Document:

Exhibit 10.1

 

AMENDMENT TO

INDEPENDENT
CONTRACTOR AGREEMENT

 

THIS
AMENDMENT TO INDEPENDENT CONTRACTOR AGREEMENT (this “Amendment”) is dated as of
April 16th, 2008, by and between Dennis Gauger, an individual resident of
the State of Utah (the “Contractor”) and Cimetrix Incorporated, a Nevada
corporation (“Cimetrix”).

 

WHEREAS, the Contractor and
Cimetrix entered into that certain Independent Contractor Agreement, dated as
of April 16, 2004 (the “Agreement”).

 

WHEREAS, the Contractor and
Cimetrix wish to amend the terms of the Agreement as contained herein.

 

NOW, THEREFORE, in
consideration of the mutual promises and covenants set forth herein, the
parties hereto hereby agree as follows:

 

1.             Section 1 of the
Agreement is hereby amended and restated to be as follows:

 

“This
Agreement shall become effective as of the date hereof and shall continue
thereafter for a period of five (5) years unless terminated in accordance
with the provisions hereof.”

 

2.             Section 2.1 of the
Agreement is hereby amended and restated to be as follows:

 

“During
the term hereof, the Contractor agrees to use his best efforts and devote such
time as may be reasonably necessary to perform the duties to be agreed
upon.  Cimetrix and Contractor agree that
the Contractor will provide approximately 300 hours of service during each one
year period of this Agreement, and the consideration to be paid to Contractor
pursuant to this Agreement has been primarily based upon Contractor providing
that number of hours of service.”

 

3.             Section 7 of the Agreement
is hereby amended and restated to be as follows”

 

“This
Agreement and all rights granted to the Contractor hereunder may, at the option
of either party, be terminated, with or without reason, thirty (30) days after
written notice is provided to the other party. 
Upon termination, all obligations of the parties shall cease except the
obligations identified in the agreements listed in Paragraph 2.4.

 

4.             “Exhibit A” and “Exhibit B”
to the Agreement are hereby amended and restated to be as set forth on the
attached Exhibit A.

 

5.             By executing this Amendment, each of Cimetrix and
Contractor agrees to be bound by all the terms and conditions set forth in the
Agreement, as amended hereby.

 

6.             Except as modified by this
Amendment, the Agreement is ratified and affirmed and shall remain in full
force and effect.  From and after the
date of the Amendment, each and every reference in the Agreement to “this
Agreement”, “herein,” “hereof,” or similar words and phrases referring to the
Agreement or any word of phrase referring to a section or provision of the
Agreement is deemed for all purposes to be a reference to the Agreement as
amended pursuant to this Amendment.

 

 

7.             This Amendment shall inure
to the benefit of, and be binding upon, the parties and their respective
distributes, successors and assigns. 
This Amendment shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Utah.

 

8.             This Amendment may be
executed in any number of duplicate originals or counterparts, each of which
when so executed shall constitute in the aggregate but one and the same
document.  This Amendment may be executed
by facsimile signatures, each of which will be deemed an original.

 

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

 

CIMETRIX:

 

Cimetrix
Incorporated

 

	
  By:
  /s/ Robert H. Reback

  	
   

  
	
  Name:
  Robert H. Reback

  	
   

  
	
  Title:
  President and Chief Executive Officer

  	
   

  

 

 

CONTRACTOR:

 

	
  /s/
  Dennis P. Gauger

  	
   

  
	
  Dennis
  P. Gauger

  	
   

  

 

2

 

EXHIBIT A

 

Compensation
Schedule

 

	
  $3,500
  per month, due as follows:

  	
  $1,750
  paid by the 1st of each month

  
	
   

  	
  $1,750
  paid by the 16th of each month

  

 

For
the year ending April 15th, 2005, Cimetrix granted Contractor
35,000 Options to purchase Cimetrix common shares at a strike price of $0.35
per share that vested 25% every three months during such year.

 

For
the year ending April 15th, 2006, Cimetrix granted Contractor
35,000 Options to purchase Cimetrix common shares at a strike price of
$0.46 per share that vested 25% every three months during such year.

 

For
the year ending April 16th, 2006, Cimetrix granted Contractor
20,000 Shares of Restricted Stock under the 2006 Long-Term Incentive Plan that
vested 25% every three months during such year.

 

For
the year beginning April 16th, 2007, Cimetrix will grant
Contractor 20,000 Shares of Restricted Stock under the 2006 Long-Term Incentive
Plan that will vest 25% every three months during such year.

 

For
the year beginning April 16th, 2007, in the event that Cimetrix
undertakes a public offering, Cimetrix will (i) pay Contractor $100 per
hour for the additional work relating to the public offering performed by
Contractor for such year, and (ii) issue to Contractor additional Options
to purchase 15,000 shares of Cimetrix common stock.

 

For
the year beginning April 16th, 2008, Cimetrix will grant
Contractor 5,000 Shares of Restricted Stock under the 2006 Long-Term Incentive
Plan every three months for services rendered during such year.

 

3Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

by and between

 

 

DTS, INC.,

as Seller,

 

 

BEAUFORT CALIFORNIA, INC.,

as Buyer,

 

 

and

 

 

BEAUFORT INTERNATIONAL GROUP PLC,

as Guarantor

 

 

Dated as of

 

May 9, 2008

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  PURCHASE AND SALE OF THE ASSETS

  	
   

  	
  1

  
	
  1.1

  	
   

  	
  Assets and Liabilities

  	
   

  	
  1

  
	
  1.2

  	
   

  	
  Purchase Price; Payment Terms

  	
   

  	
  4

  
	
  1.3

  	
   

  	
  Sales, Use and Transfer Taxes

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
    ARTICLE II

  	
  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
   

  	
  6

  
	
  2.1

  	
   

  	
  Organization

  	
   

  	
  6

  
	
  2.2

  	
   

  	
  Authorization

  	
   

  	
  6

  
	
  2.3

  	
   

  	
  No Conflict

  	
   

  	
  6

  
	
  2.4

  	
   

  	
  Judgments; Litigation

  	
   

  	
  7

  
	
  2.5

  	
   

  	
  Intellectual Property and Proprietary Rights

  	
   

  	
  7

  
	
  2.6

  	
   

  	
  Employees and Independent Contractors

  	
   

  	
  9

  
	
  2.7

  	
   

  	
  Financial Statements

  	
   

  	
  10

  
	
  2.8

  	
   

  	
  Changes

  	
   

  	
  10

  
	
  2.9

  	
   

  	
  Material Contracts

  	
   

  	
  10

  
	
  2.10

  	
   

  	
  Compliance with Laws

  	
   

  	
  11

  
	
  2.11

  	
   

  	
  Permits, Licenses, Etc

  	
   

  	
  11

  
	
  2.12

  	
   

  	
  Taxes

  	
   

  	
  12

  
	
  2.13

  	
   

  	
  Brokers

  	
   

  	
  13

  
	
  2.14

  	
   

  	
  Purchased Subsidiaries

  	
   

  	
  13

  
	
  2.15

  	
   

  	
  Purchased Assets

  	
   

  	
  14

  
	
  2.16

  	
   

  	
  Customers

  	
   

  	
  14

  
	
  2.17

  	
   

  	
  Suppliers

  	
   

  	
  14

  
	
  2.18

  	
   

  	
  Environmental Matters

  	
   

  	
  15

  
	
  2.19

  	
   

  	
  Product Returns and Warranty Liability

  	
   

  	
  15

  
	
  2.20

  	
   

  	
  Absence of Certain Changes

  	
   

  	
  15

  
	
  2.21

  	
   

  	
  Disclosure

  	
   

  	
  15

  
	
  2.22

  	
   

  	
  Closing Working Capital

  	
   

  	
  15

  
	
  2.23

  	
   

  	
  No Other Representations or Warranties

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
    ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES OF BUYER AND
  GUARANTOR

  	
   

  	
  16

  
	
  3.1

  	
   

  	
  Organization and Qualification

  	
   

  	
  16

  
	
  3.2

  	
   

  	
  Authorization

  	
   

  	
  16

  
	
  3.3

  	
   

  	
  No Conflict

  	
   

  	
  16

  
	
  3.4

  	
   

  	
  Legal Proceedings

  	
   

  	
  17

  
	
  3.5

  	
   

  	
  Parent Company

  	
   

  	
  17

  
	
  3.6

  	
   

  	
  Brokers

  	
   

  	
  17

  
	
  3.7

  	
   

  	
  Transferred Employees

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
    ARTICLE IV

  	
  COVENANTS

  	
   

  	
  17

  
	
  4.1

  	
   

  	
  Employee Matters

  	
   

  	
  17

  
	
  4.2

  	
   

  	
  Assumed Liabilities

  	
   

  	
  18

  

 

i

 

	
  4.3

  	
   

  	
  Filing of Tax Returns; Allocation of Straddle Period
  Taxes; Cooperation

  	
   

  	
  18

  
	
  4.4

  	
   

  	
  Allocation of Consideration

  	
   

  	
  19

  
	
  4.5

  	
   

  	
  Bulk Sales Laws

  	
   

  	
  19

  
	
  4.6

  	
   

  	
  Confidentiality

  	
   

  	
  19

  
	
  4.7

  	
   

  	
  Conduct of Business During Earnout Period

  	
   

  	
  19

  
	
  4.8

  	
   

  	
  Earnout Determination

  	
   

  	
  19

  
	
  4.9

  	
   

  	
  Board Observation Rights

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   ARTICLE V

  	
  CLOSING DELIVERIES

  	
   

  	
  20

  
	
  5.1

  	
   

  	
  Transaction Agreements

  	
   

  	
  20

  
	
  5.2

  	
   

  	
  Deliveries to Buyer

  	
   

  	
  20

  
	
  5.3

  	
   

  	
  Deliveries to Seller

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   ARTICLE VI

  	
  INDEMNIFICATION

  	
   

  	
  21

  
	
  6.1

  	
   

  	
  Survival of Representations and Warranties and
  Covenants

  	
   

  	
  21

  
	
  6.2

  	
   

  	
  Indemnification by Seller

  	
   

  	
  22

  
	
  6.3

  	
   

  	
  Indemnification by Buyer

  	
   

  	
  22

  
	
  6.4

  	
   

  	
  Claims

  	
   

  	
  22

  
	
  6.5

  	
   

  	
  Limitations on Indemnity

  	
   

  	
  23

  
	
  6.6

  	
   

  	
  Subrogation and Duplication of Payments

  	
   

  	
  24

  
	
  6.7

  	
   

  	
  Indemnification Net of Benefits

  	
   

  	
  24

  
	
  6.8

  	
   

  	
  Exclusive Remedy

  	
   

  	
  24

  
	
  6.9

  	
   

  	
  Relationship Between Assumed Liabilities and
  Indemnification

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   ARTICLE VII

  	
  MISCELLANEOUS

  	
   

  	
  25

  
	
  7.1

  	
   

  	
  Rules of Construction

  	
   

  	
  25

  
	
  7.2

  	
   

  	
  Further Actions

  	
   

  	
  25

  
	
  7.3

  	
   

  	
  Expenses

  	
   

  	
  25

  
	
  7.4

  	
   

  	
  Entire Agreement

  	
   

  	
  25

  
	
  7.5

  	
   

  	
  Descriptive Headings; Definitions

  	
   

  	
  26

  
	
  7.6

  	
   

  	
  Notices

  	
   

  	
  26

  
	
  7.7

  	
   

  	
  Governing Law

  	
   

  	
  27

  
	
  7.8

  	
   

  	
  Assignability

  	
   

  	
  27

  
	
  7.9

  	
   

  	
  Waivers and Amendments

  	
   

  	
  27

  
	
  7.10

  	
   

  	
  Third Party Rights

  	
   

  	
  27

  
	
  7.11

  	
   

  	
  Severability

  	
   

  	
  27

  
	
  7.12

  	
   

  	
  Guarantee

  	
   

  	
  27

  
	
  7.13

  	
   

  	
  Counterparts

  	
   

  	
  27

  

 

ii

 

Exhibits

 

	
  Exhibit A

  	
   

  	
  Definition of Certain Terms

  
	
  Exhibits B-1 through B-4

  	
   

  	
  Closing Deliveries

  
	
  Exhibit C -1 through C-5

  	
   

  	
  Sublease Agreements

  

 

Schedules

 

	
  Schedule 1.1(a)(ii)

  	
   

  	
  Purchased Assets – Owned Business IP Rights

  
	
  Schedule 1.1(a)(iii)

  	
   

  	
  Purchased Assets – In-Bound Licenses of Seller

  
	
  Schedule 1.1(a)(iv)

  	
   

  	
  Purchased Assets – In-Bound Licenses and Intra-Company Licenses of
  Purchased Subsidiaries

  
	
  Schedule 1.1(a)(v)

  	
   

  	
  Purchased Assets – Purchased Out-Bound Licenses

  
	
