10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2011 or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission file number 0-15071

___________

ADPT Corporation

(Exact name of Registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)	94-2748530 (I.R.S. Employer Identification No.)
691 S. MILPITAS BLVD., SUITE 208, MILPITAS, CALIFORNIA (Address of principal executive offices)	95035 (Zip Code)
Registrant's telephone number, including area code (408) 945-8600

___________

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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No ¨

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

Large accelerated filero	Accelerated filerx	Non-accelerated filero	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesoNox

The number of shares of ADPT's common stock outstanding as of August 9, 2011 was 108,832,141.

TABLE OF CONTENTS

				Page
Part I.	FINANCIAL INFORMATION
	Item 1. FINANCIAL STATEMENTS
		Condensed Consolidated Statements of Operations for the three-month and six- month periods ended July 1, 2011 and July 2, 2010		3
		Condensed Consolidated Balance Sheets as of July 1, 2011 and December 31, 2010		4
		Condensed Consolidated Statements of Cash Flows for the six months ended July 1, 2011 and July 2, 2010		5
		Notes to Unaudited Condensed Consolidated Financial Statements		6
	Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
			RESULTS OF OPERATIONS	19
	Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			24
	Item 4. CONTROLS AND PROCEDURES			24
Part II.	OTHER INFORMATION
	Item 1. LEGAL PROCEEDINGS			25
	Item 1A. RISK FACTORS			25
	Item 6. EXHIBITS			25
	SIGNATURES			26

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ADPT Corporation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

	Three-Month Period Ended						Six-Month Period Ended
	July 1,			July 2,			July 1,			July 2,
	2011			2010			2011			2010
Revenues	$	-		$	4,112		$	-		$	4,899
Cost of revenues (inclusive of amortization and impairment of acquisition-related intangible assets)		-			14,852			-			16,029
Gross margin		-			(10,740	)		-			(11,130	)
Operating expenses:
Research and development		-			5,300			-			9,670
Selling, marketing and administrative		2,984			3,994			5,366			9,452
Amortization of acquisition-related intangible assets		-			1,077			-			1,402
Restructuring charges		-			2,289			38			2,879
Impairment of long-lived assets		-			4,838			-			4,838
Total operating expenses		2,984			17,498			5,404			28,241
Operating loss		(2,984	)		(28,238	)		(5,404	)		(39,371	)
Interest and other income, net		2,795			1,671			8,127			3,534
Income (loss) from continuing operations before income taxes		(189	)		(26,567	)		2,723			(35,837	)
Benefit from (provision for) income taxes		(1,361	)		7,353			(2,456	)		8,774
Income (loss) from continuing operations, net of taxes		(1,550	)		(19,214	)		267			(27,063	)
Income (loss) from discontinued operations, net of taxes		1,910			(662	)		1,910			(52	)
Gain on disposal of discontinued operations, net of taxes		4,920			10,746			4,920			11,012
Income from discontinued operations, net of taxes		6,830			10,084			6,830			10,960
Net income (loss)	$	5,280		$	(9,130	)	$	7,097		$	(16,103	)
Income (loss) per share:
Basic
Income (loss) from continuing operations, net of taxes	$	(0.01	)	$	(0.16	)	$	0.00		$	(0.23	)
Income from discontinued operations, net of taxes	$	0.06		$	0.08		$	0.06		$	0.09
Net income (loss)	$	0.05		$	(0.08	)	$	0.07		$	(0.13	)
Diluted
Income (loss) from continuing operations, net of taxes	$	(0.01	)	$	(0.16	)	$	0.00		$	(0.23	)
Income from discontinued operations, net of taxes	$	0.06		$	0.08		$	0.06		$	0.09
Net income (loss)	$	0.05		$	(0.08	)	$	0.07		$	(0.13	)
Shares used in computing income (loss) per share:
Basic		108,813			119,675			108,807			119,539
Diluted		108,949			119,675			108,912			119,539

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

3

ADPT Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)

	July 1,		December 31,
	2011		2010
Assets
Current assets:
Cash and cash equivalents	$	3,894	$	38,276
Marketable securities		356,942		314,135
Restricted cash		-		1,676
Prepaid expenses and other current assets		3,343		4,807
Assets held for sale		-		6,000
Total current assets		364,179		364,894
Other long-term assets		2,811		2,658
Total Assets	$	366,990	$	367,552
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	1,538	$	3,353
Accrued and other liabilities		1,330		4,398
3/4% convertiable senior subordinated notes due 2023		346		346
Total current liabilities		3,214		8,097
Other long-term liabilities		11,245		12,203
Deferred income taxes		986		986
Total liabilities		15,445		21,286
Commitments and contingencies (Note 8)
Shareholders' Equity:
Common stock		108		108
Additional paid-in capital		171,476		170,987
Accumulated other comprehensive income, net of taxes		554		2,861
Retained earnings		179,407		172,310
Total shareholders' equity		351,545		346,266
Total Liabilities and Shareholders' Equity	$	366,990	$	367,552

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4

ADPT Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Six-Month Period Ended
	July 1,			July 2,
	2011			2010
Cash Flows From Operating Activities:
Net income (loss)	$	7,097		$	(16,103	)
Less: Income from discontinued operations, net of taxes		(6,830	)		(10,960	)
Income (loss) from continuing operations, net of taxes		267			(27,063	)
Adjustments to reconcile income (loss) from continuing operations, net of taxes to net cash used in operating activities
Stock-based compensation expense		460			851
Inventory-related charges		-			100
Depreciation and amortization		1,412			13,722
Gain on release of foreign currency translation, net of taxes		(2,542	)		-
Adjustment of deferred taxes		1,365			-
Loss on retirement/impairment of assets		-			10,205
Changes in current assets and liabilities		2,999			(17,681	)
Net cash provided by (used in) operating activities of continuing operations		3,961			(19,866	)
Net cash provided by operating activities of discontinued operations		6,848			1,607
Net cash provided by (used in) operating activities		10,809			(18,259	)
Cash Flows From Investing Activities:
Purchases of intangible assets		-			(281	)
Purchases of property and equipment		-			(106	)
Purchases of marketable securities		(478,222	)		(159,010	)
Sales of marketable securities		383,143			59,074
Maturities of marketable securities		49,571			50,151
Net cash used in investing activities of continuing operations		(45,508	)		(50,172	)
Net cash provided by investing activities of discontinued operations		-			28,945
Net cash used in investing activities		(45,508	)		(21,227	)
Cash Flows From Financing Activities:
Repurchases of long-term debt		-			(68	)
Proceeds from issuance of common stock		29			1,806
Net cash provided by financing activities of continuing operations		29			1,738
Net cash provided by financing activities of discontinued operations		-			-
Net cash provided by financing activities		29			1,738
Effect of foreign currency translation on cash and cash equivalents		288			(587	)
Net increase (decrease) in cash and cash equivalents		(34,382	)		(38,335	)
Cash and cash equivalents, beginning of period		38,276			85,930
Cash and cash equivalents, end of period	$	3,894		$	47,595
Non-Cash Investing and Financing Activities:
Unrealized gains (losses) on available-for-sale securities, net of taxes	$	76		$	(854	)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

5

ADPT Corporation

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Description and Basis of Presentation

Description

ADPT Corporation (“ADPT” or the “Company”) is primarily focused on capital redeployment and identification of new business operations in which it can utilize its existing working capital and maximize the use of the Company’s net tax operating losses (“NOLs”) in the future.  The identification of new business operations includes, but is not limited to, exploring the sports business.  For details regarding the Company’s historical business, which has been accounted for as discontinued operations, refer to Note 4 of the Notes to Financial Statements.

Basis of Presentation

In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements (“Consolidated Financial Statements”) of ADPT and its wholly-owned subsidiaries have been prepared on a consistent basis with the December 31, 2010 audited consolidated financial statements.  The Consolidated Financial Statements have been prepared in accordance with the regulations of the Securities and Exchange Commission (the “SEC”) and, therefore, omit certain information and footnote disclosure necessary to present the statements in accordance with accounting principles generally accepted in the United States of America. The December 31, 2010 Condensed Consolidated Balance Sheet was derived from audited financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Transition Report on Form 10-K for the nine-month period ended December 31, 2010, which was filed with the SEC on March 3, 2011. The nine-month period from April 1, 2010 to December 31, 2010 (the “Transition Period”) reflects the Company’s change in fiscal year end from March 31 to December 31.  Subsequent to the Transition Period, the Company’s fiscal year will represent the twelve-month period from January 1 to December 31, with historical periods remaining unchanged related to the twelve-month period from April 1 to March 31, which include, but are not limited to, the Company’s fiscal years ended March 31, 2010 (“fiscal 2010”) and March 31, 2009 (“fiscal 2009”) or (collectively “fiscal years 2010 and 2009”).  As a result, the comparative financial information included in this Form 10-Q relates to the three-month and six-month periods ended July 1, 2011 and July 2, 2010.  The results of operations for the three-month and six-month periods ended July 1, 2011 are not necessarily indicative of the results to be expected for the entire fiscal year.

The Company’s Consolidated Financial Statements include the accounts of ADPT and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

2. Recent Accounting Pronouncements

There were no additional accounting pronouncements recently issued in the six-month period ended July 1, 2011 that are applicable to the Company or may be considered material to the Company.

3. Employee Stock Benefit Plans

Stock Benefit Plans

The Company grants stock options and other stock-based awards to employees, directors and consultants under two equity incentive plans, the 2004 Equity Incentive Plan and the 2006 Director Plan.

As of July 1, 2011, the Company had an aggregate of 18.0 million shares of its common stock reserved for issuance under its 2004 Equity Incentive Plan, of which 0.6 million shares were subject to outstanding options and other stock-based awards and 17.4 million shares were available for future grants of options and other stock-based awards.  As of July 1, 2011, the Company had an aggregate of 0.9 million shares of its common stock reserved for issuance under its 2006 Director Plan, of which 0.6 million shares were subject to outstanding options and other stock-based awards and 0.3 million shares were available for future grants of options and other stock-based awards. 

6

Stock Benefit Plans Activities

Stock Options: A summary of option activity under all of the Company’s equity incentive plans as of July 1, 2011 and changes during the six-month period ended July 1, 2011 was as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	(in thousands, except exercise price and contractual terms)
Outstanding at December 31, 2010		799		$	3.56
Granted		250		$	2.91
Exercised		(10	)	$	2.86
Forfeited		-			-
Expired		(55	)	$	6.99
Outstanding at July 1, 2011		984		$	3.21		6.19	$	61
Options vested and expected to vest at July 1, 2011		843		$	3.26		6.02	$	49
Options exercisable at July 1, 2011		664		$	3.35		5.61	$	34

The aggregate intrinsic value is calculated as the difference between the price of the Company’s common stock on the Pink Sheets Electronic Quotation Service and the exercise price of the underlying awards for the 0.6 million shares subject to options that were in-the-money at July 1, 2011.  As of July 1, 2011, the total unamortized stock-based compensation expense related to non-vested stock options, net of estimated forfeitures, was approximately $0.3 million and this expense is expected to be recognized over a remaining weighted-average period of 2.3 years.

Restricted Stock: Restricted stock awards and restricted stock units (collectively, “restricted stock”) were granted under the Company’s 2004 Equity Incentive Plan and 2006 Director Plan.  As of July 1, 2011, there were 18,959 shares of service-based restricted stock awards and 212,500 shares of restricted stock units outstanding.  The cost of restricted stock, determined to be the fair market value of the shares at the date of grant, is expensed ratably over the period the restrictions lapse.

A summary of activity for restricted stock as of July 1, 2011 and changes during the six-month period ended July 1, 2011 was as follows:

				Weighted Average
	Shares			Grant-Date Fair Value
	(in thousands, except weighted average grant-date fair value)
Non-vested restricted stock at December 31, 2010 (1)		84		$	2.91
Awarded		150		$	0.00
Vested		(3	)	$	2.84
Forfeited		-			-
Non-vested restricted stock at July 1, 2011 (1)		231		$	2.91

(1)Non-vested restricted stock at each period included shares issued to certain non-employee directors in which vesting will occur immediately if the relationship between the Company and the non-employee director ceases for any reason.  These non-vested shares were recognized and fully expensed as stock-based compensation expense in the Unaudited Condensed Consolidated Statements of Operations at the date of grant or the date of modification.

7

All restricted stock was awarded at the par value of $0.001 per share.  As of July 1, 2011, the total unamortized stock-based compensation expense related to non-vested restricted stock that is expected to vest, net of estimated forfeitures, was approximately $36,400 and this expense is expected to be recognized over a remaining weighted-average period of 2.3 years.

Stock-Based Compensation

The Company measures and recognizes stock-based compensation expense for all stock-based awards made to its employees and directors based on estimated fair values using a straight-line amortization method over the respective requisite service period of the awards and adjusted it for estimated forfeitures.  In addition, the Company applies the simplified method to establish the beginning balance of the additional paid-in capital pool related to the tax effects of employee stock-based compensation, which is available to absorb tax shortfalls.

Stock-based compensation expense included in the Unaudited Condensed Consolidated Statements of Operations for the three-month and six-month periods ended July 1, 2011 and July 2, 2010 was as follows:

	Three-Month Period Ended				Six-Month Period Ended
	July 1, 2011		July 2, 2010		July 1, 2011		July 2, 2010
	(in thousands)
Stock-based compensation expense by caption:
Research and development	$	-	$	72	$	-	$	227
Selling, marketing and administrative		452		162		460		624
Effect on income (loss) from continuing operations	$	452	$	234	$	460	$	851
Stock-based compensation expense by award type:
Stock options	$	12	$	165	$	16	$	423
Restricted stock awards and restricted stock units		440		69		444		428
Effect on income (loss) from continuing operations	$	452	$	234	$	460	$	851

Stock-based compensation expense in the above table does not reflect any significant income tax expense, which is consistent with the Company’s treatment of income or loss from its United States operations.  For the three-month and six-month periods ended July 1, 2011 and July 2, 2010, there were no income tax benefits realized for the tax deductions from option exercises of the stock-based payment arrangements. In addition, there was no stock-based compensation costs capitalized as part of an asset in the three-month and six-month periods ended July 1, 2011 and July 2, 2010 as the amounts were not material.

Valuation Assumptions

The Company used the Black-Scholes option pricing model for determining the estimated fair value for all stock-based awards.  No grants were made in the three-month and six-month periods ended July 2, 2010 for stock options and other stock-based awards.  The fair value of the stock-based awards granted in the three-month and six-month periods ended July 1, 2011 was estimated using the following weighted average assumptions:

	Assumption
Expected life (in years)		4.3
Risk-free interest rates		1.5	%
Expected volatility		44	%
Dividend yield		0.0
Weighted average fair value of restricted stock		$1.09

8

4.  Business Dispositions

DPS Business:  On June 8, 2010, the Company consummated a transaction with PMC-Sierra, Inc. (“PMC-Sierra”) in which PMC-Sierra purchased certain assets related to the Company’s business of providing data storage hardware and software solutions and products (the “DPS Business”) and PMC-Sierra assumed certain liabilities of the Company related to the DPS Business.  The purchase price for the DPS Business was $34.3 million, of which $29.3 million was received by the Company upon the closing of the transaction and the remaining $5.0 million was withheld in an escrow account (“DPS Holdback”).  The DPS Holdback was to secure potential indemnification obligations pursuant to the Asset Purchase Agreement entered into by PMC-Sierra and ADPT on May 8, 2010.  The DPS Holdback was released to the Company on June 8, 2011, one year after the consummation of the sale of the Company’s DPS Business, except for $80,000 to provide for one disputed claim, and was recognized as contingent consideration in discontinued operations when received.

On June 8, 2010, the Company also entered into a transition service agreement with PMC-Sierra, in which the Company provided certain services required for the operation of the DPS Business through December 2010 and the direct costs associated with providing these services were reimbursed by PMC-Sierra.  As a result of the transition service agreement, cash of $1.7 million was received on behalf of PMC-Sierra upon collection of accounts receivable and was classified as “Restricted cash” and included in “Accounts payable” on the Company’s Unaudited Condensed Consolidated Balance Sheet at December 31, 2010. During the six-month period ended July 1, 2011, the Company completed remitting the $1.7 million to PMC-Sierra.

Revenues and the components of income related to the DPS Business included in discontinued operations follow:

	Three-Month Period Ended		Six-Month Period Ended
	July 2, 2010		July 2, 2010
Revenues	$	11,725	$	27,531
Income from discontinued operations before income taxes	$	253	$	2,477
Provision for income taxes		(915)		(2,529)
Income from discontinued operations, net of taxes	$	(662)	$	(52)

During the three-months ended July 1, 2011, the Company sold patents from its DPS Business for $1.9 million, which was included in income from discontinued operations.

Snap Server Network Attached Storage (“NAS”) Business:  On June 27, 2008, the Company entered into an asset purchase agreement with Overland Storage, Inc. (“Overland”) for the sale of the Snap Server NAS business for $3.3 million, of which $2.1 million was received by the Company upon the closing of the transaction and the remaining $1.2 million, which was reserved as a result of the financial difficulties Overland had reported, was to be received on the 12-month anniversary of the closing of the transaction pursuant to a promissory note issued to the Company.  In the three-month period ended July 3, 2009, the Company amended the promissory note agreement with Overland, which allowed Overland to pay the Company the remaining $1.2 million receivable plus accrued interest over time through March 31, 2010; however, the Company received the final payment from Overland in the three-month period ended July 2, 2010.  Due to the Company’s continued concern regarding Overland’s ability to pay the Company, the Company released the reserve on the receivable as cash was collected.  As a result, in the six-month period ended July 2, 2010, the Company recorded a gain of $0.4 million in “Gain on disposal of discontinued operations, net of taxes,” in the Unaudited Condensed Consolidated Statements of Operations.

5. Marketable Securities

The Company’s investment policy focuses on three objectives:  to preserve capital, to meet liquidity requirements and to maximize total return.  The Company’s investment policy establishes minimum ratings for each classification of investments when purchased and investment concentration is limited to minimize risk.  The policy also limits the final maturity on any investment and the overall duration of the portfolio.  Given the overall market conditions, the Company regularly reviews its investment portfolio to ensure adherence to its investment policy and to monitor individual investments for risk analysis and proper valuation.

9

The Company’s portfolio of marketable securities at July 1, 2011 was as follows:

	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Available-for-Sale Marketable Securities:
Short-term deposits	$	1,191		$	-	$	-		$	1,191
United States government securities		351,354			436		(50	)		351,740
Government agencies		3,511			35		-			3,546
Corporate obligations		1,528			14		-			1,542
Total available-for-sale securities		357,584			485		(50	)		358,019
Amounts classified as cash equivalents		(1,077	)		-		-			(1,077	)
Amounts classified as marketable securities	$	356,507		$	485	$	(50	)	$	356,942

The Company’s portfolio of marketable securities at December 31, 2010 was as follows:

	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Available-for-Sale Marketable Securities:
Short-term deposits	$	5,737		$	-	$	-		$	5,737
United States government securities		57,379			409		(32	)		57,756
Government agencies		53,065			308		(51	)		53,322
Mortgage-backed securities		32,161			141		(36	)		32,266
State and municipalities		4,021			2		(39	)		3,984
Corporate obligations		183,971			1,122		(117	)		184,976
Asset-backed securities		492			17		-			509
Total available-for-sale securities		336,826			1,999		(275	)		338,550
Amounts classified as cash equivalents		(24,415	)		-		-			(24,415	)
Amounts classified as marketable securities	$	312,411		$	1,999	$	(275	)	$	314,135

Sales of marketable securities resulted in gross realized gains of $1.5 million and $2.0 million during the three-month and six-month periods ended July 1, 2011, respectively, and $0.1 million and $0.2 million during the three-month and six-month periods ended July 2, 2010, respectively.  Sales of marketable securities resulted in gross realized losses of $0.2 million and $0.3 million during the three-month and six-month periods ended July 1, 2011, respectively, and $0.4 million for the three-month and six-month periods ended July 2, 2010.

The following table summarizes the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities, aggregated by type of investment instrument and length of time that individual securities have been in a continuous unrealized loss position, at July 1, 2011:

	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
United States government securities	$	198,376	$	(50	)	$	-	$	-	$	198,376	$	(50	)

The following table summarizes the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities, aggregated by type of investment instrument and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2010:

10

	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
United States government securities	$	12,793	$	(32	)	$	-	$	-	$	12,793	$	(32	)
Government agencies		17,977		(51	)		-		-		17,977		(51	)
Mortgage-backed securities		11,019		(36	)		-		-		11,019		(36	)
State and municipalities		2,843		(39	)		-		-		2,843		(39	)
Corporate obligations		36,815		(117	)		-		-		36,815		(117	)
Total	$	81,447	$	(275	)	$	-	$	-	$	81,447	$	(275	)

The Company’s investment portfolio consists of both corporate and government securities that generally mature within three years.  The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields.  As yields increase, those securities purchased with a lower yield-at-cost show a mark-to-market unrealized loss.  All unrealized losses are due to changes in interest rates and bond yields.  The Company has considered all available evidence and determined that the marketable securities in which unrealized losses were recorded in the three-month and six-month periods ended July 1, 2011 and July 2, 2010 were not deemed to be other-than-temporary. The Company holds its marketable securities as available-for-sale and marks them to market.

The amortized cost and estimated fair value of investments in available-for-sale debt securities at July 1, 2011 and December 31, 2010, by contractual maturity, were as follows:

	July 1, 2011				December 31, 2010
			Estimated				Estimated
	Cost		Fair Value		Cost		Fair Value
	(in thousands)
Mature in one year or less	$	279,442	$	279,580	$	149,441	$	149,900
Mature after one year through three years		78,142		78,439		184,162		185,436
Mature after three years through five years		-		-		3,223		3,214
Total	$	357,584	$	358,019	$	336,826	$	338,550

The maturities of asset-backed and mortgage-backed securities were estimated primarily based upon assumed prepayment forecasts utilizing interest rate scenarios and mortgage loan characteristics.

6. Fair Value Measurements

Fair value is defined as the price that would be received for selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard surrounding fair value measurements establishes a fair value hierarchy, consisting of three levels, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Financial Assets Measured at Fair Value on a Recurring Basis

The Company utilized levels 1 and 2 to value its financial assets on a recurring basis.  Level 1 instruments use quoted prices in active markets for identical assets or liabilities, which include the Company’s cash accounts, short-term deposits and money market funds as these specific assets are liquid.  Level 1 instruments also include United States government securities, government agencies, state and municipalities, and substantially all mortgage-backed securities as these securities are backed by the federal or state governments and traded in active markets frequently with sufficient volume.  Level 2 instruments are valued using the market approach, which uses quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities and include corporate obligations and asset-backed securities as similar or identical instruments can be found in active markets. At both July 1, 2011 and December 31, 2010, there were no significant transfers that occurred between levels 1 and 2 of the Company’s financial assets.  At both July 1, 2011 and December 31, 2010, the Company did not utilize level 3 to value its financial assets on a recurring basis.  Level 3 is supported by little or no market activity and requires a high level of judgment to determine fair value.

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A summary of financial assets measured at fair value on a recurring basis at July 1, 2011 and December 31, 2010 were as follows:

			July 1, 2011						December 31, 2010
			Fair Value Measurements						Fair Value Measurements
			at Reporting Date Used						at Reporting Date Used
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs				Quoted Prices in Active Markets for  Identical Assets		Significant Other Observable Inputs
	Total		(Level 1)		(Level 2)		Total		(Level 1)		(Level 2)
	(in thousands)
Cash, including short-term deposits (1)	$	4,008	$	4,008	$	-	$	19,598	$	19,598	$	-
United States government securities (2)		351,740		351,740		-		57,756		57,756		-
Government agencies (2)		3,546		3,546		-		53,322		53,322		-
Mortgage-backed securities (2)		1,542		-		1,542		32,266		31,870		396
State and municipalities (2)		-		-		-		3,984		3,984		-
Corporate obligations (3)		-		-		-		184,976		-		184,976
Asset-backed securities (2)		-		-		-		509		-		509
Total	$	360,836	$	359,294	$	1,542	$	352,411	$	166,530	$	185,881

(1) At July 1, 2011, the Company recorded $3.9 million and $0.1 million within “Cash and cash equivalents,” and “Marketable securities,” respectively.  At December 31, 2010, the Company recorded $19.5 million and $0.1 million within “Cash and cash equivalents” and “Marketable securities,” respectively.

(2) Recorded within “Marketable securities.”

(3) At July 1, 2011, the Company recorded zero and $356.8 million within “Cash and cash equivalents” and “Marketable securities,” respectively.  At December 31, 2010, the Company recorded $18.8 million and $166.2 million within “Cash and cash equivalents” and “Marketable securities,” respectively.

The Company’s other financial instruments include accounts payable and accrued and other liabilities.  Carrying values of these financial liabilities approximate their fair values due to the relatively short maturity of these items.  The related cost basis for the Company’s 3/4% Convertible Senior Notes due December 22, 2023 (the “3/4% Notes”) at both December 31, 2010 and July 2, 2011 was approximately $0.3 million. Although the remaining balance of its 3/4% Notes is relatively small and the market trading is very limited, the Company expects the cost basis of approximately $0.3 million at both December 31, 2010 and July 2, 2011 for the 3/4% Notes to approximate fair value. The Company’s convertible debt is recorded at its carrying value, not the estimated fair value.

Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

The Company utilized level 3 to value its non-financial assets on a non-recurring basis.  Level 3, which is categorized as significant unobservable inputs, included the Company’s long-lived assets classified as held for sale and non-controlling interest in certain non-public companies through two venture capital funds, Pacven Walden Ventures V Funds and APV Technology Partners II, L.P.  Although the Company used the market approach for the fair value of its long-lived assets classified as held for sale based on similar assets either sold, pending sale or available for sale, the terms of these similar assets are highly subjective, resulting in the classification as level 3.  The Company regularly monitors its two venture capital funds and records these investments within “Other long-term assets” on the Unaudited Condensed Consolidated Balance Sheets based on quarterly statements the Company receives from each of the funds.  The statements are generally received one quarter in arrears, as more timely valuations are not practical.  The statements reflect the net asset value, which the Company uses to determine the fair value for these investments, which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company.  The assumptions used by the Company, due to lack of observable inputs, may impact the fair value of these equity investments in future periods.  In the event that the carrying value of its equity investments exceeds their fair value, or the decline in value is determined to be other-than-temporary, the carrying value is reduced to its current fair value, which is recorded in “Interest and other income, net,” in the Unaudited Condensed Consolidated Statements of Operations.  At both July 1, 2011 and December 31, 2010, there were no transfers in or out of level 3 related to the Company’s long-lived assets classified as held for sale and the Company’s two venture capital funds.

