RAMBUS INC (Form: 10-Q, Received: 04/22/2016 14:02:09)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-Q

_______________________________

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-22339

_______________________________

RAMBUS INC.

(Exact name of registrant as specified in its charter)

_______________________________



Delaware		94-3112828
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



1050 Enterprise Way, Suite 700 Sunnyvale, California				94089
(Address of principal executive offices)				(ZIP Code)

Registrant’s telephone number, including area code: (408) 462-8000

_______________________________

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

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

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



Large accelerated filer ý		Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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

The number of shares outstanding of the registrant’s Common Stock, par value $.001 per share, was 110,077,451 as of March 31, 2016 .

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RAMBUS INC.

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	PAGE
Note Regarding Forward-Looking Statements	3
PART I. FINANCIAL INFORMATION	5
Item 1. Financial Statements (Unaudited):	5
Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	5
Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015	6
Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015	7
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	8
Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures about Market Risk	39
Item 4. Controls and Procedures	40
PART II. OTHER INFORMATION	41
Item 1. Legal Proceedings	41
Item 1A. Risk Factors	41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3. Defaults Upon Senior Securities	53
Item 4. Mine Safety Disclosures	53
Item 5. Other Information	53
Item 6. Exhibits	54
Signature	55
Exhibit Index	56

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements include, without limitation, predictions regarding the following aspects of our future:


•	Success in the markets of our products and services or our customers’ products;


•	Sources of competition;


•	Research and development costs and improvements in technology;


•	Sources, amounts and concentration of revenue, including royalties;


•	Success in signing and renewing license agreements;


•	Terms of our licenses and amounts owed under license agreements;


•	Technology product development;


•	Dispositions, acquisitions, mergers or strategic transactions and our related integration efforts, including our recent acquisition of Smart Card Software Ltd.;


•	Impairment of goodwill and long-lived assets;


•	Pricing policies of our customers;


•	Changes in our strategy and business model, including the expansion of our portfolio of inventions, products and solutions to address additional markets in lighting, chip and system security;


•	Deterioration of financial health of commercial counterparties and their ability to meet their obligations to us;


•	Effects of security breaches or failures in our or our customers’ products and services on our business;


•	Engineering, sales and general and administration expenses;


•	Contract revenue;


•	Operating results;


•	International licenses and operations;


•	Effects of changes in the economy and credit market on our industry and business;


•	Ability to identify, attract, motivate and retain qualified personnel;


•	Effects of government regulations on our industry and business;


•	Manufacturing and supply partners and/or sale and distribution channels;


•	Growth in our business;


•	Methods, estimates and judgments in accounting policies;


•	Adoption of new accounting pronouncements;


•	Effective tax rates;


•	Restructurings and plans of termination;


•	Realization of deferred tax assets/release of deferred tax valuation allowance;


•	Trading price of our common stock;


•	Internal control environment;


•	The level and terms of our outstanding debt and the repayment or financing of such debt;


•	Litigation expenses;


•	Protection of intellectual property;


•	Any changes in laws, agency actions and judicial rulings that may impact the ability to enforce intellectual property rights;


•	Indemnification and technical support obligations;


•	Equity repurchase plans;

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•	Issuances of debt or equity securities, which could involve restrictive covenants or be dilutive to our existing stockholders;


•	Outcome and effect of potential future intellectual property litigation and other significant litigation; and


•	Likelihood of paying dividends.

You can identify these and other forward-looking statements by the use of words such as “may,” “future,” “shall,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continue,” “projecting” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.

Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Item 1A, “Risk Factors.” All forward-looking statements included in this document are based on our assessment of information available to us at this time. We assume no obligation to update any forward-looking statements.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

RAMBUS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	March 31, 2016			December 31, 2015
	(In thousands, except shares and par value)
ASSETS
Current assets:
Cash and cash equivalents	$	136,629		$	143,764
Marketable securities	88,943			143,942
Accounts receivable	14,617			16,408
Prepaids and other current assets	13,017			11,476
Total current assets	253,206			315,590
Intangible assets, net	114,325			64,266
Goodwill	163,805			116,899
Property, plant and equipment, net	56,403			56,616
Deferred tax assets	160,464			162,485
Other assets	4,622			2,165
Total assets	$	752,825		$	718,021
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,874		$	4,096
Accrued salaries and benefits	8,432			12,278
Deferred revenue	7,317			5,780
Accrued acquisition liability	12,100			—
Other current liabilities	7,392			6,212
Total current liabilities	40,115			28,366
Convertible notes, long-term	121,069			119,418
Long-term imputed financing obligation	38,496			38,625
Long-term income taxes payable	3,110			2,903
Deferred tax liabilities	14,677			—
Other long-term liabilities	637			2,176
Total liabilities	218,104			191,488
Commitments and contingencies (Notes 9 and 13)
Stockholders’ equity:
Convertible preferred stock, $.001 par value:
Authorized: 5,000,000 shares
Issued and outstanding: no shares at March 31, 2016 and December 31, 2015	—			—
Common stock, $.001 par value:
Authorized: 500,000,000 shares
Issued and outstanding: 110,077,451 shares at March 31, 2016 and 109,287,591 shares at December 31, 2015	110			109
Additional paid-in capital	1,137,500			1,130,368
Accumulated deficit	(602,439		)	(604,317		)
Accumulated other comprehensive income (loss)	(450		)	373
Total stockholders’ equity	534,721			526,533
Total liabilities and stockholders’ equity	$	752,825		$	718,021

See Notes to Unaudited Condensed Consolidated Financial Statements

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RAMBUS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Three Months Ended
	March 31,
	2016			2015
	(In thousands, except per share amounts)
Revenue:
Royalties	$	62,877		$	66,963
Contract and other revenue	9,805			5,951
Total revenue	72,682			72,914
Operating costs and expenses:
Cost of revenue*	12,207			10,756
Research and development*	28,527			28,534
Sales, general and administrative*	23,095			18,502
Gain from sale of intellectual property	—			(2,260		)
Gain from settlement	(441		)	(510		)
Total operating costs and expenses	63,388			55,022
Operating income	9,294			17,892
Interest income and other income (expense), net	242			132
Interest expense	(3,141		)	(3,083		)
Interest and other income (expense), net	(2,899		)	(2,951		)
Income before income taxes	6,395			14,941
Provision for income taxes	4,517			5,439
Net income	$	1,878		$	9,502
Net income per share:
Basic	$	0.02		$	0.08
Diluted	$	0.02		$	0.08
Weighted average shares used in per share calculation:
Basic	109,733			115,336
Diluted	112,252			117,442

