer or the issuance of securities that would reduce Wearnes’ effective ownership of us to a level that is below a majority of our outstanding shares of common stock, as determined on a fully diluted basis. As a result, Wearnes could preclude us from engaging in an acquisition or other strategic opportunity that we may want to pursue if such acquisition or opportunity required the issuance of our common stock. This concentration of ownership may also discourage, delay or prevent a change of control of our company, which could deprive our other stockholders of an opportunity to receive a premium for their stock as part of a sale of our company, could harm the market price of our common stock and could impede the growth of our company. Wearnes could also sell a controlling interest in us to a third party, including a participant in our industry, or buy additional shares of our stock.

Wearnes and its designees on our board of directors may have interests that conflict with, or are different from, the interests of our other stockholders. These conflicts of interest could include potential competitive business activities, corporate opportunities, indemnity arrangements, registration rights, sales or distributions by Wearnes of our common stock and the exercise by Wearnes of its ability to influence our management and affairs. In general, our certificate of incorporation does not contain any provision that is designed to facilitate resolution of actual or potential conflicts of interest. If any conflict of interest is not resolved in a manner favorable to our stockholders, our stockholders’ interests may be substantially harmed.

Wearnes is currently unable to vote its shares on specified matters that require stockholder approval without obtaining its own stockholders’ and regulatory approval and it is possible that Wearnes’ stockholders or the relevant regulators may not approve the proposed corporate action.

Wearnes’ ordinary shares are listed on the Singapore Securities Exchange Trading Limited (“the Singapore Exchange”). Under the rules of the Singapore Exchange, to the extent that we constitute a principal subsidiary of Wearnes as defined by the rules of the Singapore Exchange at any time that we submit a matter for the approval of our stockholders, Wearnes may be required to obtain the approval of its own stockholders for such action before it can vote its shares with respect to our proposal or dispose of our shares of common stock. Examples of corporate actions we may seek to take that may require Wearnes to obtain its stockholders’ approval include an amendment of our certificate of incorporation, a sale of all or substantially all of our assets, a merger or reorganization transaction, and certain issuances of our capital stock.

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To obtain stockholder approval, Wearnes must prepare a circular describing the proposal, obtain approval from the Singapore Exchange and send the circular to its stockholders, which may take several weeks or longer. In addition, Wearnes is required under its corporate rules to give its stockholders advance notice of the meeting. Consequently, if we need to obtain the approval of Wearnes at a time in which we qualify as a principal subsidiary (including this year), the process of seeking Wearnes’ stockholder approval may delay our proposed action and it is possible that Wearnes’ stockholders may not approve our proposed corporate action. It is also possible that we might not be able to establish a quorum at our stockholder meeting if Wearnes was unable to vote at the meeting as a result of the Singapore Exchange rules. The rules of the Singapore Exchange that govern Wearnes are subject to revision from time to time, and policy considerations may affect rule interpretation and application. It is possible that any change to or interpretation of existing or future rules may be more restrictive and complex than the existing rules and interpretations.

Our business requires significant investments in capital equipment, facilities and technological improvements, and we may not be able to obtain sufficient funds to make such capital expenditures.

To remain competitive we must continue to make significant investments in capital equipment, facilities and technological improvements. We expect that substantial capital will be required to expand our manufacturing capacity and fund working capital requirements for our anticipated growth. In addition, we expect that new technology requirements may increase the capital intensity of our business. We may need to raise additional funds through further debt or equity financings in order to fund our anticipated growth and capital expenditures, and we may not be able to raise additional capital on reasonable terms, or at all, particularly given the current turmoil in global credit markets. If we are unable to obtain sufficient capital in the future, we may have to curtail our capital expenditures. Any curtailment of our capital expenditures could result in a reduction in net sales, reduced quality of our products, increased manufacturing costs for our products, harm to our reputation, reduced manufacturing efficiencies or other harm to our business.

In addition, Wearnes’ approval is required for the issuance of securities that would reduce its effective ownership of us to below a majority of the outstanding shares of our common stock as determined on a fully diluted basis. If Wearnes’ approval is required for a proposed financing, it is possible that it may not approve the financing and we may not be able to complete the transaction, which could make it more difficult to obtain sufficient funds to operate and expand our business.

The global credit market crisis and economic weakness may adversely affect our earnings, liquidity and financial condition.

Global financial and credit markets recently have been, and continue to be, extremely unstable and unpredictable. Worldwide economic conditions have been weak and may be further deteriorating. The instability of the markets and weakness of the economy could affect the demand for our customers’ products, the amount, timing and stability of their orders to us, the financial strength of our customers and suppliers, their ability or willingness to do business with us, our willingness to do business with them, and/or our suppliers’ and customers’ ability to fulfill their obligations to us. These factors could adversely affect our operations, earnings and financial condition.

In addition, continued, and potentially increased, volatility, instability and weakness in the financial and credit markets could affect our ability to sell our investment securities and other financial assets, which in turn could adversely affect our liquidity and financial position. We encountered a situation in which we were unable to make such sales as described below in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.” This instability also could affect the prices at which we could make any such sales, which also could adversely affect our earnings and financial condition. These conditions could also negatively affect our ability to secure funds or raise capital, if needed.

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We included an other-than-temporary impairment charge in our consolidated statement of income during the fiscal year ended September 30, 2008 to reduce the carrying value of certain auction rate securities we hold, and we may incur additional impairment charges with respect to auction rate securities in the future.

Our investments consist of auction rate obligation securities issued by state agencies, which are collateralized by student loans. These auction rate securities were intended to provide liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals (every twenty-eight days), allowing investors to either roll over their holdings or gain immediate liquidity by selling such interest at par. As a result of current negative conditions in the global credit markets, during the second quarter of our fiscal 2008, auctions for investment in these securities, including the auction rate securities we hold, continued to fail to settle on their respective settlement dates. Consequently, the investments are not currently liquid through the normal auction process and we determined to reclassify these investments as long-term investments instead of short-term investments during the second quarter. Our long-term investments at September 30, 2008 represented $13.3 million of auction rate securities net of the other-than-temporary impairment charge of $1.2 million which has been recorded in the September 30, 2008 consolidated statement of income.

We determined the fair value of these securities using a model that calculates the present value of the expected future cash flows from the securities and other indications of value. The valuation of our investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact its valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates and ongoing strength and quality of market credit and liquidity. If the current market conditions deteriorate further such that these investments remain illiquid or recovery in market values does not occur, the value of these securities may decline further such that we may be required to record additional unrealized or realized losses for impairment, with such losses reducing our income.

We cannot predict whether or if future auctions related to auction rate securities will be successful. We are currently seeking alternatives for reducing our exposure to the auction rate market, including assessing whether our auction rate securities are eligible for participation in any recently announced settlements with the various entities that marketed auction rate securities; however, there is no guarantee that we will able to achieve alternate financing or other liquidity for some or all of our auction rate securities in the near term, or at all.

We are subject to the risk of increased income tax rates and other taxes.

A number of countries in which we are located allow for tax holidays or provide other tax incentives to attract and retain business. We currently enjoy tax holidays and other tax incentives for certain of our operations in China, including two tax holidays for our second manufacturing facility in China, MFC2. However, any tax holidays we may receive may be challenged, modified or even eliminated by taxing authorities or changes in law. Our taxes could increase if tax holidays or incentives are not renewed upon expiration, or if tax rates applicable to us are otherwise increased. For example, on March 16, 2007, the Chinese government passed a new unified enterprise income tax law which became effective on January 1, 2008. Among other things, this law cancels certain income tax incentives and increases the standard withholding rate on earnings distributions. The effect of these and other changes in Chinese tax laws on our overall tax rate will be affected by, among other things, our income, the manner in which China interprets, implements and applies the new tax provisions and our ability to qualify for any exceptions or new incentives. In addition, from time to time we may be subject to various types of tax audits.

If we fail to secure or protect our intellectual property rights, competitors may be able to use our technologies, which could weaken our competitive position and harm our business.

We rely primarily on trade secrets and confidentiality procedures relating to our manufacturing processes to protect our proprietary rights. Despite our efforts, these measures can only provide limited protection. Unauthorized third parties may try to copy or reverse engineer portions of our products or otherwise obtain and

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use our intellectual property. If we fail to protect our proprietary rights adequately, our competitors could offer similar products using processes or technologies developed by us, potentially harming our competitive position. In addition, other parties may independently develop similar or competing technologies.

We also rely on patent protection for the intellectual property that we have developed. Our patents may be expensive to obtain and there is no guarantee that either our current or future patents will provide us with any competitive advantages. A third party may challenge the validity of our patents, or circumvent our patents by developing competing products based on technology that does not infringe our patents. Further, patent protection is not available at all in certain countries and some countries that do allow registration of patents do not provide meaningful redress for patent violations. As a result, protecting intellectual property in those countries is difficult, and competitors could sell products in those countries that have functions and features that would otherwise infringe on our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our technology and our business may be harmed.

We may be sued by third parties for alleged infringement of their proprietary rights.

From time to time, we have received, and expect to continue to receive, notices of claims of infringement, misappropriation or misuse of other parties’ proprietary rights. We could also be subject to claims arising from the allocation of intellectual property rights among us and our customers. Any claims brought against us or our customers, with or without merit, could be time-consuming and expensive to litigate or settle, and could divert management attention away from our business plan. Adverse determinations in litigation could subject us to significant liability and could result in the loss of our proprietary rights. A successful lawsuit against us could also force us to cease selling or require us to redesign any products that incorporate the infringed intellectual property. In addition, we could be required to seek a license from the holder of the intellectual property to use the infringed technology, and it is possible that we may not be able to obtain a license on reasonable terms, or at all. If we fail to develop a non-infringing technology on a timely basis or to license the infringed technology on acceptable terms, our business, financial condition and results of operations could be harmed.

Complying with environmental laws and regulations may increase our costs and reduce our profitability.

We are subject to a variety of environmental laws and regulations relating to the storage, discharge, handling, emission, generation, manufacture, use and disposal of chemicals, solid and hazardous waste and other toxic and hazardous materials used in the manufacture of flexible printed circuits and component assemblies in our operations in the United States and Asia. A significant portion of our manufacturing operations are located in China, where we are subject to constantly evolving environmental regulation. The costs of complying with any change in such regulations and the costs of remedying potential violations or resolving enforcement actions that might be initiated by governmental entities in China could be substantial.

In the event of a violation, we may be required to halt one or more segments of our operations until such violation is cured. Although we attempt to operate in compliance with all applicable environmental laws and regulations, we may not succeed in this effort at all times. The costs of remedying violations or resolving enforcement actions that might be initiated by governmental authorities could be substantial. Any remediation of environmental contamination would involve substantial expense that could harm our results of operations. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our operations may be subject or the manner in which existing or future laws will be administered or interpreted. Future regulations may be applied to materials, products or activities that have not been subject to regulation previously. The costs of complying with new or more stringent regulations could be significant.

Potential future acquisitions could be difficult to integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our financial results.

In November 2008, we entered into a Share Purchase Agreement (the “Agreement”) with Multi-Fineline Electronix Singapore Pte. Ltd., one of our wholly owned subsidiaries, to acquire all of the issued ordinary shares of Pelikon Limited (“Pelikon”), a privately held technology company focused on the development of printed

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segmented electroluminescent displays and keypads, from the shareholders of Pelikon. The closing of such share purchase, which is expected to occur in December 2008, is subject to a number of customary closing conditions. As part of our business strategy, we intend to continue to consider acquisitions of companies; technologies and products that we feel could enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. We have limited experience in acquiring other businesses and technologies. Potential and completed acquisitions and strategic investments involve numerous risks, including:

• difficulties in integrating operations, technologies, accounting and personnel;

• problems maintaining uniform standards, procedures, controls and policies;

• difficulties in supporting and transitioning customers of our acquired companies;

• diversion of financial and management resources from existing operations;

• risks associated with entering new markets in which we have no or limited prior experience;

• potential loss of key employees; and

• inability to generate sufficient revenues to offset acquisition or start-up costs.

Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could affect the market price of our stock. As a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate.

We face potential risks associated with loss, theft or damage of our property or property of our customers.

Some of our customers have entrusted us with proprietary equipment to be used in the manufacture and testing of the products we make for them. In some instances, we face potentially millions of dollars in financial exposure to those customers if such equipment is lost, damaged or stolen. Although we take precautions against such loss, theft or damage and we may insure against a portion of these risks, such insurance is expensive, may not be applicable to any loss we may experience and, even if applicable, may not be sufficient to cover any such loss. Further, deductibles for such insurance may be substantial and may adversely affect our operations if we were to experience a loss, even if insured.

The trading price of our common stock is volatile.

The trading prices of the securities of technology companies, including the trading price of our common stock, have historically been highly volatile. During the 12 months ended September 30, 2008, our common stock traded between $29.21 and $12.51 per share. Factors that could affect the trading price of our common stock include:

• fluctuations in our financial results;

• announcements of technological innovations or events affecting other companies in our industry;

• changes in the estimates of our financial results;

• changes in the recommendations of any securities analysts that elect to follow our common stock; and

• market conditions in our industry, the industries of our customers and the economy as a whole.

In addition, although we have approximately 25 million shares of common stock outstanding, approximately 14.8 million of those shares are held by a few investors. As a result, there is a limited public float in our common stock. If any of our significant stockholders were to decide to sell a substantial portion of its shares the trading price of our common stock could decline.

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If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results.

Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our operating results could be misstated, current and potential stockholders could lose confidence in our financial reporting and the trading price of our stock could be negatively affected. There can be no assurance that our internal controls over financial processes and reporting will be effective in the future.

Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management including, among other things, provisions providing for a classified board of directors, authorizing the board of directors to issue preferred stock and the elimination of stockholder voting by written consent. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may discourage, delay or prevent certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These provisions in our charter, bylaws and under Delaware law could discourage delay or prevent potential takeover attempts that stockholders may consider favorable.

Because we do not intend to pay dividends, our stockholders will benefit from an investment in our common stock only if our stock price appreciates in value.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend entirely upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which it was purchased.

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Item 2. Properties.

Our corporate headquarters are located in Anaheim, California. Our manufacturing facilities are located in Anaheim, California, Pontian, Malaysia and Suzhou, China, and we have an office in Singapore. We also have a facility located in Tucson, Arizona related to Aurora Optical, which we are in the process of transferring to our California facility. Following is a summary of our properties:

Function	Location	Square Feet	Lease Expiration Dates
Executive offices, engineering and circuit fabrication and assembly	Anaheim, California	Owned—105,000 Leased—19,001*	N/A April 2009 to August 2011
Aurora Optical, Inc.—Engineering, lens assembly and manufacturing	Tucson, Arizona	Owned—47,000	N/A
MFC1—Engineering, circuit fabrication and assembly	Suzhou, China	Leased—111,038 Leased—201,470***	2043** November 2008 to January 2011
MFC2—Engineering, circuit fabrication and assembly	Suzhou, China	Leased—485,000 Leased—193,712	2052 August 2009 May 2011
Asian Regional Office	Singapore	Leased—3,300***	February 2011
MFM—Engineering and assembly	Pontian, Malaysia	Leased—117,842***	February 2011

 * We have four leases relating to this space, which range in terms from seven months to three years and range in size from approximately 4,000 square feet to approximately 6,000 square feet. These leases expire in various months of each year and are typically extended on substantially the same terms.

 ** We have several other parcels that have long-term land leases expiring beyond 2043. Under the terms of these leases, we paid an upfront fee for use of the parcel through expiration of the lease. We have no other financial obligations on these long-term land leases other than payments of real estate taxes. However, we expect that we may move this facility to a more industrialized area in the coming years.

 *** Some or all of the referenced square footage is leased from a subsidiary of Wearnes.

We believe our facilities are adequate for our current needs and that suitable additional or substitute space will be available to accommodate foreseeable expansion of our operations or to move our operations in the event one or more of our short-term leases can no longer be renewed on commercially reasonable terms at the expiration of its term.

Item 3. Legal Proceedings.

From time to time, we may be party to lawsuits in the ordinary course of business. We are currently not a party to any material legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth quarter of our fiscal year through the solicitation of proxies or otherwise.

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Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Common Stock

Our common stock, par value $0.0001 (“Common Stock”) is traded on the NASDAQ Global Select Market (“Nasdaq”) under the symbol “MFLX.” The following table sets forth, for the periods indicated, the high and low closing prices for our Common Stock on Nasdaq, as reported in its consolidated transaction reporting system:

	Fiscal 2008				Fiscal 2007
	High		Low		High		Low
First Quarter	$	22.46	$	13.40	$	26.06	$	19.95
Second Quarter		23.44		12.83		20.28		15.35
Third Quarter		28.53		17.58		17.95		14.70
Fourth Quarter		27.78		14.40		17.51		10.28

Holders of Record

Stockholders of record on November 30, 2008 numbered approximately 48. Because many of the shares of our Common Stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these stockholders of record.

Dividends

We have never declared or paid any cash dividend on our Common Stock, nor do we currently intend to pay any cash dividend on our Common Stock in the foreseeable future. We expect to retain our earnings, if any, for the growth and development of our business. A description of the terms of our revolving credit facility can be found in this Annual Report under Item 8, Note 7.

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Stock Performance Graph

The following graph shows the cumulative total stockholder return (change in stock price plus reinvested dividends) assuming the investment of $100 on June 25, 2004 (the day of the Company’s initial public offering) in each of our Common Stock, the NASDAQ Index and the NASDAQ Electronic Components Index. The comparisons in the table are required by the SEC and are not intended to forecast or be indicative of possible future performance of our Common Stock. This Stock Price Performance Graph is not deemed to be “soliciting material” or “filed” with the SEC under the Securities Exchange Act of 1934, and is not incorporated by reference in any past or future filing by us under the Securities Exchange Act of 1934 or the Securities Act of 1933, unless it is specifically referenced.

Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding the securities authorized for issuance under our equity compensation plans can be found under Item 12 of this Annual Report.

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Item 6. Selected Consolidated Financial Data

The following selected consolidated financial data is qualified by reference to, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Item 7 of this Annual Report and the Consolidated Financial Statements and related notes included in Item 8 of this Annual Report. The selected consolidated statements of income data for the years ended September 30, 2008, 2007 and 2006 and selected consolidated balance sheet data as of September 30, 2008 and 2007 are derived from audited consolidated financial statements included elsewhere in this Annual Report. The selected consolidated statements of income data for the years ended September 30, 2005 and 2004 and selected consolidated balance sheet data as of September 30, 2006, 2005 and 2004 were derived from audited consolidated financial statements not included in this Annual Report. Our historical results are not necessarily indicative of our future results.

	Year Ended September 30,
	2008			2007			2006			2005			2004
	(in thousands, except shares, per share data and ratios)
Consolidated Statement of Income Data:
Net sales	$	728,805		$	508,147		$	504,204		$	357,090		$	253,049
Cost of sales		611,517			461,376			413,156			277,202			197,412
Gross profit		117,288			46,771			91,048			79,888			55,637
Operating expenses
Research and development		2,470			2,499			2,035			883			284
Sales and marketing		17,957			12,544			9,233			8,783			7,649
General and administrative		30,518			24,216			22,231			17,587			11,285
Asset impairment and restructuring costs		2,180			—			—			—			—
Terminated acquisition expenses		—			7,821			—			—			—
Total operating expenses		53,125			47,080			33,499			27,253			19,218
Operating income (loss)		64,163			(309	)		57,549			52,635			36,419
Other income (expense), net
Interest income (expense), net		1,581			1,229			1,257			514			(468	)
Other (expense) income, net		(2,742	)		200			(229	)		378			(100	)
Income before (provision for) benefit from income taxes		63,002			1,120			58,577			53,527			35,851
(Provision for) benefit from-income taxes		(22,523	)		1,918			(18,220	)		(16,361	)		(10,145	)
Net income	$	40,479		$	3,038		$	40,357		$	37,166		$	25,706
Net income per share:
Basic	$	1.63		$	0.12		$	1.66		$	1.57		$	1.33
Diluted	$	1.59		$	0.12		$	1.59		$	1.51		$	1.27
Shares used in calculating net income per share:
Basic		24,828,732			24,520,040			24,353,854			23,603,935			19,310,044
Diluted		25,433,676			25,164,401			25,315,548			24,593,998			20,306,842
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	62,090		$	27,955		$	24,460		$	38,253		$	16,631
Working capital	$	133,900		$	107,481		$	129,444		$	108,126		$	78,961
Total assets	$	487,610		$	377,287		$	327,045		$	259,600		$	189,998
Current ratio		1.8			1.8			2.5			2.6			2.7
Long-term debt	$	—		$	—		$	—		$	—		$	—
Stockholders equity	$	310,318		$	250,006		$	238,365		$	189,041		$	141,084

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The following table presents our unaudited quarterly consolidated income statement data for the eight quarters ended September 30, 2008. These quarterly results include all adjustments consisting of normal recurring adjustments that we consider necessary for the fair presentation for the quarters presented and are not necessarily indicative of the operating results for any future period.

	For the Quarter Ended (Unaudited)
	September 30, 2008			June 30, 2008			March 31, 2008			December 31, 2007			September 30, 2007			June 30, 2007			March 31, 2007			December 31, 2006
	(in thousands, except per share data)
Net sales	$	213,095		$	167,623		$	163,936		$	184,152		$	166,716		$	104,138		$	113,406		$	123,887
Cost of sales		178,693			144,450			135,009			153,366			152,588			99,355			100,553			108,880
Gross profit		34,402			23,173			28,927			30,786			14,128			4,783			12,853			15,007
Operating expenses
Research and development		752			638			588			493			701			570			639			589
Sales and marketing		3,756			5,056			4,528			4,617			4,234			3,263			2,489			2,558
General and administrative		8,366			7,622			7,753			6,777			6,182			5,606			5,462			6,966
Asset impairment and restructuring costs		2,180			—			—			—			—			—			—			—
Terminated acquisition expenses		—			—			—			—			—			7,821			—			—
Total operating expenses		15,054			13,316			12,869			11,887			11,117			17,260			8,590			10,113
Operating income (loss)		19,348			9,857			16,058			18,899			3,011			(12,477	)		4,263			4,894
Interest income, net		402			404			476			300			345			414			237			233
Other (expense) Income, net		(1,010	)		48			(2,129	)		349			(435	)		457			54			124
Income (loss) before (provision for) benefit from income taxes		18,740			10,309			14,405			19,548			2,921			(11,606	)		4,554			5,251
(Provision for) benefit from income taxes		(11,100	)		(1,480	)		(3,981	)		(5,962	)		110			4,894			(1,488	)		(1,598	)
Net income (loss)	$	7,640		$	8,829		$	10,424		$	13,586		$	3,031		$	(6,712	)	$	3,066		$	3,653
Net income (loss) per share:
Basic	$	0.31		$	0.35		$	0.42		$	0.55		$	0.12		$	(0.27	)	$	0.13		$	0.15
Diluted	$	0.30		$	0.34		$	0.41		$	0.54		$	0.12		$	(0.27	)	$	0.12		$	0.14

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read this discussion together with the financial statements, related notes and other financial information included in this Annual Report. The following discussion may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under Item 1.A-”Risk Factors” and elsewhere in this Annual Report. These risks could cause our actual results to differ materially from any future performance suggested below.

Overview

We are a global provider of high-quality, technologically advanced flexible printed circuits and value-added component assembly solutions to the electronics industry. We offer customized flexible printed circuit applications and services ranging from design and application engineering, prototyping and high-volume manufacturing to turnkey component assembly and testing. We target our solutions within the electronics market and, in particular, we focus on applications where flexible printed circuits facilitate human interaction with an electronic device and are the enabling technology in achieving a desired size, shape, weight or functionality of the device. Current applications for our products include mobile phones and smart mobile devices, portable bar code scanners, personal digital assistants, power supplies and consumable medical sensors.

From our inception in 1984 until 1989, we were engaged primarily in the manufacturing of flexible printed circuits for military and aerospace applications. In early 1990, we began to develop the concept of attaching components on flexible printed circuits for Motorola. Through these early efforts, we developed the concept of the value-added approach with respect to integrating our design engineering expertise with our component assembly capabilities. This strategy has enabled us to capitalize on two trends over the course of the 1990s, the outsourcing by OEMs of their manufacturing needs and the shift of manufacturing facilities outside of the United States. In 1994, we formed MFC1, a wholly owned Chinese subsidiary to better serve customers that have production facilities in Asia and provide a cost-effective, high-volume production platform for the manufacture of our products. MFC1 provides a complete range of capabilities and services to support our global customer base, including design engineering and high-volume production of single-sided, double-sided and multi-layer flexible printed circuits and component assemblies. In fiscal 2002, we formed MFC2, a second wholly owned subsidiary in China to further expand our flexible printed circuit manufacturing and assembly capacity. In fiscal 2008, we leased a manufacturing facility in Pontian, Malaysia for flexible printed circuit manufacturing and assembly capacity and to broaden our geographic base. In addition, in fiscal 2008, we leased office space in Singapore for our Asia Pacific regional office.

In fiscal 2005, we acquired the assets of Applied Optics, Inc., a company which designed and manufactured optical and photonic imaging solutions, and operate this business as Aurora Optical, Inc., a subsidiary of MFLEX (“Aurora Optical”). In July 2008, we began implementing a plan to close the Tucson, Arizona facility of Aurora Optical to consolidate the research and development and other design activities into our corporate headquarters in Anaheim, California, and to complete the transfer of the subsidiary’s product manufacturing activities to our China subsidiary. The closure is expected to be completed by the end of calendar year 2008. We plan to sell or dispose of certain of the related assets, which consist mainly of a company-owned building and manufacturing equipment, before the end of their expected useful life, and transfer certain pieces of manufacturing equipment, which can be modified to other uses, to our Anaheim facility at their carrying value. Based on this, we completed an impairment analysis under the guidance of Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), determined that certain of the assets were impaired, and recorded a pre-tax charge of $2.0 million during the fourth quarter of 2008. Additionally, under the guidance of SFAS No.146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS 146”), a pre-tax restructuring charge composed of severance, relocation, and other costs related to the closure was estimated at $540,000, of which $180,000 was recorded in the fourth quarter of fiscal 2008, with the remainder of $360,000 expected to be recorded in the first quarter of fiscal 2009. Going forward, we believe that we can achieve approximately $2-3 million dollars per year in cost savings.

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Net Sales

We design and manufacture our products to customer specifications. We engage the services of eight non-exclusive sales representatives to provide customer contacts and market our products directly to our global customer base. Seven of these sales representatives are located throughout the United States and we also have one sales representative in Korea. The variety of products our customers manufacture are referred to as programs. The majority of our sales are to customers outside of the United States. Sales volumes may be impacted by customer program and product mix changes and delivery schedule changes imposed on us by our customers. All sales from our Anaheim, California and Tucson, Arizona facilities are denominated in U.S. Dollars. All sales from our China facilities are denominated in U.S. Dollars for sales outside China or Chinese Renminbi for sales made in China.

During fiscal year 2008, our net sales were impacted by a shift in our customer base. Although net sales to our historically largest customer decreased from 57% of net sales in fiscal year 2007 to 20% of net sales in fiscal year 2008, our net sales to all other customers grew in total by $365 million, or nearly 67%, in fiscal year 2008 as compared to 2007. This growth was driven primarily by increases in net sales during fiscal year 2008 to our three other key customers.

Cost of Sales

Cost of sales consists of four major categories: material, overhead, labor and purchased process services. Material cost relates primarily to the purchase of copper foil, polyimide substrates and electronic components. Overhead costs include all materials and facilities associated with manufacturing support, processing supplies and expenses, support personnel costs, utilities, amortization of facilities and equipment and other related costs. Labor cost represents the cost of personnel related to the manufacture of the completed product and includes stock-based compensation expense related to such personnel. Purchased process services relate to the subcontracting of specific manufacturing processes to outside contractors. Cost of sales may be impacted by capacity utilization, manufacturing yields, product mix and production efficiencies. Also, we may be subject to increased costs as a result of changing material prices because we do not have long-term fixed supply agreements.

During fiscal year 2008, we experienced improved gross margins, primarily due to improved yields on high-volume production programs and the leveraging of fixed overhead expenses on the higher net sales.

Research and Development

Research and development costs are incurred in the development of new products and processes, including significant improvements and refinements to existing products and are expensed as incurred.

Sales and Marketing Expense

Sales and marketing expense includes commissions paid to sales representatives, personnel-related costs associated with our sales and marketing, business development and engineering support groups and expenses for overseas sales support, trade show and promotional and marketing brochures.

General and Administrative Expense

General and administrative expense primarily consists of salaries and benefits of administrative, finance, human resources, regulatory, information services and executive personnel and other expenses related to external accounting, legal and professional expenses, business insurance, management information systems, stock-based compensation, travel and entertainment and other corporate office expenses.

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Impairment and Restructuring Expense

Asset impairment expense is the difference between the fair market value, based on the estimated future cash flows of the under-lying assets, and the carrying value, or net book value, of the assets. Impairment occurs when the carrying value exceeds the fair market value of the underlying assets. Restructuring expense represents severance, relocation, and other costs related to the closure or disposal of a business unit or location.

Interest Income

Interest income consists of interest income earned on cash, cash equivalents balances and long-term investments.

Interest Expense

Interest expense consists of interest expense incurred on our lines of credit.

Other Income (Expense), Net

Other income (expense), net, consists primarily of the loss on our auction rate securities investments and gain or loss on foreign currency exchange.

Provision for Income Taxes

We record a provision for income taxes based on the statutory rates applicable in the countries in which we do business, subject to any tax holiday periods granted by the respective governmental authorities. We account for income taxes under the provisions of SFAS No. 109, Accounting for Income Taxes (“SFAS 109”). SFAS 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Critical Accounting Policies and Estimates

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and related disclosures. On an ongoing basis, we evaluate our estimates, including those related to inventories, income taxes, accounts receivable allowances and warranty. We base our estimates on historical experience, performance metrics and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results will differ from these estimates under different assumptions or conditions.

We apply the following critical accounting policies in the preparation of our consolidated financial statements:

• Revenue Recognition. Revenues, which we refer to as net sales, are generated from the sale of flexible printed circuit boards, which are sold to OEMs, subcontractors and EMS providers to be included in other electronic products. An EMS provider may or may not be an OEM subcontractor. We recognize revenue when there is persuasive evidence of an arrangement with the customer that states a fixed or determinable sales price, when title and risk of loss transfers, when delivery of the product has occurred in accordance with the terms of the sale and collectability of the related account receivable is reasonably assured. Our remaining obligation to customers after delivery is limited to our warranty obligations on our product. We report revenues net of an allowance for returns, refunds and credits, which we estimate based on historical experience.

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• Inventories. We value our inventory at the lower of the actual cost to purchase and/or manufacture the inventory or the current estimated market value of the inventory. We regularly review our inventory and record a provision for excess or obsolete inventory based primarily on historical usage and our estimate of expected and future product demand. Our estimates of future product demand will differ from actual demand; therefore, our estimates of the provision required for excess and obsolete inventory may change, which we will record in the period such determination was made.

• Investments. We value our investments at fair value. We regularly review our investments and record appropriate charges when the recoverable value is less than it related carrying value. The Company’s investments consist primarily of auction rate securities backed by student loans. The company utilizes a discounted cash flow method to determine the related investments fair value. Market variables utilized in developing the valuation model for these securities include relative yields on federal student loan securities, average 90 day T-Bill rates, 90 day LIBOR rates, interest rate spreads as determined by the changing credit market environment and quality of market credit and liquidity The risks and uncertainties include changes in the credit quality of the securities, changes in liquidity as a result of normal market mechanisms or issuer calls of the securities, and the effects of changes in interest rates.

• Income Taxes. We determine if our deferred tax assets and liabilities are realizable on an ongoing basis by assessing our need for a valuation allowance and by adjusting the amount of such allowance, as necessary. In the determination of any valuation allowance, we have considered taxable income in prior carry back years, future taxable income and the feasibility of tax planning initiatives. If we determine that it is more likely than not that we will realize certain of our deferred tax assets for which we previously provided a valuation allowance, an adjustment would be required to reduce the existing valuation allowance. Conversely, if we determine that we would not be able to realize our recorded net deferred tax asset, an adjustment to increase the valuation allowance would be charged to our results of operations in the period such conclusion was reached. In addition, we operate within multiple domestic and foreign taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues, which may require an extended period of time for resolution. Although we believe that adequate consideration has been made for such issues, it is possible that the ultimate resolution of such issues could be significantly different than originally estimated.

• Accounts Receivable Allowance. We perform ongoing credit evaluations of our customers and adjust credit limits and their credit worthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain an allowance for doubtful accounts based on our historical experience, our anticipation of uncollectible amounts and any specific customer collection issues that we have identified. While our credit losses historically have been within our expectations and the allowance provided, we may not continue to experience the same credit loss rates that we have in the past. The majority of our receivables are concentrated in relatively few customers; therefore, a significant change in the liquidity or financial position of any one customer could make it more difficult for us to collect our accounts receivable and require us to increase our allowance for doubtful accounts.

• Warranty Reserves. We provide a two to thirty-six month warranty on our products. We provide a warranty reserve for the estimated cost of product warranties at the time the net sales are recognized. While we engage in quality programs and processes, up to and including the final product, our warranty obligation is affected by product failure rates, the cost of the failed product and the inbound and outbound freight costs incurred in replacing defective parts. We continuously monitor and analyze product returns for warranty and maintain a reserve for the related warranty costs based on historical experience and assumptions. If actual failure rates and the resulting cost of replacement vary from our historically based estimates, revisions to the estimated warranty reserve would be required.

• Long-Lived Asset Impairment. We test for impairment whenever circumstances or events may affect the recoverability of long-lived assets under the guidance of SFAS 144. The evaluation is primarily dependent on the estimated future cash flows of the assets and the fair value of these items, as

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determined by management based on a number of estimates, including future cash flow projections, discount rates and terminal values. In determining these estimates, management considered information supplied by management and information obtained from discussions with market participants. The determination of fair value requires significant judgment both by management and outside experts engaged to assist in this process.

The impairment test for long-lived assets is a two step process. The first step is to assess if events or changes in circumstances have affected the recoverability of long-lived assets. If management believes that recoverability has been affected, then step two requires management to calculate the undiscounted future cash flow related to the asset or asset group and to compare the cash flow to the carrying value of the asset or asset group. If undiscounted future cash flows exceed the carrying value, there is no impairment. On September 30, 2008, management completed impairment testing of the long-lived assets of Aurora Optical and determined that the long-lived assets were impaired.

• Restructuring Charges. We recognize restructuring charges related to plans to close or consolidate duplicate manufacturing and administrative facilities. In connection with these activities, we record restructuring charges for employee termination and relocation costs and other exit-related costs.

The recognition of restructuring charges under the guidance of SFAS 146 requires that we make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned exit activity. To the extent that actual results differ from these estimates and assumptions, we may be required to revise the estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of liabilities already recognized. Such changes to previously estimated amounts may be material to the consolidated financial statements. At the end of each reporting period, we evaluate the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in accordance with developed exit plans.

In conjunction with the planned closure of Aurora Optical, we estimated the restructuring costs that would result from the closure. Those costs include, but are not limited to, (a) termination benefits provided to current employees that are involuntarily terminated under the terms of a benefit arrangement that, in substance, is not an ongoing benefit arrangement or an individual deferred compensation contract, (b) costs to terminate a contract that is not a capital lease, and (c) costs to consolidate facilities or relocate employees. Based on our analysis, we recorded a pre-tax restructuring charge composed of severance, relocation, and other costs related to the closure of Aurora Optical in the fourth quarter of fiscal 2008, and will recorded a similar charge in the first quarter of fiscal 2009.

• Goodwill. We evaluate the carrying value of goodwill during July of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: (i) a significant adverse change in legal factors or in business climate, (ii) unanticipated competition, or (iii) an adverse action or assessment by a regulator. In performing the impairment review, we determine the carrying amount of each reporting unit by assigning assets and liabilities, including the existing goodwill, to those reporting units. A reporting unit is defined as an operating segment or one level below an operating segment (a “Component”). A Component of an operating segment is deemed a reporting unit if the Component constitutes a business for which discrete financial information is available and management regularly reviews the operating results of that Component. To evaluate whether goodwill is impaired, we compare the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. We determine the fair value of each reporting unit using the present value of expected future cash flows for that reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the

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amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. To date, we have had no impairments of goodwill.

• Stock-Based Compensation. In first quarter of fiscal 2006, we adopted SFAS No. 123R, Share Based Payment: An Amendment of FASB Statement No.123 and 95 (“SFAS 123R”). In accordance with SFAS 123R, in our first quarter of fiscal year 2006, we started to recognize compensation expense related to stock options granted to employees based on: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of October 1, 2005, based on the grant date fair value estimated in accordance with SFAS No 123, Accounting for Stock-Based Compensation (“SFAS 123”), adjusted for an estimated future forfeiture rate, and (b) compensation cost for all share-based payments granted subsequent to October 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R.

Our assessment of the estimated fair value of the stock options granted is affected by our stock price as well as assumptions regarding a number of complex and subjective variables and the related tax impact. We utilize the Black-Scholes model to estimate the fair value of stock options granted subsequent to our initial public offering on June 25, 2004 (our “IPO”) and the minimum value method for stock options granted prior to our IPO. Generally, our calculation of the fair value for options granted under SFAS 123R is similar to the calculation of fair value under SFAS 123 with the exception of the treatment of forfeitures. Expected forfeitures of stock options are estimated based on the historical turnover of our employees. Prior to SFAS 123R, we recognized forfeitures under SFAS 123 as they occurred. The fair value of restricted stock units granted is based on the grant date price of our Common Stock.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. This model also requires the input of highly subjective assumptions including:

(a) the expected volatility of our common stock price, which we determine based on historical volatility of our common stock since the date of our IPO;

(b) expected dividends, which are zero, as we do not currently anticipate issuing dividends;

(c) expected life of the stock option, which is estimated based on the historical stock option exercise behavior of our employees; and

(d) risk free interest rate is based on observed interest rates (zero coupon U.S. Treasury debt securities) appropriate for the expected holding period.

In the future, we may elect to use different assumptions under the Black-Scholes valuation model or a different valuation model, which could result in a significantly different impact on our net income or loss.

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Results of Operations

The following table sets forth our Statement of Operations data, expressed as a percentage of net sales for the periods indicated.

	Year Ended September 30,
	2008		2007		2006
Net sales	100.0	%	100.0	%	100.0	%
Cost of sales	83.9		90.8		81.9
Gross profit	16.1		9.2		18.1
Research and development	.3		0.5		0.4
Sales and marketing expense	2.5		2.5		1.8
General and administrative expense	4.2		4.8		4.5
Asset impairment and restructuring costs	.3		—		—
Terminated acquisition expenses	—		1.5		—
Operating income (loss)	8.8		(0.1	)	11.4
Interest income, net	0.2		0.2		0.2
Other (expense) income, net	(0.4	)	0.1		—
Income before income taxes	8.6		0.2		11.6
(Provision for) benefit from income taxes	(3.1	)	0.4		(3.6	)
Net income	5.6	%	0.6	%	8.0	%

Year Ended September 30, 2008 Compared to Year Ended September 30, 2007

Net Sales. Net sales increased $220.7 million to $728.8 million in fiscal 2008 versus $508.1 million in fiscal 2007 driven primarily by increased net sales to customers within our wireless sector, which increased $191.6 million and comprised 91% of net sales in fiscal 2008 versus 92% during fiscal 2007. The increase in wireless net sales was largely due to the ramp up of new programs and unit volume shipment increases to three customers offset by declines in unit volume shipments to a fourth customer. Due to the success of our customer diversification efforts, sales to our four largest customers represented 45%, 20%, 20% and 11% of total sales for fiscal year 2008 as compared to 57% of sales to one customer in fiscal 2007. We believe that this expanded wireless customer base will provide an increased opportunity for top line revenue growth in fiscal 2009. Net sales to the consumer products sector increased 2417% or $28.7 million to $29.9 million versus $1.2 million in fiscal 2007 as a result of new program wins and unit volume increases. We believe that unit volume increases on new consumer product programs will contribute to further revenue growth in this sector in fiscal 2009. Net sales to the industrial sector, our third largest sector, decreased 23% or $5.7 million to $19.1 million for the year ended September 30, 2008 versus $24.8 million in the prior fiscal year mainly due to continued unit volume declines.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales decreased to 84% for fiscal 2008 versus 91% for fiscal 2007. The decrease in cost of sales as a percentage of net sales was driven by several factors. The main driver was favorable customer mix changes, followed by cost leveraging from improved factory utilization and improved manufacturing yields. In the previous fiscal year, manufacturing yields were negatively impacted by the substantially larger number of new high-volume program ramp-ups that occurred during that time. This along with significant increases in overhead spending driven by the $33 million MFC2 capacity expansion that was on-going throughout the second half of fiscal 2007 resulted in increased cost of sales, due to the leveraging of fixed overhead expenses.

Gross profit increased to $117.3 million in the year ended September 30, 2008 versus $46.8 million in the prior year, an increase of 151%. As a percentage of net sales, gross profit increased to 16% for fiscal year 2008 from 9% in the prior fiscal year. The increase in gross profit is primarily due to a favorable customer mix change followed by improved plant utilization which leveraged our cost structure and improved manufacturing yields in the current fiscal year. We expect quarterly gross margins to return to the 10% to 15% range in the first half of fiscal 2009. Gross profits in the prior fiscal year were adversely impacted by the cost of sales increases stated above.

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Research and Development. Research and development expenses remained relatively unchanged at $2.5 million for the years ended September 30, 2008 and 2007. We expect these expenses to grow as we continue to focus on additional new technologies, primarily those which will provide for additional miniaturization and cost reduction of our products, and also allow us to further differentiate ourselves from our competition.

Sales and Marketing Expense. Sales and marketing expenses increased to $18.0 million in fiscal 2008 from $12.6 million in fiscal 2007, an increase of 43%. Sales representative commissions and other sales related expense increased to $9.7 million for fiscal 2008 from $6.6 million in fiscal 2007, an increase of 47%. The increase is primarily attributable to a $2.8 million increase in commission expense related to the higher increased net sales on relatively stable average commission rates as well as a $309,000 increase in customer support expenses primarily related to our Netherlands sales office and our new Asian regional office in Singapore. Compensation and benefit expense increased to $7.3 million in fiscal 2008 from $5.9 million in fiscal 2007, an increase of 24%. As a percentage of net sales, compensation and benefit expense for fiscal 2008 decreased to 1.0% from 1.2% in fiscal 2007, primarily due to the leveraging of expense over the higher net sales volumes. We expect sales and marketing expense, as a percentage of net sales, to remain relatively flat during the upcoming fiscal year.

General and Administrative Expense. The $6.3 million increase in general and administrative expense was primarily due to a $4.5 million increase in compensation and benefits related to headcount increases in the U.S., China and Singapore, increased professional fees of $1.6 million, increased depreciation expense of $473,000 and increased information systems infrastructure costs of $432,000, offset by a decrease of $1.6 million, primarily related to a reduction in litigation expenses incurred in the prior year related to the terminated offer to acquire all of the outstanding shares of MFS Technology Ltd. (the “MFS Offer”). As a percentage of net sales, general and administrative expense decreased from 4.8% in fiscal 2007 to 4.2% in fiscal 2008 primarily due to the leveraging of expense on the higher net sales. We expect general and administrative expense, as a percentage of net sales, to remain relatively flat during the upcoming fiscal year.

Asset Impairment and Restructuring Cost. During the fiscal year ended 2008 we recorded an asset impairment and restructuring charge of $2.2 million related to the restructuring of our wholly owned subsidiary, Aurora Optical in Tucson, Arizona. No charges were recorded during the prior fiscal year. Going forward, we believe that we can achieve approximately $2 to $3 million dollars per year in cost savings.

Terminated Acquisition Costs. During the fiscal year ended September 30, 2007, we recorded a $7.8 million non-recurring charge to write-off deferred transaction costs related to the termination of the MFS Offer. No charges were recorded during the current fiscal year.

Interest Income. Interest income increased to $1.7 million for fiscal 2008 from $1.5 million for fiscal 2007, due to additional cash balances available for investment.

Interest Expense. Interest expense decreased to $106,000 in fiscal 2008 from $311,000 in fiscal 2007. The decrease is attributable to reduced borrowings on our lines of credit during fiscal 2008.

Other (Income) Expense, Net. Net other (income) expense changed to an expense of $2.7 million for the year ended September 30, 2008 from income of $200,000 for the prior year. The change is primarily due to a $1.7 million loss on foreign exchange in the current fiscal year versus a gain from foreign exchange of $178,000 during the prior year and a $1.2 million charge related to the impairment of our long term investments in auction rate securities. During the fourth fiscal quarter of 2008, due to a worsening of the economic and credit markets and significant changes in interest rates for short-term treasury bills, we determined that the impairment in value of our auction rate securities was other than temporary and therefore we recorded the charge against net income. The increase in loss on foreign exchange was due to the significant devaluation of the U.S. Dollar against the Chinese RMB, Japanese Yen, and other major foreign currencies.

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Income Taxes. The effective tax rate for fiscal 2008 was a provision of 36%, compared to a benefit of 171% for fiscal 2007. The higher effective tax provision was primarily due to increased income generated in the U.S., a higher tax jurisdiction. The Company recorded additional tax expense of $7.3 million as a result of international reorganization efforts and the transition of technology to further strengthen the Company’s Asian operations. In addition to enhancing operational efficiencies, this action is expected to reduce the Company’s future effective tax rate.

The higher effective tax benefit in the prior fiscal year was mainly due to foreign tax credits offsetting U.S. taxes, the tax benefit of losses generated in the U.S., a higher tax jurisdiction, and income generated in China, a lower tax jurisdiction.

Year Ended September 30, 2007 Compared to Year Ended September 30, 2006

Net Sales. The essentially flat net sales of $508.1 million in fiscal 2007 versus $504.2 million in fiscal 2006 were primarily attributable to significant offsetting fluctuations in net sales to customers within our wireless sector, which comprised 92% of net sales in fiscal 2007 versus 91% during fiscal 2006. While net sales to our largest customer decreased $141.5 million, or 33% in fiscal 2007 compared to fiscal year 2006 due to price reductions and substantially reduced sales volume as a result of increased competition and softer demand from this customer, net sales to our second largest customer increased $101.8 million, or 427%, during fiscal year 2007 due to the continuation of high-volume orders on programs which were initiated at the end of fiscal 2006 as well as the ramping up of several new programs during fiscal year 2007. Sales to our largest customer, which represented 86% of our net sales in fiscal 2006, decreased to 57% of our net sales in fiscal year 2007 due to the declines mentioned above as well as the success of our customer diversification efforts, which resulted in our second largest customer increasing from a concentration of 5% of our net sales in fiscal 2006 to 25% in fiscal 2007. Net sales to the industrial sector, our second largest sector, decreased 14% or $4.1 million to $24.8 million for the year ended September 30, 2007 versus $28.9 million in fiscal year 2006 mainly due to the continued decline in demand.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales increased to 91% for fiscal 2007 versus 82% for fiscal 2006. The increase in cost of sales as a percentage of net sales was driven by several factors. The main driver was manufacturing yield decreases, which comprised approximately 50% of the increase. Manufacturing yields were negatively impacted by the substantially larger number of new high-volume program ramp-ups that occurred during fiscal 2007 versus fiscal 2006. Yield improvements were achieved during the fourth quarter of fiscal year 2007 due to the stabilization of these new programs. Increased overhead spending driven by a 10% increase in sales volumes drove approximately 35% of the increase in cost of sales as a percentage of net sales. The increase in overhead spending was primarily driven by the $33 million MFC2 capacity expansion that was on-going throughout the second half of fiscal 2007 and resulted in some de-leveraging of fixed overhead expenses during fiscal year 2007 in anticipation of higher sales volumes in the latter portion of fiscal 2007 and throughout fiscal 2008. These sales volume increases were beginning to be realized in the fourth quarter of fiscal 2007. Approximately 15% of the increase was attributable to customer price reductions which were initiated early in fiscal 2007.

Gross profit decreased to $46.8 million in the year ended September 30, 2007 versus $91.0 million in fiscal 2006, a decrease of 49%. As a percentage of net sales, gross profit decreased to 9% for fiscal year 2007 from 18% in fiscal 2006. The decrease in gross profit is primarily due to the price reductions on our products and decreased manufacturing yields, as compared to fiscal 2006.

Research and Development. Research and development expenses increased to $2.5 million for the year ended September 30, 2007 from $2.0 million for the year ended September 30, 2006, an increase of 25%. The increase is primarily due to our increasing focus on new technologies, primarily lens applications and low profile camera modules, as well as increased research and development activities at our Anaheim location.

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Sales and Marketing Expense. Sales representatives’ commissions and other sales related expense increased to $6.6 million for fiscal 2007 from $4.5 million in fiscal 2006, an increase of 47%. The increase is primarily attributable to a $1.7 million increase in commission expense related to the higher commission rates on new programs as well as a $400,000 increase in customer support expenses related to the expansion of our international sales offices, particularly our Netherlands sales office. Compensation and benefit expense increased to $5.9 million in fiscal 2007 from $4.7 million in fiscal 2006, an increase of 26%. As a percentage of net sales, compensation and benefit expense for fiscal 2007 increased to 1.2% from 0.9% in fiscal 2006, primarily due to the increased engineering headcount in China to support a number of new program ramp-ups during fiscal 2007.

General and Administrative Expense. As a percentage of net sales, general and administrative expense increased slightly from 4.5% in fiscal 2006 to 4.8% in fiscal 2007. The $2.0 million increase in general and administrative expense was primarily due to the $1.5 million increase in litigation expenses related to termination of the MFS Offer which were expensed as incurred during the year ended September 30, 2007. Head count increases in China related to the planned expansion of the manufacturing capacity of MFC2 in China also generated approximately $300,000 in additional administrative expense during fiscal 2007.

Terminated Acquisition Costs. During the fiscal year ended September 30, 2007, we recorded a $7.8 million non-recurring charge to write-off deferred transaction costs related to the termination of the MFS Offer. No charges were recorded during fiscal 2006.

Interest Income. Interest income remained constant at $1.5 million for fiscal 2006 and 2007.

Interest Expense. Interest expense increased slightly to $311,000 in fiscal 2007 from $203,000 in fiscal 2006. The increase is attributable to a higher average balance of $1.7 million carried on our lines of credit during the fiscal 2007 versus an average balance of $1.3 million carried during fiscal 2006.

Other (Income) Expense, Net. Net other income/expense changed to income of $200,000 for the year ended September 30, 2007 from expense of $229,000 for fiscal 2006. The change was primarily due to a $484,000 increase in gain on foreign exchange. We experienced a loss from foreign exchange of $306,000 during the year ended September 30, 2006 versus a gain of $178,000 during the year ended September 30, 2007. The increase in gain on foreign exchange is due to gains experienced on MFC2 purchases made in U.S. Dollars and recorded in RMB, MFC2’s functional currency.

Income Taxes. The effective tax rate for fiscal 2007 was a benefit of 171% compared to a provision of 31% for fiscal 2006. The higher effective tax benefit was mainly due to foreign tax credits offsetting U.S. taxes, the tax benefit of losses generated in the U.S., a higher tax jurisdiction, and income generated in China, a lower tax jurisdiction.

