10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended April 30, 2007
o	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: 0-29939

OMNIVISION TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	77-0401990
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification Number)

1341 Orleans Drive, Sunnyvale, CA 94089-1136

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (408) 542-3000

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

	Name of each exchange
Title of each class	on which registered
Common Stock, $0.001 par value	The Nasdaq Stock Market LLC
(Including associated Preferred Stock Purchase Rights)	(Nasdaq Global 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 o 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 o No x

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  o

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 the 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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer  x        Accelerated filer  o        Non-accelerated filer  o

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

As of October 31, 2006, the last business day of Registrant’s most recently completed second fiscal quarter, there were 54,682,162 shares of Registrant’s common stock outstanding, and the aggregate market value of such shares held by non-affiliates of registrant (based upon the closing sale price of such shares on the Nasdaq National Market on October 31, 2006) was approximately $802,989,624. Shares of Registrant’s common stock held by the Registrant’s executive officers and directors and by each entity that owns five percent or more of Registrant’s 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.

As of May 31, 2007, 55,082,878 shares of common stock of the Registrant were outstanding, exclusive of 5,870,000 shares of treasury stock.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant has incorporated by reference into Part III of this Annual Report on Form 10-K portions of its Proxy Statement for the 2007 Annual Meeting of Stockholders.

OMNIVISION TECHNOLOGIES, INC.

INDEX TO

ANNUAL REPORT ON FORM 10-K

FOR YEAR ENDED APRIL 30, 2007

PART I		3
Item 1.	Business	3
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	29
Item 2.	Properties	29
Item 3.	Legal Proceedings	30
Item 4.	Submission of Matters to a Vote of Security Holders	31
PART II		32
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 8.	Consolidated Financial Statements and Supplementary Data	54
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	93
Item 9A.	Controls and Procedures	93
Item 9B.	Other Information	94
PART III		95
Item 10.	Directors, Executive Officers and Corporate Governance	95
Item 11.	Executive Compensation	95
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	95
Item 13.	Certain Relationships and Related Transactions and Director Independence	95
Item 14.	Principal Accounting Fees and Services	95
PART IV		96
Item 15.	Exhibits and Financial Statement Schedules	96
Signatures		99
Exhibit Index
Exhibit 10.17
Exhibit 10.18
Exhibit 10.19
Exhibit 10.20
Exhibit 10.21
Exhibit 10.22
Exhibit 10.23
Exhibit 10.24
Exhibit 10.25
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32

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PART I

ITEM 1.   BUSINESS

The following information should be read in conjunction with our audited consolidated financial statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which involve risks and uncertainties. Forward-looking statements generally include words such as “may,” “will,” “plans,” “seeks,” “expects,” “anticipates,” “outlook,” “intends,” “believes” and words of similar import as well as the negative of those terms. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. All forward-looking statements included in this Annual Report on Form 10-K, including, but not limited to, statements regarding the extent of future sales through distributors, future trends and opportunities in certain markets, the development, introduction and capabilities of new products, the establishment of partnerships with other companies, increased unit volume sales, the increase of competition in our industry, the continued importance of the camera cell phone market to our business, continued price competition and the consequent reduction in the average selling prices of our products, future gross margins and future expenses, our effective tax rate for fiscal 2008, our future investments, our working capital requirements in fiscal 2008, and the sufficiency of our available cash, cash equivalents and short-term investments are based on current expectations and are subject to important factors that could cause actual results to differ materially from those projected in the forward-looking statements. Such important factors include, but are not limited to, those set forth under the caption “Item 1A. Risk Factors,” beginning on page 15 of this Annual Report and elsewhere in this Annual Report and in other documents we file with the U.S. Securities and Exchange Commission (“SEC”). All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by such factors.

OmniVision and OmniPixel are registered trademarks of OmniVision Technologies, Inc. CameraChip, OmniPixel2, OmniPixel3, OmniQSP and TrueFocus are trademarks of OmniVision Technologies, Inc. Wavefront Coded is a registered trademark of CDM Optics, Inc., a wholly-owned subsidiary of OmniVision Technologies, Inc. Wavefront Coding is a trademark of CDM Optics, Inc.

Corporate Information

OmniVision Technologies, Inc., a Delaware corporation, was incorporated in May 1995 in California, and reincorporated in Delaware in March 2000. Our executive offices are located at 1341 Orleans Drive, Sunnyvale, California 94089-1136 and our telephone number is (408) 542-3000. Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Proxy Statement for our annual stockholders’ meeting and Current Reports on Form 8-K, as well as any amendments to these reports, are available through our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the United States Securities and Exchange Commission, or the SEC. Information about our company is available on the Internet at www.ovt.com. The information in, or that can be accessed through, our website is not part of this report.

Overview

We design, develop and market high performance, highly integrated and cost efficient semiconductor image sensor devices. Our main products, image-sensing devices which we refer to by the name CameraChip™ image sensors, are used to capture an image electronically and are used in a number of consumer and commercial mass-market applications. Our CameraChip image sensors are manufactured using the complementary metal oxide semiconductor, or CMOS, fabrication process. Our CameraChip image sensors are predominantly single-chip CMOS solutions that integrate several distinct functions including image capture, image processing, color processing, signal conversion and output of a fully processed image or video stream. We believe that our highly integrated CameraChip image sensors enable camera device manufacturers to build high quality camera products that are smaller, less complex, more reliable, more cost effective and more power efficient than cameras using traditional charge-coupled devices, or CCDs.

We sell our products worldwide directly to original equipment manufacturers, or OEMs, which include branded customers and contract manufacturers, and value added resellers, or VARs, and indirectly through distributors. In order to ensure that we address all available markets for our image sensors, we divide our marketing efforts into two separate departments. The Mainstream Products marketing department addresses the camera cell

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phone and digital still camera, or DSC, markets, and the Advanced Products marketing department addresses the security and surveillance, toys and games, personal computer, automotive and medical markets.

We currently outsource the wafer fabrication and packaging of our image-sensor products to third parties.  We outsource the color filter and micro-lens phases of production to a joint venture. This approach allows us to focus our resources on the design, development, marketing and testing of our products and significantly reduces our capital requirements.

We currently perform the final testing of the majority of our products ourselves at our facility in Shanghai, China. We are currently upgrading and expanding our testing capabilities with new automated testing equipment.

The Current Economic and Market Environment

We operate in a challenging economic environment that has undergone significant changes in technology and in patterns of global trade. We strive to remain a leader in the development and marketing of image sensing devices based on the CMOS fabrication process and have benefited from the growing market demand for and acceptance of this technology.

In the camera cell phone market in particular, future revenues depend to a large extent on design wins where, on the basis of an exhaustive evaluation of available products, a particular handset maker determines which image sensor to design into one or more specific models. There is generally a time lag of between six and nine months between the time of a particular design win and the first shipments of the designated product. Design wins are also an important driver in the many other markets that we address, and in some cases, such as automotive applications, the time lag between a particular design win and first revenue can be longer than one year.

In most cases, the decision to specify a particular product requires conforming other specifications of the product to the chosen image sensor and makes subsequent changes both difficult and expensive. Accordingly, the ability to produce and deliver reliable products on time and in large quantities is a key competitive differentiator. Since our inception, we have shipped more than 550 million image sensors, including approximately 250 million in fiscal 2007, which demonstrates the capabilities of our production system.

To increase and enhance our production capabilities, last year we completed a project with Taiwan Semiconductor Manufacturing Co., Ltd., or TSMC, our principal wafer supplier and one of the largest wafer fabrication companies in the world, to increase from two to four the number of their fabrication facilities, at which our products can be produced. VisEra, our joint venture with TSMC and our investments in two key back-end packaging suppliers are part of a broad strategy to ensure that we have sufficient back-end capacity for the processing of our image sensors in the various formats required by our customers. In January 2007, we amended our joint venture agreement with TSMC to each invest an additional $27 million in VisEra to fund VisEra’s further expansion. Separately, TSMC purchased approximately 90.5 million previously-unissued shares from XinTec, Inc., or XinTec, a Taiwan-based provider of chip-scale packaging services, to expand XinTec’s capacity. In February 2007, we entered into a foundry manufacturing agreement with Powerchip Semiconductor Corp., or PSC. We are also expanding our testing capacity in China, as well as our overall capability to design more custom products for our customers. As necessary, we will make further investments to ensure that we have sufficient capacity to meet the demands of our customers as part of our ongoing efforts to lower production costs to offset, at least in part, the continuing pressure we experience on prices.

Many of the products using our image sensors, such as camera cell phones, digital still cameras and cameras for toys and games, are consumer electronics goods. These mass-market camera devices generally have seasonal cycles which historically have caused the sales of our customers to fluctuate quarter-to-quarter. Historically, demand from OEMs and distributors that serve such consumer product markets has been stronger in the second and third quarters of our fiscal year and weaker in the first and fourth quarters of our fiscal year. In addition, since a very large number of the manufacturers who use our products are located in China, Hong Kong and Taiwan, the pattern of demand for our image sensors has been increasingly influenced by the timing of the extended lunar or Chinese New Year holiday, a period in which the factories which use our image sensors generally close.

We believe that the market opportunity represented by cell phones remains very large. The percentage of cell phones which incorporate a camera continues to increase, and we are now seeing cell phones equipped with a second camera designed for use in video-conferencing. In fiscal 2007, we benefited from the growth in shipments of

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image sensors, particularly for camera cell phones, where we saw increased demand for our video graphics array, or VGA, 1.3-megapixel and 2.0-megapixel image sensors.

We also believe that, like the DSC market, camera cell phone demand will not only continue to shift toward higher resolutions, but also will increasingly fragment into multiple resolution categories. In addition, there is increased demand for customization, and several different interface standards are coming to maturity. All of these trends will require the development of an increasing variety of products. In response to these trends we have introduced several 1.3-megapixel products based on our OmniPixel® technology. In fiscal 2007, we began volume production and shipments of our first product based on the second generation of our OmniPixel technology which we call OmniPixel2™ technology. This is a 2.0-megapixel image sensor, the world’s first 2.0-megapixel sensor in a quarter-inch format. We also believe that VGA resolution sensors will continue to account for a large portion of the volume shipments in handsets in fiscal 2008. Consequently, we have continued to introduce new products at this resolution, most recently the OV7680, a 1/10 inch VGA sensor that permits a camera module height of 3.17 mm. We also believe that consumers will require image focusing capabilities as image sensor resolutions in camera cell phones continue to increase. To meet this requirement, we introduced our first TrueFocus product in February 2007.

The camera cell phone market also evidences a trend toward slim and thin form factors. In January 2006, based on the new and improved OV7670 VGA sensor, we introduced an ultra thin VGA camera module which measures 6 x 6 x 4.1 mm. Our design meets the current trend of slim and thin form factors in camera phones and other electronic devices. In addition to addressing the continuous demand for smaller, thinner camera phones, the ultra thin module solution is also proving popular in PC notebook applications where the camera module needs to be no thicker than the LCD housing. In October 2006, we introduced our sixth generation 1.3-megapixel CameraChip sensor based on our OmniPixel2 technology. Featuring a 2.0 x 2.0 pixel and 1/5-inch optical format, the OV9660 enables a 25% thinner camera module than the previous generation, meeting the requirements of ultra slim handset designs. Additionally, the smaller module size is especially attractive to handset makers because it allows a drop-in upgrade from VGA to 1.3 megapixels, thereby extending the life of existing VGA camera phone designs.

In the emerging market for image sensors embedded in PC notebooks, we continue to win designs. We are supplying sensors to four of the top five notebook OEMs. Our shipments to notebook and standalone PC camera manufacturers continue to grow as services such as, AOL, Google, Skype and Yahoo are adding video capability to their conferencing software. The OV9660 also provides ultra-portable notebook manufacturers with the ability to upgrade to 1.3-megapixel cameras without the need for a costly system redesign by avoiding the size constraints which previously limited them to VGA resolution cameras.

As the markets for image sensors have grown, we have experienced increasing competition from manufacturers of CMOS and CCD image sensors. Our principal competitors in the market for CMOS image sensors include MagnaChip, Micron, Samsung, ST Microelectronics and Toshiba. We expect to see continued price competition in the image sensor market for camera cell phones and digital cameras as those markets continue to grow. Although we believe that we currently compete effectively in those markets, our competitive position could be impaired by companies that have greater financial, technical, marketing, manufacturing and distribution resources, broader product lines, better access to large customer bases, greater name recognition, longer operating histories and more established strategic and financial relationships than we do. Such companies may be able to adapt more quickly to new or emerging technologies and customer requirements or devote greater resources to the promotion and sale of their products. Many of these competitors own and operate their own fabrication facilities, which in certain circumstances may give them the ability to price their products more aggressively than we can or may allow them to respond more rapidly to changing market opportunities than we can.

As a result of the increase in competition and the growth of various consumer-product applications for image sensors, we have experienced a shortening in the life cycle of some image-sensor products. For example, although in the security and surveillance market we continue to sell image sensors introduced more than four years ago, in the camera cell phone market, product life cycles can be as short as six months. The shortening of product life cycles combined with our 12-14 week production cycle makes it increasingly difficult to accurately forecast customer demand for or to predict the ramp of our products. As a result, we face the risk of being unable to fulfill customer orders if we underestimate market demand and the risks of excess inventory and product obsolescence if we overestimate market demand for our products. As a result, it is possible that we could suffer from shortages for certain products and build inventories in excess of demand for other products. We carefully consider the risk that our inventories may be excess to expected future demand and record appropriate reserves. If, as sometimes happens, we

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are subsequently able to sell these reserved products, the sales have little or no associated cost and consequently they have a favorable impact on gross margins. The shortening of product life cycles also increases the importance of having short product development cycles and being accurate in the prediction of market trends in the design of new products. The reduction in product life cycles increases the importance of our continued investment in research and development, which we consider to be critical to our future success.

In common with many other semiconductor products and in response to competitive pressures, the average selling prices, or ASPs, of image sensor products have declined steadily since their introduction, and we expect ASPs to continue to decline in the future. Accordingly, in order to maintain our gross margins, we and our suppliers have to work continuously to lower our manufacturing costs and increase our production yields, and in order to maintain or grow our revenues, we have to increase the number of units we sell by a large enough amount to offset the effect of declining ASPs. In fiscal 2007, ASPs declined more rapidly than we were able to reduce our manufacturing costs, and our gross margins declined.  In addition, if we are unable to timely introduce new products that can take advantage of smaller process geometries or new products that incorporate more advanced technology and include more advanced features that can be sold at higher average selling prices, our gross margin will decline.

Technology

In August 2004, we announced the introduction of our OmniPixel technology. In September 2005, we announced the introduction of our OmniPixel2 architecture. The OmniPixel2  architecture, which is based on a 2.2µ x 2.2µ pixel and uses a 0.13µ process geometry, is less than half the size of the OmniPixel architecture introduced in 2004, but with improved performance. With the OmniPixel2 architecture, we significantly improved sensor performance in three key areas: the improved fill-factor and zero-gap micro-lens structure increased the sensor’s capacity to capture light; the sensor’s improved quantum efficiency improved its dynamic range, that is its capacity to capture widely differing light levels in a single image; and the capacity to rapidly adjust to changes in light levels.

In February 2007, we introduced our first TrueFocus™ camera with Wavefront Coding™ technology for the mobile handset market. Our patented Wavefront Coding technology is a method of optically encoding light using a special lens to form an intermediate image on the sensor, and decoding this intermediate image with digital processing to create a picture that is in focus across virtually the entire image. TrueFocus offers true ‘point-and-shoot’ capability where the entire image is always in focus and always available for instant one-click capture in real time, with no waiting for the lens to focus. TrueFocus is designed to provide our customers with a product that effectively targets the mobile handset market by being small, durable, easy to manufacture and cost-competitive.

In May 2007, we announced the introduction of the latest generation of our OmniPixel architecture, our OmniPixel3™ architecture. The OmniPixel3 architecture is based on a new 1.75 x 1.75 pixel and uses a 0.11 process geometry which further reduces the size of a given sensor array without any reduction in image quality.

Given the rapidly changing nature of our technology, there can be no assurance that we will not encounter delays or other unexpected production or performance issues with future products. During the early stages of production, production yields and gross margins for products based on new technology are typically lower than those of established products.

Product Design

Mixed Analog/Digital Circuit and CMOS Image Sensor Design

We have the in-house expertise to design complex analog and digital semiconductor circuits. This in-house expertise enables us to process video data in both analog and digital domains, which has allowed us to optimize each aspect of analog and digital chip design. Analog processing works directly with the original image signals without the loss of data that typically occurs in conversion to digital processing. Analog circuits require considerably less space, which means we can design smaller chips that have more functions but that still produce far less noise than is typically generated by the heat and cross talk found in digital circuits. Analog processing is the key for integrating all of the functions on a single chip, thereby taking advantage of the benefits of CMOS technology. We have also developed in-house expertise in the mixing of analog and digital signals in the same semiconductor design without suffering the common problems of interference from noise caused by heat or crosstalk. Our in-house semiconductor design engineers are skilled in the design of high speed, low power, mixed analog/digital image sensors with advanced pixel cell structures. We use advanced design techniques to develop high-speed, highly integrated

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semiconductors which can be fabricated using standard CMOS processes. The result has been a combination of improved image quality coupled with a reduction in unwanted electrical noise.

Advanced Image Processing

With our acquisition of CDM Optics, Inc., or CDM, and its patented Wavefront Coding technology, we significantly expanded our proprietary technology. Wavefront Coding technology combines optics and electronics to significantly increase the depth of field of an image without changing the aperture of or reducing the amount of light reaching the lens and can eliminate the need for a mechanical auto-focus system. Wavefront Coding technology changes the phase of light as it traverses a specialized element in the lens and deliberately blurs all points in any image to an identical degree. Powerful algorithms then remove the system-dependent image blur to produce a sharp and clear image from the intermediate coded image.

Products

Our main products, image-sensing devices we refer to by the name CameraChip image sensors, are used to capture images electronically and are used in a number of consumer and commercial mass-market applications. Our products have a variety of features, including:

Product Features

CMOS CameraChip image sensors		Color or black and white
Resolutions		CIF (352 x 288 pixels) to 5.17 megapixel (2560 x 2048 pixels)
Output signal		Analog for television, digital for computers and other digital devices
Operating voltage		5 volt, 3 volt, 2.7 volt or 1.8 volt
Optical lens/array size		1/18, 1/10, 1/9, 1/7, 1/6, 1/5, 1/4, 1/3 or 1/2 inch formats
Interface chips		For connecting to computers and other devices
Software drivers:
	·     Standard operating systems	Linux®, Mac OS®, Windows®
	·     Embedded systems	Palm OS®, Symbian OS™, Windows CE™, Windows Embedded™ and Windows Mobile®

We provide companion chips used to connect our CameraChip image sensors to various interfaces, including the universal serial bus, or USB, a connection which allows add-on devices to be connected to personal computers and other industry standard interfaces. In addition, we provide companion chips that perform compression in standardized still photo and digital video formats.

We also design and develop standard software drivers for Microsoft Windows, Linux and Mac OS, as well as for embedded operating systems such as Windows Embedded, Windows CE, Windows Mobile, Symbian and Palm OS. These software drivers accept the image data being received from the USB, provide data decompression, if required, and manage interface protocols with the camera. We have designed these drivers for speed and flexibility and allow easy customization of the user interface. We do not record any revenue from this software, which we provide to our customers as an element of customer support.

New Products

In October 2005, we announced the OV2640 sensor, our first product on the OmniPixel2 architecture and the world’s first 2.0-megapixel sensor on a ¼ inch form factor. In addition to the features of the OmniPixel2 architecture, the OV2640 sensor also incorporates an advanced image signal processor called the OmniQSP™ system which provides high-grade picture processing and features traditionally found only in digital still cameras. In July 2006, we announced that the OV2640 sensor was in volume production.

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In October 2005, we also announced the OV7950, an enhanced sensor designed specifically for the automotive market. The OV7950 offers several improvements including a dual dynamic overlay function allowing for both a dynamic and a static visual aid layer (text or graphics) within the image. This is especially useful for reference frames and guiding systems in backup and parking assist cameras for cars and trucks.

In April 2006, we announced our second-generation, 5.17-megapixel camera chip. The OV5620 offers a small form-factor, 5.17-megapixel CMOS camera that we believe surpasses CCD sensors in performance. Furthermore, we believe the OV5620’s advanced high-definition, or HD, video modes with vivid colors make this CameraChip image sensor especially attractive for next generation DSCs, and hybrid cameras, which take both still and video pictures.

In September 2006, we introduced the OV7720, a high sensitivity digital VGA CameraChip sensor designed specifically for security and surveillance applications. Unlike the sensors used in conventional analog security cameras, the new sensor produces high quality digital output and eliminates the need for A/D converters while simplifying post processing. The OV7720 is one of the first high performance sensors capable of running at 60 frames per second and delivers, we believe, exceptional low-light sensitivity and performance without sacrificing the speed required for advanced security applications. In September 2006, we also unveiled the new OV7949 advanced CMOS CameraChip sensor designed specifically for commercial CCTV/video monitoring security systems. The highly integrated, single-chip OV7949 video camera chip sensor is based on our proprietary OmniPixel architecture. The OV7949 combines a high level of functionality with a brand new design that we specifically engineered to operate extremely well in low-light conditions, a feature especially critical to indoor and night security monitoring systems.

In October 2006, we announced the availability of our new all digital OV7710 CameraChip advanced CMOS image sensor developed specifically for automotive applications. The OV7710 is a highly integrated CMOS video camera that combines a high level of functionality with all digital output. Digital output is a key requirement for automotive machine-vision applications such as airbag deployment, lane departure warning, collision avoidance/pedestrian detection, windshield wiper control, and drowsiness detection. The OV7710 features a dual dynamic overlay function, which permits text or graphics within the image.

In February 2007, in addition to the first TrueFocus camera described earlier, we announced the details of two other new products. The first was a 5.17-megapixel auto-focus camera module for mobile handsets based around the OV5623 CameraChip sensor. The new module provides the basis for high resolution cameras to enter the mainstream mobile handset market. Our introduction of the 5.17-megapixel camera module with auto-focus capability, a function previously associated only with DSCs and expensive camera phones, brings high image quality and camera performance closer to the mainstream camera phone market. We expect that our new 5.17-megapixel camera module will enable our handset customers to continue to move up the ‘megapixel curve’ in order to provide DSC-quality imaging on mass market camera phones.

The second new product was the OV7680, a new 1/10 inch VGA CameraChip sensor designed for entry-level camera phones, for secondary cameras in 3G handsets, and for integrated notebook PC cameras. The new sensor incorporates a unique non-linear lens shift technology, which permits a reduction in the height of the camera module to just 3.17mm.

In March 2007, we introduced the OV10620, our first color High Dynamic Range, or HDR, CMOS image sensor for mass market applications. The new OV10620 has the capacity to capture widely differing light levels in a single image and to rapidly adjust to changes in light levels, much like the human eye under quickly changing light conditions. The OV10620 rapidly switches to HDR mode to handle extreme variations of bright and dark conditions and automatically switches back to non-HDR mode when condition return to normal. The new single-chip sensor also has a spectral light sensitivity of up to 1,000 nm, which is near infrared sensitivity.

In June 2007, we introduced the OV3640, the first fully integrated 3.2-megapixel CameraChip sensor in a ¼-inch format. Based on the new 1.75-micron OmniPixel3™ architecture, the OV3640 is small enough to fit the standard 8 x 8 mm sockets used in 2.0-megapixel camera phones, making it an ideal drop-in upgrade for existing handset designs. The highly integrated OV3640 features a high-speed two-lane mobile industry processor interface, or MIPI, to enable the fast transfer of large blocks of data, which is critical to making effective use of increased camera resolutions. In addition, the new sensor incorporates advanced image signal processing and onboard JPEG compression to allow existing baseband processors without MIPI to support a camera upgrade to 3.2 megapixels at

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15 frames per second in full resolution. In addition to MIPI, the OV3640 also incorporates advanced image stabilization functionality similar to that used in DSC and camcorder products.

Strategic Investments and Acquisitions

Joint Venture with TSMC

In October 2003, we entered into a Shareholders’ Agreement, or the VisEra Agreement, with TSMC pursuant to which we agreed with TSMC to form VisEra Technologies Company, Ltd., or VisEra, a joint venture in Taiwan. VisEra’s mission is to provide back-end manufacturing services. In connection with the formation of VisEra, both TSMC and we entered into separate nonexclusive license agreements with VisEra pursuant to which each party licenses certain intellectual property to VisEra relating to manufacturing services. The VisEra Agreement also provided that once VisEra had acquired the capability to deliver high quality manufacturing services, we would be committed to direct a substantial portion of our requirements in these areas to VisEra, subject to pricing and technology requirements. Both TSMC and we have also committed not to compete directly or indirectly with VisEra in the provision of certain manufacturing services. Historically, we have relied upon TSMC to provide us with a substantial proportion of our wafers. As a part of the VisEra Agreement, TSMC agreed to commit substantial wafer manufacturing capacity to us in exchange for our commitment to purchase a substantial portion of our wafers from TSMC, subject to pricing and technology requirements.

In August 2005, we entered into an Amended and Restated Shareholders’ Agreement with TSMC, or the Amended VisEra Agreement, under which the parties reaffirmed their respective commitments to VisEra, expanded the scope of and made minor modifications to the VisEra Agreement. Under the Amended VisEra Agreement, the parties agreed to raise the total capital committed to the joint venture from $50.0 million to $68.0 million. The $18.0 million increase was designated principally for the acquisition from unrelated existing shareholders of approximately 29.6% of the issued share capital of XinTec, of which we directly owned approximately 7.8% at that time. In fiscal 2006, VisEra invested an additional $0.5 million and we invested an additional $130,000 in XinTec as our portion of an additional capital injection to enable XinTec to expand its production capacity. As a result of the increase in our beneficial interest in XinTec due to VisEra’s investment in XinTec during fiscal 2006, we accounted for our investment in XinTec under the equity method. In January 2007, TSMC through the purchase of approximately 90.5 million previously unissued shares, acquired a controlling interest in XinTec. As a result of TSMC’s investment, our ownership percentage in XinTec declined from 7.8% to 4.4% and VisEra’s ownership percentage declined from 29.6% to 16.9%. Due to the reduction in our ownership percentage in XinTec and the deconsolidation of VisEra described below, effective January 1, 2007, we began to account for our interest in XinTec under the cost method.

As a result of the additional investment that TSMC and we made in VisEra under the Amended VisEra Agreement, TSMC’s and our interest each increased from 25% to 43%, and consequently we re-evaluated our accounting for VisEra in accordance with Financial Accounting Standards Board, or FASB, Interpretation No. 46 (revised December 2003), or FIN 46(R), “Consolidation of Variable Interest Entities.” We concluded that, as a result of our step acquisition of VisEra and because substantially all of the activities of VisEra either involve or are conducted on our behalf, VisEra was a variable interest entity. Since we were the source of virtually all of VisEra’s revenues, we had a decisive influence over VisEra’s profitability. Accordingly, we considered ourselves to be the primary beneficiary of the joint venture, and in the quarter which ended in October 2005, we began to include VisEra’s financial results in our consolidated financial statements. In the quarter ended January 2006, we increased our interest in VisEra from 43% to 46% through purchases of unissued shares. In January 2006, pursuant to the Amended VisEra Agreement, VisEra purchased from TSMC the equipment used for applying color filers and micro-lenses to wafers, and VisEra is now providing the related processing services that we previously purchased from TSMC. In November 2006, we invested $6.1 million in VisEra as our portion of an additional cash or asset contribution to be made by TSMC and us under the then current Amended VisEra Agreement.

Effective January 1, 2007, by mutual agreement, we assumed responsibility for the logistics management services previously provided to us by VisEra. As a consequence, we concluded that we had lost our status as the primary beneficiary of the joint venture and VisEra had ceased to be a variable interest entity (“VIE”) as defined under FIN 46(R). As a result, we deconsolidated VisEra as of the date of the change. As a consequence of the deconsolidation, effective January 1, 2007, we account for our investment in VisEra under the equity method. The deconsolidation of VisEra did not have a material effect on our reported revenue or reported net income for fiscal 2007. See Note 5 – “Long-term Investments” to our consolidated financial statements.

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In January 2007, we and TSMC also signed an amendment to the Amended VisEra Agreement to provide for an increase in VisEra’s manufacturing capacity. Under the amendment, we and TSMC each made an additional $27.0 million investment in VisEra in April 2007. This investment is part of an ongoing capacity expansion program at VisEra. All other material terms of the Amended VisEra Agreement remain in effect.

Joint Venture with PSC

In May 2004, we entered into an agreement with PSC, to establish SOI as a joint venture. The purpose of SOI is to conduct manufacturing, marketing and selling of certain of our legacy products. In connection with the establishment of SOI, we have agreed to enter into manufacturing and other agreements as appropriate with PSC. In March 2005, we assumed control of the board of directors of SOI and we have consolidated SOI since April 30, 2005. In July 2006, SOI declared a cash dividend of $482,000, of which we received $237,000 when the cash dividend was paid in August 2006. SOI also issued shares to its employees in July 2006, with an estimated fair value of $459,000 which caused our ownership percentage to decline from 49.0% to 46.6%. In April 2007, SOI became listed on the TGSM. The TGSM is the approximate equivalent in Taiwan of the Over-The-Counter market in the United States. In conjunction with the TGSM listing, various employees of SOI exercised their options and increased the number of shares outstanding, which caused our ownership percentage to decline to 45.4% as of April 30, 2007. See Note 18 – “Related Party Transactions” to our consolidated financial statements.

Acquisition of CDM

In April 2005, we completed the acquisition of CDM. CDM is located in Boulder, Colorado. CDM is the exclusive licensee from an affiliate of the University of Colorado of a patented technology, known as Wavefront Coding technology that increases the performance of an imaging system by substantially increasing the depth of field and/or correcting optical aberrations within the image. We expect that it will significantly reduce the size and complexity of the auto-focus function on future camera modules utilizing OmniVision sensors. Because the image is always in focus, Wavefront Coding technology also eliminates the time-delay inherent in conventional auto or manually focused camera systems. The closing consideration for the acquisition consisted of $10.0 million in cash and approximately 515,000 shares of our common stock. Approximately 147,000 of these shares were retained as security for certain indemnities given by the sellers.

In the quarter ended October 31, 2006, we increased “Goodwill” related to our acquisition of CDM by $2.6 million. The increase was partially related to a put option that expired during the quarter with respect to the 147,000 CDM escrow shares. The escrow shares were puttable back to us at a premium and 145,000 shares were put to us for cash totaling $2.8 million. Additionally, the value of the initial shares that were issued in April 2005 as part of the CDM acquisition were also increased due to a put option that expired unexercised subsequent to the original issuance of the shares. Both amounts should have been recorded as part of the initial acquisition of CDM. We are also obligated to pay an additional $10.0 million in cash upon the sale, prior to the end of April 2009, of a pre-determined number of revenue-producing products incorporating CDM’s technology.

Industry Background

Image Sensor Technologies

Digital imaging enables the capture of still or moving images without the use of photographic, or chemical-based films. The two most common electronic image sensors, both developed in the late 1960s, are CCD and CMOS image sensors. Both sensors are silicon-based semiconductor devices that convert light to an electric charge for display or storage.

CMOS image sensors are typically less expensive to produce and consume significantly less power than CCDs, but the quality of early CMOS image sensors lagged behind that of CCDs. Owing to their historically superior image quality, CCDs became a standard for digital imaging and have been used in a wide variety of applications ranging from video camcorders to numerous industrial and scientific applications. Until a few years ago, CMOS image sensors were primarily used for relatively lower-cost applications, such as PC video cameras, for which high image quality was not a priority.

In recent years, advances in semiconductor manufacturing processes and design techniques have led to improvements in CMOS image sensor performance and image quality, resulting in smaller circuits and better current

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control, making it possible to design CMOS image sensors that provide image quality comparable to that of CCDs of comparable resolution. As a result, CMOS image sensors have become a compelling alternative to CCDs for a wide range of uses, particularly in consumer photography and new camera market segments, such as camera-equipped cell phones, security and surveillance systems, toys and interactive video game consoles, laptop computers, and automotive applications, where high image quality, low power consumption, small size and low cost are important considerations.

CMOS Sensors versus CCD Sensors

One of the critical differences between CCD and CMOS image sensors is the way in which each processes an electrical charge, or a signal. Cameras employing CCDs require an additional integrated circuit called an analog-to-digital converter, or ADC, to convert a signal from analog to digital format. In contrast, image sensors based on the CMOS manufacturing process are able to integrate a number of functions on one device, enabling all of the conversion circuitry to be incorporated in a single sensor chip. This high level of integration reduces the overall number of components and system complexity, and reduces the space required for them.

Market Opportunity

Demand for CMOS image sensors for use in camera cell phones continued to account for a substantial portion of our revenue in fiscal 2007. Other applications and markets that we are currently serving or that are developing include embedded applications for personal computers, security and surveillance, toys and interactive video game consoles, and automotive and medical applications. As device manufacturers become increasingly aware of the numerous advantages associated with single chip CMOS image sensor solutions, such as high image quality, accelerated time to market, efficient design and manufacturability, smaller size, lower power consumption and reduced cost, we believe these markets offer significant additional opportunities for mass-market applications for CMOS image sensors.

Customers

We sell directly to OEMs and VARs and indirectly through distributors. OEMs include branded camera device manufacturers and contract manufacturers. During fiscal 2007, we shipped approximately 250 million CameraChip image sensors, as compared to approximately 150 million CameraChip image sensors in fiscal 2006.

In fiscal 2007, we derived approximately 60% of our revenues from OEMs and VARs and approximately 40% of our revenues through distributors. The one OEM customer that accounted for 10% or more of our revenues in fiscal 2007 was the Foxconn Technology Group, or Foxconn, which accounted for approximately 14.0% of our revenues. The two distributors that accounted for 10% or more of our revenues in fiscal 2007 were World Peace Industrial Group, or World Peace, and SiDa Electronics (Hong Kong) Co., Limited, or SiDa Electronics, which accounted for approximately 15.1% and 12.9% of our revenues, respectively. No other OEM, VAR or distributor accounted for 10% or more of our fiscal 2007 revenues.

Sales and Marketing

We sell our products through a direct sales force and indirectly through distributors. As of April 30, 2007, our sales and marketing organization had a total of 168 full-time employees. We also have ten independent distributors, eight of which are located outside the United States. Sales outside of the United States represented approximately 99% of our revenues in fiscal 2005, fiscal 2006 and fiscal 2007. We expect that sales outside of the United States will continue to account for a very large proportion of our revenues and in certain markets, it is more cost-effective for us to sell to certain customers through distributors who often have more sales coverage than we do and assume responsibility for logistics, collections, product returns and customer support. In addition to our standard product marketing, we also participate in tradeshows and other industry events to promote our CameraChip solutions.

Research and Development

We have designed the internal structure of our CMOS CameraChip image sensors in a modular fashion. The major functions, such as image capture, image sensor control logic, color processing, analog output, digital output and programming control, are stand-alone circuits that we can rapidly modify for use in new product developments. We design circuit improvements so that we can transfer them readily to other CameraChip products to help reduce total development time and cost for new products. As of April 30, 2007, we had a total of 340 full-time employees

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in research and development. Research, development and related expenses for fiscal 2005, 2006 and 2007 were approximately, $25.5 million $40.6 million and $67.6 million, respectively.

Intellectual Property

Our success and future revenue growth will depend, in part, on our ability to protect our intellectual property. We rely on a combination of patents, copyrights, trademarks and trade secrets, as well as nondisclosure agreements and other methods, to protect various aspects of our CameraChip image sensors. As of April 30, 2007, we have been issued 74 United States patents which expire between October 2015 and August 2025. We have also received 79 foreign patents which expire between October 2015 and December 2025. As of April 30, 2007, we have 75 additional United States patent applications pending, of which two have been allowed, and we have filed 239 foreign patent applications, of which 17 have been allowed.

From time to time, we have been subject to legal proceedings and claims with respect to such matters as patents and other actions arising out of the normal course of business. It is possible that companies might pursue litigation with respect to any claims such companies purport to have against us. The results of any litigation are inherently uncertain. In the event of an adverse result in any litigation with respect to intellectual property rights relevant to our products that could arise in the future, we could be required to obtain licenses to the infringed technology, pay substantial damages under applicable law, including treble damages if we are held to have willfully infringed, cease the manufacture, use and sale of infringing products or expend significant resources to develop non-infringing technology, even if we ultimately prevail. Litigation frequently involves substantial expenditures and can require significant management attention.

Manufacturing

Wafer Fabrication

Our semiconductor products are fabricated using standard CMOS processes, which permit us to engage independent wafer foundries to manufacture our semiconductors. We outsource our wafer manufacturing for CameraChip image sensors to TSMC and PSC. Our CameraChip image sensors are currently fabricated using a standard process at 0.11µ, 0.13µ, 0.18µ, 0.25µ, 0.50µ and 0.60µ. In addition, TSMC and Semiconductor Manufacturing International Corporation, or SMIC, fabricate our companion DSP and interface chips.

Color Filter Application

A majority of our fiscal 2007 CameraChip image sensor sales were color CameraChip image sensors, which, in addition to a micro-lens, require a color filter to be applied to the wafer before packaging. The color filter application uses a series of masks to place red, green and blue dyes on the individual pixels in an industry-standard Bayer pattern. In the final step, a micro lens is applied to each pixel. We outsource these manufacturing steps to VisEra.

Wafer Probe Testing

Wafers that are designated for chip-on-board, or COB, packaging are tested using a process called wafer probe testing. We outsource wafer probe testing to King Yuan Electronics Co., Ltd., or KYEC, Winstek Semiconductor Corp., or Winstek, and VisEra.

Packaging

In the case of chip-scale packaged or CSP products, after wafer fabrication, color filter application if required, and micro-lens application, the wafers are packaged and then diced into chips. With the exception of CSP products, the wafers are diced first and then packaged. Our products are designed to use standard packaging that is widely used for optical sensor chips. These packages have a glass lid to allow light to pass through to the image sensor array. For our higher-priced product lines, we rely on Advanced Semiconductor Engineering, or ASE, Chipbond Technology Corporation and ImPac Technology Co., Ltd., or ImPac, an investee company, for substantially all of our ceramic chip packaging. We rely on ImPac for our plastic chip packaging and on XinTec, another investee company, for the large majority of our CSP products, which are generally designed for the smallest form factor applications.

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Final Testing

High volume final product testing is a critical element of the production of CameraChip image sensors and is a substantial barrier to entry for potential competitors. Production final testing instruments designed for conventional CMOS devices are not sufficient for testing image sensors, because an optical image must be captured and checked in addition to checking the standard logic and electrical functions.

We are currently in the process of installing new high-throughput automated final test equipment built to our specifications at our testing facility in Shanghai, China. The new testers have automated handling capability, a lighting and lens system, a changeable image source and automated output sorting by functionality. The system is programmable so that testing criteria and methodology can be changed easily to accommodate new products or special testing requirements.

Product Quality Assurance

We focus on product quality through all stages of the design and manufacturing process. We submit all our designs to in-depth circuit simulation before we commit them to silicon. Before we commit a new product to production, we fabricate test wafers, package test chips and test the final product. We keep initial production runs to a minimum until sufficient products have completed the entire manufacturing and testing process and are delivered to and approved by customers. We commit to full production runs after final customer approval.

We qualify each of our subcontractors through a series of industry standard environmental product stress tests, as well as through an audit and an analysis of the subcontractor’s quality system and manufacturing capability. We also participate in quality and reliability monitoring through each stage of the production cycle by reviewing electrical parametric data from our foundries and other subcontractors.

Competition

We operate in an industry characterized by intense competition, rapid technological changes, evolving industry standards, declining average selling prices and rapid product obsolescence. Our competition both comes from CMOS and CCD image sensor manufacturers:

·CMOS Image Sensor Manufacturers. Image sensor manufacturers using CMOS technology include a number of well established companies such as Kodak, MagnaChip, Micron, Matsushita, Samsung, Sony, STMicroelectronics and Toshiba. In addition, we compete with a large number of smaller CMOS manufacturers including Foveon, PixArt, Pixelplus and Pixim.

·CCD Image Sensor Manufacturers. Image sensor manufacturers using CCD technology include a number of well-established companies, particularly vertically integrated camcorder and high-resolution digital still camera manufacturers. Our main competition from CCD manufacturers comes from Fuji, Kodak, Matsushita, NEC, Sanyo, Sharp, Sony, Texas Instruments and Toshiba.

Our competitors include many large domestic and international companies that have greater presence in key markets, greater access to advanced wafer foundry capacity, substantially greater financial, technical, marketing, manufacturing, distribution and other resources, better access to large customer bases, greater name recognition, longer operating histories and more established strategic and financial relationships than we do. As a result, they may be able to adapt more quickly to new or emerging technologies and customer requirements or devote greater resources to the promotion and sale of their products.

We believe that the principal factors affecting our competition in our markets include relationships with key OEMs that incorporate image sensors into mass-market applications, relationships with key distributors, relationships with semiconductor foundries and other participants in the semiconductor manufacturing chain, time to market, quality, total system design cost, product performance, customer support and supplier reputation. We believe that we compete effectively with respect to these factors.

Backlog

Sales are generally made pursuant to standard purchase orders. Our backlog includes only accepted customer orders with assigned shipment dates within the upcoming 12 months. As of April 30, 2006 and 2007, our backlog was approximately $134.5 million and $149.6 million, respectively. The increase in our backlog reflects the fact that with product in relatively short supply as compared to a year ago, customers need to place purchase orders farther in

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advance of shipments than they did in the prior period. Our current backlog is subject to changes in delivery schedules, and may not necessarily be an indication of future revenue.

Employees

As of April 30, 2007 we had a total of 2,064 full-time employees, 336 located in the U.S. and 1,728 located in China, Finland, Germany, Hong Kong, Japan, Singapore, South Korea, Taiwan and the United Kingdom, with approximately 1,600 of these employees located in China. Most of the increase from the prior year occurred in China and Taiwan to staff our expanded test, logistics and research activities. Our future success will depend, in part, on our ability to continue to attract, retain and motivate highly qualified technical and management personnel. None of our employees is represented by a collective bargaining agreement, and we have never experienced any work stoppage. We believe that our employee relations are good.

Financial Information About Geographic Areas

For information about revenue and long-lived assets by geographic region/country, see Note 16 — “Segment and Geographic Information” in Part II, Item 8 of this Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K.

Executive Officers and Directors of the Registrant

The following persons are our executive officers as of the date of this report:

Name	Age	Position
Shaw Hong	69	Chief Executive Officer, President and Director
Xinping He	44	Chief Operating Officer and Director
Peter V. Leigh	62	Chief Financial Officer
Y. Vicky Chou	44	Vice President of Legal and General Counsel
Dr. John T. Yue	60	Vice President of Quality and Reliability
Anson Chan	38	Vice President of Finance

Shaw Hong, one of our cofounders, has served as one of our directors and as our Chief Executive Officer and President since May 1995. Mr. Hong holds a B.S. degree in electrical engineering from Jiao Tong University in China and an M.S. degree in electrical engineering from Oregon State University.

Xinping He has served as our Chief Operating Officer since August 2006. From February 2003 to August 2006, Mr. He served as our Senior Vice President of Engineering. Mr. He joined our company in June 1995 and served as a senior design engineer until his promotion to design manager in July 1998. From August 2001 until February 2003, Mr. He served as our Vice President of Core Technology. In November 2006, our board of directors appointed Mr. He as a member of the board of directors as a Class II director. Mr. He holds a B.S. degree and an M.S. degree in electrical engineering from Tsinghua University in Beijing.

Peter V. Leigh has served as our Chief Financial Officer since September 2004. From September 2004 to February 2007, Mr. Leigh also served as our Vice President of Finance. From December 2002 to September 2004, Mr. Leigh was self-employed as a consultant to a technology company. From November 1995 to December 2002, Mr. Leigh served as Chief Financial Officer of Metron Technology, Inc., a global provider of materials and services to the semiconductor industry. From 1992 to 1995, Mr. Leigh was Chief Financial Officer of Liposome Technology, a bio-pharmaceutical company. From 1982 to 1992, Mr. Leigh served as Corporate Controller of Bio-Rad Laboratories, a multi-national manufacturer of research chemistry products, clinical diagnostics and analytical instruments. Mr. Leigh holds an M.B.A. degree from the Harvard Business School and a B.A. degree in economics from Oxford University.

Y. Vicky Chou has served as our Vice President of Legal and General Counsel since June 2003. From February 2003 to June 2003, Ms. Chou served as our Corporate Counsel. From August 1999 to January 2003, Ms. Chou was an attorney at Heller Ehrman White & McAuliffe LLP. From June 1997 to July 1999, Ms. Chou was an attorney/corporate specialist at Coudert Brothers LLP. Ms. Chou received a B.S. degree in anthropology from Temple University, an M.B.A. degree from St. Joseph’s University and a J.D. degree from Santa Clara University.

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Dr. John T. Yue has served as our Vice President of Quality and Reliability since February 2005. From September 1999 to February 2005, Dr. Yue was employed by Taiwan Semiconductor Manufacturing Company (TSMC) where he served as Vice President of Quality and Reliability from September 1999 to June 2002 and as Vice President of Technology with the company’s North America operations from July 2002 to February 2005. Prior to joining TSMC, Dr. Yue was employed for 17 years by Advanced Micro Devices (AMD) where he held various positions, including Director of Reliability and Quality in the Corporate Quality Division and was an AMD fellow. Prior to AMD, Dr. Yue held management positions at National Semiconductor and Texas Instruments. He holds a Ph.D. and an M.S. degree in physics from Stanford University, a B.S. degree in physics from the Massachusetts Institute of Technology, and an M.B.A. degree from Southern Methodist University.

Anson Chan has served as our Vice President of Finance since February 2007. From July 2006 to February 2007, Mr. Chan served as our Vice President of Business Strategy. From September 1997 to July 2006, Mr. Chan served in various positions with PricewaterhouseCoopers, LLP, an independent public accounting firm, most recently as a Senior Manager. Mr. Chan holds a B.S. degree in economics and a B.S. degree in engineering from the University of Pennsylvania and an M.B.A. degree in business strategy and operations management from the University of Chicago.

ITEM 1A.   RISK FACTORS

This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements. These forward-looking statements are subject to substantial risks and uncertainties that could cause our future business, financial condition or results of operations to differ materially from our historical results or currently anticipated results, including those set forth below.

Risks Related to Our Business

We face intense competition in our markets from more established CMOS and CCD image sensor manufacturers, and if we are unable to compete successfully we may not be able to maintain or grow our business.

The image sensor market is intensely competitive, and we expect competition in this industry to continue to increase. This competition has resulted in rapid technological change, evolving standards, reductions in product selling prices and rapid product obsolescence. If we are unable to successfully meet these competitive challenges, we may be unable to maintain and grow our business. Any inability on our part to compete successfully would also adversely affect our results of operations and impair our financial condition.

Our image-sensor products face competition from other companies that sell CMOS image sensors and from companies that sell CCD image sensors. Many of our competitors have longer operating histories, greater presence in key markets, greater name recognition, larger customer bases, more established strategic and financial relationships and significantly greater financial, sales and marketing, distribution, technical and other resources than we do. Many of them also have their own manufacturing facilities which may give them a competitive advantage. As a result, they may be able to adapt more quickly to new or emerging technologies and customer requirements or devote greater resources to the promotion and sale of their products. Our competitors include established CMOS image sensor manufacturers such as Kodak, MagnaChip, Micron, Matsushita, Samsung, Sony, STMicroelectronics and Toshiba as well as CCD image sensor manufacturers such as Fuji, Kodak, Matsushita, NEC, Sanyo, Sharp, Sony, Texas Instruments and Toshiba. Many of these competitors own and operate their own fabrication facilities, which in certain circumstances may give them the ability to price their products more aggressively than we can or may allow them to respond more rapidly than we can to changing market opportunities. In addition, we compete with a large number of smaller CMOS manufacturers including Foveon, PixArt and Pixelplus and Pixim. Competition with these and other companies has required, and in the future may require, us to reduce our prices. For instance, we have seen increased competition in the markets for VGA image sensor products with resulting pressures on product pricing. Downward pressure on pricing could result both in decreased revenues and lower gross margins, which would adversely affect our profitability.

Our competitors may acquire or enter into strategic or commercial agreements or arrangements with foundries or providers of color filter processing, assembly or packaging services. These strategic arrangements between our competitors and third party service providers could involve preferential or exclusive arrangements for our competitors. Such strategic alliances could impair our ability to secure sufficient capacity from foundries and service

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providers to meet our demand for wafer manufacturing, color filter processing, assembly or packaging services, adversely affecting our ability to meet customer demand for our products. In addition, competitors may enter into exclusive relationships with distributors, which could reduce available distribution channels for our products and impair our ability to sell our products and grow our business. Further, some of our customers could also become developers of image sensors, and this could potentially adversely affect our results of operations, business and prospects.

Declines in our average selling prices may result in declines in our revenues and may further reduce our gross margins.

We have experienced and expect to continue to experience pressure to reduce the selling prices of our products, and our average selling prices have declined as a result. Competition in our product markets is intense and as this competition continues to intensify, we anticipate that these pricing pressures will increase. We expect that the average selling prices for many of our products will continue to decline over time. Unless we can increase unit sales sufficiently to offset these declines in our average selling prices, our revenues will decline. Our low average selling prices have adversely affected our gross margins, and unless we can reduce manufacturing costs to compensate, additional reductions in our average selling prices will continue to adversely affect our gross margins and could materially and adversely affect our operating results and impair our financial condition. We have increased and intend to continue to increase our research, development and related expenses to continue the development of new image sensor products in fiscal years 2008 and 2009 that can be sold at higher selling prices and/or manufactured at lower cost. However, if we are unable to timely introduce new products that incorporate more advanced technology and include more advanced features that can be sold at higher average selling prices, or if we are unable to successfully develop more cost-effective technologies, our financial results could be adversely affected.

Sales of our image-sensor products for camera cell phones account for a large portion of our revenues, and any decline in sales to the camera cell phone market or failure of this market to continue to grow as expected could adversely affect our results of operations.

Sales to the camera cell phone market account for a large portion of our revenues. Although we can only estimate the percentages of our products that are used in the camera cell phone market due to the significant number of our image-sensor products that are sold to module makers or through distributors and VARs, we believe that the camera cell phone market accounted for approximately 70% and 80% of our revenues in fiscal 2006 and fiscal 2007, respectively. We expect that revenues from sales of our image-sensor products to the camera cell phone market will continue to account for a significant portion of our revenues during fiscal 2008 and beyond. Any factors adversely affecting the demand for our image sensors in this market could cause our business to suffer and adversely affect our operating results. The digital image sensor market for camera cell phones is extremely competitive, and we expect to face increased competition in this market in the future. In addition, we believe the market for camera cell phones is also relatively concentrated and the top five producers account for more than 80% of the annual sales of these products. If we do not continue to achieve design wins with key camera cell phone manufacturers, our market share or revenues could decrease. The camera cell phone image sensor market is also subject to rapid technological change. In order to compete successfully in this market, we will have to correctly forecast customer demand for technological improvements and be able to deliver such products on a timely basis at competitive prices. If we fail to do this, our results of operations, business and prospects would be materially and adversely affected. In the past, we have experienced problems accurately forecasting customer demand in other markets. If our sales to the camera cell phone market do not increase and/or the camera cell phone market does not grow as expected, our results of operations, business and prospects would be materially adversely affected.

Our future success depends on the timely development, introduction, marketing and selling of new CMOS image sensors, which we might not be able to achieve.

Our failure to successfully develop new products that achieve market acceptance in a timely fashion would adversely affect our ability to grow our business and our operating results. The development, introduction and market acceptance of new products is critical to our ability to sustain and grow our business. Any failure to successfully develop, introduce, market and sell new products could materially adversely affect our business and operating results. The development of new products is highly complex, and we have in the past experienced delays in completing the development and introduction of new products. From time to time, we have also encountered unexpected manufacturing problems as we increase the production of new products. For example, in the fourth quarter of fiscal 2005, and again in the first quarter of fiscal 2006, the back-end yields on two of our advanced products were significantly below where we planned, and our gross margins were adversely impacted. As our

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products integrate new and more advanced functions, they become more complex and increasingly difficult to design and debug. Successful product development and introduction depends on a number of factors, including:

·accurate prediction of market requirements and evolving standards, including pixel resolution, output interface standards, power requirements, optical lens size, input standards and operating systems for personal computers and other platforms;

·development of advanced technologies and capabilities;

·definition, timely completion and introduction of new CMOS image sensors that satisfy customer requirements;

·development of products that maintain a technological advantage over the products of our competitors, including our advantages with respect to the functionality and pixel capability of our image-sensor products and our proprietary testing processes; and

·market acceptance of the new products.

Accomplishing all of these steps is difficult, time consuming and expensive. We may be unable to develop new products or product enhancements in time to capture market opportunities or achieve significant or sustainable acceptance in new and existing markets. In addition, our products could become obsolete sooner than anticipated because of a rapid change in one or more of the technologies related to our products or the reduced life cycles of consumer products.

Design wins are a key determinant of future revenues, and failure to obtain design wins has in the past, and could in the future, adversely affect our revenues and impair our ability to grow our business.

Our past success has been, and our future success is, dependent upon manufacturers designing our image-sensor products into their products. To achieve design wins, which are decisions by manufacturers to design our products into their systems, we must define and deliver cost effective and innovative image-sensor solutions on a timely basis that satisfy the manufacturers’ requirements. Our ability to achieve design wins is subject to numerous risks including competitive pressures as well as technological risks. If we do not achieve a design win with a prospective customer, it may be difficult to sell our image-sensor products to such prospective customer in the future because once a manufacturer has designed a supplier’s products into its systems, the manufacturer may be reluctant to change its source of components due to the significant costs, time, effort and risk associated with qualifying a new supplier. Accordingly, if we fail to achieve design wins with key device manufacturers that embed image sensors in their products, our market share or revenues could decrease. Furthermore, to the extent that our competitors secure design wins, our ability to expand our business in the future will be impaired.

We depend on a limited number of third party wafer foundries, which reduces our ability to control our manufacturing process.

Unlike some of our larger competitors, we do not own or operate a semiconductor fabrication facility. Instead, we rely on TSMC, PSC and other subcontract foundries to produce all of our wafers. Historically, we have relied on TSMC to provide us with a substantial majority of our wafers. As a part of our joint venture agreement with TSMC, TSMC has agreed to commit substantial wafer manufacturing capacity to us in exchange for our commitment to purchase a substantial portion of our wafers from TSMC, subject to pricing and technology requirements.

In addition, we recently entered into a foundry manufacturing agreement with PSC pursuant to which we and PSC have agreed to jointly develop certain pixel-related process technology and for PSC to process certain of our CMOS image sensors at PSC’s facilities in accordance with the scheduled development approved by both parties.

Under the terms of these supply agreements, we secure manufacturing capacity in any particular period on a purchase order basis. The foundries have no obligation to supply products to us for any specific period, in any specific quantity or at any specific price, except as set forth in a particular purchase order. In general, our reliance on third party foundries involves a number of significant risks, including:

·reduced control over delivery schedules, quality assurance, manufacturing yields and production costs;

·lack of guaranteed production capacity or product supply;

·unavailability of, or delayed access to, next generation or key process technologies; and

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ITEM 1A.   RISK FACTORS — (Continued)

·financial difficulties or disruptions in the operations of third party foundries due to causes beyond our control.

If TSMC, PSC, or any of our other foundries were unable to continue manufacturing our wafers in the required volumes, at acceptable quality, yields and costs, or in a timely manner, we would have to identify and qualify substitute foundries, which would be time consuming and difficult, and could increase our costs or result in unforeseen manufacturing problems. In addition, if competition for foundry capacity increases we may be required to pay increased amounts for manufacturing services. We are also exposed to additional risks if we transfer our production of semiconductors from one foundry to another, as such transfer could interrupt our manufacturing process. Further, some of our foundries may also be developers of image sensor products and if one or more of our other foundries were to decide not to fabricate our companion DSP chips for competitive or other reasons, we would have to identify and qualify other sources for these products.

We rely on a joint venture company for color filter application and on third party service providers for packaging services, which reduces our control over delivery schedules, product quality and cost, and could adversely affect our ability to deliver products to customers.

We rely on VisEra, our joint venture with TSMC, for the color filter processing of our completed wafers. In addition, we rely on ASE and ImPac for substantially all of our ceramic chip packages. We also rely on ImPac, our equity investee, for our plastic chip packages. We rely on XinTec, another investee company, and China Wafer Level CSP, Ltd. for chip scale packages, which are generally used in our products designed for the smallest form factor applications. We currently have plans to expand color filter processing capacity at VisEra and with these service providers. If for any reason one or more of these service providers becomes unable or unwilling to continue to provide color filter processing or packaging services of acceptable quality, at acceptable costs and in a timely manner, our ability to deliver our products to our customers could be severely impaired. We would have to identify and qualify substitute service providers, which could be time consuming and difficult and could result in unforeseen operational problems. Substitute service providers might not be available or, if available, might be unwilling or unable to offer services on acceptable terms.

In addition, if competition for color filter processing or packaging capacity increases, we may be required to pay or invest significant amounts to secure access to these services, which could adversely impact our operating results. The number of companies that provide these services is limited and some of them have limited operating histories and financial resources. In the event our current providers refuse or are unable to continue to provide these services to us, we may be unable to procure services from alternate service providers. Furthermore, if customer demand for our products increases, we may be unable to secure sufficient additional capacity from our current service providers on commercially reasonable terms, if at all. Moreover, our reliance on a limited number of third party service providers to provide color filter processing services subjects us to reduced control over delivery schedules, quality assurance and costs. This lack of control may cause unforeseen product shortages or may increase our costs of manufacturing, assembling or testing of our products, which would adversely affect our operating results.

Fluctuations in our quarterly operating results have caused volatility in the market price of our common stock and make it difficult to predict our future operating results.

Our quarterly operating results have varied significantly from quarter-to-quarter in the past and are likely to vary significantly in the future based on a number of factors, many of which are beyond our control. These factors and other industry risks, many of which are more fully discussed in our other risk factors, include, but are not limited to:

·the volume and mix of our product sales;

·competitive pricing pressures;

·our ability to accurately forecast demand for our products;

·our ability to achieve acceptable wafer manufacturing or back-end processing yields;

·our gain or loss of a large customer;

·our ability to manage our product transitions;

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ITEM 1A.   RISK FACTORS — (Continued)

·the availability of production capacity at the suppliers that manufacture our products or components of our products;

·the growth of the market for products and applications using CMOS image sensors;

·the timing and size of orders from our customers;

·the volume of our product returns;

·the seasonal nature of customer demand for our products;

·the deferral of customer orders in anticipation of new products, product designs or enhancements;

·the announcement and introduction of products and technologies by our competitors;

·the level of our operating expenses; and

·the increased volatility of our effective tax rate as a consequence of our adoption of FASB Interpretation No. 48, or FIN 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109.”

Our introduction of new products and our product mix have affected and may continue to affect our quarterly operating results. Changes in our product mix could adversely affect our operating results, because some products provide higher margins than others. We typically experience lower yields when manufacturing new products through the initial production phase, and consequently our gross margins on new products have historically been lower than our gross margins on our more established products. We also anticipate that the rate of orders from our customers may vary significantly from quarter to quarter. Our operating expenses are relatively fixed, and our inventory levels are based on our expectations of future revenues. Consequently, if we do not achieve the revenues we expect in any quarter, expenses and inventory levels could be disproportionately high, and our operating results for that quarter, and potentially future quarters, may be harmed.

All of these factors are difficult to forecast and could result in fluctuations in our quarterly operating results. Our operating results in a given quarter could be substantially less than anticipated, and, if we fail to meet market analysts’ expectations, a substantial decline in our stock price could result. Fluctuations in our quarterly operating results could adversely affect the price of our common stock in a manner unrelated to our long-term operating performance.

Our business is subject to seasonal fluctuations which may in turn cause fluctuations in our results of operations from period to period.

Many of the products using our image sensors, such as camera cell phones, digital still cameras and cameras for toys and games, are consumer electronics goods. These mass-market camera devices generally have seasonal cycles which historically have caused the sales of our customers to fluctuate quarter-to-quarter. Historically, demand from OEMs and distributors that serve such consumer product markets has been stronger in the second and third quarters of our fiscal year and weaker in the first and fourth quarters of our fiscal year.

In addition, since a very large number of the manufacturers who use our products are located in China, Hong Kong and Taiwan, the pattern of demand for our image sensors has been increasingly influenced by the timing of the extended lunar or Chinese New Year holiday, a period in which the factories which use our image sensors generally close. For example, we believe that the decline in revenues that we experienced in the fourth quarter of fiscal 2007 is partly attributable to the fact that Chinese New Year occurred this year in mid-February, and manufacturing did not resume in full until sometime in March.

Problems with wafer manufacturing and/or back-end processing yields could result in higher product costs and could impair our ability to meet customer demand for our products.

If the foundries manufacturing the wafers used in our products cannot achieve the yields we expect, we will incur higher per unit costs and reduced product availability. Foundries that supply our wafers have experienced problems in the past achieving acceptable wafer manufacturing yields. Wafer yields are a function both of our design technology and the particular foundry’s manufacturing process technology. Certain risks are inherent in the introduction of such new products and technology. Low yields may result from design errors or manufacturing failures in new or existing products. During the early stages of production, production yields for new products are typically lower than those of established products. Unlike many other semiconductor products, optical products can

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ITEM 1A.   RISK FACTORS — (Continued)

be effectively tested only when they are complete. Accordingly, we perform final testing of our products only after they are assembled. As a result, yield problems may not be identified until our products are well into the production process. The risks associated with low yields could be increased because we rely on third party offshore foundries for our wafers, which can increase the effort and time required to identify, communicate and resolve manufacturing yield problems. In addition to wafer manufacturing yields, our products are subject to yield loss in subsequent manufacturing steps, often referred to as back-end processing, such as the application of color filters and micro-lenses, dicing (cutting the wafer into individual devices, or die) and packaging. Any of these potential problems with wafer manufacturing and/or back-end processing yields could result in a reduction in our gross margins and/or our ability to timely deliver products to customers, which could adversely affect our customer relations and make it more difficult to sustain and grow our business. For example, low back-end yields on two of our products adversely impacted our gross margins for the fiscal quarters ended April 30, 2005, July 31, 2005 and October 31, 2005.

If we do not forecast customer demand correctly, our business could be impaired and our stock price may decline.

Our sales are generally made on the basis of purchase orders rather than long-term purchase commitments; however, we manufacture products and build inventory based on our estimates of customer demand. Accordingly, we must rely on multiple assumptions to forecast customer demand. We are continually working to improve our sales forecasting procedures. If we overestimate customer demand, we may manufacture products that we may be unable to sell, or we may have to sell to other customers at lower prices. This could materially and adversely affect our results of operations and financial condition. In addition, our customers may cancel or defer orders at any time by mutual written consent. We have experienced problems with accurately forecasting customer demand in the past. For example there was a shift in the mix of product demand, in particular a shift in demand towards VGA products late in the second quarter of fiscal 2007, and as a result our inventories at the end of the second and third quarters were higher than we intended them to be. We are required to accurately predict customer demand because we must often make commitments to have products manufactured before we receive firm purchase orders from our customers. Conversely, if we underestimate customer demand, we may be unable to manufacture sufficient products quickly enough to meet actual demand, causing us to lose customers and impairing our ability to grow our business. In preparation for new product introductions, we gradually ramp down production of established products. With our 12-14 week production cycle, it is extremely difficult to predict precisely how many units of established products we will need. It is also difficult to accurately predict the speed of the ramp of our new products and the impact on inventory levels presented by the shorter life cycles of end-user products. The shorter product life cycle is a result of an increase in competition and the growth of various consumer-product applications for image sensors. For example, although in the security and surveillance market we continue to sell image-sensor products introduced more than four years ago, in the camera cell phone market, the product life cycle of image sensors can be as little as six months. Under these circumstances, it is possible that we could suffer from shortages for certain products and, if we underestimate market demand, we face the risk of being unable to fulfill customer orders. We also face the risk of excess inventory and product obsolescence if we overestimate market demand for our products and build inventories in excess of demand. Our ability to accurately forecast sales is also a critical factor in our ability to meet analyst expectations for our quarterly and annual operating results. Any failure to meet these expectations would likely lead to a substantial decline in our stock price.

We depend on the increased acceptance of mass-market image sensor applications to grow our business and increase our revenues.

Our business strategy depends in large part on the continued growth of various markets into which we sell our image-sensor products, including the markets for camera cell phones, digital still and video cameras, commercial and security and surveillance applications, personal computers and lap-tops, toys and games, including interactive video games, and automotive applications. Our ability to sustain and grow our business also depends on the continued development of new markets for our products such as medical imaging devices. If these current and new markets do not grow and develop as anticipated, we may be unable to sustain or grow the sales of our products.

In addition, the market price of our common stock may be adversely affected if certain of these new markets do not emerge or develop as expected. Securities analysts may already factor revenue from such new markets into their future estimates of our financial performance and should such markets not develop as expected by such securities analysts the trading price of our common stock could be adversely affected.

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ITEM 1A.   RISK FACTORS — (Continued)

Our lengthy manufacturing, packaging and assembly cycle, in addition to our customers’ design cycle, may result in uncertainty and delays in generating revenues.

The production of our image sensors requires a lengthy manufacturing, packaging and assembly process, typically lasting approximately 12-14 weeks. Additional time may pass before a customer commences volume shipments of products that incorporate our image sensors. Even when a manufacturer decides to design our image sensors into its products, the manufacturer may never ship final products incorporating our image sensors. Given this lengthy cycle, we experience a delay between the time we incur expenditures for research and development and sales and marketing efforts and the time we generate revenue, if any, from these expenditures. This delay makes it more difficult to forecast customer demand, which adds uncertainty to the manufacturing planning process and could adversely affect our operating results. In addition, the product life cycle for certain of our image-sensor products designed for use in certain applications can be relatively short. If we fail to appropriately manage the manufacturing, packaging and assembly process, our products may become obsolete before they can be incorporated into our customers’ products and we may never realize a return on investment for the expenditures we incur in developing and producing these products.

Our ability to deliver products that meet customer demand is dependent upon our ability to meet new and changing requirements for color filter application and sensor packaging.

We expect that as we develop new products to meet technological advances and new and changing industry and customer demands, our color filter application and ceramic, plastic and chip-scale packaging requirements will also evolve. Our ability to continue to profitably deliver products that meet customer demand is dependent upon our ability to obtain third party services that meet these new requirements on a cost-effective basis. We have historically relied exclusively on third parties, and more recently, on one of our joint ventures, to provide these services. There can be no assurances that any of these parties will be able to develop enhancements to the services they provide to us to meet these new and changing industry and customer requirements. Furthermore, even if these service providers are able to develop their services to meet new and evolving requirements, these services may not be available at a cost that enables us to sustain our profitability.

The high level of complexity and integration of our products increases the risk of latent defects, which could damage customer relationships and increase our costs.

Because we integrate many functions on a single chip, our products are complex and are based upon evolving technology. The integration of additional functions into the complex operations of our products could result in a greater risk that customers or end users could discover latent defects or subtle faults after volumes of product have already been shipped. Although we test our products, we have in the past and may in the future encounter defects or errors. For example, in the third quarter of fiscal 2005, we made a provision of $2.7 million related to the possible replacement of products that did not meet a particular customer’s standards. Delivery of products with defects or reliability, quality or compatibility problems may damage our reputation and ability to retain existing customers and attract new customers. In addition, product defects and errors could result in additional development costs, diversion of technical resources, delayed product shipments, increased product returns, product warranty costs for recall and replacement and product liability claims against us which may not be fully covered by insurance.

Historically, our revenues have been dependent upon a few key customers, the loss of one or more of which could significantly reduce our revenues.

Historically, a relatively small number of OEMs, VARs and distributors have accounted for a significant portion of our revenues. Any material delay, cancellation or reduction of purchase orders from one or more of our major customers or distributors could result in our failure to achieve anticipated revenue for a particular period. In addition, if we are unable to retain one or more of our largest OEM, distributor or VAR customers, or if we are unable to maintain our current level of revenues from one or more of these significant customers, our business and results of operation would be impaired and our stock price could decrease, potentially significantly. In fiscal 2007, one OEM customer accounted for approximately 14.0% of our revenues. In fiscal 2007, two distributors accounted for approximately 15.1% and 12.9% of our revenues In addition, approximately 50% of our revenues have historically come from our top five customers. Our business, financial condition, results of operations and cash flows will continue to depend significantly on our ability to retain our current key customers and attract new customers, as well as on the financial condition and success of our OEMs, VARs and distributors.

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ITEM 1A.   RISK FACTORS — (Continued)

Changes in accounting rules for stock-based compensation have adversely affected our reported operating results, and may adversely affect our stock price and our competitiveness in the employee marketplace.

Since our founding, we have used employee stock options and other stock-based compensation to attract, motivate and retain our employees. In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards, or SFAS, No. 123(R), “Share-Based Payment,” or SFAS No. 123(R). We adopted SFAS No. 123(R) on May 1, 2006 and accordingly, we began to measure compensation costs for all stock-based compensation at fair value and recognize these costs as expenses in our Consolidated Statements of Income. The recognition of these expenses in our Consolidated Statements of Income has had a negative effect on our earnings per share, which could negatively impact our future stock price. In addition, if we reduce or alter our use of stock-based compensation to minimize these expenses, our ability to attract, motivate and retain qualified employees may be impaired, which could put us at a competitive disadvantage in the employee marketplace.

We may be required to record a significant charge to earnings if our goodwill, amortizable intangible assets or long-term investments become impaired.

Under generally accepted accounting principles, we are required to review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. We are required to test goodwill for impairment at least annually. Factors that may be considered a change in circumstances indicating that the carrying value of our amortizable intangible assets may not be recoverable include a decline in stock price and market capitalization, and slower growth rates in our industry. We may be required to record a significant charge to earnings in our financial statements during the period in which we determine that our goodwill, amortizable intangible assets or long-term investments have been impaired. Any such charge would adversely impact our results of operations. As of April 30, 2007, our net goodwill and amortizable intangible assets totaled approximately $28.0 million and our long term investments totaled approximately $67.3 million.

We maintain a backlog of customer orders that is subject to cancellation or delay in delivery schedules, and any cancellation or delay may result in lower than anticipated revenues.

Our sales are generally made pursuant to standard purchase orders. We include in our backlog only those customer orders for which we have accepted purchase orders and assigned shipment dates within the upcoming 12 months. Orders constituting our current backlog are subject to cancellation or changes in delivery schedules, and backlog may not necessarily be an indication of future revenue. Any cancellation or delay in orders which constitute our current or future backlog may result in lower than expected revenues.

If we are unable to maintain processes and procedures to sustain effective internal control over our financial reporting, our ability to provide reliable and timely financial reports could be harmed and this could have a material adverse effect on our stock price.

We are required to comply with the rules promulgated under Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires that we prepare an annual management report assessing the effectiveness of our internal control over financial reporting, and requires a report by our independent registered public accounting firm addressing this assessment and the effectiveness of our internal control over financial reporting.

We have in the past discovered, and may in the future discover, areas of our internal control that need improvement. For example, we restated our financial statements for the first, second and third quarters of fiscal 2004. If these or similar types of issues were to arise with respect to our internal controls in future periods, they could impair our ability to produce accurate and timely financial reports.

As our business expands, ongoing compliance with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and maintenance of effective internal control over financial reporting will require that we hire additional qualified finance and accounting personnel. Because other businesses face similar challenges, there is significant competition for such personnel, and there can be no assurance that we will be able to attract and/or retain suitably qualified employees.

Corporate governance regulations have recently increased our compliance costs and could further increase our expenses if changes occur within our business.

Changes in laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act, have imposed new requirements on us and on our officers, directors, attorneys and independent registered

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ITEM 1A.   RISK FACTORS — (Continued)

public accounting firm. In order to comply with these new rules, we added internal resources and have utilized additional outside legal, accounting and advisory services, which increased our operating expenses in fiscal 2005 and fiscal 2006 as compared to prior fiscal years. We expect to incur ongoing operating expenses as we maintain compliance with Section 404. In addition, if we undergo significant modifications to our structure through personnel or system changes, acquisitions, or otherwise, it may be increasingly difficult to maintain compliance with the existing and evolving corporate governance regulations.

There are risks associated with our operations in China.

In December 2000, we established Hua Wei Semiconductor (Shanghai) Co. Ltd., or HWSC, as part of our efforts to streamline our manufacturing process and reduce the costs and working capital associated with the testing of our image-sensor products, and relocated our automated image testing equipment from the United States to China. In addition, we also expect to expand testing capabilities with additional automated testing equipment, which will also be located in China. However, there are significant administrative, legal and governmental risks to operating in China that could result in increased operating expenses or that could prevent us from achieving our objectives in operations. The risks from operating in China that could increase our operating expenses and adversely affect our operating results, financial condition and ability to deliver our products and grow our business include, without limitation:

·difficulties in staffing and managing foreign operations, particularly in attracting and retaining personnel qualified to design, sell and support CMOS image sensors;

·difficulties in coordinating our operations in China with those in California;

·diversion of management attention;

·difficulties in maintaining uniform standards, controls, procedures and policies across our global operations, including inventory management and financial consolidation;

·political and economic instability, which could have an adverse impact on foreign exchange rates in Asia and could impair our ability to conduct our business in China; and

·inadequacy of the local infrastructure to support our needs.

We may experience integration or other problems with potential future acquisitions, which could have an adverse effect on our business or results of operations. New acquisitions could dilute the interests of existing stockholders, and the announcement of new acquisitions could result in a decline in the price of our common stock.

We may in the future make acquisitions of, or investments in, businesses that offer products, services and technologies that we believe would complement our products, including CMOS image sensor manufacturers. We may also make acquisitions of, or investments in, businesses that we believe could expand our distribution channels. Even if we were to announce an acquisition, we may not be able to complete it. In addition, any future acquisition or substantial investment could present numerous risks, including:

·difficulty in realizing the potential technological benefits of the transaction;

·difficulty in integrating the technology, operations or work force of the acquired business with our existing business;

·unanticipated expenses related to technology integration;

·disruption of our ongoing business;

·difficulty in realizing the potential financial or strategic benefits of the transaction;

·difficulty in maintaining uniform standards, controls, procedures and policies;

·possible impairment of relationships with employees, customers, suppliers and strategic partners as a result of integration of new businesses and management personnel;

·reductions in our future operating results from amortization of intangible assets;

·impairment of resulting goodwill; and

·potential unknown or unexpected liabilities associated with acquired businesses.

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ITEM 1A.   RISK FACTORS — (Continued)

We expect that any future acquisitions could include consideration to be paid in cash, shares of our common stock or a combination of cash and our common stock. If and when consideration for a transaction is paid in common stock, it will result in dilution to our existing stockholders.

We may never achieve all of the anticipated benefits from our joint venture with TSMC.

In October 2003, we entered into an agreement with TSMC to form VisEra, a joint venture in Taiwan, for the purposes of providing manufacturing services. In August 2005, we amended and restated our agreement with TSMC in part to enable VisEra to acquire 29.6% of XinTec, a supplier of chip-scale packaging services in which we originally invested in April 2003 and in which we directly hold an approximate four percent interest. In January 2007, we entered into a further amendment to the agreement with TSMC to expand the scope of VisEra’s activities and provide additional funding for the expansion of VisEra.

In January 2006, VisEra acquired certain color filter processing equipment from TSMC and assumed direct responsibility for providing the color filter processing services that had previously been provided by TSMC. We expect that VisEra will be able to provide us with a committed supply of high quality manufacturing services at competitive prices. However, there are significant legal, governmental and relationship risks to developing VisEra, and we cannot ensure that we will receive the expected benefits from the joint venture. For example, VisEra may not be able to provide manufacturing services that have competitive technology or prices, which could adversely affect our product offerings and our ability to meet customer requirements for our products. In addition, the existence of VisEra may also make it more difficult for us to secure dependable services from competing merchant vendors who provide similar manufacturing services.

We may not achieve all of the anticipated benefits of our alliances with, and strategic investments in, third parties.