_________________________________________

* Includes stock-based compensation:



Cost of revenue	$	14	$	12
Research and development	$	2,080	$	1,767
Sales, general and administrative	$	2,770	$	1,987

See Notes to Unaudited Condensed Consolidated Financial Statements

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RAMBUS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended
	March 31,
(In thousands)	2016			2015
Net income	$	1,878		$	9,502
Other comprehensive income:
Foreign currency translation adjustment	(640		)	—
Unrealized gain (loss) on marketable securities, net of tax	(183		)	53
Total comprehensive income	$	1,055		$	9,555

See Notes to Unaudited Condensed Consolidated Financial Statements

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RAMBUS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Three Months Ended
	March 31,
	2016			2015
	(In thousands)
Cash flows from operating activities:
Net income	$	1,878		$	9,502
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	4,864			3,766
Depreciation	2,969			3,227
Amortization of intangible assets	7,719			6,322
Non-cash interest expense and amortization of convertible debt issuance costs	1,651			1,559
Deferred income taxes	1,142			644
Incremental tax benefits from stock-based compensation	(485		)	(182		)
Gain from sale of intellectual property and property, plant and equipment, net	(37		)	(2,267		)
Change in operating assets and liabilities:
Accounts receivable	10,015			(540		)
Prepaid expenses and other assets	(2,398		)	(1,436		)
Accounts payable	266			(965		)
Accrued salaries and benefits and other liabilities	(9,857		)	(5,959		)
Income taxes payable	(233		)	(86		)
Deferred revenue	(1,236		)	1,272
Net cash provided by operating activities	16,258			14,857
Cash flows from investing activities:
Purchases of property, plant and equipment	(1,599		)	(1,095		)
Purchases of marketable securities	—			(46,779		)
Maturities of marketable securities	54,585			40,070
Proceeds from sale of marketable securities	—			6,600
Proceeds from sale of intellectual property and property, plant and equipment	—			2,280
Acquisition of business, net of cash acquired	(80,523		)	—
Net cash provided by (used in) investing activities	(27,537		)	1,076
Cash flows from financing activities:
Proceeds received from issuance of common stock under employee stock plans	3,799			1,424
Principal payments against lease financing obligation	(140		)	(98		)
Incremental tax benefits from stock-based compensation	485			182
Net cash provided by financing activities	4,144			1,508
Net increase (decrease) in cash and cash equivalents	(7,135		)	17,441
Cash and cash equivalents at beginning of period	143,764			154,126
Cash and cash equivalents at end of period	$	136,629		$	171,567

Non-cash investing activities during the period:
Property, plant and equipment received and accrued in accounts payable and other liabilities	$	830		$	248
Assumed cash liability from acquisition	$	12,100		$	—

See Notes to Unaudited Condensed Consolidated Financial Statements

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RAMBUS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Rambus Inc. (“Rambus” or the “Company”) and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements. Investments in entities with less than 20% ownership or in which the Company does not have the ability to significantly influence the operations of the investee are being accounted for using the cost method and are included in other assets.

In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring items) necessary to state fairly the financial position and results of operations for each interim period presented. Interim results are not necessarily indicative of results for a full year.

The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information. Certain information and Note disclosures included in the financial statements prepared in accordance with generally accepted accounting principles have been omitted in these interim statements pursuant to such SEC rules and regulations. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto in Form 10-K for the year ended December 31, 2015 .

Operating Segment Definitions

Operating segments are based upon Rambus' internal organization structure, the manner in which its operations are managed, the criteria used by its Chief Operating Decision Maker ("CODM") to evaluate segment performance and availability of separate financial information regularly reviewed for resource allocation and performance assessment.

The Company determined its CODM to be the Chief Executive Officer and determined its operating segments to be: (1) Memory and Interface Division ("MID"), which focuses on the design, development and licensing of technology that is related to memory and interfaces; (2) Cryptography Research Division ("CRD"), which focuses on the design, development and licensing of technologies for chip and system security and anti-counterfeiting; (3) Emerging Solutions Division ("ESD"), which includes the computational sensing and imaging group along with the development efforts in the area of emerging technologies; and (4) Lighting and Display Technologies ("LDT"), which focuses on the design, development and licensing of technologies for lighting.

For the three months ended March 31, 2016 , only MID and CRD were reportable segments as each of them met the quantitative thresholds for disclosure as a reportable segment. The results of the remaining other operating segments were shown under “Other.”

Reclassifications

Certain prior periods' amounts were reclassified to conform to the current year’s presentation. None of these reclassifications had an impact on reported net income for any of the periods presented. Refer to Note 8 "Convertible Notes" for details.

2. Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, "Improvements to Employee Share-Based Payment Accounting." This ASU affects entities that issue share-based payment awards to their employees. The ASU is designed to simplify several aspects of accounting for share-based payment award transactions, which include the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeiture rate calculations. This ASU will become effective for the Company on January 1, 2017. Early adoption is permitted in any interim or annual period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases." This ASU requires assets and liabilities arising from leases, including operating leases, to be recognized on the balance sheet. This ASU will become effective for the Company in the first quarter of fiscal year 2019, and requires adoption using a modified retrospective approach. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

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In November 2015, the FASB issued ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes (Topic 740)," to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this ASU as of December 31, 2015 on a prospective basis. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs", which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU requires retrospective adoption and is effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. The Company has adopted this ASU as of March 31, 2016 on a retrospective basis. Refer to Note 8, "Convertible Notes" for further details.

