ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT by and among

CP SECURE INTERNATIONAL HOLDING LIMITED, THE STOCKHOLDERS THEREOF, and NETGEAR, INC.

Dated as of September 22, 2008

TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND TERMS
Section		1.1		Certain Definitions						2
Section		1.2		Other Terms		12
Section		1.3		Interpretation of Agreement								12
ARTICLE II
PURCHASE AND SALE OF THE BUSINESS
Section		2.1		Purchase and Sale of Assets								13
Section		2.2		Excluded Assets				14
Section		2.3		Assumption of Liabilities								15
Section		2.4		Excluded Liabilities						15
Section		2.5		Purchase Price. 15
Section		2.6		Escrow Fund		15
Section		2.7		Contingent Payment.						16
Section		2.8		Closing		16
Section		2.9		Ancillary Agreements						16
Section		2.10		Deliveries by Buyer						17
Section		2.11		Deliveries by Seller						17
Section		2.12		Nonassignability of Assets								18
Section		2.13		Affiliate Acquisitions						19
Section		2.14		Post-Closing Transition Services										19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section		3.1		Organization and Qualification										19
Section		3.2		Subsidiaries				20
Section		3.3		Corporate Authorization						20
Section		3.4		Consents and Approvals						20
Section		3.5		Non-Contravention 20
Section		3.6		Binding Effect				21
Section		3.7		Financial Statements.						21
Section		3.8		Litigation and Claims						22
Section		3.9		Taxes 22
Section		3.10		Reserved.		22
Section		3.11		Compliance with Laws						22
Section		3.12		Intellectual Property.						23
Section		3.13		Reserved.		26
Section		3.14		Contracts		26
Section		3.15		Territorial Restrictions								27
Section		3.16		Absence of Changes						27
Section		3.17		Confidentiality 27
Section		3.18		Assets		27

 

Section		3.19		Title to Property.						27
Section		3.20		Operation of the Business.								28
Section		3.21		Absence of Liabilities						28
Section		3.22		Warranties/Product Liability 28
Section		3.23		Insurance 29
Section		3.24		Finders’ Fees				29
Section		3.25		Continued Employment						29
Section		3.26		Seller Products and Inventory.										29
Section		3.27		Export Controls, Trade Sanctions and Certain Payments.																		29
Section		3.28		Disclosure 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section		4.1		Organization and Qualification										30
Section		4.2		Corporate Authorization						30
Section		4.3		Consents and Approvals						31
Section		4.4		Non-Contravention				31
Section		4.5		Binding Effect				31
Section		4.6		Finders’ Fees				31
Section		4.7		Financial Capability						31
Section		4.8		Investigation.				31
ARTICLE V
COVENANTS
Section		5.1		Access and Information.						32
Section		5.2		Conduct of Business						33
Section		5.3		Reasonable Best Efforts						35
Section		5.4		Tax Matters.				36
Section		5.5		Post-Closing Obligations of the Business to Certain Employees.																				39
Section		5.6		Ancillary Agreements						40
Section		5.7		Non-Solicitation/Non-Competition.										40
Section		5.8		Further Assurances						41
Section		5.9		Confidentiality.				41
Section		5.10		No Solicitation of Prohibited Transactions.														42
Section		5.11		Intellectual Property Non-Assertion												42
Section		5.12		Update to Assumed Liabilities Schedule												42
Section		5.13		Minimum Inventory						43
Section		5.14		Transition Services Agreement										43
Section		5.15		Post-Closing Legal Proceedings										43
Section		5.16		Post-Closing Access to Books and Records.														43
Section		5.17		CP Secure Nanjing Leases								44
ARTICLE VI
CONDITIONS TO CLOSING
Section		6.1		Conditions to the Obligations of Buyer and Seller																44
Section		6.2		Conditions to the Obligations of Buyer												44
Section		6.3		Conditions to the Obligations of Seller												46
ARTICLE VII
SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES
Section		7.1		Survival		46
Section		7.2		Indemnification by Seller and Selling Stockholders. 47
Section		7.3		Indemnification by Buyer.								49
Section		7.4		Third Party Claim Indemnification Procedures.														50
Section		7.5		Direct Claims				52
Section		7.6		Payments		52
Section		7.7		Characterization of Indemnification Payments														52

 

ARTICLE VIII
TERMINATION
Section		8.1		Termination 53
Section		8.2		Termination Procedures								53
Section		8.3		Effect of Termination								53
ARTICLE IX
EMPLOYEE MATTERS
Section		9.1		Employment Matters								54
Section		9.2		No Third Party Rights								55
Section		9.3		Employee Communications								55
ARTICLE X
MISCELLANEOUS
Section		10.1				Notices		55
Section		10.2				Amendment; Waiver						56
Section		10.3				No Assignment or Benefit to Third Parties										56
Section		10.4				Entire Agreement				57
Section		10.5				Fulfillment of Obligations								57
Section		10.6				Public Disclosure						57
Section		10.7				Expenses		57
Section		10.8				Schedules		57
Section		10.9				Bulk Sales		57
Section		10.10 Governing Law; Submission to Jurisdiction; Selection of Forum;
Waiver of Trial by Jury								58
Section		10.11 Counterparts								58
Section		10.12 Headings						58
Section		10.13 Severability								58
EXHIBITS
Exhibit A				-		Intellectual Property Assignment Agreements
Exhibit B				-		Escrow Agreement
Exhibit C				-		Transition Services Agreement
Exhibit D				-		Form of Local Purchase Agreements

 

      ASSET PURCHASE AGREEMENT, dated as of September 22, 2008, by and among CP SECURE INTERNATIONAL HOLDING LIMITED, a corporation organized under the laws of the Cayman Islands (“Seller”), the stockholders of Seller listed on the signature pages hereto (collectively, the “Selling Stockholders”) and NETGEAR, INC., a Delaware corporation (“Buyer”).

W I T N E S S E T H:

      WHEREAS, Seller is engaged worldwide, among other things, in the business of making and selling gateway content security appliances that provide anti-malware, anti-spyware, anti-trojan, anti-spam, URL filtering and other security functions (as conducted by Seller and its Affiliates during the period through the Closing Date, the “Business”); WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase and assume from Seller certain assets and liabilities of the Business, as more particularly set forth herein; WHEREAS, on the Closing Date, Seller and Buyer will enter into (or, as applicable, will cause one or more of their respective Affiliates to enter into) one or more Intellectual Property Assignment Agreements in the form of Exhibit A (the “Intellectual Property Assignment Agreements”);

      WHEREAS, on the Closing Date, Seller and Buyer will enter into an Escrow Agreement, substantially in the form attached hereto as Exhibit B (the “Escrow Agreement”), pursuant to which the Escrow Amount will be deposited into and held in escrow to offset potential indemnification claims of the Buyer Indemnified Parties under this Agreement; WHEREAS, CP Secure Nanjing and Buyer (or its Affiliate) will enter into a Transition Services Agreement in the form of Exhibit C (the “Transition Services Agreement”) on the date specified in Section 5.14 of this Agreement; WHEREAS, as a condition and an inducement to Buyer to enter into this Agreement, each of the Key Employees has entered into an employment agreement with Buyer or one of its Affiliates, dated the date hereof, and substantially in the form previously made available to Seller (collectively, the “Employment Agreements”), that are conditioned on the Closing and will become effective on the Closing Date (or in the case of Renkui Tao and Jianghao Li will become effective on the later of (a) the Closing Date and (b) the date that Buyer has formed the Nanjing branch of the wholly-foreign owned enterprise of Buyer (the “Buyer WFOE”) contemplated by Section 6.2(l) (the later of such date identified in (a) and (b) above, the “Nanjing Effective Date”)); WHEREAS, certain of the purchase and sale transactions provided for in this Agreement shall be effected through one or more Local Purchase Agreements (as defined below) which will be subject to the terms, provisions and conditions of this Agreement, except as otherwise stipulated in this Agreement.

      NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

ARTICLE I

 

DEFINITIONS AND TERMS

      Section 1.1 Certain Definitions. As used in this Agreement, the following terms have the meanings set forth below: “Accounts Payable” means all trade accounts and notes payable and other miscellaneous payable of the Business as of the Closing arising out of the purchase or other acquisition of goods or services of the Business.

      “Accounts Receivable” means all trade accounts and notes receivable and other miscellaneous receivables of the Business as of the Closing arising out of the sale or other disposition of goods or services of the Business.

      “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with, such other Person as of the date on which, or at any time during the period for which, the determination of affiliation is being made. For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities or by contract or otherwise.

      “Agreement” means this Asset Purchase Agreement, as the same may be amended or supplemented from time to time in accordance with the terms hereof.

      “Ancillary Agreements” has the meaning set forth in Section 2.9. “Applicable Employees” has the meaning set forth in Section 9.1. “Assumed Liabilities” means the following Liabilities of the Business under the Contracts to furnish goods or services to another party after the Closing: (i) all Liabilities arising after the Closing under the Transferred Contracts (but excluding any Liability for any breach arising in whole or in

part on or prior to the Closing); (ii) all Liabilities for product warranty claims and subscription license support with respect to the Products set forth on Schedule 1.1(a), as it may be updated pursuant to Section 5.12; and (iii) all Liabilities to the extent arising out of, relating to or in connection with the ownership or operation of the Transferred Assets after the Closing Date. For the avoidance of doubt, Assumed Liabilities shall not include: (a) Liabilities for refunds, rebates, rights of return or similar obligations, with respect to any Products sold prior to the Closing Date; (b) any Liabilities of Seller pursuant to any Benefit Plan or as an employer related to the employee rights, compensation and benefits arising up to and including the Closing Date; (c) any Liabilities arising from any breach of a Contract that occurred on or prior to the Closing; (d) any Liabilities for Intellectual Property infringements or unpaid royalty payments with respect to activities conducted by Seller prior to the Closing Date, including any Products sold prior to the Closing Date; (e) all Accounts Payable in existence as of the Closing, (f) any Liability relating to intercompany payables, (g) any environmental Liability, (h) any Liability for Taxes relating to tax periods prior to the Closing Date and (i) any Indebtedness of Seller or any of its Affiliates.

“Audited Financial Statements” has the meaning set forth in

Section 3.7.

      “Benefit Plans” shall mean all benefit and compensation plans, contracts, policies or arrangements covering Employees, including any trust instruments and insurance contracts forming a part thereof, any “employee benefit plans”, any deferred compensation, stock option, stock purchase, stock appreciation rights, stock based, incentive, bonus, workers’ compensation, short term disability, vacation and severance plans and all employment, consulting, severance and change in control agreements, and all amendments thereto “Books and Records” means all books, ledgers, files, databases, reports, plans, records, Tax Records, channel and customer contact lists, manuals, assy drawings, product schematics, build of materials, test plans, test procedures, test programs, approved vendor lists, design validation reports, regulatory reports, regulatory certificates and other materials (in any form or medium) of, or maintained for, the Business, but excluding any such items to the extent (i) they are included in any Excluded Assets or Excluded Liabilities, (ii) any Law prohibits their transfer, (iii) any transfer thereof otherwise would subject Seller or any of its Affiliates to any material liability, or (iv) they are described on Schedule 1.1(b).

“Business” has the meaning set forth in the Recitals.

      “Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New York, New York, San Francisco, California, Beijing, China or Taipei, Taiwan are authorized or obligated by Law or executive order to close.

“Business IT Assets” has the meaning set forth in Section 3.12(i). “Buyer” has the meaning set forth in the Preamble.

“Buyer Indemnified Parties” has the meaning set forth in Section 7.2. “Buyer WFOE” has the meaning set forth in the Recitals.

“Cash Closing Payment” has the meaning set forth in Section 2.5(a). “Chosen Courts” has the meaning set forth in Section 10.10.

      “Contingent Payment” has the meaning set forth in Section 2.7. “Claim Notice” has the meaning set forth in Section 7.4(a). “Closing” means the closing of the Transaction that is the subject of this Agreement.

“Closing Date” has the meaning set forth in Section 2.8. “Code” means the Internal Revenue Code of 1986, as amended.

      “Confidentiality Agreement” means the mutual nondisclosure agreement between CP Secure, Inc. (an Affiliate of Seller) and Buyer, dated March 19, 2008.

“Consideration” has the meaning set forth in Section 5.4(g).

      “Contracts” means all (a) agreements, contracts and arrangements with, and commitments and licenses from, customers of the Business except to the extent they are immaterial and do not purport to impose a commitment on Buyer or its Affiliates, (b) purchase orders issued by customers of the Business which are an order for one or more products of the Business and pursuant to which the product(s) which are the subject of such purchase order are scheduled to be shipped by Seller or its Affiliates after the Closing Date, (c) all other agreements, contracts, arrangements, commitments, licenses, purchase orders and other documents pursuant to which Seller or its Affiliates have any rights and which are Related to the Business except to the extent they are immaterial and do not purport to impose a commitment on Buyer or its Affiliates, and (d) licenses for any Transferred Assets to the extent such license is not an Excluded Asset, in the case of each of clauses (a) through (d) of this definition of Contracts, whether such Contracts are written or oral.

      “CP Secure Germany” means CP Secure Deutschland GmbH, a corporation organized under the laws of the Federal Republic of Germany.

      “CP Secure Nanjing” means CP Secure Inc., Nanjing, a corporation organized under the laws of the People’s Republic of China.

      “CP Secure Nanjing Leases” means (a) the Office Lease, dated June 12, 2008, by and between CP Secure Nanjing and Nanjing Property Development Co., Ltd. for a portion of the 28th floor of TouZi Building, 414 South Zhong Shan Road, Nanjing, China 210006, comprising 160.24 square meters and with a lease term of July 1, 2008 through March 31, 2011 and (b) the Office Lease, dated December 10, 2007, by and between CP Secure Nanjing and Nanjing Property Development Co., Ltd. for a portion of the 23rd floor of TouZi Building, 414 South Zhong Shan Road, Nanjing, China 210006, comprising 580.54 square meters and with a lease term of March 1, 2008 through March 31, 2011.

      “CP Secure Taiwan” means CP Secure Inc., a corporation organized under the laws of the Republic of China.

      “CP Secure Group” means Seller, CP Secure Germany, CP Secure Nanjing, CP Secure Taiwan, CP Secure Inc., a California corporation, and Partner Plus Enterprises International Limited, a corporation organized under the laws of the British Virgin Islands.