Liquidity and Capital Resources

Our principal sources of liquidity have been cash provided by operations, equity offerings and borrowings under our various credit facilities. Our principal uses of cash have been to finance working capital, facility expansions and other capital expenditures. We anticipate these uses will continue to be our principal uses of cash in the future. Global financial and credit markets recently have been, and continue to be, extremely unstable and unpredictable. Worldwide economic conditions have been weak and may be further deteriorating. Continued, and potentially increased, volatility, instability and weakness in the financial and credit markets could affect our ability to sell our investment securities and other financial assets, which in turn could adversely affect our liquidity and financial position. This instability also could affect the prices at which we could make any such sales, which could also adversely affect our earnings and financial condition. These conditions could also negatively affect our ability to secure funds or raise capital, if needed.

It is our policy to carefully monitor the state of our business, cash requirements and capital structure. We believe that funds generated from our operations and available from our borrowing facilities will be sufficient to fund current business operations as well as anticipated growth over at least the next twelve months. We also

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believe we will have sufficient capital to fund our operations without the need to derive cash from the sale of our auction rate securities; however, there can be no assurance that any growth will occur and unexpected events may result in our need to raise additional capital. The valuation of the Company’s investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact its valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, market interest rates, discount rates and ongoing strength. Market variables utilized in developing the valuation model for these securities include relative yields on federal student loan securities, average 90 day T-Bill rates, 90 day LIBOR rates, interest rate spreads as determined by the changing credit market environment and quality of market credit and liquidity.

The following table sets forth, for the years indicated, our net cash flows provided by (used in) operating, investing and financing activities, our period-end cash and cash equivalents and certain other operating measures:

	Years Ended September 30,
	2008			2007			2006
	(dollars in thousands)
Cash flow provided by operating activities	$	82,339		$	46,690		$	16,307
Cash flow used in investing activities	$	(52,728	)	$	(45,083	)	$	(41,083	)
Cash flow provided by (used in) financing activities	$	3,805		$	(3,309	)	$	8,918
Cash and cash equivalents at year end	$	62,090		$	27,955		$	24,460
Days sales outstanding		68.6			82.8			64.4
Inventory turnover		12.0			7.7			8.2

Net cash generated from operations during fiscal 2008 was $82.3 million. During fiscal 2008, net income of $40.5 million, adjusted for depreciation and amortization, provision for doubtful accounts, deferred taxes, asset impairment and restructuring costs, impairment of long term investments, loss on equipment disposal and stock-based compensation expense generated $75.3 million of operating cash. In addition, $6.9 million in cash was generated from working capital.

Changes in the principal components of operating cash flows in our 2008 fiscal year were as follows:

• Our net accounts receivable increased to $162.4 million at September 30, 2008 from $124.3 million for the prior year, an increase of 31%. The increase in outstanding accounts receivable is attributable to the increase in sales volume in the fourth quarter of fiscal 2008 offset by a decrease in day’s sales outstanding, due to improved customer payment terms. Our net inventory balances decreased to $59.8 million at September 30, 2008 from $63.4 million for the prior year, a decrease of 6%. Inventory decreased as a result of improved shipment volumes. Our accounts payable increased to $128.6 million at September 30, 2008 from $111.9 million for the prior year, an increase of 15%, as a result of increased purchases in support of the higher business volumes.

• Depreciation and amortization expense was $31.2 million for fiscal 2008 versus $20.4 million in the prior year due to the increased fixed asset base, mainly at MFC1 and MFC2.

Our principal investing and financing activities in our 2008 fiscal year were as follows:

• Net cash used in investing activities was $52.7 million for fiscal 2008. Capital expenditures included $47.0 million of capital equipment and other assets, and $2.1 million in deposits for fixed asset purchases, which were related to the MFC1 and MFC2 manufacturing capacity expansion. As of September 30, 2008, we had outstanding purchase commitments totaling $9.2 million.

• Net cash generated in financing activities was $3.8 million for fiscal 2008 and consisted of $1.6 million of tax benefit related to the exercise of stock options and $2.2 million of proceeds from the exercise of stock options. Our loans payable and borrowings outstanding against credit facilities were zero at September 30, 2008 and 2007.

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Net cash generated from operations during fiscal 2007 was $46.7 million. During fiscal 2007, net income of $3.0 million, adjusted for depreciation and amortization, provision for doubtful accounts, deferred taxes, loss on equipment disposal and stock-based compensation expense generated $26.4 million of operating cash. In addition, $20.3 million in cash was generated from working capital.

Changes in the principal components of operating cash flows in our 2007 fiscal year were as follows:

• Our net accounts receivable increased to $124.3 million at September 30, 2007 from $109.5 million for fiscal 2006 , an increase of 14%. The increase in outstanding accounts receivable was attributable to the increase in sales volume in the fourth quarter of fiscal 2007. Our net inventory balances increased to $63.4 million at September 30, 2007 from $56.4 million for fiscal 2006, an increase of 12%. The principal reason for the increase was the build up of inventory to support the higher sales volumes experienced in the fourth quarter as well as the expected sales increase in the first quarter of fiscal 2008. Our accounts payable increased to $111.9 million at September 30, 2007 from $70.1 million for fiscal 2006, an increase of 60%, as a result of increased purchases in support of the higher business volumes as well as the equipment expansion at MFC2.

• Depreciation and amortization expense was $20.4 million for fiscal 2007 versus $14.5 million in fiscal 2006 due to the increased fixed asset base, mainly at MFC2.

Our principal investing and financing activities in our 2007 fiscal year were as follows:

• Net cash used in investing activities was $45.1 million for fiscal 2007. Capital expenditures included $55.7 million of capital equipment and other assets, and $1.7 million in deposits for fixed asset purchases, which were related to the MFC2 manufacturing capacity expansion. As of September 30, 2007, we had outstanding purchase commitments related to MFC2 capital projects, which totaled $8.5 million.

• Net cash used in financing activities was $3.3 million for fiscal 2007 and consisted of $4.0 million of repayments on our lines of credit offset by $638,000 of proceeds from the exercise of stock options. Our loans payable and borrowings outstanding against credit facilities decreased to zero at September 30, 2007 from $4.0 million at September 30, 2006.

Net cash generated from operations during fiscal 2006 was $16.3 million. During fiscal 2006, net income of $40.4 million, adjusted for depreciation, deferred taxes, loss on equipment disposal and loss on equity investment generated $54.5 million of operating cash, offset by $38.2 million required for working capital.

Changes in the principal components of operating cash flows in our 2006 fiscal year were as follows:

• Our net accounts receivable increased to $109.5 million at September 30, 2006 from $71.5 million for fiscal 2005, an increase of 53%. The increase in outstanding accounts receivable is attributable to the extension of the payment terms for our major customer from 60 days to 90 days. Our net inventory balances increased to $56.4 million at September 30, 2006 from $45 million for fiscal 2005, an increase of 25%. The principal reason for the increase was an increase in inventory hub activity and increased raw material levels to support higher sales volumes. Our accounts payable increased to $70.1 million at September 30, 2006 from $58 million for the fiscal 2005, an increase of 21%, as a result of increased purchases in support of the higher business volumes.

• Depreciation and amortization expense was $14.5 million for fiscal 2006 versus $11.4 million in the prior year due to the increased fixed asset base, mainly at MFC2.

Our principal investing and financing activities in our 2006 fiscal year were as follows:

• Net cash used in investing activities was $41.1 million for fiscal 2006. Capital expenditures included $37.8 million of capital equipment and other assets, including $3.2 million in deposits for fixed asset

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purchases, which were related to the construction of the MFC2 expansion as well as improvements at the Anaheim facility. As of September 30, 2006 and 2005, we had outstanding purchase commitments related to MFC2 capital projects which totaled $8.3 million and $4.6 million, respectively.

• Net cash provided by financing activities was $8.9 million for fiscal 2006 and consisted of $1.6 million of proceeds from the exercise of stock options and $4.0 million of net borrowings on our lines of credit. Our loans payable and borrowings outstanding against credit facilities increased to $4.0 million at September 30, 2006 from $0 at September 30, 2005. The increase in outstanding loan amounts resulted from a $4.0 million draw down on our credit facility with Norddeutsche Landesbank Girozentrale (“NLG”) to fund working capital needs. In addition, $3.4 million in cash was generated by the tax benefit related to stock options.

Capital Commitments

As of September 30, 2008, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of the Securities and Exchange Commission’s (“SEC”) Regulation S-K. The following summarizes our contractual obligations, excluding accrued taxes related to FIN 48, at September 30, 2008, and the effect those obligations are expected to have on our liquidity and cash flow in future periods (in thousands):

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Operating leases (facilities)	$	2,410	$	1,281	$	1,129	$	—	$	—
Capital lease obligations		7		7		—		—		—
Purchase obligations		9,203		9,203		—		—		—
Total contractual obligations	$	11,620	$	10,491	$	1,129	$	—	$	—

We have four leases or contractual arrangements relating to space at our California facilities, which range in terms from seven months to three years, and range in size from approximately 4,000 square feet to approximately 6,000 square feet. These leases expire in various months of each year and are typically extended on substantially the same terms. We have several parcels at MFC1 that have long-term land leases expiring beyond 2043. Under the terms of the leases, we paid an upfront fee for use of the parcel through expiration of the lease. We have no other financial obligations on the long-term land leases at MFC1 other than payments of real estate taxes. However, we expect that we may move this facility to a more industrialized area in the coming years.

In April 2007, our board of directors approved a $33.0 million capital expansion plan to increase our assembly capacity in the expanded MFC2 facility and in one satellite location in Suzhou. As of September 30, 2008, essentially all of the equipment related to the expansion had been installed. As of September 30, 2008, we had purchase obligations of $9.2 million which were primarily related to expansion activities at various satellite locations in Suzhou, China and for research and development equipment-related purchases at our Anaheim, California facility.

In November 2008, we entered into a Share Purchase Agreement (the “Agreement”) with Multi-Fineline Electronix Singapore Pte. Ltd. (“M-Flex Singapore”), one of our wholly owned subsidiaries and Pelikon Limited (“Pelikon”) to acquire all of the issued ordinary shares of Pelikon, a privately held technology company. Pursuant to the terms of the Agreement, in consideration for the purchase of the issued ordinary shares of Pelikon, M-Flex Singapore shall issue, at the closing, unsecured promissory notes in an aggregate principal amount equal to $10.7 million. In addition to the promissory notes, MFLEX Singapore may pay contingent consideration not to exceed $2.2 million in 2009 and $7.2 million in 2010, based on Pelikon achieving certain stipulated shipment volumes.

We adopted the provisions of FIN 48 on October 1, 2007. As of September 30, 2008, we recorded $13.8 million in long-term liabilities for accrued taxes related to uncertain tax positions under FIN 48. We are not able to reasonably estimate the timing of the long-term payments, or the amount by which our liability will increase or decrease over time; therefore, the FIN 48 liability has not been included in the contractual obligations table.

40

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurement (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. During 2007, the FASB became aware of numerous implementation issues as companies worked to prepare to adopt SFAS 157. Accordingly, the FASB agreed in February 2008 to a one-year deferral of the effective date for nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis, e.g., those measured at fair value in a business combination. SFAS 157 will be adopted by the Company beginning in the first quarter of fiscal 2009, effective October 1, 2008, and the Company does not expect that SFAS 157 will have a material impact on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits companies to make a one-time election to carry eligible types of financial assets and liabilities at fair value, even if fair value measurement is not required under generally accepted accounting principles in the United States (“U.S. GAAP”). SFAS 159 will be adopted by the Company beginning in the first quarter of fiscal 2009, effective October 1, 2008, and the Company does not expect that SFAS 159 will have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R establishes principles and requirements for how the acquiror of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning December 15, 2008, which is October 1, 2009 for the Company. The Company is currently evaluating the impact of the provisions of SFAS 141R on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for a non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company beginning October 1, 2009. The Company does not believe that SFAS 160 will have an impact on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The guidance in SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning November 15, 2008 for the Company, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The Company does not believe that SFAS 161 will have an impact on its consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in

41

conformity with U.S. GAAP for nongovernmental entities in the United States. SFAS 162 is effective 60 days following SEC approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company is currently evaluating the impact the provisions of SFAS 162 will have on its consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

Market risk represents the risk of loss arising from adverse changes in market rates and foreign exchange rates. At September 30, 2008, no amounts were outstanding under our loan agreements with Shanghai Pudong Development Bank or Bank of China. The amounts outstanding under these loan agreements at any time may fluctuate and we may from time to time be subject to refinancing risk. We do not believe that a change of 100 basis points in interest would have a material effect on our results of operations or financial condition based on our current borrowing level.

Foreign Currency Risk

We derive a substantial portion of our sales outside of the United States. Approximately $643 million, or 97%, of total shipments to these foreign manufacturers for fiscal 2008 were made in U.S. Dollars. The balance of our net sales is denominated in RMB. The exchange rate for the RMB to the U.S. Dollar has been an average of 7.1 RMB per U.S. Dollar for the fiscal year ended September 30, 2008. Transactions in RMB represent approximately 3% of total net sales from foreign customers for the fiscal year ended September 30, 2008. In July 2005, the People’s Bank of China (“PBOC”) terminated the fixed exchange rate between the RMB and the U.S. Dollar, adjusted the exchange rate from 8.3 to 8.1 and established a 0.3% maximum daily appreciation against the U.S. Dollar. However, during the third quarter of fiscal 2007, the PBOC increased the rate at which the RMB/U.S. Dollar exchange can fluctuate, which resulted in a greater RMB appreciation. We anticipate the RMB appreciation against the U.S. Dollar to continue to increase in the future, which will result in an increase in the cost of our business expenses in China due to the movement of the exchange rates. We generally do not consider it necessary to hedge against currency risk, as a significant portion of our material cost of sales is denominated in U.S. Dollars, eliminating much of the need to hedge; however, we continue to be vulnerable to appreciation or depreciation of foreign currencies against the U.S. Dollar.

Liquidity Risk

As a result of the liquidity issues experienced in the global credit and capital markets, during 2008 auctions for investment in auction rate securities held by us failed. An auction fails when there is insufficient demand. However, a failed auction does not represent a default by the issuer. The auction rate securities continue to pay interest in accordance with the terms of the underlying security; however, liquidity will be limited until there is a successful auction or until such time as other markets for these investments develop. However, due to the current absence of a liquid market, we have reclassified our investments in auction rate securities from current assets to non-current assets in our consolidated condensed balance sheet. When liquidity for these types of investments returns in the market, we intend to sell these investments or reclassify them back to current assets. We do not believe that the lack of liquidity relating to auction rate securities will have an impact on our ability to fund operations.

All of our auction rate securities are rated AAA/Aaa, are collateralized by student loans substantially guaranteed by the U.S. government and continue to pay interest in accordance with their contractual terms. The valuation of our investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact the valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates and ongoing strength and quality of market credit and liquidity. As of September 30, 2008, the fair value of our auction rate securities of $12.1 million was determined using a model that calculates the present value of the expected future cash flows from our securities and other indications of value, and as a consequence of our belief that the impairment is of an other than temporary nature, we have recorded a charge of $1.2 million in our results of operations for the period ended September 30, 2008.

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Item 8. Financial Statements and Supplementary Data

MULTI-FINELINE ELECTRONIX, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	44
Consolidated Balance Sheets as of September 30, 2008 and 2007	45
Consolidated Statements of Income for the Years Ended September 30, 2008, 2007 and 2006	46
Consolidated Statements of Stockholders’ Equity for the Years Ended September 30, 2008, 2007 and 2006	47
Consolidated Statements of Cash Flows for the Years Ended September 30, 2008, 2007 and 2006	48
Notes to Consolidated Financial Statements	49
Schedule II—Consolidated Valuation and Qualifying Accounts and Reserves for the Years Ended September  30, 2008, 2007 and 2006	72

43

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Multi-Fineline Electronix, Inc:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Multi-Fineline Electronix, Inc. and its subsidiaries at September 30, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index appearing under Item 8 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for uncertain tax positions in 2008.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Orange County, California

December 8, 2008

44

MULTI-FINELINE ELECTRONIX, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

	September 30,
	2008		2007
ASSETS
Cash and cash equivalents	$	62,090	$	27,955
Short term investments		—		7,000
Restricted cash		1		2,343
Accounts receivable, net of allowances of $1,520 and $1,300 at September 30, 2008 and 2007, respectively		162,419		124,313
Inventories		59,774		63,424
Deferred taxes		6,571		4,073
Income taxes receivable		3,445		2,701
Other current assets		2,983		2,749
Total current assets		297,283		234,558
Property, plant and equipment, net		160,217		133,633
Long-term investments		12,138		—
Restricted cash		203		135
Deferred taxes		4,964		2,185
Goodwill		3,629		3,629
Other assets		9,176		3,147
Total assets	$	487,610	$	377,287
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	128,642	$	111,934
Accrued liabilities		22,938		14,994
Due to affiliates		3,138		30
Income taxes payable		8,658		—
Other current liabilities		7		119
Total current liabilities		163,383		127,077
Other liabilities		13,909		204
Total liabilities		177,292		127,281
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $0.0001 par value, 5,000,000 and 5,000,000 shares authorized at September 30, 2008 and 2007, respectively; 0 and 0 shares issued and outstanding at September 30, 2008 and 2007, respectively		—		—
Common stock, $0.0001 par value; 100,000,000 and 100,000,000 shares authorized at September 30, 2008 and 2007, respectively; 25,011,649 and 24,598,510 shares issued and outstanding at September 30, 2008 and 2007, respectively		2		2
Additional paid-in capital		116,100		108,872
Retained earnings		172,770		132,532
Accumulated other comprehensive income		21,446		8,600
Total stockholders’ equity		310,318		250,006
Total liabilities and stockholders’ equity	$	487,610	$	377,287

The accompanying notes are an integral part of these consolidated financial statements.

45

MULTI-FINELINE ELECTRONIX, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share and Share Data)

	Years Ended September 30,
	2008			2007			2006
Net sales	$	728,805		$	508,147		$	504,204
Cost of sales		611,517			461,376			413,156
Gross profit		117,288			46,771			91,048
Operating expenses
Research and development		2,470			2,499			2,035
Sales and marketing		17,957			12,544			9,233
General and administrative		30,518			24,216			22,231
Impairment and restructuring costs		2,180			—			—
Terminated acquisition expenses		—			7,821			—
Total operating expenses		53,125			47,080			33,499
Operating income (loss)		64,163			(309	)		57,549
Other income (expense), net
Interest expense		(106	)		(311	)		(203	)
Interest income		1,687			1,540			1,460
Other (expense) income, net		(2,742	)		200			(229	)
Income before (provision for) benefit from income taxes		63,002			1,120			58,577
(Provision for) benefit from income taxes		(22,523	)		1,918			(18,220	)
Net income	$	40,479		$	3,038		$	40,357
Net income per share:
Basic	$	1.63		$	0.12		$	1.66
Diluted	$	1.59		$	0.12		$	1.59
Shares used in computing net income per share:
Basic		24,828,732			24,520,040			24,353,854
Diluted		25,433,676			25,164,401			25,315,548

The accompanying notes are an integral part of these consolidated financial statements.

46

MULTI-FINELINE ELECTRONIX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Share Data)

	Common Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income		Total Stockholders’ Equity			Comprehensive Income
	Shares	Amount
Balance at September 30, 2005	24,179,884	$	2	$	98,564	$	89,137		$	1,338	$	189,041		$	38,503
Exercise of stock options	263,487		—		1,562		—			—		1,562			—
Compensation relating to the modification of stock options	—		—		1,984		—			—		1,984			—
Stock-based compensation income tax benefits	—		—		3,356		—			—		3,356			—
Net income	—		—		—		40,357			—		40,357			40,357
Translation adjustment	—		—		—		—			2,065		2,065			2,065
Balance at September 30, 2006	24,443,371	$	2	$	105,466	$	129,494		$	3,403	$	238,365		$	42,422
Exercise of stock options	155,139		—		638		—			—		638			—
Stock-based compensation expense	—		—		2,715		—			—		2,715			—
Stock-based compensation income tax benefits	—		—		53		—			—		53			—
Net income	—		—		—		3,038			—		3,038			3,038
Translation adjustment	—		—		—		—			5,197		5,197			5,197
Balance at September 30, 2007	24,598,510	$	2	$	108,872	$	132,532		$	8,600	$	250,006		$	8,235
Exercise of stock options	413,139		—		2,182		—			—		2,182			—
Stock-based compensation expense	—		—		3,423		—			—		3,423			—
Stock-based compensation income tax benefits	—		—		1,623		—			—		1,623			—
Net Income	—		—		—		40,479			—		40,479			40,479
Translation adjustment	—		—		—		—			12,846		12,846			12,846
Cumulative effect of adoption of FIN 48	—		—		—		(241	)		—		(241	)		—
Balance at September 30, 2008	25,011,649	$	2	$	116,100	$	172,770		$	21,446	$	310,318		$	53,325

The accompanying notes are an integral part of these consolidated financial statements.

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MULTI-FINELINE ELECTRONIX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Years Ended September 30,
	2008			2007			2006
Cash flows from operating activities
Net income	$	40,479		$	3,038		$	40,357
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		31,150			20,447			14,473
Provision for doubtful accounts		216			696			3
Deferred income taxes		(4,462	)		(725	)		(2,423	)
Stock-based compensation expense		3,423			2,715			1,984
Impairment of long term investments		1,162			—			—
Impairments		2,450			—			—
Loss on disposal of equipment		718			190			107
Changes in operating assets and liabilities
Accounts receivable		(37,000	)		(15,492	)		(38,032	)
Inventories		8,360			(6,994	)		(11,455	)
Due to/from affiliates, net		5,592			(120	)		237
Other current assets		842			(1,479	)		(345	)
Other assets		(4,146	)		4,127			(3,610	)
Accounts payable		8,137			41,791			12,173
Accrued liabilities		6,259			1,941			2,031
Income tax payable		11,327			(3,370	)		923
Other liabilities		7,832			(75	)		(116	)
Net cash provided by operating activities		82,339			46,690			16,307
Cash flows from investing activities
Proceeds from sales and (purchases) of short-term investments		(6,300	)		12,355			(3,265	)
Cash paid for property and equipment		(45,949	)		(55,711	)		(34,552	)
Purchases of software and capitalized internal-use software		(1,183	)		(195	)		(461	)
Deposits on property and equipment		(2,086	)		(1,713	)		(3,217	)
Proceeds from sale of equipment		300			369			569
Increase (decrease) in restricted cash, net		2,490			(188	)		(157	)
Net cash used in investing activities		(52,728	)		(45,083	)		(41,083	)
Cash flows from financing activities
Borrowings on line of credit		—			—			12,000
Payments on line of credit		—			(4,000	)		(8,000	)
Income tax benefit related to stock option exercise		1,623			53			3,356
Proceeds from exercise of options		2,182			638			1,562
Net cash provided by (used in) financing activities		3,805			(3,309	)		8,918
Effect of exchange rate changes on cash		719			5,197			2,065
Net increase (decrease) in cash		34,135			3,495			(13,793	)
Cash and cash equivalents at beginning of year		27,955			24,460			38,253
Cash and cash equivalents at end of year		62,090		$	27,955		$	24,460
Supplemental disclosure
Interest paid	$	152		$	248		$	68
Income taxes paid	$	10,839		$	2,073		$	17,504

The accompanying notes are an integral part of these consolidated financial statements.

48

MULTI-FINELINE ELECTRONIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Per Share and Share Data)

1. Basis of Presentation and Significant Accounting Policies

Description of the Company

Multi-Fineline Electronix, Inc. (“MFLEX” or the “Company”) was incorporated in 1984 in the State of California and reincorporated in the State of Delaware in June 2004. The Company is primarily engaged in the engineering, design and manufacture of flexible printed circuit boards along with related component assemblies.

Affiliates and subsidiaries of WBL Corporation Limited (collectively “Wearnes”), a Singapore company, owned approximately 59%, 60% and 61% of the Company’s outstanding common stock as of September 30, 2008, 2007 and 2006, respectively, allowing Wearnes to exercise operating control over the Company.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has two wholly owned subsidiaries located in China: Multi-Fineline Electronix (Suzhou) Co., Ltd. (“MFC1”), and Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. (“MFC2”); one located in the Cayman Islands: M-Flex Cayman Islands Inc.; one located in Singapore: Multi-Fineline Electronix Singapore Pte. Ltd.; one located in Malaysia: Multi-Fineline Electronix Malaysia Sdn. Bhd.; and one located in Arizona: Aurora Optical, Inc. (“Aurora Optical”). All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used in the determination of accounts receivable allowances, valuation of inventory, warranty reserves, valuation of the Company’s common stock options and income tax contingencies. Actual results could differ from those estimates.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents as of September 30, 2008 and 2007 consisted of money market funds.

Investments

The Company’s long-term investments represent auction rate securities in debt obligations, which are collateralized by student loans. These auction rate securities were intended to provide liquidity via an auction process that reset the applicable interest rate at predetermined calendar intervals (twenty eight days), allowing investors to either roll over their holdings or gain immediate liquidity by selling such interests at par. In fiscal 2008, the Company began experiencing failed auctions for the auction rate securities that have gone to auction, resulting in the Company’s inability to sell these securities. The valuation of the Company’s investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact its valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, market interest rates, discount rates and ongoing strength. Market variables utilized in developing the valuation model for these securities include relative yields on federal student loan securities, average 90 day T-Bill rates, 90 day LIBOR rates, interest rate spreads as determined by

49

the changing credit market environment and quality of market credit and liquidity. The Company has historically classified these securities as short-term investments. However, based on the lack of liquidity related to these investments, as described above, in the second quarter of fiscal 2008, the Company re-classified these investments as long-term assets. As of September 30, 2008, the fair value of these securities of $12,138 was determined using a model that calculates the present value of the expected future cash flows from the securities and other indications of value, using the factors previously described.

The Company reviews impairments associated with the above in accordance with Emerging Issues Task Force (“EITF”) 03-1 and FSP Statement on Financial Accounting Standard (“SFAS”) 115-1 and 124-1, The Meaning of Other-Than-Temporary-Impairment and Its Application to Certain Investments, to determine the classification of the impairment as “temporary” or “other-than-temporary.” The factors evaluated to differentiate between temporary and other-than-temporary include the projected future cash flows, credit ratings actions and the assessment of the credit quality of the underlying collateral. The Company analyzed recent changes and trends in the financial and credit markets and specific factors that impacted student loan based auction rate securities during the Company’s fiscal fourth quarter. Most notably the rates on 90 day treasuries fell sharply due to the high market interest in these securities as being a “safe” investment. The interest rate caps on many of the student loan issues are structured such that the spread of 120 basis points added to the 90 day treasury rate makes the current yield on these issues extremely low, thereby making them unattractive compared to most other alternative debt issues available in the market place. Due to these changing circumstances, the Company determined that the impairment of its investments was of an other-than-temporary nature and, accordingly, a charge of $1,200 was recorded in the September 30, 2008 consolidated statement of income.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their short maturities. There are no borrowings outstanding as of September 30, 2008 and 2007.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, to the extent balances exceed limits that are insured by the Federal Deposit Insurance Corporation, and accounts receivable. The Company maintains its cash with major financial institutions. Credit risk exists because the Company’s flexible printed circuit boards and related component assemblies are sold to a limited number of customers (Note 9). The Company does not require collateral and maintains reserves for potential credit losses. Such losses have historically been within management’s expectations.

Accounts Receivable

The Company records revenue in accordance with the terms of the sale, which is generally at shipment. Accounts receivable are recorded at the invoiced amount, and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in existing accounts receivable. The Company determines the allowance based on historical write-off experience as well as specific identification of credit issues with invoices. The Company reviews the allowance for doubtful accounts quarterly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. All other balances are reviewed on an aggregate basis. Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be collected. The Company does not have any off-balance sheet credit exposure related to its customers.

Inventories

Inventories are stated at the lower of cost or market, cost being determined on a first-in, first-out basis. The Company records a provision for excess and obsolete inventory based on historical usage and expected future product demand.

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Property, Plant and Equipment

Property, plant, and equipment are stated at cost, less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:

Building	30 - 39 years
Machinery and equipment	3 - 10 years
Furniture and fixtures	5 years
Leasehold improvements	Shorter of 10 years or life of lease

Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related lease. Maintenance, repairs and minor renewals are charged to expense as incurred. Additions, major renewals and betterments to property and equipment are capitalized. The cost of assets and related accumulated depreciation are removed from the balance sheet when such assets are disposed of, and any related gains or losses are included in operating expenses.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows attributable to such assets, including any cash flows upon their eventual disposition, to their carrying value. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value. As of September 30, 2008, the Company recorded a non-cash charge of $2,000 for long-lived assets impaired by the closure of the Tucson, Arizona facility of Aurora Optical (Note 13). No impairment charges were recorded in the prior year.

Capitalized Software Costs

Costs incurred to develop software for internal use are accounted for in accordance with Statement of Position (“SOP”) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. In accordance with SOP No. 98-1, expenses related to preliminary project assessment, research and development, re-engineering, training and application maintenance are expensed as incurred. Costs that qualify for capitalization under SOP No. 98-1 are included in other assets and consist primarily of purchased software, payroll costs and consulting fees related to the development of the internal use software. Capitalized costs commence depreciation when they are put in service and are amortized using the straight-line method over a period of three years.

Goodwill

The Company records the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Valuation of intangible assets entails significant estimates and assumptions including, but not limited to, determining the timing and expected costs to complete development projects, estimating future cash flows from product sales, developing appropriate discount rates, estimating probability rates for the successful completion of development projects, continuation of customer relationships and renewal of customer contracts, and approximating the useful lives of the intangible assets acquired.

The Company reviews the recoverability of the carrying value of goodwill on an annual basis every July, or more frequently when an event occurs or circumstances change to indicate that an impairment of goodwill has possibly occurred. The determination of whether any potential impairment of goodwill exists is based upon a comparison of the fair value of the reporting unit to the accounting value of the underlying net assets of such reporting unit. If the fair value of the reporting unit is less than the accounting value of the underlying net assets, goodwill is deemed impaired and an impairment loss is recorded to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of all its underlying identifiable assets and liabilities. The Company has determined that it has one reporting unit for evaluating its goodwill for impairment. As of September 30, 2008 and 2007, there were no such impairments of goodwill.

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Revenue Recognition

The Company’s revenues, which the Company refers to as net sales, net of allowance for returns, refunds and credits, which are estimated based on historical experience, are generated from the sale of flexible printed circuit boards and related component assemblies, which are sold to original equipment manufacturers and electronic manufacturing services providers to be included in other electronic products. The Company recognizes revenue when there is persuasive evidence of an arrangement with the customer that states a fixed or determinable sales price, when title and risk of loss transfers, when delivery of the product has occurred in accordance with the terms of the sale and collectability of the related accounts receivable is reasonably assured. The Company does not have any post-shipment obligations (e.g., installation or training), customer acceptance or multiple-element arrangements. The Company’s remaining obligation to its customer after delivery is limited to warranty on its product.

Shipping and Handling Costs

Shipping cost related to products shipped utilizing a customer specified shipping service is paid directly by the customer. Products that are not shipped utilizing customer shipping services are charged by the Company to its customers and are included in net sales. Shipping and handling costs incurred by the Company are expensed as incurred and are recorded as a component of cost of sales.

Product Warranty Accrual

The Company warrants its products from 2 to 36 months. The standard warranty requires the Company to replace defective products returned to the Company at no cost to the customer. The Company records an estimate for warranty related costs at the time revenue is recognized based on historical amounts incurred for warranty expense and historical return rates. The warranty accrual is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

Changes in the product warranty accrual for the years ended September 30, 2008, 2007 and 2006 was as follows:

	Warranty Accrual Balance at October 1		Warranty Expenditures			Provision for Estimated Warranty Cost		Warranty Accrual Balance at September 30
2008	$	1,673	$	(4,354	)	$	5,282	$	2,601
2007	$	1,285	$	(4,779	)	$	5,167	$	1,673
2006	$	1,439	$	(3,549	)	$	3,395	$	1,285

Research and Development

Research and development costs are incurred in the development of new products and processes, including significant improvements and refinements to existing products and are expensed as incurred.

Income Taxes

Income taxes are computed using the asset and liability method. Under this method, deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the tax bases and financial reporting amounts of existing assets and liabilities. Valuation allowances are established when it is more likely than not that such deferred tax assets will not be realized. The Company does not file a consolidated return with its foreign wholly owned subsidiaries.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”), which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and

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measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities, based on the technical merits of the position. The amount recognized is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. As of October 1, 2007, the Company adopted FIN48 and recognizes potential accrued interest and penalties related to unrecognized tax benefit in income tax expense.

Comprehensive Income

Comprehensive income is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The difference between net income and comprehensive income for the years ended September 30, 2008, 2007 and 2006 was comprised entirely of the Company’s foreign currency translation adjustment.

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is either the local currency or if the predominant transaction currency is “United States Dollars”, then United States Dollars will be the functional currency. Balances are translated into United States Dollars using the exchange rate at each balance sheet date for assets and liabilities and an average exchange rate for each period for statement of income amounts. Currency translation adjustments are recorded in other comprehensive income, a component of stockholders’ equity.

Foreign currency transactions occur when there is a receivable or payable denominated in other than the respective entity’s functional currency. The Company records the changes in the exchange rate for these transactions in the consolidated statements of income. For the years ended September 30, 2008, 2007 and 2006, foreign exchange transaction gains and losses were included in other expenses and were a net loss of $1,690, net gain of $178, and a net loss of $306, respectively.

Accounting for Stock-Based Compensation

The Company accounts for share-based payments under the fair value recognition provisions of SFAS No. 123R, Share Based Payment: An Amendment of FASB Statements No. 123 and 95 (“SFAS 123R”), utilizing the modified-prospective-transition method, as prescribed by SFAS 123R. Under that transition method, compensation cost recognized during the year ended September 30, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of October 1, 2005, based on the grant date fair value estimated in accordance with SFAS 123R, adjusted for an estimated future forfeiture rate, and (b) compensation cost for all share-based payments granted subsequent to October 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Under the modified-prospective-transition method, results for the prior periods have not been restated. See Note 11 for further discussion of stock-based compensation.

Net Income Per Share—Basic and Diluted

Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities. The impact of potentially dilutive securities is determined using the treasury stock method.

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The following table presents a reconciliation of basic and diluted income per share:

	Years Ended September 30,
	2008	2007	2006
Basic weighted-average number of common shares outstanding	24,828,732	24,520,040	24,353,854
Dilutive effect of outstanding stock options	604,944	644,361	961,694
Diluted weighted-average number of common and potential common shares outstanding	25,433,676	25,164,401	25,315,548
Potential common shares excluded from the per share calculation because the effect of their inclusion would be anti-dilutive	113,025	192,384	58,882

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. During 2007, the FASB became aware of numerous implementation issues as companies worked to prepare to adopt SFAS 157. Accordingly, the FASB agreed in February 2008 to a one-year deferral of the effective date for nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis, e.g., those measured at fair value in a business combination. SFAS 157 will be adopted by the Company beginning in the first quarter of fiscal 2009, effective October 1, 2008, and the Company does not expect that SFAS 157 will have a material impact on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits companies to make a one-time election to carry eligible types of financial assets and liabilities at fair value, even if fair value measurement is not required under generally accepted accounting principles in the United States (“U.S. GAAP”). SFAS 159 will be adopted by the Company beginning in the first quarter of fiscal 2009, effective October 1, 2008, and the Company does not expect that SFAS 159 will have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R establishes principles and requirements for how the acquiror of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. SFAS 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning December 15, 2008, which is October 1, 2009 for the Company. The Company is currently evaluating the impact of the provisions of SFAS 141R on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for a non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company beginning October 1, 2009. The Company does not believe that SFAS 160 will have an impact on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 changes the disclosure

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requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The guidance in SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning November 15, 2008 for the Company, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The Company does not believe that SFAS 161 will have an impact on its consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. GAAP for nongovernmental entities in the United States. SFAS 162 is effective 60 days following SEC approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company is currently evaluating the impact the provisions of SFAS 162 will have on its consolidated financial statements.

2. Restricted Cash

Restricted cash consists of funds held in short-term deposits that are legally restricted as to withdrawal. Restricted cash of $1 and $2,343 as of September 30, 2008 and 2007, respectively, was on deposit with various banks in China to secure the Company’s customs reporting activities.

The Company also had restricted cash of $203 and $135 as of September 30, 2008 and 2007, respectively, held at the direction of the County of Orange, California, to finance environmental clean-up costs, estimated by the Company and approved by the County, in the event the Company vacates its Anaheim, California manufacturing facilities. During fiscal year 2008, the Company updated its environmental clean-up cost analysis and accordingly increased its restricted cash deposit. The Company is not a party to any environmental claims. As of September 30, 2008, the Company believes the amount held as restricted cash is sufficient to pay environmental clean-up costs that may exist, if any, should the Company vacate its facilities.

3. Related Party Transactions

During the years ended September 30, 2008, 2007 and 2006, the Company has recognized revenue and recorded purchases from the following affiliated companies: (a) MFS Technology Pte. Ltd. (“MFS”); and (b) MFS Technologies (Hunan) Co. Ltd., a subsidiary of MFS. As discussed in Note 1, Wearnes owns 59% and 60% of the Company’s common stock as of September 30, 2008 and 2007, respectively. MFS is an indirect subsidiary of Wearnes.

Sales to and purchases from affiliates comprise the following:

	Years Ended September 30,
	2008		2007		2006
Sales to affiliates:
MFS Technologies (Hunan) Co. Ltd.	$	2,660	$	—	$	—
MFS		—		—		25
	$	2,660	$	—	$	25
Purchases from affiliates:
MFS	$	8,982	$	—	$	—
	$	8,982	$	—	$	—

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Rent expense for the years ended September 30, 2008, 2007 and 2006 included related-party payments to various Wearnes subsidiaries of $257, $116 and $74, respectively. As of September 30, 2008, 2007 and 2006, the Company leased 239, 61 and 62 square feet of office and manufacturing space from Wearnes related parties.

Net amounts due from/to affiliated companies comprise the following:

	September 30,
	2008		2007
Due from Affiliates
MFS Technologies (Hunan) Co. Ltd.	$	1,130	$	—
	$	1,130	$	—

	September 30,
	2008		2007
Due to affiliates
Suzhou Wearnes-Xirlink Electric Co. Ltd.	$	—	$	30
MFS		3,138		—
	$	3,138	$	30

4. Composition of Certain Balance Sheet Components

Inventories comprise the following:

	September 30,
	2008		2007
Raw materials and supplies	$	21,503	$	25,436
Work-in-progress		24,729		26,341
Finished goods		13,542		11,647
	$	59,774	$	63,424

Property, plant, and equipment, net, comprise the following:

	September 30,
	2008			2007
Land	$	4,054		$	4,054
Building		37,530			39,483
Machinery and equipment		192,188			141,129
Furniture and fixtures		1,750			5,131
Leasehold improvements		16,552			2,703
	$	252,074		$	192,500
Accumulated depreciation and amortization		(91,857	)		(58,867	)
	$	160,217		$	133,633

Depreciation expense for the years ended September 30, 2008, 2007 and 2006, was $30,371, $19,956 and $13,821, respectively.

Included in other assets as of September 30, 2008 and 2007 is capitalized purchased software and internally developed software costs. Amortization of software costs for the years ended September 30, 2008, 2007 and 2006 was $779, $491 and $652, respectively.

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In addition, included in other assets as of September 30, 2008 and 2007 is $2,086 and $1,713, respectively, of deposits on equipment to be purchased.

Accrued liabilities comprise the following:

	September 30,
	2008		2007
Wages and compensation	$	12,704	$	7,200
Warranty accrual		2,601		1,673
Other taxes		585		578
Other		7,048		5,543
	$	22,938	$	14,994

5. Investment—Cornerstone

In June 2004, the Company entered into a definitive agreement with Cornerstone Equipment Management, Inc. (“Cornerstone”), in which the Company agreed to invest $450 in exchange for shares equal to approximately 14% of the ownership of Cornerstone. In addition, the Company agreed to provide certain services to Cornerstone at the Company’s standard terms and conditions. The Company accounts for its investment in Cornerstone using the cost method of accounting and periodically reviews the investment for other-than-temporary declines in fair value, as defined in SFAS 115-1 and 124-1, The Meaning of Other Than-Temporary-Impairment and Its Application to Certain Investments. Fair value for this investment is evaluated based on several factors including: recent financial information, cash position, historical and forecasted financial and business information, and estimates of fair value of the Cornerstone common stock or potential new investments in Cornerstone by third parties. Based on the information acquired through these sources, the Company believes that the value of this investment experienced a decline in value during the second quarter of fiscal year 2008 that is other-than-temporary, which resulted in a recognized loss of $450 that was included in other income (expense), net for the year ended September 30, 2008.

6. Income Taxes

United States and foreign (loss) income before taxes are as follows:

	Years Ended September 30,
	2008		2007			2006
United States	$	42,677	$	(5,261	)	$	45,685
Foreign		20,325		6,381			12,892
	$	63,002	$	1,120		$	58,577

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The (benefit from) provision for income taxes consisted of the following components:

	Years Ended September 30,
	2008			2007			2006
Current
Federal	$	19,141		$	(2,732	)	$	16,399
State		2,122			(69	)		2,317
Foreign		6,054			1,608			1,927
	$	27,317		$	(1,193	)	$	20,643
Deferred
Federal	$	(2,179	)	$	421		$	(1,799	)
State		(69	)		(67	)		(89	)
Foreign		(2,545	)		(1,079	)		(535	)
		(4,793	)		(725	)		(2,423	)
	$	22,524		$	(1,918	)	$	18,220

Deferred tax assets and (liabilities) comprise the following:

	September 30,
	2008			2007
Deferred tax assets
Inventory	$	2,605		$	2,432
Depreciation		2,716			1,559
Stock-based compensation		1,494			940
Accrued expenses		1,058			472
Allowance for doubtful accounts		591			506
Warranty reserve		1,021			658
Capital loss carryforward		329			59
Net operating loss		973			299
Investments		633			272
Asset impairment		786			—
State taxes		697			—
Other		68			85
Subtotal deferred tax assets		12,971			7,282
Valuation allowance		(962	)		(331	)
Total deferred tax assets		12,009			6,951
Deferred tax liabilities
Depreciation		(261	)		(419	)
Amortization		(212	)		(108	)
State taxes		—			(166	)
Other		(1	)		—
Total deferred tax liabilities		(474	)		(693	)
Net deferred tax assets	$	11,535		$	6,258

The Company established a valuation allowance of approximately $962 and $331 as of September 30, 2008 and 2007, respectively. The valuation allowance is comprised of capital loss carryforwards and deferred income tax benefits attributable to the Company’s investments. There is an uncertainty regarding the future realization of these deferred tax assets and management has determined that it is more likely than not that it will not receive future tax benefits.

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As of September 30, 2008 and 2007, the Company had net operating loss carryforwards for state tax purposes of approximately $0, and $2,572, respectively. In addition, the Company had net operating loss carryforwards for foreign tax purposes of approximately $3,891 and $797, respectively. These net operating loss carryforwards will begin to expire in 2012 for foreign tax purposes.

The (benefit from) provision for income taxes differs from the amount obtained by applying the statutory tax rate as follows:

	Years Ended September 30,
	2008		2007		2006
Provision for income taxes at statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in taxes resulting from:
State taxes, net of federal benefit	2.3	%	(7.9	)%	2.5	%
Foreign tax credit	(0.2	)%	(96.4	)%	(1.6	)%
Foreign rate variance	(5.7	)%	(152.2	)%	(5.3	)%
Nondeductible expenses	0.3	%	4.1	%	0.1	%
Return to provision adjustments	0.0	%	7.2	%	0.2	%
IRS exam	0.0	%	18.9	%	0.0	%
Tax contingency reserve	3.2	%	17.7	%	0.0	%
Other	0.9	%	2.4	%	0.2	%
	35.8	%	(171.2	)%	31.1	%

The Company currently enjoys tax holidays and other tax incentives for its operations in China. The tax holiday rate of 12% for the Company’s first manufacturing facility in China, MFC1, expired on December 31, 2007, and MFC1 is now subject to an income tax rate of 25%, based on current law.

The Company has obtained two tax holidays for its second manufacturing facility in China, MFC2. The first tax holiday, which commenced in 2004, allows for tax-free operation for the first two years (beginning in the first year of profitability) followed by three years of operation at a reduced rate of income tax equal to 12.5% on the profits generated from the original registered capital. The second tax holiday, which commenced in 2006, allows for tax-free operation for the first two years followed by three years of operation at a reduced rate of income tax equal to 12.5% on the profits generated from the increased capital. On February 1, 2008, MFC2 became subject to a tax holiday rate of 12.5% on both the original and increased capital. However, these tax holidays may be challenged, modified or even eliminated by taxing authorities or changes in law.

Had the Company not received the tax holiday for its operations in China, net income for the years ended September 30, 2008, 2007 and 2006 would have been decreased to the pro forma amounts below:

	Years Ended September 30,
	2008			2007			2006
Net income, as reported	$	40,479		$	3,038		$	40,357
Additional tax in China		(6,520	)		(1,520	)		(4,373	)
Pro forma net income	$	33,959		$	1,518		$	35,984
Net income per share
Basic, as reported	$	1.63		$	0.12		$	1.66
Basic, pro forma	$	1.37		$	0.06		$	1.48
Diluted, as reported	$	1.59		$	0.12		$	1.59
Diluted, pro forma	$	1.34		$	0.06		$	1.42

Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $73,120, $55,643 and $48,811 for the years ended September 30, 2008, 2007 and 2006, respectively. Those earnings are considered to be permanently reinvested and, accordingly, no provision for U.S. federal and state taxes has been provided

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thereon. Upon repatriation of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes and withholding taxes payable to the foreign country. It is not practical to estimate the amount of unrecognized deferred U.S. taxes on those undistributed earnings.

As of October 1, 2007, the Company adopted FIN 48. FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities, based on the technical merits of the position. The amount recognized is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. As a result of the implementation of FIN 48, the Company recognized a $241 decrease to the October 1, 2007 balance of retained earnings related to adjustments to certain unrecognized tax benefits.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the year:

Unrecognized tax benefit at October 1, 2007	$	5,070
Increases for positions taken in current period		4,554
Increases for positions taken in prior period		3,507
(Decreases) for positions taken in prior period		(67	)
(Decreases) for settlement with taxing authorities		(164	)
Decreases for lapse in applicable statute of limitations		—
Unrecognized tax benefit at September 30, 2008	$	12,900

As of September 30, 2008, the Company had $12,900 of unrecognized tax benefits on the balance sheet, of which $6,190, if recognized, would affect the effective tax rate, and $6,710, if recognized, would reduce the Company’s deferred tax assets or other tax receivables. The Company expects a reduction of approximately $2,800 of unrecognized tax benefits within the next 12 months primarily due to expiration of statutes of limitation and audit settlement. The Company anticipates that there will be other changes to the unrecognized tax benefit associated with uncertain tax positions due to the expiration of statutes of limitation, payment of tax on amended returns, audit settlements and other changes in reserves. However, due to the uncertainty regarding the timing of these events, a current estimate of the range of other changes that may occur within the next twelve months cannot be made.

The Company recognizes potential accrued interest and penalties related to unrecognized tax benefit in income tax expense. Related to the unrecognized tax benefits noted above, the Company accrued $228 and ($23) of interest and penalties, respectively during fiscal year 2008 and in total, has recognized a liability of $881 for interest as of September 30, 2008.

The Company and its subsidiaries conduct business globally and, as a result, it or one or more of its subsidiaries file income tax returns in the U.S. federal and various state, local and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal tax examinations for years through fiscal 2004. With limited exceptions, the Company is no longer subject to state and foreign income tax examinations by taxing authorities for years through fiscal 2002. The Chinese tax authority is currently auditing MFC1’s income tax returns for tax years 2005 through 2007 and MFC2’s income tax returns for tax years 2004 through 2007.

7. Lines of Credit

In January 2008, the Company’s subsidiaries in China entered into credit line agreements with Bank of China (“BC”) providing for two lines of credit in an aggregate of 200,000 RMB ($29,333 at September 30, 2008). The lines of credit will mature in January 2009 and bear interest at LIBOR (4.052% at September 30, 2008). The credit facility contains covenants restricting the pledging of assets. As of September 30, 2008 and September 30, 2007, the Company had no borrowings outstanding under these lines of credit. In July 2008, the

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Company’s subsidiaries in China entered into credit line agreements with Shanghai Pudong Development Bank (“SPDB”), which provide for two borrowing facilities, for 75,000 RMB each ($11,000 each at September 30, 2008). The lines of credit will mature in July 2009 and pursuant to such agreements, for so long as MFC1 or MFC2, as applicable, has at least U.S. $3,000 on deposit with SPDB, the interest rate under the applicable credit line will be LIBOR (4.052% at September 30, 2008), minus 15 basis points. Otherwise, interest shall be determined within the scope ruled by the People’s Bank of China and if there is no such rule, as determined by SPDB. The credit facility documents contain covenants restricting the pledging of assets. SPDB also has the right to adjust the MFC1 and MFC2 Credit Lines and the duration of such credit in the event of specified events. These specified events include: (i) a significant adjustment in a country’s currency policy; (ii) significant change in MFC1 or MFC2’s financial position, business environment or marketplace or that of the Company as guarantor; (iii) MFC 1 or MFC2 undergo a significant organizational change such as merger, termination, or divestiture; (iv) MFC1 or MFC2 do not use the facility according to the agreed on terms or violate the terms of the facility, there is damage or loss to pledged assets or hidden assets, withdrawn funds or MFC1 or MFC2 fail to meet its debt obligations; and (v) other occasions or situations where in the analysis of SPDB, situations would lead to the reduction of MFC1 or MFC2’s debt re-payment ability. As of September 30, 2008 and 2007, the Company had no borrowings under this line of credit.

In July 2005, the Company entered into a $15,000 credit facility with Norddeutsche Landesbank Girozentrale (“NLG”). Borrowings under this facility would bear interest at LIBOR plus 2.5% correlating with the time period of the borrowing. Each borrowing under the facility matured six months after the borrowing date with respect to such borrowing. On March 31, 2008 the Company and NLG mutually agreed to terminate this credit facility. A summary of the lines of credit follows:

	Amounts Available at September 30, 2008		Amounts Outstanding at September 30,
			2008		2007
Line of credit (BC)	$	29,333	$	—	$	—
Line of credit (SPDB)		22,000		—		—
	$	51,333	$	—	$	—

8. Segment Information

Based on the evaluation of the Company’s internal financial information, management believes that the Company operates in one reportable segment which is primarily engaged in the engineering, design and manufacture of flexible circuit boards along with related component assemblies. The Company operates in three geographical areas: domestic (U.S.), China and Singapore. Net sales are presented based on the country in which the sales originate (i.e., where the legal entity is domiciled). The financial results of the Company’s geographic segments are presented on a basis consistent with the consolidated financial statements.

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Financial information by geographic segment is as follows:

	Years Ended September 30,
	2008			2007			2006
Net sales
United States	$	709,726		$	485,088		$	477,002
China		519,062			307,186			251,236
Singapore		—			—			—
Eliminations		(499,983	)		(284,127	)		(224,034	)
Total	$	728,805		$	508,147		$	504,204
Operating (loss) income
United States	$	26,017		$	(17,884	)	$	35,900
China		37,978			17,575			21,649
Singapore		(238	)		—			—
Eliminations		406			—			—
Total	$	64,163		$	(309	)	$	57,549
Depreciation and amortization
United States	$	3,417		$	3,462		$	3,510
China		27,732			16,985			10,963
Singapore		1			—			—
Total	$	31,150		$	20,447		$	14,473

	Years Ended September 30,
	2008			2007
Total assets
United States	$	382,229		$	307,661
China		204,250			236,432
Singapore		59,999			—
Eliminations		(158,868	)		(166,806	)
Total	$	487,610		$	377,287
Long-lived assets
United States	$	20,422		$	20,421
China		139,913			113,347
Singapore		85			—
Total	$	160,420		$	133,768
Capital Expenditures
United States	$	3,039		$	1,869
China		42,825			55,555
Singapore		85			—
Total	$	45,949		$	57,424

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9. Significant Concentrations

Customers and Vendors

Net sales to the Company’s four largest Original Equipment Manufacturer (“OEM”) customers, inclusive of net sales made to their designated sub-contractors, are presented below.