In May 2014, the FASB and International Accounting Standards Board issued their converged accounting standards update on revenue recognition. The core principle of the new guidance is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new guidance also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. In August 2015, the FASB deferred the effective date of this accounting standards update by one year. The new accounting standards update becomes effective for the Company on January 1, 2018. The Company is currently evaluating the impact that this guidance will have on its financial condition and results of operations.

3. Earnings Per Share

Basic earnings per share is calculated by dividing the net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing the earnings by the weighted average number of common shares and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of incremental common shares issuable upon exercise of stock options, employee stock purchases, restricted stock and restricted stock units and shares issuable upon the conversion of convertible notes. The dilutive effect of outstanding shares is reflected in diluted earnings per share by application of the treasury stock method. This method includes consideration of the amounts to be paid by the employees, the amount of excess tax benefits that would be recognized in equity if the instrument was exercised and the amount of unrecognized stock-based compensation related to future services. No potential dilutive common shares are included in the computation of any diluted per share amount when a net loss is reported.

The following table sets forth the computation of basic and diluted net income per share:



	Three Months Ended March 31,
	2016		2015
Net income per share:	(In thousands, except per share amounts)
Numerator:
Net income	$	1,878	$	9,502
Denominator:
Weighted-average shares outstanding - basic	109,733		115,336
Effect of potential dilutive common shares	2,519		2,106
Weighted-average shares outstanding - diluted	112,252		117,442
Basic net income per share	$	0.02	$	0.08
Diluted net income per share	$	0.02	$	0.08

For the three months ended March 31, 2016 and 2015 , options to purchase approximately 2.6 million and 3.8 million shares, respectively, were excluded from the calculation because they were anti-dilutive after considering proceeds from exercise, taxes and related unrecognized stock-based compensation expense.

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4. Intangible Assets and Goodwill

Goodwill

The following tables present goodwill information for each of the reportable segments for the three months ended March 31, 2016 :



Reportable Segment:	As of December 31, 2015		Additions to Goodwill (1)		Impairment Charge of Goodwill		Effect of Exchange Rates			As of March 31, 2016
	(In thousands)
MID	$	19,905	$	—	$	—	$	—		$	19,905
CRD	96,994		47,239		—		(333		)	143,900
Total	$	116,899	$	47,239	$	—	$	(333	)	$	163,805

(1) During the first quarter of 2016, the Company acquired Smart Card Software Limited (“SCS”) which resulted in the addition to goodwill. See Note 16, “Acquisition” for further details.



	As of
	March 31, 2016
Reportable Segment:	Gross Carrying Amount		Accumulated Impairment Losses			Net Carrying Amount
	(In thousands)
MID	$	19,905	$	—		$	19,905
CRD	143,900		—			143,900
Other	21,770		(21,770		)	—
Total	$	185,575	$	(21,770	)	$	163,805

Intangible Assets

The components of the Company’s intangible assets as of March 31, 2016 and December 31, 2015 were as follows:



		As of March 31, 2016
	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
		(In thousands)
Existing technology (1)	3 to 10 years	$	212,244	$	(133,426	)	$	78,818
Customer contracts and contractual relationships (1)	1 to 10 years	63,824		(28,317		)	35,507
Non-compete agreements and trademarks	3 years	300		(300		)	—
Total intangible assets		$	276,368	$	(162,043	)	$	114,325

(1) Includes intangible assets from the acquisition of SCS. See Note 16, “Acquisition” for further details.



		As of December 31, 2015
	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
		(In thousands)
Existing technology	3 to 10 years	$	185,321	$	(127,028	)	$	58,293
Customer contracts and contractual relationships	1 to 10 years	31,093		(25,120		)	5,973
Non-compete agreements and trademarks	3 years	300		(300		)	—
Total intangible assets		$	216,714	$	(152,448	)	$	64,266

During the three months ended March 31, 2016 , the Company did not sell any intangible assets. During the three months ended March 31, 2015 , the Company did not purchase or sell any intangible assets.

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Included in customer contracts and contractual relationships are favorable contracts which are acquired software and service agreements where the Company has no performance obligations. Cash received from these acquired favorable contracts reduces the favorable contract intangible asset. For the three months ended March 31, 2016 , the Company received $1.7 million related to the favorable contracts. For the three months ended March 31, 2015 , the Company did not receive any cash related to the favorable contracts. As of March 31, 2016 and December 31, 2015 , the net balance of the favorable contract intangible assets was $6.9 million and zero , respectively.

Amortization expense for intangible assets for the three months ended March 31, 2016 was $7.7 million . Amortization expense for intangible assets for the three months ended March 31, 2015 was $6.3 million . The estimated future amortization expense of intangible assets as of March 31, 2016 was as follows (amounts in thousands):



Years Ending December 31:	Amount
2016 (remaining 9 months)	$	30,394
2017	34,102
2018	20,519
2019	11,391
2020	10,903
Thereafter	7,016
	$	114,325

It is reasonably possible that the businesses could perform significantly below the Company's expectations or a deterioration of market and economic conditions could occur. This would adversely impact the Company's ability to meet its projected results, which could cause the goodwill in any of its reporting units or long-lived assets in any of its asset groups to become impaired. Significant differences between these estimates and actual cash flows could materially affect the Company's future financial results. If the Company determines that its goodwill or long-lived assets are impaired, it would be required to record a non-cash charge that could have a material adverse effect on its results of operations and financial position.

5. Segments and Major Customers

For the three months ended March 31, 2016 , MID and CRD were reportable segments as each of them met the quantitative thresholds for disclosure as a reportable segment. The results of the remaining operating segments were shown under “Other.”

The Company evaluates the performance of its segments based on segment operating income (loss), which is defined as revenue minus segment operating expenses. Segment operating expenses are comprised of direct operating expenses.

Segment operating expenses do not include sales, general and administrative expenses and the allocation of certain expenses managed at the corporate level, such as stock-based compensation, amortization, and certain bonus and acquisition costs. The “Reconciling Items” category includes these unallocated sales, general and administrative expenses as well as corporate level expenses.

The tables below present reported segment operating income (loss) for the three months ended March 31, 2016 and 2015 , respectively.



