EXHIBIT 10.1

ASSET PURCHASE AGREEMENT

AMONG

MACROVISION CORPORATION,

MACROVISION INTERNATIONAL HOLDING LIMITED PARTNERSHIP

AND

CRYPTOGRAPHY RESEARCH, INC.

Dated November 17, 2007

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TABLE OF CONTENTS

 

               Page

1.

  

Sale and Transfer of Assets

   1

2.

  

Purchase Price; Escrow

   1

3.

  

Certain Tax Matters

   2

4.

  

Allocation of Purchase Price

   3

5.

  

Securities Laws Restrictions; Legend

   4

6.

  

Assumption of Liabilities

   4

7.

  

Representations and Warranties of Seller

   5    (a)   

Organization and Good Standing

   5    (b)   

Execution and Effect of Agreement

   5    (c)   

No Contravention

   6    (d)   

Title to Assets

   6    (e)   

Compliance with Laws

   6    (f)   

Financial Reports

   6    (g)   

Litigation; Consents

   6    (h)   

Employees

   6    (i)   

Environmental Matters

   7    (j)   

Taxes

   7    (k)   

Governmental Permits and Approvals

   7    (l)   

Inventory and Warranty Claims

   7    (m)   

Investment

   7    (n)   

Proprietary Rights

   8    (o)   

Contracts

   11

8.

  

Representations and Warranties of Buyer

   14

9.

  

Covenants

   16

10.

  

Conditions Precedent to Buyer’s Obligations

   18

11.

  

Conditions Precedent to Seller’s Obligations

   20

12.

  

The Closing

   21

13.

  

Registration Rights

   22

14.

  

Further Assurances

   30

15.

  

Labor and Employment Matters

   30

 

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TABLE OF CONTENTS

(continued)

 

          Page

16.

  

Survival of Representations and Warranties

   31

17.

  

Indemnification

   31

18.

  

Indemnification Procedure

   33

19.

  

Third Party Claims

   34

20.

  

Notices

   35

21.

  

Entire Agreement

   36

22.

  

Successors

   36

23.

  

Section Headings

   36

24.

  

Applicable Law

   37

25.

  

Expenses

   37

26.

  

Severability

   37

27.

  

Counterparts

   37

28.

  

Termination

   37

 

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ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (“Agreement”) is made this 17th day of November
2007, by and among Cryptography Research, Inc., a California corporation
(“Seller”), and Macrovision Corporation, a Delaware corporation (“Macrovision”),
and Macrovision International Holding Limited Partnership, a Cayman Island
Limited Partnership (“Macrovision International,” and collectively with
Macrovision, the “Buyer”). Each of Buyer and Seller acknowledges and agrees that
Macrovision retains the right to have all of its obligations performed by, and
all of its rights inure to the benefit of, Macrovision International; provided,
however, that Macrovision shall remain ultimately liable for any and all of its
obligations and liabilities hereunder. Each of Seller and Buyer may hereafter be
referred to as a “party” or collectively as the “parties.”

W I T N E S S E T H:

WHEREAS, Seller is engaged in the business of developing cryptographic security
technologies with applications across industries, including a business unit
focused on content protection marketed under the Self-Protecting Digital Content
(“SPDC”) brand (the “Self-Protecting Digital Content Business”); and

WHEREAS, Buyer desires to purchase and acquire from Seller, and Seller desires
to sell, assign and transfer to Buyer, certain of the assets of the
Self-Protecting Digital Content Business in consideration for the purchase
price, and upon the terms and subject to the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:

1. Sale and Transfer of Assets. On the Closing Date, subject to the terms and
conditions hereinafter set forth, Seller agrees to sell, convey, assign,
transfer and deliver to Buyer, and Buyer agrees to purchase from Seller, all of
Seller’s right, title and interest in and to all of the assets of the
Self-Protecting Digital Content Business listed or described on Exhibit A-1
(such assets are hereinafter collectively referred to as the “Assets”);
provided, however, that the Assets shall not include the assets listed or
described on Exhibit A-2 (the “Excluded Assets”).

2. Purchase Price; Escrow.

(a) Subject to the terms and conditions of this Agreement, in full consideration
for the purchase by Buyer of the Assets, Buyer shall cause to be paid and
issued, as the case may be, to Seller on the dates set forth below:

(i) $45,000,000 (the “Cash Component”), shall be paid to Seller on the Closing
Date, subject to the escrow requirements set forth in Section 2(c) below;

(ii) a warrant (the “Unit Warrant”) to purchase shares of Buyer’s common stock,
$0.001 par value per share (the “Common Stock”), in the form attached hereto as
Exhibit B shall be issued to Seller on the earlier of (A) the effective date of
the UW Registration Statement or (B) December 31, 2009.

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(iii) a warrant (the “Studio Warrant”) to purchase Buyer’s Common Stock in the
form attached hereto as Exhibit C shall be issued to Seller on the earlier of
(A) the effective date of the SW Registration Statement or (B) December 31,
2009; and

(iv) a warrant (the “Non-Contingent Warrant”) to purchase Buyer’s Common Stock
in the form attached hereto as Exhibit D shall be issued to Seller on the
earlier of (A) the later of the effective date of the NCW Registration Statement
and January 1, 2008 or (B) December 31, 2008.

(b) The Unit Warrant, the Studio Warrant and the Non-Contingent Warrant shall be
collectively referred to herein as the “Warrants.” The Warrants shall be issued
to Seller in private placements. The shares of Common Stock issuable upon
exercise of the Warrants shall be registered in accordance with the provisions
of Section 13 below.

(c) On the Closing Date, Buyer shall deliver $6,000,000 of the Cash Component to
Wells Fargo Bank, NA, as escrow agent (the “Escrow Agent”), which shall be held
in escrow (the “Escrow Fund”) subject to the escrow agreement attached hereto as
Exhibit E (the “Escrow Agreement”) for the purposes of securing the Seller’s
indemnity obligations under this Agreement. The amount deposited into the Escrow
Fund shall be deducted from the Cash Component otherwise deliverable to Seller
as set forth in Section 2(a) above. Subject to and in accordance with the terms
of the Escrow Agreement, sixteen (16) months following the Closing Date (or, if
such date is not on a Business Day, the first Business Day thereafter), the
Escrow Agent shall deliver any amount remaining in the Escrow Fund to the
Seller. Notwithstanding the foregoing and subject to and in accordance with the
terms of the Escrow Agreement, the Escrow Agent may withhold from such delivery
the equivalent of any amounts then in dispute relating to indemnification
obligations arising under this Agreement, provided that the withheld amount, to
the extent not applied in satisfaction of indemnification obligations, shall be
delivered to the Seller as described above promptly upon resolution of such
dispute. For purposes of this Agreement, “Business Day” means shall mean any
day, other than a Saturday, Sunday or a day on which banks located in San
Francisco, California, shall be authorized or required by law to close.

3. Certain Tax Matters.

(a) All sales or use, transfer, real property gains, excise, stamp, or other
taxes which are in the nature of sales, use, or property tax, whether imposed on
Seller or Buyer (but specifically excluding income taxes or taxes in the nature
of income taxes imposed on Buyer relating to Buyer’s conduct of the activities
associated with the Assets following the Closing Date) resulting from the sale
of Assets and the assumption of the Assumed Liabilities contemplated by this
Agreement shall be borne 100% by Seller. Buyer and Seller agree to cooperate to
the extent commercially reasonable and legally permitted to minimize any
transfer taxes arising out of or relating to the transactions contemplated by
this Agreement.

(b) Unless otherwise required pursuant to a determination within the meaning of
Section 1313 of the Code, Buyer and Seller agree to treat (i) the Warrants as
issued in exchange for the Assets (rather than for services) for all applicable
income tax purposes; and (ii) Seller as having engaged in a contingent payment
sale within the meaning of Section 453 of the Code and

 

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the regulations thereunder, with each issuance of a Warrant to Seller pursuant
to this Agreement constituting a “payment” within the meaning of
Section 453(f)(3) of the Code and the regulations thereunder in an amount equal
to the fair market value of such Warrant as of such date of issuance. Buyer and
Seller acknowledge that the timing of recognition and amount of Buyer’s
determination of its basis in the assets purchased and Seller’s timing of
recognition and amount of gross income, with respect to the Warrants, may be
different under the applicable provisions of the Code, applicable regulations
and other authority. Nothing herein shall limit Seller’s right to elect not to
apply the installment method under Section 453(d) of the Code with respect to
the Warrants or any other payments to be received under this Agreement. For
purposes of this Section 3(b) and Section 4, the fair market value of each
Warrant as of its date of issuance shall be determined with reference to the
Black Scholes Model, consistently applying the assumptions that were used to
determine the number of Warrant Shares (as such term is defined in each Warrant)
pursuant to the particular Warrant. Buyer and Seller agree to cooperate with
each other, as and to the extent reasonably requested by the other party, in
connection with the filing of tax returns reflecting any income or deduction
arising with respect to the Warrants (including, to the extent necessary in
connection with the filing of Seller’s tax returns, the determination of the
agreed upon fair market value, as of the Closing Date, of Seller’s rights to
receive the Warrants pursuant to this Agreement), and any audit, litigation or
other proceeding with respect to such tax returns.

4. Allocation of Purchase Price. For purposes of complying with the requirements
of Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”),
each of the parties will allocate the purchase price among the Assets and the
Non-Competition Agreement of Seller in accordance with the principles of
Section 3(b) and in a manner that reflects the relative fair market values of
the Assets and Non-Competition Agreement. Buyer will prepare a purchase price
allocation schedule as soon as practicable following the Closing and in all
events no later than two months thereafter and furnish such schedule to Seller
for its review and comment. Buyer and Seller will cooperate in good faith to
agree upon such purchase price allocation schedule and, if they do, such
schedule shall be attached hereto as Schedule 4. In the event of such agreement,
each of Buyer and Seller agrees to prepare its federal, state and foreign income
tax returns for all current and future tax reporting periods and file Form 8594
(and corresponding state forms) with respect to transfer of the Assets to Buyer
in a manner consistent with such allocation, to update such allocation and such
Forms 8594 as necessary to reflect any changes thereto, and, except as required
pursuant to a determination (within the meaning of Section 1313 of the Code),
not to take any position inconsistent therewith upon examination of any tax
return, in any refund claim, or in any litigation, investigation or otherwise.
If any state, federal or foreign taxing authority challenges such agreed
allocation, the party receiving notice of such challenge shall give the other
party prompt written notice of such challenge, and the parties hereby agree to
cooperate in good faith in responding to it in order to preserve the
effectiveness of the allocation. In the event that Buyer and Seller cannot agree
upon the purchase price allocation schedule, then the preceding two sentences of
this Section 4 shall not apply, and each of Buyer and Seller shall prepare its
federal, state and foreign income tax returns and file Form 8594 based on such
purchase price allocation as it deems appropriate in its sole judgment;
provided, that for tax purposes (including, without limitation, reporting on
Form 8594 and any other applicable tax returns), Buyer and Seller shall not
allocate the amount of the purchase price that they each determine relates to
section 197 intangibles (within the meaning of Section 197(d) of the Code) to
separate section 197 intangibles, other than any allocation to (i) goodwill and
going concern value and (ii) the Non-Competition Agreement, except as otherwise
required by applicable tax law.

 

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5. Securities Laws Restrictions; Legends.

(a) With respect to the Warrants and the shares of Common Stock issuable upon
exercise of the Warrants (collectively, the “Warrant Shares”), Seller agrees
that all its sales, transfers, pledges, assignments, disposals or encumbrances
of the Warrant Shares shall be effected in compliance with all applicable
federal and state securities laws.

(b) Upon issuance, the Warrants shall bear a legend stating:

“NEITHER THIS WARRANT, NOR THE COMMON STOCK TO BE ISSUED UPON EXERCISE OF THIS
WARRANT, HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), OR QUALIFIED UNDER THE APPLICABLE SECURITIES LAWS OF ANY OTHER
JURISDICTION (THE “LAW”), AND THIS WARRANT HAS BEEN, AND THE COMMON STOCK TO BE
ISSUED UPON EXERCISE OF THIS WARRANT WILL BE, ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION OF THE
WARRANT OR COMMON STOCK AS APPLICABLE. NO SALE OR OTHER DISPOSITION MAY BE MADE
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND QUALIFICATION
UNDER ANY APPLICABLE LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
(AS THAT TERM IS DEFINED BELOW) AND ITS COUNSEL, THAT THE REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED UNDER THE ACT AND LAW, RESPECTIVELY.”