	Years Ended September 30,
	2008		2007		2006
Net sales
OEM—A	20	%	57	%	86	%
OEM—B	45	%	25	%	5	%
OEM—C	20	%	4	%	—
OEM—D	11	%	8	%	—

Net sales direct to the Company’s largest customers, exclusive of OEM subcontractor relationship, which account for more than 10% of the Company’s net sales, and accounts receivable from such customers are presented below. The customers consist principally of major electronic companies or electronics company sub-contractors.

	Years Ended September 30,
	2008		2007		2006
Net sales
Customer—1	18	%	46	%	71	%
Customer—2	37	%	19	%	3	%
Customer—3	15	%	6	%	1	%
Customer—4	4	%	—		—
	Years Ended September 30,
	2008		2007		2006
Accounts Receivable
Customer—1	13	%	39	%	69	%
Customer—2	23	%	32	%	3	%
Customer—3	23	%	7	%	—
Customer—4	16	%	1	%	—

Purchases from the Company’s vendors, which account for more than 10% of the Company’s total purchases and accounts payable, are presented below.

	Years Ended September 30,
	2008		2007		2006
Purchases
Vendor—A	3	%	8	%	10	%
Vendor—B	6	%	6	%	19	%
Vendor—C	18	%	10	%	—
Vendor—D	9	%	22	%	4	%
Vendor—E	5	%	1	%	—
	Years Ended September 30,
	2008		2007		2006
Accounts payable
Vendor—C	13	%	11	%	—
Vendor—D	5	%	7	%	6	%
Vendor—E	12	%	1	%	—

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The Company’s customers require the use of materials that have been pre-qualified by them. Any interruption in pre-qualified sources of materials may result in the Company’s inability to timely deliver products to its customers.

Geographic

Information regarding net sales by geographical area based on the location of the customer is summarized below:

	Years Ended September 30,
	2008		2007		2006
North America	$	100,954	$	92,681	$	144,946
China		192,408		185,196		259,892
Hong Kong		158,150		126,037		50,356
Malaysia		206,606		64,237		10,770
Asia-Pacific		14,473		23,364		27,342
Europe		55,870		9,094		7,341
Other foreign		344		7,538		3,557
	$	728,805	$	508,147	$	504,204

Sales to customers in North America include the United States, Canada, Mexico and Puerto Rico. Sales to customers in Asia-Pacific countries include Singapore, Japan, Malaysia, Thailand, Taiwan, the Philippines and Korea. Sales to customers in Europe include the Netherlands, Austria, Sweden, Hungary, Denmark, Italy, Scotland, Germany, France and the United Kingdom.

Industry

In the years ended September 30, 2008, 2007 and 2006, 91%, 92% and 91% of net sales were derived from sales to companies that provide products or services to the wireless industry. The wireless industry is subject to economic cycles and has experienced periods of slowdown in the past. It is likely that current economic conditions will impact unit volume shipments.

10. Commitments and Contingencies

Operating Leases

The Company leases its facilities and certain assets under non-cancelable operating leases which expire at various dates through 2011. Future minimum lease payments under non-cancelable operating leases at September 30, 2008 are as follows:

Year Ending September 30,	Operating Leases
2009	$	1,281
2010		837
2011		292
2012		—
2013 and after		—
Total	$	2,410

Total rent expense was $1,828, $1,301 and $1,214 for the years ended September 30, 2008, 2007 and 2006, respectively.

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Capital Leases

During the year ended September 30, 2007 Aurora Optical extended the terms of its equipment capital lease by one year. During fiscal 2008, the capital lease obligation for Aurora Optical was paid in full. The Company is obligated to pay $7 during the year ended September 30, 2009, under the terms of a phone system lease.

Terminated MFS Offer

In March 2006, the Company announced a proposed offer (the “MFS Offer”) to acquire all of the outstanding ordinary shares of MFS, a related party publicly traded in Singapore and a subsidiary of Wearnes. Approval of the shareholders of Wearnes for the MFS Offer was a pre-condition (the “WBL Shareholder Precondition”) to the Company making the MFS Offer. On June 26, 2007, Wearnes announced that its shareholders had voted against tendering its shares of MFS for stock consideration in the MFS Offer, and against voting Wearnes’ MFLEX stock in favor of the MFS Offer. Accordingly, since one of the pre-conditions to the MFS Offer, namely the WBL Shareholder Precondition, would not be met by June 30, 2007, the Company withdrew the Company’s amended Registration Statement on Form S-4 regarding the MFS Offer on June 28, 2007. As a result, $7,821 in deferred transaction costs were expensed during the year ended September 30, 2007.

Litigation

The Company is involved in litigation from time to time in the ordinary course of business; the outcome of which the Company’s management believes will not have a material adverse affect on the Company’s financial position, results of operations or cash flows.

Other Commitments

As of September 30, 2008 and 2007, the Company had outstanding purchase commitments related to capital projects at its various facilities which totaled $9,203 and $8,457, respectively.

Pursuant to the laws applicable to the Peoples’ Republic of China’s Foreign Investment Enterprises, the Company’s two wholly owned subsidiaries in China, MFC1 and MFC2, are restricted from paying cash dividends on 10% of after-tax profit, subject to certain cumulative limits. The amount of net income restricted by the foregoing for the years ended September 30, 2008, 2007 and 2006 are $8,106, $5,362 and $4,979, respectively.

Indemnifications

In the normal course of business the Company provides indemnification and guarantees of varying scope to customers and others. These indemnities include among other things, intellectual property indemnities to customers in connection with the sale of the Company’s products, warranty guarantees to customers related to products sold and indemnities to the Company’s directors and officers to the maximum extent permitted by Delaware law. The duration of these indemnities and guarantees varies, and, in certain cases, is indeterminate. Historically, costs related to these indemnification provisions have not been significant and with the exception of the warranty accrual (Note 1) no liabilities have been recorded for these indemnification provisions.

11. Stock Option Plans

1994 Stock Plan

In December 1994, the Company adopted the 1994 Stock Plan (the “1994 Plan”), which is administered by the Company’s board of directors or a committee thereof (the “administrator”). The 1994 Plan provides for the granting of stock options and stock purchase rights to employees, officers, directors (including non-employee

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directors) and consultants. The administrator determined the term of the options, which was prohibited from exceeding ten years from the grant date. Options granted under the 1994 Plan vest based on periods determined by the administrator, which have been one year for employees with greater than one year of service with the Company and two years for employees with less than one year of service with the Company. A total of 2,049,750 shares of common stock have been authorized for issuance and reserved under the 1994 Plan. The 1994 Plan officially terminated on December 9, 2004. Effective with the adoption of the 2004 Plan the Company ceased granting options under the 1994 Plan.

2004 Stock Incentive Plan

In June 2004, the Company adopted the 2004 Stock Incentive Plan, as amended from time to time (the “2004 Plan”), which is also administered by the administrator. The 2004 Plan provides for the granting of stock options, stock appreciation rights, restricted share awards and restricted stock units to employees, directors (including non-employee directors), advisors and consultants. Options granted under the 2004 Plan vest and expire based on periods determined by the administrator, but in no event can the expiration date be later than ten years from the date of grant (five years after the date of grant if the grant is an incentive stock option to an employee who owns more than 10% of the total combined voting power of all classes of the Company’s capital stock (a “10% owner”). Options may be either incentive stock options or nonqualified stock options. The per share exercise price on an incentive stock option shall not be less than 100% of the fair market value of the Company’s common stock on the date the option is granted (110% of the fair market value if the grant is to a 10% owner). The per share exercise price of a nonqualified stock option shall not be less than 85% of the fair market value of the Company’s common stock on the date the option is granted. A total of 2,876,400 shares of common stock have been authorized for issuance and reserved under the 2004 Plan.

The Company’s assessment of the estimated fair value of the stock options granted is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables and the related tax impact. The Company utilizes the Black-Scholes option valuation model to estimate the fair value of stock options granted. Expected forfeitures of stock options are estimated based on the historical turnover of the Company’s employees. Prior to SFAS 123R, the Company recognized forfeitures under SFAS 123 as they occurred. The fair value of restricted stock units granted is based on the grant date price of the Company’s common stock.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. This model also requires the input of highly subjective assumptions including:

(a) the expected volatility of the Company’s common stock price, which the Company determines based on historical volatility of the Company’s common stock since the date of the Company’s IPO on June 30, 2004;

(b) expected dividends, which are zero, as the Company does not currently anticipate issuing dividends;

(c) expected life of the stock option, which is estimated based on the historical stock option exercise behavior of the Company’s employees; and

(d) risk free interest rate is based on observed interest rates (zero coupon U.S. Treasury debt securities) appropriate for the expected holding period.

The Company uses the minimum value method for each option grant prior to the Company’s IPO and the Black-Scholes option valuation model for each option grant on the date of and subsequent to the Company’s IPO. No stock options were granted during the year ended September 30, 2008.

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Stock Options

Stock option activity for the years ended September 30, 2008, 2007 and 2006 under the 1994 and 2004 Plans is summarized as follows:

	Number of Shares		Weighted- Average Exercise Price
Options outstanding at September 30, 2005	1,981,705		$	7.65
Exercised	(263,487	)		5.94
Forfeited	(12,151	)		10.00
Options outstanding at September 30, 2006	1,706,067		$	7.89
Exercised	(127,667	)		5.00
Forfeited	(20,860	)		10.00
Options outstanding at September 30, 2007	1,557,540		$	8.10
Exercised	(378,422	)		5.76
Forfeited	(23,706	)		18.32
Options outstanding at September 30, 2008	1,155,412		$	8.66
Exercisable at September 30, 2008	1,140,402		$	8.54
Vested and expected to vest at September 30, 2008	1,154,372		$	8.65

The intrinsic value of options exercised during the year ended September 30, 2008 and 2007 was $1,251 and $1,582, respectively. During the years ended September 30, 2008 and 2007, the Company recognized compensation costs of $903 and $1,176, respectively, related to stock options. As of September 30, 2008 and 2007 there were stock options exercisable for up to 1,140,402 and 1,339,190 shares of common stock outstanding, respectively. Unearned compensation of $206 existed at September 30, 2008, related to non-vested stock options which will be recognized into expense over a weighted average period of 0.7 years.

The following table summarizes information about stock options outstanding and exercisable as of September 30, 2008:

Outstanding							Exercisable
Range of Exercise Prices	Number of Options	Weighted- Average Remaining Contractual Life (in Years)	Weighted- Average Exercise Price		Aggregate Intrinsic Value (000’s)		Number of Options Exercisable	Weighted- Average Exercise Price		Aggregate Intrinsic Value (000’s)		Weighted- Average Remaining Contractual Life (in Years)
$2.07	67,875	0.3	$	2.07	$	864	67,875	$	2.07	$	864	0.3
$3.73-$4.00	345,155	0.9		3.99		3,726	345,155		3.99		3,726	0.9
$8.75	10,000	5.9		8.75		60	10,000		8.75		60	5.9
$10.00	608,382	5.7		10.00		2,914	608,382		10.00		2,914	5.7
$16.80-$18.08	79,000	6.7		17.41		—	63,990		17.41		—	6.7
$20.81	45,000	6.4		20.81		—	45,000		20.81		—	6.4
	1,155,412		$	8.66	$	7,564	1,140,402	$	8.54	$	7,564

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Restricted Stock Units

Restricted stock unit activity for the years ended September 30, 2008, 2007 and 2006 under the 2004 Plan is summarized as follows:

	Number of Shares		Weighted- Average Grant-Date Fair Value
Non-vested shares outstanding at September 30, 2005	—		$	—
Granted	88,290			42.86
Forfeited	(1400	)		53.42
Non-vested shares outstanding at September 30, 2006	86,890			42.69
Granted	190,200			17.80
Vested	(27,472	)		47.61
Forfeited	(2,500	)		42.79
Non-vested shares outstanding at September 30, 2007	247,118		$	22.99
Granted	264,443			19.18
Vested	(34,717	)		29.94
Forfeited	(72,113	)		17.78
Non-vested shares outstanding at September 30, 2008	404,731		$	20.87

The Company made non-performance-based and performance-based restricted stock unit (“RSU”) grants during the years ended September 30, 2008 and 2007 totaling 264,443 and 190,200, respectively, of the Company’s common stock under the 2004 Plan to certain employees, including executive officers and directors at no cost to the individuals. Each RSU represents one hypothetical share of the Company’s common stock, without voting or dividend rights. The non-performance-based RSUs granted to employees vest over a period of three years with one-third vesting on each of the anniversary dates of the grant date. The non-performance-based RSUs granted to directors vest upon the earlier to occur of (i) the Company’s next annual stockholders’ meeting or (ii) the anniversary date of the grant date; provided that one director grant made in 2008 vests over a period of three years with one-third vesting on each of the anniversary dates of the grant date. No shares are delivered until the individual satisfies the vesting schedule. Unearned compensation related to the RSUs is determined based on the fair value of the Company’s stock on the date of grant and is amortized to expense over the vesting period. In March 2006 and 2007, the Company also made restricted stock unit grants equal to 8,000 shares under the 2004 Plan to certain members of the board of directors. The RSUs granted to directors vest upon the earlier of one year after the date of grant or the next regularly scheduled annual meeting of stockholders. With respect to RSU grants equal to 155,500 of the Company’s common stock made during March 2007, one-third of the units were subject to vesting requirements based on certain financial metrics being achieved by the Company during fiscal 2007, and one-third of the units will vest on each of November 15, 2008 and 2009. The Company did not meet the vesting requirements placed on the March 2007 grant and one-third of the units associated with that grant lapsed in October 2007.

Unearned compensation related to the restricted stock units is determined based on the fair value of the Company’s stock on the date of grant and the number of units management estimates will vest if there are vesting requirements associated with the grant. The unearned compensation is amortized to expense on a straight-line basis over the vesting period.

Unearned compensation related to restricted stock units was $5,783 as of September 30, 2008, and will be recognized into expense over a weighted average vesting period of 2.1 years. During the year ended September 30, 2008 and 2007, the Company recognized compensation expense of $2,520 and $1,539 related to restricted stock units, respectively. The exercise price of all restricted stock units is zero. The Company anticipates making future grants of restricted stock units in lieu of stock options.

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The Company realized a tax benefit of $1,071 and $732 for the years ended September 30, 2008 and 2007, respectively, related to SFAS No. 123R.

Performance-Based Restricted Stock Units

On June 11, 2008, the Company’s board of directors approved the grant of 22,000 performance-based RSUs to certain employees, including executive officers, under the 2004 Plan. These performance-based RSU’s vest and become fully exercisable subject to the achievement of defined performance objectives pertaining to each grant, with vesting to occur between the date of grant and through March 31, 2011. In accordance with SFAS No. 123R, at the end of each reporting period, the Company evaluates the probability that the performance-based RSUs granted will vest. The Company records share-based compensation cost based on the grant-date fair value and the probability that the performance metrics will be achieved. As of the year ended September 30, 2008, the Company has reviewed each of the underlying performance targets related to its outstanding performance based RSU grants and has determined that it is probable that the RSU’s will vest.

The following table summarizes information about RSUs outstanding, as of September 30, 2008:

Range of Grant Prices	Number of Units	Average Remaining Contractual Life (Years)	Weighted Average Grant Fair Value
$15.27 – $19.88	311,443	9.0	$	18.17
$20.04 – $25.84	59,893	9.5		22.97
$38.65	28,595	7.2		38.65
$64.50 – $65.47	4,800	1.3		64.50
	404,731	9.0	$	20.87

12. Employee Benefit Plan

The Company maintains a 401(k) defined contribution plan (the “Benefit Plan”). The Benefit Plan covers substantially all employees of the Company who meet minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions are determined at the discretion of the Company’s board of directors. Contributions to the Benefit Plan were $256, $151 and $145 for the years ended September 30, 2008, 2007 and 2006, respectively.

13. Restructuring Costs and Long-Lived Asset Impairment

At the end of the fourth quarter of fiscal 2008, due to the closure of the Tucson, Arizona facility of Aurora Optical, we completed our long-lived asset impairment analysis and a restructuring cost analysis in accordance with the guidance of SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets and SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities.

Long-Lived Asset Impairment: Based on our analysis of the net book value and fair market value of the Aurora Optical assets which are planned for sale, after deducting the net book value of assets being transferred to our Anaheim facility, we determined that

the remaining assets of Aurora Optical were impaired, and we recorded a pre-tax impairment charge of $2,000. By major class of asset, the impairment charge is composed of the following:

	For the Year Ended September 30, 2008
Long-Lived Asset Impairment Charges:
Land & Building	$	1,300
Manufacturing Equipment		600
Other Assets		100
Total Impairment Charge	$	2,000

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Restructuring Cost: Based on our analysis, a pre-tax restructuring charge composed of severance, relocation, and other costs related to the closure of Aurora Optical was estimated at $540, of which $180 was recorded in the fourth quarter of 2008, with the remainder of $360 to be recorded in the first quarter of fiscal 2009.

The $180 recorded in fiscal 2008 related to severance and outplacement charges and has been accrued as of September 30, 2008. The remaining restructuring charge to be recorded in the first quarter of fiscal 2009 is composed of $166 of severance and outplacement, $144 of relocation, and $50 of contract termination costs. There were no impairments to long-lived assets or restructuring costs for the fiscal years ended September 30, 2007 and September 30, 2006.

14. Subsequent Events

In November 2008, the Company entered into a Share Purchase Agreement (the “Agreement”) with Multi-Fineline Electronix Singapore Pte. Ltd., a wholly owned subsidiary of the Company (“MFLEX Singapore”) to acquire all of the issued ordinary shares of Pelikon Limited (“Pelikon”), a privately held technology company focused on the development of printed segmented electroluminescent displays and keypads, from the shareholders of Pelikon.

Pursuant to the terms of the Agreement, in consideration for the purchase of the issued ordinary shares of Pelikon, M-Flex Singapore shall issue, at the closing, unsecured promissory notes in an aggregate principal amount equal to $10,707, as follows: (i) up to $5,850 in unsecured promissory notes payable to all shareholders of Pelikon (the “Sellers”), on a pro rata basis (the “Sellers Promissory Notes”), and (ii) up to $4,857 in unsecured promissory notes payable to certain secured debt holders of Pelikon in settlement of debt outstanding and owed to them by Pelikon as of the closing (the “Lender Promissory Notes” and, together with the Sellers Promissory Notes, the “Initial Consideration”).

The Sellers Promissory Notes and Lender Promissory Notes accrue interest at the rate of 6% per year, and the aggregate principal amount and any accrued interest thereon is due and payable on the date that is two years following the closing, subject to certain exceptions in the case of the Sellers Promissory Notes. The aggregate principal amount of the Sellers Promissory Notes and any accrued interest thereon is subject to reduction, on a dollar for dollar basis, for, among other things, transaction costs which remain outstanding at the closing, past due real property lease obligations and certain other accounts payable and accrued expenses outstanding as of the closing in excess of agreed upon levels, and 50% of the stamp duty charge arising out of or in connection with the transactions. The Sellers Promissory Notes are subject to further reduction in the event that M-Flex Singapore or any of its affiliates is entitled to recover damages from the Sellers pursuant to the terms of the Agreement.

In addition to the Initial Consideration, the Sellers may receive contingent consideration (the “Contingent Consideration”) for each pSel Hybrid Display unit sold to a third party by M-Flex Singapore, Pelikon or any of their respective affiliates or licensees, net of applicable returns (including returns for warranty claims), during calendar years 2009 and 2010 (each calendar year, an “Earn-Out Period”), conditional upon certain sales levels being achieved in each of calendar years 2009 and 2010 (each, an “Earn-Out Target”). Any Contingent Consideration paid shall not exceed $2,190 in 2009 and $7,236 in 2010, and if one or both of the Earn-Out Targets are not achieved the Contingent Consideration will not be paid for one or both of the Earn-Out Periods, as applicable. Any Contingent Consideration payable is subject to reduction, on a dollar for dollar basis, in the event that M-Flex Singapore or any of its affiliates is entitled to recover damages from the Sellers pursuant to the terms of the Agreement and the aggregate principal amount and accrued interest under the Sellers Promissory Notes is not sufficient to cover such damages.

Completion of the transactions contemplated by the Agreement is subject to customary closing conditions, including the retention of certain key employees, receipt of required third party consents, the absence of certain claims concerning Pelikon’s intellectual property, the absence of certain liabilities, and Sellers holding at least 90% of the issued ordinary shares of Pelikon must have agreed to sell their shares to M-Flex Singapore. Until the

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transactions are completed, Pelikon will continue to operate its business independently. Following the completion of the transactions, Pelikon will operate as a wholly owned subsidiary of M-Flex Singapore. The closing is targeted to occur on or before December 31, 2008. The Company may record a one-time charge for purchased research and development expenses related to the acquisition of Pelikon in the quarter in which the transaction closes. The amount of that charge, if any, has not yet been determined. A preliminary purchase price allocation is anticipated to be recorded by December 31, 2008.

On December 4, 2008, the Company’s board of directors authorized a share repurchase plan, pursuant to which the Company may purchase up to 2,250,000 shares in the aggregate of the Company’s common stock, to be implemented by management as appropriate. The Company expects to enter into an agreement with respect to this repurchase plan during December 2008.

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MULTI-FINELINE ELECTRONIX, INC.

SCHEDULE II—

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

FOR THE YEARS ENDED SEPTEMBER 30, 2008, 2007 AND 2006

(In Thousands)

Allowance for Doubtful Accounts	Balance at Beginning of Year		Additions Charged to Operations		Deductions (Write-offs)			Balance at End of Year
2008	$	1,300	$	5,687	$	(5,467	)	$	1,520
2007	$	604	$	7,554	$	(6,858	)	$	1,300
2006	$	601	$	1,879	$	(1,876	)	$	604

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There have been no changes in our independent registered public accounting firm or disagreements with such accountants on any matter of accounting principles or practices, financial statement disclosure or auditing scope of procedure.

Item 9A. Controls and Procedures

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (the “Exchange Act”). A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of controls to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), management conducted an assessment of the effectiveness of our internal control over financial reporting as of September 30, 2008. In making this assessment, management used the criteria set forth in the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled “Internal Control—Integrated Framework.” Based on this evaluation and on the criteria in Internal Control—Integrated Framework, management has concluded that our internal control over financial reporting was effective as of September 30, 2008.

The effectiveness of the Company’s internal control over financial reporting as of September 30, 2008 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

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Changes in Internal Control over Financial Reporting

During the fourth fiscal quarter, there was no change in our internal control over financial reporting identified in connection with the evaluation described above that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management including our CEO and CFO, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on an evaluation carried out as of the end of the period covered by this Annual Report, under the supervision and with the participation of our management, including our CEO and CFO, our CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), are effective.

Item 9B. Other Information.

On December 5, 2008, our board of directors approved (i) an increase in the calendar year 2009 base salaries of our 2009 named executive officers (“NEOs”) as follows: Reza Meshgin, our president and chief executive officer to $570,000; Tom Liguori, executive vice president and chief financial officer to $340,000; Thomas Lee, our executive vice president of operations to $275,000; and Christine Besnard, our vice president, general counsel and secretary to $260,000 (to be pro-rated based on a part-time schedule), (ii) an increase in the car allowance for NEOs to $12,000 per year, and (iii) a tax and financial planning allowance of $5,000 per year for NEOs.

In addition, on December 5, 2008, the special compensation committee of our board of directors, comprised solely of independent, non-employee directors, approved a fiscal year 2009 bonus plan, pursuant to which the NEOs can obtain a cash bonus (“Bonus”), at a target level equal to seventy-five percent for Mr. Meshgin, and fifty percent for Messrs. Liguori and Lee and Ms. Besnard, of such executive’s annual base salary. The bonus plan includes net revenue, net income and return on invested capital metrics which must be met in order for the NEOs to be awarded the Bonuses. In certain specified circumstances, the Bonuses may exceed these percentages.

Also on December 5, 2008, our special compensation committee approved entering into stock appreciation right agreements under our 2004 Stock Incentive Plan with certain of its employees, including the NEOs. The agreements cover grants of stock appreciation rights that will vest in one installment three years after the applicable grant date.

We recently determined to effect a layoff in our facilities in China in order to reduce our labor costs. On November 28, 2008, we posted an internal notice about potential layoffs, and subsequently we formally submitted our proposed plan of termination to the Chinese authorities. We intend to commence notifying affected employees on or about December 29, 2008.

Our plan of termination involves eliminating approximately 700 to 1,000 positions; or approximately four to five percent of our overall workforce. We expect this will result in a one-time incurrence of severance related expenses of between $1.0 to $1.5 million during the first and second quarters of fiscal 2009; however, we expect to realize cost savings in future periods as a result of increased efficiencies that we expect to realize through this reduction in labor. The expected completion date of this termination plan is on or before December 31, 2008.

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Part III

Item 10. Directors, Executive Officers and Corporate Governance.

Executive Officers of the Registrant

The following table sets forth information about our executive officers as of November 30, 2008:

Name	Age	Position(s)
Reza Meshgin	45	President and Chief Executive Officer
Thomas Liguori	50	Executive Vice President and Chief Financial Officer
Thomas Lee	49	Executive Vice President of Operations
Christine Besnard	38	Vice President, General Counsel and Secretary

Reza Meshgin joined us in June 1989, assumed his current position as our President and Chief Executive Officer in March 2008 and was elected to the Board of Directors in April 2008. Prior to his current role, Mr. Meshgin served as our President and Chief Operating Officer from January 2003 through February 2008, was Vice President and General Manager from May 2002 through December 2003, and prior to that time was our Engineering Supervisor, Application Engineering Manager, Director of Engineering and Telecommunications Division Manager. Mr. Meshgin holds a B.S. in Electrical Engineering from Wichita State University and an M.B.A. from University of California at Irvine.

Thomas Liguori joined us as Chief Financial Officer and Executive Vice President in February 2008. Prior to joining us, Mr. Liguori served as Chief Financial Officer at Hypercom, Inc. from November 2005 to February 2008, where he designed and built the global finance and administration functions. From February 2005 to November 2005, Mr. Liguori served as Vice President, Finance and Chief Financial Officer at Iomega Corporation, a publicly traded provider of storage and network security solutions, and from April 2000 to February 2005, as Chief Financial Officer at Channell Commercial Corporation, a publicly traded provider of designer and manufacturer of telecommunications equipment. Prior to that time, Mr. Liguori served as Chief Financial Officer of Dole Europe for Dole Food Company and was the top-ranking financial and IT executive in Dole’s operations in Europe, Africa and the Middle East, and as Vice President of Finance at Teledyne. Mr. Liguori holds a Bachelor’s in Business Administration, Summa Cum Laude, from Boston University and completed a Master’s in Business Administration in Finance, Summa Cum Laude, from Arizona State University. He is a Certified Management Accountant and a Certified Financial Manager.

Thomas Lee joined us in October 1986 as our Supervisor of Photo Department and subsequently served as our Manufacturing Manager and Director of Operations from May 1995 to May 2002. Since May 2002, Mr. Lee has served as our Executive Vice President of Operations. Prior to joining us, Mr. Lee served as a Mechanical Engineer at the Agricultural Corporation in Burma. Mr. Lee holds a B.E. in Mechanical Engineering from the Rangoon Institute of Technology in Burma.

Christine Besnard joined us as General Counsel in August 2004, assumed the role of Secretary in March 2005 and was named Vice President in March 2006. Prior to joining us, Ms. Besnard was senior corporate counsel at Sage Software, Inc., from August 2000 to July 2004, and a corporate securities associate at Pillsbury, Madison & Sutro LLP. Ms. Besnard holds a bachelor’s degree in political science from San Diego State University and a juris doctor from the University of Southern California Law Center. She was admitted to the California State Bar in 1997.

The information required by this item (with respect to our directors) will be contained in the section called “Election of Directors” in our 2009 Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for our 2009 Annual Meeting of Stockholders expected to be held in March of 2009, and is incorporated herein by reference. Certain information regarding our executive officers required by this item is set forth in Part I of this Annual Report under the caption “Executive Officers of the Registrant.”

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The information required by this item regarding compliance with Section 16(a) of the Exchange Act will be contained in, and is hereby incorporated by reference to, our 2009 Proxy Statement under the caption “Section 16(a) Beneficial Ownership Reporting Compliance.”

We have adopted a Code of Ethics for Senior Officers (“Code of Ethics”), that applies to our CEO, President, CFO and other key management employees (including other senior financial officers) who have been identified by the board of directors. We have also adopted a Code of Business Conduct that applies to all of our employees, officers and directors. The Code of Ethics is included as Exhibit 14.1 to this Annual Report. Each of the Code of Ethics and Code of Business Conduct may be found on our website at www.mflex.com. We will post (i) any waiver, if and when granted, to any provision of the Code of Ethics or Code of Business Conduct (for executive officers or directors) and (ii) any amendment to the Code of Ethics or Code of Business Conduct on our website.

We have a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are Sanford L. Kane (Chairperson), Linda Lim, Ph.D., Donald Schwanz and Sam Yau. All of such members meet the independence standards established by Nasdaq and the requirements under Section 10A of the Exchange Act for serving on an audit committee. Further, our board of directors has determined that Mr. Kane qualifies as an “audit committee financial expert” for audit committee member purposes within the meaning of such regulations.

Item 11. Executive Compensation

The information required by this item regarding executive compensation will be contained in, and is hereby incorporated by reference to, our 2009 Proxy Statement under the captions “Election of Directors—Compensation of Directors,” “Executive Compensation” and “Election of Directors—Compensation Committee Interlocks and Insider Participation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item regarding security ownership of certain beneficial owners and management will be contained in the section called “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in our 2009 Proxy Statement, and is incorporated herein by reference.

Equity Compensation Plan Information

The following summarizes our equity compensation plans at September 30, 2008:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))
	(a)	(b)		(c )
Equity compensation plans approved by security holders	1,560,143	$	6.41	1,337,748
Equity compensation plans not approved by security holders	—		—	—
Total	1,560,143	$	6.41	1,337,748

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Item 13. Certain Relationships, Related Transactions, and Director Independence

The information required by this item regarding certain relationships and related transactions will be contained under the caption “Certain Relationships and Related Transactions” in our 2009 Proxy Statement, and is incorporated herein by reference. The information required by this item regarding director independence will be contained under the caption “Election of Directors” in our 2009 Proxy Statement, and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this item will be contained under the captions “Ratification of Appointment of Independent Registered Public Accounting Firm—Principal Accountant Fees and Services” and “Ratification of Appointment of Independent Registered Public Accounting Firm—Pre-Approval Policies and Procedures” in our 2009 Proxy Statement and is incorporated herein by reference.

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Part IV

Item 15. Exhibits, Financial Statement Schedules

(a) Documents filed as part of this report:

(1) Financial Statements

See Index to Consolidated Financial Statements under Item 8.

(2) Financial Statement Schedule

See Index to Consolidated Financial Statements under Item 8.

(3) Exhibits

See Item 15(b) below. Each management contract or compensatory plan or arrangement required to be filed has been so identified.

(b) Exhibits:

3.2(1)	Restated Certificate of Incorporation of the Company
3.4(2)	Amended and Restated Bylaws of the Company
4.1(1)	Form of Common Stock Certificate
10.1(1)	Form of Indemnification Agreement between the Company and its officers, directors and agents
10.2(1)	1994 Stock Plan of the Company, as amended
10.3(5)	2004 Stock Incentive Plan of the Company, as amended and restated
10.4(1)	Corporate Services Agreement dated as of June 4, 2004 by and between the Company and Wearnes Brothers Services (Private) Limited
10.20(3)	Amended and Restated Stockholders Agreement dated October 25, 2005 between Multi-Fineline Electronix, Inc., Wearnes Technology Pte. Ltd, United Wearnes Technology Pte. Ltd., and WBL Corporation Limited
10.21(4)	Form of Restricted Stock Unit Agreement.
10.38(6)	Master Purchase Agreement between Multi-Fineline Electronix, Inc., Multi-Fineline Electronix (Suzhou) Co., Ltd., and Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Sony Ericsson Mobile Communications (USA) Inc. dated April 19, 2006.
10.39(7)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Bank of China Co., Ltd. Suzhou Wuzhong Sub-branch dated January 24, 2008.
10.40(7)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Bank of China Co., Ltd. Suzhou Wuzhong Sub-branch dated January 24, 2008.
10.41(8)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.42(8)	Collaboration Agreement by and between by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.43(8)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.44(8)	Collaboration Agreement by and between by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.

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10.45*	Form of Stock Appreciation Right Agreement.
10.46*	Share Purchase Agreement by and among Multi-Fineline Electronix Singapore Pte. Ltd., Pelikon Limited (the “Company”), Multi-Fineline Electronix, Inc., the members of the Company set forth on the signatures pages thereto, and Michael Powell, as the Shareholders’ Representative, dated November 18, 2008.
10.47*(9)	Master Development and Supply Agreement by and between Apple Computer, Inc. and Multi-Fineline Electronix, Inc. dated June 22, 2006.
14.1(10)	Code of Ethics for Senior Officers
21.1*	List of Subsidiaries of Registrant
23.1*	Consent of PricewaterhouseCoopers LLP
24.1*	Power of Attorney (see signature page of this Annual Report)
31.1*	Section 302 Certification by the Company’s chief executive officer
31.2*	Section 302 Certification by the Company’s principal financial officer
32.1*	Section 906 Certification by the Company’s chief executive officer and principal financial officer

^* Filed herewith

⁽¹⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Registration Statement on Form S-1, as amended (File No. 333-114510) declared effective by the Securities and Exchange Commission (“SEC”), on June 24, 2004.

⁽²⁾ Incorporated by reference to an exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on May 24, 2005.

⁽³⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2005.

⁽⁴⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on December 9, 2005.

⁽⁵⁾ Incorporated by reference to exhibit (as Appendix A) to the Company’s Proxy Statement for its 2006 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 26, 2006.

⁽⁶⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K/A filed with the SEC on July 26, 2007. Confidential treatment has been granted for certain portions of this agreement.

⁽⁷⁾ Incorporated by reference to exhibits (with same exhibits numbers) to the Company’s Current Report on Form 8-K filed with the SEC on January 30, 2008.

⁽⁸⁾ Incorporated by reference to exhibits (with same exhibits numbers) to the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2008.

⁽⁹⁾ Confidential treatment is being requested with respect to portions of this agreement.

⁽¹⁰⁾ Incorporated by reference to exhibit (with same exhibit numbers) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 20, 2004.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

		Multi-Fineline Electronix, Inc. a Delaware Corporation
Date:	December 8, 2008	By:	/s/    REZA MESHGIN
			Reza Meshgin
			President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Reza Meshgin and Thomas Liguori, and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/S/     PHILIP A. HARDING         Philip A. Harding	Chairman of the Board of Directors	December 5, 2008
/S/    REZA MESHGIN         Reza Meshgin	President, Chief Executive Officer and Director (Principal Executive Officer)	December 5, 2008
/S/    THOMAS LIGUORI         Thomas Liguori	Chief Financial Officer and Executive Vice President (Principal Financial and Accounting Officer)	December 5, 2008
/S/    RICHARD J. DADAMO         Richard J. Dadamo	Director	December 5, 2008
/S/    SANFORD L. KANE         Sanford L. Kane	Director	December 5, 2008
/S/    HUAT SENG LIM, PH.D.         Huat Seng Lim, Ph.D.	Director	December 5, 2008
/S/    LINDA LIM, PH.D.         Linda Lim, Ph.D.	Director	December 5, 2008

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Name	Title	Date
/S/    DONALD SCHWANZ         Donald Schwanz	Director	December 5, 2008
/S/    CHOONG SENG TAN         Choon Seng Tan	Director	December 5, 2008
/S/    SAM YAU         Sam Yau	Director	December 5, 2008

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EXHIBIT INDEX

3.2(1)	Restated Certificate of Incorporation of the Company
3.4(2)	Amended and Restated Bylaws of the Company
4.1(1)	Form of Common Stock Certificate
10.1(1)	Form of Indemnification Agreement between the Company and its officers, directors and agents
10.2(1)	1994 Stock Plan of the Company, as amended
10.3(5)	2004 Stock Incentive Plan of the Company, as amended and restated
10.4(1)	Corporate Services Agreement dated as of June 4, 2004 by and between the Company and Wearnes Brothers Services (Private) Limited
10.20(3)	Amended and Restated Stockholders Agreement dated October 25, 2005 between Multi-Fineline Electronix, Inc., Wearnes Technology Pte. Ltd, United Wearnes Technology Pte. Ltd., and WBL Corporation Limited
10.21(4)	Form of Restricted Stock Unit Agreement
10.38(6)	Master Purchase Agreement between Multi-Fineline Electronix, Inc., Multi-Fineline Electronix (Suzhou) Co., Ltd., and Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Sony Ericsson Mobile Communications (USA) Inc. dated April 19, 2006.
10.39(7)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Bank of China Co., Ltd. Suzhou Wuzhong Sub-branch dated January 24, 2008.
10.40(7)	Line of Credit Agreement between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Bank of China Co., Ltd. Suzhou Wuzhong Sub-branch dated January 24, 2008.
10.41(8)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.42(8)	Collaboration Agreement by and between by and between Multi-Fineline Electronix (Suzhou) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.43(8)	Comprehensive Credit Line Agreement by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.44(8)	Collaboration Agreement by and between by and between Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. and Shanghai Pudong Development Bank Suzhou Branch dated July 31, 2008.
10.45*	Form of Stock Appreciation Right Agreement.
10.46*	Share Purchase Agreement by and among Multi-Fineline Electronix Singapore Pte. Ltd., Pelikon Limited (the “Company”), Multi-Fineline Electronix, Inc., the members of the Company set forth on the signatures pages thereto, and Michael Powell, as the Shareholders’ Representative, dated November 18, 2008.
10.47*(9)	Master Development and Supply Agreement by and between Apple Computer, Inc. and Multi-Fineline Electronix, Inc. dated June 22, 2006.
14.1(10)	Code of Ethics for Senior Officers
21.1*	List of Subsidiaries of Registrant
23.1*	Consent of PricewaterhouseCoopers LLP

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24.1*	Power of Attorney (see signature page of this Annual Report)
31.1*	Section 302 Certification by the Company’s chief executive officer
31.2*	Section 302 Certification by the Company’s principal financial officer
32.1*	Section 906 Certification by the Company’s chief executive officer and principal financial officer

^* Filed herewith

⁽¹⁾ Incorporated by reference to exhibits (with same exhibit numbers) to the Company’s Registration Statement on Form S-1, as amended (File No. 333-114510) declared effective by the Securities and Exchange Commission (“SEC”), on June 24, 2004.

⁽²⁾ Incorporated by reference to an exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on May 24, 2005.

⁽³⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2005.

⁽⁴⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K filed with the SEC on December 9, 2005.

⁽⁵⁾ Incorporated by reference to exhibit (as Appendix A) to the Company’s Proxy Statement for its 2006 Annual Meeting of Stockholders on Form DEF 14A filed with the SEC on January 26, 2006.

⁽⁶⁾ Incorporated by reference to exhibit (with same exhibit number) to the Company’s Current Report on Form 8-K/A filed with the SEC on July 26, 2007. Confidential treatment has been granted for certain portions of this agreement.

⁽⁷⁾ Incorporated by reference to exhibits (with same exhibits numbers) to the Company’s Current Report on Form 8-K filed with the SEC on January 30, 2008.

⁽⁸⁾ Incorporated by reference to exhibits (with same exhibits numbers) to the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2008.

⁽⁹⁾ Confidential treatment is being requested with respect to portions of this agreement.

⁽¹⁰⁾ Incorporated by reference to exhibit (with same exhibit numbers) to the Company’s Annual Report on Form 10-K filed with the SEC for the year ended September 20, 2004.

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EX-10.45

Exhibit 10.45

MULTI-FINELINE ELECTRONIX, INC.

2004 STOCK INCENTIVE PLAN

NOTICE OF STOCK APPRECIATION RIGHT GRANT

You have been granted the following Stock Appreciation Right (the “SAR” or “SARs”) to acquire Common Stock of Multi-Fineline Electronix, Inc. (the “Company”) under the Company’s 2004 Stock Incentive Plan (the “Plan”):

Name of Participant:	[Name of Participant]
Total Number of SARs Granted:	[Total Number of SARs]
Base Appreciation Amount per Share:	$[          ]
Grant Date:	[          ]
Vesting Commencement Date:	[          ]
Vesting Schedule:	[          ]
Expiration Date:	[          ]. This SAR expires earlier if your Service terminates earlier, as described in the SAR Agreement.

YOU ACKNOWLEDGE AND AGREE THAT THE SARS SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF YOUR SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE SAR OR ACQUIRING SHARES HEREUNDER). YOU FURTHER ACKNOWLEDGE AND AGREE THAT NOTHING IN THIS NOTICE, THE SAR AGREEMENT, OR THE PLAN SHALL CONFER UPON YOU ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF YOUR SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH YOUR RIGHT OR THE RIGHT OF THE COMPANY OR A PARENT OR SUBSIDIARY OF THE COMPANY TO WHICH YOU PROVIDE SERVICES TO TERMINATE YOUR SERVICE, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. YOU ACKNOWLEDGE THAT UNLESS YOU HAVE A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, YOUR STATUS IS AT WILL.

You have reviewed this Notice, the Plan, and the SAR Agreement in their entirety, have had an opportunity to obtain the advice of counsel prior to executing this Notice, and fully understand all provisions of this Notice, the Plan and the SAR Agreement. You hereby agree that all questions of interpretation and administration relating to this Notice, the Plan and the SAR Agreement shall be resolved by the Committee in accordance with the SAR Agreement. You further agree to the venue selection in accordance with the SAR Agreement. You further agree to notify the Company upon any change in the residence address indicated in this Notice.

-1-

By your signature and the signature of the Company’s representative below, you and the Company agree that this SAR is granted under and governed by the term and conditions of the Plan and the SAR Agreement, both of which are attached to and made a part of this document.

PARTICIPANT:	MULTI-FINELINE ELECTRONIX, INC.
	By:
Participant’s Signature	Title:
Participant’s Printed Name

-2-

MULTI-FINELINE ELECTRONIX, INC.

2004 STOCK INCENTIVE PLAN

STOCK APPRECIATION RIGHT AGREEMENT

Vesting	This SAR becomes exercisable in installments, as shown in the Notice of SAR Grant (the “Notice”). This SAR will in no event become exercisable for additional shares after your Service has terminated for any reason.
Term	This SAR expires in any event at the close of business at Company headquarters on the day before the 10th anniversary of the Grant Date, as shown on the Notice. This SAR may expire earlier if your Service terminates, as described below.
Regular Termination	If your Service terminates for any reason except death or “Total and Permanent Disability” (as defined in the Plan), then this SAR will expire at the close of business at Company headquarters on the date three (3) months after the date your Service terminates (or, if earlier, the Expiration Date). The Company has discretion to determine when your Service terminates for all purposes of the Plan and its determinations are conclusive and binding on all persons.
Death	If you die, then this SAR will expire at the close of business at Company headquarters on the date 12 months after the date your Service terminates (or, if earlier, the Expiration Date). During that period of up to 12 months, your estate or heirs may exercise the SAR.
Disability	If your Service terminates because of your Total and Permanent Disability, then this SAR will expire at the close of business at Company headquarters on the date 12 months after the date your Service terminates (or, if earlier, the Expiration Date).
Leaves of Absence	For purposes of this SAR, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing and if continued crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to active work. If you go on a leave of absence, then the vesting schedule specified in the Notice may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis, then the vesting schedule specified in the Notice may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.

Restrictions on Exercise	The Company will not permit you to exercise this SAR if the issuance of shares at that time would violate any law or regulation. The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of the Company stock pursuant to this SAR shall relieve the Company of any liability with respect to the non-issuance or sale of the Company stock as to which such approval shall not have been obtained. However, the Company shall use its best efforts to obtain such approval. If the exercise of the SAR within the applicable time periods set forth herein is prevented by this section, the SAR will remain exercisable until one (1) month after the date you are notified by the Company that the SAR is exercisable, but in any event no later than the Expiration Date set forth in the Notice. Notwithstanding any provision of this SAR Agreement to the contrary, if a sale, within the applicable time periods for a regular termination or termination due to death or disability as described above, of shares acquired upon the exercise of the SAR would subject you to suit under Section 16(b) of the Exchange Act, the SAR shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by you would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after your termination of Service, or (iii) the Expiration Date set forth in the Notice.
Notice of Exercise	The SAR shall be exercisable only by delivery of an exercise notice in such form as determined by the Committee (including an exercise notice in electronic form) which shall state the election to exercise the SAR and the whole number of SARs being exercised. Your notice must also specify how your shares should be registered. The notice will be effective when it is received by the Company or any third-party administrator designated by the Company. If someone else wants to exercise this SAR after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.
Method of Exercise	Upon the exercise of the SAR, the Company will deliver to you the net number of shares equal to (i) the number of SARs being exercised, multiplied by (ii) a fraction, the number of which is the Fair Market Value per share (on the exercise date) less the Base Appreciation Amount per share, and the denominator of which is such Fair Market Value per share. The net number of shares to be received will be rounded down to the nearest whole number of shares.

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Right to Exercise	This SAR will be subject to the provisions of Sections 9 and 11 of the Plan relating to the exercisability or termination of the SAR in the event of a Change in Control or other transaction affecting the Company. You will be subject to reasonable limitations on the number of requested exercises during any monthly or weekly period as determined by the Committee. In no event will the Company issue fractional shares.
Taxes	Prior to any event in connection with the SAR (e.g., exercise) that the Company determines may result in any tax withholding obligation, whether United States federal, state, local or non-U.S., including any social insurance, employment tax, payment on account or other tax-related obligation (the “Tax Withholding Obligation”), you must arrange for the satisfaction of the minimum amount of such Tax Withholding Obligation in a manner acceptable to the Company.
	•     Share Withholding. If permissible under applicable law, you authorize the Company to, upon the exercise of its sole discretion, withhold from those shares otherwise issuable to you the whole number of shares sufficient to satisfy the minimum applicable Tax Withholding Obligation. You acknowledge that the withheld shares may not be sufficient to satisfy your minimum Tax Withholding Obligation. Accordingly, you agree to pay to the Company as soon as practicable, including through additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied by the withholding of shares described above.
	•     By Sale of Shares. Unless you determine to satisfy the Tax Withholding Obligation by some other means in accordance with the bullet point below, your acceptance of this SAR constitutes your instruction and authorization to the Company and any brokerage firm determined acceptable to the Company for such purpose to, upon the exercise of the Company’s sole discretion, sell on your behalf a whole number of shares from those shares issuable to you as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the minimum applicable Tax Withholding Obligation. Such shares will be sold on the day such Tax Withholding Obligation arises (e.g., an exercise date) or as soon thereafter as practicable. You will be responsible for all broker’s fees and other costs of sale, and you agree to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. To the extent the proceeds of such sale exceed your minimum Tax Withholding Obligation, the Company agrees to pay such excess in cash to you. You acknowledge that the Company or its designee is under no obligation to arrange for

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	such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy your minimum Tax Withholding Obligation. Accordingly, you agree to pay to the Company as soon as practicable, including through additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied by the sale of shares described above.
	•     By Check, Wire Transfer or Other Means. At any time not less than five (5) business days (or such fewer number of business days as determined by the Board of Directors) before any Tax Withholding Obligation arises, you may elect to satisfy your Tax Withholding Obligation by delivering to the Company an amount that the Company determines is sufficient to satisfy the Tax Withholding Obligation by (x) wire transfer to such account as the Company may direct, (y) delivery of a certified check payable to the Company, or (z) such other means as specified from time to time by the Board.
	Notwithstanding the foregoing, the Company also may satisfy any Tax Withholding Obligation by offsetting any amounts (including, but not limited to, salary, bonus and severance payments) payable to you by the Company. Furthermore, in the event of any determination that the Company has failed to withhold a sum sufficient to pay all withholding taxes due in connection with the SAR, you agree to pay the Company the amount of such deficiency in cash within five (5) days after receiving a written demand from the Company to do so, whether or not you are an employee of the Company at that time.
Restrictions on Resale	By signing this Agreement, you agree not to sell any SAR shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale (e.g., a lock-up period after the Company goes public). This restriction will apply as long as you are an employee, consultant or director of the Company or a subsidiary of the Company.
Transfer of SAR	In general, only you can exercise this SAR prior to your death. You may in any event dispose of this SAR in your will. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse’s interest in your SAR in any other way. However, the “Committee” (as defined in the Plan) may, in its sole discretion, allow you to transfer this SAR as a gift to one or more family members. For purposes of this Agreement, “family member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse,

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	former spouse, sibling, niece, nephew, mother-in-law, father-in-law or sister-in-law (including adoptive relationships), any individual sharing your household (other than a tenant or employee), a trust in which one or more of these individuals have more than 50% of the beneficial interest, a foundation in which you or one or more of these persons control the management of assets, and any entity in which you or one or more of these persons own more than 50% of the voting interest. In addition, the Committee may, in its sole discretion, allow you to transfer this option to your spouse or former spouse pursuant to a domestic relations order in settlement of marital property rights. The Committee will allow you to transfer this SAR only if both you and the transferee(s) execute the forms prescribed by the Committee, which include the consent of the transferee(s) to be bound by this Agreement.
Retention Rights	Neither your SAR nor this Agreement gives you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause.
Stockholder Rights	You, or your estate or heirs, have no rights as a stockholder of the Company until you have exercised this SAR by giving the required notice to the Company. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this SAR, except as described in the Plan.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of SARs covered by this SAR Agreement and the base appreciation amount per share may be adjusted pursuant to the Plan.
Entire Agreement; Applicable Law	The Notice, the Plan and this SAR Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and you with respect to the subject matter hereof, and may not be modified adversely to your interest except by means of a writing signed by the Company and you. Nothing in the Notice, the Plan and this SAR Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this SAR Agreement are to be construed in accordance with and governed by the internal laws of the State of California without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties. Should any provision of the Notice, the Plan or this SAR Agreement be determined to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

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Construction	The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in the SAR Agreement shall have the meanings assigned to them in the Plan. The captions used in the Notice and this SAR Agreement are inserted for convenience and shall not be deemed a part of the SAR for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
Administration and Interpretation	Any question or dispute regarding the administration or interpretation of the Notice, the Plan or this SAR Agreement shall be submitted by you or by the Company to the Committee. The resolution of such question or dispute by the Committee shall be final and binding on all persons.
Venue	The Company, you and your assignees (the “parties”) agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this SAR Agreement shall be brought in the United States District Court for the Southern District of California (or should such court lack jurisdiction to hear such action, suit or proceeding, in a California state court in the County of Orange) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. If any one or more provisions of this section shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.
Notices	Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other party.

BY SIGNING THE COVER SHEET OF THIS AGREEMENT,

YOU AGREE TO ALL OF THE TERMS AND CONDITIONS

DESCRIBED ABOVE AND IN THE PLAN.