	For the Three Months Ended March 31, 2016
	MID		CRD		Other			Total
	(In thousands)
Revenues	$	53,545	$	14,101	$	5,036		$	72,682
Segment operating expenses	12,043		11,910		7,126			31,079
Segment operating income (loss)	$	41,502	$	2,191	$	(2,090	)	$	41,603
Reconciling items								(32,309		)
Operating income								$	9,294
Interest and other income (expense), net								(2,899		)
Income before income taxes								$	6,395

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	For the Three Months Ended March 31, 2015
	MID		CRD		Other			Total
	(In thousands)
Revenues	$	54,733	$	12,826	$	5,355		$	72,914
Segment operating expenses	11,520		7,339		7,259			26,118
Segment operating income (loss)	$	43,213	$	5,487	$	(1,904	)	$	46,796
Reconciling items								(28,904		)
Operating income								$	17,892
Interest and other income (expense), net								(2,951		)
Income before income taxes								$	14,941

The Company’s CODM does not review information regarding assets on an operating segment basis. Additionally, the Company does not record intersegment revenue or expense.

Accounts receivable from the Company's major customers representing 10% or more of total accounts receivable at March 31, 2016 and December 31, 2015 , respectively, was as follows:



	As of
Customer	March 31, 2016		December 31, 2015
Customer 1 (Other segment)	24	%	27	%
Customer 2 (CRD reportable segment)	21	%	21	%
Customer 3 (MID reportable segment)	*		28	%
Customer 4 (MID reportable segment)	*		16	%

_________________________________________

* Customer accounted for less than 10% of total accounts receivable in the period

Revenue from the Company’s major customers representing 10% or more of total revenue for the three months ended March 31, 2016 and 2015 , respectively, was as follows:



	Three Months Ended
	March 31,
Customer	2016		2015
Customer A (MID and CRD reportable segments)	21	%	21	%
Customer B (MID reportable segment)	22	%	16	%
Customer C (MID reportable segment)	13	%	13	%

Revenue from customers in the geographic regions based on the location of contracting parties was as follows:



	Three Months Ended
	March 31,
(In thousands)	2016		2015
South Korea	$	31,454	$	26,821
USA	25,265		27,707
Japan	4,987		8,491
Europe	3,793		5,175
Canada	214		196
Singapore	4,619		2,810
Asia-Other	2,350		1,714
Total	$	72,682	$	72,914

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6. Marketable Securities

Rambus invests its excess cash and cash equivalents primarily in U.S. government sponsored obligations, commercial paper, corporate notes and bonds, money market funds and municipal notes and bonds that mature within three years. As of March 31, 2016 and December 31, 2015 , all of the Company’s cash equivalents and marketable securities had a remaining maturity of less than one year .

All cash equivalents and marketable securities are classified as available-for-sale. Total cash, cash equivalents and marketable securities are summarized as follows:



	As of March 31, 2016
(In thousands)	Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Weighted Rate of Return
Money market funds	$	90,342	$	90,342	$	—	$	—		0.20	%
U.S. Government bonds and notes	14,057		14,061		—		(4		)	0.48	%
Corporate notes, bonds, commercial paper and other	74,886		74,910		2		(26		)	0.56	%
Total cash equivalents and marketable securities	179,285		179,313		2		(30		)
Cash	46,287		46,287		—		—
Total cash, cash equivalents and marketable securities	$	225,572	$	225,600	$	2	$	(30	)



	As of December 31, 2015
(In thousands)	Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Weighted Rate of Return
Money market funds	$	77,804	$	77,804	$	—	$	—		0.12	%
U.S. Government bonds and notes	14,110		14,142		—		(32		)	0.48	%
Corporate notes, bonds, commercial paper and other	160,823		160,979		—		(156		)	0.45	%
Total cash equivalents and marketable securities	252,737		252,925		—		(188		)
Cash	34,969		34,969		—		—
Total cash, cash equivalents and marketable securities	$	287,706	$	287,894	$	—	$	(188	)

Available-for-sale securities are reported at fair value on the balance sheets and classified as follows:



	As of
	March 31, 2016		December 31, 2015
	(In thousands)
Cash equivalents	$	90,342	$	108,795
Short term marketable securities	88,943		143,942
Total cash equivalents and marketable securities	179,285		252,737
Cash	46,287		34,969
Total cash, cash equivalents and marketable securities	$	225,572	$	287,706

The Company continues to invest in highly rated quality, highly liquid debt securities. As of March 31, 2016 , these securities have a remaining maturity of less than one year. The Company holds all of its marketable securities as available-for-sale, marks them to market, and regularly reviews its portfolio to ensure adherence to its investment policy and to monitor individual investments for risk analysis, proper valuation, and unrealized losses that may be other than temporary.

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The estimated fair value of cash equivalents and marketable securities classified by the length of time that the securities have been in a continuous unrealized loss position at March 31, 2016 and December 31, 2015 are as follows:



	Fair Value				Gross Unrealized Loss
	March 31, 2016		December 31, 2015		March 31, 2016			December 31, 2015
	(In thousands)
Less than one year
U.S. Government bonds and notes	$	10,212	$	14,110	$	(4	)	$	(32	)
Corporate notes, bonds and commercial paper	47,247		145,563		(26		)	(156		)
Total Corporate notes, bonds, and commercial paper and U.S. Government bonds and notes	$	57,459	$	159,673	$	(30	)	$	(188	)

The gross unrealized loss at March 31, 2016 and December 31, 2015 was not material in relation to the Company’s total available-for-sale portfolio. The gross unrealized loss can be primarily attributed to a combination of market conditions as well as the demand for and duration of the U.S. government sponsored obligations and corporate notes and bonds. There is no requirement to sell and the Company believes that it can recover the amortized cost of these investments. The Company has found no evidence of impairment due to credit losses in its portfolio. Therefore, these unrealized losses were recorded in other comprehensive income. However, the Company cannot provide any assurance that its portfolio of cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require the Company in the future to record an impairment charge for credit losses which could adversely impact its financial results.