6. Assumption of Liabilities.

(a) On the Closing Date, effective immediately upon consummation of the Closing,
Buyer shall assume and agree to discharge only the liabilities and obligations
of Seller identified on Exhibit F hereto (the “Assumed Liabilities”).

(b) Except as set forth in this Agreement, Buyer shall not assume and shall not
be liable for any liabilities and obligations of Seller or the conduct of the
business by Seller of whatever nature whether presently in existence or arising
hereafter, except for the Assumed Liabilities. All such liabilities and
obligations not assumed by Buyer as contemplated by this Agreement, shall be
retained by and remain liabilities and obligations of Seller (collectively, the
“Excluded Liabilities”). Without limiting the generality of the foregoing, Buyer
shall not assume and shall not be liable for any of the following liabilities or
obligations of Seller: (i) any liability or obligation for taxes attributable to
or imposed upon Seller or Buyer, or attributable to or imposed upon the Assets
for any period (or portion thereof) ending on or prior to the applicable Closing
Date, including without limitation taxes imposed upon Seller as a result of the
transactions contemplated by this Agreement; (ii) all lawsuits, claims and other
liabilities or obligations arising in connection with all actions, suits,
claims, investigations or proceedings to

 

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the extent relating to the conduct of the business relating to the Assets by
Seller prior to Closing or the ownership of the Assets by Seller prior to
Closing; (iii) all liabilities or obligations relating to the employment,
failure to employ or termination of employment of any individual with respect to
the business relating to the Assets by Seller or relating to or under any labor
agreements or employee benefit or compensation arrangements, plans, programs,
policies, practices or agreements, including, without limitation, severance or
accrued vacation pay, of Seller or for the benefit of employees of Seller;
(iv) any liability arising under Environmental Laws (as such term is defined in
Section 7(j) hereof) with respect to the conduct of the business relating to the
Assets by Seller prior to Closing; (v) any indebtedness for borrowed money or
otherwise of Seller; (vi) any amounts payable to Seller’s affiliates; or
(vii) any workers’ compensation claims relating to employees of Seller and
resulting from the employment by Seller.

7. Representations and Warranties of Seller. Each representation and warranty
set forth below is qualified by the exceptions or disclosures set forth in the
disclosure schedule attached hereto (with specific reference to the section of
this Agreement to which the information stated in such disclosure relates) (the
“Disclosure Schedule”); provided, however, if any section of the Disclosure
Schedule discloses information with sufficient detail and in a way as to make
its relevance to the disclosure required on another section of the Disclosure
Schedule readily apparent on its face, then the applicable information will be
deemed to have been disclosed in that other section of the Disclosure Schedule,
notwithstanding the omission of a cross-reference in or to that other section.
As of the Closing (except to the extent that any such representation or warranty
is made as of a specific date, in which case such representation or warranty
shall apply only as of such specified date), and subject to the Disclosure
Schedule, Seller represents and warrants to Buyer as follows:

(a) Organization and Good Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
Seller has the full power and authority to own its properties, to carry on the
Self-Protecting Digital Content Business as presently conducted and to sell and
convey the Assets to Buyer.

(b) Execution and Effect of Agreement. Seller has the requisite power and
authority to enter into this Agreement and to perform its obligations hereunder,
and the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and the performance of Seller’s obligations
hereunder have been duly authorized by all necessary action on the part of
Seller. This Agreement has been duly executed and delivered by Seller and
constitutes the legal, valid and binding obligation of Seller, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (the “Enforceability
Exceptions”). The vote or approval by the holders of the Seller’s capital stock
(or rights to acquire the Seller’s capital stock) of this Agreement or the
transactions contemplated by this Agreement is not required under California
law, the Seller’s Articles of Incorporation or Bylaws, or any agreement or
arrangement between the Company and any holder or holders of its capital stock
(or rights to acquire its capital stock).

 

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(c) No Contravention. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) violate or
conflict with any provision of Seller’s Articles of Incorporation or Bylaws,
(ii) except as set forth on Schedule 7(c) (with or without the giving of notice
or the lapse of time or both) violate, or result in a breach of, or constitute a
default under, or conflict with, or give rise to a right of termination of, or
accelerate the performance required by, any of the terms of any agreement,
lease, mortgage, indenture or other instrument to which the Assets are subject
or otherwise involves Seller’s Self-Protecting Digital Content Business (each, a
“Seller Contract”), or (iii) violate or conflict with any judgment, decree,
order or award of any court, governmental body or arbitrator, or, any law, rule
or regulation applicable to Seller, nor will the same result in the creation of
any Liens (as such term is defined in Section 7(d) hereof) upon any of the
Assets.

(d) Title to Assets. Seller is the owner of the Assets, and, by the execution
and delivery on the Closing Date of the instruments of transfer provided for
herein, Buyer will be vested with good, valid and marketable title to each of
the Assets, free and clear of all liens, mortgages, pledges, imperfections of
title, security interests, restrictions, prior assignments, encumbrances and
claims of any kind or nature whatsoever (collectively, “Liens”). Except as set
forth on Schedule 7(d) hereto, there are no Liens on any of the Assets as of the
Closing Date.

(e) Absence of Certain Changes or Events. Since October 15, 2007, there has not
been any material adverse change in the business, results of operations or
financial condition of the Self-Protecting Digital Content Business (a “Material
Adverse Change”), and no event has occurred or circumstance exists that is
reasonably likely to result in such a Material Adverse Change; provided,
however, that in no event shall any of the following constitute or be considered
in determining a Material Adverse Change: (i) any change resulting from
conditions affecting the industry in which the Self-Protecting Digital Content
Business operates or from changes in general business or economic conditions;
(ii) any change resulting from the announcement or pendency of any of the
transactions contemplated by this Agreement; or (iii) any change resulting from
compliance by Seller with the terms of, or the taking of any action contemplated
or required by, this Agreement.

(f) Compliance with Laws. All business conduct relating, directly or indirectly,
to the Assets has been conducted, and is presently being conducted, in
compliance with all applicable requirements of laws, ordinances, regulations and
rules and all applicable requirements of governmental bodies and agencies having
jurisdiction over Seller.

(g) Financial Reports. Seller has delivered to Buyer a copy of the financial
information set forth on Schedule 7(g). There are no material inaccuracies,
undisclosed liabilities or discrepancies contained or reflected therein. Such
financial information fairly presents in all material respects the cash flows of
the Self-Protecting Digital Content Business as of the respective date of and
for the periods referred to in such documents.

(h) Litigation; Consents. Except as set forth on Schedule 7(h) hereto, there is
no action, suit, litigation, administrative or arbitration proceeding or formal
governmental inquiry or investigation pending or threatened against Seller with
respect to the Assets or the business relating to the Assets or which seeks to
restrain or prohibit or otherwise challenges the execution, delivery and
performance of this Agreement or the consummation, legality or validity

 

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of the transactions contemplated hereby. Seller is not in violation of any term
of any judgment, decree, injunction or order entered by any court or
governmental authority and outstanding against it relating to or with respect to
the business relating to the Assets or any Asset. Except as set forth on
Schedule 7(h) hereto, no consent, approval or authorization of or filing with
any governmental authority or other third party on the part of Seller is
required in connection with the execution, delivery and performance of this
Agreement or the consummation of any of the transactions contemplated hereby.

(i) Employees. There are no pending or threatened strikes, work stoppages,
slowdowns, grievances or other labor disputes with respect to individuals set
forth on Schedule 7(i) hereto. There are no pending or threatened complaints or
charges with any federal, state or local governmental agency or court with
respect to any individual set forth on Schedule 7(i) hereto alleging employment
discrimination, wrongful termination, any unfair labor practice charges or any
other employment-related claim. No individuals set forth on Schedule 7(i) hereto
are represented by any labor organization with respect to their employment by
Seller, and no group of such individuals or labor organization with respect to
such individuals have made a demand for recognition or have filed a petition
seeking a representation proceeding with the National Labor Relations Board
within the past two years.

(j) Environmental Matters. To the Seller’s knowledge, the operations of the
business relating to the Assets are in compliance in all material respects with
all applicable federal, state, local or other governmental statutes, codes,
rules, regulations, ordinances, decrees, orders or other requirements of law
relating to the protection of human health and safety or the environment
(collectively, “Environmental Laws”) and all permits issued pursuant to
Environmental Laws.

(k) Taxes. For purposes of this Agreement, the term “taxes” shall mean all sales
and use taxes, real and personal property taxes, gross receipts taxes,
documentary transfer taxes, employment taxes, withholding taxes, unemployment
insurance contributions and other taxes or governmental charges of any kind,
however denominated, including any interest, penalties and additions to tax in
respect thereto, under any federal, state, local, foreign or other applicable
tax law. Except as set forth on Schedule 7(k) hereto, all taxes of Seller and
any other person for which Buyer could bear successor liability or become a
charge or Lien against the Assets for any period (or portion thereof) ending on
or prior to the applicable Closing Date have been or will be paid on a timely
basis. Seller has duly and timely filed (or will file prior to the applicable
Closing) such returns and reports of taxes required to be filed prior to
Closing, and all such returns and reports are true, correct, and complete in all
material respects. There are no Liens for taxes on any of the Assets other than
permitted liens. Seller has complied with all record keeping and tax reporting
obligations relating to income and employment taxes due with respect to
compensation paid to the Transferred Employees (as defined below). Seller is not
a “foreign person” within the meaning of Section 1445(f)(3) of the Code. There
are no pending or, to Seller’s knowledge, threatened proceedings with respect to
taxes for which Buyer could bear successor liability or which could become a
charge against the Assets, and there are no outstanding waivers or extensions of
statutes of limitations with respect to assessments of taxes of Seller for which
Buyer could bear successor liability or which could become a charge against the
Assets. No agreement or arrangement regarding compensation of any Transferred
Employee requires any payments which will result in the disallowance of any tax
deduction for Buyer pursuant to Section 162, 404 or 280G of the Code or an
excise tax to the recipient of such payment pursuant to Section 4999 of the
Code.

 

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(l) Governmental Permits and Approvals. Seller has all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities necessary or required for the conduct of the business relating to
the Assets (collectively, the “Permits”). Within the past eighteen months,
Seller has not received a written notice alleging a violation or probable
violation or notice of revocation or other written communication from or on
behalf of any governmental entity, which violation has not been corrected or
otherwise settled, alleging (i) any violation of any Permit or (ii) that Seller
requires any Permit not currently held by Seller.

(m) Inventory and Warranty Claims. Seller has no inventory related to the
Assets. No product liability or warranty claims have been communicated in
writing to Seller relating to the Self-Protecting Digital Content Business.

(n) Investment. Seller (i) understands that, as of the Closing Date, neither the
Warrants nor the Warrant Shares will have been registered under the Securities
Act of 1933, as amended (the “Securities Act”), or under any state securities
laws, and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (ii) is acquiring
the Warrants and the Warrant Shares solely for its own account and not with a
view to the distribution thereof except in compliance with the Securities Act,
(iii) is a sophisticated investor with knowledge and experience in business and
financial matters, (iv) has had the ability and opportunity to review certain
information concerning Buyer, including, without limitation, Buyer’s Form 10-K
for the fiscal year ended December 31, 2006 filed with the Securities and
Exchange Commission (the “SEC”) and each other current or periodic report filed
with the SEC since December 31, 2006 and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in acquiring and holding the Warrants and the Warrant Shares, (v) that
it is able to fend for itself, can bear the economic risk of its investment, and
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment in the Warrants and
the Warrant Shares, (vi) was at no time presented with or solicited by or
through any leaflet, public promotional meeting, television advertisement or any
other form of general solicitation or advertising relating to Buyer or any
investment in the Warrants and the Warrant Shares and (vii) is an “accredited
investor” for purposes of the Securities Act and any applicable state securities
laws, or has such knowledge and experience in financial and business matters
that he or she is capable of evaluating the merits and risks of the prospective
investment.

(o) Proprietary Rights. Except as set forth in the Disclosure Schedule or with
respect to the Excluded Assets:

(i) Seller Registrations. The Disclosure Schedule lists all patents issued to
Seller, patent applications filed by Seller, trademarks registered by Seller,
copyrights registered by Seller, and applications for registration of any of the
foregoing, to the extent that the foregoing are used in or necessary for the
operation of Seller’s Self-Protecting Digital Content Business as of the Closing
Date.