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EX-10.46

Exhibit 10.46

SHARE PURCHASE AGREEMENT

among

MULTI-FINELINE ELECTRONIX SINGAPORE PTE. LTD.

a private company of Singapore limited by shares;

PELIKON LIMITED

a private limited company of England and Wales;

MULTI-FINELINE ELECTRONIX, INC.

a Delaware corporation;

THE SELLING SHAREHOLDERS;

and

MICHAEL POWELL, as the Shareholders’ Representative

Dated as of November 18, 2008

EXHIBITS AND SCHEDULES

Exhibit A	-	Certain Definitions
Exhibit B	-	Form of Lender Promissory Notes
Exhibit C	-	Form of Remaining Shareholder Promissory Note
Exhibit D	-	Form of Selling Shareholder Promissory Notes
Exhibit E	-	Form of Contingent Consideration Note
Exhibit F	-	List of Key Employees

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TABLE OF CONTENTS

		PAGE
ARTICLE 1.	DESCRIPTION OF TRANSACTION	2
1.1	Purchase and Sale of the Shares	2
1.2	Closing	3
1.3	Treatment of Company Rights	3
1.4	Estimated Balance Sheet and Estimated Closing Indebtedness	3
1.5	Assumption of Closing Indebtedness	3
1.6	Delivery of Sellers Promissory Notes	4
1.7	Contingent Consideration	5
ARTICLE 2.	WARRANTIES OF THE COMPANY	9
2.1	Organization; Standing and Power; Subsidiaries	9
2.2	Company Constituent Documents; Records	10
2.3	Capitalization, Etc	11
2.4	Authority; Binding Nature of Agreement	12
2.5	Non-Contravention; Consents	12
2.6	Financial Statements	13
2.7	Absence of Certain Changes	14
2.8	Title to and Sufficiency of Assets	16
2.9	Bank Accounts; Accounts Receivable; Inventory	17
2.10	Equipment	17
2.11	Real Property	18
2.12	Intellectual Property	18
2.13	Contracts	20
2.14	Customers; Accounts Payable	23
2.15	Liabilities	23
2.16	Compliance with Legal Requirements; Governmental Authorizations	24
2.17	Tax Matters	24
2.18	Benefit Plans; Employees and Agents	31
2.19	Environmental Matters	33
2.20	Insurance	34
2.21	Related Party Transactions	35

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TABLE OF CONTENTS

(CONTINUED)

		PAGE
2.22	Legal Proceedings; Orders	35
2.23	Company and Shareholder Action	36
2.24	Finder’s Fee; Transaction Costs	36
2.25	Certain Payments	36
2.26	Full Disclosure	37
ARTICLE 3.	WARRANTIES OF THE SELLING SHAREHOLDERS	37
3.1	Organization; Standing and Power	37
3.2	Authority; Binding Nature of Agreement	37
3.3	Ownership and Transfer of the Shares	38
3.4	Non-Contravention; Consents	38
3.5	No Other Agreements	38
3.6	Litigation	39
3.7	Finder’s Fees	39
ARTICLE 4.	WARRANTIES OF PURCHASER AND PARENT	39
4.1	Corporate Existence and Power	39
4.2	Authority; Binding Nature of Agreement	39
4.3	Non-Contravention; Consents	40
4.4	Compliance with Legal Requirements	40
ARTICLE 5.	PARENT GUARANTEE OF PURCHASER OBLIGATIONS	40
5.1	Guarantee of Purchaser Obligations	40
ARTICLE 6.	COVENANTS OF THE PARTIES	41
6.1	Access to Information	41
6.2	Operation of the Company’s Business	42
6.3	No Solicitation	45
6.4	Termination of Company Rights	45
6.5	Exercise of Drag-Along Right	45
6.6	Third Party Notices	46
6.7	Notification of Certain Matters; Updated Company Disclosure Schedule	46
6.8	Confidentiality	46
6.9	Public Disclosure	46
6.10	Payment of Stamp Duty	46

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TABLE OF CONTENTS

(CONTINUED)

		PAGE
6.11	Corporation Tax Returns	47
6.12	Minority Shareholder SPA	47
ARTICLE 7.	CLOSING CONDITIONS	47
7.1	Conditions to Obligation of Each Party to Effect the Transactions	47
7.2	Additional Conditions to Obligations of Purchaser	47
7.3	Additional Conditions to Obligation of the Selling Shareholders and the Company	50
ARTICLE 8.	TERMINATION	50
8.1	Termination	50
8.2	Procedure and Effect of Termination	51
ARTICLE 9.	RECOURSE FOR DAMAGES	51
9.1	Survival	51
9.2	Recovery by Purchaser Parties	52
9.3	Basket; Limitation on Liability	53
9.4	Offset Against Sellers Promissory Notes and Contingent Consideration	54
9.5	Procedure for Recovery of Damages	55
9.6	Third Party Claims	57
9.7	Characterization of Recovery	58
9.8	No Contribution	58
ARTICLE 10.	MISCELLANEOUS PROVISIONS	58
10.1	Shareholders’ Representative	58
10.2	Further Assurances	59
10.3	Fees and Expenses	60
10.4	Amendment	60
10.5	Attorneys’ Fees	60
10.6	Waiver; Remedies Cumulative	60
10.7	Entire Agreement	61
10.8	Execution of Agreement; Counterparts; Electronic Signatures	61
10.9	Governing Law and Submission to Jurisdiction; Appointment of Process Agent	61
10.10	Assignment and Successors	62

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TABLE OF CONTENTS

(CONTINUED)

		PAGE
10.11	Parties in Interest	62
10.12	Notices	62
10.13	Construction; Usage	63
10.14	Enforcement of Agreement	64
10.15	Severability	65

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SHARE PURCHASE AGREEMENT

This SHARE PURCHASE AGREEMENT (this “Agreement”) is made and entered into as a deed as of November 18, 2008 (the “Agreement Date”), by and among Multi-Fineline Electronix Singapore Pte. Ltd., a private company of Singapore limited by shares (“Purchaser”), Pelikon Limited, a private limited company of England and Wales (the “Company”), Multi-Fineline Electronix, Inc., a Delaware corporation (“Parent”), the members of the Company set forth on the signature pages hereto (each a “Selling Shareholder” and together, the “Selling Shareholders”), and Michael Powell, an individual serving as and entering into this Agreement in the capacity of the Shareholders’ Representative (the “Shareholders’ Representative,” as replaced or substituted from time to time in accordance with Section 10.1(b) hereof). Capitalized terms used in this Agreement and not otherwise defined shall have the meanings set forth in Exhibit A hereto.

RECITALS

WHEREAS, the Purchaser has made a bona fide offer on an arm’s length basis to purchase all of the issued ordinary shares of £0.001 each in the capital of the Company (the “Company Ordinary Shares”) for aggregate consideration as described in Article 1 hereof;

WHEREAS, the Selling Shareholders collectively own 92.7% of the issued Company Ordinary Shares;

WHEREAS, the Selling Shareholders desire to sell to the Purchaser all of the Company Ordinary Shares held by them (the “Selling Shareholder Shares”), and the Purchaser desires to purchase from the Selling Shareholders all of the Selling Shareholder Shares, on the terms and subject to the conditions contained in this Agreement;

WHEREAS, the Articles of Association of the Company provide that if holders of at least 75% of the issued Company Ordinary Shares intend to sell all of their holdings of Company Ordinary Shares to a proposed purchaser who has made a bona fide offer on an arm’s length basis for all of the issued Company Ordinary Shares, such selling holders can compel the remaining holders of Company Ordinary Shares (the “Remaining Shareholders” and, together with the Selling Shareholders, the “Sellers”) to sell all Company Ordinary Shares held by them (the “Remaining Shareholder Shares” and, together with the Selling Shareholder Shares, the “Shares”) to such purchaser on the same terms and conditions offered to the Selling Shareholders (such right to compel the sale of the Remaining Shareholder Shares being referred to herein as the “Drag-Along Right”); and

WHEREAS, the Selling Shareholders desire to exercise the Drag-Along Right such that upon the consummation of the transactions contemplated by this Agreement, the Purchaser will own 100% of the total issued share capital of the Company, on a fully-diluted basis.

NOW, THEREFORE, in consideration of the foregoing and the respective covenants, agreements and warranties set forth herein, the parties to this Agreement, intending to be legally bound, agree as follows:

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AGREEMENT

ARTICLE 1.

DESCRIPTION OF TRANSACTION

1.1 Purchase and Sale of the Shares.

(a) On the terms and subject to the conditions set forth in this Agreement and in accordance with the Drag-Along Right and Minority Shareholder SPA, at the Closing, each Seller shall sell, assign, transfer, convey and deliver to the Purchaser (or to the Purchaser’s designee), free and clear of all Encumbrances, and in the case of the Selling Shareholders, with full title guarantee, and the Purchaser (or Purchaser’s designee, if applicable) shall purchase from each Seller, all the Shares owned by such Seller in consideration of payment of any:

(i) amounts to the Sellers, on the dates and under the terms set forth in this Agreement and in the Sellers Promissory Notes (as defined in Section 1.6(a)), with each Seller being entitled to receive an amount in cash equal to the product of (1) the Per Share Note Payment Amount, multiplied by (2) the number of Shares owned by such Seller, and

(ii) amounts of Contingent Consideration to the Sellers on the dates and under the terms set forth in this Agreement and in the Contingent Consideration Note (as defined in Section 1.7(a)), with each Seller being entitled to receive an amount in cash, without interest, equal to the product of (1) the Per Share Contingent Consideration, multiplied by (2) the number of Shares owned by such Seller.

(b) For purposes of this Agreement:

(i) “Financial Advisor Commission” shall mean five percent (5%) of any Contingent Consideration earned by and payable to the Sellers pursuant to Section 1.7(b) of this Agreement, subject to the limitations set forth in Section 1.7(d) of this Agreement.

(ii) “Fully Diluted Company Ordinary Shares” shall mean the aggregate number of Company Ordinary Shares that are issued immediately prior to the Closing.

(iii) “Per Share Contingent Consideration” shall mean the quotient (rounded to the nearest cent) obtained by dividing (A) any Contingent Consideration earned by and payable to the Sellers pursuant to Section 1.7(b) of this Agreement, subject to the limitations set forth in Section 1.7(d) of this Agreement, less the Financial Advisor Commission, by (B) the Fully Diluted Company Ordinary Shares.

(iv) “Per Share Note Payment Amount” shall mean the quotient (rounded to the nearest cent) obtained by dividing (A) the Note Payment Amount (as defined in Section 1.6(a)) paid to the Sellers under the terms of the Sellers Promissory Notes, if any, by (B) the Fully Diluted Company Ordinary Shares.

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1.2 Closing. Subject to the terms and conditions of this Agreement, the purchase and sale of the Shares and the consummation of the other transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Burges Salmon LLP, Narrow Quay House, Narrow Quay, Bristol BS1 4AH, at 10:00 a.m., local time, on the last day of the month in which the last of the conditions set forth in Article 7 of this Agreement is satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), or on such other date as may be mutually agreed upon by the Selling Shareholders, on the one hand, and the Purchaser, on the other hand. The date on which the Closing actually takes place is referred to in this Agreement as the “Closing Date”.

1.3 Treatment of Company Rights. As of the Closing Date, all rights under any provision of any scheme, plan, program, agreement or arrangement providing for the issuance or grant of any interest in respect of the share capital of the Company shall be cancelled and terminated. Neither Purchaser nor any of its Affiliates shall be responsible for or otherwise assume any obligations with respect to any outstanding options, warrants or other rights to purchase share capital of the Company. The Company shall effectuate the foregoing and the Sellers and the Company shall ensure that, from and following the Closing Date, no Person shall have any right under any scheme, plan, program, agreement or arrangement with respect to share capital of the Company.

1.4 Estimated Balance Sheet and Estimated Closing Indebtedness. No later than five Business Days prior to the Closing Date, the Company shall deliver to the Purchaser (a) an estimated balance sheet of the Company, which estimated balance sheet reflects estimated balances as of the Closing Date (the “Estimated Balance Sheet”), (b) an itemized schedule of the estimated amount of Closing Indebtedness (separately listing each item of Indebtedness and the related creditor) (“Estimated Closing Indebtedness”), (c) an itemized schedule of the Transaction Costs paid or owed by the Company (separately listing each Transaction Cost and the related creditor), in each case as of the Closing Date (the “Schedule of Company Transaction Costs”), and (d) a certificate of the Company, executed by the Chief Executive Officer and the Chief Financial Officer of the Company, certifying that each of the Estimated Balance Sheet, Estimated Closing Indebtedness and Schedule of Company Transaction Costs were prepared by the Company in good faith in accordance with this Agreement, and, in the case of the Estimated Balance Sheet, in accordance with the Company’s accounting policies and generally accepted accounting practice in the United Kingdom (“GAAP”) applied in a manner consistent with the preparation of the Company Audited Financial Statements, except as otherwise specifically contemplated by this Agreement (the “Closing Certificate”).

1.5 Assumption of Closing Indebtedness. At the Closing, the Purchaser shall deliver to each creditor listed on the schedule of Estimated Closing Indebtedness attached to the Closing Certificate (other than creditors under Capital Lease Obligations) a promissory note, in substantially the form attached hereto as Exhibit B, in a principal amount equal to the amount of Indebtedness outstanding to such creditor immediately prior to the Closing, as reflected on the schedule of Estimated Closing Indebtedness (collectively, the “Lender Promissory Notes”); provided, that the aggregate principal amount of the Lender Promissory Notes shall not exceed an amount equal to US$4.857 million. As of the date hereof, the Purchaser and each creditor listed on the schedule of Estimated Closing Indebtedness (other than creditors under Capital

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Lease Obligations) have entered into an assignment agreement pursuant to which each such creditor has agreed, effective as of the Closing Date, to (a) assign all Indebtedness outstanding to such creditor immediately prior to the Closing, as reflected on the schedule of Estimated Closing Indebtedness, to the Purchaser and (b) provide the Purchaser with recordable form lien releases, note, trademark and patent assignments and other documents reasonably requested by the Purchaser, in exchange for delivery by the Purchaser of the Lender Promissory Note.

1.6 Delivery of Sellers Promissory Notes.

(a) At the Closing, the Purchaser shall deliver (i) to the Shareholders’ Representative, on behalf of the Remaining Shareholders, a promissory note in substantially the form attached hereto as Exhibit C (the “Remaining Shareholder Promissory Note”) and (ii) to each of the Selling Shareholders, a promissory note in substantially the form attached hereto as Exhibit D (each, a “Selling Shareholder Promissory Note” and, together with the Remaining Shareholder Promissory Note, the “Sellers Promissory Notes”). The aggregate principal amount of the Sellers Promissory Notes shall be calculated as follows (the “Aggregate Principal Amount”): (i) US$5.85 million, minus (ii) any unpaid Transaction Costs at Closing, minus (iii) any past due real property lease obligations reflected on the schedule of Estimated Closing Indebtedness, minus (iv) any other accounts payable or accrued liabilities reflected on the Estimated Balance Sheet (excluding those accounts payable and accrued liabilities reflected on Part 1.6(a) of the Company Disclosure Schedule, up to an aggregate amount of £219,000), minus (v) 50% of the Stamp Duty payable in connection with the transactions effected pursuant to this Agreement, plus (vi) any cash held by the Company at the Closing (taking into account any outstanding cheques), plus (vii) to the extent actually received by the Company on or before March 31, 2009, the 2008 R&D Tax Credit; provided, that the increase to the Aggregate Principal Amount, if any, pursuant to this subsection (vii) shall not exceed the reduction to the Aggregate Principal Amount, if any, pursuant to subsection (iv) above, without duplication and, in the case of (ii), (iii), (iv), (v), (vi) and (vii), converted into U.S. dollars, if necessary, based upon the Agreed Rate. The principal amount of each Selling Shareholder Promissory Note shall be equal to the result of (A)(1) the Aggregate Principal Amount, divided by (2) the Fully Diluted Company Ordinary Shares, multiplied by (B) the aggregate number of Company Ordinary Shares that are issued to the Selling Shareholder holding such Selling Shareholder Promissory Note immediately prior to the Closing. The principal amount of the Remaining Shareholder Promissory Note shall be equal to (1) the Aggregate Principal Amount, minus (2) the aggregate principal amount of the Selling Shareholder Promissory Notes, calculated in accordance with the foregoing sentence. The Sellers Promissory Notes shall be issued by the Purchaser or an Affiliate of the Purchaser and guaranteed by Parent as described with particularity in Article 5 hereof. The Remaining Shareholder Promissory Note shall be issued in the name of the Shareholders’ Representative who shall hold as nominee for the Remaining Shareholders, on behalf of the Remaining Shareholders, and is hereby authorized to propose, negotiate and agree (as applicable) to any variation to the terms of the Remaining Shareholder Promissory Note on behalf of the Remaining Shareholders, provided that any such variation shall not be to the detriment of any one or more of the Remaining Shareholders, diminish the value of the Remaining Shareholder Promissory Note nor deprive any one or more of the Remaining Shareholders of his, her or its entitlement to benefit under the terms of the Remaining Shareholder Promissory Note. The principal amount of each Sellers Promissory Note and any accrued interest earned thereon shall be subject to reduction to satisfy any rights of the Purchaser Parties to recover for Damages

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suffered by them in accordance with Section 1.6(b) and Article 9 of this Agreement. The aggregate amount of principal and accrued interest paid to the Sellers under the Seller Promissory Notes, as reduced to satisfy any rights of the Purchaser Parties to recover for Damages suffered by them in accordance with Section 1.6(b) and Article 9 of this Agreement (the “Note Payment Amount”), shall be for the benefit of the Sellers and for distribution in accordance with Section 1.1(a)(i) of this Agreement.

(b) In the event that any Purchaser Party shall incur any Damages for which it is entitled to recovery under this Agreement, the Purchaser shall be entitled to offset the aggregate amount of such Damages (converted into U.S. dollars in accordance with Section 9.4, if necessary) against the principal amounts of the Sellers Promissory Notes and all accrued interest thereon in accordance with Section 9.4 hereof. In addition, if any Purchaser Party has any pending claim for recovery of Damages under this Agreement on the date on which final payment under the Sellers Promissory Notes is due, the Purchaser shall be entitled to withhold from the final payments due to the Sellers an amount equal to 100% of any Claimed Amount or Contested Amount, as applicable (converted into U.S. dollars, if necessary, in accordance with Section 9.4), in accordance with Section 9.4 hereof and the Purchaser shall not be obligated to deliver any of such withheld amount to the Sellers until the related claim for recovery of Damages is finally resolved in accordance with the terms set forth in this Agreement, at which time such amount shall be delivered to the Sellers together with any accrued interest thereon less any setoff in accordance with Section 9.4 of this Agreement.

1.7 Contingent Consideration.

(a) Delivery of Contingent Consideration Note. At the Closing, the Purchaser shall deliver to the Shareholders’ Representative a promissory note, in substantially the form attached hereto as Exhibit E (the “Contingent Consideration Note”), in a principal amount of up to US$9.426 million. For the avoidance of doubt, no amounts shall be payable pursuant to the Contingent Consideration Note unless and until such time as the Sellers have earned and are entitled to receive Contingent Consideration pursuant to this Section 1.7, and then, only to the extent of the Contingent Consideration earned by and payable to the Sellers. The Contingent Consideration Note shall be issued by the Purchaser or an Affiliate of the Purchaser and guaranteed by Parent as described with particularity in Article 5 hereof and shall be issued in the name of the Shareholders’ Representative who shall hold as nominee for the Sellers, on behalf of the Sellers, and is hereby authorized to propose, negotiate and agree (as applicable) to any variation to the terms of the Contingent Consideration Note on behalf of the Sellers, provided that any such variation shall not be to the detriment of any one or more of the Sellers, diminish the value of the Contingent Consideration Note nor deprive any one or more of the Sellers of his, her or its entitlement to benefit under the terms of the Contingent Consideration Note.

(b) Calculation of Contingent Consideration. The Sellers shall be entitled to receive additional earn-out consideration equal to US$0.30, for each pSel Hybrid Display sold and delivered to any third party by the Purchaser, the Company or any of their respective Affiliates or licensees (collectively, the “Selling Parties”), without duplication and net of applicable returns (including returns for warranty claims), during calendar years 2009 and 2010, which shall be paid to the Sellers pursuant to the terms of the Contingent Consideration Note, subject to reduction, if any, to satisfy the rights of the Purchaser Parties to recover for Damages

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suffered by them in accordance with the terms of Section 1.7(d) and Article 9 of this Agreement (the “Contingent Consideration”), subject to the following:

(i) the Sellers shall not be entitled to receive any payments of Contingent Consideration pursuant the Contingent Consideration Note with respect to sales made during calendar year 2009 until such time as the Selling Parties have sold and delivered in excess of 3.65 million pSel Hybrid Display units to third parties, net of any applicable returns (including returns for warranty claims), in such year (in which case and at such time, the Sellers shall be deemed to have earned and shall be entitled to receive, on the next Installment Due Date, subject to the terms and conditions set forth in Section 1.7(d), Contingent Consideration pursuant to the Contingent Consideration Note with respect to all units sold and delivered to third parties by the Selling Parties during such year, net of any applicable returns (including returns for warranty claims), and not merely the units in excess of 3.65 million units); provided, that the aggregate Contingent Consideration to be paid by the Purchaser pursuant to the Contingent Consideration Note shall not exceed US$2.19 million with respect to units sold and delivered to third parties by the Selling Parties during calendar year 2009;

(ii) the Sellers shall not be entitled to receive any payments of Contingent Consideration pursuant to the Contingent Consideration Note with respect to sales made during calendar year 2010 until such time as the Selling Parties have sold and delivered in excess of 12.9 million pSel Hybrid Display units to third parties, net of any applicable returns (including returns for warranty claims), in such year (in which case and at such time, the Sellers shall be deemed to have earned and shall be entitled to receive, on the next Installment Due Date, subject to the terms and conditions set forth in Section 1.7(d), Contingent Consideration pursuant to the Contingent Consideration Note with respect to all units sold and delivered to third parties by the Selling Parties during such year, net of any applicable returns (including returns for warranty claims), and not merely the units in excess of 12.9 million units); provided, that the aggregate Contingent Consideration to be paid by the Purchaser pursuant to the Contingent Consideration Note shall not exceed US$7.236 million with respect to units sold and delivered to third parties by the Selling Parties during calendar year 2010; provided, further, that under no circumstances shall sales made during calendar year 2009 (regardless of whether any Contingent Consideration was payable) be taken into account in determining whether the 12.9 million unit threshold for 2010 has been achieved; and

(iii) notwithstanding the foregoing provisions of this Section 1.7(b), if any Company Contract existing immediately prior to the Closing permits a Person (other than ELK Corporation, the Purchaser and their respective Affiliates) to manufacture and sell pSel Hybrid Display units following the Closing, the Contingent Consideration to be paid by the Purchaser pursuant to the Contingent Consideration Note with respect to each unit sold and delivered to a third party by such Person shall be equal to the lesser of (A) US$0.30 or (B) 50% of the amount actually paid by such Person to the Purchaser or an Affiliate of the Purchaser as a royalty, per unit or other license or similar payment on such units sold, and shall be subject to all of the limitations set forth in the foregoing clauses (i) and (ii).

(c) Sale of Company Products. Following the Closing, Purchaser shall not take any action that is specifically intended to affect the timing and delivery of Company Products in an effort to prevent the payment or decrease the amount of Contingent Consideration that may become payable under this Section 1.7.

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(d) Payment of Contingent Consideration. Any Contingent Consideration earned pursuant to Section 1.7(b) shall be paid by the Purchaser to the Sellers in five installments under the terms of the Contingent Consideration Note. Installment payments under the Contingent Consideration Note shall be made on or before August 31, 2009, February 28, 2010, August 31, 2010, February 28, 2011 and August 31, 2011, or such later date with respect to all or any portion of the Contingent Consideration payable on each such date as necessary to resolve any disputes with respect to the calculation of Contingent Consideration pursuant to Section 1.7(e) and to resolve any pending claims for recovery of Damages pursuant to Article 9 (each, an “Installment Due Date”). On each of the first four Installment Due Dates, the Sellers shall be entitled to receive an amount equal to any Contingent Consideration earned by the Sellers pursuant to Section 1.7(b) during the relevant measurement period set forth in the Contingent Consideration Note (each, a “Measurement Period”) (subject to the limitations set forth in this Section 1.7(d)). All calculations of the number of pSel Hybrid Display units sold and delivered at any time and the related calculation of any Contingent Consideration due pursuant to the Contingent Consideration Note shall be net of any applicable returns (including returns for warranty claims) without duplication; provided, that Purchaser shall be entitled to withhold an amount from the installment payment to be made on February 28, 2011 equal to the Estimated Remaining Return Amount. Purchaser shall pay the Excess Warranty Holdback Amount (to the extent such amount is a positive number) pursuant to the terms of the Contingent Consideration Note on the August 31, 2011 Installment Due Date. If the Excess Warranty Holdback Amount is zero or a negative number, Purchaser shall have no obligation to pay the Sellers any portion of the Estimated Remaining Return Amount. In the event that any Purchaser Party shall incur any Damages for which it is entitled to recovery under this Agreement, the Purchaser shall be entitled to offset in the manner described in Article 9 the aggregate amount of such Damages (converted into U.S. dollars in accordance with Section 9.4, if necessary) against any Contingent Consideration otherwise payable to the Sellers under the Contingent Consideration Note pursuant to this Section 1.7 to the extent such Damages exceed the then-outstanding balance under the Sellers Promissory Notes (including accrued interest). In addition, if any Purchaser Party has any pending claim pursuant to Article 9 of this Agreement for the recovery of Damages under this Agreement on an Installment Due Date in excess of the then-outstanding balance under the Sellers Promissory Notes (including accrued interest), then the Purchaser shall be entitled to withhold from the Contingent Consideration otherwise payable to the Sellers under the Contingent Consideration Note an amount equal to the amount by which the Claimed Amount or Contested Amount, as applicable (converted into U.S. dollars in accordance with Section 9.4, if necessary), exceeds the then-outstanding balance under the Sellers Promissory Notes (including accrued interest), and the Purchaser shall not be obligated to deliver any of such withheld Contingent Consideration to the Sellers pursuant to the Contingent Consideration Note until the related claim for recovery of Damages is finally resolved in accordance with the terms of this Agreement, at which time such Contingent Consideration shall be delivered to the Sellers together with any accrued interest thereon, less any setoff in accordance with Section 9.4 of this Agreement. For the avoidance of doubt, however, Purchaser’s withholding of amounts from payment on the February 28, 2011 Installment Due Date with respect to the Estimated Remaining Return Amount shall not extend the period for which Purchaser’s recourse for Damages is available pursuant to Article 9 or increase the amount available for recovery of Damages. Any payment of Contingent Consideration to the Sellers under the Contingent Consideration Note pursuant to this Section 1.7(d) shall be distributed in accordance with Section 1.1(a)(ii) of this Agreement.

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(e) Administration and Calculation of Contingent Consideration.

(i) Fifteen (15) Business Days prior to each of the first four Installment Due Dates, Purchaser shall: (A) prepare or cause to be prepared a statement (the “Sales Statement”) setting forth the number of pSel Hybrid Display units sold and delivered to third parties by the Selling Parties during the relevant Measurement Period, net of applicable returns (including returns for warranty claims), together with supporting documentation, and a calculation of the Contingent Consideration payable to the Sellers pursuant to the Contingent Consideration Note at such Installment Due Date and (B) deliver or cause to be delivered such Sales Statement to the Shareholders’ Representative.

(ii) In the event that the Shareholders’ Representative objects to Purchaser’s calculation of the number of pSel Hybrid Display units sold or the calculation of Contingent Consideration set forth in such Sales Statement or requires further information in order to perform and confirm such calculations or determine such amounts, then within ten (10) Business Days after receipt by the Shareholders’ Representative of the Sales Statement (the “Initial Response Period”), the Shareholders’ Representative shall deliver to Purchaser a written notice (an “Initial Objection Notice”): (A) describing in reasonable detail the Shareholders’ Representative’s objections to Purchaser’s calculation of the amounts set forth in the Sales Statement and containing a statement setting forth the actual number of pSel Hybrid Display units sold net of applicable returns (including returns for warranty claims), or the amount of any such Contingent Consideration, determined by the Shareholders’ Representative to be correct; or (B) requesting additional information from Purchaser that the Shareholders’ Representative reasonably requires in order to perform such calculations or determine such amounts (which information, to the extent reasonably necessary in order to perform such calculations, shall be provided by Purchaser within fifteen (15) Business Days after Purchaser’s receipt of such request). If the Shareholders’ Representative does not deliver an Initial Objection Notice to Purchaser during the Initial Response Period, then Purchaser’s calculation of the amounts set forth in the Sales Statement shall be final, binding and conclusive on Purchaser, Sellers and the Shareholders’ Representative. If the Shareholders’ Representative delivers an Initial Objection Notice to Purchaser accompanied by a request for additional information from Purchaser as described above during the Initial Response Period, then the Shareholders’ Representative shall have an additional ten (10) Business Days after receiving from Purchaser all of the information reasonably requested by Shareholders’ Representative and required in order for Shareholders’ Representative to perform its calculation of the Sales Statement (the “Final Response Period”) to deliver to Purchaser a written notice (a “Final Objection Notice”) describing in reasonable detail the Shareholders’ Representative’s objections to Purchaser’s calculations of the amounts set forth in the Sales Statement accompanied by a statement setting forth the number of pSel Hybrid Display units sold net of applicable returns (including returns for warranty claims), or the dollar amount of any such Contingent Consideration, determined by the Shareholders’ Representative to be correct. If the Shareholders’ Representative has requested additional information during the Initial Response Period and does not deliver a Final Objection Notice to Purchaser during the Final Response Period, then Purchaser’s calculation of the amounts set forth in the Sales

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Statement shall be final, binding and conclusive on Purchaser, the Sellers and the Shareholders’ Representative. If the Shareholders’ Representative delivers an Initial Objection Notice or Final Objection Notice, as the case may be, accompanied by a statement setting forth the number of pSel Hybrid Display units sold net of applicable returns (including returns for warranty claims), or the amount of any such Contingent Consideration, determined by the Shareholders’ Representative to be correct to Purchaser during either the Initial Response Period or the Final Response Period in accordance with this Section 1.7(e)(ii), and if the Shareholders’ Representative and Purchaser are unable to agree upon the calculation of the amounts set forth in the Sales Statement within thirty (30) calendar days after such Initial Objection Notice or Final Objection Notice, as the case may be, is delivered to Purchaser, the dispute shall be finally settled by a U.S. nationally recognized independent accounting firm jointly selected by Purchaser and the Shareholders’ Representative; provided, that such independent accounting firm shall have had no material relationship with Seller or Purchaser or their respective Affiliates (the “Accounting Referee”). The determination by the Accounting Referee of the disputed amounts, number of pSel Hybrid Display units sold net of applicable returns (including returns for warranty claims) and/or the Contingent Consideration, if any, shall be final, conclusive and binding on Purchaser, the Sellers and the Shareholders’ Representative. The fees and other expenses of such independent accounting firm shall be paid by the party whose determination of Contingent Consideration payable most diverges (on an absolute dollar basis) from the determination of the Accounting Referee. For the avoidance of doubt, the Shareholders’ Representative shall be the sole party authorized, on behalf of the Sellers, to object to the calculations set forth in the Sales Statement, request additional information from the Purchaser related to such calculations and negotiate, adjudicate and enter into settlements and compromises of objections and claims made pursuant to this Section 1.7(e)(ii).

(f) Payment of the Financial Advisor. To the extent that any Contingent Consideration has been earned by and is payable to the Sellers pursuant to this Section 1.7 and the Contingent Consideration Note, the Purchaser shall pay the Financial Advisor an amount in cash equal to the Financial Advisor Commission.

ARTICLE 2.

WARRANTIES OF THE COMPANY

Except as set forth on the Company Disclosure Schedule, which shall qualify the warranties of the Company set forth in this Article 2, the Company warrants, on a dollar for dollar basis and in accordance with Article 9, as of the date of this Agreement and as of the Closing Date, to and for the benefit of the Purchaser Parties, as follows (an exception or disclosure made in the Company Disclosure Schedule with regard to a warranty of the Company shall be deemed made with respect to any other warranty to which the applicability of such exception or disclosure is reasonably apparent):

2.1 Organization; Standing and Power; Subsidiaries.

(a) The Company is a private limited company duly incorporated and validly existing under the laws of England and Wales, has all necessary power and authority to (i) own, lease and use its properties and assets in the manner in which its properties and assets are currently owned, leased and used; (ii) carry on its business in the manner in which its business is currently being conducted and (iii) perform its obligations under all Company Contracts.

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(b) The Company has not conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name, other than the name Pelikon Limited or Elumin Limited.

(c) The Company is not, and within the last two (2) years has not been, required to be qualified, authorized, registered or licensed to do business as a foreign corporation in any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the Company Disclosure Schedule.

(d) Part 2.1(d) of the Company Disclosure Schedule accurately sets forth (i) the names of the members of the board of directors of the Company (the “Board”), (ii) the names of the members of each committee of the Board (if any) and (iii) the names and titles of the officers of the Company.

(e) The Company has no Subsidiary. The Company does not own any controlling interest in any Entity and, except for the financial interests identified in Part 2.1(e) of the Company Disclosure Schedule, the Company has never owned, beneficially or otherwise, any shares or other securities of, or any direct or indirect equity or other financial interest in, any Entity. The Company has not agreed nor is it obligated to make any future investment in or capital contribution to any Entity. The Company has not guaranteed nor is it responsible or liable for any obligation of any of the Entities in which it owns or has owned any equity or other financial interest. Neither the Company nor any of its members has ever approved, or commenced any proceeding or made any election contemplating, the dissolution or liquidation of the business or affairs of the Company.

2.2 Company Constituent Documents; Records. The Company has delivered to Purchaser accurate and complete copies of (a) the Certificate of Incorporation of the Company, Memorandum of Association of the Company and the Articles of Association of the Company, in each case including all amendments thereto; (b) its statutory registers and (c) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of its members in their capacity as such, the Board and all committees of the Board, in each case since January 1, 2001 (the items described in (a), (b) and (c) above, collectively, the “Company Constituent Documents”). There have been no formal meetings of or material actions taken by the Company’s members, the Board or any committee of the Board that are not fully reflected in the Company Constituent Documents. There has not been any violation of the Company Constituent Documents, and the Company has not taken any action that is inconsistent in any material respect with the Company Constituent Documents. The books of account, statutory registers (including the register of members and register of directors and register of charges) and other records of the Company are accurate, up-to-date and complete in all material respects, and have been maintained materially in accordance with applicable Legal Requirements and prudent business practices.

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2.3 Capitalization, Etc.

(a) The authorized share capital of the Company consists of 4,648,936,483 Company Ordinary Shares, of which 3,150,752,088 shares have been issued as of the date of this Agreement. None of the issued share capital of the Company is held by the Company in treasury. All the issued Company Ordinary Shares have been duly authorized and validly issued, are fully paid and were not issued in violation of any preemptive or other similar rights. All issued Company Ordinary Shares have been issued in compliance with (i) all applicable securities laws and other applicable Legal Requirements, and (ii) all requirements set forth in the Company Constituent Documents and applicable Contracts. Each of the Remaining Shareholders is the record and beneficial owner of the Shares as set forth opposite such Remaining Shareholder’s name on Part 2.3(a) of the Company Disclosure Schedule, and such Shares are free and clear of all Encumbrances. None of the Remaining Shareholders are organized or incorporated in or residents or citizens of the United States or Singapore. Upon execution and delivery by Purchaser of the Lender Promissory Notes, the Sellers Promissory Notes and the Contingent Consideration Note at the Closing, each Remaining Shareholder will convey good and marketable title to the Shares held by it set forth opposite its name on Part 2.3(a) of the Company Disclosure Schedule to Purchaser, free and clear of all Encumbrances. The assignments, endorsements, powers and other instruments of transfer delivered by each of the Remaining Shareholders (or their respective authorized agents) at the Closing will be sufficient to transfer to the Purchaser such Remaining Shareholder’s entire right, title and interest, legal and beneficial, in such Shares.

(b) As of the date of this Agreement, there are issued warrants to purchase 466,250,000 Company Ordinary Shares and stock options to purchase 1,031,934,395 Company Ordinary Shares. As of the Closing, there are no issued warrants, options or other rights to purchase Company Ordinary Shares.

(c) Except as set forth above in this Section 2.3, as of the date of this Agreement, there is no (i) issued share capital or other voting securities of the Company; (ii) outstanding securities, instruments or obligations that are or may become convertible into or exchangeable or exercisable for any share capital or other securities of the Company; (iii) outstanding subscriptions, options, calls, warrants or rights (whether or not currently exercisable) to acquire any share capital or other securities of the Company; or (iv) commitments or agreements to which the Company is a party or by which it is bound, in any case obligating the Company to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, any share capital or other securities of the Company, or obligating the Company to enter into any such commitment or agreement or grant or extend any subscription, option, warrant, call or right to acquire any share capital of, or any securities that are convertible into or exchangeable or exercisable for any share capital of, or other securities of the Company (clauses (i) through (iv) of this Section 2.3(c) above, collectively “Company Rights”). The Company has not issued any debt securities which grant the holder thereof any right to vote on, or veto (except in the context of negative covenants over the Company’s ability to incur indebtedness and grant security interests in the assets or property of the Company), any actions by the Company (or which are convertible into, or exercisable or exchangeable for, securities having the right to vote on, or veto, any actions by the Company).

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(d) The Company has never repurchased, redeemed or otherwise reacquired any share capital or other securities of the Company other than pursuant to share purchase agreements or option agreements providing for the repurchase of such securities at the original issuance price of such securities. All securities so reacquired by the Company were reacquired in compliance with (i) the applicable provisions of the Companies Act 1985 and all other applicable Legal Requirements, and (ii) all requirements set forth in applicable subscription and shareholders’ agreements and other applicable Contracts.

2.4 Authority; Binding Nature of Agreement. The Company has all right, power and authority to execute and deliver this Agreement and any Related Agreement to which it is a party, to consummate the transactions contemplated hereby and thereby and to take all other actions required to be taken by it pursuant to the provisions hereof and thereof. The execution, delivery and performance of this Agreement and any Related Agreement to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company, and no other action on the part of the Company is necessary to authorize the execution, delivery and performance by the Company of this Agreement and any Related Agreement to which the Company is a party and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Company. This Agreement constitutes and, upon execution and delivery thereof by the Company, any Related Agreement to which it is a party will constitute (assuming due and valid authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, if any) the valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms, except as such enforcement may be limited by any insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors’ rights and remedies generally and by general principles of equity, regardless of whether enforcement is sought in a proceeding at law or in equity.

2.5 Non-Contravention; Consents. Except as set forth in Part 2.5 of the Company Disclosure Schedule, the execution, delivery and performance of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby do not, directly or indirectly (with or without notice or lapse of time):

(a) contravene, conflict with or result in a violation of any of the terms, conditions or provisions of the Company Constituent Documents;

(b) contravene, conflict with or result in a violation of any Legal Requirement or any Order, writ, injunction, judgment or decree to which the Company or any of the assets owned, used or controlled by the Company is subject or, to the Knowledge of the Company, give any Governmental Body or other Person the right to challenge any of the transactions contemplated by this Agreement or any of the Related Agreements or to exercise any remedy or obtain any relief under, any such Legal Requirement or Order, writ, injunction, judgment or decree to which the Company or any of the assets owned, used or controlled by the Company is subject;

(c) contravene, conflict with or result in a violation of any of the terms or requirements of any Governmental Authorization that is held by the Company or that otherwise relates to the business of the Company or to any of the assets owned, used or controlled by the

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Company, including in such a manner as would, pursuant to the terms of such Governmental Authorization, give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify such Governmental Authorization;

(d) contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any Material Contract to which the Company or any of the assets owned, used or controlled by the Company is subject, or give any Person the right to (i) declare a default or exercise any remedy under any such Material Contract, (ii) accelerate the maturity or performance of any such Material Contract or (iii) cancel, terminate or modify any such Material Contract; or

(e) result in the imposition or creation of any Encumbrance upon or with respect to any asset owned or used by the Company (except for minor liens that will not, in any case or in the aggregate, materially detract from the value of the assets subject thereto or materially impair the operations of the Company).

The Company has complied, in all material respects, with all applicable Legal Requirements and Orders in connection with the execution, delivery and performance of this Agreement and any Related Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby. No filing with, notice to or consent from any Person (other than the parties hereto) is required in connection with the execution, delivery or performance of this Agreement or any of the Related Agreements by the Company, the consummation of the transactions contemplated hereby and thereby by the Company or the conduct of the business of the Company in the same manner immediately after the Closing Date as before the Closing Date.

2.6 Financial Statements.

(a) Part 2.6 of the Company Disclosure Schedule includes the following financial statements (collectively, the “Company Financial Statements”):

(i) The audited consolidated balance sheet of the Company as of December 31, 2007 and 2006 (the “Balance Sheet”) and the related audited profit and loss account of the Company for the periods then ended together with the notes thereto and the unqualified report and opinion of Deloitte & Touche LLP relating thereto (collectively, the “Company Audited Financial Statements”); and

(ii) the unaudited consolidated balance sheets of the Company as of September 30, 2008 (the “Balance Sheet Date”) and the related unaudited profit and loss account of the Company for the period from January 1, 2008 through the Balance Sheet Date (the “Unaudited Interim Financial Statements”).

(b) The Company Audited Financial Statements give a true and fair view of the financial position of the Company as of the dates thereof and the results of operations and cash flows of the Company for the periods covered thereby. The Company Audited Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered. The Company Audited Financial Statements were prepared from the books and records of the Company, which books and records have been maintained in accordance with sound business practices and all applicable Legal Requirements and reflect all financial transactions of the Company that are required to be reflected in accordance with GAAP.

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(c) The Unaudited Interim Financial Statements have been prepared with due care and attention, on a basis consistent with the Company Audited Financial Statements, and give a fair and reasonable view of the assets and liabilities of the Company as at their date and of the profits and losses for the period in respect of which they have been prepared, subject to year-end adjustments.

(d) The Company 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 financial statements of the Company in accordance with GAAP and to maintain accountability for the Company’s assets; (iii) access to the Company’s assets is permitted only in accordance with management’s authorization; (iv) the reporting of the Company’s assets is compared with existing assets at regular intervals and (v) accounts and other receivables and inventory are recorded in good faith and reserves established against them based upon actual prior experience and in accordance with GAAP, and proper procedures are implemented for the collection thereof on a commercially reasonable basis. The Company does not have any Knowledge of any significant deficiencies or material weaknesses in the design or operation of the Company’s internal control structure and procedures over financial reporting. The Company has heretofore made available to Purchaser a true, complete and correct copy of any disclosure (or, if unwritten, a summary thereof) by any Representative of the Company to the Company’s independent auditors relating to (A) any significant deficiencies in the design or operation of internal controls that could adversely affect the ability of the Company to record, process, summarize and report financial data and any material weaknesses in internal controls and (B) any fraud, whether or not material, that involves management or other Employees who have a significant role in the internal control over financial reporting of the Company.

(e) The Company possesses books and records which contain all financial and other information from the date of its incorporation through the date hereof necessary for the preparation of financial statements.

2.7 Absence of Certain Changes. Except as set forth in Part 2.7 of the Company Disclosure Schedule, since the Balance Sheet Date, the Company has conducted its business only in the ordinary course of business consistent with past practice. Except as set forth in Part 2.7 of the Company Disclosure Schedule, since the Balance Sheet Date:

(a) there has not been any Company Material Adverse Effect, and, to the Knowledge of the Company, no event has occurred that will, or could reasonably be expected to, have a Company Material Adverse Effect;

(b) the Company has not (i) suffered any damage, destruction or loss, or any interruption in the use of, any of its assets with a value in excess of US$50,000 in the aggregate (whether or not covered by insurance) or (ii) suffered any repeated, recurring or prolonged shortage, cessation or interruption of supplies or services required to conduct its business;

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(c) the Company has not declared, accrued, set aside or paid any dividend or made any other distribution in respect of any capital shares or other equity securities, and, other than repurchases at cost of shares or other equity securities subject to repurchase options, has not repurchased, redeemed or otherwise reacquired any of its capital shares or other securities;

(d) the Company has not sold, issued or authorized the issuance of (i) any of its capital shares or other securities or (ii) any Company Rights;

(e) there has been no amendment to any of the Company Constituent Documents, and the Company has not effected or been a party to any Acquisition Transaction, recapitalization, reclassification of shares or similar transaction;

(f) the Company has not formed any Subsidiary or acquired any equity interest or other interest in any other Entity;

(g) the Company has not made any capital expenditure which, when added to all other capital expenditures made on behalf of the Company since the Balance Sheet Date, exceeds US$50,000;

(h) the Company has not written off as uncollectible, or established any extraordinary reserve with respect to, any billed or unbilled account receivable or other indebtedness outside existing reserves;

(i) the Company has not incurred any liabilities in excess of US$50,000 in the aggregate, 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 any material damage or risk of material loss to it or relating to any of its assets or properties;

(j) the Company has not (i) acquired, leased or licensed any right or other asset from any other Person, (ii) sold, assigned, transferred or otherwise disposed of, or leased or licensed, any right or other asset to any other Person or (iii) waived or relinquished any right, except, in each case, for (A) immaterial rights or other immaterial assets acquired, leased, licensed or disposed of, (B) non-exclusive licenses of Intellectual Property in connection with sales of Company Products or services to customers and (C) sales of Company Products, in each case in the ordinary course of business and consistent with past practice;

(k) the Company has not (i) loaned any sum of money to any Person (other than pursuant to advances for ordinary and necessary business expenses made to employees in the ordinary course of business consistent with past practice), (ii) created, incurred, assumed or guaranteed any indebtedness for money borrowed or (iii) mortgaged, pledged or otherwise permitted any of its assets or properties to become subject to any Encumbrance, except for Permitted Encumbrances made in the ordinary course of business consistent with past practice;

(l) the Company has not (i) made or suffered any amendment or termination of any Contract to which it is a party or by which it is bound and under which it is entitled to receive or obligated to pay US$25,000 or more in the aggregate or (ii) cancelled, modified or waived any debts or claims in excess of US$25,000 in the aggregate held by it, whether or not in the ordinary course of business;

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(m) the Company has not (i) established, adopted or materially amended any employee benefit plan, (ii) paid or committed to pay any bonus or made any profit-sharing or similar payment to, or increased the amount of wages, salary commissions, fringe benefits, pension or welfare benefits, severance benefits, stock-based benefits or other compensation or remuneration payable to, any of its current or former directors, consultants, officers or employees, or (iii) hired any new director, consultant, officer or any other employee;

(n) the Company has not changed any of its methods of accounting or accounting practices in any respect, except as may be required by GAAP;

(o) the Company has not made any Tax election;

(p) the Company has not threatened, commenced or settled any Legal Proceeding;

(q) the Company has not entered into any transaction involving US$25,000 or more other than in the ordinary course of business consistent with past practice;

(r) the Company has not entered into, or agreed to enter into, any agreements granting any Person a license to any Company Intellectual Property, other than non-exclusive licenses of Intellectual Property in connection with sales of Company Products or services to customers in the ordinary course of business and consistent with past practice;

(s) the Company has not terminated the employment of any Employees;

(t) the Company has not hired any executive officer of the Company;

(u) the Company has not terminated or reduced any development activities; and

(v) the Company has not agreed to take, or committed to take, any of the actions referred to in clauses (c) through (u) above.

2.8 Title to and Sufficiency of Assets.

(a) Except as set forth in Part 2.8(a) of the Company Disclosure Schedule and save for any Real Property, the Company is the sole legal and beneficial owner of all the assets that it purports to own, including, without limitation, (i) all assets referred to in Sections 2.9 and 2.11 of this Agreement, and (ii) all other assets reflected in the Company’s books and records as being owned by the Company. All such assets are owned by the Company free and clear of any Encumbrances, except for (A) Permitted Encumbrances and (B) Encumbrances specifically described in the notes to the Company Audited Financial Statements.

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(b) The assets of the Company constitute all the assets used in or necessary to carry on its business as such business is being conducted as of the date hereof and as of immediately prior to the Closing.

(c) Except for this Agreement, the Company does not have any Contract, absolute or contingent, (i) to effect any Acquisition Transaction or (ii) to sell or otherwise transfer any assets of the Company, except for sales of Company Products or services to be made in the ordinary course of business consistent with past practice.

2.9 Bank Accounts; Accounts Receivable; Inventory.

(a) Part 2.9(a) of the Company Disclosure Schedule provides accurate information with respect to each account maintained by or for the benefit of the Company at any bank or other financial institution, including the name of the bank or financial institution, the account number, the balance as of the date hereof and the names of all individuals authorized to draw on or make withdrawals from such accounts.

(b) Part 2.9(b) of the Company Disclosure Schedule provides an accurate and complete breakdown and aging of all billed and unbilled accounts receivable and other receivables of the Company as of the Balance Sheet Date. All existing accounts receivable of the Company (including those accounts receivable that have not yet been billed or that have not yet been collected and those accounts receivable that have arisen since the Balance Sheet Date and have not yet been collected) are (i) valid, genuine and subsisting obligations of customers of the Company, arising from bona fide sales and deliveries of goods, performance of services or other business transactions in the ordinary course of business and (ii) are fully collectible (except to the extent reserved against in the Company Financial Statements, which such reserves have been determined based upon actual prior experience and are consistent with GAAP, consistently applied) and are not presently, other than as set forth in Part 2.9(b) of the Company Disclosure Schedule, subject to defences, set-offs or counterclaims.

(c) Part 2.9(c) of the Company Disclosure Schedule sets forth a true, correct and complete list of all of the inventory of the Company. All of the inventory of the Company (i) was acquired for the operation of its business in the ordinary course consistent with past practice, (ii) is of a quality and quantity usable or saleable in the ordinary course of business (except as reserved against in the Company Financial Statements), and (iii) is valued on the books and records of the Company at the lower of cost or market value with the cost determined under the first-in-first-out inventory valuation method consistent with past practice.

2.10 Equipment. Part 2.10 of the Company Disclosure Schedule sets forth a true, correct and complete list of all equipment and other tangible assets owned by the Company having an original cost in excess of US$10,000 and regularly or customarily used by the Company in the operation of its business. All equipment and other tangible assets that are owned, leased or used by the Company (i) are free of material defects and deficiencies and in good operating condition and repair, subject to normal wear and tear and continued repair and replacement in accordance with past practice, and (ii) comply in all material respects with, and are being operating and otherwise used in material compliance with, all applicable Legal Requirements. During the past twelve (12) months there has not been any significant interruption of the operations of the Company due to inadequate maintenance of such assets.

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2.11 Real Property.

(a) The Company does not own, nor has it ever owned, any real property or any interest in any real property, except for the leasehold interests created under the real property leases identified in Part 2.13(a)(viii) of the Company Disclosure Schedule (each, a “Lease”).

(b) Part 2.11(b) of the Company Disclosure Schedule includes a complete list of all real property leased, subleased or licensed by the Company (the “Real Property”). No material damage or destruction has occurred with respect to any of the Real Property for which the Company corporation may be liable.

(c) The premises leased pursuant to each Lease are supplied with utilities and other services necessary for the operation of such premises.

2.12 Intellectual Property.

(a) Part 2.12(a) of the Company Disclosure Schedule sets forth a complete and accurate list of all Registered IP owned, in whole or in part, by, under an obligation to be assigned to, or filed in the name of the Company.