See Note 7, “Fair Value of Financial Instruments,” for discussion regarding the fair value of the Company’s cash equivalents and marketable securities.

7. Fair Value of Financial Instruments

The Company reviews the pricing inputs by obtaining prices from a different source for the same security on a sample of its portfolio. The Company has not adjusted the pricing inputs it has obtained. The following table presents the financial instruments that are carried at fair value and summarizes the valuation of its cash equivalents and marketable securities by the above pricing levels as of March 31, 2016 and December 31, 2015 :



	As of March 31, 2016
	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Money market funds	$	90,342	$	90,342	$	—	$	—
U.S. Government bonds and notes	14,057		—		14,057		—
Corporate notes, bonds, commercial paper and other	74,886		922		73,964		—
Total available-for-sale securities	$	179,285	$	91,264	$	88,021	$	—



	As of December 31, 2015
	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Money market funds	$	77,804	$	77,804	$	—	$	—
U.S. Government bonds and notes	14,110		—		14,110		—
Corporate notes, bonds, commercial paper and other	160,823		1,264		159,559		—
Total available-for-sale securities	$	252,737	$	79,068	$	173,669	$	—

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The Company monitors its investments for other-than-temporary impairment and records appropriate reductions in carrying value when necessary. The Company monitors its investments for other-than-temporary losses by considering current factors, including the economic environment, market conditions, operational performance and other specific factors relating to the business underlying the investment, reductions in carrying values when necessary and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in the market. Any other-than-temporary loss is reported under “Interest and other income (expense), net” in the condensed consolidated statement of operations.

For the three months ended March 31, 2016 and 2015 , there were no transfers of financial instruments between different categories of fair value.

The following table presents the financial instruments that are not carried at fair value but require fair value disclosure as of March 31, 2016 and December 31, 2015 :



	As of March 31, 2016						As of December 31, 2015
(In thousands)	Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value
1.125% Convertible Senior Notes due 2018 (the "2018 Notes")	$	138,000	$	121,069	$	174,853	$	138,000	$	119,418	$	156,292

The fair value of the convertible notes at each balance sheet date is determined based on recent quoted market prices for these notes which is a level 2 measurement. As discussed in Note 8, "Convertible Notes," as of March 31, 2016 , the 2018 Notes are carried at their face value of $138.0 million , less any unamortized debt discount and unamortized debt issuance costs. The carrying value of other financial instruments, including accounts receivable, accounts payable and other liabilities, approximates fair value due to their short maturities.

8. Convertible Notes

The Company adopted ASU 2015-03 during the first quarter of 2016. Pursuant to the guidance in ASU 2015-03, the Company has reclassified unamortized debt issuance costs associated with the Company's 2018 Notes in the previously reported Consolidated Balance Sheet as of December 31, 2015 , as follows:



(In thousands)	As presented December 31, 2015		Reclassifications			As adjusted December 31, 2015
Other assets	$	3,648	$	(1,483	)	$	2,165
Convertible notes, long-term	120,901		(1,483		)	119,418

The Company’s convertible notes are shown in the following table:



(In thousands)	As of March 31, 2016			As of December 31, 2015
1.125% Convertible Senior Notes due 2018	$	138,000		$	138,000
Unamortized discount	(15,589		)	(17,099		)
Unamortized debt issuance costs	(1,342		)	(1,483		)
Total convertible notes	$	121,069		$	119,418
Less current portion	—			—
Total long-term convertible notes	$	121,069		$	119,418

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Interest expense related to the notes for the three months ended March 31, 2016 and 2015 was as follows:



	Three Months Ended
	March 31,
	2016		2015
	(In thousands)
2018 Notes coupon interest at a rate of 1.125%	$	388	$	403
2018 Notes amortization of discount and debt issuance costs at an additional effective interest rate of 5.5%	1,651		1,559
Total interest expense on convertible notes	$	2,039	$	1,962

9. Commitments and Contingencies

As of March 31, 2016 , the Company’s material contractual obligations were as follows (in thousands):



	Total		Remainder of 2016		2017		2018		2019		2020		Thereafter
Contractual obligations (1)
Imputed financing obligation (2)	$	26,856	$	4,636	$	6,302	$	6,447	$	6,602	$	2,869	$	—
Leases and other contractual obligations	10,425		3,847		2,823		1,798		1,040		456		461
Software licenses (3)	3,562		1,497		1,300		765		—		—		—
Convertible notes	138,000		—		—		138,000		—		—		—
Interest payments related to convertible notes	3,881		776		1,553		1,552		—		—		—
Total	$	182,724	$	10,756	$	11,978	$	148,562	$	7,642	$	3,325	$	461

_________________________________________

(1)

The above table does not reflect possible payments in connection with uncertain tax benefits of approximately $22.1 million including $19.6 million recorded as a reduction of long-term deferred tax assets and $2.5 million in long-term income taxes payable as of March 31, 2016 . As noted below in Note 12, “Income Taxes,” although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months, the Company cannot reasonably estimate the outcome at this time.

(2)

With respect to the imputed financing obligation, the main components of the difference between the amount reflected in the contractual obligations table and the amount reflected on the unaudited condensed consolidated balance sheets are the interest on the imputed financing obligation and the estimated common area expenses over the future periods. The amount includes the amended Ohio lease and the amended Sunnyvale lease.


(3)	The Company has commitments with various software vendors for non-cancellable agreements generally having terms longer than one year.

Building lease expense was approximately $0.8 million and $0.7 million for the three months ended March 31, 2016 and 2015 , respectively. Deferred rent of $0.7 million and $0.8 million as of March 31, 2016 and December 31, 2015 , respectively, was included primarily in other long-term liabilities.

Indemnification

From time to time, the Company indemnifies certain customers as a necessary means of doing business. Indemnification covers customers for losses suffered or incurred by them as a result of any patent, copyright, or other intellectual property infringement or any other claim by any third party arising as result of the applicable agreement with the Company. The Company generally attempts to limit the maximum amount of indemnification that the Company could be required to make under these agreements to the amount of fees received by the Company, however, this is not always possible. The fair value of the liability as of March 31, 2016 and December 31, 2015 is not material.