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Non-financial assets measured at fair value on a non-recurring basis at July 1, 2011 were as follows:

			Fair Value Measurement at
			Reporting Date Used
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Non-controlling interests in certain funds	$	1,151	$	-	$	-	$	1,151

Non-financial assets measured at fair value on a non-recurring basis at December 31, 2010 were as follows:

			Fair Value Measurement at
			Reporting Date Used
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Non-controlling interests in certain funds	$	1,184	$	-	$	-	$	1,184
Long-lived asset held for sale		6,000		-		-		6,000
	$	7,184	$	-	$	-	$	7,184

7. Assets Held For Sale

The Company’s headquarters building was classified as “Assets held for sale” in the Unaudited Condensed Consolidated Balance Sheet at December 31, 2010 at its estimated fair value, less cost to sell, of $6.0 million. The Company’s carrying value of the building was increased by $0.2 million during the three-month period ended April 1, 2011 due to leasehold improvements that were placed into service during that period. The Company sold the building on June 1, 2011 for a total consideration of $6.5 million less selling expenses of $0.2 million, resulting in a gain of approximately $50,000.

8. Accrued and Other Liabilities

The components of accrued and other liabilities at July 1, 2011 and December 31, 2010 were as follows:

	July 1, 2011		December 31, 2010
	(in thousands)
Tax-related	$	373	$	557
Restructuring-related		175		1,231
Accrued compensation and related taxes		46		1,334
Professional services		494		1,148
Other		242		128
Total	$	1,330	$	4,398

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9. Commitments and Contingencies

Contractual Obligations

On April 4, 2011, the Company entered into a one-year sports business advisory consulting agreement with Legend7 Sports, LLC and Dennis M. Mannion, with an effective date of March 31, 2011. The consulting agreement provides for a fee of $83,333 per month or $1.0 million over a one-year term, unless terminated prior to the end of the term upon a material breach by Legend7 Sports, LLC or Mr. Mannion.

The Company completed the sale of its headquarters building on June 1, 2011 for net cash proceeds of $6.3 million. Concurrently, the Company began leasing a 3,581 square foot portion of the building from the new owner for approximately $4,300 per month. This space is leased through December 31, 2011.

Legal Proceedings

The information set forth under Part II, Item 1 contained in the “Legal Proceedings” is incorporated herein by reference.

10. Restructuring Charges

The Company implemented restructuring plans during the Transition Period and during fiscal years 2010 and 2009.  The goals of these plans were to bring its operational expenses to appropriate levels relative to its historical net revenues, while simultaneously implementing extensive company-wide expense-control programs.  All expenses, including adjustments, associated with the Company’s restructuring plans are included in “Restructuring charges” and/or “Income from discontinued operations, net of taxes” in the Unaudited Condensed Consolidated Statements of Operations.

In the three-month and six-month periods ended July 1, 2011, the Company recorded minimal restructuring accrual adjustments related to the Transition Period’s restructuring plan for severance and benefits (none in the three-month period ended July 1, 2011).  To date, the Company has recorded a total of $3.9 million associated with this plan, of which $3.7 million related to severance and benefit charges for affected employees who were notified of their impending employment termination date and $0.2 million related to a termination fee for vacating a facility in California.  The Company does not expect to record additional restructuring charges related to this plan in the future.

In the three-month period ended July 2, 2010, the Company recorded restructuring charges of $2.8 million related to the Company’s Transition Period restructuring plan for severance and benefits. In the six-month period ended July 2, 2010, the Company incurred the previously mentioned $2.8 million of charges plus $0.7 million related to the Company’s fiscal 2010 restructuring plan for severance and benefits and restructuring accrual adjustments of $(0.1) million related to a previous acquisition-related restructuring plan and fiscal 2009 restructuring plan due to the estimated loss on the Company’s facilities.

The activity in the restructuring accrual for all outstanding plans was as follows for the six-month period ended July 1, 2011:

	Severance and Benefits			Other Charges			Total
	(in thousands)
Accrual balance at December 31, 2010	$	881		$	350		$	1,231
Accrual adjustments		38			-			38
Cash paid		(845	)		(249	)		(1,094	)
Accrual balance at July 1, 2011	$	74		$	101		$	175

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The Company anticipates that the remaining restructuring accrual balance of $0.2 million at July 1, 2011, which was reflected in “Accrued and other liabilities” in the Unaudited Condensed Consolidated Balance Sheets, will be paid out by December 31, 2011.  The remaining restructuring severance and benefits accrual balance of $0.1 million at July 1, 2011 relates to COBRA benefits, while the remaining restructuring other charges balance of $0.1 million at July 1, 2011 relates to lease obligations that end in October 2011.

The activity in the restructuring accrual for all outstanding plans was as follows for the six-month period ended July 2, 2010:

	Severance and Benefits			Other Charges			Total
	(in thousands)
Accrual balance at January 1, 2010	$	383		$	1,043		$	1,426
Transition Period Restructuring Plan Charges (1)		2,849			-			2,849
Fiscal 2010 Restructuring Plan Charges (2)		693			-			693
Accrual adjustments		-			(104	)		(104	)
Cash paid		(3,410	)		(438	)		(3,848	)
Accrual balance at July 2, 2010	$	515		$	501		$	1,016

(1) The total Transition Period restructuring plan charges included $0.5 million classified as discontinued operations that were reflected in “Income from discontinued operations, net of taxes” in the Unaudited Condensed Consolidated Statements of Operations.

(2) The charges for fiscal 2010 restructuring plan included $1,000 classified as discontinued operations in the six-month period ended July 2, 2010, which was reflected in “Income from discontinued operations, net of taxes” in the Unaudited Condensed Consolidated Statements of Operations.

11. Interest and Other Income, Net

The components of interest and other income, net, for the three-month and six-month periods ended July 1, 2011 and July 2, 2010 were as follows:

	Three-Month Period Ended				Six-Month Period Ended
	July 1, 2011		July 2, 2010		July 1, 2011		July 2, 2010
	(in thousands)
Interest income, net	$	2,168	$	1,500	$	3,558	$	3,387
Realized currency translation gains (losses)		252		90		4,098		50
Other		375		81		471		97
Interest and other income, net	$	2,795	$	1,671	$	8,127	$	3,534

The realized foreign currency translation gains were primarily due to substantial liquidation of certain of the Company’s foreign subsidiaries.

12. Income Taxes

Income tax provisions for interim periods are based on the Company’s estimated annual income tax rate for entities that were profitable.  Entities that had operating losses with no tax benefit were excluded. The estimated annual tax for the three-month and six-month periods ended July 1, 2011 and July 2, 2010 includes foreign taxes related to the Company’s foreign subsidiaries and certain state minimum taxes.  Interest is accrued on prior years’ tax disputes and refund claims as a discrete item each period.  Although the Company believes its tax estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in its Financial Statements and may cause a higher effective tax rate that could materially affect its income tax provision, results of operations or cash flows in the period or periods for which such determination is made.

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The Company recorded a tax provision of $1.4 million and $2.5 million for the three-month and six-month periods ended July 1, 2011, respectively, primarily due to the reversal of income taxes, which was reflected in “Accumulated other comprehensive income (loss), net of taxes” in the Unaudited Condensed Consolidated Balance Sheets at July 1, 2011. During the three-month period ended July 1, 2011, the Company made significant changes to its historic investment portfolio to move to primarily low-risk interest-bearing government securities. These changes were significant enough, in the Company’s judgment, to consider the legacy portfolio to have been disposed of for the purpose of tracking a disproportionate tax effect that arose in fiscal 2008. The six-month period ended July 1, 2011 also included the Company realizing certain currency translation gains due to substantial liquidation of certain of its foreign subsidiaries during the period. These taxes were partially offset by income tax benefits from losses incurred in the Company’s foreign jurisdictions and the reversal of reserves for certain foreign taxes..  The Company recorded a tax benefit of $7.4 million and $8.8 million for the three-month and six-month periods ended July 2, 2010, respectively, due to losses incurred from continuing operations that were offset against income and taxes recorded in discontinued operations.  This was partially offset by state minimum taxes and foreign taxes related to its foreign subsidiaries.

As of July 1, 2011, the Company’s total gross unrecognized tax benefits were $31.8 million, of which $12.1 million, if recognized, would affect the effective tax rate.  There have been no material changes to the Company’s total gross unrecognized tax benefits from December 31, 2010.

The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates or formerly operated. As of July 1, 2011, fiscal years 2004 onward remained open to examination by the U.S. taxing authorities and fiscal years 1999 onward remained open to examination in various foreign jurisdictions.  U.S. tax attributes generated in fiscal years 2004 onward also remain subject to adjustment in subsequent audits when they are utilized.

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company conducts or formerly conducted business. Management believes that it is not reasonably possible that the gross unrecognized tax benefits will change significantly within the next 12 months; however, tax audits remain open and the outcome of any tax audits are inherently uncertain, which could change this judgment in any given quarter.

13. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share gives effect to all potentially dilutive common shares outstanding during the period, which include certain stock–based awards, calculated using the treasury stock method, and convertible notes which are potentially dilutive at certain earnings levels, and are computed using the if-converted method.

A reconciliation of the numerator and denominator of the basic and diluted income (loss) per share computations for continuing operations, discontinued operations and net income (loss) was as follows:

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	Three-Month Period Ended						Six-Month Period Ended
	July 1, 2011			July 2, 2010			July 1, 2011		July 2, 2010
	(in thousands, except per share amounts)
Numerators (basic and diluted):
Income (loss) from continuing operations, net of taxes	$	(1,550	)	$	(19,214	)	$	267	$	(27,063	)
Income from discontinued operations, net of taxes		6,830			10,084			6,830		10,960
Net income (loss)	$	5,280		$	(9,130	)	$	7,097	$	(16,103	)
Denominators:
Weighted average shares outstanding - basic		108,813			119,675			108,807		119,539
Effect of dilutive securities:
Stock-based awards		136			-			105		-
Weighted average shares outstanding - diluted		108,949			119,675			108,912		119,539
Income (loss) per share:
Basic
Income (loss) from continuing operations, net of taxes	$	(0.01	)	$	(0.16	)	$	0.00	$	(0.23	)
Income from discontinued operations, net of taxes	$	0.06		$	0.08		$	0.06	$	0.09
Net income (loss)	$	0.05		$	(0.08	)	$	0.07	$	(0.13	)
Diluted
Income (loss) from continuing operations, net of taxes	$	(0.01	)	$	(0.16	)	$	0.00	$	(0.23	)
Income from discontinued operations, net of taxes	$	0.06		$	0.08		$	0.06	$	0.09
Net income (loss)	$	0.05		$	(0.08	)	$	0.07	$	(0.13	)

Diluted loss per share for the three-month and six-month periods ended July 2, 2010 was based only on the weighted-average number of shares outstanding during that period, as the inclusion of any common stock equivalents would have been anti-dilutive. As a result, the same weighted-average number of common shares outstanding during that period was used to calculate both the basic and diluted earnings per share.  In addition, certain potential common shares were excluded from the diluted computation for the three-month and six-month periods ended July 1, 2011 because their inclusion would have been anti-dilutive.  The weighted-average number of common shares used to calculate the diluted earnings per share for loss from continuing operations, net of taxes, during each of the periods was also used to compute all other reported diluted earnings per share, even though it could result in anti-dilution.  The potential common shares excluded for the three-month and six-month periods ended July 1, 2011 and July 2, 2010 were as follows:

	Three-Month Period Ended				Six-Month Period Ended
	July 1, 2011		July 2, 2010		July 1, 2011		July 2, 2010
	(in thousands)
Outstanding stock options		-		4,395		-		4,875
Outstanding restricted stock		-		1,119		-		1,489
3/4% convertible senior subordinated notes due 2023		30		30		30		30

14. Comprehensive Loss

The Company's comprehensive loss, net of taxes, which consisted of net income (loss) and the changes in net unrealized loss on marketable securities net of taxes, and foreign currency translation adjustments, net of taxes, was as follows:

17

	Three-Month Period Ended					Six-Month Period Ended
	July 1, 2011		July 2, 2010			July 1, 2011			July 2, 2010
	(in thousands)
Net foreign currency translation adjustment, net of taxes
Foreign currency translation adjustment, net of taxes	$	7	$	(67	)	$	159		$	(445	)
Release of currency translation gainsm, net of taxes		-		-			(2,542	)		-
Total		7		(67	)		(2,383	)		(445	)
Net income (loss)		5,280		(9,130	)		7,097			(16,103	)
Net unrealized gain (loss) on marketable securities, net of taxes		858		(72	)		76			(372	)
Comprehensive loss, net of taxes	$	6,145	$	(9,269	)	$	4,790		$	(16,920	)

The Company has considered all available evidence and determined that the marketable securities in which unrealized losses were recorded in the three-month and six-month periods ended July 1, 2011 and July 2, 2010 were not deemed to be other-than-temporary. The Company holds its marketable securities as available-for-sale and marks them to market.  The Company expects to realize the full value of all its marketable securities upon maturity or sale, as the Company has the intent and ability to hold the securities until the full value is realized. However, the Company cannot provide any assurance that its invested cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require the Company to record an impairment charge that could adversely impact its financial results.

The components of accumulated other comprehensive income (loss), net of taxes, at July 1, 2011 and December 31, 2010 were as follows:

	July 1, 2011		December 31, 2010
	(in thousands)
Net unrealized gain on marketable securities, net of taxes	$	435	$	364
Foreign currency translation, net of taxes		119		2,497
Accumulated other comprehensive income, net of taxes	$	554	$	2,861

15. Related Party Transactions

As of July 1, 2011, Warren G. Lichtenstein, Steel Partners, LLC, Steel Partners Holdings, L.P., SPH Group Holdings LLC and SPH Group LLC (collectively, “Steel Partners”) beneficially owned approximately 36% of the Company's outstanding common stock.  Jack L. Howard, John J. Quicke and Mr. Lichtenstein are directors of the Company and each such person is deemed to be an affiliate of Steel Partners under the rules of the Securities Exchange Act of 1934, as amended.  Each of the three directors are compensated with cash compensation and equity awards or equity-based awards in amounts that are consistent with the Company’s Non-Employee Director Compensation Policy.  In addition, Mr. Quicke currently serves as the Interim President and CEO of the Company and is compensated $30,000 per month in connection with this role, which is in addition to the compensation he receives as a non-executive board member. Mr. Quicke also serves as the CEO of another affiliate of Steel Partners. Further, Mr. Lichtenstein is President of a subsidiary of the Company that intends to engage in the sports business. In connection with his appointment to such office, Mr. Lichtenstein was awarded an option to acquire 250,000 shares of the Company’s Common Stock in lieu of an annual salary. This equity award is in addition to the compensation he receives as a non-executive board member.

16. Subsequent Events

On June 27, 2011, the Company entered into an Assets Purchase Agreement to acquire substantially all of the assets of Baseball Heaven LLC and Baseball Café, Inc. used in the business of marketing and providing baseball facility services, including training camps, summer camps, leagues and tournaments, and concession and catering events.  The purchase price for these assets was $6.2 million in cash. The transaction was consummated on July 27, 2011. The Company has not completed the purchase accounting as the valuation work is currently in process.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The statements contained in this document that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding our business, including, but not limited to, our ability to deploy our capital in a manner that maximizes stockholder value;  the ability to identify suitable acquisition candidates or business and investment opportunities; the ability to realize the benefits of our net tax operating losses; the possibility of being deemed a “shell company” under the federalsecurities laws, which may adversely impact our ability to offer our stock to officers, directors and consultants, and would likely increase the costs of registration compliance following the completion of a business combination; the possibility of being deemed an investment company under the Investment Company Act of 1940, as amended, which may make it difficult for us to complete future business combinations or acquisitions; the potential need to record additional impairment charges for long-lived assets or marketable securities based on current market conditions; the necessity to record material tax provisions or pay additional tax payments in the future as a result of estimates for tax provisions that materially differ from actual outcomes and tax audits and redetermination by the United States and foreign taxing authorities in which we operate or formerly operated; the ability to reduce our operating costs; general economic conditions and our expected liquidity in future periods. We may identify these statements by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and other similar expressions. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements, except as may otherwise be required by law.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the “Risk Factors” section in our Transition Report on Form 10-K for the nine-month period ended December 31, 2010. In evaluating our business, current and prospective investors should consider carefully these factors in addition to the other information set forth in this report.

While management believes that the discussion and analysis in this report is adequate for a fair presentation of the information presented, we recommend that you read this discussion and analysis in conjunction with our Transition Report on Form 10-K for the nine-month period ended December 31, 2010.

Basis of Presentation

On December 7, 2010, our Board of Directors approved the change in our fiscal year end from March 31 to December 31.  As a result of this change, a Transition Report on Form 10-K was filed with the Securities and Exchange Commission, or the SEC, on March 3, 2011 which included financial information for the nine-month transition period from April 1, 2010 to December 31, 2010, or Transition Period.  Subsequent to the Transition Period, our fiscal year will represent the twelve-month period from January 1 to December 31, with historical periods remaining unchanged related to the twelve-month period from April 1 to March 31, which include, but are not limited to, our fiscal years ended March 31, 2010, or fiscal 2010, and March 31, 2009, or fiscal 2009.  As a result, the comparative financial information included in this Form 10-Q relates to the three-month and six-month periods ended July 1, 2011 and July 2, 2010.

In June 2010, we sold certain assets related to our business of providing data storage hardware and software solutions and products, or the DPS Business, to PMC-Sierra Inc., or PMC-Sierra, and PMC-Sierra assumed certain liabilities related to the DPS Business.  In June 2008, we sold the Snap Server Network Attached Storage business, or Snap Server NAS business, to Overland Storage, Inc., or Overland. Accordingly, we reclassified the financial statements and related disclosures for all periods, except for the historical Consolidated Balance Sheets and Statements of Stockholders’ Equity, to reflect these businesses as discontinued operations. These reclassifications had no impact on net loss, total assets or total stockholders’ equity. Unless otherwise indicated, the following discussion pertains only to our continuing operations.

Overview

We are now primarily focused on capital redeployment and identification of new business operations in which we can utilize our existing working capital and maximize the use of our net tax operating losses, or NOLs, in the future.  The identification of new business operations includes, but is not limited to, exploring the sports business.  With the consummation of the sale of the DPS Business to PMC-Sierra in June 2010 and the completion of the wind down related to our products and associated technology obtained from our previous acquisition of Aristos Logic Corporation, or Aristos Business, which provided enterprise-class external storage products, including Application Specific Integrated Circuits and software, to Original Equipment Manufacturers in September 2010, a limited number of employees continue to be retained temporarily to handle corporate matters, including attempting to monetize our building and patent portfolio and the ongoing exploration of strategic alternatives.  We remain committed to providing value to all of our stockholders and will aggressively pursue opportunities to deploy the cash and liquid assets on hand to create value for our stockholders.

19

Results of Operations

As we completed the wind down of the Aristos Business in September 2010, we did not have any revenues, cost of revenues, nor research and development expenses in the three-month and six-month periods ended July 1, 2011. Until we have acquired and begun operating a business or businesses, we do not expect to have transactions in these categories.

Operating Expenses

Selling, marketing, and administrative:  The 44% and  58% decrease in selling, marketing and administrative expense in the three-month and six-month periods ended July 1, 2011 compared to the three-month and six-month periods ended July 2, 2010, respectively, were primarily the result of reductions in our workforce and infrastructure spending due to the restructuring plans we previously implemented.

Amortization of acquisition-related intangible assets:  In the three-month period ended July 2, 2010, we performed a review of our long-lived assets and determined that an indicator was present in which the carrying value was not recoverable based on our decision to wind down our Aristos Business by the end of September 2010 and in anticipation of putting our building up for sale towards the end of the Transition Period.  We then measured the impairment loss and recognized the amount in which the carrying value of our long-lived assets exceeded the estimated fair value, which resulted in the write off of all our intangible assets in the three-month and six-month periods ended July 2, 2010. As such, there is no amortization of acquisition-related intangible assets in the three-month and six-month periods ended July 1, 2011.

Restructuring charges:  We implemented restructuring plans during the Transition Period and during fiscal years 2010 and 2009. All expenses, including adjustments, associated with our restructuring plans were included in “Restructuring charges” and/or “Income from discontinued operations, net of taxes” in the Unaudited Condensed Consolidated Statements of Operations.

In the six-month period ended July 1, 2011, the Company recorded minimal restructuring accrual adjustments related to the Transition Period’s restructuring plan for severance and benefits (none in the three-month period ended July 1, 2011).  The Company does not expect to record additional restructuring charges related to this plan in the future.  In the three-month period ended July 2, 2010, the Company recorded restructuring charges of $2.8 million related to the Company’s Transition Period restructuring plan for severance and benefits. In the six-month period ended July 2, 2010, the Company incurred the previously mentioned $2.8 million of charges plus $0.7 million related to the Company’s fiscal 2010 restructuring plan for severance and benefits and restructuring accrual adjustments of $(0.1) million related to a previous acquisition-related restructuring plan and fiscal 2009 restructuring plan due to the estimated loss on the Company’s facilities.

Interest and Other Income, Net

The increases in interest and other income, net, in the three-month and six-month periods ended July 1, 2011 compared to the three-month and six-month periods ended July 2, 2010 were primarily due to the recognition of foreign currency translation gains that arose from substantial liquidation of certain of our foreign subsidiaries. During the three-month period ended July 1, 2011, these realized translation gains aggregated $0.3 million compared to $0.1 million during the three-month period ended July 2, 2010. During the six-month period ended July 1, 2011, these realized translation gains aggregated $4.1 million compared to $50,000 for the six-month period ended July 2, 2010.

Income Taxes

Income tax provisions for interim periods are based on our estimated annual income tax rate for entities that were profitable.  Entities that had operating losses with no tax benefit were excluded. The estimated annual tax for the three-month and six-month periods ended July 1, 2011 and July 2, 2010 includes foreign taxes related to our foreign subsidiaries and certain state minimum taxes.  Interest is accrued on prior years’ tax disputes and refund claims as a discrete item each period.  Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in our Financial Statements and may cause a higher effective tax rate that could materially affect our income tax provision, results of operations or cash flows in the period or periods for which such determination is made.

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The Company recorded a tax provision of $1.4 million and $2.5 million for the three-month and six-months periods ended July 1, 2011, respectively, primarily due to the reversal of income taxes, which was reflected in “Accumulated other comprehensive income (loss), net of taxes” in the Balance Sheets at July 1, 2011. During the three-month period, the Company made significant changes to its historic investment portfolio to move to primarily low-risk interest-bearing government securities. These changes were significant enough, in the Company’s judgment, to consider the legacy portfolio to have been disposed of for the purpose of tracking a disproportionate tax effect that arose in fiscal 2008. The six-month period also included the Company realizing certain currency translation gains due to substantial liquidation of certain of its foreign subsidiaries during the period. These taxes were partially offset by income tax benefits from losses incurred in the Company’s foreign jurisdictions and the reversal of reserves for certain foreign taxes..  The Company recorded a tax benefit of $7.4 million and $8.8 million for the three-month and six-month periods ended July 2, 2010, respectively, due to losses incurred from continuing operations that were offset against income and taxes recorded in discontinued operations.  This was partially offset by state minimum taxes and foreign taxes related to its foreign subsidiaries.

As of July 1, 2011, the Company’s total gross unrecognized tax benefits were $31.8 million, of which $12.1 million, if recognized, would affect the effective tax rate.  There have been no material changes to the Company’s total gross unrecognized tax benefits from December 31, 2010.

The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates or formerly operated. As of July 1, 2011, fiscal years 2004 onward remained open to examination by the U.S. taxing authorities and fiscal years 1999 onward remained open to examination in various foreign jurisdictions.  U.S. tax attributes generated in fiscal years 2004 onward also remain subject to adjustment in subsequent audits when they are utilized.

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company conducts or formerly conducted business. Management believes that it is not reasonably possible that the gross unrecognized tax benefits will change significantly within the next 12 months; however, tax audits remain open as discussed further below and the outcome of any tax audits are inherently uncertain, which could change this judgment in any given quarter.

Discontinued Operations

The income from discontinued operations in the three-month and six-month periods ended July 1, 2011 and July 2, 2010 are both related to the sale of our DPS Business to PMC-Sierra. The July 2, 2010 period includes recognition of the gain on the initial sale of our DPS Business to PMC-Sierra of $10.1 million, while the July 1, 2011 period includes the receipt of the $5.0 million DPS Holdback from PMC-Sierra and $1.9 million of patent sales from the DPS Business.

Liquidity and Capital Resources

Key Components of Cash Flows

Working Capital:  Our principal source of liquidity is cash on hand.  We focus on managing the critical components of working capital, which include payables and short-term debt.  Our working capital at July 1, 2011 and December 31, 2010 was $361.0 million and $356.8 million, respectively.  The increase in working capital at July 1, 2011 compared to December 31, 2010 of $4.2 million was primarily attributable to receipt of the DPS Holdback of $5.0 million and sales of patents from the DPS Business for $1.9 million offset by decreases in accounts payables and accrued liabilities of $5.2 million, as we made payments to our professional service providers and employees related to compensation matters that included payments made under our restructuring plans and retention programs.

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Operating Activities:Net cash provided by operating activities was $10.8 million for the six-month period ended July 1, 2011 compared to net cash used of $18.3 million in the six-month period ended July 2, 2010.  The increase in cash from operating activities was mainly due to negative changes in assets and liabilities of $17.7 million in the six-month period ended July 2, 2010 compared to positive changes in assets and liabilities of $3.0 million in the six-month period ended July 1, 2011. The July 2, 2010 period activity was driven by the sale of the DPS Business to PMC-Sierra, as PMC-Sierra purchased substantially all accounts receivable and inventory and a substantial portion of fixed assets related to the DPS Business, while we retained substantially all liabilities.

Investing Activities:Net cash used in investing activities was $45.5 million in the six-month period ended July 1, 2011 compared with net cash used in investing activities of $21.2 million in the six-month period ended July 2, 2010.  We used cash proceeds to purchase net marketable securities of $45.5 million and $50.2 million in the six-month periods ended July 1, 2011 and July 2, 2010, respectively. For the six-month period ended July 2, 2010, these purchases were offset by $28.9 million of cash proceeds from the sale of the DPS Business. We continue to manage our cash through interest-bearing accounts.