(b) Part 2.12(b) of the Company Disclosure Schedule sets forth all Intellectual Property (including software programs) and Intellectual Property Rights (other than Registered IP) owned, in whole or in part, by or under an obligation to be assigned to the Company that are material to the conduct of its business as presently being conducted.

(c) Part 2.12(c) of the Company Disclosure Schedule sets forth all In-Licenses, other than software that is generally commercially available for a cost of not more than US$5,000 for a perpetual license for a single user or work station (or US$25,000 in the aggregate for all users and work stations), and excluding “open source” materials described in Section 2.12(p) below.

(d) Part 2.12(d) of the Company Disclosure Schedule sets forth all Out-Licenses, other than non-exclusive licenses and related agreements of Company Products granted to end user customers in the ordinary course of business pursuant to the standard form of end user license agreement used by the Company and other than written non-disclosure agreements.

(e) Except as set forth in Part 2.12(e) of the Company Disclosure Schedule, the Company exclusively owns all Company Intellectual Property and all Company Intellectual Property is free and clear of any Encumbrances other than Permitted Encumbrances and nonexclusive licenses granted to end user customers in the ordinary course of business. The Intellectual Property and the Intellectual Property Rights owned or used by the Company are not subject to any restriction or limitation of any kind (including geographic restrictions or limitations) that would materially adversely affect the right by the Company to use or exploit thereof, or the right to manufacture, market, distribute, or sell any Company Products currently being developed, offered, manufactured, distributed or sold by the Company.

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(f) The Company owns or otherwise has sufficient rights to all Intellectual Property and Intellectual Property Rights necessary to conduct its businesses as currently conducted.

(g) The Company does not jointly own any Intellectual Property or Intellectual Property Rights with any of its directors, officers, employees, consultants or any other Person pursuant to any non-disclosure, collaboration, license or other agreement or otherwise.

(h) The Company is no longer subject to the exclusivity provision set forth in Section 6.3(a) of that certain Development and Engineering Services Agreement, dated October 23, 2006, between the Company and Motorola related to wireless communications voice devices.

(i) The Registered IP owned by the Company (i) has not been adjudged invalid or unenforceable, (ii) to the Knowledge of the Company, is valid, subsisting, and enforceable, (iii) is not the subject of any pending or threatened proceeding in which the scope, validity, or enforceability of any Registered IP is being or has been contested or challenged and (iv) is in compliance with all formal legal requirements, and all filings, payments, and other actions required to be made or taken to maintain such Registered IP in full force and effect have been made by the applicable deadline.

(j) The Company has not, within the last six years, infringed, misappropriated, or otherwise violated the Intellectual Property Rights of any third party. There are no pending or, to the Knowledge of the Company, threatened infringement, misappropriation, or similar claims or proceedings against the Company. The Company has not received any written notice or other written communication of any alleged infringement or misappropriation of any third party’s Intellectual Property Rights by the Company.

(k) To the Knowledge of the Company, no person or entity is infringing, misappropriating, or otherwise violating any Intellectual Property Rights owned by the Company.

(l) The Company has taken all reasonable steps to maintain the confidentiality of or otherwise protect and enforce its rights in its confidential information, in particular the trade secrets owned by the Company.

(m) None of the software distributed, licensed, or sold by the Company (“Company Software”) fails to comply in any material respect with any applicable warranty or other contractual commitment by the Company relating to the use, functionality, or performance of such software.

(n) Except as set forth in Part 2.12(n) of the Company Disclosure Schedule, no portion of any Company Software has been delivered, made available, or licensed to any third party, nor is the Company obligated to deliver, make available, or license such software in source code form to any third party under any circumstance, other than to the Company’s contractors or consultants who have been hired to develop, manage, and/or modify such Company Software and are obligated to maintain the confidentiality of such source code.

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(o) To the Knowledge of the Company, no Company Software contains any “back door,” “drop dead device,” “time bomb,” “Trojan horse,” “virus,” or “worm” (as such terms are commonly understood in the software industry) or any other code designed to (i) disrupt, disable, harm, or otherwise impede in any manner the operation of, or provide unauthorized access to, a computer system or network or other device on which such code is stored or installed or (ii) damage or destroy any data or files without the user’s consent.

(p) No Company Software is subject to any “copyleft” or other obligation or condition (including any obligation or condition under any “open source” license such as the GNU Public License, Lesser GNU Public License, the wxWindows Library License, or Mozilla Public License) that would require the disclosure, licensing or distribution of any source code for the Company Software owned by the Company.

(q) All Employees of the Company who have created or developed any Intellectual Property or Intellectual Property Rights for the Company have signed written agreements that are valid and enforceable, containing a confidentiality provision protecting the Company’s confidential information and assigning to the Company his or her Intellectual Property Rights developed within the scope of his or her employment or engagement (as applicable) with the Company.

(r) Other than IP Contracts with third parties set forth in Part 2.12(c) and Part 2.12(d) of the Company Disclosure Schedule and agreements with the Company’s customers entered into in the ordinary course of business, the Company is not bound by any agreement to indemnify any other person or entity for intellectual property infringement, misappropriation, or similar claims.

(s) Neither the execution, delivery, or performance of this Agreement (or any of the Related Agreements) nor the consummation by the Company of any of the transactions contemplated by this Agreement (or any of the Related Agreements) will, with or without notice or lapse of time, directly or indirectly result in (i) a loss of, or encumbrance or restriction on any Intellectual Property or Intellectual Property Rights owned by or used by the Company that are material to the conduct of its business as presently being conducted, (ii) a breach of any In-License, (iii) the grant, assignment, or transfer to any third party of any license or other right or interest under, to, or in any of the Company Intellectual Property.

2.13 Contracts.

(a) Except as set forth in Part 2.13(a) of the Company Disclosure Schedule, the Company is not a party to nor is it bound by any written or oral:

(i) Contract with any present or former shareholder, partner, member other equity holder, director, officer, employee or consultant or for the employment of, performance of services by or payment of commissions to any Person, including any consultant;

(ii) Contract with any labor union or other representative of employees;

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(iii) Contract relating to the acquisition, transfer, use, development, sharing or license of any Company Intellectual Property other than (A) licenses of Intellectual Property in connection with the sales of Company Products or services in the ordinary course of business consistent with past practice, (B) end user software licenses that are generally available on standard terms for less than US$5,000; and (C) contracts relating to technology and proprietary assets immaterial to the Company’s business as presently conducted;

(iv) Contract relating to any material acquisition, issuance or transfer of any securities (other than issuances of Company securities in connection with connection with the Company’s share option scheme and employee equity arrangements);

(v) Contract for the purchase of, or payment for, supplies, products or services (A) from a Related Party or (B) involving (1) in any one case, US$25,000 or more or (2) in the aggregate, US$50,000 or more;

(vi) Contract to sell or supply products or to perform services, (A) to or for a Related Party or (B) involving (1) in any one case, US$25,000 or more or (2) in the aggregate, US$50,000 or more;

(vii) Contract creating or involving any agency relationship, distribution arrangement or franchise relationship;

(viii) Contract relating to the lease of or license to enter any Real Property;

(ix) Contract relating to the lease of any equipment used by the Company;

(x) note, debenture, bond, conditional sale agreement, equipment trust agreement, loan agreement or other contract or commitment for the borrowing or lending of money (including, without limitation, loans to or from present or former shareholders, partners, members, other equity holders, officers, directors, employees or any member of their immediate families);

(xi) Contract relating to the creation of an Encumbrance (other than a Permitted Encumbrance) with respect to any asset of the Company or involving or incorporating any indemnity or surety arrangement, guaranty, security agreement, pledge, performance or completion bond or pursuant to which the Company otherwise undertakes the indebtedness of any other Person;

(xii) Contract creating or relating to any partnership or joint venture or any sharing of revenues, profits, losses, costs or liabilities;

(xiii) Contract involving Tax sharing;

(xiv) Contract relating to a charitable or political contribution;

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(xv) Contract for any individual capital expenditure in excess of US$25,000, or US$50,000 in the aggregate;

(xvi) Contract imposing any restriction on the Company’s right or ability (A) to compete with any other Person, (B) to acquire any product or other assets or any services from any other Person, to sell any amount of product or other assets to, or perform any services for any other Person, or (C) to develop or distribute any technology, nor, to the Knowledge of the Company, is any officer or employee of the Company subject to any such Contract, other than with the Company;

(xvii) Contract not made in the ordinary course of business; or

(xviii) Contract not otherwise listed in Part 2.13(a) of the Company Disclosure Schedule that (A) continues over a period of more than twelve (12) months from the date hereof, (B) exceeds US$25,000 in value and (C) may not be terminated by the Company (without penalty) within 30 days after the delivery of a termination notice by the Company.

Contracts in the respective categories described in clauses (i) through (xviii) of this Section 2.13 are referred to in this Agreement as “Material Contracts”.

(b) The Company has provided Purchaser with true, correct and complete copies of all written Material Contracts. Part 2.13(b) of the Company Disclosure Schedule provides an accurate description of the terms of each Material Contract that is not in written form. Each Material Contract is valid and in full force and effect and is enforceable in accordance with its terms.

(c) Except as set forth in Part 2.13(c) of the Company Disclosure Schedule:

(i) The Company has not violated or breached, or committed any default under, any provision of any Material Contract, and, to the Knowledge of the Company, no other Person has violated or breached, or committed any default under, any provision of any Material Contract;

(ii) No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or could reasonably be expected to, (A) result in a violation or breach of any provision of any Material Contract, (B) give any Person the right to declare a default or exercise any remedy under any Material Contract, (C) give any Person the right to accelerate the maturity or performance of any Material Contract, or (D) give any Person the right to cancel, terminate or modify any Material Contract;

(iii) The Company has not received any notice or other communication regarding any actual or possible violation or breach of, or default under, any Material Contract that has not been resolved; and

(iv) The Company has not waived any of its rights under any Material Contract.

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(d) No Person is renegotiating, or has a right (absent any default or breach of a Material Contract) pursuant to the terms of any Material Contract to renegotiate, any amount paid or payable to the Company under any Material Contract or any other material term or provision of any Material Contract.

(e) The Company Contracts collectively constitute all of the Contracts necessary to enable the Company to conduct its business substantially in the manner in which its business is being conducted as of the date hereof and as of immediately prior to the Closing.

(f) Except as disclosed in Part 2.13(f) of the Company Disclosure Schedule, with respect to each Material Contract, the Material Contract will continue to be valid, binding, enforceable, and in full force and effect on identical terms immediately following the consummation of the transactions contemplated by this Agreement and the Related Agreements, and the consummation of the transactions contemplated hereby and thereby shall not result in any payment or payments becoming due from the Company to any Person or give any Person the right to terminate or alter the provisions of such Material Contract. The consummation of the transactions described herein will not affect any of the Material Contracts in a manner that could reasonably be expected to result in a Company Material Adverse Effect.

2.14 Customers; Accounts Payable.

(a) Part 2.14(a) of the Company Disclosure Schedule identifies each Person that has committed (whether oral or written and whether pursuant to an agreement or purchase order or otherwise) to purchase products or services with a dollar value of US$25,000 or more from the Company, and sets forth for each such Person the quantities or amounts of such products or services that such Person has committed to purchase (the “Purchase Commitments”) and whether such commitment is oral or written. The Company has provided to Purchaser true and complete copies of all documents evidencing such Purchase Commitments. All such Purchase Commitments are in full force and effect, have not been withdrawn, amended, modified or terminated and, if accepted and performed by the Company prior to any such withdrawal, amendment, modification or termination, are enforceable by the Company and, upon consummation of the Transactions, will be enforceable by Purchaser, against the other party to such Purchase Commitments. No fact, condition or circumstance exists that would give any party the right to withdraw, amend, modify or terminate any Purchase Commitment and no Person has given any notice to the Company, and the Company has no knowledge, that any Person intends to withdraw, amend, modify or terminate any Purchase Commitment.

(b) Part 2.14(b) of the Company Disclosure Schedule provides an accurate and complete breakdown and aging of the Company’s accounts payable as of the Balance Sheet Date. Part 2.14(b) of the Company Disclosure Schedule accurately identifies, and provides an accurate and complete breakdown of the amounts paid to, each supplier or other Person (other than Employees) that received more than $50,000 from the Company during 2006, 2007 or 2008.

2.15 Liabilities. Except (i) as not required in accordance with GAAP to be reflected or reserved against in the Company Financial Statements, (ii) as and to the extent reflected or reserved against in the Company Financial Statements (including the notes thereto), (iii) as set forth in Part 2.15 of the Company Disclosure Schedule or (iv) as incurred in the

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ordinary course of business since the Balance Sheet Date, the Company does not have any material direct or indirect debts, liabilities, claims, losses, damages, deficiencies, costs, expenses or obligations (whether absolute, accrued, known or unknown, contingent or otherwise) of any nature whatsoever (including, without limitation, obligations under capital leases or any unfunded obligations as required for funding on an ongoing basis under any Plan or arrangement or any uninsured liabilities resulting from failure to comply with any applicable Legal Requirement). The Company does not have any off-balance sheet liabilities.

2.16 Compliance with Legal Requirements; Governmental Authorizations.

(a) The Company is, and has at all times been, in material compliance with all applicable Legal Requirements. The Company has not received any notice or other communication from any Governmental Body regarding any actual or possible violation of, or failure to comply with, any material Legal Requirement. To the Knowledge of the Company, no Governmental Body has proposed or is considering any Legal Requirement that, if adopted or otherwise put into effect, would reasonably be expected to have an adverse effect on the Company’s business, condition, assets, liabilities, operations, financial performance, net income or prospects.

(b) Part 2.16(b) of the Company Disclosure Schedule identifies each Governmental Authorization held by the Company and the Company has delivered to Purchaser accurate and complete copies of all Governmental Authorizations identified in Part 2.16(b) of the Company Disclosure Schedule. The Governmental Authorizations identified in Part 2.16(b) of the Company Disclosure Schedule are valid and in full force and effect, collectively constitute all Governmental Authorizations necessary to enable the Company to conduct its business in the manner in which its business is currently being conducted and will continue in full force and effect immediately following the Closing. The Company is in substantial compliance with the terms and requirements of the respective Governmental Authorizations identified in Part 2.16(b) of the Company Disclosure Schedule. The Company has not received any notice or other communication from any Governmental Body regarding (i) any actual or possible violation of or failure to comply with any material term or requirement of any Governmental Authorization or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any material Governmental Authorization.

2.17 Tax Matters.

(a) General.

(i) All notices, returns (including any land transaction returns), reports, accounts, computations, statements, assessments and registrations and any other necessary information submitted by the Company to any Taxation Authority for the purpose of Taxation have been made on a proper basis, were submitted within applicable time limits, were accurate and complete in all material respects when supplied and remain, to the Knowledge of the Company, accurate and complete in all material respects. None of the above is, or, to the Knowledge of the Company, is likely to be, the subject of any material dispute with any Taxation Authority.

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(ii) All Taxation (whether of the UK or elsewhere), for which the Company has been liable or is liable to account for, has been duly paid (insofar as such Taxation ought to have been paid) and the Company will not become liable to pay any Taxation as a result of any event occurring before Closing or income profits or gains arising to or earned by the Company before Closing.

(iii) The Company has, within applicable time limits, maintained all records in relation to Taxation as they are required by law to maintain.

(iv) The Company has complied within applicable time limits with all notices served on them and any other requirements lawfully made of them by any Taxation Authority.

(v) The Company has not made any payments representing installments of corporation tax pursuant to the Corporation Tax (Installment Payments) Regulations 1998 in respect of any current or preceding accounting periods and is not under any obligation to do so.

(vi) The Company has not paid, within the past seven years ending on the Agreement Date, any penalty, fine, surcharge or interest charged by virtue of the TMA 1970 or any other Tax Statute.

(vii) All Taxation and national insurance deductible and payable under the Pay-As-You-Earn system and/or any other Taxation Statute has, so far as is required to be deducted, been deducted from all payments made (or treated as made) by the Company. All amounts due to be paid to the relevant Taxation Authority prior to the date of this Agreement have been so paid, including without limitation all Tax chargeable on benefits provided for directors, employees or former employees of the Company or any persons required to be treated as such.

(viii) Proper records have been maintained in respect of all such deductions and payments, and all applicable regulations have been complied with.

(ix) The Company is not involved in any dispute with any Taxation Authority and has not, within the past 12 months, been subject to any visit, audit, investigation, discovery or access order by any Taxation Authority. The Company is not aware of any circumstances existing which make it likely that a non-routine visit, audit, investigation, discovery or access order will be made in the next 12 months.

(x) The Company Disclosure Schedule contains details of any concession, agreement or other formal or informal arrangement (that is, an arrangement which is not based on a strict interpretation of all relevant Taxation Statutes, published extra-statutory concessions and published statements of practice) with any Taxation Authority.

(xi) The Company Disclosure Schedule contains details of all transactions, schemes or arrangements in respect of which the Company has been a party or has otherwise been involved for which a statutory clearance application was made. The Company Disclosure Schedule also contains copies of all relevant applications for clearances and copies of

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all clearances obtained in connection with such transactions, schemes or arrangements. All such clearances have been obtained on the basis of full and accurate disclosure of all material facts and considerations relating thereto. All such transactions, schemes or arrangements have been implemented strictly in accordance with the terms of such clearances.

(xii) The Company is not, or will not become, liable to make to any Person (including any Taxation Authority) any payment in respect of any liability to Taxation which is primarily or directly chargeable against, or attributable to, any other Person (other than the Company).

(xiii) The Company Financial Statements make full provision or reserve within GAAP for any period ended on or before the date to which they were drawn up for all Taxation assessed or liable to be assessed on the Company, or for which the Company is accountable at that date, whether or not the Company has (or may have) any right of reimbursement against any other person. Proper provision has been made and shown in the Company Financial Statements for deferred taxation in accordance with GAAP.

(b) Chargeable Gains. The book value shown in, or adopted for the purposes of, the Company Financial Statements as the aggregate value of the assets of the Company, on the disposal of which a chargeable gain or allowable loss could arise, does not exceed the amount which on a disposal of the assets at the date of this Agreement would be deductible, in each case, disregarding any statutory right to claim any allowance or relief other than amounts deductible under Section 38 of TCGA 1992.

(c) Capital Allowances.

(i) If the assets of the Company were disposed of at the Closing Date for their book value as shown in, or adopted for the purpose of, the Company Financial Statements, or for the value of consideration actually given for them on their acquisition (if such assets were acquired since the Balance Sheet Date), no balancing charge under CAA 2001 would be made on the Company.

(d) Distributions and Other Payments.

(i) No distribution or deemed distribution, within the meaning of Sections 209, 210 or 211 of ICTA 1988, has been made (or will be deemed to have been made) by the Company, except dividends shown in the Company Audited Financial Statements, and the Company is not bound to make any such distribution.

(ii) No rents, interest, annual payments or other sums of an income nature, paid or payable by the Company or which the Company is under an existing obligation to pay in the future, are or will be wholly or partially disallowable as deductions, management expenses or charges in computing taxable profits for Taxation purposes.

(iii) The Company has not, within the period of seven years preceding the Closing Date, been engaged in, or been a party to, any of the transactions set out in Sections 213 to 218 (inclusive) of ICTA 1988, nor has it made or received a chargeable payment as defined in Section 218(1) of ICTA 1988.

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(e) Loan Relationships.

(i) All interests, discounts and premiums payable by the Company in respect of its loan relationships (within the meaning of Section 81 of the Finance Act 1996) are eligible to be brought into account by the Company as a debit for the purposes of Chapter II of Part IV of the Finance Act 1996 at the time, and to the extent that such debits are recognized in the statutory accounts of the Company.

(ii) The Company is not a party to a debtor relationship (within the meaning of Section 103 of the Finance Act 1996) to which paragraph 2 of Schedule 9 to the Finance Act 1996 applies or may apply.

(iii) The Company is not a party to a loan relationship made other than on arm’s length terms. There are no circumstances in which paragraphs 11 and 11A of Schedule 9 to the Finance Act 1996 could apply to require an adjustment of debits and/or credits brought into account by the Company.

(iv) The Company has not been a party to a loan relationship which had an unallowable purpose (within the meaning of paragraph 13 of Schedule 9 to the Finance Act 1996).

(f) Close Companies. The Company is not, nor has it ever been a close company within the meaning of Sections 414 and 415 of ICTA 1988.

(g) Intangible Assets. For the purposes of this paragraph (g), references to intangible fixed assets means intangible fixed assets and goodwill within the meaning of Schedule 29 to the Finance Act 2002 to which that Schedule applies. References to an intangible fixed asset shall be construed accordingly.

(i) Part 2.17(g)(i) of the Company Disclosure Schedule sets out the amount of expenditure on each of the intangible fixed assets of the Company and provides the basis on which any debit relating to that expenditure has been taken into account in the Company Financial Statements.

(ii) No claims or elections have been made by the Company under Part 7 of, or paragraph 86 of Schedule 29 to, the Finance Act 2002 in respect of any intangible fixed asset of the Company.

(iii) Since the Balance Sheet Date:

(1) the Company has not owned an asset which has ceased to be a chargeable intangible asset in the circumstances described in paragraph 108 of Schedule 29 to the Finance Act 2002;

(2) the Company has not realized or acquired an intangible fixed asset for the purposes of Schedule 29 to the Finance Act 2002; and

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(3) no circumstances have arisen which have required, or will require, a credit to be brought into account by the Company on a revaluation of an intangible fixed asset.

(h) Company Residence, Treasury Consents and Overseas Interests.

(i) The Company has, throughout the past seven years, been resident in the UK for corporation tax purposes and has not, to the Knowledge of the Company, at any time in the past seven years, been treated as resident in any other jurisdiction for the purposes of any double taxation arrangements having effect under Section 249 of the Finance Act 1994, Section 788 of ICTA 1988 or for any other tax purpose.

(ii) The Company has not caused, permitted or entered into any of the transactions specified in Section 765 of ICTA 1988 (migration of companies) without the prior written consent of HM Treasury, or without having duly provided the required information to HM Revenue & Customs (as appropriate).

(iii) The Company does not hold shares in a company which is not resident in the UK and which would be a close company if it were resident in the UK in circumstances such that a chargeable gain accruing to the company not resident in the UK could be apportioned to the Company pursuant to Section 13 of TCGA 1992.

(iv) The Company is not holding, or has not held in the past seven years, any interest in a controlled foreign company within Section 747 of ICTA 1988. The Company does not have any material interest in an offshore fund as defined in Section 759 of ICTA 1988.

(v) The Company has not had, nor within the last seven years has it had, a permanent establishment outside the UK.

(vi) The Company is not an agent or permanent establishment of another company, Person, business or enterprise for the purpose of assessing the company, Person, business or enterprise to Taxation in the country of residence of the Company.

(i) Anti-Avoidance. All transactions or arrangements made by the Company have been made on fully arm’s length terms. There are no circumstances in which Section 770A of, or Schedule 28AA to, ICTA 1988 or any other rule or provision could apply allowing any Taxation Authority to make an adjustment to the terms on which such transaction or arrangement is treated as being made for Taxation purposes, and no notice or enquiry has been made by any Taxation Authority in connection with any such transactions or arrangements.

(j) Inheritance Tax.

(i) The Company has not:

(1) made any transfer of value within Sections 94 and 202 of IHTA 1984; or

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(2) received any value such that liability might arise under Section 199 of IHTA 1984; or

(3) been a party to associated operations in relation to a transfer of value as defined by Section 268 of IHTA 1984.

(ii) There is no unsatisfied liability to inheritance tax attached to, or attributable to, the Shares or any asset of the Company. None of them are subject to any HM Revenue & Customs charge as mentioned in Section 237 and 238 of IHTA 1984.

(iii) No asset owned by the Company, nor the Shares, are liable to be subject to any sale, mortgage or charge by virtue of Section 212(1) of IHTA 1984.

(k) Value Added Tax.

(i) The Company is a taxable Person and is registered for the purposes of VAT. The Company is not, nor has it been in the period of six years ending with the Closing Date, a member of a group of companies for VAT purposes.

(ii) The Company is registered, for the purposes of VAT, with monthly prescribed accounting periods. Such registration, as is referred to this Section 2.17(k)(ii) is not subject to any conditions imposed by or agreed with HM Revenue & Customs. The Company is not (nor are there any circumstances by virtue of which it may become) under a duty to make monthly payments on account under the Value Added Tax (Payments on Account) Order 1993. The Company has complied with all statutory provisions, rules, regulations, orders and directions in respect of VAT.

(iii) All supplies made by the Company are taxable supplies. The Company has not been, nor, to the Company’s Knowledge, will it be, denied full credit for all input tax paid or suffered by it. All VAT paid or payable by the Company is input tax as defined in Section 24 of the VATA 1994 and regulations made under it.

(iv) No act or transaction has been effected in consequence of which the Company is liable for any VAT arising from supplies made by another company. No direction has been given by HM Revenue & Customs under Schedule 9A to the VATA 1994 as a result of which the Company would be treated for the purposes of VAT as a member of a group.

(v) The Company does not own, or has at any time within the period of ten years preceding the date of this Agreement owned, any assets which are capital items subject to the capital goods scheme under Part XV of the VAT Regulations 1995.

(vi) The Company has not made any claim for any bad debt relief under Section 36 of the VATA 1994.

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(l) Stamp Duty, Stamp Duty Land Tax and Stamp Duty Reserve Tax.

(i) Any document that is necessary in proving the title of the Company to any asset which is owned by the Company at the Closing Date, and each document which the Company may wish to enforce or produce in evidence is, so far as required by law, duly stamped for stamp duty purposes. No such documents which are outside the UK would attract stamp duty if they were brought into the UK.

(ii) Neither entering into this Agreement nor Closing will result in the withdrawal of any stamp duty or stamp duty land tax relief granted on or before Closing Date which will affect the Company.

(iii) The Company Disclosure Schedule sets out full and accurate details of any chargeable interest (as defined under Section 48 of the Finance Act 2003) acquired or held by the Company before the Closing Date in respect of which the Company is aware, or ought reasonably to be aware, that an additional land transaction return will be required to be filed with a Taxation Authority and/or a payment of stamp duty land tax made on or after the Closing Date.

(iv) The Company has complied in all material respects with the provisions of Part IV of Finance Act 1986 (Stamp Duty Reserve Tax) and any regulations made under such legislation.

(m) Tax Sharing. The Company is not bound by or party to any Taxation indemnity, Taxation sharing or any Taxation allocation agreement in respect of which claims against the Company would not be time barred.

(n) Capital Losses. No capital loss has accrued to the Company that is a loss within the meaning of Section 8 or 16A of the Taxation of Capital Gain Act 1992.

(o) Exclusions. The Tax Warranties shall not apply to the extent that in respect of any liability to Taxation of the Company:

(i) a provision or reserve in respect thereof is made in the Accounts; or

(ii) it would not have arisen but for a change after Closing in the accounting bases upon which the Company values its assets (other than a change made in order to comply with GAAP or any applicable Tax Statute); or

(iii) the Purchaser is compensated for any such matter under any other provision of this Agreement; or

(iv) it would not have arisen but for a voluntary act or transaction carried out by Purchaser or the Company after Closing being an act which:

(1) is not in the ordinary course of business; or

(2) could reasonably have been avoided; or

(3) the Company was not legally committed to do under a commitment that existed on or before Closing; or

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(v) such liability arises or is increased as a result of a change in the law or published administrative or revenue practice or interpretation announced and coming into force on or after Closing or any subsequent increase in the rates of Taxation in force at today’s date; or

(vi) such liability arises or is increased as a result of a failure or omission of the Company or Purchaser to make any claim, election, surrender or disclaimer or give any notice or consent after Closing the making, giving, or doing of which was taken into account or assumed in the provision or reserve for Tax or deferred Tax in the Accounts; or

(vii) such liability arises or is increased as a result of the winding up or a change after Closing in the nature or conduct of a trade carried on by the Company before Closing or a reduction or cessation of trade after Closing; or

(viii) such liability is stamp duty in respect of the purchase of the Shares pursuant to this Agreement (except if and to the extent the Sellers’ portion of any such Taxes, as set forth in Section 6.10, was not offset in calculating the Aggregate Principal Amount of the Sellers Promissory Notes on the Closing Date); or

(ix) such liability would not have arisen or been increased but for any claim, election, surrender or disclaimer made or notice or consent made or given after Closing by Purchaser or the Company other than any claim, election, surrender, disclaimer, notice or consent assumed to have been made, given or done in computing the amount of any allowance, provision or reserve in the Accounts.

2.18 Benefit Plans; Employees and Agents.

(a) Part 2.18(a) of the Company Disclosure Schedule identifies each employee benefit plan and all salary, bonus, deferred compensation, incentive scheme, stock purchase, stock option, restricted stock, severance pay, termination pay, hospitalization, medical, life or other insurance, supplemental unemployment benefits, welfare, profit-sharing, pension or retirement plan, program or agreement (whether qualified or non-qualified, currently effective or terminated, written or unwritten) (collectively, the “Plans”) currently sponsored, maintained, contributed to or required to be contributed to by the Company for the benefit of any current or former employee, director or consultant of the Company (collectively, “Employee”).

(b) Since the Balance Sheet Date, no material changes have been made or promised to the terms of employment, benefits or conditions of service of any Employee or to benefits provided to any person engaged to any extent in the Company’s business (now or in the past) or any dependants of such person or to the terms of any agreement or arrangement (whether written or unwritten and whether binding or not) with any trade union, employee representative or body of employees or their representatives.

(c) No person is employed or engaged in the Company’s business (whether temporarily or permanently and whether under a contract of service or contract for services) other than the Employees, and the Employees are all employed by the Company and work wholly or mainly in the Company’s business.

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(d) The Company has disclosed full and accurate particulars of the current terms of employment or engagement and benefits of all Employees whether or not recorded in writing, or implied by custom or practice or otherwise; and details of all remuneration and benefits which the Employees or their dependants receive or are entitled to receive (now or in the future).

(e) In respect of each of the Employees, the Company has: materially performed all obligations and duties required to be performed by it, whether arising under contract, statute, at common law or in equity; maintained adequate, suitable and up to date records relating to the Employees; and paid to HM Revenue & Customs and any other appropriate authority all taxes, National Insurance contributions and other levies due in respect of the Employees on account of their employment by the Company up to and including the Closing Date.

(f) With the exception of the Enterprise Management Incentive Scheme adopted by the Board on 23 October 2001 (the “EMI Scheme”), the Company has established no employee share or other incentive plans or arrangements, and nothing has been done to undermine the tax-favored status of the EMI Scheme.

(g) All contracts of service or for services with any of the Employees or agents of the Company are terminable by the Company at any time on three months’ notice or less without compensation (other than for unfair dismissal or a statutory redundancy payment). The Company has no liability other than for salary, wages, commission or pension to or for the benefit of any person who is an Employee or agent of the Company.

(h) There are no terms under which the Employees are employed and, to the Knowledge of the Company, no event has occurred and no condition or circumstance exists that could give rise to any claim for unlawful discrimination or unequal pay.

(i) No Employee: has given or received notice to terminate employment or engagement and, to the Knowledge of the Company, no Employee is entitled or intends or is likely to terminate such employment or engagement as a result of the parties entering into this Agreement or the consummation of the transactions contemplated by this Agreement; has been off sick for a period of 21 working days or more in any six-month period within the three years ending on the date of this Agreement (whether or not consecutive), or is receiving or is due to receive payment under any sickness or disability or permanent health insurance scheme and, so far as the Company is aware, there are no such claims pending or threatened; is on secondment, maternity or other statutory leave or otherwise absent from work other than on normal annual leave or continuous sickness or incapacity absence of less than 21 working days; or is subject to a current disciplinary warning or procedure.

(j) The Company is not a party to any arrangements or promise to make or in the habit of making ex gratia or voluntary payments on redundancies or payments by way of bonus, pension, allowance or similar payments to any such persons.

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(k) There are no schemes or arrangements (whether legally enforceable or not) for payment of pension, disability, or death benefit or similar schemes or arrangements in operation or contemplated in respect of any of the Employees or their dependants, or persons formerly employed or engaged in the Company’s business or their dependants, under which the Purchaser or any of the owners for the time being of the Company’s business or the assets or any part of them may become liable to make payments or to provide equivalent benefits.

(l) The Company is not engaged or involved in any dispute, claim or legal proceedings (whether arising under contract, common law, statute or in equity) with any of the Employees or any other person currently or previously employed by or engaged in the Company’s business or their dependants and, so far as the Company is aware, there is no event which could give rise to such dispute, claim or proceeding.

(m) The Company has not recognized any trade union or any other organization of employees or their representatives in respect of any of the Employees.

2.19 Environmental Matters.

(a) The Company is in compliance in all material respects with all applicable Environmental Laws, which compliance includes the possession by the Company of all permits and other Governmental Authorizations required under applicable Environmental Laws and compliance with the terms and conditions thereof. All material Governmental Authorizations currently held by the Company pursuant to Environmental Laws are identified in Part 2.19(a) of the Company Disclosure Schedule. All applications required to have been filed by the Company for the renewal or transfer of the Governmental Authorizations identified or required to be identified in Part 2.19(a) of the Company Disclosure Schedule have been duly filed on a timely basis with the appropriate Governmental Bodies, and each other notice or filing required to have been given or made with respect to such Governmental Authorizations has been duly given or made on a timely basis with the appropriate Governmental Body.

(b) The Company has not received, at any time, any notice or other communication (in writing), whether from a Governmental Body, citizens group, Employee or otherwise, (i) that alleges that it is not in compliance with any Environmental Law, (ii) regarding any actual, alleged, possible or potential obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any investigation, cleanup or remedial, corrective or response action of any nature arising as a result of a breach of Environmental Law, (iii) that alleges environmental claims, damages, penalties or losses, including bodily injury and property damage claims.

(c) Part 2.19(c) of the Company Disclosure Schedule sets forth a list of all documents (whether in hard copy or electronic form) that contain any environmental reports, investigations and audits relating to premises currently or previously owned or operated by the Company (whether conducted by or on behalf of the Company or a third party, and whether done at the initiative of the Company or directed by a Governmental Body or other third party) which were issued or conducted during the past five years and which the Company has possession of or access to. A complete and accurate copy of each such document has been provided to the Purchaser.

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(d) To the Knowledge of the Company, no Materials of Environmental Concern have been used, manufactured, generated, sold, handled, treated, transported, stored or disposed by the Company, in breach of applicable Environmental Laws.

(e) To the Knowledge of the Company no Materials of Environmental Concern are present at or have been released on or at any property owned, leased or controlled by the Company in quantities that will trigger an environmental claim by a Governmental Authority or third party, and to the knowledge of the Company no underground storage tanks, above-ground storage tanks, asbestos-containing materials, landfills or disposal areas are present on any such property.

2.20 Insurance.

(a) Part 2.20(a) of the Company Disclosure Schedule identifies all insurance contracts or policies maintained by, at the expense of or for the benefit of the Company, including the name of the insurer and the types and amounts of coverage (collectively, the “Policies”), and the Company has delivered to Purchaser accurate and complete copies of the Policies identified or required to be identified on Part 2.20(a) of the Company Disclosure Schedule. All the Policies are in full force and effect, all premiums with respect thereto covering all periods up to the Closing Date have been paid or accrued, and the Company has not received any notice or other communication regarding any actual or possible (i) cancellation, invalidation or termination of any Policy or (ii) material adjustment in the amount of premiums payable with respect to any Policy. The coverage provided by the Policies complies with (i) applicable Legal Requirements and (ii) the requirements that the Company maintain insurance under all Material Contracts. The Company has not breached or otherwise failed to perform in any material respect its obligations under any of the Policies nor has the Company received any adverse notice from any of the insurers party to the Policies with respect to any alleged breach or failure in connection with any of the Policies which remains outstanding at Closing. Since January 1, 2006, the Company has not been refused any insurance with respect to its assets or operations, nor has coverage ever been limited by any insurance carrier to which the Company has applied for any Policy or with which the Company has carried a Policy. The Company is, and has at all times been, in compliance with all surety bond requirements of Governmental Authorizations held by the Company or otherwise set forth in applicable Legal Requirements or Contracts.

(b) Set forth in Part 2.20(b) of the Company Disclosure Schedule is a list of all claims which have been made by the Company since January 1, 2005 under any worker’s compensation, general liability, property or other insurance policy applicable to the Company or any of its properties. Such claim information includes the following information with respect to each accident, loss or other event: (i) the identity of the claimant; (ii) the date of the occurrence; (iii) the status as of the date hereof and (iv) the amounts paid or recovered to date. Except as set forth in Part 2.20(b) of the Company Disclosure Schedule, there are no pending or, to the Knowledge of the Company, threatened claims under any insurance policy, and the Company has not received any notice or other communication regarding any actual or possible rejection of any pending claim under any insurance policy.

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2.21 Related Party Transactions.

(a) No Related Party has, and no Related Party has had at any time since January 1, 2005, any direct or indirect interest in any material asset used in or otherwise relating to the business of the Company;

(b) no Related Party is, or has been at any time since January 1, 2005, indebted to the Company;

(c) since January 1, 2005, no Related Party has entered into, or has had any direct or indirect financial interest in, any Material Contract, transaction or business dealing involving the Company;

(d) to the Knowledge of the Company, no Related Party is competing, or has competed at any time since January 1, 2006, directly or indirectly, with the Company; and

(e) no Related Party has any claim or right against the Company (other than rights to receive compensation for services performed as an Employee).

2.22 Legal Proceedings; Orders.

(a) Except as set forth in Part 2.22(a) of the Company Disclosure Schedule, there is (i) no pending Legal Proceeding, and to the Knowledge of the Company, no Person has threatened to commence any Legal Proceeding (A) against, affecting or which involves the Company or any of the assets owned by the Company, any Person whose liability the Company has or may have retained or assumed, either contractually or by operation of law or any of the directors, officers, employees or equity holders of the Company with respect to their activities as such, any Plan or the assets of any Plan; or (B) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Transactions or (ii) to the Knowledge of the Company, no pending or threatened Legal Proceeding against, affecting or which involves any assets used or controlled by the Company. To the Knowledge of the Company, no event has occurred and no claim or dispute exists that will, or that would reasonably be expected to, give rise to or serve as a basis for the commencement of any such Legal Proceeding.

(b) Except as set forth in Part 2.22(a) of the Company Disclosure Schedule, no Legal Proceeding has ever been commenced by or has ever been pending against the Company that has not been fully adjudicated or settled prior to the date of this Agreement without liability to the Company that is likely to be incurred after the date of this Agreement. The Company has delivered to Purchaser accurate and complete copies of all pleadings, correspondence and other written materials to which the Company has access and that relate to any Legal Proceeding identified in the Company Disclosure Schedule.

(c) There is no Order to which the Company, or any of the assets owned or used by it, is subject. To the Knowledge of the Company, no officer or other employee of the Company is subject to any Order that prohibits such officer or other employee from engaging in or continuing any conduct, activity or practice relating to the Company’s business. To the Knowledge of the Company, there is no proposed Order that, if issued or otherwise put into

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effect, (i) could have a Company Material Adverse Effect or an adverse effect on the ability of the Company or any of its Representatives or shareholders to comply with or perform any covenant or obligation under any of the Related Agreements or (ii) could have the effect of preventing, delaying, making illegal or otherwise interfering with the Transactions.

2.23 Company and Shareholder Action.

(a) The Board (at a meeting duly called and held in accordance with the Company Constituent Documents) has (i) unanimously determined that the Transactions are advisable and in the best interests of the Company and its members, (ii) unanimously approved and adopted the Transactions and this Agreement, (iii) unanimously recommended the adoption and approval of the Transactions and this Agreement by the members of the Company and (iv) directed that this Agreement be submitted for a vote by the members of the Company. The Company has provided Purchaser with a certified copy of the Board resolutions adopting and approving the Transactions and this Agreement.

(b) This Agreement and the Transactions were approved and ratified by the affirmative vote of members of the Company holding at least 75% of the Company Ordinary Shares issued and outstanding on the date of such vote (which such vote was taken in compliance with all notice and other requirements contained in the Company Constituent Documents). The affirmative vote of members of the Company holding 50% of the Company Ordinary Shares issued and outstanding on the date of such vote was the only vote of the members of the Company needed to approve the Transactions and the principal terms of this Agreement. The Company has provided Purchaser with a certified copy of the resolutions of the members of the Company approving the Transactions and this Agreement.

2.24 Finder’s Fee; Transaction Costs. Other than as set forth in Part 2.24 of the Company Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company or any of the Sellers. All Transaction Costs which were not paid by the Company at or prior to the Closing Date have been taken into account in calculating the Aggregate Principal Amount of the Sellers Promissory Notes.

2.25 Certain Payments. Neither the Company, nor, to the Company’s Knowledge, any Representative or other Person associated with or acting for or on behalf of the Company, has at any time, directly or indirectly:

(a) used any corporate funds (i) to make any unlawful political contribution or gift or for any other unlawful purpose relating to any political activity, (ii) to make any unlawful payment to any governmental official or employee or (iii) to establish or maintain any unlawful or unrecorded fund or account of any nature;

(b) made any false or fictitious entry, or failed to make any entry that should have been made, in any of the books of account or other records of the Company;

(c) made any payoff, influence payment, bribe, rebate, kickback or unlawful payment to any Person;

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(d) performed any favor or used corporate funds in giving any gift which was not deductible for federal income tax purposes;

(e) made any payment (whether or not lawful) to any Person, or provided (whether lawfully or unlawfully) any favor or anything of value (whether in the form of property or services, or in any other form) to any Person, for the purpose of obtaining or paying for (i) favorable treatment in securing business, or (ii) any other special concession; or

(f) agreed, committed, offered or attempted to take any of the actions described in clauses (a) through (e) of this Section 2.25.

2.26 Full Disclosure. To the Knowledge of the Company, this Agreement and the Company Disclosure Schedule do not (a) contain any warranty or information that is false or misleading with respect to any material fact or (b) omit to state any material fact necessary in order to make the warranties and information contained herein and therein, in light of the circumstances under which such warranties and information were or will be made or provided, not false or misleading.

ARTICLE 3.

WARRANTIES OF THE SELLING SHAREHOLDERS

Each Selling Shareholder, severally (but not jointly) warrants on its own behalf only, as of the date of this Agreement and as of the Closing Date, to and for the benefit of the Purchaser, as follows:

3.1 Organization; Standing and Power. If a Selling Shareholder is an Entity, such Selling Shareholder is duly organized (or incorporated as the case may be), validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all necessary power and authority to enter into and perform its obligations under this Agreement. Such Selling Shareholder is not organized or incorporated in or a resident or citizen of the United States or Singapore.

3.2 Authority; Binding Nature of Agreement. Such Selling Shareholder has all requisite corporate or other power and authority and the capacity to execute and deliver (or procure the delivery of) this Agreement and any Related Agreement to which it is a party, to consummate the transactions contemplated hereby and thereby and to take all other actions required to be taken by it pursuant to the provisions hereof and thereof. The execution, delivery and performance of this Agreement and any Related Agreement to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or other action on the part of the Selling Shareholder, and no other corporate or other action on the part of the Selling Shareholder is necessary to authorize the execution, delivery and performance by the Selling Shareholder of this Agreement and any Related Agreement to which the Selling Shareholder is a party and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Selling Shareholder. This Agreement and any Related Agreement to which the Selling Shareholder is a party constitutes (assuming due and valid authorization, execution and

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delivery hereof and thereof by the other parties hereto and thereto, if any) the valid and binding obligation of the Selling Shareholder, enforceable against the Selling Shareholder in accordance with their respective terms, except as such enforcement may be limited by any bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors’ rights and remedies generally and by general principles of equity, regardless of whether enforcement is sought in a proceeding at law or in equity.

3.3 Ownership and Transfer of the Shares. Each Selling Shareholder is, in respect of the Shares as set forth opposite such Selling Shareholder’s name on Part 2.3(a) of the Company Disclosure Schedule, (a) the legal and beneficial owner of those shares with full authority to transfer the legal and beneficial interest in the Shares or (b) the beneficial owner of those Shares and has the power to procure the transfer of those Shares by the legal owner, in each case, free and clear of any and all Encumbrances. The Selling Shareholder has the power, authority and capacity to sell, transfer, assign and deliver (or to procure such sale, transfer, assignment and delivery of) such Shares as provided in this Agreement, and such delivery will convey to Purchaser good and marketable title to such Shares, free and clear of any and all Encumbrances.

3.4 Non-Contravention; Consents. The execution, delivery and performance of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby do not, directly or indirectly (with or without notice or lapse of time):

(a) contravene, conflict with or result in a violation of any of the terms, conditions or provisions of the organizational documents of such Selling Shareholder if such Selling Shareholder is an Entity; or

(b) contravene, conflict with or result in a material violation of any Legal Requirement or any Order, writ, injunction, judgment or decree to which such Selling Shareholder or any of the assets owned, used or controlled by such Selling Shareholder (including the Shares held by such Selling Shareholder) is subject.

(c) Other than in connection with the Selling Shareholders’ exercise of the Drag-Along Right, the Selling Shareholder is not required to obtain the Consent of, make any filing with or provide any notification to, any Person or Governmental Body in connection with the execution and delivery by such Selling Shareholder of this Agreement, the performance by such Selling Shareholder of its covenants and agreements under this Agreement and the consummation by such Selling Shareholder of the transactions contemplated hereby.

3.5 No Other Agreements. Such Selling Shareholder does not have any legal obligation, absolute or contingent, to any other Person to sell or otherwise transfer the Shares held by such Selling Shareholder (other than pursuant to this Agreement). Such Selling Shareholder is not subject to any voting agreement with respect to a change of control of the Company or a right of first refusal related to the Shares held by such Selling Shareholder.

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3.6 Litigation. There is no action, claim, suit, proceeding or investigation pending or, to Selling Shareholder’s Knowledge, threatened against or affecting the Selling Shareholder or the Shares held by such Selling Shareholder, in each case before any court or Governmental Body, that would reasonably be expected to affect the ability of the Selling Shareholder to sell and transfer the Selling Shareholder’s Shares or otherwise to consummate the transactions contemplated by this Agreement at the Closing.

3.7 Finder’s Fees. Except as set forth on the Schedule of Company Transaction Costs, no broker, finder, or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Selling Shareholder.

ARTICLE 4.

WARRANTIES OF PURCHASER AND PARENT

Purchaser and Parent, jointly and severally, warrant to the Company and each of the Sellers, as of the date of this Agreement and as of the Closing Date, as follows:

4.1 Corporate Existence and Power. Purchaser is a private company limited by shares duly organized and validly existing under the laws of Singapore. Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of Purchaser and Parent has all necessary power and authority to carry on its business in the manner in which its business is currently being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the conduct of its business or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified would not have a material adverse effect on Purchaser’s or Parent’s ability to complete the Transactions.

4.2 Authority; Binding Nature of Agreement. Each of Purchaser and Parent has all right, power and authority to execute and deliver this Agreement and any Related Agreements to which it is a party, to consummate the transactions contemplated hereby and thereby and to take all other actions required to be taken by it pursuant to the provisions hereof and thereof. The execution, delivery and performance by each of Purchaser and Parent of this Agreement and each Related Agreement to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of Purchaser and Parent, as applicable, and no other action on the part of Purchaser or Parent is necessary to authorize the execution, delivery and performance by Purchaser or Parent of this Agreement or any Related Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by each of Purchaser and Parent. This Agreement constitutes and, upon execution and delivery thereof by Purchaser and Parent, each Related Agreement to which either or both or them is a party will constitute (assuming due and valid authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, if any) the legal, valid and binding obligation of Purchaser and/or Parent, as applicable, enforceable against Purchaser and/or Parent, as applicable, in accordance with its terms, except as such enforcement may be limited by any bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors’ rights and remedies generally and by general principles of equity, regardless of whether enforcement is sought in a proceeding at law or in equity.

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4.3 Non-Contravention; Consents. The execution, delivery and performance by Purchaser and Parent of this Agreement and of each Related Agreement to which either is a party or both of them are parties and the consummation of the transactions contemplated hereby and thereby by Purchaser and Parent do not, directly or indirectly (without notice or lapse of time):

(a) contravene, conflict with or result in a violation of any of the terms, conditions or provisions of their respective organizational documents;

(b) contravene, conflict with or result in a violation of any Order, writ, injunction, judgment or decree to which Purchaser or any of the assets owned, used or controlled by Purchaser or Parent is subject or, to the Knowledge of Purchaser and/or Parent, as applicable, give any Governmental Body or other Person the right to challenge any of the transactions contemplated by this Agreement or any of the Related Agreements or to exercise any remedy or obtain any relief under, any Legal Requirement; or

(c) contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any material Contract to which Purchaser or Parent or any of the assets owned, used or controlled by them is subject, or give any Person the right to (i) declare a default or exercise any remedy under any such Contract, (ii) accelerate the maturity or performance of any such Contract or (iii) cancel, terminate or modify any such Contract, in each case solely to the extent that such contravention, violation or breach would reasonably be expected to prevent, enjoin, alter or delay the transactions contemplated by this Agreement or any of the Related Agreements.

4.4 Compliance with Legal Requirements. Purchaser and Parent each has complied with all applicable Legal Requirements and Orders in connection with the execution, delivery and performance of this Agreement and any Related Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby. No filing with, notice to or consent from any Person (other than the parties hereto) is required in connection with the execution, delivery or performance of this Agreement or any of the Related Agreements by Purchaser and Parent or either of them or the consummation of the transactions contemplated hereby and thereby by Purchaser and Parent or either of them.

ARTICLE 5.

PARENT GUARANTEE OF PURCHASER OBLIGATIONS

5.1 Guarantee of Purchaser Obligations. Purchaser is a direct subsidiary of Parent, and Parent acknowledges that it will derive substantial benefit from the Transactions. As consideration for the Selling Shareholders entering into this Agreement and the Related Agreements and for the Selling Shareholders consummation of the Transactions, Parent irrevocably and unconditionally guarantees the due and punctual payment as, when and if due, of all sums payable under (a) the Sellers Promissory Notes, on the terms and subject to the conditions set forth in Section 1.6 hereof and such Sellers Promissory Notes, and (b) the Contingent Consideration Note, on the terms and subject to the conditions set forth in Section 1.7 hereof and such Contingent Consideration Note, and the performance of Purchaser’s obligations pursuant to this Agreement (collectively, the “Guaranteed Obligations”); provided, that the

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holders of the Sellers Promissory Notes and the Contingent Consideration Note to whose benefit the guarantee pursuant to this Article 5 inures (each, a “Guaranteed Party”) shall be required first to demand payment of the Guaranteed Obligations from the Purchaser, and only if the Guaranteed Obligations are not satisfied by the Purchaser within ten (10) Business Days shall the Guaranteed Party demand payment of or assert a claim against Parent under this Article 5. The guarantee set forth in this Article 5 may only be enforced on the terms set forth herein and nothing set forth in this Article 5 shall confer or give or shall be construed to confer or give to any Person other than the Guaranteed Parties any rights or remedies against any Person other than the rights of the Guaranteed Parties against Parent as expressly set forth herein. For the avoidance of doubt, the Shareholders’ Representative shall be the sole party authorized, on behalf of the Sellers, to enforce the guarantee set forth in this Article 5 with respect to the Remaining Shareholder Promissory Note and the Contingent Consideration Note. Notwithstanding anything to the contrary contained in this Agreement, (y) to the extent the Purchaser is relieved of all or any portion of the Guaranteed Obligations (i) pursuant to the terms of this Agreement, the Sellers Promissory Notes or the Contingent Consideration Note, (ii) by the satisfaction thereof, or (iii) in connection with any agreement between the Purchaser or Parent, on the one hand, and a Guaranteed Party, on the other hand, or (z) in the event the Purchaser or any Affiliate of the Purchaser shall incur any Damages for which it is entitled to recovery under this Agreement, then the Guaranteed Obligations shall be reduced by an amount equal to the amount of any such reduction or claim.