      “Customer Lists” means all lists maintained as of the Closing Date by Seller or its Affiliates of customers or potential customers of the Business (including all channel and end customers or potential customers).

“Direct Claim” has the meaning set forth in Section 7.5. “Employees” means all current employees of the Business.

      “Employment Agreement” has the meaning set forth in the Recitals. “Encumbrance” means any lien, pledge, charge, claim, encumbrance, security interest, option, mortgage, easement, or other restriction or third party right of any kind, including any right of first refusal or restriction on voting.

      “Escrow Agent” means an escrow agent selected by Buyer and reasonably acceptable to Seller.

“Escrow Agreement” has the meaning set forth in the Recitals. “Escrow Amount” means $1,700,000.

“Escrow Fund” has the meaning set forth in Section 2.6.

      “Escrow Payment” means the remainder, if any, of the Escrow Amount after the deduction of the aggregate amount finally determined to be payable to Buyer Indemnified Persons pursuant to Article VII. “Excluded Assets” has the meaning set forth in Section 2.2.

      “Excluded Liabilities” means all Liabilities of Seller or any of its Affiliates other than the Assumed Liabilities.

      “Excluded Taxes” means (a) all Income Taxes owed by Seller or any of its Affiliates for any period; (b) all Taxes relating to the Excluded Assets or Excluded Liabilities for any period; (c) all Taxes relating to the Business, the

Transferred Assets, or the Assumed Liabilities imposed with respect to or otherwise attributable to any Pre-Closing Period; (d) all Taxes of Seller or any other Person by reason of being a member of a consolidated, combined, unitary or affiliated group that includes any of Seller or any of its present or past Affiliates prior to the Closing, by reason of a Tax sharing, Tax indemnity or similar agreement entered into by Seller or any of its present or past Affiliates prior to the Closing (other than this Agreement) or by reason of transferee or successor liability arising in respect of a transaction undertaken by Seller or any of its present or past Affiliates prior to the Closing; (e) Taxes imposed on Buyer as a result of any breach of warranty or misrepresentation herein, or breach by Seller of any covenant relating to Taxes; (f) all Transfer Taxes for which Seller is liable under Section 5.4(e), except as may otherwise be provided in a Local Purchase Agreement; and (g) all VAT for which Seller is liable under Section 5.4(i).

      “Financial Statements” has the meaning set forth in Section 3.7. “Fixtures and Equipment” means all furniture, furnishings, vehicles, equipment, computers, tools, custom capital equipment, sheet metal tooling, plastic injection molded tooling, production test fixtures, and other tangible personal property (other than Inventory) Related to the Business, wherever located, including any of the foregoing purchased subject to any conditional sales or title retention agreement in favor of any other Person.

      “GAAP” means the generally accepted accounting principles of a Person’s jurisdiction of organization.

      “Governmental Authorizations” means all licenses, permits, certificates and other authorizations and approvals related to the Business and issued by or obtained from a Government Entity or Self-Regulatory Organization.

      “Government Entity” means any federal, state or local court, administrative body or other governmental or quasi-governmental entity with competent jurisdiction.

      “Import Duties” shall mean any import duties imposed by a Government Entity on the sale of the Transferred Assets from Seller to Buyer.

      “Income Taxes” means Taxes imposed on or measured by reference to gross or net income or receipts, and franchise, net worth, capital or other doing business Taxes.

      “Indebtedness” means (i) all liabilities for borrowed money, whether current or funded, secured or unsecured, all obligations evidenced by bonds, debentures, notes or similar instruments, all liabilities in respect of mandatorily redeemable or purchasable capital stock or securities convertible into capital stock, and any interest, premium, fees, penalties unpaid and owing with respect to the foregoing liabilities; (ii) all liabilities for the deferred purchase price of property; (iii) all liabilities in respect of any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which liabilities are required to be classified and accounted for under GAAP as capital leases; (iv) any payment obligation in respect of interest under any existing interest rate swap or hedge agreement entered into with respect to any liabilities described in clauses (i) or (ii) above; (v) any negative cash or overdraft balances; and (vi) all liabilities for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction securing obligations of a type described in clauses (i), (ii) or (iii) above to the extent of the obligation secured, and all liabilities as obligor, guarantor, or otherwise, to the extent of the obligation secured.

      “Indemnified Parties” has the meaning set forth in Section 7.2. “Indemnifying Party” has the meaning set forth in Section 7.4(a). “Intellectual Property” means (i) trademarks, service marks, brand names, certification marks, collective marks, d/b/a’s, Internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names, and

other indicia of source or origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all renewals of same (“Trademarks”); (ii) inventions and discoveries, whether patentable or not, and all patents, registrations, invention disclosures and applications therefor, including divisions, continuations, continuations-in-part and renewal applications, and including renewals, extensions and reissues; (iii) confidential information, trade secrets and know-how, including processes, schematics, business methods, formulae, drawings, prototypes, models, designs, and customer and supplier lists and information (collectively, “Trade Secrets”); (iv) published and unpublished works of authorship, whether copyrightable or not (including databases and other compilations of information), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; (v) rights of publicity and privacy; (vi) computer software (including object code and source code), software platforms, Internet websites and website content; (vii) product design specifications; (viii) all intellectual property rights and benefits granted to or enjoyed by the Seller and/or any of its Affiliates under the IP Contracts; (ix) all other intellectual property or proprietary rights of any type throughout the world; and (x) copies and tangible embodiments of any of the foregoing, in whatever form or medium.

      “Intellectual Property Assignment Agreement” has the meaning set forth in the Recitals.

      “Inventory” means all inventory Related to the Business, wherever located, including all finished goods whether held at any location or facility of Seller or any of its Affiliates or in transit to Seller or any of its Affiliates, except to the extent included in Excluded Assets or sold by Seller in the Ordinary Course of Business during the period between the date of this Agreement and the Closing.

      “IP Contracts” means all contracts relating to Intellectual Property or IT Assets to which Seller and/or any of its Affiliates is a party as of the date hereof, including contracts granting Seller and/or any of its Affiliates rights to use the Intellectual Property of other Persons, non-assertion agreements, settlement agreements, agreements granting rights to use Transferred IP, Trademark coexistence agreements, and Trademark consent agreements.

      “IT Assets” means computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, all other information technology equipment and all associated documentation.

      “Key Employees” means Shuang Ji, Renkui Tao and Jianghao Li. “Knowledge” or any similar phrase means the collective knowledge of employees or such persons who have primary responsibility for the relevant matter of Seller and its Affiliates, or of Buyer, as the case may be.

      “Law” means any law, statute, ordinance, rule, regulation, code, order, judgment, injunction or decree enacted, issued, promulgated, enforced or entered by a Government Entity or Self-Regulatory Organization.

      “Legal Proceeding” has the meaning set forth in Section 5.15. “Liabilities” means any and all debts, liabilities, commitments and obligations of any kind, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, asserted or not asserted, known or unknown, determined, determinable or otherwise, whenever or however arising (including, whether arising out of any contract or tort based on negligence or strict liability) and whether or not the same would be required by GAAP to be reflected in financial statements or disclosed in the notes thereto.