  Schedule 1.1(a)(vi)

  	
   

  	
  Purchased Assets – Purchased Shares

  
	
  Schedule 1.1(a)(ix)

  	
   

  	
  Purchased Assets – Purchased Personal Property

  
	
  Schedule 1.1(a)(xiii)

  	
   

  	
  Purchased Assets – Other Purchased Assets

  
	
  Schedule 2.3(b)

  	
   

  	
  Consents

  
	
  Schedule 2.5(a)

  	
   

  	
  Owned Business IP Rights

  
	
  Schedule 2.5(b)

  	
   

  	
  In-Bound Licenses

  
	
  Schedule 2.5(c)

  	
   

  	
  Out-Bound Licenses

  
	
  Schedule 2.5(d)

  	
   

  	
  Intra-Company Licenses

  
	
  Schedule 2.5(j)

  	
   

  	
  Assignment of Intellectual Property Rights Exceptions

  
	
  Schedule 2.6

  	
   

  	
  Business Employees

  
	
  Schedule 2.6(c)

  	
   

  	
  Business Employees – Severance Obligations

  
	
  Schedule 2.6(d)

  	
   

  	
  Independent Contractors

  
	
  Schedule 2.7

  	
   

  	
  Financial Statements

  
	
  Schedule 2.8

  	
   

  	
  Changes

  
	
  Schedule 2.9

  	
   

  	
  Material Contracts

  
	
  Schedule 2.11

  	
   

  	
  Permits

  
	
  Schedule 2.14(c)

  	
   

  	
  Purchased Subsidiaries – Jurisdictions Qualified to Do Business

  
	
  Schedule 2.16

  	
   

  	
  Customers

  
	
  Schedule 2.17

  	
   

  	
  Suppliers

  
	
  Schedule 2.18

  	
   

  	
  Environmental Matters

  
	
  Schedule 2.19

  	
   

  	
  Product Warranties

  
	
  Schedule 2.20

  	
   

  	
  Certain Changes

  
	
  Schedule A-1

  	
   

  	
  Other Permitted Encumbrances

  

 

iii

 

ASSET PURCHASE AGREEMENT

 

THIS
ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as
of May 9, 2008 (the “Effective Date”), by and among DTS, Inc.,
a Delaware corporation (“Seller”), Beaufort California, Inc., a California
corporation (“Buyer”), and, with respect to Article III and Section 7.12
only, Beaufort International Group Plc, a public limited company incorporated
in England (“Guarantor”).  Each of
Seller and Buyer may hereafter be referred to herein as a “party” or
collectively as the “parties.”

 

RECITALS

 

A.                                   Through
its DTS Digital Cinema division, Seller is engaged, among other things, in the
business of designing, developing, marketing, licensing, implementing and
supporting technologies, products and services for the distribution and
presentation of content in commercial cinemas, but specifically excluding
operations incident to Seller’s digital images business and consumer licensing
business (the “Business”).

 

B.                                     The
Board of Directors of Seller has determined that it is advisable and in the
best interests of Seller’s stockholders to sell, assign, transfer, convey and
deliver to Buyer, and Buyer desires to purchase from Seller the Business,
including, without limitation, certain rights, property, title and interest in
the assets, properties and rights of the Business, subject to the terms and
conditions set forth in this Agreement and, in furtherance thereof, the Boards
of Directors of each of Seller and Buyer has approved this Agreement and the
transactions contemplated hereby.

 

C.                                     Certain
operations of the Business are conducted by Seller directly and others are
conducted through the Purchased Subsidiaries.

 

D.                                    Unless
otherwise defined herein, for purposes of this Agreement capitalized terms
shall have the meanings ascribed to them in Exhibit A.

 

AGREEMENT

 

NOW,
THEREFORE, in consideration of the mutual benefits to be derived and the
representations and warranties, conditions and promises contained herein, and
intending to be legally bound hereby, the parties hereby agree as follows:

 

ARTICLE I

 

PURCHASE AND SALE OF THE ASSETS

 

1.1                                 Assets
and Liabilities.

 

(a)                                  Purchased
Assets.  Upon the terms and subject
to the conditions of this Agreement, Buyer hereby purchases from Seller, and
Seller hereby sells, assigns, transfers, conveys and delivers to Buyer, all of
Seller’s right, title and interest as of the Effective Date in and to the
following assets of Seller (collectively the “Purchased Assets”):

 

(i)                                     all
of Seller’s rights under the Purchased Contracts;

 

 

(ii)                                  the
Owned Business IP Rights identified on Schedule 1.1(a)(ii);

 

(iii)                               all
of Seller’s rights under the In-Bound Licenses identified on Schedule 1.1(a)(iii);

 

(iv)                              all
of the Purchased Subsidiaries’ rights under the In-Bound Licenses and
Intra-Company Licenses identified on Schedule 1.1(a)(iv);

 

(v)                                 all
of the rights of Seller or the Purchased Subsidiaries under the Out-Bound
Licenses identified on Schedule 1.1(a)(v) (the “Purchased
Out-Bound Licenses”);

 

(vi)                              the
outstanding shares of capital stock of each of the subsidiaries of Seller
listed on Schedule 1.1(a)(vi) (collectively, “Purchased
Shares”) and all minute books and other corporate records relating to the
Purchased Subsidiaries;

 

(vii)                           all
accounts receivable arising pursuant to the Purchased Contracts or otherwise
derived from the operations of the Business;

 

(viii)                        all
federal, foreign, state, local or other governmental consents, licenses,
permits, grants or authorizations and the like owned, held or utilized by
Seller in the operation of the Business, subject to Section 7.2 of this
Agreement, to the extent Seller is permitted to transfer or assign the same to
Buyer and does not need to retain them to operate the Retained Business (the “Authorizations”);

 

(ix)                                the
tangible assets of Seller, including Inventory, machinery, equipment, office
supplies, furniture, leasehold improvements, vehicles and other tangible
personal property of Seller, that are identified on Schedule 1.1(a)(ix),
plus such additions or less any such deletions therefrom as occur in the
ordinary course of business (collectively, the “Purchased Personal Property”);

 

(x)                                   all
of Seller’s rights, claims, credits, causes of action or rights of set-off
against third parties relating to the Purchased Assets, including all rights to
seek and obtain injunctive relief and to recover damages for past, present and
future infringement of Purchased IP Rights;

 

(xi)                                to
the extent permitted by applicable law, copies of all books and records of
Seller (including those kept in electronic form) to the extent exclusively
pertaining to or necessary for the operation of the Business, the Purchased
Assets or the Assumed Liabilities;

 

(xii)                             any
Employee Plan or interest in any Employee Plan of the Foreign Purchased
Subsidiaries; and

 

(xiii)                          the
other assets of Seller identified in Schedule 1.1(a)(xiii).

 

(b)                                 Excluded
Assets.  Seller is not selling,
assigning, transferring or conveying to Buyer hereunder and Buyer is not
purchasing hereunder any assets of Seller other than the Purchased Assets
(collectively, “Excluded Assets”), including, without limitation, the
following:

 

2

 

(i)                                     all
cash and cash equivalents on hand and in banks, including petty cash, security
deposits, letters of credit issued by Seller and any other restricted cash or
cash assets;

 

(ii)                                  all
accounts receivable arising pursuant to contracts or other documents other than
the Purchased Contracts;

 

(iii)                               all
rights to refunds and credits with respect to any Taxes paid by Seller for all
taxable periods ending on or prior to the Effective Date;

 

(iv)                              all
of Seller’s rights under Intra-Company Licenses;

 

(v)                                 any
Employee Plan or interest in any Employee Plan, other than Employee Plans or
interest in Employee Plans of the Foreign Purchased Subsidiaries;

 

(vi)                              all
rights and interest in insurance policies of Seller and any subsidiary of
Seller, including prepaid insurance premiums, unearned refunds and claim
proceeds; and

 

(vii)                           all of
Seller’s rights, titles and interests, whether presently existing or arising
hereafter, in assets other than the Purchased Assets.

 

(c)                                  Liabilities
Assumed by Buyer.  Upon the terms and
subject to the conditions of this Agreement, effective as of the Effective
Date, Buyer shall assume and be obligated pursuant to this Agreement to pay
when due, perform or discharge any and all Liabilities of Seller (other than
Excluded Liabilities), to the extent relating to or arising out of the
operation of the Business or the ownership of the Purchased Assets, whether
such Liabilities were or are incurred or accrued prior to or following the
Effective Date (collectively, the “Assumed Liabilities”).  The Assumed Liabilities include:

 

(i)                                     product
liability, any warranty, service or upgrade obligations or any other Liability
with respect to the Inventory and any and all products manufactured,
distributed, shipped, consigned, sold or licensed in the conduct of the
Business or any services rendered by Seller or any Purchased Subsidiary in
connection with the Business, whether occurring prior to or following the
Effective Date;

 

(ii)                                  all
Taxes incurred, accrued or due in connection with the operation of the Business
and ownership of the Purchased Assets, including all Taxes incurred, accrued or
due in jurisdictions not part of the United States and all Transfer Taxes,
other than Taxes imposed on the income of Seller or any Purchased Subsidiary
included in a consolidated return filed or to be filed by Seller;

 

(iii)                               all
Liabilities in connection with, arising under or pursuant to,
the Purchased IP Rights, whether or not occurring prior to the Effective
Date, including but not limited to, Liabilities with respect to intellectual
property infringement;

 

(iv)                              all
Liabilities of Seller arising out of the termination of employment of any
Transferred Employee, including any and all claims made by a Transferred 

 

3

 

Employee against Seller alleging wrongful
termination or that Seller failed to provide any advance notice of termination
of employment required under applicable law, including, without limitation,
under the federal WARN Act or the California WARN Act;

 

(v)                                 all
trade payables and accrued Liabilities of the Business;

 

(vi)                              any
and all Liabilities, whenever incurred, under the Purchased Contracts;

 

(vii)                           any and
all Liabilities, whenever incurred, under the Purchased Out-Bound Licenses; and

 

(viii)                        all
Liabilities of the Purchased Subsidiaries.

 

(d)                                 Excluded
Liabilities.  Buyer is not assuming,
and the term “Assumed Liabilities” does not include, any Excluded
Liabilities.  For purposes of this
Agreement, the term “Excluded Liabilities” shall mean any and all
Liabilities of Seller solely relating to or solely arising out of any of the
following:

 

(i)                                     Seller’s
operation of business activities unrelated to the Business;

 

(ii)                                  the
Excluded Assets;

 

(iii)                               income
tax liability of any Purchased Subsidiary reported or required to be reported
on a consolidated income tax return with Seller;

 

(iv)                              all
Liabilities of Seller with respect to accrued wages, salaries, vacation,
holiday, sick leave and other benefits of the Transferred Employees as of the
Effective Date, and all Liabilities of Seller with respect to bonus (including
any bonuses that arise out of the completion of the transactions contemplated
hereby), commissions and severance amounts, if any, due to the Transferred
Employees as of the Effective Date;

 

(v)                                 payroll
taxes in respect of the employment of Transferred Employees  through and including the Effective Date; and

 

(vi)                              contracts
or agreements of Seller that are not Purchased Contracts or Purchased Out-Bound
Licenses.

 

1.2                                 Purchase
Price; Payment Terms.

 

(a)                                  The
aggregate consideration payable at the Closing for the Purchased Assets is
$3,250,000 (the “Cash Purchase Price”) plus assumption by Buyer of the
Assumed Liabilities (together, the “Purchase Price”).

 

(b)                                 Concurrently
with Buyer’s purchase from Seller the Purchased Assets hereunder, Buyer is
assuming the Assumed Liabilities.

 

4

 

(c)                                  The
Cash Purchase Price is being paid to Seller, by wire transfer of funds,
concurrently with the execution of this Agreement.

 

(d)                                 In
addition to the Cash Purchase Price, following the Effective Date, Buyer shall
pay to Seller an additional $6,750,000 (the “Deferred Purchase Price”)
upon the earliest to occur of:

 

(i)                                     the
first anniversary of the Effective Date;

 

(ii)                                  the
admission or readmission of the Guarantor or the Buyer to the London Stock
Exchange’s AIM market;

 

(iii)                               the
sale or other transfer by the Guarantor of 50% or more of the issued and
outstanding shares of Buyer, other than to an affiliate of the Guarantor;

 

(iv)                              the
acquisition by an individual or legal entity of more than one-half of the
voting rights or equity interests in the Guarantor or in the Buyer in a merger,
tender offer or exchange offer;

 

(v)                                 the
sale or other disposition by Buyer outside of the ordinary course of business
of a majority of Buyer’s assets, as determined by reference to the book value
thereof, whether in a single transaction or a series of transactions; and

 

(vi)                              any
action taken by Buyer or the Guarantor to liquidate, dissolve or otherwise
suspend or terminate its operations.

 

The
first to occur of (i) – (vi) above is referred to as the “Trigger
Date”.