 

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(ii) Inbound Licenses. The Disclosure Schedule lists all licenses and other
agreements with third parties which grant to Seller material subject matter,
including without limitation, patent rights, copyrights, trademarks and trade
secrets, within Seller’s Self-Protecting Digital Content Business. To the
knowledge of Seller, all such licenses and agreements are valid and subsisting,
and neither Seller nor, to Seller’s knowledge, any of its employees or
contractors have breached any of such licenses or other agreements, with respect
to such licenses granted to Seller. Other than as described in the Disclosure
Schedule, all of the inbound licenses are freely assignable by Seller without
the consent of any person or other restrictions or limitations on assignment.
Notwithstanding any provision of this Agreement to the contrary, Seller makes no
representations or warranties with respect to licenses or IP Rights pertaining
to commercial, off-the-shelf software that is readily available having an
aggregate price of less than Fifty Thousand Dollars ($50,000.00) or the
assignability of any such license or agreement.

(iii) Noninfringement by Seller. The Seller Products (and the Seller’s conduct
of the Self-Protecting Digital Content Business) do not misappropriate trade
secret rights of any third party and, to the knowledge of Seller, do not
infringe any IP Rights (other than trade secret rights) of any third party and
Seller knows of no claim or allegation that Seller Products or Seller’s conduct
of the Self-Protecting Digital Content Business infringe or misappropriate any
IP Rights of any third party. Notwithstanding any provision of this Agreement to
the contrary, the only representations or warranties made by Seller in this
Agreement related to infringement or misappropriation of IP Rights of any third
party with respect to Seller Products, the Self-Protecting Digital Content
Business or otherwise, are set forth in this Section 7(o)(iii) (Noninfringement
by Seller). “Seller Products” means all versions and implementations of any of
the Assets, developed by Seller, to the extent such Assets have been or are
being offered, distributed or sold by Seller within the Self-Protecting Digital
Content Business.

(iv) Ownership. Seller is the sole owner of the Seller IP Rights, free and clear
of any security interests to secure indebtedness. Seller has not received any
written notice or been the subject of any legal proceeding alleging anything to
the contrary. “Seller IP Rights” means all material IP Rights listed on the
schedule of Assets, together with Seller’s copyrights in the works of authorship
listed on Exhibit A-1 (to the extent originally created and used by Seller
within the Self-Protecting Digital Content Business). “Seller IP Rights” do not
include IP Rights licensed to Seller by third parties. “IP Rights” means,
collectively, all patents, patent applications, patent rights, trademark rights,
trademark registrations and applications therefor, trade dress rights, rights in
trade names, service mark rights, service mark registrations and applications
therefor, copyrights, copyright registrations and applications therefor, mask
work rights, mask work registrations and applications therefor, domain names
(URLs) and trade secret rights.

(v) Validity, Enforceability and Existence. To the knowledge of Seller (and
excluding patent prosecution communications from the United States Patent and
Trademark Office, or foreign counterparts): (a) the Seller IP Rights (other than
patent applications or items of similar nature) are valid and enforceable; and
(b) Seller has not received any written third party assertions, or verbal or
written third party threats of legal action, to the contrary.

 

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(vi) Patent Application Process. With respect to the Self-Protecting Digital
Content Business, Seller has complied with its duty of candor and disclosure to
the United States Patent and Trademark Office and any relevant foreign patent
office with respect to patent applications filed by or on behalf of Seller and,
to the knowledge of Seller, Seller has made no material misrepresentation, or to
its knowledge, failed to disclose material prior art, in such applications.

(vii) Seller Conduct of the Business. No claims have been asserted or threatened
against Seller (and Seller is not aware of any claims which are likely to be
asserted against Seller relating to Seller IP Rights or Seller Products) by any
person challenging Seller’s use, possession, manufacture, sale or distribution
of Seller Products or challenging or questioning the validity or effectiveness
of any material license or agreement relating to Seller IP Rights or Seller
Products or alleging a violation within the Self-Protecting Digital Content
Business of any person’s or entity’s privacy, personal or confidentiality
rights. Seller knows of no valid basis for any claim of the type specified in
the immediately preceding sentence. None of the Seller IP Rights or Seller
Products is subject to any proceeding or outstanding order or decree of a court
or other governmental body: (A) restricting in any manner the use, development,
manufacture, marketing, licensing, sale, distribution, furnishing or disposition
by Seller of any Seller Product; or (B) restricting the conduct of the Seller’s
Self-Protecting Digital Content Business in order to accommodate the
intellectual property rights of a third party. Subject to Section 7(o)(iii)
(Noninfringement by Seller), the operation of the Seller’s current
Self-Protecting Digital Content Business, the use, manufacture, marketing,
license, sale, distribution or furnishing by Seller of any Seller Product, and
the use or exploitation of any Seller IP Right in the Self-Protecting Digital
Content Business does not violate any license or other contract between Seller
and any third party, with respect to any contract provision relating to IP
Rights.

(viii) Outbound Agreements. The Disclosure Schedule lists all outbound
agreements with respect to which Seller is a party and pursuant to which Seller
grants licenses to Seller IP or performs services using Seller IP. Seller has
not granted any third party any right to reproduce, modify, offer for sale or
license, distribute, market or exploit any of the Seller Products or any
adaptations, translations, or derivative works based on the Seller Products or
any portion thereof, within the Self-Protecting Digital Content Business. Other
than as described in the Disclosure Schedule, all of the outbound agreements are
freely assignable by Seller without the consent of any person or other
restrictions or limitations on assignment.

(ix) Employee Matters. Each person presently or previously employed by Seller
(including independent contractors, if any) has executed a confidentiality,
non-disclosure and proprietary inventions assignment agreement pursuant to the
form of agreement previously provided to Buyer or its representatives, which
agreement without limitation acknowledges Seller’s ownership of all work product
created by such employee during the course of the employment relationship,
within the Self-Protecting Digital Content Business. To Seller’s knowledge, no
employee (or independent contractor) within the Self-Protecting Digital Content
Business is in violation of any such agreement. The Disclosure Schedule lists
all employees, directors, contractors and consultants who have participated in
any material way in the development of any material technological portion of the
Seller Products or the Seller IP Rights.

 

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(x) No Third Party Infringement. To Seller’s knowledge, with respect to the
Self-Protecting Digital Content Business, there is no material unauthorized
infringement or misappropriation of any Seller IP Rights, by any third party,
including any employee, former employee or independent contractor of Seller.
With respect to the Self-Protecting Digital Content Business, Seller has not
entered into any agreement to indemnify any other person or business entity
against any charge of infringement of any Seller IP Rights.

(xi) Trade Secrets and Confidential Information. Except as disclosed in the
Disclosure Schedule, Seller has taken reasonable action customary in its
industry to protect and preserve the confidentiality of all material trade
secrets and other confidential information, used within the Self-Protecting
Digital Content Business, not otherwise protected by patents (“Confidential
Information”). Except as disclosed in the Disclosure Schedule, all disclosure by
Seller within the Self-Protecting Digital Content Business to a third party, and
to the knowledge of Seller, all use, disclosure or appropriation by another
party pursuant to rights granted to it by Seller within the Self-Protecting
Digital Content Business, of material Confidential Information owned by Seller
has been pursuant to the terms of a written agreement between Seller and such
third party reasonably sufficient under the circumstances to protect the secrecy
of such Confidential Information.

(xii) No Exclusivity or Sublicensing. Except as set forth in the Disclosure
Schedule, none of Seller’s contracts within the Self-Protecting Digital Content
Business grants any third party exclusive rights in any Seller Product or
service or under any Seller IP Rights, or grants any third party the right to
sublicense to another, unrelated third party, the right to use application
programming interfaces for, to create derivate works of, or to reproduce and
distribute or sell, any Seller Product or service. Except as disclosed in the
Disclosure Schedule, Seller has not transferred ownership to any third party of
any Seller IP Right, or (other than in the exercise of its reasonable business
judgment with respect to claims in patent applications and trade secrets)
knowingly permitted Seller’s rights in such Seller IP Rights to lapse or enter
the public domain.

(xiii) Source Code. Neither Seller nor any other party authorized to act on its
behalf has disclosed or delivered to any third party, or permitted the
disclosure or delivery to any escrow agent or other third party of, any Seller
source code of any of the Assets. No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time, or both) shall,
or would reasonably be expected to, result in the disclosure or delivery by
Seller or any other party authorized to act on its behalf to any third party of
any Seller source code of any of the Assets. The Disclosure Schedule identifies
each contract in effect as of the date of this Agreement, which Seller will
update as of the Closing Date if necessary, pursuant to which Seller has
deposited, or is required to deposit, with an escrow agent or other third party,
any Seller source code of any of the Assets. The execution of this Agreement or
the consummation of the transactions contemplated herein or any of the other
transactions contemplated by this Agreement, in and of itself, is not reasonably
expected to result in the release from escrow of any Seller source code of any
of the Assets.

 

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(xiv) No Government Funding. No government funding or facilities of a
university, college, other educational institution or similar research center,
was used in the development of the Seller Products or services, computer
software programs or applications owned by Seller within the Self-Protecting
Digital Content Business. No current or former employee, consultant or
independent contractor of Seller who contributed to, the creation or development
of any Seller IP Rights has performed services for the government, for a
university, college or other educational institution or for a similar research
center during a period of time during which such employee, consultant or
independent contractor was also performing services for Seller within the
Self-Protecting Digital Content Business.

(xv) Standards Bodies and Public Software. Seller has made no submission or
written proposal, and is not subject to any agreement with, standard bodies or
similar entities which obligate Seller to grant licenses to or otherwise impair
any of the Seller IP Rights. Seller has not taken any actions that:
(A) incorporate any Public Software, in whole or in part, into any Seller
Product or service or any portion thereof; (B) use Public Software, in whole or
in part, in the development of any part of any Seller Product or service or any
portion thereof in a manner that subjects any Seller Product or service, in
whole or in part, to all or part of the license obligations of any Public
Software; or (C) combine or distribute any Seller Product or service with Public
Software in a manner that subjects any Seller Product or service, in whole or in
part, to all or part of the license obligations of any Public Software. As used
herein, the term “Public Software” shall mean any software, generally available
at no charge and in source code form, that is redistributed by Seller in any
Seller Product, and that is subject to license terms that either: (A) create, or
purport to create, obligations of the user with respect to the Seller’s Product
or service or any derivative work thereof; or (B) grant, or purport to grant, to
any third party any rights to or immunities under the Seller Product or Seller
IP Rights, including without limitation any software that requires as a
condition of use, modification, and/or distribution of such software that such
software or other software incorporated into, derived from or distributed with
such software be disclosed or distributed in source code form, licensed for the
purpose of making derivative works, or redistributable at no charge and, by way
of example, shall include software licensed under the GNU’s General Public
License (GPL) or Lesser/Library GPL, the Mozilla Public License, the Netscape
Public License, the Sun Community Source License, the Sun Industry Standards
License, the BSD License, and the Apache License.

(xvi) Commercial Software Licenses. Notwithstanding any provision of this
Agreement to the contrary, Seller makes no representations or warranties with
respect to (a) any commercial software that is readily available having an
aggregate price of less than Fifty Thousand Dollars ($50,000), or (b) any
licenses or agreements which grant to Seller any rights to use such commercial
software.

(xvii) Excluded Assets. Notwithstanding any provision of this Agreement to the
contrary, Seller makes no representations or warranties with respect to any
Excluded Assets.

(xviii) Self-Protecting Digital Content Business. Notwithstanding any provision
contained in this Agreement to the contrary, the representations and warranties
set forth in this Section 7(o) (Proprietary Rights) shall not apply with respect
to any IP Rights, subject matter or business of Seller outside the
Self-Protecting Digital Content Business.

 

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(p) Conformance with Specifications. Except with respect to non-conformities
that do not result in any material liability, all software developed by Seller
within the Self-Protecting Digital Content Business that are included among the
Assets and all Seller Products provided by or through Seller to customers
conform in all material respects to applicable product specifications and to any
material representations with respect to product specifications provided to
customers within the Self-Protecting Digital Content Business, and, to the
knowledge of Seller, there is no legitimate basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against Seller that could reasonably be expected to give rise to any
material liability relating to such product specifications or material
representations with respect to such product specifications provided to
customers.

(q) Testing and Security. Seller has not concealed or intentionally withheld
from Buyer any material documentation relating to the testing of the Seller
Products, or any plans and specifications for Seller Products currently under
development by Seller; provided, however, that the foregoing shall not be
construed as a representation or warranty that Seller has made available all
such documentation, plans or specifications to Buyer. Seller has a policy and
procedure for tracking material bugs, errors and defects of which it becomes
aware in any Seller Products, and maintains a database covering the foregoing.

(r) Privacy Practices. With respect to the Self-Protecting Digital Content
Business, Seller represents and warrants that Seller does not collect personally
identifiable information from any third party other than employees.