ARTICLE 6.

COVENANTS OF THE PARTIES

6.1 Access to Information.

(a) During the period from the Agreement Date until the earlier to occur of (i) the Closing Date or (ii) the termination of this Agreement pursuant to Article 8 (the “Pre-Closing Period”), subject to compliance with applicable Legal Requirements (including antitrust, anti-competition and similar fair trade laws), the Company shall, and shall cause its Representatives to, provide Purchaser and Purchaser’s Representatives with (i) reasonable access during normal business hours to personnel and assets and to all existing books, records, Tax Returns, contracts, work papers and other documents and information relating to the Company; and (ii) copies of such existing books, records, Tax Returns, work papers and other documents and information relating to the Company, and with such additional financial, operating and other data and information regarding the Company, as Purchaser may reasonably request.

(b) No information or knowledge obtained in any investigation in accordance with this Section 6.1 or otherwise shall affect or be deemed to modify any warranty contained herein, the conditions to the obligations of the parties hereto to consummate the transactions contemplated by this Agreement or any party’s rights hereunder (including rights under Article 9).

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6.2 Operation of the Company’s Business.

(a) During the Pre-Closing Period, the Company shall: (i) conduct its business and operations (A) in the ordinary course and in accordance with past practices, and (B) in compliance with all applicable Legal Requirements and the requirements of all Company Contracts; (ii) use reasonable efforts to maintain and preserve intact its current business organization, keep available the services of its current officers and employees and maintain its business relations with all suppliers, customers, landlords, creditors, licensors, licensees, employees and other Persons having business relationships with the Company; (iii) provide all notices, assurances and support required by any Contract relating to any Intellectual Property in order to ensure that no condition under such Contract occurs which could result in, or could increase the likelihood of, any transfer or disclosure by the Company of any Intellectual Property; (iv) keep in full force and effect (with the same scope and limits of coverage) all insurance policies in effect as of the Agreement Date covering material assets of the Company; and (v) take no action that would adversely affect or materially delay the ability of the parties to obtain any necessary approvals of any Governmental Body required for the Transactions or to perform its covenants and agreements under this Agreement or to complete the Transactions.

(b) During the Pre-Closing Period, except as set forth in Part 6.2(b) of the Company Disclosure Schedule, the Company shall not (without the prior written consent of Purchaser):

(i)        (A) declare, accrue, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its share capital or other equity or voting interests; (B) split, combine or reclassify any of its share capital or other equity or voting interests, or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any of its share capital or other equity or voting interests, (C) purchase, redeem or otherwise acquire any of its share capital, equity interests or any other securities of any Entity or any options, warrants, calls or rights to acquire any such shares, equity interests or other securities (including any options or shares of restricted stock except pursuant to forfeiture conditions of such restricted stock), or (D) take any action that would result in any change of any term (including any conversion price thereof) of any debt security of the Company;

(ii) issue or sell any additional share capital of the Company or securities convertible into or exercisable for such share capital, or issue or grant any options, warrants, calls, subscription rights or other rights of any kind to acquire additional share capital of the Company;

(iii) amend or permit the adoption of any amendment to the Company Constituent Documents, or effect, become a party to or authorize any recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

(iv) except as required by applicable Legal Requirements, adopt or enter into any collective bargaining agreement or other labor union Contract applicable to the employees;

(v) adopt a plan of complete or partial liquidation or dissolution or resolutions providing for or authorizing such a liquidation or a dissolution;

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(vi) form any Subsidiary or acquire any equity interest or other interest in any other Entity;

(vii) make any capital expenditure outside the ordinary course of business consistent with past practices or make any single capital expenditure in excess of US$10,000; provided, however, that the maximum amount of all capital expenditures made on behalf of the Company during the Pre-Closing Period shall not exceed US$25,000 in the aggregate;

(viii) enter into or become bound by, or permit any of the assets owned or used by it to become bound by, any Contract which, if entered into prior to the date of this Agreement, would have been a Material Contract, or amend or terminate, or waive or exercise any material right or remedy under, any Material Contract;

(ix) acquire, lease or license any right or other asset from any other Person or sell or otherwise dispose of, or lease or encumber, any right or other asset to any other Person (except in each case for assets acquired, leased, licensed, encumbered or disposed of by the Company in the ordinary course of business consistent with past practices and not having a value, or not requiring payments to be made or received, in excess of US$10,000 individually, or US$25,000 in the aggregate), or waive or relinquish any material right;

(x) repurchase, prepay or incur any indebtedness or guarantee any indebtedness of another Person, guarantee any debt securities of another Person, enter into any “keep well” or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing;

(xi) make any loans, advances or capital contributions to, or investments in, any other Person, except for customary travel advances to employees;

(xii) increase in any manner the compensation or benefits of, or pay any bonus to, any employee, officer, director or independent contractor of the Company, except for increases, or bonuses made, in the ordinary course of business consistent with past practices for any employee or independent contractor of the Company (other than executive officers or members of the boards of directors of the Company) that were communicated to such employee or independent contractor prior to the Agreement Date;

(xiii) except as required to comply with applicable Legal Requirements or a Company Employee Plan in effect on the Agreement Date, (A) pay to any employee, officer, director or independent contractor of the Company any benefit not provided for under any Company Employee Plan in effect on the Agreement Date, (B) grant any awards under any Company Employee Plan (including the grant of options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock or the removal of existing restrictions in any Company Employee Plan or awards made thereunder), (C) take any action to fund or in any other way secure the payment of compensation or benefits under any Company Employee Plan, (D) take any action to accelerate the vesting or payment of any compensation or benefit under any Company Employee Plan, (E) adopt, enter into or amend any employment agreement other than offer letters entered into with new employees in the ordinary course of

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business consistent with past practices that provide, except as required by applicable Legal Requirements, for “at will employment” with no severance benefits, or (F) make any material determination under any Company Employee Plan that is inconsistent with the ordinary course of business consistent with past practices;

(xiv) hire any new employee, dismiss any employee, promote any employee, or engage any independent contractor whose relationship may not be terminated by the Company on thirty (30) days’ notice or less;

(xv) except as required by GAAP or applicable Legal Requirements, change its fiscal year, revalue any of its material assets or make any changes in financial or Tax accounting methods, principles or practices;

(xvi)      (A) fail to accrue a reserve in its books and records and financial statements in accordance with past practices for Taxes payable by the Company, (B) settle or compromise any Legal Proceeding relating to any material Tax, or (C) revoke any material Tax election;

(xvii)    (A) pay, discharge, settle or satisfy any material claims, liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction in the ordinary course of business consistent with past practices or as required by their terms as in effect on the Agreement Date of claims, liabilities or obligations (i) reflected or reserved against in the Unaudited Interim Financial Statements (or the notes thereto), (ii) incurred since the date of such financial statements in the ordinary course of business consistent with past practices or (iii) Transaction Costs or (B) commence any Legal Proceeding; provided, that prior to the Closing the Company shall pay, discharge, settle or satisfy those liabilities reflected on Part 1.6(a) of the Company Disclosure Schedule to the extent possible in order to deliver the Company on a zero-cash basis at the Closing;

(xviii) enter into any material transaction or take any other material action outside the ordinary course of business and inconsistent with past practices;

(xix) enter into any new line of business that is material to the Company or change its operating policies that are material to the Company, except as required by applicable Legal Requirements, regulations or policies imposed by any Governmental Body;

(xx) transfer or license to any Person any Intellectual Property other than non-exclusive licenses of Intellectual Property granted in connection with sales of Company Products or services to customers in the ordinary course of business consistent with past practice;

(xxi) enter into any operating lease requiring lease payments in excess of US$10,000; or

(xxii) acquire or agree to acquire by merging or consolidating with, or by purchasing the assets of, or by any other manner, any business or any company, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to the Company.

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6.3 No Solicitation.

(a) During the Pre-Closing Period, the Company and the Selling Shareholders each shall not, directly or indirectly, through any officer, director, employee, representative or agent of the Company or such Selling Shareholder or otherwise, (i) solicit, initiate, or encourage any inquiries or proposals that constitute, or would reasonably be expected to lead to, a proposal or offer for an Acquisition Transaction involving the Company other than the Transactions (any of the foregoing inquiries or proposals an “Acquisition Proposal”); (ii) engage or participate in negotiations or discussions concerning, or provide any non-public information to any Person or entity relating to, any Acquisition Proposal; or (iii) agree to, enter into, accept, approve or recommend any Acquisition Proposal. The Company and each of the Selling Shareholders have terminated any pending discussions or negotiations relating to an Acquisition Proposal and each warrants that the Company and such Selling Shareholder, as applicable, had the legal right to terminate such discussions without payment of any fee or other penalty.

(b) The Company shall notify Purchaser immediately (and no later than 48 hours) after receipt by the Company or a Selling Shareholder (or their respective advisors) of any Acquisition Proposal or any request for nonpublic information in connection with an Acquisition Proposal or for access to the properties, books or records of the Company by any Person or entity that informs the Company that it intends to make, or has made, an Acquisition Proposal. Such notice shall be made in writing and shall indicate in reasonable detail the identity of the offeror and the material terms and conditions of such proposal, inquiry or contact.

6.4 Termination of Company Rights. The Company shall cause all options, warrants or other rights to purchase share capital of the Company to be cancelled and terminated prior to the Closing in compliance with the underlying instrument or plan, all other applicable Company Contracts, the Company Constituent Documents, and all applicable Legal Requirements and without liability to the Company, the Purchaser or any of their respective Affiliates after the Closing. The Company shall provide the Purchaser with a reasonable and timely opportunity to review and comment on any documentation or correspondence related to the termination and cancellation of Company Rights. Purchaser’s review and approval of such documentation shall not alter its right to recover for Damages suffered by it under Article 9 of this Agreement or any of the warranties of the Company or the Selling Shareholders set forth in this Agreement.

6.5 Exercise of Drag-Along Right. Within one (1) Business Day following the date of this Agreement (the “Notice Date”), the Selling Shareholders shall exercise their Drag-Along Right, and the Company shall send a notice to each of the Remaining Shareholders notifying them of such exercise, in each case, in accordance with Sections 7.5 through 7.8 of the Company’s New Articles of Association. In the event that any Remaining Shareholder does not comply with the terms of the notice sent by the Company and agree to sell his, her or its Shares (such shares, the “Defaulting Shares”) to the Purchaser pursuant to the terms of this Agreement, the Board shall authorize some person to execute and deliver to the Purchaser, on behalf of each holder of Defaulting Shares, the necessary Stock Transfer Form on the terms set forth in the Company’s Articles of Association.

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6.6 Third Party Notices. On or before the Notice Date, the Company shall send a notice to Noble Venture Finance I Limited (“NVF I”) and Noble Venture Finance II Limited (“NVF II”), pursuant to that certain Facility Agreement, dated August 8, 2005, between the Company and NVF I and that certain Facility Agreement, dated May 30, 2008, between the Company and NVF II, respectively, regarding the conditionality of the Transactions, in each case in accordance with the terms of the applicable agreement and in such form as may be reasonably acceptable to the Purchaser.

6.7 Notification of Certain Matters; Updated Company Disclosure Schedule. During the Pre-Closing Period, each of the Purchaser, the Company and the Selling Shareholders agree to give prompt notice to each other, of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which could reasonably be expected to cause any of such party’s warranties contained in this Agreement to be untrue or inaccurate in all material respects after the date hereof and (ii) any failure on its part to comply with or satisfy in all material respects any covenant, condition, or agreement to be complied with or satisfied by it hereunder. The Company also shall be entitled to deliver at Closing an updated version of the Company Disclosure Schedule setting forth any matter described in clause (i) of the preceding sentence. It is expressly understood that the delivery of any notice or of an updated version of the Company Disclosure Schedule pursuant to this Section 6.7 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice or such updated version of the Company Disclosure Schedule, and such notice or updated version of the Company Disclosure Schedule shall not be considered for purposes of determining whether the condition set forth in Section 7.2(a)(i) has been satisfied or in determining whether any warranty has been breached or is inaccurate for purposes of Section 9.2(a)(i), and such determinations shall be made based solely on the Company Disclosure Schedule delivered to Purchaser on the date of this Agreement.

6.8 Confidentiality. The parties acknowledge that the Company and the Purchaser have previously executed a Confidentiality Agreement, dated May 17, 2008 (the “Confidentiality Agreement”), which Confidentiality Agreement is hereby incorporated herein by reference and shall continue in full force and effect in accordance with its terms.

6.9 Public Disclosure. Unless otherwise permitted by this Agreement, the Company and the Selling Shareholders shall consult with the Purchaser before issuing any press release or otherwise making any public statement or making any other public (or non-confidential) disclosure (whether or not in response to an inquiry) regarding the terms of this Agreement and the Transactions, and neither the Company nor the Selling Shareholders shall issue any such press release or make any such statement or disclosure without the prior approval of the Purchaser (which approval shall not be unreasonably withheld), except as may be required by law or by any regulatory or governmental body to which a party is subject, including the London Stock Exchange, the Takeover Panel or the UK Listing Authority.

6.10 Payment of Stamp Duty. The Sellers, on the one hand, and Purchaser, on the other hand, shall each pay 50% of the Stamp Duty payable on the transfer of the Shares to Purchaser; provided, that the Sellers’ portion of such Stamp Duty shall be deducted in calculating the Aggregate Principal Amount of the Sellers Promissory Notes on the Closing Date. Purchaser shall file all necessary documentation and Tax Returns with respect to payment of such Stamp Duty.

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6.11 Corporation Tax Returns

(a) The Company shall prepare the Company’s corporation tax returns for the periods ended on or prior to Closing and deal with all matters and correspondence relating thereto. All such returns shall be submitted in draft form to the Shareholders’ Representative or his duly authorised agent for comments. The Shareholders’ Representative shall comment within a reasonable period of time of such submission and the Company shall adopt any reasonable comments and include them in the return(s).

(b) The Company shall liaise with the Shareholders’ Representative in the event of an enquiry which may be raised in respect of the said returns, and reflect the Shareholders’ Representative’s reasonable comments in any correspondence, negotiations or other contact with the Taxation Authority in respect of such enquiry.

6.12 Minority Shareholder SPA. During the Pre-Closing Period, the Company shall use all reasonable endeavors to ensure that each Remaining Shareholder duly execute and deliver the Minority Shareholder SPA prior to the Closing.

ARTICLE 7.

CLOSING CONDITIONS

7.1 Conditions to Obligation of Each Party to Effect the Transactions. The respective obligations of each party to effect the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing Date that, there is no temporary restraining order, preliminary or permanent injunction, or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Sale contemplated hereby in effect, and no litigation by any Governmental Body seeking any of the foregoing shall have been commenced and be pending. There shall not be any action taken, or any statute, rule, regulation, or order enacted, entered, enforced, or deemed applicable to the Transactions that makes the consummation of the Transactions illegal.

7.2 Additional Conditions to Obligations of Purchaser. The obligations of Purchaser to effect the Transactions are also subject to the following conditions:

(a) Warranties of the Company; Performance of Obligations.

(i) Each of the warranties of the Company set forth herein shall be true, correct and complete in all material respects (except for any such warranties which are qualified by their terms by a reference to materiality or Company Material Adverse Effect, which warranties as so qualified shall be true and correct in all respects) as of the date hereof and as of the Closing Date, with the same effect as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case, as of such date);

(ii) each of the terms, covenants, agreements and conditions set forth herein to be performed, complied with or satisfied by the Company on or prior to the Closing Date shall have been duly performed, complied with or satisfied in all material respects; and

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(iii) a certificate to the foregoing dated as of the Closing Date and signed by the Chief Executive Officer of the Company shall have been delivered to Purchaser.

(b) Warranties of the Selling Shareholders; Performance of Obligations.

(i) Each of the warranties of the Selling Shareholders set forth herein shall be true, correct and complete in all material respects (except for any such warranties which are qualified by their terms by a reference to materiality, which warranties as so qualified shall be true and correct in all respects) as of the date hereof and as of the Closing Date, with the same effect as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date); and

(ii) each of the terms, covenants, agreements and conditions set forth in this Agreement to be performed, complied with or satisfied by the Selling Shareholders on or prior to the Closing Date shall have been duly performed, complied with or satisfied in all material respects.

(c) Officer’s Certificate. Purchaser shall have received a certificate, executed by the Chief Executive Officer of the Company, which shall (i) certify to and attach a copy of the then-current Certificate of Incorporation of the Company, issued by the Registrar of Companies for England and Wales and certified by a director of the Company, (ii) certify to and attach a copy of the resolutions of the Board and/or the members of the Company, as applicable, evidencing the adoption and approval of this Agreement and the Transactions, (iii) certify to and attach a copy of the then-current Memorandum of Association of the Company, (iv) certify to and attach a copy of the then-current Articles of Association of the Company, and (v) attach a certificate of good standing issued by the Registrar of Companies for England and Wales as of a date not more than five calendar days prior to the Closing Date.

(d) Claims Regarding Share Ownership. There must not have been made or threatened by any Person (other than a Seller) any claim (other than claims that have been validly withdrawn or waived in writing with full and final release of the Company in respect of any liability associated with such claim) asserting that such Person (i) is the holder or the beneficial owner of, or has the right to acquire or obtain beneficial ownership of, any stock of, or any other voting equity, or ownership interest in, the Company or (ii) is entitled to all or any portion of the consideration payable for the Shares.

(e) Closing Documentation. Purchaser shall have received (i) the Estimated Balance Sheet, (ii) the Estimated Closing Indebtedness, (iii) the Schedule of Company Transaction Costs and (iv) the Closing Certificate, and the assignment agreements referenced in Section 1.5 shall remain in full force and effect.

(f) Shareholder List. The Company shall have delivered to Purchaser for review a detailed spreadsheet, in such form as may be reasonably requested by the Purchaser, setting forth (i) the name and address of each Seller, as well as the number of Company Ordinary Shares held of record by each such Seller, as of immediately prior to the Closing Date, (ii) the percentage of the Note Payment Amount and the Contingent Consideration to which each such Seller is entitled to pursuant to Article 1 of this Agreement and (iii) wire transfer instructions or other means and address of payment for each Seller.

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(g) Consents Obtained. All consents, waivers, approvals, authorizations, or orders required to be obtained, and all filings required to be made, by the Company as set forth on Schedule 7.2(g) of the Company Disclosure Schedule for the authorization, execution, and delivery of this Agreement and the consummation by it of the Transactions shall have been obtained and made by the Company or by the Selling Shareholders and shall be in full force and effect.

(h) Material Adverse Effect. Since the date of this Agreement, there shall not have been a Company Material Adverse Effect, and no event shall have occurred that will, or could reasonably be expected to, have a Company Material Adverse Effect;

(i) Retention of Key Employees. Each of the employees listed on Exhibit F shall have agreed to an amendment of their respective existing employment agreements effective upon the Closing Date and shall not have indicated their intent to the Company to discontinue their employment with the Company following the Closing Date.

(j) Company Option Plan. The Company Option Plan shall have been terminated.

(k) Director and Officer Resignations. Purchaser shall have received a written resignation from each director and officer of the Company, in a form reasonably acceptable to the Purchaser, effective as of the Closing Date. Each director of the Company shall have executed and delivered to the Purchaser the appropriate resignation forms to be filed with the Companies House in the UK.

(l) Absence of Intellectual Property Claims. There shall not be pending or threatened any legal proceeding in which the scope, validity or enforceability of any material Company Intellectual Property or material Intellectual Property Right has been contested or challenged or alleging infringement or misappropriation of any third party’s Intellectual Property Rights by the Company.

(m) Termination of Engagement Letters. The Company shall have terminated that certain Engagement Letter, dated December 4, 2007, between the Company and KBC Peel Hunt Ltd. (“KBC”), as amended by that certain Letter Agreement, dated July 18, 2008, between the Company and KBC, and that certain Engagement Letter, dated May 22, 2008, between the Company and the Financial Advisor, and received a payoff letter from each of KBC and the Financial Advisor in form and substance reasonably acceptable to Purchaser.

(n) Absence of Liabilities. The sum of the Company’s outstanding Indebtedness (other than Closing Indebtedness to be assigned to the Purchaser at the Closing pursuant to Section 1.5 and real property lease obligations that are not past due), unpaid Transaction Costs and accounts payable and accrued expenses (other than those accounts payable and accrued expenses set forth on Part 1.6(a) of the Company Disclosure Schedule, not to exceed £219,000), in each case, converted into U.S. dollars, if necessary, based upon the Agreed Rate, shall not exceed $250,000 in the aggregate.

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(o) Termination of Company Rights. All options, warrants and other rights to purchase share capital of the Company shall have been cancelled and terminated without liability to the Purchaser, the Company or any of their respective Affiliates following the Closing, and Purchaser shall have received a termination and release agreement reasonably satisfactory to the Purchaser from (i) each Selling Shareholder holding a Company Right as of immediately prior to the Closing and (ii) each holder of a Company Right as of immediately prior to the Closing that does not terminate automatically, in accordance with its terms, upon the Closing.

(p) Receipt Stock Transfer Forms. Purchaser shall have received duly executed stock transfer forms, in such form as is reasonably satisfactory to the Purchaser, transferring ownership in the Shares to the Purchaser.

(q) Receipt of Legal Payoff Letters. Purchaser shall have received a payoff letter from each of Wilson Sonsini Goodrich & Rosati, P.C. and Burges Salmon in form and substance reasonably acceptable to Purchaser.

(r) Execution of Minority Shareholder SPA. The Minority Shareholder SPA shall be duly executed by Remaining Shareholders holding such number of Shares that when added to the Selling Shareholder Shares constitute at least 90% of the total Shares.

7.3 Additional Conditions to Obligation of the Selling Shareholders and the Company. The obligation of the Selling Shareholders and the Company to effect the Transactions is also subject to the following conditions:

(a) Warranties; Performance of Obligations.

(i) Each of the warranties of the Purchaser and Parent set forth herein shall be true, correct and complete in all material respects (except for any such warranties which are qualified by their terms by a reference to materiality, which warranties as so qualified shall be true and correct in all respects) as of the date hereof and as of the Closing Date, with the same effect as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date);

(ii) each of the terms, covenants, agreements and conditions of this Agreement to be performed, complied with or satisfied by the Purchaser or Parent on or prior to the Closing Date shall have been duly performed, complied with or satisfied; and

(iii) a certificate to the foregoing dated as of the Closing Date and signed by an officer of Parent shall have been delivered to the Company.

ARTICLE 8.

TERMINATION

8.1 Termination. This Agreement may be terminated at any time prior to the Closing Date:

(a) by the mutual written consent of Purchaser and the Shareholders’ Representative;

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(b) by Purchaser, if Purchaser is not in material breach of any of its obligations under this Agreement and there shall have been a material breach of any warranty, covenant or agreement by the Company or any of the Selling Shareholders set forth in this Agreement such that the conditions set forth in Section 7.2(a)(i), Section 7.2(a)(ii), Section 7.2(b)(i) or Section 7.2(b)(ii) would not be satisfied on the date of such breach and such breach has not been cured within five (5) Business Days after written notice has been provided to the Shareholders’ Representative;

(c) by the Shareholders’ Representative, if the Selling Shareholders or the Company are not in material breach of any of their obligations under this Agreement and there shall have been a material breach of any warranty, covenant or agreement by Purchaser set forth in this Agreement such that the conditions set forth in Section 7.3(a)(i) or Section 7.3(a)(ii) would not be satisfied on the date of such breach and such breach has not been cured within five (5) Business Days after written notice has been provided to Purchaser; or

(d) by Purchaser or the Shareholders’ Representative if the Closing shall not have occurred by January 5, 2009; provided, that the right to terminate this Agreement under this Section 8.1(d) shall not be available to any party if such party’s failure to fulfill any obligation under this Agreement has been the sole cause of, or solely resulted in, the failure of the Closing to occur on or before such date; provided, further, that a party wishing to terminate pursuant to this Section 8.1(d) must provide the other parties hereto with two (2) Business Days’ prior written notice of its intent to terminate this Agreement pursuant to this Section 8.1(d).

8.2 Procedure and Effect of Termination. In the event of the termination of this Agreement pursuant to Section 8.1 hereof, written notice thereof shall forthwith be given to the other party to this Agreement and this Agreement shall terminate without any further action by any of the parties hereto. If this Agreement is terminated as provided herein, no party hereto shall have any liability or further obligation to any other party to this Agreement resulting from such termination, provided that each party hereto shall remain liable for any willful or intentional breaches of this Agreement that occurred prior to its termination.

ARTICLE 9.

RECOURSE FOR DAMAGES

9.1 Survival. All of the warranties (including those warranties set forth in Article 2, Article 3 and Article 4) and covenants contained herein or in any instrument or document delivered or to be delivered pursuant to this Agreement, and the rights of the Sellers, the Company and the Purchaser to recover for damages incurred by them, as set forth in this Article 9, shall survive the execution of this Agreement and the Closing Date notwithstanding any investigation heretofore or hereafter made by or on behalf of any party hereto or any Knowledge of facts determined or determinable by any party hereto and shall continue until, and all claims with respect thereto shall be made on or prior to, the first anniversary of the date hereof, except for (a) the warranties set forth in (i) Section 2.3 (Capitalization) and Section 3.3 (Ownership and

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Transfer of Shares), which shall survive indefinitely, (ii) Section 2.12 (Intellectual Property) and Section 2.17 (Tax Matters), which shall survive until the second anniversary of the Closing Date; (b) warranties, covenants and other matters for which notice of a claim for recovery has been given in accordance with this Agreement as of the end of the applicable period referred to above, in which event such warranties, covenants and other matters that serve as the basis for such claim shall survive until the final disposition of such claim; and (c) covenants to be performed after the Closing Date, which shall survive until performed in accordance with their respective terms.

9.2 Recovery by Purchaser Parties.

(a) In the event a Purchaser Party directly or indirectly suffers or incurs or otherwise becomes subject to any Damages (regardless of whether such Damages relate to any third-party claim) which arise from or as a result of or are, directly or indirectly, related to or in connection with:

(i) any inaccuracy in or breach of any warranty of the Company set forth in this Agreement (including in Article 2 of this Agreement) or contained in any Schedule or Exhibit to this Agreement or any certificate or instrument delivered hereunder by the Company without regard to any “Company Material Adverse Effect,” materiality, or similar qualifications contained in such warranties;

(ii) any breach of any covenant or obligation of the Company contained in this Agreement;

(iii) any unpaid Transaction Costs, past due real property lease obligations as of the Closing Date, and other accounts payable or accrued liabilities of the Company (excluding those accounts payable and accrued liabilities set forth on Part 1.6(a) of the Company Disclosure Schedule that in the aggregate do not exceed £219,000), without duplication, that were not deducted in calculating the Aggregate Principal Amount of the Sellers Promissory Notes on the Closing Date;

(iv) any Closing Indebtedness (excluding any capital lease payment obligations that are not past due) that remains outstanding after the Closing, other than any past due capital lease obligations that were deducted in calculating the Aggregate Principal Amount of the Sellers Promissory Notes on the Closing Date;

(v) Company Rights which were not terminated or cancelled prior to the Closing;

(vi) any Taxes of the Company attributable to any period prior to the Closing that were not deducted in calculating the Aggregate Principal Amount of the Sellers Promissory Notes on the Closing Date, and the Sellers’ portion of any transfer Taxes arising out of or in connection with the transactions effected pursuant to this Agreement (if and to the extent the Sellers’ portion of any transfer Taxes, as set forth in Section 6.10, was not deducted in calculating the Aggregate Principal Amount of the Sellers Promissory Notes on the Closing Date); and

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(vii) all demands, assessments, judgments, costs and reasonable legal and other expenses arising from, or in connection with, any action, suit, proceeding or claim incident to any of the foregoing,

such Purchaser Party shall set off the determined amount of such Damages, on a dollar for dollar basis, in the manner set forth in Section 9.4 (but subject always to the limitations set forth in Section 9.3).

(b) In the event a Purchaser Party directly or indirectly suffers or incurs or otherwise becomes subject to any Damages (regardless of whether such Damages relate to any third-party claim) which arise from or as a result of or are, directly or indirectly, related to or in connection with:

(i) any inaccuracy in or breach of any warranty of a Selling Shareholder set forth in this Agreement (including in Article 3 of this Agreement) or contained in any Schedule or Exhibit to this Agreement or any certificate or instrument delivered hereunder by such Selling Shareholder; and

(ii) any breach of any covenant or obligation of a Selling Shareholder contained in this Agreement,

such Purchaser Party shall set off the determined amount of such Damages from such Selling Shareholder, on a dollar for dollar basis, in the manner set forth in Section 9.4 (but subject always to the limitations set forth in Section 9.3).

9.3 Basket; Limitation on Liability.

(a) The Purchaser Parties shall not be entitled to set off for Damages arising under Section 9.2(a)(i) or Section 9.2(b)(i) until the aggregate amount of all Damages suffered by the Purchaser Parties exceeds US$100,000 (the “Basket”), in which case the applicable parties shall be entitled to recover for the aggregate amount of all Damages suffered in excess of the Basket. For the purpose of determining whether the aggregate amount of Damages suffered by the Purchaser Parties has exceeded the Basket, individual claims shall only be considered if made pursuant to Section 9.5 and if totaling in amount at least US$2,500. From and after such time as the amount of the Basket has been exceeded, there shall be no such limitation on the size of individual claims. For the avoidance of doubt, Damages suffered by the Purchaser Parties pursuant to Sections 9.2(a)(ii) through (vii) and Section 9.2(b)(ii) shall not be subject to the Basket or any limitation on the size of individual claims, and the Purchaser Parties shall be entitled to recover for the aggregate amount of such Damages.

(b) Notwithstanding anything contained in this Agreement to the contrary, (i) the maximum amount that the Purchaser Parties shall be entitled to set off in respect of Damages under this Agreement (including this Article 9), the Related Agreements and under all other theories of liability, shall not exceed (A) in the case of any Damages which arise from or as a result of or are, directly or indirectly, related to or in connection with Section 9.2(a)(i) or Section 9.2(b)(i) (excluding any inaccuracy in or breach of a warranty set forth in Section 2.12 (Intellectual Property) or Section 2.17 (Tax Matters)), an aggregate amount equal to the Recourse Amount and (B) in the case of any Damages which arise from or as a result of or are,

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directly or indirectly, related to or in connection with any inaccuracy in or breach of a warranty set forth in Section 2.12 (Intellectual Property) or Section 2.17 (Tax Matters), the aggregate of the total principal and accrued interest outstanding under the Seller Promissory Notes and any Contingent Consideration that becomes payable pursuant to Section 1.7 of this Agreement, and (ii) any recovery of Damages to which the Purchaser Parties may be entitled under this Agreement, the Related Agreements and under any other theory of liability, shall be pursuant to this Article 9 and shall be satisfied solely by recourse to the total principal and accrued interest outstanding under the Sellers Promissory Notes or the Contingent Consideration, as applicable, as provided in Section 9.4, pro rated between the Sellers in accordance with their relative interests in the Sellers Promissory Notes and Contingent Consideration, except to the extent the Purchaser Parties’ right to recover arises pursuant to Section 9.2(b), in which case, such set off shall be made solely from the principal and accrued interest outstanding under the Selling Shareholders Promissory Note held by the Selling Shareholder whose breach gave rise to such recovery or such Selling Shareholder’s proportional interest in any Contingent Consideration, as applicable. For the avoidance of doubt, in no event shall a Seller be liable under this Agreement, any Related Agreement or any other theory of liability for any amount which exceeds such Seller’s interest in the total principal and accrued interest outstanding under the Sellers Promissory Notes or the Contingent Consideration, if any; provided, that this Section 9.3(b) shall not limit the amount that the Purchaser Parties shall be entitled to recover from a Selling Shareholder in respect of Damages under this Agreement or any Related Agreement for fraud by such Selling Shareholder, willful and intentional misconduct by such Selling Shareholder and willful and intentional misrepresentation by such Selling Shareholder.

9.4 Offset Against Sellers Promissory Notes and Contingent Consideration. In the event a Purchaser Party shall suffer any Damages for which such Purchaser Party is entitled to recovery under this Article 9, such Purchaser Party shall set off an amount equal to such Damages first by offsetting an amount equal to the aggregate amount of such Damages (converted into U.S. dollars as set forth below, if necessary) against the total principal and accrued interest outstanding under the Sellers Promissory Notes, and second from any Contingent Consideration that becomes payable pursuant to Section 1.7(d). A Purchaser Party shall not be entitled to set off more than once for the same Damages, and, for the avoidance of doubt, a Purchaser Party shall not be entitled to set off pursuant to this Article 9 for those amounts already deducted in calculating the Aggregate Principal Amount of the Sellers Promissory Notes on the Closing Date pursuant to Section 1.6(a). To the extent the Purchaser Party’s right to recover pursuant to this Article 9 arises pursuant to Section 9.2(a), any such offset shall be from each Seller, in the same proportion as such Seller’s proportionate interest in the principal and accrued interest outstanding under the Sellers Promissory Notes or the Contingent Consideration, as applicable. To the extent the Purchaser Party’s right to recover arises pursuant to Section 9.2(b), any such offset shall be made solely from the principal and accrued interest outstanding under the Selling Shareholder Promissory Note held by the Selling Shareholder whose breach gave rise to such recovery or such Selling Shareholder’s proportional interest in any Contingent Consideration, as applicable. Damages to be offset against the outstanding balances under the Sellers Promissory Notes or any Contingent Consideration pursuant to Section 1.6(b), Section 1.7(d) and/or this Section 9.4 shall be converted into U.S. dollars, if necessary, based on the average of the daily average Interbank currency exchange rates for British pounds sterling being converted into U.S. dollars at the close of business on each of the five Business Days prior to (a) the date the amount of such Damages was finally determined

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pursuant to this Agreement or (b) if such Damages relate to a pending claim for recovery of Damages and have not been finally determined pursuant to this Agreement, the date on which final payment under the Sellers Promissory Notes is due or the relevant Installment Due Date, as applicable, in each case as reported in the Wall Street Journal.

9.5 Procedure for Recovery of Damages.

(a) If a Purchaser Party has or claims to have incurred or suffered Damages for which it is or may be entitled to recovery under this Agreement, Parent or the Purchaser, on behalf of such Purchaser Party, or such Purchaser Party shall promptly deliver a written claim notice (a “Claim Notice”) to the Shareholders’ Representative. Each Claim Notice shall state (i) that such Purchaser Party believes that there is or has been a breach of a warranty or covenant contained in this Agreement or that such Purchaser Party is otherwise entitled to recovery of Damages pursuant to this Article 9, (ii) a reasonably detailed description of the circumstances supporting the basis for such Purchaser Party’s belief that there is or has been such a breach or the basis for which such Purchaser Party is so entitled to recovery of Damages under this Article 9, and (iii) the estimated amount of Damages such Purchaser Party claims to have so incurred or suffered (the “Claimed Amount”). The Shareholders’ Representative shall be the sole party authorized, on behalf of the Sellers, to dispute, adjudicate, negotiate and enter into settlements and compromises of claims made pursuant to this Section 9.5.

(b) Within thirty (30) days after receipt by the Shareholders’ Representative of a Claim Notice, the Shareholders’ Representative may deliver to Purchaser a written response (the “Response Notice”) in which the Shareholders’ Representative: (i) agrees that an amount equal to the full Claimed Amount may be offset against the outstanding balance under the Sellers Promissory Notes, pursuant to Section 1.6(b) and Section 9.4 of this Agreement, or any Contingent Consideration payable, in accordance with Section 1.7(d) and Section 9.4 of this Agreement, as applicable; (ii) agrees that an amount equal to part, but not all, of the Claimed Amount (the “Agreed Amount”) may be offset against the outstanding balance under the Sellers Promissory Notes or any Contingent Consideration payable, as applicable; or (iii) indicates that no offset may be made from the outstanding balance under the Sellers Promissory Notes or any Contingent Consideration payable, as applicable. Any part of the Claimed Amount that is not agreed to be offset pursuant to the Response Notice shall be the “Contested Amount.” If a Response Notice is not received by the Purchaser within such 30-day period, then the Shareholders’ Representative shall be conclusively deemed to have agreed that an amount equal to the full Claimed Amount may be offset against the outstanding balance under the Sellers Promissory Notes or any Contingent Consideration payable, as applicable.

(c) If the Shareholders’ Representative delivers a Response Notice agreeing that an amount equal to the full Claimed Amount may be offset against the outstanding balance under the Sellers Promissory Notes or any Contingent Consideration payable, as applicable, or if the Shareholders’ Representative does not deliver a Response Notice on a timely basis in accordance with Section 9.5(b), the full Claimed Amount shall be offset against the outstanding balance under the Sellers Promissory Notes or any Contingent Consideration payable, as applicable, and such offset shall be deemed to be made in full and final satisfaction of the claim described in such Claim Notice.

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(d) If the Shareholders’ Representative delivers a Response Notice agreeing that an amount equal to less than the full Claimed Amount may be offset against the outstanding balance under the Sellers Promissory Notes or any Contingent Consideration payable, as applicable, an amount equal to the Agreed Amount shall be offset against the outstanding balance under the Sellers Promissory Notes or any Contingent Consideration payable, as applicable.

(e) If the Shareholders’ Representative delivers a Response Notice indicating that there is a Contested Amount, the Shareholders’ Representative and the Purchaser Party shall attempt in good faith to resolve the dispute related to the Contested Amount. If the Purchaser Party and the Shareholders’ Representative resolve such dispute, such resolution shall be binding on all of the Sellers and such Purchaser Party, and a joint written instruction shall be signed by Purchaser and the Shareholders’ Representative (regarding such resolution) (the “Joint Written Instruction”) and such amount as may be set forth in such Joint Written Instruction, if any, shall be offset against the outstanding balance under the Sellers Promissory Notes or any Contingent Consideration payable, as applicable, and such offset shall be deemed to be made in full and final satisfaction of the claim described in such Claim Notice.

(f) If the Shareholders’ Representative and the Purchaser Party are unable to resolve the dispute related to the Contested Amount within sixty (60) days after delivery of the Response Notice, either the Shareholders’ Representative or the Purchaser Party may demand arbitration of the matter unless the amount of the Damages is at issue in pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained or both parties agree to arbitration. In the event such dispute is submitted to arbitration as provided above, then such dispute shall be settled by arbitration conducted by one arbitrator mutually agreeable to the Shareholders’ Representative and the Purchaser Party. In the event that, within thirty (30) days after submission of any dispute related to a Contested Amount to arbitration, the Shareholders’ Representative and the Purchaser Party cannot mutually agree on one arbitrator, then, within fifteen (15) days after the end of such thirty (30) day period, the Shareholders’ Representative, on the one hand, and the Purchaser Party, on the other hand, shall each select one arbitrator. The two arbitrators so selected shall select a third arbitrator. Any such arbitration shall be conducted in the English language and held in London, England, under the rules then in effect of the Chartered Institute of Arbitrators.

(g) The arbitrator shall (i) determine how all expenses relating to the arbitration shall be paid, including without limitation, the fees of each arbitrator and the administrative fee of the Chartered Institute of Arbitrators, (ii) set a limited time period and establish procedures designed to reduce the cost and time for discovery while allowing the parties an opportunity (adequate in the sole judgment of the arbitrator) to discover relevant information about the subject matter of the dispute, (iii) rule upon motions to compel or limit discovery, and (iv) have the authority to impose sanctions, including attorneys’ fees and costs, to the same extent as a competent court of law or equity, should the arbitrator determine that discovery was sought without substantial justification or that discovery was refused or objected to without substantial justification. The decision of the arbitrator shall be final, binding, and conclusive. Such amount as may be set forth in the final arbitration decision, if any, shall be offset against the outstanding balance under the Sellers Promissory Notes or any Contingent Consideration payable, as applicable, and such offset shall be deemed to be made in full satisfaction of the claim described in such Claim Notice.

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9.6 Third Party Claims. Except as otherwise provided in this Agreement, the following procedures shall be applicable with respect to recovery for claims made by third parties (“Third Party Claims”). Promptly after receipt by a Purchaser Party of notice of the commencement of any (a) Tax audit or proceeding for the assessment of Tax by any Taxation Authority or any other proceeding likely to result in the imposition of a Tax liability or obligation or (b) any action or the assertion of any Legal Proceeding, liability or obligation by a third party (whether by legal process or otherwise), against which Legal Proceeding, liability or obligation the Purchaser is entitled to recover from Sellers under this Agreement, the Purchaser will (i) use commercially reasonable efforts to obtain insurance coverage under existing policies covering the Purchaser Party with respect to such Third Party Claim and (ii) promptly notify the Shareholders’ Representative in writing of the commencement or assertion thereof and give the Shareholders’ Representative a copy of such Third Party Claim, process and all legal pleadings; provided, however, that any failure by the Purchaser to so notify the Shareholders’ Representative shall not limit any of the Purchaser Parties’ rights to recover Damages under this Article 9 (except to the extent such failure actually prejudices the defence of such Third Party Claim). The Shareholders’ Representative shall be the sole party authorized, on behalf of the Sellers, to assume or participate in the defence of and negotiate and enter into settlements and compromises of claims made pursuant to this Section 9.6. The Shareholders’ Representative shall have the right, exercisable upon written notice within 10 Business Days after receipt of such notice, to assume the defence of such action with counsel of reputable standing unless in such action injunctive or equitable remedies have been sought therein in respect of the Purchaser Party(ies), the Purchaser or the Company or such action involves Intellectual Property (in which event Purchaser and Parent shall have the sole right to defend such claim). The Shareholders’ Representative and the Purchaser Party(ies) shall reasonably cooperate in the defence of such claims. If the Shareholders’ Representative shall assume or participate in the defence of such audit, assessment or other proceeding as provided herein, the Purchaser Party(ies) shall make available to the Shareholders’ Representative all relevant records and take such other action and sign such documents as are necessary to defend such audit, assessment or other proceeding in a timely manner. If the Purchaser Party(ies) shall be required by judgment or a settlement agreement to pay any amount in respect of any obligation or liability against which the Purchaser Party(ies) are entitled to recover from Sellers under this Agreement, such amount, net of any insurance proceeds actually recovered (less any amounts reasonably incurred by the Purchaser Parties in order to secure such recoveries, including any applicable insurance deductibles), shall be offset against the outstanding balance under the Seller Promissory Notes or any Contingent Consideration payable, as applicable. No Seller, in the defence of any such Third Party Claim, shall, except with the written consent of the Purchaser Party(ies) (which consent shall not be unreasonably withheld or delayed), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Purchaser Party(ies) of a release from all liability with respect to such claim or litigation. In the event that the Shareholders’ Representative does not assume the defence of any matter for which it is entitled to assume such defence as provided above, the Purchaser Party(ies) shall have the full right to defend against any such claim or demand, and shall be entitled to in good faith settle or agree to pay in full such claim or demand, in its sole discretion; provided, that the Purchaser Party(ies) may, at its or their option, seek the consent of the Shareholders’

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Representative to such settlement or payment (which consent shall not be unreasonably withheld or delayed), and, if such consent is given, such settlement shall be finally determined to have been made by the Purchaser Party(ies) in good faith. With respect to any matter as to which the Shareholders’ Representative is not entitled to assume the defence pursuant to this Section 9.6, the Purchaser Party(ies) shall not enter into any settlement for which a claim for recovery of Damages will be made hereunder without the written consent of the Shareholders’ Representative (which consent shall not be unreasonably withheld or delayed).

If the Shareholders’ Representative shall have assumed the defence of an action pursuant to this Section 9.6, a Purchaser Party shall have the right to participate in the defence of such action with its own counsel, but the fees and expenses of such counsel shall be at the expense of the Purchaser Party unless (a) the employment of such counsel shall have been authorized in writing by the Shareholders’ Representative in connection with the defence of such action or claim, (b) the Shareholders’ Representative shall not have employed counsel in the defence of such action or claim, or (c) such Purchaser Party shall have reasonably concluded on the advice of its counsel that there may be defences available to it which are contrary to, or inconsistent with, those available to the Sellers, thus preventing the Sellers’ counsel from adequately representing the Sellers and the Purchaser Party, in any of which events such fees and expenses of not more than one additional counsel for the Purchaser Party(ies) shall be borne by the Sellers.

9.7 Characterization of Recovery. The parties agree to treat any recovery of Damages received by the Purchaser Parties under this Agreement as an adjustment to the purchase price for Tax purposes, unless otherwise required by applicable law.

9.8 No Contribution. The Sellers shall not have and shall not exercise or assert (or attempt to exercise or assert), any right of contribution, right of recovery or other right or remedy against the Company or any of its officers or directors in connection with any reimbursement obligation or any other liability to which such Sellers may become subject under or in connection with this Agreement.

ARTICLE 10.

MISCELLANEOUS PROVISIONS

10.1 Shareholders’ Representative.

(a) The Selling Shareholders hereby appoint Michael Powell to serve as their Shareholders’ Representative and to act as their agent and attorney-in-fact for purposes of Article 1, Article 5, Article 8, Article 9 and Section 10.4 of this Agreement, and consent to the taking by the Shareholders’ Representative of any and all actions and the making of any decisions required or permitted to be taken by him pursuant to such provisions of this Agreement. The Shareholders’ Representative hereby agrees to negotiate, enter into settlements and compromises of claims, including third-party claims, to comply with orders of courts and awards of arbitrators with respect to such claims, resolve any claim made pursuant to Article 9 of this Agreement, take all actions necessary in his judgment for the accomplishment of the foregoing and hereby accepts his appointment as the Shareholders’ Representative for purposes of Article 1, Article 5, Article 8, Article 9 and Section 10.4 of this Agreement and for purposes of any claims under the

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Remaining Shareholder Promissory Note and the Contingent Consideration Note. Parent and Purchaser shall be entitled to deal exclusively with the Shareholders’ Representative on all matters relating to Article 1, Article 5, Article 8, Article 9 and Section 10.4 of this Agreement, and shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of any Seller by the Shareholders’ Representative, and on any other action taken or purported to be taken on behalf of any Seller by the Shareholders’ Representative, as fully binding upon such Seller.

(b) If the Shareholders’ Representative shall die, become disabled or otherwise be unable or declare himself unwilling to fulfill his responsibilities as agent of the Sellers, then the Selling Shareholders who held a majority of the Shares prior to the Closing collectively shall, within ten days after such time, appoint a successor representative reasonably satisfactory to Purchaser. The Shareholders’ Representative may be removed at any time, with or without cause, by the Selling Shareholders who held a majority of the Shares prior to the Closing; provided, that within ten days after such time, such Selling Shareholders shall appoint a successor representative reasonably satisfactory to Purchaser. Any such successor shall become the “Shareholders’ Representative” for purposes of Article 1, Article 5, Article 8, Article 9 and Section 10.4 of this Agreement and this Section 10.1.

(c) A Shareholders’ Representative shall not be liable for any act done or omitted hereunder as Shareholders’ Representative while acting in good faith and in the exercise of reasonable judgment. The Selling Shareholders shall severally and proportionate between themselves indemnify each Shareholders’ Representative and hold each Shareholders’ Representative harmless against any loss, liability, cost or expense incurred without gross negligence, bad faith or willful misconduct on the part of such Shareholders’ Representative and arising out of or in connection with the acceptance or administration of such Shareholders’ Representative’s duties pursuant to the terms of this Agreement, including the reasonable fees and expenses of any legal counsel retained by such Shareholders’ Representative.

(d) The Shareholders’ Representative shall be entitled to rely upon any order, judgment, certificate, demand, notice, instrument or other writing delivered to him hereunder without being required to investigate the validity, accuracy or content thereof nor shall the Shareholders’ Representative be responsible for the validity or sufficiency of this Agreement. In all questions arising under this Agreement, the Shareholders’ Representative may rely on the advice of counsel, and for anything done, omitted or suffered in good faith by the Shareholders’ Representative based on such advice, the Shareholders’ Representative shall not be liable to anyone.

10.2 Further Assurances. Each party hereto shall execute and cause to be delivered to each other party hereto such instruments and other documents, and shall take such other actions, as such other party may reasonably request (on or after the Closing Date) for the purpose of carrying out or evidencing any of the transactions contemplated by this Agreement, any of the Related Agreements or any of the other documents, certificates, etc. executed or delivered in connection therewith.

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10.3 Fees and Expenses. Each party to this Agreement shall bear and pay all fees, costs and expenses (including legal fees and accounting fees) that have been incurred or that are incurred by such party in connection with the transactions contemplated by this Agreement, including all fees, costs and expenses incurred by such party in connection with or by virtue of (a) the investigation and review conducted by Purchaser and its Representatives with respect to the Company’s business (and the furnishing of information to Purchaser and its Representatives in connection with such investigation and review), (b) the negotiation, preparation and review of this Agreement (including the Company Disclosure Schedule), the Related Agreements and all agreements, certificates, opinions and other instruments and documents delivered or to be delivered in connection with the transactions contemplated by this Agreement or the Related Agreements, (c) the preparation and submission of any filing or notice required to be made or given in connection with any of the transactions contemplated by this Agreement or the Related Agreements, and the obtaining of any Consent required to be obtained in connection with any of such transactions, and (d) the consummation of the Transactions; provided, that any Transaction Costs that have not been paid prior to the Closing Date and which shall remain obligations on the Company after the Closing Date shall be taken into account in calculating the Aggregate Principal Amount of the Sellers Promissory Notes; provided, further, that the Sellers shall be responsible in the manner set forth in Article 9 for any Transaction Costs that were not paid prior to the Closing Date and were not taken into account in determining the Aggregate Principal Amount of the Sellers Promissory Notes.

10.4 Amendment. The Selling Shareholders hereby consent to the Shareholders’ Representative proposing, negotiating and agreeing (as applicable) to any variation to this Agreement on behalf of the Selling Shareholders; provided, that any such variation shall not be to the detriment of any one or more of the Sellers. This Agreement may be amended only by an instrument in writing signed by the Company, Purchaser and the Selling Shareholders or the Shareholders’ Representative at any time.

10.5 Attorneys’ Fees. In any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

10.6 Waiver; Remedies Cumulative. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by any party in exercising any right, power or privilege under this Agreement, any of the Related Agreements or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable Legal Requirements, (i) no claim or right arising out of this Agreement, any of the Related Agreements or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (ii) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (iii) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

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10.7 Entire Agreement. This Agreement, the Related Agreements and the Minority Shareholder SPA constitute the entire agreement among the parties to this Agreement and supersedes all other prior agreements and understandings, both written and oral, among or between any of the parties with respect to the subject matter hereof and thereof.

10.8 Execution of Agreement; Counterparts; Electronic Signatures.

(a) This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument, and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties; it being understood that all parties need not sign the same counterparts.

(b) The exchange of copies of this Agreement and of signature pages by facsimile transmission (whether directly from one facsimile device to another by means of a dial-up connection or whether mediated by the worldwide web), by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, or by combination of such means, shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.

10.9 Governing Law and Submission to Jurisdiction; Appointment of Process Agent. Except as otherwise set forth in Article 9 of this Agreement:

(a) This Agreement shall be governed by and construed in accordance with the laws of England and Wales.