Financing Activities:  There were no material financing activities in the six-month period ended July 1, 2011.  Net cash provided by financing activities in the six-month period ended July 2, 2010 was $1.7 million, which related to the receipt of proceeds of $1.8 million from the issuance of common stock under our equity compensation programs and was offset by repurchases of less than $0.1 million in principal amount of our 3/4% Convertible Subordinated Notes due in 2023, or 3/4% Notes.

Liquidity Requirements

At July 1, 2011, we had $360.8 million in cash, cash equivalents and marketable securities, of which approximately $1.8 million was held by our foreign subsidiaries whose functional currency is the local currency.  Our available-for-sale securities included short-term deposits, corporate obligations, United States government securities, and government agencies, and were recorded on our Unaudited Condensed Consolidated Balance Sheets at fair market value, with their related unrealized gain or loss reflected as a component of “Accumulated other comprehensive income, net of taxes” in shareholders’ equity.

In the six-month periods ended July 1, 2011 and July 2 2010, we did not recognize a material loss on our securities as the unrealized losses incurred were not deemed to be other-than-temporary.  We hold our marketable securities as available-for-sale and mark them to market.  We expect to realize the full value of all our marketable securities upon maturity or sale, as we have the intent and ability to hold the securities until the full value is realized.  However, we cannot provide any assurance that our invested cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require us to record an impairment charge that could adversely impact our financial results.

In addition, we maintain our cash, cash equivalents and marketable securities with certain financial institutions, in which our balances exceed the limits that are insured by the Federal Deposit Insurance Corporation.  If the underlying financial institutions fail or other adverse conditions occur in the financial markets, our cash balances may be impacted.

We may in the future make acquisitions of businesses, and we may be required to use a significant portion of our available cash balances for such acquisitions or for working capital needs thereafter.

We have invested in technology companies through two venture capital funds, Pacven Walden Ventures V Funds and APV Technology Partners II, L.P. At July 1, 2011 and December 31, 2010, the carrying value of such investments aggregated $1.2 million at each date, which were based on quarterly statements we receive from each of the funds.  The statements are generally received one quarter in arrears, as more timely valuations are not practical.  The statements reflect the net asset value, which we use to determine the fair value for these investments, which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company.  The assumptions we use due to lack of observable inputs may impact the fair value of these equity investments in future periods. While we have seen some improvement in global economic conditions, any adverse changes in equity investments and current market conditions may require us to record an impairment charge against all or a portion of these equity investments in the future.

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We believe that our cash balances will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. The consummation of the sale of the DPS Business materially changed our operations, including our anticipated cash needs. We are exploring strategic alternatives to maximize stockholder value going forward, including deploying the proceeds received for the DPS Business and our other assets in seeking business acquisition opportunities and taking other actions to redeploy our capital. In addition, should the scale of potential opportunities, prevailing economic conditions and/or financial, business and other factors beyond our control adversely affect our estimates of our future cash requirements, we could be required to fund our cash requirements by alternative financing. In these instances, we may seek to raise such additional funds through public or private equity or debt financings or from other sources. As a result, we may not be able to obtain adequate or favorable financing, if needed, due in part to our shares of common stock currently trading on the Pink Sheets Electronic Quotation Service.   Any equity financing we obtain may dilute existing ownership interests, and any debt financing could contain covenants that impose limitations on the conduct of our business. There can be no assurance that additional financing, if needed, would be available on terms acceptable to us or at all.

Commitments and Contingencies

Legal Proceedings

The information set forth under Part II, Item 1 contained in the “Legal Proceedings” is incorporated herein by reference.

Convertible Subordinated Notes

At July 1, 2011, we had a remaining liability of $0.3 million of aggregate principal amount related to our 3/4% Notes that are due in December 2023.  Each remaining holder of the 3/4% Notes may require us to purchase all or a portion of our 3/4% Notes on December 22, 2013, on December 22, 2018 or upon the occurrence of a change of control (as defined in the indenture governing the 3/4% Notes) at a price equal to the principal amount of 3/4% Notes being purchased plus any accrued and unpaid interest and we may redeem some or all of the 3/4% Notes for cash at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued interest to, but excluding, the redemption date. We may seek to make open market repurchases of the remaining balance of our 3/4% Notes within the next twelve months (See Note 8 of the Notes to Consolidated Financial Statements included in our Transition Report on Form 10-K for the nine-month period ended December 31, 2010 for a detailed discussion of our debt and equity transactions).

Contractual Obligations

As of July 1, 2011, we did not have any significant changes to the contractual obligations that were disclosed in the Liquidity section of our Transition Report on Form 10-K for the nine-month period ended December 31, 2010.  On April 4, 2011, the Company entered into a one-year consulting agreement with Legend7 Sports, LLC and Dennis M. Mannion, with an effective date of March 31, 2011. The consulting agreement provides for a fee of $83,333 per month or $1.0 million over a one-year term, unless terminated prior to the end of the term upon a material breach by Legend7 Sports, LLC or Mr. Mannion.

The Company completed the sale of its headquarters building on June 1, 2011 for net cash proceeds of $6.3 million. Concurrently, the Company began leasing a 3,581 square foot portion of the building from the new owner for approximately $4,300 per month. This space is leased through December 31, 2011.

Recent Accounting Pronouncements

There were no additional accounting pronouncements recently issued in the three-month and six-month periods ended July 1, 2011 that are applicable to us or may be considered material to us.

Critical Accounting Policies

Our critical accounting policies have not changed from those presented in the  Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies in our Transition Report on Form 10-K for the nine-month period ended December 31, 2010.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

For financial market risks related to changes in interest rates, equity price and foreign currency exchange rates, reference is made to Item 7A: “Quantitative and Qualitative Disclosures About Market Risk” contained in Part II of our Transition Report on Form 10-K for the nine-month period ended December 31, 2010.  Our exposure to market risk has not changed materially since December 31, 2010.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Interim Chief Executive Officer, or Interim CEO, and our Chief Financial Officer, or CFO, we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Interim CEO and our CFO have concluded that the design and operation of our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission,  or SEC,  rules and forms and (ii) is accumulated and communicated to our management, including our Interim CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the six-month period ended July 1, 2011, which was the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitations on Effectiveness of Controls

A control system, no matter how well conceived and operated, can only provide reasonable assurance that the objectives of the control system are met.  Because of these inherent limitations, no evaluation of our disclosure controls and procedures or our internal control over financial reporting will provide absolute assurance that misstatements due to error or fraud will not occur.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be a party in legal actions in various U.S. and foreign jurisdictions, arising from the normal course of business. In the opinion of management, such legal actions are not expected to have a material adverse effect on our financial condition or results of operations.

Item 1A. Risk Factors

Our business faces significant risks. The risks described in “Item 1A: Risk Factors” in our Transition Report on Form 10-K for the nine-month period ended December 31, 2010, may not be the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our results of operations and financial condition.  If any of the events or circumstances described in our Transition Report on Form 10-K for the nine-month period ended December 31, 2010 actually occurs, our business, financial condition or results of operations could suffer, and the trading price of our common stock could decline.

Item 6. Exhibits

10.1*	Agreement of Purchase and Sale and Escrow Instructions, dated March 26, 2011, between the Company and Swift Realty Partners, LLC.
10.2*	First Amendment to the Agreement of Purchase and Sale and Escrow Instructions, dated May 4, 2011, between the Company and Swift Realty Partners, LLC.
10.3*	Second Amendment to the Agreement of Purchase and Sale and Escrow Instructions, dated May 26, 2011, between the Company and Swift Realty Partners, LLC.
10.4*	Independent Contractor Agreement, dated June 1, 2011, between the Company and Mary L. Dotz.
10.5*	Director Compensation Policy, as adopted May 25, 2011.
31.1*	Certification of the Principal Executive Officer, John J. Quicke, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer, Mark. A. Zorko, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certifications of the Principal Executive Officer, John J. Quicke, and the Principal Financial Officer, Mark A. Zorko, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.
* Filed herewith.
** Furnished with this Form 10-Q. In accordance with Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for the purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ADPT Corporation
By:	/s/ JOHN J. QUICKE	Date: August 9, 2011
	John J. Quicke Interim President and Chief Executive Officer (principal executive officer)
By:	/s/ MARK A. ZORKO
	Mark A. Zorko Chief Financial Officer (principal financial officer)	Date: August 9, 2011

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EX-10.1

Exhibit 10.1

AGREEMENT OF PURCHASE AND SALE

AND ESCROW INSTRUCTIONS

THIS AGREEMENT OF PURCHASE AND SALE AND ESCROW INSTRUCTIONS (“Agreement”), dated for references purposes as of March 26, 2011 (“Agreement Date”), by and between ADPT CORPORATION, a Delaware corporation, formerly known as Adaptec, Inc. (“Seller”) and SWIFT REALTY PARTNERS, LLC, a California limited liability company or its assignee (“Buyer”).

RECITALS

A.           Seller is the current owner of the Property (as defined in Section 2).

B.           Buyer desires to purchase and Seller is willing to sell the Property on the terms and conditions of this Agreement.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:

AGREEMENT

1.      Certain Basic Definitions.  For purposes of this Agreement, the following terms shall have the following definitions:

1.1           “Agreement Date” means the date first set forth above in this Agreement.

1.2           “Buyer’s Address” means:

Swift Realty Partners, LLC

One Ferry Building, Suite 210

San Francisco, California 94111

Attention:  Christopher Peatross

Telephone:  (415) 395-9701

Facsimile:    (415) 395-0960

With copy to:

Greenberg Traurig LLP

1900 University Avenue, Fifth Floor

East Palo Alto, California 94303

Attention:  Real Estate Notices (RCS)

Telephone:                     (650) 289-7870

Facsimile:                     (650) 462-7870

1.3           “Closing Date” means (i) twenty (20) days after the expiration of the Due Diligence Period or such earlier date after the execution of this Agreement as Buyer and Seller may mutually agree in writing; provided, however, if the Closing Date is scheduled to occur on a Monday, then such date shall occur on Tuesday of the same week.

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1.4           “Contracts” shall have the meaning set forth in Section 7.3.4 hereof.

1.5           “Deposit” means the money deposited pursuant to Section 2.2.1 below, and all interest accrued thereon.

1.6           “Due Diligence Period” shall expire at 5:00 p.m. PST on the date which is thirty (30) days after the full execution and delivery of this Agreement.

1.7           “Environmental Law” means any current legal requirement pertaining to (a) the protection of health, safety, and the indoor or outdoor environment, (b) the conservation, management, protection or use of natural resources and wildlife, (c) the protection or use of source water and groundwater, (d) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, release, threatened release, abatement, removal, remediation or handling of, or exposure to, any Hazardous Material or (e) pollution (including any release to air, land, surface water, and groundwater); and includes, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC §§9601 et seq., Solid Waste Disposal Act, as amended by the Resource Conservation Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 USC §§6901 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 USC §§1251 et seq., Clean Air Act of 1966, as amended, 42 USC §§7401 et seq., Toxic Substances Control Act of 1976, 15 USC §§2601 et seq., Hazardous Materials Transportation Act, 49 USC App. §§1801, Occupational Safety and Health Act of 1970, as amended, 29 USC §§651 et seq., Oil Pollution Act of 1990, 33 USC §§2701 et seq., Emergency Planning and Community Right-to-Know Act of 1986, 42 USC App. §§11001 et seq., National Environmental Policy Act of 1969, 42 USC §§4321 et seq., Safe Drinking Water Act of 1974, as amended by 42 USC §§300(f) et seq., and any similar, implementing or successor law, any amendment, rule, regulation, order or directive, issued thereunder.

1.8           “Escrow Holder” means First American Title Insurance Company.

1.9           “Escrow Holder’s Address” means:

 FIRST AMERICAN TITLE INSURANCE COMPANY

 1737 North First Street, Suite 100

 San Jose, California 95112

 Attention:  Zenny Cabagbag

 Escrow No. NCS-472936-SC

 Telephone: (408) 451-7800

 Facsimile: (408) 451-7836

 Email: zcabagbag@firstam.com

1.10          “Hazardous Material” means any hazardous or toxic substance as defined in or regulated by any Environmental Law in effect at the pertinent date or dates.

1.11          “Leases” means those certain lease agreements, as amended, as set forth in Schedule 1.11.

1.12          “Purchase Price” means the sum of Six Million Five Hundred Thousand Dollars ($6,500,000.00).

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1.13          “Seller Leaseback”means that lease to be delivered at Closing by and between Buyer, as Landlord, and Seller, as Tenant, a copy of which is attached hereto as Exhibit “I” and made a part hereof (the “Seller Lease”).

1.14          “Seller’s Address” means:

 ADPT Corporation

 691 South Milpitas Boulevard

 Milpitas, California 95035

 Attention:  Robert W. Kraiss

 With a copy to:

 SILICON VALLEY LAW GROUP

 25 Metro Drive, 6th Floor

 San Jose, California 95110

 Attention:  Terri Molinaro

 Facsimile:  (408) 573-5701

1.15          “Tenants” mean those certain tenants under the Leases.

1.16          “Title Company” means First American Title Insurance Company.

1.17          “Title Company Address” means:

 FIRST AMERICAN TITLE INSURANCE COMPANY

 1737 North First Street, Suite 100

 San Jose, California 95112

 Attention: Michael Hickey

 Order No.:  NCS-472936

 Telephone: (408) 451-7905

 Facsimile: (408) 451-7836

 E-Mail:  mhickey@firstam.com

2.      Sale of Property:  Purchase Price.

2.1           Sale of Property.  Subject to the terms, covenants and conditions of this Agreement, Seller shall sell to Buyer, and Buyer shall purchase from Seller:

2.1.1           the land consisting of approximately 6.36 acres, located in the City of Milpitas, County of Santa Clara, State of California, which is more particularly described in Exhibit “A”, together with, all and singular, the tenements, hereditaments, easements, rights of way and appurtenances belonging or in anywise appertaining to the same (“Land”);

2.1.2           all improvements, structures and fixtures now or on the “Closing Date” (as defined below) located upon the Land, including one (1) two story business condominium building described as 691 South Milpitas Boulevard, comprised of approximately 104,000 square feet (“Improvements”) (the Land, the Improvements are collectively referred to herein as the “Real Property”);

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2.1.3           all right, title and interest of Seller in and to any equipment, machinery or other property which is affixed to the Improvements and all personal property located on or used in connection with the Land or Improvements, including the furniture (which is depicted on the Floor Plans attached hereto as Schedule 2.1.3), but excluding (i) those items of personal property owned by Tenants, and (ii) any personal property pertaining to the operation of Seller’s business and  currently located in the area demised by the Seller Lease at Closing (exclusive of the items referred to in clause 2.1.3(a) above) (“Personal Property”);

2.1.4           all right, title and interest of Seller in and to all intangible property related to the Real Property or Personal Property, including, without limitation, the Leases and all other agreements demising space in or providing for the use or the occupancy of the Land or Improvements and any permits, approvals, operating permits, plans, specifications, licenses, entitlements, approvals, surveys, warranties and guaranties (including those related to construction), and all other contracts and agreements and all intangible property and rights relating to the Land, Improvements or Personal Property, if any, (collectively, the “Intangible Property”), to the extent the Intangible Property is assignable and Buyer elects to have such Intangible Property assigned to Buyer (the Real Property, Personal Property and Intangible Property are collectively referred to herein as the “Property”).

2.2           Purchase Price.  The Purchase Price shall be payable as follows:

(a)      Deposit.Within two (2) business days following the Buyer’s and Seller’s execution and delivery of a fully executed copy of this Agreement to Escrow Holder, the sum of One Hundred Fifty Thousand Dollars ($150,000.00) (the “Deposit”) shall be delivered by Buyer to Escrow Holder in the form of a wire transfer made payable to the order of Escrow Holder, and shall be deposited by Escrow Holder pursuant to the provisions of Section 3.1 below.  If Buyer, in its sole and absolute discretion, disapproves in writing of the results of its investigation of the Property prior to the expiration of the Due Diligence Period and/or fails to notify Seller in writing that it has removed the contingencies referenced in Sections 3.3.1 (Inspection), 3.3.4 (Preliminary Title Report) and 3.3.5 (Due Diligence Items) by delivery of an “Approval Notice” (as defined below) by the expiration of the Due Diligence Period, then the Deposit shall be refunded to Buyer and this Agreement shall terminate.   If an Approval Notice is timely delivered during the Due Diligence Period, then from and after delivery of such Approval Notice, the Deposit shall be nonrefundable pursuant to the provisions of Section 9.1.2, except that in the event of a default by Seller hereunder and as expressly otherwise provided herein the Deposit shall be refundable to Buyer.  On the Closing (as hereinafter defined), the Deposit shall be applied toward the payment of the Purchase Price.

(b)      With respect to any provisions of this Agreement which provides for the return of the Deposit to Buyer, notwithstanding any such provision the sum of Five Hundred Dollars ($500) of the Deposit shall be disbursed to Seller as partial consideration for entry by Seller into this Agreement and the balance of the Deposit shall be distributed to Buyer.

2.2.2           Interest on Deposit.  At Buyer’s election, all funds received from or for the account of Buyer shall be deposited by Escrow Holder in an interest-bearing account with a federally insured state or national bank (“Account”) located in California.  All interest accrued on the Deposit shall be credited to Buyer.  Buyer shall provide Escrow Holder with its Federal Tax Identification Number and such other information as Escrow Holder may request in connection with establishing the Account.

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3.Escrow; Closing Conditions; Post-Closing Covenants.

3.1           Escrow.  Upon the execution of this Agreement by Buyer and Seller, and the acceptance of this Agreement by Escrow Holder in writing, this Agreement shall constitute the joint escrow instructions of Buyer and Seller to Escrow Holder to open an escrow (“Escrow”) for the consummation of the sale of the Property to Buyer pursuant to the terms of this Agreement.  Upon Escrow Holder’s receipt of the Deposit and Escrow Holder’s written acceptance of this Agreement, Escrow Holder is authorized to act in accordance with the terms of this Agreement.  Upon the Close of Escrow, Escrow Holder shall pay any sum owed to Seller with immediately available federal funds.  Seller and Buyer hereby designate the Escrow Holder as the “Reporting Person” for the transaction pursuant to Section 6045(e) of the Code and the regulations promulgated thereunder and agree to execute such documentation as is reasonably necessary to effectuate such designation.  Seller and Buyer shall each be entitled to submit escrow instructions to the Escrow Holder in connection with the Close of Escrow provided that in the event of any conflict between the terms and conditions of this Agreement and the provision of any Escrow Instructions prepared by Seller, Buyer or Escrow Holder, the terms and conditions of this Agreement shall control.

3.2           Closing Date.  The Escrow shall close (“Close of Escrow” or “Closing”) on the Closing Date, provided that all conditions to the Close of Escrow set forth in this Agreement have been satisfied or waived in writing by the party intended to be benefited thereby.

3.3           Buyer’s Conditions to Closing.  The Close of Escrow is subject to and contingent on the satisfaction of the following conditions or the waiver of the same by Buyer in writing in accordance with the applicable time periods set forth herein:

3.3.1           Inspection.  Buyer shall have approved, in its sole and absolute discretion, the physical condition of the Property, which approval shall be given, if at all, in accordance with the provisions of Section 3.4 by an Approval Notice prior to the expiration of the Due Diligence Period.  Buyer’s inspection and review shall be performed at Buyer’s sole cost and expense.  Notwithstanding the foregoing, Buyer’s right to inspect the Property pursuant to the terms of this Agreement shall, at all times, be subject to Tenants’ rights under the Leases and the following terms and conditions:

(a)      Prior to commencing any investigative activities on the Property, Buyer shall obtain or cause its consultants to obtain, at Buyer’s sole cost and expense, a policy of commercial general liability insurance covering any and all liability of Buyer and Seller with respect to or arising out of any investigative activities.  Such policy of insurance shall be an occurrence policy and shall have liability limits of not less than Two Million Dollars ($2,000,000.00) combined single limit per occurrence for bodily injury, personal injury and property damage liability.  Such insurance policy shall name Seller, its successors and assigns as additional insured and shall insure the indemnity obligations of Buyer described in subparagraph (d) below.  In addition, Buyer shall maintain worker’s compensation insurance as required by law.  Buyer shall deliver insurance certificates evidencing the required insurance to Seller prior to any entry onto the Property.

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(b)      Subject to the terms of subparagraph (a) above, Buyer shall have the right to commence Buyer’s physical inspection of the Property immediately after Buyer’s and Seller’s execution of this Agreement.  Buyer’s physical inspection of the Property shall be conducted during normal business hours at times mutually and reasonably acceptable to Buyer and Seller.  Notwithstanding anything contained herein to the contrary, no invasive or intrusive testing or boring or testing in occupied space shall be done without the prior notification of Seller and Seller’s written permission of the same, which permission may be withheld in Seller’s reasonable discretion.  Any request for invasive or destructive testing by Buyer shall be based upon, and Buyer shall deliver such to Seller, the recommendation for such testing from Buyer’s expert report and a written description of the general nature and scope of the proposed testing, the protective measures to be utilized by Buyer to avoid or minimize any damage to the Land or the Improvements, the restoration activities proposed to be performed by Buyer to restore any anticipated damage, the names of the contractor(s) to be conducting such testing (and a description of their qualifications and licensing), those portions of the Property to be affected by such testing and Buyer’s proposed schedule for conducting such inspections.  Within five (5) days after Buyer’s receipt thereof, Buyer shall provide Seller with copies of all reports, data or test results from any investigative activites.

(c)      Buyer acknowledges that prior to the expiration of the Due Diligence Period:  (i) Buyer has or will have had the opportunity to conduct such surveys and inspections, and made such percolation, geologic, environmental and soils tests and other studies of the Property, including, but not limited to, non-invasive soil tests thereon; and (ii) Seller shall provide Buyer with adequate opportunity to make such inspection of the Property (including an inspection for zoning, land use, environmental and other laws, regulations and restrictions) as Buyer shall, in Buyer’s sole and absolute discretion, deem necessary or advisable as a condition precedent to Buyer’s purchase of the Property and to determine the physical, environmental and land use characteristics of the Property) and its suitability for Buyer’s intended use.

(d)      Buyer shall protect, indemnify, defend and hold the Property, Seller and Seller’s officers, directors, partners, members, fiduciaries, participants, affiliates, employees, representatives, attorneys, insurance carriers, invitees, agents and contractors free and harmless from and against any and all claims, actions, damages, liens, stop notices, liabilities, losses, costs and expenses, including reasonable attorneys’ fees and court costs (collectively, “Liabilities”), resulting from Buyer’s inspection and testing of the Property, including, without limitation, repairing any and all damages to any portion of the Property to the extent caused by Buyer’s conducting such inspections, surveys, tests, and studies.  Further, Buyer and its agents, contractors or invitees shall, in performing Buyer’s requested inspections, (i) comply with the agreed upon procedures and with any and all laws, ordinances, rules, and regulations applicable to the Property; (ii) not engage in any activities which would violate any permit, license, or Environmental Law; (iii) promptly pay when due the costs of all entry and inspections and examinations done with regard to the Property; (iv) minimize damage to the Property when performing Buyer’s investigations and tests; provided, however, this subsection (iv) shall in no way limit Buyer’s other obligations set forth in this Section 3.3; and (v) perform its investigations and tests in such a way as to not unreasonably cause any disturbance to Tenants of the Property.  The provisions of this Section 3.3.1(d) shall survive the Closing or the termination of this Agreement, as applicable, for a period of eighteen (18) months (or if an action shall be instituted by Seller within such period, then such period shall be extended until full and final resolution of such claim is accomplished).  The foregoing indemnity notwithstanding, in no way shall Buyer be responsible for any liability, claims, costs or expenses incurred or suffered by Seller or any such indemnified parties arising out of or related to Buyer’s discovery during the course of its due diligence of environmental substances, environmental contamination, building or site deficiencies, encroachments, title defects or other damage or defects not created on the Property by Buyer; provided, however, the foregoing exception from the aforementioned indemnity shall not apply to the extent Buyer exacerbates or contributes to pre-existing environmental substances, environmental contamination, or other damage or defects related to the Property.

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(e)      Buyer hereby covenants that it shall comply with all the terms and conditions set forth in the Leases and shall in no manner whatsoever unreasonably interfere or disturb the Tenants or the Tenants’ rights, duties and obligations under the Leases.  Buyer shall first obtain Seller’s consent prior to contacting any Tenants, which consent shall not be unreasonably withheld.

(f)      Seller may, but shall not be obligated to, have a representative of Seller present during any inspections of the Property or contact by Buyer with any Tenants.

3.3.2           Title Policy.  Title Company shall irrevocably commit to issue the Buyer’s Title Policy (as defined in Section 3.8.6, below) complying with the requirements of Section 3.8.6 below; provided, however, the issuance of endorsements requested by Buyer shall not be a condition precedent to Buyer’s obligation to proceed with the Closing unless such endorsements are for the purpose of removing disapproved title exceptions that Seller has agreed to attempt to remove at or prior to the Closing.

3.3.3           Covenants.  Seller shall have performed and satisfied, in all material respects, all agreements and covenants required hereby to be performed by Seller prior to or at the Close of Escrow, including delivery into Escrow of the items and documents described in Sections 3.8 and 3.10.

3.3.4           Preliminary Title Report.  Buyer shall approve, in its sole discretion, by the expiration of the Due Diligence Period of the following: (i) a current preliminary title report for the Property issued by the Title Company (“PTR”); (ii) copies of all underlying title documents described in such preliminary title report, and (iii) any existing survey of the property in Seller’s actual possession (the “Title Documents”).

(a)      Seller shall deliver to Buyer, within five (5) days of the Agreement Date (“Title Delivery Date”) the Title Documents.  Buyer, at its sole and absolute discretion, shall have the right to commission an ALTA survey of the Property (or update of an existing survey).

(b)      Buyer shall have until 5:00 p.m. Pacific Time, on the date that is ten (10) days prior to the expiration of the Due Diligence Period (the “Title Review Period”) to examine the Title Documents.  If Buyer objects to any title exceptions disclosed in the Title Documents, Buyer shall, prior to the expiration of the Title Review Period, notify Seller in writing (“Buyer's Notice”), specifying the objectionable matters.  Buyer’s failure to timely deliver Buyer’s Notice shall be deemed Buyer’s approval of the exceptions shown on the Title Documents.