We expect to develop our business partly through forming alliances or joint ventures with and making strategic investments in other companies, some of which may be companies at a relatively early stage of development. For example, in April 2003, we made an investment in XinTec, a chip scale packaging service company, and in June 2003 we made an investment in ImPac, a plastic packaging service company. In December 2005, VisEra, our joint venture with TSMC, completed the acquisition of a further 29.6% of the issued and outstanding shares of XinTec. In January 2007, TSMC acquired directly a 43.0% interest in XinTec, thus reducing our beneficial ownership in XinTec to 12.4%.

In May 2004, we entered into an agreement with PSC under which we established SOI, a joint venture as a company incorporated under the laws of Taiwan., The purpose of the joint venture is to conduct the business of manufacturing, marketing and selling of certain of our legacy products. In March 2005, we assumed control of the board of directors of SOI and we have consolidated SOI since April 30, 2005.

Our investments in these companies may negatively impact our operating results, because, under certain circumstances, we are required to recognize our portion of any loss recorded by each of these companies or to consolidate them into our operating results. We expect to continue to utilize partnerships, strategic alliances and investments, particularly those that enhance our manufacturing capacity and those that provide manufacturing services and testing capability. These investments and partnering arrangements are crucial to our ability to grow our business and meet the increasing demands of our customers. However, we cannot ensure that we will achieve the benefits expected as a result of these alliances. For example, we may not be able to obtain acceptable quality and/or wafer manufacturing yields from these companies, which could result in higher operating costs and could impair our ability to meet customer demand for our products. In addition, certain of these investments or partnering relationships may place restrictions on the scope of our business, the geographic areas in which we can sell our products and the types of products that we can manufacture and sell. For example, our agreement with TSMC provides that we may not engage in business that will directly compete with the business of VisEra. This type of non-competition provision may impact our ability to grow our business and to meet the demands of our customers.

Changes in our relationships with our joint ventures and/or companies in which we hold less than a majority interest could change the way we account for such interests in the future.

As part of our strategy, we have formed joint ventures with two of our foundry partners, and we hold a minority interest in two companies from which we purchase certain manufacturing services. Under the applicable provisions of generally accepted accounting principles in the United States of America, we currently consolidate one

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ITEM 1A.   RISK FACTORS — (Continued)

of these joint ventures into our consolidated financial statements and results of operations, and record the equity interests that we do not own as minority interests. For the investments that we account for under the equity method, we record as part of other income or expense our share of the increase or decrease in the equity of the companies in which we have invested. It is possible that, in the future, our relationships and/or our interests in or with these joint ventures or other investees could change. Such changes have in the past, and could in the future result in deconsolidation or consolidation of such entities, as the case may be, which could result in changes in our reported results.

We may be unable to adequately protect our intellectual property, and therefore we may lose some of our competitive advantage.

We rely on a combination of patent, copyright, trademark and trade secret laws as well as nondisclosure agreements and other methods to protect our proprietary technologies. We have been issued patents and have a number of pending United States and foreign patent applications. However, we cannot provide assurance that any patent will be issued as a result of any applications or, if issued, that any claims allowed will be sufficiently broad to protect our technology. It is possible that existing or future patents may be challenged, invalidated or circumvented. For example, in August 2002 we initiated a patent infringement action in Taiwan, Republic of China against IC Media Corporation of San Jose, California for infringement of a Taiwanese patent that had been issued to us. In response to our patent infringement action, in October 2002, IC Media Corporation initiated a cancellation proceeding in the Taiwan Intellectual Property Office with respect to our patent. In July 2003, the Taiwan Intellectual Property Office made an initial determination to grant the cancellation of the subject patent, which decision was upheld by the Taiwan Ministry of Economic Affairs and the High Administrative Court. We decided not to appeal such decision by the May 31, 2005 deadline. Although we do not believe the cancellation of the Taiwanese patent at issue in the dispute described above has had a material adverse effect on our business or prospects, there may be other situations where our inability to adequately protect our intellectual property rights could materially and adversely affect our competitive position and operating results. If a third party can copy or otherwise obtain and use our products or technology without authorization, develop corresponding technology independently or design around our patents, this could materially adversely affect our business and prospects. Effective patent, copyright, trademark and trade secret protection may be unavailable or limited in foreign countries. Any disputes over our intellectual property rights, whatever the ultimate resolution of such disputes, may result in costly and time-consuming litigation or require the license of additional elements of intellectual property for a fee.

Litigation regarding intellectual property could divert management attention, be costly to defend and prevent us from using or selling the challenged technology.

In recent years, there has been significant litigation in the United States involving intellectual property rights, including in the semiconductor industry. We have in the past been, and may in the future be, subject to legal proceedings and claims with respect to our intellectual property, including such matters as trade secrets, patents, product liabilities and other actions arising out of the normal course of business. These claims may increase as our intellectual property portfolio becomes larger or more valuable. Intellectual property claims against us, and any resulting lawsuit, may cause us to incur significant expenses, subject us to liability for damages and invalidate our proprietary rights. In fiscal 2002, we paid $3.5 million to settle an intellectual property litigation matter. Any potential intellectual property litigation against us would likely be time-consuming and expensive to resolve and would divert management’s time and attention and could also force us to take actions such as:

·ceasing the sale or use of products or services that incorporate the infringed intellectual property;

·obtaining from the holder of the infringed intellectual property a license to sell or use the relevant technology, which license may not be available on acceptable terms, if at all; or

·redesigning those products or services that incorporate the disputed intellectual property, which could result in substantial unanticipated development expenses and delay and prevent us from selling the products until the redesign is completed, if at all.

If we are subject to a successful claim of infringement and we fail to develop non-infringing intellectual property or license the infringed intellectual property on acceptable terms and on a timely basis, we may be unable to sell some or all of our products, and our operating results could be adversely affected. We may in the future initiate claims or litigation against third parties for infringement of our intellectual property rights or to determine the scope and validity of our proprietary rights or the proprietary rights of competitors. These claims could also result in significant expense and the diversion of technical and management attention.

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ITEM 1A.   RISK FACTORS — (Continued)

We have been named as a defendant in certain litigation that could have a material adverse impact on our operating results and financial condition.

We are currently a defendant in ongoing litigation matters as described in Part I, Item 3 — “Legal Proceedings” of this Annual Report. We have reached an agreement in principle to settle the shareholder class action lawsuit pending in the United States District Court for the Northern District of California. We accrued $3.3 million in litigation settlement expenses during the quarter ended October 31, 2006 to reflect our share of the settlement, including unreimbursed defense costs, net of $13.0 million in recoverable insurance proceeds. The parties have executed a Stipulation of Settlement that was filed with the Court in May 2007. Notice of the settlement must be provided to the purported shareholder class and the Court must grant final approval of the settlement. There is no assurance that the settlement will become final. If there is no final settlement of the matters described in Part I, Item 3 — “Legal Proceedings,” and we fail to prevail in such matters, such failure could have a material adverse effect on our consolidated financial position, results of operations, or cash flows in the future. In addition, the results of litigation are uncertain, and the litigation process may utilize a portion of our cash resources and divert management’s attention from the day-to-day operations of our company, all of which could harm our business.

If we do not effectively manage our growth, our ability to increase our revenues and improve our earnings could be adversely affected.

Our growth has placed, and will continue to place, a significant strain on our management and other resources. To manage our growth effectively, we must, among other things:

·significantly improve our operational, financial and accounting systems;

·train and manage our existing employee base;

·attract and retain qualified personnel with relevant experience; and

·effectively manage accounts receivable and inventory.

For example, our failure to effectively manage our inventory levels could result either in excess inventories, which could adversely affect our gross margins and operating results, or lead to an inability to fill customer orders, which would result in lower sales and could harm our relationships with existing and potential customers.

We must also manage multiple relationships with customers, business partners and other third parties, such as our foundries and process and assembly vendors. Moreover, our growth may significantly overburden our management and financial systems and other resources. We may not make adequate allowances for the costs and risks associated with our expansion. In addition, our systems, procedures or controls may not be adequate to support our operations, and we may not be able to expand quickly enough to capitalize on potential market opportunities. Our future operating results will also depend, in part, on our ability to expand sales and marketing, research and development, accounting, finance and administrative support.

Our future tax rates could be higher than we anticipate if the proportion of future operating income generated outside the U.S. by our foreign subsidiaries is less than we expect, or the mix differs from that which we expect.

A number of factors will affect our future tax rate, and certain of these factors could increase our effective tax rate in future periods, which could adversely impact our operating results. For example, the complex rules for accounting for the tax effects of stock-based compensation under SFAS No. 123(R) resulted in an increase in our effective tax rate in the fiscal year ended April 30, 2007. Similarly, we anticipate that there will be greater volatility in our future effective tax rates due to the adoption of FIN 48 in the fiscal year which began on May 1, 2007. In addition, our future effective tax rates could be negatively affected by changes in tax laws or the interpretation of tax laws, by unanticipated decreases in the amount of revenue or earnings in countries with low statutory tax rates, or by changes in the valuation of our deferred tax assets and liabilities.

In common with all multinational companies, we are subject to tax in multiple jurisdictions. The tax authorities in any given jurisdiction may seek to increase the taxes being collected by, for example, asserting that the transfer prices we charge between related entities are either too high or too low depending on which side of the transaction they are looking at. Although we believe we have provided sufficient taxes for all prior periods, adjustments could be proposed that would, in some cases, result in liabilities in excess of such provisions.

26

ITEM 1A.   RISK FACTORS — (Continued)

Our sales through distributors increase the complexity of our business and may reduce our ability to forecast revenues.

During fiscal 2006 and 2007, approximately 31.1% and 40.0%, respectively, of our revenues came from sales through distributors. We expect that revenues from sales through distributors will continue to represent higher proportion of our total revenues than they have in the past. Selling through distributors reduces our ability to accurately forecast sales and increases the complexity of our business, requiring us to, among other matters:

·manage a more complex supply chain;

·manage the level of inventory at each distributor;

·provide for credits, return rights and price protection;

·estimate the impact of credits, return rights, price protection and unsold inventory at distributors; and

·monitor the financial condition and creditworthiness of our distributors.

Any failure to manage these challenges could cause us to inaccurately forecast sales and carry excess or insufficient inventory, thereby adversely affecting our operating results.

We face foreign business, political and economic risks, because a majority of our products and those of our customers are manufactured and sold outside of the United States.

We face difficulties in managing our third party foundries, color filter application service providers, ceramic and plastic packaging service providers and our foreign distributors, most of whom are located in Asia. Any political and economic instability in Asia might have an adverse impact on foreign exchange rates and could cause service disruptions for our vendors and distributors and adversely affect our customers.

Sales outside of the United States accounted for substantially all of our revenues for fiscal 2006 and 2007. We anticipate that sales outside of the United States will continue to account for nearly all of our revenues in future periods. Dependence on sales to foreign customers involves certain risks, including:

·longer payment cycles;

·the adverse effects of tariffs, duties, price controls or other restrictions that impair trade;

·decreased visibility as to future demand;

·difficulties in accounts receivable collections; and

·burdens of complying with a wide variety of foreign laws and labor practices.

Sales of our products have to date been denominated principally in U.S. dollars. Over the last several years, the U.S. dollar has weakened against most other currencies. Future increases in the value of the U.S. dollar, if any, would increase the price of our products in the currency of the countries in which our customers are located. This may result in our customers seeking lower-priced suppliers, which could adversely impact our operating results. A larger portion of our international revenues may be denominated in foreign currencies in the future, which would subject us to increased risks associated with fluctuations in foreign exchange rates.

Our business could be harmed if we lose the services of one or more members of our senior management team, or if we are unable to attract and retain qualified personnel.

The loss of the services of one or more of our executive officers or key employees, which has occurred from time to time, or the decision of one or more of these individuals to join a competitor, could adversely affect our business and harm our operating results and financial condition. Our success depends to a significant extent on the continued service of our senior management and certain other key technical personnel. None of our senior management is bound by an employment or non-competition agreement. We do not maintain key man life insurance on any of our employees.

Our success also depends on our ability to identify, attract and retain qualified sales, marketing, finance, management and technical personnel, particularly analog or mixed signal design engineers. We have experienced, and may continue to experience, difficulty in hiring and retaining candidates with appropriate qualifications. If we

27

ITEM 1A.   RISK FACTORS — (Continued)

do not succeed in hiring and retaining candidates with appropriate qualifications, our revenues and product development efforts could be harmed.

We are in the process of upgrading our enterprise resource planning and other management information systems.

As our business grows and becomes more complex, we have to expand and upgrade our enterprise resource planning system and other management information systems which are critical to the operational, accounting and financial functions of our company. We have evaluated alternative solutions, both short-term and long-term, to meet the operating, administrative and financial reporting requirements of our business and have decided to implement a system based on a suite of application software developed by Oracle Corporation.  Implementation of such a system requires significant management attention and resources over an extended period of time and any significant design errors in or delay in the implementation of the system could materially adversely affect our operating results and impact our ability to manage our business.

Our operations may be impaired as a result of disasters, business interruptions or similar events.

Disasters and business interruptions such as earthquakes, water, fire, electrical failure, accidents and epidemics affecting our operating activities, major facilities, and employees’ and customers’ health could materially and adversely affect our operating results and financial condition. In particular, our Asian operations and most of our third party service providers involved in the manufacturing of our products are located within relative close proximity. Therefore, any disaster that strikes within close proximity of that geographic area could be extremely disruptive to our business and could materially and adversely affect our operating results and financial condition. We do not currently have a disaster recovery plan.

Acts of war and terrorist acts may seriously harm our business and revenue, costs and expenses and financial condition.

Acts of war or terrorist acts, wherever they occur around the world, may cause damage or disruption to our business, employees, facilities, suppliers, distributors or customers, which could significantly impact our revenue, costs, expenses and financial condition. In addition, as a company with significant operations and major distributors and customers located in Asia, we may be adversely impacted by heightened tensions and acts of war that occur in locations such as the Korean Peninsula, Taiwan and China. The potential for future terrorist attacks, the national and international responses to terrorist attacks or perceived threats to national security, and other acts of war or hostility have created many economic and political uncertainties that could adversely affect our business and results of operations in ways that cannot presently be predicted. We are uninsured for losses and interruptions caused by terrorist acts and acts of war.

Risks Related to the Securities Markets and Ownership of Our Common Stock

Provisions in our charter documents and Delaware law, as well as our stockholders’ rights plan, could prevent or delay a change in control of our company and may reduce the market price of our common stock.

Provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable. These provisions include:

·adjusting the price, rights, preferences, privileges and restrictions of preferred stock without stockholder approval;

·providing for a classified board of directors with staggered, three year terms;

·requiring supermajority voting to amend some provisions in our certificate of incorporation and bylaws;

·limiting the persons who may call special meetings of stockholders; and

·prohibiting stockholder actions by written consent.

Provisions of Delaware law also may discourage, delay or prevent another company from acquiring or merging with us. Our board of directors adopted a preferred stock rights agreement in August 2001. Pursuant to the rights agreement, our board of directors declared a dividend of one right to purchase one one-thousandth share of our Series A Participating Preferred Stock for each outstanding share of our common stock. The dividend was paid on September 28, 2001 to stockholders of record as of the close of business on that date. Each right entitles the registered holder to purchase from us one one-thousandth of a share of Series A Preferred at an exercise price of

28

ITEM 1A.   RISK FACTORS — (Continued)

$176.00, subject to adjustment. The exercise of the rights could have the effect of delaying, deferring or preventing a change of control of our company, including, without limitation, discouraging a proxy contest or making more difficult the acquisition of a substantial block of our common stock. The rights agreement could also limit the price that investors might be willing to pay in the future for our common stock.

Our stock has been and will likely continue to be subject to substantial price and volume fluctuations due to a number of factors, many of which are beyond our control, that may prevent our stockholders from selling our common stock at a profit.

The market price of our common stock has fluctuated substantially, and there can be no assurance that such volatility will not continue. Since the beginning of fiscal 2002 through April 30, 2007, the closing sales price of our common stock has ranged from a high of $33.90 per share to a low of $1.26 per share. The closing sales price of our common stock on June 22, 2007 was $17.38 per share. The securities markets have experienced significant price and volume fluctuations in the past, and the market prices of the securities of semiconductor companies have been especially volatile. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our common stock in spite of our operating performance. The market price of our common stock may fluctuate significantly in response to a number of factors, including:

·actual or anticipated fluctuations in our operating results;

·changes in expectations as to our future financial performance;

·changes in financial estimates of securities analysts;

·release of lock-up or other transfer restrictions on our outstanding shares of common stock or sales of additional shares of common stock;

·sales or the perception in the market of possible sales of shares of our common stock by our directors, officers, employees or principal stockholders;

·changes in market valuations of other technology companies; and

·announcements by us or our competitors of significant technical innovations, design wins, contracts, standards or acquisitions.

Due to these factors, the price of our stock may decline and investors may be unable to resell their shares of our stock for a profit. In addition, the stock market experiences extreme volatility that often is unrelated to the performance of particular companies. These market fluctuations may cause our stock price to decline regardless of our performance.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

Our principal offices are located in a leased 43,960 square foot facility in Sunnyvale, California. Our lease on the Sunnyvale facility expires on May 31, 2009 with the right to extend the lease for an additional five years. In December 2005, we leased an additional 48,896 square feet of office space in an adjacent facility in Sunnyvale, California. Our lease on the second Sunnyvale facility expires on June 30, 2009 with the right to extend the lease for an additional five years. In March 2007, we purchased a complex of four buildings in Santa Clara County, California, totaling approximately 207,000 square feet for an aggregate purchase price of approximately $37.5 million. We expect to spend approximately $10.0 million to complete the interior build-out of the buildings and currently expect to occupy two of the four buildings in mid-2008 upon completion of the work.

In January 2007, we entered into a Land-Use-Right Purchase Agreement, or the Purchase Agreement, with the Construction and Transportation Commission of the Pudong New District, Shanghai through our wholly-owned subsidiary, Shanghai OmniVision IC Design Co. Ltd., or SDC. The Purchase Agreement has an effective date of December 31, 2006. Under the terms of the Purchase Agreement, we agreed to pay an aggregate amount of approximately $0.6 million (the “Purchase Price”) in exchange for the right to use approximately 323,000 square feet of land located in Shanghai for a period of 50 years. In addition, we are obligated to invest a minimum of approximately $30.0 million to develop the land and construct facilities, which amount includes the Purchase Price. Construction of the facilities on the land must commence and be completed during the time period beginning on

29

ITEM 2.   PROPERTIES — (Continued)

June 30, 2007 and ending on June 30, 2009, subject to an additional one-year extension under limited circumstances. We may use the land solely for the purposes of industrial use and/or scientific research.

In December 2001, our Chinese subsidiary, HWSC, entered into an agreement to lease 447,400 square feet of land in Shanghai, China on which we have built a facility that is currently used for product design and testing and may possibly be used for other activities in the future. This lease agreement expires in December 2051. We believe that our existing or readily available facilities are suitable and adequate for our present purposes.

ITEM 3.   LEGAL PROCEEDINGS

From time to time, we have been subject to legal proceedings and claims with respect to such matters as patents, product liabilities and other actions arising out of the normal course of business.

On November 29, 2001, a complaint captioned McKee v. OmniVision Technologies, Inc., et. al., Civil Action No. 01 CV 10775, was filed in the United States District Court for the Southern District of New York against us, some of our directors and officers, and various underwriters for our initial public offering. Plaintiffs generally allege that the named defendants violated federal securities laws because the prospectus related to our offering failed to disclose, and contained false and misleading statements regarding, certain commissions purported to have been received by the underwriters, and other purported underwriter practices in connection with their allocation of shares in our offering. The complaint seeks unspecified damages on behalf of a purported class of purchasers of our common stock between July 14, 2000 and December 6, 2000. Substantially similar actions have been filed concerning the initial public offerings for more than 300 different issuers, and the cases have been coordinated as In re Initial Public Offering Securities Litigation, 21 MC 92. Claims against our directors and officers have been dismissed without prejudice pursuant to a stipulation. On February 19, 2003, the Court issued an order dismissing all claims against us except for a claim brought under Section 11 of the Securities Act of 1933.

The issuer defendants and plaintiffs negotiated a stipulation of settlement for the claims against the issuer defendants, including us, that was submitted to the Court for approval. In August 2005, the Court preliminarily approved the settlement. In December 2006, the appellate court overturned the certification of classes in the six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings. Because class certification is a condition of the settlement, it is unlikely that the current settlement will receive final court approval. In that event, any revised or future settlement would be uncertain. If the litigation proceeds, we believe that we have meritorious defenses to plaintiffs’ claims and intend to defend the action vigorously.

On June 10, 2004, the first of several putative class actions was filed against us and certain of our present and former directors and officers in federal court in the Northern District of California on behalf of investors who purchased our common stock at various times from February 2003 through June 9, 2004. Those actions were consolidated under the caption In re OmniVision Technologies, Inc., No. C-04-2297-SC, and a consolidated complaint was filed. The consolidated complaint asserts claims on behalf of purchasers of our common stock between June 11, 2003 and June 9, 2004, and seeks unspecified damages. The consolidated complaint generally alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by allegedly engaging in improper accounting practices that purportedly led to our financial restatement. On July 29, 2005, the court denied our motion to dismiss the complaint. The parties engaged in settlement discussions and in November 2006, the parties reached an agreement in principle to settle this litigation. The total amount of the proposed settlement is approximately $13.8 million, of which approximately $0.8 million would be contributed by us and the remainder would be funded by insurance carriers that issued Directors and Officers Liability Insurance Policies to us. We accrued $3.3 million during fiscal 2007, as our share of the settlement, including unreimbursed defense costs, net of the $13.0 million in recoverable insurance proceeds. The parties have executed a Stipulation of Settlement that was filed with the Court on May 15, 2007. On May 25, 2007, the Court issued an Order preliminarily approving the settlement and providing for notice of the settlement to be provided to the purported shareholder class. The Order also scheduled a hearing on September 7, 2007 to determine whether the proposed settlement is fair, reasonable and adequate to the purported class and should receive final approval by the Court. As a result of the pending settlement, the parties have agreed to stay discovery and other proceedings. We believe that ultimate settlement is probable at the currently estimated amount. There is no assurance that the Court will grant such approval, or that the settlement will become final. If the settlement does not occur and litigation against us continues, we believe that we have meritorious defenses and intend to defend the case vigorously. If the litigation continues, we cannot estimate whether the result of the litigation would have a material adverse effect on our financial condition, results of operations or cash flows.

30

ITEM 3.   LEGAL PROCEEDINGS — (Continued)

On October 20, 2005, a purported shareholder derivative complaint, captioned Hackl v. Hong, No. 1:05-CV-050985, was filed in Santa Clara County Superior Court for the State of California. This derivative action contains allegations that were virtually identical to the prior state court derivative actions that were voluntarily dismissed, and which were based on the allegations contained in the securities class actions. The complaint generally sought unspecified damages and equitable relief based on causes of action against various of our present and former directors and officers for purported breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment and violations of California Corporations Code. We were named solely as a nominal defendant against whom no monetary recovery was sought. Pursuant to a January 20, 2006 Court Order, plaintiff furnished a bond for reasonable expenses in order to proceed with his derivative action. On May 15, 2006, the Court sustained our demurrer to the complaint with leave to amend on the grounds that the plaintiff failed to make a pre-litigation demand on our board of directors and fails to sufficiently plead that demand is futile. On October 4, 2006, the Court sustained our demurrer to the amended complaint as well and again granted plaintiff leave to amend. On May 10, 2007, the Court sustained our demurrer contending that plaintiff’s amended complaint failed to allege adequately why no pre-litigation demand had been made on the OmniVision Board of Directors, but granted plaintiff leave to further amend the complaint. Simultaneously, the parties advised the Court that they had reached a settlement in principle. The parties executed a Stipulation of Settlement that was filed with the Court on June 18, 2007. On June 26, 2007, the Court entered an order approving the settlement, pursuant to which we agreed to pay a settlement fee in the amount of $200,000.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No stockholder votes took place during the fourth quarter of fiscal 2007.

31

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Price Range of Common Stock

Our common stock has been quoted on the Nasdaq National Market under the symbol “OVTI” since our initial public offering in July 2000. Prior to that time, there was no public market for our common stock. The following table sets forth for the periods indicated the high and low sale prices per share of our common stock as reported on the Nasdaq National Market.

	High		Low
Fiscal 2007:
First quarter	$	34.49	$	17.21
Second quarter	19.20		13.85
Third quarter	18.90		11.00
Fourth quarter	14.93		11.29
Fiscal 2006:
First quarter	$	16.29	$	13.36
Second quarter	14.95		11.81
Third quarter	25.23		12.81
Fourth quarter	31.02		23.99

On June 22, 2007, the reported last sale price of our common stock on the Nasdaq National Market was $17.38 per share. As of June 22, 2007, there were approximately 74 holders of record of our common stock. This number does not include stockholders whose shares are held in trust by other entities. The actual number of stockholders is greater than this number of holders of record. We estimate that the number of beneficial stockholders of the shares of our common stock as of June 22, 2007 was approximately 20,000.

Dividend Policy

We have never declared or paid cash dividends on our capital stock. Other than for the repurchase of our common stock as described below, we currently expect to retain our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the next 12 months.

Repurchase of Our Common Stock

On June 21, 2005, our board of directors authorized the repurchase in an open-market program of up to an aggregate of $100 million of our common stock. Repurchases under the open-market program were authorized for a twelve-month period ended June 21, 2006. At the expiration of the program on June 21, 2006, we had cumulatively repurchased 5,870,000 shares of our common stock for an aggregate cost of approximately $79.6 million.

On February 27, 2007, our board of directors approved an additional stock repurchase program that provides for the repurchase of up to $100 million of our outstanding common stock. Subject to applicable securities laws, such repurchases will be at times and in amounts as we deem appropriate, based on factors such as market conditions, legal requirements and other corporate considerations. We did not make any purchases of our common stock in the three months ended April 30, 2007. See the section entitled “Capital Resources” in Item 7 of this Annual Report on Form 10-K for further information on this program.

32

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES — (Continued)

Performance Graph

Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the price performance of our common stock shall not be deemed “filed” with the SEC or “Soliciting Material” under the Securities Exchange Act of 1934, as amended, or subject to Regulation 14A or 14C, or to liabilities of Section 18 of the Exchange Act except to the extent we specifically request that such information be treated as soliciting material or to the extent we specifically incorporate this information by reference.

The following is a line graph comparing the cumulative total return to stockholders of our common stock at April 30, 2007 since April 30, 2002, to the cumulative total return over such period of (i) The Nasdaq Stock Market United States Index and (ii) the S&P Semiconductors Index.

	4/02	4/03	4/04	4/05	4/06	4/07
OmniVision Technologies, Inc.	100.00	204.46	376.77	235.35	489.06	227.61
NASDAQ Composite	100.00	84.83	114.47	114.98	142.84	156.41
S&P Semiconductors	100.00	64.61	89.33	81.30	92.28	91.01

*Assumes that $100.00 was invested on April 30, 2002 in our common stock and in the Nasdaq Stock Market (U.S.) Index and the S&P Semiconductor Index, and that all dividends were reinvested. No dividends have been declared on our common stock. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

33

ITEM 6.   SELECTED FINANCIAL DATA

	Year Ended April 30,
	2007(2)			2006		2005			2004		2003
	(in thousands, except per share data)
Consolidated Statements of Income data:
Revenues	$	528,143		$	491,926	$	388,062		$	318,123	$	108,998
Cost of revenues	372,776			310,250		231,508			194,106		66,904
Gross profit	155,367			181,676		156,554			124,017		42,094
Operating expenses:
Research, development and related	67,570			40,572		25,494			15,568		11,700
Selling, general and administrative	58,674			35,320		29,012			22,387		11,032
Litigation settlement, net of recovery of $13,000	3,300			—		—			—		—
Total operating expenses	129,544			75,892		54,506			37,955		22,732
Income from operations	25,823			105,784		102,048			86,062		19,362
Interest income, net	14,580			8,949		4,218			1,696		802
Other income (expense), net	(1,285		)	933		(173		)	1,250		—
Income before income taxes and minority interest	39,118			115,666		106,093			89,008		20,164
Provision for income taxes	9,392			23,133		29,706			30,263		4,840
Minority interest	5,753			3,385		—			—		—
Net income	$	23,973		$	89,148	$	76,387		$	58,745	$	15,324
Net income per share:
Basic (1)	$	0.44		$	1.64	$	1.35		$	1.11	$	0.34
Diluted (1)	$	0.43		$	1.56	$	1.24		$	0.98	$	0.31
Shares used in computing net income per share:
Basic (1)	54,706			54,268		56,688			52,856		45,357
Diluted (1)	55,234			56,958		61,566			59,688		50,200

(1)Amounts have been retroactively restated for a 2-for-1 stock split, which was effective on February 17, 2004.

(2)On May 1, 2006, we adopted the provisions of SFAS No. 123(R) for recording stock-based compensation.

	April 30,
	2007		2006		2005		2004		2003
	(in thousands)
Consolidated Balance Sheet data:
Cash and cash equivalents	$	190,878	$	240,227	$	170,457	$	114,653	$	39,288
Restricted cash	—		—		—		1,072		—
Working capital	357,027		363,252		342,755		271,919		80,864
Total assets	688,059		577,269		479,833		345,836		117,953
Total current liabilities	158,685		123,008		78,073		45,823		21,410
Non-current portion of long-term debt	27,576		308		—		—		—
Retained earnings (accumulated deficit)	240,084		216,111		126,963		50,576		(8,169		)
Total stockholders’ equity	490,456		422,807		390,098		300,013		96,543

34

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with our audited consolidated financial statements and the notes thereto included in Item 8 of this Annual Report on Form 10-K.

Overview

We design, develop and market high performance, highly integrated and cost efficient semiconductor image sensor devices. Our main products, image-sensing devices which we refer to by the name CameraChip™ image sensors, capture an image electronically and are used in a number of consumer and commercial mass-market applications. Our CameraChip image sensors are manufactured using the complementary metal oxide semiconductor, or CMOS, fabrication process and are predominantly single-chip solutions that integrate several distinct functions including image capture, image processing, color processing, signal conversion and output of a fully processed image or video stream. We believe that our highly integrated image sensors enable camera device manufacturers to build high quality camera products that are smaller, less complex, more reliable, more cost effective and more power efficient than cameras using traditional charge-coupled devices, or CCDs.

The Current Economic and Market Environment

We operate in a challenging economic environment that has undergone significant changes in technology and in patterns of global trade. We strive to remain a leader in the development and marketing of image sensing devices based on the CMOS fabrication process and have benefited from the growing market demand for and acceptance of this technology.

We sell our products worldwide directly to original equipment manufacturers, or OEMs, which include branded customers and contract manufacturers, and value added resellers, or VARs, and indirectly through distributors. In order to ensure that we address all available markets for our image sensors, we divide our marketing efforts into two separate departments. The Mainstream Products marketing department addresses the camera cell phone and digital still camera, or DSC, markets, and the Advanced Products marketing department addresses the security and surveillance, toys and games, personal computers, automotive and medical markets.

In the camera cell phone market in particular, future revenues depend to a large extent on design wins where, on the basis of an exhaustive evaluation of available products, a particular hand-set maker determines which image sensor to design into one or more specific models. There is generally a time lag of between six and nine months between the time of a particular design win and the first shipments of the designated product. Design wins are also an important driver in the many other markets that we address, and in some cases, such as automotive applications, the time lag between a particular design win and first revenue can be longer than one year.

The overwhelming majority of sales of our products depend on decisions by engineering designers and manufacturers of products that incorporate image sensors to specify one of our products rather than one made by a competitor. In most cases, the decision to specify a particular product requires conforming other specifications of the product to the chosen image sensor and makes subsequent changes both difficult and expensive. Accordingly, the ability to produce and deliver on time reliable products in large quantities is a key competitive differentiator. Since our inception, we have shipped more than 550 million image sensors, including approximately 250 million in fiscal 2007, which demonstrates the capabilities of our production system, including our sources of offshore fabrication.

We currently outsource the wafer fabrication and packaging of our image-sensor products to third parties.  We outsource the color filter and micro-lens phases of production to a joint venture. This approach allows us to focus our resources on the design, development, marketing and testing of our products and significantly reduces our capital requirements.

To increase and enhance our production capabilities, last year we completed a project with TSMC, our principal wafer supplier and one of the largest wafer fabrication companies in the world, to increase from two to four the number of their fabrication facilities, at which our products can be produced. VisEra, our joint venture with TSMC and our investments in two key back-end packaging suppliers are part of a broad strategy to ensure that we have sufficient back-end capacity for the processing of our image sensors in the various formats required by our customers. We are currently expanding our capacity with VisEra. In January 2007, we amended our joint venture

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

agreement with TSMC to each invest an additional $27 million in VisEra. Separately, TSMC purchased 90.5 million shares from XinTec to expand XinTec’s capacity. In February 2007, we entered into a foundry manufacturing agreement with Powerchip Semiconductor Corporation, or PSC. We currently perform the final testing of the majority of our products ourselves. We are also expanding our testing capacity in China, as well as our overall capability to design more custom products for our customers. As necessary, we will make further investments to ensure that we have sufficient production capacity to meet the demands of our customers as part of our ongoing efforts to lower production costs to offset, at least in part, the continuing pressure we experience on prices.

Since our end-user customers market and sell their products worldwide, our revenues by geographic location are not necessarily indicative of the geographic distribution of end-user sales, but rather indicate where the products and/or their components are manufactured or sourced. The revenues by geography are based on the country or region in which our customers issue purchase orders to us.

Many of the products using our image sensors, such as camera cell phones, digital still cameras and cameras for toys and games, are consumer electronics goods. These mass-market camera devices generally have seasonal cycles which historically have caused the sales of our customers to fluctuate quarter-to-quarter. Historically, demand from OEMs and distributors that serve such consumer product markets has been stronger in the second and third quarters of our fiscal year and weaker in the first and fourth quarters of our fiscal year. In addition, since a very large number of the manufacturers who use our products are located in China, Hong Kong and Taiwan, the pattern of demand for our image sensors has been increasingly influenced by the timing of the extended lunar or Chinese New Year holiday, a period in which the factories which use our image sensors generally close.

We believe that the market opportunity represented by camera cell phones remains very large. We benefited from growth in shipments of image sensors, particularly for camera cell phones in fiscal 2007, driven by increased demand for our VGA, 1.3-megapixel and 2.0-megapixel image sensors.

We also believe that, like the digital still camera market, camera cell phone demand will not only continue to shift toward higher resolutions, but also will increasingly fragment into multiple resolution categories. In addition, there is increased demand for customization, and several different interface standards are coming to maturity. All of these trends will require the development of an increasing variety of products.

As the markets for image sensors have grown, we have experienced competition from manufacturers of CMOS and CCD image sensors. Our principal competitors in the market for CMOS image sensors include MagnaChip, Micron, Samsung, ST Microelectronics and Toshiba. We expect to see continued price competition in the image sensor market for camera cell phones and digital cameras as those markets continue to grow. Although we believe that we currently compete effectively in those markets, our competitive position could be impaired by companies that have greater financial, technical, marketing, manufacturing and distribution resources, broader product lines, better access to large customer bases, greater name recognition, longer operating histories and more established strategic and financial relationships than we do. Such companies may be able to adapt more quickly to new or emerging technologies and customer requirements or devote greater resources to the promotion and sale of their products. Many of these competitors own and operate their own fabrication facilities, which in certain circumstances may give them the ability to price their products more aggressively than we can or may allow them to respond more rapidly than we can to changing market opportunities.

As a result of the increase in competition and the growth of various consumer-product applications for image sensors, we have experienced a shortening in the life cycle of some image-sensor products. For example, although in the security and surveillance market we continue to sell image sensors introduced more than four years ago, in the camera cell phone market, product life cycles can be as short as six months. With the shortening of product life cycles, it will be increasingly difficult to accurately forecast customer demand for our products. As a result, we face the risk of being unable to fulfill customer orders if we underestimate market demand and the risks of excess inventory and product obsolescence if we overestimate market demand for our products. The shortening of product life cycles also increases the importance of having short product development cycles and being accurate in the prediction of market trends in the design of new products. The reduction in product life cycles increases the importance of our continued investment in research and development, which we consider to be critical to our future success.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

In common with many other semiconductor products and as a response to competitive pressures, the average selling prices, or ASPs, of image sensor products have declined steadily since their introduction, and we expect ASPs to continue to decline in the future. Accordingly, in order to maintain our gross margins, we and our suppliers have to work continuously to lower our manufacturing costs and increase our production yields, and in order to maintain or grow our revenues, we have to increase the number of units we sell by a large enough amount to offset the effect of declining ASPs. In addition, if we are unable to timely introduce new products that can take advantage of smaller process geometries or new products that incorporate more advanced technology and include more advanced features that can be sold at higher average selling prices, our gross margin will decline.

We have migrated the production of our new sensors to the 0.13µ process geometries, which has enabled us to increase the resolution of our image sensors while decreasing overall chip size. We initiated mass production volumes at the end of calendar 2005. Given the rapidly changing nature of our technology, there can be no assurance that we will not encounter delays or other unexpected yield issues with future products. During the early stages of production, production yields and gross margins for new products are typically lower than those of established products. We can encounter unexpected manufacturing issues, such as the unexpected back-end problems that resulted in low yields on two of our products, the first of which arose in the fourth quarter of fiscal 2005 and in the first quarter of fiscal 2006. In addition, in preparation for new product introductions, we gradually decrease production of established products. Due to our 12-14 week production cycle, it is extremely difficult to predict precisely how many units of established products we will need. It is also difficult to accurately predict the speed of the ramp of new products. As a result, it is possible that we could suffer from shortages for certain products and build inventories in excess of demand for other products. We carefully consider the risk that our inventories may be excess to expected future demand and record appropriate reserves. If, as sometimes happens, we are subsequently able to sell these reserved products, the sales have little or no associated cost and consequently they have a favorable impact on gross margins.

Strategy

Our strategic goal is to produce the image sensors of choice for all available end-use markets. The most important elements of our strategy are the following:

Maintain Technology Leadership. We intend to maintain our position as a leader in CMOS image sensor technology by continuing to develop our expertise in mixed-signal implementation, advanced pixel design, feature integration, and manufacturing processes and controls, including automated testing. Our image sensor integrates both the sensor and the signal processor into a single chip, often eliminating the requirement for a separate DSP. As a result, our CameraChip image sensors offer camera device manufacturers advantages in terms of size, power consumption, cost and ease of design. For example, we have successfully migrated full volume production from 0.80µ, 0.60µ, 0.50µ, 0.45µ , 0.25µ and 0.18µ to 0.13μ process geometries, which has enabled us to increase the resolution of our image sensors while decreasing overall chip size. We have announced the latest generation of our OmniPixel technology, our OmniPixel3 architecture, which is based on 0.11μ process geometry and expect to begin volume production in the near future. We are continuing to develop products using still narrower geometries. We have successfully developed sensor technology from 100,000 pixels to 5.17 megapixels, underscoring our ability to deliver a wide range of solutions to address changing market demands. We are committed to continue increasing image quality and to reducing the overall size of the CameraChip image sensor’s array.

Continue to Develop Our Proprietary Technology to Maintain Competitive Advantage. We intend to continue to develop proprietary intellectual property to maintain our competitive advantage. We have developed a variety of proprietary technologies that expand the utility of our CameraChip solutions. For example, we have produced CameraChip image sensors capable of generating useable data in both low light and bright light conditions simultaneously. This high dynamic range, or HDR, technology enables the use of CameraChip image sensors in demanding environments such as in automotive and security applications. Our commitment to enhancing our proprietary technology is also reflected in our acquisition of CDM and its Wavefront Coding technology.

Leverage Expertise Across Multiple Mass-Market Applications. We intend to continue to focus on developing our CameraChip image sensors for multiple mass-market applications. To date we have shipped over 550 million

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

CameraChip image sensors. As camera functionality becomes a standard feature in a wider variety of consumer, commercial and industrial applications, we expect that additional markets will emerge. In the past, we have leveraged our expertise in certain end-markets to expand into emerging mass-market applications for our CameraChip image sensors. For example, we used the expertise we developed in camera cell phone markets to develop image sensors for laptop PC applications. Other markets and applications we are focusing on include security and surveillance, toys and interactive video game consoles, and the multiple opportunities in automotive and medical applications.

Increase Our Market Presence. We intend to increase our visibility and penetration into new product designs by collaborating with OEMs, VARs and distributors and by entering into partnerships with other companies that offer complementary and supporting technologies. In certain instances we will provide design services to our contract manufacturing partners, enabling them to increase their overall value-added through the production of highly tailored end products, which we believe will increase the likelihood that they will recommend the use of our products to branded manufacturers. In addition, we will team with companies that offer complementary and supporting technologies to integrate our products with theirs for use in the reference designs that they promote to manufacturers. As a result, we believe that we are able to provide our customers with valuable design and marketing references.

Further Develop Close Customer Relationships. We intend to enhance our customer relationships by continuing to collaborate with our customers on the design and specification of their products. We work with customers during various stages of their product development cycles, including strategic decision-making, new product design and replacement design to help them develop a logical technology migration path and to ensure that our products meet their future design needs. By working closely with our customers, we believe we can better anticipate their future design needs and increase the likelihood that they will incorporate our CameraChip image sensors into their products.

Our Solution

We specifically design our highly integrated CameraChip image sensors to be cost effective and to provide high image quality. By integrating a number of distinct functions onto a single CMOS chip, including image capture, image processing, color processing, signal conversion and output of images for either digital or analog equipment, our CameraChip image sensors offer camera device manufacturers a number of benefits, including:

High Image Quality and Resolution. We have developed a number of proprietary methods for enhancing image quality by increasing our CameraChip image sensors’ sensitivity to light and significantly improving their signal to noise ratio. These methods allow us to reduce the size of each individual pixel and thereby increase the number of pixels in a given sensor. The result is a portfolio of several high resolution CameraChip image sensors currently ranging up to a 5.17-megapixel product. In addition, we are able to produce CameraChip image sensors at lower resolutions with smaller pixel arrays, which serves to reduce the overall cost of the CameraChip image sensor and its supporting components, such as lenses.

Lower Cost. The highly integrated design of our CameraChip image sensor enables us to deliver image sensors to our customers at a cost which makes the cameras they are part of less and less expensive.  This cost saving is driven, in large part, by the fact that we have been able to achieve a high level of functionality in a single chip, while at the same time reducing the overall size of the device.  In some cases, our competitors’ solutions requires components or chips to achieve the same level of functionality. Our integrated solution reduces the number of parts subject to failure and thus increases the reliability of our image sensors.

Smaller Size and Lower Power Consumption. Our highly integrated solution enables our customers to develop cameras that are smaller in size and use less power than cameras based on multi-chip solutions. For portable applications such as cell phones, size and power consumption are critical design considerations for device manufacturers. Our CameraChip image sensors integrate the image capture and signal processing circuitry on a single chip, often eliminating the requirement for a separate digital signal processor, or DSP, thus consuming less board space in the device and enabling our customers to reduce the overall size of their products or to integrate additional functions. We believe that the size and power characteristics of our CameraChip image sensors will

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

enable us to penetrate new mass-market applications as device manufacturers take advantage of their ability to integrate complete camera functionality in their products without sacrificing other key functions or performance.

Accelerated Time to Market. The highly integrated nature of our CameraChip image sensor simplifies the design of cameras and allows our customers to shorten their product design cycles. This provides our cell phone industry and consumer electronics customers with critical competitive advantages, as time to market is typically a major determinant of product success and longevity. We also work closely with our customers to accelerate product development cycles by providing camera reference designs, engineering design review services and customer product evaluation, testing and debugging services. In addition, we have designed our manufacturing and production processes to allow us to quickly ramp production volumes to meet increased customer demand, which is particularly important in the high volume markets in which we participate.

Streamlined Manufacturing and Production. Our CameraChip image sensors are well suited for production using the relatively simple, low cost and large-scale wafer fabrication processes developed for other semiconductor products that use the CMOS process. We work closely with our foundry partners and with all the other providers of the manufacturing services we require to produce our final products to refine their processes in order to optimize sensor performance and yields.

Ease of Use. Our single chip CMOS design outputs video in industry standard formats directly from the chip. These formats include the National Television System Committee, or NTSC, format and/or the Phase Alternating Line, or PAL, format for analog video. For digital video, our sensors output unprocessed data called RGB and/or a standard signal color encoding system known as YUV. As a result, our CameraChip image sensors can be quickly and easily integrated into products targeted at numerous mass-markets. This is especially important in markets such as in cell phones, PCs and PDAs, where video-imaging expertise has not been fully developed.

Capital Resources

As of April 30, 2007, we had approximately $190.9 million in cash and cash equivalents and approximately $114.4 million in short-term investments. To mitigate market risk related to short-term investments, we have an investment policy designed to preserve the value of capital and to generate interest income from these investments without material exposure to market fluctuations. Market risk is the potential loss due to the change in value of a financial instrument as a result of changes in interest rates or bond prices. Our policy is to invest in financial instruments with short maturities, limiting interest rate exposure, and to measure performance against comparable benchmarks. We maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including both government and corporate obligations with ratings of A or better and money market funds.

In June 2005, our board of directors authorized us to use up to $100 million of our available cash in an open-market program to repurchase our common stock. At the expiration of the program on June 21, 2006, we had cumulatively repurchased 5,870,000 shares of our common stock for an aggregate cost of approximately $79.6 million.

In February 2007, our board of directors approved an additional stock repurchase program that provides for the repurchase of up to $100 million of our outstanding common stock. Subject to applicable securities laws, such repurchases will be at times and in amounts as we deem appropriate, based on factors such as market conditions, legal requirements and other corporate considerations. See Note 14 – “Treasury Stock” to our consolidated financial statements.

Sources of Revenues

We generate almost all our revenue by selling our products directly to OEMs and VARs and indirectly through distributors. We treat sales to OEMs and VARs as one source of revenue, and distributors as another. Our revenue recognition policies for the two groups are different. See “Critical Accounting Policies and Estimates—Revenue Recognition” below for additional information regarding recognition of revenue.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. On an ongoing basis we re-evaluate our judgments and estimates including those related to product returns, bad debts, inventories, long-lived assets, income taxes, litigation and contingencies. We base our estimates and judgments on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Actual results could differ from those estimates, and material effects on our operating results and financial position may result. Our significant accounting policies are more fully described in Note 2 — “Summary of Significant Accounting Policies” to the consolidated financial statements included in this Annual Report on Form 10-K. Our estimates reflect the following critical accounting policies:

Revenue Recognition

In general, we sell to our customers on FOB shipping point or FCA terms.

For shipments to customers without agreements that allow for returns or credits, principally OEMs and VARs, we recognize revenue using the “sell-in” method. Under this method, we recognize revenue when title passes to the customer provided that we have received a signed purchase order, the price is fixed or determinable, title and risk of loss has transferred to the customer, collection of resulting receivables is considered reasonably assured, product returns are reasonably estimable, there are no customer acceptance requirements and there are no remaining material obligations. We provide for future returns of potentially defective products based on historical experience at the time we recognize revenue. For cash consideration given to customers for which we do not receive a separately identifiable benefit or cannot reasonably estimate fair value, we record the amounts as reductions of revenue.

For shipments to distributors under agreements allowing for returns or credits, we recognize revenue using the “sell-through” method under which we defer revenue and related costs of sales until the distributor resells the product to our end-user customer and notifies us in writing of such sale. The amount billed to these distributors, less the cost of inventory shipped to but not yet sold by the distributors, is shown net on the consolidated balance sheets as deferred income. Accounting for revenue on the “sell-through” method requires that we obtain sales and inventory information from our distributors. As part of our internal control process, we observe our distributors’ physical counts of their inventories of our products on a regular basis.

In order to determine whether collection is probable, we assess a number of factors, including our past transaction history with the customer and the creditworthiness of the customer. If we determine that collection is not reasonably assured, we defer the recognition of revenue until collection becomes reasonably assured or upon receipt of payment.

In addition, we recognize revenue from the performance of services to a limited number of our customers by our wholly-owned subsidiary, CDM, and, through December 31, 2006, by our then consolidated affiliate, VisEra. We recognize the CDM-associated revenue under either the completed-contract or the percentage-of-completion methods. The percentage-of-completion method of accounting is used for cost reimbursement-type contracts, where revenues recognized are that portion of the total contract price equal to the ratio of costs expended to date to the anticipated final total costs based on current estimates of the costs to complete the projects. CDM-associated revenue has not been material in any of the periods presented. Until December 31, 2006 we recognized VisEra’s service revenue from third-party customers when the production services provided by VisEra were complete and the product was shipped to the customer.

Allowance for Doubtful Accounts

We undertake credit evaluations for all major sale transactions before we release product for shipment. Normal payment terms apply upon transfer of risk of loss. On an ongoing basis, we analyze the payment history of customer accounts, including recent customer purchases. We evaluate aged items in accounts receivable and provide

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

allowances for doubtful accounts. Customer creditworthiness and economic conditions may change and increase the risk of collectibility and may require additional allowances, which would negatively impact our operating results. As of April 30, 2007, our allowance for doubtful accounts represented approximately 1.4% of total accounts receivable.

Allowance for Sales Returns and Warranties

Based on historical sales returns and other known factors, we provide for estimated sales returns in the same period we record the related revenues. To estimate sales returns and allowances, we analyze potential customer specific product application issues, potential quality and reliability issues and historical returns. We evaluate quarterly the adequacy of the allowance for sales returns. This allowance is reflected as a reduction to accounts receivable in our consolidated balance sheets. Increases to the reserve are recorded as a reduction to net revenues. Because the allowance for sales returns is based on our judgments and estimates, particularly as to product application, quality and reliability issues, our reserves may not be adequate to cover actual sales returns and other allowances. If our reserves are not adequate, our net revenues could be adversely affected. We warrant to our customers that our products will work in accordance with their respective specifications. Due to the cost and other complexities associated with rectifying any product defects, we do not repair any defective products. If a product is defective, the customer notifies us and, with our approval, returns the defective product. We then send replacement products to the customer. Accordingly, we account for any exposure related to defective products as a portion of our allowance for sales returns. The net change in our allowance for sales returns balance in fiscal 2007 was approximately 0.2% of revenues, and the allowance was approximately 7.6% of total accounts receivable at April 30, 2007.

Excess and Obsolete Inventory and Effect on Gross Margin

We regularly monitor inventory quantities on hand and record allowances for excess and obsolete inventories based primarily on historical usage rates and our forecast of future demand for our products. We record allowances for the cost of inventories when the number of units on hand exceeds the number of units that we forecast will be sold over a certain period of time, generally 12 months. When we recognize the allowance, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration of or increase in that newly established cost basis. Because of risk of obsolescence, we will generally provide for the costs of our inventories in excess of our forecast for the applicable period.

In fiscal 2007, 2006 and 2005, from time to time, we sold certain previously reserved products. Even though we have sold some products at a price that was less than our original cost, sales of these products improved our gross margins because the inventory was previously reserved.

We attempt to control our inventory levels so that we do not hold inventories in excess of demand for the succeeding three months. However, because we need to place non-cancelable orders with significant lead time and because it is difficult to estimate product demand, it is possible that we will build inventories in excess of demand for future periods. If we have inventories in excess of estimated product demand, we will provide an allowance, which could have a material adverse effect on our reported results of operations and financial position. In preparation for new product introductions, we gradually decrease production of established products, while preparing for production of newer products. Given our 12-14 week production cycle, it is extremely difficult to predict precisely how many units of established products we need. It is also difficult to accurately predict the speed of the ramp of new products or the projected life cycles of new products which have continued to shorten in duration. Under these circumstances, it is possible that we could suffer from shortages of certain products and also build inventories in excess of demand for other products.

Stock-Based Compensation Expense

Effective May 1, 2006, we adopted the provisions of SFAS No. 123(R). SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options and employee stock purchases under our employee stock purchase plan, to be recognized in our financial statements based on their respective grant date fair values. We currently use the Black-Scholes option pricing model to estimate the fair value of our share-based payment awards. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, including our stock price, expected volatility, expected term, risk-free interest rate and expected

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

dividend yield. For expected volatility, we use an average between the historical volatility of our common stock, and the implied volatility of traded options on our common stock. The expected term of the awards is based on historical data regarding our employees’ option exercise behaviors. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our awards. The dividend yield assumption is based on our history and expectation of dividend payouts. In addition to the requirement for fair value estimates, SFAS No. 123(R) also requires the recording of expense that is net of an anticipated forfeiture rate. Only expenses associated with awards that are ultimately expected to vest are included in our financial statements. Our forfeiture rate is determined based on our historical option cancellation experience.

We evaluate the Black-Scholes assumptions that we use to value our awards on a quarterly basis. With respect to the forfeiture rate, we will revise the rate, if necessary, in subsequent periods if actual forfeitures differ from our estimates. If factors change and we employ different assumptions, stock-based compensation expense related to future stock-based payments may differ significantly from estimates recorded in prior periods.

In November 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. FAS123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-based Payment Awards” (“FSP 123(R)-3”). FSP 123(R)-3 provides an alternative transition method of accounting for the tax effects of adopting SFAS No. 123(R). This FSP grants one year from the later of the date of the FSP or the adoption of SFAS No. 123(R) to us for determination of the one-time election for purposes of transition. We have elected to use the long-form method to establish the beginning balance of the additional paid-in capital pool related to the tax effects of employee stock-based awards granted prior to the adoption of SFAS No. 123(R).

Upon adoption of SFAS No. 123(R), we also chose to derecognize both the gross deferred tax assets and the offsetting valuation allowance pertaining to net operating loss and tax credit carryforwards that represent excess tax benefits from stock-based awards.

We have also elected to use the “with and without” approach as described in EITF Topic No. D-32 in determining the order in which tax attributes are utilized.  As a result, we will recognize a tax benefit from stock-based awards in additional paid-in capital only if an incremental tax benefit is realized after all other tax attributes currently available to us have been utilized.  In addition, we have elected to account for the indirect effects of stock-based awards on other tax attributes, such as R&D tax credit, through the income statement.

Valuation of Long-Lived Assets

Although to date, we have not recognized any impairment losses, we assess whether the value of identifiable intangibles and long-lived assets, including property and equipment and prepaid wafer credits, has been impaired annually and whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Impairment evaluations involve management estimates of assets’ useful lives and future cash flows. If such events occur, we would estimate the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted expected future cash flows were less than the carrying amount of the asset, we would recognize an impairment loss. Actual useful lives and cash flows could be different from those estimated by our management. This could have a material effect on our operating results and financial position. Factors we consider important that could trigger an impairment review include the following:

·operating losses;

·significant negative industry trends;

·significant underutilization of the assets; and

·significant changes in how we use the assets or our plans for their use.

Accounting for Income Taxes

As of April 30, 2007, we had recorded a valuation allowance of $2.9 million to offset California R&D tax credit carryovers. We believe that it is more likely than not that we will not realize these carryovers. In the future,

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

when the credit is utilized and the valuation allowance is released, the release of valuation allowance will be accounted for as a reduction of the income tax expense in the year such event occurs. For fiscal 2007, 2006 and 2005, the income tax provision reflected an effective tax rate of 24%, 20% and 28%, respectively. These rates are less than the combined federal and state statutory rate of approximately 40% principally because we earn a portion of our profits in jurisdictions where tax rates are lower than the combined federal and state statutory rate.

We expect that our consolidated effective tax rate in fiscal 2008 may be higher than in fiscal 2007 but will continue to be less than the combined federal and state statutory rates. Achieving an effective tax rate in fiscal 2008 that is less than the combined federal and state statutory rates is principally dependent upon the amount of non-deductible stock-based compensation expenses and the proportion and geographic mix of our income.

Litigation and Contingencies

From time to time, we have been subject to legal proceedings and claims with respect to such matters as patents and other actions arising out of the normal course of business, as well as other matters identified in “Legal Proceedings” in Part I, Item 3 of this Annual Report.

It is possible that other companies might pursue litigation with respect to any claims such companies purport to have against us. The results of any litigation are inherently uncertain. In the event of an adverse result in any litigation with respect to intellectual property rights relevant to our products that could arise in the future, we could be required to obtain licenses to the infringed technology, pay substantial damages under applicable law, including treble damages if we are held to have willfully infringed, cease the manufacture, use and sale of infringing products or to expend significant resources to develop non-infringing technology. Litigation frequently involves substantial expenditures and can require significant management attention, even if we ultimately prevail.

Given the uncertainties associated with litigation, if our assessments prove to be wrong, or if additional information becomes available such that we estimate that there is a possible loss or possible range of loss associated with these contingencies, then we would record the minimum estimated liability, which could materially impact our results of operations, financial position or cash flows.

Results of Operations

The following table sets forth the results of our operations as a percentage of revenues. Our historical operating results are not necessarily indicative of the results we can expect for any future period.

	Fiscal Year Ended April 30,
	2007			2006			2005
Revenues		100.0	%		100.0	%		100.0	%
Cost of revenues		70.6			63.1			59.7
Gross margin		29.4			36.9			40.3
Operating expenses:
Research, development and related		12.8			8.2			6.5
Selling, general and administrative		11.1			7.2			7.5
Litigation settlement, net of recovery of $13,000		0.6			—			—
Total operating expenses		24.5			15.4			14.0
Income from operations		4.9			21.5			26.3
Interest income, net		2.7			1.8			1.1
Other income (expense), net		(0.2	)		0.2			—
Income before income taxes and minority interest		7.4			23.5			27.4
Provision for income taxes		1.8			4.7			7.7
Minority interest		1.1			0.7			—
Net income		4.5	%		18.1	%		19.7	%

Revenues

We derive substantially all of our revenues from the sale of our image-sensor products.  Revenues increased 7.4% to approximately $528.1 million in fiscal 2007 from $491.9 million in fiscal 2006. Revenues increased 26.8%

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

to $491.9 million in fiscal 2006 from $388.1 million in fiscal 2005. Revenue growth was driven primarily by an increase in unit sales of our image-sensor products, primarily for cell phones, partially offset by a decrease in average selling prices.

Revenues from Sales to OEMs and VARs as Compared to Distributors

We sell our image-sensor products either directly to OEMs and VARs or indirectly through distributors. The percentage of revenues from sales to distributors was significantly higher in fiscal 2007 as compared to the prior fiscal year. We expect that revenues from sales through distributors will continue to represent a higher proportion of our total revenues than they have in prior fiscal years. The following table shows the percentage of revenues from sales to OEMs and VARs and distributors in each of fiscal 2007, 2006 and 2005:

	Fiscal Year Ended April 30,
	2007			2006			2005
OEMs and VARs		60.0	%		68.9	%		79.4	%
Distributors		40.0			31.1			20.6
Total		100.0	%		100.0	%		100.0	%

OEMs and VARs. The one OEM customer that accounted for 10% or more of our revenues in fiscal 2007 was Foxconn, which accounted for approximately 14.0% of our revenues. The two OEM customers that accounted for 10% or more of our revenues in fiscal 2006 were Lite-On Technology Corporation, or Lite-On, which accounted for approximately 14.6% of our revenues and Sanshin Electronics Co., Ltd., or Sanshin Electronics, which accounted for approximately 11.6% of our revenues. The two OEM customers that accounted for 10% or more of our revenues in fiscal 2005 were Lite-On, which accounted for approximately 19.1% of our revenues and Sanshin Electronics, which accounted for approximately 15.6% of our revenues. For fiscal 2007, 2006 and 2005, no other OEM or VAR customer accounted for 10% or more of our revenues.

Distributors. The two distributors that accounted for 10% or more of our revenues in fiscal 2007 were World Peace and SiDa Electronics, which accounted for approximately 15.1% and 12.9% of our revenues, respectively. The one distributor that accounted for 10% or more of our revenues in fiscal 2006 and 2005 was World Peace, which accounted for approximately 13.7% and 10.9% of our revenues, respectively. For fiscal 2007, 2006 and 2005, no other distributor accounted for 10% or more of our revenues.

Revenues from Domestic Sales as Compared to Foreign Sales

The following table shows the percentage of our revenues derived from sales of our image-sensor products to domestic customers as compared to foreign customers in each of fiscal 2007, 2006 and 2005:

	Fiscal Year Ended April 30,
	2007			2006			2005
Domestic sales		1.0	%		1.0	%		0.8	%
Foreign sales		99.0			99.0			99.2
Total		100.0	%		100.0	%		100.0	%

We derive the majority of our foreign sales from customers in Asia and, to a lesser extent, in Europe. Over time, our sales to Asia-Pacific customers have increased primarily as a result of the continuing trend of outsourcing the production of consumer electronics products to Asia-Pacific manufacturers and facilities and to the increasing markets in Asia for consumer products. Because of the preponderance of Asia-Pacific manufacturers and the fact that virtually all products incorporating our image-sensor products are sold globally, we believe that the geographic distribution of our sales does not accurately reflect the geographic distribution of sales into end-user markets of products which incorporate our image sensors.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Gross Profit

Comparison of Fiscal 2007 and Fiscal 2006

Our gross margin for fiscal 2007 was 29.4% of revenues, down from the 36.9% we reported for fiscal 2006. The principal cause of the year-over-year decline in our gross margin was the decline in our average selling prices and a less favorable product mix, in particular the larger share of lower-margin VGA sensors in our unit and dollar volume as compared to the previous year, which were only partially offset by reductions in our production costs.

During fiscal 2007, we recognized credits of $3.8 million in compensation from suppliers whose product quality in previous periods did not meet our standards. In addition, we recorded approximately $3.7 million in stock-based compensation expense to cost of revenues in fiscal 2007 in accordance with SFAS No. 123(R). We adopted SFAS No. 123(R) effective May 1, 2006 and there was no similar expense in the prior fiscal year. The sale of the products that were affected by the back-end yield issues which arose in the fourth quarter of fiscal 2005 and the first quarter of fiscal 2006 reduced our gross margin in fiscal 2006 by approximately 400 basis points.

Revenue from sales of previously reserved products in fiscal 2007 was $12.6 million, as compared to $10.1 million in the prior fiscal year. In fiscal 2007, we recorded provisions of $8.2 million to cost of sales for excess and obsolete inventory as compared to $11.5 million in the prior fiscal year.

In fiscal 2006, we consolidated the operating results of SOI. Consolidating SOI reduced our gross margin by approximately 40 and 70 basis points in fiscal 2007 and 2006, respectively; however, because SOI’s operating expense ratio is lower than ours, SOI’s operating income as a percentage of revenue, or operating margins, are comparable to ours and do not have a material impact on our consolidated operating margins.

Comparison of Fiscal 2006 and Fiscal 2005

Our gross margin for fiscal 2006 was 36.9% of revenues, down from the 40.3% we reported for fiscal 2005. The principal cause of the year-over-year decline in our gross margin was a decline in our average selling prices, offset, in part, by a more favorable product mix and by reductions in our production costs.

Revenue from sales of previously reserved products in fiscal 2006 was $10.1 million, as compared to $13.0 million in the prior fiscal year. In fiscal 2006, we recorded an allowance for excess and obsolete inventory totaling $11.5 million to cost of sales as compared to $10.7 million in the prior fiscal year. In fiscal 2005, our gross profit benefited from a $1.4 million reduction in cost of goods sold as the result of the settlement of a dispute related to the late cancellation of an order from one of our customers.

In fiscal 2006, we consolidated the operating results of SOI, whereas in the prior year period we accounted for SOI under the equity method of accounting. Consolidating SOI reduced our gross margin by approximately 70 basis points in fiscal 2006; however, because SOI’s operating expense ratio is lower than ours, SOI’s operating income as a percentage of revenue, or operating margins, are comparable to ours and do not have a material impact on our consolidated operating margins. Beginning in the second quarter of fiscal 2006, we consolidated VisEra.

Research, Development and Related

Research, development and related expenses consist primarily of compensation and personnel-related expenses, non-recurring engineering costs and costs for purchased materials, designs, tooling, depreciation of computers and workstations, and amortization of acquired intangible intellectual property and computer aided design software. Because the number of new designs can fluctuate from period to period, research, development and related expenses may fluctuate significantly. Research, development and related expenses for fiscal 2007, 2006 and 2005 were approximately $67.6 million, $40.6 million and $25.5 million, respectively. As a percentage of revenues, research, development and related expenses for fiscal 2007, 2006 and 2005 represented 12.8%, 8.2% and 6.5%, respectively.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Comparison of Fiscal 2007 and Fiscal 2006

The increase in research, development and related expenses of approximately $27.0 million, or 66.5%, in fiscal 2007 as compared to fiscal 2006 resulted primarily from the recognition of $12.5 million in stock-based compensation expense recognized with the adoption of SFAS No. 123(R), a $8.5 million increase in salary and payroll-related expenses associated with the hiring of additional personnel, a $1.9 million increase in software expenses, a $1.3 million increase in non-recurring engineering expenses related to new product development and a $1.0 million increase in amortization expenses of acquired intangible assets. The increase in non-recurring engineering expenses is primarily due to an increase in the number of new designs we released to our foundry partners. We anticipate that our research, development and related expenses will continue to increase as we develop and introduce new products employing our OmniPixel3 and Wavefront Coding technologies and develop other new technologies related to image sensors.

Comparison of Fiscal 2006 and Fiscal 2005

The increase in research, development and related expenses of approximately $15.1 million, or 59.1%, in fiscal 2006 as compared to fiscal 2005 resulted primarily from a $5.7 million increase in salary and payroll-related expenses associated with the hiring of additional personnel, a $5.5 million increase in amortization expenses of acquired intangible assets primarily associated with the acquisition of CDM, a $1.0 million increase in office expenses, a $0.7 million increase in patent-related expenses, a $0.5 million increase in facility-related expenses and a $0.5 million increase in outside service expenses.

Selling, General and Administrative

Selling, general and administrative expenses consist primarily of compensation and personnel related expenses, commissions paid to distributors and manufacturers’ representatives and insurance and legal expenses. Selling, general and administrative expenses for fiscal 2007, 2006 and 2005 were approximately $58.7 million, $35.3 million and $29.0 million, respectively. As a percentage of revenues, selling, general and administrative expenses for fiscal 2007, 2006 and 2005 represented 11.1%, 7.2% and 7.5%, respectively.

Comparison of Fiscal 2007 and Fiscal 2006

The increase in selling, general and administrative expenses of approximately $23.4 million, or 66.1%, for fiscal 2007 from fiscal 2006 resulted primarily from the recognition of $13.4 million in stock-based compensation expense recognized with the adoption of SFAS No. 123(R), a $5.7 million increase in salary and payroll-related expenses associated with the hiring of additional personnel, a $1.5 million increase in commissions paid to distributors and manufacturers’ representatives associated with increased revenues, a $1.4 million increase in outside service expenses and a $1.0 million increase in facility expenses, partially offset by a $1.5 million reduction in legal expenses. We anticipate that our selling, general and administrative expenses will increase in the future due to the continued expansion of our organization and the continuing upgrade of our computer systems, including our enterprise resource planning, or ERP, and other management information systems.

Comparison of Fiscal 2006 and Fiscal 2005

The increase in selling, general and administrative expenses of approximately $6.3 million, or 21.7%, for fiscal 2006 from fiscal 2005 resulted primarily from: a $5.5 million increase in salary and payroll-related expenses, a $0.9 million increase in accounting expenses resulting from the work we performed to comply with the requirements of the Sarbanes-Oxley legislation and audit-related expenses due to the increasing size and complexity of our organization, a $0.6 million increase in outside service expenses, a $0.6 million increase in travel expenses, and a $0.5 million increase in our provision for bad debts. These increases were partially offset by a $1.1 million reduction in legal expenses due principally to the absence of the expenses incurred in the prior year for the investigation into, and subsequent restatement of, our financial statements for the first three quarters of fiscal 2004 and a $0.9 million reduction in stock compensation charges.

Litigation Settlement, net of recovery of $13.0 million

We accrued $3.3 million in litigation settlement expenses in fiscal 2007, net of recovery of $13.0 million, to reflect our share of a tentative settlement of a securities class action lawsuit pending in the United States District

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Court for the Northern District of California. The parties have executed a Stipulation of Settlement that was filed with the Court in May 2007. Notice of the settlement must be provided to the purported shareholder class and the Court must approve the settlement in order for it to become final. Litigation settlement expenses for fiscal 2007 represented 0.6% of revenue. See Note 17 – “Commitments and Contingencies” of the Notes to our consolidated financial statements.

Interest Income, Net

We invest our cash, cash equivalents and short-term investments in interest-bearing accounts consisting primarily of money market funds, commercial paper, certificates of deposit, high-grade corporate securities and government bonds with maturities from the date of purchase up to 39 years. Interest income, net, for fiscal 2007, 2006 and 2005 was approximately $14.6 million, $8.9 million and $4.2 million, respectively. Interest income, net, increased in fiscal 2007 as compared to fiscal 2006 as a result of both of higher balances in interest-bearing accounts resulting primarily from cash from operations, and by higher interest rates. Interest income, net, increased in fiscal 2006 as compared to fiscal 2005 as a result of higher balances in interest-bearing accounts resulting primarily from cash from operations, and by higher interest rates.

Other Income (Expense), Net

Our portion of the income recorded under the equity method of accounting is included in Other income (expense), net. (See Note 5 – “Long-term Investments” of the Notes to our consolidated financial statements.) Other income (expense), net, for fiscal 2007 was expense of $1.3 million and consisted of approximately $1.7 million representing our portion of the income recorded by XinTec and $225,000 representing our portion of the income recorded by ImPac Technology Co., Ltd., or ImPac. Offsetting these items was a $2.9 million contra-income item, which reflected residual income attributable to the 52.9% interest in VisEra that we do not own. The income was earned through our sale of inventory purchased from VisEra prior to January 1, 2007, the effective date of the deconsolidation. Prior to the deconsolidation, we reported the income attributable to the equity interest that we did not own as part of minority interest expense. In the eight months ended December 31, 2006, we accounted for XinTec under the equity method prior to our reversion to the cost method beginning on January 1, 2007. There was also a $492,000 expense reflecting the change in fair value of an interest rate swap. See Note 9 – “Borrowing Arrangements” of the Notes to our consolidated financial statements.

Other income (expense), net, for fiscal 2006 was income of $0.9 million on a net basis and consisted of $1.3 million as our portion of the income recorded by XinTec which we accounted for in fiscal 2006 using the equity method of accounting, partially offset by other expenses.  Other income (expense), net, for fiscal 2005 was an expense of $0.2 million on a net basis and consisted principally of our portion of the losses recorded by ImPac which we accounted for in fiscal 2005 using the equity method of accounting, partially offset by income recorded by SOI another investee company which we accounted for during fiscal 2005 using the equity method of accounting.

Provision for Income Taxes

We generated approximately $39.1 million, $115.7 million and $106.1 million in income before income taxes and minority interest for fiscal 2007, 2006 and 2005, respectively. We recorded a provision for income taxes for fiscal 2007, 2006 and 2005 of approximately $9.4 million, $23.1 million and $29.7 million, respectively. For fiscal 2007, 2006 and 2005, the effective rates were 24.0%, 20.0% and 28.0%, respectively. These rates were less than the combined federal and state statutory rate of approximately 40% because we earn a substantial portion of our income in jurisdictions where tax rates are lower than in the United States. The higher effective tax rate for fiscal 2007 as compared to fiscal 2006 was principally due to the unfavorable impact of the adoption of SFAS No. 123(R), partially offset by an increase in tax exempt interest income, an increase in the research and development, or R&D, tax credit due to the retroactive extension of the United States R&D tax credit, the release of tax reserves due to expiration of statute of limitations on assessment, and the change in proportion and geographical mix of income. The lower effective tax rate for fiscal 2006 as compared to fiscal 2005 was due to the geographic mix of income between domestic and foreign entities for fiscal 2006. We expect that our consolidated effective tax rate in fiscal 2008 will continue to be less than the combined federal and state statutory rates. The extent to which our effective tax rate in fiscal 2008 is less than the combined federal and state statutory rates is principally contingent upon the amount of non-deductible stock-based compensation and the proportion and geographic mix of

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

our total pre-tax income. We anticipate that there will be greater volatility in our future effective tax rates due to the adoption of FIN 48, See “Recent Accounting Pronouncements” below for further discussion.

Minority Interest

Minority interest for fiscal 2007 and fiscal 2006 was $5.8 million and $3.4 million, respectively. There was no minority interest in fiscal 2005. In fiscal 2007, approximately $267,000 represents the 54.6% interest that we did not own in the net income of SOI and approximately $5.5 million represents the 52.9% interest that we did not own in the net income of VisEra. In fiscal 2006, approximately $1.4 million represents the 51.0% interest that we did not own in the net income of SOI and approximately $2.0 million represents the 54.4% interest that we did not own in the net income of VisEra. There was no minority interest in fiscal 2005.

Liquidity and Capital Resources

Our principal sources of liquidity at April 30, 2007 consisted of cash, cash equivalents and short-term investments of $305.3 million.

Liquidity

Our working capital decreased by approximately $6.3 million to $357.0 million as of April 30, 2007 from $363.3 million as of April 30, 2006. The decrease was primarily attributable to: a $49.3 million decrease in cash and cash equivalents; a $13.8 million increase in the accrual for the settlement of the securities class-action litigation; a $13.5 million increase in accounts payable; a $9.2 million increase in accrued income taxes payable which increased as a consequence of additional provisions in fiscal 2007 and a $2.5 million increase in deferred income. These decreases were partially offset by: a $64.7 million increase in inventories as the result of increases in product demand for the first quarter of fiscal 2008 which required us to accelerate our production schedules in the fourth quarter; a $13.0 million increase in recoverable insurance proceeds associated with the settlement of the securities class-action litigation; $3.8 million decrease in accrued expenses and other current liabilities to support increased levels of operations and a $1.6 million increase in refundable and deferred income taxes.

In March 2007, we purchased a complex of four buildings in Santa Clara, California, or the Santa Clara Property. In connection with the purchase, we entered into a Loan and Security Agreement with a domestic bank on March 16,  2007. The Loan and Security Agreement provides for a term mortgage loan in the principal amount of $27.9 million, or the Mortgage Loan, and a secured line of credit with an aggregate maximum principal amount of up to $12.0 million, or the Term Loan. Borrowings under the Mortgage loan accrue interest at the London Interbank Borrowing Rate, or LIBOR, rate plus 90 basis points. Borrowings under the Term loan accrue interest at the LIBOR rate plus 125 basis points. The Mortgage and Term Loans mature on March 31, 2017 and September 30, 2012, respectively.

In order to secure the obligations, on March 16, 2007 we also entered into a Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing made by us to First American Title Insurance Company for the benefit of the domestic bank and a Stock Pledge Agreement between us and the domestic bank.

The Loan and Security Agreement requires us to comply with certain affirmative covenants including, but not limited to, meeting certain minimum financial standards, as well as certain negative covenants limiting our ability to take certain actions without the prior written consent of the domestic bank including, but not limited to, selling or leasing the Santa Clara Property or merging or consolidating with another entity. In addition, the Loan and Security Agreement provides that upon the occurrence of certain events of default our obligations under the Loan and Security Agreement may become immediately due and payable, or the domestic bank may cease making additional advances under the Term Loan or otherwise extending credit to us under the Loan and Security Agreement. As of April 30, 2007, we were in compliance with the financial covenants of the Loan and Security agreement.

As of April 30, 2007, the entire $27.9 million amount of the Mortgage Loan was outstanding. Of the $27.9 million, $27.4 million and was classified as a long-term obligation on the Consolidated Balance Sheets. At April 30, 2007, the interest rate under the Mortgage Loan was 6.2%. As of April 30, 2007, there were no borrowings

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

outstanding under the Term Loan. See Note 9 – “Borrowing Arrangements” of the Notes to our consolidated financial statements.

Concurrent with the Mortgage Loan, we also entered into an interest rate swap with the bank to help manage interest rate risk. The swap is for a period of ten years, and the notional amount of the swap approximates the principal outstanding under the Mortgage Loan. We are the fixed rate payer under the swap with a fixed rate of approximately 5.3% per annum, and the effective rate on the Mortgage Loan is fixed at approximately 6.2%. We measure the swap at fair value and record it as either an asset or a liability, depending on whether the fair value is a gain or loss to us.

SOI maintains four unsecured lines of credit with three commercial banks, which provide a total of approximately $3.4 million in available credit. All borrowings under the four lines of credit maintained by SOI bear interest at the market interest rate prevailing at the time of borrowing. There are no financial covenant requirements for these facilities and at April 30, 2007, there were no borrowings outstanding under these facilities.