 

(e)                                  No
later than the fifth business day after the Trigger Date, Buyer shall pay the
Deferred Purchase Price to Seller by wire transfer of immediately available
funds to such account as Seller shall designate in writing to Buyer.

 

(f)                                    In
addition to the Purchase Price and the Deferred Purchase Price, Buyer shall
make to Seller earnout payments as follows (the “Earnout Payments”):

 

(i)                                     With
respect to Year 1, $1,000,000 if Gross Revenues for Year 1 exceed $25,000,000
but are less than $30,000,000, and $2,500,000 if Gross Revenues  for Year 1 are greater than or equal to
$30,000,000; and

 

(ii)                                  With
respect to Year 2, $1,000,000 if Gross Revenues for Year 2 exceed $35,000,000
but are less than $40,000,000, and $2,500,000 if Gross Revenues  for Year 2 are greater than or equal to $40,000,000.

 

(g)                                 Buyer
shall make Earnout Payments within 90 days after the applicable period by wire
transfer of immediately available funds to such account as Seller shall
designate in writing to Buyer.

 

5

 

1.3                                 Sales,
Use and Transfer Taxes.  Buyer shall
be responsible for paying, shall promptly discharge when due, and shall
reimburse, indemnify and hold harmless Seller from, any sale or use, transfer,
value added, real property gains, excise, stamp, stamp duty, stamp duty reserve
tax (SDRT), or other Taxes imposed by reason of the transfer of the Purchased
Assets provided hereunder (“Transfer Taxes”) and any deficiency,
interest or penalty asserted with respect thereto.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller
represents and warrants to Buyer and Guarantor as follows as of May 7,
2008 (or, in the case of a representation or warranty made as of a specific
other date, as of such other date), subject to such exceptions as are disclosed
in a disclosure schedule delivered by Seller to Buyer contemporaneously
with the execution of this Agreement (the “Disclosure Schedule”).  The Disclosure Schedule exceptions shall
be arranged according to specific sections in this Article II and shall
provide exceptions to, or otherwise qualify, the corresponding section in
this Article II and any other section in this Article II where it is
reasonably apparent that the disclosure is relevant to such other section.

 

2.1                                 Organization.  Seller is a corporation, duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has the power and authority to conduct the Business as it is presently
being conducted and to sell and convey the Purchased Assets to Buyer.

 

2.2                                 Authorization.  The execution and delivery of this Agreement
and each agreement, instrument, certificate and document being or to be
executed and delivered pursuant to this Agreement (each a “Transaction
Agreement”) by Seller and the performance of all obligations hereunder and
thereunder by Seller have been duly authorized and no other action or approval
is necessary for the execution, delivery or performance of this Agreement and
each Transaction Agreement by Seller. 
Seller has the requisite corporate power and authority to execute and
deliver this Agreement and each Transaction Agreement.  This Agreement and each Transaction Agreement
to which Seller is a party has been or will be duly executed and delivered by
Seller and is or will be a valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except as such enforceability may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect, relating to or limiting
creditors’ rights generally and (b) general principles of equity (whether
considered in an action in equity or at law).

 

2.3                                 No
Conflict.  Except for the filings as
may be required under, and other applicable requirements of, the Exchange Act,
neither the execution and delivery of this Agreement or any Transaction
Agreement by Seller, nor the consummation of the transactions contemplated
hereunder, will:

 

(a)                                  result
in the creation or imposition of any Encumbrance upon the Purchased Assets,
other than Permitted Encumbrances;

 

6

 

(b)                                 except
as set forth on Schedule 2.3(b), (i) require the consent,
approval or authorization of, or declaration, filing or registration with any
Governmental Entity or other Person to be made or obtained by Seller or a
Purchased Subsidiary, or (ii) constitute (with the giving of notice or
lapse of time, or both) a default under or give rise to any right of
termination, cancellation or acceleration of any material right or obligation
of Seller or a Purchased Subsidiary under any Material Contract, except where
the failure to obtain such consent, approval, authorization, declaration,
filing or registration, or where such default, right of termination,
cancellation or acceleration, would not result, individually or in the
aggregate, in a Material Adverse Effect; or

 

(c)                                  violate
in any material respect any provision of applicable law relating to the
Business or the Purchased Assets, other than such violations as would not
result, individually or in the aggregate, in a Material Adverse Effect on (i) the
validity or enforceability of this Agreement or any of the Transaction
Agreements, or (ii) Seller’s ability to convey the Purchased Assets or
otherwise complete the transactions contemplated hereunder.

 

2.4                                 Judgments;
Litigation.  There is no (a) outstanding
judgment, order, decree, award, stipulation or injunction of any Governmental
Entity against Seller or any Purchased Subsidiary affecting the Purchased
Assets or the Business or (b) action, suit, arbitration, hearing, inquiry,
proceeding, complaint, charge or investigation, whether civil, criminal or
administrative, by or before any Governmental Entity or arbitrator or any
appeal from any of the foregoing pending or, to the knowledge of Seller, threatened
against Seller or any Purchased Subsidiary, or affecting the Purchased Assets
or the Business (collectively, the “Judgments and Litigation”), except
such threatened Judgments and Litigation as would not have, individually or in
the aggregate, a Material Adverse Effect.

 

2.5                                 Intellectual
Property and Proprietary Rights.

 

(a)                                  Schedule
2.5(a) contains an accurate and complete list (by name, owner, and,
where applicable, registration number and jurisdiction of registration,
application, certification or filing) of all the material Intellectual Property
Rights owned by Seller or a Purchased Subsidiary and used exclusively in
connection with the products and services provided by the Business or the
operation of the Business as conducted as of the Effective Date (collectively,
the “Owned Business IP Rights,” with all such registered Owned Business
IP Rights being referred to herein as “Registered Business IP Rights”).  Except as set forth in Schedule 2.5(a),
Seller or a Purchased Subsidiary owns the entire right, title and interest to
all Owned Business IP Rights free and clear of Encumbrances (other than
Permitted Encumbrances).

 

(b)                                 Schedule
2.5(b) contains an accurate and complete list of all licenses,
sublicenses and other agreements material to the Business pursuant to which a
third party authorizes Seller or a Purchased Subsidiary to use, modify,
distribute, or practice any rights under, grant sublicenses with respect to or
incorporate in Purchased Assets, any Intellectual Property Rights owned by a third
party (“In-Bound Licenses”), other than In-Bound Licenses that consist
solely of “shrink-wrap” and similar commercially available end-user licenses,
and, with respect to each such In-Bound License, states whether such In-Bound
License is exclusive or non-exclusive.

 

7

 

(c)                                  Schedule
2.5(c) contains an accurate and complete list of all licenses,
sublicenses and other agreements material to the Business pursuant to which
Seller or a Purchased Subsidiary authorizes a third party to use, modify,
distribute, or practice any rights under or grant sublicenses with respect to,
any Purchased IP Rights or pursuant to which Seller grants rights to use or
practice any rights under any Intellectual Property Rights owned by a third
party (“Out-Bound Licenses”), other than Out-Bound Licenses that consist
solely of “shrink-wrap” and similar commercially available end-user licenses,
and, with respect to each such Out-Bound License, states whether such Out-Bound
License is exclusive or non-exclusive.

 

(d)                                 Schedule
2.5(d) contains an accurate and complete list of all licenses and
other agreements material to the Business pursuant to which Seller authorizes a
Purchased Subsidiary to use, modify, distribute or practice any rights under or
grant any sublicenses with respect to any Owned Business IP Rights (“Intra-Company
Licenses”).

 

(e)                                  The
Owned Business IP Rights, together with the rights granted to Seller and the
Purchased Subsidiaries under the In-Bound Licenses constitute all the
Intellectual Property Rights material to the Business as currently conducted.

 

(f)                                    All
Registered Business IP Rights that are Purchased IP Rights are in good
standing, are in material compliance with applicable legal requirements and are
not subject to any unpaid maintenance fees or taxes or actions falling due
within thirty  (30) days after the Effective
Date.  To Seller’s knowledge, there are
no proceedings, challenges or claims before any court, tribunal (including the
U.S. Patent and Trademark Office or equivalent authority anywhere in the world)
related to any such Registered Business IP Rights, other than normal patent and
trademark prosecution proceedings.

 

(g)                                 To
Seller’s knowledge, the business, operations and activities of the Business as
presently conducted do not infringe or violate, or constitute a
misappropriation of, any intellectual property rights of any other Person
(including, without limitation, any Affiliate of Seller).  Seller has not received, since January 1,
2007, any complaint, claim or notice alleging any such infringement, violation
or misappropriation relating to the Business or the Purchased Assets, and no
claim or notice made prior to January 1, 2007 remains outstanding or
unresolved.  To Seller’s knowledge,
neither Seller nor any Purchased Subsidiary has taken any action or failed to
take any action that would reasonably be expected to result in the abandonment,
cancellation, forfeiture, relinquishment, invalidation, waiver or
unenforceability of any Purchased IP Right. 
To Seller’s knowledge, no Person has infringed or is infringing any
Purchased IP Right or has otherwise misappropriated or is otherwise
misappropriating any Purchased IP Right.

 

(h)                                 The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not constitute a breach of any
instrument or agreement governing any Purchased IP Right, will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any Purchased IP Right or impair the right of Buyer or any Purchased
Subsidiaries to use, sell or license any Purchased IP Right or portion thereof,
in each case, except as would not individually or in the aggregate, have a
Material Adverse Effect.

 

8

 

(i)                                     Seller
has taken reasonable steps to protect and preserve the confidentiality of all
Purchased IP Rights not otherwise disclosed in published patents, patent
applications, registered copyrights or public publications (“Business Confidential
Information”).  Use by and disclosure
to employees or others of Business Confidential Information has been pursuant
to the terms of valid and binding written confidentiality and
nonuse/restricted-use agreements or agreements that contain similar
obligations.

 

(j)                                     Except
as set forth on Schedule 2.5(j), to Seller’s knowledge, each
current and former employee and independent contractor of Seller and each
Purchased Subsidiary who is or was involved in, or who has contributed to, the
creation or development of any Purchased IP Right has executed and delivered
(and, to Seller’s knowledge, is in compliance with) an agreement which provides
a valid written assignment, or an obligation to provide an assignment on
request, to Seller or the Purchased Subsidiaries, as applicable, of all title
and rights to all such Purchased IP Rights.

 

2.6                                 Employees
and Independent Contractors.

 

(a)                                  Schedule 2.6
contains a true and complete list, as of April 15, 2008, of all employees
employed primarily in the Business, including Persons employed by a Purchased
Subsidiary, (collectively, the “Business Employees”), including each
such employee’s (i) name, (ii) title, (iii) principal location
of employment, (iv) name of employer (i.e., Seller or a Purchased
Subsidiary), and (v) current salary and other compensation arrangement
(i.e. commission rate).

 

(b)                                 (i) 
all Business Employees and other employees who have previously been employed
for the Business have executed Seller’s form Proprietary Information and
Inventions Agreement, a copy of which has been provided to Buyer (or, in the
case of employees of a Purchased Subsidiary, a form providing similar
protections); (ii) to the knowledge of Seller, no Business Employee is a
party to or is bound by any employment contract, patent disclosure agreement,
noncompetition agreement or other restrictive covenant or other contract with
any third party that would be likely to affect in any material way (A) the
performance by such Business Employee of any of his or her duties or
responsibilities as an employee of the Business, or (B) the Business;
and (iii) to the knowledge of Seller, no Business Employee is in violation
of any term of any employment contract, patent disclosure agreement,
noncompetition agreement, or any other restrictive covenant with any third
party relating to the right of any such Business Employee to be employed by
Seller.

 

(c)                                  Seller
has terminated the employment of all Transferred Employees, including the
employment agreements set forth on Schedule 2.6(c), effective upon the
consummation of the transactions contemplated by this Agreement.  Seller has paid or otherwise satisfied all
obligations due to the Transferred Employees in respect of their employment
with Seller upon the termination of their employment with Seller, including if
applicable, any wages, salaries, bonuses (including any bonuses that arise out
of the completion of the transactions contemplated hereby), accrued vacation
pay, and severance pay, and all payroll taxes payable with respect to such
employees, with the exception of the retention agreements set forth on Schedule
2.6(c), which will be discharged by Seller in accordance with their terms.  Buyer shall have no obligations or
liabilities to any Transferred Employee as a result of wages, salaries, bonuses
(including any bonuses that arise out of the completion of the transactions
contemplated 

 

9

 

hereby), accrued vacation pay and severance pay, if any, owing to a
Transferred Employee as a result of such employee’s employment with Seller
prior to the Effective Date.

 

(d)                                 Schedule 2.6(d) contains
a true and complete list, as of May 1, 2008, of all consultants and other
independent contractors who are providing material services to the Business
(the “Independent Contractors”), including (i) each such
Independent Contractor’s name, (ii) type of services being provided by
each Independent Contractor, (iii) principal location where services are
provided, and (iv) name of entity (i.e., Seller or a Purchased Subsidiary)
with which such Independent Contractor contracted to provide services.