(c)      Seller may elect (but shall have no obligation whatsoever except as set forth below) to cure some or all of such objectionable matters by notifying Buyer in writing (“Seller's Notice”) within five (5) days after receipt of Buyer's Notice.  If Seller elects to cure some or all of such disapproved title matters, Seller agrees to use commercially reasonable efforts to effectuate such cure.  Failure of Seller to deliver Seller's Notice shall be deemed Seller's election not to cure any objectionable title matter in Buyer’s Notice.  Notwithstanding anything to the contrary contained in this Agreement, Seller shall be obligated to remove at or prior to the Close of Escrow all monetary liens against the Property (other than the lien of current taxes and assessments subject to proration at the Close of Escrow) (“Monetary Liens”), and in no event shall Buyer be required to disapprove of Monetary Liens in Buyer’s Notice or include Monetary Liens in Buyer’s Title Waiver Notice.

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(d)      If Seller elects not to cure some or all of the matters objected to by Buyer, or if Seller is deemed to have elected not to cure such objectionable title matters, then Buyer shall have until the expiration of the Due Diligence Period, in which to notify Seller  in writing that Buyer has elected to waive such objections which Seller has elected not to cure (the “Buyer's Title Waiver Notice”), in which event Buyer and Seller shall proceed to the Closing as provided for herein, or terminate this Agreement and receive a refund of the Deposit.  In the event Buyer fails to deliver a Buyer's Title Waiver Notice, this Agreement shall terminate and the Deposit shall be returned to Buyer.

(e)      If Seller has agreed to remove or cure some or all of the items set forth in Buyer’s Notice and is unable to or has failed to remove or cure the same by Close of Escrow, then Buyer shall have, as Buyer’s sole and exclusive remedy, the right exercisable prior to Closing Date either to: (i) waive such exceptions to title, and proceed to take title to the Property without any deduction or offset in the Purchase Price, or (ii) terminate this Agreement and the Escrow by giving written notice of such termination to Seller and to Escrow Holder in which event Buyer and Seller shall have no further liability to the other hereunder except for those provisions that specifically survive the termination of this Agreement and the Deposit shall be returned to Buyer.  Buyer’s failure to provide Seller or Escrow Holder with written notice of termination prior to the Closing Date shall constitute Buyer’s election under (i) above.   Notwithstanding the foregoing, if Seller fails to remove Monetary Liens, Buyer shall have the right to cause the proceeds of the sale which Seller would otherwise receive to be applied to the satisfaction of Monetary Liens

(f)      Buyer shall be deemed to have approved all title exceptions shown on the Title Documents not objected to in Buyer’s Notice or to which objections have been waived in Buyer’s Title Waiver Notice or by Buyer pursuant to Section 3.3.4(e) above, other than Monetary Liens which shall be removed by Seller at its sole cost and expense.

3.3.5           Due Diligence Items.  Within five (5) days of the Agreement Date, to the extent in Seller’s possession, Seller shall deliver or otherwise make available to Buyer, the due diligence items set forth in Schedule 3.3.5 (the “Due Diligence Items”).  Buyer shall have approved, in its sole and absolute discretion, the Due Diligence Items, which approval shall be given prior to the expiration of the Due Diligence Period pursuant to the provisions of Section 3.4 below.  Seller acknowledges Buyer may desire to discuss or otherwise inquire about the Due Diligence Items with various governmental entities, utilities, Tenants and third parties.  In this regard, Buyer is permitted to contact all necessary third parties and discuss with such third parties the governmental records, Leases, Intangible Property, contracts and other Due Diligence Items; provided, however, Buyer first obtains Seller’s reasonable consent and Seller is first given a reasonable opportunity to be present at such contact or discussions at a time and location specified by Buyer in writing.  Notwithstanding the foregoing, it shall be reasonable for Seller to withhold consent to any agreement, document, dealing, cooperation or any other matter that (i) would create liability for Seller; (ii) would be binding on Seller prior to the Closing; or (iii) would be binding on Seller if the Closing does not occur.

3.3.6           Seller Leaseback.  Prior to the expiration of the Due Diligence Period, Buyer, as landlord, and Seller, as tenant, shall execute and deposit with Escrow Holder the Seller Leaseback, which shall be in substantially the form attached hereto as Exhibit “I”; provided, however, such Seller Leaseback shall be effective only if and when escrow closes with regard to the transaction contemplated herein. If this Agreement is terminated, then such Seller Leaseback shall be of no further force or effect.

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3.3.7           Representations and Warranties.  All representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the date made and as of the Close of Escrow (as if made on and as of Close of Escrow) with the same effect as though such representations and warranties were made at and as of the Close of Escrow.

3.3.8           Damage or Destruction; Condemnation.  Buyer shall not have elected, pursuant to the terms of Section 6, to terminate this Agreement.

3.3.9           Estoppel Certificates.  Seller shall use commercially reasonable efforts (which shall include delivery of the same to Tenants within three (3) business days after the date hereof) to obtain from each Tenant and deliver to Buyer, not later than two (2) business days prior to expiration of the Due Diligence Period, an estoppel certificate in the form attached hereto as Exhibit “J” with respect to each of the Tenants pursuant to the Leases (the “Estoppel Certificates”), which Estoppel Certificates shall have been executed by each respective Tenant without material modification, or if modified, with modification acceptable to Buyer in its sole and absolute discretion.  Upon receipt Seller shall promptly deliver to Buyer any and all executed Estoppel Certificates received by Seller.  In the event Seller is unable to obtain such Estoppel Certificates or Buyer is not satisfied, in Buyer’s sole and absolute discretion, with the number of Estoppel Certificates delivered or the form or content of any such Estoppel Certificate, Buyer may elect to terminate this Agreement in writing on or before the last day of the Due Diligence Period, by failing to give the Approval Notice Buyer shall be deemed to have elected to terminate this Agreement.  Other than the preparation of the Estoppel Certificates and delivery of such documents, Seller shall not be obligated to expend any funds in connection with obtaining any such Estoppel Certificates, and the failure of Seller to obtain any such Estoppel Certificates shall not be a breach or default hereunder so long as Seller uses commercially reasonable efforts to obtain them.

3.4           Approval Procedure.  Buyer shall notify Seller of Buyer’s approval or disapproval in its sole and absolute discretion of the matters described in Sections 3.3.1 (Inspection), 3.3.4 (Preliminary Title Report), and 3.3.5 (Due Diligence Items) by written notice delivered to Seller and Escrow Holder by the expiration of the Due Diligence Period (or such other date as is specified therein).    The written approval by Buyer of the matters as described in this Section 3.4 shall sometimes be referred to as the “Approval Notice”. Buyer’s failure to affirmatively approve all of the matters described in Sections 3.3.1, 3.3.4, and 3.3.5 in writing by the expiration of the Due Diligence Period (or such other date as is specified therein) by giving the Approval Notice shall be deemed Buyer’s disapproval of such matters.

3.5           Termination Upon Disapproval.  If Buyer timely disapproves, or is deemed to have disapproved by failing to give the Approval Notice, any of the matters described in Sections 3.3.1, 3.3.4 (subject to Seller’s right to remove or cure or to obtain a bond or title endorsement with respect to items set forth in Buyer’s Notice), or 3.3.5 or 3.3.9 on or before the expiration of the Due Diligence Period, then this Agreement shall automatically terminate.  Upon termination of this Agreement pursuant to Section 3.3.4 or this Section 3.5 or pursuant to Section 6: (a) each party shall promptly execute and deliver to Escrow Holder such documents as Escrow Holder may reasonably require to evidence such termination; (b) Escrow Holder shall return all documents to the respective parties who delivered such documents to Escrow; (c) Escrow Holder shall remit the Deposit to Buyer; (d) Buyer and Seller shall each pay one-half (½) of Escrow Holder’s escrow cancellation fees, if any; (e) Buyer shall return to Seller all Due Diligence Items in Buyer’s possession relating to the Property together with the tests, reports or studies prepared by or on behalf of Buyer with respect to the Property; and (f) the respective obligations of Buyer and Seller under this Agreement shall terminate except for those obligations that expressly survive the termination of this Agreement.

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3.6           Seller’s Conditions to Closing.  The obligations of Seller to consummate the transactions provided for herein are subject to and contingent upon the satisfaction of the following conditions or the waiver of same by Seller in writing:

3.6.1           Representations and Warranties.  All representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects as of the date made and as of the Close of Escrow with the same effect as though such representations and warranties were made at and as of the Close of Escrow.

3.6.2           Covenants.  Buyer shall have performed and satisfied all agreements and covenants required hereby to be performed by Buyer prior to or at the Close of Escrow in all material respects.

3.7           Failure of Condition Precedent.  So long as a party is not in default hereunder, if any condition to said party’s obligation to proceed with the Closing hereunder has not been satisfied as of the Closing Date, such party may, in its sole and absolute discretion, elect to either (i) terminate this Agreement by delivering written notice to the other party on or before the Closing Date, in which event the Deposit shall be returned to the Buyer, or (ii) proceed with the Closing, notwithstanding the fact that such condition has not been satisfied, in which event such party shall be deemed to have waived any such condition.  If such party elects to proceed with the Closing, notwithstanding the fact that such condition has not been satisfied, there shall be no liability on the part of the other party for non-satisfaction of such condition or for breaches of representations and warranties of which the party electing to close had knowledge as of the Closing.

3.8           Documents and Title Insurance.

3.8.1           Deed.  Seller shall convey title to the Property to Buyer by grant deed in the form of Exhibit “B” attached hereto (“Deed”).

3.8.2           Assignment and Assumption of Leases.  Seller shall assign to Buyer Seller’s right, title and interest in and to the Leases pursuant to an assignment and assumption of the leases in the form of Exhibit “C” attached hereto (“Assignment and Assumption of Leases”).

3.8.3           General Assignment and Assumption.  Seller shall assign to Buyer to the extent assignable, Seller’s right, title and interest if any in the Intangible Property, subject to any rights of consent as provided therein, pursuant to the general assignment and assumption in the form of Exhibit “D” attached hereto (“General Assignment and Assumption”).

3.8.4           Bill of Sale.  Seller shall convey all of Seller’s right, title and interest, if any, in and to the Personal Property owned by Seller and used in the operation of the Property pursuant to a Bill of Sale in the form of Exhibit “E” attached hereto (“Bill of Sale”).

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3.8.5           Assignment and Assumption of Contracts.  Seller shall assign to Buyer Seller’s right, title and interest in and to the Contracts assumed by Buyer pursuant to this Agreement pursuant to an assignment and assumption of the contracts in the form of Exhibit “H” attached hereto (“Assignment and Assumption of Contracts”).

3.8.6           Buyer’s Title Policy.  Provided Buyer has fully complied with each and every of the Title Company’s requirements to be complied with by Buyer as a condition precedent to the Title Company’s issuance of an extended coverage policy of title insurance, at the Close of Escrow, Escrow Holder shall cause the Title Company to issue to Buyer a 2006 ALTA Extended Coverage Owner’s Policy of Title Insurance (“Buyer’s Title Policy”) with such customary endorsements as Buyer shall reasonably require which the Title Company is willing to issue, which:

(a)      shall be written with liability in the amount of the Purchase Price; and

(b)      shall insure title to the Property, to be vested in Buyer, subject only to the following exceptions (“Permitted Exceptions”):  (i) general and special Property taxes and assessments for the current fiscal year, a lien not yet due and payable; (ii) the exceptions approved or deemed approved by Buyer pursuant to Section 3.3.4 above; (iii) the possessory rights of the Tenants pursuant to the Leases and possessory rights of Seller, as tenant, pursuant to the Seller Leaseback, (iv) any title exceptions directly or indirectly created or approved by Buyer; and (v) the standard printed exceptions set forth in the Escrow Holder’s 2006 ALTA Extended Coverage Owner’s Policy of Title Insurance.

If Buyer has not fully complied with each and every of the Title Company’s requirements to be complied with by Buyer as a condition precedent to the Title Company’s issuance of an extended coverage policy of title insurance, at the Close of Escrow, the Buyer’s Title Policy shall be a 2006 CLTA Standard Coverage Owner’s Policy of Title Insurance written with liability in the amount of the Purchase Price and insuring title to the Property, to be vested in Buyer, subject only to the Permitted Exceptions, as such term may be modified to account for the standard printed exceptions set forth in the Escrow Holder’s 2006 CLTA Standard Coverage Owner’s Policy of Title Insurance.

3.9           Closing Costs and Charges.

3.9.1           Seller’s Costs.  Seller shall pay (a) the cost of the CLTA portion of Buyer’s Title Policy; (b) all City and County documentary transfer taxes payable in connection with the transfer of the Property; (c) one-half (½) of the Escrow Holder’s fees in connection with the Escrow; and (d) the cost to remove Monetary Liens (if any).

3.9.2           Buyer’s Costs.  Buyer shall pay (a) the cost of the ALTA portion of Buyer’s Title Policy and all endorsements as requested by Buyer; (b) one-half (½) of the Escrow Holder’s fees in connection with the Escrow; and (c) all recording fees payable in connection with the transfer of the Property.

3.9.3           Other Costs.  All other costs, if any, shall be apportioned in the customary manner for Property transactions in the county where the Property is located.

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3.10           Deposit of Documents and Funds by Seller.  Not later than one (1) business day prior to the Closing Date, Seller shall deposit the following items into Escrow each of which shall be duly executed and acknowledged by Seller where appropriate:

3.10.1   The Deed;

3.10.2   Three (3) counterparts of the Assignment and Assumption of Leases;

3.10.3   Three (3) counterparts of the General Assignment and Assumption;

3.10.4   The Bill of Sale;

3.10.5   The Certification of Non-Foreign Status in the form of Exhibit “F” (“Certification”);

3.10.6   Notice to Tenants in the form of Exhibit “G” (“Notice to Tenants”);

3.10.7   Three (3) counterparts of the Seller Leaseback;

3.10.8   Three (3) counterparts of the Assignment and Assumption of Contracts;

3.10.9   A certification that Buyer is exempt from the withholding requirements of California Revenue & Taxation Code Section 17052.2, et. seq., in such form and content required by applicable governmental agencies, including, but not limited to, the California Franchise Tax Board, duly executed by Seller (“California Certificate”); and

3.10.10   Other documents that may reasonably be required by Escrow Holder to close the Escrow in accordance with this Agreement, including all appropriate authority documents and certificates, affidavits and indemnities required for Buyer’s Title Policy.

3.11        Deposit of Documents and Funds by Buyer.  Not later than one (1) business day prior to the Closing Date, Buyer shall deposit the following items into Escrow each of which shall be duly executed and acknowledged by Buyer where appropriate:

3.11.1   Buyer's delivery to Seller through Escrow of the Deposit, the balance of the Purchase Price, and any other funds as may be required to close the Escrow in accordance with this Agreement.

3.11.2   Three (3) counterparts of the Assignment and Assumption of Leases;

3.11.3   Three (3) counterparts of the General Assignment and Assumption;

3.11.4   Three (3) counterparts of the Assignment and Assumption of Contracts; and

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3.11.5   Other documents that may reasonably be required by Escrow Holder to close the Escrow in accordance with this Agreement, including all appropriate authority documents and certificates.

The parties hereto shall jointly deposit any required transfer declarations or declarations of value and mutually agreed closing statements.   In addition, Seller shall deliver to Buyer (or leave at the Property) the originals of the Leases, Contracts and the balance of the Intangible Property.

3.11.6   Delivery of Documents and Funds at Closing.  Provided that all conditions to closing set forth in this Agreement have been satisfied or, as to any condition not satisfied, waived by the party intended to be benefited thereby, on the Closing Date Escrow Holder shall conduct the closing by:

(a)           Recording the Deed in the Official Records of Santa Clara County Recorder.

(b)           Delivering to Buyer:  (a) the original Buyer’s Title Policy; (b) the original Certification; (c) conformed copy of the Deed; (d) an original counterpart of the Assignment and Assumption of Leases; (e) an original counterpart of the General Assignment and Assumption executed by Seller and Buyer; (f) an original Bill of Sale; (g) the original of each Notice to the Tenants; (h) an original counterpart of the Seller Leaseback; (i) an original counterpart of the Assignment and Assumption of Contracts, (j) the original of the California Certificates, and (k) a counterpart copy of the closing statement.

(c)           Delivering to Seller a counterpart or original (as applicable) of every document delivered to Buyer.

(d)           Delivering to Seller the Purchase Price and such other funds, if any, as may be due to Seller by reason of credits under this Agreement, less all items chargeable to Seller under this Agreement.

3.12        Prorations and Adjustments.

3.12.1   Generally.  If any expenses are not determinable on the Close of Escrow, at the earliest possible opportunity following the Close of Escrow but in no event later than six (6) months after the Close of Escrow (except in the case of taxes, which shall be finally prorated within thirty (30) days of receipt of final tax bills, and “Additional Rents”, which shall be subject to final reconciliation as provided below), Seller and Buyer shall make any interim and final adjustments.   This Section 3.12 shall survive Close of Escrow for the period described above.

3.12.2   Taxes. All property taxes, bonds and assessments shall be prorated at the Close of Escrow.  If property taxes, bonds and assessments are not determinable on the Close of Escrow, such shall be reconciled within thirty (30) days after accurate information is obtained by the parties.

3.12.3   Utility Costs; Operating Expenses.  Any and all utility costs or other operating expenses payable under Contracts assumed by Buyer at the Closing shall be prorated at the Close of Escrow based upon the current billing period of the applicable service provider in which the Close of Escrow occurs (which charges assumed to be incurred uniformly during such billing period).  Seller shall be entitled to pursue a refund of all deposits presently in effect with the utility providers, it being understood that Buyer and Seller shall cooperate to ensure that there is no disruption in services and Buyer is obligated to make its own arrangements for deposits with said utility providers.   Where practicable, meters should be read concurrently with Close of Escrow.

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3.12.4   Rentals.  At the Close of Escrow, the parties shall prorate rental income received from Tenants under the Leases (including base rents and CAM reimbursements) for the month in which the Close of Escrow occurs (the “Current Month”).  Delinquent rents shall not be prorated.  Any rental payments received after the Close of Escrow shall be applied to current rentals first and then to delinquent rentals in order of the most recent delinquency.  If, after the Close of Escrow, either party receives rental payments belonging to the other as required by the previous sentence, such party shall promptly forward such amount to the other.  Buyer shall use reasonable efforts to collect delinquent rents but shall have no obligation to bring any action or proceeding to collect such delinquent rents.  No person or entity (other than Buyer) shall institute an action against any tenant for delinquent rentals and other tenant charges and Additional Rents attributable to periods prior to the Current Month prior to the later of 90 days after the Closing Date and five business days after it gives Buyer written notice of such demand or action (and in no event shall Seller be entitled to take any action against a tenant which would result in a termination of any Tenant Lease or the tenant’s right of occupancy thereunder).  Tenants of the Property may be obligated to pay, as additional rent, certain percentage rent, escalations in base rent and pass throughs of operating and similar expenses pursuant to the terms of the Leases (collectively, “Additional Rents”).  As to any Additional Rents that are based on estimates and that are subject to adjustment or reconciliation pursuant to the Leases after the Closing Date, Seller and Buyer shall “re prorate” such Additional Rents (including any portions thereof that may be required to be refunded to tenants) at the time that such estimates are actually adjusted or reconciled pursuant to the terms of such Leases.  Any amounts that may be due Seller as a result of such re prorations shall be paid by Buyer to Seller promptly after Buyer collects such amounts from the tenants, and any amounts that may be due the tenants from Seller as a result of such re prorations shall be paid by Seller to Buyer promptly after written request therefor is delivered to Seller by Buyer.

3.12.5   Security Deposits; Prepaid Rents; Tenant Inducements.  At the Close of Escrow, Buyer shall receive a credit against the Purchase Price in an amount equal to the amount of all Tenants’ security deposits identified in the Tenant Leases paid by each Tenant in connection with the Leases, together with any other prepaid rent paid by tenants for periods after the Current Month.

3.12.6   Prorations.  All prorations shall be made as of the Closing Date on the basis of the actual days of the month in which the Close of Escrow occurs.  Such date shall be an income and expense day for Buyer.  Seller shall be responsible for all expenses of the Property applicable to the period prior to the Closing Date and Buyer shall be responsible for all expenses applicable to the period from and after the Closing Date.  All prorations and adjustments shall be made, where feasible, through Escrow.  Seller and Buyer agree that (a) none of the insurance policies relating to the Property will be assigned to Buyer (and Seller shall pay any cancellation fees resulting from the termination of such policies) and Buyer shall be responsible for arranging for its own insurance as of the Closing Date; (b) the Property will not be subject to any Monetary Liens; and (c) all employees of Seller performing services at the Property (other than employees that Seller intends to retain in the premises demised by the Seller Lease) shall be terminated or relocated by Seller prior to the Closing Date and Seller shall fully pay such employees prior to the Closing Date all accrued salaries, wages and benefits (including vacation and sick pay), and Buyer shall not be obligated to rehire such employees.  Accordingly, there will be no prorations for insurance, debt service or payroll.

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4.      Delivery and Possession.  Seller shall deliver possession of the Property to Buyer at the Close of Escrow, subject to the rights of the Tenants under the Leases and their sublessee(s), if any, and the rights of Seller, as tenant, under the Seller Leaseback.

5.      Commissions. Buyer and Seller each represent and warrant to the other that there are no commissions, finder’s fees or brokerage fees arising out of the transactions contemplated by this Agreement other than a brokerage fee payable to CB Richard Ellis, Inc. (“Broker”) pursuant to a separate agreement entered into by Seller and Broker.  Seller shall pay the commission pursuant to such separate written agreement as and when required thereby if and only if the Closing occurs.  Buyer and Seller each represent and warrant to the other that there are no other commissions, finder’s fees or brokerage fees arising out of the transactions contemplated by this Agreement.  Each party shall indemnify and hold the other party harmless from and against any and all liabilities, claims, demands, damages, costs and expenses, including, without limitation, reasonable attorneys’ fees and court costs, in connection with claims for any such commissions, finders’ fees or brokerage fees arising out of each such party's conduct or the inaccuracy of the foregoing representation and/or warranty of such party.

6.      Damage or Destruction:  Condemnation.

6.1           Casualty.  Prior to the Closing, and notwithstanding the pendency of this Agreement, the entire risk of loss for damage by earthquake, flood, landslide, fire or other casualty shall be borne and assumed by Seller, except as otherwise provided in this Section 6.1.  If, prior to the Closing, any part of the Real Property is damaged or destroyed by earthquake, flood, landslide, fire or other casualty, Seller shall immediately notify Buyer of such fact.  If such damage or destruction is “material”, Buyer shall have the option to terminate this Agreement upon notice to Seller given not later than ten (10) days after receipt of Seller's notice.  For purposes of this Section 6.1, “material” shall be deemed to be any damage or destruction where the costs of repair or replacement is estimated to be One Hundred fifty Thousand Dollars ($150,000.00), or more.  If Buyer does not exercise this option to terminate this Agreement, or the casualty is not material, neither party shall have the right to terminate this Agreement, but Seller shall assign and turn over to Buyer, and Buyer shall be entitled to receive and keep all insurance proceeds payable to it with respect to such destruction and the parties shall proceed to the Closing pursuant to the terms hereof without modification of the terms of this Agreement and without any reduction in the Purchase Price provided that Buyer shall be entitled to a credit against the Purchase Price in the amount of the deductible with respect to the applicable insurance coverage, or if such casualty is uninsured, Buyer shall be entitled to a credit for the cost to repair or restore the same (but in no event shall Seller be required to provide a credit in excess of $150,000).  If Buyer does not elect to terminate this Agreement by reason of any casualty, Buyer shall have the right to participate in any adjustment in the insurance claim.  If Buyer does terminate this Agreement pursuant to this Section 6.1, this Agreement shall terminate, all rights and obligations hereunder of each party shall be at an end (except those matters which are specifically stated in this Agreement to survive the termination) and the Escrow Holder is hereby instructed to return promptly to the party which placed such items into Escrow all funds and documents which are held by the Escrow Holder on the date of termination.

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6.2           Condemnation.  If prior to the Closing all or any portion of the Real Property is subject to an actual or threatened taking by a public authority, by the power of eminent domain or otherwise, Buyer shall have the right, exercisable by giving written notice to Seller within ten business (10) days after Buyer’s receipt of written notice of such taking, either to (i) terminate this Agreement, in which case all rights and obligations hereunder of each party shall be at an end (except those matters which are specifically stated in this Agreement to survive the termination) and the Escrow Holder is hereby instructed to return promptly to the party which placed such items into Escrow all funds and documents which are held by the Escrow Holder on the date of termination, or (ii) to accept the applicable portion of the Property in its then condition without an adjustment of the Purchase Price, and to receive an assignment of all of Seller’s rights to any condemnation award payable by reason of such taking.  If Buyer elects to proceed under clause (ii) above, Seller shall not compromise, settle or adjust any claims to such award without Buyer’s prior written consent.

7.      Seller’s Representations, Warranties and Covenants.

7.1           Representations and Warranties.  It is expressly understood and agreed that all liability of Seller for breach of the representations and warranties contained in this Section 7.1 shall terminate if Buyer has not notified Seller in writing of an alleged breach thereof within one (1) year following the Closing Date.  If Buyer so notifies Seller, only the representations and warranties in question shall survive for the period (“Survival Period”) until the earlier of (i) the expiration of applicable statutes of limitations (or if an action shall be instituted by Buyer within such period, then full and final resolution and payment of such claim); and (ii) Seller’s cure of such breach to Buyer’s satisfaction.  Further, Seller’s liability for such breach shall be subject to the limitations set forth in Section 9.3 below.  Seller represents and warrants to Buyer that as of the date of this Agreement and as of the Closing Date, as such representations and warranties may be updated pursuant to Section 7.2 below:

7.1.1           Organization; Authority.  Seller is duly organized, validly existing and in good standing under the laws of the state of its organization.  Seller is authorized to transact business in California, and has full power and authority to enter into and perform this Agreement in accordance with its terms.  The persons executing this Agreement have been duly authorized to do so on behalf of Seller.

7.1.2           Authorization; Validity.  The execution and delivery of this Agreement by Seller and Seller’s consummation of the transactions contemplated by this Agreement have been duly and validly authorized.  Assuming the valid execution and delivery of this Agreement by Buyer, this Agreement constitutes a legal, valid and binding agreement of Seller enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally, and the exercise of judicial discretion in accordance with general principles of equity.

7.1.3           Litigation.  Seller has not received written notice that it is, nor to the best of Seller’s knowledge, is it now a party to any litigation, arbitration, or other proceedings (“Litigation”) with respect to the Property.