      “Limited License” has the meaning set forth in Section 3.12(k). “Local Purchase Agreements” shall mean the local purchase agreements between the entities listed in Schedule 1.1(c), subject to the terms and conditions of this Agreement and in substantially the same form as Exhibit D in all material respects and with the trade terms specified in Schedule 1.1(c),

subject to any applicable changes related to the Laws and practice of the applicable local jurisdiction for each such agreement and any other changes necessary to give effect to the purchase and sale of the portion of the Transferred Assets being transferred pursuant to each such agreement.

“Losses” has the meaning set forth in Section 7.2(a).

      “Material Adverse Effect” means an effect that is materially adverse to the business, assets, financial condition, results of operations, liquidity or prospects of the Business.

      “Minimum Inventory” has the meaning set forth in Section 5.13. “Nanjing Effective Date” has the meaning set forth in the Recitals. “Non-Governmental Authorizations” means all licenses, permits, certificates and other authorizations and approvals other than Governmental Authorizations that are (i) held by Seller or any of its Affiliates and (ii) Related to the Business.

“Notice Period” has the meaning set forth in Section 7.4(a). “Offer Letter” has the meaning set forth in Section 9.1.

      “Ordinary Course” or “Ordinary Course of Business” means the conduct of the Business in accordance with Seller’s normal day-to-day customs, practices and procedures, consistent with past customs, practices and procedures.

      “Permitted Encumbrances” means (i) mechanics’, materialmen’s, warehousemen’s, carriers’, workers’, or repairmen’s liens or other similar common law or statutory Encumbrances arising or incurred in the Ordinary Course and which would not materially impair the operation of the Business or the use or value of the Transferred Assets and (ii) liens for Taxes, assessments and other governmental charges not yet due and payable or due but not delinquent, in each case, in an amount that would not be material to the Business or the Transferred Assets.

      “Person” means an individual, a corporation, a partnership, an association, a limited liability company, a Government Entity, a trust or other entity or organization.

      “Pre-Closing Period” means any taxable period (or portion thereof) ending on or prior to the Closing Date.

      “Primary Core Technology” means the following proprietary software held by the CP Secure Group: (a) the Stream Scanning Engine and (b) the Mini Engine.

      “Product” has the meaning set forth in Section 3.22. “Prohibited Transaction” has the meaning set forth in Section 5.10(a).

      “Purchase Price” shall mean the Cash Closing Payment, the Escrow Payment, if any, and the Contingent Payment, if any.

      “Registered” means issued by, registered with, renewed by or the subject of a pending application before any Government Entity or domain name registrar.

      “Related to the Business” means required for, related to, or used in connection with, the Business as conducted by Seller and its Subsidiaries prior to the Closing.

      “Self-Regulatory Organization” means any self-regulatory body or organization.

      “Seller” has the meaning set forth in the Preamble. “Seller Closing Certificate” has the meaning set forth in Section 6.2(e).

      “Seller Disclosure Schedules” means any Schedules to this Agreement delivered by Seller.

“Seller Extended Warranties” has the meaning set forth in

Section 7.1.

“Seller Indemnifying Parties” has the meaning set forth in

Section 7.2.

“Seller Indemnified Parties” has the meaning set forth in

Section 7.3.

      “Seller Required Approvals” means all consents, approvals, waivers, authorizations, notices and filings that are required to be listed on Schedules 3.4(i) and 3.4(ii).

      “Selling Stockholders” has the meaning set forth in the Preamble. “Subsidiary” means any Person (i) whose securities or other ownership interests having by their terms the power to elect a majority of the board of directors or other persons performing similar functions are owned or controlled, directly or indirectly, by Seller and/or one or more Subsidiaries, or (ii) whose business and policies Seller and/or one or more Subsidiaries have the power to direct.

      “Supplier Lists” means all lists maintained as of the Closing Date by Seller or its Affiliates of past or present suppliers or potential future suppliers of the Business.

      “Tax” or “Taxes” means all federal, state, local, or foreign income, profits, franchise, gross receipts, net receipts, capital, capital stock, net worth, sales, use, withholding, turnover, value added, ad valorem, registration, general business, employment, social security, disability, occupation, real property, personal property (tangible and intangible), recording, stamp, transfer, conveyance, severance, production, excise, and other taxes, withholdings, duties, levies, imposts, license and registration fees, and other similar charges and assessments, whether payable directly or by withholding and whether or not requiring the filing of a Tax Return (including all fines, penalties, and additions attributable to or otherwise imposed on or with respect to any such taxes, charges, fees, levies, or other assessments, and all interest thereon and any liability arising pursuant to the provisions of any applicable state, local or foreign Tax Law) imposed by or on behalf of any Taxing Authority, whether arising before, on, or after the Closing Date.

      “Tax Records” means copies of all records of any kind and in whatever format, including all documents, microfiche, microfilm and computer records (including magnetic tape, disc storage, card forms and printed copy) that relate to any withholding Tax imposed on or in connection with the Transferred Assets or the Business, or any information return required to be filed in connection with the Transferred Assets or the Business.

“Tax Returns” means any and all returns, reports and forms

(including elections, declarations, amendments, schedules, information returns or attachments thereto) required to be filed with a Taxing Authority with respect to Taxes.

      “Taxing Authority” means any foreign, federal, state or local government, political subdivision or governmental or regulatory authority, agency, board, bureau, commission, instrumentality or court or quasi-governmental authority, body, or instrumentality exercising any authority to impose, regulate, or administer the imposition of Taxes.

      “Termination Date” has the meaning set forth in Section 8.1(b). “Third Party Claim” has the meaning set forth in Section 7.4(a). “Trademarks” has the meaning set forth in the definition of “Intellectual Property”.

      “Trade Secrets” has the meaning set forth in the definition of “Intellectual Property”.

      “Transaction” means the purchase and sale of the Transferred Assets and the assumption of the Assumed Liabilities pursuant to this Agreement.

      “Transfer Taxes” has the meaning set forth in Section 5.4(e). “Transferred Assets” has the meaning set forth in Section 2.1. “Transferred Contracts” has the meaning set forth in Section 2.1(d). “Transferred Employees” means those Applicable Employees who accept offers of employment with Buyer.

      “Transferred Employees’ Records” means all personnel files related to the Transferred Employees, provided that Transferred Employees’ Records shall not include any files the transfer of which would be prohibited by Law.

      “Transferred Fixed Assets” has the meaning set forth in Section 2.1(g).

      “Transferred IP” or “Transferred Intellectual Property” shall mean, collectively, the Transferred Patents and the Transferred Non-Patent IP.

      “Transferred IP Contracts” has the meaning set forth in Section 3.12(d).

      “Transferred Inventory” has the meaning set forth in Section 2.1(c). “Transferred Non-Patent IP” has the meaning set forth in Section 2.1(b).

“Transferred Patents” has the meaning set forth in Section 2.1(a). “Transition Services Agreement” has the meaning set forth in the

Recitals.

“Unaudited Financial Statements” has the meaning set forth in

Section 3.7.

      “UTM Products” has the meaning set forth in Section 2.7. “VAT” shall mean Value Added Tax or any analogous tax in any relevant jurisdiction including but not limited to business, consumption, use, sales and local sales taxes of any kind.

      “Wholly-Owned Subsidiary” means, with respect to any Person, any Subsidiary all of the outstanding voting stock (other than directors’ qualifying shares) of which is owned by such Person, directly or indirectly.