(b) The parties irrevocably agree that the courts of England are to have exclusive jurisdiction to settle any dispute that may arise out of or in connection with this Agreement and that any proceedings arising out of or in connection with this Agreement shall be brought in such courts. Each of the parties hereto irrevocably submits to the exclusive jurisdiction (both subject matter and personal jurisdiction) of such courts and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

(c) The Purchaser hereby irrevocably appoints the Company, Unit R, Trecenydd Business Park, Caerphilly, CF83 2RZ. UK, as its agent to accept service of process in England in any legal action or proceedings arising out of this Agreement following the Closing, service upon whom shall be deemed completed whether or not forwarded to or received by the Purchaser.

(d) If such process agent ceases to be able to act as such or to have an address in England, each party irrevocably agrees to appoint a new process agent in England acceptable to the other party and to deliver to the other party within 14 days a copy of a written acceptance of appointment by the process agent.

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10.10 Assignment and Successors. No party may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other parties, except that Purchaser may assign any of its rights and delegate any of its obligations under this Agreement to any Affiliate of Purchaser (it being agreed acknowledged that Parent will continue to guarantee the performance of such Affiliate pursuant to the terms of Article 5 hereof). Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon and inure to the benefit of the successors and permitted assigns of the parties.

10.11 Parties in Interest. Except for the provisions of Section 1.1, Article 9 and Section 10.1, none of the provisions of this Agreement is intended to provide any rights or remedies to any Person other than the parties hereto and their respective successors and assigns (if any), except for the provisions of Section 5.1 with respect to the Remaining Shareholders.

10.12 Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given (a) upon actual receipt, when delivered by hand, (b) upon receipt of transmission confirmation, when sent by facsimile, (c) three Business Days after mailing by prepaid registered or certified mail within the United States, (d) one Business Day after sending by overnight courier (with postage prepaid and confirmation requested) within the United States or (e) two Business Days after sending by international courier (with postage prepaid and confirmation requested):

if to Purchaser:

Multi-Fineline Electronix, Inc.

3140 E. Coronado Street

Anaheim, CA 92806

Fax No.: (714) 238-1487

Attention: General Counsel

with a copy to (which copy shall not constitute notice):

Paul, Hastings, Janofsky & Walker LLP

4747 Executive Drive, 12th Floor

San Diego, CA 92121

Attention: Carl Sanchez

Fax No.: (858) 458-3005

if to the Company:

Pelikon Limited

Unit R

Trecenydd Business Park

Caerphilly, CF83 2RZ. UK

Fax: +44 (0)2920 855211

Attention: President

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with a copy to (which copy shall not constitute notice):

Wilson Sonsini Goodrich & Rosati, P.C.

650 Page Mill Road

Palo Alto, CA 94304

Attn: Steven V. Bernard

Fax No.: (650) 439-6811

Burges Salmon

Narrow Quay House

Narrow Quay

Bristol

BS1 4AH

Attn: Richard Spink

Fax: 0117 902 4400

if to the Shareholders’ Representative or the Sellers:

Mr. M A Powell

87 Ranelagh Road

London

W5 5RP

with a copy to (which copy shall not constitute notice):

Wilson Sonsini Goodrich & Rosati, P.C.

650 Page Mill Road

Palo Alto, CA 94304

Attn: Steven V. Bernard

Fax No.: (650) 439-6811

Burges Salmon

Narrow Quay House

Narrow Quay

Bristol

BS1 4AH

Attn: Richard Spink

Fax: 0117 902 4400

If to one or more Selling Shareholders individually, to the address set forth for such Selling Shareholder on such Selling Shareholder’s signature page hereto.

10.13 Construction; Usage.

(a) Interpretation. In this Agreement, unless a clear contrary intention appears:

(i) the singular number includes the plural number and vice versa;

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(ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(iii) reference to any gender includes each other gender;

(iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(v) reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(vi) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

(vii) “including” means including without limiting the generality of any description preceding such term; and

(viii) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

(b) Legal Representation of the Parties. This Agreement was negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation hereof.

(c) Headings. The headings contained in this Agreement are for the convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

10.14 Enforcement of Agreement. The parties acknowledge and agree that each of them would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement could not be adequately compensated in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to which any party may be entitled, at law or in equity, it shall be entitled to enforce any provision of this Agreement by a decree of specific performance and temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.

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10.15 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

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The parties hereto have caused this Agreement to be executed and delivered as a deed as of the date first set forth above.

		PURCHASER
		Multi-Fineline Electronix Singapore Pte. Ltd.
		By:	/s/    Reza Meshgin
		Name:	Reza Meshgin
		Title:	President
COMPANY
SIGNED as a DEED by Mike Powell		)	/s/    Mike Powell
PELIKON LIMITED acting by a director		)	Name: Mike Powell
in the presence of		)	Director
Witness Signature	/s/    B. Schubert
Witness Full Name	B. Schubert
Witness Address	106 Rushdene Crescent
	Northolt Middx
	UB5. 6NH
Witness Occupation
		PARENT
		Multi-Fineline Electronix, Inc.
		By:	/s/    Reza Meshgin
		Name:	Reza Meshgin
		Title:	President

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EXECUTED and unconditionally delivered		)	/s/    Peter Wright
as a DEED by FINANCE WALES		)	Investment Director
INVESTMENTS LIMITED acting by		)
a director in the presence of:		)
Witness Signature	/s/    Kathryn Barker
Witness Full Name	Kathryn Barker
Witness Address	Finance Wales
	Cardiff
Witness Occupation	Executive Assistant
Address	Finance Wales
	Cardiff
EXECUTED and unconditionally delivered		)	/s/    Reese E. Schroeder
as a DEED by MOTOROLA INC		)	Name: Reese E. Schroeder
who is in accordance with the laws of the		)	Managing Director of Motorola Ventures
territory in which MOTOROLA INC is		)	Authorized signatory
incorporated is acting under the authority of		)
MOTOROLA INC		)
Address	1303 E. Algonquin Road, Schaumburg, IL 60196, U.S.A., Attn: Managing Director, Motorola Ventures
	Copy to: 1303 E. Algonquin Road, Schaumburg, IL 60196, U.S.A., Attn: General Counsel

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EXECUTED and unconditionally delivered		)	/s/    Jake Leavesley
as a DEED by RAB CAPITAL PLC		)	Name: Jake Leavesley
for and on behalf of RAB SPECIAL		)	Authorised signatory
SITUATIONS (MASTER) FUND LIMITED		)
acting by its authorised signatories		)	/s/    Benjamin Hill
			Name: Benjamin Hill
			Authorised signatory
Address	c/o RAB Capital Plc, 1 Adam Street
	London, WCLN 6LE, UK
EXECUTED and unconditionally delivered		)	/s/    Mark Murray
as a DEED by ARTEMIS INVESTMENT		)	Name: Mark Murray
MANAGEMENT LIMITED as manager for		)	Fund Manager/Authorised signatory
and on behalf of ARTEMIS AIM VCT 2		)
PLC acting by its authorised signatory		)
Address	42 Melville Street
	Edinburgh EH3 7HA
EXECUTED and unconditionally delivered		)	/s/    Trelawny Williams
as a DEED by FIL INVESTMENTS		)	Name: Trelawny Williams
INTERNATIONAL (for and on behalf of		)	Director/Authorized Signatory
Fidelity Funds – European Smaller Companies		)
Fund) acting by		)
Witness Signature	/s/ Margaret Rowe
Witness Full Name	Margaret Rowe

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EXECUTED and unconditionally delivered		)	/s/    Trelawny Williams
as a DEED by FIL INVESTMENT		)	Name: Trelawny Williams
SERVICES LIMITED (for and on behalf of		)	Director/Authorized Signatory
Fidelity European Opportunities Fund)		)
acting by		)
Witness Signature	/s/    Margaret Rowe
Witness Full Name	Margaret Rowe
EXECUTED and unconditionally delivered		)	/s/    Sergio Levi
as a DEED by SPARK VCT Plc		)	Name: Sergio Levi
acting by its manager		)	Director
SPARK VENTURE MANAGEMENT		)
LIMITED
			/s/    Nghi Tran
			Name: Nghi Tran
			Secretary
Address	33 Glasshouse Street
	London WIB SDG
EXECUTED and unconditionally delivered		)	/s/    Sergio Levi
as a DEED by SPARK VCT 2 Plc		)	Name: Sergio Levi
acting by its manager		)	Director
SPARK VENTURE MANAGEMENT		)
LIMITED
			/s/    Nghi Tran
			Name: Nghi Tran
			Secretary
Address	33 Glasshouse Street
	London WIB SDG

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EXECUTED and unconditionally delivered		)	/s/    Sergio Levi
as a DEED by SPARK VCT 3 Plc		)	Name: Sergio Levi
acting by its manager		)	Director
SPARK VENTURE MANAGEMENT		)
LIMITED
			/s/    Nghi Tran
			Name: Nghi Tran
			Secretary
Address	33 Glasshouse Street
	London WIB SDG
EXECUTED and unconditionally delivered		)	/s/    Simon Chambers
as a DEED by KBC PEEL HUNT		)	Name: Simon Chambers
LIMITED acting by Simon Chambers		)	Director
a director in the presence of:		)
Witness Signature	/s/    Kelly Louise Morgan
Witness Full Name	Kelly Louise Morgan
Witness Address	93 Princes Road
	Ramford
	RM1 2SP
Witness Occupation	Assistant Compliance Officer
Address

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EXECUTED as a DEED by	)	/s/    Michael Powell
MICHAEL POWELL	)
in the presence of:-	)
Signature of witness	/s/    B. Schubert
Name (in BLOCK CAPITALS)	B. SCHUBERT
Address	106 Rushdene Crescent
	Northolt Middx
	UB5 6NH
EXECUTED as a DEED by	)	/s/    Colin Alexander Garrett
COLIN ALEXANDER GARRETT	)
in the presence of:-	)
Signature of witness	/s/    J.C. Wright
Name (in BLOCK CAPITALS)	J.C. WRIGHT
Address	810, Warick Road
	Southill
	W-MIDS
EXECUTED as a DEED by	)	/s/    Christopher Fryer
CHRISTOPHER FRYER	)
in the presence of:-	)
Signature of witness	/s/    C.M. Evans
Name (in BLOCK CAPITALS)	C.M. EVANS
Address	16 Ash Gree
	Great Chesterford CBIOIQR

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EXHIBIT A

CERTAIN DEFINITIONS

For purposes of the Agreement (including this Exhibit A):

“2008 R&D Tax Credit” shall mean that certain R&D Tax Credit related to calendar year 2008 that is expected by the Company to be paid to the Company by the appropriate Tax Authority during calendar year 2009.

“Accounting Referee” shall have the meaning specified in Section 1.7(e)(ii).

“Accounts” shall mean the Estimated Balance Sheet, Estimated Closing Indebtedness, Schedule of Company Transaction Costs and the Closing Certificate.

“Acquisition Proposal” shall have the meaning specified in Section 6.3(a).

“Acquisition Transaction” shall mean any transaction or series of transactions involving:

(a) any merger, consolidation, share exchange, share purchase, business combination, issuance of securities, direct or indirect acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction in which (i) the Company is a constituent corporation or is otherwise involved, (ii) a Person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of Persons directly or indirectly acquires beneficial or record ownership of securities representing more than 5% of the outstanding securities of any class of voting securities of any of the Company or (iii) the Company issues securities representing more than 5% of the outstanding securities of any class of voting securities of the Company;

(b) any direct or indirect sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or of assets or rights that constitute or account for 10% or more of the consolidated net revenues, net income or assets of the Company; or

(c) any liquidation or dissolution of any of the Company.

“Affiliate” shall mean, with respect to any Person, any other Person, directly or indirectly, controlling, controlled by or under common control with such Person.

“Aggregate Principal Amount” shall have the meaning specified in Section 1.6(a).

“Agreed Amount” shall have the meaning specified in Section 9.5(b).

“Agreed Rate” shall mean the average of the daily average Interbank currency exchange rates for British pounds sterling being converted into U.S. dollars at the close of business on each of the five Business Days prior to the Closing Date as reported in the Wall Street Journal.

“Agreement” shall have the meaning specified in the introductory paragraph to this Agreement.

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“Agreement Date” shall have the meaning specified in the introductory paragraph to this Agreement.

“Balance Sheet” shall have the meaning specified in Section 2.6(a)(i).

“Balance Sheet Date” shall have the meaning specified in Section 2.6(a)(ii).

“Basket” shall have the meaning specified in Section 9.3(a).

“Board” shall have the meaning specified in Section 2.1(d).

“Business Day” shall mean any day, other than a Saturday, Sunday or legal holiday in the State of California or in England, on which banks are open for substantially all their banking business in Los Angeles and London.

“CAA 2001” shall mean the Capital Allowances Act 2001.

“Capital Lease Obligations” shall mean those lease obligations that are required to be capitalized by the lessee pursuant to GAAP.

“Claim Notice” shall have the meaning specified in Section 9.5(a).

“Claimed Amount” shall have the meaning specified in Section 9.5(a).

“Closing” shall have the meaning specified in Section 1.2.

“Closing Certificate” shall have the meaning specified in Section 1.4.

“Closing Date” shall have the meaning specified in Section 1.2.

“Closing Indebtedness” shall mean all Indebtedness of the Company outstanding immediately prior to the Closing.

“Company” shall have the meaning specified in the introductory paragraph to this Agreement.

“Company Audited Financial Statements” shall have the meaning specified in Section 2.6(a)(i).

“Company Constituent Documents” shall have the meaning specified in Section 2.2.

“Company Contract” shall mean any Contract, including any amendment or supplement thereto, (a) to which the Company is a party; (b) by which the Company or any of its assets is bound or under which the Company has any obligation or (c) under which Company has any right or interest.

“Company Disclosure Schedule” shall mean the schedule (dated as of the date of the Agreement) delivered to Purchaser on behalf of the Company on the date of this Agreement and, to the extent updated and provided pursuant to Section 6.7 hereof and subject to the limitations of such Section 6.7, such schedule as updated.

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“Company Employee Plan” shall mean (i) any employee pension benefit plan, any employee welfare benefit plan, and any other plan, agreement or arrangement, written or oral, involving compensation or benefits, including insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock-based or stock related awards, stock purchase, phantom stock, stock appreciation or other forms of fringe benefits, perquisites, incentive compensation or post-retirement compensation or post-employment compensation; and (ii) all employment, management, consulting, relocation, repatriation, expatriation, visa, work permit, change in control, severance or similar agreements or contracts, written or oral, maintained, or contributed to or required to be contributed to during the last six (6) years by the Company, and in the case of clauses (i) and (ii) above, established for the benefit of, or relating to, any current or former employee, officer, director or consultant who provided services to the Company for which such individual received compensation.

“Company Financial Statements” shall have the meaning specified in Section 2.6(a).

“Company Intellectual Property” shall mean any and all Intellectual Property and Intellectual Property Rights that are owned by, or claimed to be owned by, licensed to, or filed in the name of the Company.

“Company Material Adverse Effect” An event, violation, inaccuracy, circumstance or other matter will be deemed to have a “Material Adverse Effect” on the Company if, individually or in the aggregate, such event, violation, inaccuracy, circumstance or other matter had or could reasonably be expected to have a material adverse effect on the business, assets, liabilities, operations, or condition (financial or otherwise) of the Company; provided, however, that Company Material Adverse Effect shall not include any material adverse change, effect, event, occurrence, state of facts or development (i) relating to or resulting from the industry in which the Company operates generally or the U.S. or European economy in general, only to the extent such adverse change, effect, occurrence, state of fact or development does not affect the Company more adversely than comparable Entities or (ii) resulting from any worldwide, national or local crisis (political, economic, financial or regulatory), including, without limitation, an outbreak or escalation of war, armed hostilities, acts of terrorism, political instability or other national or international calamity, crisis or emergency occurring within or outside the United States or Europe.

“Company Option Plan” shall mean the EMI Scheme.

“Company Ordinary Shares” shall have the meaning specified in the Recitals to this Agreement.

“Company Products” shall mean all products, technologies and services developed (including products, technologies and services under development), owned, made, distributed, or sold by the Company.

“Company Rights” shall have the meaning specified in Section 2.3(c).

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“Company Software” shall have the meaning specified in Section 2.12(m).

“Confidentiality Agreement” shall have the meaning specified in Section 6.8.

“Consent” shall mean any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).

“Contested Amount” shall have the meaning specified in Section 9.5(b).

“Contingent Consideration” shall have the meaning specified in Section 1.7(b).

“Contingent Consideration Note” shall have the meaning specified in Section 1.7(a).

“Contract” shall mean any written agreement, oral or other agreement, contract, subcontract, lease, understanding, instrument, note, warranty, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking of any nature, whether express or implied.

“Damages” shall include any loss, damage, injury, liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including reasonable attorneys’ fees), charge, cost (including costs of investigation) or expense of any nature.

“Defaulting Shares” shall have the meaning specified in Section 6.5.

“Drag-Along Right” shall have the meaning specified in the Recitals to this Agreement.

“EMI Scheme” shall have the meaning specified in Section 2.18(f).

“Employee” shall have the meaning specified in Section 2.18(a).

“Encumbrance” shall mean any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, preemptive right, community property interest or restriction of any nature affecting property, real or personal, tangible or intangible, including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset, any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset, any lease in the nature thereof and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statute of any jurisdiction).

“Entity” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company), firm or other enterprise, association, organization or entity.

“Environmental Law” means any federal, state, local or foreign Legal Requirement relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or subsurface strata), including any law or regulation

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relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern.

“Estimated Balance Sheet” shall have the meaning specified in Section 1.4.

“Estimated Closing Indebtedness” shall have the meaning specified in Section 1.4.

“Estimated Remaining Return Amount” shall mean an amount equal to (a) US$0.30, multiplied by (b) (i) (A) the total number of pSel Hybrid Display units sold and delivered to third parties by the Selling Parties during the period commencing on March 1, 2010 and ending on December 31, 2010, multiplied by (B) the average return rate (expressed as a percentage) experienced by Purchaser, the Company and/or any of their respective Affiliates or licensees on pSel Hybrid Display units sold and delivered to third parties by the Selling Parties during the six month period commencing on September 1, 2009 and ending on February 28, 2010, minus (ii) the total number of pSel Hybrid Display units returned prior to February 28, 2011 which were initially sold and delivered to third parties by the Selling Parties during the period commencing on March 1, 2010 and ending on December 31, 2010.

“Excess Warranty Holdback Amount” shall be equal to an amount determined by subtracting (a) the Purchaser Actual Return Amount from (b) the Estimated Remaining Return Amount.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended and, the rules and regulations promulgated thereunder.

“Final Objection Notice” shall have the meaning specified in Section 1.7(e)(ii).

“Final Response Period” shall have the meaning specified in Section 1.7(e)(ii).

“Financial Advisor” shall mean Woodside Capital Partners International LLC.

“Financial Advisor Commission” shall have the meaning specified in Section 1.1(b)(i).

“Fully Diluted Company Ordinary Shares” shall have the meaning specified in Section 1.1(b)(ii).

“GAAP” shall have the meaning specified in Section 1.4.

“Governmental Authorization” shall mean any: (a) approval, permit, license, certificate, franchise, permission, clearance, registration, qualification or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Body.

“Governmental Body” shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, supranational or other government or (c) governmental, self-regulatory or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or Entity and any court or other tribunal).

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“Guaranteed Obligations” shall have the meaning specified in Section 5.1.

“Guaranteed Party” shall have the meaning specified in Section 5.1.

“ICTA 1988” means the Income and Corporation Taxes Act 1988.

“IHTA 1984” means the Inheritance Tax Act 1984.

“In-Licenses” shall mean all agreements pursuant to which a third party has licensed any Intellectual Property or Intellectual Property Rights to the Company.

“Indebtedness” shall mean all outstanding indebtedness of the Company for borrowed money and any accrued interest thereon, including, without limitation, any short and long-term debt to any creditors, including members and Affiliates of the Company, and capital lease payment obligations.

“Initial Objection Notice” shall have the meaning specified in Section 1.7(e)(ii).

“Initial Response Period” shall have the meaning specified in Section 1.7(e)(ii).

“Installment Due Date” shall have the meaning specified in Section 1.7(d).

“Intellectual Property” shall mean and includes all algorithms, APIs, apparatus, databases and data collections, diagrams, inventions (whether or not patentable), know-how, logos, marks (including brand names, product names, logos, and slogans), methods, network configurations and architectures, processes, proprietary information, protocols, schematics, specifications, software, software code (in any form including source code and executable or object code), subroutines, user interfaces, techniques, URLs, web sites, works of authorship and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing such as instruction manuals, prototypes, samples, studies, and summaries).

“Intellectual Property Rights” shall mean and includes all past, present, and future rights of the following types, which may exist or be created under the laws of any jurisdiction in the world: (a) rights associated with works of authorship, including exclusive exploitation rights, copyrights and moral rights; (b) trademark and trade name rights and similar rights; (c) trade secret rights; (d) patents and industrial property rights; (e) other proprietary rights in Intellectual Property of every kind and nature; and (f) all registrations, renewals, extensions, combinations, divisions, or reissues of, and applications for, any of the rights referred to in clauses (a) through (e) above.

“IP Contracts” shall mean In-Licenses and Out-Licenses, collectively.

“Joint Written Instruction” shall have the meaning specified in Section 9.5(e).

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“KBC” shall have the meaning specified in Section 7.2(m).

“Knowledge” An individual shall be deemed to have “knowledge” of a particular fact or other matter if:

(a) such individual is actually aware of such fact or other matter; or

(b) such individual would have had knowledge of such fact following a reasonable investigation, if under the circumstances a reasonable person would have determined such investigation was required or appropriate in the normal course of fulfillment of such individual’s duties.

The Company shall be deemed to have “knowledge” of a particular fact or other matter if any Person listed on Part A of the Company Disclosure Schedule has Knowledge of such fact or other matter.

“Lease” shall have the meaning specified in Section 2.11(a).

“Legal Proceeding” shall mean any ongoing or threatened action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

“Legal Requirement” shall mean any federal, state, local, municipal, foreign or international, multinational or other law, statute, constitution, principle of common law, resolution, ordinance, legally binding code, edict, decree, rule, regulation, ruling or legally binding requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body.

“Lender Promissory Notes” shall have the meaning specified in Section 1.5.

“Material Contracts” shall have the meaning specified in Section 2.13(a).

“Materials of Environmental Concern” means any chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products and any other substance that is regulated under any applicable Environmental Law.

“Measurement Period” shall have the meaning specified in Section 1.7(d).

“Minority Shareholder SPA” shall mean that certain agreement for the sale and purchase of Company Ordinary Shares held by the Remaining Shareholders to be entered into between each Remaining Shareholder, the Purchaser and the Shareholders’ Representative following the date of this Agreement.

“New Articles of Association” shall mean the New Articles of Association of Pelikon Limited, as adopted by Special Resolution passed on February 19, 2008.

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“Note Payment Amount” shall have the meaning specified in Section 1.6(a).

“Notice Date” shall have the meaning specified in Section 6.5.

“NVF I” shall have the meaning specified in Section 6.6.

“NVF II” shall have the meaning specified in Section 6.6.

“Order” shall mean any decree, permanent injunction, stipulation, order or similar action.

“Out-Licenses” shall mean all agreements pursuant to which the Company has granted to any third party any rights or licenses to Intellectual Property or Company Products.

“Parent” shall have the meaning specified in the introductory paragraph to this Agreement.

“Permitted Encumbrances” shall mean (i) liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith; (ii) liens of carriers, warehousemen, mechanics, materialmen, vendors, and landlords incurred in the ordinary course of business for sums not overdue, payable without penalty or being contested in good faith; (iii) easements, reservations, rights of way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances affecting real property in a manner not affecting the value or use of such property; (iv) liens securing obligations under a capital lease or securing the purchase price of equipment if such liens do not extend to property other than the property leased under such capital lease or so purchased, and any accessions, replacements, substitutions and proceeds (including insurance proceeds) thereof or thereto.

“pSel Hybrid Display” shall mean any product containing a polymer dispersed liquid crystal coated substrate which such product’s application is for a morphing keypad display or LCD display window cover.

“Per Share Contingent Consideration” shall have the meaning specified in Section 1.1(b)(iii).

“Per Share Note Payment Amount” shall have the meaning specified in Section 1.1(b)(iv).

“Person” shall mean any individual, Entity or Governmental Body.

“Plans” shall have the meaning specified in Section 2.18(a).

“Policies” shall have the meaning specified in Section 2.20(a).

“Pre-Closing Period” shall have the meaning specified in Section 6.1(a).

“Purchase Commitments” shall have the meaning specified in Section 2.14(a).

“Purchaser” shall have the meaning specified in the introductory paragraph to this Agreement.

14

EXECUTION COPY

“Purchaser Actual Return Amount” shall be equal to (a) US$0.30 multiplied by (b) the actual number of pSel Hybrid Display units returned (including returns for warranty claims) to the Selling Parties during the period commencing on March 1, 2011 and ending on August 31, 2011 related to pSel Hybrid Display units sold and delivered to third parties by the Selling Parties during calendar year 2010.

“Purchaser Party” shall mean any of the following Persons: (a) Purchaser; (b) Purchaser’s current and future Affiliates (including the Company following the Closing Date); (c) the respective officers, directors or employees of the Persons referred to in clauses (a) and (b) of this paragraph and (d) the respective successors and assigns of the Persons referred to in clauses (a), (b) and (c) of this paragraph.

“Real Property” shall have the meaning specified in Section 2.11(b).

“Recourse Amount” shall equal, in aggregate, the sum of US$2,000,000 and any Contingent Consideration payable pursuant to Section 1.7 of this Agreement.

“Registered IP” means all Intellectual Property Rights that are registered, filed or issued under the authority of any Governmental Body, including all patents, registered copyrights, and registered trademarks and all applications for any of the foregoing.

“Related Agreements” shall mean the Seller Promissory Notes, the Contingent Consideration Note and the Lender Promissory Notes.

“Related Party” shall mean (a) each individual who is a corporate officer or director of the Company; (b) each member of the immediate family of each of the individuals referred to in clause (a) above; and (c) any trust or other Entity (other than the Company) in which any one of the individuals referred to in clauses (a) and (b) above holds (or in which more than one of such individuals collectively hold), beneficially or otherwise, a controlling interest.

“Remaining Shareholder Promissory Note” shall have the meaning specified in Section 1.6(a).

“Remaining Shareholder Shares” shall have the meaning specified in the Recitals to this Agreement.

“Remaining Shareholders” shall have the meaning specified in the Recitals to this Agreement.

“Representatives” shall mean officers, directors, employees, agents, attorneys, accountants, advisors and representatives.

“Response Notice” shall have the meaning specified in Section 9.5(b).

“Sale” shall mean the purchase and sale of the Shares pursuant to this Agreement.

“Sales Statement” shall have the meaning specified in Section 1.7(c)(i).

15

EXECUTION COPY

“Schedule of Company Transaction Costs” shall have the meaning specified in Section 1.4.

“Sellers” shall have the meaning specified in the Recitals to this Agreement.

“Sellers Promissory Notes” shall have the meaning specified in Section 1.6(a).

“Selling Parties” shall have the meaning specified in Section 1.7(b).

“Selling Shareholder Promissory Note” shall have the meaning specified in Section 1.6(a).

“Selling Shareholder Shares” shall have the meaning specified in the Recitals to this Agreement.

“Selling Shareholders” shall have the meaning specified in the introductory paragraph to this Agreement.

“Shares” shall have the meaning specified in the Recitals to this Agreement.

“Shareholders’ Representative” shall have the meaning specified in the introductory paragraph to this Agreement.

“Subsidiary” any Entity shall be deemed to be a “Subsidiary” of another Person if such Person directly or indirectly (a) has the power to direct the management or policies of such Entity or (b) owns, beneficially or of record, (i) an amount of voting securities or other interests in such Entity that is sufficient to enable such Person to elect at least a majority of the members of such Entity’s board of directors or other governing body or (ii) at least 50% of the outstanding equity or financial interests of such Entity.

“Taxation” or “Tax” means any form of taxation, withholding, duty, impost, levy or tariff in each case in the nature of taxation, anywhere in the world, whenever and wherever imposed including, without limitation, income tax, corporation tax, capital gains tax, value added tax, import or export duties, stamp duty, stamp duty reserve tax, national insurance and social security contributions, and including any fines, penalties, surcharge, interest or other imposition relating to any such tax, withholding, duty, impost or levy.

“Tax Authority” or “Taxation Authority” means any authority or body, anywhere in the world and whether national or otherwise, having the power or authority or other function in relation to Tax.

“Tax Return” shall mean any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information filed with or submitted to, or required to be filed with or submitted to, any Taxation Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

16

EXECUTION COPY

“Tax Statute” means any primary or secondary statute, instrument, enactment, order, law, by-law or regulation in any jurisdiction making any provision for or in relation to Tax.

“Tax Warranties” shall mean the warranties set out at Section 2.17 of this Agreement.

“TCGA 1992” means the Taxation of Capital Gains Act 1992.

“Third Party Claims” shall have the meaning specified in Section 9.6.

“Transaction Costs” shall mean all fees, costs and expenses incurred by the Sellers or by the Company for its account or for the account of any of the Sellers at any time in connection with pursuing, negotiating or consummating the Letter of Intent, this Agreement, the Related Agreements and/or the transactions contemplated hereby or thereby, including, without limitation, legal, investment banking and other professional fees and expenses, including, without limitation, any fees payable to the Financial Advisor in connection therewith (other than fees payable to the Financial Advisor in accordance with Section 1.7(f), if any), the amount of all bonuses, accelerated payments or other similar amounts that may become payable by the Company to any directors, officers or employees of the Company or to other Persons in connection with or as a result of the consummation of the transactions contemplated by this Agreement and the Related Agreements, including, without limitation, any Taxes or other amounts payable by the Company in connection therewith, the amount of any Taxes payable by the Company with respect to the cancellation and termination of Company Rights, fees and expenses for any appraisal or other valuation of the Company performed by the Company or the Sellers, travel and overhead expenses of representatives of the Sellers or the Company incurred in connection with pursuing, negotiating or consummating this Agreement, the Related Agreements or the transactions contemplated hereby or thereby and one-half of any filing fees associated with obtaining any domestic or foreign antitrust, anti-competition or other necessary Governmental Authorization required for the consummation of the transactions contemplated by this Agreement.

“Transactions” shall mean the Sale and the other transactions contemplated by this Agreement and the Related Agreements.

“Unaudited Interim Financial Statements” shall have the meaning specified in Section 2.6(a)(ii).

“VAT” means value added tax or any similar sales tax in any jurisdiction.

“VATA 1994” means the Value Added Tax Act 1994.

17

EX-10.47

Exhibit 10.47

¨

APPLE COMPUTER, INC.

MASTER DEVELOPMENT AND SUPPLY AGREEMENT

#C56-06-00844

THIS MASTER DEVELOPMENT AND SUPPLY AGREEMENT is entered into by and between Apple Computer, Inc., a California corporation having its principal place of business at 1 Infinite Loop, Cupertino, California 95014, United States and Apple Computer International, an Irish Corporation having its principal place of business at Holly Hill Industrial Estate, Cork City, Ireland (collectively, “Apple”), and Multi-Fineline Electronix, Inc. (aka M-FLEX), a Delaware corporation, having its principal place of business at 3140-A Coronado Street, Anaheim, CA 92806 (“Company”), effective as of June 22, 2006 (the “Effective Date”).

PURPOSE

Apple desires to engage Company and its affiliates to provide services in connection with the development and supply of components for use in Apple products. This Master Development and Supply Agreement contains the general terms and conditions governing the relationship of the parties. The parties may sign statements of work that reference this Master Development and Supply Agreement to set forth terms and conditions specific to particular goods and services. However, if the parties have not yet signed a statement of work for particular goods and services to be provided, then, unless the provision of such goods and services is governed by a separate written agreement, the terms and conditions of this Master Development and Supply Agreement will apply.

AGREEMENT

Capitalized terms not defined herein, have the meanings set forth in Schedule 1, attached hereto and incorporated herein by reference.

1. Development

1.1. Deliverables. At the beginning of a project, Apple and Supplier will meet to agree upon a Project Schedule that sets forth the dates Supplier will provide Development Deliverables agreed upon by Apple and Supplier.

1.2. Delivery. Supplier will deliver Development Deliverables to Authorized Purchasers in accordance with the Project Schedule with written notice of the delivery. Payment of invoices will not [CONFIDENTIAL TREATMENT REQUESTED] of Development Deliverables, but rather Development Deliverables delivered will [CONFIDENTIAL TREATMENT REQUESTED] the Authorized Purchaser. Upon delivery of a Development Deliverable, the Authorized Purchaser will [CONFIDENTIAL TREATMENT REQUESTED] the Development Deliverable, [CONFIDENTIAL TREATMENT REQUESTED] in the event that, in [CONFIDENTIAL TREATMENT REQUESTED], the Development Deliverable [CONFIDENTIAL TREATMENT REQUESTED], including the Project Schedule [CONFIDENTIAL TREATMENT REQUESTED] Development Deliverable. If an Authorized Purchaser requests, Supplier will assist the Authorized Purchaser with testing the Development Deliverables [CONFIDENTIAL TREATMENT REQUESTED]. Upon [CONFIDENTIAL TREATMENT REQUESTED] Development Deliverable, Supplier will promptly [CONFIDENTIAL

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

Apple Confidential Page 1

Apple-M-FLEX

Master Development and Supply Agreement

#C56-06-00844

TREATMENT REQUESTED] with the Specifications [CONFIDENTIAL TREATMENT REQUESTED] the Development Deliverable to Authorized Purchasers as soon as is practicable, or such other time period agreed upon by the Authorized Purchaser in writing. The Authorized Purchaser will [CONFIDENTIAL TREATMENT REQUESTED] in accordance with the foregoing procedure, which procedure will [CONFIDENTIAL TREATMENT REQUESTED] the Authorized Purchaser [CONFIDENTIAL TREATMENT REQUESTED] the Development Deliverable [CONFIDENTIAL TREATMENT REQUESTED] the Development Deliverable.

1.3. Re-scheduling. If Supplier is unable to provide the Development Deliverables or related services in accordance with the Project Schedule for any reason, including Apple’s or any Authorized Purchaser’s failure to provide timely delivery of required information, Supplier will promptly notify Apple, specifying the reason for such failure to comply with the Project Schedule.

1.4. Cancellation. An Authorized Purchaser may cancel all or any part of a Purchase Order issued by such Authorized Purchaser for Development Deliverables and related services [CONFIDENTIAL TREATMENT REQUESTED]. Upon any such cancellation, Supplier will, to the extent and at the times specified by the Authorized Purchaser, stop all work on the Purchase Order (or designated portions thereof) so cancelled, incur no further costs, and protect all property in which the Authorized Purchaser has or may acquire an interest. Supplier will do so promptly [CONFIDENTIAL TREATMENT REQUESTED]. Except as may be set forth in the applicable SOW, the Authorized Purchaser will [CONFIDENTIAL TREATMENT REQUESTED] in connection with the cancelled Purchase Order except for [CONFIDENTIAL TREATMENT REQUESTED] performed [CONFIDENTIAL TREATMENT REQUESTED] in accordance with this Section 1 [CONFIDENTIAL TREATMENT REQUESTED], provided, however, [CONFIDENTIAL TREATMENT REQUESTED] (1) the EOL Date, (2) expiration or termination of the applicable SOW, or (3) termination of this Agreement, [CONFIDENTIAL TREATMENT REQUESTED] (a) undelivered Development Deliverables completed in accordance with the Specifications, (b) work-in progress prepared in accordance with the Specifications and the Forecast, and (c) the excess Long Lead Time Materials, if any, at [CONFIDENTIAL TREATMENT REQUESTED] for such materials, [CONFIDENTIAL TREATMENT REQUESTED] (i) were purchased no earlier than required by applicable Lead-Times to fulfill the requirements of the then current (at the time of purchase by Supplier) Forecast, (ii) meet all applicable Specifications, and (iii) [CONFIDENTIAL TREATMENT REQUESTED]. Supplier will scrap any such materials [CONFIDENTIAL TREATMENT REQUESTED] upon Apple’s request, provided [CONFIDENTIAL TREATMENT REQUESTED] to scrap such materials.

1.5. No Obligation. Provision by Supplier of any Development Deliverables or related services does not obligate Apple or any other Authorized Purchaser to purchase any Goods from Supplier.

1.6. Costs. Except for amounts due pursuant to a Purchase Order or SOW or as otherwise agreed in writing by the parties, Authorized Purchasers will not be responsible for any costs in connection with the Development Deliverables or related services.

1.7. Taxes. The Development Deliverables in their tangible form have no intrinsic value. As such, no value added, sales, or use taxes have been assessed or are anticipated to be required as a result of the services provided under this Agreement.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

Apple Confidential Page 2

2. Production and Order Fulfillment

2.1. Production. Supplier will manufacture, test, package, and deliver Goods in accordance with all applicable Specifications pursuant to Purchase Orders issued by Authorized Purchasers and the requirements set forth, if any, in the applicable SOW, as more fully set forth below.

2.2. Forecasts

(a) Delivery. Apple will provide Supplier with a Forecast on at least [CONFIDENTIAL TREATMENT REQUESTED] until the EOL Date.

(b) Confirmation. Within [CONFIDENTIAL TREATMENT REQUESTED] of receipt of a Forecast, Supplier will respond [CONFIDENTIAL TREATMENT REQUESTED] supply of the Goods [CONFIDENTIAL TREATMENT REQUESTED] the Forecast. Supplier agrees to [CONFIDENTIAL TREATMENT REQUESTED] subsequent Forecasts with respect to each [CONFIDENTIAL TREATMENT REQUESTED] of the Forecast to the extent that: (i) the subsequent Forecast does not exceed the previous Forecast for the [CONFIDENTIAL TREATMENT REQUESTED] by more than [CONFIDENTIAL TREATMENT REQUESTED] if any, in the applicable SOW; or (ii) if no previous Forecast exists for a [CONFIDENTIAL TREATMENT REQUESTED], the subsequent Forecast does not exceed the [CONFIDENTIAL TREATMENT REQUESTED] forecasted in a Forecast by more than [CONFIDENTIAL TREATMENT REQUESTED], if any, in the applicable SOW.

If the applicable SOW does not contain a Flexibility Schedule, Supplier will respond in the same manner as with the initial Forecast set forth above.

(c) Supply Constraint. If Supplier’s ability to supply any Goods in accordance with the then current Forecast is constrained for any reason, Supplier agrees that Supplier [CONFIDENTIAL TREATMENT REQUESTED] will immediately escalate the issue to both parties’ management for the purpose of resolving the supply constraint.

(d) Disclaimer. APPLE MAKES NO WARRANTIES REGARDING THE QUANTITY OF GOODS THAT IT OR ANY OTHER AUTHORIZED PURCHASERS WILL ORDER OR PURCHASE, IF ANY. SUBJECT TO SECTION 2.4(D) BELOW WITH RESPECT TO QUANTITIES CITED IN A PURCHASE ORDER, ALL QUANTITIES CITED IN THIS AGREEMENT OR IN DISCUSSIONS ARE NON-BINDING.

2.3. Hubs. If requested by an Authorized Purchaser, Supplier will store Goods in Hubs before their delivery date to support just-in-time delivery of the Goods required pursuant to the then current Forecast. Supplier will: (i) [CONFIDENTIAL TREATMENT REQUESTED] associated with warehousing Goods in Hubs; (ii) maintain a sufficient inventory of Goods in the Hubs to satisfy the requirements of the then current Forecast; (iii) ensure that the Authorized Purchaser or its carrier(s) may withdraw Goods from the Hubs as needed; (iv) retain title to Goods until they are withdrawn by the Authorized Purchaser or its carrier from the Hubs; (v) fully insure or require the Hub operator to fully insure all Goods in transit to or stored at a Hub against all risk of loss or damage until such time as the Authorized Purchaser takes title to them; and (vi) require that the Hub operator take all steps necessary to protect all Goods in a Hub consistent with good commercial warehousing practice.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

Apple Confidential Page 3

2.4. Purchase Orders

(a) Orders. An Authorized Purchaser may purchase Goods by issuing Supplier a Purchase Order. During the period covered by a Forecast confirmed by Supplier in accordance with Section 2.2(b) above, Supplier may [CONFIDENTIAL TREATMENT REQUESTED] a Purchase Order for Goods issued by an Authorized Purchaser [CONFIDENTIAL TREATMENT REQUESTED] of Goods ordered [CONFIDENTIAL TREATMENT REQUESTED] in the then current Forecast [CONFIDENTIAL TREATMENT REQUESTED], if any, in the applicable SOW, or if the Purchase Order does not conform with the terms of this Agreement. Supplier will fulfill orders for Goods using the electronic order processing protocols identified in the document(s), if any, referenced in the Apple Requirements Document.

(b) [CONFIDENTIAL TREATMENT REQUESTED]. The price of Goods will be set forth in the applicable SOW or other written agreement among the parties, or if none, in the applicable Purchase Order. Except as set forth in the applicable Purchase Order or SOW or as otherwise agreed in writing, prices include all duties and taxes assessable upon the Goods prior to delivery to an Authorized Purchaser in accordance with this Agreement. Supplier represents and warrants that the prices for Goods [CONFIDENTIAL TREATMENT REQUESTED]. If previously agreed upon pricing [CONFIDENTIAL TREATMENT REQUESTED], then Supplier will [CONFIDENTIAL TREATMENT REQUESTED] to Authorized Purchasers [CONFIDENTIAL TREATMENT REQUESTED].

(c) Adjustments. Authorized Purchasers may reschedule the shipment date of any undelivered Goods [CONFIDENTIAL TREATMENT REQUESTED]. An Authorized Purchaser may increase the number of units of Goods ordered pursuant to a particular Purchase Order [CONFIDENTIAL TREATMENT REQUESTED] in accordance with the Flexibility Schedule, if any, in the applicable SOW. An Authorized Purchaser may redirect shipments of any Goods under any Purchase Order to alternate locations [CONFIDENTIAL TREATMENT REQUESTED].

(d) Cancellation. An Authorized Purchaser may cancel all or any part of a Purchase Order issued by such Authorized Purchaser at any time. Upon any such cancellation, Supplier will, to the extent and at the times specified by the Authorized Purchaser, stop all work on the Purchase Order (or designated portions thereof) so cancelled, incur no further costs, and protect all property in which the Authorized Purchaser has or may acquire an interest. Supplier will do so promptly [CONFIDENTIAL TREATMENT REQUESTED]. Except as may be set forth in the applicable SOW, an Authorized Purchaser will [CONFIDENTIAL TREATMENT REQUESTED] in connection with the cancellation of a Purchase Order for Goods to be delivered during the Production Period. For Goods to be delivered outside of the Production Period, an Authorized Purchaser will [CONFIDENTIAL TREATMENT REQUESTED] in connection with the cancellation of a Purchase Order if the cancelled Purchase Order is cancelled more than the applicable Lead-Time prior to the requested delivery date. If an Authorized Purchaser cancels a Purchase Order for Goods to be delivered outside of the Production Period less than or equal to the applicable Lead-Time prior to the requested delivery date, the Authorized Purchaser will [CONFIDENTIAL TREATMENT REQUESTED] to fulfill the cancelled Purchase Order that [CONFIDENTIAL TREATMENT REQUESTED].

(e) Excess Materials. Upon the earlier of (1) the EOL Date, (2) expiration or termination of the applicable SOW, or (3) termination of this Agreement, the [CONFIDENTIAL TREATMENT REQUESTED] (a) undelivered Goods completed in accordance with the Specifications, (b) work-in progress prepared in accordance with the Specifications and the Forecast, and (c) the excess Long Lead

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

Apple Confidential Page 4

Apple-M-FLEX

Master Development and Supply Agreement

#C56-06-00844

Time Materials, if any, held by Supplier, [CONFIDENTIAL TREATMENT REQUESTED] (i) were purchased no earlier than required by applicable Lead-Times to fulfill the requirements of the then current (at the time of purchase by Supplier) Forecast, (ii) meet all applicable Specifications, and (iii) [CONFIDENTIAL TREATMENT REQUESTED]. Supplier will scrap any such materials so purchased upon Apple’s request, provided [CONFIDENTIAL TREATMENT REQUESTED].

2.5. Delivery

(a) On-Time Delivery. TIME IS OF THE ESSENCE as to the provision of the Goods under this Agreement. If Supplier cannot meet the requirements of the then current Forecast or of the delivery date specified in a Purchase Order, Supplier will promptly notify the Authorized Purchaser and propose a revised delivery date, and the Authorized Purchaser may [CONFIDENTIAL TREATMENT REQUESTED] (i) [CONFIDENTIAL TREATMENT REQUESTED] the Purchase Order [CONFIDENTIAL TREATMENT REQUESTED]; or (ii) require Supplier to [CONFIDENTIAL TREATMENT REQUESTED]. If neither the remedy in clause (i) or (ii) is sufficient, after reasonable efforts to resolve the delay in delivery between senior management of both parties, the Authorized Purchaser may [CONFIDENTIAL TREATMENT REQUESTED] and hold [CONFIDENTIAL TREATMENT REQUESTED] for the [CONFIDENTIAL TREATMENT REQUESTED] Authorized Purchasers for [CONFIDENTIAL TREATMENT REQUESTED] including [CONFIDENTIAL TREATMENT REQUESTED], and may exercise all other remedies provided at law, in equity and in this Agreement. If after a reasonable effort [CONFIDENTIAL TREATMENT REQUESTED] the Authorized Purchaser is unable to do so, or if circumstances reasonably indicate that such effort will be unavailing, the Authorized Purchaser will have [CONFIDENTIAL TREATMENT REQUESTED]. No Authorized Purchaser is obligated to accept [CONFIDENTIAL TREATMENT REQUESTED]. Unless an Authorized Purchaser has otherwise agreed in writing, Supplier must [CONFIDENTIAL TREATMENT REQUESTED] in the applicable Purchase Order. Authorized Purchasers reserve the right to [CONFIDENTIAL TREATMENT REQUESTED] and to [CONFIDENTIAL TREATMENT REQUESTED].

(b) [CONFIDENTIAL TREATMENT REQUESTED]. Payment of invoices will [CONFIDENTIAL TREATMENT REQUESTED]. The Authorized Purchaser may [CONFIDENTIAL TREATMENT REQUESTED] that do not [CONFIDENTIAL TREATMENT REQUESTED] with the [CONFIDENTIAL TREATMENT REQUESTED] applicable Purchase Order or this Agreement. At the Authorized Purchaser’s option, and pursuant to the Authorized Purchaser’s written instructions, Supplier will promptly: (i) [CONFIDENTIAL TREATMENT REQUESTED] plus any [CONFIDENTIAL TREATMENT REQUESTED] or (ii) [CONFIDENTIAL TREATMENT REQUESTED] such items.

(c) Terms of Sale. Except as provided in Section 3.2 below, all Goods will be delivered by [CONFIDENTIAL TREATMENT REQUESTED]; provided, however, that if Goods are delivered via Hubs in accordance with Section 2.3 above, Supplier will retain title and risk of loss with respect to Goods delivered to a Hub until [CONFIDENTIAL TREATMENT REQUESTED].

2.6. Costs. Except for amounts due pursuant to a Purchase Order or SOW, Authorized Purchasers will not be responsible for any costs in connection with the ordering and purchase of any Goods.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

Apple Confidential Page 5

Apple-M-FLEX

Master Development and Supply Agreement

#C56-06-00844

3. Support Services and Service Units

3.1. Service Unit Inventory. Supplier will, at Supplier’s expense, provide an inventory of Service Units to Apple in accordance with the Service Unit inventory requirements set forth in document(s), if any, referenced in the Apple Requirements Document or applicable SOW. In absence of such requirements and upon Apple’s request, Supplier will (i) deliver an Initial Service Unit Inventory to entities designated by Apple, [CONFIDENTIAL TREATMENT REQUESTED] Apple first ships the applicable Apple Product.

3.2. Terms of Sale. Supplier will deliver all Service Units [CONFIDENTIAL TREATMENT REQUESTED] and title will transfer [CONFIDENTIAL TREATMENT REQUESTED] of the Service Units at [CONFIDENTIAL TREATMENT REQUESTED]; provided, however, that whenever Service Units are delivered to Apple Computer International or Apple Computer Limited, Cork Branch in the Asia-Pacific region, Goods will be delivered [CONFIDENTIAL TREATMENT REQUESTED] and title will transfer at [CONFIDENTIAL TREATMENT REQUESTED].

3.3. Costs. Except for amounts due pursuant to a Purchase Order or SOW, Authorized Purchasers will not be responsible for any costs in connection with Supplier’s obligations in this Section 3.

4. Modifications

4.1. By Supplier. Supplier will not modify any Specifications without obtaining Apple’s prior consent via the Project Management System.

4.2. By Apple. Apple may modify any Specifications via the Project Management System. Supplier will acknowledge the modification via the Project Management System in accordance with applicable procedures. The terms and conditions of this Agreement will be amended by such modification upon Supplier’s acknowledgement thereof or, if within [CONFIDENTIAL TREATMENT REQUESTED] of receipt of notice of such modification, if Supplier has not given Apple notice of its acknowledgement. In the event the modification results in [CONFIDENTIAL TREATMENT REQUESTED] performance of Supplier’s obligations under this Agreement, Apple will [CONFIDENTIAL TREATMENT REQUESTED] Supplier’s reports [CONFIDENTIAL TREATMENT REQUESTED] to Apple within [CONFIDENTIAL TREATMENT REQUESTED] of the receipt of the notice and obtains Apple’s prior written consent to proceed with the modification.

5. Quality and Safety Requirements

5.1. Requirements and Qualifications. Supplier will comply with the quality, safety and regulatory requirements as set forth in the document(s), if any, referenced in the Apple Requirements Document and as set forth in the applicable SOW, or in the absence of such requirements, with good commercial practice and applicable law.

5.2. Testing Requirements. Supplier will test the Development Deliverables and the Goods in accordance with the testing requirements set forth in the document(s), if any, referenced in the Apple Requirements Document and as set forth in the applicable SOW, or in the absence of such testing requirements, in a manner sufficient to confirm conformance with all applicable Specifications. Upon

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

Apple Confidential Page 6

Apple-M-FLEX

Master Development and Supply Agreement

#C56-06-00844

Apple’s request, Supplier will provide and ship Development Deliverables and Goods to Apple to be used for testing.

5.3. Environmental Compliance. Supplier will, with respect to the provision of Development Deliverables and Goods, and all related processes and materials used in connection therewith, including packaging, comply with: (i) all applicable laws and regulations governing the use, declaration, preparation and marketing of hazardous substances and energy consumption efficiency; and (ii) any requirements with respect to the same set forth in the document(s), if any, referenced in the Apple Requirements Document and in the applicable SOW.

5.4. Failures and Safety Risks.

(a) Generally. Supplier must notify Apple immediately if it has reason to believe that the Goods provided under this Agreement may (i) produce an Excessive Failure; (ii) produce an Environmental Compliance Failure; or (iii) present a Safety Risk.

(b) Remedies. If there is an Excessive Failure, an Environmental Compliance Failure, or the Goods present a Safety Risk, [CONFIDENTIAL TREATMENT REQUESTED] (i) reimburse Authorized Purchasers for [CONFIDENTIAL TREATMENT REQUESTED] (ii) if [CONFIDENTIAL TREATMENT REQUESTED] affected Goods; and (iii) [CONFIDENTIAL TREATMENT REQUESTED], promptly provide [CONFIDENTIAL TREATMENT REQUESTED]. For Multiple-Cause Excessive Failures, these remedies will apply only to [CONFIDENTIAL TREATMENT REQUESTED]. For Single-Cause Excessive Failures, these remedies will apply to [CONFIDENTIAL TREATMENT REQUESTED].