7.1.4           Leases.  There are no leases affecting the Property, oral or written, except as listed on the rent roll set forth in Schedule 7.1.4 (the “Rent Roll”).  Copies of the Leases, which have been delivered to Buyer, are, to the best of Seller’s knowledge, true, correct and complete copies thereof and all modifications or amendments thereto.  To the best of Seller’s knowledge, no defaults exist thereunder except as noted on the Rent Roll.  Except as set forth in the Leases, no Tenant(s) is entitled to interest in any security deposits.  Each Lease is in full force and effect, and the term of the same and the obligation to pay rent thereunder has commenced and the tenant thereunder is in full possession and actual occupancy thereof, and all improvements required to be completed under the provisions thereof are completed (or allowances therefore have been paid).  All brokerage commissions with respect to Leases have been paid in full or will have been paid in full prior to the Closing Date and there are and will be no commissions payable with respect to renewals, extensions or expansions of or under any Lease.  Seller has executed no exclusive brokerage agencies that will be in effect as of the Closing.

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7.1.5           Contracts.  Except for the Contracts listed in Schedule 7.1.5, Seller (and to Seller’s best knowledge, Seller’s predecessors in interest) has not entered into any management, service, maintenance, utility or other contracts or agreements affecting the Property, oral or written, which extend beyond the Closing Date and which would bind Buyer or encumber the Property more than thirty (30) days after Closing.   To Seller’s best knowledge, no defaults exist under the Contracts except as set forth in Schedule 7.1.5.

7.1.6           Condemnation.  Neither the whole nor any portion of the Property, including access thereto or any easement benefiting the Property, has been condemned, or taken in any proceeding similar to a condemnation proceeding, nor, to the best of Seller’s knowledge, is there now pending or threatened in writing any condemnation or similar proceeding against the Property or any portion thereof.  To the best of Seller’s knowledge, no written notice has been received that any such proceeding is contemplated.

7.1.7           Foreign Investment and Real Property Tax Act.  Seller is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code, or under any comparable state statutes which are applicable to this transaction.

7.1.8           Bankruptcy.  Seller has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by Seller’s creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of Seller’s assets; (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Seller’s assets; or (v) admitted in writing its ability to pay its debts as they come due.

7.1.9           Hazardous Waste.  To the best of Seller’s knowledge, and except otherwise disclosed to Buyer in the Due Diligence Items, the Property has not at any time been used for the purposes of storing, manufacturing, releasing or dumping Hazardous Materials or Substances, except for normal quantities of Hazardous Materials or Substances utilized in connection with the normal maintenance and operation of the Property in compliance with all Environmental Laws (as hereinafter defined).  To the best of Seller’s knowledge, and except as otherwise disclosed to Buyer, no underground storage tanks or clarifiers have been or are located on the Property.

7.1.10         Compliance with Laws.  To the best of Seller’s knowledge and except as disclosed to Buyer in writing in the Due Diligence Items, Seller has not received any current notices from any governmental authority of zoning, building, environmental protection, clean air, pollution, fire or health code violations with respect to the Property, or violations pertaining to the use and occupancy of the Property, including, without limitation, discrimination on any prohibited basis, that have not been cured.

7.1.11         CC&Rs.  To the best of Seller’s knowledge, there is no default by either Seller or the other owner pursuant to the CC&Rs or any facts or circumstances existing that, with the passage of time, or the giving of notice would constitute a default.

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7.1.12         Seller’s Knowledge.  As used in this Agreement, the phrase “to the best of Seller’s knowledge”, or words of similar import, shall be limited to the current, actual knowledge, with no duty of inquiry of Robert Kraiss, Director of Corporate Facilities and Real Estate; provided, however, in no event shall this Agreement give rise to any personal obligation, liability or duty on the part of Robert W. Kraiss, or any other trustee, officer, director, agent, representative or employee of Seller. Robert W. Kraiss shall not be charged with constructive or inquiry notice or knowledge, or imputed knowledge of any agents, contractors, or employees.  Seller hereby represents and warrants to Buyer that Robert W. Kraiss is the only person that needs to be listed within the definition of Seller’s knowledge such that such representations and warranties may be made on a reasonably informed basis.

7.1.13        OFAC Compliance.  Seller is in compliance with all laws, statutes, rules and regulations or any federal, state or local governmental authority in the United States of America applicable to Seller, and to Seller’s knowledge, and all beneficial owners of Seller, including, without limitation, the requirements of Executive Order No. 133224, 66 Fed Reg. 49079 (September 25, 2001) (the “Order”) and other similar requirements contained in the rules and regulations of the Office of Foreign Asset Control of the Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “Orders”).  Seller agrees to make its policies, procedures and practices regarding compliance with the Orders available to Buyer for its review and inspection during normal business hours and upon reasonable prior notice.  Neither Seller, nor to Seller’s knowledge, any beneficial owner of Seller:  (i) is listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “Lists”); (ii) has been determined by competent authority to be subject to the prohibitions contained in the Orders; (iii) is owned or controlled by, nor acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders.

7.1.14         Property Reports.  To Seller’s knowledge, Seller has delivered all Due Diligence Items to Buyer in its possession or control.

7.2           Buyer’s Remedies For Seller’s Breach of Representations and Warranties.  If, prior to the Closing, Seller shall notify Buyer that a representation or warranty made herein by Seller is materially untrue, inaccurate or incorrect due to circumstances (i) coming to Seller’s attention after the Agreement Date, including as a result of any subsequent acts, actions, notifications or events; (ii) which are beyond Seller’s reasonable control; (iii) which would, if allowed to remain, render a representation and warranty materially untrue as of the Closing; and (iv) which cannot be cured or corrected by Seller on or before the Closing Date or as to which Seller has not agreed in writing to use commercially reasonable efforts to attempt to cure such matter on or before the Closing Date; then Buyer shall have the right, as its sole and exclusive remedy, to (x) to terminate this Agreement by notice given to Seller on or before the Closing Date and receive a refund of the Deposit, or (y) accept such notice of changed circumstances and proceed with the Closing in which case Seller shall have no liability with regard to such matter.  If such notice is given by Seller prior to the expiration of the Due Diligence Period, the provisions of Section 3.4 and 3.5 shall control, and this Section 7.2 shall not be applicable for any purpose.  Buyer’s failure to notify Seller as required by the two preceding sentences shall be deemed Buyer’s election to proceed under subsection (y).

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7.3           Seller’s Interim Covenants.  From the Date of this Agreement through the Closing, Seller covenants and agrees to the following:

7.3.1           Litigation.  Seller shall give to Buyer prompt notice of the institution of any litigation prior to the Closing Date after Seller becomes aware of the same.

7.3.2           Leases.  Between the date hereof and the Closing Date, without first obtaining Buyer’s written consent, which consent shall not be unreasonably withheld during the Due Diligence Period but may be withheld in Buyer’s sole and absolute discretion thereafter, Seller will not (i) terminate or modify existing Leases; or (ii) enter into any new leases or grant additional renewal rights to any tenant. If, during the term of this Agreement, Seller desires to take any of the actions set forth in (i) or (ii) above, Seller shall provide written notice of such matter to Buyer, together with a copy of the proposed lease or lease modification (and, if applicable, a disclosure of the Leasing Costs (defined below)), and Buyer shall have five (5) days in which to respond to Seller in writing whether Buyer is granting or withholding consent to such matter.  If Buyer withholds consent to such matter Buyer shall concurrently with delivery of the aforementioned written notice, provide Seller with a detailed written explanation as to why Buyer is withholding its consent.  Buyer’s failure to provide timely written notice to Seller as set forth in the second preceding sentence shall be deemed Buyer’s consent to such matter during the Due Diligence Period, or if requested after the Due Diligence Period, the same shall be deemed disapproved by Buyer.  If Buyer consents to any of the actions set forth in (ii) above and proceeds to close Escrow, Buyer shall (A) reimburse Seller for the reasonable out of pocket costs and expenses paid by Seller in connection with such Lease, including, but not limited to, brokerage commissions, tenant improvement allowances, costs associated with tenant improvements, reasonable attorneys’ fees and costs, and any other third party costs and expenses (collectively “Leasing Costs”), (B) assume the responsibility for the payment of Leasing Costs for such lease which are unpaid as of the Closing; and (C) indemnify, defend, protect and hold Seller harmless from and against any and all claims, responsibility, liability, costs, loss, damage, expenses or causes of action arising from the Leasing Costs for such lease which are unpaid as of the Closing; provided, however that in each such instance such Leasing Costs were disclosed in writing to Buyer concurrently with such approval request.  The provisions of this Section 7.3.2 shall survive the Closing or be reflected in the Assignment and Assumption of Leases.

7.3.3           Maintenance and Operation of Property.  Seller shall keep, maintain and operate the Property in substantially the manner in which it is currently being maintained and operated during the twelve (12) month period prior to the Agreement Date.

7.3.4           Contracts.

(a)      Within five (5) days of the Agreement Date, Seller shall make available to Buyer copies of all written contracts, agreements, and reports affecting the Property and/or which would become binding on Buyer after Closing (the "Contracts"), which Contracts are listed on Schedule 7.1.5.  At least five (5) days prior to the Closing, Buyer shall provide Seller with written notice of the Contracts, if any, that Buyer desires to assume (“Notice to Assume”), which Contracts shall become the list of Service Contracts to be attached as Exhibit “A” to the Assignment and Assumption of Contracts.  Failure to give such Notice to Assume shall be deemed an election by Buyer to terminate all Contracts and any Contract not listed in the Notice to Assume shall be terminated by Seller; provided, however, that Seller, as tenant under the Seller Leaseback, may continue with the performance of any of the following Contracts:  (i) Contracts not directly binding Buyer after the Closing or in the event of a termination of the Seller Leaseback; and/or (ii) Contracts that satisfy a requirement of Section 7.3.4(b) hereof.  Except for the Contracts which Seller elects to continue performance under the preceding sentence, within five (5) days after receipt of the Notice to Assume, Seller shall send a notice of termination with respect to each of the Contracts not included in such Notice to Assume.

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(b)      Notwithstanding anything contained herein, at or prior to the Closing, Seller shall have entered into any and all contracts, agreements and insurance policies required to be entered into by Seller pursuant to the terms of the Seller Leaseback, including, but not limited to, those pertaining to maintenance and repair that is the obligation of Seller under the terms and conditions of the Seller Leaseback and insurance policies required thereby.

8.      Buyer’s Representations and Warranties.  Buyer represents and warrants to Seller that as of the date of this Agreement and as of the Closing Date:

8.1           Organization; Authority.  Buyer is duly organized, validly existing and in good standing under the laws of the state of its organization.  Buyer is authorized to transact business in California, and has full power and authority to enter into and perform this Agreement in accordance with its terms.  The persons executing this Agreement have been duly authorized to do so on behalf of Buyer.

8.2           Authorization; Validity.  The execution and delivery of this Agreement by Buyer and Buyer’s consummation of the transactions contemplated by this Agreement have been duly and validly authorized.  Assuming the valid execution and delivery of this Agreement by Buyer, this Agreement constitutes a legal, valid and binding agreement of Buyer enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors generally, and the exercise of judicial discretion in accordance with general principles of equity.

8.3           Bankruptcy.  Buyer has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by Buyer’s creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of Buyer’s assets; (iv) suffered the attachment or other judicial seizure of all, or substantially all, of Buyer’s assets; or (v) admitted in writing its ability to pay its debts as they come due.

8.4           OFAC Compliance.  Buyer is in compliance with all laws, statutes, rules and regulations or any federal, state or local governmental authority in the United States of America applicable to Buyer and all beneficial owners of Buyer, including, without limitation, the requirements of Executive Order No. 133224, 66 Fed Reg. 49079 (September 25, 2001) (the “Order”) and other similar requirements contained in the rules and regulations of the Office of Foreign Asset Control of the Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “Orders”).  Buyer agrees to make its policies, procedures and practices regarding compliance with the Orders available to Seller for its review and inspection during normal business hours and upon reasonable prior notice.  Neither Buyer nor any beneficial owner of Buyer:  (i) is listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “Lists”); (ii) has been determined by competent authority to be subject to the prohibitions contained in the Orders; (iii) is owned or controlled by, nor acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders.

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9.      Defaults.

9.1           Buyer’s Default.

9.1.1           Default.Buyer shall be deemed to be in default under this Agreement if Buyer fails, for reasons other than Seller’s default hereunder or the failure of a condition precedent to Buyer’s obligation to perform hereunder, to meet, comply with or perform any covenant, agreement or obligation on Buyer’s part required within the time limits and in the manner required in this Agreement or there shall have occurred a material breach of any representation or warranty made by Buyer; provided, however, no such default shall be deemed to have occurred unless and until Seller has given Buyer written notice thereof, describing the nature of the default, and Buyer has failed to cure such default within five (5) days of the receipt of such notice (but in any event before the Closing Date, unless such default occurs after Closing).  The preceding to the contrary notwithstanding, no such written notice of default shall be required if Buyer fails to close escrow on the date scheduled for Closing or with respect to any failure by Buyer to timely deposit the Deposit referred to above.

9.1.2           LIQUIDATED DAMAGES.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IF BUYER HAS NOT TERMINATED THIS AGREEMENT OR BEEN DEEMED TO HAVE TERMINATED THIS AGREEMENT PRIOR TO THE EXPIRATION OF THE DUE DILIGENCE PERIOD AND IF THE SALE OF THE PROPERTY TO BUYER IS NOT CONSUMMATED BECAUSE OF BUYER’S DEFAULT, SELLER SHALL BE ENTITLED TO RETAIN, AS SELLER’S SOLE AND EXCLUSIVE REMEDY, THE DEPOSIT (WHICH INCLUDES ANY ACCRUED INTEREST THEREON) AS SELLER’S LIQUIDATED DAMAGES. THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLE AND EXTREMELY DIFFICULT TO ASCERTAIN THE ACTUAL DAMAGES SUFFERED BY SELLER AS A RESULT OF BUYER’S FAILURE TO COMPLETE THE PURCHASE OF THE PROPERTY PURSUANT TO THIS AGREEMENT, AND THAT UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT, THE LIQUIDATED DAMAGES PROVIDED FOR IN THIS SECTION REPRESENTS A REASONABLE ESTIMATE OF THE DAMAGES WHICH SELLER WILL INCUR AS A RESULT OF SUCH FAILURE, PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT LIMIT SELLER’S RIGHTS TO RECEIVE REIMBURSEMENT FOR ATTORNEYS’ FEES, NOR WAIVE OR AFFECT SELLER’S RIGHTS AND BUYER’S INDEMNITY OBLIGATIONS UNDER OTHER SECTIONS OF THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTION 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676, AND 1677.  THE PARTIES HAVE SET FORTH THEIR INITIALS BELOW TO INDICATE THEIR AGREEMENT WITH THE LIQUIDATED DAMAGES PROVISION CONTAINED IN THIS SECTION.

/s/ MLD
Seller’s Initials	Buyer's Initials

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9.2           Seller’s Default.

9.2.1           Default.Seller shall be deemed to be in default under this Agreement if Seller fails, for a reason other than Buyer’s default hereunder or the failure of a condition precedent to Seller’s obligation to perform hereunder, to meet, comply with, or perform any covenant, agreement or obligation on its part required within the time limits and in the manner required in the Agreement, or there shall have occurred a material breach of any representation or warranty made by Seller; provided, however, no such default shall be deemed to have occurred unless and until Buyer has given Seller written notice thereof, describing the nature of the default, and Seller has failed to cure such default within five (5) days of receipt of such notice.  The preceding to the contrary notwithstanding, no such written notice of default shall be required if Seller fails to close escrow on the date scheduled for Closing.

9.2.2           Remedies Before Closing.  If Seller shall be deemed in default under Section 9.2.1 at or before Closing, and Buyer does not waive such default, Buyer may pursue one of the following remedies, each of which shall be Buyer’s sole and exclusive remedy:

(a)           Enforce specific performance of this Agreement against Seller, in which case Buyer shall have no claim for damages or any other remedy against Seller; provided, however, if Buyer fails to file suit for specific performance against Seller in a court having jurisdiction in Santa Clara County on or before the date sixty (60) days following the date upon which the Closing hereunder was to have occurred, then Buyer shall be deemed to elected to terminate this Agreement and receive back the return of its Deposit and pursue its remedy as provided in Section 9.2.2(b) below.  Buyer shall only be entitled to bring a specific performance action against Seller if Seller breaches its obligation to convey the Property to Buyer in the manner required by this Agreement.

(b)           Terminate this Agreement by written notice delivered to Seller on or before the Closing Date, and Buyer shall be entitled to the return of its Deposit, and Buyer may bring an action against Selller to recover Buyer’s actual, out of pocket costs incurred with this Agreement and the transactions contemplated hereby in an amount not to exceed fifty thousand dollars ($50,000).  In no event shall Buyer be entitled to seek to recover from Seller any monetary damages based on any breach or default by Seller at or before Closing except as expressly provided in this Section 9.2.2(b).

9.2.3           Remedies After Closing.

(a)           If the Closing has occurred, Buyer shall not be entitled to bring a claim against Seller unless Buyer establishes that Seller shall have materially breached a representation or warranty contained in Section 7.1 or a covenant in Section 3.12 or 7.3.2, in which case Buyer may seek damages by reason thereof, but shall not be entitled to consequential or exemplary damages.   All other claims of Buyer against Seller shall be deemed waived to the extent provided in Section 9.3, below.

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                      (b)           Buyer shall not be entitled to bring any claim against Seller for misrepresentation or breach of warranty or default under Section 3.12 or 7.3.2 if and to the extent Buyer had actual knowledge before Closing of the existence of any condition, fact or circumstance giving rise or relating to such claim.   As used in this Agreement, the phrase “Buyer’s actual knowledge” or similar phraseology shall be limited to the current, actual knowledge, with no duty of inquiry of Christopher Peatross or Craig Firpo; provided, however, in no event shall this Agreement give rise to any personal obligation, liability or duty on the part of Christopher Peatross or Craig Firpo, or any other trustee, officer, director, agent, representative or employee of Buyer. Christopher Peatross or Craig Firpo shall not be charged with constructive or inquiry notice or knowledge, or imputed knowledge of any agents, contractors, or employees.  Further, in no event shall this Section 9.2(b) be deemed to release Seller from liability from its fraud, intentional misrepresentation or intentional breach of this Agreement.

9.3           Buyer's Release.  Except as set forth below, Buyer hereby waives its right to recover from and fully and irrevocably releases Seller, and, at each level, its partners, members, employees, officers, directors, representatives, agents, servants, attorneys, affiliates, parent, subsidiaries, successors and assigns (“Released Parties”) from any and all claims, responsibility and/or liability that it may now have or hereafter acquire against any of the Released Parties for any costs, loss, liability, damage, expenses, demand, judgments, penalties, fines, liens, action or cause of action, whether direct or indirect, known or unknown, foreseen or unforeseen, arising from, on account of, or related to (i) the condition (including title to the Property, any construction defects, errors, omissions or other conditions, latent, patent or otherwise and/or the environmental condition of the Property), valuation, salability or utility of the Property, or its suitability for any purpose whatsoever, (ii) any and all objections to or complaints regarding the Property and its condition; and (iii) any information furnished by the Released Parties under or in connection with this Agreement.  This release includes claims of which Buyer is presently unaware or which Buyer does not presently suspect to exist which, if known by Buyer, would materially affect Buyer's release to Seller.  Buyer specifically waives the provision of California Civil Code Section 1542, which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR EXPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN TO HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

/s/ MLD	/s/ CSP
Seller's Initials	Buyer's Initials

Notwithstanding anything contained herein to the contrary, the foregoing releases are not intended and do not include (i) any claims arising from a breach of Seller’s representations or warranties or covenants set forth in Section 7.1 or covenants set forth in Section 7.3.2 of this Agreement; (ii) fraud; and (iii) willful misconduct or intentional concealment.

The release granted herein shall survive the Close of Escrow and the recordation of the Grant Deed.

10.           WAIVER OF TRIAL BY JURY.  SELLER AND BUYER HEREBY EXPRESSLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT, OR IN ANY WAY CONNECTED WITH OR RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE.  TO THE EXTENT THEY MAY LEGALLY DO SO, SELLER AND BUYER HEREBY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY OR PARTIES HERETO TO WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY JURY.

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11.           Attorneys’ Fees.  If any action or proceeding is commenced by either party to enforce their rights under this Agreement or to collect damages as a result of the breach of any of the provisions of this Agreement, the prevailing party in such action or proceeding, including any bankruptcy, insolvency or appellate proceedings, shall be entitled to recover all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and court costs, in addition to any other relief awarded by the court.

12.           Notices.  All notices, demands, approvals, and other communications provided for in this Agreement shall be in writing and shall be effective upon the earliest of the following to occur:  (a) when delivered to the recipient; (b) one (1) business day after deposit with a nationally recognized overnight-guaranteed delivery service for next business day delivery, charges prepaid; or (c) upon receipt or refusal of receipt after deposit in a sealed envelope in the United States mail, postage prepaid by registered or certified mail, return receipt requested, addressed to the recipient as set forth below.  All notices to Seller shall be sent to Seller’s Address.  All notices to Buyer shall be sent to Buyer’s Address.  All notices to Escrow Holder shall be sent to Escrow Holder’s Address.  If the date on which any notice to be given hereunder falls on a Saturday, Sunday or legal holiday (i.e., optional bank holiday), then such date shall automatically be extended to the next business day immediately following such Saturday, Sunday or legal holiday.  The foregoing addresses and facsimile numbers may be changed by written notice given in accordance with this Section.  Seller and Buyer agree that their respective counsel listed herein are entitled to receive copies of notices and shall be entitled to give notices on behalf of Seller or Buyer, as the case may be.

13.           Amendment; Complete Agreement.  All amendments and supplements to this Agreement must be in writing and executed by Buyer and Seller.  This Agreement contains the entire agreement and understanding between Buyer and Seller concerning the subject matter of this Agreement and supersedes all prior agreements, terms, understandings, conditions, representations and warranties, whether written or oral, made by Buyer or Seller concerning the Property or the other matters which are the subject of this Agreement.  This Agreement has been drafted through a joint effort of the parties and their counsel and, therefore, shall not be construed in favor of or against either of the parties.

14.           Governing Law.  This Agreement shall be governed by and interpreted in accordance with the laws of the State of California.

15.           Severability.  If any provision of this Agreement or application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement (including the application of such provision to persons or circumstances other than those to which it is held invalid or unenforceable) shall not be affected thereby, and each provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.

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16.           Counterparts, Headings and Defined Terms.  This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one agreement.  The headings to sections of this Agreement are for convenient reference only and shall not be used in interpreting this Agreement.

17.           Time of the Essence.  Time is of the essence of this Agreement.

18.           Waiver.  No waiver by Buyer or Seller of any of the terms or conditions of this Agreement or any of their respective rights under this Agreement shall be effective unless such waiver is in writing and signed by the party charged with the waiver.

19.           Third Parties.  This Agreement is entered into for the sole benefit of Buyer and Seller and their respective permitted successors and assigns.  No party other than Buyer and Seller and such permitted successors and assigns shall have any right of action under or rights or remedies by reason of this Agreement.

20.           Additional Documents.  Each party agrees to perform any further acts and to execute and deliver such further documents which may be reasonably necessary to carry out the terms of this Agreement.

21.           Independent Counsel.  Buyer and Seller each acknowledge that:  (i) they have been represented by independent counsel in connection with this Agreement; (ii) they have executed this Agreement with the advice of such counsel; and (iii) this Agreement is the result of negotiations between the parties hereto and the advice and assistance of their respective counsel.  The fact that this Agreement was prepared by Seller’s counsel as a matter of convenience shall have no import or significance.  Any uncertainty or ambiguity in this Agreement shall not be construed against Seller because Seller’s counsel prepared this Agreement in its final form.

22.           Assignment.  Buyer may assign this Agreement without Seller’s prior written consent by providing at least ten (10) days prior written notice of such assignment to Seller.  Notwithstanding any assignment of Buyer’s rights hereunder, Buyer shall not be released from any of Buyer’s obligations because of such assignment.

23.           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto.

24.           Exhibits.  Each reference to a Section or Exhibit in this Agreement shall mean the sections of this Agreement and the exhibit attached to this Agreement, unless the context requires otherwise.  Each such exhibit is incorporated herein by this reference.

25.           No Reservation of Property.  The preparation and/or delivery of unsigned drafts of this Agreement shall not create any legally binding rights in the Property and/or obligations of the parties, and Buyer and Seller acknowledge that this Agreement shall be of no effect until it is duly executed by both Buyer and Seller.

26.           Duty of Confidentiality.  Buyer and Seller represent and warrant that prior to Closing each shall keep all information and/or reports obtained from the other, or related to or connected with the Property, the other party, or this transaction, confidential and will not disclose any such information to any person or entity, without obtaining the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned or delayed, except (i) to its officers, partners, members, investors, lenders, attorneys, accountants and consultants, as may be necessary to assist Buyer or Seller in its acquisition or disposition of the Property, as applicable, provided each representative shall be informed by the relevant party of the confidential nature of the transaction, or (ii) as required by law, or (iii) to enforce the provisions of this Agreement.  The parties further agree that no advertisement or other publicity concerning the proposed transaction will be made or disseminated by either party either before or after the Closing without the approval of the other party.

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27.           Business Day.  If the Closing Date or the day for performance of any act required under this Agreement falls on a Saturday, Sunday or legal holiday (i.e. optional bank holidays), then the Closing Date or the day for such performance, as the case may be, shall be the next following regular business day.

28.           Condition of Property.  Buyer represents and warrants, which representations and warranties shall survive the Close of Escrow and not be merged with the Deed, that, as specified in Section 3.3.1 hereof, Buyer has, or shall have the opportunity to have inspected and conducted tests and studies of the Property, as Buyer has deemed necessary and advisable in its sole and absolute discretion, and that Buyer is or will be prior to the Close of Escrow familiar with the general condition of the Property.  Buyer understands and acknowledges that the Property may be subject to earthquake, fire, floods, erosion, high water table, dangerous underground soil conditions, hazardous materials and similar occurrences that may alter its condition or affect its suitability for any proposed use.  Buyer represents and warrants that, except for Seller’s express representations and warranties contained in Section 7 above, Buyer is acting, and will act, only upon information obtained by Buyer directly from Buyer’s own inspection of the Property.  Notwithstanding anything to the contrary contained in this Agreement, the suitability or lack of suitability of the Property for any proposed or intended use, or availability or lack of availability of (a) permits or approvals of governmental or regulatory authorities, or (b) easements, licenses or other rights with respect to any such proposed or intended use of the Property, shall not affect the rights or obligations of the Buyer hereunder.