      Section 1.2 Other Terms. Other terms may be defined elsewhere in the text of this Agreement and, unless otherwise indicated, shall have such meaning throughout this Agreement.

      Section 1.3 Interpretation of Agreement. Unless the express context otherwise requires: (a) each party acknowledges that it has participated in the drafting of this Agreement, and any applicable rule of construction to the effect that ambiguities are to be resolved against the drafting party will not be applied in connection with the construction or interpretation of this Agreement; (b) the table of contents of this Agreement and the bold-faced headings contained in this Agreement are for convenience of reference only, will not be deemed to be a part of this Agreement and will not be referred to in connection with the construction or interpretation of this Agreement; (c) the words “hereof”, “herein”, and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) the terms defined in the singular have a comparable meaning when used in the plural, and vice versa;

(e)	the terms “Dollars” and “$” mean United States Dollars;
(f)	references herein to a specific Section, Subsection, Schedule or

Exhibit shall refer, respectively, to Sections, Subsections, Schedules or Exhibits of this Agreement; (g) wherever the word “include”, “includes”, or “including” is used in this Agreement, it shall be deemed to be followed by the words “without limitation”; and (h) references herein to any gender includes both genders.

ARTICLE II

 

PURCHASE AND SALE OF THE BUSINESS

      Section 2.1 Purchase and Sale of Assets. On the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall and shall

cause each of its Affiliates to, sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase from Seller or such Affiliates, all of the rights, title and interests of Seller and each of its Affiliates into and under the following, free and clear of all Encumbrances, other than Permitted Encumbrances (which, subject to Section 2.2, are referred to in this Agreement as the “Transferred Assets”): (a) the patents and patent applications and patent rights to inventions identified on Schedule 2.1(a), as well as any foreign or multinational counterparts identified on Schedule 2.1(a)(1) (including patents, statutory invention registrations, patent registrations, patent applications, provisional patent applications, industrial designs and industrial models) thereof, whether or not identified on Schedule 2.1(a), including all United States and foreign reissues, divisions, revisions, supplementary protection certificates, continuations, continuations in part, extensions, renewals and reexaminations, and all rights therein provided by multinational treaties or conventions and all improvements to the inventions disclosed in each of the foregoing (collectively, the “Transferred Patents”); and the invention disclosures identified on Schedule 2.1(a) including all rights therein as well as all improvements to the inventions disclosed therein made by Buyer; (b) the Intellectual Property (other than patent rights) in and to or associated with the items identified on Schedule 2.1(b) (the “Transferred Non-Patent IP”);

(c)	the Inventory (the “Transferred Inventory”);
(d)	the Contracts listed on Schedule 2.1(d) (the “Transferred Contracts”);
(e)	Customer Lists;
(f)	Supplier Lists;
(g)	the prototypes, systems, furniture, Fixtures and Equipment, masks, IT

Assets and other fixed assets of (i) CP Secure, Inc, Nanjing, a Subsidiary of Seller or (ii) that are identified on Schedule 2.1(g) (the “Transferred Fixed Assets”);

(h)	Books and Records;
(i)	Transferred Employees’ Records;
(j)	all hardware production-related equipment and tooling;
(k)	all causes of action, lawsuits, judgments, claims and demands of any

nature available from time to time to or being pursued by Seller or any of its Affiliates in each case to the extent related to the Transferred Assets, the Assumed Liabilities or the ownership, use, function or value of any Transferred Asset, whether known or unknown, suspected or unsuspected and whether arising by way of counterclaim or otherwise including the right of Seller or any of its Affiliates to pursue claims and enforce the obligations of any party to any proprietary/confidential information agreements and non-competition agreements to which any current or former employee, consultant, contractor and actual or potential business partner, counterparty or investor of or in Seller or any of its Affiliates is a party, in each case to the extent related to the Transferred Assets, except in each case to the extent included in the Excluded Assets; (l) any credits, prepaid expenses, deferred charges, advance payments, security deposits, prepaid items and duties to the extent related to a Transferred Asset; (m) to the extent their transfer is permitted by Law, all Governmental Authorizations and Non-Governmental Authorizations and all applications therefor; and (n) any guaranties, warranties, indemnities and similar rights in favor of Seller or any of its Affiliates to the extent related to the Transferred Assets.

      Section 2.2 Excluded Assets. Notwithstanding anything herein to the contrary, from and after the Closing, Seller and its Affiliates shall retain all of their existing right, title and interest in and to, and there shall be excluded from the sale, conveyance, assignment or transfer to Buyer hereunder,

and the Transferred Assets shall not include, the following (collectively, the “Excluded Assets”): (a) any asset or class of assets excluded from the defined terms set forth in Section 2.1(a)-(o) by virtue of the limitations expressed or implied therein;

(b)	any asset identified on Schedule 2.2(b);
(c)	Accounts Receivable;
(d)	all rights in connection with and assets of the Benefit Plans;
(e)	all credits, prepaid expenses, deferred charges, advance payments,

security deposits, prepaid items and duties to the extent related to any asset that is not a Transferred Asset; and (f) all cash and cash equivalents.

      Section 2.3 Assumption of Liabilities. On the terms and subject to the conditions set forth herein, at the Closing, Buyer shall assume and discharge or perform when due all the Assumed Liabilities. Buyer will not assume or have any responsibility of any nature with respect to any Liability relating to the Business, the Transferred Assets or the Transferred Employees that exists, or arises out of the operation or ownership of the Transferred Assets or the Business or the employment of the Transferred Employees, on or prior to the Closing and that is not an Assumed Liability.

      Section 2.4 Excluded Liabilities. Seller and its Affiliates shall retain and be responsible for all Excluded Liabilities and Excluded Taxes.

Section 2.5 Purchase Price.

      (a) On the terms and subject to the conditions set forth herein, in consideration of the sale of the Transferred Assets, at the Closing, in addition to the assumption of the Assumed Liabilities, Buyer shall pay to Seller (or shall cause its Affiliates to pay to Seller or its Affiliates pursuant to the Local Purchase Agreements) an aggregate amount in cash equal to $12,300,000. This amount shall be allocated and paid pursuant to this Agreement and the Local Purchase Agreements in accordance with Section 5.4(g) (the “Cash Closing Payment”).

      (b) The Seller shall also be entitled to payment of the Escrow Payment, if any, at such time and in the amount, and subject to the terms and conditions, set forth in Section 2.6.

      (c) The Seller shall also be entitled to payment of the Contingent Payment, if any, in the amount, and subject to the terms and conditions, set forth in Section 2.7.

      (d) Buyer shall deduct from the Purchase Price any amounts required to be withheld and deducted under the Code or other applicable Tax Law. As applicable, any amounts so deducted shall be remitted by Buyer to the appropriate Government Entity on a timely basis or at the request of Seller, if permitted by applicable Law, paid over by Buyer to Seller upon delivery by Seller to Buyer of an official receipt, certification or other statement from the Government Entity that such Taxes have been paid to the Government Entity on a timely basis or that no such Taxes are due.

      Section 2.6 Escrow Fund. On or prior to the Closing, Seller and Buyer shall enter into the Escrow Agreement with the Escrow Agent. Pursuant to the terms of the Escrow Agreement, on the Closing Date, Buyer will create the escrow fund (the “Escrow Fund”) by depositing the Escrow Amount with the Escrow Agent. Distributions of any portion of the Escrow Fund shall be governed by the terms and conditions of the Escrow Agreement.