Cash Flows From Operating Activities

For fiscal 2007, net cash provided by operating activities totaled approximately $42.5 million as compared to $136.9 million for fiscal 2006. The principal components of the current year amount were: net income of approximately $24.0 million for fiscal 2007, adjusted for non-cash charges of $29.7 million in stock-based compensation, $13.0 million in depreciation and amortization, $5.8 million in the minority interest in the net income of our consolidated affiliate, $3.6 million of gains in equity investments and $1.8 million in excess tax benefits from stock-based compensation; a $16.0 million increase in accrued income taxes payable; a $34.4 million increase in accounts payable and a $10.2 million increase in accrued expenses and other current liabilities. These increases were partially offset by: a $70.1 million increase in inventories; a $19.9 million increase in prepaid expenses and other current assets; a $8.1 million increase in refundable and deferred income taxes and a $75,000 increase in accounts receivable, net. The $75,000 increase in accounts receivable, net, reflects the decline in the level of revenues during the fourth quarter of fiscal 2007, and the increase in days of sales outstanding as of April 30, 2007 to 49 days from 45 days as of April 30, 2006. The $19.9 million increase in prepaid expenses and other current assets principally reflects $13.0 million in recoverable insurance proceeds associated with the settlement of securities class-action litigation. The $10.2 million increase in accrued expenses and other current liabilities resulted from a litigation settlement accrual associated with the settlement of securities class-action litigation. The $70.1 million increase in inventories was principally the result of increases in product demand for the first quarter of fiscal 2008  which required us to accelerate our production schedules in the fourth quarter. The increase in inventory balances resulted in a decline in annualized inventory turns to 3.1 as of April 30, 2007 from 6.1 as of April 30, 2006. Our accrued income taxes payable increased as a consequence of additional provisions in fiscal 2007.

For fiscal 2006, net cash provided by operating activities totaled approximately $136.9 million as compared to $88.8 million for fiscal 2005, primarily due to net income of approximately $89.1 million for fiscal 2006, adjusted for non-cash charges of $10.6 million in depreciation and amortization, $3.4 million in the minority interest in the net income of consolidated affiliates and $2.9 million in tax benefits from stock option exercises, a $19.8 million increase in accrued income taxes payable, a $15.4 million increase in accounts payable, a $6.6 million increase in accrued expenses and other current liabilities, a $3.7 million decrease in refundable and deferred income taxes and a $3.4 million decrease in inventories, partially offset by a $6.7 million increase in prepaid expenses and other current assets, and $6.0 million increase in accounts receivable, net. The $6.0 million increase in accounts receivable, net, reflects the higher level of revenues during fiscal 2006, partially offset by a decrease in days of sales outstanding to 45 days as of April 30, 2006 from 52 days as of April 30, 2005. The $3.4 million decrease in inventories was attributable to our reduction of finished goods inventories late in the fiscal year, partially offset by an increase in work-in-process inventory. Inventory turns increased to 6.1 as of April 30, 2006 from 4.5 as of April 30, 2005.

Cash Flows From Investing Activities

For fiscal 2007, cash used in investing activities increased to approximately $142.4 million from $16.9 million for fiscal 2006 due primarily to: $82.8 million in purchases of property, plant and equipment; $27.0 million in purchases of long-term investments; $20.6 million resulting from the deconsolidation of VisEra and $11.4 million in net purchases of short-term investments.

49

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

For fiscal 2006, cash used in investing activities decreased to approximately $16.9 million from $38.3 million for fiscal 2005 due primarily to: $22.7 million in purchases of property, plant and equipment; $12.5 million of in purchases of long-term investments, and $5.5 million in purchases of intangible assets. These uses were partially offset by a $13.8 million in proceeds from the consolidation of VisEra, net of cash payments and $10.0 million in net proceeds from the sales or maturities of short-term investments.

Cash Flows From Financing Activities

For fiscal 2007, net cash provided by financing activities totaled approximately $50.5 million as compared to net cash used in financing activities of $50.9 million for fiscal 2006 primarily due to: $27.9 million in proceeds from long-term borrowings under our Mortgage loan to purchase the Santa Clara Property; $10.5 million principally in a cash contribution to VisEra by TSMC and Dai Nippon Printing Co., Ltd.; $10.6 million in proceeds from the exercise of stock options and employee purchases through our employee stock purchase plan for fiscal 2007 as compared to $19.2 million for fiscal 2006 and $1.8 million in excess tax benefits from stock-based compensation.

For fiscal 2006, net cash used in financing activities totaled approximately $50.9 million as compared to net cash provided by financing activities of $5.4 million for fiscal 2005 primarily due to $79.6 million in payments for repurchase of our common stock, partially offset by an increase in proceeds from the exercise of stock options and employee purchases through our employee stock purchase plan to approximately $19.2 million for fiscal 2006 as compared to $5.4 million for fiscal 2005 and $9.5 million in a cash contribution to VisEra by TSMC.

Capital Resources

We currently expect our available cash, cash equivalents and short-term investments, together with cash that we expect to generate from business operations, will be sufficient to satisfy our foreseeable capital requirements. Other than normal working capital requirements, we expect our capital requirements in fiscal 2008 to consist primarily of funding at VisEra to expand capacity available to us and to complete the upgrade and expansion of our testing capacity.

We are obligated to pay an additional $10.0 million in cash upon the sale, prior to the end of April 2009, of a pre-determined number of revenue-producing products incorporating CDM’s technology. CDM and the costs associated with the acquisition are included in our consolidated balance sheets at April 30, 2007 and 2006.

In June 2005, our board of directors authorized us to use up to $100 million of our available cash in an open-market program to repurchase our common stock. At the expiration of the program on June 21, 2006, we had cumulatively repurchased 5,870,000 shares of our common stock for an aggregate cost of approximately $79.6 million.

In February 2007, our board of directors authorized a further $100 million stock repurchase program.  As of April 30, 2007, we had not repurchased any shares under this program.

Our ability to generate cash from operations in the future is subject to substantial risks described above under Item 1A. “Risk Factors.” We encourage you to review these risks carefully.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Contractual Obligations and Commercial Commitments

The following summarizes our contractual obligations and commercial commitments as of April 30, 2007 and the effect such obligations and commitments are expected to have on our liquidity and cash flows in future periods (in thousands):

	Payments Due by Period
				Less than						More than
	Total			1 Year		1 - 3 Years		3 - 5 Years		5 Years
Contractual Obligations:
Operating leases	$	14,164		$	4,324	$	8,369	$	1,274	$	197
Capital leases	280			146		134		—		—
Mortgage obligation	27,927		(3)	485		1,063		1,203		25,176
Noncancelable orders	100,554			100,554		—		—		—
Total contractual obligations	142,925			105,509		9,566		2,477		25,373
Other Commercial Commitments:
Investment in HWSC	3,000		(1)	3,000		—		—		—
Investment in Shanghai Design Center	22,060		(2)	—		22,060		—		—
Total commercial commitments	25,060			3,000		22,060		—		—
Total contractual obligations and commercial commitments	$	167,985		$	108,509	$	31,626	$	2,477	$	25,373

(1)Represents the remaining $3.0 million of registered capital for our subsidiary, HWSC. See Note 17 – “Commitments and Contingencies” to our consolidated financial statements.

(2)Over the next two years, we expect to invest a total of approximately $30.0 million in our subsidiary, SDC, of which we have already invested $7.5 million. SDC will use the funds to develop land and construct facilities for its use. See Note 17 – “Commitments and Contingencies” to our consolidated financial statements.

(3)In March 2007, we entered into a mortgage loan with a domestic bank in the amount of $27.9 million. See Note 9 – “Borrowing Arrangements” to our consolidated financial statements.

Other Financial Arrangements

As of April 30, 2007, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

In June 2006, the FASB issued FIN 48. FIN 48 requires that we recognize in our consolidated financial statements the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. The evaluation of a tax position in accordance with this interpretation is a two-step process. In the first step, recognition, we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step addresses measurement of a tax position that meets the more-likely-than-not criterion. The tax position is measured at the largest amount of benefit that has a greater than 50%  likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. FIN 48 is effective for fiscal years beginning after December 15, 2006. The differences between the amounts recognized in the consolidated financial statements prior to the adoption of FIN 48 and the amounts

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

reported after adoption will be accounted for as a cumulative-effect adjustment recorded to the beginning balance of retained earnings. We are currently evaluating the impact FIN 48 will have on our financial position, results of operations or cash flows. Based on our preliminary analysis, we expect a substantial portion of our accrued income taxes payable balance of $61.6 million as of April 30, 2007 to be reclassified in fiscal 2008 as a non-current liability. In addition, the adoption of FIN 48 may result in greater volatility in our future effective tax rates.

In September 2006, the FASB issued Statement of Financial Accounting Standards, or SFAS, No. 157, “Fair Value Measurements,” or SFAS No. 157, which defines fair value, establishes guidelines for measuring fair value and expands the requisite disclosures for fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather establishes a common definition of fair value to be used throughout generally accepted accounting principles. SFAS No. 157 is effective in fiscal years beginning after November 15, 2007 and is required to be adopted by us in the first quarter of fiscal 2009. Our adoption of the provisions of SFAS No. 157 is not expected to have a material effect on our financial condition, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” or SFAS No. 159, which permits entities to choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. SFAS No. 159 does not establish requirements for recognizing and measuring dividend income, interest income, or interest expense. This Statement does not eliminate disclosure requirements included in other accounting standards. SFAS No. 159 is effective in fiscal years beginning after November 15, 2007 and is required to be adopted by us in the first quarter of fiscal 2009. We are currently evaluating the impact SFAS No. 159 may have on our financial position, results of operations or cash flows.

52

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

We sell our products globally, in particular to branded customers, contract manufacturers, VARs and distributors in China, Hong Kong, Japan, Korea and Taiwan.

The great majority of our transactions with our customers and vendors are denominated in U.S. dollars. The expenses we incur in currencies other than U.S. dollars include certain costs affecting gross profit, selling, general and administrative and research, development and related expenses, which are primarily incurred in China, where the Chinese Yuan Renminbi (“CNY”) is the local currency and Taiwan, where the New Taiwan dollar is the local currency. Since July 2005, the Chinese central bank has benchmarked the CNY against a basket of currencies, and as of April 30, 2007 has allowed the CNY to appreciate by approximately 6.8% against the U.S. dollar.

As of April 30, 2007, the functional currency of our wholly-owned subsidiaries located in Hong Kong, OmniVision Technologies (Hong Kong) Company Limited and OmniVision Trading (Hong Kong) Company Ltd., in the Cayman Islands, OmniVision International Holding, Ltd. and HuaWei Technology International, Ltd., and in China, HWSC and SDC, is the U.S. dollar. Our other wholly-owned subsidiaries have their respective local currencies as their functional currencies. The functional currency of our consolidated affiliate, SOI, is the New Taiwan dollar. Transaction gains and losses resulting from transactions denominated in currencies other than the respective functional currencies are included in “Other income (expense), net” for the periods presented. The amounts of transaction gains and losses for fiscal 2007, 2006 and 2005 were not material.

Given that the only expenses that we incur in currencies other than U.S. dollars are certain costs which historically have not been a significant percentage of our revenues, we do not believe that our foreign currency exchange rate fluctuation risk is significant. Consequently, we do not believe that a 10% change in foreign currency exchange rates would have a significant effect on our future net income or cash flows.

We have not hedged exposures denominated in foreign currencies or used any other derivative financial instruments as we do not believe that we currently have any significant direct foreign currency exchange rate risk. Although we transact our business in U.S. dollars, future fluctuations in the value of the U.S. dollar may affect the competitiveness of our products and results of operations.

Market Interest Rate Risk

Our cash equivalents and short-term investments are exposed to financial market risk due to fluctuation in interest rates, which may affect our interest income and, in the future, the fair market value of our investments. We manage our exposure to financial market risk by performing ongoing evaluations of our investment portfolio. We presently invest in money market funds, certificates of deposit issued by banks, commercial paper, certificates of deposit, high-grade corporate securities and government bonds maturing approximately 18 months or less from the date of purchase. We also invest in auction rate securities which have a final maturity date of up to thirty years but whose interest rate is reset principally up to every 35 days, and in variable rate demand notes, which have a final maturity date of up to thirty years but whose interest rate is reset at varying intervals typically between 1 and 7 days. Due to the short maturities of our investments, the carrying value should approximate the fair market value. In addition, we do not use our investments for trading or other speculative purposes. Due to the short duration of our investment portfolio, we do not expect that an immediate 10% change in interest rates would have a material effect on the fair market value of our portfolio. Therefore, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates.

During fiscal 2007, we financed the purchase of a four-building complex with an $27.9 million mortgage loan. The mortgage loan is a variable rate loan which bears interest at LIBOR plus 90 basis points and changes in the interest rate will affect our interest payments. Concurrent with the mortgage loan, we also entered into an interest rate swap with a notional amount that approximates the principal outstanding under the mortgage loan. We are the fixed rate payer under the swap with a fixed rate of 5.27%. Consequently, we do not believe that a hypothetical 10% change in LIBOR would have a material effect on our annual interest expense.

53

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

OMNIVISION TECHNOLOGIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	55
Consolidated Balance Sheets	57
Consolidated Statements of Income	58
Consolidated Statements of Stockholders’ Equity and Comprehensive Income	59
Consolidated Statements of Cash Flows	60
Notes to Consolidated Financial Statements	61
Supplementary Data	93

54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of OmniVision Technologies, Inc.:

We have completed integrated audits of OmniVision Technologies, Inc.’s consolidated financial statements and of its internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of OmniVision Technologies, Inc. and its subsidiaries at April 30, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 2007 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 indexpresents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes 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. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 13 to the consolidated financial statements, effective May 1, 2006, the Company changed its method of accounting for share-based payments in accordance with Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-based Payments.”

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of April 30, 2007 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2007, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

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

55

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
San Jose, California
June 27, 2007

56

OMNIVISION TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	April 30,
	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	190,878		$	240,227
Short-term investments	114,432			114,278
Accounts receivable, net of allowances for doubtful accounts and sales returns	65,666			65,916
Inventories	119,663			54,973
Refundable and deferred income taxes	3,356			1,708
Prepaid expenses and other current assets	8,717			9,158
Recoverable insurance proceeds (Note 17)	13,000			—
Total current assets	515,712			486,260
Property, plant and equipment, net	64,363			38,010
Long-term investments	67,281			18,673
Goodwill	7,541			4,892
Intangibles, net	20,493			26,245
Other long-term assets	12,669			3,189
Total assets	$	688,059		$	577,269
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	56,290		$	42,770
Accrued expenses and other current liabilities	17,524			21,351
Litigation settlement accrual	13,750			—
Accrued income taxes payable	61,617			52,406
Deferred income	8,873			6,329
Current portion of long-term debt	631			152
Total current liabilities	158,685			123,008
Long-term liabilities:
Non-current portion of long-term debt	27,576			308
Other long-term liabilities	6,998			4,033
Total long-term liabilities	34,574			4,341
Total liabilities	193,259			127,349
Commitments and contingencies (Note 17)
Minority interest	4,344			27,113
Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 60,810,998 issued and 54,940,998 outstanding at April 30, 2007 and 59,743,625 shares issued and 53,873,625  outstanding at April 30, 2006, respectively	61			60
Additional paid-in capital	329,012			285,112
Accumulated other comprehensive income	867			1,092
Treasury stock, 5,870,000 shares at April 30, 2007 and 2006	(79,568		)	(79,568		)
Retained earnings	240,084			216,111
Total stockholders’ equity	490,456			422,807
Total liabilities, minority interest and stockholders’ equity	$	688,059		$	577,269

The accompanying notes are an integral part of these Consolidated Financial Statements.

57

OMNIVISION TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

	Year Ended April 30,
	2007			2006		2005
Revenues	$	528,143		$	491,926	$	388,062
Cost of revenues	372,776			310,250		231,508
Gross profit	155,367			181,676		156,554
Operating expenses:
Research, development and related	67,570			40,572		25,494
Selling, general and administrative	58,674			35,320		29,012
Litigation settlement, net of recovery of $13,000 (Note 17)	3,300			—		—
Total operating expenses	129,544			75,892		54,506
Income from operations	25,823			105,784		102,048
Interest income, net	14,580			8,949		4,218
Other income (expense), net	(1,285		)	933		(173		)
Income before income taxes and minority interest	39,118			115,666		106,093
Provision for income taxes	9,392			23,133		29,706
Minority interest	5,753			3,385		—
Net income	$	23,973		$	89,148	$	76,387
Net income per share:
Basic	$	0.44		$	1.64	$	1.35
Diluted	$	0.43		$	1.56	$	1.24
Shares used in computing net income per share:
Basic	54,706			54,268		56,688
Diluted	55,234			56,958		61,566

The accompanying notes are an integral part of these Consolidated Financial Statements.

58

OMNIVISION TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(in thousands, except share data)

				Accumulated
			Additional	Other
Common Stock		Deferred	Paid-in	Comprehensive	Treasury	Retained		Comprehensive
Shares	Amount	Compensation	Capital	Income (Loss)	Stock	Earnings	Total	Income

Balance at May 1, 2004	56,212,119		$	56	$	(20	)	$	249,405		$	(4	)	$	—		$	50,576	$	300,013		$	58,741
Exercise of stock options	934,326		1		—			3,835			—			—			—		3,836
Employee stock purchase plan	119,690		—		—			1,564			—			—			—		1,564
Grant of fully-vested options to non-employees.	—		—		—			938			—			—			—		938
Tax benefits from stock options	—		—		—			2,104			—			—			—		2,104
Shares issued for CDM Optics, Inc. acquisition	368,206		1		—			5,256			—			—			—		5,257
Amortization of deferred compensation	—		—		20			—			—			—			—		20
Translation gains	—		—		—			—			1			—			—		1			$	1
Unrealized losses on available-for-sale securities, net	—		—		—			—			(22		)	—			—		(22		)	(22		)
Net income	—		—		—			—			—			—			76,387		76,387			76,387
Balance at April 30, 2005	57,634,341		58		—			263,102			(25		)	—			126,963		390,098			$	76,366
Exercise of stock options	1,992,887		2		—			17,584			—			—			—		17,586
Employee stock purchase plan	116,397		—		—			1,565			—			—			—		1,565
Purchase of stock for treasury	(5,870,000	)	—		—			—			—			(79,568		)	—		(79,568		)
Grant of fully-vested options to non-employees.	—		—		—			6			—			—			—		6
Tax benefits from stock options	—		—		—			2,855			—			—			—		2,855
Translation gains	—		—		—			—			1,142			—			—		1,142			$	1,142
Unrealized losses on available-for-sale securities, net	—		—		—			—			(25		)	—			—		(25		)	(25		)
Net income	—		—		—			—			—			—			89,148		89,148			89,148
Balance at April 30, 2006	53,873,625		60		—			285,112			1,092			(79,568		)	216,111		422,807			$	90,265
Exercise of stock options	858,833		1		—			7,798			—			—			—		7,799
Employee stock purchase plan	206,800		—		—			2,829			—			—			—		2,829
Employee stock-based compensation	—		—		—			29,660			—			—			—		29,660
Tax effect from stock-based compensation	—		—		—			(728		)	—			—			—		(728		)
Goodwill adjustment for put rights issued to CDM Optics, Inc. selling stockholders	—		—		—			1,894			—			—			—		1,894
Shares issued for CDM Optics, Inc. acquisition	1,740		—		—			34			—			—			—		34
Change-of-interest benefit from minority investments	—		—		—			2,413			—			—			—		2,413			$	2,413
Translation losses	—		—		—			—			(220		)	—			—		(220		)	(220		)
Unrealized losses on available-for-sale securities, net	—		—		—			—			(5		)	—			—		(5		)	(5		)
Net income	—		—		—			—			—			—			23,973		23,973			23,973
Balance at April 30, 2007	54,940,998		$	61	$	—		$	329,012		$	867		$	(79,568	)	$	240,084	$	490,456		$	26,161

The accompanying notes are an integral part of these Consolidated Financial Statements.

59

OMNIVISION TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended April 30,
	2007			2006			2005
Cash flows from operating activities:
Net income	$	23,973		$	89,148		$	76,387
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	13,012			10,598			3,037
Change in fair value of interest rate swap	492			—			—
Stock-based compensation	29,660			6			958
Tax effect from stock-based compensation	(728		)	2,855			2,104
Minority interest in net income of consolidated affiliates	5,753			3,385			—
Equity investment (gain) loss, net	(3,639		)	(847		)	149
Affiliate stock grants	179			—			—
Write-down of inventories	8,235			11,544			10,702
Excess tax benefits from stock-based compensation	(1,836		)	—			—
Loss on disposal of property, plant and equipment	7			19			96
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net	(75		)	(6,049		)	(5,870		)
Inventories	(70,131		)	(8,130		)	(27,076		)
Refundable and deferred income taxes	(8,131		)	3,709			1,391
Prepaid expenses and other current assets	(19,865		)	(6,713		)	(161		)
Accounts payable	34,375			15,449			(1,939		)
Accrued expenses and other current liabilities	10,210			6,577			1,362
Accrued income taxes payable	15,976			19,784			31,019
Deferred income	2,544			846			(3,402		)
Deferred tax liabilities	2,498			(5,314		)	—
Net cash provided by operating activities	42,509			136,867			88,757
Cash flows from investing activities:
Restricted cash	—			—			1,072
Purchases of short-term investments	(259,208		)	(184,372		)	(194,533		)
Proceeds from sales or maturities of short-term investments	247,838			194,322			171,050
Purchases of property, plant and equipment, net of sales	(82,787		)	(22,655		)	(1,483		)
Payment for acquisition of CDM Optics, Inc., net of cash acquired	—			—			(13,528		)
Additional investment made in Silicon Optronics, Inc.	—			—			(2,078		)
Consolidation of Silicon Optronics, Inc.	—			—			2,662
Proceeds from consolidation of VisEra, net of cash payments	—			13,792			—
De-consolidation of VisEra	(20,646		)	—			—
Purchases of long-term investments	(27,000		)	(12,471		)	—
Purchases of intangible assets	(548		)	(5,500		)	(1,460		)
Net cash used in investing activities	(142,351		)	(16,884		)	(38,298		)
Cash flows from financing activities:
Proceeds from short-term borrowings of consolidated affiliate	—			3,981			—
Repayment of short-term borrowings of consolidated affiliate	—			(3,981		)	—
Proceeds from long-term borrowings	27,927			—			—
Payment of capital lease obligations	(142		)	(27		)	—
Cash contribution by minority shareholder	10,495			9,500			—
Affiliate cash dividend paid to minority shareholder	(245		)	—			—
Proceeds from exercise of stock options and employee stock purchase plan	10,628			19,151			5,400
Payments for repurchases of common stock	—			(79,568		)	—
Excess tax benefits from stock-based compensation	1,836			—			—
Net cash provided by (used in) financing activities	50,499			(50,944		)	5,400
Effect of exchange rate changes on cash and cash equivalents	(6		)	731			(55		)
Net (decrease) increase in cash and cash equivalents	(49,349		)	69,770			55,804
Cash and cash equivalents at beginning of period	240,227			170,457			114,653
Cash and cash equivalents at end of period	$	190,878		$	240,227		$	170,457
Supplemental cash flow information:
Taxes paid (refunds received),net	$	(2,046	)	$	2,474		$	310
Interest paid	$	25		$	20		$	—
Supplemental schedule of non-cash investing and financing activities:
Capital equipment financing obligation	$	2,915		$	393		$	—
Affiliate shares issued to affiliate employees	$	459		$	—		$	—
Change-of-interest benefit from minority shareholder cash contribution	$	2,413		$	—		$	—
Escrow shares issued to CDM selling stockholders	$	34		$	—		$	5,257
Escrow shares to be issued in connection with CDM Optics, Inc. acquisition	$	—		$	—		$	2,095
Capitalized interest and other costs	$	278		$	—		$	—

The accompanying notes are an integral part of these Consolidated Financial Statements.

60

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended April 30, 2007, 2006 and 2005

Note 1 — Basis of Presentation

The Company

OmniVision Technologies, Inc. and its subsidiaries (“OmniVision” or the “Company”) design, develop, manufacture and market semiconductor image sensor devices. The Company’s main product, a device called the CameraChipTM image sensor, is used to capture an image and is used in a number of commercial and consumer mass-market applications. The Company’s CameraChip image sensor is designed to use the complementary metal oxide semiconductor, or CMOS, fabrication process. The Company was incorporated in California in May 1995 and reincorporated in Delaware in March 2000.

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, 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. The Company bases its estimates and judgments on its historical experience, knowledge of current conditions and beliefs of what could occur in the future considering available information. Actual results could differ from these estimates.

Note 2 — Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its consolidated affiliate. All significant inter-company accounts and transactions have been eliminated.

In limited circumstances where an unrelated third party invests in the Company’s consolidated subsidiary or affiliate, and the per share value of the investment exceeds the Company’s average per share carrying value in the entity, the Company will record the change-of-interest benefit as “Additional paid-in capital.” If the per share value is less than the Company’s per share carrying value, the Company will assess whether the investment has been impaired.

Consolidation of Affiliates

Financial Accounting Standards Board Interpretation No. 46 (revised December 2003) (“FIN 46(R)”), “Consolidation of Variable Interest Entities,” requires that if an entity is the primary beneficiary of a variable interest entity (“VIE”), the entity should include the assets, liabilities and results of operations of the VIE in its consolidated financial statements. In the quarter ended October 31, 2005, the Company consolidated VisEra Technologies Company, Ltd (“VisEra”) and VisEra Holding Company (“VisEra Cayman”), as the combined VisEra entity was deemed a VIE and the Company considered itself to be the primary beneficiary of VisEra. During the quarter ended January 31, 2007, the Company assumed responsibility for logistics management previously provided by VisEra, and as a result, concluded that it had lost its status as the primary beneficiary in VisEra and VisEra ceased to be a VIE. As a result, the Company deconsolidated VisEra and VisEra Cayman on January 1, 2007, and accounted for the combined VisEra entity under the equity method. (See Note 5.)

Foreign Currency Translation

In general, the functional currencies of the Company’s wholly-owned subsidiaries are their respective local currencies. The functional currency of the Company’s subsidiaries located in Hong Kong, OmniVision Technologies (Hong Kong) Company Limited and OmniVision Trading (Hong Kong) Company Ltd., in Shanghai, China, Hua Wei Semiconductors (Shanghai) Co. Ltd. (“HWSC”) and Shanghai OmniVision IC Design Co., Ltd., (“SDC”)  and in the Cayman Islands, OmniVision International Holding, Ltd. and HuaWei Technology International, Ltd., is the U.S. dollar.

Effective May 1, 2006, the functional currency of one of the Company’s affiliates, VisEra, became the U.S. dollar. The change was necessitated by a significant increase in U.S. dollar-based transactions after VisEra’s

61

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

acquisition of certain color-filter manufacturing assets from Taiwan Semiconductor Manufacturing Company Limited (“TSMC”). The functional currency of Silicon Optronics, Inc., (“SOI”), the only consolidated affiliate of the Company as of April 30, 2007, remains the New Taiwan dollar.

For subsidiaries with local currencies as the functional currencies, the assets and liabilities of the subsidiaries are translated at the rates of exchange prevailing on the balance sheet date. Revenue and expense items are translated at the average rate of exchange for the period. Unrealized gains and losses from foreign currency translation are included in “Accumulated other comprehensive income,” a component of stockholders’ equity. For subsidiaries or consolidated affiliates with assets denominated in currencies other than the functional currency, non-monetary assets are remeasured into U.S. dollars using historical rates of exchange. Monetary assets are remeasured into U.S. dollars using exchange rates prevailing on the balance sheet date. Remeasurement gains and losses are included in “Other income (expense), net” and have not been material in any of the periods presented.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity at the date of purchase of three months or less to be cash equivalents. Cash equivalents consist principally of commercial paper, government bonds, certificates of deposit and money market funds that are stated at cost, which approximates fair value.

The Company’s cash and cash equivalent amount is subject to concentration of credit risk. The Company maintains some cash and cash equivalents balances with financial institutions that are in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits.

Restricted Cash

Restricted cash represents cash that was set aside as a result of court proceedings in which the parties stipulated to the filing of a bond that the Company posted with the San Diego County Superior Court. In November 2004, the parties settled the dispute.

Short-Term Investments

The Company’s short-term investments, which are classified as available-for-sale securities, are invested in high-grade corporate securities, municipal bonds and notes and government debt securities maturing in eighteen months or less from the date of purchase. The Company also invests in auction rate securities which have a final maturity date of up to thirty years but whose interest rate is reset principally up to every 35 days, and in variable rate demand notes, which have a final maturity date of up to thirty years but whose interest rate is reset at varying intervals typically between 1 and 7 days. The market for auction rate securities is highly liquid and the Company has always been able to sell its holdings at par on a reset date. Variable rate demand notes can be readily liquidated at any interest rate reset date either by putting them back to the original issuer or by putting them to a third party remarketer as generally provided in the original prospectus. To date, the Company has always been able to redeem its holdings of these securities in accordance with their terms, and the Company believes that the risk of non-redemption is minimal. Consequently, these securities are available for use in current operations and they are classified as short-term investments.

Short-term investments are reported at fair value at April 30, 2007 and 2006. Unrealized gains or losses are recorded in stockholders’ equity and included in “Accumulated other comprehensive income.” Declines in value judged to be other than temporary, of which there were none in the periods presented, would be recorded in operations at the time such judgment was made.

Accounts Receivable

Accounts receivable are recorded at invoiced amounts and do not bear interest. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. Allowances for doubtful accounts and sales returns are established based on various factors including credit profiles of the Company’s customers, contractual terms and conditions, historical payments, returns and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

discounts experience, and current economic trends. The Company reviews its allowance for doubtful accounts quarterly by assessing individual accounts receivable over a specific aging and amount, and all other balances on a pooled basis based on historical collection experience and economic risk assessment. Accounts receivable are written off on a case-by-case basis, net of any amounts that may be collected. The Company determines its allowance for sales returns through evaluation of historical sales returns and other known factors and provides for estimated sales returns in the same period it records the related revenues. To estimate allowance for sales returns, the Company analyzes potential customer specific product application issues, potential quality and reliability issues and historical returns. The Company evaluates quarterly the adequacy of the allowance for sales returns. This allowance is reflected as a reduction to accounts receivable in the Company’s consolidated balance sheets. Increases to the allowance are recorded as a reduction to revenues.

Fair Value of Financial Instruments

Due to their short maturities, the reported amounts of the Company’s financial instruments, including cash and cash equivalents, restricted cash, short-term investments, accounts receivable, accounts payable and other current liabilities approximate fair value.

The fair value of the Company’s mortgage debt approximates book value as the underlying interest rate is based on a risk adjusted market rate. (See Note 9.)

Related to the mortgage debt, the Company has also entered into an interest rate swap arrangement. For such derivative instrument, the Company will recognize it at the reporting date as either an asset or liability in its consolidated balance sheets and measure the instrument at fair value. The accounting for changes in fair value of a derivative depends on the intended use of the derivative and the associated hedging designation. For the swap, the Company has not designated it as a hedge and has recorded the change in fair value to “Other income (expense), net.” (See Note 9.)

Property, Plant and Equipment

Property, plant and equipment, including land-use rights, is stated at cost less accumulated depreciation and amortization. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets as follows:

Buildings	40 years
Building/leasehold improvements	Shorter of 20 years or life of lease
Machinery and equipment	3–10 years
Furniture and fixtures	3–7 years
Land-use rights	Life of right, generally 50 years

Construction in progress includes project costs paid to third parties that are clearly associated with the acquisition, development, and construction of a real estate project and are capitalized as a cost of that project prior to the use of the asset. Such costs include the costs of materials, interest, legal, and escrow services. These capitalized project costs are not subject to depreciation until the assets to which they are related are placed into production.

In December 2000, the Company established HWSC, a Chinese subsidiary, to conduct testing operations in China. Subsequently, the Company constructed a manufacturing facility in Shanghai, China, owned by HWSC. This manufacturing facility was placed in service in July 2003. HWSC does not own the land that underlies the facility but holds a “land use right” that was acquired from the local Chinese government in December 2000 for approximately $0.8 million, and entitles the Company to use the land for 50 years. The cost of the land use right was recorded as a component of property, plant and equipment and is being depreciated over 50 years, the useful life of the right.

In addition, in January 2007, the Company, through its wholly-owned subsidiary, SDC, entered into a Land-Use-Right Purchase Agreement (the “Purchase Agreement”) with the Construction and Transportation Commission of the Pudong New District, Shanghai. The Purchase Agreement has an effective date of December 31, 2006. Under

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

the terms of the Purchase Agreement, the Company agreed to pay an aggregate amount of approximately $0.6 million (the “Purchase Price”) in exchange for the right to use approximately 323,000 square feet of land located in Shanghai, China, for a period of 50 years. At April 30, 2007, the cost of the land use right was temporarily recorded as “Prepaid expenses and other current assets” pending receipt of the formal Certificate of Ownership.

Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable, and at least annually. When such an event occurs, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the undiscounted expected future cash flows are less than the carrying amount of the asset, an impairment loss is recognized in order to write-down the carrying value of the asset to its estimated fair market value. To date, the Company has not recognized any impairment losses.

Inventories

Inventories are stated at the lower of cost, determined on a first-in, first-out (“FIFO”) basis, or market.

The Company records provisions to reduce the carrying value of inventories to their net realizable value when the Company believes that the net realizable value is less than cost. The Company also records allowances for the cost of inventories when the number of units on hand exceeds the number of units that the Company forecasts will be sold over a certain period of time, generally 12 months. The recording of these allowances establishes new and lower cost basis for specifically identified inventory items. The Company does not restore the cost bases to their original levels despite subsequent changes in facts and circumstances.

Goodwill

The Company records goodwill when the consideration paid for an acquisition exceeds the fair value of net tangible and intangible assets acquired, including related tax effects. Goodwill is not amortized; instead goodwill is tested for impairment on an annual basis, or more frequently if the Company believes indicators of impairment exist. The performance of the test involves a two-step process. The first step requires comparing the fair value of the reporting unit (the Company has one reporting unit) to its net book value, including goodwill. The fair value of the reporting unit is determined by taking the market capitalization of the reporting unit as determined through quoted market prices. A potential impairment exists if the fair value of the reporting unit is lower than its net book value. The second step of the process, which is performed only if a potential impairment exists, involves determining the difference between the fair value of the reporting unit’s net assets other than goodwill and the fair value of the reporting unit. If this difference is less than the net book value of goodwill, an impairment exists and is recorded.

Intangible Assets Other than Goodwill

The Company carries intangible assets other than goodwill at cost less accumulated amortization. Intangible assets are generally amortized on a straight-line basis over the estimated economic lives of the respective assets, generally two to seven years. The Company reviews identifiable intangible assets other than goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of the undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the amount by which the carrying value exceeds the fair value of the asset.

Warranty for Defective Products

The Company warrants to its customers that its products will work in accordance with their respective specifications. Due to the cost and other complexities associated with rectifying any product defects, the Company does not repair any defective products. If a product is defective, the customer notifies the Company and, with the Company’s approval, returns the defective product. The Company then sends replacement products to the customer.

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For the Years Ended April 30, 2007, 2006 and 2005

Accordingly, the Company accounts for any exposure related to defective products as a portion of its allowance for sales returns.

Treasury Stock

The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity.

Revenue Recognition

For shipments to customers without agreements that allow for returns or credits, principally original equipment manufacturers (“OEMs”) and value added resellers (“VARs”), the Company recognizes revenue using the “sell-in” method. Under this method, the Company recognizes revenue upon the shipment of products to the customer provided that the Company has received a signed purchase order, the price is fixed or determinable, title and risk of loss has transferred to the customer, collection of resulting receivables is considered reasonably assured, product returns are reasonably estimable, there are no customer acceptance requirements and there are no remaining material obligations. At the time revenue is recognized, the Company provides for future returns of potentially defective product based on historical experience. For cash consideration given to customers for which the Company does not receive a separately identifiable benefit or cannot reasonably estimate fair value, the Company records the amounts as reductions of revenue.

For shipments to distributors under agreements allowing for returns or credits, the Company recognizes revenue using the “sell-through” method under which the Company defers revenue and the related costs of sale until the distributor resells the product to the Company’s end-user customer and the Company is notified in writing by the distributor of such sale. The amount billed to these distributors less the cost of inventory shipped to but not yet sold by the distributors is shown net on the consolidated balance sheets as deferred income.

In addition, the Company recognizes revenue from the performance of services to a limited number of customers by its wholly-owned subsidiary, CDM Optics, Inc., or CDM, and, through December 31, 2006, by its then consolidated affiliate, VisEra. (See Note 5.) The Company recognizes the CDM-associated revenue under either the completed-contract or the percentage-of-completion methods. The percentage-of-completion method of accounting is used for cost reimbursement-type contracts, where revenues recognized are that portion of the total contract price equal to the ratio of costs expended to date to the anticipated final total costs based on current estimates of the costs to complete the projects. CDM-associated revenue has not been material in any of the periods presented. Until December 31, 2006, the Company recognized VisEra’s service revenue from third party customers when the production services provided by VisEra were complete and the product was shipped to the customer.

Research, Development and Related

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 2, “Accounting for Research and Development Costs,” the Company recognizes the costs associated with the internal development of intellectual property rights as expense when incurred. These costs include expenses associated with patent, copyright, trademark and trade secrets.

Advertising

All of the Company’s advertising costs are expensed as incurred.

Income Taxes

The Company accounts for deferred income taxes using the liability method, under which the expected future tax consequences of timing differences between the book and tax basis of assets and liabilities are recognized as deferred tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets when management estimates, based on available objective evidence, that it is more likely than not that the benefit of deferred tax assets will not be realized.

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OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Stock-Based Compensation

Effective May 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No. 123(R)”) which requires all share-based payments to employees, including grants of employee stock options and employee stock purchases under the 2000 Employee Stock Purchase Plan (the “2000 Purchase Plan”), to be recognized in the financial statements based on their respective grant date fair values. SFAS No. 123(R) supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations and eliminates the pro forma disclosures of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). In March 2005, the SEC issued SAB No. 107, “Share-Based Payment” (“SAB 107”), which provides guidance regarding the interaction of SFAS No. 123(R) and certain SEC rules and regulations. The Company has applied the provisions of SAB 107 in its adoption of SFAS No. 123(R).

The Company adopted SFAS No. 123(R) using the modified prospective method. The Company’s consolidated financial statements as of and for the fiscal year ended April 30, 2007 reflect the impact of adopting SFAS No. 123(R). In accordance with the modified prospective method, the consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123(R). (See Note 13.)

Under SFAS No. 123(R), stock-based compensation is measured at the grant date, based on the fair value of the award using the Black-Scholes option pricing model (“Black-Scholes”), and is recognized as expense over the requisite service period of the award. The Company has chosen to recognize stock-based compensation expense using the straight-line attribution method. Black-Scholes requires the use of highly subjective, complex assumptions, including the expected term and the price volatility of the Company’s stock. SFAS No. 123(R) also requires forfeiture rates to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Stock-based compensation expense was recorded net of estimated forfeitures for fiscal 2007 such that expense was recorded only for those stock-based awards that are expected to vest. Previously under APB 25 to the extent awards were forfeited prior to vesting, the corresponding previously recognized expense was reversed in the period of forfeiture.

In accordance with Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) No. FAS123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-based Payment Awards,” as of April 30, 2007, the Company elected to use the long-form method to establish the beginning balance of the additional paid-in capital pool (“APIC Pool”) related to the tax effects of employee stock-based awards granted prior to the adoption of SFAS No. 123(R).

The Company has also elected to use the “with and without” approach as described in EITF Topic No. D-32 in determining the order in which tax attributes are utilized.  As a result, the Company will recognize a tax benefit from stock-based awards in additional paid-in capital only if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been utilized.  In addition, the Company has elected to account for the indirect effects of stock-based awards on other tax attributes, such as R&D tax credit, through the income statement.

Upon adoption of SFAS No. 123(R), the Company also chose to derecognize both the deferred tax assets pertaining to net operating loss and tax credit carryforwards that represent excess tax benefits from stock-based awards and the offsetting valuation allowance.

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OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Prior to the adoption of SFAS No. 123(R), the Company accounted for stock-based employee compensation arrangements using the intrinsic value method in accordance with the provisions of APB 25, and complied with the disclosure provisions of SFAS No. 123. Under APB 25, compensation cost was recognized based on the difference on the date of grant, if any, between the fair value of the Company’s stock and the amount an employee was required to pay to acquire the stock. In accordance with SFAS No. 123, the Company provided pro forma information to illustrate the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation. In the pro forma presentation, the Company recognized stock-based compensation expense under the accelerated method, as specified in FASB Interpretation No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.”

Comprehensive Income

Comprehensive income is defined as the change in the equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Comprehensive income for fiscal 2007, 2006 and 2005, was $26.2 million, $90.3 million and $76.4 million, respectively, and included net income, unrealized losses from available-for-sale securities, change-of-interest benefits and translation gains (losses) from foreign subsidiaries.

Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with SFAS No. 128, “Earnings per Share,” under the provisions of which basic income (loss) per share is computed by dividing the income (loss) available to holders of common stock for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted income (loss) per share excludes potential common stock if the effect of such stock is antidilutive. Potential common stock consists of unvested common stock subject to repurchase and incremental common shares issuable upon the exercise of stock options.

Minority Interest

Minority interest in the Company’s consolidated financial statements results from the accounting for the acquisition of a noncontrolling interest in a consolidated subsidiary or affiliate. Minority interest represents a partially-owned subsidiary’s or consolidated affiliate’s income, losses, and components of other comprehensive income which should be attributed to the controlling and noncontrolling interests or other parties with a right or obligation that affects the attribution of comprehensive income or loss, on the basis of their contractual rights or obligations, if any, otherwise, on the basis of ownership interests. In fiscal 2007, approximately $267,000 represents the 54.6% interest that the Company did not own in the net income of SOI and approximately $5.5 million represents the 52.9% interest that the Company did not own in the net income of VisEra. In fiscal 2006, approximately $1.4 million represents the 51.0% interest that the Company did not own in the net income of SOI and approximately $2.0 million represents the 54.4% interest that the Company did not own in the net income of VisEra. There was no minority interest in fiscal 2005.

Recent Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”) “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109.” FIN 48 requires that the Company recognize in the consolidated financial statements the impact of a tax position that, based on the technical merits of the position, is more likely than not to be sustained upon examination. The evaluation of a tax position in accordance with this interpretation is a two-step process. In the first step, recognition, the Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step addresses measurement of a tax position that meets the more-likely-than-not criterion. The tax position is measured at the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold will be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-

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OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

likely-than-not recognition threshold will be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. FIN 48 is effective for fiscal years beginning after December 15, 2006. The differences between the amounts recognized in the consolidated financial statements prior to the adoption of FIN 48 and the amounts reported after adoption will be accounted for as a cumulative-effect adjustment recorded to the beginning balance of retained earnings. The Company is currently evaluating the impact FIN 48 will have on its financial position, results of operations or cash flows. Based on its preliminary analysis, the Company expects a substantial portion of its accrued income taxes payable balance of $61.6 million as of April 30, 2007 to be reclassified in fiscal 2008 as a non-current liability. In addition, the adoption of FIN 48 may result in greater volatility in the Company’s future effective tax rates.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements’’ (“SFAS No. 157”), which defines fair value, establishes guidelines for measuring fair value and expands the requisite disclosures for fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather establishes a common definition of fair value to be used throughout generally accepted accounting principles. SFAS No. 157 is effective in fiscal years beginning after November 15, 2007 and is required to be adopted by the Company in the first quarter of fiscal 2009. The Company’s adoption of the provisions of SFAS No. 157 is not expected to have a material effect on its financial condition, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (“SFAS No. 159”) which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. SFAS No. 159 does not establish requirements for recognizing and measuring dividend income, interest income, or interest expense. This Statement does not eliminate disclosure requirements included in other accounting standards. SFAS No. 159 is effective in fiscal years beginning after November 15, 2007 and is required to be adopted by the Company in the first quarter of fiscal 2009. The Company is currently evaluating the impact SFAS No. 159 may have on its financial position, results of operations or cash flows.

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OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Note 3 — Short-Term Investments

Available-for-sale securities at April 30, 2007 and 2006 were as follows (in thousands):

	As of April 30, 2007
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
Certificates of deposit	$	3,332	$	—	$	—		$	3,332
U.S. government debt securities with maturities less than one year	3,000		—		—			3,000
U.S. government debt securities with maturities over one year	10,034		—		(12		)	10,022
Municipal bonds and notes	70,521		—		(23		)	70,498
Commercial paper and bond funds	27,623		—		(43		)	27,580
	$	114,510	$	—	$	(78	)	$	114,432
Contractual maturity dates, less than one year								$	20,130
Contractual maturity dates, one year to two years								46,602
Contractual maturity dates, two years to 39 years(1)								47,700
								$	114,432

	As of April 30, 2006
	Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value
Municipal bonds and notes	$	95,445	$	—	$	(39	)	$	95,406
Commercial paper	18,900		—		(28		)	18,872
	$	114,345	$	—	$	(67	)	$	114,278
Contractual maturity dates, less than one year								$	36,648
Contractual maturity dates, one year to 34 years(1) (2)								77,630
								$	114,278

(1)Represents auction rate securities, which have a maturity date of up to 39 years with the interest rate being reset principally up to every 35 days.

(2)Represents variable rate demand notes, which have a final maturity date of up to 34 years but whose interest rate is reset at varying intervals typically between one and seven days.

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OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Note 4 — Balance Sheet Accounts (in thousands)

	April 30,
	2007			2006
Cash and cash equivalents:
Cash	$	18,274		$	8,597
Money market funds and certificates of deposit	89,020			197,030
Commercial paper and government bonds	83,584			34,600
	$	190,878		$	240,227
Accounts receivable, net:
Accounts receivable	$	72,113		$	73,412
Less:    Allowance for doubtful accounts	(980		)	(1,067		)
Allowance for sales returns	(5,467		)	(6,429		)
	$	65,666		$	65,916
Inventories:
Work in progress	$	64,159		$	34,310
Finished goods	55,504			20,663
	$	119,663		$	54,973
Prepaid expenses and other current assets:
Prepaid expenses	$	2,967		$	2,758
Deposits and other	4,693			4,556
Interest receivable	1,057			1,844
	$	8,717		$	9,158
Property, plant and equipment, net:
Land(1)	$	26,074		$	—
Buildings and land use right	7,612			7,163
Buildings/leasehold improvements	4,666			2,702
Machinery and equipment(2)	19,745			34,185
Furniture and fixtures	718			713
Software	2,546			2,280
Construction in progress	17,496			3,248
	78,857			50,291
Less: Accumulated depreciation and amortization	(14,494		)	(12,281		)
	$	64,363		$	38,010
Other long-term assets:
Deferred income taxes – noncurrent	$	6,869		$	179
Prepaid wafer credits	4,000			—
Long-term employee loan receivable	1,000			—
Other long-term assets	800			3,010
	$	12,669		$	3,189
Accrued expenses and other current liabilities:
Employee compensation	$	4,713		$	5,301
Third party commissions	1,021			1,876
Acquisition costs	—			2,095
Professional services	1,830			2,494
Noncancelable purchase commitments	906			2,627
Pricing adjustments	4,022			3,968
Other	5,032			2,990
	$	17,524		$	21,351
Other long-term liabilities:
Deferred tax liabilities	$	6,506		$	4,033
Other	492			—
	$	6,998		$	4,033

(1)The Company acquired four buildings and land in Santa Clara County, California, in March 2007, and allocated $26.1 million of the purchase price to Land. (See Note 9.)

(2)The deconsolidation of VisEra effective January 1, 2007 reduced machinery and equipment by approximately $53.7 million. (See Note 5.)

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OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Note 5 — Long-Term Investments

Long-term investments as of April 30, 2007 and 2006 consisted of the following (in thousands):

	April 30,
	2007		2006
ImPac	$	2,355	$	2,130
VisEra	60,265		—
XinTec	4,661		16,543
Total	$	67,281	$	18,673

ImPac Technology Co., Ltd.

In 2003, in order to enhance its access to plastic and ceramic packaging services that were in short supply, the Company purchased approximately 27% of the common stock of ImPac Technology Co., Ltd. (“ImPac”), a privately-held company based in Taiwan for a total of $2.0 million in cash. In December 2003, the Company made an additional cash contribution of approximately $0.8 million to maintain its equity ownership percentage in ImPac. Unrelated third parties own the balance of ImPac’s equity. During fiscal 2004, the Company’s equity interest declined to approximately 23% due to additional rounds of financing obtained by ImPac in which the Company did not participate. The Company’s purchases from ImPac are at arm’s length and the Company accounts for this investment using the equity method. The Company recorded equity income of $225,000 and $14,000 in “Other income (expense), net” for its portion of the net income in fiscal 2007 and 2006, respectively, recorded by ImPac. For fiscal 2005, the Company recorded an equity loss of $0.6 million in “Other income (expense), net”, as its portion of the net loss of ImPac. (See Note 18.)

VisEra Technologies Company, Ltd.

In August 2005, the Company entered into an Amended and Restated Shareholders’ Agreement (the “Amended VisEra Agreement”) with TSMC, VisEra, and VisEra Cayman. The Amended VisEra Agreement amended and restated the original Shareholders’ Agreement (the “VisEra Agreement”) that the parties entered into on October 29, 2003, pursuant to which the Company and TSMC agreed to form VisEra, a joint venture in Taiwan, for the purposes of providing manufacturing services and automated final testing services related to complementary metal oxide semiconductor, or CMOS, image sensors. In November 2003, pursuant to the terms of the original Shareholders’ Agreement, the Company contributed $1.5 million in cash to VisEra and granted a non-exclusive license to certain of its manufacturing and automated final testing technologies and patents. In order to provide greater financial and fiscal flexibility to VisEra, in connection with the Amended VisEra Agreement, the parties formed VisEra Cayman, a company incorporated in the Cayman Islands and VisEra became a subsidiary of VisEra Cayman.

Under the terms of the Amended VisEra Agreement, the parties reaffirmed their respective commitments to VisEra, and expanded the scope of and made certain modifications to the original Shareholders’ Agreement. In particular, the parties agreed to raise the total capital committed to the joint venture from $50.0 million to $68.0 million, which commitments may be met or discharged in the form of cash or asset contributions. The Company and TSMC have equal interests in VisEra Cayman. In the quarter ended October 31, 2005, the Company contributed $7.5 million to VisEra Cayman. At a future date yet to be determined, the Company expects to contribute certain of its assets to the joint venture, including technology and plant and equipment currently owned by it or to be purchased with funds for existing commercial commitments. To the extent, if any, that the value of the assets contributed by the Company exceeds the balance of the Company’s commitment, the Company will receive cash from VisEra Cayman.

As a result of the additional investment that the Company and TSMC made in VisEra during the quarter ended October 31, 2005, the Company’s and TSMC’s interest each increased from 25% to 43%, and consequently the Company re-evaluated its accounting for VisEra in accordance with FIN 46(R). The Company concluded that, as a result of its step acquisition of VisEra, and because substantially all of the activities of VisEra either involved or were conducted on behalf of the Company, VisEra was a variable interest entity. Since the Company was the source

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For the Years Ended April 30, 2007, 2006 and 2005

of virtually all of VisEra’s revenues, the Company had a decisive influence over VisEra’s profitability. In the quarter ended January 2006, the Company increased its interest in VisEra from 43% to 46% through purchases of $9.5 million of unissued shares. Accordingly, the Company considered itself to be the primary beneficiary of VisEra, and included VisEra’s financial results in its consolidated financial statements through December 31, 2006.

In January 2006, in accordance with the Amended VisEra Agreement, VisEra purchased color filter processing equipment and related assets from TSMC for an aggregate price equivalent to $16.9 million. In connection with the purchase, VisEra entered into a three-year lease agreement with TSMC. Under this agreement, VisEra leases from TSMC approximately 14,000 square feet of factory and office space where the assets are located at an annual cost of approximately $2.4 million.

In May 2006, VisEra purchased certain equipment and intellectual property from Dai Nippon Printing Co., Ltd., or Dai Nippon, for approximately $3.1 million. Dai Nippon also made an investment in VisEra Cayman of approximately $4.3 million. Because the per share value of the Dai Nippon investment exceeded the Company’s average per share carrying value in VisEra Cayman, the Company recorded a one-time change-of-interest benefit of $1.2 million directly to “Additional paid-in capital,” a component of stockholders’ equity. In November 2006, the Company invested another $6.1 million in VisEra.

On January 1, 2007, the Company assumed responsibility for logistics management services previously provided to the Company by VisEra. As a consequence of the change, the Company concluded that, as of the date of the change, it would lose its status as the primary beneficiary of the joint venture, VisEra would cease to be VIE as defined under FIN 46(R), and that, as a result, the Company was required to deconsolidate VisEra. Accordingly, beginning on January 1, 2007, the Company accounted for its investment in VisEra under the equity method. The deconsolidation of VisEra did not have a material effect on the Company’s reported revenue or reported net income for the fiscal year ended April 30, 2007. In April 2007, pursuant to a January 2007 amendment to the Amended VisEra Agreement that provided for an increase in VisEra’s manufacturing capacity, the Company and TSMC each made an additional investment of $27.0 million. This additional investment is part of an ongoing capacity expansion program at VisEra. Through April 30, 2007, the Company has contributed $51.6 million to VisEra and VisEra Cayman.

All other material terms of the original Shareholders’ Agreement remain in effect. (See Note 17.)

XinTec, Inc.

Between October 2005 and March 2006, pursuant to the terms of the Amended VisEra Agreement (as defined below), VisEra Cayman completed the acquisition of approximately 29.6% of the issued and outstanding shares of XinTec, Inc. (“XinTec”), a Taiwan-based supplier of chip-scale packaging services, in which the Company already held an approximate 7.8% interest. Since VisEra was a consolidated entity at the time, the Company’s beneficial interest in XinTec increased to more than 20%. Consequently, the Company began to account for its investment in XinTec under the equity method.

In January 2007, TSMC purchased approximately 90.5 million previously-unissued shares from XinTec. The purchased shares represented approximately a 43.0% ownership interest in XinTec. Because the per share value of the TSMC investment exceeded the Company’s average per share carrying value in XinTec, the Company recorded a one-time change-of-interest benefit of $1.2 million directly to “Additional paid-in capital,” a component of stockholders’ equity. Other existing shareholders, including the Company and the Company’s affiliate, VisEra, did not purchase additional shares. Consequently, the Company’s direct ownership percentage in XinTec declined to approximately 4.4%. VisEra’s ownership interest declined to 16.9%, and the Company’s beneficial ownership percentage in XinTec declined to 12.4%. Consequently, in accordance with APB Opinion No. 18, “The Equity Method of Accounting For Investments in Common Stocks,” (“APB 18”), the Company began to account for XinTec as a cost method investment effective January 1, 2007.

Beginning in the three months ended October 31, 2005 and through December 31, 2006, the Company accounted for its investment in XinTec under the equity method. For fiscal 2007 and 2006, the Company recorded

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For the Years Ended April 30, 2007, 2006 and 2005

equity income of $1.7 million and $1.3 million, respectively, in “Other income (expense), net.” Prior to October 2005, the Company recorded its investment in XinTec under the cost method.

In August 2006, the Company entered into an Equipment Procurement Agreement (the “Equipment Agreement”) with XinTec. Under the Equipment Agreement, XinTec agreed to provide chip-scale packaging services to the Company, and the Company agreed to procure, through XinTec, up to $50.0 million of certain equipment to be located at XinTec’s facilities for the sole purpose of providing such chip-scale packaging services to the Company. In January 2007, OmniVision and XinTec mutually determined that, as a result of the acquisition by TSMC of a controlling interest in XinTec, it was in each company’s best interest to terminate the Equipment Agreement, and for XinTec to own and operate the capital equipment which, as of January 1, 2007, was in place and operational in the same manner as it operates its existing equipment. Pursuant to the agreement between the Company and XinTec to terminate the Equipment Agreement, XinTec refunded to the Company approximately $32.0 million, representing all funds previously remitted by the Company to XinTec for the purpose of the equipment purchase contemplated by the Equipment Agreement, plus interest accrued thereon. The deposits made to XinTec pursuant to the original Equipment Agreement, and the refund upon the termination of the agreement, are presented in the “Cash flows from investing activities” section of Consolidated Statements of Cash Flows for fiscal 2007.

The following table presents the summary combined financial information of ImPac and VisEra, as derived from the ImPac and VisEra financial statements for the fiscal year ended April 30, 2007, 2006 and 2005 and as of April 30, 2007 and 2006 (in thousands):

	Year Ended April 30,
	2007		2006		2005
Operating data:
Revenues	$	179,584	$	115,192	$	78,570
Gross profit	30,936		10,153		4,215
Income (loss) from operations	21,701		1,979		(110		)
Net income (loss)	14,315		2,130		(1,209		)
	April 30,
	2007		2006
Balance sheet data:
Current assets	$	98,557	$	39,178
Long-term assets	94,158		43,657
Current liabilities	49,902		27,112
Long-term liabilities	729		1,118

The summarized financial information for the twelve months ended April 30, 2006 and 2005 was derived from financial statements prepared under Taiwanese generally accepted accounting principles. The differences between United States and Taiwanese generally accepted accounting principles did not materially impact the amounts reflected in the Company’s financial statements.

The amount of consolidated retained earnings that represented undistributed earnings of investees accounted for by the equity method totaled $6.8 million and $298,000 at April 30, 2007 and 2006, respectively.

Note 6 — Consolidated Affiliate

Silicon Optronics, Inc.

In May 2004, the Company entered into an agreement with Powerchip Semiconductor Corporation (“PSC”), a Taiwan based company that produces memory chips and also provides semiconductor foundry services to fabless companies, to establish a joint venture in Taiwan. The purpose of the joint venture, Silicon Optronics, Inc.,  or SOI, is to conduct manufacturing, marketing and selling of certain of the Company’s legacy products. The Company contributed approximately $2.1 million to SOI in exchange for an ownership percentage of 49.0%. In March 2005,

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For the Years Ended April 30, 2007, 2006 and 2005

the Company assumed control of the board of directors of SOI and the Company has consolidated SOI since April 30, 2005.

In July 2006, SOI declared a cash dividend of $482,000, of which the Company received $237,000 when the cash dividend was paid in August 2006. SOI also issued in July 2006, shares to its employees with an estimated fair value of $459,000 which caused the Company’s ownership percentage to decline from 49.0% to 46.6%.

In April 2007, SOI became listed on the Taiwan GreTai Securities Market, (“TGSM”). The TGSM is the approximate equivalent in Taiwan of the Over-The-Counter market in the United States. In conjunction with the TGSM listing, various employees of SOI exercised their options and increased the number of shares outstanding, which caused the Company’s ownership percentage to decline to 45.4% as of April 30, 2007. (See Note 18.)

Note 7 — Acquisition of CDM Optics, Inc.

In April 2005, the Company acquired all of the outstanding common stock of privately-held CDM. CDM is the exclusive licensee from an affiliate of the University of Colorado of a technology known as Wavefront Coding™ technology. The closing consideration consisted of $10.0 million in cash and approximately 515,000 shares of OmniVision common stock, representing $10.0 million at an agreed valuation of $19.42 per share. Approximately 147,000 of these shares were retained as security for certain indemnities given by the sellers.

Under the terms of the agreement, upon the date of the sale of a predetermined number of revenue-producing products, or April 18, 2007, whichever came earlier, the holders of the approximate 515,000 shares had the right to put the shares to the Company at $19.42 per share; unless, prior to the exercise of the put option, the Company’s common stock closed above a price of $19.42 per share for a period of ten consecutive trading days, in which case the put right would terminate. On December 15, 2005, the Company’s common stock closed above $19.42 for the tenth consecutive day and the put right terminated.  In fiscal 2007, the Company subsequently issued the 147,000 escrow shares to the original shareholders. The escrow shares were puttable back to the Company at a premium and 145,000 shares were put to the Company for cash totaling $2.8 million. The Company is also obligated to pay an additional $10.0 million in cash upon the sale, prior to the end of April 2009, of a pre-determined number of revenue-producing products incorporating CDM’s technology.

CDM and the costs associated with the acquisition are included in the consolidated balance sheets at April 30, 2007 and 2006. CDM’s results of operations have been included in the Company’s consolidated financial statements commencing in fiscal 2006. (See Note 8.)

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For the Years Ended April 30, 2007, 2006 and 2005

In accordance with SFAS No. 141, “Business Combinations,” the Company allocated the purchase price to tangible assets, intangible assets and liabilities based on their estimated fair values. The excess purchase price over the fair values was recorded as goodwill. The fair value assigned to intangible assets acquired was based on estimates and assumptions determined by management. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and purchased intangibles with indefinite lives acquired after June 30, 2001 are not amortized but reviewed periodically for impairment. Purchased intangibles with finite lives are amortized on a straight-line basis over their respective useful lives. The purchase consideration has been allocated as follows, based on the estimated fair value of asset acquired and liabilities assumed (in thousands):

	Fair Value
Purchase consideration:
Cash	$	13,000
OmniVision common stock and limited price guarantee	9,246
Acquisition costs	729
Total purchase consideration	$	22,975
	Fair Value			Amortization Period
Allocation:
Property, plant and equipment	$	97
Core technology	17,800			5 years
Patents	5,800			5 years
Trademarks and tradenames	1,400			5 years
Customer contracts and related relationships	100			3 years
Goodwill	7,541
Current liabilities, net	(416		)
Deferred tax liability	(9,347		)
Total	$	22,975

In performing the purchase price allocation, the Company considered, among other factors, its intention for future use of the acquired assets, analyses of historical financial performance and estimates of future performance of CDM’s products. The fair values of intangible assets were estimated using the income approach for core technology, patents, trademarks and tradenames and customer relationships. The net cash flows were discounted to their present values based on an estimated weighted-average cost of capital of 25%. This discount rate was determined after consideration of the required weighted average return on debt and invested capital and the risk associated with achieving forecasted sales related to the technology and assets acquired from CDM.

Goodwill represents the excess of the purchase price of CDM over the fair value of net tangible and intangible assets acquired after the provision for the deferred tax liability, which represents the difference between the book and tax basis of the intangibles acquired.

The goodwill is not expected to be deductible for tax purposes. (See Note 8.)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

The following unaudited pro forma financial information combines the consolidated results of operations as if the acquisition of CDM had occurred as of the beginning of the periods presented. Pro forma adjustments include only the effects of events directly attributed to transactions that are factually supportable and expected to have a continuing impact. The pro forma results contained in the table below (in thousands, except per share amounts) include pro forma adjustments for amortization of acquired intangibles, of $4.9 million for fiscal 2005:

	Year Ended April 30, 2005
Revenues	$	390,159
Net income	$	72,638
Net income per common share – basic	$	1.27
Net income per common share – diluted	$	1.17

Note 8 — Intangible Assets and Goodwill

In September 2004, the Company purchased certain intellectual property rights that have been recorded in Other long-term assets. In April 2005, the Company acquired all of the outstanding common stock of privately-held CDM. (See Note 7.) In fiscal 2006, the Company purchased approximately $5.5 million of intangible assets, consisting of a $4.0 million licensing fee in connection with the use of a CMOS patent and a $1.5 million licensing fee paid by VisEra to TSMC in accordance with the provisions of the Amended VisEra Agreement.

Intangible assets as of April 30, 2007 consist of the following (in thousands):

	Cost		Accumulated Amortization		Net Book Value
Core technology	$	17,800	$	7,120	$	10,680
Patents and licenses	13,460		4,520		8,940
Trademarks and tradenames	1,400		560		840
Customer relationships	100		67		33
Intangible assets, net	$	32,760	$	12,267	$	20,493

Intangible assets as of April 30, 2006 consist of the following (in thousands):

	Cost		Accumulated Amortization		Net Book Value
Core technology	$	17,800	$	3,560	$	14,240
Patents and licenses	11,260		1,865		9,395
Other intangible assets	1,525		102		1,423
Trademarks and tradenames	1,400		280		1,120
Customer relationships	100		33		67
Intangible assets, net	$	32,085	$	5,840	$	26,245

During fiscal 2007 and 2006, the Company recorded $6.8 million and $5.7 million, respectively, in total amortization expense of intangible assets. The total expected future annual amortization of these intangible assets are as follows (in thousands):

Years Ended April 30,
2008	$	6,565
2009	6,532
2010	6,386
2011	973
2012	37
Total	$	20,493

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For the Years Ended April 30, 2007, 2006 and 2005

The following table shows the activity recorded to “Goodwill” during fiscal 2007 (in thousands):

	Goodwill
Balance at April 30, 2006	$	4,892
Increase in goodwill associated with CDM acquisition in fiscal 2005 (1)	2,649
Balance at April 30, 2007	$	7,541

(1)In the three months ended October 31, 2006, the Company increased “Goodwill” related to its acquisition of CDM by $2.6 million. The increase was due in part to a put option related to shares held in escrow that expired during the same quarter. The escrow shares were puttable back to the Company at a premium and 145,000 shares were put to the Company for cash totaling $2.8 million. Additionally, the value of the initial shares that were issued in April 2005 as part of the CDM acquisition was also increased due to a put option that expired unexercised subsequent to their original issuance. Both amounts should have been recorded as part of the initial acquisition cost of CDM.

Note 9 — Borrowing Arrangements

The following table shows the Company’s debt and lease obligations (in thousands):

	April 30,
	2007			2006
Mortgage loan	$	27,927		$	—
Capital lease obligations	280			460
	28,207			460
Less: amount due within one year	(631		)	(152		)
Non-current portion of long-term debt	$	27,576		$	308

At April 30, 2007, aggregate debt maturities were as follows: (in thousands):

Years Ended April 30,	Mortgage Loan		Capital Lease		Total
2008	$	485	$	146	$	631
2009	515		134		649
2010	548		—		548
2011	583		—		583
2012	620		—		620
Thereafter	25,176		—		25,176
Total	$	27,927	$	280	$	28,207

Mortgage Loan

On March 16,  2007, the Company entered into a Loan and Security Agreement with a domestic bank. The Loan and Security Agreement provides for a term mortgage loan in the principal amount of $27.9 million (the “Mortgage Loan”) and a secured line of credit with an aggregate maximum principal amount of up to $12.0 million (the “Term Loan”). Borrowings under the Mortgage loan accrue interest at the London Interbank Borrowing Rate (“LIBOR”) rate plus 90 basis points. Borrowings under the Term loan accrue interest at the LIBOR rate plus 125 basis points. The Mortgage and Term Loans mature on March 31, 2017 and September 30, 2012, respectively.

In order to secure the obligations and duties of the Company under the Loan and Security Agreement, the Company granted to the bank a security interest in the following assets:

·all presently existing and later acquired collateral relating to a complex of four buildings in Santa Clara County, California, totaling approximately 207,000 square feet (collectively, the “Santa Clara Property”), including, but not limited to, goods, equipment, inventory, contract rights, rents, royalties, and financial assets; and

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For the Years Ended April 30, 2007, 2006 and 2005

·sixty-five percent of the issued and outstanding shares of capital stock of OmniVision International Holdings Ltd, a wholly-owned subsidiary of the Company.

The Loan and Security Agreement requires the Company to comply on a periodic basis with certain affirmative covenants including, but not limited to, meeting certain minimum financial standards, as well as certain negative covenants. The Company has the right to repay the Mortgage Loan at any time prior to its maturity.

As of April 30, 2007, the entire $27.9 million amount of the Mortgage Loan was outstanding for purposes of completing the purchase of the Santa Clara Property. At April 30, 2007, the interest rate under the Mortgage Loan was 6.2%. The Company was in compliance with the financial covenants of the Loan and Security agreement as of April 30, 2007.

Concurrent with the Mortgage Loan, the Company also entered into an interest rate swap with the bank to help manage interest rate risk. The swap is for a period of ten years, and the notional amount of the swap approximates the principal outstanding under the Mortgage Loan. The Company is the fixed rate payer under the swap with a fixed rate of 5.27% per annum. The Company measures the swap at fair value and records it as either an asset or a liability, depending on whether the fair value is a net gain or net loss to the Company. As of April 30, 2007, the Company recorded $492,000 in “Other long-term liabilities” and an expense of $492,000 in “Other income (expense), net.”

Line of Credit at SOI

SOI maintains four unsecured lines of credit with three commercial banks, which provide a total of approximately $3.4 million in available credit. All borrowings under the four lines of credit maintained by SOI bear interest at the market interest rate prevailing at the time of borrowing. There are no financial covenant requirements for these facilities and at April 30, 2007, there were no borrowings outstanding under these facilities.

Capital Lease Obligations

In February 2006, the Company leased telecommunications equipment under a three-year capital lease at an imputed interest rate of 7.5% per annum. Terms of the agreement require the Company to make monthly payments of approximately $14,000 through February 2009. Accordingly, the Company recorded a capital asset for $393,000 that is being depreciated over a five-year period in accordance with the Company’s capitalization policy. As of April 30, 2007 and 2006, $280,000 and $460,000, respectively, were outstanding under the capital lease. As of April 30, 2007 and 2006, $134,000 and $308,000, respectively, was classified as a long-term obligation.

Note 10 — Income Taxes

The provision for income taxes consists of the following (in thousands):

	Year Ended April 30,
	2007			2006			2005
Current:
Federal	$	3,680		$	13,761		$	16,764
State	2			3			1
Foreign	12,167			11,351			11,591
Total current	15,849			25,115			28,356
Deferred:
Federal	(5,916		)	(939		)	1,879
State	(616		)	(914		)	(529		)
Foreign	75			(129		)	—
Total deferred	(6,457		)	(1,982		)	1,350
Total provision	$	9,392		$	23,133		$	29,706

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Income before provision for income taxes consisted of (in thousands):

	Year Ended April 30,
	2007			2006		2005
United States	$	(30,282	)	$	3,375	$	19,563
International	69,400			112,291		86,530
Total	$	39,118		$	115,666	$	106,093

The provision for income taxes differs from the amount computed by applying the federal income tax rate of 35% to pretax income from operations as a result of the following (in thousands):

	Year Ended April 30,
	2007			2006(1)			2005(1)
Statutory federal income tax	$	13,692		$	40,483		$	37,133
State income tax benefit, net of federal tax benefit	(615		)	(592		)	(343		)
Foreign rate differential	(7,111		)	(14,846		)	(5,426		)
Non-deductible stock-based compensation	7,012			(34		)	7
Tax credits	(3,140		)	(907		)	(1,235		)
Other	(446		)	(971		)	(430		)
Tax provision	$	9,392		$	23,133		$	29,706

(1)Certain reclassifications have been made to prior year amounts in order to conform to the current year presentation.

The components of deferred tax assets (liabilities) included in the consolidated balance sheets are (in thousands):

	April 30,
	2007(1)			2006(2)
Net operating loss carryforwards	$	101		$	512
Tax credits	4,455			9,528
Reserves	2,277			3,159
Fixed assets	312			499
Stock-based compensation expenses	3,613			—
Accruals and other	1,947			681
Gross deferred tax assets	12,705			14,379
Valuation allowance	(2,876		)	(9,264		)
Deferred tax assets	9,829			5,115
Intangible assets	(6,110		)	(7,261		)
Deferred tax liabilities	(6,110		)	(7,261		)
Net deferred tax assets (liabilities)	$	3,719		$	(2,146	)

(1)The April 30, 2007 amounts are presented net of the fully reserved stock-based compensation related net operating loss and tax credit deferred tax assets.

(2)Certain reclassifications have been made to prior year amounts in order to conform to the current year presentation.

In fiscal 2007, the Company chose to derecognize both the gross deferred income tax assets and the offsetting valuation allowance pertaining to net operating loss and tax credit carryforwards that represent excess tax benefits from stock-based awards due to a change in presentation as a result of the adoption of SFAS No. 123(R). In prior years, such excess tax benefits, with an offsetting valuation allowance, were recorded in the Company’s

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For the Years Ended April 30, 2007, 2006 and 2005

consolidated balance sheet. As the excess tax benefits were realized, the valuation allowance was released and additional paid-in capital was increased. SFAS No. 123(R) prohibits recognition of a deferred tax asset for excess tax benefits due to stock-based compensation deductions that have not yet been realized through a reduction in income taxes payable. Accordingly, in fiscal 2007, the Company reversed the deferred tax asset and the offsetting valuation allowance relating to excess tax benefits for stock-based compensation deductions. Such unrecognized deferred tax benefits totaled $7.2 million as of April 30, 2007 and will be accounted for as a credit to additional paid-in capital, if and when realized through a reduction in income taxes payable.

Management regularly assess the realizability of deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction by jurisdiction basis. Deferred tax assets in the amount of $2.9 million at April 30, 2007 pertain to California R&D tax credit carryovers. Management believes it is more likely than not that the Company will not realize such deferred tax assets; therefore, a valuation allowance has been established against the deferred tax assets. In the future, if the credit is utilized and the valuation allowance is released, the release of valuation allowance will be accounted for as a reduction of the income tax expense in the year such event occurs.

As of April 30, 2007, the Company has federal and state research and development credits of approximately $1.6 million and $2.9 million, respectively. If not utilized, the federal credits will begin to expire in fiscal 2026 and the state credits will be carried over indefinitely.

The Company has not provided federal, state, and foreign withholding taxes on approximately $155.2 million of undistributed earnings for certain non-U.S. subsidiaries, because such earnings are intended to be indefinitely reinvested.

The Company is subject to income taxes in the United States and numerous foreign tax jurisdictions. Significant judgment is required in determining the Company’s worldwide provision for income taxes and recording the related assets and liabilities. There are transactions in the ordinary course of the Company’s business where the ultimate tax determination is uncertain. Accruals for tax contingencies are provided for in accordance with the requirements of SFAS No. 5, “Accounting for Contingencies.”

Note 11 — Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period.

Diluted net income per share is computed according to the treasury stock method using the weighted average number of common and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares represent the effect of stock options. For the years ended April 30, 2007, 2006 and 2005, 5,857,125, 2,718,909 and 3,005,800 shares of common stock, respectively, of common stock subject to outstanding options were not included in the calculation of diluted net income per share because they were antidilutive (i.e., the per share exercise price for such options exceeded the average trading price of the Company’s common stock as reported on The Nasdaq Stock Market for the periods presented).

The Company’s earnings per share were calculated under the provisions of the Statement of Financial Accounting Standards (or “SFAS”) No. 128, “Earnings Per Share,” or SFAS No. 128. SFAS No. 128 requires that the Company take into account the effect on consolidated earnings per share of options, warrants and convertible securities issued by its subsidiaries. The effect on consolidated earnings per share depends on whether the securities issued by the subsidiary enable their holders to obtain common stock of the subsidiary company or common stock of the parent company. Securities issued by a subsidiary that enable their holders to obtain the subsidiary’s common stock are included in computing the subsidiary’s earnings per share data. The diluted per-share earnings of the subsidiary are included in the Company’s consolidated earnings per shares computations based on the consolidated group’s holding of the subsidiary’s securities. In February 2005, SOI issued options exercisable for 1,400,000 shares of its own common stock. Subsequently, in June 2006, SOI issued options exercisable for an additional 700,000

80

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

shares of its own common stock. In the calculation of its earnings per share for fiscal 2007 and 2006, the Company included the effect of SOI’s options in its consolidated earnings per share.

The following table sets forth the computation of basic and diluted earnings per share attributable to common stockholders for the periods indicated (in thousands, except per share data):

	Year Ended April 30,
	2007			2006			2005
Basic:
Numerator:
Net income	$	23,973		$	89,148		$	76,387
Denominator:
Weighted average shares	54,706			54,268			56,691
Weighted average unvested common stock subject to repurchase	—			—			(3		)
Weighted average common shares for net income per share	54,706			54,268			56,688
Basic net income per share	$	0.44		$	1.64		$	1.35
Diluted:
Numerator:
Net income	$	23,973		$	89,148		$	76,387
Dilutive effect of SOI consolidation	(13		)	(47		)	—
Net income for diluted computation	$	23,960		$	89,101		$	76,387
Denominator:
Denominator for basic net income per share	54,706			54,268			56,688
Weighted average effect of dilutive securities:
Common stock options	528			2,690			4,875
Unvested common stock subject to repurchase	—			—			3
Weighted average common shares for diluted net income per share	55,234			56,958			61,566
Diluted net income per share	$	0.43		$	1.56		$	1.24

Note 12 — Common Stock

The Company is authorized to issue up to 100,000,000 shares of common stock. As of April 30, 2007 and 2006, approximately 54,941,000 and 53,874,000 shares were issued and outstanding, respectively. As of April 30, 2007 and 2006, 5,870,000 shares were held as treasury stock. In addition, as of April 30, 2007, approximately 26,827,000 shares of common stock have been reserved for issuance under the Company’s employee stock option plans, the directors’ stock option plan and employee stock purchase plan.