 

(e)                                  (i) Seller
is not a party to any collective bargaining agreement or other labor contract
applicable to a Business Employee, (ii) to Seller’s knowledge, no union
has bargaining rights with respect to any Business Employee and there are no
threatened or apparent union organizing activities involving any Business
Employee, (iii) there are no strikes, slowdowns or work stoppages pending
or threatened between Seller and a Business Employee, and (iv) to Seller’s
knowledge, there are no unfair labor practice complaints involving a Business
Employee pending against Seller.

 

2.7                                 Financial
Statements.  Schedule 2.7 sets
forth the (a) unaudited consolidated balance sheet of the Business as of December 31,
2007, and the related unaudited statement of operations for the twelve-month
period ended December 31, 2007, and (b) the unaudited consolidated
balance sheet of the Business as of March 31, 2008 (the “Interim
Balance Sheet”), and the related unaudited statement of operations for the
three-month period then ended, in each case prepared in accordance GAAP (except
as indicated therein and for the absence of footnotes and subject to year-end
adjustments which would not, individually or in the aggregate, have a Material
Adverse Effect) consistent with the Business’s past practice.

 

2.8                                 Changes.  Except as described in Schedule 2.8,
as contemplated by or as disclosed in this Agreement, or undertaken in
connection with the Restructuring, since December 31, 2007, Seller has
conducted the Business only in the ordinary course and in a manner materially
consistent with past practice and, since such date there has not been a
Material Adverse Effect.

 

2.9                                 Material
Contracts.

 

(a)                                  Schedule 2.9
sets forth all of the following written agreements to which Seller or any
Purchased Subsidiary is a party that are solely attributable or exclusively
relate to the Business:

 

(i)                                     any
lease of real property and any lease of personal property with a future payment
obligation in excess of $100,000 per annum;

 

(ii)                                  any
contract for the purchase of materials, supplies, goods, services, equipment or
other assets providing for annual payments by Seller or a Purchased Subsidiary
of, or pursuant to which in 2007 Seller or a Purchased Subsidiary paid, in the
aggregate $100,000 or more;

 

(iii)                               any
sales, distribution or other similar agreement providing for the sale by Seller
or a Purchased Subsidiary of materials, supplies, goods, services, equipment or

 

10

 

other assets that provide for annual payments
to Seller or a Purchased Subsidiary of, or pursuant to which in 2007 Seller or
a Purchased Subsidiary received, in the aggregate $100,000 or more;

 

(iv)                              any
contract relating to outstanding indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed or
secured by any asset), except contracts relating to indebtedness incurred in
the ordinary course of business in an amount not exceeding $50,000;

 

(v)                                 any
employment, severance or consulting agreement with respect to any Business
Employee;

 

(vi)                              any
contract or other document that limits the freedom of Seller to compete in any
line of business or with any Person or in any area (collectively with all the
agreements identified in this Section 2.9(a), the “Material Contracts”).

 

(b)                                 To
Seller’s knowledge, each Material Contract that is currently in effect
constitutes a legal, valid and binding agreement of Seller or a Purchased
Subsidiary and of each other party thereto, and is enforceable in accordance
with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to or limiting creditors’ rights generally, and (b) general
principles of equity (whether considered in an action in equity or at
law).  Neither Seller nor, to Seller’s
knowledge, any other party to such Material Contracts, is in violation or
breach of or default under any such Material Contract (or with notice or lapse
of time or both, would be in violation or breach of or default under such
Material Contract) which would result, individually or in the aggregate, in a
Material Adverse Effect.

 

2.10                           Compliance
with Laws.  Neither Seller nor any
Purchased Subsidiary is in violation of or in default in any material respect
under any foreign or domestic (federal, state or local) law, statute, treaty,
rule, regulation, ordinance, franchise, permit, concession, license, order,
decree, consent decree or similar instrument or determination or award
applicable to it by which any of the Purchased Assets or the Business is bound
or affected, except for such violations or defaults as would not, individually
or in the aggregate, result in a Material Adverse Effect.

 

2.11                           Permits,
Licenses, Etc.  Seller possesses all
franchises, licenses, permits, certificates, authorizations, rights and other
approvals of Governmental Entities (“Permits”) necessary to conduct the
Business as currently conducted, except for such failure as would not
individually or in the aggregate, have a Material Adverse Effect.  Schedule 2.11 contains a true and
complete list of all material Permits. 
To Seller’s knowledge, each Permit was lawfully and validly issued, and
no proceeding is pending or, to Seller’s knowledge, threatened regarding the
revocation, suspension or limitation of any Permit.  The consummation of the transactions
contemplated by this Agreement will not result in the revocation, suspension or
limitation of any Permit, and except as set forth on Schedule 2.11, no
Permit will require the consent of its issuing authority to or as a result of
the consummation of the transactions contemplated hereby.

 

11

 

2.12                           Taxes.

 

(a)                                  The
Purchased Assets are not subject to any liens for Taxes, except liens for Taxes
not yet due, and Buyer will not become directly or indirectly liable for, and
no lien, claim or encumbrance will be placed upon the Purchased Assets with respect
to, (i) any Taxes attributable to the ownership or use of the Purchased
Assets with respect to periods prior to and including the Effective Date or (ii) any
other Taxes attributable to the actions or activities of Seller on or prior to
the Effective Date, in each case other than Transfer Taxes and other Taxes
included in the Assumed Liabilities or included as current liabilities in the
calculation of Working Capital.  None of
the Purchased Assets is a “United States real property interest” within the
meaning of Section 897 of the Code.

 

(b)                                 With
respect to the Purchased Subsidiaries:

 

(i)                                     All
Tax Returns of the Purchased Subsidiaries required to be filed on or prior to
the Effective Date have been or will be timely filed.  All such Tax Returns were or will be correct
and complete in all material respects when filed.

 

(ii)                                  All
material Taxes required to be paid by the Purchased Subsidiaries (whether or
not shown on any Tax Return) have been paid in full.  There is (A) no claim for Taxes being
asserted against any Purchased Subsidiary that has resulted in a lien against
the property of the Purchased Subsidiary other than liens for Taxes not yet due
and payable, (B) no audit or pending audit of, or Tax controversy
associated with, any Tax Return of any Purchased Subsidiary, or of any other
person where any Purchased Subsidiary could be held liable for Taxes, being
conducted by a Tax Authority, (C) no extension of any statute of
limitations on the assessment of any Taxes granted by any Purchased Subsidiary currently
in effect, and (D) no agreement to any extension of time for filing any
Tax Return which has not been filed.

 

(iii)                               No
Purchased Subsidiary has been a member of an affiliated group filing a
consolidated federal income Tax Return other than the group the common parent
of which is Seller (the “Seller Group”). 
All consolidated income Tax Returns, including any consolidated or
combined state or foreign income Tax Returns, that were required to be filed by
the Seller Group on or prior to the date hereof and which included a Purchased
Subsidiary were timely filed.  All such
Tax Returns were correct and complete in all material respects when filed.  No Purchased Subsidiary will be a party to
any Tax allocation, Tax sharing agreement or other similar agreement as of the
Effective Date nor will any Purchased Subsidiary have any liability or
potential liability to another party under any such agreement.

 

(iv)                              Each
Purchased Subsidiary has withheld and paid all material Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.

 

(v)                                 No
audit is currently pending with respect to any Tax Return of any Purchased
Subsidiary or of the Seller Group.  Neither
Seller nor any Purchased Subsidiary has waived any statute of limitations in
respect of Taxes or agreed to any extension of time for the assessment of any
Tax.  No claim is currently pending by an
authority in a jurisdiction where 

 

12

 

a Purchased Subsidiary does not file Tax
Returns asserting that such Purchased Subsidiary is or may be subject to
taxation by that jurisdiction.

 

(vi)                              No
Purchased Subsidiary will be required to include in income, or exclude any item
of deduction from, taxable income for any taxable period (or portion thereof)
ending after the Effective Date as a result of any (i) change in method of
accounting for a taxable period ending on or prior to the Effective Date; (ii) “closing
agreement” described in Section 7121 of the Code (or any corresponding or
similar provision of state, local, or foreign tax law); (iii) intercompany
transactions or any excess loss account described in Treasury Regulations under
Section 1502 of the Code (or any corresponding or similar provision of
state, local, or foreign tax law); (iv) installment sale or open
transaction disposition made on or prior to the Effective Date; or (v) prepaid
amount received on or prior to the Effective Date.  No Purchased Subsidiary has been or will be
required to include any adjustment in taxable income for any taxable period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state, local or foreign tax laws as a result of
transactions, events or accounting methods employed prior to the Effective
Date.

 

(vii)                           No
Purchased Subsidiary is obligated to make any payments, and is not a party to
any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 162(m) or
280G.  Seller has not been a United
States real property holding corporation within the meaning of Code Section 897(c)(2).

 

(viii)                        Each
Purchased Subsidiary has disclosed on its Tax Returns any tax reporting position
taken in any Tax Return which could result in the imposition of penalties under
Section 6662 of the Code or any comparable provisions of state, local or
foreign law.  No Purchased Subsidiary has
consummated, has participated in, or is currently participating in any
transaction which was or is a “tax shelter” transaction as defined in Section 6662,
6011, 6012 or 6111 of the Code or the Treasury Regulations promulgated
thereunder or which was or is a “Listed Transaction” or a “Reportable
Transaction” as those terms are defined in the Code and the Treasury
regulations thereunder.

 

2.13                           Brokers.  Except for Cowen and Company, LLC, and
Montgomery & Co. LLC, each of whose fees, commissions and expenses are
the sole responsibility of Seller, all negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by Seller
directly with Buyer without the intervention of any Person on behalf of Seller
in such manner as to give rise to any valid claim by any Person against Buyer
for a finder’s fee, brokerage commission or similar payment.

 

2.14                           Purchased
Subsidiaries.

 

(a)                                  Except
for a nominal number of shares of capital stock of the Foreign Purchased
Subsidiaries which, while beneficially owned directly or indirectly by Seller,
are owned of record by an Affiliate of Seller due to requirements of applicable
law, (i) each of the Purchased Subsidiaries is a direct or indirect,
wholly-owned subsidiary of Seller, (ii) the Purchased Shares constitute
all of the issued and outstanding capital stock of each Purchased Subsidiary,
and (iii) there are no outstanding options, warrants, rights or agreements
for the purchase or acquisition from the Purchased Subsidiaries of any shares
of their capital stock.

 

13

 

(b)                                 Each
Purchased Subsidiary is an entity duly organized, validly existing and in good
standing (to the extent the laws of such jurisdiction contemplate the concept
of “good standing”) under the laws of the jurisdiction of its organization, and
has the power and authority to conduct its portion of the Business as it is
presently being conducted, except for such failures as would not, individually
or in the aggregate, have a Material Adverse Effect.

 

(c)                                  Each
Purchased Subsidiary is duly qualified or licensed to do business and in good
standing (to the extent the laws of such jurisdiction(s) contemplate the
concept of “good standing”) in each of the jurisdictions in which such
qualification is required, except for such failure as would not individually or
in the aggregate, have a Material Adverse Effect.

 

(d)                                 Seller
has delivered to Buyer complete and correct copies of the certificate of
incorporation and bylaws or other organizational documents, in each case, as
amended and in effect as of the date hereof, of each Purchased Subsidiary.

 

2.15                           Purchased
Assets.

 

(a)                                  To
Seller’s knowledge, the Purchased Assets represent all of the assets currently
used predominantly in the conduct of the Business except for such assets that
are not material.

 

(b)                                 To
Seller’s knowledge, other than commercially available software used to support
the Business, general corporate, support and shared services provided by Seller
(including without limitation services related to accounting, finance, legal
and information technology), credit support and similar arrangements provided
by Seller, the Purchased Assets and the assets presently owned, leased, or
licensed by the Purchased Subsidiaries in the aggregate are sufficient for the
conduct of the Business as presently conducted, consistent with past practice,
except for such assets, which the failure to own, lease or license would not,
individually or in the aggregate, have a Material Adverse Effect.

 

(c)                                  To
Seller’s knowledge, Seller has good title to, a valid leasehold interest in, or
valid rights to use, all the Purchased Assets free and clear of all
Encumbrances other than Permitted Encumbrances, except for such failures as
would not, individually or in the aggregate, have a Material Adverse Effect.

 

(d)                                 To
Seller’s knowledge, the Purchased Assets taken as a whole are generally
adequate for the purposes for which they are used by Seller in the ordinary
course of the Business.

 

2.16                           Customers.  Listed in Schedule 2.16 are the
names of the ten (10) most significant customers (by revenue) of the
Business for the 12-month period ended March 31, 2008, and since that date
until the date hereof, no such customer has terminated its relationship with
Seller or provided Seller with written notice of its intention so to terminate
(or not to renew) its relationship with Seller.