Section 2.7 Contingent Payment.

      (a) Immediately following the Closing, Buyer shall appoint Mr. Shuang Ji as the Vice President of Engineering, Security Products, for Buyer. Mr. Shuang Ji’s employment with Buyer will be governed by the terms and conditions of his Employment Agreement. The specifications for the development of the unified threat management products of Buyer for up to 10 users and for up to 25 users (the “UTM Products”) will be substantially similar to the specifications set

forth in Schedule 2.7(a). If within five years after the Closing Date, both UTM Products pass the acceptance criteria and procedure as set forth on Schedule 2.7(a), Buyer shall pay to Seller, within 60 days of such acceptance, an amount equal to $3,500,000 (the “Contingent Payment”). Buyer will make available such resources for the development of the unified threat management products as it deems commercially reasonable. In addition, for the first eight months after the Closing, Buyer will devote engineering resources to develop the UTM Products at a level that is substantially similar to the engineering team that Seller has in Nanjing, China as of the date hereof (but in any event the engineering resources shall not exceed the Transferred Employees who are members of the engineering team in Nanjing, China and who have not voluntarily left the employment of Buyer and its Affiliates during such eight month period).

      (b) Except otherwise provided by the Section 2.7(a), the Seller acknowledges, understands and agrees that, after the Closing, Buyer shall exercise operational control of the Business and the Transferred Assets without interference by Seller. The Seller understands that, after the Closing, except as expressly provided herein (including Section 2.7(a)), the future design, creation, manufacturing, marketing, sales and distribution of the Business and its products and projects shall be exercised by Buyer in accordance with its own business judgment and in its sole and absolute discretion.

      (c) Seller will not transfer the right to receive the Contingent Payment (including any direct or indirect interest in the right to receive the Contingent Payment).

      Section 2.8 Closing. The Closing shall take place at the offices of Sullivan & Cromwell LLP, 1870 Embarcadero Road, Palo Alto, California 94303 at 10:00 A.M., San Francisco time, on the date which is the fifth Business Day following the date on which the conditions set forth in Article 6 (other than those conditions that by their nature are to be satisfied at the Closing but subject to the fulfillment or waiver of those conditions) have been satisfied or waived, or at such other time and place as the parties hereto may mutually agree. For purposes of this Agreement, “Closing Date” means the date on which the Closing actually takes place in Palo Alto, California.

      Section 2.9 Ancillary Agreements. At the Closing, Seller and Buyer, or their respective Affiliates, as applicable, will execute and deliver the following additional agreements to the extent not entered into previously (the “Ancillary Agreements”):

(a)	the Escrow Agreement;
(b)	the Local Purchase Agreements;
(c)	the Intellectual Property Assignment Agreements; and
(d)	the Transition Services Agreement.

      Section 2.10 Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller the following: (a) the Cash Closing Payment in immediately available funds by wire transfer to an account or accounts which have been designated by Seller in writing at least five Business Days prior to the Closing Date; (b) a duly executed counterpart of each of the Ancillary Agreements to the extent not delivered prior to the Closing; (c) a certificate certifying that Buyer has deposited the Escrow Amount in the Escrow Fund pursuant to Section 2.6; and (d) the certificate to be delivered pursuant to Section 6.3(d).

      Section 2.11 Deliveries by Seller. At the Closing, Seller shall deliver, or cause to be delivered, to Buyer the following: (a) bills of sale or other appropriate documents of transfer, in form and substance reasonably acceptable to Buyer, transferring the tangible personal property included in the Transferred Assets to Buyer;

      (b) assignment agreements, in form and substance reasonably acceptable to Buyer and Seller, assigning to Buyer all rights of Seller and its Affiliates in and to all of the Transferred Contracts, exclusive of any Excluded Liabilities; (c) assignments, in form and substance reasonably acceptable to Buyer and, if applicable, as required by any Government Entity with which Seller’s or any of its Affiliates’ rights to any Transferred Intellectual Property have been filed, assigning to Buyer the Transferred Intellectual Property;

(d)	the Books and Records;
(e)	the Transferred Employees’ Records;
(f)	an opinion of Cayman Islands counsel to Seller reasonably satisfactory

to Buyer with respect to such matters as Buyer may reasonably request;

      (g) a duly executed counterpart of each of the Ancillary Agreements to the extent not delivered prior to the Closing; (h) evidence of the obtaining of, or the filing with respect to, Seller Required Approvals;

(i)	the certificate to be delivered pursuant to Section 6.2(e); and
(j)	such other customary instruments of transfer, assumptions, filings or

documents, in form and substance reasonably satisfactory to Buyer, as may be required to give effect to this Agreement.

      Section 2.12 Nonassignability of Assets. Notwithstanding anything to the contrary contained in this Agreement, to the extent that the sale, assignment, sublease, transfer, conveyance or delivery or attempted sale, sublease, assignment, transfer, conveyance or delivery to Buyer of any asset that would be a Transferred Asset or any claim or right or any benefit arising thereunder or resulting therefrom is prohibited by any applicable Law or would require any governmental or third party authorizations, approvals, consents or waivers, and such authorizations, approvals, consents or waivers shall not have been obtained prior to the Closing, the Closing shall proceed without the sale, assignment, sublease, transfer, conveyance or delivery of such asset unless such failure causes a failure of any of the conditions to Closing set forth in Article 6, in which event the Closing shall proceed only if the failed condition is waived by the party or parties entitled to the benefit thereof. In the event that the failed condition is waived and the Closing proceeds without the transfer, sublease or assignment of any such asset, then following the Closing, the parties shall use their reasonable best efforts, and cooperate with each other, to obtain promptly such authorizations, approvals, consents or waivers; provided, however, that Seller shall bear all of the costs of obtaining such authorizations, approvals, consents or waivers. Pending such authorization, approval, consent or waiver, the parties shall cooperate with each other in any mutually agreeable, reasonable and lawful arrangements designed to provide to Buyer the benefits of use of such asset and to Seller the benefits, including any indemnities, that it would have obtained had the asset been conveyed to Buyer at the Closing. Once authorization, approval, consent or waiver for the sale, assignment, sublease, transfer, conveyance or delivery of any such asset not sold, assigned, subleased, transferred, conveyed or delivered at the Closing is obtained, Seller shall or shall cause its relevant Affiliates to, assign, transfer, convey and deliver such asset to Buyer at no additional cost. To the extent that any such asset cannot be transferred or the full benefits of use of any such asset cannot be provided to Buyer following the Closing pursuant to this Section 2.12, then Buyer and Seller shall enter into such arrangements (including subleasing, sublicensing or subcontracting) to provide to the parties hereto the economic (taking into account Tax costs and benefits) and operational equivalent, to the extent permitted, of obtaining such authorization, approval, consent or waiver and the performance by Buyer of the obligations thereunder. Seller shall hold in trust for and pay to Buyer promptly upon receipt thereof, all income, proceeds and other monies received by Seller or any of its Affiliates in connection with its use of any asset (net of any Taxes and any

other costs imposed upon Seller or any of its Affiliates) in connection with the arrangements under this Section 2.12. Section 2.13 Affiliate Acquisitions. Notwithstanding anything to the contrary contained in this Agreement, Buyer may elect to have any or all of the Transferred Assets conveyed or transferred to, or any of the Assumed Liabilities assumed by, one or more of its Affiliates; provided however, that no such election shall relieve Buyer of any of its obligations to Seller and its Affiliates hereunder with respect to the Assumed Liabilities or otherwise. The Purchase Price shall be allocated, based on valuations performed by Duff & Phelps Corporation or another valuation firm agreed upon by Buyer and Seller, among those Transferred Assets to be conveyed to Buyer and those Transferred Assets to be conveyed to the respective Affiliates of Buyer, but in no event shall the amount of the Purchase Price or any other items to be paid for the Transferred Assets, the nature of the Assumed Liabilities to be assumed, the obligation to pay Taxes (including Transfer Taxes) or the allocation of risk and responsibility between Seller and Buyer be modified to the detriment of Seller and/or Buyer and their respective Affiliates as a result of the delivery of separate bills of sale, assignments and other closing documents.