(s) Disclosure. None of this Agreement, the financial information referred to in
Section 7(g) (Financial Reports) (including the footnotes thereto), any
Schedule, Exhibit or certificate delivered pursuant to this Agreement or any
document or statement in writing which has been supplied to Buyer or its
representatives by or on behalf of the Seller in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact, or omits any statement of a material fact necessary to make the
statements contained herein or therein not misleading. There is no fact known to
the Seller that could reasonably be expected to have a Material Adverse Change
which has not been set forth in this Agreement, or any Schedule, Exhibit or
certificate delivered pursuant to this Agreement.

(t) Contracts. All contracts of the Seller involving the use of, or otherwise
relating to, the Assets are set forth on Schedule 7(t) (Contracts). Except as
set forth on Schedule 7(t) (Contracts), each contract of the Seller is in full
force and effect and there exists no (i) default or event of default by the
Seller or, to the knowledge of the Seller, by any other party to any contract of
the Seller with respect to any material term or provision of any such contract
or (ii) event, occurrence, condition or act (including the consummation of the
transactions contemplated hereby) which would reasonably be expected to become a
default or event of default by the Seller or, to the knowledge of the Seller,
any other party thereto, with respect to any material term or provision of any
such contract. Seller has not violated any of the material terms or conditions
of any contract or agreement and, to the knowledge of the Seller all of the
covenants to be performed by any other party thereto have not been breached in
any material respects. The Seller has delivered to Buyer true and complete
copies, including all amendments, of each contract involving the Assets. To
Seller’s knowledge, no current or former employee, director, consultant or
independent contractor hired by Seller within the Self-Protecting Digital
Content Business: (A) is in material violation of any term or covenant of any

 

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employment contract, patent disclosure agreement, invention assignment
agreement, nondisclosure agreement, non-competition agreement or any other
contract with any other party by virtue of such employee’s, director’s,
consultant’s or independent contractor’s being employed by, or performing
services for, Seller within the Self-Protecting Digital Content Business; or
(B) has developed any technology, software or other copyrightable, patentable or
otherwise proprietary work for Seller within the Self-Protecting Digital Content
Business that is subject to any contract under which such employee, director,
consultant or independent contractor has assigned or otherwise granted to any
third party any rights in or to such technology, software or other
copyrightable, patentable or otherwise proprietary work. Except with respect to
non-conformities that do not result in any material liability, and subject to
Section 7(o)(iii) (Noninfringement by Seller), all software developed by Seller
within the Self-Protecting Digital Content Business that are included among the
Assets, all Seller Products provided by or through Seller to customers, and the
operation of the Seller’s current Self-Protecting Digital Content Business,
conform in all material respects to applicable contractual commitments,
including without limitation, express and applicable implied warranties.

8. Representations and Warranties of Buyer. Each representation and warranty set
forth below is qualified by the exceptions or disclosures set forth in the
disclosure schedule attached hereto (with specific reference to the section of
this Agreement to which the information stated in such disclosure relates) (the
“Buyer Disclosure Schedule”); provided, however, if any section of the Buyer
Disclosure Schedule discloses information with sufficient detail and in a way as
to make its relevance to the disclosure required on another section of the Buyer
Disclosure Schedule readily apparent on its face, then the applicable
information will be deemed to have been disclosed in that other section of the
Buyer Disclosure Schedule, notwithstanding the omission of a cross-reference in
or to that other section. As of the Closing (except to the extent that any such
representation or warranty is made as of a specific date, in which case such
representation or warranty shall apply only as of such specified date), and
subject to the Buyer Disclosure Schedule, Buyer represents and warrants to
Seller as follows:

(a) Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power and authority to own, lease and operate its properties and
carry on its business as it is now being conducted.

(b) Execution and Effect of Agreement. Buyer has the requisite power and
authority to enter into this Agreement and to perform its obligations hereunder,
and the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and the performance of Buyer’s obligations
hereunder have been duly authorized by all necessary action on the part of
Buyer. This Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer, enforceable
against it in accordance with its terms, subject to the Enforceability
Exceptions.

(c) No Contravention. Neither the execution and delivery of this Agreement nor
the consummation of the transactions effected hereby will (i) violate or
conflict with any provision of Buyer’s Certificate of Incorporation or Bylaws,
(ii) (with or without the giving of notice or the lapse of time or both)
violate, or result in a breach of, or constitute a default under, or conflict
with, or give rise to a right of termination of, or accelerate the performance
required

 

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by, any of the terms of any agreement, lease, mortgage, indenture or other
instrument to which Buyer is a party or by which it is bound, or (iii) violate
or conflict with any judgment, decree, order or award of any court, governmental
body or arbitrator, or any law, rule or regulation applicable to Buyer.

(d) No Undisclosed Liabilities, Absence of Certain Events and Changes. Except as
set forth in the Buyer Disclosure Schedule or as otherwise disclosed in Buyer
SEC Reports (as defined below) required to be filed by Buyer with the SEC since
September 30, 2007, neither Buyer nor any of its subsidiaries has incurred any
liabilities or obligations (whether absolute or contingent) other than those
arising from operations in the ordinary course of business consistent with past
practice. Since September 30, 2007, except as set forth in the Buyer Disclosure
Schedule or disclosed in the Buyer SEC Reports filed with the SEC and publicly
available prior to the date hereof, there has not been any event, occurrence,
development or circumstances and there has been no change in or development with
respect to the business, condition (financial or otherwise), assets,
liabilities, properties, operations or results of operations of Buyer and its
subsidiaries except events, occurrences, developments, circumstances and changes
in and developments with respect to the ordinary course of business of Buyer
consistent with past practice which have not had or could not reasonably be
expected to have, individually or in the aggregate, a material adverse effect on
Buyer.

(e) Registration Statement. As of the date of this Agreement, Buyer is eligible
to file a registration statement on Form S-3 with respect to the Warrant Shares
to be issued pursuant to this Agreement and has taken all actions which would be
required to permit sales of its securities under Rule 144 under the Securities
Act.

(f) SEC Filings; Financial Statements.

(i) Buyer has made available true and correct copies to Seller of all forms,
schedules, reports, prospectuses, proxy statements and documents filed by Buyer
with the SEC since January 1, 2005 (the “Buyer SEC Reports”). The Buyer SEC
Reports (i) at the time they were filed, complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations promulgated thereunder, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of Buyer’s
subsidiaries are required to file any forms, reports or other documents with the
SEC.

(ii) Each of the consolidated financial statements (including, in each case, any
related notes thereto) (the “Buyer Financial Statements”) contained in the Buyer
SEC Reports has been prepared in accordance with GAAP applied on a consistent
basis throughout the period involved (except as may be indicated in the notes
thereto) and complied in all material respects with the rules and regulations of
the SEC. Each of the Buyer Financial Statements fairly presents in all material
respects the consolidated financial position of Buyer and its subsidiaries as of
the respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements do not include notes and were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be,
individually or in the aggregate, materially adverse to Buyer and its
subsidiaries taken as a whole.

 

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(g) Capitalization. As of the date of this Agreement, the authorized capital
stock of Buyer consists of 250,000,000 shares of Common Stock, par value $0.001
per share, and 5,000,000 shares Preferred Stock, par $0.001 per share. As of
November 1, 2007, 53,618,434 shares of Common Stock were issued and outstanding.
All such shares of Buyer have been duly authorized, and all such issued and
outstanding shares have been validly issued, are fully-paid and nonassessable.

(h) Litigation. There are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of Buyer, threatened against Buyer
or any of its subsidiaries or any of their properties or assets before any
governmental authority which (i) in any manner challenge or seek to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement or (ii), except as set forth in the Buyer SEC Reports filed prior to
the date of this Agreement, could reasonably be expected to have, individually
or in the aggregate, a material adverse effect on Buyer.

(i) Warrant Shares. The Warrant Shares have been duly authorized, and when
issued to Seller in accordance with the terms hereof and the terms of the
Warrants, as the case may be, will be validly issued, fully paid and
non-assessable and free of any Liens. Upon issuance, the Warrant Shares will be
listed on the NASDAQ Global Select market or other comparable system then in
use. The Warrants will be validly issued and free of any Liens when issued in
accordance with the terms of this Agreement.

(j) Breach Representation. Buyer does not have Actual Knowledge of any breach of
any of the representations and warranties or covenants or other obligations of
Seller contained in this Agreement except as expressly disclosed in writing to
Seller. Buyer shall be deemed to have waived in full any breach of any of
Seller’s representations, warranties, covenants and obligations of which Buyer
has such Actual Knowledge as of the Closing. For purposes of this paragraph,
“Actual Knowledge” means the actual knowledge of a particular fact, circumstance
or event by one of the following employees of Buyer: Ray Campbell, Steve
Goldberg, Jeff Haslem, Mark Hollar, Mark Holloway, Vikram Koka, Lauren
Landfield, Eric Rodli and Pam Sergeeff.

9. Covenants.

(a) Public Announcements. Except as in the opinion of counsel as may be required
by applicable law or regulation, Seller and its affiliates shall not, without
the written approval of the Buyer, issue any press releases or otherwise make
any public statements with respect to this Agreement or the transactions
contemplated by this Agreement, provided that Seller may, after the Closing
Date, notify its stockholders, customers, accountants, attorneys, and any other
persons or entities in the ordinary course of business.

 

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(b) Notification of Certain Matters, Further Assurances. Seller shall give
prompt notice to Buyer of any of the following which occurs, or of which it
becomes aware, between the date of this Agreement and the Closing: (i) any
notice of, or other communication relating to, a default or event that, with
notice or lapse of time or both, would become a default under any Seller
Contract; (ii) the occurrence or existence of any fact, circumstance or event
which would result in (A) any representation or warranty made by Seller in this
Agreement or in any Schedule or Exhibit to this Agreement, to be materially
untrue or materially inaccurate or (B) the failure of any condition precedent to
either party’s obligations; and (iii) any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement. The Seller
shall use commercially reasonable efforts to obtain any consents, execute any
documents and take such other actions as may reasonably be necessary to fulfill
the objectives of this Agreement. Buyer shall give prompt notice to Seller of
any of the following which occurs, or of which it becomes aware, between the
date of this Agreement and the Closing: (i) the occurrence or existence of any
fact, circumstance or event which would result in (A) any representation or
warranty made by Buyer in this Agreement or in any Schedule, Exhibit or
certificate delivered herewith, to be materially untrue or materially inaccurate
or (B) the failure of any condition precedent to either party’s obligations; and
(ii) any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.

(c) Between the date of this Agreement and the Closing, Seller shall, except as
contemplated by this Agreement:

(i) conduct its business relating to the Assets only in the ordinary course of
business;

(ii) except as otherwise directed by Buyer in writing, and without making any
commitment on Buyer’s behalf, use its commercially reasonable efforts to
preserve intact its current business organization of the Self-Protecting Digital
Content Business, keep available the services of its officers, employees and
agents working in the Self-Protecting Digital Content Business and maintain its
relations and good will with suppliers, customers, landlords, creditors,
employees, agents and others having business relationships with the
Self-Protecting Digital Content Business;

(iii) confer with Buyer prior to implementing operational decisions of a
material nature relating to the Self-Protecting Digital Content Business;

(iv) otherwise report periodically to Buyer concerning the status of its
Self-Protecting Digital Content Business, if requested by Buyer;

(v) make no material changes in personnel in the Self-Protecting Digital Content
Business without prior consultation with Buyer;

(vi) maintain the Assets in a state of repair and condition that is consistent
with the requirements and normal conduct of the Self-Protecting Digital Content
Business;

(vii) keep in full force and effect, without amendment, all material rights
relating to the Assets;

 

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(viii) comply with all legal requirements and material contractual obligations
applicable to the Assets and the Self-Protecting Digital Content Business;

(ix) continue in full force and effect its insurance coverage with respect to
the Assets; and

(x) maintain all books and records of Seller relating to the Assets in the
ordinary course of business.

(d) Until the earlier to occur of (a) the Closing or (b) the termination of this
Agreement pursuant to its terms, neither Seller nor any of Seller’s officers,
directors, employees, agents or other representatives shall, directly or
indirectly, (i) initiate, solicit, entertain or knowingly encourage (including
by way of furnishing information regarding the Assets) any Asset Acquisition
Proposal, or make any statements to third parties which may reasonably be
expected to lead to any Asset Acquisition Proposal or (ii) negotiate, engage in
any substantive discussions, or enter into any agreement, with any person
concerning any Asset Acquisition Proposal. Seller will promptly inform Buyer in
writing of any Asset Acquisition Proposal received by them and shall provide to
Buyer the name of such third party and the material terms of any such Asset
Acquisition Proposal. The covenants in this Section 9(d) will apply to any and
all discussions in which Seller (or any employee or representative of Seller) is
currently involved with third parties, and Seller shall, and shall cause its
employees and representatives to, immediately terminate all such discussions.
For purposes of this Agreement, “Asset Acquisition Proposal” means any proposal,
inquiry or offer from any person (i) concerning the acquisition or license
(other than licenses of or relating to the sale of product to customers in the
ordinary course of business) of all or any portion of the Assets or (ii) the
consideration or consummation of which would be reasonably likely to materially
delay the consummation of the transactions contemplated by this Agreement.