In connection with the CDM acquisition, the Company issued 515,000 shares of common stock representing $10 million at an agreed valuation of $19.42 per share. Approximately 147,000 of these shares were retained as security for certain indemnities given by the sellers. In fiscal 2007, the Company subsequently issued the 147,000 escrow shares to the original shareholders. The escrow shares were puttable back to the Company at a premium and 145,000 shares were put to the Company for cash totaling $2.8 million.

In June 2005, the Company’s board of directors authorized management to use up to $100 million of the Company’s available cash in an open-market program to repurchase its common stock. The program expired in June 2006. Under the program, the Company repurchased 5,870,000 shares of its common stock. In February 2007, the Company’s board of directors approved another stock repurchase program that, subject to applicable securities laws, provides for the repurchase of up to $100 million of its outstanding common stock. As of April 30, 2007 and 2006, the Company had cumulatively repurchased 5,870,000 shares of its common stock. (See Note 14.)

81

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Note 13 — Employee Stock Purchase and Stock Option Plans

2000 Employee Stock Purchase Plan

The 2000 Employee Stock Purchase Plan (the “2000 Purchase Plan”) was adopted by the board of directors in February 2000 and was approved by the shareholders in March 2000. The 2000 Purchase Plan became effective upon the closing of the Company’s initial public offering. Under the 2000 Purchase Plan, 3,000,000 shares of common stock were initially reserved for issuance together with an annual increase in the number of shares reserved thereunder beginning on the first day of the fiscal year commencing May 1, 2001 in an amount equal to the lesser of: 2,000,000 shares, or four percent of the Company’s outstanding common stock on the last day of the prior fiscal year, or an amount determined by the Company’s board of directors. The offering periods under this plan are the periods of approximately 24 months commencing on the first trading day on or after June 1 and December 1 of each year and terminating on the last trading day in the periods ending twenty-four months later. Depending on the fair market value of the common stock, the offer periods can be consecutive or overlapping. The purchase period under the 2000 Purchase Plan begins on the first trading day on or after June 1 and December 1 of each year and ends six months later. The purchase price of the common stock under this plan is 85% of the lesser of the fair market value per share on the first trading day of the offering period or on the last trading day of the purchase period. Employees may end their participation in an offering period at any time, and their participation ends automatically on termination of employment with the Company. The 2000 Purchase Plan will terminate in February 2010, unless the board of directors determines to terminate it sooner. As of April 30, 2007, 1,868,825 shares had been purchased under the 2000 Purchase Plan.

1995 Stock Option Plan

In May 1995, the Company adopted the 1995 Stock Option Plan under which 7,200,000 shares of common stock were reserved for issuance to eligible employees, directors and consultants upon exercise of the stock options and stock purchase rights. Incentive stock options were granted at a price not less than 100% of the fair market value of the Company’s common stock and at a price of not less than 110% of the fair market value for grants to any person who owned more than 10% of the voting power of all classes of stock on the date of grant. Nonstatutory stock options were granted at a price not less than 85% of the fair market value of the common stock and at a price not less than 110% of the fair market value for grants to a person who owned more than 10% of the voting power of all classes of stock on the date of the grant. Options granted under the 1995 Stock Option Plan generally vest over five years and are exercisable immediately or for up to ten years (five years for grants to any person who owned more than 10% of the voting power of all classes of stock on the date of the grant).

In February 2000, the Company terminated the 1995 Stock Option Plan as to future grants. However, options outstanding under the 1995 Stock Option Plan continue to be governed by the terms of the 1995 Stock Option Plan.

2000 Stock Plan

In February 2000, the Company adopted the 2000 Stock Plan under which 6,000,000 shares of common stock were initially reserved for issuance together with an annual increase in the number of shares reserved thereunder beginning on the first day of the Company’s fiscal year, commencing May 1, 2002, in an amount equal to the lesser of: 3,000,000 shares, or 6% of outstanding shares of common stock on the last day of the prior fiscal year, or an amount determined by the Company’s board of directors. The 2000 Stock Plan provides for grants of incentive stock options to its employees including officers and employees, directors and nonstatutory stock options to its consultants including nonemployee directors. Incentive stock options are granted at a price not less than 100% of the fair market value of the Company’s common stock and at a price not less than 110% of the fair market value for grants to any person who owns more than 10% of the voting power of all classes of stock on the date of grant. Nonstatutory stock options are granted at a price not less than 85% of the fair market value of the common stock and at a price not less than 110% of the fair market value for grants to a person who owns more than 10% of the voting power of all classes of stock on the date of the grant. Options granted under the 2000 Stock Plan have been at fair market value on the date of the grant and generally vest over four years and are exercisable up to ten years (five years for grants to any person who owned more than 10% of the voting power of all classes of stock on the date of the grant).

82

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Under the 2000 Stock Plan, options to purchase approximately 5,273,000 and 1,871,000 shares of common stock were granted to employees during fiscal 2007 and 2006, respectively. As of April 30, 2007, options to purchase approximately 12,149,000 shares of common stock were outstanding under the 2000 Stock Plan.

2000 Director Option Plan

The 2000 Director Option Plan was adopted by the board of directors in February 2000 and approved by the shareholders in March 2000. Under this plan 500,000 shares of common stock were initially reserved for issuance together with an annual increase in the number of shares reserved thereunder beginning on the first day of the Company’s fiscal year commencing May 1, 2002 equal to the lesser of 150,000 shares, or 0.25% of the outstanding shares of the common stock on the last day of the prior fiscal year, or an amount determined by the board of directors. The 2000 Director Option Plan provides for an initial grant to the nonemployee director to purchase 40,000 shares of common stock. Subsequent to the initial grants, each nonemployee director is granted an option to purchase 20,000 shares of common stock at the next meeting of the board of directors following the annual meeting of stockholders, if on the date of the annual meeting the director has served on the board of directors for not less than six months. The contractual term of options granted under the 2000 Director Option Plan is ten years, but the options expire three months following the termination of the optionee’s status as a director or twelve months if the termination is due to death or disability. The initial 40,000 share grants are exercisable at a rate of one-fourth of the shares on the first anniversary of the grant date and at a rate of 1/16th of the shares per quarter thereafter. The subsequent 20,000 share grants are exercisable at the rate of 1/16th of the shares per quarter. The exercise price of all of these options is 100% of the fair market value of the common stock on the date of grant.

The following table summarizes stock-based compensation award activity under the 2000 Stock Plan and the 2000 Director Option Plan, and the related weighted average exercise price, for the three fiscal years ended April 30, 2007:

	Options outstanding
	Options Available For Grant		Number of Shares		Weighted Average Price Per Share
	(in thousands)		(in thousands)
Balance at May 1, 2004	1,661		7,537		$	10.51
Replenished	3,140		—		—
Granted	(3,984	)	3,984		19.58
Exercised	—		(934	)	4.11
Canceled	841		(841	)	16.87
Balance at April 30, 2005	1,658		9,746		14.28
Replenished	3,144		—		—
Granted	(1,931	)	1,931		18.22
Exercised	—		(1,993	)	8.83
Canceled	721		(721	)	15.83
Expired – 1995 Stock Option Plan	(551	)	—		—
Balance at April 30, 2006	3,041		8,963		16.22
Replenished	3,135		—		—
Granted	(5,333	)	5,333		21.26
Exercised	—		(859	)	9.08
Expired or forfeited	900		(900	)	20.58
Balance at April 30, 2007	1,743		12,537		$	18.54
Vested and expected to vest at April 30, 2007			11,816		$	18.36

83

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

As of April 30, 2007 and 2006, options to purchase 6,126,000 and 4,768,000 shares, respectively, were vested. Information regarding the options outstanding as of April 30, 2007 is summarized below:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Options Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Aggregate Intrinsic Value		Options Vested and Exercisable	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Aggregate Intrinsic Value
	(in thousands)	(in years)			(in thousands)		(in thousands)	(in years)			(in thousands)
$  0.15 – $14.58	2,221	6.07	$	8.85			1,737		$	7.70
$14.59 – $16.40	2,317	6.69	16.02				2,078		16.01
$16.41 – $18.00	2,611	9.24	16.89				547		16.90
$18.01 – $25.40	2,809	7.50	23.11				1,651		23.02
$25.41 – $30.05	2,579	9.01	25.83				113		28.06
$  0.15 – $30.05	12,537	7.77	$	18.54	$	10,584	6,126	6.74	$	15.84	$	10,209

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the aggregate difference between the closing stock price of the Company’s common stock on April 30, 2007 of $13.52 and the exercise price of in-the-money options) that would have been received by the option holders had all option holders exercised their options as of that date. The total number of shares of common stock underlying in-the-money options exercisable as of April 30, 2007 was 1,598,000.

The total intrinsic value of options exercised during fiscal 2007 was $3.8 million. Total cash received from employees as a result of employee stock option exercises during fiscal 2007 was approximately $7.8 million.

As of April 30, 2007, net of forfeitures, there was $44.5 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 1.2 years. For the 2000 Purchase Plan, as of April 30, 2007, there was $1.2 million of unrecognized compensation cost which is expected to be recognized over a weighted average period of 1.1 years. The Company’s current practice is to issue new shares to settle share option exercises.

Impact of the Adoption of SFAS No. 123(R)

The Company adopted SFAS No. 123(R) beginning May 1, 2006 and used the modified prospective transition method. In accordance with the modified prospective transition method, the Company’s consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123(R). Effective with the adoption of SFAS No. 123(R), stock-based compensation expense is recognized in the Company’s Consolidated Statements of Operations and includes (i) compensation expense for stock-based compensation awards granted prior to, but not yet vested as of May 1, 2006, based on the grant-date fair value estimated in accordance with the pro forma provisions of SFAS No. 123 and (ii) compensation expense for the stock-based compensation awards granted or modified subsequent to May 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). The impact of SFAS No. 123(R) on the Company’s consolidated financial statements by award type during fiscal 2007 was as follows (in thousands):

	Year Ended
	April 30, 2007
Stock-based compensation expense by type of award:
Employee stock options	$	28,277
Employee stock purchase plan	1,383
Total stock-based compensation	29,660
Tax effect	3,613
Net effect on net income	$	26,047

84

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Valuation Assumptions

SFAS No. 123(R) requires companies to estimate the fair value of stock-based compensation awards on the grant date using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period in the Company’s Consolidated Statements of Income. The Company measures the fair value of stock-based compensation awards using Black-Scholes consistent with the provisions of SFAS No. 123(R), SEC SAB No. 107 and the Company’s prior period pro forma disclosures of net earnings, including stock-based compensation (determined under a fair value method as prescribed by SFAS No. 123). Black-Scholes was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions. These assumptions differ significantly from the characteristics of the Company’s stock-based compensation awards. Black-Scholes also requires the use of highly subjective, complex assumptions, including expected term and the price volatility of the Company’s stock.

The fair value for these options was estimated using the Black-Scholes option pricing model. The per share weighted average estimated grant date fair value for employee options granted during the years ended April 30, 2007, 2006 and 2005 was $11.37, $9.36 and $14.59, respectively.

The following weighted average assumptions are included in the estimated fair value calculations for stock options granted in fiscal 2007, 2006 and 2005:

	Employee Stock Option Plans Year Ended April 30,						Employee Stock Purchase Plan Year Ended April 30,
	2007		2006		2005		2007		2006		2005
Risk-free interest rate	4.9	%	4.1	%	3.2	%	5.0	%	4.0	%	2.3	%
Expected term of options (in years)	4.1		3.5		3.4		0.5		0.5		0.5
Expected volatility	64	%	79	%	123	%	52	%	46	%	65	%
Expected dividend yield	0	%	0	%	0	%	0	%	0	%	0	%

Using Black-Scholes, the per share weighted average estimated fair value of rights issued pursuant to the Company’s 2000 Purchase Plan during the years ended April 30, 2007, 2006 and 2005 was $7.41, $3.92 and $4.37, respectively.

The methodologies for determining the above values were as follows:

·Expected term: The expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is estimated based on historical experience.

·Risk-free interest rate: The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the Company’s stock-based awards.

·Expected volatility: Upon the adoption of SFAS No. 123(R), the Company determines expected volatility based on an average between the historical volatility of the Company’s common stock and the implied volatility based on the Company’s traded options. Averaging two data sources may provide a better proxy to what market place participants would use to value the Company’s options. Previously, the Company determined expected volatility based on the historical volatility of the Company’s common stock.

·Dividend yield: The dividend yield assumption reflects the Company’s intention not to issue a dividend under its dividend policy.

·Estimated pre-vesting forfeitures: When estimating pre-vesting forfeitures, the Company considers forfeiture behavior based on actual historical information.

85

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Periods Prior to Adoption of SFAS No. 123(R)

Prior to the adoption of SFAS No. 123(R), the Company applied APB 25 and related interpretations and provided the required pro forma disclosures of SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosures.” The pro forma information in the following table illustrates the effect on net income and net income per share for fiscal 2006 and 2005 as if the Company had applied the fair value recognition provisions of SFAS No. 123 (in thousands, except per share amounts):

	Year Ended April 30,
	2006		2005
Net income, as reported	$	89,148	$	76,387
Add:  Stock-based employee compensation expense included in reported net income, net of related tax effects	—		14
Deduct: Total stock-based employee compensation determined under fair value based method for all awards, net of related tax effects	19,164		24,422
As adjusted net income	$	69,984	$	51,979
Net income per share – Basic:
As reported	$	1.64	$	1.35
As adjusted	$	1.29	$	0.92
Net income per share – Diluted:
As reported	$	1.56	$	1.24
As adjusted	$	1.29	$	0.92
Shares used in computing net income per share – Basic:
As reported	54,268		56,688
As adjusted	54,268		56,688
Shares used in computing net income per share – Diluted:
As reported	56,958		61,566
As adjusted	54,268		56,688

Note 14 — Treasury Stock

In June 2005, the Company’s board of directors authorized the repurchase in an open-market program of up to an aggregate of $100 million of the Company’s common stock. Repurchases under the open-market program were authorized for a twelve-month period that ended on June 21, 2006. As of January 31, 2007 and April 30, 2006, the Company had cumulatively repurchased 5,870,000 shares of its common stock under the open-market program for an aggregate cost of approximately $79.6 million.

In February 2007, the Company’s board of directors approved another stock repurchase program that, subject to applicable securities laws, provides for the repurchase of up to $100 million of its outstanding common stock in an open-market program. Such purchases will be at times and in amounts as the Company deems appropriate, based on factors such as market conditions, legal requirements and other corporate considerations.

Note 15 — Risks and Uncertainties

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments and trade receivables.

The Company maintains cash and cash equivalents and short-term investments with various financial institutions, located in several different jurisdictions. Deposits held with banks may generally be redeemed upon demand and may exceed the limit of insurance provided on such deposits. All these deposits and other financial

86

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

instruments are maintained with financial institutions of reputable credit and therefore bear minimal credit risk. The Company has not sustained credit losses from instruments held at financial institutions.

The Company’s products are primarily sold to OEMs, VARs and to distributors. The Company’s sales to significant customers as a percentage of revenues for the fiscal years indicated were as follows:

	Year Ended April 30,
	2007	2006	2005
Percentage of revenues:
Customer A	15.1%	13.7%	10.9%
Customer B	14.0%	*	*
Customer C	12.9%	*	*
Customer D	*	14.6%	19.1%
Customer E	*	11.6%	15.6%

*   Less than ten percent of revenues.

The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts. Significant customer account receivables as a percentage of net accounts receivable for the fiscal years indicated were as follows:

	April 30,
	2007	2006
Percentage of accounts receivable, net:
Customer A	22.7%	20.3%
Customer B	21.1%	*
Customer C	12.0%	16.7%
Customer D	*	17.8%

*   Less than ten percent of accounts receivable, net.

Certain of the Company’s wafer, color filter application and packaging services are obtained from a single source or a limited group of suppliers. The partial or complete loss of one or more of these sources could have at least a temporary adverse effect on the Company’s consolidated results of operations.

Note 16 — Segment and Geographic Information

The Company identifies its business segments based on business activities, management responsibility and geographic location. For all periods presented, the Company operated in a single reportable business segment.

The Company sells its image-sensor products either directly to OEMs and VARs or indirectly through distributors. The following table illustrates the percentage of revenues from sales to OEMs and VARs and to distributors for fiscal years 2007, 2006 and 2005, respectively:

	Year Ended April 30,
	2007		2006		2005
OEMs and VARs	60.0	%	68.9	%	79.4	%
Distributors	40.0		31.1		20.6
Total	100.0	%	100.0	%	100.0	%

87

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the Years Ended April 30, 2007, 2006 and 2005

Since the Company’s end-user customers market and sell their products worldwide, its revenues by geographic location are not necessarily indicative of the geographic distribution of end-user sales, but rather indicate where the products and/or their components are manufactured or sourced. The revenues by geography in the following table are based on the country or region in which the Company’s customers issue to us purchase orders (in thousands):

	Year Ended April 30,
	2007		2006		2005
China(1)	$	365,204	$	287,702	$	206,997
Taiwan	75,999		97,467		72,977
South Korea	35,684		40,037		27,998
Japan	31,387		57,422		69,393
United States	5,141		4,771		3,049
All other	14,728		4,527		7,648
Total	$	528,143	$	491,926	$	388,062

(1)Prior year data reclassified to combine the results for Hong Kong and China.

The Company’s long-lived assets are located in the following countries (in thousands):

	April 30,
	2007		2006
Taiwan	$	71,953	$	40,637
China	22,053		17,146
United States	41,896		1,633
All other	542		456
	$	136,444	$	59,872

Note 17 — Commitments and Contingencies

Commitments

In December 2000, the Company formed HWSC as a subsidiary to conduct testing operations and other processes associated with the manufacturing of the Company’s products in China. The registered capital of HWSC is $30.0 million of which the Company has funded a total of $27.0 million. Under an agreement with the Chinese government, the date by which the remaining registered capital must be funded has been extended to July 17, 2007. The $27.0 million invested through April 30, 2007 was used primarily for payment to building contractors for the construction of facilities and the purchase of equipment.

The Company also maintains a subsidiary in Shanghai, SDC, which provides assistance to the Company in various product design projects. On January 10, 2007, SDC entered into a Land-Use-Right Purchase Agreement (the “Purchase Agreement”) with the Construction and Transportation Commission of the Pudong New District, Shanghai. The Purchase Agreement has an effective date of December 31, 2006. Under the terms of the Purchase Agreement, the Company agreed to pay an aggregate amount of approximately $0.6 million (the “Purchase Price”) in exchange for the right to use approximately 323,000 square feet of land located in Shanghai for a period of 50 years. In addition, the Company is obligated to invest a minimum of approximately $30 million to develop the land and construct facilities, which amount includes the Purchase Price. As of April 30, 2007, the Company has already contributed $7.5 million of the $30 million total investment. Construction of the facilities on the land must commence and be completed during the time period beginning on June 30, 2007 and ending on June 30, 2009, subject to an additional one-year extension under limited circumstances. The Company may use the land solely for the purposes of industrial use and/or scientific research. The Company intends to use SDC’s registered capital to partially fund its commitment to this project.

The Company has various commitments arising from the VisEra Agreement, as amended. In April 2007, the Company contributed an additional $27 million to VisEra, which satisfied its portion of the latest total capital

88

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
For the Years Ended April 30, 2007, 2006 and 2005

commitment to the joint venture, of $112.9 million.  This capital amount was established in the January 2007 amendment to the Amended VisEra Agreement. Through April 30, 2007, the Company has contributed $51.6 million to VisEra and VisEra Cayman. The Company’s future contributions may be made in the form of cash or asset contributions. To the extent, if any, that the value of the assets contributed exceeds the value of the Company’s commitment, the Company will receive cash from VisEra Cayman. (See Note 5.)

The Company leases certain facilities and software under non-cancelable operating lease agreements. The non-cancelable operating leases expire at various dates through fiscal 2013. At April 30, 2007, future minimum lease commitments under operating leases are as follows (in thousands):

Years Ended April 30,
2008	$	4,324
2009	4,910
2010	3,459
2011	640
2012	634
Thereafter	198
Total	$	14,165

Rental expenses under all operating leases amounted to approximately $8.0 million, $4.0 million and $2.2 million for the years ended April 30, 2007, 2006 and 2005, respectively.

Litigation

From time to time, the Company has been subject to legal proceedings and claims with respect to such matters as patents, product liabilities and other actions arising out of the normal course of business.

On November 29, 2001, a complaint captioned McKee v. OmniVision Technologies, Inc., et. al., Civil Action No. 01 CV 10775, was filed in the United States District Court for the Southern District of New York against OmniVision, some of the Company’s directors and officers, and various underwriters for the Company’s initial public offering. Plaintiffs generally allege that the named defendants violated federal securities laws because the prospectus related to the Company’s offering failed to disclose, and contained false and misleading statements regarding, certain commissions purported to have been received by the underwriters, and other purported underwriter practices in connection with their allocation of shares in the Company’s offering. The complaint seeks unspecified damages on behalf of a purported class of purchasers of the Company’s common stock between July 14, 2000 and December 6, 2000. Substantially similar actions have been filed concerning the initial public offerings for more than 300 different issuers, and the cases have been coordinated as In re Initial Public Offering Securities Litigation, 21 MC 92. Claims against the Company’s directors and officers have been dismissed without prejudice pursuant to a stipulation. On February 19, 2003, the Court issued an order dismissing all claims against the Company except for a claim brought under Section 11 of the Securities Act of 1933.

The issuer defendants and plaintiffs negotiated a stipulation of settlement for the claims against the issuer defendants, including OmniVision, that was submitted to the Court for approval. In August 2005, the Court preliminarily approved the settlement. In December 2006, the appellate court overturned the certification of classes in the six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings. Because class certification is a condition of the settlement, it is unlikely that the current settlement will receive final court approval. In that event, any revised or future settlement would be uncertain. If the litigation proceeds, the Company believes that it has meritorious defenses to plaintiffs’ claims and intends to defend the action vigorously.

On June 10, 2004, the first of several putative class actions was filed against the Company and certain of its present and former directors and officers in federal court in the Northern District of California on behalf of investors who purchased its common stock at various times from February 2003 through June 9, 2004. Those actions were consolidated under the caption In re OmniVision Technologies, Inc., No. C-04-2297-SC, and a consolidated complaint was filed. The consolidated complaint asserts claims on behalf of purchasers of the Company’s common

89

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
For the Years Ended April 30, 2007, 2006 and 2005

stock between June 11, 2003 and June 9, 2004, and seeks unspecified damages. The consolidated complaint generally alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by allegedly engaging in improper accounting practices that purportedly led to the Company’s financial restatement. On July 29, 2005, the court denied the Company’s motion to dismiss the complaint. The parties engaged in settlement discussions and in November 2006, the parties reached an agreement in principle to settle this litigation. The total amount of the proposed settlement is approximately $13.8 million, of which approximately $0.8 million would be contributed by the Company and the remainder would be funded by insurance carriers that issued Directors and Officers Liability Insurance Policies to the Company. The Company accrued $3.3 million during fiscal 2007, as its share of the settlement, including unreimbursed defense costs, net of the $13.0 million in recoverable insurance proceeds. The parties have executed a Stipulation of Settlement that was filed with the Court on May 15, 2007. On May 25, 2007, the Court issued an Order preliminarily approving the settlement and providing for notice of the settlement to be provided to the purported shareholder class. The Order also scheduled a hearing on September 7, 2007 to determine whether the proposed settlement is fair, reasonable and adequate to the purported class and should receive final approval by the Court. As a result of the pending settlement, the parties have agreed to stay discovery and other proceedings. The Company believes that ultimate settlement is probable at the currently estimated amount. There is no assurance that the Court will grant such approval, or that the settlement will become final. If the settlement does not occur and litigation against it continues, the Company believes that it has meritorious defenses and intends to defend the case vigorously. If the litigation continues, the Company cannot estimate whether the result of the litigation would have a material adverse effect on its financial condition, results of operations or cash flows.

On October 20, 2005, a purported shareholder derivative complaint, captioned Hackl v. Hong, No. 1:05-CV-050985, was filed in Santa Clara County Superior Court for the State of California. This derivative action contains allegations that were virtually identical to the prior state court derivative actions that were voluntarily dismissed, and which were based on the allegations contained in the securities class actions. The complaint generally sought unspecified damages and equitable relief based on causes of action against various of the Company’s present and former directors and officers for purported breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment and violations of California Corporations Code. The Company was named solely as a nominal defendant against whom no monetary recovery was sought. Pursuant to a January 20, 2006 Court Order, plaintiff furnished a bond for reasonable expenses in order to proceed with his derivative action. On May 15, 2006, the Court sustained the Company’s demurrer to the complaint with leave to amend on the grounds that the plaintiff failed to make a pre-litigation demand on the Company’s board of directors and fails to sufficiently plead that demand is futile. On October 4, 2006, the Court sustained the Company’s demurrer to the complaint as well and again granted plaintiff leave to amend. On May 10, 2007, the Court sustained the Company’s demurrer contending that plaintiff's complaint failed to allege adequately why no pre-litigation demand had been made on the  Company’s Board of Directors, but granted plaintiff leave to further amend the complaint. Simultaneously, the parties advised the Court that they had reached a settlement in principle. The parties executed a Stipulation of Settlement that was filed with the Court on June 18, 2007. On June 26, 2007, the Court entered an order approving the settlement, pursuant to which the Company agreed to pay a settlement fee in the amount of $200,000.

Note 18— Related Party Transactions

In May 2006, the Company consummated a loan agreement with one of its employees. Under the terms of the agreement, which was approved in fiscal 2004, the Company extended to the employee a three-year $1.0 million loan with an imputed interest rate of approximately five percent per annum which matures on May 12, 2009. The loan is secured by a deed of trust.

In the second quarter of fiscal 2006, the Company entered into an agreement with ImPac (see Note 5) under which ImPac agreed to provide certain management and support services to HWSC. The Company compensates ImPac for the services provided in accordance with the Company’s policy regarding related party transactions. The

90

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
For the Years Ended April 30, 2007, 2006 and 2005

Company’s board of directors approved the agreement, which may be cancelled by either party at any time. During the three months ended January 31, 2007, the Company and ImPac agreed to phase out ImPac’s management and support services over the next several months beginning on January 1, 2007. During fiscal 2007 and 2006, the Company paid ImPac approximately $3.5 million and $0.5 million, respectively, as compensation for manufacturing and management support services. There were no such payments in fiscal 2005. In fiscal 2006 and 2005, the Company also received $1.3 million and $1.0 million, respectively, from ImPac for the sale of products to ImPac. In addition, from August 2005 to December 2006, Tsuey-Jiuan Chen, the president of ImPac, has also acted as president of HWSC. From August 2001 to April 2003, Tsuey-Jiuan Chen served on the Company’s board of directors.

In January 2006, in accordance with the Amended VisEra Agreement (see Note 5), VisEra, the Company’s joint venture with TSMC, purchased from TSMC color filter processing equipment and related assets for an aggregate price equivalent to $16.9 million. In connection with the purchase, VisEra entered into a three-year lease agreement with TSMC. Under this agreement, VisEra leases from TSMC approximately 14,000 square feet of factory and office space where the assets are located. Under a related services contract, TSMC agreed to provide VisEra with certain manufacturing support services, such as mail delivery and receipt and reception services, at prices which approximate cost.

The Company consolidated VisEra’s operating results from August 1, 2005 to December 31, 2006. For the remainder of the three-year period ended April 30, 2007, the Company accounted for its investment in VisEra under the equity method. For the four-month period ended April 30, 2007, the three-month period ended July 31, 2005, and fiscal year 2005, the Company paid $45.4 million, $18.1 million and $72.5 million, respectively, to VisEra for manufacturing and logistics support services.

91

OMNIVISION TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
For the Years Ended April 30, 2007, 2006 and 2005

The following table summarizes the transactions that the Company’s consolidated affiliate, SOI, and its affiliate, VisEra, engaged in with related parties in the ordinary course of business in each of the last three fiscal years (in thousands):

	Year Ended April 30,
	2007		2006		2005
SOI transactions with:
ImPac:
Purchases of manufacturing services	$	4,162	$	5,700	$	3,770
Balance payable at year end	742		447		1,171
PSC:
Purchases of wafers	5,345		6,770		4,334
Rent and other services	51		45		493
Balance payable at year end	244		612		658
VisEra:
Purchases of manufacturing services	—		50		188
Balance payable at year end	—		—		143
VisEra transactions with:
ImPac:
Purchases of manufacturing services	10,913		12,420		6,677
Balance payable at year end	14		1,367		889
TSMC:
Sales to TSMC	2,409		1,195		—
Purchases of manufacturing services	923		21,516		17,681
Rent, utilities and other services	5,544		1,832		856
Balance payable at year end	1,601		2,414		2,230
XinTec:
Sales to XinTec	49		—		—
Purchases of manufacturing services	65,539		32,138		23,214
Balance payable at year end	$	11,333	$	6,987	$	3,513

The Company purchases a substantial portion of its wafers from TSMC. The Company also purchases a portion of its wafers from PSC.

Note 19 — Subsequent Event

In May 2007, the Company, through its wholly-owned subsidiary, OmniVision Trading (Hong Kong) Company Limited, consummated an Investment Agreement with China WLCSP Limited (“WLCSP”) (the “Investment Agreement”) and an Equity Interests Transfer Agreement with WLCSP and Infinity-CSVC Venture Capital Enterprise (“Infinity-CSVC”) (the “Transfer Agreement”), each with an effective date as of April 6, 2007. Pursuant to the Investment Agreement, the Company acquired 2,500,000 units of WLCSP’s equity interests from WLCSP at a per unit price of $2.00 for an aggregate purchase amount of $5,000,000. Under the terms of the Transfer Agreement, the Company purchased from Infinity-CSVC 2,000,000 units of WLCSP’s outstanding equity interests at a price per unit of $2.00 for an aggregate purchase amount of $4,000,000. Following the completion of the two transactions, the Company owns approximately 19.98% of WLCSP’s registered capital on a fully-diluted basis and has appointed a member to WLCSP’s board of directors and a supervisor to monitor the actions of WLCSP’s board of directors and officers.

WLCSP is in the business of designing, manufacturing, packaging and selling certain wafer level chip scale packaging related services, for which the Company is currently a customer. Following the consummation of the investment transactions described above, the Company anticipates entering into a service agreement with WLCSP.

92

Supplementary Data (Unaudited)

	Three Months Ended
	July 31, 2006(2)		Oct. 31, 2006(1)(2)		Jan. 31, 2007(2)		April 30, 2007(2)
	(in thousands, except per share data)
Revenues	$	136,875	$	137,656	$	134,381	$	119,231
Cost of revenues	87,155		92,101		100,892		92,628
Gross profit	49,720		45,555		33,489		26,603
Net income (loss)	$	15,881	$	5,415	$	4,130	$	(1,453	)
Net income (loss) per share:
Basic	$	0.29	$	0.10	$	0.08	$	(0.03	)
Diluted	$	0.28	$	0.10	$	0.07	$	(0.03	)
Shares used in computing per share amounts:
Basic	54,401		54,620		54,872		54,929
Diluted	56,704		55,624		55,885		54,929

	Three Months Ended
	July 31, 2005		Oct. 31, 2005		Jan. 31, 2006		April 30, 2006
	(in thousands, except per share data)
Revenues	$	95,994	$	126,820	$	137,283	$	131,829
Cost of revenues	64,065		80,997		81,922		83,266
Gross profit	31,929		45,823		55,361		48,563
Net income	$	14,382	$	22,597	$	29,636	$	22,533
Net income per share:
Basic	$	0.25	$	0.42	$	0.56	$	0.42
Diluted	$	0.25	$	0.41	$	0.53	$	0.39
Shares used in computing per share amounts:
Basic	57,178		53,807		52,576		53,529
Diluted	58,194		55,486		55,547		57,229

(1)In the three months ended October 31, 2006, the Company recorded $3.3 million in litigation settlement expenses, net of $13.0 million in recoverable insurance proceeds, to reflect the Company’s share of a tentative settlement of a securities class action lawsuit.

(2)On May 1, 2006, the Company adopted the provisions of SFAS No. 123(R) for recording share-based compensation.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s chief executive officer and its chief financial officer, the Company conducted an evaluation of its disclosure controls and procedures, as defined in the Securities Exchange Act of 1934, as of the end of the period covered by this Annual Report on Form 10-K. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information the Company is required to disclose in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to its management, including the Company’s chief executive officer and chief financial officer. Based on this evaluation, the Company’s chief executive officer and chief financial officer have concluded that, at the level of reasonable assurance, the Company’s disclosure controls and procedures were effective as of April 30, 2007.

93

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. OmniVision’s internal control over financial reporting is 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. The 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.

The Company’s management conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in the document entitled Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that, owing to changes in conditions, controls may become inadequate, or that the degree of compliance with policies or procedures may deteriorate. Based on this evaluation, the Company’s management concluded that, as of April 30, 2007 the Company’s internal control over financial reporting was effective.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of April 30, 2007 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included herein.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.     OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item concerning our directors is incorporated by reference to the sections captioned “Proposal 1 – Election of Directors” and “Corporate Governance” contained in our proxy statement related to our 2007 Annual Meeting of Stockholders, to be filed with the SEC within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K (the “Proxy Statement”). The information required by this item concerning compliance with Section 16(a) of the Exchange Act is incorporated by references to the section captioned “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement. Certain information required by this item concerning executive officers is set forth in Part I of this Report in Item 1. “Business” under the heading “Executive Officers and Directors of the Registrant.”

Code of Ethics

We have a code of ethics that applies to all of our employees, including our principal executive officer, principal financial officer and principal accounting officer. This code of ethics is posted on our Internet website. The Internet address for our website is http://www.ovt.com, and the code of ethics may be found on the “Corporate Governance” section of our “Investors” webpage.

We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above, or as otherwise required by the NASDAQ Global Market.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the sections captioned “Executive Compensation and Other Matters” contained in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated by reference to the sections captioned “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” contained in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to the section captioned “Related Party Transactions” contained in the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated by reference to the section captioned “Proposal Three — Ratification of Appointment of Independent Registered Public Accounting Firm” contained in the Proxy Statement.

95

PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)  The following documents are filed as part of this Report:

1.   Consolidated Financial Statements. Refer to the financial statements filed as a part of this Report under “Item 8—Financial Statements and Supplementary Data.”

2.   Financial Statement Schedules. The following financial schedule is filed as part of this Report under “Schedule II—Valuation and Qualifying Accounts for the Years Ended April 30, 2007, 2006 and 2005.” All other schedules called for by Form 10-K have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the consolidated financial statements or notes thereto.

3.   Exhibits.

Exhibit Number			Description
+2.1		(8)	Agreement and Plan of Merger by and among the Registrant, Ski-Jump Acquisition Corp, R.C. Mercure, Jr., W. Thomas Cathy, Jr. and Edward Dowski, Jr., CDM Optics, Inc., and R.C. Mercure, Jr., a representative of the CDM security holders
3.1		(1)	Restated Certificate of Incorporation
3.2		(1)	Bylaws of the Registrant
4.1		(1)	Specimen Common Stock Certificate
4.2		(1)	Amended and Restated Registration Rights Agreement, dated as of May 20, 1998, by and among the Registrant and certain stockholders of the Registrant
4.3		(3)	Preferred Stock Rights Agreement, dated August 21, 2001, between the Registrant and Equiserve Trust Company, N.A., including the Certificate of Designation, the form of Rights Certificate and Summary of Rights attached thereto as Exhibits A, B and C, respectively
4.4		(6)	Amendment to Preferred Stock Rights Agreement, dated August 21, 2001, between the Registrant and EquiServe Trust Company, N.A., effective June 7, 2004
4.5		(8)	Registration Rights Agreement dated April 19, 2005, by and among the Registrant and former holders of CDM Optics, Inc. securities
10.1		(1)	Form of Indemnification Agreement between the Registrant and each of its directors and officers
10.2		(1)	2000 Stock Plan and form of option agreement
10.3		(1)	2000 Employee Stock Purchase Plan and form of subscription agreement
10.4		(1)	2000 Director Stock Option Plan and form of option agreement
10.5		(4)	Lease Agreement between the Registrant and Caribbean/Geneva Investors and Crossman Partners, L.P., dated March 14, 2003, for the premises at 1341 Orleans Drive, Sunnyvale, California 94089-1136
*10.6		(1)	Non-exclusive Distributor Agreement between the Registrant and World Peace Industrial Co., Ltd. dated January 1, 1998
10.7		(2)	Agreement on Construction of Complete Municipal Facilities, Shanghai Songjiang Export Processing Zone between OmniView Technology International Ltd. and Shanghai Songjiang Export Processing Zone Administrative Committee dated December 28, 2000
10.8		(2)	Shanghai Songjiang Export Processing Zone Administrative Committee Official Reply to the Feasibility Study Report and Articles of Association of Foreign Solely-funded Omni View Electronics (Shanghai) Co., Ltd. dated December 19, 2000
10.9		(2)	Contract on the Transfer of Shanghai State-owned Land Use Right between OmniView Technology International Ltd. and Shanghai Songjiang District Building and Land Administrative Bureau dated December 28, 2000
*10.10	(b)	(5)	Letter of Comfort, dated October 29, 2003, by and between the Registrant and Taiwan Semiconductor Manufacturing Company
10.11		(7)	Executive Officer Profit Sharing/Bonus Plan
10.12		(9)	Amended and Restated Shareholders’ Agreement dated August 12, 2005, by and between the Registrant, Taiwan Semiconductor Manufacturing Company and certain other parties
*10.13		(10)	Equipment Procurement Agreement dated as of August 31, 2006, by and between OmniVision Trading (Hong Kong) Co. Ltd. and XinTec Inc.
10.14		(11)	Termination Agreement, dated January 23, 2007, by and between XinTec, Inc. and OmniVision Trading (Hong Kong) Co. Ltd.
10.15		(12)	Land-Use-Right Purchase Agreement by and between the Registrant and the Construction and Transportation Commission of the Pudong New District, Shanghai, dated December 31, 2006
10.16		(12)	First Amendment to the Amended and Restated Shareholders’ Agreement by and between the Registrant and Taiwan Semiconductor Manufacturing Co., Ltd. dated December 31, 2006
*10.17			Foundry Manufacturing Agreement by and between OmniVision International Holding Ltd. and Powerchip Semiconductor Corporation, dated February 27, 2007
10.18			Loan and Security Agreement by and between the Registrant and Citibank, N.A., dated March 16, 2007
10.19			Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing made as of March 20, 2007 by the Registrant, as trustor, to First American Title Insurance Company, as trustee, for the benefit of Citibank, N.A., as beneficiary
10.20			Stock Pledge Agreement entered into as of March 16, 2007 by the Registrant, as pledgor, in favor of Citibank, N.A., as secured party

96

10.21	Promissory Note Secured by Deed of Trust (Term Loan) issued by the Registrant to Citibank, N.A., dated March 16, 2007
10.22	Promissory Note Secured by Deed of Trust (Mortgage Loan) by the Registrant to Citibank, N.A., dated March 16, 2007
10.23	Investment Agreement by and between the OmniVision Trading (Hong Kong) Company Limited and China WLCSP Limited, dated April 6, 2007
10.24	Equity Interests Transfer Agreement by and among OmniVision Trading (Hong Kong) Company Limited, China WLCSP Limited and Infinity-CSVC Venture Capital Enterprise, dated April 6, 2007
10.25	Letter Agreement by and between the Registrant and Citibank, N.A., dated March 20, 2007
21.1	Subsidiaries of the Registrant
23.1	Consent of Independent Registered Public Accounting Firm
24.1	Power of Attorney (included on page 99)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32	Certification of 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.

*Portions of this agreement have been omitted pursuant to a request for confidential treatment and the omitted portions have been filed separately with the Securities and Exchange Commission.

+Schedules, exhibits and similar attachments to the Merger Agreement, as described therein, have been omitted pursuant to Item 6.01(b)(2) of Regulation S-K. The registrant will furnish supplementally a copy of any omitted schedule, exhibit or similar attachment to the Securities and Exchange Commission upon its request.

(1)Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-1 (File No. 333-31926) as declared effective by the Securities and Exchange Commission on July 13, 2000.

(2)Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2001.

(3)Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form 8-A (Reg. No. 000-29939) as declared effective by the Securities and Exchange Commission on September 12, 2001.

(4)Incorporated by reference to exhibits filed with Registrant’s Annual Report on Form 10-K for the fiscal year ended April 30, 2003.

(5)Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2003.

(6)Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2004.

(7)Incorporated by reference to exhibits filed with Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission March 31, 2005.

(8)Incorporated by reference to exhibits filed with Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission April 25, 2005.

(9)Incorporated by reference to an exhibit filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.

(10)   Incorporated by reference to an exhibit filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2006.

(11)   Incorporated by reference to an exhibit filed with Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2007.

(12)   Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2007.

97

SCHEDULE II

OMNIVISION TECHNOLOGIES, INC.

VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended April 30, 2007, 2006 and 2005
(In thousands)

Description	Balance at Beginning of Year		Additions and Charges to Expenses			Write-offs and Deductions		Balance at End of Year
Allowance for doubtful accounts receivable:
Fiscal year ended April 30, 2007	$	1,067	$	179		$	266	$	980
Fiscal year ended April 30, 2006	$	1,237	$	(81	)	$	89	$	1,067
Fiscal year ended April 30, 2005	$	1,780	$	(543	)	$	—	$	1,237
Deferred tax valuation allowance:
Fiscal year ended April 30, 2007	$	9,264	$	859		$	7,247	$	2,876
Fiscal year ended April 30, 2006	$	1,761	$	7,503		$	—	$	9,264
Fiscal year ended April 30, 2005	$	1,260	$	501		$	—	$	1,761
Allowance for sales returns:
Fiscal year ended April 30, 2007	$	6,429	$	945		$	1,907	$	5,467
Fiscal year ended April 30, 2006	$	5,293	$	2,303		$	1,167	$	6,429
Fiscal year ended April 30, 2005	$	3,301	$	6,224		$	4,232	$	5,293

98

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	OMNIVISION TECHNOLOGIES, INC.
By:	/s/ SHAW HONG
	Shaw Hong
	President and Chief Executive Officer

Date: June 29, 2007

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Shaw Hong and Peter V. Leigh, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-facts and agents, or his substitute or substitutes, or any of them, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/s/ SHAW HONG	Chief Executive Officer, President	June 29, 2007
Shaw Hong	and Director (Principal Executive
	Officer)
/s/ PETER V. LEIGH	Chief Financial Officer	June 29, 2007
Peter V. Leigh	(Principal Financial and
	Accounting Officer)
/s/ XINPING HE	Chief Operating Officer and Director	June 29, 2007
Xinping He
/s/ JOSEPH JENG	Director	June 29, 2007
Joseph Jeng
/s/ DWIGHT STEFFENSEN	Director	June 29, 2007
Dwight Steffensen
/s/ ANDREW WANG	Director	June 29, 2007
Andrew Wang

99

EXHIBIT INDEX

Exhibit Number			Description
+2.1		(8)	Agreement and Plan of Merger by and among the Registrant, Ski-Jump Acquisition Corp, R.C. Mercure, Jr., W. Thomas Cathy, Jr. and Edward Dowski, Jr., CDM Optics, Inc., and R.C. Mercure, Jr., a representative of the CDM security holders
3.1		(1)	Restated Certificate of Incorporation
3.2		(1)	Bylaws of the Registrant
4.1		(1)	Specimen Common Stock Certificate
4.2		(1)	Amended and Restated Registration Rights Agreement, dated as of May 20, 1998, by and among the Registrant and certain stockholders of the Registrant
4.3		(3)	Preferred Stock Rights Agreement, dated August 21, 2001, between the Registrant and Equiserve Trust Company, N.A., including the Certificate of Designation, the form of Rights Certificate and Summary of Rights attached thereto as Exhibits A, B and C, respectively
4.4		(6)	Amendment to Preferred Stock Rights Agreement, dated August 21, 2001, between the Registrant and EquiServe Trust Company, N.A., effective June 7, 2004
4.5		(8)	Registration Rights Agreement dated April 19, 2005, by and among the Registrant and former holders of CDM Optics, Inc. securities
10.1		(1)	Form of Indemnification Agreement between the Registrant and each of its directors and officers
10.2		(1)	2000 Stock Plan and form of option agreement
10.3		(1)	2000 Employee Stock Purchase Plan and form of subscription agreement
10.4		(1)	2000 Director Stock Option Plan and form of option agreement
10.5		(4)	Lease Agreement between the Registrant and Caribbean/Geneva Investors and Crossman Partners, L.P., dated March 14, 2003, for the premises at 1341 Orleans Drive, Sunnyvale, California 94089-1136
*10.6		(1)	Non-exclusive Distributor Agreement between the Registrant and World Peace Industrial Co., Ltd. dated January 1, 1998
10.7		(2)	Agreement on Construction of Complete Municipal Facilities, Shanghai Songjiang Export Processing Zone between OmniView Technology International Ltd. and Shanghai Songjiang Export Processing Zone Administrative Committee dated December 28, 2000
10.8		(2)	Shanghai Songjiang Export Processing Zone Administrative Committee Official Reply to the Feasibility Study Report and Articles of Association of Foreign Solely-funded Omni View Electronics (Shanghai) Co., Ltd. dated December 19, 2000
10.9		(2)	Contract on the Transfer of Shanghai State-owned Land Use Right between OmniView Technology International Ltd. and Shanghai Songjiang District Building and Land Administrative Bureau dated December 28, 2000
*10.10	(b)	(5)	Letter of Comfort, dated October 29, 2003, by and between the Registrant and Taiwan Semiconductor Manufacturing Company
10.11		(7)	Executive Officer Profit Sharing/Bonus Plan
10.12		(9)	Amended and Restated Shareholders’ Agreement dated August 12, 2005, by and between the Registrant, Taiwan Semiconductor Manufacturing Company and certain other parties
*10.13		(10)		Equipment Procurement Agreement dated as of August 31, 2006, by and between OmniVision Trading (Hong Kong) Co. Ltd. and XinTec Inc.
10.14		(11)		Termination Agreement, dated January 23, 2007, by and between XinTec, Inc. and OmniVision Trading (Hong Kong) Co. Ltd.
10.15		(12)		Land-Use-Right Purchase Agreement by and between the Registrant and the Construction and Transportation Commission of the Pudong New District, Shanghai, dated December 31, 2006
10.16		(12)		First Amendment to the Amended and Restated Shareholders’ Agreement by and between the Registrant and Taiwan Semiconductor Manufacturing Co., Ltd. dated December 31, 2006
*10.17				Foundry Manufacturing Agreement by and between OmniVision International Holding Ltd. and Powerchip Semiconductor Corporation, dated February 27, 2007
10.18				Loan and Security Agreement by and between the Registrant and Citibank, N.A., dated March 16, 2007

10.19	Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing made as of March 20, 2007 by the Registrant, as trustor, to First American Title Insurance Company, as trustee, for the benefit of Citibank, N.A., as beneficiary
10.20	Stock Pledge Agreement entered into as of March 16, 2007 by the Registrant, as pledgor, in favor of Citibank, N.A., as secured party
10.21	Promissory Note Secured by Deed of Trust (Term Loan) issued by the Registrant to Citibank, N.A., dated March 16, 2007
10.22	Promissory Note Secured by Deed of Trust (Mortgage Loan) by the Registrant to Citibank, N.A., dated March 16, 2007
10.23	Investment Agreement by and between the OmniVision Trading (Hong Kong) Company Limited and China WLCSP Limited, dated April 6, 2007
10.24	Equity Interests Transfer Agreement by and among OmniVision Trading (Hong Kong) Company Limited, China WLCSP Limited and Infinity-CSVC Venture Capital Enterprise, dated April 6, 2007
10.25	Letter Agreement by and between the Registrant and Citibank, N.A., dated March 20, 2007
21.1	Subsidiaries of the Registrant
23.1	Consent of Independent Registered Public Accounting Firm
24.1	Power of Attorney (included on page 99)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32	Certification of 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.

*Portions of this agreement have been omitted pursuant to a request for confidential treatment and the omitted portions have been filed separately with the Securities and Exchange Commission.

+Schedules, exhibits and similar attachments to the Merger Agreement, as described therein, have been omitted pursuant to Item 6.01(b)(2) of Regulation S-K. The registrant will furnish supplementally a copy of any omitted schedule, exhibit or similar attachment to the Securities and Exchange Commission upon its request.

(1)Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form S-1 (File No. 333-31926) as declared effective by the Securities and Exchange Commission on July 13, 2000.

(2)Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2001.

(3)Incorporated by reference to exhibits filed with Registrant’s Registration Statement on Form 8-A (Reg. No. 000-29939) as declared effective by the Securities and Exchange Commission on September 12, 2001.

(4)Incorporated by reference to exhibits filed with Registrant’s Annual Report on Form 10-K for the fiscal year ended April 30, 2003.

(5)Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2003.

(6)Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2004.

(7)Incorporated by reference to exhibits filed with Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission March 31, 2005.

(8)Incorporated by reference to exhibits filed with Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission April 25, 2005.

(9)Incorporated by reference to an exhibit filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2005.

(10)   Incorporated by reference to an exhibit filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2006.

(11)   Incorporated by reference to an exhibit filed with Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2007.

(12)   Incorporated by reference to exhibits filed with Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2007.

EX-10.17

EXHIBIT 10.17

CONFIDENTIAL TREATMENT

FOUNDRY MANUFACTURING AGREEMENT

THIS FOUNDRY MANUFACTURING AGREEMENT (the “Agreement”) is entered into on February 27, 2007 (the “Effective Date”) by and between OmniVision International Holding Ltd., a Cayman Islands company, having its registered office at Second Floor, Zephyr House, Mary Street, P. O. Box 709, George Town, Grand Cayman, Cayman Islands, British West Indies (“OmniVision”) and Powerchip Semiconductor Corp., a company duly incorporated under the laws of the Republic of China, having its principal office located at No. 12, Li-Hsin Rd. 1, Hsinchu Science Park, Hsinchu, Taiwan, R.O.C. (“PSC”).  OmniVision and PSC are each a “Party” and collectively the “Parties”.

RECITALS

WHEREAS, OmniVision intends to have a manufacturing source for its CMOS image sensor products;

WHEREAS, PSC is in the business of providing foundry services for integrated circuits;

WHEREAS, the Parties wish to exploit and further jointly develop certain pixel related process technology (the “Target Technology” as defined herein) for PSC to process certain CMOS Image Sensors (CIS) products of OmniVision design (the “Products” as defined herein) at PSC.

NOW, THEREFORE, in consideration of the foregoing and the covenants and promises contained in this Agreement, the Parties agree as follows:

SECTION I
DEFINITIONS

1.1“Additional Contributions” shall mean the resources contributed by the parties in furtherance of this Agreement as set forth in Exhibit E.

1.2“Background Technology” shall have the meaning set forth in Section 5.1.

1.3“Development Schedule” shall have the meaning set forth in Exhibit A.

1.4“Intellectual Property Right(s)” shall mean any and all intellectual property rights associated with technologies, processes, procedures, products, designs, inventions (whether patentable or not), discoveries, know-how, and documents thereof, including, without limitation: patents, utility models and the like issued anywhere in the world, and applications therefor, including any additions, continuations, continuations-in-part, divisions, reissues, renewals and extensions based thereon; copyrights and all other literary property and rights in works of authorship, as well as all rights, title and interest in and to all copyrights, copyright registrations, certificates of copyrights and copyrighted

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

Confidential

1

interests; all mask work rights, mask work applications, and mask work registrations; and trade secrets.

1.5“Processes” shall mean the processes and technologies represented by the Target Technology jointly developed by PSC and OmniVision which will be used by PSC to provide foundry services to OmniVision for the manufacture of the Products during the term of this Agreement.

1.6“Products” shall mean OmniVision integrated circuit products containing CMOS image sensors with specifications set forth in Exhibit A, to be manufactured by PSC for OmniVision under this Agreement.

1.7 “Proprietary Technology” shall have the meaning set forth in Section 5.1.

1.8“Qualification” shall have the meaning set forth in Section 2.1.

1.9“Quality and Reliability Specifications” shall mean the parametric, electrical, process flow, quality, and reliability specifications, as well as other standards or requirements, for the Products. The initial set of Quality and Reliability Specifications adopted by OmniVision will be furnished to PSC within fifteen (14) days after the Effective Date.

1.10“Target Technology” shall have the meaning set forth in Exhibit C.

SECTION II
PROCESS DEVELOPMENT; QUALIFICATIONS

2.1Both Parties shall make good faith efforts to develop the Processes in accordance with the Development Schedule.  The Processes shall be tested at PSC for the Products prior to production (the “Qualifications”) so that the Products manufactured by the Processes will conform to the Quality and Reliability Specifications.  PSC shall make good faith efforts complete the Qualifications at least one month before the production date in accordance with the Development Schedule, such that OmniVision can plan and place its wafer order accordingly. Each Party shall give the other party 90-day prior written notice in the event that the Party  expects  not to meet the above schedule for any reason, and the Parties will discuss in good faith for expeditious resolution.

2.2OmniVision shall, upon the full Qualification of the Processes and throughout the remainder term of this Agreement, provide PSC on a monthly basis, six-month rolling forecasts (each a “Rolling Forecast”) of the estimated volume requirements, as initially set forth in Exhibit B. Notwithstanding the foregoing, PSC agrees that, as a pre-condition to OmniVision’s commitment to purchase, the terms and conditions set forth elsewhere in this Agreement (including, without limitation, wafer price, capacity reserve and quality, reliability and yield requirements) shall be satisfied and continue to be satisfied. Loading volumes for the remaining months of a Rolling Forecast shall represent the bona fide

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

2

projection of the demands by OmniVision based on the current market condition, and are provided to PSC for planning purposes and not binding upon OmniVision.

2.3PSC shall confirm the Rolling Forecast within 5 working days after receipt and shall make commercially reasonable efforts to provide capacity per OmniVision forecasts.

2.4[***]

SECTION III
PURCHASE AND SUPPLY

3.1OmniVision will place purchase orders (each a “Purchase Order”) for the quantities of Products required by OmniVision.  A Purchase Order shall include any and all purchase information released or issued by OmniVision specifically relating thereto, including any and all reasonable instructions that shall govern the particular purchases.

3.2PSC shall notify OmniVision in writing within five (5) working days upon receipt of a Purchase Order, either to accept the Purchase Order or to suggest the way in which PSC wishes to modify the Purchase Order.  A Purchase Order placed by OmniVision shall be deemed accepted by PSC absent a timely, written notice of intent to modify. In the event of modification, PSC and OmniVision shall consult with each other immediately to resolve the differences in good faith.

3.3OmniVision will make a refundable, interest-bearing deposit in the amount of four (4) million US Dollars (the “Deposit”) into PSC’s designated bank account on the Effective Date as a down payment, in the form of wire transfer.

3.4The prices for the Products shall be consistent with Exhibit B.  Unless otherwise agreed to by the Parties in writing, payment terms shall be net thirty (30) days from the date OmniVision receives an invoice; provided however, that OmniVision shall not be invoiced earlier than the actual shipment of the Products.  PSC may issue quotations from time to time so long as no terms and conditions of such quotations shall contradict with this Agreement.  If there is any discrepancy or contradiction between the terms and conditions of this Agreement and those of any quotation, this Agreement shall prevail.

SECTION IV
SHIPMENT AND ACCEPTANCE; WARRANTIES

4.1The Products shall be packed and labeled according to OmniVision requirements which will contain the trademark, logo or other indicia of OmniVision and suitable for shipment according to a standard not less than the then prevailing manufacturing practices of the industry. PSC shall deliver the Products to OmniVision or its designated party on the trade term of FCA or pursuant to other applicable delivery term as agreed by both Parties in writing.  Title and risk of loss to the Products shall pass to OmniVision consistent with the terms and conditions of INCOTERMS 2000.

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

3

4.2Upon the receipt of the Products by OmniVision or its designated party, OmniVision shall notify PSC within fifteen  (15) days (the “Acceptance Period”), in writing, if there is any obvious visual defect other than the failure of the Products to meet the Quality and Reliability Specifications (for example, broken or damaged package boxes, wrong products or incorrect quantity of the Products).  If the rejection is based on a failure of the Products to meet the Quality and Reliability Specifications, the Parties shall follow the procedure set forth in Section 4.3below, and OmniVision may request that any pending and unshipped Purchase Orders be held until the origin and nature of the problems is ascertained, and such request shall be honored by PSC.

4.3PSC warrants that the Products delivered hereunder shall meet the Quality and Reliability Specifications and shall be free from defects in material and workmanship under normal and intended use of the Product. If there is any defect in the Products, the Parties shall promptly enter into a discussion upon notification by OmniVision to reach a mutual agreement on the best solution, and PSC shall as soon as reasonably practicable repair, replace or credit OmniVision for such non-conforming Products, or take other reasonable actions to cure the problems to the satisfaction of OmniVision.

4.4OmniVision may, with PSC’s consent, such consent not to be unreasonably withheld, send its representatives to visit PSC’s production facilities. Such visit shall be conducted during PSC’s normal working hours. While staying on the production facilities, OmniVision’s representatives shall fully comply with PSC’s internal rules and regulations.

4.5PSC shall keep records of all process and production control information and summaries of production monitors concerning the manufacture of the Products for a period of five  (5) years from the date of production, and upon OmniVision’s request, shall provide OmniVision such process and production control information.

4.6THE LIABILITY FOR ANY CLAIM ARISING FROM ANY CAUSE INCLUDING, BUT NOT LIMITED TO, THE MANUFACTURE, SALE, OR DELIVERY OF ANY PRODUCTS, SHALL IN NO EVENT EXCEED THE TOTAL AMOUNT FOR THE PURCHASE AND SALE OF THE PRODUCTS UNDER THIS AGREEMENT FOR WHICH THE DEFAULTING PARTY HAS BREACHED CONTRACTUAL OBLIGATIONS.

4.7EXCEPT WITH RESPECT TO CONFIDENTIAL OBLIGATION UNDER SECTION 5.4, NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQENTIAL DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT, HOWEVER CAUSED, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS, LOSS OF DATA, OR COSTS FOR PROCUREMENT OF SUBSTITUTE GOODS OR SERVICE.

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

4

4.8Each party disclaims any indemnification of IPR infringement arising from this development or foundry business.

SECTION V
INTELLECTUAL PROPERTY RIGHTS AND PROPRIETARY INFORMATION

5.1OmniVision and PSC agree to cooperate in good faith and develop the leading-edge process technologies, as listed in more detail in Exhibit C (“Target Technology”), to achieve time-to-market, cost-efficiency, and superior quality reliability and yield standards.  The Target Technology, together with all Intellectual Property Rights (the “IPRs”) contained therein, shall be jointly owned by PSC and OmniVision.  The IPRs of the Product design are proprietary to OmniVision (“OmniVision Proprietary Technology”) and shall be solely owned by OmniVision.  The IPRs of certain processes that are proprietary to PSC (“PSC Proprietary Technology”) shall be solely owned by PSC.  Each of OmniVision and PSC shall contribute its process technologies to the joint development as Background Technology, listed in attached Exhibit C.  Each OmniVision and PSC shall separately own the respective background technology (“Background Technology”), together with all improvements thereof, as part of respective OmniVision or PSC Proprietary Technology (collectively, “Proprietary Technology”). For avoidance of doubt, the ownership of the Intellectual Property Rights under this Agreement is as illustrated in Exhibit D.  Each Party will use its intellectual property to accomplish the development of Target Technology.

5.2The Parties agree that PSC will not have the right to use the Target Technology or OmniVision Proprietary Technology to provide foundry service either for its own or to any third party without obtaining OmniVision’s prior written consent.  Notwithstanding the foregoing, PSC may continue to pursue the business in existence as of the Effective Date and PSC may freely contact any customers for any business under any technologies other than the Target Technology hereunder and OmniVision Proprietary Technology.  In the event that OmniVision or OVT will license its Products using the process developed under this Agreement to any third party, PSC will have the right to provide foundry service to such licensee.  PSC shall be granted a non-exclusive non-transferable license, without right to sublicense, to use the OmniVision Proprietary Technology for the sole purpose contemplated herein.

5.3The term “Proprietary Information” shall mean any information provided by a Party that is identified as proprietary and/or confidential and disclosed to the other Party under this Agreement.  For written Proprietary Information, it shall be clearly marked “Confidential” or “Proprietary”. All oral disclosures of Proprietary Information shall be identified as such prior to disclosure and confirmed in writing by the disclosing Party (“Discloser”) within thirty (30) days of disclosure. In case of disagreement, the receiving Party (“Recipient”) must make a written objection thereto within thirty (30) days after receipt of the written information or written confirmation of orally disclosed information.  Notwithstanding the foregoing, the Rolling Forecasts and Quality and Reliability

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

5

Specifications shall be deemed the Proprietary Information of OmniVision without marking. The Proprietary Information shall not include information that: (1) is now or subsequently in the public domain or otherwise becomes available to the public other than by Recipient’s breach of this Agreement; (2) has been rightfully in Recipient’s possession before the disclosure of such Proprietary Information by Discloser, as sufficiently proved by Recipient’s written records; (3) is rightfully received by Recipient from a third party entitled to do so; (4) is independently developed by Recipient without use of any Proprietary Information of Discloser and can be sufficiently proved so by Recipient’s written records; or (5) is properly authorized by Discloser for release or disclosure.

5.4Except as otherwise expressly provided herein, for a period of five (5) years starting from the date of each disclosure, Recipient agrees to maintain the Proprietary Information disclosed by Discloser in strict confidence, not to make use thereof other than for the performance of this Agreement, to release it only to employees who have a need to know the same, and not to release or disclose it to any third party without the prior written consent of Discloser. Recipient shall be jointly and severally liable for any and all damages arising from the breach of this confidentiality obligation by its employees who have or had access to the Proprietary Information. In the event that when OmniVision discloses aforementioned Proprietary Information to OVT, OVT shall likewise be bound by terms and conditions of this Agreement. Any breach of the confidential obligation hereof by OVT will be deemed breach of this Agreement by OmniVision.

5.5All Proprietary Information and any copies shall remain the property of Discloser. Upon expiration or termination of this Agreement, Recipient shall immediately return the original and all copies of Proprietary Information in all tangible forms, or if stored electronically in digital form, shall erase and destroy all of the Proprietary Information so stored and shall furnish Discloser with a statement signed by Recipient’s duly authorized representative stating that all such Proprietary Information has been destroyed or erased.

5.6Recipient agrees and acknowledges that due to the unique nature of the Proprietary Information, remedy at law for any breach of the obligations hereunder may be inadequate, that any such breach may result in irreparable and significant harm to Discloser, and that Discloser is entitled to seek injunctive or other equitable relief in addition to remedies it might have at law.

5.7Notwithstanding the foregoing, Recipient may disclose or produce any Proprietary Information if and to the extent required by any discovery request, subpoena, court order or governmental action or requirement; provided, that Recipient gives Discloser reasonable advance notice of the same (e.g., so as to afford Discloser a reasonable opportunity to appear, object and obtain a protective order or other appropriate relief regarding such disclosure).

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

6

SECTION VI
TERM AND TERMINATION

6.1The term of this Agreement shall be five (5) years (the “Initial Term”) from the Effective Date, unless it is terminated earlier in accordance with Section 6.2.  At the expiration of the Initial Tem, this Agreement may be extended for additional terms upon mutual agreement (each additional term, a “Renewal Term;” together with the Initial Term, the “Term”).

6.2This Agreement may be terminated by a Party if the other Party: (i) gives 180 days advance written notice; (ii) breaches any material provision of this Agreement and does not cure or remedy such breach within sixty (60) days after receiving notice of the breach; or (iii) becomes the subject of a voluntary or involuntary petition in bankruptcy or any proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors if such petition or proceeding is not dismissed with prejudice within sixty (60) days after filing.

6.3Sections 4.3 (Warranties), 5.1 through 5.7 (Intellectual Property Rights and Proprietary Information), 6.3 (Effect of Termination) and Section VII (Miscellaneous) shall survive any termination and expiration of this Agreement. Except as set forth in this Agreement, all other rights and obligations of the Parties under this Agreement shall terminate upon the effective date of termination of this Agreement.

SECTION VII
MISCELLANEOUS

7.1Assignment.  Neither Party shall assign this Agreement or any right, obligation, or interest under this Agreement, nor delegate or subcontract any work or obligation to be performed under this Agreement, without the other Party’s prior written consent except to an affiliate or to a successor by virtue of a merger, consolidation, reorganization or sale of all or substantially all of its assets related to this Agreement. Any attempted assignment or delegation in contravention of this section shall be null and void, and ineffective in law or in equity; provided that OmniVision may assign this Agreement, in whole or in part, to an affiliate, provided that such affiliate shall notify PSC in advance and be bound to all the obligations of OmniVision and its own under this Agreement. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns.

7.2Waiver. The waiver by either Party of any default or breach of this Agreement shall not constitute a waiver of any other or subsequent default or breach.

7.3Relationship of the Parties. The relationship of the Parties hereto is that of independent contractors. Neither Party nor its agents or employees shall be deemed to be the agents, employee, joint venture, partner or fiduciary of the other Party. Neither Party shall have

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

7

the right to bind the other Party, transact any business in the other Party’s name or on the other Party’s behalf or incur any liability for or on behalf of the other Party.

7.4Non-Publicity.  No publicity or information regarding the existence or contents of this Agreement shall be given or released by either Party without the prior written consent of the other Party, except for required by applicable laws or regulations (inclusive of stock exchange regulations) or in connection with a permitted assignment of this Agreement.

7.5Dispute Resolution.  The Parties will attempt to resolve any dispute arising under or in connection with this Agreement in good faith. If a dispute is not resolved within ninety (90) days after written notice of the dispute, then the dispute will be submitted to and resolved by the courts in Taiwan in accordance with the laws of Taiwan if the respondent is PSC, and to the courts in California, USA in accordance with the laws of the State of California, USA if the respondent is OmniVision; provided that either Party will be permitted to seek injunctive or temporary relief in any court of competent jurisdiction.

7.6Force Majeure.  Neither Party shall be responsible for any delay, failure to perform or non-performance (the “Event of Default”) under this Agreement if such an Event of Default is attributable to unforeseeable circumstances or causes beyond its control, including but not limited to, labor dispute, strike, labor shortage or stoppage, embargo, war or act of war (whether an actual declaration is made or not), insurrection, riot, or civil commotion, act of public enemy or sabotage, act of any governmental authority, judicial action, acts of civil and military authorities, short or reduced supply of fuel or raw materials, fire, floods, earthquakes or other types of Act of God.  In such event, the performance so affected by the force majeure event shall be extended corresponding to the period of time such force majeure event exists.

7.7Notices.

All notices required or permitted to be sent by either Party to the other Party under this Agreement shall be in English and sent by registered mail or an express delivery service, postage or shipping cost prepaid, by personal delivery or by fax. Any notice given by fax shall be followed by a confirmation copy within three (3) working days. Unless changed by written notice given by a Party to the other Party, the addresses and fax numbers of the respective Parties shall be as follows:

To PSC:
Powerchip Semiconductor Corp.
No. 12, Li-Hsin Rd. 1
Hsinchu Science Park, Hsinchu, Taiwan, R.O.C.

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

8

Attention: Alec Chen with Logic Product Division
Tel: +886-3-5795000 Ext. 2139
Fax: +886-3-5792014

To OmniVision:
OmniVision International Holding, Ltd.
Second Floor, Zephyr House, Mary Street
P. O. Box 709, George Town
Grand Cayman, Cayman Islands, British West Indies

Attention: James He, Director

With a copy to:
OmniVision Technologies Inc.
1341 Orleans Drive
Sunnyvale, CA 94089

Attention: General Counsel
Tel: 408-542-3000
Fax: 408-542-3001

7.8Export Regulations. The export of commodities or technical data from the United States of America, and/or the re-export from foreign countries of commodities or technical data or direct products of technical data of United States of America origin may be conditioned upon the issuance of an export license by the government of the United States of America. Each Party represents that it will not export or re-export any commodities or technical data or direct products of technical data in furtherance of this Agreement unless and until it has complied in all respects with the United States of America Export Control Regulations or the corresponding Taiwan export regulations, and/or other applicable foreign export laws and regulations.

7.9Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of State of California, USA, without regard to its conflict of laws provisions.  Disputes arising hereunder which cannot be resolved amicably between the Parties shall be submitted to the courts in Taiwan in accordance with the laws of Taiwan if the respondent is PSC, and to the courts in California, USA in accordance with the laws of the State of California, USA if the respondent is OmniVision.

7.10Severability. If any provision in this Agreement shall be held to be invalid, illegal or unenforceable according to its terms by any court or tribunal having competent jurisdiction over the Parties and subject matter, such holding shall not affect the validity of the other provisions of this Agreement and the Parties intend to give such other

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

9

provisions the full force and effect as if this Agreement contained no such invalid provisions at the outset..

7.11Headings. The section headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

7.12Entire Agreement. This Agreement, together with its Exhibit(s), shall constitute the entire agreement between the Parties with respect to the subject matter hereof and supersede and replace all prior or contemporaneous understandings, agreements, dealings, and negotiations, oral or written, regarding the subject matter. No modification, alteration or amendment of this Agreement shall be effective unless in writing and signed by both Parties. No waiver of any breach or failure by either Party to enforce any provision of this Agreement shall be deemed a waiver of any other or subsequent breach or a waiver of future enforcement of that or any other provision.  The language governing this Agreement will be English and the English version of this Agreement will be deemed the original.

7.13Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

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IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be duly executed on their behalf by their duly authorized officers and representatives on the date first given above.

OMNIVISION INTERNATIONAL HOLDING, LTD.		POWERCHIP SEMICONDUCTOR CORP.
BY:	/S/ SHAW HONG	BY:	/S/ BRIAN SHIEH
NAME: SHAW HONG		NAME: BRIAN SHIEH
TITLE: DIRECTOR		TITLE: PRESIDENT
DATE: FEB. 26, 2007		DATE: FEB. 27, 2007

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

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EXHIBIT A

DEVELOPMENT SCHEDULE

I.Product Specifications and Schedule

1.The following represents the Products specifications of OmniVision and the bona fide development schedule (the “Products Schedule”).

[***]

2.OmniVision will make good faith efforts to develop the Products in accordance with the Product schedule.  In the event that OmniVision expects not to meet the Product Schedule for any reason, OmniVision shall give PSC 90 days prior written notice.

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

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EXHIBIT B

PURCHASING SPECIFICATIONS

I.Wafer Loads

1.Volume Forecasts: the following represents bona fide projection of production volume of OmniVision for the Products in year 2008:

[***]

2.PSC will make commercially reasonable efforts to provide capacity per OmniVision above forecast.  Upon Process Qualification, OmniVision will provide PSC with a 6-month monthly rolling forecast for the Products and PSC will confirm it within 5 working days after receipt.

II.Wafer Price and Conditions

1.Wafer Prices for the Products:

[***]

2.[***]

3.The prices shall be subject to the quality, reliability and yield standards pursuant to OmniVision requirements, in particular, Price Adjustment set forth in III.2 below.

4.Test-run wafers: OmniVision is responsible for test-run wafers after Products Tapeout; PSC is responsible for test-run wafers prior to Product Tapeout.

5.[***]

6.[***]

7.[***]

III.Yield Requirements and Price Adjustments

1.[***]

2.[***]

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

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EXHIBIT C

TARGET AND BACKGROUND TECHNOLOGY

I.Target Technology

The following is the list of Target Technology to be jointly developed by OmniVision and PSC based on certain pixel related process technology under this Agreement, and the ownership shall be co-owned by OmniVision and PSC for IP developed during the course of joint development.

[***]

II.Background Technology

OmniVision agrees to contribute the following background technology (“OmniVision Background Technology”) to the joint development, and PSC acknowledges that such technology shall be owned by OmniVision exclusively.

[***]

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

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EXHIBIT D

Illustration of Ownership of Intellectual Property Rights

Note: OVI  in the above chart refers to OmniVision.

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

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EXHIBIT E

ADDITIONAL CONTRIBUTION OF RESOURCES

Each Party will provide the following resources towards the development of the Target Technology at its own expense:

OmniVision	PSC
Two OmniVision process integration engineers on PSC site: 1 from July, 2007 and another at a later time to be determined.	Engineering support as necessary and reasonably requested by OmniVision.
Test Run Wafer (after OmniVision Tape Out)	Test Run Wafer (before OmniVision Tape Out)
Tape Out Mask	TEG Mask
[***]	Current available equipments

[***]

***Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.  Omitted portions have been filed separately with the Commission.

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EX-10.18

Exhibit 10.18

LOAN AND SECURITY AGREEMENT

by and between

OMNIVISION TECHNOLOGIES, INC.

a Delaware corporation

and

CITIBANK, N.A., a national banking association

Dated as of March 16, 2007

Loan and Security Agreement

Borrower:	OmniVision Technologies, Inc.,
	a Delaware corporation
Address:	1341 Orleans Drive
	Sunnyvale, California 94089
	Attention: General Counsel

Date:March 16, 2007

THIS LOAN AND SECURITY AGREEMENT (“Agreement”) is entered into as of the above date between Citibank N.A., a national banking association (“Lender”), with offices at 201 West Lexington Drive, 6th Floor, Glendale, California 91203, and the borrower named above (“Borrower”), whose chief executive office is located at the above address (“Borrower’s Address”).

1.DEFINITIONS AND INTERPRETATIONS

1.1Definitions. As used in this Agreement, the following terms have the following meanings:

“Additional Costs” has the meaning set forth in Section 3.3(a).

“Borrower” has the meaning set forth in the introduction to this Agreement.

“Borrower’s Address” has the meaning set forth in the introduction to this Agreement.

“Business Day” means (i) a day on which Lender is open for business in the State of California, and (ii) a day on which banks are open for dealings in dollar deposits in the London interbank market.

“Change of Control” shall be deemed to have occurred at such time as a “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) (other than the current holders of the ownership interests in any Borrower) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, as a result of any single transaction, of more than fifty percent (50%) of the total voting power of all classes of stock or other ownership interests then outstanding of any Borrower normally entitled to vote in the election of directors or analogous governing body.

“Conversion Date” means September 30, 2008 or such earlier date as elected by Borrower in writing on at least five (5) Business Days’ notice to Lender.

“Default” means any event which, with notice or passage of time or both, would constitute an Event of Default.

“Dollars or $” means United States dollars.

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“EBITDA” means, in any fiscal period, Borrower’s consolidated net income or net loss as determined by Lender, plus (i) the amount of all interest expense, income tax expense, depreciation expense and amortization expense of Borrower for such period, [on a consolidated basis], and plus or minus (as the case may be) (ii) any other non-cash charges which have been added or subtracted (including non-cash stock options), as the case may be, in calculating Borrower’s consolidated net income for such period.

“Event of Default” means any of the events set forth in Section 9.1.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

“Indebtedness” of any Person shall mean, without duplication, (a) all items which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of the balance sheet of such Person as of the date as of which Indebtedness is to be determined, including any lease which, in accordance with GAAP would constitute Indebtedness, (b) all indebtedness secured by any mortgage, pledge, security, Lien or conditional sale or other title retention agreement to which any property or asset owned or held by such Person is subject, whether or not the indebtedness secured thereby shall have been assumed, (c) all indebtedness of others which such Person has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock, equity or other ownership interest purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable.

“Interest Expense” shall mean, for any period, total interest expense (including attributable to capital leases in accordance with GAAP) fees with respect to all outstanding indebtedness including capitalized interest but excluding commissions, discounts and other fees owed with respect to letters of credit and bankers’ acceptance financing and net costs under Interest Rate Agreements.

“Interest Period” means for (a) for the first Interest Period hereunder, from the date of initial funding of either of the Loans through and including March 31, 2007, and (b) for each Interest Period thereafter commencing April 1, 2007, one calendar month (i.e., periods ending on the last day of each calendar year).

“Interest Rate Agreement” means any interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to hedge the position with respect to interest rates.