      Section 2.14 Post-Closing Transition Services. For a period of time after the Closing not to exceed four (4) months, at Buyer’s request Seller shall, and shall cause its Affiliates to: (a) use commercially reasonable efforts using its then existing employees to assist Buyer in establishing the procedure by which customers of the Business following the Closing may make all claims related to warranty liability and other obligations with respect to servicing, repairing or replacing any products delivered by Seller or its Affiliates to a customer of the Business on or prior to the Closing Date; and (b) use commercially reasonable efforts using its then existing employees to comply with all other reasonable requests of Buyer which are related or incidental to the transition, or the continued operation, of the Business by Buyer.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

      Seller represents and warrants to Buyer, as of the date hereof and as of the Closing, as follows: Section 3.1 Organization and Qualification. Seller is a corporation duly organized, validly existing and is in good standing under the laws of the Cayman Islands and has all requisite power and authority to own, lease and operate its assets (including any Transferred Assets) and to carry on the Business as currently conducted. The Seller is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or the operation of the Transferred Assets or the conduct of the Business requires such qualification.

      Section 3.2 Subsidiaries. Each Affiliate of Seller which has title to any Transferred Asset is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its assets and to carry on its portion of the Business as currently conducted and is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction where the ownership or operation of its assets or the conduct of its business requires such qualification.

      Section 3.3 Corporate Authorization. Seller has full corporate power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it is a party, and to perform its obligations hereunder and

thereunder. The execution, delivery and performance by Seller of this Agreement and each of the Ancillary Agreements to which it is a party has been duly and validly authorized and no additional corporate or shareholder authorization or consent is required in connection with the execution, delivery and performance by Seller of this Agreement or any of the Ancillary Agreements to which it is a party. Each Affiliate of Seller has full corporate power and authority to execute and deliver each Ancillary Agreement or Closing document to which it is a party and to perform its obligations thereunder. The execution, delivery and performance by each Affiliate of Seller of each Ancillary Agreement or Closing document to which it is a party has been or prior to the Closing will have been duly and validly authorized, and no additional corporate or shareholder authorization or consent is or will be required in connection with the execution, delivery and performance by any Affiliate of Seller of the Ancillary Agreements or Closing documents to which such Affiliate is a party or signatory.

      Section 3.4 Consents and Approvals. Except as set forth on Schedule 3.4(i), no consent, approval, waiver, authorization, notice or filing is required to be obtained by Seller or any of its Affiliates from, or to be given by Seller or any of its Affiliates to, or made by Seller or any of its Affiliates with, any Government Entity or Self-Regulatory Organization, in connection with the execution, delivery and performance by Seller or any of its Affiliates of this Agreement and the Ancillary Agreements. Except as set forth on Schedule 3.4(ii), no consent, approval, waiver, authorization, notice or filing is required to be obtained by Seller or any of its Affiliates from, or to be given by Seller or any of its Affiliates to, or made by Seller or any of its Affiliates with, any Person which is not a Government Entity or Self-Regulatory Organization in connection with the execution, delivery and performance by Seller or any of its Affiliates of this Agreement and the Ancillary Agreements.

      Section 3.5 Non-Contravention. The execution, delivery and performance by Seller and its Affiliates of this Agreement and the Ancillary Agreements to which they are a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) violate any provision of the Articles of Incorporation, Bylaws or other organizational documents of Seller or any of its Affiliates, (ii) assuming the receipt of all consents, approvals, waivers and authorizations and the making of the notices and filings set forth on Schedule 3.4(ii), conflict with, or result in the breach of, or constitute a default under, or result in the termination, cancellation, modification or acceleration (whether after the filing of notice or the lapse of time or both) of any right or obligation of Seller or any of its Affiliates under, or result in a loss of any benefit to which Seller or any of its Affiliates is entitled under, any Transferred Contract, (iii) assuming the receipt of all consents, approvals, waivers and authorizations and the making of notices and filings set forth on Schedule 3.4(i) or required to made or obtained by Buyer violate or result in a breach of or constitute a default under any Law to which Seller or any of its Affiliates is subject, or under any Governmental Authorization, or (iv) result in the creation of any Encumbrance upon any of the Transferred Assets, other than, in the case of clauses (iii) and (iv) conflicts, breaches, or violations that would not, individually or in the aggregate, impair or delay the ability of Seller and its Affiliates to perform their obligations hereunder or impair the value of the Transferred Assets.

      Section 3.6 Binding Effect. This Agreement and each of the Ancillary Agreements, when executed and delivered by Buyer and the other parties thereto, constitutes a valid and legally binding obligation of Seller and each Affiliate of Seller which is a party to such agreements, enforceable against Seller and each such Affiliate in accordance with their respective terms.

Section 3.7 Financial Statements.

      (a) Set forth on Schedule 3.7(a)(i) is (a) a copy of the balance sheet and statement of income, changes in stockholders’ equity and cash flows for CP

Secure Taiwan for each of the years ended December 31, 2006 and December 31, 2007, (b) a copy of the balance sheet and statement of income, changes in stockholders’ equity and cash flows for CP Secure Nanjing for the year ended December 31, 2007, (c) a copy of the balance sheet and statement of income, changes in stockholders’ equity and cash flows for CP Secure Germany for each of the years ended December 31, 2005 and December 31, 2006 , and (d) a copy of the balance sheet and statement of income, changes in stockholders’ equity and cash flows for CP Secure Germany for each of the years ended December 31, 2006 and December 31, 2007 (collectively, the “Audited Financial Statements”). The Audited Financial Statements have been audited in accordance with GAAP by an independent public accounting firm, and such firm has confirmed in writing that such statements and information have been audited in accordance with GAAP in a manner reasonably satisfactory to Buyer. Set forth on Schedule 3.7(a)(ii) is (a) a copy of the consolidated statement of income for CP Secure Taiwan for each of the years ended December 31, 2006 and December 31, 2007 and a copy of the consolidated balance sheet of CP Secure Taiwan as of December 31, 2007 and (b) a copy of the consolidated balance sheet and statement of income for CP Secure Taiwan for each of the three months ended March 31, 2008 and June 30, 2008 (the “Unaudited Financial Statements” and, together with the Audited Financial Statements, the “Financial Statements”). The Audited Financial Statements have been prepared in accordance with GAAP consistently applied and fairly present, in all material respects, the financial condition and results of operations and cash flows of such member of the CP Secure Group as of the dates thereof or the periods then ended. The Unaudited Financial Statements have been prepared in good faith on the basis of the books and records of CP Secure Taiwan. There are no material off balance sheet transactions, arrangements, obligations, or relationships attributable to the Business or to which any Subsidiary of Seller is a party that may have a Material Adverse Effect.