(e) Each of the parties hereto hereby agrees that, subject to Section 9(a), any
information obtained pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby shall be governed by
the terms of the Non-Disclosure Agreement, dated August 7, 2007, between Seller
and Buyer (the “NDA”).

10. Conditions Precedent to Buyer’s Obligations. The Buyer’s obligations
hereunder (including, without limitation, its obligation to consummate the
transactions contemplated hereby on the Closing Date and its incurrence of any
indemnification obligations under Section 17(c) below) are, unless waived in
writing by Buyer, subject to the satisfaction of the following conditions:

(a) (i) Each of the representations and warranties of Seller contained in
Section 7 hereof that are qualified as to materiality shall be true and correct
in all such respects on and as of the Closing Date with the same force and
effect as though the same had been made on and as of the Closing Date (except
that any such representations and warranties that are made as of a specific date
need to be true and correct in all such respects only as of such date), and
(ii) each of the representations and warranties of Seller contained in Section 7
hereof that are not qualified as to materiality shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though the same had been made on and as of the Closing Date (except that any
such representations and warranties that are made as of a specific date need to
be true and correct in all material respects only as of such date).

 

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(b) Seller shall have obtained, in the form reasonably acceptable to Buyer, all
required consents to the transactions contemplated hereby and shall have
arranged for the release on or prior to the Closing Date of all Liens which
encumber any of the Assets, which required consents and releases of Liens are
listed on Schedule 10(b) hereto (the “Required Consents”).

(c) Since the date of this Agreement, no event (including a lawsuit filed
against Seller that relates to any of the Assets) shall have occurred which has
resulted in or is reasonably likely to result in a Material Adverse Change on
the Self-Protecting Digital Content Business.

(d) No order of any court or other governmental or regulatory body restraining,
prohibiting or enjoining the consummation of the transactions contemplated
hereby shall be in effect or be threatened or sought by any governmental or
regulatory body.

(e) Buyer shall have received each of the certificates, documents, agreements
and other instruments set forth in Section 12(c) hereof and each of the
following certificates, documents, agreements or instruments:

(i) A legal opinion of Perkins Coie LLP in substantially the form of Exhibit G
hereto;

(ii) A copy of the executed employment agreement, in the form attached hereto as
Exhibit H (“Employment Agreement”), between Buyer and the employee set forth on
Schedule 10(e)(ii) (the “Main Employee”);

(iii) Evidence satisfactory to Buyer that the Main Employee has effectively
delivered his resignation to Seller, in the form attached hereto as Exhibit I
(the “Main Employee Resignation Notice”);

(iv) Copies of executed employment offer letters, in the forms attached hereto
as Exhibit J (the “Offer Letters”), from the employees listed on
Schedule 10(e)(iv) (the “Key Employees”); and

(v) The Key Employees have effectively delivered their resignations to Seller or
terminated their consulting relationships with Seller, in the forms attached
hereto as Exhibit K (the “Key Employees Resignations”).

(vi) The non-compete agreements, in the form attached hereto as Exhibit L (the
“Executive Non-Competition Agreements”), with respect to the business of the
Seller executed by the executives listed on Schedule 10(e)(vi);

(f) The Closing Date shall have occurred on or prior to January 1, 2008.

(g) All authorizations, consents, orders or approvals of, or declarations or
filings with, or expiration of waiting periods imposed by, any governmental or
regulatory body necessary for the consummation of the transactions contemplated
by this Agreement shall have been filed, occurred or been obtained.

 

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(h) Each of the covenants and obligations of the Seller to be performed at or
before the Closing Date pursuant to the terms of this Agreement shall have been
duly performed in all material respects and, at the Closing, the Seller shall
have delivered to Buyer a certificate to that effect, executed by an executive
officer of the Seller.

11. Conditions Precedent to Seller’s Obligations. The obligation of Seller to
consummate the transactions contemplated hereby on the Closing Date is subject
to the satisfaction of the following conditions:

(a) Each of the representations and warranties of Buyer contained in Section 8
hereof that are qualified as to materiality shall be true and correct in all
such respects on and as of the Closing Date with the same force and effect as
though the same had been made on and as of the Closing Date (except that any
such representations and warranties that are made as of a specific date need to
be true and correct in all such respects only as of such date), and (ii) each of
the representations and warranties of Buyer contained in Section 8 hereof that
are not qualified as to materiality shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
the same had been made on and as of the Closing Date (except that any such
representations and warranties that are made as of a specific date need to be
true and correct in all material respects only as of such date).

(b) No order of any court or other governmental or regulatory body restraining,
prohibiting or enjoining the consummation of the transactions contemplated
hereby shall be in effect or be threatened or sought by any governmental or
regulatory body.

(c) Seller shall have received each of the certificates, documents, agreements
and other instruments set forth in Section 12(d) hereof and each of the
following documents:

(i) A legal opinion of Heller Ehrman LLP in substantially the form of Exhibit M
hereto; and

(ii) Buyer executes a consent to be bound by the SPDC Intellectual Property
License Agreement, between Seller, Matsushita and Sony, dated March 31, 2006, as
amended on October 22, 2006 and May 16, 2007.

(d) All authorizations, consents, orders or approvals of, or declarations or
filings with, or expiration of waiting periods imposed by, any governmental or
regulatory body necessary for the consummation of the transactions contemplated
by this Agreement shall have been filed, occurred or been obtained.

(e) Each of the covenants and obligations of the Buyer to be performed at or
before the Closing Date pursuant to the terms of this Agreement shall have been
duly performed and, at the Closing, the Buyer shall have delivered to Seller a
certificate to that effect, executed by an executive officer of the Buyer.

 

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(f) Since the date of this Agreement, no event shall have occurred which has
resulted or is reasonably likely to result in a material adverse effect on Buyer
or Buyer’s inability to satisfy its obligations to Seller under Sections 2 and
13 of this Agreement.

12. The Closing.

(a) The Closing of the sale of the Assets pursuant to this Agreement (herein
referred to as the “Closing”) shall take place at the offices of Heller Ehrman
LLP, Menlo Park, CA 94025, as promptly as practicable after the execution and
delivery of this Agreement, but no later than two business days following the
satisfaction of the conditions precedent to Buyer’s and Seller’s obligations
hereunder set forth in Sections 10, 11 and 12, or at such other time and place
as shall be mutually agreeable to Buyer and Seller. As used herein, the term
“Closing Date” shall mean the date on which the Closing occurs.

(b) All corporate actions and proceedings to be taken and all documents to be
executed and delivered by Seller in connection with the consummation of the
transactions contemplated hereby, including obtaining the unanimous approval of
Seller’s board of directors, shall be reasonably satisfactory in form and
substance to Buyer and its counsel or shall be in the form approved by Buyer and
its counsel prior to the date of this Agreement. All corporate actions and
proceedings to be taken and all documents to be executed and delivered by Buyer
in connection with the consummation of the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to Seller and its counsel
or shall be in the form approved by Seller and its counsel prior to the date of
this Agreement. All corporate actions and proceedings taken and all documents to
be executed and delivered by the parties at the Closing shall be deemed to have
been taken and executed simultaneously and no proceedings shall be deemed taken
nor any documents executed or delivered until all have been taken, executed and
delivered.

(c) At the Closing, Seller shall deliver to Buyer the following:

(i) Such bills of sale, endorsements, assignments, and other good and sufficient
instruments of transfer and conveyance to vest in Buyer good, valid and
marketable title to the Assets, free and clear of all Liens, in accordance
herewith, all as set forth on the Bill of Sale and Assignment and Assumption
Agreement, in the form attached hereto as Exhibit N;

(ii) Recent certificates of good standing for Seller issued by the Secretary of
State of California and the Franchise Tax Board of California;

(iii) An incumbency and specimen signature certificate, in a form provided by
the Buyer prior to the date of this Agreement, dated as of the Closing Date,
from Seller with respect to the officers of Seller executing this Agreement and
any other document delivered hereunder by or on behalf of Seller;

(iv) A certificate of Seller, dated as of the Closing Date, signed by an
authorized executive officer of Seller, certifying as to the matters set forth
in Sections 10(a), 10(b), 10(c) and 10(d) hereof;

 

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(v) A copy of the resolutions adopted by the board of directors of Seller
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, certified by a duly authorized officer of
Seller, as of the Closing Date; and

(vi) All required consents to the transactions contemplated hereby and releases
for all Liens which encumber the Assets, all of which Required Consents are set
forth on Schedule 10(b);

(vii) The non-compete agreement, in the form attached hereto as Exhibit O (the
“CRI Non-Competition Agreements”), with respect to the business of the Seller
executed by Seller.

(viii) A copy of the Escrow Agreement between Buyer and Seller, executed by
Seller.

(ix) A copy of the technical services agreement between Buyer and Seller,
executed by Seller, in the form attached hereto as Exhibit P (the “Technical
Services Agreement”); and

(x) Such other documents and instruments as may be reasonably requested by Buyer
or its counsel to effectuate the terms of this Agreement.

(d) At the Closing, Buyer shall deliver to Seller the following:

(i) A certificate of Buyer, in a form reasonably acceptable to Buyer, dated the
Closing Date, signed by an executive officer or other authorized person of
Buyer, certifying as to the matters set forth in Sections 11(a), 11(b), and
11(d) hereof;

(ii) A copy of the Technical Services Agreement between Buyer and Seller,
executed by Buyer; and

(iii) Such other documents and instruments as may be reasonably requested by
Seller or its counsel to effectuate the terms of this Agreement.

13. Registration Rights.

(a) Registration Procedures.

(i) Non-Contingent Warrant. Buyer shall, subject to receipt of necessary
information from Seller after request from Buyer to Seller to provide such
information, prepare and file with the SEC, within twenty (20) Business Days
after the Closing Date, a registration statement on Form S-3 or, if Form S-3 is
not available, then on Form S-1 (the “NCW Registration Statement”), to enable
the resale by Seller in compliance with the Securities Act of the shares of
Buyer’s Common Stock issuable upon exercise of the Non-Contingent Warrant (the
“NCW Warrant Shares”); and subject to receipt of necessary information from
Seller after request from Buyer to the Seller to provide such information, and
subject to Section 2(a)(iv) herein, use best efforts to cause the NCW
Registration Statement to become effective on or prior to the earlier of (i) ten
(10) calendar days after notification by the SEC that the NCW Registration
Statement will not be reviewed and (ii) the sixtieth (60th) day after the
Closing Date

 

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(the “NCW Required Effective Date”). However, so long as Buyer filed the NCW
Registration Statement within twenty (20) Business Days after the Closing Date,
if the NCW Registration Statement receives SEC review, then the NCW Required
Effective Date will be the ninetieth (90th) calendar day after the Closing Date.
Buyer shall in good faith fully respond to the SEC within six (6) business days
of receipt of comments from the SEC regarding the NCW Registration Statement.
Buyer shall use best efforts to prepare and file with the SEC such amendments
and supplements to the NCW Registration Statement in compliance with applicable
laws, and the prospectus used in connection therewith (the “NCW Prospectus”) as
may be necessary to keep the NCW Registration Statement current, effective and
free from any material misstatement or omission to state a material fact for a
period not exceeding, with respect to the NCW Warrant Shares, the earlier of
(A) the sixth anniversary of the Closing Date, (B) the first date following the
exercise of the Non-Contingent Warrant in full in which Seller may publicly sell
all then outstanding NCW Warrant Shares pursuant to Rule 144 of the Securities
Act during a three (3) month period without registration, or (C) such time as
all of the NCW Warrant Shares have been sold in the public market. Buyer shall
also furnish to Seller with respect to the NCW Warrant Shares registered under
the NCW Registration Statement such number of copies of the NCW Registration
Statement and NCW Prospectus in conformity with the requirements of the
Securities Act and such other documents as Seller may reasonably request, in
order to facilitate the public sale or other disposition of all or any of the
NCW Warrant Shares by Seller; file documents required of Buyer for blue sky
clearance in states specified in writing by the Seller and use best efforts to
maintain such blue sky qualifications during the period Buyer is required to
maintain the effectiveness of the NCW Registration Statement, provided, however,
that Buyer shall not be required to qualify to do business or consent to service
of process in any jurisdiction in which it is not now so qualified or has not so
consented; bear all expenses in connection with the registration of the NCW
Warrant Shares pursuant to the NCW Registration Statement (other than
underwriting discounts or commissions, brokers’ fees and similar selling
expenses and any other fees or expenses incurred by Seller, including attorneys’
fees); and advise Seller, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or suspending
the effectiveness of the NCW Registration Statement or of the initiation or
threat of any proceeding for that purpose; and Buyer will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal as
promptly as possible if such stop order should be issued.