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10. Equity Incentive Plans and Stock-Based Compensation

As of March 31, 2016 , 8,408,844 shares of the 35,400,000 cumulative shares approved under both the current 2015 Equity Incentive Plan (the “2015 Plan”) and past 2006 Equity Incentive Plan (the “2006 Plan”) remain available for grant, which included an increase of 4,000,000 shares approved under the 2015 Plan. On April 23, 2015, the Company's stockholders approved the 2015 Plan, which authorizes 4,000,000 shares for future issuance plus the number of shares that remained available for grant under the 2006 Plan as of the effective date of the 2015 Plan. The 2015 Plan became effective and replaced the 2006 Plan on April 23, 2015. The 2015 Plan was the Company’s only plan for providing stock-based incentive awards to eligible employees, executive officers, non-employee directors and consultants as of March 31, 2016. No further awards will be made under the 2006 Plan, but the 2006 Plan will continue to govern awards previously granted under it. In addition, any shares subject to stock options or other awards granted under the 2006 Plan that on or after the effective date of the 2015 Plan are forfeited, cancelled, exchanged or surrendered or terminate under the 2006 Plan will become available for grant under the 2015 Plan. Additionally, the 1997 Stock Option Plan (the “1997 Plan”) continues to govern awards previously granted under that plan.

A summary of shares available for grant under the Company’s plans is as follows:



	Shares Available for Grant
Shares available as of December 31, 2015	11,173,545
Stock options granted	(440,000	)
Stock options forfeited	470,134
Stock options expired under former plans	(192,467	)
Nonvested equity stock and stock units granted (1) (2)	(3,060,279	)
Nonvested equity stock and stock units forfeited (1)	457,911
Total available for grant as of March 31, 2016	8,408,844

_________________________________________


(1)	For purposes of determining the number of shares available for grant under the 2015 Plan (and previously the 2006 Plan) against the maximum number of shares authorized, each share of restricted stock granted reduces the number of shares available for grant by 1.5 shares and each share of restricted stock forfeited increases shares available for grant by 1.5 shares.


(2)	Amount includes 300,003 shares that have been reserved for potential future issuance related to certain performance unit awards granted in the first quarter of 2016 and discussed under the section titled "Nonvested Equity Stock and Stock Units" below.

General Stock Option Information

The following table summarizes stock option activity under the 1997 Plan, 2006 Plan and 2015 Plan for the three months ended March 31, 2016 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of March 31, 2016 .



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
	(In thousands, except per share amounts)
Outstanding as of December 31, 2015	8,995,017		$	10.01
Options granted	440,000		$	12.31
Options exercised	(550,229	)	$	6.82
Options forfeited	(470,134	)	$	15.02
Outstanding as of March 31, 2016	8,414,654		$	10.06	5.75	$	43,807
Vested or expected to vest at March 31, 2016	8,129,382		$	10.12	5.68	$	42,263
Options exercisable at March 31, 2016	5,139,627		$	11.39	4.66	$	24,873

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No stock options that contain a market condition were granted during the three months ended March 31, 2016 . As of March 31, 2016 and December 31, 2015 , there were 1,225,000 and 1,315,000, respectively, stock options outstanding that require the Company to achieve minimum market conditions in order for the options to become exercisable. The fair values of the options granted with a market condition were calculated, on their respective grant dates, using a binomial valuation model, which estimates the potential outcome of reaching the market condition based on simulated future stock prices.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options at March 31, 2016 , based on the $13.75 closing stock price of Rambus’ common stock on March 31, 2016 on the NASDAQ Global Select Market, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options outstanding and exercisable as of March 31, 2016 was 6,922,015 and 3,702,454 , respectively.

Employee Stock Purchase Plan

No purchases were made under the 2006 Employee Stock Purchase Plan ("2006 ESPP") or 2015 Employee Stock Purchase Plan ("2015 ESPP") during the three months ended March 31, 2016 and 2015 , respectively. As of March 31, 2016 , 2,000,000 shares under the 2015 ESPP remain available for issuance. The 2006 ESPP remained in effect until the Company’s November 2, 2015 offering period, at which time the first offering period under the 2015 ESPP began.

Stock-Based Compensation

For the three months ended March 31, 2016 and 2015 , the Company maintained stock plans covering a broad range of potential equity grants including stock options, nonvested equity stock and equity stock units and performance based instruments. In addition, the Company sponsors the 2015 ESPP (and previously the 2006 ESPP), whereby eligible employees are entitled to purchase common stock semi-annually, by means of limited payroll deductions, at a 15% discount from the fair market value of the common stock as of specific dates.

Stock Options

During the three months ended March 31, 2016 , the Company granted 440,000 stock options with an estimated total grant-date fair value of $2.1 million . During the three months ended March 31, 2016 , the Company recorded stock-based compensation expense related to stock options of $1.2 million .

During the three months ended March 31, 2015 , the Company granted 362,335 stock options, with an estimated total grant-date fair value of $1.7 million . During the three months ended March 31, 2015 , the Company recorded stock-based compensation expense related to stock options of $2.2 million .

As of March 31, 2016 , there was $7.4 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested stock-based compensation arrangements granted under the stock option plans. That cost is expected to be recognized over a weighted-average period of 1.9 years. The total fair value of shares vested as of March 31, 2016 was $36.9 million .

The total intrinsic value of options exercised was $3.1 million for the three months ended March 31, 2016 . The total intrinsic value of options exercised was $1.0 million for the three months ended March 31, 2015 . Intrinsic value is the total value of exercised shares based on the price of the Company’s common stock at the time of exercise less the cash received from the employees to exercise the options.

During the three months ended March 31, 2016 , net proceeds from employee stock option exercises totaled approximately $3.8 million .

Employee Stock Purchase Plan

For the three months ended March 31, 2016 , the Company recorded compensation expense related to the 2015 ESPP of $0.5 million . For the three months ended March 31, 2015 , the Company recorded compensation expense related to the 2006 ESPP of $0.4 million . As of March 31, 2016 , there was $0.2 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the 2015 ESPP. That cost is expected to be recognized over one month.