29.           Survival.  The covenants, agreements, representations and warranties made herein shall, subject to Section 7.1, survive the Closing and the delivery of the Deed and this Agreement for the periods expressly set forth herein and shall, subject to Section 23 hereof, extend to the respective successors, heirs and assigns of Seller and Buyer.

30.           Tax Deferred Exchange.  Buyer and Seller hereby agree to cooperate with each other and shall execute any and all documents necessary, in the form reasonably approved by the both parties, which shall assign all of such party’s right, title and interest in and to this Agreement to an intermediary, which intermediary shall complete the sale/purchase of the Property, in order to accommodate a tax-deferred exchange for such party pursuant to the provisions of Section 1031 of the Internal Revenue Code of 1986, as amended provided, however neither party shall incur additional costs, expenses or liabilities in assisting the party with the tax-deferred exchange other than for review of the exchange documents, such exchange shall not delay the Closing, nor shall either party be required to take title to other property.

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31.           Property “AS IS”.  Buyer acknowledges and agrees that, except as specifically provided in Section 7.1 herein, Seller has not made, does not make and specifically negates and disclaims any representations, warranties, promises, covenants, agreements or guarantees of any kind or character whatsoever, whether express or implied, oral or written, past, present or future, of, as to, concerning or with respect to (i) value; (ii) the income to be derived from the Property; (iii) the suitability of the Property for any and all activities and uses which Buyer may conduct thereon, including, without limitation, the possibilities for future development of the Property; (iv) the nature, quality or condition of the Property, construction, reconstruction, construction materials, construction methods and deck construction including, without limitation, the water, soil, and geology; (v) the compliance of or by the Property or its operation with any laws, rules ordinances, or regulations or any applicable governmental authority or body; (vi) compliance with any environmental protection, pollution or land use laws, rules, regulations, orders or requirements; (vii) the presence or absence of hazardous materials at, on, under or contiguous or adjacent to the Property; (viii) the relationship with or status of any Tenant; or (ix) any other matter.  Buyer further acknowledges and agrees that having been given the opportunity to inspect the Property and review information and documentation affecting the Property, Buyer is relying solely on its own investigation of the Property and review of such information and documentation, and not on any information provided or to be provided by Seller, except for Section 7.1 hereof.  Seller is not liable or bound in any manner by any oral or written statements, representations or information pertaining to the Property, or the operation thereof, furnished by any real estate broker, agent, employee, servant or other person.  Buyer further acknowledges and agrees that to the maximum extent permitted by law, the sale of the Property as provided for herein is made on an “as is” and “with all faults” condition and basis, and that Seller has no obligations to make repairs, replacements or improvements to the Property other than as expressly set forth herein in Section 7.1.  Notwithstanding any other provisions contained herein, or in any document or instrument delivered in connection with the transfer contemplated hereby, to the contrary (including, without limitation, any language providing the survival of certain provisions hereof or thereof), Buyer hereby acknowledges and agrees that Seller shall, upon the Close of Escrow, be deemed to have satisfied and fulfilled all of Seller’s covenants, indemnities, and obligations contained in this Agreement and the documents delivered pursuant hereto, and except for the warranties and representations set forth in Section 7 herein, and Seller’s covenants under Sections 3.12 and 7.3.2 Seller shall have no further liability to Buyer or otherwise with respect to this Agreement, the transfers contemplated hereby, or any documents delivered pursuant hereto.

(signatures to follow on succeeding page)

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IN WITNESS WHEREOF, Buyer and Seller do hereby execute this Agreement as of the date first written above.

Seller:		Buyer:
ADPT Corporation,		SWIFT REALTY PARTNERS, LLC,
a Delaware corporation		a California limited liability company
By:	/s/ MARY DOTZ	By:	/s/ CHRISTOPHER PEATROSS
Name:	Mary Dotz	Name:	Christopher Peatross
Its:	Vice President & CFO	Its:	President & CEO
Date:	March 31, 2011	Date	March 30, 2011

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Acceptance by Escrow Holder

Escrow Holder acknowledges receipt of the foregoing Agreement and accepts the instructions contained therein.

Dated:  April 4, 2011

FIRST AMERICAN TITLE INSURANCE COMPANY

By: /s/ ZENNY V. CABAGBAG

Name: Zenny V. Cabagbag

Its:           Escrow Officer

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EX-10.2

Exhibit 10.2

FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE

AND ESCROW INSTRUCTIONS

THIS FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE AND ESCROW INSTRUCTIONS (this “First Amendment”), is entered into effective as of May 4, 2011, by and between ADPT CORPORATION, a Delaware corporation, formerly known as Adaptec, Inc. (“Seller”) and SWIFT REALTY PARTNERS, LLC, a California limited liability company or its assignee (“Buyer”).  The parties hereto are sometimes jointly called the “Parties.”

R E C I T A L S:

A.           Buyer and Seller have entered into that certain AGREEMENT OF PURCHASE AND SALE AND ESCROW INSTRUCTIONS dated as of March 26, 2011 (“Agreement”), for the purchase and sale of that certain Property commonly referred to as 691 South Milpitas Boulevard, Milpitas, California, as more particularly described in the Agreement.

B.           The Due Diligence Period expires on May 4, 2011 at 5:00 p.m. PST, and the Buyer has requested an extension with respect on certain feasibility related matters.

C.           Buyer and Seller desire to amend the Agreement on the terms and conditions contained herein to extend the Due Diligence Period as to certain matters and to approve Buyer’s feasibility review of the Property as to certain other matters.

NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements hereinafter set forth, the Parties hereby agree as follows:

1.           Certain Approvals.  Buyer hereby delivers an Approval Notice solely with respect to the matters described in Section 3.3.1 (Physical Inspections) and Section 3.3.4 (Preliminary Title Report and Survey).

2.           Extension of Due Diligence Period.  The Due Diligence Period set forth in Section 1.6 of the Agreement is hereby extended to Wednesday, May 11, 2011 at 5:00 p.m. PST, and unless Buyer delivers an Approval Notice in its sole and absolute discretion with respect to the matters set forth in Section 3.3.5 (Due Diligence Items) and Section 3.3.9 (Estoppels) prior to such deadline, the Agreement shall terminate and the Deposit shall be returned to Buyer.

3.           Binding Effect.  This First Amendment shall be binding upon and inure to the benefit of the Parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

4.           Counterparts.  This First Amendment may be executed in counterparts, all of which together shall constitute one agreement binding on all of the Parties, notwithstanding that all such parties are not signatories to the original or the same counterpart.  The executed versions of this First Amendment may be delivered by fax and/or email transmission with the same effect as if originals were exchanged.

5.           Confirmation of the Agreement.  Except as set forth in this First Amendment, the Agreement is not being amended, supplemented or otherwise modified, and all of the undersigned agree that the terms, conditions and agreements set forth in the Purchase Agreement are hereby ratified and confirmed and shall continue in full force and effect.  Any capitalized terms not defined herein shall have the meanings ascribed to them in the Agreement.

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IN WITNESS WHEREOF, the Parties have executed this First Amendment as of the day first above written.

Seller:		Buyer:
ADPT Corporation,		SWIFT REALTY PARTNERS, LLC,
a Delaware corporation		a California limited liability company
By:	/s/ MARY DOTZ	By:	/s/ CHRISTOPHER PEATROSS
Name:	Mary Dotz	Name:	Christopher Peatross
Its:	Vice President & CFO	Its:	President
Date:	May 4, 2011	Date	May 4, 2011

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EX-10.3

Exhibit 10.3

SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE

AND ESCROW INSTRUCTIONS

THIS SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE AND ESCROW INSTRUCTIONS (this “Second Amendment”), is entered into effective as of May 26, 2011, by and between ADPT CORPORATION, a Delaware corporation, formerly known as Adaptec, Inc. (“Seller”) and SWIFT REALTY PARTNERS, LLC, a California limited liability company or its assignee (“Buyer”).  The parties hereto are sometimes jointly called the “Parties.”

R E C I T A L S:

A.           Buyer and Seller have entered into that certain AGREEMENT OF PURCHASE AND SALE AND ESCROW INSTRUCTIONS dated as of March 26, 2011, as amended by that certain FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE AND ESCROW INSTRUCTIONS dated as of March 4, 2011 (collectively, the “Agreement”), for the purchase and sale of that certain Property commonly referred to as 691 South Milpitas Boulevard, Milpitas, California, as more particularly described in the Agreement.

B.           Pursuant to the terms of the Agreement, the Close of Escrow was to occur on May 31, 2011, but the Parties have agreed to extend the Closing until June 1, 2011.

C.           Buyer and Seller desire to amend the Agreement on the terms and conditions contained herein to extend the Closing for one day.

D.           Seller, as landlord, and Gluster, Inc., a Delaware corporation (“Gluster”), as tenant, entered into that certain Lease Agreement dated February 18, 2009, as amended by that certain First Amendment to Lease dated as of September 4, 2010, and that certain Second Amendment to Lease dated as of December 8, 2010 (collectively, the “GlusterLease”) with respect to the lease of approximately 6,588 square feet of leasable area located at 691 South Milpitas Boulevard, Suites 202 and 204, Milpitas, California (the “Gluster Premises”).

E.           The Gluster Lease expired on April 30, 2011, and Gluster vacated and surrendered the Gluster Premises to Seller.  Seller currently holds in its possession Gluster’s security deposit under the Gluster Lease in the amount of $4,019.69 (the “Gluster Security Deposit”).

F.           Buyer and Seller have agreed that Seller will not be assigning the Gluster Lease to Buyer at the Closing, and desire to amend the Agreement on the terms and conditions contained herein so that Seller will indemnify Buyer for any claims made by Gluster for the return of the Gluster Security Deposit.

NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements hereinafter set forth, the Parties hereby agree as follows:

1.           Extension of Close of Escrow.  The Close of Escrow, as described in Section 3.2 of the Agreement is hereby extended to Wednesday, June 1, 2011.

2.           Indemnity Concerning Gluster Lease.  Seller agrees to indemnify, defend and hold Buyer harmless from and against any and all cost, loss, harm or damage which may arise due to a claim by Gluster for the return of the Gluster Security Deposit or otherwise in connection with the Gluster Lease.

3.           Binding Effect.  This Second Amendment shall be binding upon and inure to the benefit of the Parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

4.           Counterparts.  This Second Amendment may be executed in counterparts, all of which together shall constitute one agreement binding on all of the Parties, notwithstanding that all such parties are not signatories to the original or the same counterpart.  The executed versions of this Second Amendment may be delivered by fax and/or email transmission with the same effect as if originals were exchanged.

5.           Confirmation of the Agreement.  Except as set forth in this Second Amendment, the Agreement is not being amended, supplemented or otherwise modified, and all of the undersigned agree that the terms, conditions and agreements set forth in the Purchase Agreement are hereby ratified and confirmed and shall continue in full force and effect.  Any capitalized terms not defined herein shall have the meanings ascribed to them in the Agreement.

IN WITNESS WHEREOF, the Parties have executed this Second Amendment as of the day first above written.

Seller:		Buyer:
ADPT Corporation,		SWIFT REALTY PARTNERS, LLC,
a Delaware corporation		a California limited liability company
By:	/s/ JOHN O’HANLON	By:	/s/ CHRISTOPHER PEATROSS
Name:	John O’Hanlon	Name:	Christopher Peatross
Its:	Assistant Controller	Its:	President
Date:	May 27, 2011	Date	May 27, 2011

EX-10.4

Exhibit 10.4

WARNING: ANY WRITTEN-IN CORRECTIONS, DELETIONS OR ADDITIONS SHALL VOID THIS AGREEMENT

ADPT CORPORATION

691 South Milpitas Boulevard, Suite 208

Milpitas, California 95035

Tel: (408) 945-8600

Fax: (408) 957-7137

INDEPENDENT CONTRACTOR AGREEMENT

Mary Dotz

Contractor

This Agreement is entered into by and between ADPT Corporation, which includes its wholly owned subsidiaries ("ADPT"), and the contractor set forth above ("Contractor") as of the date executed by ADPT ("Effective Date").  ADPT agrees to retain Contractor and Contractor agrees to perform work for ADPT, subject to the Independent Contractor Agreement Terms and Conditions attached.

CONTRACTOR ACKNOWLEDGES HAVING READ THE TERMS AND CONDITIONS SET FORTH ON THIS FIRST PAGE AND THE AGREEMENT ATTACHED HERETO, UNDERSTANDS ALL SUCH TERMS AND CONDITIONS, AND AGREES TO BE BOUND THEREBY.

ADPT CORPORATION	MARY DOTZ
By:/s/ JOHN J. QUICKE	By: /s/ MARY DOTZ
Title: President & CEO	Title: CFO
Effective Date: June 1, 2011	Date: May 25, 2011

INDEPENDENT CONTRACTOR AGREEMENT TERMS AND CONDITIONS

1.           RETENTION OF CONTRACTOR

1.1           Retention.  ADPT hereby retains Contractor to perform the work specified in Exhibit A (“Services”) and Contractor hereby accepts such retention.  Contractor acknowledges that, irrespective of Contractor’s retention to perform such Services, ADPT may engage other contractors to supply the same or similar services.

1.2           Performance.  Contractor shall perform the Services in a careful, professional and workmanlike manner and to the best of Contractor’s ability.  Contractor will determine, in its sole discretion, the manner and means by which the Services will be performed.  Contractor may choose to perform the Services, or engage others in addition to or instead of Contractor to perform the Services.  Contractor shall assign and appropriately supervise such personnel as are necessary to ensure its timely completion of the Services, subject to the provisions of Section 2.3.

1.3           Employees and Subcontractors.  In the event that others in addition to Contractor are necessary to complete the Services, Contractor agrees to assign only qualified and experienced personnel to perform Services, and will consult with ADPT in connection with such assignment.  Contractor will provide ADPT with resumes or descriptions of the experience of all personnel assigned to perform Services upon ADPT’s request.  Prior to assigning any subcontractor, outside consultant or other third party (collectively, “Subcontractors”) to perform Services, Contractor will obtain ADPT’s written consent.  The names of the Subcontractors who will perform the Services must be indicated on Exhibit B.  Contractor shall remain primarily liable for the performance of such Services as are delegated to Subcontractors.  Contractor shall be responsible for payment of all salaries or other compensation or expenses payable or reimbursable to its employees and Subcontractors.  Contractor shall obtain from each employee and Subcontractor a written agreement in a form reasonably acceptable to ADPT, which shall include, among other things, such party’s agreement to abide by each of the provisions of Sections 3.6, 5 and 6.

1.4           Replacement of Employees and Subcontractors.  Contractor shall inform ADPT prior to implementing any change in personnel.  Contractor shall promptly replace any employee or Subcontractor assigned to the Project upon ADPT’s written request.

1.5           Independent Contractor.  The parties agree that Contractor, together with any employees and Subcontractors, is an independent contractor in the performance of the Services and is not an employee of ADPT.  Contractor, its employees and Subcontractors are not entitled to participate in any plans, arrangements, or distributions pertaining to any employee benefits for ADPT’s employees.  ADPT will make no deductions from any compensation paid to Contractor for taxes, insurance, bonds or for any other reason.  Nothing herein or in the performance hereof will imply a partnership, joint venture or principal and agent relationship between the parties.  Neither party will have any right, power or authority to create any obligation, express or implied, on behalf of the other.

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1.6           Competition.  Contractor acknowledges that all individuals assigned to perform Services hereunder could be exposed to certain of ADPT’s most sensitive and confidential business information.  Therefore, during the term of this Agreement, and for a period of twelve (12) months thereafter, Contractor shall not assign any individual responsible for the performance of Services hereunder to perform services for any firm which ADPT may reasonably deem to be a competitor of ADPT, unless such services are wholly unrelated to the Services or unless Contractor first obtains ADPT’s prior written consent.  The foregoing restriction shall not apply to clerical personnel.

1.7           No solicitation.  Each party agrees that, during the term of this Agreement and for a period of six (6) months thereafter, it will not solicit for employment any employee of the other party known to the first party solely by reason of the relationship established by this Agreement.  Nothing herein shall preclude a public solicitation by either party or solicitation by recruiting professionals, retained by a party or acting on speculation, and not otherwise directed to solicit from among the employees of the other.  It shall not be "solicitation" hereunder for a party to discuss employment with, or to employ, an employee of the other party who has initiated the inquiry.

2.           PERFORMANCE OF THE PROJECT

2.1           ADPT Facilities.  ADPT will provide Contractor with reasonable use of office space, including access to conference rooms, telephones, support staff and computers, as required for Contractor to perform the Services, as agreed upon by the parties.  Contractor agrees, while working on ADPT’s premises, to observe ADPT’s rules and policies relating to security of, access to or use of ADPT’s premises or any of ADPT’s properties, including proprietary or ADPT Confidential Information (as that term is defined below).  Contractor shall not remove any property of ADPT, including any ADPT Confidential Information, from ADPT's premises without the prior written consent of ADPT.  Contractor will take all reasonable steps to ensure that its employees and Subcontractors assigned to the Project comply with the foregoing requirements.  ADPT reserves the right to immediately remove any employee or Subcontractor of Contractor who does not abide by the foregoing requirements.

2.2           Delivery and Inspection of Deliverables.

2.2.1           Inspection.  During the term of this Agreement ADPT may review the work product specified in Exhibit A (“Deliverables”) then in progress by Contractor, and the status and quality of such Deliverables.

2.2.2           Acceptance.  ADPT will promptly review all Deliverables delivered by Contractor hereunder, and will use reasonable efforts to inform Contractor of its acceptance or rejection of each Deliverable within ten (10) business days.  In the event that ADPT rejects a Deliverable, it shall inform Contractor of the grounds for such rejection.  Contractor shall then have a reasonable time, not to exceed fifteen (15) business days, to provide an acceptable Deliverable.  The parties will negotiate in good faith with respect to the compensation of Contractor is correcting an unacceptable Deliverable.  Unless otherwise agreed by the parties, ADPT’s failure to accept a Deliverable will not extend the time for performance of the Services.

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2.3           Project Delays.  Contractor shall not be responsible for delays to the extent that they are incurred as a consequence of the actions or unavailability of ADPT personnel.

3.           TERM AND TERMINATION

3.1           Term.  This Agreement shall commence on the Effective Date and shall continue for a period of one (1) year, unless earlier terminated in accordance with the provisions of this Section 3 or upon mutual agreement of the parties.  Each Service listed in Exhibit A will commence on the date specified therein and terminate within the time so indicated.  Both the term of this Agreement and the term of each Service may be extended by a writing signed by both parties.

3.2           Termination for Cause.  In the event Contractor violates any of the provisions of this Agreement or fails to perform the Services to ADPT's satisfaction, at ADPT’s sole option, this Agreement will terminate immediately upon delivery of ADPT’s written notice to Contractor.

3.3           Termination for Convenience.  Either party may terminate this Agreement by delivering written notice to the other at least five (5) days in advance of the desired termination date.

3.4           Services Phase-Out.  In the event either party provides notice of termination, Contractor agrees to work with ADPT to achieve a mutually acceptable phase-out of Services during the remaining term of the Agreement, which may, at ADPT’s sole option, involve a workload that is increased or decreased from that set forth in Exhibit A.  Contractor will work with ADPT to effect a smooth transition of the Services and Deliverables to ADPT or its designee.

3.5           Payment for Services.  In the event of termination of this Agreement, ADPT shall pay Contractor all accrued but unpaid compensation for Services rendered through the termination date and shall reimburse Contractor for all expenses properly budgeted, incurred and documented in accordance with the provisions of Section 4.2, each in accordance with the payment terms of this Agreement.

3.6           Return of Material; Documentation.  Upon termination of this Agreement for any reason, Contractor shall promptly return to ADPT (i) all records, materials, equipment, drawings and documents which are owned, leased or licensed by ADPT; and (ii) any data of any nature pertaining to or incorporating any ADPT Confidential Information, including any copies thereof, regardless of when obtained by or made available to Contractor.  Additionally, Contractor shall prepare and submit such documentation as may be necessary to evidence the results of the Services and the progress of Contractor in the performance of the Services.

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3.7           Survival.  The termination of this Agreement for any reason shall not terminate the obligations or liabilities of the parties under Sections 1.6, 1.7, 3.4, 3.5, 3.6, 4, 5, 6, 7, 8 and 9 and the applicable portions of Section 10 below, and under this Section 3.7, each of which shall survive any such termination.

4.           COMPENSATION.

4.1           Basic Compensation.  As full compensation for the performance of the Services, and all other obligations of Contractor hereunder, Contractor shall invoice ADPT according to the schedule set forth in Exhibit A and ADPT shall pay such invoices within thirty (30) days of receipt of invoice.

4.2           Expense Reimbursement.  ADPT shall reimburse Contractor for all reasonable expenses incurred in connection with the performance of Services that have been approved in advance by ADPT.  Reimbursable expenses shall be invoiced to ADPT on a monthly basis, together with all supporting documentation required by ADPT, and ADPT shall pay such invoices within thirty (30) days of receipt of invoice.  All such expenses shall be billed at Contractor’s actual out-of-pocket cost, without surcharge.

4.3           Taxes.  Contractor shall be solely responsible for withholding and paying for its employees and Subcontractors all applicable payroll taxes and contributions, including, without limitation, federal, state and local income taxes, FICA, FUTA and state unemployment, workers’ compensation and disability insurance.

5.           CONFIDENTIALITY

5.1           Confidentiality of ADPT Information.  Contractor agrees to keep confidential and not to disclose or make any unauthorized use of any trade secrets, confidential information, knowledge, data or other information of ADPT relating to products, research and development activities, processes, software concepts, know-how, designs, test data, customer lists, business plans, marketing plans and strategies, and pricing strategies or other subject matter pertaining to any business or research of ADPT, or any of ADPT’s clients, customers, consultants, licensees or affiliates, or which Contractor knows or has reason to know is considered confidential by ADPT (collectively referred to herein as “ADPT Confidential Information”), which Contractor may have produced, obtained, learned or otherwise acquired during the course of rendering the Services.  Contractor’s duty to maintain such ADPT Confidential Information in confidence hereunder shall survive the termination of this Agreement for a period of five (5) years.  Contractor agrees to use such ADPT Confidential Information solely in connection with the performance of Services and for no other purpose.  ADPT Confidential Information shall not include information which:

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(a)           is or becomes publicly available without breach of this Agreement by Contractor;

(b)           is rightfully received by Contractor from a third party not under an obligation of confidence to ADPT with respect thereto;

(c)           was known to Contractor prior to the disclosure by ADPT, as evidenced by its written books and records;

(d)           is independently developed by Contractor without the use of ADPT Confidential Information and without the use of individuals exposed to the ADPT Confidential Information; or

(e)           is disclosed pursuant to the requirement of a governmental agency or operation of law, provided that Contractor is obligated to use reasonable efforts to prevent disclosure under such circumstances and to provide five (5) business days notice to ADPT prior to such disclosure.

5.2           Confidentiality of Contractor Information.  ADPT agrees to keep confidential and not to disclose or make any unauthorized use of any trade secrets, confidential information, knowledge, data or other information of Contractor relating to processes, software, concepts and know-how and which is either marked as confidential or, if disclosed verbally, followed with a written statement of confidentiality within ten (10) business days of the date of disclosure (collectively referred to herein as “Contractor Confidential Information”) which ADPT obtains, learns or otherwise acquires as a consequence of Contractor’s performance of Services.  ADPT’s duty to maintain such Contractor Confidential Information in confidence hereunder shall survive the termination of this Agreement for a period of five (5) years.  ADPT agrees to use such Contractor Confidential Information solely in connection with the performance of the Services and its use of the Deliverables and for no other purpose.  Contractor Confidential Information shall not include information which:

(a)           is or becomes publicly available without breach of this Agreement by ADPT;

(b)           is rightfully received by ADPT from a third party not under an obligation of confidence to Contractor with respect thereto;

(c)           was known to ADPT prior to the disclosure by Contractor;

(d)           is independently developed by ADPT without the use of Contractor Confidential Information; or

(e)           is disclosed pursuant to the requirement of a governmental agency or operation of law, provided that ADPT is obligated to use reasonable efforts to prevent disclosure under such circumstances and to provide five (5) business days notice to Contractor prior to such disclosure.

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5.3           Other Obligations.  Contractor acknowledges that ADPT from time to time may have agreements with third parties that impose obligations or restrictions on ADPT regarding inventions or creative works made during the course of work thereunder or regarding the confidential nature of such work.  Contractor agrees to be bound by all such obligations and restrictions, of which Contractor is informed, and to take all action necessary to discharge the obligations of ADPT thereunder upon notice of same from ADPT.

6.           OWNERSHIP

6.1           Pre-existing Works.  Contractor shall own all right title and interest, including all intellectual property rights, in and to its pre-existing works identified in Exhibit B (“Pre-existing Works”).  Contractor hereby grants to ADPT a worldwide, irrevocable, perpetual, fully-paid license, with rights to sublicense and to authorize the granting of further sublicenses, to make, have made, use, execute, reproduce, display, perform, sell and otherwise distribute all Pre-existing Works incorporated in the Deliverables, or the results of the Services and to create derivatives, upgrades and enhancements of the foregoing.

6.2           Third Party Material.  Contractor shall not incorporate any materials owned by a third party (“Third Party Materials”) in a Deliverable unless (a) such Third Party Material is identified in Exhibit B, and (b) Contractor has sufficient authority to grant, and does grant, ADPT a worldwide, irrevocable, perpetual, fully-paid license, with rights to sublicense and to authorize the granting of further sublicenses, to make, have made, use, execute, reproduce, display, perform, sell and otherwise distribute all Third Party Materials incorporated in the Deliverables, or the results of the Services and to create derivatives, upgrades and enhancements of the foregoing.

6.3           Deliverables.  ADPT shall own all right, title, and interest, including all intellectual property rights, in and to the Deliverables, including all inventions related thereto, except for Pre-existing Works and Third Party Material.  Contractor hereby assigns and transfers to ADPT in perpetuity all of Contractor’s worldwide rights, title and interest in and to the Deliverables, including, but not limited to, all patent rights, copyrights, mask rights, trade secret rights and other intellectual property rights therein.

6.4           Further Assurances.  Contractor agrees to execute such patent, copyright and other documents of assignment, transfer or registration, and to provide such other assistance as ADPT may reasonably request, at ADPT’s expense, in order to assist ADPT in obtaining, perfecting, evidencing or protecting its rights in the Deliverables.