 

2.17                           Suppliers.  Schedule 2.17 contains a complete
list of each of the ten (10) most significant suppliers of raw materials,
supplies, merchandise, services and other goods for the Business for the
12-month period ended March 31, 2008 (“Significant Suppliers”) and
the 

 

14

 

amount for which
each such Significant Supplier invoiced Seller during such period.  Seller has not received any notice that any
Significant Supplier will not continue to sell materials, supplies,
merchandise, services and other goods to the Business.

 

2.18                           Environmental
Matters.  Except as set forth on Schedule 2.18,
(a) Seller and the Purchased Subsidiaries have operated the Business in material
compliance with all applicable Environmental Laws, (b) to Seller’s
knowledge, there has been no material generation, use, transportation,
treatment, storage, release or disposal by Seller or any Purchased Subsidiary
of any Hazardous Substances in connection with or relating to the ownership,
lease, occupation or use of the Facilities by Seller or any Purchased
Subsidiary in material violation of any applicable Environmental Laws, (c) to
Seller’s knowledge, there is not present in, on, under or emanating onto or
from any of the Facilities any Hazardous Substance in violation of any
applicable Environmental Laws, and (d) neither Seller nor any Purchased
Subsidiary has received any actual or threatened notice, demand, or claim that
the operation of the Business or any of the Facilities is in violation of or
non-compliance with any applicable Environmental Laws, except, in all cases, as
would not result, individually or in the aggregate, in a Material Adverse
Effect.

 

2.19                           Product
Returns and Warranty Liability. 
Copies of the Business’s forms of standard product warranties are
attached as Schedule 2.19 hereto. 
Except for variations from such standard policies as would not,
individually or in the aggregate, have a Material Adverse Effect, the Business
has not provided product warranties more favorable than provided for in the
standard form.

 

2.20                           Absence
of Certain Changes.  Since December 31,
2007, except in connection with the Restructuring, as reflected in the Interim
Balance Sheet, or as disclosed in Schedule 2.20, Seller has not:  (i) incurred any material debts,
obligations or liabilities (absolute, accrued, contingent or otherwise) of the
Business, other than in the ordinary course of business; (ii) subjected to
or permitted a Encumbrance (other than a Permitted Encumbrance) upon or
otherwise encumbered any of the Purchased Assets; (iii) sold, transferred,
licensed or leased any of the Purchased Assets except in the ordinary course of
business; (iv) suffered any physical damage, destruction or loss (whether
or not covered by insurance) to the Purchased Assets causing a Material Adverse
Effect; (v) made or suffered any material amendment of any Material
Contract; or (vi) entered into any agreement or otherwise obligated itself
to do any of the foregoing.

 

2.21                           Disclosure.  To Seller’s knowledge, no representation or
warranty of Seller in this Agreement (as qualified by the Disclosure Schedule)
contains any untrue statement of a material fact or omits or will omit to state
any material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
materially misleading.

 

2.22                           Closing
Working Capital.  As of the close of
business on the business day immediately preceding the Effective Date, the
Working Capital of the Business is equal to or greater than $1,000,000.

 

2.23                           No
Other Representations or Warranties. 
EXCEPT AS SPECIFICALLY SET FORTH IN THIS ARTICLE II, NEITHER SELLER NOR
ANY OF ITS OFFICERS, 

 

15

 

DIRECTORS,
EMPLOYEES, AFFILIATES, AGENTS OR REPRESENTATIVES IS MAKING, AND EACH OF THEM
HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR

 

Buyer
and Guarantor hereby represent and warrant to Seller as follows:

 

3.1           Organization
and Qualification.  Each of Buyer and
Guarantor is an entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has the power and
authority to perform its obligations under this Agreement.

 

3.2           Authorization.  The execution and delivery of this Agreement
and each Transaction Agreement by each of Buyer and Guarantor and the
performance of each Buyer and Guarantor of its obligations hereunder have been
duly authorized by Buyer and Guarantor and no other action or approval by Buyer
or Guarantor is necessary for the execution, delivery or performance of this
Agreement and each Transaction Agreement by each of Buyer and Guarantor, as
applicable.  Each of Buyer and Guarantor
has full right, power, authority and capacity to execute and deliver this
Agreement and each Transaction Agreement, as applicable.  This Agreement and each Transaction Agreement
to which Buyer or Guarantor is a party has been or will be duly executed and
delivered by Buyer and Guarantor, as applicable, and is or will be a valid and
binding obligation of each of Buyer and Guarantor, as applicable, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or limiting creditors’
rights generally, and (b) general principles of equity (whether considered
in an action in equity or at law).

 

3.3           No
Conflict.  Except as described on Schedule 3.3,
neither the execution and delivery of this Agreement by each of Buyer and
Guarantor nor the consummation of the transactions contemplated hereunder will:

 

(a)                                  conflict
with or result in a breach by either Buyer or Guarantor of, or constitute a
default by Buyer or Guarantor under, or create an event that, with the giving
of notice or the lapse of time, or both, would be a default under or material
breach of, any of the terms, conditions or provisions of (i) any material
indenture, mortgage, lease, deed of trust, pledge, loan or credit agreement,
license agreement or any other material contract, arrangement or agreement to
which Buyer or Guarantor, as applicable, is a party or to which a material
portion of Buyer’s or Guarantor’s assets is subject, (ii) its certificate
of incorporation or bylaws or other organizational documents, or (iii) any
judgment, order, writ, injunction, decree or demand of any Governmental Entity
which materially affects Buyer’s or Guarantor’s ability to perform its
obligations under this Agreement;

 

(b)                                 result
in the creation or imposition of any Encumbrance upon any material portion of
the assets of Buyer or Guarantor, or which materially affects Buyer’s or
Guarantor’s 

 

16

 

ability to conduct its business as conducted prior to the date of this
Agreement or perform its obligations under this Agreement; or

 

(c)                                  require
the consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Entity or other Person to be made or
obtained by Buyer or Guarantor in connection with the execution, delivery and
performance by Buyer or Guarantor of this Agreement and the consummation of the
transactions contemplated hereby.

 

3.4                                 Legal
Proceedings.  There is no action,
claim suit or proceeding pending or, to Buyer’s and Guarantor’s knowledge,
threatened, by or against or affecting Buyer, Buyer’s Affiliates, Guarantor or
Guarantor’s Affiliates that challenges, or may have the effect of preventing,
delaying, making illegal or otherwise interfering with the execution and
delivery by Buyer or Guarantor of this Agreement or any of the Transaction
Agreements or the performance of Buyer or Guarantor hereunder or thereunder.

 

3.5                                 Parent
Company.  Guarantor owns all of the
issued and outstanding shares of capital stock of Buyer.

 

3.6                                 Brokers.  All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by Buyer
directly with Seller without the intervention of any Person on behalf of Buyer
in such manner as to give rise to any valid claim by any Person against Seller
for a finder’s fee, brokerage commission or similar payment.

 

3.7                                 Transferred
Employees.  Buyer has offered
Continued Equivalent Employment to at least 95% of the Business Employees with “California”
opposite his or her name on Schedule 2.6.  Each Business Employee that accepts such
offer of employment is referred to herein as a “Transferred Employee.”

 

ARTICLE IV

 

COVENANTS

 

4.1                                 Employee
Matters.

 

(a)                                  Employment.
Effective as of the Effective Date immediately following the termination of
their employment with the Seller, Buyer shall hire all Transferred Employees.

 

(b)                                 Certain
Benefit Payments.  To the extent it
has not done so prior to the consummation of the transactions contemplated by
this Agreement, on the Effective Date, Seller shall pay or otherwise discharge
any liability for claims filed with respect to any Business Employee eligible
for coverage, reimbursement and/or benefits under the terms of any of Employee
Plan, other than an Employee Plan of a Foreign Purchased Subsidiary, provided
such liability (A) accrued or became payable during the period of such
employee’s employment with Seller prior to the Effective Date or (B) arose
out of Seller’s termination of such employee’s employment on or prior to the
Effective Date.

 

(c)                                  No
Rights Conferred Upon Employees.  The
parties hereby acknowledge that, other than the Transferred Employees, Buyer is
under no obligation to employ any current 

 

17

 

or future employee of Seller. 
Further, Buyer shall be under no obligation to (i) continue the
employment of any Transferred Employee after the Effective Date, and nothing in
this Agreement shall confer any rights or remedies under this Agreement on any
such Transferred Employee or (ii) continue any Transferred Employee’s
coverage under any Employee Plan.

 

4.2                                 Assumed
Liabilities.  Buyer will pay or
otherwise discharge the Assumed Liabilities and will indemnify and hold
harmless Seller in respect thereof.

 

4.3                                 Filing
of Tax Returns; Allocation of Straddle Period Taxes; Cooperation.

 

(a)                                  Subject
to subsections (c) and (d) below, Seller will be responsible for
the preparation and filing of all Tax Returns of Seller (including Tax Returns
required to be filed after the Effective Date) to the extent such Tax Returns
include or relate to Seller’s operation of the Business or Seller’s use or
ownership of the Purchased Assets on or prior to the Effective Date, and
specifically including consolidated, combined or unitary returns for taxable
periods of the Purchased Subsidiaries that end on the Effective Date.  Seller’s Tax Returns, to the extent they
relate to the Business or Purchased Assets, shall, in all material respects, be
true, complete and correct and prepared in accordance with applicable law.  Except as provided in Section 1.3,
Seller will be responsible for and make all payments of Taxes shown to be due
on such Tax Returns.

 

(b)                                 Buyer
will be responsible for the preparation and filing of all Tax Returns it is
required to file with respect to Buyer’s ownership or use of the Purchased
Assets or its operation of the Business attributable to taxable periods (or
portions thereof) commencing after the Effective Date.  Buyer’s Tax Returns, to the extent they
relate to the Purchased Assets or the Business, shall be true, complete and
correct and prepared in accordance with applicable law in all material
respects.  Buyer will make all payments
of Taxes shown to be due on such Tax Returns.

 

(c)                                  Except
with respect to any consolidated, combined or unitary income Tax Return
required to be prepared by Seller or Buyer as set forth above, each Purchased
Subsidiary shall be responsible for the preparation and filing of its own Tax
Returns and payment of all Taxes as they become due.  Each such Tax Return shall be prepared in a
manner consistent with past accounting methods and practices of such Purchased
Subsidiary.

 

(d)                                 Buyer
will be responsible for the preparation and filing of all Tax Returns required
to filed with respect to the Business or the Purchased Assets, including Tax
Returns of the Purchased Subsidiaries, for which Taxes are reported on a Tax
Return covering a period commencing before and ending after the Effective Date
(a “Straddle Period Tax”).  Each
such Tax Return shall be prepared in a manner consistent with past accounting
methods and practices of such Purchased Subsidiary.

 

(e)                                  To
the extent relevant to the Business or the Purchased Assets, each party shall (i) provide
the other with such assistance as may reasonably be required in connection with
the preparation of any Tax Return and the conduct of any audit or other
examination by any taxing authority or in connection with judicial or
administrative proceedings relating to any liability for Taxes and (ii) retain
and provide the other with all records or other information that 

 

18

 

may be relevant to the preparation of any Tax Return, or the conduct of
any audit or examination, or other proceeding relating to Taxes.

 

4.4                                 Allocation
of Consideration.  The Parties agree
that for income tax purposes the consideration received by Seller for the
Purchased Assets pursuant to this Agreement shall be allocated in accordance
with Section 1060 of the Code and that all financial reports and income
tax returns and reports, including IRS Form 8594, as applicable, and any
corresponding state or foreign tax forms, will be prepared and filed in a
manner consistent with such allocation, and no party hereto will take any
position inconsistent with such allocation in any subsequent income tax
returns, reports, or proceedings.  The
parties agree to cooperate in good faith to allocate the consideration in
accordance with this Section 4.4 within 30 days following the Effective
Date.

 

4.5                                 Bulk
Sales Laws.  Buyer hereby waives
compliance by Seller with any applicable bulk sale or bulk transfer laws of any
jurisdiction (“Bulk Sales Laws”) in connection with the sale of the
Purchased Assets to Buyer.    Nothing in
this Section 4.5 shall estop or prevent Buyer or Seller from asserting as
a bar or defense of any Action brought under the Bulk Sales Laws that such Bulk
Sales Laws do not apply to the transactions contemplated hereby.

 

4.6                                 Confidentiality.  The parties acknowledge and agree to continue
to abide by the terms and conditions of that certain Confidentiality Agreement dated as of August 28, 2007.