There were no tax benefits realized as a result of employee stock option exercises, stock purchase plan purchases, and vesting of equity stock and stock units for the three months ended March 31, 2016 and 2015 calculated in accordance with accounting for share-based payments.

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Valuation Assumptions

The fair value of stock awards is estimated as of the grant date using the Black-Scholes-Merton (“BSM”) option-pricing model assuming a dividend yield of 0% and the additional weighted-average assumptions as listed in the table below.

The following table presents the weighted-average assumptions used to estimate the fair value of stock options granted that contain only service conditions in the periods presented.



	Stock Option Plans
	Three Months Ended
	March 31,
	2016			2015
Stock Option Plans
Expected stock price volatility	36		%	41		%
Risk free interest rate	1.7		%	1.2		%
Expected term (in years)	6.1			6.0
Weighted-average fair value of stock options granted to employees	$	4.66		$	4.59

No shares were issued under the 2015 ESPP and 2006 ESPP during the three months ended March 31, 2016 and 2015 , respectively.

Nonvested Equity Stock and Stock Units

The Company grants nonvested equity stock units to officers, employees and directors. During the three months ended March 31, 2016 , the Company granted nonvested equity stock units totaling 1,840,184 shares under the 2015 Plan. During the three months ended March 31, 2015 , the Company granted nonvested equity stock units totaling 1,521,178 shares under the 2006 Plan. These awards have a service condition, generally a service period of four years , except in the case of grants to directors, for which the service period is 1 year . For the three months ended March 31, 2016 , the nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $22.7 million . For the three months ended March 31, 2015 , the nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $17.1 million . During the first quarters of 2016 and 2015, the Company granted performance unit awards to certain Company executive officers with vesting subject to the achievement of certain performance conditions. The ultimate number of performance units that can be earned can range from 0% to 150% of target depending on performance relative to target over the applicable period. The shares earned will vest on the third anniversary of the date of grant. The Company's shares available for grant has been reduced to reflect the shares that could be earned at 150% of target. During the three months ended March 31, 2016 and 2015 , the Company recorded $0.6 million and $0.2 million of stock-based compensation expense related to these performance unit awards, respectively.

For the three months ended March 31, 2016 , the Company recorded stock-based compensation expense of approximately $3.2 million related to all outstanding nonvested equity stock grants. For the three months ended March 31, 2015 , the Company recorded stock-based compensation expense of approximately $1.2 million related to all outstanding nonvested equity stock grants. Unrecognized stock-based compensation related to all nonvested equity stock grants, net of estimated forfeitures, was approximately $36.2 million at March 31, 2016 . This amount is expected to be recognized over a weighted average period of 3.2 years .

The following table reflects the activity related to nonvested equity stock and stock units for the three months ended March 31, 2016 :



Nonvested Equity Stock and Stock Units	Shares		Weighted- Average Grant-Date Fair Value
Nonvested at December 31, 2015	3,008,118		$	11.32
Granted	1,840,184		$	12.33
Vested	(362,963	)	$	10.04
Forfeited	(164,864	)	$	11.61
Nonvested at March 31, 2016	4,320,475		$	11.85

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11. Stockholders’ Equity

Share Repurchase Program

During the three months ended March 31, 2016 , the Company did not repurchase any shares of its common stock under its share repurchase program.

On January 21, 2015, the Company's Board approved a share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares. Share repurchases under the plan may be made through the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules, and regulations. There is no expiration date applicable to the plan.

On October 26, 2015, the Company initiated an accelerated share repurchase program with Citibank, N.A. The accelerated share repurchase program is part of the broader share repurchase program previously authorized by the Company's Board on January 21, 2015. Under the accelerated share repurchase program, the Company pre-paid to Citibank, N.A., the $100.0 million purchase price for its common stock and, in turn, the Company received an initial delivery of approximately 7.8 million shares of its common stock from Citibank, N.A, which were retired and recorded as a $80.0 million reduction to stockholders' equity. The remaining $20.0 million of the initial payment was recorded as a reduction to stockholders’ equity as an unsettled forward contract indexed to the Company's stock. The number of shares to be ultimately purchased by the Company will be determined based on the volume weighted average price of the common stock during the terms of the transaction, minus an agreed upon discount between the parties. The program is expected to be completed by June 2016.

As of March 31, 2016 , there remained an outstanding authorization to repurchase approximately 12.2 million shares of the Company's outstanding common stock under the current share repurchase program.

The Company records stock repurchases as a reduction to stockholders’ equity. The Company records a portion of the purchase price of the repurchased shares as an increase to accumulated deficit when the price of the shares repurchased exceeds the average original proceeds per share received from the issuance of common stock.

12. Income Taxes

The Company recorded a provision for income taxes of $4.5 million and $5.4 million for the three months ended March 31, 2016 and 2015 , respectively. The income taxes for the three months ended March 31, 2016 is primarily comprised of the Company's U.S. federal, state and foreign taxes and income tax expense recognized from exercises and expiration of shares from equity incentive plans. The provision for income taxes for the three months ended March 31, 2015 was primarily comprised of withholding taxes, state taxes and other foreign taxes based upon income earned during the period.

During the three months ended March 31, 2016 , the Company paid withholding taxes of $5.5 million . During the three months ended March 31, 2015 , the Company paid withholding taxes of $4.8 million .

As of March 31, 2016 , the Company’s unaudited condensed consolidated balance sheets included net deferred tax assets, before valuation allowance, of approximately $166.7 million , which consists of net operating loss carryovers, tax credit carryovers, amortization, employee stock-based compensation expenses and certain liabilities, partially reduced by deferred tax liabilities associated with the convertible notes.

As of March 31, 2016, the Company continues to maintain a valuation allowance against the majority of its state deferred tax assets. Management periodically evaluates the realizability of the Company's net deferred tax assets based on all available evidence, both positive and negative. The realizability of the Company's net deferred tax assets is dependent on its ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. The Company continues to maintain a deferred tax asset valuation allowance of $21.9 million as of March 31, 2016 .