“Interest Rate Swap Agreement (Long Form Trade Confirmation)” means an Interest Rate Agreement (Long Form Trade Confirmation) with Lender or another party designated by Borrower that will swap the interest rate hereunder for a fixed interest rate, which agreement must be in form and substance acceptable to Lender.

“Lender” has the meaning set forth in the introduction to this Agreement.

“LIBOR Base Rate (Term Loan)” means the rate per annum for United States dollar deposits quoted by Lender in accordance with its customary procedures and utilizing such electronic or other quotation sources as it considers appropriate in its sole discretion as the London interbank offered rate for a period of thirty (30), sixty (60) or ninety (90) days with the understanding that such rate is quoted by Lender for the purpose of calculating effective rates of interest for the loans making reference thereto. Borrower may designate in writing the election of whether the period shall be thirty (30), sixty (60) or ninety (90) days, but such period may only change on the first day of each month (and Borrower must have provided at least five Business Days advance written request for any change); provided, however, that such period shall be thirty (30) days from and after the Conversion Date. The LIBOR Base Rate (Term Loan) shall be adjusted on the first day of each Interest Period based on the LIBOR Base Rate (Term Loan) on the applicable LIBOR Determination Date.

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“LIBOR Base Rate (Mortgage Loan)” means the rate per annum for United States dollar deposits quoted by Lender in accordance with its customary procedures and utilizing such electronic or other quotation sources as it considers appropriate in its sole discretion as the London interbank offered rate for a period of thirty (30) days, with the understanding that such rate is quoted by Lender for the purpose of calculating effective rates of interest for the loans making reference thereto. The LIBOR Base Rate (Mortgage Loan) shall be adjusted on the first day of each Interest Period based on the LIBOR Base Rate (Mortgage Loan) on the applicable LIBOR Determination Date.

“LIBOR Determination Date” means, with respect to each Interest Period, the date that is two (2) Business Days prior to the first day upon which such Interest Period commences; provided, however, that in connection with a securitization of the Loan, Lender may, upon prior written notice to Borrower, change the LIBOR Determination Date to a date selected by Lender in its sole discretion (whereupon such newly selected LIBOR Determination Date shall thereafter be effective) and, if requested by Lender, Borrower shall promptly execute an amendment to this Loan Agreement to evidence such change.

“LIBOR Rate (Term Loan)” means, for each Interest Period, the rate per annum (rounded upwards, if necessary, to the next 1/16%) determined by Lender as the sum of (a) the quotient of (i) the LIBOR Base Rate (Term Loan) for such Interest Period, divided by (ii) 100% minus the Reserve Percentage, plus (b) one and one-quarter percent (1.25%). The LIBOR Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

“LIBOR Rate (Mortgage Loan)” means, for each Interest Period, the rate per annum (rounded upwards, if necessary, to the next 1/16%) determined by Lender as the sum of (a) the quotient of (i) the LIBOR Base Rate (Mortgage Loan) for such Interest Period, divided by (ii) 100% minus the Reserve Percentage, plus (b) nine-tenths percent (0.90%). The LIBOR Rate (Mortgage Loan) shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

“Loan Account” has the meaning provided to such term in Section 2.2 hereof.

“Loan Borrowing Certificate” means an irrevocable request from Borrower to Lender, in the form set forth on Exhibit “A” attached hereto, duly executed by Borrower, specifying the date an advance under the Term Loan is to be made (which shall be a Business Day.

“Loan Documents” means this Agreement, the agreements and documents listed in Section 6.1, and any other agreement, instrument or document executed in connection herewith or therewith.

“Material Adverse Effect” means a material adverse effect on (i) the business, assets, condition (financial or otherwise) or results of operations of Borrower of any of the obligations secured by the Deed of Trust (as defined below), (ii) the ability of Borrower to perform its obligations under this Agreement (including, without limitation, repayment of the Loans and all amounts secured by the Deed of Trust as they come due), or (iii) the validity or enforceability of this Agreement or any other agreement or document entered into by any party in connection herewith, or the rights or remedies of Lender hereunder or thereunder.

“Maturity Date (Term Loan)” means September 30, 2012 or such earlier date as the Term Loan is accelerated by Lender.

“Maturity Date (Mortgage Loan)” means March 31, 2017 or such earlier date as the Mortgage Loan is accelerated by Lender.

“Net Income” means the net income (or loss) determined in conformity with GAAP, provided that there shall be excluded (i) the income (or loss) of any Person in which any other Person (other than Borrower) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to a Borrower by such Person, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Borrower or is merged into or consolidated with a Borrower or that Person’s assets are acquired by a Borrower, (iii) the income of any subsidiary of Borrower to the extent that the declaration or payment of

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dividends or similar distributions of that income by that subsidiary is not at the time permitted by operation of the terms of the charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that subsidiary, (iv) compensation expense resulting from the issuance of capital stock, stock options or stock appreciation rights issued to former or current employees, including officers, of a Borrower, or the exercise of such options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be settled by the payment of cash by a Borrower or any affiliate thereof, and (v) compensation expense resulting from the repurchase of capital stock, options and rights described in clause (iv) of this definition of Net Income.

“Obligations” means all present and future advances, debts, liabilities, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to Lender, whether evidenced by this Agreement or any note or other instrument or document, whether arising from an extension of credit, opening of a letter of credit, banker’s acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any participation by Lender in Borrower’s debts owing to others), absolute or contingent, due or to become due, including, without limitation, all interest, charges, expenses, fees, attorneys’ fees (including attorneys’ fees and expenses incurred in bankruptcy), expert witness fees and expenses, fees and expenses of consultants, audit fees, letter of credit fees, collateral monitoring fees, closing fees, facility fees, termination fees, and any other sums chargeable to Borrower under this Agreement or under any other present or future instrument or agreement between Borrower and Lender, including under any Interest Rate Agreement.

“Permitted Liens” means the following:

(a)purchase money security interests in specific items of equipment that are not fixtures to the Property;

(b)leases of specific items of equipment that are not fixtures to the Property;

(c)liens for taxes not yet payable;

(d)security interests being terminated substantially concurrently with this Agreement;

(e)liens of materialmen, mechanics, warehousemen, carriers, or other similar liens arising in the ordinary course of business and securing obligations which are not delinquent;

(f)liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by liens of the type described above in clauses (a) or (b) above, provided that any extension, renewal or replacement lien is limited to the property encumbered by the existing lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase; or

(g)liens in favor of customs and revenue authorities which secure payment of customs duties in connection with the importation of goods.

“Person” means any individual, sole proprietorship, general partnership, limited partnership, limited liability partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, government, or any agency or political division thereof, or any other entity.

“Property” shall have the meaning provided in the Deed of Trust.

“Regulatory Change” means, with respect to Lender, any change on or after the date of this Agreement in United States federal, state or foreign laws or regulations, including Regulation D, or the adoption or making on or after such date of any interpretations, directives or requests applying to a class of lenders including Lender of or under any United States federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.

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“Reserve Percentage” means, on any day, the maximum percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor governmental authority) for determining the reserve requirements (including any basic, supplemental, marginal, or emergency reserves) that are in effect on such date with respect to eurocurrency funding (currently referred to as “eurocurrency liabilities”) of Lender, but so long as Lender is not required or directed under applicable regulations to maintain such reserves, the Reserve Percentage shall be zero.

“Solvent” means, with respect to any Person on a particular date, that on such date (a) at fair valuations, all of the properties and assets of such Person are greater than the sum of the debts, including contingent liabilities, of such Person, (b) the present fair salable value of the properties and assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business.

“Subordinated Debt” shall mean any Indebtedness and liabilities of Borrower which have been subordinated by written agreement to Indebtedness owed by Borrower to Lender in a form and substance acceptable to Lender.

“Tangible Net Worth” means, as of the date of determination, all of Borrower’s assets, plus Subordinated Debt (excluding all assets of a Person that would be treated as intangible assets on such Person’s balance sheet prepared in accordance with GAAP, i.e., goodwill, patents, trademarks, trade names, copyrights, franchises, formulas, leasehold interests, leasehold improvements, non-compete agreements, engineering plans, deferred tax benefits, organization costs, prepaid items and monies due Affiliates, employees and officers), less Total Debt.

“Total Debt” shall mean the total of all items of Indebtedness, obligations or liability as shown on a consolidated balance sheet of Borrower as of the date as of which Total Debt is to be determined, excluding, however, Subordinated Debt.

1.2Accounting Terms and Determinations Unless otherwise specified herein, all accounting terms used in this Agreement, unless otherwise indicated, shall have the meanings given to such terms in accordance with GAAP. In addition, unless otherwise specified herein all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP.

1.3Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular and references to the singular include the plural; references to any gender include any other gender; the part includes the whole; the term “including” is not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”. The words, “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Article, section, subsection, clause, exhibit and schedule references are to this Agreement, unless otherwise specified. Any reference in this Agreement or any of the Loan Documents to this Agreement or any of the Loan Documents includes any and all permitted alterations, amendments, changes, extensions, modifications, renewals, or supplements thereto or thereof, as applicable.

1.4Exhibits and Schedules. All of the exhibits and schedules attached hereto shall be deemed incorporated herein by reference.

1.5No Presumption Against Any Party. Neither this Agreement, any of the Loan Documents, any other documents, agreement, or instrument entered into in connection herewith, nor any uncertainty or ambiguity herein or therein shall be construed or resolved using any presumption against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement, the Loan Documents, and the other documents, instruments, and agreements entered into in connection herewith have been reviewed by each of the parties and their counsel and shall be construed and interpreted according to

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the ordinary meanings of the words used so as to accomplish fairly the purposes and intentions of all parties hereto.

1.6Independence of Provisions. All agreements and covenants hereunder, under the Loan Documents and the other documents, instruments, and agreements entered into in connection herewith shall be given independent effect such that if a particular action or condition is prohibited by the terms of any such agreement or covenant, the fact that such action or condition would be permitted within the limitations of another agreement or covenant shall not be construed as allowing such action to be taken or condition to exist.

2.CREDIT FACILITIES

2.1Loans.

(a)Mortgage Loan. Lender will make a loan to Borrower (the “Mortgage Loan”) in an amount not to exceed Twenty-Seven Million Nine Hundred Twenty-Seven Thousand Forty-Five and No/100 Dollars ($27,927,045.00) on the terms and conditions contained herein. The Mortgage Loan shall be made in one advance. Borrower may not reborrow any amounts advanced under the Mortgage Loan.

(b)Term Loan. Provided no Default or Event of Default has occurred and is continuing, Lender will make additional advances to Borrower (collectively, the “Term Loan”; the Term Loan together with the Mortgage Loan may be referred to herein, collectively, as the “Loans”) from time to time from the date hereof to and including the Conversion Date in minimum advances of One Million Dollars ($1,000,000) for the first advance and Two Hundred Fifty Thousand Dollars ($250,000) for subsequent advances in a total aggregate amount not to exceed Twelve Million Dollars ($12,000,000). Borrower may not reborrow any amounts advanced under the Term Loan.

2.2Loan Account. Lender shall maintain on its books a record of account (“Loan Account”) in which Lender shall make entries for each of the Loans and such other debits and credits as shall be appropriate in connection with the credit facility set forth in this Agreement. Each of the Loans made by Lender shall be deposited in Borrower’s account number DDA #600956767 at Lender, or such other account with Lender as designated in writing by Borrower.

3.TERMS OF PAYMENT

3.1Interest.

(a)Mortgage Loan. The outstanding principal balance of the Mortgage Loan shall accrue interest at the LIBOR Rate (Mortgage Loan).

(b)Term Loan. The outstanding principal balance of the Term Loan shall accrue interest at the LIBOR Rate (Term Loan). Borrower shall request additional advances from the Term Loan by delivering to Lender a Loan Borrowing Certificate with respect thereto. The Loan Borrowing Certificate shall be received by Lender no later than 11:00 a.m. (California time) at least two (2) Business Days prior to the Business Day such advance shall occur. Any Loan Borrowing Certificate received by Lender after 11:00 a.m. (California time) shall not be considered by Lender until the next Business Day.

3.2Payments.

(a)Mortgage Loan.

(i)Commencing with the date of the initial disbursement of funds through the end of the calendar month in which such disbursement occurs, interest only shall be payable in advance on the Mortgage Loan at the LIBOR Rate (Mortgage Loan). Interest for such partial month shall be computed on

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the basis of a 360-day year and shall be equal to the sum of a per diem interest charge (for each day the principal balance hereof is outstanding during such partial month) equal to the product of (a) 1/360 and (b) the Contract Rate and (c) the outstanding principal balance hereunder for the day in question.

(ii)Commencing on May 1, 2007, and continuing on the first day of each calendar month thereafter, Borrower shall make monthly payments to Lender of principal and interest (in arrears) in an amount necessary to fully amortize the Mortgage Loan over an amortization period ending on April 30, 2032.

(iii)The entire balance of principal and accrued interest and other amounts then outstanding on the Mortgage Loan are due and payable on the Maturity Date (Mortgage Loan). Borrower acknowledges that such balance will not equal the monthly payments specified in Section 3.2(a)(i) and Section 3.2(a)(ii).

(b)Term Loan.

(i)Commencing on April 1, 2007, and continuing on the first day of each calendar month thereafter, Borrower shall make monthly payments to Lender of all accrued interest under the Term Loan.

(ii)Commencing on the Conversion Date if such date is the first date of a calendar month and otherwise on the first date of the next calendar month, and continuing on the first day of each calendar month thereafter, in addition to interest payable under the Term Loan, the Term Loan will be repayable in forty-eight (48) additional equal monthly installments of principal, in an amount sufficient to cause the Term Loan to be repaid on the Maturity Date (Term Loan).

(iii)Unless otherwise repaid, the entire balance of principal and accrued interest and other amounts then outstanding on the Term Loan are due and payable on the Maturity Date (Term Loan). Borrower acknowledges that such balance may not equal the regular monthly payment specified in Section 3.2(b)(i) and Section 3.2(b)(ii).

(c)Deduction of Amounts Payable. Borrower agrees that interest and principal payments, and any fees, will be deducted automatically on the due date from Borrower’s account with Lender, account number DDA #600956767 or such other of the Borrower’s accounts with Lender as designated in writing by the Borrower. Borrower will maintain sufficient funds in the account on the dates the Lender enters debits authorized by the ACH (as defined below).

3.3Additional Costs and Other Terms.

(a)Borrower shall pay to Lender, upon demand by Lender, from time to time such amounts as Lender may determine to be necessary to compensate it for any costs incurred by Lender that Lender determines are attributable to its making or maintaining of any amount receivable by Lender hereunder in respect of the Mortgage Loan or Term Loan relating thereto (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”), in each case resulting from any Regulatory Change which:

(i)changes the basis of taxation of any amounts payable to Lender under this Agreement with respect of the Mortgage Loan or Term Loan (other than changes which affect taxes measured by or imposed on the overall net income of Lender by the jurisdiction in which Lender has its principal office); or

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(ii)imposes or modifies any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of Lender (including the Mortgage Loan or Term Loan or any deposits referred to in the definition of “LIBOR Base Rate (Mortgage Loan)” or “LIBOR Base Rate (Term Loan); or

(iii)imposes any other condition affecting the Mortgage Loan or Term Loan.

Lender will notify Borrower of any event occurring after the date of this Agreement which will entitle Lender to compensation pursuant to this Section as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. Lender will furnish Borrower with a statement setting forth the basis and amount of each request by Lender for compensation under this Section 3.3. Determinations and allocations by Lender for purposes of this Section 3.3 of the effect of any Regulatory Change on its costs of maintaining its obligations to make the Mortgage Loan or Term Loan or of making or maintaining the Mortgage Loan or Term Loan or on amounts receivable by it in respect of the Mortgage Loan or Term Loan, and of the additional amounts required to compensate Lender in respect of any Additional Costs, shall be conclusive absent manifest error.

(b)If Borrower requests additional advances, in addition to all other amounts payable hereunder, Borrower shall pay to Lender, upon the request of Lender, such amount or amounts as shall be sufficient (in the sole good faith opinion of such Lender) to compensate it for any loss, costs or expense incurred by it as a result of any failure by Borrower to borrow any amounts on the date for such borrowing specified in the relevant notice of borrowing hereunder; provided, however, that Lender acknowledges that there is no unused line fee in connection with the Mortgage Loan or the Term Loan.

(c)If Lender shall determine that the adoption or implementation of any applicable law, rule, regulation or treaty regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Lender in any respect, with any directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of Lender or any person or entity controlling Lender (a “Parent”) as a consequence of its obligations hereunder to a level below that which Lender (or its Parent) could have achieved but for such adoption, change or compliance (taking into consideration its policies with respect to capital adequacy) by an amount deemed by Lender to be material, then from time to time, within fifteen (15) days after demand by Lender, Borrower shall pay to Lender such additional amount or amounts as will compensate Lender for such reduction. A statement of Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive, absent manifest error.

(d)If at any time Lender, in its sole and absolute discretion, determines that either the LIBOR Rate (Mortgage Loan) or LIBOR Rate (Term Loan) does not accurately reflect the cost to Lender of lending the Loan, then Lender shall promptly give notice thereof to Borrower, and upon the giving of such notice, Lender’s obligation to make additional advances the Loans shall terminate, unless Lender and Borrower agree in writing to a different interest rate applicable to Loans. If it shall become unlawful for Lender to continue to fund or maintain any Loans, or to perform its obligations hereunder, upon demand by Lender, Borrower shall prepay the Loans in full with accrued interest thereon and all other amounts payable by Borrower hereunder (including, without limitation, any amount payable in connection with such prepayment pursuant to Section 4.3).

4.PAYMENT OF OBLIGATIONS

4.1Maturity Date. On the Maturity Date, Borrower shall pay and perform in full all outstanding Loans and Obligations, whether for principal, interest, costs, fees or otherwise, and whether or not all or any part of such Loans and Obligations are otherwise then due and payable. Such payment of the outstanding Obligations shall be withdrawn from Borrower’s Loan Account, or such other account with Lender as designated in writing by Borrower.

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4.2Default Rate of Interest. Upon the occurrence and during the continuation of an Event of Default, the rate(s) of interest that would otherwise be applicable at such time with respect to each of the Loans shall be increased by five (5) percentage points (the “Past Due Rate”). In addition, any amount not paid within ten (10) days when due hereunder shall include a past due charge equal to the greater of (a) five percent (5%) of such delinquent amount and (b) Fifty Dollars ($50) (but in no event more than the maximum amount allowed by law) (the “Past Due Charge”). In addition, Borrower shall pay a fee to Lender equal to Twenty Dollars ($20) if Borrower makes any payment hereunder the check or pre-authorized charge with which Borrower pays is later dishonored.

4.3Early Payment. If for any reason (including voluntary or mandatory prepayment or acceleration), Lender receives all or part of the principal amount of any of the Loans prior to the last day of the then applicable Interest Period, Borrower shall, on demand by Lender, pay Lender the amount (if any) by which (i) the additional interest which would have been payable on the amount so received had it not been received until the last day of such Interest Period exceeds (ii) the interest which would have been recoverable by Lender by placing the amount so received on deposit in the certificate of deposit markets or the offshore currency interbank markets or United States Treasury investment products, as the case may be, for a period starting on the date on which it was so received and ending on the last day of such Interest Period at the interest rate determined by Lender in its reasonable discretion. Lender’s determination as to such amount shall be conclusive absent manifest error.

4.4Prepayment. So long as no Default or Event of Default exists, Borrower shall have the privilege to prepay the principal of the Mortgage Loan and/or the Term Loan (in whole only but not in part) upon and subject to the following terms and conditions:

(a)Concurrently with such prepayment, Borrower shall pay all accrued and unpaid interest under the applicable Loan (whether or not then due), all other amounts then due under this Loan Agreement, the applicable Note and the Deed of Trust.

(b)Any prepayment shall be made only after not less than forty-five (45) days’ advance written notice to Lender, which notice in each instance shall specify Borrower’s election to make such prepayment and the amount of the same and the date of repayment; provided, however, that such advance written notice period shall be not less than five (5) Business Days (rather than not less than forty-five (45) days) for prepayments, if any, required by Lender pursuant to Section 3.3(a)-(d) hereof or for prepayments if made by Borrower within thirty (30) days of notice by Lender of the imposition of any additional charges under such sections.

(c)Included within payment shall be any breakage fees, if any, in connection with any Interest Rate Agreement (but such amounts shall only be payable if required under the Interest Rate Agreement and, then, only on the terms and conditions provided therein).

5.SECURITY INTEREST. The Loan and all obligations hereunder shall be secured by that certain Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated as of the date hereof (the “Deed of Trust”) and that certain Stock Pledge Agreement dated as of even date herewith (the “Stock Pledge Agreement”).

6.CONDITIONS PRECEDENT. The obligation of Lender to make the Loans is subject to the satisfaction, in the sole discretion of Lender, at or prior to the first advance of funds hereunder, of each, every and all of the following conditions:

6.1Documents and Agreements. Borrower shall deliver to Lender the following documents, in form and substance satisfactory to Lender in its sole and absolute discretion: this Agreement; and

(a)the Deed of Trust;

(b)an Environmental Indemnity by Borrower in favor of Lender;

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(c)a Promissory Note by Borrower evidencing the Mortgage Loan and the Term Loan made hereunder (each, a “Note”);

(d)the Authorization Agreement for Pre-Authorized Payments (Debits) (the “ACH”);

(e)the Stock Pledge Agreement;

(f)Interest Rate Swap Agreement (Long Form Trade Confirmation);

(g)Authorized Signatories and MIFT Agreement; and

(h)Alternative Dispute Resolution Agreement.

6.2Organizational Documents. Lender shall have received copies of Borrower’s articles certificate of incorporation and all amendments thereto, and a certificate of good standing, each certified by the Secretary of State of the state of Borrower’s organization, and dated a recent date prior to the date of the initial funding of the Loan. Lender shall have received evidence as to the due authorization, execution and delivery of this Agreement and the other documents contemplated hereby, and the transactions contemplated hereunder.

6.3Certified Resolutions. Lender shall have received copies of Borrower’s By-laws and all amendments thereto, and Lender shall have received copies of the resolutions of the board of directors of Borrower, authorizing the execution and delivery of this Agreement and the other documents contemplated hereby, and authorizing the transactions contemplated hereunder and thereunder, and authorizing specific officers of Borrower to execute the same on behalf of Borrower, in each case certified by the Secretary or other acceptable officer of Borrower as of the Closing Date.

6.4Due Diligence. Lender shall have completed its due diligence with respect to Borrower and the Property.

6.5Other Documents and Agreements. Lender shall have received such other agreements, instruments and documents as Lender may require in connection with the transactions contemplated hereby, all in form and substance satisfactory to Lender in Lender’s sole and absolute discretion (including a title insurance policy in form, with such endorsements and such exceptions as are acceptable to Lender).

6.6Opinion of Borrower’s Counsel. Lender shall have received an opinion of Borrower’s counsel, in form and substance satisfactory to Lender in its sole and absolute discretion.

6.7Default. No Default or Event of Default shall exist hereunder.

6.8Commitment Fee. Borrower shall have paid to Lender a nonrefundable commitment fee in the amount of forty-one hundreths percent (.40%) of the maximum possible amount that may be advanced under the Mortgage Loan and the Term Loan.

7.REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. In order to induce Lender to enter into this Agreement and to make the Loan, Borrower represents and warrants to Lender as follows, and Borrower covenants that the following representations will continue to be true, and that Borrower will at all times comply with all of the following covenants:

7.1State of Organization, Existence and Authority. Borrower is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization which is accurately set forth in the heading to this Agreement. Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would have a Material Adverse Effect. The execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby (a) have been duly and validly authorized, (b) are enforceable against Borrower in

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accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors’ rights generally), and (c) do not violate Borrower’s operating agreement, or any law or any material agreement or instrument which is binding upon Borrower or the Property, and (d) do not constitute grounds for acceleration of any material indebtedness or obligation under any material agreement or instrument that is binding upon Borrower or the Property.

7.2Validity of Loan Documents. The execution, delivery and performance by Borrower of the Loan Documents: (1) are duly authorized and do not require the consent or approval of any other party or governmental authority which has not been obtained; and (2) will not violate any law of the United States, including federal state or local laws (and to Borrower’s knowledge any foreign laws) or result in the imposition of any lien, charge or encumbrance upon the assets of any such party, except as contemplated by the Loan Documents. The Loan Documents constitute the legal, valid and binding obligations of Borrower, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, or similar laws generally affecting the enforcement of creditors’ rights.

7.3Name; Trade Names and Styles. The name of Borrower set forth in the heading to this Agreement is its correct name. Borrower has complied, and will in the future comply, with all laws relating to the conduct of business under a fictitious business name.

7.4Place of Business. Borrower’s Address set forth in the heading to this Agreement is the address and location of Borrower’s chief executive office.

7.5Books and Records. Borrower has maintained and will maintain at Borrower’s Address complete and accurate books and records, comprising an accounting system in accordance with GAAP.

7.6Financial Condition, Statements and Reports. All financial statements now or in the future delivered to Lender have been, and will be, prepared in conformity with GAAP (except, in the case of unaudited financial statements, for the absence of footnotes and subject to normal year-end adjustments) and now and in the future will fairly reflect the financial condition of Borrower, at the times and for the periods therein stated. Between the last date covered by any such statement provided to Lender and the date hereof, there has been no Material Adverse Effect. Borrower is now and will continue to be Solvent.

7.7Tax Returns and Payments; Pension Contributions. Borrower has timely filed, and will timely file, all tax returns and reports required by foreign, federal, state and local law, and Borrower and each Essential Additional Party has timely paid, and will timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions now or in the future owed by Borrower. Borrower may, however, defer payment of any contested taxes, provided that Borrower (a) in good faith contests Borrower’s obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, and (b) posts bonds or takes any other steps required to keep the contested taxes from becoming a lien upon any of the property of Borrower. As of the date hereof, Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid, and shall continue to pay all amounts necessary to fund all present and future pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not and will not withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any such plan which could result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

7.8Taxes and Assessments. To Borrower’s knowledge, the Property is comprised of one or more parcels, each of which constitutes a separate legal parcel and a separate tax lot and none of which constitutes a portion of any other tax lot. There are no pending or, to Borrower’s best knowledge, proposed, special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments.

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7.9Compliance with Law.

(a)Borrower represents and warrants that any current noncompliance, if any, with any foreign, federal, state and local laws and regulations relating to Borrower (including, but not limited to, the Fair Labor Standards Act, and those relating to Borrower’s ownership of real or personal property, the conduct and licensing of Borrower’s business, and environmental matters), shall not have a Material Adverse Effect. Borrower agrees that Borrower shall comply, in all material respects, with all foreign, federal, state and local laws and regulations relating to Borrower or the Property, including, but not limited to, the Fair Labor Standards Act, and those relating to Borrower’s ownership of real or personal property, the conduct and licensing of Borrower’s business, and environmental matters.

(b)To Borrower’s knowledge, Borrower has all requisite licenses, permits, franchises, qualifications, certificates of occupancy or other governmental authorizations to own, lease and operate the Property and carry on its business, the Property is in compliance with all applicable legal requirements and is free of structural defects, and all building systems contained therein are in good working order, subject to ordinary wear and tear. Borrower shall cause (i) Borrower to have all requisite licenses, permits, franchises, qualifications, certificates of occupancy or other governmental authorizations to own, lease and operate the Property and carry on its business, and (ii) the Property at all times to be in compliance with all applicable legal requirements and to be free of structural defects, and shall cause all building systems contained therein to be in good working order, subject to ordinary wear and tear. To Borrowers knowledge, the Property does not constitute, in whole or in part, a legally nonconforming use under applicable legal requirements;

(c)To Borrower’s knowledge, no condemnation has been commenced or, is contemplated with respect to all or any portion of the Property or for the relocation of roadways providing access to the Property; and

(d)To Borrower’s knowledge, (i) the Property has adequate rights of access to public ways and is served by adequate water, sewer, sanitary sewer and storm drain facilities; (ii) all public utilities necessary or convenient to the full use and enjoyment of the Property are located in the public right-of-way abutting the Property, and all such utilities are connected so as to serve the Property without passing over other property, except to the extent such other property is subject to a perpetual easement for such utility benefiting the Property; and (iii) all roads necessary for the full utilization of the Property for its current purpose have been completed and dedicated to public use and accepted by all governmental authorities. Borrower shall cause (i) the Property to have adequate rights of access to public ways and is served by adequate water, sewer, sanitary sewer and storm drain facilities; (ii) all public utilities necessary or convenient to the full use and enjoyment of the Property to be located in the public right-of-way abutting the Property, and all such utilities to be connected so as to serve the Property without passing over other property, except to the extent such other property is subject to a perpetual easement for such utility benefiting the Property; and (iii) all roads necessary for the full utilization of the Property for its current purpose to be completed and dedicated to public use and accepted by all governmental authorities.

7.10Liabilities; Litigation.

(a)There is no claim, suit, litigation, proceeding or investigation pending, or to the best of Borrower’s knowledge, threatened by or against or affecting Borrower in any court or before any governmental agency (or any basis therefore known to Borrower) which may result, either separately or in the aggregate, in a Material Adverse Effect. Borrower will promptly inform Lender in writing of any proceeding, litigation or investigation in the future or instituted by or against Borrower involving any single claim of $10,000,000 or more, or involving $25,000,000 or more in the aggregate.

(b)Borrower is not contemplating either the filing of a petition by it under state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of its assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against it.

7.11Use of Proceeds. All proceeds of the Mortgage Loan or Term Loan shall be used solely for lawful business purposes.

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8.ADDITIONAL DUTIES OF THE BORROWER

8.1Insurance. Borrower shall, at all times insure all of the property of Borrower as required in the Deed of Trust.

8.2Reports. Borrower shall cause to be delivered to Lender copies of the following reports:

(a)Annual Form 10K Report of Borrower (and its subsidiaries on a consolidated basis), which will be delivered within ninety (90) days of fiscal year end of Borrower;

(b)Quarterly Form 10Q Report of Borrower (and its subsidiaries on a consolidated basis), which will be delivered within forty-five (45) days after the end of each calendar quarter;

(c)Covenant Compliance Certificate in the form of Exhibit “B” hereto, which will be delivered within forty-five days after the end of each calendar quarter;

(d)Covenant Compliance Certificate in the form of Exhibit “C” hereto, which will be delivered within ninety (90) days after the end of each calendar year;

(e)Annual company-prepared consolidating balance sheet and consolidating income statement showing key entities of the Borrower (as a minimum, needs to show OmniVision International Holdings Ltd. and OmniVision Technologies (Hong Kong) Company Limited); and

(f)Quarterly company-prepared consolidating balance sheet and consolidating income statement showing key entities of the Borrower (as a minimum, needs to show OmniVision International Holdings Ltd. and OmniVision Technologies (Hong Kong) Company Limited).

The financial and operating statements shall be prepared in accordance with GAAP, and shall be certified as correct by Borrower. Borrower shall keep books and records of account of all income and expenses of the Property and of its own financial affairs sufficient to permit the preparation of the financial and operating statements in accordance with the standards herein contained. Lender and its designated agents and representatives shall have the absolute right at all times upon reasonable prior notice to Borrower (unless an Event of Default exists) to examine, copy, and audit any such books and records. Borrower shall also furnish to Lender promptly upon request such documents and instruments as Lender may request in order to verify the accuracy of any of the information contained in any statement submitted hereunder. All books and records pertaining to the income, expenses, management or operation of the Property shall be kept at the Property unless otherwise approved by Lender; and all books and records pertaining to Borrower’s financial condition shall be kept at Borrower’s principal place of business or the office of Borrower’s accountants.

8.3Negative Covenants. Borrower shall not, without Lender’s prior written consent, which shall not be unreasonably withheld, do any of the following:

(a)Except in cases involving one or more Affiliates of the Borrower, merge or consolidate with another entity, except in a transaction in which (i) the owners of Borrower hold at least fifty percent (50%) of the ownership interest in the surviving entity immediately after such merger or consolidation, and (ii) Borrower is the surviving entity;

(b)[omitted];

(c)sell, lease (except as expressly permitted by this Agreement or by any other of the Loan Documents) or license the Property or grant any other security interest in any of the property of Borrower other than for Permitted Liens (provided, however, that in no event may the aggregate amount outstanding under Permitted Liens exceed Fifty Million Dollars ($50,000,000));

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(d)make any change in Borrower’s capital structure which would have a Material Adverse Effect;

(e)dissolve or elect to dissolve;

(f)change the state of its organization; or

(g)change its legal name without advance notice to Lender.

Transactions permitted by the foregoing provisions of this Section are only permitted if no Default or Event of Default is continuing or would occur as a result of such transaction.

8.4Litigation Cooperation.  Should any third-party suit or proceeding be instituted by or against Lender with respect to the Property or relating to Borrower, Borrower shall, without expense to Lender, make available Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Lender may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding.

8.5Further Assurances. Borrower agrees, at its expense, on request by Lender, to execute all documents and take all actions, as Lender, may deem reasonably necessary or useful in order to fully consummate the transactions contemplated by this Agreement.

9.EVENTS OF DEFAULT AND REMEDIES

9.1Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” under this Agreement, and Borrower shall give Lender immediate written notice thereof:

(a)Any warranty, representation, statement, report or certificate made or delivered to Lender by Borrower or any of Borrower’s officers, employees or agents, now or in the future, shall be untrue or misleading and results in a Material Adverse Effect; or

(b)Borrower shall fail to pay when due any amounts under the Loans or any interest thereon or any other monetary Obligation; or

(c)Borrower shall breach any negative covenant set forth in Section 8.3 above; or

(d)Borrower shall fail to comply with the financial covenants (if any) set forth in Section 10 or shall fail to perform any other non-monetary Obligation which by its nature cannot be cured; or

(e)Borrower shall fail to perform any other non-monetary Obligation, which failure is not cured within five (5) Business Days after the date due or breaches any other terms under any of the other Obligations (including under any of the other Loan Documents) not otherwise mentioned in this definition of Event of Default and such failure is not cured within thirty (30) days after prior written notice thereof; or

(f)Any levy, assessment, attachment, seizure, lien or encumbrance is made on all or any part of the Property which is not cured within ten (10) days after the occurrence of the same; or

(g)any default or event of default occurs under any obligation secured by a Permitted Lien, which is not cured within any applicable cure period or waived in writing by the holder of the Permitted Lien; or

(h)any default or event of default occurs under any unsecured obligation of Borrower in excess of One Million Dollars ($1,000,000);

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(i)Borrower breaches any material contract or obligation, which has or may reasonably be expected to have a Material Adverse Effect; or

(j)Dissolution, termination of existence, insolvency or business failure of Borrower; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or

(k)the commencement of any proceeding against Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is (i) not timely controverted, or (ii) not cured by the dismissal thereof within thirty (30) days after the date commenced; or

(l)revocation or termination of, or limitation or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement of proceedings by any guarantor of any of the Obligations under any bankruptcy or insolvency law; or

(m)revocation or termination of, or limitation or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged by any third party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or commencement of proceedings by or against any such third party under any bankruptcy or insolvency law; or

(n)Borrower makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations, other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way limits his subordination agreement; or

(o)Borrower shall suffer or experience any Change of Control without Lender’s prior written consent, which consent shall be in the discretion of Lender in the exercise of its reasonable business judgment;

(p)Borrower shall generally not pay its debts as they become due, or Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or

(q)Borrower shall fail to comply with the terms and conditions of any Interest Rate Agreement with Lender or any other party (including the Interest Rate Swap Agreement (Long Form Trade Confirmation)) or shall amend, modify, or terminate any such agreement or waive any rights thereunder; or

(r)Failure of Borrower to occupy the buildings located at 4275 and 4295 Burton Drive, Santa Clara, California; or

(s)There shall be any Material Adverse Effect;

(t)An “Event of Default” shall occur under that certain Stock Pledge Agreement of even date herewith by Borrower in favor of Lender; or

(u)A breach occurs under Section 6.16.1 of the Deed of Trust.

Lender may cease making any advances or extending any credit hereunder during any of the above-specified cure periods.

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9.2Remedies.

(a)Upon the occurrence and during the continuance of any Event of Default, Lender, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower), may do any one or more of the following:

(i)Cease making additional advances under the Term Loan or otherwise extending credit to Borrower under this Agreement or any other document or agreement; or

(ii)Accelerate and declare all or any part of the Obligations to be immediately due, payable and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation; or

(b)All attorneys’ fees, expenses, costs, liabilities and obligations incurred by Lender (including attorneys’ fees and expenses incurred in connection with bankruptcy) with respect to the foregoing shall be due from Borrower to Lender on demand; or

(c)Exercise any other remedies available at law or equity

9.3Remedies Cumulative. In addition to the rights and remedies set forth in this Agreement, Lender shall have all the other rights and remedies accorded a creditor at law or in equity, and under any other instrument or agreement now or in the future entered into between Lender and Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Lender of one or more of its rights or remedies shall not be deemed an election, nor bar Lender from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Lender to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations (as defined in the Note) have been indefeasibly paid and performed.

10.FINANCIAL COVENANTS

10.1Tangible Net Worth. Borrower will maintain a minimum Tangible Net Worth, calculated as of the end of each fiscal quarter of Borrower (i.e., the calendar quarters ending April 30, July 31, October 31, and January 31) of (i) at least Four Hundred Million Dollars ($400,000,000) for each calendar quarter ending on or before April 30, 2007, and (ii) for each calendar quarter ending on or after July 31, 2008, at least the sum of Four Hundred Million Dollars ($400,000,000) plus, to the extent greater than zero, fifty percent (50%) of any Net Income incurred in any prior calendar years (commencing with the calendar year ending April 30, 2007); provided, however, that the required Tangible Net Worth shall decrease by the amount of Net Profits used to repurchase stock of Borrower (but such decrease shall not be in excess of an aggregate amount of One Hundred Million Dollars ($100,000,000)).

10.2Debt Service Coverage Ratio. Borrower will maintain a Debt Service Coverage Ratio of no less than 2.00 to 1.00 for each calendar quarter commencing with the calendar quarter ending on March 31, 2007. As used in this Section 10.2, “Debt Service Coverage Ratio” means the ratio of (a) EBITDA for the previous twelve (12) calendar months over (b) the sum of (i) Interest Expenses incurred over the previous twelve (12) calendar months, plus (ii) principal amounts payable hereunder and the current portion of any other long-term debt of Borrower due over the next twelve (12) calendar months (under GAAP).

11.GENERAL PROVISIONS

11.1Application of Payments. All payments with respect to the Obligations shall be applied as provided in each [Note].

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11.2Charges to Accounts. Lender may, in its discretion, require that Borrower pay monetary Obligations in cash to Lender, or charge them to Borrower’s Loan Account, in which event they will bear interest from the date due to the date paid at the same rate applicable to the Loan.

11.3Notices. All notices to be given under this Agreement shall be in writing and shall be given either personally or by reputable private delivery service or by regular first-class mail, facsimile or certified mail return receipt requested. All notices to Borrower shall be addressed to Borrower at the address shown in the heading to this Agreement, or at any other address designated in writing by Borrower to Lender. All notices to Lender shall be addressed to Lender at the address set forth in the introductory paragraph of this Agreement, to the attention of the Commercial Banking Division, Manager, Note Department, or at any other address designated in writing by Lender to Borrower. All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, faxed (at time of confirmation of transmission), or at the expiration of one (1) Business Day following delivery to a private delivery service, or two (2) Business Days following the deposit thereof in the United States mail, with postage prepaid.

11.4Severability. Should any provision of this Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect.

11.5Integration. This Agreement and such other written agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between Borrower and Lender and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. There are no oral understandings, representations or agreements between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith.

11.6Waivers. The failure of Lender at any time or times to require Borrower to strictly comply with any of the provisions of this Agreement or any other present or future agreement between Borrower and Lender shall not waive or diminish any right of Lender later to demand and receive strict compliance therewith. Any waiver of any Default shall not waive or affect any other Default, whether prior or subsequent, and whether or not similar. None of the provisions of this Agreement or any other agreement now or in the future executed by Borrower and delivered to Lender shall be deemed to have been waived by any act or knowledge of Lender or its agents or employees, but only by a specific written waiver signed by an authorized officer of Lender and delivered to Borrower. Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, account, general intangible (as defined in the California Uniform Commercial Code), document or guaranty at any time held by Lender on which Borrower is or may in any way be liable, and notice of any action taken by Lender, unless expressly required by this Agreement.

11.7No Liability for Ordinary Negligence. Neither Lender, nor any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Lender shall be liable for any claims, demands, losses or damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower or any other party through the ordinary negligence of Lender, or any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Lender, but nothing herein shall relieve Lender from liability for its own gross negligence or willful misconduct; provided, however, that this Section 11.7 shall not relieve Lender of any obligation of returning excess amounts that may have been negligently charged to Borrower under the Term Loan or the Mortgage Loan.

11.8Amendment. The terms and provisions of this Agreement may not be waived or amended, except in a writing executed by Borrower and a duly authorized officer of Lender.

11.9Time of Essence. Time is of the essence in the performance by either party of each and every of their obligations under this Agreement.

11.10Attorneys’ Fees, Costs and Charges. Borrower shall reimburse Lender for all attorneys’ fees (including attorneys’ fees and expenses incurred pursuant to bankruptcy) and all filing, recording, search,

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title insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, or in connection with, or relating to this Agreement (whether or not a lawsuit is filed), including, but not limited to, any attorneys’ fees and costs (including attorneys’ fees and expenses incurred pursuant to Borrower’s bankruptcy) Lender incurs in order to do the following: prepare and negotiate this Agreement and the documents relating to this Agreement, obtain legal advice in connection with this Agreement or Borrower; enforce, or seek to enforce, any of its rights; commence, intervene in, or defend any action or proceeding; initiate any complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect or audit any of Borrower’s books and records; protect, obtain possession of, lease, dispose of, or otherwise enforce Lender’s security interest in the Property; and otherwise represent Lender in any litigation relating to Borrower. If either Lender or Borrower files any lawsuit against the other predicated on a breach of this Agreement, the prevailing party in such action shall be entitled to recover its costs and attorneys’ fees (including attorneys’ fees and expenses incurred pursuant to bankruptcy), including (but not limited to) attorneys’ fees and costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment. Borrower shall also pay Lender’s standard charges for returned checks and for wire transfers, in effect from time to time. All attorney’s fees, costs and charges (including attorneys’ fees and expenses incurred pursuant to bankruptcy) and other fees, costs and charges to which Lender may be entitled pursuant to this Agreement may be charged by Lender to Borrower’s Loan Account and shall thereafter bear interest at the same rate as the Mortgage Loan.

11.11Benefit of Agreement. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Borrower and Lender; provided, however, that Borrower may not assign or transfer any of its rights under this Agreement, except as permitted pursuant to the terms and conditions of the Deed of Trust, without the prior written consent of Lender, and any prohibited assignment shall be void. No consent by Lender to any assignment shall release Borrower from its liability for the Obligations. Lender may assign its rights and delegate its duties hereunder without the consent of Borrower. Lender reserves the right to syndicate all or a portion of the transaction created herein or sell, assign, transfer, negotiate, or grant participations in all or any part of, or any interest in Lender’s rights and benefits hereunder. In connection with any such syndication, assignment or participation, Lender may disclose all documents and information which Lender now or hereafter may have relating to Borrower or Borrower’s business. To the extent that Lender assigns its rights and obligations hereunder to a third Person, Lender thereafter shall be released from such assigned obligations to Borrower.

11.12Publicity. Lender is hereby authorized, at its expense and in its sole discretion, to issue appropriate press releases and to cause a tombstone to be published announcing the consummation of this transaction and the aggregate amount thereof.

11.13Governing Law; Jurisdiction; Venue. This Agreement and all acts and transactions hereunder and all rights and obligations of Lender and Borrower shall be governed by the internal laws of the State of California, without regard to its conflicts of law principles. As a material part of the consideration to Lender to enter into this Agreement, Borrower (a) agrees that all actions and proceedings relating directly or indirectly to this Agreement shall, at Lender’s option, be litigated in courts located within California, and that the exclusive venue therefor shall be in the City and County of San Francisco; (b) consents to the jurisdiction and venue of any such court and consents to service of process in any such action or proceeding by personal delivery or any other method permitted by law; and (c) waives any and all rights Borrower may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding.

11.14Mutual Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER AND LENDER EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN LENDER AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. NOTWITHSTANDING THE FOREGOING, ANY CONTROVERSY HEREUNDER SHALL BE GOVERNED BY THE TERMS AND CONDITIONS OF THAT

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CERTAIN ALTERNATIVE DISPUTE RESOLUTION AGREEMENT, DATED AS OF THE DATE HEREOF, BY AND AMONG BORROWER AND LENDER.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the heading to this Agreement.

BORROWER:
	OMNIVISION TECHNOLOGIES,INC.,
	a Delaware corporation
	By:	/s/ James He
		Name:	James He
		Title:	COO

LENDER:
CITIBANK, N.A., a national banking association
By:	/s/ Ada Lei Man Wong
Name:			Ada Lei Man Wong
Title:		VICE PRESIDENT

EXHIBIT A

LOAN BORROWING CERTIFICATE

The undersigned hereby certifies as follows:

I, ____________________________, am the duly elected and acting ________________________ of OMNIVISION TECHNOLOGIES, INC (“Borrower”).

This Loan Borrowing Certificate is delivered pursuant to Section 3.1 f that certain Loan and Security Agreement (the “Loan Agreement”) dated as of March      , 2007 by and between Borrower and CITIBANK, N.A., a national banking association (“Lender”). The terms used in this Loan Borrowing Certificate which are defined in the Loan Agreement have the same meaning herein as ascribed to them therein.

Borrower hereby requests an additional Advance of the Term Loan as follows:

(a)       The date on which the Term Loan is to be made is_____________ 20 _____.

(b)       The amount of the Term Loan is to be ___________________ Dollars ($ ____________________).

All representations and warranties of Borrower set forth in the Loan Agreement are true, correct and complete in all material respects as of the date of this request for an advance of the Term Loan Loan; provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date. No Default or Event of Default exists

IN WITNESS WHEREOF, this Loan Borrowing Certificate is executed by the undersigned as of this             day of ____________________, 20______ .

By:

Name:

Title:

EXHIBIT B

Quarterly Covenant Compliance Certificate

Borrower: OMNIVISION TECHNOLOGIES, INC.,

	As of:
Date

Financial Reporting to be delivered within 45 days of the end of each fiscal quarter of Borrower
(i.e., the calendar quarters ending April 30, July 31, October 31, and January 31):

1)   Quarterly Form 10Q Report of Borrower (and its subsidiaries on a consolidated basis);
	In Compliance
	(Yes/No)
2)   Quarterly company-prepared consolidating balance sheet and consolidating income statement showing key entities of the Borrower (as a minimum, needs to show OmniVision International Holdings Ltd. and OmniVision Technologies (Hong Kong) Company Limited).
	In Compliance
	(Yes/No)

Financial Covenants: (Measured Quarterly—calculated as of the end of each fiscal quarter of Borrower
(i.e., the calendar quarters ending April 30, July 31, October 31, and January 31))

1)   Tangible Net Worth of (i) at least Four Hundred Million Dollars ($400,000,000) for each fiscal quarter ending on or before April 30, 2007, and (ii) for each fiscal quarter ending on or after July 31, 2008, at least the sum of Four Hundred Million Dollars ($400,000,000) plus, to the extent greater than zero, fifty percent (50%) of any Net Income incurred in any prior fiscal years (commencing with the fiscal year ending April 30, 2007); provided, however, that the required Tangible Net Worth shall decrease by the amount of Net Profits used to repurchase stock of

The undersigned certifies that the foregoing (including any attachments) is true, complete and correct, and that the information reflected in this Compliance certificate complies with the provisions set forth in the Loan and Security Agreement between Borrower and Citibank N.A., dated March      , 2007 (the “Loan Agreement”). The undersigned further certifies that, as of the date hereof, no Default or Event of Default (each as defined in the Loan Agreement) has occurred.

OMNIVISION TECHNOLOGIES, INC.,

a Delaware corporation

By:

Name:

Title:

Date:

EXHIBIT C

Annual Covenant Compliance Certificate

Borrower:OMNIVISION TECHNOLOGIES, INC.,

	As of:
Date

Financial Reporting to be delivered within 90 days of the end of fiscal year end Borrower
(i.e., the fiscal year ending April 30):

	1)	Annual Form 10K Report of Borrower (and its subsidiaries on a consolidated basis),
			In Compliance
			(Yes/No)
2)          (Annual company-prepared consolidating balance sheet and consolidating income statement showing
key entities of the Borrower (as a minimum, needs to show OmniVision International Holdings Ltd. and OmniVision
Technologies (Hong Kong) Company Limited
			In Compliance
			(Yes/No)

Financial Covenants: (Measured Quarterly—calculated as of the end of each fiscal quarter of Borrower
(i.e., the fiscal quarters ending April 30, July 31, October 31, and January 31))

1) Tangible Net Worth of (i) at least Four Hundred Million Dollars ($400,000,000) for each fiscal quarter ending on or before April 30, 2007, and (ii) for each fiscal quarter ending on or after July 31, 2008, at least the sum of Four Hundred Million Dollars ($400,000,000) plus, to the extent greater than zero, fifty percent (50%) of any Net Income incurred in any prior fiscal years (commencing with the fiscal year ending April 30, 2007); provided, however, that the required Tangible Net Worth shall decrease by the amount of Net Profits used to repurchase stock of Borrower (but such decrease shall not be in excess of an aggregate amount of One Hundred Million Dollars ($100,000,000)).

2) Minimum Debt Service Coverage Ratio of 2.0:1.0                                                  

The undersigned certifies that the foregoing (including any attachments) is true, complete and correct, and that the information reflected in this Compliance certificate complies with the provisions set forth in the Loan and Security Agreement between Borrower and Citibank N.A., dated March       , 2007 (the “Loan Agreement”). The undersigned further certifies that, as of the date hereof, no Default or Event of Default (each as defined in the Loan Agreement) has occurred.

OMNIVISION TECHNOLOGIES, INC.,

a Delaware corporation

By:

Name:

Title:

Date:

EX-10.19

Exhibit 10.19

CONFORMED COPY: This document has not been compared with the original. SANTA CLARA COUNTY RECORDER

RECORDING REQUESTED BY,
AND WHEN RECORDED, MAIL TO:

Pitcher, Nichols & Meeks
1925 Century Park East, Suite 1700
LOS Angeles, California 90087
Attention: David L. Packer, Esq.
	(SPACE ABOVE THIS LINE FOR RECORDER’S USE ONLY)

DEED OF TRUST,
ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT
AND FIXTURE FILING

THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING (the “Deed of Trust”) is made as of March 20, 2007 by OMNIVISION TECHNOLOGIES, INC., a Delaware corporation (“Trustor”), as trustor, to FIRST AMERICAN TITLE INSURANCE COMPANY (“Trustee”), as trustee, for the benefit of CITIBANK, N.A., a national banking association (“Beneficiary”), as beneficiary.

1.DEFINITIONS. Certain terms used in this Deed of Trust are defined below; and certain other terms used in this Deed of Trust are defined elsewhere in this Deed of Trust. Except as otherwise indicated; terms defined in the Notes shall have the same meaning when used in this Deed of Trust or other Loan Documents; and terms defined in the Loan Documents other than this Deed of Trust shall have the same meaning when used herein or in the Notes.

“Event of Default” shall have the meaning provided in the Loan Agreement.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

“Good Faith” is used in this Deed of Trust and the Loan Documents in the manner defined in the Section 1201(19) of the Uniform Commercial Code.

“Interest Rate Agreement” shall mean any interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to hedge the position with respect to interest rates, including the “Interest Rate Swap Agreement (Long Form Trade Confirmation)” (as defined in the Loan Agreement) and any confirmation of any of such documents.

“Loan Agreement” means that certain Loan Agreement of even date herewith between Trustor, as borrower, and Beneficiary, as Lender

“Loan Documents” means the Notes, the Loan Agreement, this Deed of Trust and any other agreement, instrument, or document executed in connection with the Loan Agreement, this Deed of Trust or the Notes.

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“Notes” means, collectively, (i) that certain promissory note evidencing the loan in the original principal amount of up to $27,927,045.00, payable by Trustor to Beneficiary or its order (the “Secured Term Loan”) and any amendments, modifications or supplements thereto or renewals or replacements thereof (including any new notes upon a split of a prior note or notes), and (ii) that certain promissory note evidencing the additional advances in the maximum aggregate principal amount of up to $12,000,000.00, payable by Trustor to Beneficiary or its order (the “Additional Term Loan”) and any amendments, modifications or supplements thereto or renewals or replacements thereof (including any new notes upon a split of a prior note or notes) (the Secured Term Loan and the Additional Term Loan are herein collectively referred to as the “Loan”).

“Person” means any individual, sole proprietorship, general partnership, limited partnership, limited liability partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, government, or any agency or political division thereof, or any other entity.

“Personal Property” means all “Accounts”, “Cash proceeds”, “Chattel paper”, “Collateral”, “Commercial tort claims”, “Deposit accounts”, “Documents”, “Electronic chattel paper”, “Equipment”, “Fixtures”, “General intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment property”, “Letter-of-credit rights”, “Noncash proceeds”, “Payment intangibles”, “Proceeds”, “Software”, “Supporting Obligations”, and “Tangible chattel paper”, as defined in the Uniform Commercial Code (as such Uniform Commercial Code may be amended from time to time) in which Trustor has any interest, whether currently owned or hereafter acquired, relating to, generated from, arising out of or incidental to the ownership, development, use or operation of the Real Property (whether or not subsequently removed from the Real Property (other than that portion of the Property consisting of the Real Property), including, without limitation, all

(i) machinery and tools; (ii) rugs, carpets and other floor coverings; (iii) draperies and drapery rods and brackets, awnings, window shades, Venetian blinds and curtains; (iv) lamps, chandeliers and other lighting fixtures; (v) office maintenance and other supplies; (vi) apparatus, appliances, furniture and furnishings, building service equipment, and building materials, supplies and equipment; (vii) rights, royalties, rents, security deposits, advance rentals, revenues, profits and benefits; (viii) leases, lease guarantees, contracts, contract rights, licenses, permits and certificates; (ix) deposits, funds, money and deposit accounts (including any accounts, including reserve accounts, established under any of the Loan Documents); (x) tenements, hereditaments and appurtenances; (xi) approvals and parcel maps (whether tentative or final), building permits and certificates of occupancy; (xii) names under or by which the Property or any of the Improvements may at any time be operated or known and rights to carry on business under any such names or any variant thereof; (xiii) trademarks and good will; (xiv) management agreements, service contracts, supply contracts or other contracts or agreements; (xv) warranties; (xvi) water stock; (xvii) shares of stock or other evidence of ownership of any part of the Property or Improvements that is owned by Trustor in common with others, and all documents of membership in any owners’ or members’ association or similar group having responsibility for managing, maintaining or operating any part of the Property or Improvements; (xviii) plans and specifications prepared for construction of improvements on the Property, or any part thereof, and studies, data and drawings related thereto, including, without limitation, studies, data or reports relating to toxic or hazardous wastes or materials located on the Property and/or Improvements, and contracts and agreements of Trustor relating to the aforesaid plans and specifications or to the aforesaid studies, data, reports and drawings or to the construction of improvements on the Property; (xix) sales agreements, deposit receipts, escrow agreements and other ancillary documents and agreements entered into respecting the sale to any purchasers of any part of the Property, and/or Improvements, together with all deposits and other proceeds of the sale thereof; (xx) damages, royalties and revenue of every kind, nature and description whatsoever that Trustor may be entitled to receive from any person or entity owning or having or hereafter acquiring a right to the oil, gas or mineral rights and reservations of the Property; (xxi) deposits made with or other security given to utility companies by Trustor with respect to the Property and/or Improvements; (xxii) advance payments of insurance premiums made by Trustor with respect to, and all claims or demands with respect to, insurance; (xxiii) negotiable certificates of deposit of Trustor in Beneficiary’s possession and all accounts of Trustor maintained with Beneficiary and each deposit account of Trustor assigned to Beneficiary pursuant to any agreement;

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(xxiv) insurance proceeds (including insurance proceeds for insurance not required under the terms of this Deed of Trust); (xxv) condemnation awards; (xxvi) causes of action, claims, compensation, awards and recoveries for any damage or injury to the Property and/or Improvements or for any loss or diminution in value of the Property and/or Improvements; (xxvii) books and records relating to the Property, including, without limitation, all computer records, computer tapes and electronic and electromagnetic representations and reproductions thereof; (xxviii) guaranties of and security for any of the foregoing; (xxix) all substitutions, renewals, improvements, attachments, accessions, additions and replacements to any of the foregoing; and all “Proceeds” (as such term is defined in the Uniform Commercial Code), collections, insurance proceeds and products of any of the property listed in (i) through (xxix) above, including without limitation, proceeds of any voluntary or involuntary disposition or claim respecting any part thereof (pursuant to judgment, condemnation award or otherwise) and all documents, instruments, general intangibles, goods, equipment, inventory, chattel paper, monies, accounts, deposit accounts and other personal property that may arise from the sale or disposition of any of the foregoing, all guaranties of and security for any of the foregoing, and all books and records, including, without limitation, all computer records, computer tapes and electronic and electromagnetic representations and reproductions thereof, relating to any of the foregoing.

“Property” means the real property described in Exhibit “A”, attached hereto and incorporated herein by reference, together with all buildings and other improvements (“Improvements”) now or hereafter located thereon, and any and all right, title or interest of Trustor in any other real property or improvements comprised in such real property, which right, title or interest is acquired after the date of this Deed of Trust (such real property, buildings, improvements and after-acquired interest being hereinafter collectively referred to as the “Real Property”); the Personal Property; all easements and other rights now or hereafter made appurtenant to the Real Property; all additions and accretions to the Real Property; all fixtures, machinery, equipment, and appliances at any time attached to, or located in or on the Real Property in which Trustor has an interest; all rights in or to existing or future streets or public places; all existing and future minerals, oil, gas and other hydrocarbon substances upon, under or through the Real Property; all water and water rights, pumps and pumping plants, and existing and future water stock relating thereto; all existing and future shares of stock or other evidence of ownership of any part of the foregoing property and all intangible property and rights relating to the foregoing property, or the operation thereof or used in connection therewith, including all options, sales contracts and rights of first refusal of any nature whatsoever, covering all or any portion of such property, together with any deposits or other payments made in connection therewith, existing and future development rights, permits and approvals, air rights and other similar land use permits, approvals or entitlements; and all proceeds of any of the foregoing. Any reference in this Deed of Trust to the “Property” shall mean the Property described in this Section, any part thereof, or any interest therein.

“Taxes and Assessments” means all taxes, assessments, levies and charges imposed by any public or quasi-public authority having jurisdiction over the Property which are or may affect, or become a lien upon, the Property, or the rents, royalties, profits and income of the Property, or interest therein, or imposed by any public or quasi-public authority upon Trustor, Trustee or Beneficiary by reason of their respective interests in the Property or by reason of any payment, or portion thereof, made to Beneficiary hereunder or pursuant to any obligation secured by this Deed of Trust or any of the other Loan Documents, other than taxes which are measured by and imposed upon Beneficiary’s general net income.

“Transfer” means the sale, transfer, hypothecation, encumbrance, mortgage, conveyance, lease (other than leases permitted pursuant to the terms and conditions of this Deed of Trust, the Loan Agreement and any other Loan Document), alienation, assignment, disposition, divestment, or leasing with option to purchase, or assignment of the Property, or any portion thereof or interest therein (whether direct or indirect, legal or equitable, including the issuance, sale, assignment, alienation, conveyance, divestment, transfer, disposition, hypothecation, mortgage or encumbrance of any ownership interest in Trustor; or, if any Additional Essential Party is an entity, the issuance, sale, assignment, alienation, conveyance, divestment, transfer, disposition, hypothecation, mortgage or encumbrance of any ownership interest in the Additional Essential Party (whether direct or indirect, legal or equitable); or entering into any agreement or contract to do any of the foregoing which is not conditioned on compliance with the terms of the Loan Documents with respect to Transfers, or undertaking, suffering or causing any of the foregoing to occur voluntarily, involuntarily or by operation of law.

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“Uniform Commercial Code” means the Uniform Commercial Code as enacted in the State of California.

2.GRANT IN TRUST. Trustor does hereby irrevocably and unconditionally grant and assign the Property to Trustee, in trust, with power of sale and right of entry and possession, for the benefit of Beneficiary, for the purposes and upon the terms and conditions hereinafter set forth.

3.ASSIGNMENT OF RENTS. Trustor absolutely, unconditionally and irrevocably assigns to Beneficiary the rents, royalties, issues, profits, security deposits and income of the Property for the purposes and upon the terms and conditions hereinafter set forth (including the license granted in Section 6.10.1 hereof). The foregoing assignment shall not impose upon Beneficiary any duty to produce rents from the Property, and such assignment shall not cause Beneficiary to be a “mortgagee in possession” for any purpose. This assignment is an absolute and present assignment from Trustor to Beneficiary and not merely the passing of a security interest, subject only to the provisions hereinafter contained pertaining to Trustor’s right to collect the rents, issues and profits of the Property.

4.OBLIGATIONS SECURED.  Trustor makes the foregoing grant and assignment for the purpose of securing the following in such order of priority as Beneficiary may determine (the “Obligations”):

4.1Payment of Loan.  Payment to Beneficiary of all indebtedness evidenced by or arising under the Notes or the Loan Agreement, together with interest thereon, including sums added to the principal balance of the Notes in accordance with the terms thereof, and all prepayment, late charges or other charges or fees payable thereunder, and any and all modifications, extensions, renewals or substitutions thereof whether or not evidenced by a new or additional promissory note or notes;

4.2Payment of Further Loans.  Payment of such further indebtedness with interest thereon, and performance of and compliance with such further obligations as the then record owner of the Property may undertake to pay, perform or comply with for the benefit of Beneficiary, its successors or assigns, when such borrowing or obligation is consented to in writing by Trustor evidenced by a note or by any writing reciting that it or they are so secured;

4.3Performance Under Loan Documents. Performance of and compliance with each agreement, undertaking, obligation, warranty or representation of Trustor or any other person contained in any Loan Document, or incorporated therein by reference, or in any and all documents, leases or instruments assigned to Beneficiary or executed in Beneficiary’s favor and delivered thereunder, and payment of all sums, fees, costs and expenses as therein set forth or which may otherwise be advanced by or due to Trustee or Beneficiary under any provision of any Loan Document, with interest thereon at the rate provided therein. However, if any document now or hereafter executed by Trustor and Beneficiary contains any obligation, covenant, representation or warranty of Trustor that by its express terms, or by the express terms of such document, is not intended to be secured by this Deed of Trust, then such obligation, covenant, representation or warranty shall not be secured by this Deed of Trust or any other Loan Document (but only to the extent necessary, with respect to temporal applicability, scope or otherwise, to render the same unsecured), and to the extent (if any) that such unsecured obligation, covenant, representation or warranty may be repeated in any provision of this Deed of Trust or any other Loan Document, it shall be deemed stricken and excluded from this Deed of Trust and such Loan Document (but only to the extent necessary, with respect to temporal applicability, scope or otherwise, to render the same unsecured) from and after the date on which such unsecured obligation, covenant, representation or warranty arises and becomes effective under terms of the document in which it is contained.

4.4Performance Under Interest Rate Agreements Payment and performance of all duties and obligations of Trustor owing to “Party A” under and pursuant to that Interest Rate Swap Transaction Confirmation dated on or about the date hereof (the “Confirmation Letter”), in which Trustor is described as Counterparty or “Party B” any amendments or modifications thereto or any replacements thereof, relative to a “Swap Transaction” or “Transaction” (as defined in the Confirmation Letter), and compliance with each agreement, undertaking, obligation, warranty or representation of Trustor contained in

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any Interest Rate Agreements in favor of Beneficiary or its affiliates.

5.SECURITY AGREEMENT AND FIXTURE FILING.

5.1Grant of Security Interest.  Trustor hereby grants to Beneficiary a security interest in the Personal Property to secure all of the Obligations and all other obligations of Trustor to Beneficiary under any other Loan Documents. This Deed of Trust constitutes a security agreement with respect to all personal property in which Beneficiary is granted a security interest hereunder, and Beneficiary shall have all of the rights and remedies of a secured party under the Uniform Commercial Code as well as all other rights and remedies available at law or in equity.

5.2Perfection. Trustor will execute, acknowledge, deliver and cause to be recorded or filed, in the manner and place required by any present or future law, any instrument that may be requested by Beneficiary to publish notice or protect, perfect, preserve, continue, extend, or maintain the security interest and lien, and the priority thereof, of this Deed of Trust or the interest of Beneficiary in the Property, including, without limitation, deeds of trust, security agreements, financing statements, continuation statements, and instruments of similar character, and Trustor shall pay or cause to be paid (i) all filing and recording taxes and fees incident to each such filing or recording, (ii) all expenses, including without limitation, actual attorneys’ fees and costs, incurred by Beneficiary in connection with the preparation, execution, and acknowledgement of all such instruments, and (iii) all federal, state, county and municipal stamp taxes and other taxes, duties, imposts, assessments, and charges arising out of or in connection with the execution and delivery of such instruments.  Trustor hereby irrevocably constitutes and appoints Beneficiary as the attorney-in-fact of Trustor, to execute, deliver and, if appropriate, file with the appropriate filing officer or office any such instruments if Trustor should fail to do so within five (5) days of written demand by Beneficiary. In addition, Trustor hereby authorizes Beneficiary to cause any financing statement or fixture filing to be filed or recorded without the necessity of any signature of Trustor on such financing statement or fixture filing.

5.3Remedies. Upon the occurrence of any Event of Default, Beneficiary shall have the right to cause any of the Property that is Personal Property and subject to the security interest of Beneficiary hereunder to be sold at any one or more public or private sales as permitted by applicable law, and Beneficiary shall further have all other rights and remedies, whether at law, in equity, or by statute, as are available to secured creditors under applicable law, specifically including, without limitation, the right to proceed as to both the real property and the personal property contained within the Property as permitted by Uniform Commercial Code Section 9604(a)(1). Any such disposition may be conducted by an employee or agent of Beneficiary or Trustee.  Any person, including both Trustee and Beneficiary, shall be eligible to purchase any part or all of such property at any such disposition.

5.4Expenses. Expenses of retaking, holding, preparing for sale, selling or the like shall be borne by Trustor and shall include, without limitation, Beneficiary’s and Trustee’s actual attorneys’ fees and legal expenses. Trustor, upon demand of Beneficiary, shall assemble the Personal Property and make it available to Beneficiary at such place as shall be required by Beneficiary in its sole discretion. Beneficiary shall give Trustor at least five (5) days’ prior written notice of the time and place of any public sale or other disposition of such personal property or of the time of or after which any private sale or any other intended disposition is to be made, and if such notice is sent to Trustor, at the same address as is provided for the mailing of notices herein, it is hereby deemed that such notice shall be and is reasonable notice to Trustor.

5.5Place of Business.  Trustor maintains a place of business, as set forth as the address of Trustor provided on the Addendum hereto, and Trustor will immediately notify Beneficiary in writing of any change in its place of business.

5.6Fixtures. This Deed of Trust is also to be recorded as a “fixture filing” as defined in Uniform Commercial Code Section 9102(a)(40) and covers goods that are or are to become fixtures.

6.COVENANTS.

6.1Performance of Obligations.   Trustor shall promptly pay when due all sums

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secured hereby, together with any interest thereon, and shall perform and comply with in a timely manner all other obligations secured by this Deed of Trust. All sums payable by Trustor hereunder shall be paid without notice, demand, protest, setoff, deduction, defense, abatement or deferment and all obligations and liabilities of Trustor hereunder shall not be released, discharged or otherwise affected by reason of any act, claim or circumstance of any kind or nature, whether or not Trustor has notice or knowledge thereof.

6.2Title.Trustor warrants and represents that (a) Trustor lawfully holds and possesses the Property and has the right to encumber the same; (b) the persons executing this Deed of Trust on behalf of Trustor have the full right, power and authority so to do on behalf of Trustor; (c) this Deed of Trust, as so executed and delivered, is a valid and fully binding obligation of Trustor, enforceable in accordance with its terms; and (d) Trustor, its authorized employees, agents and representatives, have all reviewed, approved, and been fully advised with respect to this Deed of Trust, the loan transaction evidenced by the Notes, and any other document or instrument executed and delivered in connection therewith or as security therefor.

6.3Taxes and Assessments.

6.3.1Trustor’s Obligation for Payment of Taxes and Assessments.  Trustor shall pay or cause to be paid all Taxes and Assessments prior to delinquency. Trustor shall deliver promptly to Beneficiary receipts or other reasonable evidence evidencing such payment (and such evidence shall be furnished by no later than the date that Taxes and Assessments would otherwise be delinquent), except to the extent Beneficiary makes payments with deposits under Section 6.5.  Trustor shall not suffer, permit, initiate, or otherwise cause for any tax purpose, the joint assessment of the real property described in Exhibit “A” hereto and any personal property located thereon, or any other procedure whereby the lien of real property taxes and assessments and the lien of personal property taxes shall be assessed, levied or charged against such real property as a single lien.  While any obligation or indebtedness secured by any Loan Document or the lien of this Deed of Trust remains outstanding on the Property, the Property shall be segregated on the applicable tax rolls from all other property, both real and personal.

6.3.2Effect of Change in Law. If at any time any law is enacted which deducts from the value of real property, for taxation purposes, any lien thereon, or changes in any way the laws now in force for the taxation of deeds of trust or debts secured thereby, or the manner of collection of any such taxes so as to affect any interest of Beneficiary under this Deed of Trust then Trustor shall pay such tax if it may lawfully do so. If Trustor is not permitted by applicable law to pay such tax, or if such payment would violate any applicable law, then the whole of the principal sum secured by this Deed of Trust, together with accrued interest thereon, at the option of Beneficiary, without demand or notice, shall immediately become due and payable.

6.4Insurance. For so long as this Deed of Trust or the Notes is in effect, Trustor shall continuously maintain insurance in accordance with the following provisions:

6.4.1Required Coverage. Trustor shall maintain or cause to be maintained insurance in such amounts and insuring against such risks as shall be required by Beneficiary from time to time, including the following:

A.All Risk. All risk coverage insurance, including loss or damage by fire, lightning, windstorm, hail, explosion, riot attending a strike, civil commotions, aircraft, vehicles, smoke and other risks from time to time included under “all risks coverage” policies in an amount equal to one hundred percent (100%) of the full replacement value of all improvements on the Property, with co-insurance clause, if any, only as acceptable to Beneficiary;

BENEFICIARY HAS AND HEREBY DISCLOSES TO TRUSTOR IN WRITING THAT UNDER SECTION 2955.5 OF THE CALIFORNIA CIVIL CODE:

“NO LENDER SHALL REQUIRE A BORROWER, AS A CONDITION OF RECEIVING OR MAINTAINING A LOAN SECURED BY REAL PROPERTY, TO PROVIDE HAZARD INSURANCE COVERAGE AGAINST RISKS TO THE IMPROVEMENTS ON THAT

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REAL PROPERTY IN AN AMOUNT EXCEEDING THE REPLACEMENT VALUE OF THE IMPROVEMENTS ON THE PROPERTY.”

B.Liability. Commercial general liability insurance with respect to the Property providing for limits of liability of not less than $10,000,000 for both injury to or death of a person and for property damage per occurrence, $10,000,000 in the aggregate, and (b) other liability insurance as reasonably required by Beneficiary.

C.Flood. Flood insurance in amount equal to the lesser of (1) the amount required for one hundred percent (100%) of the full replacement value of all improvements, with co-insurance clause if any, only as acceptable to Beneficiary, or (2) the maximum limit of coverage available with respect to the Property under the National Flood Insurance Program; provided that such flood insurance shall not be required if Trustor shall provide Beneficiary with evidence satisfactory to Beneficiary that the Property is not situated within an area identified by the Federal Emergency Management Agency (“FEMA”) (or any other appropriate governmental department, agency, bureau, board, or instrumentality) as a “special flood hazard area”, and that no flood insurance is required on the Property by any regulations under which the Beneficiary is governed;

D.Omitted;

E.Mandatory Insurance. Workers’ compensation and all other insurance, if any, of whatsoever description and in such amounts as may be required by any ordinance, law or governmental regulation to be carried or maintained by Trustor or the owner of all or any part of the Property in connection with Trustor’s operation of the same or the use of the same by Trustor or any other person, partnership, corporation or entity, or in connection with the construction, demolition, maintenance or repair of the Property or any part thereof; and

F.Other Insurance Coverages. Such increased amounts and additional insurance, and in such amounts, as may from time to time be required by Beneficiary including boiler and machinery insurance, earthquake, terrorism and leasehold interest income insurance; provided, however, that earthquake and terrorism insurance shall not be required unless either (i) such insurance is required by any governmental entities or regulators of Beneficiary, or (ii) such insurance is being required by other institutional lenders for comparable properties in the same general vicinity.

6.4.2General Requirements. The policies of insurance to be maintained by Trustor under the provisions of this Deed of Trust shall be issued by responsible insurance carriers with a Best’s rating of no less than A/VII, licensed to do business in the State of California, who are acceptable to Beneficiary and shall be in such form and with such endorsements (including a mortgagee clause in favor of Beneficiary), waivers and deductibles (in no event to exceed $250,000) as Beneficiary shall designate or approve. Without limitation on the foregoing:

A.Named Insureds. All policies shall name Trustor as the insured, and (with the exception of policies for workmen’s compensation insurance) shall name Beneficiary as mortgagee and as an additional insured (under, if required in writing by Beneficiary, a standard non-contributing mortgagee protection clause, in form satisfactory to Beneficiary, attached to such policy or policies whenever applicable, and providing, among other matters, that all insurance proceeds shall be paid to Beneficiary).

B.Required Provisions. All policies shall contain: (1) the agreement of the insurer to give Beneficiary at least 30 days’ notice prior to cancellation or expiration of or change in such policies, or any of them; (2) a waiver of subrogation rights against Beneficiary and, if available Trustor; (3) an agreement that such policies are primary and, if required in writing by Beneficiary, non-contributing with any insurance that may be carried by Beneficiary; (4) a statement that the insurance shall not be invalidated should any insured waive in writing prior to a loss any or all right of recovery against any party for loss accruing to the property described in the insurance policy; and (5) if obtainable, a provision that no act or omission of Trustor shall affect or limit the obligation of the insurance carrier to pay the amount of any loss sustained. As of the date hereof, and subject to any changes in such requirements which Beneficiary may, in its discretion, make from

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time to time pursuant to its rights under this Section 6.4, each policy of property insurance hereunder shall contain a lender’s Loss Payable endorsement (Form 438 B.F.U.), Mortgagee Clause (Form 127B), or other non-contributory mortgagee clause of similar form and substance acceptable to Beneficiary in favor of Beneficiary as a first mortgagee.

6.4.3Delivery of Policies and Renewals. Concurrently herewith, Trustor shall deliver to Beneficiary original policies or certificates with premiums prepaid evidencing the insurance required hereunder. Trustor shall procure and pay for renewals of such insurance (or shall cause the procurement and payment) from time to time before the expiration thereof, and Trustor shall deliver to Beneficiary such original renewal policies or certificates with premiums prepaid at least 10 days after the expiration of any existing policy.

6.4.4Adjustment and Distribution of Casualty Insurance Proceeds. Trustor shall cause any insurance policy in respect of loss or damage to the Property to provide that any loss (a) shall be adjusted by Trustor and Beneficiary, and (b) except as provided for herein, shall be paid to Beneficiary.

6.4.5Release. Trustor, for itself, and on behalf of its insurers, hereby releases and waives any right to recover against Beneficiary or Trustee on any liability for: damages for injury to or death of persons; any loss or damage to property, including the property of any occupant of the Property; any loss or damage to buildings or other improvements comprising the Property; any other direct or indirect loss or damage caused by fire or other risks, which loss or damage is or would be covered by the insurance required to be carried hereunder by Trustor, or is otherwise insured; or claims arising by reason of any of the foregoing, except to the extent caused solely by the active negligence of Beneficiary or Trustee, respectively.