 

4.7                                 Conduct
of Business During Earnout Period. 
During the period commencing on the Effective Date and ending on the
last day of Year 2, Buyer shall dedicate such resources as, in its commercial
judgment, are required to operate the Business to obtain a viable economic return,
and to use its commercial efforts consistent with its business objectives to
achieve Gross Revenues in excess of $30,000,000 in Year 1 and in excess of
$40,000,000 in Year 2.   Buyer shall, and
shall cause any Affiliates engaged in the Business to, conduct the Business
through Buyer and the Purchased Subsidiaries. 
Nothing herein shall, however, limit the ability of Guarantor or any of
Guarantor’s other Affiliates from engaging in other businesses or operations,
whether or not such other businesses or operations are similar to, or
complimentary with the Business.  Should
Buyer breach the covenants set forth in this Section 4.7, the Earnout
Payments shall immediately become due in full, and Buyer shall promptly pay
such amount to Seller.

 

4.8                                 Earnout
Determination.  As promptly as
practical after the end of each of Year 1 and Year 2, but in no event later
than thirty (30) days after the end of each such year, Buyer shall prepare and
deliver to Seller a statement of Gross Revenues for each of Year 1 and Year 2,
as applicable prepared in accordance with GAAP as modified by the definition of
Gross Revenues together with all relevant supporting materials and workpapers
used in such determination (the “Determination”).  Buyer shall make available its management
team and employees to discuss such information with Seller.  Should Seller object to the determination,
Seller shall give written notice to Buyer of its objections thereto.  If Seller and Buyer are unable to reconcile
their differences in writing within twenty (20) days after written notice of
the objection is delivered to Buyer, the items in dispute shall be submitted to
a mutually acceptable accounting firm for final determination (the “Determining
Accountants”) and the Gross Revenues shall be determined by the Determining
Accountants and shall become final and conclusive upon all parties hereto.  The Determining Accountants shall consider
only the items in dispute and shall be instructed to act within thirty (30)
days (or such longer period as the Seller and Buyer may agree) to resolve all 

 

19

 

claims and
dispute.  All Earnout Payments shall be
paid within two (2) business days of final determination, whether by
agreement of the parties or determination of the Determining Accountants.  The fees and expenses of the Determining
Accountants shall be borne equally by Seller and Buyer.

 

4.9                                 Board
Observation Rights.  From the
Effective Date until the date of final determination of the payment of the
Earnout Payments, Seller shall have the right to attend all meetings either in
person or telephonically of the Board of Directors and shareholders of Buyer in
a nonvoting observer capacity, to receive reasonable advanced written notice of
such meetings and to receive the information provided by Buyer to the attendees
of such meetings.

 

4.10                           Cooperation
With Intellectual Property Assignments. 
Seller agrees to execute and deliver at the request of Buyer, all
documents, instruments and assignments reasonably requested by Buyer, and to
perform any other reasonable acts Buyer may require in order to vest all of
Seller’s right, title, and interest in and to the Intellectual Property Rights
acquired by Buyer hereunder in Buyer and/or to provide evidence to support any
of the foregoing in the event such evidence is reasonably deemed necessary by
Buyer, to the extent such evidence is in the possession or control of
Seller.  Buyer shall reimburse Seller for
any out-of-pocket costs incurred pursuant to this Section 4.10.

 

ARTICLE V

 

CLOSING DELIVERIES

 

5.1                                 Transaction
Agreements.  Concurrently with the
execution of this Agreement, the parties are entering into the following
additional Transaction Agreements:

 

(a)                                  License
Agreement.  A consent to the
assignment of that certain Intellectual Property License Agreement DTS-DDC,
dated November 16, 2007 from DTS Digital Cinema, Inc. to Buyer.

 

(b)                                 Real
Estate Arrangements.  Buyer and
Seller are entering into Sublease Agreements, the forms of which are attached
hereto as Exhibits C-1 and C-5.

 

5.2                                 Deliveries
to Buyer.  Concurrently with the
execution of this Agreement, Seller is delivering to Buyer the following
certificates, instruments and agreements:

 

(i)                                     a
bill of sale and the assignment, assumption, and general conveyance (the “Assignment
and Assumption Agreement”), in substantially the form attached hereto as Exhibits B-1
and B-2, dated as of the Effective Date, executed by Seller;

 

(ii)                                  an
assignment from Seller of all right, title and interest of Seller in each
patent, patent application, trademark and trademark application, and domain
name assignment  (the “Domain Name
Assignment”)included as a Purchased Asset hereunder, in substantially the
form attached hereto as Exhibits B-3 and B-4, dated as of the Effective
Date, executed by Seller in favor of Buyer;

 

20

 

(iii)                               a
stock assignment or other transfer instrument appropriate under the relevant
jurisdiction executed by Seller in favor of Buyer, or Buyer’s designee, with
respect to the Purchased Shares (except for DTS France S.A.R.L. and DTS Italia
S.r.l., which are owned by other Purchased Subsidiaries; except that with
respect to outstanding shares of the Foreign Purchased Subsidiaries required
under applicable law to be held by an entity other than Buyer, Seller or the
Affiliate of Seller who is the record holder of such shares immediately prior
to execution of this Agreement has executed and delivered the stock assignment
or transfer instrument in favor of such Affiliate of Buyer as designated by
Buyer.

 

5.3                                 Deliveries
to Seller.  Concurrently with the
execution of this Agreement, Buyer is delivering to Seller each of the
following certificates, instruments, agreements and items:

 

(i)                                     a
certificate, dated as of the Effective Date, executed by Buyer, certifying that
the resolutions attached to such certificate were duly adopted by the Board of
Directors of Buyer and that such resolutions remain in full force and effect,
authorizing and approving the execution by Buyer of this Agreement and the
Transaction Agreements and approving the consummation by Buyer of the transactions
contemplated by such agreements and documents;

 

(ii)                                  the
Assignment and Assumption Agreement, dated as of the Effective Date, executed
by Buyer;

 

(iii)                               the
Domain Name Assignment, dated as of the Effective Date, executed by Buyer; and

 

(iv)                              the
Cash Purchase Price, by wire transfer of immediately available funds to an
account designated by Seller.

 

ARTICLE VI

 

INDEMNIFICATION

 

6.1                                 Survival
of Representations and Warranties and Covenants.

 

(a)                                  The
representations and warranties of the parties hereto contained in this
Agreement shall survive the execution and delivery of this Agreement and the
closing and the consummation of the transactions contemplated hereby (and any
examination or investigation by or on behalf of any party hereto) until the first
anniversary of the Effective Date (the “Cut-Off Date”).  Notwithstanding the foregoing, (i) any
obligation in respect of a claim for indemnity as a result of a breach of any
representation or warranty of any party that is asserted in writing with reasonable
specificity as to the nature and, if then determinable, amount of the claim
prior to the Cut-Off Date shall survive past such date until finally resolved
or settled, and (ii) any obligation in respect of a claim by a party for
indemnity as a result of a breach of a representation or warranty arising or
resulting from actual fraud on the part of the other party (either, a “Fraud
Claim”) shall survive until the expiration of the applicable statute of
limitations (except for claims in respect thereof pending at such time, which
shall survive until finally resolved or settled).

 

21

 

(b)                                 No
Action may be commenced with respect to any representation or warranty
hereunder, or in any writing delivered pursuant hereto, unless written notice,
setting forth in reasonable detail the claimed breach thereof, shall be
delivered pursuant to Section 7.6 to the party or parties against whom
liability for the claimed breach is charged on or before the termination of the
survival period specified in Section 6.1(a) for such representation,
warranty, covenant or agreement; provided, that the foregoing shall not
apply to Seller’s obligations pursuant to Section 1.2.

 

6.2                                 Indemnification
by Seller.  Subject to the provisions
of this Article VI, Seller covenants and agrees to defend, indemnify and
hold harmless Buyer and each Person who controls Buyer from and against and
with respect to any Damages directly or indirectly, relating to, resulting from
or arising out of (i) any breach of or inaccuracy in any representation or
warranty by Seller under this Agreement, (ii) any breach, default or
nonfulfillment of any covenant, agreement or other obligation of Seller under
this Agreement, or (iii) any Excluded Liabilities.

 

6.3                                 Indemnification
by Buyer.  Buyer covenants and agrees
to defend, indemnify and hold harmless Seller from and against any and all
Damages arising out of or resulting from (i) any inaccuracy in or breach
of any representation or warranty made by Buyer in this Agreement, (ii) the
failure of Buyer to perform or observe any covenant, agreement or provision to
be performed or observed by Buyer pursuant to this Agreement, including but not
limited to the Assumed Liabilities, (iii) the operation or business of
Buyer or the Business after the Effective Date or any claims, actions or
litigation concerning the same, or (iv) violation of the federal WARN Act
or the California WARN Act, resulting from the transactions contemplated by
this Agreement or the operation of the Business after the Effective Date.

 

6.4                                 Claims.

 

(a)                                  If
any party entitled to be indemnified pursuant to Section 6.2 or Section 6.3
(an “Indemnified Party”) receives notice of the assertion by any third
party of any claim or of the commencement by any such third party of any Action
(any such claim or Action, a “Third Party Claim”) or otherwise is
entitled to assert a claim for indemnification thereunder (any such claim or
Third Party Claim being referred to herein as an “Indemnifiable Claim”)
with respect to which another party hereto (an “Indemnifying Party”) is
or may be obligated to provide indemnification, the Indemnified Party shall
promptly notify the Indemnifying Party in writing (the “Claim Notice”)
of the Indemnifiable Claim; provided, however, that the failure to provide such
notice shall not relieve or otherwise affect the obligation of the Indemnifying
Party to provide indemnification hereunder, except to the extent that such
failure or delay prejudices the defense thereof.

 

(b)                                 The
Indemnifying Party shall have a reasonable period of time under the
circumstances after receipt of the Claim Notice to undertake, conduct and
control, through counsel of its own choosing, and at the Indemnifying Party’s
expense, the settlement or defense of any Third Party Claim, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith; provided, however, that (i) the Indemnifying Party shall permit
the Indemnified Party to participate in such settlement or defense through
counsel chosen by the Indemnified Party (subject to the consent of the
Indemnifying Party, which consent shall not be 

 

22

 

unreasonably
withheld), provided that the fees and expenses of such counsel shall be borne
by the Indemnified Party, and (ii) the Indemnifying Party shall not settle
any Third Party Claim without the Indemnified Party’s consent, which consent
shall not be unreasonably withheld (it being understood that consent to any
settlement that does not consist solely of the payment of money damages may
reasonably be withheld).  So long as the
Indemnifying Party is contesting any such Third Party Claim in good faith, the
Indemnified Party shall not pay or settle such claim without the Indemnifying
Party’s consent, which consent shall not be unreasonably withheld (it being
understood that consent to any settlement that does not consist solely of the
payment of money damages may reasonably be withheld).

 

(c)                                  Subject
to the foregoing provisions of this Section 6.4, for a period of 20 days
after delivery of a Claim Notice, the Indemnifying Party shall have the right
to object in a written statement (an “Objection”) to the claim made in
the Claim Notice, and such statement shall have been delivered to the
Indemnified Party prior to the expiration of such 20-day period.  If an Objection has been made, the
Indemnifying Party shall attempt to resolve the dispute with the Indemnified
Party in accordance with this Section 6.4(e).  Once an Objection has been made, the
Indemnifying Party and Indemnified Party shall attempt in good faith to agree
upon the rights of the respective parties with respect to the claim or claims
relating to the Claim Notice.  Any such
agreement shall be set forth in a written memorandum signed by both parties.  If the parties cannot come to such agreement
within 15 days after receipt by the Indemnified Party of the Objection, the
parties shall attempt to resolve such matter first by submission to non-binding
mediation in Los Angeles County, California. 
Except as otherwise agreed to in writing by the Indemnifying Party and
Indemnified Party, such matter shall be addressed in the following manner:  (i) the Indemnifying Party and
Indemnified Party will promptly provide each other with a detailed description
of each of their respective positions regarding the claim, including any
supporting evidence, documents or materials as reasonably requested by each
other; (ii) authorized representatives of each of the Indemnifying Party
and Indemnified Party will meet to discuss and attempt to resolve the Objection
or claim; and (iii) if the Objection or claim is not resolved as
contemplated by clause (ii) above, Indemnifying Party and Indemnified
Party will, by mutual consent, select an independent third party to mediate such
controversy, which mediation shall be non-binding.  Any communications made pursuant to this Section 6.4(e) shall
be deemed to be treated as settlement negotiations pursuant to Federal Rules of
Evidence 408 and shall not be admissible in court or an arbitration for any
purpose.