6.5           Maintenance of Records.  Contractor agrees to keep and maintain adequate and current written records of the development and progress of all Deliverables (in the form of notes, sketches, drawings and as may be specified by ADPT), which records shall be available to and remain the sole property of ADPT at all times.

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7.           INDEMNITIES

7.1           Intellectual Property.  Contractor agrees to defend, indemnify and hold ADPT harmless from any and all claims, actions, damages, liabilities, costs and expenses, including reasonable attorneys’ fees and expenses, arising out of any third party claim that any of the Deliverables or other materials provided to ADPT by Contractor hereunder misappropriates any trade secret, or infringes any copyright, mask rights or other intellectual property rights of any third party.

7.2           Negligent Conduct.  Contractor agrees to indemnify and hold ADPT harmless from and against any and all liabilities, obligations and expenses that ADPT may incur arising as a consequence of damage to or loss or destruction of any real or tangible personal property and resulting from the negligent conduct of Contractor, its employees or Subcontractors, in the performance of this Agreement.

7.3           Condition to Indemnification.  When seeking indemnification pursuant to this Section 7, ADPT shall give prompt notice upon learning of a situation giving rise to such claim for indemnity, and will reasonably cooperate with Contractor in the defense of such claim.

8.           WARRANTIES AND DISCLAIMERS

8.1           Originality.  Contractor represents and warrants the originality of the Deliverables provided to ADPT under this Agreement and that no portion of such Deliverables, or their use, execution, reproduction, display, performance or distribution, will misappropriate any trade secret, infringe any copyright or mask rights, or knowingly infringe any patent of any third party.

8.2           Title and Interest.  Contractor represents and warrants that it has the title and interest to transfer all licenses granted pursuant to this agreement.

8.3           Deliverable Compliance.  Contractor represents and warrants that the Deliverables provided hereunder will comply to the material requirement of Exhibit A.

8.4           Services.  Contractor warrants that the performance of the Services will meet the standards set forth in Section 1.3.

8.5           Authorization.  Each party warrants that it has the right to enter into this Agreement and that there exist no prior commitments or other obligations that prevent such party from making all of the grants and undertakings provided for in this Agreement.

8.6           DISCLAIMER.  EXCEPT AS EXPRESSLY WARRANTED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE DELIVERABLES OR ANY OTHER ITEM PROVIDED UNDER THIS AGREEMENT, AND EXPRESSLY DISCLAIMS THE IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY WITH RESPECT TO ALL SUCH ITEMS.

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9.           LIMITATION OF LIABILITY.  EXCEPT AS PROVIDED IN SECTION 7, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS, ARISING AS A CONSEQUENCE OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREUNDER.

10.           MISCELLANEOUS

10.1           Notices.  All notices required or permitted under this Agreement shall be in writing and shall be by given by personal delivery or by nationally recognized overnight courier service, or by registered or certified U.S. mail with postage prepaid.  Notices delivered by personal delivery or by courier service shall be effective upon receipt.  Notices sent by registered or certified U.S. mail shall be effective three business days after the date of mailing.

10.2           Successors and Assigns.  The rights and benefits of this Agreement will inure to the benefit of, and be enforceable by, ADPT's successors and assigns.  Except as provided herein, Contractor’s rights and obligations under this Agreement may only be assigned with the prior written consent of ADPT.

10.3           Further Actions.  Both parties agree to execute any additional documents and take such further action as may be reasonably necessary to carry out the purposes of this Agreement.

10.4           Injunctive Relief.  In addition to any of the other remedies available to ADPT, Contractor agrees that ADPT shall be entitled to a decree of specific performance or an injunction restraining violations or compelling actions with respect to Sections 5.1 or 6 of this Agreement.  No remedy provided herein is intended to be exclusive of any other remedy, and each and every remedy will be cumulative and will be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity.

10.5           Governing Law.  This Agreement will be governed by and construed in accordance with the laws of the State of California.

10.6           Severability.  If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions will continue in full force and effect.

10.7           No Continuation of Service.  Nothing contained herein will confer upon Contractor any right to continue to render services to ADPT (including the Services) or to become employed by ADPT, and ADPT reserves all rights to terminate Contractor’s services (including the Services) in accordance with Section 3 above, for any reason whatsoever, with or without cause.

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10.8           Arbitration.  Any controversy or claim arising out of or relating to the Agreement, or the breach thereof, will be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"), as modified below.

(a)           Contractor or ADPT will initiate arbitration by filing a demand at the San Francisco, California, Regional Office of the AAA.

(b)           Unless the parties can agree on one arbitrator, disputes will be heard and determined by a panel of three arbitrators.  One party arbitrator will be appointed by each party to serve on the panel.  One neutral arbitrator will be appointed by the AAA.

(c)           Any party to an arbitration may petition the court in the state in which the arbitration was held to confirm, correct or vacate the award on the grounds stated in the Federal Arbitration Act.

(d)           Nothing in this Agreement will prevent ADPT from seeking injunctive relief against Contractor (and its employees and sub-contractors) from any judicial or administrative authority pending the resolution of a dispute or controversy by arbitration.

e)           The prevailing party will be entitled to an award of costs and attorney's fees incurred in connection with any such controversy or claim.

10.9           Waivers.  No waiver of any provision of this Agreement or any rights or obligations of any party hereunder will be effective, except pursuant to a written instrument signed by the party or parties waiving compliance, and any such waiver will be effective only in the specific instance and for the specific purpose stated in such writing.

10.10           Counterparts.  This Agreement may be executed in one or more counterparts each of which will be an original and all of which together will constitute one and the same instrument.

10.11           Entire Agreement.  This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior and contemporaneous written or oral communications or agreements between ADPT and Contractor regarding the subject matter hereof.  This Agreement may be amended only by written agreement between ADPT and Contractor.  In the event there are conflicts or inconsistencies between the terms and conditions of this Agreement and any Exhibits attached hereto, this Agreement shall prevail.

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Exhibit A

Services Definition and Schedule

(a)	Commencement Date: June 1, 2011
(b)	Anticipated Ending Date (may not exceed the term of this Agreement): August 31, 2011
(c)	Name of ADPT’s Project Manager(s): Assistant Controller, Controller, CFO or CEO
(d)	Names of employees/consultants approved and their hourly rate(s): Mary Dotz $ 400.00 per hour
(e)	Terms and Form of Total Compensation Payable by: time  project  other  X Description:
	Contractor shall receive a fee of $18,000 per month for consulting services as indicated below in item (f). Consulting services shall not exceed 40 hours per month. If services exceed 40 hours in any month, contactor shall be compensated in addition to a flat fee of $18,000 per month at a rate of $400.00 per hour for time in excess of 40 hours per month. If ADPT terminates this agreement for convenience, as stipulated in Section 3.3, prior to the anticipated end date, ADPT shall pay Contractor a fee of $18,000 per month through the end of the then current monthly period offered in this agreement. Contractor shall receive payment within twenty (20) days of receipt of early termination of this agreement.
	If you are paid on acceptance of milestones  check here _______ and see Milestone Delivery Payment Chart attached to this Project Schedule and incorporated herein by this reference.
(f)	Services Description and Deliverables (attach details, including description of work product or product specification, if applicable, milestones and time schedule, all of which are incorporated herein by this reference). Perform services related to cross-training the role of Chief Financial Officer. Additional duties may be added as jointly agreed upon by Contractor and Project Manager.

ATTACH ANY ADDITIONAL STATEMENT OF WORK, WHICH IS INCORPORATED INTO THIS AGREEMENT.

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Exhibit B

Pre-Existing Works

Third Party Material

Sub-Contractors

N/A

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EX-10.5

Exhibit 10.5

ADPT Corporation

Director Compensation Policy

(Adopted May 25, 2011)

I. Cash Compensation

A. Member Annual Retainer

$50,000 per year paid in equal quarterly installments of $12,500 at the beginning of each quarter, with additional meeting fees to be paid if in excess of eight Board meetings are held per year.  Additional meeting fees, if any, will be paid at the rate of $2,000 per meeting, unless the Chairman of the Board designates a meeting as a “reduced fee meeting”, in which case the additional meeting fee will be reduced to $1,000 for that meeting.

B. Annual Committee Retainers

Committee/Role	Committee Chairman		Other Committee Members
Audit Committee	$	15,000	$	7,500
Compensation Committee	$	10,000	$	5,000
Governance and Nominating Committee	$	5,000	$	2,500

Above amounts to be paid each year in equal quarterly installments at the beginning of each quarter (e.g. the Audit Committee Chairman will be paid $3,750 at the beginning of each quarter).

C. Annual Non-Executive Chairman of the Board Retainer

$15,000 per year paid in equal quarterly installments of $3,750 at the beginning of each quarter.

D. Board Member Special Assignment Fee

$3,500 per day or $500 per hour.

II. Equity Compensation

Non-employee directors are eligible to participate in the Adaptec, Inc. 2006 Director Plan (the “Plan”). Awards under the Plan are discretionary and are determined by the Board.

At present, it is the practice of the Board of Directors to make initial equity grants to a director at the time of joining the board in the amount of 16,250 restricted stock units ("RSUs") and options to acquire 32,500 shares of stock granted at the fair market value of such shares, as determined in accordance with the Plan or such other plan that such awards shall be granted from.  Both the option and restricted stock unit grants shall vest 33.33% on the one-year anniversary, and in equal quarterly installments thereafter in the amount of 8.33%, such that the awards shall be fully vested at the three year anniversary of the grant date.

Additionally, it is the current practice of the Board of Directors to make annual grants of 25,000 RSUs to continuing members, which RSUs vest upon the earlier of one year from the date of grant, or the date that a person ceases to be a member of the Board of Directors for any reason.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, John J. Quicke, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ADPT Corporation;

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 the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ JOHN J. QUICKE
Date: August 9, 2011	John J. Quicke Interim Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mark A. Zorko, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ADPT Corporation;

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 the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/ MARK A. ZORKO
Date: August 9, 2011	Mark A. Zorko Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John J. Quicke, certify to the best of my knowledge based upon a review of the Quarterly Report on Form 10-Q of ADPT Corporation for the quarter ended April 1, 2011 (the "Form 10-Q"), that the Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ADPT Corporation for the quarterly periods covered by the Form 10-Q.

	By: /s/ JOHN J. QUICKE
Date: August 9, 2011	John J. Quicke Interim Chief Executive Officer

I, Mark A. Zorko, certify to the best of my knowledge based upon a review of the Form 10-Q, that the Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ADPT Corporation for the periods covered by the Form 10-Q.

	By: /s/ MARK A. ZORKO
Date: August 9, 2011	Mark A. Zorko Chief Financial Officer

XML



Condensed Consolidated Balance Sheets (unaudited) (USD $) In Thousands	Jul. 01, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 3,894	$ 38,276
Marketable securities	356,942	314,135
Restricted cash		1,676
Prepaid expenses and other current assets	3,343	4,807
Assets held for sale		6,000
Total current assets	364,179	364,894
Other long-term assets	2,811	2,658
Total Assets	366,990	367,552
Current liabilities:
Accounts payable	1,538	3,353
Accrued and other liabilities	1,330	4,398
3/4% convertiable senior subordinated notes due 2023	346	346
Total current liabilities	3,214	8,097
Other long-term liabilities	11,245	12,203
Deferred income taxes	986	986
Total liabilities	15,445	21,286
Commitments and contingencies (Note 8)
Shareholders' Equity:
Common stock	108	108
Additional paid-in capital	171,476	170,987
Accumulated other comprehensive income, net of taxes	554	2,861
Retained earnings	179,407	172,310
Total shareholders' equity	351,545	346,266
Total Liabilities and Shareholders' Equity	$ 366,990	$ 367,552

XML



Condensed Consolidated Statements of Cash Flows (unaudited) (USD $) In Thousands	6 Months Ended
	Jul. 01, 2011	Jul. 02, 2010
Cash Flows From Operating Activities:
Net income (loss)	$ 7,097	$ (16,103)
Less: Income from discontinued operations, net of taxes	(6,830)	(10,960)
Income (loss) from continuing operations, net of taxes	267	(27,063)
Adjustments to reconcile income (loss) from continuing operations, net of taxes to net cash used in operating activities
Stock-based compensation expense	460	851
Inventory-related charges		100
Depreciation and amortization	1,412	13,722
Gain on release of foreign currency translation, net of taxes	(2,542)
Adjustment of deferred taxes	1,365
Loss on retirement/impairment of assets		10,205
Changes in current assets and liabilities	2,999	(17,681)
Net cash provided by (used in) operating activities of continuing operations	3,961	(19,866)
Net cash provided by operating activities of discontinued operations	6,848	1,607
Net cash provided by (used in) operating activities	10,809	(18,259)
Cash Flows From Investing Activities:
Purchases of intangible assets		(281)
Purchases of property and equipment		(106)
Purchases of marketable securities	(478,222)	(159,010)
Sales of marketable securities	383,143	59,074
Maturities of marketable securities	49,571	50,151
Net cash used in investing activities of continuing operations	(45,508)	(50,172)
Net cash provided by investing activities of discontinued operations		28,945
Net cash used in investing activities	(45,508)	(21,227)
Cash Flows From Financing Activities:
Repurchases of long-term debt		(68)
Proceeds from issuance of common stock	29	1,806
Net cash provided by financing activities of continuing operations	29	1,738
Net cash provided by financing activities	29	1,738
Effect of foreign currency translation on cash and cash equivalents	288	(587)
Net increase (decrease) in cash and cash equivalents	(34,382)	(38,335)
Cash and cash equivalents, beginning of period	38,276	85,930
Cash and cash equivalents, end of period	3,894	47,595
Non-Cash Investing and Financing Activities:
Unrealized gains (losses) on available-for-sale securities, net of taxes	$ 76	$ (854)

XML



Document And Entity Information	6 Months Ended
	Jul. 01, 2011	Aug. 09, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	ADPT Corporation
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		108,832,141
Amendment Flag	false
Entity Central Index Key	0000709804
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jul. 01, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

XML



Note 8 - Accrued and Other Liabilites

6 Months Ended

Jul. 01, 2011

Other Liabilities Disclosure [Text Block]

8. Accrued and Other Liabilities

The components of accrued and other liabilities at July 1, 2011 and December 31, 2010 were as follows:

	July 1, 2011		December 31, 2010
	(in thousands)
Tax-related	$	373	$	557
Restructuring-related		175		1,231
Accrued compensation and related taxes		46		1,334
Professional services		494		1,148
Other		242		128
Total	$	1,330	$	4,398

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Note 13 - Net Income (Loss) Per Share

6 Months Ended

Jul. 01, 2011

Earnings Per Share [Text Block]

13. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share gives effect to all potentially dilutive common shares outstanding during the period, which include certain stock–based awards, calculated using the treasury stock method, and convertible notes which are potentially dilutive at certain earnings levels, and are computed using the if-converted method.

A reconciliation of the numerator and denominator of the basic and diluted income (loss) per share computations for continuing operations, discontinued operations and net income (loss) was as follows:

	Three-Month Period Ended						Six-Month Period Ended
	July 1, 2011			July 2, 2010			July 1, 2011		July 2, 2010
	(in thousands, except per share amounts)
Numerators (basic and diluted):
Income (loss) from continuing operations, net of taxes	$	(1,550	)	$	(19,214	)	$	267	$	(27,063	)
Income from discontinued operations, net of taxes		6,830			10,084			6,830		10,960
Net income (loss)	$	5,280		$	(9,130	)	$	7,097	$	(16,103	)
Denominators:
Weighted average shares outstanding - basic		108,813			119,675			108,807		119,539
Effect of dilutive securities:
Stock-based awards		136			-			105		-
Weighted average shares outstanding - diluted		108,949			119,675			108,912		119,539
Income (loss) per share:
Basic
Income (loss) from continuing operations, net of taxes	$	(0.01	)	$	(0.16	)	$	0.00	$	(0.23	)
Income from discontinued operations, net of taxes	$	0.06		$	0.08		$	0.06	$	0.09
Net income (loss)	$	0.05		$	(0.08	)	$	0.07	$	(0.13	)
Diluted
Income (loss) from continuing operations, net of taxes	$	(0.01	)	$	(0.16	)	$	0.00	$	(0.23	)
Income from discontinued operations, net of taxes	$	0.06		$	0.08		$	0.06	$	0.09
Net income (loss)	$	0.05		$	(0.08	)	$	0.07	$	(0.13	)

Diluted loss per share for the three-month and six-month periods ended July 2, 2010 was based only on the weighted-average number of shares outstanding during that period, as the inclusion of any common stock equivalents would have been anti-dilutive. As a result, the same weighted-average number of common shares outstanding during that period was used to calculate both the basic and diluted earnings per share.  In addition, certain potential common shares were excluded from the diluted computation for the three-month and six-month periods ended July 1, 2011 because their inclusion would have been anti-dilutive.  The weighted-average number of common shares used to calculate the diluted earnings per share for loss from continuing operations, net of taxes, during each of the periods was also used to compute all other reported diluted earnings per share, even though it could result in anti-dilution.  The potential common shares excluded for the three-month and six-month periods ended July 1, 2011 and July 2, 2010 were as follows:

	Three-Month Period Ended				Six-Month Period Ended
	July 1, 2011		July 2, 2010		July 1, 2011		July 2, 2010
	(in thousands)
Outstanding stock options		-		4,395		-		4,875
Outstanding restricted stock		-		1,119		-		1,489
3/4% convertible senior subordinated notes due 2023		30		30		30		30

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Note 4 - Business Dispositions

6 Months Ended

Jul. 01, 2011

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

4.  Business Dispositions

DPS Business:  On June 8, 2010, the Company consummated a transaction with PMC-Sierra, Inc. (“PMC-Sierra”) in which PMC-Sierra purchased certain assets related to the Company’s business of providing data storage hardware and software solutions and products (the “DPS Business”) and PMC-Sierra assumed certain liabilities of the Company related to the DPS Business.  The purchase price for the DPS Business was $34.3 million, of which $29.3 million was received by the Company upon the closing of the transaction and the remaining $5.0 million was withheld in an escrow account (“DPS Holdback”).  The DPS Holdback was to secure potential indemnification obligations pursuant to the Asset Purchase Agreement entered into by PMC-Sierra and ADPT on May 8, 2010.  The DPS Holdback was released to the Company on June 8, 2011, one year after the consummation of the sale of the Company’s DPS Business, except for $80,000 to provide for one disputed claim, and was recognized as contingent consideration in discontinued operations when received.

On June 8, 2010, the Company also entered into a transition service agreement with PMC-Sierra, in which the Company provided certain services required for the operation of the DPS Business through December 2010 and the direct costs associated with providing these services were reimbursed by PMC-Sierra.  As a result of the transition service agreement, cash of $1.7 million was received on behalf of PMC-Sierra upon collection of accounts receivable and was classified as “Restricted cash” and included in “Accounts payable” on the Company’s Unaudited Condensed Consolidated Balance Sheet at December 31, 2010. During the six-month period ended July 1, 2011, the Company completed remitting the $1.7 million to PMC-Sierra.

Revenues and the components of income related to the DPS Business included in discontinued operations follow:

	Three-Month Period Ended		Six-Month Period Ended
	July 2, 2010		July 2, 2010
Revenues	$	11,725	$	27,531
Income from discontinued operations before income taxes	$	253	$	2,477
Provision for income taxes		(915)		(2,529)
Income from discontinued operations, net of taxes	$	(662)	$	(52)

During the three-months ended July 1, 2011, the Company sold patents from its DPS Business for $1.9 million, which was included in income from discontinued operations.

Snap Server Network Attached Storage (“NAS”) Business:  On June 27, 2008, the Company entered into an asset purchase agreement with Overland Storage, Inc. (“Overland”) for the sale of the Snap Server NAS business for $3.3 million, of which $2.1 million was received by the Company upon the closing of the transaction and the remaining $1.2 million, which was reserved as a result of the financial difficulties Overland had reported, was to be received on the 12-month anniversary of the closing of the transaction pursuant to a promissory note issued to the Company.  In the three-month period ended July 3, 2009, the Company amended the promissory note agreement with Overland, which allowed Overland to pay the Company the remaining $1.2 million receivable plus accrued interest over time through March 31, 2010; however, the Company received the final payment from Overland in the three-month period ended July 2, 2010.  Due to the Company’s continued concern regarding Overland’s ability to pay the Company, the Company released the reserve on the receivable as cash was collected.  As a result, in the six-month period ended July 2, 2010, the Company recorded a gain of $0.4 million in “Gain on disposal of discontinued operations, net of taxes,” in the Unaudited Condensed Consolidated Statements of Operations.

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Note 10 - Restructuring Charges

6 Months Ended

Jul. 01, 2011

Restructuring and Related Activities Disclosure [Text Block]

10. Restructuring Charges

The Company implemented restructuring plans during the Transition Period and during fiscal years 2010 and 2009.  The goals of these plans were to bring its operational expenses to appropriate levels relative to its historical net revenues, while simultaneously implementing extensive company-wide expense-control programs.  All expenses, including adjustments, associated with the Company’s restructuring plans are included in “Restructuring charges” and/or “Income from discontinued operations, net of taxes” in the Unaudited Condensed Consolidated Statements of Operations.

In the three-month and six-month periods ended July 1, 2011, the Company recorded minimal restructuring accrual adjustments related to the Transition Period’s restructuring plan for severance and benefits (none in the three-month period ended July 1, 2011).  To date, the Company has recorded a total of $3.9 million associated with this plan, of which $3.7 million related to severance and benefit charges for affected employees who were notified of their impending employment termination date and $0.2 million related to a termination fee for vacating a facility in California.  The Company does not expect to record additional restructuring charges related to this plan in the future.

In the three-month period ended July 2, 2010, the Company recorded restructuring charges of $2.8 million related to the Company’s Transition Period restructuring plan for severance and benefits. In the six-month period ended July 2, 2010, the Company incurred the previously mentioned $2.8 million of charges plus $0.7 million related to the Company’s fiscal 2010 restructuring plan for severance and benefits and restructuring accrual adjustments of $(0.1) million related to a previous acquisition-related restructuring plan and fiscal 2009 restructuring plan due to the estimated loss on the Company’s facilities.

The activity in the restructuring accrual for all outstanding plans was as follows for the six-month period ended July 1, 2011:

	Severance and Benefits			Other Charges			Total
	(in thousands)
Accrual balance at December 31, 2010	$	881		$	350		$	1,231
Accrual adjustments		38			-			38
Cash paid		(845	)		(249	)		(1,094	)
Accrual balance at July 1, 2011	$	74		$	101		$	175

The Company anticipates that the remaining restructuring accrual balance of $0.2 million at July 1, 2011, which was reflected in “Accrued and other liabilities” in the Unaudited Condensed Consolidated Balance Sheets, will be paid out by December 31, 2011.  The remaining restructuring severance and benefits accrual balance of $0.1 million at July 1, 2011 relates to COBRA benefits, while the remaining restructuring other charges balance of $0.1 million at July 1, 2011 relates to lease obligations that end in October 2011.

The activity in the restructuring accrual for all outstanding plans was as follows for the six-month period ended July 2, 2010:

	Severance and Benefits			Other Charges			Total
	(in thousands)
Accrual balance at January 1, 2010	$	383		$	1,043		$	1,426
Transition Period Restructuring Plan Charges (1)		2,849			-			2,849
Fiscal 2010 Restructuring Plan Charges (2)		693			-			693
Accrual adjustments		-			(104	)		(104	)
Cash paid		(3,410	)		(438	)		(3,848	)
Accrual balance at July 2, 2010	$	515		$	501		$	1,016

(1) The total Transition Period restructuring plan charges included $0.5 million classified as discontinued operations that were reflected in “Income from discontinued operations, net of taxes” in the Unaudited Condensed Consolidated Statements of Operations.

(2) The charges for fiscal 2010 restructuring plan included $1,000 classified as discontinued operations in the six-month period ended July 2, 2010, which was reflected in “Income from discontinued operations, net of taxes” in the Unaudited Condensed Consolidated Statements of Operations.

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Note 15 - Related Party Transactions

6 Months Ended

Jul. 01, 2011

Related Party Transactions Disclosure [Text Block]

15. Related Party Transactions

As of July 1, 2011, Warren G. Lichtenstein, Steel Partners, LLC, Steel Partners Holdings, L.P., SPH Group Holdings LLC and SPH Group LLC (collectively, “Steel Partners”) beneficially owned approximately 36% of the Company's outstanding common stock.  Jack L. Howard, John J. Quicke and Mr. Lichtenstein are directors of the Company and each such person is deemed to be an affiliate of Steel Partners under the rules of the Securities Exchange Act of 1934, as amended.  Each of the three directors are compensated with cash compensation and equity awards or equity-based awards in amounts that are consistent with the Company’s Non-Employee Director Compensation Policy.  In addition, Mr. Quicke currently serves as the Interim President and CEO of the Company and is compensated $30,000 per month in connection with this role, which is in addition to the compensation he receives as a non-executive board member. Mr. Quicke also serves as the CEO of another affiliate of Steel Partners. Further, Mr. Lichtenstein is President of a subsidiary of the Company that intends to engage in the sports business. In connection with his appointment to such office, Mr. Lichtenstein was awarded an option to acquire 250,000 shares of the Company’s Common Stock in lieu of an annual salary. This equity award is in addition to the compensation he receives as a non-executive board member.

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Note 11 - Interest and Other Income, Net

6 Months Ended

Jul. 01, 2011

Interest and Other Income [Text Block]

11. Interest and Other Income, Net

The components of interest and other income, net, for the three-month and six-month periods ended July 1, 2011 and July 2, 2010 were as follows:

	Three-Month Period Ended				Six-Month Period Ended
	July 1, 2011		July 2, 2010		July 1, 2011		July 2, 2010
	(in thousands)
Interest income, net	$	2,168	$	1,500	$	3,558	$	3,387
Realized currency translation gains (losses)		252		90		4,098		50
Other		375		81		471		97
Interest and other income, net	$	2,795	$	1,671	$	8,127	$	3,534

The realized foreign currency translation gains were primarily due to substantial liquidation of certain of the Company’s foreign subsidiaries.

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Note 9 - Commitments and Contingencies

6 Months Ended

Jul. 01, 2011

Commitments and Contingencies Disclosure [Text Block]

9. Commitments and Contingencies

Contractual Obligations

On April 4, 2011, the Company entered into a one-year sports business advisory consulting agreement with Legend7 Sports, LLC and Dennis M. Mannion, with an effective date of March 31, 2011. The consulting agreement provides for a fee of $83,333 per month or $1.0 million over a one-year term, unless terminated prior to the end of the term upon a material breach by Legend7 Sports, LLC or Mr. Mannion.