6.4.6Miscellaneous. Neither Beneficiary nor Trustee shall, by reason of accepting, rejecting, obtaining or failing to obtain insurance, incur any liability for (a) the existence, non-existence, form, amount or legal sufficiency thereof, (b) the solvency or insolvency of any insurer, or (c) the payment of losses. All insurance required hereunder or carried by Trustor shall be procured at Trustor’s sole cost and expense. Trustor shall deliver to Beneficiary receipts satisfactory to Beneficiary evidencing full prepayment of the premiums therefor, except to the extent Beneficiary makes payments with Trustor’s deposits under Section 6.5 (for the periods and payments so covered by such payments). In the event of foreclosure on, or other transfer of title in lieu of foreclosure of, the Property, all of Trustor’s interest in and to any and all insurance policies in force shall pass to Beneficiary, or the transferee or purchaser as the case may be, and Beneficiary is hereby irrevocably authorized to assign in Trustor’s name to such purchaser or transferee all such policies, which may be amended or rewritten to show the interest of such purchaser or transferee.

6.5Impound Account. Trustor shall pay to Beneficiary each month (on the first day thereof, together with the principal and interest payments under the Notes) an amount estimated by Beneficiary to be equal to (a) the Taxes and Assessments payable under Section 6.3, and (b) premiums next due for all insurance carried under Section 6.4, each such estimate divided by the number of months to lapse preceding the month in which it will become due and Trustor irrevocably grants and assigns to Beneficiary a security interest in and to the amounts, if any, so paid by Trustor. Trustor acknowledges that an initial deposit may be made pursuant to the terms of the Loan Agreement. Such funds shall not be claimed to be held in trust and no sums so paid shall bear interest, except to the extent of the minimum amount of interest, if any, required by law; and Beneficiary shall, unless Trustor has committed an Event of Default, apply such funds to, or (at the sole option of Beneficiary) release such funds to Trustor for, payment of such Taxes and Assessments and premiums. If Trustor has committed an Event of Default, Beneficiary may, in its sole discretion, apply all or any part of such sums in order of priority as Beneficiary may determine to any indebtedness secured by this Deed of Trust. Trustor shall restore all of the amounts so applied, as well as correct the other events or conditions constituting the Event of Default not corrected by such application. If the total amount retained in the impound account exceeds the amount of payments actually applied by Beneficiary as set forth above, such excess may be credited by Beneficiary on subsequent payments to be made by Trustor hereunder or, at the option of Beneficiary, refunded to Trustor; but if the security account shall not be sufficient to pay the sums required at least thirty (30) days before the same are due and payable, Trustor shall immediately deposit with Beneficiary the full amount of any such deficiency. Upon repayment of

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the amounts evidenced by the Notes and the satisfaction of all other obligations of Trustor secured hereby, any remaining funds held under this paragraph shall be released to Trustor.

6.6Liens and Encumbrances. Except as is specifically permitted by this Deed of Trust, Trustor shall not cause, suffer or create any liens or encumbrances upon the Property; and Trustor shall pay, or cause to be paid, at or prior to maturity, all obligations secured by or reducible to liens and encumbrances which now or hereafter shall encumber the Property, whether senior or subordinate hereto, including all claims for work or labor performed, or materials or supplies furnished in connection with any work of improvement upon the Property. Notwithstanding the preceding sentence, Trustor may contest any such claim of lien without cost or expense to Trustee or Beneficiary, but only upon posting, and concurrently supplying to Beneficiary a certified copy of a statutory bond or other security sufficient under applicable law fully to protect any and all of the Property encumbered by such claim of lien and otherwise sufficient in Beneficiary’s sole opinion to protect Trustee and Beneficiary against any judgment in favor of the lien claimant. If Beneficiary is made a party to any litigation concerning this Deed of Trust, or the Property or any part thereof or interest therein, or the occupancy thereof by any person or entity, then Trustor shall indemnify, defend and hold Beneficiary harmless from all claims and liability by reason of such litigation, including attorneys’ fees and expenses incurred by Beneficiary whether or not any such litigation is prosecuted to judgment. Any lien or encumbrance hereunder shall be paid or fully discharged by Trustor, within five (5) days after demand by Beneficiary.

6.7Disposition of Insurance and Condemnation Proceeds and Damages.

6.7.1Beneficiary’s Rights in Proceeds and Damages. Trustor hereby assigns to Beneficiary (a) any award for damages suffered or compensation paid by reason of a taking for public use, or an action in eminent domain, or the exercise of the police power, whether by a condemnation proceeding or otherwise (such as by inverse condemnation), or any transfer of all or any part of the Property in avoidance thereof, affecting the Property, (b) all proceeds of any insurance policies paid by reason of loss sustained to the Property, and (c) all claims, damages, causes of action, against or from any party or parties, with respect to the Property, or any funds received or receivable in connection with any damage to the Property, incurred as a result of any cause whatsoever. All proceeds of any such claims shall be paid by the person or entity making payment directly to Beneficiary and Trustor shall do all things necessary to obtain prompt settlement for each loss or claim covered by a policy of insurance. After first deducting all costs and expenses of Beneficiary incurred in connection with the settlement or recovery of any proceeds hereunder, Beneficiary may, at its option and without regard to the adequacy of the security hereunder, except as otherwise provided in Section 6.7.2, apply any such sum it retains hereunder to any indebtedness or obligation secured hereby whether due or not, and in such order or priority as Beneficiary may determine; however, after deducting its costs and expenses Beneficiary may, at the sole discretion of Beneficiary and regardless of any impairment of security or lack thereof, except as otherwise provided in Section 6.7.2, release to Trustor all or any part of the entire amount so collected for reimbursement for costs and expenses incurred by Trustor for the repair and restoration of the affected Property upon any conditions Beneficiary chooses. Application of all or any portion of such funds, or the release thereof, shall not cure or waive any Event of Default or notice of an Event of Default or invalidate any acts done pursuant to such notice. Trustor shall execute such further assignments, documents or instruments as Beneficiary may from time to time require in order to evidence the assignment hereunder. If, on any loss of or damage to the Property or on a partial taking or condemnation of the Property, Beneficiary is not entitled under law to retain the entirety of any proceeds or award pursuant to this Section 6.7, then Beneficiary shall be entitled to apply the proceeds or award to the repayment of the Notes and any other indebtedness secured by any Loan Document to the extent necessary in Beneficiary’s judgment to reduce the Notes balance and such other indebtedness by the ratio which the value of the Property remaining encumbered hereby bears to the value of the Property encumbered hereby immediately prior to such loss, damage or partial condemnation or taking, as determined by Beneficiary’s appraiser retained for such purpose. In the event any insurance proceeds or condemnation awards are applied by Beneficiary against the Notes under this Section 6.7.1, no prepayment premium shall apply.

6.7.2Use of Insurance Proceeds to Repair Property.

(a)In the event of damage to or destruction of the Property from

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any cause actually covered under insurance maintained by Trustor hereunder, then Beneficiary shall make available to Trustor the net insurance proceeds available as a result of such damage or destruction (after deducting costs and expenses incurred by Beneficiary in connection with the settlement or recovery of any proceeds as provided in Section 6.7.1) for use by Trustor, in the reconstruction and repair of the damaged improvements to the condition approved by Beneficiary, on the terms and conditions hereinafter set forth. In the event any of the conditions to Trustor’s right to utilize the net proceeds set forth in Section 6.7.2(b) below are not satisfied or fulfilled at any time, then such net proceeds shall be applied as provided in Section 6.7.1.

(b)Such net proceeds shall be made available hereunder only if: (a) no default or an Event of Default occurs; (b) the Loan is not impaired as a consequence of the casualty; (c) Beneficiary has reviewed and approved in Trustor’s plans and specifications for the work of repair and restoration, Trustor’s architect and any general contractors, subcontractors and material suppliers employed to perform such work; (d) if so required by Beneficiary in its discretion, all general contractors, all major subcontractors and material suppliers have supplied 100% performance and completion bonds and bonds protecting the Property from the imposition of mechanic’s or other liens; (e) if the net insurance proceeds or condemnation proceeds available are insufficient for payment of the full cost of restoration or repair and the payments under the Notes during the completion period (and re-leasing period, if any), as estimated by Beneficiary, Trustor has deposited with Beneficiary sufficient additional funds to insure payment of all such costs, or made arrangements acceptable to Beneficiary for such sufficient additional funds, such additional funds to be disbursed for costs incurred in the manner herein specified prior to the disbursement of any other funds held by Beneficiary; and (f) Trustor shall have satisfied such other conditions as Beneficiary may in good faith determine to be appropriate. Disbursement of funds by Beneficiary hereunder shall be subject to all of Beneficiary’s then customary construction loan disbursement procedures.

(c)Funds held by Beneficiary hereunder shall bear interest; and Beneficiary shall have no other duties or obligations with respect thereto, or with respect to the provisions of this Section 6.7.2, other than that of a construction lender; and the reasonable costs and expenses of Beneficiary incurred in connection therewith (including the fees of a construction consultant and disbursing agent) shall be paid by Trustor (and Beneficiary shall be entitled to pay such costs and expenses out of the insurance proceeds held by Beneficiary). Specifically, but without limiting the generality of the foregoing, no relationship of trust, or any other duty in the nature of fiduciary duties or otherwise, shall be imposed or implied by the status or actions of Beneficiary hereunder; and under no circumstances shall Beneficiary become obligated to take any action to repair or reconstruct any damaged or destroyed Property. Any net proceeds not disbursed under this Section 6.7.2 shall be disbursed in accordance with Section 6.7.1.

6.7.3Waiver of Allocation Rights. Without limitation of the foregoing, Trustor hereby specifically, unconditionally and irrevocably waives all rights of a property owner granted under California Code of Civil Procedure Section 1265.225(a), which provides for allocation of condemnation proceeds between a property owner and a lienholder, and any other law or successor statute of similar import.

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6.8Maintenance and Preservation of the Property.

6.8.1Trustor’s Obligation for Maintenance of Property and Security. Trustor shall: (a) keep the Property in good condition and repair and replace any items comprising the Property as they become obsolete or worn out with items of at least the same utility, quality and value, free of any liens or security interests of any kind or character other than the lien of the Loan Documents; (b) not remove or demolish the Property; (c) restore promptly and in good and workmanlike manner any part of the Property which may be damaged or destroyed; (d) comply with and not suffer violations of laws, ordinances, regulations, covenants, conditions, restrictions, equitable servitudes and easements, whether public or private, of every kind and character, and requirements of insurance companies and any bureau or agency which establishes standards of insurability (“Requirements”); (e) not commit or permit waste of the Property; (f) do all other acts which from the character or use of the Property may be reasonably necessary to maintain and preserve its value or to protect the security hereof; (g) perform and comply with all obligations required to be performed or complied with in leases, licenses, concessions, management agreements, or like agreements affecting the Property or the management, operation, occupation or use thereof; (h) pay any and all charges, assessments or fees imposed in connection with the delivery, installation or maintenance of any utility services or installations on, to or for the Property; (i) not change the character, the nature of the occupancy or use of the Property, or any portion thereof; (j) not drill for or extract, or enter into a lease or any other type of agreement for the drilling for or extraction of, oil, gas or other hydrocarbon substances, or any mineral of any kind, on, in or under the Property; (k) make no assignment of rents of the Property except to Beneficiary; and (l) execute and, where appropriate, acknowledge and deliver, such further documents or instruments as Beneficiary or Trustee deems necessary or appropriate to preserve, continue and perfect the security provided for herein.

6.8.2Beneficiary’s Approval Rights for Work. Trustor shall not undertake or suffer to be made any alteration, addition, relocation, removal or demolition of, or structural or other material change in, any building, improvement, fixture, machinery, or equipment comprising the Property, without the prior written approval of Beneficiary, unless (a) the aggregate cost of such work does not exceed $500,000, (b) such work does not affect the roof or the structure of the building and improvements comprising the Property, or adversely affect or diminish the value of the Property or arise as a result of any damage or destruction, and (c) such work is designed by licensed professionals (to the extent that design services are or are customarily obtained for such work) and is constructed by licensed contractors, all qualified for such purpose, and in accordance with all applicable laws, ordinances, regulations, permits and approvals. The foregoing shall not limit Trustor’s obligations under Section 6.8.1 and accordingly, Trustor shall immediately seek any consent required under this Section 6.8.2 in connection with its obligations under Section 6.8.1.

6.8.3Compliance with Laws. Trustor warrants and represents to Beneficiary that Trustor and the Property currently comply, and will in the future comply, fully with all applicable laws, ordinances and regulations, and all permits and approvals issued thereunder, affecting Trustor’s right and qualification to do business, the construction and installation of the improvements located or to be located upon the Property, the operation, leasing, financing or sale of the Property and the occupancy, use and enjoyment thereof. Without limitation on the foregoing, Trustor represents and warrants to Beneficiary that it has complied with and shall continue to comply with all applicable laws relating to accessibility for the handicapped, including The Architectural Barriers Act of 1968, The Rehabilitation Act of 1973, The Fair Housing Act of 1988 and The Americans With Disabilities Act of 1990. Without the prior written consent of Beneficiary, Trustor shall not seek, make or consent to any change in the lot or parcel boundaries, zoning, conditions of use, or any other applicable land use laws, ordinances, regulations, permits, approvals or licenses pertaining to the Property, or which would constitute a violation of the warranties and representations herein contained, or would change the nature of the use or occupancy of the Property. Trustor shall within ten (10) days after receipt thereof by Trustor, or its agent or representative, deliver to Beneficiary copies of any and all approvals, permits and licenses procured by Trustor with respect to the Property, construction and installation of improvements thereon, or the occupancy, use and enjoyment thereof, pursuant to applicable laws, ordinances, or regulations.

6.9Defense and Notice of Actions. Trustor shall, without liability, cost or expense to Beneficiary or Trustee, protect, preserve and defend title to the Property, the security hereof and the rights or

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powers of Beneficiary or Trustee hereunder, against all adverse claimants to title, or any possessory or non-possessory interest in the Property. Trustor shall give Beneficiary and Trustee prompt written notice of the filing or occurrence of any such event, action or proceeding, including fire or other casualty causing damage to the Property; notice of condemnation or other taking of the Property; notice from any governmental agency relating to the Property of any violation of law; a change in the nature of the occupancy or use of the Property; or the commencement of any litigation affecting the Property or the title thereto.

6.10Collection of Rents, Issues and Profits; Approval of Leases.

6.10.1Trustor’s Authority to Collect and Retain Rents. Beneficiary confers upon Trustor the license to collect and retain the rents, issues and profits of the Property as they become due and payable, subject, however, to the right of Beneficiary to revoke such license at any time following the occurrence of an Event of Default in its sole discretion and without notice to Trustor. Beneficiary shall have the absolute right to revoke such authority and collect and retain the rents, issues and profits assigned herein, without taking possession of all or any part of the Property. The right to collect rents and profits herein provided shall not grant to Beneficiary or Trustee the right to possession, except as expressly herein provided; nor shall such right impose upon Beneficiary or Trustee the duty to produce rents or profits or maintain the Property in whole or in part. Possession of the Property by a receiver appointed by a court of competent jurisdiction shall not be considered possession of the Property by Beneficiary or Trustee for purposes hereof. Following the occurrence of an Event of Default, Beneficiary may apply, in its sole discretion and in any order of priority, any rents, issues and profits collected against the costs of collection and any indebtedness secured by or obligations of Trustor arising under the Loan Documents. Collection of any rents, issues and profits by Beneficiary shall not cure or waive any Event of Default or notice of Event of Default, or invalidate any acts done pursuant to such notice.

6.10.2Trustor’s Authority to Enter into Leases. Trustor shall not enter into any lease of the Property, or any portion thereof, without Beneficiary’s prior written consent in its sole discretion, or modify or amend or supplement any such lease without the prior written consent of Beneficiary in its sole discretion unless such leases are to parties that are not affiliates of Trustor and are for space in the buildings located at 2240 & 2270 Agnew Road (all such leases of which shall be subordinate to Beneficiary; provided, however, that the tenants thereunder shall execute any reasonable form of subordination, nondisturbance and attornment agreement required by Beneficiary). Trustor shall, on demand, execute such further assignments to Beneficiary of any or all leases, agreements, rents, issues or profits of the Property as Beneficiary may require. Upon request of Beneficiary, Trustor shall promptly deliver to Beneficiary a copy of the fully executed original of any or all leases or agreements entered into hereunder. All leases of the Property shall be subordinate to this Deed of Trust unless Beneficiary elects in writing, at its sole option, to subordinate this Deed of Trust to a particular lease or leases; and all such leases shall provide, in a manner approved by Beneficiary, that the tenant thereunder shall recognize as its lessor and attorn to any person succeeding to the interest of Trustor upon foreclosure of this Deed of Trust (or deed in lieu thereof).

6.11Right of Inspection. Beneficiary, its agents or employees, may enter the Property at any time for the purpose of inspecting the Property or ascertaining Trustor’s compliance with the terms of any Loan Document.

6.12Intentionally omitted.

6.13Acceptance of Trust. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, becomes a public record as provided by law. Trustee shall not be obligated to perform any act required of it hereunder unless the performance of such act is requested in writing and Trustee is reasonably indemnified against loss, cost, liability and expense.

6.14Powers of Trustee; Indemnity. From time to time upon written request of Beneficiary and presentation of this Deed of Trust for endorsement, and without affecting the liability of any person or entity for payment of any indebtedness or performance of obligations secured hereby, Trustee may, without liability therefor and without notice: reconvey all or any part of the Property; consent to the making of any map or plat thereof; join in granting any easement thereon; join in any declaration of covenants

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and restrictions; or join in any extension agreement or any agreement subordinating the lien or charge hereof. Trustee (or Beneficiary) may from time to time apply in any Court of competent jurisdiction for aid and direction in the execution of the trusts and the enforcement of the rights and remedies available hereunder, and Trustee (or Beneficiary) may obtain orders or decrees directing, confirming or approving acts in the execution of such trusts and the enforcement of such remedies. All costs and expenses of any such proceeding (including attorneys’ fees and costs) shall be borne by Trustor. Trustee shall not be obligated to notify any party of any pending sale of the Property, or any portion thereof, under any other deed of trust or otherwise, or of any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party, unless Trustee brings such action or unless held or commenced and maintained by Trustee under this Deed of Trust. Trustor shall pay to Trustee reasonable compensation and reimbursement for all services and expenses in the administration of the trusts created hereunder, including attorneys’ fees and costs. Trustor shall indemnify, defend and hold Trustee and Beneficiary, and each of them, harmless against any and all losses, claims, demands, liabilities, costs or expenses (including attorneys’ fees and costs) which either may incur, in the execution of the trusts created hereunder, or in the performance of any act or obligation required or permitted hereunder or by law or otherwise arising out of or in connection with the Notes or any other Loan Document, except to the extent any of the foregoing results from the sole gross negligence or willful misconduct of a party indemnified hereunder, in which event the foregoing indemnity shall not extend (to such extent) to such indemnified party with respect to such negligence or misconduct, but shall continue in full force and effect and benefit the other indemnified party hereunder.

6.15Substitution of Trustee. From time to time, by an instrument signed and acknowledged by Beneficiary, referring to this Deed of Trust filed for record as required by law, Beneficiary may appoint another trustee to act in the place and stead of Trustee. The recordation of such instrument shall discharge Trustee herein named and shall appoint the new trustee as the Trustee hereunder. An instrument so recorded shall be conclusive proof of the proper substitution of such new trustee, who shall then have all the title, powers, duties and rights of Trustee hereunder, without necessity of any conveyance from such predecessor, with the same effect as if originally named Trustee herein.

6.16Acceleration Upon Sale or Further Encumbrance.

6.16.1  Obligations of Trustor Regarding Transfers. By delivery of this Deed of Trust, Trustor acknowledges that the financial standing and managerial and operational ability of Trustor are substantial and material considerations to Beneficiary in its agreement to make the loan evidenced by the Notes and that any encumbrance or transfer of an interest in the Property will materially impair Beneficiary’s reasonable security hereunder. In order to induce Beneficiary to make the loan evidenced by the Notes secured hereby, Trustor agrees Trustor shall not effect a Transfer, either directly or indirectly, or by operation of law, without in each instance first obtaining Beneficiary’s prior written consent, which consent may be withheld for any reason, or given upon such terms and conditions as Beneficiary deems necessary or appropriate, all within Beneficiary’s sole discretion, to the extent permitted by applicable law. Upon any Transfer made in violation of this Section 6.16.1, Beneficiary shall have the absolute right in its sole discretion, without demand or notice, to declare all sums, indebtedness and obligations secured hereby to be immediately due and payable (including the prepayment premium set forth in the Notes, if any), except to the extent that and in such particular circumstances where exercise of such right by Beneficiary is prohibited by law. Any Transfer effected pursuant to a consent or waiver by Beneficiary shall be subject to this Deed of Trust, and any such direct transferee shall, as a condition of the effectiveness of any such consent or waiver and as a covenant of Trustor and such transferee, and in form and substance prescribed by Beneficiary, assume all obligations hereunder and agree to be bound by all provisions contained herein (and, without limitation, such assumption shall contain an express acknowledgment of the prepayment provisions of the Notes and their application if there is an acceleration of the Notes by reason of a Transfer or otherwise, which acknowledgment shall be separately initialed by the transferee). Such assumption shall not, however, release Trustor or any maker or guarantor of the Notes from any liability thereunder. Except as herein provided, any transaction or event of any kind effecting a Transfer or further encumbering the Property, or changing the identity of the parties primarily liable for performance of Trustor’s covenants under this Deed of Trust except as permitted herein, shall constitute an impairment of Beneficiary’s reasonable security interests under this Deed of Trust. Notwithstanding the above provisions of this Section 6.16.1, the trading of any shares of stock of Trustor that are publicly traded on a national securities exchange shall not violate the

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provisions of this paragraph provided that no such trade (or series of trades) causes a “Change of Control” (as defined in the Loan Agreement) in Trustor.

6.16.2  Deed of Trust Provisions Control Over Other Instruments. The provisions of this Section 6.16 shall prevail notwithstanding any contrary provisions in the Notes or any other instrument which evidences or secures obligations hereby secured. Trustor shall notify Beneficiary promptly in writing of, but in any event not later than thirty (30) days prior to, any transaction or event which may give rise to a right of acceleration under this Section 6.16.

6.17Reconveyance. Upon Beneficiary’s written request, and upon surrender to Trustee for cancellation of this Deed of Trust and the Notes or instruments setting forth all obligations secured hereby, Trustee shall reconvey, without warranty, the Property, or that portion thereof then held hereunder. The recitals of any matters or facts in any reconveyance executed hereunder shall be conclusive proof of the truthfulness thereof. To the extent permitted by law, the reconveyance may describe the grantee as “the person or persons legally entitled thereto.” Neither Beneficiary nor Trustee shall have any duty to determine the rights of persons claiming to be rightful grantees of any reconveyance. When the Property has been fully reconveyed, the last such reconveyance shall operate as a reassignment of all future rents, issues and profits of the Property to the person or persons legally entitled thereto, unless such reconveyance expressly provides to the contrary.

6.18Defense and Indemnity Rights. Whenever, under any Loan Document, Trustor is obligated to indemnify or defend Beneficiary or Trustee, or defend or prosecute any action or proceeding, then Beneficiary and Trustee, and each of them, shall have the right of full participation in any such action or proceeding, with counsel of Beneficiary’s choice, and all costs and expenses incurred by Beneficiary or Trustee in connection with such participation (including reasonable attorneys’ fees and costs) shall be reimbursed by Trustor to Beneficiary or Trustee immediately upon demand. Trustor shall give notice to Beneficiary and Trustee of the initiation of all proceedings prosecuted or required to be defended by Trustor, or which are subject to Trustor’s indemnity obligations under any Loan Document promptly after the receipt by Trustor of notice of the existence of any such proceeding. All costs or expenses required to be reimbursed by Trustor to Beneficiary hereunder shall, if not paid when due as herein specified, bear interest at the interest rate of the Notes or at the Past Due Rate if such Notes contains a Past Due Rate, until paid by Trustor. As used herein, “proceeding” shall include litigation, arbitration and administrative hearings or proceedings.

6.19Destruction of Notes. Trustor shall, if either of the Notes is mutilated or destroyed by any cause whatsoever, or otherwise lost or stolen and regardless of whether due to the act or neglect of Beneficiary or Trustee, execute and deliver to Beneficiary in substitution therefor a duplicate promissory note within ten (10) days after Beneficiary notifies Trustor of any such mutilation, destruction, loss or theft of such Note. Any such new promissory note shall be in full substitution for that Note, shall not constitute any new or additional indebtedness of Trustor to Beneficiary, shall constitute solely a substitute evidence of the indebtedness evidenced by the original Note, and shall not affect in any manner the priority of any Loan Document.

6.20Provisions Relating to Hazardous Materials.

6.20.1  Except for matters disclosed in any environmental reports delivered by Trustor to Beneficiary, Trustor represents and warrants that: (a) to the best of Trustor’s knowledge, the Property complies with all Hazardous Materials Law as to use and conditions on, under or about the Property including soil and groundwater condition; (b) neither Trustor nor, to the best of Trustor’s knowledge, any other person, has used, generated, manufactured, stored or disposed of on, under or about the Property or transported to or from the Property any Hazardous Materials; and (c) to the best knowledge of Trustor, there are no Hazardous Materials in, attributable to or affecting the Property in violation of applicable law (including Hazardous Materials Laws), including from the presence of lead based paint at the Property. Without limitation on the foregoing, to the best knowledge of Trustor: (i) the primary potable or drinking water source and groundwater has never been known to exceed the EPA Recommended Maximum Contaminant Level Goals set forth under the Safe Drinking Water Act, and Clean Water Act, as amended; (ii) there is not and has

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never been landfill containing decomposable material, petroleum wells, mineral bearing mines, sewage treatment facilities, underground storage tanks, sinkholes, radon or other toxic emissions within the Property, and (iii) no electrical transformers, fluorescent light fixtures with ballasts or other equipment containing polychlorinated biphenyls (PCBs) have been located on the Property at any time.

6.20.2  Trustor covenants and agrees that Trustor shall not cause or permit the presence, use, generation, manufacture, release, discharge, storage or disposal of any Hazardous Materials on, under, in or about the Property, or the transportation of any Hazardous Materials to or from the Property in violation of applicable law (including Hazardous Materials Laws). Without limitation, Trustor shall cause the Property to be in compliance with all Hazardous Materials Laws, including those Hazardous Materials Laws relating to lead based paint. Trustor shall immediately notify Beneficiary in writing of: (a) any enforcement, cleanup, removal or other governmental or regulatory action instituted, completed or threatened in connection with any Hazardous Materials; (b) any claim made or threatened by any third party against Trustor or the Property relating to damage, contribution, cost recovery, compensation, loss or injury to persons or property resulting from any Hazardous Materials located on, under or at the Property; and (c) Trustor’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause all or any portion of the Property to be classified as “border-zone property” under the provisions of the California Health and Safety Code or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Property under Hazardous Materials Law. Without Beneficiary’s prior written consent, Trustor shall not take any remedial action in response to the presence of any Hazardous Materials on, in, under or about the Property, nor enter into any settlement agreement, consent decree or other compromise in respect to any Hazardous Materials (except that in the case of an emergency, Trustor shall take such action as may be reasonably required under the circumstances and shall immediately notify Beneficiary in writing of any such action taken).

6.20.3  Trustor shall indemnify, defend and hold Beneficiary, its employees, agents, officers and directors, harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage or expense (including attorneys’, experts’ and consultant fees), directly or indirectly resulting from, arising out of, or based upon (a) the presence, release, use, manufacture, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such materials to or from, the Property, or (b) the violation, or alleged violation, of any Hazardous Materials Law affecting the Property, or the transportation of Hazardous Materials to or from the Property. This indemnity shall (i) include any damage, liability, fine, penalty, punitive damage, cost or expense arising from or out of any claim, action, suit or proceeding for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resources or the environment, nuisance, pollution, contamination, leak, spill, release or other adverse effect on the environment, and the cost of any required or necessary repair, cleanup, treatment or detoxification of the Property, and the preparation and implementation of any closure, disposal, remedial or other required actions in connection with the Property, and (ii) survive foreclosure (whether judicial or nonjudicial) of this Deed of Trust and the full or partial payment or discharge of all indebtedness secured hereby except to the extent that the liability relates to conditions arising after foreclosure. Notwithstanding Section 2941 of the California Civil Code, Trustor hereby waives its rights to any damages resulting from a delayed reconveyance of this Deed of Trust pending the identification and liquidation of Trustor’s liabilities under this Section. Trustor hereby waives any defenses or limits to the foregoing indemnification of Beneficiary that would otherwise be available to Trustor under California Code of Civil Procedure Section 736(b)(3).

6.20.4  At any time during the term of this Deed of Trust, Beneficiary shall have the right, on seventy-two (72) hours prior written notice to Trustor, at Trustor’s expense, to enter the Property and to conduct such tests and investigations as Beneficiary requires, in the event that Beneficiary has a good faith belief that such tests or investigations are required or advisable, or at any time following an Event of Default, to determine whether any Hazardous Materials are present in, under, on or about the Property. Such tests and investigation shall include underground borings, ground water analyses and borings from the floors, ceilings and walls of any improvements located on the Property. Without limitation on any other terms provided herein, Trustor shall, at Trustor’s sole cost and expense, implement any and all operations and maintenance plans recommended for asbestos or other matters relating to Hazardous Materials

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recommended in any environmental report and shall complete all surveys and/or questionaires in connection therewith.

6.20.5“Hazardous Materials Law”, for purposes of this Section 6.20, means any federal, state, or local law, ordinance or regulation or any rule adopted or guideline promulgated pursuant thereto, or any order, ruling or directive of any federal, state, local, executive, judicial, legislative, administrative or other governmental or public agency, board, body or authority relating to health, industrial hygiene, the environment, or the occupational or environmental conditions on, under or about the Property (including ambient air, soil, soil vapor, groundwater, surface water or land use), whether now or hereafter in force, including those relating to the release, emission or discharge of Hazardous Materials, those in connection with the construction, fuel supply, power generation and transmission, waste disposal or any other operations or processes relating to the Property. “Hazardous Materials Law” shall include the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, and the Carpenter-Presley-Tanner Hazardous Substance Account Act and the California Health and Safety Code, as the same are now or hereafter amended.

“Hazardous Materials”, for purposes of this Section 6.20, means any chemical, substance, object, condition, material or waste that is or may be hazardous to human health or safety or to the environment, due to its radioactivity, ignitability, corrosivity, flammability, reproductive toxicity, infectiousness or other harmful properties or effects, including all chemicals, substances, materials and wastes that are now or hereafter may be regulated in any manner, classified as dangerous, hazardous or toxic, or as pollutants or contaminants, or to which exposure is prohibited or restricted by any federal, state or local government or public agency, board, body or authority or by any Hazardous Material Law. “Hazardous Materials” include flammable explosives, radioactive materials, polychlorinated biphenyls, asbestos, hazardous waste, radon, toxic substances or other related materials whether in the form of a chemical, element, compound, solution, mixture or otherwise, including those materials defined as “hazardous substances”, “hazardous materials”, “toxic substances”, “air pollutants”, “toxic pollutants”, “hazardous wastes”, “extremely hazardous waste” or “restricted hazardous waste” by any Hazardous Materials Law.

6.20.6Nothing herein shall be construed for purposes of any Hazardous Materials Law as devolving control of the Property or imposing owner or operator status on the Trustee or Beneficiary.

6.20.7Notwithstanding anything to the contrary contained in the Notes, this Deed of Trust or any Loan Document, and without limitation on any other rights and remedies of Beneficiary, Beneficiary shall have each and all of the rights and remedies under California Civil Code Section 2929.5 and California Code of Civil Procedure Sections 564, 726.5 and 736.

6.21Default Provisions.

6.21.1Rights and Remedies. At any time after the occurrence of an Event of Default, Beneficiary and Trustee and each of them shall have each and all of the following rights and remedies:

(a)Immediate Payment of Obligations. With or without notice, to declare all obligations secured by any Loan Document immediately due and payable.

(b)Cure Default. With or without notice, and without releasing Trustor from any obligation hereunder, to cure any default of Trustor and, in connection therewith, to enter upon the Property in person, or by an agent or employee, or by a receiver appointed by a court of competent jurisdiction, and to do such acts and things as Beneficiary or Trustee may deem necessary or desirable to protect the security hereof.

(c)Judicial Proceedings. To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this Deed of Trust as a mortgage, or without regard to the adequacy of any security for the indebtedness secured hereby, to obtain specific enforcement of the covenants of Trustor hereunder, for an injunction against any violation of this Deed of Trust, the appointment of a receiver, or for

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such other equitable relief as may be appropriate, in addition to any other remedies Beneficiary may otherwise have.

(d)Manage and Operate Property. To enter upon, possess, manage and operate the Property, or any part thereof, either in person, or by an agent or employee, or by a receiver appointed by a court of competent jurisdiction; to make, terminate, enforce or modify leases of the Property upon such terms and conditions as Beneficiary deems necessary or proper and to act in any manner which Beneficiary or Trustee may deem necessary or desirable in connection therewith; and to make repairs, alterations and improvements to the Property necessary, in Trustee’s or Beneficiary’s judgment, to protect or enhance the security hereof. All sums realized by Beneficiary under this Section 6.21.1(d), less all costs and expenses incurred by it hereunder, including attorneys’ fees and costs actually incurred, shall be applied on any indebtedness secured hereby in such order of priority as Beneficiary shall determine. Neither application of such sums to such indebtedness, nor any other action taken by Beneficiary under this Section 6.21.1(d), shall cure or waive any Event of Default or notice of Event of Default or nullify the effect of any such notice.

(e)Elect to Sell Property. To execute a written notice of such Event of Default and of the election to cause the Property to be sold to satisfy the obligations secured hereby, Trustee shall give and record such notice as the law then requires as a condition precedent to a trustee’s sale. When the minimum period of time required by law after such notice has elapsed, Trustee, without notice to or demand upon Trustor except as otherwise may then be required by law, shall sell the Property at the time and place of sale fixed by it in the notice of sale, either as a whole or in separate parcels or through one or more successive sales and in such order as it or Beneficiary may determine, at public auction to the highest bidder for cash, in lawful money of the United States, or other form of payment acceptable to Beneficiary, payable at the time of sale. Trustor shall have no right to direct the order in which the Property is sold. Beneficiary may, in its sole discretion, designate the order in which the Property is offered for sale or sold and determine if the Property shall be sold through a single sale or through two or more successive sales, or in any other manner Beneficiary deems to be in its best interest. If Beneficiary elects more than one sale or other disposition of the Property, Beneficiary may at its option cause the same to be conducted simultaneously or in such order and at such times as Beneficiary may deem to be in its best interests, and no such sale shall terminate or otherwise affect the lien of this Deed of Trust on any part of the Property not then sold until all indebtedness secured hereby has been fully paid. If Beneficiary elects to dispose of the Property through more than one sale, Trustor shall pay the costs and expenses of each such sale and of any judicial proceedings where the same may be undertaken. Trustee may postpone any such sale by public announcement at the time and place fixed by the notice of sale, and may thereafter continue such postponement by like announcements at the time and place fixed by the preceding postponement, at Beneficiary’s direction and without necessity of additional notices of sale. Trustee shall deliver to the purchaser at such sale a deed conveying the Property or portion thereof so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustee, Trustor or Beneficiary, may purchase at such sale. Notwithstanding anything to the contrary contained herein, Trustee shall (to the extent permitted by applicable law) allocate or apply the proceeds of sale (including the amount of any credit bid) in such manner and in such priority as Beneficiary may elect in its sole and absolute discretion. Notwithstanding anything to the contrary contained herein, Beneficiary’s rights and remedies under California Code of Civil Procedure Section 736 shall not be waived, limited or otherwise adversely affected by virtue of a full or partial credit bid upon foreclosure of this Deed of Trust.

(f)Resort to Security. To resort to and realize upon the security hereunder and any other security now or hereafter held by Beneficiary in such order and manner as Trustee and Beneficiary, or either of them, may in their sole discretion determine. Resort to any or all such security may be taken concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both.

(g)Appointment of Receiver. To apply to any court having jurisdiction to appoint a receiver or receivers for the Property, as a matter of right and without notice to Trustor or anyone claiming under Trustor, and without regard to the then value of the Property or the adequacy of any security for the obligations secured hereby, Trustor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in

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like or similar cases and all the powers and duties of Beneficiary in case of entry as provided herein. Trustor agrees to promptly deliver to any such receiver all leases, rents, issues and profits (including security deposits), documents, financial data and other information requested by such receiver in connection with the Property and, without limiting the foregoing, Trustor hereby authorizes Beneficiary to deliver to any such receiver any or all of the leases, rents, issues and profits, documents, data and information in Beneficiary’s possession relating to the Property.

(h)Exercise Other Rights and Remedies. To exercise or invoke any and all other rights and remedies as may be available to Beneficiary or Trustee now or hereafter at law or in equity.

No action taken, or right or remedy invoked, by Beneficiary or Trustee under this Section 6.21.1, including the appointment of a receiver for the Property, or the entry into possession of the Property, or any part thereof, by such receiver, or otherwise, shall be deemed to make Beneficiary a “mortgagee in possession” or otherwise responsible or liable in any manner with respect to the Property, or the use, occupancy, enjoyment or operation of all or any part thereof. In no event shall Beneficiary be required to accept a cure of any default beyond the applicable grace, notice and cure periods provided in the Loan Documents, if any, notwithstanding any statement or provision to the effect that rights or remedies are available while an Event of Default “exists”, “continues” or is “outstanding”, or during the “existence” or “continuation” of an Event of Default (or any similar statement or provision) in any of the Loan Documents, or anything else in the Loan Documents.

6.21.2Payment of Costs, Expenses and Attorneys’ Fees. All costs and expenses incurred by Trustee and Beneficiary pursuant to Section 6.21.1 (including court costs and attorneys’ fees and costs, whether or not incurred in litigation and whether or not foreclosure is concluded, including, without limitation, attorney’s fees and costs incurred in connection with any judicial or nonjudicial foreclosure of this Deed of Trust or the other Loan Documents, or in connection with both judicial and nonjudicial foreclosure, if Beneficiary shall elect to pursue each such remedy whether concurrently or independently) shall be secured by this Deed of Trust and shall bear interest at the interest rate of the Notes or at the Past Due Rate if the Notes contain a Past Due Rate, from the date of expenditure until such sums have been paid. Beneficiary shall be entitled to bid, at any sale of the Property held pursuant to Section 6.21.1(e) above, the amount of all such costs, expenses, and interest in addition to the amount of any other obligations hereby secured by a credit bid as the equivalent of cash.

6.21.3Remedies Cumulative; No Waiver. All rights and remedies of Beneficiary and Trustee hereunder are cumulative and not alternative, and are in addition to all rights and remedies otherwise provided by law. No exercise of any right or remedy by Beneficiary or Trustee shall constitute a waiver of any other right or remedy. No delay or omission by Trustee or Beneficiary to exercise any right, power or remedy hereunder shall impair any such right or remedy, or be construed as a waiver of any Event of Default, or any acquiescence therein. By accepting payment of any sum secured hereby after its due date or later performance of any obligation secured hereby, Beneficiary shall not waive its right against any person obligated directly or indirectly hereunder, or on any obligation hereby secured, either to require prompt payment when due of all other sums so secured or to declare an Event of Default for failure to make such prompt payment or render such performance; and Beneficiary’s acceptance of partial payment of any sum secured hereby after its due date (which may be applied to such outstanding payment obligations as Beneficiary may elect, notwithstanding Trustor’s instructions to the contrary), or acceptance of partial performance of any obligation secured hereby in default, shall not cure such payment failure or default, or affect any notice of an Event of Default or sale heretofore given or recorded, unless such notice is expressly revoked in writing by Beneficiary.

6.21.4Releases, Extensions, Modifications and Additional Security. Without affecting the liability of any person for payment of any indebtedness secured hereby, or the lien or priority of this Deed of Trust or any other Loan Document upon the Property, Beneficiary may, from time to time, with or without notice, do one or more of the following: release the liability of any person for the payment of any indebtedness secured hereby; make any agreement or take any action extending the maturity or otherwise altering the terms or increasing the amount of any indebtedness secured hereby; and accept additional security, or release all or a portion of the Property and other security held to secure the indebtedness secured

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hereby. If Beneficiary holds any other or additional security for the payment of any indebtedness or performance of any obligation hereby secured, then any sale or foreclosure of such security upon any Event of Default, in the sole discretion of Beneficiary, may be prior to, subsequent to, or contemporaneous with, any sale or foreclosure hereunder and any property in which Beneficiary holds a security interest may be sold as a unit with the Property.

6.21.5Marshalling of Assets. Trustor waives all right to require a marshalling of assets by Trustee or Beneficiary; and Trustor waives the right to require Trustee or Beneficiary to resort first to any portion of the Property retained by Trustor before resorting to any other portion of the Property which may have been transferred or conveyed subject hereto, whether such resort to security is undertaken by non-judicial sale or through proceedings in judicial foreclosure.

6.22Amendments. This Deed of Trust may be amended at any time and from time to time only by an amendment in writing, executed by Beneficiary and Trustor, and recorded or filed as required by applicable law for the giving of constructive notice.

6.23Consents. Any consent or waiver by Beneficiary to or of any term, covenant or condition under this Deed of Trust, or of any Event of Default, or failure by Beneficiary to insist upon strict performance by Trustor of any term, covenant or condition contained in any Loan Document, shall be effective or binding on Beneficiary only if expressly made in writing by Beneficiary and no such consent or waiver shall be implied from any conduct or act of Beneficiary, or any omission by Beneficiary to take action with respect to any such term, covenant, condition or default. No express written consent to or waiver of any term, covenant or condition of this Deed of Trust or Event of Default shall affect any other term, covenant or condition, or any other matter or Event of Default, or cover any other time period or event, other than the application of any such term, covenant or condition to the matter as to which a consent or waiver has been given or the Event of Default, time period or event specified in such express consent or waiver.

6.24Further Assurances. Trustor shall, upon request by Beneficiary or Trustee, execute, with acknowledgment or affidavit if required, and deliver, any and all documents and instruments required to effectuate the provisions hereof.

6.25Statement of Condition. From time to time as required by law, Beneficiary shall furnish to Trustor such statements as may be required by law concerning the condition of the obligations secured hereby. As a condition to Beneficiary’s obligation to issue any such statement, Trustor shall pay to Beneficiary such charge as Beneficiary has established for the issuance of such statements, or the maximum amount allowed by law for each such statement, if such amount is less than Beneficiary’s charge.

6.26Intentionally omitted.

6.27Trustor, Beneficiary and Trustee Defined. As used in this Deed of Trust, the term “Trustor” includes each original signatory of this Deed of Trust as Trustor and each of its permitted successors and assigns; the term “Beneficiary” includes the Beneficiary named herein or any future owner or holder, including pledgees, of the Notes, notes or instrument secured hereby, or any participation therein; and the term “Trustee” includes the original Trustee under this Deed of Trust and its successors and assigns.

6.28Rules of Construction. When the identity of the parties or other circumstances make appropriate, the neuter gender shall include the feminine and masculine, and the singular number shall include the plural. Specific enumeration of rights, powers and remedies of Trustee and Beneficiary and of acts which they may do and of acts Trustor must do or not do shall not exclude or limit the general. The headings of each Section are for information and convenience and do not limit or construe the contents of any provision hereof. The provisions of this Deed of Trust shall be construed as a whole according to their common meaning, not strictly for or against any party and consistent with the provisions herein contained, in order to achieve the objectives and purposes of these trusts. The use in this Deed of Trust (including any Exhibit hereto) of the words “including”, “such as” or words of similar import when following any general term, statement or matter shall not be construed to limit such statement, term or matter to the specific items or

19

matters, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such statement, term or matter; the use herein of the words “costs” or “expenses” shall include the cost of title evidence and fees and costs of attorneys for Beneficiary or Trustee; and the use herein of the word “prompt”, or “immediately” in any form, or words of similar import, when used with reference to any notice required to be given or act to be undertaken by Trustor shall mean notice given or act performed not later than five (5) days after the occurrence of the specified event for which notice or action is required, unless another time period is made expressly applicable. If Trustor is composed of more than one person or entity, then the obligations of Trustor under this Deed of Trust, the Notes and under the other Loan Documents are joint and several; and each covenant, warranty, representation and agreement of Trustor hereunder and thereunder shall be deemed made by each such person or entity comprising Trustor, both individually and collectively.

6.29Severability. If any term of this Deed of Trust, or the application thereof to any person or circumstances, shall to any extent be invalid or unenforceable, the remainder of this Deed of Trust, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Deed of Trust shall be valid and enforceable to the fullest extent permitted by law.

6.30Successors in Interest. Subject to the limitations herein contained regarding Transfers, the terms, covenants and conditions herein contained shall be binding upon and inure to the benefit of the parties, and their respective heirs, successors and assigns, and shall also be binding upon all tenants, lessees, occupants or other persons in possession of all, or any part of, the Property, or holding under Trustor.

6.31Estoppel Certificates; Information to Third Persons.

6.31.1Execution of Estoppel Certificates. Within ten (10) business days after Beneficiary’s request therefor, Trustor shall deliver a duly acknowledged written statement setting forth the amount of the indebtedness secured by this Deed of Trust, stating either that no setoffs or defenses exist against the Deed of Trust, or, if such setoffs or defenses are alleged to exist, the specific nature thereof, and attesting to such other matters with respect to this Deed of Trust, or any indebtedness secured hereby, which Beneficiary may request. Failure of Trustor to execute, acknowledge and return such statement within the time period herein specified shall be deemed an admission by Trustor that the information contained in the statement is true and correct. Trustor acknowledges that any statement rendered hereunder may be relied upon by any transferee or assignee of Beneficiary, or any other person or entity participating in the Notes or this Deed of Trust.

6.31.2Trustor’s Obligation to Supply Information to Third Persons. If, at any time, Beneficiary desires to sell, transfer or grant a participation interest in all or any portion of the Notes, this Deed of Trust or any other Loan Document to any third person, Trustor shall furnish in a timely manner any and all information concerning the Property and leases thereof, and concerning Trustor’s and the Property’s financial condition, which information is requested by Beneficiary or such person in connection with any such sale, transfer or participation. All such financial information shall conform to the standards set forth in Section 6.12 and shall otherwise be in such form, substance and detail as Beneficiary, or such person, may require.

6.32Commingling of Funds. No sums collected or retained by Beneficiary shall be deemed to be held in trust; and Beneficiary may commingle any and all such funds or proceeds with its general assets and shall not be liable for the payment of any interest or other return thereon, except to the minimum extent required by law.

6.33Certain Warranties and Representations. All representations and warranties contained in any Loan Document, and each representation or warranty of Trustor incorporated by reference therein or herein, and any modification or amendment thereof, shall survive the closing and funding of the loan, shall not be deemed to have merged herein or in any other document or instrument delivered concurrently herewith or hereafter, and shall remain as continuing representations and warranties of Trustor

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so long as any portion of the indebtedness secured hereby remains unpaid.

6.34Trustor Waiver of Rights. Trustor waives, to the extent permitted by law, (a) the benefit of all laws now existing or that may hereafter be enacted providing for any appraisement before sale of any portion of the Property, (b) all rights of redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of the obligation secured hereby in the event of foreclosure of the liens hereby created, (c) all rights and remedies which Trustor may have or be able to assert by reason of the laws of the State of California pertaining to the rights and remedies of sureties, (d) the right to assert any statute of limitations as a bar to the enforcement of the lien of this Deed of Trust or to any action brought to enforce the Notes or any other obligation secured hereby, and (e) any rights, legal or equitable, to require marshalling of assets or to require foreclosure sales in a particular order including any rights under California Civil Code Sections 2899 and 3433. Beneficiary shall have the right to determine the order in which any or all of the Property shall be subjected to the remedies provided herein. Beneficiary shall have the right to determine the order in which any of all portions of the obligations secured hereby are satisfied from the proceeds realized upon the exercise of the remedies provided herein. Nothing contained herein shall be deemed to be a waiver of the Trustor’s rights under Section 2924c of the California Civil Code.

6.35Effect of Waivers. Trustor acknowledges, warrants and represents in connection with each waiver of any right or remedy of Trustor contained in this Deed of Trust, the Notes, or any other Loan Document, that it has been fully informed with respect to, and represented by counsel of its choice in connection with, such rights and remedies, and all such waivers, and after such advice and consultation, has presently and actually intended, with full knowledge of its rights and remedies otherwise available at law or in equity, to waive or relinquish such rights and remedies to the full extent specified in each such waiver.

6.36Late Charges; Past Due Rate; Prepayment. The Loan Agreement may contain provisions imposing a late charge and past due rate of interest if payments are not timely made, and prepayment restrictions and premiums as more particularly described in such Loan Agreement.

6.37Status of Trustee. Trustee shall be the agent of Beneficiary and Trustor hereunder, but only upon and limited solely to the rights, duties, powers, obligations, terms, covenants and conditions contained in this Deed of Trust; and Trustee’s rights, duties and obligations as agent hereunder shall be strictly limited to and construed in accordance with the terms of this Deed of Trust, Beneficiary and Trustor acknowledging their intent that no other right, duty or obligation shall be implied as a result of the agency relationship created hereunder.

6.38Governing Law. This Deed of Trust shall be governed by and construed and enforced in accordance with the laws of the State of California (without regard to conflicts of law), except where federal law is applicable (including, without limitation, any applicable federal law preempting state laws).

6.39Notices. Except when otherwise required by law, any notice which a party is required or may desire to give the other shall be in writing and may be sent by personal delivery or by mail (either [i] by United States registered or certified mail, return receipt requested, postage prepaid, or [ii] by Federal Express or similar generally recognized overnight carrier regularly providing proof of delivery), addressed as follows to Beneficiary and as provided on the Addendum as to Trustor (subject to the right of a party to designate a different address for itself by notice similarly given at least 15 days in advance):

To Beneficiary:

Citibank, N.A.
201 West Lexington Drive
Sixth Floor
Glendale, CA 91203
Attention: Commercial Markets Group/Note Department

with a copy to:

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Citibank, N.A.

One Sansome Street,

21st Floor

San Francisco, California 94104

Attention: Commercial Markets Group

Any notice so given by mail shall be deemed to have been given as of the date of delivery (whether accepted or refused) established by U.S. Post Office return receipt or the overnight carrier’s proof of delivery, as the case may be. Any such notice not so given shall be deemed given upon receipt of the same by the party to whom the same is to be given. Trustor requests that a copy of any notice of default and notice of sale hereunder by mailed to Trustor at the address specified in the Addendum hereto.

6.40Representation by Legal Counsel. Trustor acknowledges that it has been advised by Beneficiary to seek the advice of legal counsel in connection with the negotiation and preparation of the Loan Documents. If Trustor has chosen not to obtain legal representation, whether due to cost considerations or for other reasons, the lack of such representation shall not furnish Trustor with any defense to the enforcement of Beneficiary’s obligations under the Loan Documents.

6.41Reimbursement of Expenses. Trustor shall pay all expenses incurred by Beneficiary in connection with the making or administration of the Loan, including reasonable fees and expenses of Beneficiary’s attorneys, environmental, engineering and other consultants, and fees, charges or taxes for the recording or filing of Loan Documents, audit costs, attorneys’ fees and costs, and inspection fees, and fees and costs relating to settlement of condemnation and casualty awards, and premiums for title insurance and endorsements thereto.

6.43Management. Beneficiary understands that there is currently no property manager of the Property. Trustor agrees that there shall not be a property manager of the Property (nor a change in any manager of the Property) without the prior written consent of Beneficiary, to be granted or withheld by Beneficiary in good faith. Trustor shall not terminate, replace or appoint any manager or terminate, amend or enter into any management agreement for the Property without Beneficiary’s prior written approval, to be granted or withheld by Beneficiary in good faith. Each property manager, if any, shall hold and maintain all necessary licenses, certifications and permits required by law. Trustor shall fully perform all of its covenants, agreements and obligations under any management agreement of the Property. Any management agreement, if any, will be subordinated to Beneficiary’s rights hereunder.

7.Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, TRUSTOR AND BENEFICIARY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS DEED OF TRUST, THE LOAN, OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF BENEFICIARY, TRUSTOR OR TRUSTEE OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOAN OR THE PROPERTY. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BENEFICIARY TO MAKE THE LOAN TO TRUSTOR. NOTWITHSTANDING THE FOREGOING, ANY CONTROVERSY HEREUNDER SHALL BE GOVERNED BY THE TERMS AND CONDITIONS OF THAT CERTAIN ALTERNATIVE DISPUTE RESOLUTION AGREEMENT, DATED AS OF THE DATE HEREOF, BY AND AMONG BORROWER AND LENDER.

[SIGNATURE ARE ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, Trustor has executed this Deed of Trust on the day and year set forth above.

TRUSTOR PLEASE NOTE: IN THE EVENT OF YOUR DEFAULT, THIS DEED OF TRUST AND APPLICABLE LAW PERMITS THE TRUSTEE TO SELL THE PROPERTY AT A SALE HELD WITHOUT SUPERVISION BY ANY COURT AFTER EXPIRATION OF A PERIOD PRESCRIBED BY LAW. SEE SECTION 6.21.1(e) ABOVE FOR A DESCRIPTION OF THIS PROCEDURE. UNLESS YOU PROVIDE AN ADDRESS FOR THE GIVING OF NOTICE, YOU MAY NOT BE ENTITLED TO OTHER NOTICE OF THE COMMENCEMENT OF SALE PROCEEDINGS. BY EXECUTION OF THIS DEED OF TRUST, YOU CONSENT TO THIS PROCEDURE. IF YOU HAVE ANY QUESTIONS CONCERNING IT, YOU SHOULD CONSULT YOUR LEGAL ADVISOR. BENEFICIARY AND TRUSTEE URGE YOU TO GIVE BENEFICIARY PROMPT NOTICE OF ANY CHANGE IN YOUR ADDRESS SO THAT YOU MAY RECEIVE ANY NOTICE OF DEFAULT AND NOTICE OF SALE GIVEN PURSUANT TO THIS DEED OF TRUST.

“TRUSTOR”
OMNIVISION TECHNOLOGIES, INC.,
a Delaware corporation
By:	/s/ James He
Name:	JAMES HE
Title:	COO

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State of California	)
	)	SS.
County of Santa Clara	)

On March 16, 2007 before me, a notary public in and for said State, personally appeared James He, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument, the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature	/s/ Ching-Ning S. Chang	(Seal)
			[STAMP]
Capacity of Signatory Notary Public

CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT

State of California
County of Santa Clara
On March 16, 2007 before me,		Ching-Ning S. Chang
			Name and Title of Officer (e.g., “Jane Doe, Notary Public”)
Personally appeared	James He
			Name(s) of Signer(s)

o personally known to me – OR - x proved to me on the basis of satisfactory evidence to be the person(s) whose
	name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

	WITNESS my hand and official seal.
[STAMP]
	/s/ Ching-Ning S. Chang
	Signature of Notary Public

Exhibit “A”

Legal Description

EXHIBIT A

LEGAL DESCRIPTION

PARCEL A:

PARCEL 1, SO DESIGNATED AND DELINEATED ON THE PARCEL MAP RECORDED SEPTEMBER 27, 1985, IN BOOK 549 OF MAPS, PAGES 53, 54 AND 55, SANTA CLARA COUNTY RECORDS.

TOGETHER WITH A NON-EXCLUSIVE EASEMENT FOR PEDESTRIAN AND VEHICULAR INGRESS AND EGRESS OVER ALL WALKWAYS AND PAVED COMMON AREAS WITHIN PARCEL 2, SO DESIGNATED AND DELINEATED ON SAID PARCEL MAP, AS PROVIDED FOR IN THE DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND DECLARATION OF EASEMENTS RECORDED DECEMBER 27, 1985 IN BOOK J560, PAGE 919, OFFICIAL RECORDS.

PARCEL B:

PARCEL ONE:

ALL OF PARCEL 2, AS SHOWN UPON THAT CERTAIN MAP ENTITLED, “PARCEL MAP BEING A RESUBDIVISION OF ‘PARCEL A’ AS SHOWN UPON THAT CERTAIN PARCEL MAP RECORDED IN BOOK 532 OF MAPS AT PAGE 48 AND 49, RECORDS OF SANTA CLARA COUNTY”, WHICH MAP WAS FILED FOR RECORD IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON SEPTEMBER 27, 1985 IN BOOK 549 OF MAPS, AT PAGES 53, 54 AND 55.

PARCEL TWO:

A NON-EXCLUSIVE EASEMENT FOR PEDESTRIAN AND VEHICULAR INGRESS AND EGRESS OVER ALL WALKWAYS AND PAVED COMMON AREAS WITHIN PARCEL 1, AS SHOWN ON PARCEL MAP ABOVE REFERRED TO, AS PROVIDED FOR IN DECLARATION OF RESTRICTIONS RECORDED IN BOOK J560 OF OFFICIAL RECORDS, PAGE 919.

APN: 104-13-094 (Affects: Parcel A) and 104-13-095 (Affects: Parcel B)

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Exhibit “B”

ADDENDUM TO DEED OF TRUST

The following provisions are made a part of the Deed of Trust with Security Agreement, Assignment of Leases and Fixture Filing (the “Deed of Trust”) to which this Addendum is attached:

1.Impounds for Taxes and Insurance. The obligation to make payments under Section 6.5 shall apply only (a) if Trustor fails for any reason to make payment prior to delinquency of any Taxes and Assessments under Section 6.3, or (b) if Trustor fails for any reason to make payment prior to when due of any premium for any policy of insurance carried under Section 6.4 (or fails to provide timely evidence of such payment of taxes or insurance as provided herein), or (c) at Beneficiary’s option exercised at any time during the existence of any Event of Default.

2.Additional Essential Party. “Additional Essential Parties” shall mean OmniVision Technologies (Hong Kong) Company Limited and OmniVision International Holding Ltd.

3.Notice. The address of the Trustor for notice pursuant to Section 6.39 of the Deed of Trust is as follows:

OmniVision Technologies, Inc.
Attn: General Counsel
1341 Orleans Drive
Sunnyvale, CA 94089

4.Payment obligations under the Loan are absolute and unconditional without any right of rescission, setoff, counterclaim or defense for any reason against Beneficiary. Trustor is unconditionally and irrevocably obligated to make the payments required under the Loan Documents notwithstanding any damage to, defects in or destruction of the Property or any other event, including obsolescence of any property or improvements.

Table of Contents

			Page
1.	DEFINITIONS		1
2.	GRANT IN TRUST		4
3.	ASSIGNMENT OF RENTS		4
4.	OBLIGATIONS SECURED		4
	4.1	Payment of Loan	4
	4.2	Payment of Further Loans	4
	4.3	Performance Under Loan Documents	4
	4.4	Performance Under Interest Rate Agreements	4
5.	SECURITY AGREEMENT AND FIXTURE FILING		5
	5.1	Grant of Security Interest	5
	5.2	Perfection	5
	5.3	Remedies	5
	5.4	Expenses	5
	5.5	Place of Business	5
	5.6	Fixtures	5
6.	COVENANTS		5
	6.1	Performance of Obligations	5
	6.2	Title	6
	6.3	Taxes and Assessments	6
	6.4	Insurance	6
	6.5	Impound Account	8
	6.6	Liens and Encumbrances	9
	6.7	Disposition of Insurance and Condemnation Proceeds and Damages	9
	6.8	Maintenance and Preservation of the Property	11
	6.9	Defense and Notice of Actions	11
	6.10	Collection of Rents, Issues and Profits; Approval of Leases	12
	6.11	Right of Inspection	12
	6.13	Acceptance of Trust	12
	6.14	Powers of Trustee; Indemnity	12
	6.15	Substitution of Trustee	13
	6.16	Acceleration Upon Sale or Further Encumbrance	13
	6.17	Reconveyance	14
	6.18	Defense and Indemnity Rights	14
	6.19	Destruction of Note	14
	6.20	Provisions Relating to Hazardous Materials	14
	6.21	Default Provisions	16
	6.22	Amendments	19
	6.23	Consents	19
	6.24	Further Assurances	19
	6.25	Statement of Condition	19
	6.27	Trustor, Beneficiary and Trustee Defined	19
	6.28	Rules of Construction	19

6.29	Severability	20
6.30	Successors in Interest	20
6.31	Estoppel Certificates; Information to Third Persons	20
6.32	Commingling of Funds	20
6.33	Certain Warranties and Representations	20
6.34	Trustor Waiver of Rights	21
6.35	Effect of Waivers	21
6.36	Late Charges; Past Due Rate; Prepayment	21
6.37	Status of Trustee	21
6.38	Governing Law	21
6.39	Notices	21
6.40	Representation by Legal Counsel	22
6.41	Reimbursement of Expenses	22
6.43	Management	22

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EX-10.20

Exhibit 10.20

STOCK PLEDGE AGREEMENT

THIS STOCK PLEDGE AGREEMENT is entered into as of this 16th day of March, 2007, by OMNIVISION TECHNOLOGIES, INC., a Delaware corporation (“Pledgor”), as pledgor, in favor of CITIBANK N.A., a national banking association (“Secured Party”), as secured party.

WHEREAS, Pledgor has entered into that certain Loan and Security Agreement, dated as of the date hereof (as amended, supplemented or modified from time to time, the “Loan Agreement”), pursuant to which Pledgor agreed to borrow from Secured Party, and Secured Party has agreed to lend to Pledgor (the “Loan”), certain amounts all in accordance with and subject to the terms and conditions set forth in the Loan Agreement, and all other Loan Documents (as defined in the Loan Agreement).

WHEREAS, Pledgor owns the issued and outstanding shares of capital stock and other equity securities and ownership interests of OmniVision International Holdings Ltd. (“Holdings”);

WHEREAS, as a condition precedent to the obligation of Secured Party to execute and deliver and perform under the Loan Agreement and the other Loan Documents, Pledgor is required, and has agreed, to enter into and deliver this Agreement and to pledge to Secured Party, and grant a security interest in, the Pledged Collateral (as hereinafter defined) as security for Pledgor’s obligations under the Loan Agreement; and

WHEREAS, Secured Party is willing to execute, deliver and perform under the Loan Agreement and the other Loan Documents only upon the condition that Pledgor executes and delivers to Secured Party this Agreement and agrees to perform and to comply with its obligations under this Agreement;

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, and as an inducement for Secured Party to enter into the Loan Agreement and the other Loan Documents, the parties hereto, intending to be legally bound hereby, do agree as follows:

1.DEFINITIONS AND REFERENCES

1.1.Defined Terms

As used in this Agreement, the following terms shall have the meanings specified in this Section 1.1:

“Agreement” shall be defined to mean this Stock Pledge Agreement as amended, supplemented or modified from time to time.

“Default” shall mean any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both, would constitute or be or result in an Event of Default hereunder or under any Loan Document.

“Event of Default” shall mean the occurrence of any of the events set forth in Article VI.

“Material Adverse Effect” or “Material Adverse Change” means a material adverse effect on (i) the business, assets, condition (financial or otherwise) or results of operations of Pledgor of any of the obligations secured by the Deed of Trust or this Agreement or hereby, (ii) the ability of Pledgor to perform its obligations under this Agreement (including, without limitation, repayment of the Loans and all amounts secured by the Deed of Trust or this Agreement as they come due), or (iii) the validity or

enforceability of this Agreement or any other agreement or document entered into by any party in connection herewith, or the rights or remedies of Lender hereunder or thereunder.

“Obligations” means all present and future obligations, indebtedness and liabilities of Pledgor under any Loan Documents to Secured Party at any time and from time to time of every kind, nature and description, direct or indirect, secured or unsecured, joint and several, absolute or contingent, due or to become due, matured or unmatured, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, under any of the Loan Documents or otherwise relating to the Loan, including, without limitation, all applicable fees, charges and expenses and/or all amounts paid or advanced by Secured Party on behalf of or for the benefit of Pledgor for any reason at any time, including in each case obligations of performance as well as obligations of payment and interest that accrue after the commencement of any proceeding under any debtor relief law by or against any such Person.

“Pledged Collateral” shall mean, collectively and each individually, sixty-five percent (65%) of the issued and outstanding shares of capital stock of Holdings owned or held of record or beneficially by Pledgor on the date hereof in the amounts set forth on and as listed on Schedule 1.1 (and the certificates, copies of which are attached hereto, representing such shares.

1.2.General Terms

All capitalized terms in this Agreement and not defined herein shall have the defined meanings provided in the Loan Agreement. Unless otherwise specified, as used in this Agreement or in any certificate, report, instrument or other document made or delivered pursuant to this Agreement, all accounting terms not defined in this Agreement or in the Loan Agreement shall have the meanings given to such terms in and shall be interpreted in accordance with GAAP.

2.PLEDGE OF COLLATERAL

(a)As security for the due and punctual payment and performance by Pledgor of all the Obligations, including, without limitation, all of Pledgor’s obligations to Secured Party under the Loan Agreement, this Agreement and the other Loan Documents (collectively, the “Secured Obligations”), Pledgor hereby (i) pledges and assigns to Secured Party all of the Pledged Collateral and all of its right, title and interest in and to the Pledged Collateral, and (ii) grants to Secured Party a continuing first priority security interest in and Lien upon the Pledged Collateral.

(b)Simultaneously with the execution of this Agreement, Pledgor shall deliver to Secured Party all certificates representing the Pledged Collateral described in clause (i) of the definition of Pledged Collateral, and will deliver to Secured Party all certificates representing the Pledged Collateral described in clauses (ii) and (iii) of the definition of Pledged Collateral within ten (10) Business Days after Pledgor’s acquisition of such shares or other equity securities or ownership interests or other items. Each such certificate shall be registered in the name of Pledgor, duly endorsed in blank or accompanied by a stock power duly executed by Pledgor in blank, in form and substance satisfactory to Secured Party, with any and all documentary tax stamps and other documents necessary to cause Secured Party to have a good, valid and perfected continuing first priority pledge of, Lien on and security interest in the Pledged Collateral, free and clear of any mortgage, pledge, Lien, security interest, hypothecation, assignment, charge, right, encumbrance or transfer or other restriction (individually, “Encumbrance” and collectively, “Encumbrances”), including, without limitation, any necessary notations in the corporate or other records books of Pledgor or the entity in which such shares, equity securities or ownership interests evidence an ownership stake. At any time following the occurrence and continuation of an Event of Default, any or all of the Pledged Collateral, at the option of Secured Party exercised in accordance with Section 3 hereof, may be registered in the name of Secured Party or of its nominee, and Pledgor hereby covenants that, upon demand therefor by Secured Party, Pledgor shall or shall cause the entity in which such shares, equity securities or ownership interests evidence an ownership stake to effect such registration. Pledgor acknowledges that Secured Party will engage counsel, at Pledgor’s sole cost and expense, in the

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Cayman Islands to review this Agreement. Without limitation, Pledgor shall take such actions and execute such documents as recommended by such counsel to better evidence or perfect the security interests created by this Agreement.

(c)Secured Party hereby confirms receipt of the certificates representing the Pledged Collateral described in clause (i) of the definition of Pledged Collateral and agrees to hold the Pledged Collateral in accordance with the terms of this Agreement.

(d)In addition to and notwithstanding any other provision of this Agreement, Secured Party, in its sole discretion, shall have the right, at any time that Pledgor fails to do so, without prior notice to Pledgor, to: (i) obtain insurance covering any of the Pledged Collateral to the extent required under the Loan Agreement, if any, (ii) pay for the performance of any of the Pledgor’s obligations hereunder; (iii) discharge taxes, liens, security interests, or other encumbrances at any time levied or placed on any of the Pledged Collateral in violation of this Agreement unless Pledgor is in good faith with due diligence by appropriate proceedings contesting those items; and (iv) pay for the maintenance and preservation of any of the Pledged Collateral to the extent reasonably necessary. Such expenses and advances shall be added to the Secured Obligations until reimbursed to Secured Party and shall be secured by the Pledged Collateral. Any such payments and advances by Secured Party shall not be construed as a waiver by Secured Party of an Event of Default or any other rights, remedies or powers of Secured Party hereunder or otherwise.

(e)Within five (5) Business Days of any request by Secured Party, Pledgor, at its own cost and expense, will duly execute and deliver to Secured Party such financing statements, continuation statements, assignments, certificates and/or such other agreements, assignments, instructions or documents as Secured Party may request relating to the Pledged Collateral or otherwise to enable Secured Party to create, maintain and perfect or from time to time renew the security interests granted hereby or to create, maintain and perfect a security interest in any additional Pledged Collateral hereafter acquired by Pledgor or in any and all additions to and/or replacements, products and proceeds of any of the foregoing, all in form and substance satisfactory to Secured Party. Pledgor will pay all reasonable costs associated therewith, including without limitation, the cost of filing any of the foregoing in all public offices or other locations wherever Secured Party deems filing to be necessary or desirable. Pledgor irrevocably grants Secured Party the right, at Secured Party’s option, to file any or all of the foregoing pursuant to the UCC and otherwise, and Pledgor irrevocably appoints Secured Party as Pledgor’s attorney in fact to execute any of the foregoing in Pledgor’s name and to perform all other acts that Secured Party deems appropriate to perfect and continue the security interests conferred by this Agreement or otherwise to effect fully the purposes, terms and conditions of this Agreement, the Loan Agreement and the other Loan Documents.

(f)No injury to, or loss or destruction of, the Pledged Collateral or any Material Adverse Effect or Material Adverse Change shall relieve Pledgor of any of the Secured Obligations.

3.VOTING RIGHTS, DIVIDENDS AND DISTRIBUTIONS

So long as no Event of Default shall have occurred and be continuing or would result from or be caused by any of the following:

(a)Pledgor shall be entitled to exercise any and all voting and/or consensual rights and powers relating or pertaining to the Pledged Collateral or any part thereof, subject to the terms hereof;

(b)[Omitted]

(c)Secured Party shall execute and deliver (or cause to be executed and delivered) to Pledgor all such proxies, powers of attorney, dividend orders and other instruments as Pledgor may

3

request for the purpose of enabling Pledgor to exercise the voting and/or consensual rights and powers that Pledgor is entitled to exercise pursuant to Section 3(a); and

(d)Upon the occurrence and continuation of an Event of Default, all rights of Pledgor to exercise the voting and/or consensual rights and powers that Pledgor is entitled to exercise pursuant to Section 3(a) shall cease immediately without any notice to Pledgor or action by or on behalf of Secured Party or any other Person, and all such rights thereupon shall become vested in Secured Party automatically without any action by any Person, and Secured Party shall have the sole and exclusive right and authority to exercise such voting and/or consensual rights and powers and/or to receive and retain such dividends. In such case, Pledgor shall execute and deliver such proxies, powers of attorney, dividend orders and other instruments and documents as Secured Party may request or as may be otherwise required or desirable to enable Secured Party to exercise such rights and receive such dividends. In addition, Secured Party is hereby appointed the attorney-in-fact of Pledgor, with full power of substitution, which appointment as attorney-in-fact is irrevocable and coupled with an interest, to take all such actions after the occurrence and continuation of an Event of Default, whether in the name of Secured Party or Pledgor, as Secured Party may consider necessary or desirable for the purpose of exercising such rights and receiving such dividends. Any and all money and other property paid over to or received by Secured Party pursuant to the provisions of this Section 3(d) shall be retained by Secured Party as part of the Pledged Collateral and shall be applied in accordance with the provisions hereof.

4.REMEDIES ON DEFAULT

(a)Notwithstanding and without limiting any other provision of this Agreement or any of the Loan Documents, if at any time an Event of Default shall have occurred and be continuing, then, in addition to having the right to exercise any right or remedy of a secured party upon default under the UCC or applicable law or at equity, Secured Party may, to the extent permitted by law, without being required to give any notice to Pledgor or to take or do any action (except as provided below):

(i)apply any cash held by it hereunder in the manner provided in Section 4(l); and

(ii)if there shall be no such cash or if the cash so applied shall be insufficient to pay in full the items specified in Section 4(l)(i) and 4(l)(ii), collect, receive, appropriate and realize upon the Pledged Collateral or any part thereof, and/or sell, assign, transfer, contract to sell or otherwise dispose of and deliver the Pledged Collateral or any part thereof, in its entirety or in portions, at public or private sale or at any broker’s board, on any securities exchange or at any of Secured Party’s places of business or elsewhere, for cash, upon credit or for future delivery, and at such price or prices as Secured Party may deem best, and Secured Party may (except as otherwise provided by law) be the purchaser of any or all of the Pledged Collateral so sold and thereafter may hold the same, absolutely, free from any right or claim of whatsoever kind.

(b)In the event of a sale as aforesaid, Secured Party may, at any such sale, restrict the number of prospective bidders or purchasers and/or further restrict such prospective bidders or purchasers to Persons who will represent and agree that they are purchasing for their own account, for investment and not with a view to the distribution or resale of the Pledged Collateral, and may otherwise require that such sale be conducted subject to restrictions as to such other matters as Secured Party may deem necessary in order that such sale may be effected in such manner as to comply with all applicable state and federal securities and other laws. Upon any such sale, Secured Party shall have the right to deliver, assign and transfer the Pledged Collateral so sold to the purchaser thereof.

(c)Pledgor hereby acknowledges that, notwithstanding that a higher price might be obtained for the Pledged Collateral at a public sale than at a private sale or sales, the making of a public sale of the Pledged Collateral may be subject to registration requirements under applicable securities laws and other legal restrictions, compliance with which would make a public sale of the Pledged Collateral impractical. Accordingly, Pledgor hereby agrees that private sales made by Secured Party in

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good faith in accordance with the provisions of this Article 4 may be at prices and on other terms less favorable to the seller than if the Pledged Collateral were sold at a public sale, and that Secured Party shall not have any obligation to take any steps in order to permit the Pledged Collateral to be sold at a public sale.

(d)Intentionally omitted.

(e)Each purchaser at any such sale shall hold the property sold, absolutely free from any claim or right whatsoever, including any equity or right of redemption of Pledgor, and Pledgor hereby specifically waives all rights of redemption, stay or appraisal and other rights that Pledgor has or may have under any law, regulation or statute now existing or hereafter adopted or otherwise. Secured Party shall give Pledgor not less than ten (10) calendar days’ written notice of its intention to make any such public or private sale. Such notice, in case of a public sale, shall state the time and place fixed for such sale, and, in case of a sale at broker’s board, on a securities exchange, at one or more of Secured Party’s places of business or elsewhere, shall state the board, exchange or other location at which such sale is to be made and the day on which the Pledged Collateral, or that portion thereof so being sold, will first be offered for sale at such location. Such notice, in case of a private sale, shall state only the date on or after which such sale may be made. Any such notice given as aforesaid shall be deemed to be reasonable notification.

(f)Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as Secured Party may fix in the notice of such sale. At any sale the Pledged Collateral may be sold in one lot as an entirety or in parts, as Secured Party may determine. Secured Party shall not be obligated to make any sale pursuant to any such notice. Secured Party may, without notice or publication, adjourn any sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Pledged Collateral on credit or for future delivery, the Pledged Collateral so sold may be retained by Secured Party until the selling price is paid by the purchaser thereof, but Secured Party shall not incur any liability in case of the failure of such purchaser to take up and pay for the Pledged Collateral so sold and, in case of any such failure, such Pledged Collateral may again be sold upon like notice.

(g)Secured Party, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose its Lien or security interest arising from this Agreement and sell the Pledged Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction.

(h)Notwithstanding and without limiting any other provision of this Agreement or any of the Loan Documents, upon the occurrence and continuation of an Event of Default, Secured Party or its nominee shall have the right, without notice to or the consent of Pledgor, to exercise any and all rights of conversion, exchange or subscription and any other rights, privileges or options pertaining to any of the Pledged Collateral as if it were the absolute owner thereof, including, without limitation, the right to transfer, sell, dispose of or exchange, at its discretion, any or all of the Pledged Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment of Pledgor or subsidiary of Pledgor or such other Person.

(i)On any sale of any part of the Pledged Collateral, Secured Party is hereby authorized to comply with any limitation or restriction in connection with such sale that may be necessary in order to avoid any violation of applicable law or in order to obtain any required approval of the purchaser(s) by any Governmental Authority or officer or court.

(j)Pledgor hereby acknowledges, understands and agrees that Secured Party (i) may exercise its rights under the Loan Documents, whether or not they provide security for any of the Secured Obligations, without exercising its rights hereunder or affecting the security provided hereunder, and (ii) may proceed against all or any portion of the Pledged Collateral and all other collateral securing

5

any of the Secured Obligations in such order and at such time as determined by Secured Party in its sole discretion. Pledgor hereby expressly waives any rights under the doctrine of marshalling of assets.