(ii) Unit Warrant. Buyer shall, subject to receipt of necessary information from
Seller after request from Buyer to Seller to provide such information, prepare
and file with the SEC, within ten (10) Business Days after the satisfaction of
the Milestone Requirement set forth in the Unit Warrant (the “UW Filing Date”),
a registration statement on Form S-3 or, if Form S-3 is not available, then on
Form S-1 (the “UW Registration Statement”), to enable the resale by Seller in
compliance with the Securities Act of the shares of Buyer’s Common Stock
issuable upon exercise of the Unit Warrant (the “UW Warrant Shares”); and
subject to receipt of necessary information from Seller after request from Buyer
to the Seller to provide such information, use best efforts to cause the UW
Registration Statement to become effective on or prior to the earlier of (i) ten
(10) calendar days after notification by the SEC that the UW Registration
Statement will not be reviewed and (ii) the sixtieth (60th) day after the UW
Filing Date (the “UW Required Effective Date”). However, so long as Buyer filed
the UW Registration Statement within ten (10) Business Days after the UW Filing
Date, if the Registration Statement receives SEC review, then the UW Required
Effective Date will be the

 

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ninetieth (90th) calendar day after the UW Filing Date. Buyer shall in good
faith fully respond to the SEC within six (6) business days of receipt of
comments from the SEC regarding the UW Registration Statement. Buyer shall use
best efforts to prepare and file with the SEC such amendments and supplements to
the UW Registration Statement in compliance with applicable laws, and the
prospectus used in connection therewith (the “UW Prospectus”) as may be
necessary to keep the UW Registration Statement current, effective and free from
any material misstatement or omission to state a material fact for a period not
exceeding, with respect to the UW Warrant Shares, the earlier of (A) the sixth
anniversary of the Closing Date, (B) the first date following the exercise of
the Unit Warrant in full in which Seller may publicly sell all then outstanding
UW Warrant Shares pursuant to Rule 144 of the Securities Act during a three
(3) months period without registration, or (C) such time as all of the UW
Warrant Shares have been sold in the public market. Buyer shall also furnish to
Seller with respect to the UW Warrant Shares registered under the UW
Registration Statement such number of copies of the UW Registration Statement
and UW Prospectus in conformity with the requirements of the Securities Act and
such other documents as Seller may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the UW Warrant Shares by
Seller; file documents required of Buyer for blue sky clearance in states
specified in writing by the Seller and use best efforts to maintain such blue
sky qualifications during the period Buyer is required to maintain the
effectiveness of the UW Registration Statement, provided, however, that Buyer
shall not be required to qualify to do business or consent to service of process
in any jurisdiction in which it is not now so qualified or has not so consented;
bear all expenses in connection with the registration of the UW Warrant Shares
pursuant to the UW Registration Statement (other than underwriting discounts or
commissions, brokers’ fees and similar selling expenses and any other fees or
expenses incurred by Seller, including attorneys’ fees); and advise Seller,
promptly after it shall receive notice or obtain knowledge of the issuance of
any stop order by the SEC delaying or suspending the effectiveness of the UW
Registration Statement or of the initiation or threat of any proceeding for that
purpose; and Buyer will promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal as promptly as possible if such stop
order should be issued.

(iii) Studio Warrant. Buyer shall, subject to receipt of necessary information
from Seller after request from Buyer to Seller to provide such information,
prepare and file with the SEC, within ten (10) Business Days after the
satisfaction of the Milestone Requirement set forth in the Studio Warrant (the
“SW Filing Date”), a registration statement on Form S-3 or, if Form S-3 is not
available, then on Form S-1 (the “SW Registration Statement”), to enable the
resale by Seller in compliance with the Securities Act of the shares of Buyer’s
Common Stock issuable upon exercise of the Studio Warrant (the “SW Warrant
Shares”); and subject to receipt of necessary information from Seller after
request from Buyer to the Seller to provide such information, use best efforts
to cause the SW Registration Statement to become effective on or prior to the
earlier of (i) ten (10) calendar days after notification by the SEC that the SW
Registration Statement will not be reviewed and (ii) the sixtieth (60th) day
after the SW Filing Date (the “SW Required Effective Date”). However, so long as
Buyer filed the SW Registration Statement within ten (10) Business Days after
the SW Filing Date, if the Registration Statement receives SEC review, then the
SW Required Effective Date will be the ninetieth (90th) calendar day after the
SW Filing Date. Buyer shall in good faith fully respond to the SEC within six
(6) business days of receipt of comments from the SEC regarding the SW
Registration Statement. Buyer shall use best efforts to efforts to prepare and
file with the SEC

 

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such amendments and supplements to the SW Registration Statement in compliance
with applicable laws, and the prospectus used in connection therewith (the “SW
Prospectus”) as may be necessary to keep the SW Registration Statement current,
effective and free from any material misstatement or omission to state a
material fact for a period not exceeding, with respect to the SW Warrant Shares,
the earlier of (A) the sixth anniversary of the Closing Date, (B) the first date
following the exercise of the Studio Warrant in full in which Seller may
publicly sell all then outstanding SW Warrant Shares pursuant to Rule 144 of the
Securities Act during a three (3) months period without registration, or
(C) such time as all of the SW Warrant Shares have been sold in the public
market. Buyer shall also furnish to Seller with respect to the SW Warrant Shares
registered under the SW Registration Statement such number of copies of the SW
Registration Statement and SW Prospectus in conformity with the requirements of
the Securities Act and such other documents as Seller may reasonably request, in
order to facilitate the public sale or other disposition of all or any of the SW
Warrant Shares by Seller; file documents required of Buyer for blue sky
clearance in states specified in writing by the Seller and use best efforts to
maintain such blue sky qualifications during the period Buyer is required to
maintain the effectiveness of the SW Registration Statement, provided, however,
that Buyer shall not be required to qualify to do business or consent to service
of process in any jurisdiction in which it is not now so qualified or has not so
consented; bear all expenses in connection with the registration of the SW
Warrant Shares pursuant to the SW Registration Statement (other than
underwriting discounts or commissions, brokers’ fees and similar selling
expenses and any other fees or expenses incurred by Seller, including attorneys’
fees); and advise Seller, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or suspending
the effectiveness of the SW Registration Statement or of the initiation or
threat of any proceeding for that purpose; and Buyer will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal as
promptly as possible if such stop order should be issued.

(iv) Notwithstanding anything to the contrary herein, the parties acknowledge
that Buyer may choose to include, at its option and solely for its convenience,
the NCW Warrant Shares, the UW Warrant Shares and/or the SW Warrant Shares
(collectively, the “Warrant Shares”) on a single registration statement or on a
registration statement or registration statements with other similar securities.

(b) Transfer of Warrant Shares; Suspension.

(i) Seller agrees that it will not effect any disposition of the Warrant Shares,
or its right to purchase the Warrant Shares, that would constitute a sale within
the meaning of the Securities Act except as contemplated in the NCW Registration
Statement, the UW Registration Statement and/or the SW Registration Statement
(collectively, the “Registration Statements”) referred to in Section 13(a) above
and as described below or as otherwise permitted by law, and that it will
promptly notify Buyer of any changes in the information set forth in the
Registration Statements regarding the Seller or its plan of distribution (other
than changes in the number of Warrant Shares). In connection with any transfer
of the Warrant Shares other than pursuant to an effective registration statement
to Buyer or to an affiliate of Seller (who is an accredited investor and
executes a customary representation letter), Buyer may require the transferor
thereof to provide to Buyer an opinion of counsel which opinion shall be
reasonably satisfactory to Buyer, to the effect that such transfer does not
require registration of such transferred Warrant Shares under the Securities
Act.

 

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(ii) Except in the event that paragraph (iii) below applies, Buyer shall
(A) prepare and file from time to time with the SEC a post-effective amendment
to the Registration Statements or a supplement to the related Prospectuses or a
supplement or amendment to any document incorporated therein by reference or
file any other required document so that such Registration Statements will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and so that, as thereafter delivered to purchasers of the Warrant
Shares being sold thereunder, such Prospectuses will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; (B) provide Seller
copies of any documents filed pursuant to this Section 13(b)(ii) as they
reasonably request; and (C) inform Seller that Buyer has complied with its
obligations in this Section 13(b)(ii) (or that, if Buyer has filed a
post-effective amendment to the Registration Statements which has not yet been
declared effective, Buyer will notify Seller to that effect, will use best
efforts to secure the effectiveness of such post-effective amendment as promptly
as possible and will promptly notify each Investor pursuant to this
Section 13(b)(ii) hereof when the amendment has become effective).

(iii) Subject to paragraph (iv) below, in the event (A) of any request by the
SEC or any other federal or state governmental authority during the period of
effectiveness of any Registration Statement for amendments or supplements to a
Registration Statement or related Prospectus or for additional information;
(B) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose; (C) of the
receipt by Buyer of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Warrant Shares for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose; or (D) of any event or circumstance which, upon the good faith
judgment of Buyer’s Board of Directors based on the advice of its counsel,
necessitates the making of any changes in a Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of a Registration Statement, it will not contain
any untrue statement of a material fact or any omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and that in the case of a Prospectus, it will not contain any untrue
statement of a material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; or (E) there is
a Valid Business Reason; then Buyer shall deliver a certificate in writing to
Seller (the “Suspension Notice”) to the effect of the foregoing and, upon
receipt of such Suspension Notice, the Seller will refrain from selling any of
the Warrant Shares pursuant to the Registration Statements (a “Suspension”)
until Seller’s receipt of copies of supplemented or amended Prospectuses
prepared and filed by Buyer, or until it is advised in writing by Buyer that the
current Prospectuses may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectuses. In the event of any Suspension, Buyer will use best
efforts to cause the use of the Prospectuses so suspended to be resumed as soon
as reasonably practicable, but in no

 

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event later than twenty (20) Business Days after the delivery of a Suspension
Notice to Seller. For purposes of this Section 13, the terms “Valid Business
Reason” means a determination by the Board of Directors of Buyer, in its good
faith judgment, that the premature disclosure of certain material undisclosed
information would materially interfere with any material financing, acquisition,
corporate reorganization, merger or other material transaction involving Buyer.

(iv) Provided that a Suspension is not then in effect, Seller may sell the
Warrant Shares under the applicable Registration Statement; provided, that it
complies with the prospectus delivery requirements under the Securities Act.
Upon receipt of a request therefor, Buyer has agreed to provide an adequate
number of current Prospectuses to the Seller and to supply copies to any other
parties requiring such Prospectuses pursuant to the Securities Act.

(c) Indemnification.

(i) For the purpose of this Section 13(c):

(A) the term “Registration Statement” shall include the Prospectus in the form
first filed with the SEC pursuant to Rule 424(b) of the Securities Act or filed
as part of such Registration Statement at the time of effectiveness if no Rule
424(b) filing is required, and any exhibit, supplement or amendment included in
or relating to such Registration Statement; and

(B) the term “untrue statement” for purposes of Section 13(c) hereof shall
include any untrue statement or alleged untrue statement, or any omission or
alleged omission to state in a Registration Statement a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

(ii) Buyer agrees to indemnify and hold harmless Seller and each person, if any,
who controls Seller within the meaning of Section 15 of the Securities Act, and
each officer and director of Seller from and against any losses, claims, damages
or liabilities to which Seller (or any such officer, director or controlling
person) may become subject (under the Securities Act or otherwise) insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon (A) any breach of any of the
representations or warranties of Buyer contained herein or failure to comply
with any of the covenants and agreements of Buyer contained herein, (B) any
untrue statement of a material fact contained in a Registration Statement as
amended at the time of effectiveness or any omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (C) any failure by Buyer to fulfill any undertaking included in a
Registration Statement as amended at the time of effectiveness, and Buyer will
reimburse Seller for any reasonable legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such action, proceeding
or claim, or preparing to defend any such action, proceeding or claim; provided,
however, that Buyer shall not be liable to Seller to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue statement
made in such Registration Statement or any omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading
in reliance upon and in conformity with written information furnished to Buyer
by or on behalf of Seller specifically for use in

 

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preparation of the Registration Statement, or the failure of Seller to comply
with its covenants and agreements contained in Section 13(b) hereof respecting
sale of the Warrant Shares, or any statement or omission in any Prospectus that
is corrected in any subsequent Prospectus that was delivered to the Seller prior
to the pertinent sale or sales by the Seller.