(c) Exceptions. Supplier will not be liable under this Section 5.4 for an Excessive Failure or a Safety Risk to the extent (i) [CONFIDENTIAL TREATMENT REQUESTED] the Excessive Failure or the Safety Risk; or (ii) the Goods were [CONFIDENTIAL TREATMENT REQUESTED] to the Authorized Purchaser. [CONFIDENTIAL TREATMENT REQUESTED].

(d) Tracking. Supplier must track the date Goods are produced and make such information available to Apple upon Apple’s request during the term of this Agreement and for [CONFIDENTIAL TREATMENT REQUESTED] after the Goods are delivered.

5.5. Costs. Except for amounts due pursuant to a Purchase Order or SOW, Authorized Purchasers will not be responsible for any costs in connection with Supplier’s obligations in this Section 5.

6. Resource Requirements

6.1. Human Resources

(a) Management. Supplier is solely responsible for managing Supplier Personnel, including hiring, firing, where and when Supplier Personnel perform their work, work assignments, practices, policies and procedures, and compliance with all applicable laws and regulations.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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(b) Apple Premises. Upon Apple’s request, Supplier will provide Supplier Personnel [CONFIDENTIAL TREATMENT REQUESTED]. Such Supplier personnel may be required to sign a written agreement with Apple acknowledging and agreeing to comply with Apple’s security and confidentiality requirements. Apple reserves the right to prohibit specific Supplier Personnel from entering Apple’s premises at Apple’s sole discretion.

(c) Written Agreements. Supplier represents that Supplier has written agreements in place with each Supplier Personnel sufficient to enable Supplier to comply with all provisions of this Agreement.

(d) Costs. Except for amounts due pursuant to a Purchase Order or SOW, Authorized Purchasers will not be responsible for any costs associated with Supplier Personnel.

6.2. Equipment

(a) Supplier will secure all Equipment necessary to provide the Development Deliverables and the Goods, including the Equipment specified in the applicable SOW and the document(s), if any, referenced in the Apple Requirements Document. Supplier will purchase, lease or borrow the Equipment in a timely manner to ensure that the Equipment is delivered in time to meet the requirements of the Project Schedule, the then current Forecast, or any Purchase Order, as applicable.

(b) Upon Apple’s and Supplier’s mutual agreement, Supplier will obtain certain items of Equipment from Apple or purchase or lease Equipment on Apple’s behalf (collectively, “Apple Equipment”).

(c) As applicable, Supplier will place purchase orders for or lease the Apple Equipment only upon prior written approval by Apple with respect to the specifications and price of each item of Apple Equipment. Upon request, Supplier will provide Apple [CONFIDENTIAL TREATMENT REQUESTED] for each item.

(d) Supplier will hold the Apple Equipment as a bailee only and will not permit any lien or other encumbrance to be placed against it when in Supplier’s care, custody and control. Apple owns all Apple Equipment obtained from Apple. With respect to Apple Equipment purchased on Apple’s behalf, Supplier agrees that title to such Apple Equipment will transfer to Apple upon payment for the Apple Equipment by Apple. Supplier will execute any documents necessary to document or perfect Apple’s ownership of the Apple Equipment. With respect to Apple Equipment leased on Apple’s behalf, Supplier will assign Supplier’s rights and obligations under the lease to Apple upon Apple’s request.

(e) Supplier will apply Apple asset tags provided by Apple to all Apple Equipment in accordance with the requirements set forth in the documents, if any, referenced in the Apple Requirements Document. Under no circumstances will Supplier move Apple Equipment from the location designated by Apple, without Apple’s prior written consent, or deny Apple, its agents or contractors access to the Equipment.

(f) Immediately upon Apple’s request or termination of this Agreement, Supplier will deliver the Apple Equipment [CONFIDENTIAL TREATMENT REQUESTED] provided Apple has paid for any

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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Apple Equipment purchased or leased by Supplier on Apple’s behalf. Supplier agrees to return the Apple Equipment to Apple in the same condition as it was provided to Supplier, except for normal wear and tear. Supplier will be responsible for physical loss of or damage to the Apple Equipment while in the possession or control of Supplier.

(g) Supplier agrees to use Apple Equipment and any other Equipment specifically designed to manufacture or test Goods that are unique to Apple (“Custom Equipment”) solely for Apple’s benefit. Supplier will not use Apple Equipment or Custom Equipment for any other purpose or permit a third party to use the Apple Equipment or Customer Equipment except as set forth in this Agreement.

(h) The Apple Equipment provided by Apple is provided to Supplier “as is” and Apple disclaims all warranties, express or implied, including the implied warranties of merchantability and fitness for a particular purpose.

(i) Supplier is solely responsible for installing, testing, and maintaining the Equipment in its control in good working condition in compliance with applicable manufacturing specifications, for purchasing and maintaining spare parts to repair such Equipment with a minimum of downtime, and for any risk of loss in connection with the Equipment.

(j) Apple reserves the right to inspect any Apple Equipment in Supplier’s control at any time, provided it gives Supplier at least 24 hours advance notice.

(k) Except for amounts due pursuant to a Purchase Order or SOW, Authorized Purchasers will not be responsible for any costs associated with the Equipment.

6.3. Materials

(a) Procurement. Supplier will secure all materials in accordance with applicable Specifications to provide the Development Deliverables and Goods necessary to meet the requirements of the Project Schedule, the then current Forecast and Purchase Orders.

(b) [CONFIDENTIAL TREATMENT REQUESTED]. Upon Apple’s request, Supplier will [CONFIDENTIAL TREATMENT REQUESTED] set forth in the applicable SOW and document(s), if any, referenced in the Apple Requirements Document, or in the absence of such requirements, will provide Apple (i) [CONFIDENTIAL TREATMENT REQUESTED] reports by part number specifying [CONFIDENTIAL TREATMENT REQUESTED] for the immediately following [CONFIDENTIAL TREATMENT REQUESTED] period; (ii) [CONFIDENTIAL TREATMENT REQUESTED] Purchase Orders for materials required for at least [CONFIDENTIAL TREATMENT REQUESTED] period; and (iii) [CONFIDENTIAL TREATMENT REQUESTED] receipt logs of any such materials.

(c) Bill of Materials. Before placing orders for or purchasing any materials for use in Goods that are comprised of multiple components, Supplier will provide Apple, for Apple’s review and approval, a complete BOM for such Goods, as applicable, listing the supplier(s), part number(s), lead time(s), and cost(s) of each material therein, as applicable.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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(d) Costs. Except for amounts due pursuant to a Letter of Authorization, the applicable SOW or Purchase Order, Apple will not be responsible for any costs associated with the materials, including any financing charges.

7. Documentation, Reports and Reviews

7.1. Documentation. Supplier will, at Supplier’s expense, provide Documentation in English for the Development Deliverables and the Goods upon request by Apple, including the Documentation identified in the applicable SOW and the document(s), if any, referenced in the Apple Requirements Document, in the format and frequency set forth therein.

7.2. Reports. Supplier will, at Supplier’s expense, provide Apple (i) reports requested by Apple, including reports regarding the Development Deliverables, Goods, Purchase Orders, Hubs, and Defective Goods; and (ii) the reports described in the document(s), if any, referenced in the Apple Requirements Document, in the format and frequency set forth therein.

7.3. Audits. During the term of this Agreement and for [CONFIDENTIAL TREATMENT REQUESTED], Apple may, at any time during Business Days, [CONFIDENTIAL TREATMENT REQUESTED] to verify that Supplier and Supplier Affiliates have complied with their obligations under this Agreement. Supplier will provide Apple any information and documentation Apple may reasonably request in connection with such inspection and audit regarding the Goods ordered or purchased by any Authorized Purchasers. Supplier will provide such information and documentation in the format requested. Supplier agrees to maintain all records, contracts and accounts relating to such Development Deliverables and Goods, or otherwise related to this Agreement, during the term of this Agreement and for [CONFIDENTIAL TREATMENT REQUESTED]. Supplier will ensure that Supplier Personnel who are knowledgeable of the relevant records and business practices are available to facilitate any audit, and that any information or materials requested in preparation for or during such audit are provided to Apple without delay. Supplier will [CONFIDENTIAL TREATMENT REQUESTED] the audit is completed for [CONFIDENTIAL TREATMENT REQUESTED] by Authorized Purchasers [CONFIDENTIAL TREATMENT REQUESTED]. Supplier will be responsible for [CONFIDENTIAL TREATMENT REQUESTED] if the audit reveals [CONFIDENTIAL TREATMENT REQUESTED] by Authorized Purchasers during the period of time subject to the audit.

7.4. Inspections. Upon reasonable advance notice, Supplier will allow Apple, during Business Days to visit Supplier’s facilities used in connection with the provision of the Development Deliverables or Goods to ensure compliance with the terms and conditions of this Agreement, including inspection of Development Deliverables in progress or completed, Goods in progress or completed, and development and manufacturing processes. Supplier will ensure that Supplier Personnel who are knowledgeable of the relevant facilities attend such inspections.

7.5. Disclaimer. Any reports provided or audits or inspections performed in accordance with this Section 7 will not relieve Supplier of any of its obligations under this Agreement.

7.6. Costs. Except for amounts due pursuant to a Purchase Order or SOW, Authorized Purchasers will not be responsible for any costs in connection with Supplier’s obligations in this Section 7.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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8. Purchase and Payment Terms

8.1. Purchase Orders.

(a) Orders. An Authorized Purchaser will have no obligation to purchase or pay for any Development Deliverables, Goods, or related services except pursuant to a Purchase Order issued by that Authorized Purchaser and accepted in accordance with the terms of this Agreement.

(b) Acceptance. Supplier’s acknowledgment of an order, delivery of Development Deliverables and/or Goods or performance of services will constitute acceptance of a Purchase Order.

(c) Terms. All Purchase Orders placed during the term of this Agreement will be subject to and governed by the terms and conditions of this Agreement, regardless of whether they reference this Agreement or whether the parties have executed an SOW specific to the Development Deliverables or Goods ordered, unless there is another signed, written agreement in place between the parties with respect to the Development Deliverables, Goods, or related services being purchased. Subject to the terms of Section 16.17 below, any different or additional terms or conditions in any proposal, acknowledgment form or any other document will be of no force or effect and will not become part of the agreement between the parties.

8.2. Invoices

(a) Terms. Supplier will invoice Authorized Purchasers for any amounts owed by Authorized Purchasers. Except as provided elsewhere in this Agreement, payment terms of any invoices issued under this Agreement will be at least [CONFIDENTIAL TREATMENT REQUESTED] from the date of invoice. With respect to Goods, Supplier will not issue an invoice before title to Goods transfers to the Authorized Purchaser. With respect to Development Deliverables and services, Supplier will not issue an invoice until payment is due in accordance with the Purchase Order or the applicable SOW.

(b) Disputed Invoices. Supplier must provide supporting documentation to the Authorized Purchaser for any disputed invoice [CONFIDENTIAL TREATMENT REQUESTED] after receiving any such notice. If a correction is warranted, the Authorized Purchaser will pay the corrected amount [CONFIDENTIAL TREATMENT REQUESTED] after receipt of the corrected invoice, or if the correction is reflected on the next regular invoice, [CONFIDENTIAL TREATMENT REQUESTED] after the date of that invoice. While the parties work to resolve good-faith disputes under this section, neither party will be deemed to be in breach of this Agreement.

(c) Written Claims. Supplier must submit invoices to Authorized Purchasers for cancellation charges, [CONFIDENTIAL TREATMENT REQUESTED] after the charges arise, together with such reasonable evidence as the Authorized Purchaser may request supporting such claim. Failure to submit a claim within the foregoing specified period will constitute a waiver of the claim and a release of the Authorized Purchaser from all liability arising out of the cancellation.

(d) Method of Payment. Any payments due under this Agreement will be made by wire transfer to a bank account, designated by the receiving party by Notice, and in accordance with the requirements set forth in the document(s), if any, referenced in the Apple Requirements Document.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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(e) Currency. All amounts payable will be specified and paid in United States Dollars.

8.3. Right [CONFIDENTIAL TREATMENT REQUESTED]. Apple may, from time to time, [CONFIDENTIAL TREATMENT REQUESTED] Apple [CONFIDENTIAL TREATMENT REQUESTED] and [CONFIDENTIAL TREATMENT REQUESTED] to Supplier against any [CONFIDENTIAL TREATMENT REQUESTED] Supplier to Apple (regardless whether [CONFIDENTIAL TREATMENT REQUESTED] this Agreement). Apple must give Supplier notice at least [CONFIDENTIAL TREATMENT REQUESTED] any such [CONFIDENTIAL TREATMENT REQUESTED]. Supplier agrees that notice given will be effective even if a receiver, custodian, trustee, examiner, liquidator or similar official has been appointed for Supplier or any substantial portion of its assets. As used in this Section 8.3: (i) the terms “Apple” and “Supplier” include, in addition to the definition of these terms above, any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other business entity that controls, is controlled by, or is under common control with such party, provided, however, that the term “Supplier” shall not include WBL Corporation Limited, a Singapore company (“WBL”) and the entities, other than Supplier and its subsidiaries, controlled by WBL; and (ii) “control” means that the entity possesses, directly or indirectly, the power to direct or cause the direction of the management policies of the other entity, whether through ownership of voting securities, an interest in registered capital, by contract, or otherwise. The rights described in this Section 8.3 are in addition to any other rights and remedies available under this Agreement or applicable law, [CONFIDENTIAL TREATMENT REQUESTED].

8.4. Other Financial Requirements. Supplier will comply with the financial requirements set forth in the document(s), if any, referenced in the Apple Requirements Document.

9. Logistics

9.1. Labeling. Supplier will label the Goods in accordance with applicable Specifications. Upon Apple’s request, Supplier [CONFIDENTIAL TREATMENT REQUESTED]. If Apple requires use of Apple Trademarks on the Goods, Supplier must reproduce such Apple Trademarks on each unit of Goods in accordance with the most current version of the Apple trademark guidelines, available upon request. Upon termination of this Agreement, Supplier must destroy or deliver to Apple all finished or unfinished Goods in its possession or control bearing any Apple Trademark, or must remove the Apple Trademark from such Goods in accordance with Apple’s instructions. Apple will provide Supplier with any Apple Trademark artwork as necessary. Upon request, Supplier shall provide Apple with samples of the labeled Goods to verify compliance with this Section 9.1.

9.2. Packaging. All orders will be packaged and delivered in accordance with the applicable packaging requirements set forth in the applicable Purchase Order or SOW and in the document(s), if any, referenced in the Apple Requirements Document, or, in the absence of such requirements, the best method possible in accordance with good commercial practice and applicable regulations and laws.

9.3. Carriers. Supplier will use the freight carriers identified in the document(s), if any, referenced in the Apple Requirements Document, and in accordance with the requirements set forth therein, or in the absence of such documents, the providers selected by Supplier and approved by Apple via the Project Management System.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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9.4. Importer of Record. When an Authorized Purchaser is the “Importer of Record” as specified in the applicable Purchase Order or SOW, Supplier will, at no charge, promptly forward to the Authorized Purchaser any documents the Authorized Purchaser may reasonably require to allow the Authorized Purchaser to clear the Development Deliverables or Goods through customs and/or obtain possession of the Development Deliverables or Goods at the port of entry.

10. Intellectual Property Rights

10.1. Apple Intellectual Property

(a) [CONFIDENTIAL TREATMENT REQUESTED]. As between the parties, [CONFIDENTIAL TREATMENT REQUESTED]. Supplier hereby [CONFIDENTIAL TREATMENT REQUESTED] to Apple, without reservation, [CONFIDENTIAL TREATMENT REQUESTED] rights, title and interest, including [CONFIDENTIAL TREATMENT REQUESTED], it may have in and to [CONFIDENTIAL TREATMENT REQUESTED]. Supplier agrees to execute any documents reasonably requested by Apple to enable Apple to secure, register or enforce any [CONFIDENTIAL TREATMENT REQUESTED]. Apple may file for patent rights or take other action to protect its proprietary rights in [CONFIDENTIAL TREATMENT REQUESTED] anywhere in the world. Subject to Sections 10.1(b) and 10.1(c) below, Apple hereby grants to Supplier [CONFIDENTIAL TREATMENT REQUESTED] to the extent necessary for Supplier to perform its obligations under this Agreement. Supplier agrees that it will not engage in, nor will it authorize others to engage in, the reverse engineering, disassembly or the decompilation of [CONFIDENTIAL TREATMENT REQUESTED] except as required to perform its obligations under this Agreement.

(b) Apple Software. In the event Apple and Supplier mutually agreed to use any Apple Software not subject to the terms and conditions of a written license agreement between Apple and Supplier with respect to such software, the following additional terms and conditions will apply to the use of the Apple Software:

(i) Supplier may make copies of the Apple Software only if reasonably necessary for performing Supplier’s obligations under this Agreement, including testing or installing the Apple Software. The license granted hereunder is not a license to incorporate the Apple Software into any product, board, module, integrated circuit, core or other assembly or device other than Development Deliverables and Goods, as applicable, or a license, expressly or by implication, estoppel, exhaustion or otherwise, under any Apple patents.

(ii) Supplier must retain and reproduce in all copies of the Apple Software the Apple copyright and other proprietary notices and disclaimers as they appear in the Apple Software, and keep intact all notices in the Apple Software that refer to the license granted hereunder.

(iii) [CONFIDENTIAL TREATMENT REQUESTED]. Supplier hereby grants to Apple and its subsidiaries [CONFIDENTIAL TREATMENT REQUESTED], in any form, through multiple tiers of distribution.

(iv) Upon Apple’s request, Supplier agrees to provide Apple with test results obtained through use of the Apple Software.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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(v) THE APPLE SOFTWARE IS PROVIDED “AS IS” AND WITHOUT WARRANTY, UPGRADES OR SUPPORT OF ANY KIND AND APPLE EXPRESSLY DISCLAIMS ALL WARRANTIES AND/OR CONDITIONS, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES AND/OR CONDITIONS OF MERCHANTABILITY, OF SATISFACTORY QUALITY, OF FITNESS FOR A PARTICULAR PURPOSE, OF ACCURACY, OF QUIET ENJOYMENT, AND NONINFRINGEMENT OF THIRD PARTY RIGHTS. APPLE DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE APPLE SOFTWARE WILL MEET SUPPLIER’S REQUIREMENTS, THAT THE OPERATION OF THE APPLE SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE, OR THAT DEFECTS IN THE APPLE SOFTWARE WILL BE CORRECTED. NO ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY APPLE SHALL CREATE A WARRANTY.

(c) Apple Trademarks. Supplier will not use any Apple Trademarks for any purpose except to comply with its obligations under this Agreement or with Apple’s prior written consent. The goodwill derived from Supplier’s use of any Apple Trademarks inures exclusively to the benefit of and belongs to Apple. Supplier acknowledges Apple’s ownership of the Apple Trademarks and agrees not do anything inconsistent with Apple’s ownership of the Apple Trademarks, such as filing any trademark application for an identical or similar mark anywhere in the world. Any such trademark registrations that Supplier seeks to obtain will be deemed to be obtained for the benefit of Apple. APPLE LICENSES THE APPLE TRADEMARKS ON AN “AS-IS” BASIS AND EXPRESSLY DISCLAIMS ALL WARRANTIES EXPRESS OR IMPLIED, INCLUDING THE WARRANTY OF NON-INFRINGEMENT.

10.2. Supplier Intellectual Property.

(a) [CONFIDENTIAL TREATMENT REQUESTED]. As between the parties, [CONFIDENTIAL TREATMENT REQUESTED].

(b) License. Supplier grants to Apple a [CONFIDENTIAL TREATMENT REQUESTED] worldwide license under all Intellectual Property Rights and other proprietary rights of Supplier necessary to permit Apple and others authorized by Apple to [CONFIDENTIAL TREATMENT REQUESTED] Development Deliverables, and to [CONFIDENTIAL TREATMENT REQUESTED] the Goods and derivatives thereof in connection with Apple products.

11. Confidentiality

11.1. Definitions. For purposes of this Agreement, “Confidential Information” is defined as all information disclosed by one party (the “Discloser”) to the other (the “Recipient”) in connection with this Agreement, including the negotiation of this Agreement, its existence and the terms and conditions hereof, and information learned by Recipient from Discloser’s employees or agents, or through inspection of documents or other property in connection with this Agreement, whether disclosed by Discloser or accessed by Recipient from Discloser’s Information Systems. In addition, Confidential Information of Apple includes requests for information, proposals or quotations in connection with any future Development Deliverables or Goods, related documents, and the terms and conditions thereof, and the existence of any Development Deliverables or Goods, any information discerned from the inspection thereof, including their form, features and functionality. Notwithstanding anything to the contrary in the

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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foregoing, “Confidential Information” of the Discloser does not include information that: (i) is now or subsequently becomes generally available to the public through no fault or breach on the part of Recipient; (ii) Recipient can demonstrate to have had rightfully in its possession prior to disclosure to Recipient by Discloser; (iii) is independently developed by Recipient without the use of any Confidential Information of Discloser; or (iv) Recipient rightfully obtains from a third party who has the right to transfer or disclose it to Recipient without limitation.

11.2. Non-Disclosure. During the period from the disclosure of any Confidential Information of Discloser until [CONFIDENTIAL TREATMENT REQUESTED], Recipient agrees: (i) to protect the Confidential Information of Discloser, using at least the same degree of care that it uses to protect its own confidential and proprietary information of similar importance, but no less than a reasonable degree of care; (ii) to use the Confidential Information of Discloser solely for the purpose of performing its obligations under this Agreement, and not to use the Confidential Information for any other purpose or for its own or any third party’s benefit without the express prior written consent of an authorized representative of Discloser in each instance; and (iii) not to disclose, publish, or disseminate Confidential Information of Discloser to anyone other than its Personnel who have a need to know the Confidential Information and who are bound by written agreement that prohibits unauthorized disclosure or use of the Confidential Information that is at least as protective of the Confidential Information as Recipient’s obligations hereunder. Recipient may disclose Confidential Information of Discloser to the extent required by law, provided that Recipient shall make reasonable efforts to give Discloser notice of such requirement prior to any such disclosure and shall take reasonable steps to obtain protective treatment of the Confidential Information. Within three Business Days of receipt of Discloser’s written request, and at Discloser’s option, Recipient will either return to Discloser all tangible Confidential Information of Discloser, including but not limited to all electronic files, documentation, notes, plans, drawings, and copies thereof, or will provide Discloser with written certification that all such tangible Confidential Information has been destroyed.

12. Warranties

12.1. General Warranties. Supplier represents and warrants that: (i) it has the right to enter into this Agreement and its performance of this Agreement will be free and clear of liens and encumbrances; (ii) entering into this Agreement will not cause Supplier to breach any other written agreements to which it is a party; (iii) the Development Deliverables or Goods including any portion thereof or any intended combination with other hardware or software, or the sale, offer for sale, use, or importation thereof, does not infringe any patent, copyright, trademark, trade secret, or other proprietary right of a third party; (iv) all Specifications and Documentation provided by Supplier in connection with this Agreement will be complete and accurate; and (v) the Development Deliverables and Goods will not be misbranded or falsely labeled, advertised, or invoiced.

12.2. Product Warranties. Supplier warrants that all Goods will: (i) be new and comprised of new materials when delivered (not including Service Units); (ii) be safe for any use that is consistent with applicable Specifications or that is reasonably foreseeable; (iii) [CONFIDENTIAL TREATMENT REQUESTED] to all applicable Specifications; (iv) [CONFIDENTIAL TREATMENT REQUESTED] when delivered; (v) comply with all applicable requirements pursuant to Sections 5.1, 5.2, and 5.3 above.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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13. Indemnification

13.1. Indemnification. At Apple’s request, Supplier will defend any claims or allegations against Apple, Apple Affiliates or Apple Personnel that: (i) the Development Deliverables or Goods, or any portion thereof, on their own or in combination with other goods and services, infringe any third-party’s patent, copyright, trademark, trade secret, mask work right or other intellectual property right; or (ii) the Development Deliverables, Goods, or Apple Equipment (in Supplier’s possession) caused injury or damages; or (iii) arise or are alleged to have arisen as a result of negligent and/or intentional acts or omissions of Supplier or Supplier Personnel or breach by Supplier of any term of the Agreement. Supplier will indemnify and hold Apple, Apple Affiliates and Apple Personnel harmless from and against any costs, damages and fees (including attorney and other professional fees) attributable to any such claims or allegations, provided that Apple: (a) notifies Supplier promptly in writing of any such claims or allegations; (b) permits Supplier to answer and defend the claim using counsel of Supplier’s choice; and (c) provides information and assistance reasonably necessary to enable Supplier to defend the claim (at Supplier’s expense). [CONFIDENTIAL TREATMENT REQUESTED]. If Supplier does not agree that the claim or suit is fully covered by this indemnity provision, then the parties agree to negotiate in good faith an equitable arrangement regarding the control of defense of the claim or suit and any settlement thereof consistent with Supplier’s obligations hereunder.

13.2. Exceptions. Supplier will have no obligation to indemnify Apple, Apple Affiliates, or Apple Personnel against any claims pursuant to clause (i) in Section 13.1 above or to perform any actions pursuant to Section 13.3 below if and to the extent that: (a) the claim is directly attributable to [CONFIDENTIAL TREATMENT REQUESTED] or (b) the infringement is directly attributable to [CONFIDENTIAL TREATMENT REQUESTED].

13.3. Duty to Correct. If a third party claims that the Development Deliverables or Goods infringe an intellectual property right, Supplier will, in addition to its obligations under Section 13.1 above, promptly notify Apple in writing and [CONFIDENTIAL TREATMENT REQUESTED] remedies that is practicable: (i) obtain for Apple from such third party rights with respect to the Development Deliverables and Goods consistent with the rights granted to Apple by Supplier under this Agreement; (ii) modify the Development Deliverables and Goods so they are non-infringing and in compliance with this Agreement; (iii) replace the Development Deliverables and Goods with non-infringing versions that comply with the requirements of this Agreement; or (iv) [CONFIDENTIAL TREATMENT REQUESTED] of infringing Development Deliverables and Goods [CONFIDENTIAL TREATMENT REQUESTED].

14. Limitation of Liability

EXCEPT FOR SUPPLIER’S OBLIGATIONS UNDER SECTION [CONFIDENTIAL TREATMENT REQUESTED], SECTION [CONFIDENTIAL TREATMENT REQUESTED], AND SECTION [CONFIDENTIAL TREATMENT REQUESTED], AND FOR BREACHES OF SECTION [CONFIDENTIAL TREATMENT REQUESTED], IN NO EVENT WILL [CONFIDENTIAL TREATMENT REQUESTED] BE ENTITLED TO INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS, LOST REVENUES OR BUSINESS INTERRUPTION BASED ON ANY BREACH OR DEFAULT OF THE OTHER PARTY.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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15. Term and Termination

15.1. Term. This Agreement will commence on the Effective Date and continue until terminated.

15.2. Termination

(a) Termination of this Agreement. Any party may terminate this Agreement for Cause. Such termination will be effective upon [CONFIDENTIAL TREATMENT REQUESTED] advance Notice if the Cause remains uncured, or, in the event of an incurable Cause such as breach of confidentiality obligations, immediately upon written Notice. Upon any termination, unless otherwise provided in Apple’s written direction, Supplier will immediately: (i) cease work in connection with this Agreement; (ii) prepare and submit to Apple an itemization of all completed and partially completed Development Deliverables and Goods in connection with this Agreement; (iii) deliver upon request any work in process in connection with this Agreement; and (iv) deliver upon request any Apple Equipment. Subject to the terms of Section 2.4(e) above, in the event Apple terminates this Agreement for Cause, neither Apple nor any other Authorized Purchaser [CONFIDENTIAL TREATMENT REQUESTED].

(b) Termination of an SOW. Any party to an SOW may terminate the SOW for Cause. Such termination will be effective upon [CONFIDENTIAL TREATMENT REQUESTED] advance Notice. Such termination will be effective upon [CONFIDENTIAL TREATMENT REQUESTED] Notice if the Cause remains uncured, or, in the event of an incurable Cause, immediately upon Notice. [CONFIDENTIAL TREATMENT REQUESTED] any SOW without Cause upon [CONFIDENTIAL TREATMENT REQUESTED] advance Notice. Upon any termination, unless otherwise provided in Apple’s written direction, Supplier will immediately: (i) cease work in connection with the applicable SOW; (ii) prepare and submit to Apple an itemization of all completed and partially completed Development Deliverables and Goods in connection with the applicable SOW; (iii) deliver upon request any work in process in connection with the applicable SOW; and (iv) deliver upon request any Apple Equipment associated with the applicable SOW. In the event Apple terminates any SOW with Cause, neither Apple nor any other Authorized Purchaser will [CONFIDENTIAL TREATMENT REQUESTED].

15.3. Survival. Provisions in this Agreement, which by their nature, should remain in effect beyond termination of the Master Development and Supply Agreement will survive until fulfilled, including Sections 5, 6.2 (c) through (g), 7.3, 8, 9, 10, 11, 12, 13, 14, 15, and 16.

16. Miscellaneous

16.1. Press Releases and Publicity. Neither Apple nor Supplier will issue press releases or other publicity regarding this Agreement or its subject matter without the prior written approval of the other.

16.2. Compliance with Laws.

(a) Supplier agrees that it will fully comply with all applicable laws and regulations in performing its obligations under this Agreement, including all applicable employment, tax, export control and environmental laws and regulations. Without limiting this requirement Supplier agrees that it will not export, re-export, sell, resell or transfer any customer data or any export-controlled commodity, technical data or software (i) in violation of any law, regulation, order, policy or other limitation imposed

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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by the United States (including the United States Export Administration regulations) or any other government authority with jurisdiction; or (ii) to any country for which an export license or other governmental approval is required at the time of export, without first obtaining all necessary licenses or equivalent.

(b) To the extent that Goods will be transported into the United States, Supplier represents that either (a) it is C-TPAT-certified by U.S. Customs & Border Protection, and will maintain that certification throughout the term of this Agreement, or (b) it will comply with the C-TPAT (Customs-Trade Partnership Against Terrorism) security procedures that may be found on the Customs website at www.cbp.gov <http://www.cbp.gov> (or such other website that the C-TPAT security procedures may be moved to by the U.S. Government). Supplier must fairly compensate its employees by providing wages and benefits that are in compliance with applicable law, or with prevailing local standards if such standards are higher than applicable law, and must ensure that any subcontractors supplying goods and services or materials for goods and services do the same.

16.3. No Forced or Child Labor. Supplier must ensure that neither the goods and services nor any materials procured by Supplier are produced or manufactured, in whole or in part, by convict or forced labor or by any child under the age of sixteen or the minimum age permitted by applicable law, whichever age is higher.

16.4. Small Business Contracting and Socio-Economic Requirements.

(a) Utilization of Small Business Concerns. As a federal contractor, Apple is subject to federal laws and regulations governing subcontracting with small businesses. As required by federal regulation and its federal contract(s), Apple incorporates by reference FAR 52.219-8, “Utilization of Small Business Concerns” in this contract to the extent that this contract offers further subcontracting opportunities. Unless Supplier is a small business or further subcontracting is not practicable, Supplier must utilize small business concerns (as that term is defined in FAR 52.219-8) to the maximum extent practicable.

(b) Socio-Economic Requirements. As a federal contractor, Apple also is subject to federal laws, executive orders, and regulations governing certain socio-economic requirements such as Equal Opportunity and Affirmative Action. As required by federal regulation and its federal contract(s), Apple incorporates by reference in this contract the following clauses: FAR 52.222-26, Equal Opportunity, FAR 52.222-35, Affirmative Action for Special Disabled and Vietnam Era Veterans, and FAR 52.222-36, Affirmative Action for Workers with Disabilities.

16.5. Insurance and Loss Prevention.

(a) Supplier will [CONFIDENTIAL TREATMENT REQUESTED] maintain the following minimum insurance in full force and effect throughout the term of this Agreement: (i) commercial or comprehensive general liability, public liability or local equivalent, including products/completed operations, and fire legal liability, with coverage of not less than the equivalent of [CONFIDENTIAL TREATMENT REQUESTED] combined single limit per occurrence and [CONFIDENTIAL TREATMENT REQUESTED] annual aggregate.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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(b) Supplier will deliver to Apple’s Procurement Department (1 Infinite Loop, M/S 35-PO, Cupertino, California 95014) one or more certificates of insurance, or comparable documents, showing evidence of the coverage required above. Supplier shall endeavor to comply with the insurance and loss prevention requirements set forth in the document(s), if any, referenced in the Apple Requirements Document. Apple reserves the right to perform risk evaluations of Supplier’s facilities and Supplier agrees to work with Apple to upgrade any facility that does not comply with such requirements.

16.6. Independent Efforts and Similar Goods. Provided there is no infringement of the other party’s intellectual property rights or breach of the provisions in Section 11 above, nothing in this Agreement will impair either party’s right to develop, manufacture, purchase, use or market, directly or indirectly, alone or with others, products or services competitive with those offered by the other.

16.7. Relationship of Parties. Apple and Supplier are independent contractors. Nothing in this Agreement creates a joint venture, partnership, franchise, employment or agency relationship or fiduciary duty of any kind. Neither party will have the power, and will not hold itself out as having the power, to act for or in the name of or to bind the other party. Except as expressly provided, this Agreement is not for the benefit of any third parties.

16.8. Assignment. No party hereto or to any SOW may assign or delegate its rights or obligations under this Agreement without the other’s prior written consent; provided, however, that either party may assign all of its rights and obligations under this Agreement in connection with a merger or the sale of all or substantially all of its assets relating to its subject matter without the consent of the other party. This Agreement shall be binding upon, and inure to the benefit of, the successors, representatives, and administrators of the parties.

16.9. Force Majeure. No party hereto or to any SOW will be liable for delay or failure to fulfill its obligations under this Agreement due to acts of God beyond its reasonable control, provided it promptly notifies the other party and uses reasonable efforts to correct such failure or delay in its performance.

16.10. No Waiver. No delay or failure to act in the event of a breach of this Agreement will be deemed a waiver of that or any subsequent breach of any provision of this Agreement. Any remedies at law or equity not specifically disclaimed or modified by this Agreement remain available to both parties.

16.11. Governing Law. This Agreement and the rights and obligations of the parties will be governed by and construed and enforced in accordance with the laws of the State of California as applied to agreements entered into and to be performed entirely within California between California residents, without regard to conflicts of law principles. The parties expressly agree that the provisions of the United Nations Convention on Contracts for the International Sale of Goods will not apply to this Agreement or to their relationship.

16.12. Dispute Resolution, Jurisdiction and Venue. If there is a dispute between the parties, the parties agree that they will first attempt to resolve the dispute through one senior management member of each party named as a representative of the party to resolve the dispute. If they are unable to do so within 60 days after the complaining party’s written notice to the other party, the parties will then seek to resolve the dispute through non-binding mediation conducted in Santa Clara County or San Francisco County, California. Each party must bear its own expenses in connection with the mediation and must share

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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equally the fees and expenses of the mediator. If the parties are unable to resolve the dispute within 60 days after commencing mediation, either party may commence litigation in the state or federal courts in Santa Clara County, California. The parties irrevocably submit to the exclusive jurisdiction of those courts and agree that final judgment in any action or proceeding brought in such courts will be conclusive and may be enforced in any other jurisdiction by suit on the judgment (a certified copy of which will be conclusive evidence of the judgment) or in any other manner provided by law. Process served personally or by registered or certified mail, return receipt requested, will constitute adequate service of process in any such action, suit or proceeding. Each party irrevocably waives to the fullest extent permitted by applicable law (i) any objection it may have to the laying of venue in any court referred to above; (ii) any claim that any such action or proceeding has been brought in an inconvenient forum; and (iii) any immunity that it or its assets may have from any suit, execution, attachment (whether provisional or final, in aid of execution, before judgment or otherwise) or other legal process. The terms of this Section apply whether or not the dispute arises out of or relates to this Agreement, unless the dispute is governed by a separate written agreement.

16.13. Equitable Relief. Notwithstanding anything to the contrary in Section 16.12 above, either party may seek equitable relief in order to protect its Confidential Information or Intellectual Property Rights at any time, [CONFIDENTIAL TREATMENT REQUESTED]. The parties hereby [CONFIDENTIAL TREATMENT REQUESTED]. The confidentiality provisions of this Agreement will be enforceable under the provisions of the California Uniform Trade Secrets Act, California Civil Code Section 3426, as amended.

16.14. Construction. The section headings in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement. References to sections, schedules, exhibits, and SOWs are references to sections of, and exhibits, schedules and SOWs to, this Agreement, and the word “herein” and words of similar meaning refer to this Agreement in its entirety and not to any particular section or provision. The word “party” means a party to this Agreement and the phrase “third party” means any person, partnership, corporation or other entity not a party to this Agreement. The words “will” and “shall” are used in a mandatory, not a permissive, sense, and the word “including” is intended to be exemplary, not exhaustive, and will be deemed followed by “without limitation. Any requirement to obtain a party’s consent is a requirement to obtain such consent in each instance.

16.15. Severability. If a court of competent jurisdiction finds any provision of this Agreement unlawful or unenforceable, that provision will be enforced to the maximum extent permissible so as to effect the intent of the parties, and the remainder of this Agreement will continue in full force and effect.

16.16. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but which collectively will constitute one and the same instrument.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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16.17. Related Documents; Precedence. The terms and conditions of any SOW, Purchase Order, and the terms and conditions of any schedules, exhibits, attachments and other documents referenced herein or therein are incorporated into the terms and conditions of this Agreement. In the event of any conflict in the documents which constitute this Agreement, the order of precedence will be (i) the quantity, price, payment and delivery terms of the applicable Purchase Order; (ii) the applicable SOW; (iii) this Master Development and Supply Agreement; and (iv) any other schedules, exhibits, attachments and other documents referenced and incorporated herein and therein. Notwithstanding the foregoing, Supplier agrees that the price, payment and delivery terms on any Purchase Order will be at least as favorable to Authorized Purchasers as such terms are set forth in this Agreement, and that in any case the price, payment and delivery terms on any Purchase Order are less favorable to Authorized Purchasers than those in this Agreement, then the terms of such Purchase Order will be deemed to be consistent with this Agreement regarding such terms. If there is a conflict between Section 11 above and any other agreement governing the use of Confidential Information disclosed by any party in connection with this Agreement, the terms and conditions of Section 11 will govern to the extent that such terms and conditions are more restrictive with respect to the use and disclosure of such Confidential Information.

16.18. Complete Agreement. The parties agree that this Agreement constitutes the complete and exclusive agreement between them superseding all contemporaneous and prior agreements (written and oral) and all other communications between them relating to its subject matter, excluding any confidentiality agreements. Except as expressly provided herein, this Agreement may not be amended or modified except by a written amendment signed by authorized signatories of both parties. The parties expressly acknowledge that they have received and are in possession of a copy of any referenced item not physically attached to this Agreement and any such item will be treated as if attached.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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By signing below, each party agrees to be bound by the terms and conditions of this Agreement.

Apple Computer, Inc.	Multi-Fineline Electronix, Inc.
By /s/ Tony Blevins	By /s/ Reza Meshgin
Name Tony Blevins	Name Reza Meshgin
Title Sr. Director, Operations	Title President/COO
Date 8/26/06	Date 8/16/06
Apple Computer International
By /s/ Jae Allen
Name Jae Allen
Title Director
Date 1 September 2006

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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SCHEDULE 1

Definitions

“Agreement” means this Master Development and Supply Agreement and all SOWs, Purchase Orders, schedules, exhibits, attachments, and other documents incorporated in or permitted by this Master Development and Supply Agreement.

“Apple” is defined in the preamble of the Agreement.

“Apple Affiliate” means any entity authorized by Apple to procure Development Deliverables or Goods under the Agreement, including those entities listed as Apple Affiliates in the document(s), if any, referenced in the Apple Requirements Document.

“Apple Equipment” is defined in Section 6.2(b) of the Agreement.

“Apple Modification” means a modification of Specifications requested by Apple and approved by Supplier in accordance with Section 4.2 of the Agreement.

“Apple Product” means a finished good manufactured by or for Apple that incorporates the Goods.

“Apple Requirements Document” means the document attached to the Agreement as Schedule 2, as amended from time-to-time.

“Apple Software” means the Apple software provided to Supplier in connection with the performance of Supplier’s obligations under the Agreement, including the Apple software identified in the document(s), if any, in the Apple Requirement Document.

[CONFIDENTIAL TREATMENT REQUESTED].

“Apple Trademarks” means any Apple trademarks, service marks, trade names, logos or other Apple commercial or product designations.

“Apple Unique Materials” means those materials, if any, identified in an SOW as “Apple Unique Materials”.

“Authorized Purchaser” means Apple or Apple Affiliate, as applicable.

“Authorized Vendor” means a supplier of materials that has been approved by Apple for the purpose of providing such materials as set forth in the applicable BOM or SOW or as set forth in the document(s), if any, referenced in the Apple Requirements Document.

“BOM” means the engineering bill of materials for the Development Deliverables or Goods created and approved by Apple via the Project Management System.

“Business Day” means any day Monday through Saturday.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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“Cause” means a material breach of the Agreement by another party, or the event of a party becoming insolvent, making an assignment for the benefit of creditors, or filing or being the subject of a petition in bankruptcy.

“Company” is defined in the preamble of the Agreement.

“Confidential Information” is defined in Section 11.1 of the Agreement.

“Custom Equipment” is defined in Section 6.2(g) of the Agreement.

[CONFIDENTIAL TREATMENT REQUESTED].

[CONFIDENTIAL TREATMENT REQUESTED].

“Defective Goods” means Goods that (i) failed [CONFIDENTIAL TREATMENT REQUESTED] to conform with or operate according to applicable Specifications [CONFIDENTIAL TREATMENT REQUESTED]; or (ii) are the subject of an Environmental Compliance Failure or a Safety Risk.

“Development Deliverables” means the tangible results of services performed by Supplier to be delivered to Authorized Purchasers in connection with the development of Goods for use in Apple products, including the items to be delivered that are identified in an SOW, and any other such items not identified in an SOW that are offered by Supplier to Authorized Purchasers to the extent that such items are not covered under the terms and conditions of a separate written agreement signed by the parties to the Agreement, not including Goods.

“Discloser” is defined in Section 11.1 of the Agreement.

“Documentation” means documents, in English and in hard copy and electronic format, containing instructions, specifications, schematics, drawings, reports, or other descriptions in connection with the Development Deliverables and/or Goods.

“Effective Date” is defined in the preamble of the Agreement.

“End User” means a purchaser who acquires an Apple product (into which a unit of Goods has been incorporated) for personal use rather than for distribution or resale.

“Environmental Compliance Failure” means the failure by Supplier to comply with the environmental requirements set forth in Section 5.3 of the Agreement.

“EOL Date” means the date that new Goods (not including Service Units) are last required.

“Equipment” means fixtures, tooling, test equipment and any other equipment used in connection with the development, manufacturing, testing, packaging, delivery or servicing of the Development Deliverables or Goods, including Apple Equipment and Custom Equipment.

“Error Corrections” is defined in Section 10.1(b)(iii) of the Agreement.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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“Excessive Failure Threshold” means the excessive failure threshold in the SOW, or if no excessive failure threshold is specified in the SOW, [CONFIDENTIAL TREATMENT REQUESTED] for a Single Cause Excessive Failure and [CONFIDENTIAL TREATMENT REQUESTED] for a Multiple-Cause Excessive Failure.

“Excessive Failure” means the Failure Rate exceeds the Excessive Failure Threshold.

“Ex Works” has the meaning defined by the International Chamber of Commerce in its publication, Incoterms 2000; ICC Official Rules for the Interpretation of Trade Terms.

“Failure Rate” means the rate calculated using the following formula:

Failure rate    =    [CONFIDENTIAL TREATMENT REQUESTED] where:

A    =    the [CONFIDENTIAL TREATMENT REQUESTED] in a [CONFIDENTIAL TREATMENT REQUESTED] that failed [CONFIDENTIAL TREATMENT REQUESTED] to conform with or operate according to applicable Specifications [CONFIDENTIAL TREATMENT REQUESTED] within [CONFIDENTIAL TREATMENT REQUESTED] after they were manufactured; and

B    =    the [CONFIDENTIAL TREATMENT REQUESTED] in that [CONFIDENTIAL TREATMENT REQUESTED].

“Flexibility Schedule” means a schedule that sets forth the maximum percentage increase in units forecasted or ordered, based on when notice of such increase is given.

“Forecast” means a written estimate of the Goods required per week for production of Apple Products.

“Goods” means components and related Service Units identified in an SOW, and any components and related Service Units not identified in an SOW but offered by Supplier to Authorized Purchasers to the extent that such goods and related Service Units are not covered under the terms and conditions of a separate written agreement signed by the parties to the Master Development and Supply Agreement.

“Hub” means an Apple-approved warehouse located at or near Apple-specified manufacturing or distribution facilities, or other Apple-specified location.

“Information Systems” means computer hardware and software systems, including the Project Management System.

“Initial Service Unit Inventory” means the number of Service Units calculated using the following formula:

Initial Service Unit Inventory    =    [CONFIDENTIAL TREATMENT REQUESTED], where:

A    =    the [CONFIDENTIAL TREATMENT REQUESTED] (as determined [CONFIDENTIAL TREATMENT REQUESTED]) of the Goods.

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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B    =    the [CONFIDENTIAL TREATMENT REQUESTED] in the then current Forecast for the first [CONFIDENTIAL TREATMENT REQUESTED] of production.

“Intellectual Property Rights” means all current and future rights in copyrights, trade secrets, trademarks, mask works, patents, and other intellectual property rights, including, in each case whether unregistered, registered or comprising an application for registration, and all rights and forms of protection of a similar nature or having equivalent or similar effect to any of the foregoing that may exist anywhere in the world.

“Lead-Time” means the minimum amount of time in advance of the date Goods are required in accordance with Forecasts or Purchase Orders that Supplier must begin production of the Goods.

“Long Lead-Time Materials” means those materials, if any, identified in an SOW as “Long Lead-Time Materials”.

[CONFIDENTIAL TREATMENT REQUESTED].

“Multiple Causes” means any defect or defects (e.g. multiple, unrelated Single Causes).

“Multiple-Cause Excessive Failure” means an Excessive Failure due to Multiple Causes.

“Notice” means a written notification addressed to the authorized representative(s) of the a party, which notification will be deemed given: (i) when delivered personally; (ii) when sent by confirmed facsimile; (iii) one day after having been sent by commercial overnight carrier specifying next-day delivery with written verification of receipt; or (iv) three days after having been sent by first class or certified mail postage prepaid. A copy of any notice sent to Apple must also be sent simultaneously to Apple’s General Counsel at Apple Computer, Inc., 1 Infinite Loop, Cupertino, CA 95014, United States, or by fax to (408) 974-8530.

“Personnel” means officers, directors, agents, consultants, contractors, and employees.

“Production Period” means the period during which Goods are produced by Supplier to meet the requirements of the Forecasts provided by Apple in accordance with Section of 2.2(a) the Agreement.

“Project Management System” means an Information System identified by Apple and accessible to Supplier that is used to, among other things, (i) obtain approval for changes to Specifications; and (ii) maintain electronic versions of Specifications and to provide notification of and to track modifications to such Specifications, used in accordance with the procedures set forth in the document(s), if any, referenced in the Apple Requirements Document, or in the absence of such procedures, as mutually agreed by Apple and Supplier.

“Project Schedule” means the most current version of schedule(s) provided by Apple that set(s) forth when the Development Deliverables must be delivered, and when production of the Goods is to begin.

“Purchase Order” or “PO” means a written or electronically transmitted purchase order from an Authorized Purchaser to Supplier for Development Deliverables, Goods or related services that includes a description of the Development Deliverables, Goods or related services ordered, and a requested delivery

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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or performance date and location, as applicable; provided, however, that the delivery or performance date and location may be provided separately in a subsequent ship order.

“Recipient” is defined in Section 11.1 of the Agreement.

“Repair Facilities” means the facilities provided by Supplier at which Supplier is able to perform its obligations under Section 3 of the Agreement.

“Safety Risk” means a risk of bodily injury or property damage.

“Service Units” means replacements, spare parts and service modules for Goods.

“Single Cause” means the same or substantially the same defect (e.g. related to the same component, material, design, manufacturing process, or test procedure).

“Single-Cause Excessive Failure” means an Excessive Failure due to a Single Cause.

“SOW” means a written statement of work or plan of record, signed by Apple and Supplier, that references this Master Development and Supply Agreement and that describes the terms and conditions specific to Development Deliverable, Goods and/or related services.

“Specifications” means the most current version of all applicable specifications and requirements provided by Apple, including the Project Schedule, the specifications and requirements set forth in the documents referenced in the Agreement, including any documents referenced in any BOM, SOW, and any relevant specifications, drawings, samples or other descriptions provided by Supplier and approved by Apple in writing.

“Supplier” means Company and Supplier Affiliates.

“Supplier Affiliate” means any entity authorized by Apple to provide Development Deliverables and/or Goods under the Agreement.

“Supplier Modification” means a modification of Specifications requested by Supplier and approved by Apple in accordance with Section 4.1 of the Agreement.

[CONFIDENTIAL TREATMENT REQUESTED].

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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SCHEDULE 2

Apple Requirements Document

P/N	Title
069-0135	Specification, Regulated Substances
069-1111	Apple RoHS Compliance Specification
080-2153	RoHS Declaration of Conformity Procedure
080-2503	Apple Supplier Code of Conduct

[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

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EX-21.1

Exhibit 21.1

List of Subsidiaries

Name of Subsidiary	State or Jurisdiction of Incorporation or Organization
Multi-Fineline Electronix (Suzhou) Co., Ltd.	Peoples Republic of China
Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd.	Peoples Republic of China
Aurora Optical, Inc.	Delaware
M-Flex Cayman Islands, Inc.	Cayman Islands
Multi-Fineline Electronix Singapore Pte. Ltd.	Singapore
Multi-Fineline Electronix Malaysia Sdn. Bhd.	Malaysia

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No.333-116891) of Multi-Fineline Electronix, Inc. of our report dated December 8, 2008 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Orange County, California

December 8, 2008

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Reza Meshgin, certify that:

1. I have reviewed this Annual Report on Form 10-K of Multi-Fineline Electronix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	December 8, 2008	By:	/s/    REZA MESHGIN
			Reza Meshgin
			President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Thomas Liguori, certify that:

1. I have reviewed this Annual Report on Form 10-K of Multi-Fineline Electronix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	December 8, 2008	By:	/s/    THOMAS LIGUORI
			Thomas Liguori
			Chief Financial Officer and Executive Vice President

EX-32.1

Exhibit 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18. U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K (the “Report”) of Multi-Fineline Electronix, Inc. (the “Company”) for the period ended September 30, 2008, as filed with the Securities and Exchange Commission on the date hereof, Reza Meshgin, as Chief Executive Officer of the Company, and Thomas Liguori, as Chief Financial Officer of the Company, each hereby certifies, to the best of his respective knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	December 8, 2008	/s/    REZA MESHGIN	/s/    THOMAS LIGUORI
		Reza Meshgin President and Chief Executive Officer	Thomas Liguori Chief Financial Officer and Executive Vice President