The Company completed the sale of its headquarters building on June 1, 2011 for net cash proceeds of $6.3 million. Concurrently, the Company began leasing a 3,581 square foot portion of the building from the new owner for approximately $4,300 per month. This space is leased through December 31, 2011.

Legal Proceedings

The information set forth under Part II, Item 1 contained in the “Legal Proceedings” is incorporated herein by reference.

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Note 2 - Recent Accounting Pronouncements

6 Months Ended

Jul. 01, 2011

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

2. Recent Accounting Pronouncements

There were no additional accounting pronouncements recently issued in the six-month period ended July 1, 2011 that are applicable to the Company or may be considered material to the Company.

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Note 5 - Marketable Securities

6 Months Ended

Jul. 01, 2011

Marketable Securities [Text Block]

5. Marketable Securities

The Company’s investment policy focuses on three objectives:  to preserve capital, to meet liquidity requirements and to maximize total return.  The Company’s investment policy establishes minimum ratings for each classification of investments when purchased and investment concentration is limited to minimize risk.  The policy also limits the final maturity on any investment and the overall duration of the portfolio.  Given the overall market conditions, the Company regularly reviews its investment portfolio to ensure adherence to its investment policy and to monitor individual investments for risk analysis and proper valuation.

The Company’s portfolio of marketable securities at July 1, 2011 was as follows:

	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Available-for-Sale Marketable Securities:
Short-term deposits	$	1,191		$	-	$	-		$	1,191
United States government securities		351,354			436		(50	)		351,740
Government agencies		3,511			35		-			3,546
Corporate obligations		1,528			14		-			1,542
Total available-for-sale securities		357,584			485		(50	)		358,019
Amounts classified as cash equivalents		(1,077	)		-		-			(1,077	)
Amounts classified as marketable securities	$	356,507		$	485	$	(50	)	$	356,942

The Company’s portfolio of marketable securities at December 31, 2010 was as follows:

	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Available-for-Sale Marketable Securities:
Short-term deposits	$	5,737		$	-	$	-		$	5,737
United States government securities		57,379			409		(32	)		57,756
Government agencies		53,065			308		(51	)		53,322
Mortgage-backed securities		32,161			141		(36	)		32,266
State and municipalities		4,021			2		(39	)		3,984
Corporate obligations		183,971			1,122		(117	)		184,976
Asset-backed securities		492			17		-			509
Total available-for-sale securities		336,826			1,999		(275	)		338,550
Amounts classified as cash equivalents		(24,415	)		-		-			(24,415	)
Amounts classified as marketable securities	$	312,411		$	1,999	$	(275	)	$	314,135

Sales of marketable securities resulted in gross realized gains of $1.5 million and $2.0 million during the three-month and six-month periods ended July 1, 2011, respectively, and $0.1 million and $0.2 million during the three-month and six-month periods ended July 2, 2010, respectively.  Sales of marketable securities resulted in gross realized losses of $0.2 million and $0.3 million during the three-month and six-month periods ended July 1, 2011, respectively, and $0.4 million for the three-month and six-month periods ended July 2, 2010.

The following table summarizes the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities, aggregated by type of investment instrument and length of time that individual securities have been in a continuous unrealized loss position, at July 1, 2011:

	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
United States government securities	$	198,376	$	(50	)	$	-	$	-	$	198,376	$	(50	)

The following table summarizes the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities, aggregated by type of investment instrument and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2010:

	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
United States government securities	$	12,793	$	(32	)	$	-	$	-	$	12,793	$	(32	)
Government agencies		17,977		(51	)		-		-		17,977		(51	)
Mortgage-backed securities		11,019		(36	)		-		-		11,019		(36	)
State and municipalities		2,843		(39	)		-		-		2,843		(39	)
Corporate obligations		36,815		(117	)		-		-		36,815		(117	)
Total	$	81,447	$	(275	)	$	-	$	-	$	81,447	$	(275	)

The Company’s investment portfolio consists of both corporate and government securities that generally mature within three years.  The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields.  As yields increase, those securities purchased with a lower yield-at-cost show a mark-to-market unrealized loss.  All unrealized losses are due to changes in interest rates and bond yields.  The Company has considered all available evidence and determined that the marketable securities in which unrealized losses were recorded in the three-month and six-month periods ended July 1, 2011 and July 2, 2010 were not deemed to be other-than-temporary. The Company holds its marketable securities as available-for-sale and marks them to market.

The amortized cost and estimated fair value of investments in available-for-sale debt securities at July 1, 2011 and December 31, 2010, by contractual maturity, were as follows:

	July 1, 2011				December 31, 2010
			Estimated				Estimated
	Cost		Fair Value		Cost		Fair Value
	(in thousands)
Mature in one year or less	$	279,442	$	279,580	$	149,441	$	149,900
Mature after one year through three years		78,142		78,439		184,162		185,436
Mature after three years through five years		-		-		3,223		3,214
Total	$	357,584	$	358,019	$	336,826	$	338,550

The maturities of asset-backed and mortgage-backed securities were estimated primarily based upon assumed prepayment forecasts utilizing interest rate scenarios and mortgage loan characteristics.

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Note 6 - Fair Value Measurements

6 Months Ended

Jul. 01, 2011

Fair Value Disclosures [Text Block]

6. Fair Value Measurements

Fair value is defined as the price that would be received for selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard surrounding fair value measurements establishes a fair value hierarchy, consisting of three levels, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Financial Assets Measured at Fair Value on a Recurring Basis

The Company utilized levels 1 and 2 to value its financial assets on a recurring basis.  Level 1 instruments use quoted prices in active markets for identical assets or liabilities, which include the Company’s cash accounts, short-term deposits and money market funds as these specific assets are liquid.  Level 1 instruments also include United States government securities, government agencies, state and municipalities, and substantially all mortgage-backed securities as these securities are backed by the federal or state governments and traded in active markets frequently with sufficient volume.  Level 2 instruments are valued using the market approach, which uses quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities and include corporate obligations and asset-backed securities as similar or identical instruments can be found in active markets. At both July 1, 2011 and December 31, 2010, there were no significant transfers that occurred between levels 1 and 2 of the Company’s financial assets.  At both July 1, 2011 and December 31, 2010, the Company did not utilize level 3 to value its financial assets on a recurring basis.  Level 3 is supported by little or no market activity and requires a high level of judgment to determine fair value.

A summary of financial assets measured at fair value on a recurring basis at July 1, 2011 and December 31, 2010 were as follows:

			July 1, 2011						December 31, 2010
			Fair Value Measurements						Fair Value Measurements
			at Reporting Date Used						at Reporting Date Used
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs				Quoted Prices in Active Markets for  Identical Assets		Significant Other Observable Inputs
	Total		(Level 1)		(Level 2)		Total		(Level 1)		(Level 2)
	(in thousands)
Cash, including short-term deposits (1)	$	4,008	$	4,008	$	-	$	19,598	$	19,598	$	-
United States government securities (2)		351,740		351,740		-		57,756		57,756		-
Government agencies (2)		3,546		3,546		-		53,322		53,322		-
Mortgage-backed securities (2)		1,542		-		1,542		32,266		31,870		396
State and municipalities (2)		-		-		-		3,984		3,984		-
Corporate obligations (3)		-		-		-		184,976		-		184,976
Asset-backed securities (2)		-		-		-		509		-		509
Total	$	360,836	$	359,294	$	1,542	$	352,411	$	166,530	$	185,881

(1) At July 1, 2011, the Company recorded $3.9 million and $0.1 million within “Cash and cash equivalents,” and “Marketable securities,” respectively.  At December 31, 2010, the Company recorded $19.5 million and $0.1 million within “Cash and cash equivalents” and “Marketable securities,” respectively.

(2) Recorded within “Marketable securities.”

(3) At July 1, 2011, the Company recorded zero and $356.8 million within “Cash and cash equivalents” and “Marketable securities,” respectively.  At December 31, 2010, the Company recorded $18.8 million and $166.2 million within “Cash and cash equivalents” and “Marketable securities,” respectively.

The Company’s other financial instruments include accounts payable and accrued and other liabilities.  Carrying values of these financial liabilities approximate their fair values due to the relatively short maturity of these items.  The related cost basis for the Company’s 3/4% Convertible Senior Notes due December 22, 2023 (the “3/4% Notes”) at both December 31, 2010 and July 2, 2011 was approximately $0.3 million. Although the remaining balance of its 3/4% Notes is relatively small and the market trading is very limited, the Company expects the cost basis of approximately $0.3 million at both December 31, 2010 and July 2, 2011 for the 3/4% Notes to approximate fair value. The Company’s convertible debt is recorded at its carrying value, not the estimated fair value.

Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

The Company utilized level 3 to value its non-financial assets on a non-recurring basis.  Level 3, which is categorized as significant unobservable inputs, included the Company’s long-lived assets classified as held for sale and non-controlling interest in certain non-public companies through two venture capital funds, Pacven Walden Ventures V Funds and APV Technology Partners II, L.P.  Although the Company used the market approach for the fair value of its long-lived assets classified as held for sale based on similar assets either sold, pending sale or available for sale, the terms of these similar assets are highly subjective, resulting in the classification as level 3.  The Company regularly monitors its two venture capital funds and records these investments within “Other long-term assets” on the Unaudited Condensed Consolidated Balance Sheets based on quarterly statements the Company receives from each of the funds.  The statements are generally received one quarter in arrears, as more timely valuations are not practical.  The statements reflect the net asset value, which the Company uses to determine the fair value for these investments, which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company.  The assumptions used by the Company, due to lack of observable inputs, may impact the fair value of these equity investments in future periods.  In the event that the carrying value of its equity investments exceeds their fair value, or the decline in value is determined to be other-than-temporary, the carrying value is reduced to its current fair value, which is recorded in “Interest and other income, net,” in the Unaudited Condensed Consolidated Statements of Operations.  At both July 1, 2011 and December 31, 2010, there were no transfers in or out of level 3 related to the Company’s long-lived assets classified as held for sale and the Company’s two venture capital funds.

Non-financial assets measured at fair value on a non-recurring basis at July 1, 2011 were as follows:

			Fair Value Measurement at
			Reporting Date Used
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Non-controlling interests in certain funds	$	1,151	$	-	$	-	$	1,151

Non-financial assets measured at fair value on a non-recurring basis at December 31, 2010 were as follows:

			Fair Value Measurement at
			Reporting Date Used
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Non-controlling interests in certain funds	$	1,184	$	-	$	-	$	1,184
Long-lived asset held for sale		6,000		-		-		6,000
	$	7,184	$	-	$	-	$	7,184

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Note 14 - Comprehensive Loss

6 Months Ended

Jul. 01, 2011

Comprehensive Income (Loss) Note [Text Block]

14. Comprehensive Loss

The Company's comprehensive loss, net of taxes, which consisted of net income (loss) and the changes in net unrealized loss on marketable securities net of taxes, and foreign currency translation adjustments, net of taxes, was as follows:

	Three-Month Period Ended					Six-Month Period Ended
	July 1, 2011		July 2, 2010			July 1, 2011			July 2, 2010
	(in thousands)
Net foreign currency translation adjustment, net of taxes
Foreign currency translation adjustment, net of taxes	$	7	$	(67	)	$	159		$	(445	)
Release of currency translation gainsm, net of taxes		-		-			(2,542	)		-
Total		7		(67	)		(2,383	)		(445	)
Net income (loss)		5,280		(9,130	)		7,097			(16,103	)
Net unrealized gain (loss) on marketable securities, net of taxes		858		(72	)		76			(372	)
Comprehensive loss, net of taxes	$	6,145	$	(9,269	)	$	4,790		$	(16,920	)

The Company has considered all available evidence and determined that the marketable securities in which unrealized losses were recorded in the three-month and six-month periods ended July 1, 2011 and July 2, 2010 were not deemed to be other-than-temporary. The Company holds its marketable securities as available-for-sale and marks them to market.  The Company expects to realize the full value of all its marketable securities upon maturity or sale, as the Company has the intent and ability to hold the securities until the full value is realized. However, the Company cannot provide any assurance that its invested cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require the Company to record an impairment charge that could adversely impact its financial results.

The components of accumulated other comprehensive income (loss), net of taxes, at July 1, 2011 and December 31, 2010 were as follows:

	July 1, 2011		December 31, 2010
	(in thousands)
Net unrealized gain on marketable securities, net of taxes	$	435	$	364
Foreign currency translation, net of taxes		119		2,497
Accumulated other comprehensive income, net of taxes	$	554	$	2,861

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Note 7 - Assets Held For Sale

6 Months Ended

Jul. 01, 2011

Property, Plant and Equipment Disclosure [Text Block]

7. Assets Held For Sale

The Company’s headquarters building was classified as “Assets held for sale” in the Unaudited Condensed Consolidated Balance Sheet at December 31, 2010 at its estimated fair value, less cost to sell, of $6.0 million. The Company’s carrying value of the building was increased by $0.2 million during the three-month period ended April 1, 2011 due to leasehold improvements that were placed into service during that period. The Company sold the building on June 1, 2011 for a total consideration of $6.5 million less selling expenses of $0.2 million, resulting in a gain of approximately $50,000.

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Note 1 - Description and Basis of Presentation

6 Months Ended

Jul. 01, 2011

Business Description and Basis of Presentation [Text Block]

1. Description and Basis of Presentation

Description

ADPT Corporation (“ADPT” or the “Company”) is primarily focused on capital redeployment and identification of new business operations in which it can utilize its existing working capital and maximize the use of the Company’s net tax operating losses (“NOLs”) in the future.  The identification of new business operations includes, but is not limited to, exploring the sports business.  For details regarding the Company’s historical business, which has been accounted for as discontinued operations, refer to Note 4 of the Notes to Financial Statements.

Basis of Presentation

In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements (“Consolidated Financial Statements”) of ADPT and its wholly-owned subsidiaries have been prepared on a consistent basis with the December 31, 2010 audited consolidated financial statements.  The Consolidated Financial Statements have been prepared in accordance with the regulations of the Securities and Exchange Commission (the “SEC”) and, therefore, omit certain information and footnote disclosure necessary to present the statements in accordance with accounting principles generally accepted in the United States of America. The December 31, 2010 Condensed Consolidated Balance Sheet was derived from audited financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Transition Report on Form 10-K for the nine-month period ended December 31, 2010, which was filed with the SEC on March 3, 2011. The nine-month period from April 1, 2010 to December 31, 2010 (the “Transition Period”) reflects the Company’s change in fiscal year end from March 31 to December 31.  Subsequent to the Transition Period, the Company’s fiscal year will represent the twelve-month period from January 1 to December 31, with historical periods remaining unchanged related to the twelve-month period from April 1 to March 31, which include, but are not limited to, the Company’s fiscal years ended March 31, 2010 (“fiscal 2010”) and March 31, 2009 (“fiscal 2009”) or (collectively “fiscal years 2010 and 2009”).  As a result, the comparative financial information included in this Form 10-Q relates to the three-month and six-month periods ended July 1, 2011 and July 2, 2010.  The results of operations for the three-month and six-month periods ended July 1, 2011 are not necessarily indicative of the results to be expected for the entire fiscal year.

The Company’s Consolidated Financial Statements include the accounts of ADPT and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

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Note 3 - Employee Stock Benefit Plans

6 Months Ended

Jul. 01, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

3. Employee Stock Benefit Plans

Stock Benefit Plans

The Company grants stock options and other stock-based awards to employees, directors and consultants under two equity incentive plans, the 2004 Equity Incentive Plan and the 2006 Director Plan.

As of July 1, 2011, the Company had an aggregate of 18.0 million shares of its common stock reserved for issuance under its 2004 Equity Incentive Plan, of which 0.6 million shares were subject to outstanding options and other stock-based awards and 17.4 million shares were available for future grants of options and other stock-based awards.  As of July 1, 2011, the Company had an aggregate of 0.9 million shares of its common stock reserved for issuance under its 2006 Director Plan, of which 0.6 million shares were subject to outstanding options and other stock-based awards and 0.3 million shares were available for future grants of options and other stock-based awards. 

Stock Benefit Plans Activities

Stock Options: A summary of option activity under all of the Company’s equity incentive plans as of July 1, 2011 and changes during the six-month period ended July 1, 2011 was as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	(in thousands, except exercise price and contractual terms)
Outstanding at December 31, 2010		799		$	3.56
Granted		250		$	2.91
Exercised		(10	)	$	2.86
Forfeited		-			-
Expired		(55	)	$	6.99
Outstanding at July 1, 2011		984		$	3.21		6.19	$	61
Options vested and expected to vest at July 1, 2011		843		$	3.26		6.02	$	49
Options exercisable at July 1, 2011		664		$	3.35		5.61	$	34

The aggregate intrinsic value is calculated as the difference between the price of the Company’s common stock on the Pink Sheets Electronic Quotation Service and the exercise price of the underlying awards for the 0.6 million shares subject to options that were in-the-money at July 1, 2011.  As of July 1, 2011, the total unamortized stock-based compensation expense related to non-vested stock options, net of estimated forfeitures, was approximately $0.3 million and this expense is expected to be recognized over a remaining weighted-average period of 2.3 years.

Restricted Stock: Restricted stock awards and restricted stock units (collectively, “restricted stock”) were granted under the Company’s 2004 Equity Incentive Plan and 2006 Director Plan.  As of July 1, 2011, there were 18,959 shares of service-based restricted stock awards and 212,500 shares of restricted stock units outstanding.  The cost of restricted stock, determined to be the fair market value of the shares at the date of grant, is expensed ratably over the period the restrictions lapse.

A summary of activity for restricted stock as of July 1, 2011 and changes during the six-month period ended July 1, 2011 was as follows:

				Weighted Average
	Shares			Grant-Date Fair Value
	(in thousands, except weighted average grant-date fair value)
Non-vested restricted stock at December 31, 2010 (1)		84		$	2.91
Awarded		150		$	0.00
Vested		(3	)	$	2.84
Forfeited		-			-
Non-vested restricted stock at July 1, 2011 (1)		231		$	2.91

(1)Non-vested restricted stock at each period included shares issued to certain non-employee directors in which vesting will occur immediately if the relationship between the Company and the non-employee director ceases for any reason.  These non-vested shares were recognized and fully expensed as stock-based compensation expense in the Unaudited Condensed Consolidated Statements of Operations at the date of grant or the date of modification.

All restricted stock was awarded at the par value of $0.001 per share.  As of July 1, 2011, the total unamortized stock-based compensation expense related to non-vested restricted stock that is expected to vest, net of estimated forfeitures, was approximately $36,400 and this expense is expected to be recognized over a remaining weighted-average period of 2.3 years.

Stock-Based Compensation

The Company measures and recognizes stock-based compensation expense for all stock-based awards made to its employees and directors based on estimated fair values using a straight-line amortization method over the respective requisite service period of the awards and adjusted it for estimated forfeitures.  In addition, the Company applies the simplified method to establish the beginning balance of the additional paid-in capital pool related to the tax effects of employee stock-based compensation, which is available to absorb tax shortfalls.

Stock-based compensation expense included in the Unaudited Condensed Consolidated Statements of Operations for the three-month and six-month periods ended July 1, 2011 and July 2, 2010 was as follows:

	Three-Month Period Ended				Six-Month Period Ended
	July 1, 2011		July 2, 2010		July 1, 2011		July 2, 2010
	(in thousands)
Stock-based compensation expense by caption:
Research and development	$	-	$	72	$	-	$	227
Selling, marketing and administrative		452		162		460		624
Effect on income (loss) from continuing operations	$	452	$	234	$	460	$	851
Stock-based compensation expense by award type:
Stock options	$	12	$	165	$	16	$	423
Restricted stock awards and restricted stock units		440		69		444		428
Effect on income (loss) from continuing operations	$	452	$	234	$	460	$	851

Stock-based compensation expense in the above table does not reflect any significant income tax expense, which is consistent with the Company’s treatment of income or loss from its United States operations.  For the three-month and six-month periods ended July 1, 2011 and July 2, 2010, there were no income tax benefits realized for the tax deductions from option exercises of the stock-based payment arrangements. In addition, there was no stock-based compensation costs capitalized as part of an asset in the three-month and six-month periods ended July 1, 2011 and July 2, 2010 as the amounts were not material.

Valuation Assumptions

The Company used the Black-Scholes option pricing model for determining the estimated fair value for all stock-based awards.  No grants were made in the three-month and six-month periods ended July 2, 2010 for stock options and other stock-based awards.  The fair value of the stock-based awards granted in the three-month and six-month periods ended July 1, 2011 was estimated using the following weighted average assumptions:

	Assumption
Expected life (in years)		4.3
Risk-free interest rates		1.5	%
Expected volatility		44	%
Dividend yield		0.0
Weighted average fair value of restricted stock		$1.09

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Note 12 - Income Taxes

6 Months Ended

Jul. 01, 2011

Income Tax Disclosure [Text Block]

12. Income Taxes

Income tax provisions for interim periods are based on the Company’s estimated annual income tax rate for entities that were profitable.  Entities that had operating losses with no tax benefit were excluded. The estimated annual tax for the three-month and six-month periods ended July 1, 2011 and July 2, 2010 includes foreign taxes related to the Company’s foreign subsidiaries and certain state minimum taxes.  Interest is accrued on prior years’ tax disputes and refund claims as a discrete item each period.  Although the Company believes its tax estimates are reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in its Financial Statements and may cause a higher effective tax rate that could materially affect its income tax provision, results of operations or cash flows in the period or periods for which such determination is made.

The Company recorded a tax provision of $1.4 million and $2.5 million for the three-month and six-month periods ended July 1, 2011, respectively, primarily due to the reversal of income taxes, which was reflected in “Accumulated other comprehensive income (loss), net of taxes” in the Unaudited Condensed Consolidated Balance Sheets at July 1, 2011. During the three-month period ended July 1, 2011, the Company made significant changes to its historic investment portfolio to move to primarily low-risk interest-bearing government securities. These changes were significant enough, in the Company’s judgment, to consider the legacy portfolio to have been disposed of for the purpose of tracking a disproportionate tax effect that arose in fiscal 2008. The six-month period ended July 1, 2011 also included the Company realizing certain currency translation gains due to substantial liquidation of certain of its foreign subsidiaries during the period. These taxes were partially offset by income tax benefits from losses incurred in the Company’s foreign jurisdictions and the reversal of reserves for certain foreign taxes..  The Company recorded a tax benefit of $7.4 million and $8.8 million for the three-month and six-month periods ended July 2, 2010, respectively, due to losses incurred from continuing operations that were offset against income and taxes recorded in discontinued operations.  This was partially offset by state minimum taxes and foreign taxes related to its foreign subsidiaries.

As of July 1, 2011, the Company’s total gross unrecognized tax benefits were $31.8 million, of which $12.1 million, if recognized, would affect the effective tax rate.  There have been no material changes to the Company’s total gross unrecognized tax benefits from December 31, 2010.

The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates or formerly operated. As of July 1, 2011, fiscal years 2004 onward remained open to examination by the U.S. taxing authorities and fiscal years 1999 onward remained open to examination in various foreign jurisdictions.  U.S. tax attributes generated in fiscal years 2004 onward also remain subject to adjustment in subsequent audits when they are utilized.

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company conducts or formerly conducted business. Management believes that it is not reasonably possible that the gross unrecognized tax benefits will change significantly within the next 12 months; however, tax audits remain open and the outcome of any tax audits are inherently uncertain, which could change this judgment in any given quarter.

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Note 16 - Subsequent Events

6 Months Ended

Jul. 01, 2011

Subsequent Events [Text Block]

16. Subsequent Events

On June 27, 2011, the Company entered into an Assets Purchase Agreement to acquire substantially all of the assets of Baseball Heaven LLC and Baseball Café, Inc. used in the business of marketing and providing baseball facility services, including training camps, summer camps, leagues and tournaments, and concession and catering events.  The purchase price for these assets was $6.2 million in cash. The transaction was consummated on July 27, 2011. The Company has not completed the purchase accounting as the valuation work is currently in process.

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Condensed Consolidated Statements of Operations (unaudited) (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jul. 01, 2011	Jul. 02, 2010	Jul. 01, 2011	Jul. 02, 2010
Revenues		$ 4,112		$ 4,899
Cost of revenues (inclusive of amortization and impairment of acquisition-related intangible assets)		14,852		16,029
Gross margin		(10,740)		(11,130)
Operating expenses:
Research and development		5,300		9,670
Selling, marketing and administrative	2,984	3,994	5,366	9,452
Amortization of acquisition-related intangible assets		1,077		1,402
Restructuring charges		2,289	38	2,879
Impairment of long-lived assets		4,838		4,838
Total operating expenses	2,984	17,498	5,404	28,241
Operating loss	(2,984)	(28,238)	(5,404)	(39,371)
Interest and other income, net	2,795	1,671	8,127	3,534
Income (loss) from continuing operations before income taxes	(189)	(26,567)	2,723	(35,837)
Benefit from (provision for) income taxes	(1,361)	7,353	(2,456)	8,774
Income (loss) from continuing operations, net of taxes	(1,550)	(19,214)	267	(27,063)
Income (loss) from discontinued operations, net of taxes	1,910	(662)	1,910	(52)
Gain on disposal of discontinued operations, net of taxes	4,920	10,746	4,920	11,012
Income from discontinued operations, net of taxes	6,830	10,084	6,830	10,960
Net income (loss)	$ 5,280	$ (9,130)	$ 7,097	$ (16,103)
Basic
Income (loss) from continuing operations, net of taxes (in Dollars per share)	$ (0.01)	$ (0.16)	$ 0.00	$ (0.23)
Income from discontinued operations, net of taxes (in Dollars per share)	$ 0.06	$ 0.08	$ 0.06	$ 0.09
Net income (loss) (in Dollars per share)	$ 0.05	$ (0.08)	$ 0.07	$ (0.13)
Diluted
Income (loss) from continuing operations, net of taxes (in Dollars per share)	$ (0.01)	$ (0.16)	$ 0.00	$ (0.23)
Income from discontinued operations, net of taxes (in Dollars per share)	$ 0.06	$ 0.08	$ 0.06	$ 0.09
Net income (loss) (in Dollars per share)	$ 0.05	$ (0.08)	$ 0.07	$ (0.13)
Shares used in computing income (loss) per share:
Basic (in Shares)	108,813	119,675	108,807	119,539
Diluted (in Shares)	108,949	119,675	108,912	119,539