(iii) Seller agrees to indemnify and hold harmless Buyer (and each person, if
any, who controls Buyer within the meaning of Section 15 of the Securities Act,
each officer of Buyer and each director of Buyer) from and against any losses,
claims, damages or liabilities to which Buyer (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, (A) any failure
of Seller to comply with the covenants and agreements contained in Section 13(b)
hereof respecting the sale of the Warrant Shares, (B) any untrue statement of a
material fact contained in a Registration Statement or any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such untrue statement or omission was made in reliance
upon and in conformity with written information furnished by or on behalf of
Seller specifically for use in preparation of the Registration Statement, and
Seller will reimburse Buyer (or such officer, director or controlling person),
as the case may be, for any reasonable legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that Seller’s obligations under this
Section 13 shall not exceed the proceeds (net of brokers’ fees and exercise
price) received by the Seller in the related sale of the Warrant Shares.

(iv) Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 13(c), such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, but the omission to so notify the indemnifying
person will not relieve it from any liability which it may have to any
indemnified person under this Section 13(c) (except to the extent that such
omission materially and adversely affects the indemnifying person’s ability to
defend such action) or from any liability otherwise than under this
Section 13(c). Subject to the provisions hereinafter stated, in case any such
action shall be brought against an indemnified person, the indemnifying person
shall be entitled to participate therein, and, to the extent that it shall elect
by written notice delivered to the indemnified person promptly after receiving
the aforesaid notice from such indemnified person, shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
person. After notice from the indemnifying person to such indemnified person of
its election to assume the defense thereof, such indemnifying person shall not
be liable to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense thereof;
provided, however, that if there exists or shall exist a conflict of interest
that would make it inappropriate, in the reasonable opinion of counsel to the
indemnified person, for the same counsel to represent both the indemnified
person and such indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel at the expense of
such indemnifying person; provided, however, that no indemnifying person shall
be responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) for all indemnified parties hereunder.
In no event shall any indemnifying person be liable in respect of any amounts
paid in settlement of any action unless the indemnifying person shall have
approved the terms of such

 

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settlement; provided, that such consent shall not be unreasonably withheld. No
indemnifying person shall, without the prior written consent of the indemnified
person, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified person is or could have been a party and
indemnification could have been sought hereunder by such indemnified person,
unless such settlement includes an unconditional release of such indemnified
person from all liability on claims that are the subject matter of such
proceeding.

(v) If the indemnification provided for in this Section 13(c) is unavailable to
or insufficient to hold harmless an indemnified person under subsection (ii) or
(iii) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
person shall contribute to the amount paid or payable by such indemnified person
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of Buyer on the one hand and Seller on the other in connection with the
statements or omissions or other matters which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, in the case of an untrue statement, whether
the untrue statement relates to information supplied by Buyer on the one hand or
Seller on the other and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement. Buyer
and the Seller agree that it would not be just and equitable if contribution
pursuant to this subsection (v) were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above in this subsection (v). The amount paid or
payable by an indemnified person as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(v) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified person in connection with investigating or defending any
such action or claim. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

(vi) The parties to the Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including, without limitation, the provisions of
this Section 13(c), and are fully informed regarding said provisions. They
further acknowledge that the provisions of this Section 13(c) fairly allocate
the risks in light of the ability of the parties to investigate Buyer and its
business in order to assure that adequate disclosure is made in the Registration
Statement as required by the Securities Act and the Exchange Act. The parties
are advised that federal or state public policy as interpreted by the courts in
certain jurisdictions may be contrary to certain of the provisions of this
Section 13(c), and the parties hereto hereby expressly waive and relinquish any
right or ability to assert such public policy as a defense to a claim under this
Section 13(c) and further agree not to attempt to assert any such defense.

(d) Termination of Conditions and Obligations. The conditions precedent imposed
by Section 5 or this Section 13 upon the transferability of the Warrant Shares
shall cease and terminate as to any particular number of the Warrant Shares when
such shares shall have been effectively registered under the Securities Act and
sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering such Warrant Shares
or at such time as an opinion of counsel reasonably satisfactory to Buyer shall
have been rendered to the effect that such conditions are not necessary in order
to comply with the Securities Act.

 

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14. Further Assurances. Seller and Buyer shall, whenever and as often as
reasonably requested to do so by the other, do, execute, acknowledge and deliver
any and all such other and further acts, assignments and transfers and any
instruments of further assurance, approvals and consents as are necessary or
proper in order to complete, ensure and perfect the sale, transfer and
conveyance to Buyer of the Assets, and all other transactions, contemplated
hereby.

15. Labor and Employment Matters.

(a) On and after the Closing Date, all hiring and staffing decisions concerning
Buyer’s employees and consultants (including those employees and consultants
listed on Schedule 10(e)(ii) and Schedule 10(e)(iv), but not including any
consultants retained by Seller following the Closing Date) shall be within
Buyer’s sole and exclusive discretion and control. Those employees of Seller to
whom Buyer shall not offer employment or who decline the employment offer of
Buyer shall remain in the employ of Seller, or, at Seller’s option, may be
terminated by Seller in accordance with its personnel policies and at its
expense. Seller agrees that to the extent the foregoing triggers any notice
obligations under the Worker Adjustment and Retraining Notification Act (WARN),
Seller shall be responsible for providing, and shall be liable to any persons or
entities who do not receive, any required notices. Employees of Seller who
become employees of Buyer by accepting Buyer’s offer of employment (the
“Transferred Employees”) shall be subject to all rules, regulations,
requirements and policies applicable to new hires of Buyer.

(b) Buyer shall not assume any employment contracts of whatever nature or any
obligations arising out of any employment contracts, express or implied, oral or
written, individual or collective, between Seller and any of Seller’s employees.
Nor shall Buyer assume any obligations arising out of any pension benefit,
employee welfare benefit, bonus, deferred compensation, stock purchase, stock
option, severance, fringe benefit, medical insurance, life insurance or similar
plan, policy or program of Seller, whether or not covered or excluded from
coverage under ERISA. Seller shall be solely responsible for complying with all
of its obligations, if any, to its employees, including compliance with the
provisions of ERISA, the Multi-Employer Pension Plan Amendments Act of 1980
(MPPAA), and WARN.

(c) All offers of employment by Buyer to any employee of Seller shall be
conditioned on such employee terminating his or her employment with Seller on or
prior to the Closing Date and waiving, to the maximum extent permitted by
applicable law, all of his or her rights to make any claim or demand on Buyer or
any of Buyer’s affiliates in respect of (i) any employment contracts of whatever
nature or any obligations arising out of any employment contracts, express or
implied, oral or written, individual or collective, between Seller and such
employee and (ii) any obligations arising out of any pension benefit, employee
welfare benefit, bonus, deferred compensation, stock purchase, stock option,
severance, fringe benefit, medical insurance, life insurance or similar plan,
policy or program of Seller, whether or not covered or excluded from coverage
under ERISA.

 

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(d) Buyer may at any time at its sole option solicit and make employment offers
to any employees of Seller who are not retained by Buyer as of Closing and
Seller shall not in any manner restrict such employees from accepting such
employment offers.

(e) On and after the Closing Date, those employees of Seller who accept the
employment offer of Buyer shall be eligible for participation under Buyer’s
benefit plans and programs that are offered to Buyer’s current employees. Such
employees shall not receive credit for their years of continuous service with
Seller for purposes of determining participation and benefit levels under any of
Buyer’s benefit plans or programs, including, without limitation, and 401(k)
plan or vesting thereunder, flexible time-off or vacation benefits, bonus plans,
commission plans, severance or termination benefits or any other benefit plans
or programs.

(f) Seller and Buyer will (i) treat Buyer as a “successor employer” and Seller
as a “predecessor,” within the meaning of Sections 3306(b)(1) and 3121(a)(1) of
the Code, with respect to Transferred Employees who are employed by Buyer for
purposes of taxes imposed under the United States Federal Unemployment Tax Act
(“FUTA”) or the United States Federal Insurance Contributions Act (“FICA”) and
(ii) cooperate with each other to avoid, to the extent possible, the filing of
more than one IRS Form W-2 with respect to each such Transferred Employee for
the calendar year within which the Closing Date occurs. At the request of Buyer
with respect to any particular applicable tax law relating to employment,
unemployment insurance, social security, disability, workers’ compensation,
payroll, health care or other similar tax other than taxes imposed under FICA
and FUTA, Seller will and Buyer will (i) treat Buyer as a successor employer and
Seller as a predecessor employer, within the meaning of the relevant provisions
of such tax law, with respect to Transferred Employees who are employed by Buyer
and (ii) cooperate with each other to avoid, to the extent possible, the filing
of more than one individual information reporting form pursuant to each such tax
law with respect to each such Transferred Employee for the calendar year within
which the Closing Date occurs.

16. Survival of Representations and Warranties. Each of the representations and
warranties contained herein shall survive the Closing for a period of sixteen
(16) months following the Closing Date, except that (i) the representations and
warranties contained in Section 7(k) Taxes shall survive until the expiration of
the applicable statute of limitations and (ii) the representations and
warranties contained in Section 7(o) Proprietary Rights shall survive for a
period of twenty-four (24) months following the Closing Date.

17. Indemnification.

(a) Subject to the limitations set forth in Sections 17(b)-17(e), Seller agrees
to indemnify and hold Buyer and its affiliates and their respective parents,
stockholders, officers, directors, employees, agents, successors and assigns
(each a “Buyer Indemnitee”), harmless from and against any damages, losses,
liabilities, obligations, claims of any kind, interest or expenses (including
reasonable attorneys’ fees and expenses) (collectively, “Losses”), suffered,
incurred or paid, directly or indirectly, as a result of, in connection with or
arising out of: (i) the failure of any representation or warranty made by the
Seller in Section 7 of this Agreement or in any Schedule or Exhibit to this
Agreement to be true and correct in all material respects as of the Closing Date
(except for such representations and warranties that are made as of a specific
date, in which case such representation or warranty shall apply only as of such
specified date); (ii) any

 

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breach by the Seller of any of its covenants or agreements contained herein;
(iii) other than the Assumed Liabilities, any liability arising out of the
ownership or operation of the Assets prior to the Closing Date to the extent
that such liability results from ownership or operation of the Assets prior to
the Closing Date; or (iv) any Excluded Liabilities.

(b) Notwithstanding anything in this Agreement to the contrary, in no event
shall Seller’s obligations under this Section 17 (as supplemented by Section 18
and Section 19) exceed: (i) the Total Consideration in respect of any and all
claims for Losses as a result of the failure of any Listed Representation (as
set forth on Exhibit Q hereto) to be true and correct in all material respects
as of the Closing Date (except for such representations and warranties that are
made as of a specific date, in which case such representation or warranty shall
apply only as of such specified date) or (ii) $6,000,000 for any and all other
claims for indemnification under this Section 17 (as supplemented by Section 18
and Section 19). As used herein, “Total Consideration” shall mean $45,000,000
less: (A) up to an aggregate of $12,000,000 for (1) corporate and individual
taxes attributable to the sale of the Assets and (2) attorneys’ fees and
expenses paid by Seller to defend against an indemnity claim under Section 17
(as supplemented by Section 18 and Section 19) and (B) any amounts previously
paid by Seller pursuant to Section 17(b)(ii) (as supplemented by Section 18 and
Section 19). No person shall be entitled to recovery for Losses pursuant to
Section 17(a) until the total amount of Losses exceeds $250,000 (the “Basket
Amount”); provided, that to the extent the amount of Losses exceeds the Basket
Amount, the Indemnified Party shall be entitled to recover the Basket Amount as
well as the amount of Losses in excess of the Basket Amount. Notwithstanding
anything to the contrary in this Section 17, the threshold limits imposed by
this Section 17(b) shall not apply to any damages arising out of or in
connection with intentional or willful breaches of this Agreement, or fraud or
similar circumstances.

(c) Notwithstanding anything in this Agreement to the contrary, the rights set
forth in this Section 17 (as supplemented by Section 18 and Section 19 hereof)
shall provide the sole and exclusive remedy of Buyer for any and all liabilities
under this Agreement except as expressly provided for in Section 13(c) herein;
provided, however, that nothing herein shall prevent any party hereto from
bringing an action based upon allegations of fraud or other intentional breach
of this Agreement or an action seeking injunctive relief.

(d) Notwithstanding anything in this Agreement to the contrary, Seller shall
have no obligation to indemnify or hold harmless Buyer Indemnitee or otherwise
compensate any other party hereto for Losses with respect to lost profits,
restitution, damage to reputation, diminutions in value, mental or emotional
distress, exemplary, consequential, special, incidental or punitive damages.