 

6.5                                 Limitations
on Indemnity.  Buyer is not entitled
to recover under Sections 6.2(i) and 6.2(ii), (a) except to the
extent that the aggregate amount of indemnifiable Damages incurred by Buyer
exceeds $100,000 (the “Threshold Amount”), or (b) for any Damages
in excess of $1,750,000 in the aggregate (the “Maximum Liability”).  Buyer agrees that it will not submit any
claim for indemnification pursuant to Section 6.2(i) and 6.2(ii) unless
and to the extent that the aggregate amount of all Damages for which indemnity
is claimed exceeds the Threshold Amount or for any Damages in excess of the
Maximum Liability; provided, however, that the Threshold Amount shall not apply
to the Working Capital representation contained in Section 2.23; provided
further, that the limitations set forth in this Section 6.5 shall not
apply in respect of a Fraud Claim or claims for indemnity pursuant to Section 6.2(iii)
and; provided, further, that Damages from such Fraud Claim and claims for
indemnity  shall not be included as Damages for
purposes to determining whether Damages exceed the Threshold Amount or the
Maximum Liability.  Buyer agrees that the
amount claimed in respect of each claim asserted for indemnity 

 

23

 

hereunder shall be
asserted by Buyer in good faith and shall bear a reasonable relationship to the
estimated Damages incurred or to be incurred by Buyer in respect of such claim,
to the extent that such amount is then determinable.  Notwithstanding anything herein to the
contrary, an Indemnified Party shall not be entitled to indemnification for any
Damages resulting from a breach of representation or warranty if the
Indemnified Party had knowledge of such breach prior to the Effective Date.

 

6.6                                 Subrogation
and Duplication of Payments.  To the
extent of any payment by an Indemnifying Party to or on behalf of an
Indemnified Party for any indemnifiable Damages, the Indemnifying Party will be
subrogated to all rights of the Indemnified Party to recover or obtain
reimbursement for the payment from any third party.  At the request of the Indemnifying Party at
any time and from time to time, the Indemnified Party shall execute and deliver
to the Indemnifying Party any document (and do all such other legally
permissible acts and things) as are reasonably necessary to enable the
Indemnifying Party to obtain or realize the benefit of that subrogation,
including the prosecution by the Indemnified Party, at the Indemnifying Party’s
expense, of a legal proceeding to enforce those rights of the Indemnified
Party, in each case to the extent that such Indemnified Party could not
reasonably be expected to be materially and adversely affected thereby.  If the Indemnifying Party requests the
Indemnified Party to institute a legal proceeding to recover or obtain
reimbursement from a third party of any amount paid by the Indemnifying Party
to or on behalf of the Indemnified Party for any indemnified Damages, that
legal proceeding will be covered by the indemnification provisions of this Article VI
as a Third Party Claim, and the Indemnifying Party shall indemnify and hold
harmless the Indemnified Party from all Damages arising out of, or in any way
connected with, that legal proceeding to the same extent that it is obligated
to do for any Losses of a Third Party Claim that is indemnified hereunder.

 

6.7                                 Indemnification
Net of Benefits.  The amount of any
recovery by an Indemnified Party pursuant to this Article VI shall be net
of any tax benefits and net of any insurance benefits actually received by such
Indemnified Party or its Affiliates.  The
Indemnified Party covenants to seek and pursue insurance benefits to which it
is entitled.

 

6.8                                 Exclusive
Remedy.  This Article VI sets
forth the sole and exclusive remedies of Buyer and Seller and their respective
successors and assigns for any Action any of them may assert or attempt to
assert against the other to the extent the Action in any way relates to this
Agreement or its negotiation, execution, delivery or performance, any alleged
breach of or default under this Agreement, or the transactions contemplated
hereby, regardless of whether such Action is based in tort (for example,
intentional or negligent misrepresentation) or contract, or arises at law or in
equity; provided, however, the foregoing limitation shall not apply to a Fraud
Claim.

 

6.9                                 Relationship
Between Assumed Liabilities and Indemnification.  Subject to the provisions of this Article VI,
Buyer shall be entitled to indemnification pursuant to Section 6.2 for Damages
in respect of the breach by Seller of the representations and warranties
contained in Article II even if such Damages would otherwise be assumed by
Buyer under Section 1.1(c).

 

24

 

ARTICLE VII

 

MISCELLANEOUS

 

7.1                                 Rules of
Construction.  This Agreement has
been negotiated by the parties and is to be interpreted according to its fair
meaning as if the parties had prepared it together and not strictly for or
against any party.  All references in
this Agreement to sections, schedules and exhibits are to sections, schedules
and exhibits of or to this Agreement unless expressly otherwise indicated.  At each place in this Agreement where the
context so requires, the masculine, feminine or neuter gender includes others.  “Including” means “including without
limitation.”  “Or” is used in the
inclusive sense of “and/or.”  Currency
amounts referenced herein, unless otherwise specified, are in U.S. Dollars.

 

7.2                                 Further
Actions.  From time to time, as and
when requested by any party hereto, each other party shall execute and deliver,
or cause to be executed and delivered, such documents and instruments and shall
take, or cause to be taken, such further or other actions as the requesting
party may reasonably deem necessary or desirable to carry out the intent and
purposes of this Agreement, to transfer, assign and deliver the Purchased
Assets to Buyer and its respective successors and assigns effective as of the
Effective Date (or to evidence the foregoing) and to consummate and give effect
to the other transactions, covenants and agreements contemplated hereby.  To the extent that the rights of Seller under
any contract or Authorization may not be transferred or assigned without the
consent of another Person, neither this Agreement nor the Bill of Sale and
Assignment and Assumption Agreement shall constitute an agreement to transfer
or assign the same if an attempted transfer or assignment would constitute a
breach thereof or be unlawful. 
If any such consent has not been obtained or if any attempted
transfer or assignment would be ineffective or would impair Buyer’s rights
under the instrument in question so that Buyer would not effectively acquire
the benefit of all such rights, then Seller, to the maximum extent permitted by
law and the instrument, shall, at Buyer’s request and expense, act as Buyer’s
agent in order to obtain for Buyer the benefits thereunder and cooperate, to
the maximum extent permitted by law and the instrument, with Buyer in any other
reasonable arrangement designed to provide such benefits to Buyer (including,
without limitation, by entering into an equivalent arrangement).

 

7.3                                 Expenses.  Except as expressly set forth herein, Seller
and Buyer shall each bear their own legal fees and other costs and expenses
with respect to the negotiation, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereunder.

 

7.4                                 Entire
Agreement.  This Agreement, which
includes the schedules and the exhibits hereto and the other documents,
agreements and instruments executed and delivered pursuant to this Agreement,
contains the entire agreement between the Parties hereto with respect to the
transactions contemplated by this Agreement and supersedes all prior
arrangements, understandings, proposals, prospectuses, projections and related
materials with respect thereto, other than the Confidentiality Agreement dated August 28, 2007 between
Buyer and Seller, which shall survive in accordance with its terms.

 

25

 

7.5                                 Descriptive
Headings; Definitions.  The
descriptive headings of this Agreement are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.

 

7.6                                 Notices.  All notices or other communications which are
required or permitted hereunder shall be in writing and shall be sufficiently
given if (a) delivered personally or (b) sent by registered or
certified mail, postage prepaid, or (c) sent by overnight courier with a
nationally recognized courier, or (d) sent via facsimile confirmed in
writing in any of the foregoing manners, as follows:

 

	
  If to Seller:

  	
   

  	
  DTS, Inc.

  Attention: General Counsel

  5171 Clareton Drive

  Agoura Hills, CA 91301

  Facsimile No.: (818) 7827-2470

  
	
   

  	
   

  	
   

  
	
  If to Buyer:

  	
   

  	
  Beaufort California, Inc.

  Attention: Chief Executive Officer

  20010 Pacific Coast Highway

  Malibu, CA 90265

  Facsimile No.:

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Pritchard Englefield

  14 New Street

  London EC2M 4HE

  Attention: Nicholas Roche

  Facsimile No.: +44 (0) 20 7972 9721

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Beaufort
  International Group Plc

  Finsgate, 5-7 Cranwood Street
 London EC1V9EE

  Attention: Stephen Oakes

  Facsimile No.: +44

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TroyGould PC

  1801 Century Park East, Suite 1600

  Los Angeles, CA 90067

  Attention: Istvan Benko

  Facsimile No.: (310) 789-1426

  

 

If
sent by mail, notice shall be considered delivered five (5) business days
after the date of mailing, and if sent by any other means set forth above,
notice shall be considered delivered 

 

26

 

upon
receipt thereof.  Any party may by notice
to the other parties change the address or facsimile number to which notice or
other communications to it are to be delivered or mailed.

 

7.7                                 Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to the choice of law principles thereof.

 

7.8                                 Assignability.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns.  This Agreement shall
not be assignable by any Person without the written consent of the other
parties and any such purported assignment by any party without such consent
shall be void.

 

7.9                                 Waivers
and Amendments.  Any amendment or
supplementation of this Agreement shall be effective only if in writing signed
by each of the parties hereto.  Any
waiver of any term or condition of this Agreement shall be effective only if in
writing signed by the party giving the waiver. 
A waiver of any breach or failure to enforce any of the terms or
conditions of this Agreement shall not in any way affect, limit or waive a
party’s rights hereunder at any time to enforce strict compliance thereafter
with every term or condition of this Agreement, except to the extent such
future rights are specifically included within the scope of such written
waiver.

 

7.10                           Third
Party Rights.  Notwithstanding any
other provision of this Agreement, this Agreement shall not create benefits on
behalf of any shareholder or employee of Buyer, or any other Person (including
without limitation any Business Employee, broker or finder), and this
Agreement shall be effective only as between the parties hereto, their
successors and permitted assigns.

 

7.11                           Severability.  If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction, be
invalid or unenforceable, such term or provision shall be ineffective as to
such jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable such term or provision in any other
jurisdiction, the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as
to which it is held invalid or enforceable.

 

7.12                           Guarantee.  Guarantor hereby unconditionally guarantees
in favor of Seller and its successors and assigns the full and punctual
performance by Buyer of each of its obligations under this Agreement.  This guaranty is an absolute, unconditional
and continuing guaranty of the full performance of this Agreement by Buyer and
is in no way conditioned upon any requirement of Seller to first attempt to
collect any amounts owing by Buyer to Seller or to enforce performance of any
obligation hereof by Buyer.  Should Buyer
default in the payment or performance of its obligations hereunder, Seller or
its assigns may cause the immediate performance by Guarantor of Buyer’s
obligations hereunder and cause any payment obligations to immediately become
due and payable to Seller or its assigns, without demand or notice of any
nature, all of which are expressly waived by Buyer.

 

7.13                           Counterparts.  This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such 

 

27

 

counterparts
together shall constitute but one agreement. 
Facsimile signatures shall be treated as if they were originals.

 

[SIGNATURE PAGE
FOLLOWS]

 

28

 

IN
WITNESS WHEREOF, the undersigned have executed and delivered this Agreement as
of the date first above written.

 

	
  “SELLER”

  	
  DTS, INC.

  
	
   

  	
   

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jon Kirchner

  
	
   

  	
     Name:

  	
  Jon Kirchner

  
	
   

  	
     Title:

  	
  President and

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  “BUYER”

  	
  BEAUFORT CALIFORNIA, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C.R.C. Thomas

  
	
   

  	
     Name:

  	
  C.R.C. Thomas

  
	
   

  	
     Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  “GUARANTOR”

  	
  BEAUFORT INTERNATIONAL GROUP PLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  [Illegible]

  
	
   

  	
     Name:

  	
  [Illegible]

  
	
   

  	
     Title:

  	
  Director

  
									

 

[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

 

29

 

EXHIBIT A

 

DEFINITION OF
CERTAIN TERMS

 

The
terms defined in this Exhibit A, whenever used in this Agreement
(including in any schedule to this Agreement), shall have the respective
meanings indicated below for all purposes of this Agreement, unless otherwise
indicated in this Agreement (or the applicable schedule):

 

“Action”:
any actual claim, action, suit, arbitration, hearing, inquiry, proceeding,
complaint, charge or investigation by or before any Governmental Entity or
arbitrator and any appeal from any of the foregoing

 

 “Affiliate”:  with respect to any Person, any Person
directly or indirectly through one or more intermediaries, that controls, is
controlled by, or is under common control with such other Person

 

“Assumed
Liabilities”:  as defined in Section 1.1(c)

 

 “Authorizations”:  as defined in Section 1.1(a)(viii)

 

“Bulk
Sales Laws”:  as defined in Section 4.5

 

“Business”:  as defined in the Recitals

 

“Business
Day” means Monday through Friday, excluding any day of the year on which
banks are required or authorized to close in California.

 

“Business
Confidential Information”:  as
defined in Section 2.5(i)

 

“Business
Employees”:  as defined in Section 2.6

 

“Cash
Purchase Price”:  as defined in Section 1.2.