(k)Pledgor hereby acknowledges, understands and agrees that compliance with the foregoing procedures shall satisfy any applicable requirements that such sale or disposition be made in a commercially reasonable manner.

(l)The proceeds of any collection, recovery, receipt, appropriation, realization, transfer, exchange, disposition or sale as aforesaid shall be applied by Secured Party in the following order:

(i)First, to the payment of all costs and expenses of every kind incurred by Secured Party in connection therewith or incidental to the care, safekeeping or otherwise of any of the Pledged Collateral, and to the payment of all sums which Secured Party may be required or may elect to pay, if any, for taxes, assessments, insurance and other charges upon the Pledged Collateral or any part thereof, and all other payments that Secured Party may be required or authorized to make under any provision of this Agreement including, without limitation, in-house documentation and diligence fees, search, audit, recording, and filing fees and expenses and reasonable attorneys’ fees and expenses;

(ii)Second, to the payment of any other amounts due under the Secured Obligations (to be applied in accordance with the Loan Agreement);

(iii)Third, to the satisfaction of indebtedness secured by any subordinate security interest of record in the Pledged Collateral if written notification of demand therefor is received before distribution of the proceeds is completed; provided that the holder of a subordinate security interest shall furnish reasonable proof of its interest to Secured Party, and unless it does so, Secured Party need not address its claims; and

(iv)Finally, to the payment to Pledgor of any surplus then remaining from such proceeds, unless otherwise required by law or directed by a court of competent jurisdiction; provided that Pledgor shall be liable for any deficiency if such proceeds are insufficient to satisfy all of the Secured Obligations.

5.REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR

(a)Pledgor represents and warrants to Secured Party as of the date hereof (which representations and warranties shall survive the execution and delivery of this Agreement) as follows:

(i)Pledgor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power, right and authority to (A) own the Pledged Collateral, (B) execute, deliver and perform this Agreement, (C) pledge the Pledged Collateral, and (D) grant the security interests and Liens in the Pledged Collateral pursuant to this Agreement and otherwise consummate the transactions contemplated under the other Loan Documents to which it is a party;

(ii)the execution, delivery and performance by Pledgor of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary actions on the part of Pledgor (none of which actions have been modified or rescinded, and all of which actions are in full force and effect), and this Agreement has been duly executed and delivered by Pledgor and constitutes the legal, valid and binding obligation of Pledgor, enforceable against Pledgor in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors’ rights generally and to the effect of general principles of equity which may limit the availability of equitable remedies (whether in a proceeding at law or in equity);

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(iii)Pledgor is with respect to the Pledged Collateral described in the definition of Pledged Collateral, the direct record and beneficial owner of each share, security and other interest that comprises the Pledged Collateral, and Pledgor has and will have good, valid and marketable title thereto, free and clear of all Encumbrances other than the security interests created by this Agreement; and Holdings is the direct record and beneficial owner of each share, security and other interest that comprises ownership interests in “OmniVision Hong Kong” (as defined herein) (other than one share owned by Xiao-Ying Hong and one share owned by Xinping He (both of which shares are held in trust for Pledgor)) and Holdings has and will have good, valid and marketable title thereto, free and clear of all Encumbrances;

(iv)all of the Pledged Collateral has been, or, with respect to the Pledged Collateral described in the definition of Pledged Collateral not later than the time of delivery of certificates therefor will be, duly and validly issued, fully paid and nonassessable;

(v)the Pledged Collateral described in the definition of Pledged Collateral constitutes 65% of the issued and outstanding capital stock of Holdings (calculated on a fully diluted, as converted basis);

(vi)the Pledged Collateral is and will be duly and validly pledged to Secured Party in accordance with law, and Secured Party has a good, valid and perfected first priority Lien on and security interest in the Pledged Collateral and the proceeds thereof subject to no Encumbrances in favor of any other Person;

(vii)the execution, delivery and performance by Pledgor of this Agreement and the. consummation of the transactions and the creation and granting of the security interests and Liens contemplated thereby do not and will not (A) conflict with or violate the certificate of incorporation, by-laws, limited liability agreement or similar documents of Pledgor or of any entity whose securities constitute part of the Pledged Collateral or any agreement by and between Pledgor or any such entity and its respective shareholders or equity owners or among any such shareholders or equity owners; (B) conflict with, result in a breach of, constitute a default of or an event of default under, or any event, fact, condition or circumstance which, with notice or passage of time or both, would constitute or result in a conflict, breach, default or event of default under, require any consent not obtained under, or result in or require the acceleration of any indebtedness pursuant to, any agreement, indenture or other instrument to which Pledgor or any entity whose securities constitute part of the Pledged Collateral is a party or by which Pledgor or any entity whose securities constitute part of the Pledged Collateral or any of its or their respective properties or assets are bound or subject, the effect of which could reasonably be expected to have or result in a Material Adverse Effect; (C) conflict with or violate any provision of any applicable law, statute, rule, regulation, ordinance, license or tariff or any judgment, decree or order of any court or other Governmental Authority binding on or applicable to Pledgor or any entity whose securities constitute part of the Pledged Collateral or any of its or their respective properties or assets or any of the Pledged Collateral, or (D) result in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of Pledgor or any entity whose securities constitute part of the Pledged Collateral except those contemplated hereunder;

(viii)no approval, consent or authorization of, filing, registration or qualification with, or other action by, Pledgor or any entity whose securities constitute part of the Pledged Collateral, any Governmental Authority or any other Person is or will be necessary to permit the valid execution, delivery or performance of this Agreement by Pledgor or consummation of the transactions or creation or granting of the Liens and security interests contemplated hereby;

(ix)there is no action, claim, suit, proceeding or investigation pending or, to the knowledge of Pledgor, currently threatened against or affecting the Pledged Collateral, or Pledgor or any entity whose securities constitute part of the Pledged Collateral, or this Agreement or the transactions contemplated hereby, before or by any court, arbitrator or Governmental Authority (a) that questions or could prevent the validity of this Agreement or the right or ability of Pledgor to enter into this Agreement or to consummate the transactions or create or grant the Liens and security interests contemplated hereby,

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(b) that could reasonably be expected to have or result in, either individually or in the aggregate, any Material Adverse Change or Material Adverse Effect, or (c) that could reasonably be expected to result in any change in the current equity ownership of Pledgor or any entity whose securities constitute part of the Pledged Collateral or otherwise in a Change of Control, nor is Pledgor aware that there is any basis for any of the foregoing;

(x)neither Pledgor nor any entity whose securities constitute part of the Pledged Collateral is (A) a party or subject to any judgment, order or decree or any agreement, document or instrument or subject to any restriction, any of which do or would materially adversely affect or prevent Pledgor’s ability to execute or deliver, or perform under, consummate the transactions contemplated by or to observe the covenants and agreements contained in, this Agreement; (B) to Pledgor’s knowledge, in default or breach of the performance, observance or fulfillment of any obligation, covenant or condition contained in any agreement, document or instrument to which Pledgor or such entity is a party or by which any of its or their properties or assets are bound or subject, which default or breach, if not remedied within any applicable grace or cure period could reasonably be expected to have or result in a Material Adverse Effect, nor is there any event, fact, condition or circumstance which, with notice or passage of time, or both, would constitute or result in a conflict, breach, default or event of default under, any of the foregoing which, if not remedied within any applicable grace or cure period could reasonably be expected to have or result in a Material Adverse Effect; or (C) a party or subject to any agreement (oral or written), document or instrument with respect to, or obligation to pay any, service or management fee with respect to the ownership, operation, leasing or performance of any of its business or any facility, nor is there any manager with respect to any such facility.

(xi)[omitted];

(xii)the obligations of Pledgor under this Agreement are not subordinated in any way to any other obligation of Pledgor or to the rights of any other Person; and

(xiii)Other than the capital stock, there are no equity securities or other ownership interests in Holdings (nor will any be issued).

(b)Until all Obligations have been performed and satisfied in full and indefeasibly paid in full in cash and the Loan Agreement has been terminated, Pledgor hereby covenants that:

(i)Pledgor shall not sell, lease, transfer, pledge, assign or otherwise dispose of any of the Pledged Collateral or any interest therein or any other interest in Holdings, and Pledgor shall not create, incur, assume or suffer to exist any Encumbrance upon, in, against or with respect to any of the Pledged Collateral or any interest therein (except pursuant hereto) or any other interest in Holdings nor shall Pledgor permit Holdings to sell, lease, transfer, pledge, assign or otherwise dispose of any interest of Holdings in OmniVision Technologies (Hong Kong) Company Limited (“OmniVision Hong Kong”) or any interest therein, and Holdings shall not create, incur, assume or suffer to exist any Encumbrance upon, in, against or with respect to any interest of Holdings in OmniVision Hong Kong;

(ii)Pledgor shall at all times retain complete control over Holdings and Holdings shall retain complete control over OmniVision Hong Kong;

(iii)Pledgor shall, and shall cause each entity whose securities constitute part of the Pledged Collateral to: (A) preserve and maintain its existence in good standing (except as permitted or required under the Loan Agreement); (B) comply with all laws, rules, statutes, regulations, ordinances and tariffs and orders of all applicable Governmental Authorities with respect to or applicable to its business, assets or operations or to any of the Pledged Collateral, except where the failure to comply could not reasonably be expected to have or result in a Material Adverse Effect; and (C) promptly upon the occurrence thereof and in any event within three (3) calendar days after Pledgor or any Authorized Officer of Pledgor obtains knowledge thereof, give written notice to Secured Party of (1) any action, suit, litigation, investigation, arbitration, dispute resolution proceeding or proceeding of any kind

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pending, instituted or threatened against or affecting, involving or relating to Pledgor, any such entity or the Pledged Collateral or any of their respective properties or assets, whether or not the claim is covered by insurance, to the extent the amount in controversy exceeds $10,000,000 (2) the filing, recording or assessment of any federal, state, local or foreign tax lien against the Pledged Collateral, Pledgor or any such entity, (3) the occurrence of any Default or Event of Default, which notice shall specify the nature and status thereof, the period of existence thereof and what action is proposed to be taken with respect thereto, (4) the occurrence or existence of any event, fact, circumstance or condition which constitutes or results in, or would constitute or result in with the giving of notice or passage of time or both, an Event of Default, which notice shall specify the nature and status thereof, the period of existence thereof and what action is proposed to be taken with respect thereto, and (5) any other development, event, fact, circumstance, condition or action of any nature against or affecting Pledgor or any such entity or otherwise, which could reasonably be expected to have, lead to or result in a Material Adverse Effect, a Default or an Event of Default, in each case describing the nature and status thereof and the action Pledgor proposes to take with respect thereto, and (6) any matter(s) materially affecting the value, enforceability or collectability of any of the Pledged Collateral.

(iv)Pledgor shall, and shall cause each entity whose securities constitute part of the Pledged Collateral to, (a) perform in accordance with its terms every contract, agreement or other arrangement (oral or written) to which it is a party or by which it or any of the Pledged Collateral is bound, except where the failure to perform could not reasonably be expected to have or result in a Material Adverse Effect, (b) comply with all laws, statutes, rules, regulations, ordinances and tariffs of any applicable Governmental Authority with respect or applicable to its business, assets or operations or to the Pledged Collateral, except where the failure to comply could not reasonably be expected to have or result in a Material Adverse Effect, (c) pay, discharge or otherwise satisfy at or before maturity (subject where applicable to specified grace periods and, in the case of the trade payable, to ordinary course payment practices) all of its and/or their material obligations and liabilities of whatsoever nature, except when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and it shall have provided for such reserves as Secured Party may deem proper and necessary in its sole discretion, (d) pay all taxes, assessments, fees, governmental charges, claims for labor, supplies, rent and all other obligations or liabilities of any kind of or imposed upon such Person or upon the Pledged Collateral, except liabilities being contested in good faith and against which adequate reserves have been established, except where the failure to pay could not reasonably be expected to have or result in a Material Adverse Effect, (e) obtain and deliver all required consents, approvals and agreements from such third parties as Secured Party shall determine are necessary or desirable in its good-faith discretion that are satisfactory to Secured Party with respect to (I) this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby, (II) claims against Pledgor, any such entity or any of the Pledged Collateral, and/or (III) any agreement (oral or written), consent, document or instrument to which any of them is a party or by which any of their properties or assets are bound or subject, (f) perform in accordance with its terms every contract, agreement or other arrangement (oral or written) to which it is a party or by which it or any of the Pledged Collateral is bound, and (g) furnish to Secured Party such additional information as Secured Party may reasonably request from a credit or security perspective or otherwise from time to time;

(v)Pledgor shall, and shall cause each entity whose securities constitute part of the Pledged Collateral to, keep true, complete and accurate books of record with respect to the Pledged Collateral in accordance with commercially reasonable business practices; and

(vi)Pledgor shall not take or permit to be taken, or permit or cause any entity whose securities constitute part of the Pledged Collateral to take or permit to be taken, any action in connection with the Pledged Collateral or otherwise which would impair the value of the Pledged Collateral or any portion thereof or the value of the interests or rights of Pledgor or Secured Party therein or with respect thereto, including, without limitation, any amendment to or modification of the certificate of incorporation (or similar charter documents) or bylaws (or similar documents) of Pledgor or such Person which would result in or cause any of the foregoing.

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(vii)Without Secured Party’s prior written consent, no distributions in property, returns of capital, dividends and other distributions made on or in respect of the Pledged Collateral shall occur, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock, equity securities or other ownership interests of Pledgor, or received in exchange for the Pledged Collateral or any part thereof or as a result of any merger, consolidation, acquisition, transfer, sale or disposition of the Pledged Collateral or other exchange of assets to which Pledgor may be a party or otherwise.

6.EVENTS OF DEFAULT

(a)The occurrence of any one or more of the following shall constitute an “Event of Default” under this Agreement:

(i)Pledgor shall fail to perform, observe or comply with any covenant, obligation or agreement set forth in this Agreement; provided that Pledgor shall have the right to cure such breach within ten (10) days after discovery of such breach (except that, if the breach is such that it cannot be remedied within said ten (10) day period, and Pledgor promptly commences the remedy of such breach within ten (10) days of the start of such ten (10) day period and diligently pursues such remediation to completion, then such ten (10) day period shall be extended to such period of time as may be reasonably necessary, but in no event more than a total of thirty (30) days));

(ii)any representation or warranty made or deemed made by Pledgor in this Agreement shall not be true and correct in all material respects or shall have been false or misleading in any material respect on the date when made or deemed to have been made (except to the extent the representation or warranty is already qualified by materiality or the phrase “Material Adverse Effect” or “Material Adverse Change,” in which case it shall be true and correct in all respects and shall not be false or misleading in any respect); provided that in the event that Pledgor did not know, or have a reasonable basis to know, that such representations or warranties were untrue, Pledgor shall have the right to cure the condition causing such representations or warranties to be untrue with ten (10) days after discovery of the inaccuracy of such representation or warranty (except that, if the condition is such that it cannot be remedied within said ten (10) day period, and Pledgor promptly commences the remedy of such condition within ten (10) days of the start of such ten (10) day period and diligently pursues such remediation to completion, then such ten (10) day period shall be extended to such period of time as may be reasonably necessary, but in no event more than a total of thirty (30) days));

(iii)Holdings shall sell, lease, transfer, pledge, assign or otherwise dispose of any of its ownership interest in OmniVision Technologies (Hong Kong) Company Limited (the “Hong Kong Interest”), or shall create, incur, assume or suffer to exist any Encumbrance upon, in, against or with respect to any of the Hong Kong Interest, without the prior written consent of Secured Party;

(iv)any Event of Default under any Loan Document shall occur and be continuing past any cure period and shall not have been waived in writing; or

(v)this Agreement shall cease to be in full force and effect or any Lien or security interest created hereunder shall cease to constitute a valid perfected first priority Lien and security interest on the Pledged Collateral.

(b)Notwithstanding and without limiting or being limited by any other provision of this Agreement or the Loan Documents, upon the occurrence and continuation of any Event of Default, Secured Party may, by notice to Pledgor take any actions permitted hereunder or under the Loan Documents.

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7.MISCELLANEOUS PROVISIONS

7.1.Expenses

Without limiting or being limited by any other provision of this Agreement or the Loan Documents, Pledgor shall pay all costs and expenses incurred by Secured Party or any of its Affiliates, including, without limitation, documentation and diligence fees and expenses, all search, audit, appraisal, recording, professional and filing fees and expenses and all other out-of-pocket charges and expenses (including, without limitation, UCC and judgment and tax lien searches and UCC filings and fees for post-Closing UCC and judgment and tax lien searches), and reasonable attorneys’ fees and expenses, (a) in any effort to enforce this Agreement, any other Loan Document and/or any related agreement, document or instrument, or to effect collection hereunder or thereunder, (b) in connection with entering into, negotiating, preparing, reviewing and executing this Agreement and the other Loan Documents and all related agreements, documents and instruments, (c) arising in any way out of administration of the Obligations or the security interests or Liens created hereunder, (d) in connection with instituting, maintaining, preserving and enforcing Secured Party’s rights hereunder and enforcing and/or foreclosing on the security interests and/or Liens in any of the Pledged Collateral, through judicial process or otherwise, (e) in defending or prosecuting any actions, claims or proceedings arising out of or relating to this Agreement and/or any related agreement, document or instrument, (f) in seeking or receiving any advice with respect to its rights and obligations under this Agreement, any of the other Loan Documents and/or all related agreements, documents and instruments, and/or (g) in connection with any modification, supplement, amendment, waiver or extension of this Agreement, any other Loan Document or any related agreement, document or instrument, and all of the same may be charged to Pledgor’s account and shall be part of the Obligations. In addition and without limiting the foregoing, Pledgor shall pay all taxes based upon or measured by Secured Party’s income or revenues or any personal property tax), if any, in connection with the issuance of any Note and the recording of the security documents and financing statements therefore and pursuant to the Security Documents.

7.2.Notices

Any notice or request under this Agreement shall be given to any party to this Agreement at such party’s address set forth below, or at such other address as such party may hereafter specify in a notice given in the manner required under this Section 7.2:

Pledgor:

OmniVision Technologies, Inc.
1341 Orleans Drive
Sunnyvale, California 94089
Attention: General Counsel

Secured Party:

Citibank N.A.
201 West Lexington Drive,
6th Floor
Glendale, California 91203

Any notice or request hereunder shall be given only by, and shall be deemed to have been received upon (each, a “Receipt”): (i) registered or certified mail, return receipt requested, on the date on which such mail is received as indicated in such return receipt, (ii) delivery by a nationally recognized overnight courier, one (1) Business Day after deposit with such courier, or (iii) facsimile or electronic transmission, in each case upon telephone or further electronic communication from the recipient acknowledging receipt (whether automatic or manual from recipient), as applicable.

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7.3.Delay

No course of action or dealing, renewal, release or extension of any provision of this Agreement, or single or partial exercise of any such provision, or delay, failure or omission on Secured Party’s part in enforcing any such provision shall affect the liability of Pledgor or operate as a waiver of such provision or affect the liability of Pledgor or preclude any other or further exercise of such provision. No waiver by any party to any Loan Document of any one or more defaults by any other party in the performance of any of the provisions of any Loan Document shall operate or be construed as a waiver of any future default, whether of a like or different nature, and each such waiver shall be limited solely to the express terms and provisions of such waiver. Notwithstanding any other provision of any Loan Document, by completing the Closing under this Agreement, Secured Party does not waive any breach of any representation or warranty of under any Loan Document, and all of Secured Party’s claims and rights resulting from any such breach or misrepresentation are specifically reserved.

7.4.Release of Pledged Collateral

Promptly following full performance and satisfaction and indefeasible payment in full in cash of the Secured Obligations and the termination of the Loan Agreement, the security interests and Liens created hereby shall terminate and Secured Party shall execute and deliver such documents, at Pledgor’s expense, as are necessary to release Secured Party’s security interests and Liens in the Pledged Collateral and shall return the Pledged Collateral to Pledgor at the address of Pledgor set forth herein or at such other address as Pledgor may direct in writing. Secured Party shall not be deemed to have made any representation or warranty with respect to any Pledged Collateral so delivered, except that such Pledged Collateral is free and clear, on the date of such delivery, of any and all liens, charges and encumbrances arising from Secured Party’s own acts.

7.5.Successors and Assigns; Participations; New Secured Parties

This Agreement shall inure to the benefit of Secured Party, Transferees and all future holders of any Note, the Obligations and/or any of the Pledged Collateral, and each of their respective successors and assigns. This Agreement shall be binding upon the Persons’ other than Secured Party that are parties thereto and their respective successors and assigns, and no such Person may assign, delegate or transfer this Agreement or any of its rights or obligations thereunder without the prior written consent of Secured Party. No rights are intended to be created under this Agreement for the benefit of any third party donee, creditor or incidental beneficiary of Pledgor. Nothing contained in any Loan Document shall be construed as a delegation to Secured Party of any other Person’s duty of performance. PLEDGOR ACKNOWLEDGES AND AGREES THAT SECURED PARTY AT ANY TIME AND FROM TIME TO TIME MAY (I) DIVIDE AND RESTATE ANY NOTE, AND/OR (II) SELL, ASSIGN OR GRANT PARTICIPATING INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY LOAN DOCUMENT, NOTE, THE OBLIGATIONS AND/OR THE PLEDGED COLLATERAL TO OTHER PERSONS (EACH SUCH TRANSFEREE, ASSIGNEE OR PURCHASER, A “TRANSFEREE”). Each Transferee shall have all of the rights and benefits with respect to the Secured Obligations and Pledged Collateral held by it as fully as if the original holder thereof, and either Secured Party or any Transferee may be designated as the sole agent to manage the transactions and obligations contemplated therein; provided that, notwithstanding anything to the contrary in any Loan Document, Pledgor shall not be obligated to pay under this Agreement to any Transferee any sum in excess of the sum which Pledgor would have been obligated to pay to Secured Party had such participation not been effected. Notwithstanding any other provision of any Loan Document, Secured Party may disclose to any Transferee all information, reports, financial statements, certificates and documents obtained under any provision of any Loan Document.

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7.6.Severability; Captions; Counterparts; Facsimile Signatures

If any provision of this Agreement is adjudicated to be invalid under applicable laws or regulations, such provision shall be inapplicable to the extent of such invalidity without affecting the validity or enforceability of the remainder of this Agreement which shall be given effect so far as possible. The captions in this Agreement are intended for convenience and reference only and shall not affect the meaning or interpretation of this Agreement. The Agreement may be executed in one or more counterparts (which taken together, as applicable, shall constitute one and the same instrument) and by facsimile transmission, which facsimile signatures shall be considered original executed counterparts. Each party to this Agreement agrees that it will be bound by its own facsimile signature and that it accepts the facsimile signature of each other party.

7.7.Survival

It is the express intention and agreement of the parties hereto that all obligations, covenants, agreements, representations, warranties, waivers and indemnities made by Pledgor herein shall survive the execution, delivery and termination of this Agreement until all Secured Obligations are performed in full and indefeasibly paid in full in cash and the Loan Agreement is terminated.

7.8.Governing Law; Jurisdiction; Service of Process; Venue

This Agreement and all acts and transactions hereunder and all rights and obligations of Secured Party and Pledgor shall be governed by the internal laws of the State of California, without regard to its conflicts of law principles. As a material part of the consideration to Secured Party to enter into this Agreement, Pledgor (a) agrees that all actions and proceedings relating directly or indirectly to this Agreement shall, at Secured Party’s option, be litigated in courts located within California, and that the exclusive venue therefor shall be in the City and County of San Francisco, California; (b) consents to the jurisdiction and venue of any such court and consents to service of process in any such action or proceeding by personal delivery or any other method permitted by law; and (c) waives any and all rights Pledgor may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding.

7.9.Indemnity

Pledgor jointly and severally shall indemnify Secured Party, its affiliates and its and their respective managers, members, officers, employees, affiliates, agents, representatives, successors, assigns, accountants and attorneys (collectively, the “Indemnified Persons”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable fees and disbursements of counsel and in-house documentation and diligence fees and legal expenses) which may be imposed on, incurred by or asserted against any Indemnified Person with respect to or arising out of, or in any litigation, proceeding or investigation instituted or conducted by any Person with respect to any aspect of, or any transaction contemplated by or referred to in, or any matter related to, this Agreement, whether or not such Indemnified Person is a party thereto, except to the extent that any of the foregoing arises out of the gross negligence or willful misconduct of such Indemnified Person. If any Indemnified Person uses in-house counsel for any purpose for which Pledgor is responsible to pay or indemnify, Pledgor expressly agrees that its indemnification obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by such Indemnified Person in its sole discretion for the work performed. Secured Party agrees to give Pledgor reasonable notice of any event of which Secured Party becomes aware for which indemnification may be required under this Section 7.9, and Secured Party may elect (but is not obligated) to direct the defense thereof, provided that the selection of counsel shall be subject to Pledgor’s consent, which consent shall not be unreasonably withheld or delayed. Any Indemnified Person may, in its reasonable discretion, take such actions as it deems necessary and appropriate to

13

investigate, defend or settle any event or take other remedial or corrective actions with respect thereto as may be necessary for the protection of such Indemnified Person or the Pledged Collateral. Notwithstanding the foregoing, if any insurer agrees to undertake the defense of an event (an “Insured Event”), Secured Party agrees not to exercise its right to select counsel to defend the event if that would cause Pledgor’s insurer to deny coverage; provided, however, that Secured Party reserves the right to retain counsel to represent any Indemnified Person with respect to an Insured Event at its sole cost and expense. To the extent that Secured Party obtains recovery from a third party other than an Indemnified Person of any of the amounts that Pledgor has paid to Secured Party pursuant to the indemnity set forth in this Section 7.9, then Secured Party shall promptly pay to Pledgor the amount of such recovery.

7.10.Waiver of Notice; Waiver of Statute of Limitations; Defenses

Pledgor hereby waives demand, presentment, protest, notice of dishonor or non-payment, as well as all defenses with respect to any and all instruments, notice of acceptance hereof, notice of Loans or Advances made, credit extended, collateral received or delivered, or any other action taken by Secured Party in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein. The pleading of any statute of limitations as a defense to any demand against Pledgor hereunder and under the Loan Documents is expressly waived by Pledgor. Pledgor hereby waives any and all defenses and counterclaims it may have or could interpose in any action or procedure brought by Secured Party to obtain an order of court recognizing the assignment of or security interests and Liens of Secured Party in and to the Pledged Collateral.

7.11.Jury Waiver

TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALING OF THE PARTIES WITH RESPECT TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.

7.12.Entire Agreement

This Agreement and the other Loan Documents to which Pledgor is a party constitute the entire agreement between Pledgor and Secured Party with respect to the subject matter hereof and thereof, and supersede all prior agreements and understandings, if any, relating to the subject matter hereof or thereof. Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing signed by Pledgor and Secured Party. No provision of this Agreement may be changed, modified, amended, restated, waived, supplemented, discharged, canceled or terminated orally or by any course of dealing or in any other manner other than by an agreement in writing signed by Secured Party and Pledgor. Each party hereto acknowledges that it has been advised by counsel in connection with the negotiation and execution of this Agreement and is not relying upon oral representations or statements inconsistent with the terms and provisions hereof.

7.13.No Duty of Secured Party

Secured Party shall have no responsibility for or obligation or duty with respect to all or any part of the Pledged Collateral or any matter or proceeding arising out of or relating thereto, including

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without limitation, any obligation or duty to collect any sums due in respect thereof or to protect or preserve any rights pertaining thereto.

7.14.[omitted].

7.15Release of Secured Party

Notwithstanding any other provision of this Agreement or any other Loan Document, Pledgor voluntarily, knowingly, unconditionally and irrevocably, with specific and express intent, for and on behalf of itself and its Affiliates and its and their respective heirs, managers, members, directors, officers, employees, shareholders, Affiliates, agents, representatives, accountants, attorneys, successors and assigns and their respective Affiliates (collectively, the “Releasing Parties”) hereby does fully and completely release and forever discharge the Indemnified Parties and any other Person, business or insurer which may be responsible or liable for the acts or omissions of any of the Indemnified Parties, or who may be liable for the injury or damage resulting therefrom (collectively, with the Indemnified Parties, the “Released Parties”), of and from any and all actions, causes of action, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity or otherwise, whether matured or unmatured, vested or contingent, whether or not resulting from acts or conduct of any or all of them, that the Releasing Parties or any of them have against the Released Parties or any of them (whether directly or indirectly) at any time and as of the date each advance of Loan proceeds is made or requested hereunder or any other financial accommodation is made or extended to Pledgor hereunder or under any Loan Document; provided, however, that such release shall not apply to the extent liability arises due to the gross negligence or willful misconduct of the Released Parties. Pledgor acknowledges that the foregoing release is a material inducement to Secured Party’s decision to extend to Pledgor the financial accommodations under the Loan Documents and has been relied upon by Secured Party in agreeing to make the Loans and in making each Advance thereunder.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

15

IN WITNESS WHEREOF, Pledgor hereto has duly executed this Stock Pledge Agreement as of the date first written above.

OMNIVISION TECHNOLOGIES, INC.
a Delaware corporation
By:	/s/ JAMES HE
Name:	James He
Title:	COO

16

Stock Pledge Agreement

Schedule 1.1

Name of Entity	Class or Series of Securities	Number of Securities	Certificate  Representing Such Securities
OmniVision International Holding Ltd.	Ordinary	65,000	1

17

OMNIVISION INTERNATIONAL HOLDING LTD.

NUMBER		SHARES
	INCORPORATED IN THE CAYMAN ISLANDS UNDER THE COMPANIES LAW	100,000
1		Ordinary
	CAPITAL OF US$50,000 DIVIDED INTO 5,000,000 SHARES
	OF A NOMINAL OR PAR VALUE OF US$0.01

This certifies that OmniVision Technologies, Inc. of 930 Thompson Place, Sunnyvale, CA 94085, USA is the registered holder of one hundred thousand Shares fully paid and non-assessable, subject to the Memorandum and the Articles of Association of the Company, and transferable only on the books of the Company by the holder hereof in person or by Attorney upon surrender of this certificate properly endorsed.

Given under the Common Seal of the said Company

this 15th day of November, 2000

The Common Seal of the Company was		hereunto affixed in the presence of
	CAYMAN
/s/ Shaw Hong
Director	ISLANDS

EX-10.21

Exhibit 10.21

PROMISSORY NOTE SECURED BY DEED OF TRUST
(Term Loan)

$12,000,000.00	San Francisco, California
	March 16, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to CITIBANK N.A., a national banking association (“Lender”), or order, during regular business hours at 210 West Lexington Drive, Sixth Floor, Glendale, CA 91203, Attention: Commercial Markets Group/Note Department, or at such other place as Lender may from time to time designate by written notice to Borrower, with sufficient information to identify the source and application of such payment, the sum of up to Twelve Million and No/100 Dollars ($12,000,000.00) (the “Loan”) together with interest on the balance of outstanding principal from the disbursement dates thereof at the per annum rate set forth below. All calculations of interest hereunder shall be computed on the basis of the actual number of days elapsed over a 360-day year. The Loan is made pursuant to the terms and conditions of that certain Loan Agreement dated as of the date hereof, between Borrower and Lender (as it may be amended, supplemented or otherwise modified from time to time, the “Loan Agreement”). Capitalized terms used but not defined herein shall have the meanings given them in the Loan Agreement.

1.Interest and Payments.

(a)Borrower promises to pay interest on the outstanding principal amount of the Loan from the date of any advance of funds until such principal amount is irrevocably paid in full in cash pursuant to and as required by the terms of the Loan Agreement.

(b)Payments of interest, principal and any other fees and costs under the Loan shall be made, when due, in accordance with the terms and conditions of the Loan Agreement. Any payments of principal or interest or other amounts on or payments under this Note not paid automatically as provided in the Loan Agreement shall be paid to Lender only by wire transfer on the date when due, without any deduction whatsoever, including any deduction for any setoff or counterclaim, in U.S. Dollars in immediately available funds as required in the Loan Agreement.

2.Maturity. Unless earlier due and payable or accelerated under the Loan Agreement, this Note shall mature, and the outstanding principal balance hereunder, together with all other outstanding amounts due hereunder and under the Loan Agreement, shall become due and payable in full on the Maturity Date.

3.Default Rate. Notwithstanding any other provision of this Note the default rate set forth in the Loan Agreement shall apply to this Note as and when provided therein.

4.Loan Agreement. This Note is referred to in, made pursuant to, and entitled to the benefits of, the Loan Agreement and the other Loan Documents. The Loan Agreement and the other Loan Documents among other things contain provisions for acceleration of the maturity hereof upon the happening of certain stated events upon the terms and conditions therein specified, and contain provisions defining an Event of Default and the rights and remedies of Lender upon the occurrence of an Event of Default.

5.Prepayments. This Note may be prepaid in whole or in part upon notice to Lender and shall be prepaid in whole, in each case as provided or required in the Loan Agreement and upon payment of all fees and other obligations set forth therein or otherwise secured by the Deed of Trust (the “Obligations”). No payment or prepayment of any amount shall entitle any Person to be subrogated to the rights of Lender hereunder or under the Loan Agreement unless and until the Obligations have been performed in full and paid irrevocably in full in cash and the Loan Agreement has been terminated.

6.Payments Due on a Day other than a Business Day. If any payment to be made on or under this Note is stated to be due or becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to, and such payment shall be made on, the next succeeding Business Day, and such extension of time in such case shall be included in the computation of payment of any interest (at the interest rate then in effect during such extension) and/or fees, as the case may be.

7.Application of Payments. Each payment hereunder shall be applied when received first to the payment of any unpaid “Past Due Charge” (as defined below in the Loan Agreement) and then to the payment of accrued interest on the principal balance from time to time remaining unpaid and then to reduce principal, except that if any amounts due under the terms of Section 7 hereof or the Deed of Trust have not been repaid, then any monies received, at the option of Lender, may first be applied to repay such amounts and interest thereon and the balance, if any, be applied as herein specified. No such application by Lender shall constitute a cure or waiver of any default by Borrower under the “Deed of Trust” or under this Note. Borrower hereby waives any rights and benefits, if any, that may arise under or by virtue of California Civil Code Section 2822(a). Without limitation of the foregoing, in the event of any partial payment hereunder, Lender shall have the sole right and authority to determine which portion of the indebtedness evidenced hereby any partial payment may be applied against, if any; provided that, nothing in the foregoing shall impose upon Lender any duty or obligation to accept or apply any partial payment received by Lender hereunder or under the Deed of Trust except as expressly provided for herein or in the Deed of Trust.

8.Default; Acceleration. This Note is secured by that certain Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing, made by Borrower, as trustor, for the benefit of Lender, as beneficiary, concurrently herewith (the “Deed of Trust”). Upon the occurrence of an Event of Default, then, or at any time thereafter, the whole of the unpaid principal hereof, together with accrued and outstanding interest and all other sums required to be paid under this Note or the Deed of Trust or the Loan Agreement shall, at the election of Lender and without notice of such election, become immediately due and payable. Lender’s election may be exercised at any time after any such Event of Default, and the acceptance of one or more payments hereon from any person thereafter shall not constitute a waiver of Lender’s election, or of its option to make such election.

9.Costs. Borrower promises to pay to Lender, within five (5) Business Days after written notice from Lender, all costs, expenses, disbursements, property taxes, escrow fees, title charges, reasonable legal fees and expenses, actually incurred by Lender or its counsel in the negotiation, funding, administration, enforcement or attempted enforcement, by foreclosure or otherwise, of this Note or the Deed of Trust. Without limitation on the foregoing, Borrower agrees to pay all costs of collection, including reasonable attorneys’ fees and costs (whether or not for salaried attorneys regularly employed by Lender) and all costs of any action or proceeding (including any bankruptcy proceeding or any non-judicial foreclosure or private sale), in the event any payment is not paid when due, or in case it becomes necessary to enforce any other obligation of Borrower hereunder or to protect the security for the indebtedness evidenced hereby, or for the foreclosure by Lender of the Deed of Trust, or in the event Lender is made a party to any litigation because of the existence of the indebtedness evidenced by this Note, or because of the existence of the Deed of Trust. All such costs are secured by the Deed of Trust.

10.Waivers. Borrower hereby waives diligence, presentment, protest and demand, and notice of protest, of demand, of nonpayment, of dishonor and of maturity and agrees that time is of the essence of every provision hereof. Any such renewal, extension or modification, or the release or substitution of any person or security for the indebtedness evidenced hereby, shall not affect the liability of any of such parties for the indebtedness evidenced by this Note or the obligations under the Deed of Trust. Any such renewals, extensions, modifications, releases or substitutions may be made without notice to any of such parties. Any such renewals, extensions, modifications, releases or substitutions may be made without notice to any of such parties.

11.Remedies Cumulative. The rights and remedies of Lender as provided in this Note and in the Deed of Trust and in the Loan Agreement shall be cumulative and concurrent and may be pursued singly, successively or together against Borrower, the Property, or any other persons or entities who are,

2

or may become liable for all or any part of this indebtedness, and any other funds, property or security held by Lender for the payment hereof, or otherwise, at the sole discretion of Lender. Failure to exercise any such right or remedy shall in no event be construed as a waiver or release of such rights or remedies, or the right to exercise them at any later time. The right, if any, of Borrower, and all other persons or entities, who are, or may become, liable for this indebtedness, to plead any and all statutes of limitation as a defense is expressly waived by each and all of such parties to the full extent permissible by law.

12.Deed of Trust Provisions Regarding Transfers; Successors. The Deed of Trust securing this Note contains provisions for the acceleration of the indebtedness evidenced hereby upon a “Transfer” (as therein defined). Subject to the limitations on Transfer specified in the Deed of Trust, the provisions hereof shall be binding on the heirs, legal representatives, successors and assigns of Borrower and shall inure to the benefit of Lender and the successors and assigns of Lender.

13.Miscellaneous.

13.1Manner of Payment; No Offsets. All payments due hereunder shall be made in lawful money of the United States of America. Such payments shall be made by check or, upon maturity and otherwise at the option of Lender, by transferring the payment in federal or immediately available funds by bank wire or interbank transfer for the account of Lender without presentment or surrender of this Note, provided; however, that any payment of principal or interest received after 1:00 p.m. Pacific time shall be deemed to have been received by Lender on the next Business Day and shall bear interest accordingly. All sums due hereunder shall be payable without offset, demand, abatement or counter-claim of any kind or nature whatsoever, all of which are hereby waived by Borrower.

13.2Fee for Statement. For any statement regarding the obligations evidenced hereby requested to be furnished by Lender, Borrower shall pay the fee then charged by Lender therefor, not to exceed, however, the maximum fee, if any, allowed by law to be charged by Lender at the time such statement is requested.

13.3No Amendment or Waiver Except in Writing. This Note may be amended or modified only by a writing duly executed by Borrower and Lender, which expressly refers to this Note and the intent of the parties so to amend this Note. No provision of this Note will be deemed waived by Lender, unless waived in a writing executed by Lender, which expressly refers to this Note, and no such waiver shall be implied from any act or conduct of Lender, or any omission by Lender to take action with respect to any provision of this Note or the Deed of Trust. No such express written waiver shall affect any other provision of this Note, or cover any default or time period or event, other than the matter as to which an express written waiver has been given. Without limitation, acceptance of any partial payment shall not constitute a waiver of any of Lender’s rights, including the right to insist on immediate payment of all amounts due and payable.

13.4No Intent of Usury. None of the terms and provisions contained in this Note, or in the Deed of Trust, or in other documents or instruments related hereto, shall ever be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest permitted to be charged by applicable laws or regulation governing this Note (“Usury Laws”). Borrower shall never be required to pay interest on this Note in excess of the maximum interest that may be lawfully charged under such Usury Laws, as made applicable by the final judgment of a court of competent jurisdiction, and the provisions of this Section shall control over all other provisions hereof and of any other instrument executed in connection herewith or executed to secure the indebtedness evidenced hereby, which may be in apparent conflict with this Section. If Lender collects monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of that permitted to be charged by such Usury Laws, all such sums deemed to constitute interest in excess of the maximum rate shall, at the option of Lender, either be credited to the payment of principal or returned to Borrower.

13.5Governing Law. This Note shall be governed by and construed and enforced in accordance with the laws of the State of California (without regard to conflicts of laws), except where

3

federal law is applicable (including any applicable federal usury ceiling or other federal law preempting state usury laws).

13.6Certain Rules of Construction. The headings of each Section of this Note are for convenience only and do not define or limit any provision of this Note. The provisions of this Note shall be construed as a whole according to their common meaning, not strictly for or against any party, or any person or entity, who is or may become liable for the payment of this Note, and to achieve the objectives of the parties unconditionally to impose on Borrower the indebtedness evidenced by this Note. Whenever the words “including”, “includes” or “include” are used in this Note (including any Exhibit hereto), they shall be read non-exclusively as though the phrase, “without limitation,” immediately followed the same.

13.7Severability. If any term of this Note, or the application thereof to any person or circumstances, shall be invalid or unenforceable, the remainder of this Note, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Note shall be valid and enforceable to the fullest extent permitted by law.

13.8Notices. Any notice which a party is required or may desire to give the other shall be given (and be deemed given) pursuant to the terms of the Deed of Trust.

14.Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOAN OR THE PROPERTY INCLUDING ANY ACTION TO RESCIND OR CANCEL THIS NOTE, AND ANY CLAIM OR DEFENSE ASSERTING THAT THIS NOTE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN. NOTWITHSTANDING THE FOREGOING, ANY CONTROVERSY HEREUNDER SHALL BE GOVERNED BY THE TERMS AND CONDITIONS OF THAT CERTAIN ALTERNATIVE DISPUTE RESOLUTION AGREEMENT, DATED AS OF THE DATE HEREOF, BY AND AMONG BORROWER AND LENDER.

[SIGNATURES ARE ON THE FOLLOWING PAGE]

4

IN WITNESS WHEREOF, this Note was executed as of the date first written above.

“BORROWER”
OMNIVISION TECHNOLOGIES, INC., a Delaware corporation
By:	/s/ James He
Name:	JAMES HE
Title:	COO

5

EX-10.22

Exhibit 10.22

PROMISSORY NOTE SECURED BY DEED OF TRUST
(Mortgage Loan)

$27,927,045.00	San Francisco, California
	March 16, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) promises to pay to CITIBANK N.A., a national banking association (“Lender”), or order, during regular business hours at 210 West Lexington Drive, Sixth Floor, Glendale, CA 91203, Attention: Commercial Markets Group/Note Department, or at such other place as Lender may from time to time designate by written notice to Borrower, with sufficient information to identify the source and application of such payment, the sum of up to Twenty-Seven Million Nine Hundred Twenty-Seven Thousand Forty-Five and No/100 Dollars ($27,927,045.00) (the “Loan”) together with interest on the balance of outstanding principal from the disbursement dates thereof at the per annum rate set forth below. All calculations of interest hereunder shall be computed on the basis of the actual number of days elapsed over a 360-day year. The Loan is made pursuant to the terms and conditions of that certain Loan Agreement dated as of the date hereof, between Borrower and Lender (as it may be amended, supplemented or otherwise modified from time to time, the “Loan Agreement). Capitalized terms used but not defined herein shall have the meanings given them in the Loan Agreement.

1.Interest and Payments.

(a)Borrower promises to pay interest on the outstanding principal amount of the Loan from the date of any advance of funds until such principal amount is irrevocably paid in full in cash pursuant to and as required by the terms of the Loan Agreement.

(b)Payments of interest, principal and any other fees and costs under the Loan shall be made, when due, in accordance with the terms and conditions of the Loan Agreement. Any payments of principal or interest or other amounts on or payments under this Note not paid automatically as provided in the Loan Agreement shall be paid to Lender only by wire transfer on the date when due, without any deduction whatsoever, including any deduction for any setoff or counterclaim, in U.S. Dollars in immediately available funds as required in the Loan Agreement.

2.Maturity. Unless earlier due and payable or accelerated under the Loan Agreement, this Note shall mature, and the outstanding principal balance hereunder, together with all other outstanding amounts due hereunder and under the Loan Agreement, shall become due and payable in full on the Maturity Date.

3.Default Rate. Notwithstanding any other provision of this Note the default rate set forth in the Loan Agreement shall apply to this Note as and when provided therein.

4.Loan Agreement. This Note is referred to in, made pursuant to, and entitled to the benefits of, the Loan Agreement and the other Loan Documents. The Loan Agreement and the other Loan Documents among other things contain provisions for acceleration of the maturity hereof upon the happening of certain stated events upon the terms and conditions therein specified, and contain provisions defining an Event of Default and the rights and remedies of Lender upon the occurrence of an Event of Default.

5.Prepayments. This Note may be prepaid in whole or in part upon notice to Lender and shall be prepaid in whole, in each case as provided or required in the Loan Agreement and upon payment of all fees and other obligations set forth therein or otherwise secured by the Deed of Trust (the “Obligations”). No payment or prepayment of any amount shall entitle any Person to be subrogated to

the rights of Lender hereunder or under the Loan Agreement unless and until the Obligations have been performed in full and paid irrevocably in full in cash and the Loan Agreement has been terminated.

6.Payments Due on a Day other than a Business Day. If any payment to be made on or under this Note is stated to be due or becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to, and such payment shall be made on, the next succeeding Business Day, and such extension of time in such case shall be included in the computation of payment of any interest (at the interest rate then in effect during such extension) and/or fees, as the case may be.

7.Application of Payments. Each payment hereunder shall be applied when received first to the payment of any unpaid “Past Due Charge” (as defined below in the Loan Agreement) and then to the payment of accrued interest on the principal balance from time to time remaining unpaid and then to reduce principal, except that if any amounts due under the terms of Section 7 hereof or the Deed of Trust have not been repaid, then any monies received, at the option of Lender, may first be applied to repay such amounts and interest thereon and the balance, if any, be applied as herein specified. No such application by Lender shall constitute a cure or waiver of any default by Borrower under the “Deed of Trust” or under this Note. Borrower hereby waives any rights and benefits, if any, that may arise under or by virtue of California Civil Code Section 2822(a). Without limitation of the foregoing, in the event of any partial payment hereunder, Lender shall have the sole right and authority to determine which portion of the indebtedness evidenced hereby any partial payment may be applied against, if any; provided that, nothing in the foregoing shall impose upon Lender any duty or obligation to accept or apply any partial payment received by Lender hereunder or under the Deed of Trust except as expressly provided for herein or in the Deed of Trust.

8.Default; Acceleration. This Note is secured by that certain Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing, made by Borrower, as trustor, for the benefit of Lender, as beneficiary, concurrently herewith (the “Deed of Trust”). Upon the occurrence of an Event of Default, then, or at any time thereafter, the whole of the unpaid principal hereof, together with accrued and outstanding interest and all other sums required to be paid under this Note or the Deed of Trust or the Loan Agreement shall, at the election of Lender and without notice of such election, become immediately due and payable. Lender’s election may be exercised at any time after any such Event of Default, and the acceptance of one or more payments hereon from any person thereafter shall not constitute a waiver of Lender’s election, or of its option to make such election.

9.Costs. Borrower promises to pay to Lender, within five (5) Business Days after written notice from Lender, all costs, expenses, disbursements, property taxes, escrow fees, title charges, reasonable legal fees and expenses, actually incurred by Lender or its counsel in the negotiation, funding, administration, enforcement or attempted enforcement, by foreclosure or otherwise, of this Note or the Deed of Trust. Without limitation on the foregoing, Borrower agrees to pay all costs of collection, including reasonable attorneys’ fees and costs (whether or not for salaried attorneys regularly employed by Lender) and all costs of any action or proceeding (including any bankruptcy proceeding or any non-judicial foreclosure or private sale), in the event any payment is not paid when due, or in case it becomes necessary to enforce any other obligation of Borrower hereunder or to protect the security for the indebtedness evidenced hereby, or for the foreclosure by Lender of the Deed of Trust, or in the event Lender is made a party to any litigation because of the existence of the indebtedness evidenced by this Note, or because of the existence of the Deed of Trust. All such costs are secured by the Deed of Trust.

10.Waivers. Borrower hereby waives diligence, presentment, protest and demand, and notice of protest, of demand, of nonpayment, of dishonor and of maturity and agrees that time is of the essence of every provision hereof. Any such renewal, extension or modification, or the release or substitution of any person or security for the indebtedness evidenced hereby, shall not affect the liability of any of such parties for the indebtedness evidenced by this Note or the obligations under the Deed of Trust. Any such renewals, extensions, modifications, releases or substitutions may be made without notice to any of such parties. Any such renewals, extensions, modifications, releases or substitutions may be made without notice to any of such parties.

2

11.Remedies Cumulative. The rights and remedies of Lender as provided in this Note and in the Deed of Trust and in the Loan Agreement shall be cumulative and concurrent and may be pursued singly, successively or together against Borrower, the Property, or any other persons or entities who are, or may become liable for all or any part of this indebtedness, and any other funds, property or security held by Lender for the payment hereof, or otherwise, at the sole discretion of Lender. Failure to exercise any such right or remedy shall in no event be construed as a waiver or release of such rights or remedies, or the right to exercise them at any later time. The right, if any, of Borrower, and all other persons or entities, who are, or may become, liable for this indebtedness, to plead any and all statutes of limitation as a defense is expressly waived by each and all of such parties to the full extent permissible by law.

12.Deed of Trust Provisions Regarding Transfers; Successors. The Deed of Trust securing this Note contains provisions for the acceleration of the indebtedness evidenced hereby upon a “Transfer” (as therein defined). Subject to the limitations on Transfer specified in the Deed of Trust, the provisions hereof shall be binding on the heirs, legal representatives, successors and assigns of Borrower and shall inure to the benefit of Lender and the successors and assigns of Lender.

13.Miscellaneous.

13.1Manner of Payment; No Offsets. All payments due hereunder shall be made in lawful money of the United States of America. Such payments shall be made by check or, upon maturity and otherwise at the option of Lender, by transferring the payment in federal or immediately available funds by bank wire or interbank transfer for the account of Lender without presentment or surrender of this Note, provided; however, that any payment of principal or interest received after 1:00 p.m. Pacific time shall be deemed to have been received by Lender on the next Business Day and shall bear interest accordingly. All sums due hereunder shall be payable without offset, demand, abatement or counter-claim of any kind or nature whatsoever, all of which are hereby waived by Borrower.

13.2Fee for Statement. For any statement regarding the obligations evidenced hereby requested to be furnished by Lender, Borrower shall pay the fee then charged by Lender therefor, not to exceed, however, the maximum fee, if any, allowed by law to be charged by Lender at the time such statement is requested.

13.3No Amendment or Waiver Except in Writing. This Note may be amended or modified only by a writing duly executed by Borrower and Lender, which expressly refers to this Note and the intent of the parties so to amend this Note. No provision of this Note will be deemed waived by Lender, unless waived in a writing executed by Lender, which expressly refers to this Note, and no such waiver shall be implied from any act or conduct of Lender, or any omission by Lender to take action with respect to any provision of this Note or the Deed of Trust. No such express written waiver shall affect any other provision of this Note, or cover any default or time period or event, other than the matter as to which an express written waiver has been given. Without limitation, acceptance of any partial payment shall not constitute a waiver of any of Lender’s rights, including the right to insist on immediate payment of all amounts due and payable.

13.4No Intent of Usury. None of the terms and provisions contained in this Note, or in the Deed of Trust, or in other documents or instruments related hereto, shall ever be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate in excess of the maximum interest permitted to be charged by applicable laws or regulation governing this Note (“Usury Laws”). Borrower shall never be required to pay interest on this Note in excess of the maximum interest that may be lawfully charged under such Usury Laws, as made applicable by the final judgment of a court of competent jurisdiction, and the provisions of this Section shall control over all other provisions hereof and of any other instrument executed in connection herewith or executed to secure the indebtedness evidenced hereby, which may be in apparent conflict with this Section. If Lender collects monies which are deemed to constitute interest which would otherwise increase the effective interest rate on this Note to a rate in excess of that permitted to be charged by such Usury Laws, all such sums

3

deemed to constitute interest in excess of the maximum rate shall, at the option of Lender, either be credited to the payment of principal or returned to Borrower.

13.5Governing Law. This Note shall be governed by and construed and enforced in accordance with the laws of the State of California (without regard to conflicts of laws), except where federal law is applicable (including any applicable federal usury ceiling or other federal law preempting state usury laws).

13.6Certain Rules of Construction. The headings of each Section of this Note are for convenience only and do not define or limit any provision of this Note. The provisions of this Note shall be construed as a whole according to their common meaning, not strictly for or against any party, or any person or entity, who is or may become liable for the payment of this Note, and to achieve the objectives of the parties unconditionally to impose on Borrower the indebtedness evidenced by this Note. Whenever the words “including”, “includes” or “include” are used in this Note (including any Exhibit hereto), they shall be read non-exclusively as though the phrase, “without limitation,” immediately followed the same.

13.7Severability. If any term of this Note, or the application thereof to any person or circumstances, shall be invalid or unenforceable, the remainder of this Note, or the application of such term to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Note shall be valid and enforceable to the fullest extent permitted bylaw.

13.8Notices. Any notice which a party is required or may desire to give the other shall be given (and be deemed given) pursuant to the terms of the Deed of Trust.

14.Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOAN OR THE PROPERTY INCLUDING ANY ACTION TO RESCIND OR CANCEL THIS NOTE, AND ANY CLAIM OR DEFENSE ASSERTING THAT THIS NOTE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN. NOTWITHSTANDING THE FOREGOING, ANY CONTROVERSY HEREUNDER SHALL BE GOVERNED BY THE TERMS AND CONDITIONS OF THAT CERTAIN ALTERNATIVE DISPUTE RESOLUTION AGREEMENT, DATED AS OF THE DATE HEREOF, BY AND AMONG BORROWER AND LENDER.

[SIGNATURES ARE ON THE FOLLOWING PAGE]

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IN WITNESS WHEREOF, this Note was executed as of the date first written above.

“BORROWER”
OMNIVISION TECHNOLOGIES, INC., a Delaware corporation
By:	/s/ James He
Name:	JAMES HE
Title:	COO

5

EX-10.23

Exhibit 10.23

CHINA WLCSP LIMITED

INVESTMENT AGREEMENT

April 6, 2007

TABLE OF CONTENTS

			Page
SECTION 1 Purchase and Sale of Equity Interests			2
	1.1	Purchase and Sale of Equity Interests	2
	1.2	Registration of the Equity Interests	2
	1.3	Closing	2
	1.4	Delivery	3
SECTION 2 Representations, Warranties and Covenants of the Company			3
	2.1	Organization, Good Standing and Qualification	3
	2.2	Capitalization	5
	2.3	Authorization	5
	2.4	Governmental Consents	5
	2.5	Financial Statements	5
	2.6	Contracts	6
	2.7	Related-Party Transactions	6
	2.8	Changes	7
	2.9	Title to Properties and Assets	8
	2.10	Intellectual Property; Status of Proprietary Rights	8
	2.11	Litigation	9
	2.12	Tax Returns	9
	2.13	Employees	9
	2.14	Compliance with Other Instruments	10
	2.15	Environmental and Safety Laws	11
	2.16	Obligations of Management	11
	2.17	Use of Proceeds	11
	2.18	Minute Books	11
	2.19	Disclosure	11
SECTION 3 Representations and Warranties of the Investor			11
	3.1	Authorization	12
	3.2	Investment Purpose	12
	3.3	No Public Market	12
SECTION 4 Conditions to Investor’s Obligations to Close			12
	4.1	Representations and Warranties	12

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TABLE OF CONTENTS

(continued)

			Page
	4.2	Covenants	12
	4.3	No Material Adverse Effect	12
	4.4	Transaction Documents	12
	4.5	Regulatory Approval	13
	4.6	Officer’s Certificate	13
	4.7	Corporate Documents	13
	4.8	Board of Directors	13
	4.9	Indemnification Agreements	13
	4.10	Employment Arrangements	13
	4.11	Proprietary Information and Invention Assignment Agreement	13
	4.12	Service Agreement	13
	4.13	Legal Opinion	14
SECTION 5 Conditions to Company’s Obligation to Close			14
	5.1	Representations and Warranties	14
	5.2	Transaction Documents	14
SECTION 6 Miscellaneous			14
	6.1	Governing Law	14
	6.2	Arbitration	14
	6.3	Attorney Fees	15
	6.4	Survival	15
	6.5	Indemnification of Investor	15
	6.6	Entire Agreement	15
	6.7	Amendment	16
	6.8	Notices	16
	6.9	Severability	17
	6.10	Expenses	17
	6.11	Counterparts	17
	6.12	Telecopy Execution and Delivery	18
	6.13	Successors and Assigns	18
	6.14	Delays or Omissions	18
	6.15	Further Assurances	18
	6.16	Obligation of Company	18
	6.17	No Agency	19
	6.18	Confidentiality	19

ii

EXHIBITS

A.            Amended and Restated Articles of Associations

B.            Amended and Restated Equity Joint Venture Agreement

C.            Disclosure Schedules

D.            Officer’s Certificate

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CHINA WLCSP LIMITED

INVESTMENT AGREEMENT

This Investment Agreement (the “Agreement”) is made as of April 6, 2007, by and between the following entities:

A.            CHINA WLCSP LIMITED, a Sino-foreign equity joint venture company established under the laws of the People’s Republic of China (the “PRC”) whose registered address is [Suite 11C, Suchun Industrial Square, No. 428, Xinlong Road, Suzhou Industrial Park, Suzhou, Jiangsu, China  (the “Company”); and

B.            OMNIVISION TRADING (HONG KONG) COMPANY LIMITED, a Hong Kong corporation (the “Investor” or “OmniVision”).

Each of these entities may be referred to hereafter as a “Party” and collectively as “Parties”.  All dollars and dollar sign denominations referred to hereinafter shall mean US Dollars.

RECITALS

A.            WHEREAS, the Company is in the business of designing, manufacturing, packaging and selling certain wafer level CSP products and providing relevant services (the “Business”).

B.            WHEREAS, China-Singapore Suzhou Industrial Park Ventures Co., Ltd (“CSVC”), Infinity-CSVC Venture Capital Enterprise (“Infinity-CSVC”) and Shellcase Ltd. (“Shellcase”) are currently the sole shareholders of the Company. Further, immediately prior to the closing of this Agreement, Shellcase has converted its five-million-dollar ($5,000,000) convertible loan into equity interests of the Company at a predetermined conversion price pursuant to that certain Convertible Loan Agreement, and CSVC contemplates to exercise that certain warrant to invest three-million-dollar ($3,000,000) in the Company.

C.            WHEREAS, the Company and OmniVision have or will have entered into a service agreement (the “Service Agreement”), pursuant to which the Company would provide certain services to OmniVision.

D.            WHEREAS, OmniVision wishes to acquire certain equity interests of the Company from Infinity-CSVC pursuant to that certain Equity Interests Transfer Agreement to be executed immediately prior to or simultaneously with this Agreement by and between OmniVision and Infinity-CSVC (the “Transfer Agreement”).

E.             WHEREAS, OmniVision wishes to acquire certain equity interests of the Company from the Company pursuant to the terms and conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set forth, the Parties hereto agree as follows:

SECTION 1
Purchase and Sale of Equity Interests

1.1           Purchase and Sale of Equity Interests.  Subject to the terms and conditions of this Agreement, the Investor agrees to purchase, and the Company agrees to sell to the Investor, an aggregate 2,500,000 units (equal to approximately 11.36% on a fully diluted basis, assuming all transactions contemplated herein are consummated) of the equity interests of the Company as of the Closing (the “Equity Interests”) at a purchase price of $2.00 per unit. The Investor shall pay the Company in cash or cash equivalent a total of five million dollars ($5,000,000) as consideration for the Equity Interests.

1.2           Registration of the Equity Interests.  Immediately after the execution hereof, the Company shall promptly take, all such lawful and necessary actions in handling the formalities for examination and approval of the Equity Interests hereunder (including without limitation any necessary filings with the competent registration authority), including without limitation, signing all necessary legal documents pertinent to the said formalities as required by the competent government agencies.  Without limiting the generality of the foregoing, the Company shall cause effective as soon as practicable the Amended and Restated Articles of Association in substantially the form attached hereto as Exhibit A (the “Restated Articles”), and the Amended and Restated Equity Joint Venture Agreement in substantially the form attached hereto as Exhibit B (the “Restated JV Agreement,” and together with this Agreement and the Restated Articles, the “Transaction Documents”).

1.3           Closing.  The closing of the purchase and sale shall take place at such place as the Parties shall agree or at the offices of Morgan, Lewis & Bockius LLP, 2 Palo Alto Square, 3000 El Camino Real, Suite 700, Palo Alto, California 94306, as soon as practicable following the satisfaction (or waiver) of each of the conditions set forth in Sections 4 and 5 (the “Closing”).

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1.4           Delivery.  At the Closing, the Investor will pay the Company five million dollars ($5,000,000) by  wire transfer in accordance with the Company’s instructions; the Company will deliver to the Investor one or more certificates registered in the Investor’s name representing the amount of equity interests that the Investor is purchasing, and such other documents in form and substance reasonably acceptable to the Investor evidencing that the Equity Interests has been duly registered with the competent registration authority of the Company and that all approvals relating to the Company registration have been obtained.

SECTION 2
Representations, Warranties and Covenants of the Company

The Company represents and warrants to the Investor that the statements in this Section 2, except as set forth in the Disclosure Schedules (the “Disclosure Schedules”) attached to this Agreement as Exhibit C (the contents of which shall also be deemed to be representations and warranties hereunder), are all true, correct and complete as of the date hereof and as of the Closing.  For purposes of this Section 2, any reference to a party’s “knowledge” means such party’s best knowledge after due and diligent inquiries of officers, directors, and managerial personnel of such party.

2.1         Organization, Good Standing and Qualification

Except as disclosed in Disclosure Schedule 2.1:

(a)           The Company is a Sino-foreign equity joint venture company duly organized and existing under the laws of the PRC, where failure to be so would have a material adverse effect on its financial condition, business, prospects, properties, assets, liabilities or operations as now conducted or proposed to be conducted (a “Material Adverse Effect”). The registered capital of the Company is fully paid as required in accordance with applicable PRC rules and regulations.  Except as provided in Disclosure Schedule 2.1(a) hereof, there are no outstanding rights or commitments made by the Company or any of its investors or joint venture partners and owners, to issue, purchase or sell any equity interest in the Company.

(b)           Except as provided in Disclosure Schedule 2.1(b), neither is the Company nor any of its shareholders is a state-owned enterprise as defined in applicable law of the PRC.

(c)           The Company has paid all such governmental fees, taxes and stamp duty required to be paid by it under applicable PRC and other laws prior to or upon Closing.

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(d)           The Company does not maintain any office or branch except for its offices at Suite 11C, Suchun Industrial Square, No. 428, Xinlong Road, Suzhou Industrial Park, Suzhou, Jiangsu, China.

(e)           The constitutional documents of the Company are valid and have been duly approved or issued (as applicable) by the appropriate PRC authorities and are in full force.

(f)            All consents, approvals, orders, authorizations or registrations, qualifications, designations, declarations or filings with any governmental authority (the “Governmental Authorizations”), permits or licenses required under PRC laws for the due and proper establishment and operation of the Company as currently operated, or presently contemplated to be operated, have been duly obtained from the appropriate PRC authorities and are in full force and effect.

(g)           All filings and registrations with the PRC authorities required in respect of the Company and its operations, including the registrations with the Ministry of Commerce, the State Administration of Industry and Commerce, the State Administration for Foreign Exchange, Ministry of Information Industry, the tax bureau, the customs authorities, the product registration authorities, the health regulatory authorities and the local counterpart of each of the aforementioned governmental authorities, as applicable, have been duly completed in accordance with the relevant rules and regulations.

(h)           The Company has not received any letter or notice from any relevant authority notifying it of the revocation of any Governmental Authorization, permit or license issued to it for noncompliance or the need for compliance or remedial actions in respect of the activities carried out directly or indirectly by the Company.

(i)            The Company has been conducting its business activities within the permitted scope of business or is otherwise operating its business in full compliance with all relevant legal requirements, including producing, processing and/or distributing products with all requisite licenses, permits and approvals granted by competent PRC authorities.

(j)            There is no valid reason to believe that any Governmental Authorization, license or permit requisite for the conduct of any part of the Company’s business which is subject to periodic renewal will not be granted or renewed by the relevant PRC authorities.

(k)           All applicable laws and regulations with respect to the opening and operation of foreign exchange accounts and foreign exchange activities of the Company have been complied with, and all requisite approvals from the State Administration of Foreign Exchange in relation thereto have been duly obtained.

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2.2           Capitalization.  The total registered capital of the Company as of the Closing is twenty-two million five hundred twenty five thousand dollars ($22,525,000), with each dollar representative of one unit of equity interest of the Company, all of which have been paid in full as certified by qualified public accountants or will be paid in accordance with the contribution schedule set forth in the Restated Articles. Listed in Disclosure Schedule 2.2 are the names and ownership interests of each shareholder of the Company immediately after the Closing and consummation of all other transactions contemplated herein.

Except the Company’s shareholders’ first refusal rights with regard to the transaction contemplated in this Agreement, there are no options, warrants, conversion rights, preemptive rights, rights of first refusal or other rights or agreements (other than as provided under the law and the Restated Articles), orally or in writing, to purchase or otherwise acquire any of the Company’s equity interests or any securities convertible into or exchangeable for its equity interests.  The Company has obtained the waivers of the first refusal rights from its shareholders with regard to the transaction contemplated in this Agreement.

2.3           Authorization.  All corporate action on the part of the Company and their respective officers, directors and shareholders necessary for the authorization, execution and delivery of each Transaction Document, the performance of their respective obligations under each Transaction Document and all other agreements, instruments and documents executed and delivered in connection with the transactions contemplated hereby, has been taken or will be taken prior to the Closing. The Transaction Documents are valid and binding obligations of the Company, enforceable in accordance with their respective terms.

2.4           Governmental Consents.  All Governmental Authorizations on the part of the Company required in connection with the consummation of the transactions contemplated herein have been obtained and are currently effective or will be obtained prior to the Closing.

2.5           Financial Statements.          Disclosure Schedule 2.5 attaches (i) the consolidated audited balance sheets of the Company as of December 31, 2006, and the consolidated audited cash flow statements and income statements of the Company for the twelve (12) month period then ended and (ii) the consolidated unaudited financial statements of the Company (the balance sheets and income statements) as, at and for [the three (3) month] period ended March 31, 2007 (all such financial statements being collectively referred to herein as the “Financial Statements”).  The Financial Statements (a) accord with the books and records of the Company, (b) are true, correct and complete and present fairly the financial condition and state of affairs of the Company at the date or dates therein indicated and the results of operations for the period or periods therein specified, and (c) have been prepared in accordance with IAS, PRC GAAP or U.S. GAAP applied on a consistent basis, except, as to the unaudited financial statements, for the omission of notes thereto and normal year-end audit adjustments.

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Specifically, but not by way of limitation, the respective balance sheets included in the Financial Statements disclose all of the Company’s debts, liabilities and obligations of any nature, whether due or to become due, as of their respective dates (including absolute, accrued, and contingent liabilities) to the extent such debts, liabilities and obligations are required to be disclosed in accordance with the IAS, PRC GAAP or U.S. GAAP, and the Company has good and marketable unencumbered title to all assets set forth on the balance sheets included in the respective Financial Statements, except for such assets as have been spent, sold or transferred in the ordinary course of business since their respective dates.

2.6         Contracts.

(a)           Material Contracts and Obligations.  All agreements, contracts, leases, licenses, instruments, commitments (oral or written), indebtedness, liabilities and other obligations to which the Company is a party or by which it is bound that (i) would have a Material Adverse Effect on the conduct and operations of its business and properties; (ii) involve any of the officers, consultants, directors, employees or shareholders of the Company; (iii) obligate the Company to share, license or develop any product or technology; or (iv) would grant rights to manufacture, produce, assemble, license, market or sell the Company’s products or affect the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its products (collectively, the “Material Contracts”) are listed in Disclosure Schedule 2.6(a) and the copies of which have been provided to the Investor.

(b)           Validity and Status.  All of the Material Contracts are legally valid and binding, in full force and effect, and enforceable in accordance with their respective terms against the parties thereto.  There is no existing default or breach by any party thereto to the knowledge of Company and the Company has received no notice or claim or allegation of default or breach thereof from any party thereto.  The Company does not have any present intention to terminate any of the Material Contracts.

(c)           Letter of Intent.  The Company has not entered into any letter of intent, memorandum of understanding or other similar document since its inception (i) with any representative of any corporation or corporations regarding the merger of the Company with or into any such corporation or corporations; (ii) with any representative of any corporation, partnership, association or other business entity or any individual regarding the sale, conveyance or disposition of all or substantially all of the assets of the Company or a transaction or series of related transactions in which more than fifty percent (50%) of the equity interest of the Company would be transfered; or (iii) regarding any other form of liquidation, dissolution or winding up of the Company.

2.7           Related-Party Transactions.  No employee, officer, or director or shareholder of the Company (a “Related Party”) or member of such Related Party’s immediate family, or any

6

corporation, partnership or other entity in which such Related Party is an officer, director or partner, or in which such Related Party has significant ownership interests or otherwise controls, is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them.  None of such persons has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company, except that employees, officers, or directors of the Company and members of such Related Party’s immediate family may own stock in publicly traded companies that may compete with the Company.  No Related Party or member of his or her immediate family is directly or indirectly interested in any material contract with the Company.

2.8         Changes.  Since January 1, 2007 there has not been:

(a)           Any event that has had or could reasonably be expected to have a Material Adverse Effect on the Company;

(b)           Any resignation or termination of any executive officer, key employee or group of employees of the Company;

(c)           Any damage, destruction or loss, whether or not covered by insurance, with respect to the properties and assets of the Company;

(d)           Any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

(e)           Any loans made by the Company to any stockholder, employee, executive officer or director of the Company, other than advances made in the ordinary course of business;

(f)            Any material change in any compensation arrangement or agreement with any employee, executive officer, director or stockholder;

(g)           Any declaration or payment of any dividend or other distribution of the assets of the Company;

(h)           Any debt incurred, assumed or guaranteed by the Company, except those for immaterial amounts and for current liabilities incurred in the ordinary course of business;

(i)            Any sale, mortgage, pledge, transfer, lease or other assignment of any Intellectual Property (as defined below) owned by the Company;

(j)            Any material change in any Material Contract;

7

(k)           Any sale, mortgage, pledge, transfer, lease or other assignment of any of its tangible assets outside of the ordinary course of business;

(l)            Any capital expenditure in excess of $100,000; or

(m)          Any arrangement or commitment by the Company to do any of the acts described in subsection 2.8(a) through 2.8 (k) above.

2.9           Title to Properties and Assets.  The Company has good and marketable title to all respective properties and assets reflected on its account books, in each case subject to no mortgage, pledge, lien, encumbrance, security interest or charge of any kind.  With respect to the property and assets it leases, the Company and the lessor are in compliance with such leases and the Company holds valid leasehold interests in such assets free of any liens, encumbrances, security interests or claims of any party other than the lessors of such property and assets.

2.10         Intellectual Property; Status of Proprietary Rights.

(a)           The Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, processes and similar proprietary rights (“Intellectual Property”) necessary to the business of the Company as presently conducted, the lack of which could reasonably be expected to have a Material Adverse Effect, without any conflict with or infringement of the rights of others.  Disclosure Schedule 2.10 contains a complete list of the Company’s patents, trademarks, copyrights and domain names and pending patent, trademark and copyright applications.  Except for agreements with its own employees or consultants, standard end-user license agreements, support/maintenance agreements and agreements entered in the ordinary course of the Company’s business, there are no outstanding options, licenses or agreements relating to the Intellectual Property, and the Company is not bound by or a party to any options, licenses or agreements with respect to the Intellectual Property of any other person or entity.  The Company has not received any written communication alleging that the Company has violated or, by conducting its business as currently conducted, would violate any of the Intellectual Property of any other person or entity, nor is the Company aware of any basis therefor.  The Company is not obligated to make any payments by way of royalties, fees or otherwise to any owner or licensor of or claimant to any Intellectual Property with respect to the use thereof in connection with the conduct of its business as presently conducted.  There are no agreements, understandings, instruments, contracts, judgments, orders or decrees to which the Company is a party or by which it is bound which involve indemnification by the Company with respect to infringements of Intellectual Property.  The Company has obtained executed employment and consulting agreements containing intellectual property rights assignment, noncompetition and confidentiality provisions in the form provided to the Investor and its

8

counsel and subject to final approval by the Investor in its sole discretion, from all current and former employees, consultants and contactors of the Company.

(b)           No Breach by Employees.  The Company is not aware that any of its employees is obligated under any contract or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with the use of his or her efforts to promote the interests of the Company or that would conflict with the Company’s business as presently conducted.  Neither the execution nor the delivery of this Agreement, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as presently conducted, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated.  The Company does not believe it is or will be necessary to use any inventions of any of their employees made prior to their employment by the Company.

2.11         Litigation.  There is no action, suit, proceeding, claim, arbitration or investigation (“Action”) pending or, to the Company’s knowledge, currently threatened against the Company, the Company’s activities, properties or assets, or any officer, director or employee of the Company in connection with such officer’s, director’s or employee’s relationship with, or actions taken on behalf of, the Company.  There is no factual or legal basis for any such Action that might result, individually or in the aggregate, in any Material Adverse Effect on the Company.  The Company is not a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or governmental agency or instrumentality and there is no Action by the Company currently pending or which it intends to initiate.

2.12         Tax Returns.  The Company has timely filed all tax returns and reports required to be filed by it with appropriate national and local governmental agencies.  These returns and reports are true and correct in all material respects.  All taxes shown to be due and payable on such returns and reports, any assessments imposed, and, to the Company’s knowledge, all other taxes due and payable by the Company on or before the Closing have been paid or will be paid prior to the time they become delinquent.  The Company has not been advised in writing (i) that any of its returns and reports have been or are being audited as of the date hereof, or (ii) of any deficiency in assessment or proposed judgment with respect to its taxes.

2.13       Employees

(a)           The Company does not maintain or contribute to any welfare funds, social benefits, medical benefits, insurance, retirement benefits, pensions or any similar plan or agreement (an “Employee Benefit Plan”) other than the Employee Benefit Plans identified in Disclosure Schedules 2.13 (a). To the Company’s knowledge, there are no unfunded obligations of the Company under any welfare funds, social benefits, medical benefits, insurance, retirement

9

benefits, pensions or similar program, and any employee contributions withheld from payroll have been timely and fully contributed to the appropriate Employee benefit Plan as required under applicable law.

(b)           Disclosure Schedule 2.13 (b) sets forth a list of each contract, commitment, arrangement, or understanding, whether oral or written, relating to the employment of, or the performance of services by, any employee, consultant, or independent contractor. The Company is not delinquent in payments to any of its employees for any services performed for it to the date hereof or amounts required to be reimbursed to such employees.  To the Company’s knowledge, the Company has complied with all applicable PRC employment and labor laws and regulations, including laws and regulations pertaining to terms and conditions of employment, and wages and hours.

(c)           No employee of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company because of the nature of the business conducted by the Company; and to the Company’s knowledge, the continued employment by the Company of its present employees, and the performance of the Company’s contracts with its independent contractors, will not result in any such violation. The Company has not received notice alleging that any such violation has occurred. No employee of the Company has been granted the right to continued employment by the Company or to any material compensation following termination of employment with the Company. To the Company’s knowledge, none of the officers or key employees, or any group of key employees, intends to terminate his, her or their employment with the Company, nor does the Company have a present intention to terminate the employment of any of the foregoing individuals.

2.14         Compliance with Other Instruments.  The Company is not in, nor will the conduct of business of the Company as proposed to be conducted result in, any violation, breach or default of any constitutional document of the Company, or in any material respect of any term or provision of any mortgage, indenture, contract, agreement or instrument to which the Company is a party or by which it may be bound, or of any provision of any judgment, decree, order, statute, rule or regulation applicable to or binding upon the Company.  The execution, delivery and performance of and compliance with the Transaction Documents and the consummation of the transactions contemplated hereby will not result in any such violation, breach or default, or be in conflict with or constitute, with or without the passage of time or the giving of notice or both, either a default under any such constitutional documents, any such contract, agreement or instrument or a violation of any statutes, laws, regulations or orders, or an event which results in the creation of any lien, charge or encumbrance upon any asset of the Company. Especially, the Company shall guarantee that the sale of the Equity Interests pursuant to this Agreement will not

10

affect any of the Company’s Intellectual Property rights or licenses with respect to CSP technology.