(e) Effect of Insurance and Other Recoveries. The amount of any Losses for which
indemnification is provided under this Section 17 shall be reduced by (a) any
amounts recovered by the Indemnified Party or any of its affiliates from any
third party, and (b) any insurance proceeds or other cash receipts or source of
reimbursement received by the Indemnified Party or any of its affiliates with
respect to such Losses. Buyer shall use its reasonable best efforts to mitigate
the amount of any Losses.

 

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18. Indemnification Procedure.

(a) Any and all claims for indemnification (other than claims related to a
Modified Representation) by any Buyer Indemnitee pursuant to Section 17 herein,
while the Escrow Fund remains in effect and available to satisfy claims for
Losses pursuant to the indemnification provided for in Section 17(a), shall be
made in accordance with the terms of the Escrow Agreement. All other claims for
indemnification hereunder including any and all claims relating to a Modified
Representation, shall be made in accordance with the terms of this
Section 18(b)-(e).

(b) Within a reasonable period of time after the incurrence of any Losses by any
person entitled to indemnification pursuant to Section 17 hereof (an
“Indemnified Party”), including in respect of any claim by a third party
described in Section 19, which might give rise to indemnification hereunder, the
Indemnified Party shall deliver to the party from which indemnification is
sought (the “Indemnifying Party”) a certificate (the “Loss Certificate”), which
Loss Certificate shall:

(i) state that the Indemnified Party has paid or properly accrued Losses or
anticipates that it will incur liability for Losses for which such Indemnified
Party is entitled to indemnification pursuant to this Agreement;

(ii) specify in reasonable detail each individual item of Loss included in the
amount so stated, the date such item was paid or properly accrued, the basis for
any anticipated liability and the nature of the misrepresentation, breach of
warranty, breach of covenant or claim to which each such item is related and the
computation of the amount to which such Indemnified Party claims to be entitled
hereunder; and

(iii) notify the Indemnifying Party that if the Indemnifying Party in good faith
objects to the Loss Certificate or any portion of the Loss Certificate, the
Indemnifying Party must so notify the Indemnified Party within thirty (30) days
of receipt or the claim described in the Loss Certificate shall be deemed to be
an Agreed Claim that the Indemnifying Party shall be required to pay under this
Agreement.

(c) In the event that the Indemnifying Party shall object to the indemnification
of an Indemnified Party in respect of any claim or claims specified in any Loss
Certificate, the Indemnifying Party shall, within thirty (30) days after receipt
by the Indemnifying Party of such Loss Certificate, deliver to the Indemnified
Party a notice to such effect and the Indemnifying Party and the Indemnified
Party shall, within the thirty (30) day period beginning on the date of receipt
by the Indemnified Party of such objection, attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims to
which the Indemnifying Party shall have so objected. If the Indemnified Party
and the Indemnifying Party shall succeed in reaching agreement on their
respective rights with respect to any of such claims, the Indemnified Party and
the Indemnifying Party shall promptly prepare and sign a memorandum setting
forth such agreement. Should the Indemnified Party and the Indemnifying Party be
unable to agree as to any particular item or items or amount or amounts, then
either the Indemnified Party or the Indemnifying Party may submit such dispute
to a court of competent jurisdiction.

 

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(d) Claims for Losses specified in any Loss Certificate to which an Indemnifying
Party shall not object in writing within thirty (30) days of receipt of such
Loss Certificate, claims for Losses covered by a memorandum of agreement of the
nature described in Section 18(c), claims for Losses the validity and amount of
which shall have been the subject of a final judicial determination, or shall
have been settled with the consent of the Indemnifying Party, as described in
Section 18, are hereinafter referred to, collectively, as “Agreed Claims.”
Within ten (10) days of the determination of the amount of any Agreed Claims
(the “Agreed Claim Payment Date”), the Agreed Claim (i) in the case of the
indemnification obligations of the Seller, shall be paid from the Escrow Fund
pursuant to the Escrow Agreement (or paid from such other sources as otherwise
provided in the following sentence), subject to Section 17 above, and (ii) in
the case of the indemnification obligations of the Buyer, shall be paid in cash
or such other means as may then be agreed to among Buyer and the applicable
Seller Indemnitee, subject to Section 17 above. Notwithstanding anything to the
contrary herein, in the case of the indemnification obligations of the Seller,
the Indemnifying Party shall have the right, in its sole discretion, to satisfy
the amount of any Agreed Claim by paying the Indemnified Party (1) with an
amount from the Escrow Fund, if then available to satisfy such Agreed Claim;
provided, however, that if an amount from the Escrow Fund is not then available
to satisfy such Agreed Claim, the Indemnifying Party may satisfy the amount of
such Agreed Claim by wire transfer in immediately available funds to the bank
account or accounts designated by the Indemnified Party in a notice to the
Indemnifying Party not less than two (2) business days prior to such payment.

(e) All claims made against and paid out of the Escrow Fund to Buyer Indemnitees
shall be made and paid in accordance herewith and with the terms of the Escrow
Agreement.

19. Third Party Claims. If a claim by a third party is made against any
Indemnified Party, and if such Indemnified Party intends to seek indemnity with
respect thereto under Section 17, such Indemnified Party shall promptly notify
the Indemnifying Party of such claims; provided, that the failure to so notify
shall not relieve the Indemnifying Party of its obligations hereunder, except to
the extent that the Indemnifying Party is actually and materially prejudiced
thereby. The Indemnifying Party shall have thirty (30) days after receipt of
such notice to assume the conduct and control, through counsel reasonably
acceptable to the Indemnified Party at the expense of the Indemnifying Party, of
the settlement or defense thereof and the Indemnified Party shall cooperate with
it in connection therewith; provided, that (i) the Indemnifying Party shall
permit the Indemnified Party to participate in such settlement or defense
through counsel chosen by such Indemnified Party, provided that the fees and
expenses of such counsel shall be borne by such Indemnified Party and (ii) the
Indemnifying Party shall promptly be entitled to assume the defense of such
action only to the extent the Indemnifying Party acknowledges its indemnity
obligation; provided, further, that the Indemnifying Party shall not be entitled
to assume control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnified Party if (i) the Indemnified Party has been advised
in writing by counsel that a reasonable likelihood exists of a conflict of
interest between the Indemnifying Party and the Indemnified Party or (ii) upon
petition by the Indemnified Party, the appropriate court rules that the
Indemnifying Party failed or is failing to vigorously prosecute or defend such
claim. Any Indemnified Party shall have the right to employ separate counsel in
any such action or claim and to participate in the defense thereof, but the fees
and expenses of such counsel shall not be at the expense of the Indemnifying
Party unless (x) the Indemnifying Party shall have

 

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failed, within a reasonable time after having been notified by the Indemnified
Party of the existence of such claim as provided in the preceding sentence, to
assume the defense of such claim, (y) the employment of such counsel has been
specifically authorized in writing by the Indemnifying Party, or (z) the named
parties to any such action (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party and such Indemnified Party shall
have been advised in writing by such counsel that there may be one or more legal
defenses available to the Indemnified Party which are not available to the
Indemnifying Party, or available to the Indemnifying Party the assertion of
which would be adverse to the interests of the Indemnified Party. So long as the
Indemnifying Party is reasonably contesting any such claim in good faith, the
Indemnified Party shall not pay or settle any such claim. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay or settle any such
claim, provided that in such event it shall waive any right to indemnity
therefor by the Indemnifying Party for such claim unless the Indemnifying Party
shall have consented to such payment or settlement. If the Indemnifying Party
does not notify the Indemnified Party within thirty (30) days after the receipt
of the Indemnified Party’s notice of a claim of indemnity hereunder that it
elects to undertake the defense thereof, the Indemnified Party shall have the
right to contest, settle or compromise the claim but shall not thereby waive any
right to indemnity therefor pursuant to this Agreement. The Indemnifying Party
shall not, except with the consent of the Indemnified Party, which consent shall
not be unreasonably withheld, enter into any settlement that is not entirely
indemnifiable by the Indemnifying Party pursuant to this Agreement and does not
include as an unconditional term thereof the giving by the person or persons
asserting such claim to all Indemnified Parties of an unconditional release from
all liability with respect to such claim or consent to entry of any judgment.
The Indemnifying Party and the Indemnified Party shall cooperate with each other
in all reasonable respects in connection with the defense of any claim,
including making available records relating to such claim and furnishing,
without expense to the Indemnifying Party and/or its counsel, such employees of
the Indemnified Party as may be reasonably necessary for the preparation of the
defense of any such claim or for testimony as witnesses in any proceeding
relating to such claim.

20. Notices. Any notices or communications required or permitted hereunder shall
be sufficiently given if in writing and personally delivered, telecopied or sent
by registered or certified mail, postage prepaid, return receipt requested, or
sent by a nationally recognized overnight courier service, addressed as follows
or to such other address as any party shall have specified in conformity with
the foregoing:

 

  (a) If to Buyer, to:

 

       Macrovision Corporation

       1830 De La Cruz Boulevard

       Santa Clara, California 95050

       Attention: General Counsel

       Telecopy No.: (408) 567-1807

with a copy to:

 

       Heller Ehrman LLP

       275 Middlefield Road

       Menlo Park, California 94025

       Attention: Jon E. Gavenman

       Telecopy No.: (650) 324-0638

 

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  (b) If to Seller, to:

 

       Cryptography Research, Inc.

 

    

575 Market Street. 11th Floor

       San Francisco, CA 94105

       Attention: Paul Kocher

       Telecopy No.: (415) 397-0127

with a copy to:

 

       Perkins Coie

       101 Jefferson Drive

       Menlo Park, CA 94025

       Attention: Buddy Arnheim

       Telecopy No.: (650) 838-4350

21. Entire Agreement. This Agreement, including the Exhibits, Schedules and
Certificates hereto and the NDA, represent the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, including that certain letter of intent, dated
October 15, 2007, between Seller and Buyer. This Agreement cannot be amended,
supplemented or changed, nor can any provision hereof be waived, except by a
written instrument signed by the party against whom enforcement of any such
amendment, supplement, modification or waiver is sought.

22. Successors. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns. Except as set forth in the first paragraph of this Agreement, no
assignment of this Agreement or of any rights or obligations hereunder may be
made by any party (by operation of law or otherwise) without the prior written
consent of the other parties and any attempted assignment without the required
consent shall be void. Notwithstanding the foregoing, the parties hereby agree
and acknowledge that, in connection with a transfer of a Warrant to a third
party in accordance with the terms and conditions of such Warrant, Seller may
transfer the associated rights and obligations set forth in Section 13 hereto
related to such Warrant to the third party acquiring the Warrant, provided that
(a) the transfer of the Warrant is made in full compliance with the terms of the
Warrant, (b) the third party transferee agrees in writing with the Company to be
bound by the terms, conditions and obligations of Section 13 of this Agreement.

23. Section Headings. The Section headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

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24. Applicable Law. This Agreement shall be governed by, construed and enforced
in accordance with the laws of the State of California, without regard to the
principles thereof relating to conflict of laws.

25. Expenses. Subject to Section 3 and Section 13 hereof, each of the parties
hereto shall pay its own expenses in connection with this Agreement and the
transactions contemplated hereby.

26. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under all applicable
laws and regulations. If, however, any provision of this Agreement shall be
prohibited by or invalid under any such law or regulation in any jurisdiction,
it shall, as to such jurisdiction, be deemed modified to conform to the minimum
requirements of such law or regulation, or, if for any reason it is not deemed
so modified, it shall be ineffective and invalid only to the extent of such
prohibition or invalidity without affecting the remaining provisions of this
Agreement, or the validity or effectiveness of such provision in any other
jurisdiction.

27. Counterparts. This Agreement may be executed in one or more counterparts,
confirmed by facsimile signatures transmitted by telephone or PDF formatted
signatures transmitted by electronic mail, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

28. Termination. This Agreement may be terminated and the sale of Assets
contemplated hereby may be abandoned at any time prior to the Closing Date by
either party if the sale of Assets has not been consummated by January 1, 2008.

[Signatures follow]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of
the date first written above.

 

MACROVISION CORPORATION By:   /s/ James Budge   Name:   James Budge   Title:  
Chief Financial Officer

MACROVISION INTERNATIONAL

HOLDING LIMITED PARTNERSHIP

By:   /s/ Stephen Yu   Name:   Stephen Yu   Title:   Director CRYPTOGRAPHY
RESEARCH, INC. By:   /s/ Paul Kucher   Name:   Paul Kucher   Title:   President