 

“Code”:  Internal Revenue Code of 1986, as amended

 

“Continued
Equivalent Employment”: employment with Buyer that: (i) commences
immediately upon the Effective Date in the same location where the employee
worked for Seller, in an equivalent position performing equivalent functions; (ii) provides
substantially the same amount of wages the employee was earning when employment
ceased with the Seller, including, but not limited to, the employee’s (as
applicable) base salary, hourly pay rate, vacation or paid time off, bonuses,
and commissions; and (iii) provides similar employee benefits, including,
but not limited to, similar health insurance coverage.  Notwithstanding the foregoing, Continued
Equivalent Employment shall not require Buyer to (x) offer employees
equity compensation that is similar to the equity compensation offered by
Seller, (ii) offer retention bonuses or to enter into employment
agreements similar to those set forth on Schedule 2.6(c)

 

 “Damages” shall mean any and all
losses, liabilities, obligations, costs, expenses, damages or judgments of any
kind or nature whatsoever (including reasonable attorneys’, 

 

 

accountants’ and experts’ fees, and disbursements of
counsel), but excluding in all instances punitive and consequential damages

 

“Designated
Employees”:  as defined in Section 4.1(a)

 

“Employee
Plan”:  includes (i) all present
and prior (including terminated and transferred) plans, programs, agreements,
arrangements and methods of contributions or compensation (including all
amendments to and components of the same, such as a trust with respect to a
plan) providing any remuneration or benefits, other than current cash
compensation, to any current or former employee of Seller or to any other
person who provides services to Seller’s business, whether or not such plan or
plans, programs, agreements, arrangements and methods of contribution or
compensation are subject to ERISA and whether or not such plan or plans,
programs, agreements, arrangements and methods of contribution or compensation
are qualified under the Code; (ii) pension, retirement, profit sharing,
percentage compensation, stock purchase, stock option, bonus and non-qualified
deferred compensation plans; and (iii) disability, medical, dental,
workers compensation, health insurance, life insurance or other death benefits,
incentive, severance plans, vacation benefits and fringe benefits

 

“Encumbrance”:  any lien, mortgage, pledge, security
interest, charge or encumbrance of any kind, whether voluntary or involuntary,
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest)

 

“Environmental
Laws”:  the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”),
the Resource Conservation and Recovery Act of 1976, as amended (“RCRA”),
the National Environmental Policy Act of 1969 (“NEPA”), the National
Historic Preservation Act of 1966 and any other federal, state or local
statutes, regulations, rules, ordinances or codes of applicable Governmental
Entities, which relate to (i) the protection of human health or the
environment from the effects of Hazardous Substances, including those
pertaining to reporting, licensing, permitting, investigating and remediating
discharges, releases or threatened releases of Hazardous Substances into the
air, surface water, sediments, groundwater or land or (ii) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances

 

“ERISA”:  Employee Retirement Income Security Act of
1974, as amended

 

“Exchange
Act”:  the Securities Exchange Act of
1934, as amended

 

“Excluded
Assets”:  as defined in Section 1.1(b)

 

“Excluded
Liabilities”:  as defined in Section 1.1(d).

 

“Facilities”:  the facilities leased by Seller located at (i) No. 5
Tavistock Estate, Ruscombe Lane, Twyford, Berkshire RG 109NJ, United Kingdom, (iii) 6
Rue Watteau, 92400 Courbevoie, France and (iii) Via del Forte Tiburtino
98, ED. 17, Rome, Italy

 

 “Foreign Purchased Subsidiaries”:  the Purchased Subsidiaries organized under
laws of non-U.S. jurisdictions

 

 

“GAAP”:  generally accepted accounting principles as
in effect in the United States

 

“Governmental
Entity”:  any nation or any state,
commonwealth, territory, possession or tribe and any political subdivision,
courts, judicial tribunals, departments, commissions, boards, bureaus, agencies
or other instrumentalities of any of the foregoing

 

“Gross
Revenues”:  without duplication, the
sum of (w) all revenues recognized by Buyer (on a consolidated basis,
including all Purchased Subsidiaries), plus, (x) the face amount
shown as due on any invoice, billing statement, or request for payment sent by
Buyer or any Purchased Subsidiary to any customer, plus, (y) the
fair market value, as determined by prices charged to unaffiliated third
parties, of any services performed or goods sold by Buyer to any Affiliate of
Buyer or Guarantor, plus (z) the fair market value of any property
received in consideration for any services performed or goods sold by Buyer or
any Purchased Subsidiary in a barter, exchange, or similar type transaction, less
(aa) any rebates or allowances granted by Buyer and (bb) VAT included in
revenues recognized.

 

“Hazardous
Substance”:  any hazardous or toxic
substance, pollutant, contaminant or other material which, as of the date of
this Agreement, is defined as hazardous or toxic under CERCLA, and its
implementing regulations; defined as a hazardous waste or regulated substance
under RCRA and its implementing regulations; or is regulated under any other
applicable Environmental Laws, including any substance which has been
determined by regulation, ruling or otherwise by any governmental authority to
be a hazardous or toxic substance regulated under federal or state law, and
shall include petroleum and petroleum products, asbestos and polychlorinated
biphenyls

 

“In-Bound
Licenses”:  as defined in Section 2.5(b)

 

“Independent
Contractors”:  as defined in Section 2.6(d)

 

“Intellectual
Property Rights”: all right, title and interest in, to and under (i) inventions,
whether or not patentable, (ii) patents and patent applications, (iii) trademarks,
service marks, trade dress, logos, Internet domain names and trade names,
whether or not registered, and all goodwill associated therewith, (iv) rights
of publicity and other rights to use the names and likeness of individuals, (v) copyrights,
rights in databases and related rights, whether or not registered, (vi) mask
works, (vii) trade secrets and know-how, (viii) all rights to any of
the foregoing provided by bilateral or international treaties or conventions, (ix) all
other intellectual property or proprietary rights and all applications,
registrations, issuances and the like with respect thereto, and (x) all
rights to sue or recover and retain damages and costs and attorneys’ fees for
past, present and future infringement or misappropriation of any of the
foregoing

 

“Intra-Company
Licenses”: as defined in Section 2.5(d)

 

“Inventory”:  the items of inventory, including raw
materials, work-in-progress and finished goods, used or held for use
exclusively in connection with the Business, that are listed or described on Schedule
1.1(a)(ix)

 

“Judgments
and Litigation”:  as defined in Section 2.4

 

 

“knowledge
of Seller” and “Seller’s knowledge”: 
any particular fact, circumstance, event or other matter in question of
which either (i) Seller’s Chief Executive Officer, Chief Financial
Officer, or General Counsel, or (ii) William Neighbors or Todd Harrington
is actually aware

 

“Liabilities”:  any and all debts, claims, liabilities,
obligations and expenses of any nature, whether known or unknown, absolute,
accrued, matured, unmatured, determinable, contingent or otherwise and whether
due or to become due

 

“Licensed
IP Rights”: the Intellectual Property Rights licensed to Buyer pursuant to
the IP License Agreement

 

“Material
Adverse Effect”:  any material
adverse effect on the Business, the Purchased Assets, the Assumed Liabilities,
operations, prospects, or results of operations of the Business or condition
(financial or otherwise) of the Business taken as a whole, other than to the
extent caused by or affecting (i) the transactions contemplated and the
limitations and restrictions imposed on the Business by this Agreement,
including the execution of this Agreement and public announcement thereof (ii) generally
applicable financial, economic, political, banking, currency, capital market or
other similar conditions or (iii) the Business’ industry in general (so
long as the Business is not disproportionately affected thereby)

 

“Material
Contracts”:  as defined in Section 2.9

 

“Owned
Business IP Rights”:  as defined in Section 2.5(a)

 

“Out-Bound
Licenses”:  as defined in Section 2.5(c)

 

“Permitted
Encumbrances”:  (i) Encumbrances
for Taxes not yet due and payable, (ii) Encumbrances to secure obligations
to landlords, lessors or renters under leases or rental agreements, (iii) deposits
or pledges made in connection with, or to secure payment of, workers’
compensation, unemployment insurance or similar programs mandated by applicable
law, (iv) Encumbrances in favor of carriers, warehousemen, mechanics and
materialmen, to secure claims for labor, materials or supplies and other like
liens, (v) Encumbrances listed on Schedule A-1, and (vi) Encumbrances
which, individually or in the aggregate, would not result in a Material Adverse
Effect

 

“Person”:  any natural person, firm, partnership,
association, corporation, company, trust, business trust, Governmental Entity
or other entity

 

“Purchase
Price”:  as defined in Section 1.2

 

“Purchased
Assets”:  as defined in Section 1.1(a)

 

“Purchased
Contracts”:  the Material Contracts
and any contract, instrument, agreement, commitment or other understanding or
arrangement primarily attributable or relating primarily to the Business, the Purchased
Assets or the Assumed Liabilities; provided that Purchased Contracts shall not
include any contract, instrument, agreement, commitment or other understanding
or arrangement with respect to Intellectual Property Rights other than the 

 

 

Purchased IP Rights or any rights under any Out-Bound
Licenses other than the Purchased Out-Bound Licenses

 

“Purchased
IP Rights”:  collectively, the Owned
Business IP Rights identified on Schedule 1.1(a)(ii), the rights of
Seller under the In-Bound Licenses identified on Schedule 1.1(a)(iii),
and the rights of the Purchased Subsidiaries under the In-Bound Licenses and
Intra-Company Licenses identified on Schedule 1.1(a)(iv)

 

“Purchased
Out-Bound Licenses”:  as defined in Section 1.1(a)(v)

 

“Purchased
Personal Property”:  as defined in Section 1.1(a)(ix)

 

“Purchased
Shares”: as defined in Section 1.1(a)(vi)

 

“Purchased
Subsidiaries”: collectively, (i) DTS Europe (UK), Ltd., a company
incorporated in England and Wales with the number 3691273, (ii) DTS
Digital Cinema, Inc., a Delaware corporation, (iii) International
Cinema Services, Inc., a Delaware corporation, (v) DTS France
S.A.R.L., a company incorporated in France, and (iv) DTS Italia S.r.l., a
company incorporated in Italy

 

“Registered
Business IP Rights”:  as defined in Section 2.5(a)

 

“Restructuring”:  all activities of Seller and its Affiliates
taken or to be taken in connection with (i) the separation of the Business
from the Retained Business, (ii) the separation of Seller’s digital images
business from the Business, (iii) Seller’s sale of the Business or the
digital images business, and (iv) Seller’s implementation of the Oracle
enterprise reporting system

 

“Retained
Business”:  all of Seller’s business activities, including the provision of
entertainment technology, products and services to the audio and image
entertainment markets worldwide, but excluding activities solely related to the
Business

 

“Seller
Group”:  as defined in Section 2.12(b)(iii)

 

“Significant
Suppliers”:  as defined in Section 2.17

 

“Straddle
Period Tax”:  as defined in Section 4.3(d)

 

 “Tax” or, collectively, “Taxes”:  (i) any and all federal, state, local,
or non-U.S. income, franchise, sales and use taxes, real and personal property
(tangible and intangible) taxes, gross receipts taxes, documentary transfer
taxes, excise taxes, employment taxes, withholding taxes, unemployment
insurance contributions, value added taxes and any other taxes or governmental
charges of any kind, however denominated, including any interest, penalties and
additions to tax in respect thereto, for which Buyer could become liable as a
result of acquiring the Business or the Purchased Assets or which could result
in a lien on or charge against the Purchased Assets, and (ii) any
liability for the payment of any amounts of the type described in clause (i) as
a result of any express or implied obligation to indemnify any other person as
a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts, or as 

 

 

a successor or transferee, or pursuant to the
provisions of Treasury Regulation 1.1502-6 (and any comparable provision of
state, foreign or local law)

 

“Tax
Return”:  any return, declaration,
report, claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof

 

“Transaction
Agreement”:  as defined in Section 2.2

 

“Transferred
Employees”:  as defined in Section 3.7

 

“Transfer
Taxes”:  as defined in Section 1.3

 

“Trigger
Date”:  as defined in Section 1.2

 

“WARN
Act”:  Workers Adjustment and
Retraining Notification Act, as amended

 

“Working Capital”: the consolidated accounts
receivable of the Business  included in
the Purchased Assets less the consolidated current accounts payable, current
accrued expenses, and other current liabilities of the Business that are
included in the Assumed Liabilities, determined in accordance with GAAP applied
in a manner materially consistent with Seller’s past practice; provided, that, (i) any
cash actually delivered with the Business shall be deemed to be a current asset
notwithstanding that cash is not a Purchased Asset, (ii) all amounts
attributable to Avica Technology Corporation that would otherwise be included
as a current asset or current liability of the Business due to the application
of FIN 46(R) shall be excluded, (iii) no amount with respect to any
obligation or liability of the Business discharged by Seller, including without
limitation with respect to wages and benefits, payroll taxes, retention
payments, or amounts due to any Business Employee that is paid or otherwise
discharged by Seller pursuant to this Agreement shall be considered a current
account payable, current accrued expense or other current liability, (iv) no
amount in respect of deferred revenues shall be considered a current account
payable, current accrued expense or other current liability, and (v) inventory
shall not be deemed to be a current asset and shall be excluded from the
determination of Working Capital

 

“Year
1”:   the 12-month period commencing
with the Effective Date and ending on May 8, 2009

 

“Year
2”:   the 12-month period commencing
at the end of Year 1 and ending on May 8, 2010

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