      (b) There are no credits, prepaid expenses, deferred charges, advance payments, security deposits, prepaid items or duties that are primarily, but not exclusively, related to any Transferred Assets that are individually or in the aggregate material to the Business.

      Section 3.8 Litigation and Claims. Except as set forth on Schedule 3.8: (a) There is no civil, criminal or administrative action, suit, demand, claim, hearing, proceeding or investigation pending, or threatened, against or relating to Seller or any of its Affiliates in connection with the Transferred Assets, the Business or the transactions contemplated hereby.

      (b) None of the Transferred Assets is subject to any order, writ, judgment, award, injunction or decree of any court or governmental or regulatory authority of competent jurisdiction or any arbitrator or arbitrators.

      Section 3.9 Taxes. Except as set forth on Schedule 3.9, (a) there is no lien for Taxes upon any of the Transferred Assets nor is any Taxing Authority in the process of imposing any lien for Taxes on any of the Transferred Assets, other than liens for Taxes that are not yet due and payable or for Taxes the validity or amount of which is being contested by Seller or one of its Affiliates in good faith by appropriate action as listed on Schedule 3.9(a), and (b) there are no Encumbrances for Taxes upon any of the Transferred Assets nor is any Taxing Authority in the process of or otherwise contemplating imposing any Encumbrances for Taxes on any of the Transferred Assets.

Section 3.10 Reserved.

      Section 3.11 Compliance with Laws. Except as disclosed on Schedule 3.11, (a) the Business has been and currently is being conducted in compliance with all applicable Laws in all material respects, (b) neither Seller nor any of its Affiliates has received any notice alleging any material violation under any applicable Law, (c) the Business has all Governmental Authorizations necessary for the conduct of the Business as currently conducted and (d) no Governmental Authorizations or Non-Governmental Authorizations or applications therefor are

required to be held by Seller or any of its Affiliates that are specific to the design, manufacture, sale and distribution of any Products (as opposed to other goods, products or services).

Section 3.12 Intellectual Property.

      (a) Schedule 3.12(a)(i) sets forth a true and complete list of all Registered and/or Intellectual Property and IT Assets that are owned by Seller or any of its Affiliates and used in or related to the Business. The

Transferred IP constitutes all Intellectual Property (i) used in or related to the Business, and, immediately after the Closing, necessary for Buyer to conduct and operate the Business as currently conducted by Seller, and (ii) necessary to make, have made, use, import, offer to sell and sell the products currently made or sold by the Business. Seller and its Affiliates own all right, title and interest in and to the Transferred IP, free and clear of all Encumbrances. The Transferred IP is valid, subsisting and enforceable, and is not subject to any outstanding order, judgment, decree or agreement adversely affecting Seller’s or its Affiliates’ use thereof or rights thereto.

      (b) Immediately after the Closing, Buyer will own or have the right to use in the operation of the Business all of the Transferred IP and Transferred IT Assets, on terms and conditions the same as those in effect immediately prior to the Closing.

      (c) To the Knowledge of Seller, the operation of the Business as currently conducted, and the products sold and services provided by Seller or any of its Affiliates in connection therewith, do not and have not infringed, misappropriated or otherwise violated or conflicted with the Intellectual Property of any other Person. To the Knowledge of Seller, there is no litigation, opposition, cancellation, proceeding, objection or claim pending, asserted or threatened concerning the ownership, validity, registerability, enforceability, infringement, misappropriation, violation or use of, or licensed right to use, any Transferred IP or Transferred IT Assets, and no valid basis exists for any such litigation, opposition, cancellation, proceeding, objection or claim. To the Knowledge of Seller, no Person is infringing, misappropriating or otherwise violating any Transferred IP. No Person has notified Seller or any of its Subsidiaries that (i) any of such Person’s Intellectual Property are infringed, misappropriated, diluted, violated, or used without authorization by Seller or any of its Affiliates in the conduct of the Business, or (ii) Seller or any of its Affiliates requires a license to any of such Person’s Intellectual Property in order to conduct the Business as currently conducted. Further, neither Seller nor any of its Affiliates has received a written offer from any Person to license any of such Person’s Intellectual Property in connection with its conduct of the Business by Seller and its Affiliates.

      (d) Schedule 3.12(d) sets forth a true and complete list of all IP Contracts that are Transferred Contracts (the “Transferred IP Contracts”). To the Knowledge of Seller, each Transferred IP Contract is, and will continue to be immediately following the Closing, in full force and effect in accordance with its terms, legal, valid, binding and enforceable against the other party thereto. Except as set forth on Schedule 3.4(i) and (ii), no default or breach exists under, and there has been no event, condition or occurrence that, with the giving of notice or lapse of time, or both, would give rise or constitute a breach or default by Seller or any of its Affiliates or, to the Knowledge of Seller, any other Person, under, any Transferred IP Contract. To the Knowledge of Seller, no claim has been threatened or asserted that Seller or any of its Affiliates or any other Person has breached any Transferred IP Contract. Except as set forth on Schedule 3.4(i) and (ii), the consummation of the transactions contemplated hereby will not conflict with, or result in the breach of, effect or give rise to any license under, or constitute a default under, or result in the termination, cancellation or acceleration (whether after the filing of notice or the lapse of time or both) of any right of Seller or any of its

Affiliates under, or a loss of any benefit to which Seller or any of its Affiliates is entitled under, or the imposition of any obligation under, or Encumbrance on, any of the Transferred IP Contracts. Except as set forth on Schedule 3.4(i) and (ii),no Transferred IP Contract contains any term that would become applicable or inapplicable or whose scope would materially change as a result of the consummation of the transactions contemplated hereby.

      (e) The Transferred IP that is Registered Intellectual Property has been duly registered with, filed in or issued by, as the case may be, the United States Patent and Trademark Office or such other filing offices, domestic or foreign, as are identified on Schedule 3.12(e)(i) and such registrations, filings, issuances and other actions remain in full force and effect, and are current and unexpired. Seller and each of its Affiliates have properly executed and recorded all documents necessary to perfect its title to all Intellectual Property set forth on Schedule 3.12(e)(i), and have filed all documents and paid all taxes, fees, and other financial obligations required to maintain in force and effect all such items until the Closing. Schedule 3.12(e)(ii) is a complete and accurate list of all actions (including payment of fees) necessary within the 120 day-period following the Closing Date, to maintain or otherwise to keep in full force and effect the Intellectual Property set forth on Schedule 3.12(e)(i). As of the date of this Agreement, no interference, opposition, reissue, reexamination, or other legal proceeding is pending or, to Seller’s Knowledge, threatened, in which the scope, validity, ownership, right to use, or enforceability of any Intellectual Property set forth on Schedule 3.12(e)(i) is being contested or challenged.

      (f) Seller and its Affiliates have taken all reasonable measures to protect the secrecy, confidentiality and value of all Trade Secrets used