2.15         Environmental and Safety Laws.  To the Company’s knowledge, the Company is not in violation of any applicable statute, law, or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law, or regulation.

2.16         Obligations of Management.  Each employee and consultant of the Company is currently devoting one hundred percent (100%) of his or her working time to the conduct of the business of the Company.  The Company is not aware that any such employee is planning to work less than fulltime at the Company in the future.  To the knowledge of the Company, no such employee is currently working for a competitive enterprise, whether or not such person is or will be compensated by such enterprise.

2.17         Use of Proceeds.  The Company will use the proceeds of the sale of the Equity Interests for increase of its production capability and working capital. No proceeds will be used to pay off the Company’s debts and liabilities outstanding prior to the Closing.

2.18         Minute Books.  The minute books of the Company made available to the Investor contain a complete summary of all meetings and actions taken by directors and shareholders or owners of the Company since its time of formation, and reflect all transactions referred to in such meetings and actions accurately in all material respects.

2.19         Disclosure.  No representation or warranty by the Company in this Agreement or in any written statement or certificate furnished or to be furnished to the Investor pursuant to any Transaction Document contains or will contain any untrue statement of fact or omits or will omit to state any fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they are made, not misleading in any way.  The Company has fully provided the Investor with all the information that the Investor has requested for the purpose of deciding whether to purchase the equity interests and all information that could reasonably be expected to enable the Investor to make such decision.

SECTION 3
Representations and Warranties of the Investor

The Investor hereby represents and warrants to the Company as follows:

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3.1           Authorization.  The Investor has all requisite power and authority to execute and deliver the Transaction Documents, to purchase the Equity Interests hereunder and to carry out and perform its obligations under the terms of the Transaction Documents.  All action on the part of the Investor necessary for the authorization, execution, delivery and performance of the Transaction Documents, and the performance of all of the Investor’s obligations under the Transaction Documents, has been taken or will be taken prior to the Closing.

3.2           Investment Purpose.  The Investor represents that the Equity Interests to be received by it will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that it has no present intention of selling, granting any participation in or otherwise distributing the same.

3.3           No Public Market.  The Investor understands that no public market now exists for any of the Equity Interests issued by the Company and that the Company has made no assurances that a public market will ever exist for the Company’s securities.

SECTION 4
Conditions to Investor’s Obligations to Close

The Investor’s obligation to purchase the equity interests at the Closing is subject to the fulfillment on or before the Closing of each of the following conditions unless waived in writing by the Investor:

4.1           Representations and Warranties.  The representations and warranties made by the Company in Section 2 (as modified by the disclosures on Disclosure Schedules) shall be true and correct as of the date of such Closing.

4.2           Covenants.  All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing shall have been performed or complied with.

4.3           No Material Adverse Effect.  No event or events shall have occurred, or could reasonably be expected to occur, which, individually or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect on the Company.

4.4           Transaction Documents.  The Company and the Investor shall have executed and delivered each of the Transaction Documents, provided that each such agreement shall be in a final form that is acceptable to the Investor in the Investor’s sole discretion.

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4.5           Regulatory Approval.  All authorization, approvals and permits of any governmental authority or regulatory body that are required to be obtained in connection with the sale of Equity Interests pursuant to this Agreement, including but not limited to, the Certificate of Approval for Establishment of Enterprises with Foreign Investment in the People’s Republic of China and the Business License that approve and evidence the increased registered capital, shall have been duly obtained and shall be effective as of the Closing.

4.6           Officer’s Certificate  The Company shall have delivered to the Investor an Officer’s Certificate, executed by the President of the Company, dated the Closing Date, in substantially the form attached hereto as Exhibit D, certifying the satisfaction of the conditions to closing listed in this Section 4 and the true and correctness of (i) the Restated Articles as in effect at the time of the Closing, (ii) the Restated JV Agreement as in effect at the time of the Closing, (iii) resolutions approved by the Board of Directors authorizing the transactions contemplated hereby; and (iv) resolutions approved by the shareholders of the Company authorizing the transactions contemplated hereby and waiving certain rights.

4.7           Corporate Documents  The Company shall have delivered to the Investor or its counsel copies of all corporate documents of the Company as the Investor shall reasonably request.

4.8           Board of Directors; Supervisors.  Effective upon the Closing, the Investor’s appointee,                 , shall have been elected as the director to the Board of Directors of the Company. As of the Closing, the Board shall consist of              ,              ,              ,              ,               and              .  In addition, Investor shall be entitled to appoint one of the two Supervisors, with the right of re-appointment.

4.9           Indemnification Agreements.  The director elected by the Investor shall have entered into an Indemnification Agreement with the Company upon the Closing in a form that is satisfactory to the Investor.

4.10         Employment Arrangements.  The employment arrangements for each of the executives of the Company shall be satisfactory to the Investor.

4.11         Proprietary Information and Invention Assignment Agreement.  Each of the management personnel of the Company shall have entered into the Proprietary Information and Invention Assignment Agreement in such form that is satisfactory to the Investor.

4.12         Service Agreement  The Company shall have entered into a Service Agreement with the Investor, with principle terms that the Company shall give to Investor loading priority in preference to all other customers, at the most favorable price.

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4.13         Legal Opinion.  The Investor shall have received opinions, dated as of the Closing, from Fangda Partners, the Company’s PRC counsel, in such forms as are acceptable to the Investor in its sole discretion.

SECTION 5
Conditions to Company’s Obligation to Close

The Company’s obligation to sell its equity interests at the Closing is subject to the fulfillment on or before such Closing of the following conditions unless waived by the Company:

5.1           Representations and Warranties.  The representations and warranties made by the Investor at such Closing pursuant to Section 3 shall be true and correct when made and shall be true and correct as of the date of such Closing.

5.2           Transaction Documents.  The Restated Articles and the Restated JV Agreement shall have been duly authorized and shall be in full force and effect as of the Closing.

SECTION 6
Miscellaneous

6.1           Governing Law.  This Agreement shall be governed by the laws of State of New York, U.S.A., without regard to principles of conflict of laws.

6.2           Arbitration.  If the Parties should have a material dispute arising out of or relating to this Agreement, or the Parties’ respective rights and duties hereunder or as to the Investor of the Company (including any claims or assertions regarding breach of the fiduciary duties of the Company’s directors), then the Parties will refer the issue (to the exclusion of a court of law) to final and binding arbitration in Hong Kong under the UNCITRAL Arbitration Rules in accordance with the Hong Kong International Arbitration Centre Procedures for the Administration of International Arbitration in force at the date of this Agreement, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  In any arbitration pursuant to this Agreement, the award or decision shall be rendered by a majority of the members of a Board of Arbitration (the “Board of Arbitration”) consisting of three (3) members, one (1) of whom shall be appointed by each party and the third of whom shall be the chairman of the panel and be appointed by mutual agreement of said two (2) party-appointed arbitrators.  In the event of failure of said two (2) arbitrators to agree within thirty (30) days after the commencement of the arbitration proceeding upon the appointment of the third

14

arbitrator to the Board of Arbitration, the third arbitrator shall be appointed by the Hong Long International Arbitration Centre. Nothing set forth above shall be interpreted to prevent the Parties from agreeing in writing to submit any dispute to a single arbitrator in lieu of a three (3) member Board of Arbitration.  Upon the completion of the selection of the Board of Arbitration (or if the Parties agree otherwise in writing, a single arbitrator), an award or decision shall be rendered within no more than forty-five (45) days.  Notwithstanding the foregoing, the request by the Parties for preliminary or permanent injunctive relief, whether prohibitive or mandatory, shall not be subject to arbitration and may be adjudicated only by the courts of proper jurisdiction.

6.3           Attorney Fees.  In the event that any suit or action is instituted to enforce any provisions in this Agreement, the prevailing Party in such dispute shall be entitled to recover from the losing Party all fees, costs and expenses of enforcing any right of such prevailing Party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

6.4           Survival.  The warranties, representations and covenants of the Company and the Investor contained in this Agreement shall survive the execution and delivery of this Agreement and the Closing, and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investor or the Company.

6.5           Indemnification of Investor.

(a)           The Company hereby agrees to hold harmless and indemnify the Investor, the Investor’ direct and indirect subsidiaries, affiliated entities and corporations (collectively, referred to as the “Investor Indemnitees”) against any and all direct damages, liabilities, losses, reasonable costs and expenses (including attorneys’ fees and expenses), whether or not arising out of third-party claims, attributable to (i) any material inaccuracy in, or any material breach by the Company of, anyrepresentation or warranty or other statement expressly contained in this Agreement including the Disclosure Schedules, or (ii) any material breach of any covenant or agreement expressly contained in this Agreement including the Disclosure Schedules (collectively, the “Indemnifiable Claims”).

(b)           The rights to indemnification set forth in this Section 6.5 are in addition to, and not in limitation of, all rights and remedies to which the Investor may be entitled. All remedies, either under this Agreement, the Restated Articles, the Restated Joint Venture Agreement, by Law, or otherwise afforded to any party, shall be cumulative and not alternative.

6.6           Entire Agreement.  This Agreement, including the exhibits attached hereto, constitute the full and entire understanding and agreement between the Parties with regard to the

15

subjects hereof and thereof.  Neither Party shall be liable or bound to the other Party in any manner with regard to the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein or therein.

6.7           Amendment.  Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by the Company and the Investor.

6.8           Notices.  All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand or by messenger, addressed as follows:

(a)	if to the Investor, one copy shall be sent to
		OmniVision Trading (Hong Kong) Co. Ltd.
		Attn:
		Facsimile:
		With a copy to:
		OmniVision Technologies, Inc. 1341 Orleans Drive Sunnyvale, CA 94089 Attn: General Counsel Facsimile: (408) 542-3006
		With a copy to:
		Morgan, Lewis & Bockius, LLP 3000 El Camino Real, Suite 700 Palo Alto, California 94306 Attn: Lucas Chang Facsimile: (650) 843-4001
(b)	if to the Company, one copy should be sent to
		China WLCSP Limited Suite 11C, Suchuan Industrial Square

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No. 428, Xinlong Road Suzhou Industrial Park Suzhou, Jiangsu, China 215126
Attn:	Chief Executive Officer
Facsimile:
With a copy to:
		.
		.

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail or the China mail or internationally recognized next-day delivery services courier, addressed and mailed as aforesaid or, if sent by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon confirmation of delivery when directed to the electronic mail address of the recipient.

6.9           Severability.  If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision.  The balance of this Agreement shall be enforceable in accordance with its terms.

6.10         Expenses.  The Company and the Investor shall each pay their own expenses, including but not limited to tax liabilities, auditing fees and governmental charges in connection with the transactions contemplated by this Agreement.

6.11         Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the Parties actually executing such counterparts, and all of which together shall constitute one instrument.

17

6.12         Telecopy Execution and Delivery.  A facsimile, telecopy or other reproduction of this Agreement may be executed by one or both Parties hereto and delivered by such Party by facsimile or any similar electronic transmission device pursuant to which the signature of or on behalf of such Party can be seen.  Such execution and delivery shall be considered valid, binding and effective for all purposes.  At the request of either Party hereto, both Parties hereto agree to execute and deliver an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.

6.13         Successors and Assigns.  This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by the Investor without the prior written consent of the Company except in a transfer which does not breach an express restriction provided in any Transaction Document.  Any attempt by the Investor without such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void.  Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the Parties hereto.

6.14         Delays or Omissions.  Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to either Party to this Agreement upon any breach or default of the other Party under this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of either Party of any breach or default under this Agreement, or any waiver on the part of either Party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement or by law or otherwise afforded to either Party to this Agreement, shall be cumulative and not alternative.

6.15         Further Assurances.  Each Party hereto agrees to execute and deliver, by the proper exercise of its corporate or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement.

6.16         Obligation of Company.  The Company agrees to use its reasonable efforts to enforce the terms of this Agreement, to inform the Investor of any breach hereof (to the extent the Company has knowledge thereof) and to assist the Investor in the exercise of its rights and the performance of its obligations hereunder.

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6.17         No Agency.  This Agreement shall not constitute an appointment of any Party as the legal representative or agent of any other party, nor shall any party have any right or authority to assume, create or incur in any manner any obligation or other liability of any kind, express or implied, against, in the name or on behalf of, any other party.  Nothing herein or in the transactions contemplated by this Agreement shall be construed as, or deemed to be, the formation of a partnership by or among the parties.

6.18         Confidentiality.  The Parties agree that they shall not disclosure, divulge or communicate to any other party, the existence and contents of this Agreement, the Transaction Documents or the Service Agreement, or any correspondence, material, know-how, and other information acquired in connection with the transaction contemplated herein, and shall take and maintain such information under strict security precautions to prevent any disclosure.  Neither party shall issue any public statement or press release concerning any such information, without the other party’s prior written approval of the substance and form of any such statement or release, unless required by the applicable laws, regulations or stock exchange rules.  Notwithstanding the above, the Parties shall be entitled to disclose such information (a) to their interest-owners, shareholders, directors and officers and their respective professional advisers; (b) in connection with a merger, acquisition or proposed merger or acquisition, and (c) as required by applicable law, including without limitation applicable securities laws and regulations of the United States and the PRC.

[The remainder of this page is left intentionally blank.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof.

“COMPANY”
China WLCSP Limited
By:	/s/ Wei Wang
Name:	Wei Wang
Title:	Chief Executive Officer and President
“INVESTOR”
OmniVision Trading (Hong Kong) Company Limited
By:	/s/ Shaw Hong
Name:	Shaw Hong
Title:	Chief Executive Officer, President and Director (Principal Executive Officer)

(Signature Page to China WLCSP Limited Investment Agreement)

EXHIBIT A

AMENDED AND RESTATED ARTICLES OF ASSOCIATION

EXHIBIT B

AMENDED AND RESTATED EQUITY JOINT VENTURE AGREEMENT

EXHIBIT C

DISCLOSURE SCHEDULES

EXHIBIT D

CHINA WLCSP LIMITED

OFFICER’S CERTIFICATE

Pursuant to Section 4.6 of the Agreement, dated [             ], 2007, by and between China WLCSP Limited, a Sino-foreign equity joint venture company established under the laws of the PRC, and OmniVision Trading (Hong Kong) Company Limited, a Hong Kong company (the “Agreement”), the undersigned certifies on behalf of the Company as follows:

1.             He is the President of the Company;

2.             The Company has performed or complied with all covenants, agreements and conditions contained in the Agreement to be performed by the Company on or prior to the Closing; and except as set forth in or modified by the Disclosure Schedules, the representations and warranties of the Company set forth in Section 2 of the Agreement are true and correct as of the date hereof.

3.             Attached hereto as Appendix I is a true and correct copy of the Restated Articles in effect as of the date hereof, and no action has been taken by the Company to effect or authorize any amendment or other modification to such Articles.

4.             Attached hereto as  Appendix II is a true and correct copy of the Restated JV Agreement in effect as of the date hereof, and no action has been taken by the Company to effect or authorize any amendment or other modification to such Agreement.

5.             Attached hereto as Appendix III is a true and correct copy of certain resolutions duly adopted by the Board of Directors of the Company on [             ], 2007 authorizing the transactions contemplated by the Agreement.  Such resolutions have not been amended, modified or rescinded since their adoption and remain in full force and effect as of the date hereof.

6.             Attached hereto as Appendix IV is a true and correct copy of certain resolutions duly adopted by the shareholders of the Company on [             ], 2007 authorizing the transactions contemplated by the Agreement and waiving certain rights.  Such resolutions have not been amended, modified or rescinded since their adoption and remain in full force and effect as of the date hereof.

Capitalized terms used but not defined herein have the meanings ascribed to them in the Agreement.

IN WITNESS WHEREOF, the undersigned has executed this certificate as of [             ], 2007.

China WLCSP Limited

/s/ Wei Wang

President

EX-10.24

Exhibit 10.24

EQUITY INTERESTS TRANSFER AGREEMENT

by and among

CHINA WLCSP LIMITED

and

INFINITY-CSVC VENTURE CAPITAL ENTERPRISE

and

OMNIVISION TRADING (HONG KONG) COMPANY LIMITED

APRIL, 6, 2007

TABLE OF CONTENTS

		Page
SECTION 1	SALE AND PURCHASE OF TRANSFERRED INTERESTS	2
1.1	Sale and Purchase of Transferred Interests	2
1.2	Closing	2
1.3	Registration of the Transfer	2
1.4	Delivery	2
1.5	Further Action	2
SECTION 2	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	2
2.1	Organization, Good Standing and Qualification	3
2.2	Capitalization	4
2.3	Authorization	4
2.4	Governmental Consents	4
2.5	Financial Statements	5
2.6	Contracts	5
2.7	Related-Party Transactions	6
2.8	Changes	6
2.9	Title to Properties and Assets	7
2.10	Intellectual Property; Status of Proprietary Rights	7
2.11	Litigation	8
2.12	Tax Returns	8
2.13	Employees	8
2.14	Compliance with Other Instruments	9
2.15	Environmental and Safety Laws	9
2.16	Obligations of Management	9
2.17	Minute Books	9
2.18	Disclosure	10
SECTION 3	REPRESENTATIONS AND WARRANTIES OF THE SELLER	10
3.1	Title	10
3.2	Authority	10
3.3	Proceedings	10
SECTION 4	REPRESENTATIONS AND WARRANTIES OF THE BUYER	11

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TABLE OF CONTENTS

(continued)

		Page
4.1	Power and Authority	11
4.2	Investment Purpose	11
4.3	No Public Market	11
SECTION 5	CONDITIONS TO THE BUYER’S OBLIGATION TO CLOSE	11
5.1	Representations and Warranties	11
5.2	Covenants	11
5.3	No Material Adverse Effect	11
5.4	Transaction Documents	11
5.5	Regulatory Approval	11
5.6	Officer’s Certificate from the Seller	12
5.7	Officer’s Certificate from the Company	12
5.8	Corporate Documents	12
5.9	Legal Opinion	12
SECTION 6	CONDITIONS TO THE SELLER’S OBLIGATION TO CLOSE	12
6.1	Representations and Warranties	12
6.2	Transaction Documents	12
SECTION 7	MISCELLANEOUS	13
7.1	Governing Law	13
7.2	Arbitration	13
7.3	Attorney’s Fees	13
7.4	Survival	13
7.5	Indemnification of Buyer	13
7.6	Entire Agreement	14
7.7	Amendment	14
7.8	Notices	14
7.9	Severability	16
7.10	Expenses	16
7.11	Counterparts	16
7.12	Telecopy Execution and Delivery	16
7.13	Delays or Omissions	16

ii

TABLE OF CONTENTS

(continued)

		Page
7.14	Further Assurances	17
7.15	No Agency	17
7.16	Confidentiality	17

iii

EXHIBITS

A.	Amended and Restated Articles of Associations
B.	Amended and Restated Equity Joint Venture Agreement
C.	Disclosure Schedules
D.	Officer’s Certificate of the Seller
E.	Officer’s Certificate of the Company

EQUITY INTERESTS TRANSFER AGREEMENT

This Equity Interests Transfer Agreement (this “Agreement”) is made as of April 6, 2007 (the “Effective Date”), by and among the following entities:

A.            CHINA WLCSP LTD., a Sino-foreign equity joint venture company established under the laws of the People’s Republic of China (the “PRC”) (the “Company”);

B.            INFINITY-CSVC VENTURE CAPITAL ENTERPRISE, a non-legal-person enterprise formed under the laws of the PRC (the “Infinity-CSVC” or the “Seller”); and

C.            OMNIVISION TRADING (HONG KONG) COMPANY LIMITED, a Hong Kong company (the “OmniVision” or the “Buyer”).

Each of these entities may be referred to hereafter as a “Party” and collectively “Parties”. All dollars and dollar sign denominations referred to hereinafter shall mean US Dollars.

RECITALS

A.            WHEREAS, the Company is in the business of designing, manufacturing, packaging and selling certain wafer level CSP products and providing relevant services (the “Business”).

B.            WHEREAS, the registered capital of the Company as of the Effective Date is seventeen million and five hundred thousand dollars ($17,500,000), the Seller holds 22.86% of the equity interests of the Company.

C.            WHEREAS, Infinity-CSVC desires to sell to OmniVision, and OmniVision desires to purchase from the Seller, certain equity interests of the Company owned by the Seller, pursuant to the terms and conditions set forth in this Agreement (the “Transfer”).

D.            WHEREAS, contemporaneous with the Transfer, OmniVision proposes to acquire additional equity interests of the Company, as its registered capital and equity interests shall be increased in accordance with the Amended and Restated Articles of Association (the “Restated Articles”) and the Amended and Restated Joint Venture Agreement (“Restated JV Agreement”), from the Company pursuant to an Investment Agreement by and between the Company and OmniVision (the “Investment Agreement” and together with this Restated JV Agreement and the Restated Articles, the “Transaction Documents”).

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set forth, the Parties hereto hereby agree as follows:

SECTION 1
SALE AND PURCHASE OF TRANSFERRED INTERESTS

1.1           Sale and Purchase of Transferred Interests.  Subject to the terms and conditions of this Agreement, the Seller agrees to sell to the Buyer, and the Buyer agrees to purchase from the Seller, as of the Closing, 2,000,000 units (which, as of the Effective Date, amount to approximately 11.43% of the equity interests of Company (the “Transferred Interests”), at a price of $2.00 per unit, for an aggregate purchase price of four million dollars ($4,000,000) (the “Purchase Price”). Assuming the transactions contemplated by the Investment Agreement are consummated, the Transferred Interests amounts to approximately 8.88% of the total equity interests of the Company as of the Investment Closing (defined below) on a fully diluted basis.

1.2           Closing.  The closing of the purchase and sale shall take place simultaneous with or immediately prior to the closing of the Investment Agreement according to the terms and conditions provided therein (the “Investment Closing”), as soon as practicable following the satisfaction (or waiver) of each of the conditions set forth in Sections 5 and 6 (the “Closing”).

1.3           Registration of the Transfer.  Immediately after the execution hereof and to the extent available prior to the Closing, Seller shall provide and administer, and to the extent necessary, cause the Company to provide and administer, and the Company hereby agrees to administer, in a timely manner, all necessary assistance and cooperation in handling the formalities for examination and approval of the Transfer (as the case may be) and for change of registration of the Company as specified, including without limitation, signing all necessary legal documents pertinent to the said formalities as required by the competent government agencies.

1.4           Delivery.  At the Closing, the Buyer will pay the Seller four million dollars ($4,000,000) by  wire transfer in accordance with the Seller’s instructions. The Seller will deliver to the Buyer such documents in forms and substances reasonably acceptable to the Buyer evidencing that the Transfer has been duly registered with the Company and all necessary government and corporate approvals relating to the Transfer have been obtained.

1.5           Further Action.  If any further action is necessary or desirable to carry out the purposes of this Agreement, to vest in the Buyer the full right and title of the Transferred Interests and to ensure that the Company retains full right, title and possession to any and all assets, property, rights, privileges, powers and franchises of the Company, the Company and the Seller agree to take all such lawful and necessary actions to attain such results.

SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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The Company hereby represents and warrants to the Buyer that the statements in this Section 2, except as set forth in the Disclosure Schedules (the “Disclosure Schedules”) attached to this Agreement as Exhibit C (the contents of which shall also be deemed to be representations and warranties hereunder), are all true, correct and complete as of the date hereof and as of the Closing.  For purposes of this Section 2 and Section 3 below, any reference to a party’s “knowledge” means such party’s best knowledge after due and diligent inquiries of officers, directors, and managerial personnel of such party.

2.1          Organization, Good Standing and Qualification.  Except as disclosed in Disclosure Schedule 2.1:

2.1.1        The Company is a Sino-foreign equity joint venture company duly organized and existing under the laws of the PRC, where failure to be so would have a material adverse effect on its financial condition, business, prospects, properties, assets, liabilities or operations as now conducted or proposed to be conducted (a “Material Adverse Effect”). The registered capital of the Company is fully paid as required in accordance with applicable PRC rules and regulations.  Except as provided in Disclosure Schedule 2.1.1 hereof, there are no outstanding rights or commitments made by the Company or any of its investors or joint venture partners and owners, to issue, purchase or sell any equity interest in the Company.

2.1.2        Except as provided in Disclosure Schedule 2.1.2 hereof, neither is the Company, nor any of the Company’s shareholders is a state-owned enterprise as defined in applicable law of the PRC.

2.1.3        The Company has paid all such governmental fees, taxes and stamp duty required to be paid by it under applicable PRC and other laws prior to or upon Closing.

2.1.4        The Company does not maintain any office or branch except for its offices at Suite 11C, Suchun Industrial Square, No. 428, Xinlong Road, Suzhou Industrial Park, Suzhou, Jiangsu, China.

2.1.5        The constitutional documents of the Company are valid and have been duly approved or issued (as applicable) by the appropriate PRC authorities and are in full force.

2.1.6        All consents, approvals, orders, authorizations or registrations, qualifications, designations, declarations or filings with any governmental authority (the “Governmental Authorizations”), permits or licenses required under PRC laws for the due and proper establishment and operation of the Company as currently operated, or presently contemplated to be operated, have been duly obtained from the appropriate PRC authorities and are in full force and effect.

2.1.7        All filings and registrations with the PRC authorities required in respect of the Company and its operations, including the registrations with the Ministry of Commerce, the State Administration of Industry and Commerce, the State Administration for Foreign Exchange, Ministry of Information Industry, the tax bureau, the customs authorities, the product registration authorities, the health regulatory authorities and the local counterpart of each of the

3

aforementioned governmental authorities, as applicable, have been duly completed in accordance with the relevant rules and regulations.

2.1.8        The Company has not received any letter or notice from any relevant authority notifying it of the revocation of any Governmental Authorization, permit or license issued to it for noncompliance or the need for compliance or remedial actions in respect of the activities carried out directly or indirectly by the Company.

2.1.9        The Company has been conducting its business activities within the permitted scope of business or is otherwise operating its business in full compliance with all relevant legal requirements, including producing, processing and/or distributing products with all requisite licenses, permits and approvals granted by competent PRC authorities.

2.1.10      There is no valid reason to believe that any Governmental Authorization, license or permit requisite for the conduct of any part of the Company’s business which is subject to periodic renewal will not be granted or renewed by the relevant PRC authorities.

2.1.11      All applicable laws and regulations with respect to the opening and operation of foreign exchange accounts and foreign exchange activities of the Company have been complied with, and all requisite approvals from the State Administration of Foreign Exchange in relation thereto have been duly obtained.

2.2          Capitalization.  The amount of total registered capital of the company as of the Closing is seventeen million and five hundred thousand dollars ($17,500,000), all of which have been paid in full as certified by qualified public accountants or will be paid in accordance with the contribution schedule set forth in the Restated Articles. Listed in Disclosure Schedule 2.2 are the names and ownership interests of each shareholder of the Company immediately after the Closing and consummation of all other transactions contemplated by the Investment Agreement.

Except as provided in Disclosure Schedule 2.2 hereof, there are no options, warrants, conversion rights, preemptive rights, rights of first refusal or other rights or agreements (other than as provided under the law and the Restated Articles), orally or in writing, to purchase or otherwise acquire any of the Company’s equity interests or any securities convertible into or exchangeable for its equity interests. 

2.3          Authorization.  All corporate action on the part of the Company and its respective officers, directors and shareholders necessary for the authorization, execution and delivery of each Transaction Document, the performance of their respective obligations under each Transaction Document and all other agreements, instruments and documents executed and delivered in connection with the transactions contemplated hereby, has been taken or will be taken prior to the Closing. The Transaction Documents are valid and binding obligations of the Company, enforceable in accordance with their respective terms.

2.4          Governmental Consents.  All Governmental Authorizations on the part of the Company required in connection with the consummation of the transactions contemplated herein have been obtained and are currently effective or will be obtained prior to the Closing.

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2.5          Financial Statements. Disclosure Schedule 2.5 attaches (i) the consolidated balance sheets of the Company as of December 31, 2006, and the consolidated cash flow statements and income statements of the Company for the twelve (12) month period then ended and (ii) the consolidated unaudited financial statements of the Company (the balance sheets and income statements) as, at and for [the three (3) month] period ended March 31, 2007 (all such financial statements being collectively referred to herein as the “Financial Statements”).  The Financial Statements (a) accord with the books and records of the Company, (b) are true, correct and complete and present fairly the financial condition and state of affairs of the Company at the date or dates therein indicated and the results of operations for the period or periods therein specified, and (c) have been prepared in accordance with IAS, PRC GAAP or U.S. GAAP applied on a consistent basis, except, as to the unaudited financial statements, for the omission of notes thereto and normal year-end audit adjustments.

Specifically, but not by way of limitation, the respective balance sheets included in the Financial Statements disclose all of the Company’s debts, liabilities and obligations of any nature, whether due or to become due, as of their respective dates (including absolute, accrued, and contingent liabilities) to the extent such debts, liabilities and obligations are required to be disclosed in accordance with the IAS, PRC GAAP or U.S. GAAP, and the Company has good and marketable unencumbered title to all assets set forth on the balance sheets included in the respective Financial Statements, except for such assets as have been spent, sold or transferred in the ordinary course of business since their respective dates.

2.6           Contracts.

2.6.1        Material Contracts and Obligations.  All agreements, contracts, leases, licenses, instruments, commitments (oral or written), indebtedness, liabilities and other obligations to which the Company is a party or by which it is bound that (i) would have a Material Adverse Effect on the conduct and operations of its business and properties; (ii) involve any of the officers, consultants, directors, employees or shareholders of the Company; (iii) obligate the Company to share, license or develop any product or technology; or (iv) would grant rights to manufacture, produce, assemble, license, market or sell the Company’s products or affect the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its products (collectively, the “Material Contracts”) are listed in Disclosure Schedule 2.6.1 and the copies of which have been provided to the Buyer.

2.6.2        Validity and Status.  All of the Material Contracts are legally valid and binding, in full force and effect, and enforceable in accordance with their respective terms against the parties thereto.  There is no existing default or breach by any party thereto to the knowledge of Company, and the Company has received no notice or claim or allegation of default or breach thereof from any party thereto.  The Company does not have any present intention to terminate any of the Material Contracts.

2.6.3        Letter of Intent.  The Company has not entered into any letter of intent, memorandum of understanding or other similar document since its inception (i) with any representative of any corporation or corporations regarding the merger of the Company with or into any such corporation or corporations; (ii) with any representative of any corporation, partnership, association or other business entity or any individual regarding the sale, conveyance

5

or disposition of all or substantially all of the assets of the Company or a transaction or series of related transactions in which more than fifty percent (50%) of the equity interest of the Company would be transfered; or (iii) regarding any other form of liquidation, dissolution or winding up of the Company.

2.7          Related-Party Transactions.  No employee, officer, or director or shareholder of the Company (a “Related Party”) or member of such Related Party’s immediate family, or any corporation, partnership or other entity in which such Related Party is an officer, director or partner, or in which such Related Party has significant ownership interests or otherwise controls, is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them.  None of such persons has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company, except that employees, officers, or directors of the Company and members of such Related Party’s immediate family may own stock in publicly traded companies that may compete with the Company.  No Related Party or member of his or her immediate family is directly or indirectly interested in any material contract with the Company.

2.8          Changes.  Since January 1, 2007 there has not been:

2.8.1        Any event that has had or could reasonably be expected to have a Material Adverse Effect on the Company;

2.8.2        Any resignation or termination of any executive officer, key employee or group of employees of the Company;

2.8.3        Any damage, destruction or loss, whether or not covered by insurance, with respect to the properties and assets of the Company;

2.8.4        Any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

2.8.5        Any loans made by the Company to any stockholder, employee, executive officer or director of the Company, other than advances made in the ordinary course of business;

2.8.6        Any material change in any compensation arrangement or agreement with any employee, executive officer, director or stockholder;

2.8.7        Any declaration or payment of any dividend or other distribution of the assets of the Company;

2.8.8        Any debt incurred, assumed or guaranteed by the Company, except those for immaterial amounts and for current liabilities incurred in the ordinary course of business;

2.8.9        Any sale, mortgage, pledge, transfer, lease or other assignment of any Intellectual Property (as defined below) owned by the Company;

2.8.10      Any material change in any Material Contract;

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2.8.11      Any sale, mortgage, pledge, transfer, lease or other assignment of any of its tangible assets outside of the ordinary course of business;

2.8.12      Any capital expenditure in excess of $100,000; or

2.8.13      Any arrangement or commitment by the Company to do any of the acts described in subsection 2.8.1 through 2.8.11 above.

2.9          Title to Properties and Assets.  The Company has good and marketable title to all respective properties and assets reflected on its account books, in each case subject to no mortgage, pledge, lien, encumbrance, security interest or charge of any kind.  With respect to the property and assets it leases, the Company and the lessor are in compliance with such leases and the Company holds valid leasehold interests in such assets free of any liens, encumbrances, security interests or claims of any party other than the lessors of such property and assets.

2.10         Intellectual Property; Status of Proprietary Rights.

2.10.1      The Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, processes and similar proprietary rights (“Intellectual Property”) necessary to the business of the Company as presently conducted, the lack of which could reasonably be expected to have a Material Adverse Effect, without any conflict with or infringement of the rights of others.  Disclosure Schedule 2.10 contains a complete list of the Company’s patents, trademarks, copyrights and domain names and pending patent, trademark and copyright applications.  Except for agreements with its own employees or consultants, standard end-user license agreements, support/maintenance agreements and agreements entered in the ordinary course of the Company’s business, there are no outstanding options, licenses or agreements relating to the Intellectual Property, and the Company is not bound by or a party to any options, licenses or agreements with respect to the Intellectual Property of any other person or entity.  The Company has not received any written communication alleging that the Company has violated or, by conducting its business as currently conducted, would violate any of the Intellectual Property of any other person or entity, nor is the Company aware of any basis therefor.  The Company is not obligated to make any payments by way of royalties, fees or otherwise to any owner or licensor of or claimant to any Intellectual Property with respect to the use thereof in connection with the conduct of its business as presently conducted.  There are no agreements, understandings, instruments, contracts, judgments, orders or decrees to which the Company is a party or by which it is bound which involve indemnification by the Company with respect to infringements of Intellectual Property.  The Company has obtained executed employment and consulting agreements containing intellectual property rights assignment, noncompetition and confidentiality provisions in the form provided to the Buyer and its counsel and subject to final approval by the Buyer in its sole discretion, from all current and former employees, consultants and contactors of the Company.

2.10.2      No Breach by Employees.  The Company is not aware that any of its employees is obligated under any contract or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with the use of his or her efforts to promote the interests of the Company or that would conflict with the Company’s

7

business as presently conducted.  Neither the execution nor the delivery of this Agreement, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as presently conducted, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated.  The Company does not believe it is or will be necessary to use any inventions of any of their employees made prior to their employment by the Company.

2.11        Litigation.  There is no action, suit, proceeding, claim, arbitration or investigation (“Action”) pending or, to the Company’s knowledge, currently threatened against the Company, the Company’s activities, properties or assets, or any officer, director or employee of the Company in connection with such officer’s, director’s or employee’s relationship with, or actions taken on behalf of, the Company.  There is no factual or legal basis for any such Action that might result, individually or in the aggregate, in any Material Adverse Effect on the Company.  The Company is not a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or governmental agency or instrumentality and there is no Action by the Company currently pending or which it intends to initiate.

2.12        Tax Returns.  The Company has timely filed all tax returns and reports required to be filed by it with appropriate national and local governmental agencies.  These returns and reports are true and correct in all material respects.  All taxes shown to be due and payable on such returns and reports, any assessments imposed, and, to the Company’s knowledge, all other taxes due and payable by the Company on or before the Closing have been paid or will be paid prior to the time they become delinquent.  The Company has not been advised in writing (i) that any of its returns and reports have been or are being audited as of the date hereof, or (ii) of any deficiency in assessment or proposed judgment with respect to its taxes.

2.13         Employees

2.13.1      The Company does not maintain or contribute to any welfare funds, social benefits, medical benefits, insurance, retirement benefits, pensions or any similar plan or agreement (an “Employee Benefit Plan”) other than the Employee Benefit Plans identified in Disclosure Schedules 2.13.1. To the Company’s knowledge, there are no unfunded obligations of the Company under any welfare funds, social benefits, medical benefits, insurance, retirement benefits, pensions or similar program, and any employee contributions withheld from payroll have been timely and fully contributed to the appropriate Employee benefit Plan as required under applicable law.

2.13.2      Disclosure Schedule 2.13.2 sets forth a list of each contract, commitment, arrangement, or understanding, whether oral or written, relating to the employment of, or the performance of services by, any employee, consultant, or independent contractor. The Company is not delinquent in payments to any of its employees for any services performed for it to the date hereof or amounts required to be reimbursed to such employees.  To the Company’s knowledge, the Company has complied with all applicable PRC employment and labor laws and regulations, including laws and regulations pertaining to terms and conditions of employment, and wages and hours.

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2.13.3      No employee of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company because of the nature of the business conducted by the Company; and to the Company’s knowledge, the continued employment by the Company of its present employees, and the performance of the Company’s contracts with its independent contractors, will not result in any such violation. The Company has not received notice alleging that any such violation has occurred. No employee of the Company has been granted the right to continued employment by the Company or to any material compensation following termination of employment with the Company. To the Company’s knowledge, none of the officers or key employees, or any group of key employees, intends to terminate his, her or their employment with the Company, nor does the Company have a present intention to terminate the employment of any of the foregoing individuals.

2.14        Compliance with Other Instruments.  The Company is not in, nor will the conduct of business of the Company as proposed to be conducted result in, any violation, breach or default of any constitutional document of the Company, or in any material respect of any term or provision of any mortgage, indenture, contract, agreement or instrument to which the Company is a party or by which it may be bound, or of any provision of any judgment, decree, order, statute, rule or regulation applicable to or binding upon the Company.  The execution, delivery and performance of and compliance with the Transaction Documents and the consummation of the transactions contemplated hereby will not result in any such violation, breach or default, or be in conflict with or constitute, with or without the passage of time or the giving of notice or both, either a default under any such constitutional documents, any such contract, agreement or instrument or a violation of any statutes, laws, regulations or orders, or an event which results in the creation of any lien, charge or encumbrance upon any asset of the Company. Especially, the Company shall guarantee that the sale of the Transferred Interests pursuant to this Agreement will not affect any of the Company’s Intellectual Property rights or licenses with respect to CSP technology.

2.15        Environmental and Safety Laws.  To the Company’s knowledge, the Company is not in violation of any applicable statute, law, or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law, or regulation.

2.16        Obligations of Management.  Each employee and consultant of the Company is currently devoting one hundred percent (100%) of his or her working time to the conduct of the business of the Company.  The Company is not aware that any such employee is planning to work less than fulltime at the Company in the future.  To the knowledge of the Company, no such employee is currently working for a competitive enterprise, whether or not such person is or will be compensated by such enterprise.

2.17        Minute Books.  The minute books of the Company made available to the Buyer contain a complete summary of all meetings and actions taken by directors and shareholders or owners of the Company since its time of formation, and reflect all transactions referred to in such meetings and actions accurately in all material respects.

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2.18        Disclosure.  No representation or warranty by the Company in this Agreement or in any written statement or certificate furnished or to be furnished to the Buyer pursuant to any Transaction Document contains or will contain any untrue statement of fact or omits or will omit to state any fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they are made, not misleading in any way.  The Company has fully provided the Buyer with all the information that the Buyer has requested for the purpose of deciding whether to purchase the Transferred Interests and all information that could reasonably be expected to enable the Buyer to make such decision.

SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller hereby represents and warrants to the Buyer that the statements in this Section 3 are all true, correct and complete as of the date hereof and as of the Closing.

3.1          Title.   The Seller has contributed fully the registered capital of the Company allotted to it and has the legitimate, full, adequate and marketable title, ownership and power to the Transferred Interests. The Transferred Interests and all other equity interests of the Company owned by the Seller are free and clear of any liens, pledges, encumbrances, security interests, restrictions on transfer, charges or claims.  No other person or entity has any legal or equitable claim to ownership of the Transferred Interests.  In respect of the Transfer, the Company, any other equity owner of the Company and any person or entity that may hold such a right has waived its right of first refusal with regard to the transfer of the Transferred Interests, and there is no other person entitled to the rights of first refusal or other preemptive rights of first refusal or other preemptive rights with regard to the Transferred Interests. The Seller is not a party to any option, warrant, purchase right, pledge, or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of any of the Transferred Interests (other than this Agreement).

3.2          Authority.  The Seller has all requisite legal capacity to enter into this Agreement and to consummate the transactions contemplated hereby.  All corporate action on the part of the Company and its respective officers, directors and shareholders necessary for the authorization, execution and delivery of each Transaction Document, the performance of their respective obligations under each Transaction Document and all other agreements, instruments and documents executed and delivered in connection with the transactions contemplated hereby, has been taken or will be taken prior to the Closing. The Transaction Documents are valid and binding obligations of the Company, enforceable in accordance with their respective terms.

3.3           Proceedings.

There are no actions, suits, proceedings or investigations (the “Proceeding”) pending, and no person has threatened to commence any Proceeding, that may have an adverse effect on the ability of the Seller to consummate the Transfer or to perform the covenants or obligations under the Agreement. No event has occurred, and no claim, dispute or other condition or circumstances

10

exists, that likely would directly or indirectly give rise to serve as a basis for the commencement of any such Proceeding.

SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer hereby represents and warrants to the Seller as follows:

4.1           Power and Authority.  The Buyer has all requisite power and authority to execute and deliver the Transaction Documents, to purchase the Transferred Interests and to carry out and perform its obligations under the terms of the Transaction Documents.  All action on the part of the Buyer necessary for the authorization, execution, delivery and performance of the Transaction Documents, and the performance of all of the Buyer’s obligations under the Transaction Documents, has been taken or will be taken prior to the Closing.

4.2           Investment Purpose.  The Buyer represents that the Equity Interests to be received by it will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that it has no present intention of selling, granting any participation in or otherwise distributing the same.

4.3           No Public Market.  The Buyer understands that no public market now exists for any of the Equity Interests issued by the Company and that neither the Company nor the Seller has made no assurances that a public market will ever exist for the Company’s securities.

SECTION 5
CONDITIONS TO THE BUYER’S OBLIGATION TO CLOSE

The Buyer’s obligation to purchase the Transferred Interests at a Closing is subject to the fulfillment on or before the Closing of each of the following conditions unless waived in writing by the Buyer:

5.1           Representations and Warranties.  The representations and warranties made by the Company and the Seller in Section 2 and Section 3 (as modified by the disclosures on the Disclosure Schedules) shall be true and correct as of the date of such Closing.

5.2           Covenants.  All covenants, agreements and conditions contained in this Agreement to be performed by the Company and the Seller on or prior to the Closing shall have been performed or complied with.

5.3           No Material Adverse Effect.  No event or events shall have occurred which, individually or in the aggregate, have a Material Adverse Effect on the Company.

5.4           Transaction Documents.  The Company, the Seller and the Buyer shall have executed and delivered each of the Transaction Documents.

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5.5           Regulatory Approval.  All authorization, approvals and permits of any governmental authority or regulatory body that are required to be obtained in connection with the sale of Transferred Interests pursuant to this Agreement shall have been duly obtained and shall be effective as of the Closing.

5.6           Officer’s Certificate from the Seller.  The Seller shall have delivered to the Buyer an Officer’s Certificate, executed by the [President] of the Seller, dated the Closing Date, in substantially the form attached hereto as Exhibit B, certifying the resolutions approved by the Board of Directors of the Seller authorizing the transactions contemplated hereby.

5.7           Officer’s Certificate from the Company.  The Company shall have delivered to the Buyer an Officer’s Certificate, executed by the President of the Company, dated the Closing  Date, in substantially the form attached hereto as Exhibit E, certifying the satisfaction of the conditions to closing listed in this Section 5 and the true and correctness of (i) the Restated Articles as in effect at the time of the Closing , (ii) the Restated JV Agreement as in effect at the time of the Closing , (iii) resolutions approved by the Board of Directors of the Company authorizing the transactions contemplated hereby; and (iv) resolutions approved by the shareholders of the Company authorizing the transactions contemplated hereby and waiving certain rights.

5.8           Corporate Documents  The Company shall have delivered to the Buyer or its counsel copies of all corporate documents of the Company as the Buyer shall reasonably request.

5.9           Legal Opinion.  The Buyer shall have received opinions, dated as of the Closing, from Fangda Partners, the Seller’s PRC counsel, in such forms as are acceptable to the Buyer in its sole discretion.

SECTION 6
CONDITIONS TO THE SELLER’S OBLIGATION TO CLOSE

The Seller’s obligation to sell the Transferred Interests at the Closing is subject to the fulfillment on or before such Closing of the following conditions unless waived by the Seller:

6.1           Representations and Warranties.  The representations and warranties made by the Buyer in such Closing in Section 4 shall be true and correct when made and shall be true and correct as of the date of such Closing.

6.2           Transaction Documents.  The Company, the Seller and the Buyer shall have executed and delivered each of the Transaction Document.

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SECTION 7
MISCELLANEOUS

7.1           Governing Law.  This Agreement shall be governed by the laws of the State of New York, U.S.A., without regard to principles of conflict of laws.

7.2            Arbitration.  If the Parties should have a material dispute arising out of or relating to this Agreement, then the Parties will refer the issue (to the exclusion of a court of law) to final and binding arbitration in Hong Kong under the UNCITRAL Arbitration Rules in accordance with the Hong Kong International Arbitration Centre Procedures for the Administration of International Arbitration in force at the date of this Agreement, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  In any arbitration pursuant to this Agreement, the award or decision shall be rendered by a majority of the members of a Board of Arbitration (the “Board of Arbitration”) consisting of three (3) members, one (1) of whom shall be appointed by each party and the third of whom shall be the chairman of the panel and be appointed by mutual agreement of said two (2) party-appointed arbitrators.  In the event of failure of said two (2) arbitrators to agree within thirty (30) days after the commencement of the arbitration proceeding upon the appointment of the third arbitrator to the Board of Arbitration, the third arbitrator shall be appointed by the Hong Long International Arbitration Centre. Nothing set forth above shall be interpreted to prevent the parties from agreeing in writing to submit any dispute to a single arbitrator in lieu of a three (3) member Board of Arbitration.  Upon the completion of the selection of the Board of Arbitration (or if the parties agree otherwise in writing, a single arbitrator), an award or decision shall be rendered within no more than forty-five (45) days.  Notwithstanding the foregoing, the request by the parties for preliminary or permanent injunctive relief, whether prohibitive or mandatory, shall not be subject to arbitration and may be adjudicated only by the courts of proper jurisdiction.

7.3            Attorney’s Fees.  In the event that any suit or action is instituted to enforce any provisions in this Agreement, the prevailing Party in such dispute shall be entitled to recover from the losing Party all fees, costs and expenses of enforcing any right of such prevailing Party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

7.4            Survival.  The warranties, representations and covenants of the Company, the Seller and the Buyer contained in this Agreement shall survive the execution and delivery of this Agreement and the Closing, and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Buyer or the Seller.

7.5           Indemnification of Buyer.

7.5.1        The Company hereby agrees to hold harmless and indemnify the Buyer, the Buyer’ direct and indirect subsidiaries, affiliated entities and corporations (collectively, referred to as the “Buyer Indemnitees”) against any and all direct damages, liabilities, losses, reasonable costs and expenses (including attorneys’ fees and expenses), whether or not arising out of third-party claims, attributable to (i) any material inaccuracy in, or any material breach by

13

the Company of, any representation or warranty or other statement expressly contained in this Agreement including the Disclosure Schedules regarding the Company, or (ii) any material breach of any covenant or agreement expressly contained in this Agreement including the Disclosure Schedules hereto regarding the Company (collectively, the “Indemnifiable Claims Against Company”); provided, however, that the Company’s liability to the Indemnifiable Claims Against Company shall not exceed the Purchase Price.

7.5.2        The Seller hereby agrees to hold harmless and indemnify the Buyer Indemnitees against any and all direct damages, liabilities, losses, reasonable costs and expenses (including attorneys’ fees and expenses), whether or not arising out of third-party claims, attributable to (i) any material inaccuracy in, or any material breach by the Seller of, any representation or warranty or other statement expressly contained in this Agreement including the Disclosure Schedules regarding the Seller, or (ii) any material breach of any covenant or agreement expressly contained in this Agreement including the Disclosure Schedules hereto regarding the Seller (collectively, the “Indemnifiable Claims Against Seller”); provided, however, that the Seller’s liability to the Indemnifiable Claims Against Seller shall not exceed the Purchase Price.

7.5.3        The rights to indemnification set forth in this Section 7.5 are in addition to, and not in limitation of, all rights and remedies to which the Buyer may be entitled. All remedies, either under this Agreement, the Restated Articles, the Restated Joint Venture Agreement, by Law, or otherwise afforded to any party, shall be cumulative and not alternative.

7.5.4        Notwithstanding the foregoing, there shall be no liability for any Indemnifiable Claims unless the claim therefor has been asserted pursuant to Section 7.5 within thirty six (36) months after the Closing.

7.6           Entire Agreement.  This Agreement, including the exhibits attached hereto, constitute the full and entire understanding and agreement among the Parties with regard to the subjects hereof and thereof.  No Party shall be liable or bound to another Party in any manner with regard to the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein or therein.

7.7           Amendment.  Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by the Buyer, the Seller and the Company.

7.8           Notices.  All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand or by messenger, addressed as follows:

(a)	if to the Buyer, one copy shall be sent to
	OmniVision Trading (Hong Kong) Co. Ltd.

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	Attn:
	Facsimile:
	With a copy to:
	OmniVision Technologies, Inc.
	1341 Orleans Drive
	Sunnyvale, CA 94089
	Attn: General Counsel
	Facsimile: (408) 542-3006
	With a copy to:
	Morgan, Lewis & Bockius, LLP
	3000 El Camino Real, Suite 700
	Palo Alto, California 94306
	Attn: Lucas Chang
	Facsimile: (650) 843-4001
(b)	if to the Seller, one copy should be sent to
	Infinity-CVSC Venture Capital Enterprise
	Attn:
	Facsimile:
	With a copy to
		.
(c)	if to the Company, one copy should be sent to
	China WLCSP Limited
	Suite 11C, Suchuan Industrial Square
	No. 428, Xinlong Road
	Suzhou Industrial Park
	Suzhou, Jiangsu, China 215126
	Attn: Chief Executive Officer
	Facsimile:

15

With a copy to
	.

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail or the China mail or internationally recognized next-day delivery services courier, addressed and mailed as aforesaid or, if sent by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon confirmation of delivery when directed to the electronic mail address of the recipient.

7.9           Severability.  If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision.  The balance of this Agreement shall be enforceable in accordance with its terms.

7.10         Expenses.  The Buyer, the Seller and the Company shall each pay their own expenses in connection with the transactions contemplated by this Agreement.  

7.11         Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

7.12         Telecopy Execution and Delivery.  A facsimile, telecopy or other reproduction of this Agreement may be executed by one or all Parties hereto and delivered by such Party by facsimile or any similar electronic transmission device pursuant to which the signature of or on behalf of such Party can be seen.  Such execution and delivery shall be considered valid, binding and effective for all purposes.  At the request of any Party hereto, all Parties hereto agree to execute and deliver an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.

7.13         Delays or Omissions.  Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any Party to this Agreement upon any breach or default of another Party under this Agreement shall impair any such right, power or remedy of such non-defaulting Party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any Party of any breach or default under this Agreement, or any waiver on the part of any Party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All

16

remedies, either under this Agreement or by law or otherwise afforded to any Party to this Agreement, shall be cumulative and not alternative.

7.14         Further Assurances.  Each Party hereto agrees to execute and deliver, by the proper exercise of its corporate or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement.

7.15         No Agency.  This Agreement shall not constitute an appointment of any Party as the legal representative or agent of any other party, nor shall any party have any right or authority to assume, create or incur in any manner any obligation or other liability of any kind, express or implied, against, in the name or on behalf of, any other party.  Nothing herein or in the transactions contemplated by this Agreement shall be construed as, or deemed to be, the formation of a partnership by or among the parties.

7.16         Confidentiality.  The Parties agree that they shall not disclosure, divulge or communicate to any other party, the existence and contents of this Agreement, the Investment Agreement, or any correspondence, material, know-how, and other information acquired in connection with the transaction contemplated herein, and shall take and maintain such information under strict security precautions to prevent any disclosure.  Neither party shall issue any public statement or release concerning any such information, without the other party’s prior written approval of the substance and form of any such statement or release, unless required by the applicable laws, regulations or stock exchange rules.  Notwithstanding the above, the Parties shall be entitled to disclose such information (a) to their interest-owners, shareholders, directors and officers and their respective professional advisers; (b) in connection with a merger, acquisition or proposed merger or acquisition, and (c) as required by applicable law, including without limitation applicable securities laws and regulations of the United States and the PRC.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof.

“SELLER”
Infinity-CSVC Venture Capital Enterprise
By:			/s/ Xianghong Lin /s/Amir Gal-or
Name:	Xianghong Lin, Amir Gal-or
Title:	President
“COMPANY”
China WLCSP Ltd
By:			/s/ Wei Wang
Name:	Wei Wang
Title:	Chief Executive Officer and President
“BUYER”
OmniVision Trading (Hong Kong)
Company Ltd.
By:		/s/ Shaw Hong
Name:	Shaw Hong
Title:	Chief Executive Officer, President and Director (Principal Executive Officer)

(Signature Page to Equity Interests Transfer Agreement)

EXHIBIT A

AMENDED AND RESTATED ARTICLES OF ASSOCIATION

EXHIBIT B

AMENDED AND RESTATED EQUITY JOINT VENTURE AGREEMENT

EXHIBIT C

DISCLOSURE SCHEDULES

EXHIBIT D

INFINITY-CSVC VENTURE CAPITAL ENTERPRISE

OFFICER’S CERTIFICATE

Pursuant to Section 5.6 of the Agreement, dated [             ], 2007, by and among China WLCSP Limited, Infinity-CSVC Venture Capital Enterprise and OmniVision Trading (Hong Kong) Company Limited, (the “Agreement”), the undersigned certifies on behalf of the Seller as follows:

1.He is the [President] of the Seller.

2.The Seller has performed or complied with all covenants, agreements and conditions contained in the Agreement to be performed by the Seller on or prior to the Closing; and except as set forth in or modified by the Disclosure Schedules, the representations and warranties of the Seller set forth in Section 3 of the Agreement are true and correct as of the date hereof.

3.Attached hereto as Annex I is a true and correct copy of certain resolutions duly adopted by the [Board of Directors] of the Seller on [             ], 2007 authorizing the transactions contemplated by the Agreement.  Such resolutions have not been amended, modified or rescinded since their adoption and remain in full force and effect as of the date hereof.

Capitalized terms used but not defined herein have the meanings ascribed to them in the Agreement.

IN WITNESS WHEREOF, the undersigned has executed this certificate as of [             ], 2007.

Infinity-CSVC Venture Capital
Enterprise

/s/Xianghong Lin       /s/ Amir Gal-or

[President]

EXHIBIT E

CHINA WLCSP LIMITED

OFFICER’S CERTIFICATE

Pursuant to Section 5.7 of the Agreement, dated [             ], 2007, by and among China WLCSP Limited, Infinity-CSVC Venture Capital Enterprise and OmniVision Trading (Hong Kong) Company Limited (the “Agreement”), the undersigned certifies on behalf of the Company as follows:

1.He is the President and Chief Executive Officer of the Company;

2.The Company has performed or complied with all covenants, agreements and conditions contained in the Agreement to be performed by the Company on or prior to the Closing; and except as set forth in or modified by the Disclosure Schedules, the representations and warranties of the Company set forth in Section 2 of the Agreement are true and correct as of the date hereof.

3.Attached hereto as Appendix I is a true and correct copy of the Restated Articles in effect as of the date hereof, and no action has been taken by the Company to effect or authorize any amendment or other modification to such Articles.

4.Attached hereto as Appendix II is a true and correct copy of the Restated JV Agreement in effect as of the date hereof, and no action has been taken by the Company to effect or authorize any amendment or other modification to such Agreement.

5.Attached hereto as Appendix III is a true and correct copy of certain resolutions duly adopted by the Board of Directors of the Company on [             ], 2007 authorizing the transactions contemplated by the Agreement.  Such resolutions have not been amended, modified or rescinded since their adoption and remain in full force and effect as of the date hereof.

6.Attached hereto as Appendix IV is a true and correct copy of certain resolutions duly adopted by the shareholders of the Company on [             ], 2007 authorizing the transactions contemplated by the Agreement and waiving certain rights.  Such resolutions have not been amended, modified or rescinded since their adoption and remain in full force and effect as of the date hereof.

Capitalized terms used but not defined herein have the meanings ascribed to them in the Agreement.

IN WITNESS WHEREOF, the undersigned has executed this certificate as of [             ], 2007.

China WLCSP Ltd

/s/ Wei Wang

President and CEO

EX-10.25

Exhibit 10.25

[Citigroup Logo]

Date:	March 20, 2007
To:	OMNIVISION TECHNOLOGIES INC
Attn:	Anson Chan, VP Finance 1341 Orleans Drive Sunnyvale, CA 94089
Phone:
Fax:
Email:
From:	Citibank N.A., New York Confirmations Unit 333 West 34th Street, 2nd Floor New York, NY 10001, USA
Phone:	1-212-615-8398
Fax:	1-212-615-8985
Our ref:	M071483
Your ref:

TRANSACTION

The purpose of this letter agreement (this ‘Confirmation’) is to set forth the terms and conditions of the Transaction entered into between OMNIVISION TECHNOLOGIES INC (‘Counterparty’) and Citibank N.A., New York (‘Citibank’) on the Trade Date specified below (the ‘Transaction’).

1. The definitions and provisions contained in the 2000 ISDA Definitions (the ‘Definitions’) (as published by the International Swaps and Derivatives Association, Inc.) are incorporated into this Confirmation. References herein to a ‘Transaction’ shall be deemed to be references to a ‘Swap Transaction’ for the purposes of the Definitions.

This Confirmation evidences a complete and binding agreement between you and us as to the terms of the Transaction to which this Confirmation relates. In addition, you and we agree to use all reasonable efforts promptly to negotiate, execute and deliver an agreement in the form of an ISDA Master Agreement, with such modifications as you and we will in good faith agree. Upon the execution by you and us of such an agreement, this Confirmation will supplement, form part of, and be subject to that agreement. All provisions contained in, or incorporated by reference in, that agreement upon its execution will govern this Confirmation except as expressly modified below. Until we execute and dcliver that agreement, this Confirmation, together with all other documents referring to an ISDA

1

Master Agreement (each a ‘Confirmation’) confirming transactions (each a ‘Transaction’) entered into between us (notwithstanding anything to the contrary in a Confirmation), shall supplement, form a part of, and be subject to, a single agreement (the Agreement) in the pre-printed form of the 1992 ISDA Master Agreement (Multicurrency Cross Border) (the ISDA Form) as if, on the Trade Date of the first such Transaction between us, we had executed a single agreement in such form (but without any Schedule except for the election of the laws of the State of New York as the governing law, USD as the Termination Currency, Credit Event Upon Merger, Second Method and Market Quotation as applying and basic Set-Off provision contained in Section V A. of the User’s Guide to the 1992 ISDA Master Agreements 1993 Edition published by ISDA being incorporated by reference). The Agreement shall contain such other modifications (including additional elections) to the ISDA Form (each, an Agreement Modification) as may be agreed by the parties from time to time. Any Agreement Modification may be set forth in any Confirmation (whether or not it would form part of the Schedule to the ISDA Master Agreement and notwithstanding the termination or expiry of the Transaction(s) detailed in any such Confirmation). To the extent of any inconsistency between the provisions of the ISDA Form and this Confirmation, this Confirmation will prevail for the purposes of this Transaction. To the extent of any inconsistency between any Agreement Modification and a prior Agreement Modification, the terms of the Agreement Modification set forth in the most recent Confirmation shall govern.

THIS CONFIRMATION WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO THESE COURTS.

U.S. Federal law requires Citibank to obtain, verify and record customer identification information.

2. The terms of the particular Transaction to which this Confirmation relates are as follows:

Trade Date:	March 19, 2007
Effective Date:	April 1, 2007
Termination Date:	April 1, 2017, subject to adjustment in accordance with the Modified Following Business Day Convention

Fixed Amounts

Fixed Rate Payer:  Counterparty

2

Notional Amount:	With respect to each Calculation Period, the amount set forth in Exhibit I attached hereto opposite such Calculation Period under the heading ‘Notional Amount’
Fixed Rate Payer Payment Dates:	The 1st calendar day of each month commencing May 1, 2007 through and including the Termination Date
Fixed Rate:	5.2700000 percent
Fixed Rate Day Count Fraction:	Actual/360
Business Days:	New York, London
Business Day Convention:	Modified Following

Floating Amounts

Floating Rate Payer:	Citibank
Notional Amount:	With respect to each Calculation Period, the amount set forth in Exhibit I attached hereto opposite such Calculation Period under the heading ‘Notional Amount’
Floating Rate Payer Payment Dates:	The 1st calendar day of each month commencing May 1, 2007, through and including the Termination Date
Floating Rate Option:	USD-LIBOR-BBA
Designated Maturity:	One month

3

Spread:	None
Floating Rate Day Count Fraction:	Actual/360
Reset Dates:	The first day of each Floating Rate Payer Calculation Period
Compounding:	Inapplicable
Business Days:	New York, London
Business Day Convention:	Modified Following
Calculation Agent:	As per Master Agreement.

Representations. Section 3 of the Agreement is hereby amended by adding the following subsections after subsection (f) thereof:

A.            Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction; it being understood that infonnation and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. It has not received from the other party any assurance or guarantee as to the expected results of this Transaction.

B.            Evaluation and Understanding. It is capable of evaluating and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of this Transaction. It is also capable of assuming, and assumes, the financial and other risks of this Transaction.

C.            Status of Parties. The other party is not acting as a fiduciary or an advisor for it in rcspect of this Transaction.

D.            Risk Management. It has entered into this Transaction for the purpose of (i) managing its borrowings or investments, (ii) hedging its underlying assets or liabilities or (iii) in connection with its line of business.

4

E.             No Agency. It is entering into this Agreement, any Credit Support Document to which it is a party, and each Transaction, and any other documentation relating to this Agreement or any Transaction, as principal (and not as agent or in any other capacity, fiduciary or otherwise).

A. Additional Termination Event.

“Additional Termination Events” shall apply. On and after the Closing Date, each of the following shall constitute an Additional Termination Event and Party B shall be the sole Affected Party with respect thereto:-

(1)At any time, Citibank or any of its Affiliates, as the case may be, ceases to be a party to the Credit Agreement.

(2)At any time, Citibank or any of its Affiliates receives a notice or letter or other form of writing (whether from Citibank’s own Affiliates, Counterparty or Counterparty’s Affiliates or any other entity) indicating that a Cancellation Event has occurred or shall occur or take effect after the delivery of such notice, letter or other form of writing.

(3)At any time, the obligations and liabilities of Counterparty under this Transaction fail to rank, be secured or be guaranteed, in each case,

(i)on a pari passu basis with or equal in right or priority of payment with the obligations and liabilities of Counterparty and any of its Affiliates under the Loan Documents.

B. Additional Event of Default

Section 5(a) is hereby amended by inserting the following paragraph at the end thereof:

“(ix) With respect to Counterparty only, at any time a default, event of default or other similar condition or event (however described) occurs with respect to Counterparty under the Credit Agreement.”

C. Additional Definitions.

Section 14 is hereby amended by inserting the following definitions in their appropriate alphabetical order:-

5

“Cancellation Event”

Means (x) any expiration, termination or cancellation of the Credit Agreement, whether by reason of payment of all indebtedness incurred thereunder or otherwise or (y) the Credit Agreement ceases, for any reason, to be in full force and effect.

“Credit Agreement”

Means the Loan and Security Agreement, dated on March 16, 2007 (as amended, supplemented, waived or otherwise modified from time to time) by and among Counterparty, (to the extent applicable) the relevant Affiliates of Counterparty, and the banks or lenders from time to time parties thereto. For clarification, said Credit Agreement shall not incorporate or reference any agreement in respect of (x) any refinancing or extension, in each case, in whatever form, of the initial credit facility evidenced by said Credit Agreement (said initial credit facility, the “Initial Credit Facility”) or (y) any substitute credit facility.

“Collateral Documents”

Means any and all Security Documents and Guarantees that secure or guarantee or purports to secure or to guarantee, as the case may be, the performance or payment of the obligations and liabilities of the Counterparty under this Confirmation or in respect of this Transaction.

“Guarantees”

Means any and all guarantees issued at any time by Counterparty or any of its Affiliates in respect of indebtedness incurred under the Credit Agreement.

“Loan Documents”

Means the collective reference to the Credit Agreement, the Guarantees, the Security Documents, and any other document or instrument executed and delivered by Counterparty and/or any of its Affiliates in respect of the Initial Credit Facility.

“Security Documents”

Means any and all pledge and/or security agreements and any other document executed and delivered at any time in respect of the granting of any lien (however described) on any property or asset of Counterparty and/or any of its Affiliates to secure the performance or payment of the obligations and liabilities of each of Counterparty and its Affiliates under the Credit Agreement and the Guarantees.

4. Account Details

Payments to Citibank
in USD: Bank: Citibank NA New York
BIC: CITIUS33 (or ABA: 021000089)
F/O: Citibank New York
A/C: 00167679
Ref: NY Swap Operations

6

Payments to Counterparty:                Please provide to expedite payment

If you have any questions regarding this letter agreement, please contact the Swap Operations Department at the telephone numbers or the facsimile numbers indicated on this Confirmation. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us.

Very truly yours,
Citibank N.A., New York
By:	/s/ FRANK A. LICCIARDELLO

Accepted and confirmed as
of the Trade Date:

OMNIVISION TECHNOLOGIES INC
By:	/s/ Anson Chan
Authorized Signatory

EXHIBIT I-AMORTIZATION SCHEDULE
Our Reference: M071483

Calculation Period**		USD
From and including	To but excluding	Notional Amount
01 Apr 2007	01 May 2007	27,927,045.00
01 May 2007	01 Jun 2007	27,880,906.73
01 Jun 2007	01 Jul 2007	27,834,768.46
02 Jul 2007	01 Aug 2007	27,788,630.19
01 Aug 2007	01 Sep 2007	27,742,491.92
04 Sep 2007	01 Oct 2007	27,696,353.65

7

01 Oct 2007	01 Nov 2007	27,650,215.38
01 Nov 2007	01 Dec 2007	27,604,077.11
03 Dec 2007	01 Jan 2008	27,557,938.84
02 Jan 2008	01 Feb 2008	27,511,800.57
01 Feb 2008	01 Mar 2008	27,465,662.30
03 Mar 2008	01 Apr 2008	27,419,524.03
01 Apr 2008	01 May 2008	27,373,385.76
01 May 2008	01 Jun 2008	27,327,247.49
02 Jun 2008	01 Jul 2008	27,281,109.22
01 Ju1 2008	01 Aug 2008	27,234,970.95
01 Aug 2008	01 Sep 2008	27,188,832.68
02 Sep 2008	01 Oct 2008	27,142,694.41
01 Oct 2008	0l Nov 2008	27,096,556.14
03 Nov 2008	01 Dec 2008	27,050,417.87
01 Dec 2008	01 Jan 2009	27,004,279.60
02 Jan 2009	01 Feb 2009	26,958,141.33
02 Feb 2009	01 Mar 2009	26,912,003.06
02 Mar 2009	01 Apr 2009	26,865,864.79
01 Apr 2009	01 May 2009	26,819,726.52
01 May 2009	01 Jun 2009	26,773,588.25
01 Jun 2009	01 Jul 2009	26,727,449.98
01 Jul 2009	01 Aug 2009	26,681,311.71
03 Aug 2009	01 Sep 2009	26,635,173.44
01 Sep 2009	01 Oct 2009	26,589,035.17
01 Oct 2009	01 Nov 2009	26,542,896.90
02 Nov 2009	01 Dec 2009	26,496,758.63
01 Dec 2009	01 Jan 2010	26,450,620.36
04 Jan 2010	01 Feb 2010	26,404,482.09
01 Feb 2010	01 Mar 2010	26,358,343.82
01 Mar 2010	01 Apr 2010	26,312,205.55
01 Apr 2010	01 May 2010	26,266,067.28
04 May 2010	01 Jun 2010	26,219,929.01
01 Jun 2010	01 Jul 2010	26,173,790.74
01 Jul 2010	01 Aug 2010	26,127,652.47
02 Aug 2010	01 Sep 2010	26,081,514.20
01 Sep 2010	01 Oct 2010	26,035,375.93
01 Oct 2010	01 Nov 2010	25,989,237.66

8

01 Nov 2010	01 Dec 2010	25,943,099.39
01 Dec 2010	01 Jan 2011	25,896,961.12
04 Jan 2011	01 Feb 2011	25,850,822.85
01 Feb 2011	01 Mar 2011	25,804,684.58
01 Mar 2011	01 Apr 2011	25,758,546.31
01 Apr 2011	01 May 2011	25,712,408.04
03 May 2011	01 Jun 2011	25,666,269.77
01 Jun 2011	01 Ju1 2011	25,620,131.50
01 Jul 2011	01 Aug 2011	25,573,993.23
01 Aug 2011	01 Sep 2011	25,527,854.96
01 Sep 2011	01 Oct 2011	25,481,716.69
03 Oct 2011	01 Nov 2011	25,435,578.42
01 Nov 2011	01 Dee 2011	25,389,440.15
01 Dec 2011	01 Jan 2012	25,343,301.88
03 Jan 2012	01 Feb 2012	25,297,163.61
01 Feb 2012	01 Mar 2012	25,251,025.34
01 Mar 2012	01 Apr 2012	25,204,887.07
02 Apr 2012	01 May 2012	25,158,748.80
01 May 2012	01 Jun 2012	25,112,610.53
01 Jun 2012	01 Jul 2012	25,066,427.26
02 Jul 2012	01 Aug 2012	25,020,333.99
01 Aug 2012	01 Sep 2012	24,974,195.72
04 Sep 2012	01 Oct 2012	24,928,057.45
01 Oct 2012	01 Nov 2012	24,881,919.18
01 Nov 2012	01 Dec 2012	24,835,780.91
03 Dec 2012	01 Jan 2013	24,789,642.64
02 Jan 2013	01 Feb 2013	24,743,504.37
01 Feb 2013	01 Mar 2013	24,697,366.10
01 Mar2013	01 Apr 2013	24,651,227.83
02 Apr 2013	01 May 2013	24,605,089.56
01 May 2013	01 Jun 2013	24,558,951.29
03 Jun 2013	01 Jul 2013	24,512,813.02
01 Jul 2013	01 Aug 2013	24,466,674.75
01 Aug 2013	01 Sep 2013	24,420,536.48
03 Sep 2013	01 Oct 2013	24,374,398.21
01 Oct 2013	01 Nov 2013	24,328,259.94
01 Nov 2013	01 Dec 2013	24,282,121.67

9

02 Dec 2013	01 Jan 2014	24,235,983.40
02 Jan 2014	01 Feb 2014	24,189,845.13
03 Feb 2014	01 Mar 2014	24,143,706.86
03 Mar 2014	01 Apr 2014	24,097,568.59
01 Apr 2014	01 May 2014	24,051,430.32
01 May 2014	01 Jun 2014	24,005,292.05
02 Jun 2014	01 Ju1 2014	23,959,153.78
01 Ju1 2014	01 Aug 2014	23,913,015.51
01 Aug 2014	01 Sep 2014	23,866,877.24
02 Sep 2014	01 Oct 2014	23,820,738.97
01 Oct 2014	01 Nov 2014	23,774,600.70
03 Nov 2014	01 Dec 2014	23,728,462.43
01 Dec 2014	01 Jan 2015	23,682,324.16
02 Jan 2015	01 Feb 2015	23,636,185.89
02 Feb 2015	01 Mar 2015	23,590,047.62
02 Mar 2015	01 Apr 2015	23,543,909.35
01 Apr 2015	01 May 2015	23,497,771.08
01 May 2015	01 Jun 2015	23,451,632.81
01 Jun 2015	01 Jul 2015	23,405,494.54
01 Jul 2015	01 Aug 2015	23,359,356.27
03 Aug 2015	01 Sep 2015	23,313,218.00
01 Sep 2015	01 Oct 2015	23,267,079.73
01 Oct 2015	01 Nov 2015	23,220,941.46
02 Nov 2015	01 Dec 2015	23,174,803.19
01 Dec 2015	01 Jan 2016	23,128,664.92
04 Jan 2016	01 Feb 2016	23,082,526.65
01 Feb 2016	01 Mar 2016	23,036,388.38
01 Mar 2016	01 Apr 2016	22,990,250.11
01 Apr 2016	01 May 2016	22,944,111.84
03 May 2016	01 Jun 2016	22,897,973.57
01 Jun 2016	01 Jul 2016	22,851,835.30
01 Jul 2016	01 Aug 2016	22,805.697.03
01 Aug 2016	01 Sep 2016	22,759,558.76
01 Sep 2016	01 Oct 2016	22,713,420.49
03 Oct 2016	01 Nov 2016	22,667,282.22
01 Nov 2016	01 Dec 2016	22,621,143.95
01 Dec 2016	01 Jan 2017	22,575,005.68

10

03 Jan 2017	01 Feb 2017	22,528,867.41
01 Feb 2017	01 Mar 2017	22,482,729.14
01 Mar 2017	03 Apr 2017	22,436,590.87

**With respect to the Fixed Amounts and Floating Amounts, Exhibit I is subject to adjustment in accordance with the Modified Following Business Day Convention.

“Modified Following” is specified, that date will be the first following day that is a Business Day unless that day falls in the next calendar month, in which case that date will be the first preceding day that is a Business Day.

11

EX-21.1

Exhibit 21.1

OMNIVISION TECHNOLOGIES, INC.

Subsidiaries of OmniVision Technologies, Inc.

Registrant’s significant consolidated subsidiaries and the state or jurisdiction of organization of each subsidiary are shown below:

Name of Subsidiary	Jurisdiction of Incorporation	Percentage Ownership
OmniVision International Holding Ltd.	Cayman Islands	100%
HuaWei Technology International, Ltd.	Cayman Islands	100%
(formerly OmniView Technology International, Ltd.)
OmniVision Technologies (Hong Kong) Company Limited	Hong Kong, China	100%
OmniVision Trading (Hong Kong) Company Limited	Hong Kong, China	100%
HuaWei Semiconductor (Shanghai) Co., Ltd.	China	100%
(formerly OmniView Electronic (Shanghai) Co., Ltd.)
Shanghai OmniVision IC Design Co., Ltd.	China	100%
CDM Optics, Inc.	Colorado	100%
Taiwan OmniVision Technologies Co., Ltd.	Taiwan	100%

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-143376, No. 333-135403, No. 333-125511, No. 333-117651, No. 333-106503 and No. 333-42996) of OmniVision Technologies, Inc. of our report dated June 27, 2007 relating to the financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California

June 27, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Shaw Hong, certify that:

1.  I have reviewed this Annual Report on Form 10-K of OmniVision Technologies, 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(s) 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(s) 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 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.

Date: June 29, 2007

By:	/s/ SHAW HONG
		Shaw Hong
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Peter V. Leigh, certify that:

1.  I have reviewed this Annual Report on Form 10-K of OmniVision Technologies, 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(s) 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(s) 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 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.

Date: June 29, 2007

By:	/s/ PETER V. LEIGH
		Peter V. Leigh
	Chief Financial Officer (Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION OF 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

I, Shaw Hong, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of OmniVision Technologies, Inc. on Form 10-K for the fiscal year ended April 30, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of OmniVision Technologies, Inc. A signed original of this written statement required by Section 906 has been provided to OmniVision Technologies, Inc. and will be retained by OmniVision Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: June 29, 2007

By:	/s/ SHAW HONG
	Shaw Hong
	Chief Executive Officer, President and Director
	(Principal Executive Officer)

I, Peter V. Leigh, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of OmniVision Technologies, Inc. on Form 10-K for the fiscal year ended April 30, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of OmniVision Technologies, Inc. A signed original of this written statement required by Section 906 has been provided to OmniVision Technologies, Inc. and will be retained by OmniVision Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: June 29, 2007

By:	/s/ PETER V. LEIGH
	Peter V. Leigh
	Chief Financial Officer (Principal Financial
	and Accounting Officer)