The Company maintains liabilities for uncertain tax positions within its long-term income taxes payable accounts and as a reduction to existing deferred tax assets to the extent tax attributes are available to offset such liabilities. These liabilities involve judgment and estimation and are monitored by management based on the best information available including changes in tax regulations, the outcome of relevant court cases and other information.

As of March 31, 2016 , the Company had approximately $22.1 million of unrecognized tax benefits, including $19.6 million recorded as a reduction of long-term deferred tax assets and $2.5 million in long-term income taxes payable. If recognized, approximately $2.5 million would be recorded as an income tax benefit. As of December 31, 2015 , the Company had $20.8 million of unrecognized tax benefits, including $18.6 million recorded as a reduction of long-term deferred tax assets and $2.2 million recorded in long-term income taxes payable.

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Although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months, the Company cannot reasonably estimate the outcome at this time.

The Company recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision. At March 31, 2016 and December 31, 2015 , an immaterial amount of interest and penalties is included in long-term income taxes payable.

Rambus files income tax returns for the U.S., California, India and various other state and foreign jurisdictions. The U.S. federal returns are subject to examination from 2012 and forward. The California returns are subject to examination from 2009 and forward. In addition, any research and development credit carryforward or net operating loss carryforward generated in prior years and utilized in these or future years may also be subject to examination. The India returns are subject to examination from fiscal year ended March 2009 and forward. The Company is currently under examination by California for the 2010 and 2011 tax years. The Company’s India subsidiary is under examination by the Indian tax administration for tax years beginning 2011. These examinations may result in proposed adjustments to the income taxes as filed during these periods. Management regularly assesses the likelihood of outcomes resulting from income tax examinations to determine the adequacy of their provision for income taxes and believes their provision for unrecognized tax benefits is adequate.

Additionally, the Company's future effective tax rates could be adversely affected by earnings being higher than anticipated in countries where the Company has higher statutory rates or lower than anticipated in countries where it has lower statutory rates, by changes in valuation of its deferred tax assets and liabilities or by changes in tax laws or interpretations of those laws.

13. Litigation and Asserted Claims

Rambus is not currently a party to any material pending legal proceeding; however, from time to time, Rambus may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on our business, operating results, financial position or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

The Company records a contingent liability when it is probable that a loss has been incurred and the amount is reasonably estimable in accordance with accounting for contingencies.

14. Agreements with SK hynix and Micron

SK hynix

On June 11, 2013, Rambus, SK hynix and certain related entities of SK hynix entered into a settlement agreement, pursuant to which the parties have agreed to release all claims against each other with respect to all outstanding litigation between them. Pursuant to the settlement agreement, Rambus and SK hynix entered into a semiconductor patent license agreement on June 11, 2013, under which SK hynix licenses from Rambus non-exclusive rights to certain Rambus patents and has agreed to pay Rambus cash amounts over the next five years . Under the license agreement, Rambus has granted to SK hynix (i) a paid-up perpetual patent license for certain identified SK hynix DRAM products and (ii) a five -year term patent license to all other DRAM and other semiconductor products.

In June 2015, the Company s igned an amendment that extends its current agreement with SK hynix for an additional six years for use of Rambus memory-related patented innovations in SK hynix semiconductor products. The Company signed the original agreement with SK hynix for a five-year term in June 2013. Under the amendment, SK hynix has agreed to continue to pay the Company an average quarterly cash payment of $12.0 million which equates to $432.0 million from the signing of the amendment through the term of the agreement ending July 1, 2024, provided that (a) for each of the six full calendar quarters immediately following July 1, 2015, SK hynix will pay the Company a quarterly cash payment of $16.0 million , and (b) in addition, after December 1, 2017, SK hynix will have the option to make six quarterly cash payments of $8.0 million upon six months written notice. In addition, SK hynix has the option to renew the agreement for an additional three-year extension under the existing rate structure.

The agreements with SK hynix are considered a multiple element arrangement for accounting purposes. For a multiple element arrangement under the applicable accounting rules, the Company is required to identify specific elements of the arrangement and then determine when those elements should be recognized. The Company identified three elements in the arrangement: antitrust litigation settlement, settlement of past infringement, and license agreement. The Company considered

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several factors in determining the accounting fair value of the elements of the SK hynix agreements which included a third party valuation using an income approach (collectively the “SK hynix Fair Value”). The inputs and assumptions used in this accounting valuation were from a market participant perspective and included projected customer revenue, royalty rates, estimated discount rates, useful lives and income tax rates, among others. The development of a number of these inputs and assumptions in the model requires a significant amount of management judgment and discretion, and is based upon a number of factors, including the selection of industry comparables, market growth rates and other relevant factors. Changes in any number of these assumptions may have a substantial impact on the SK hynix Fair Value as assigned to each element. These inputs and assumptions represent management’s best estimates at the time of the transaction.

During the first quarter of 2016, the Company received cash consideration of $16.0 million from SK hynix. The amount was allocated between royalty revenue ( $15.9 million ) and gain from settlement ( $0.1 million ) based on the elements’ SK hynix Fair Value.

The cumulative cash receipts through March 31, 2016 and the remaining future cash receipts from the agreements with SK hynix are expected to be recognized as follows assuming no adjustments to the payments under the terms of the agreements (and assuming the option to make the lower payments begins with payments made during the middle of 2018):



	Cumulative Received to-date as of March 31,		Estimated to Be Received in												Total Estimated Cash Receipts
	2016		Remainder of 2016		2017		2018		2019		2020		2021 and Thereafter		Total Estimated Cash Receipts
(in millions)
Royalty revenue	$	142.1	$	48.0	$	48.0	$	40.0	$	32.0	$	48.0	$	168.0	$	526.1
Gain from settlement	1.9		—		—		—		—		—		—		1.9
Total	$	144.0	$	48.0	$	48.0	$	40.0	$	32.0	$	48.0	$	168.0	$	528.0

Micron

On December 9, 2013, Rambus, Micron and certain related entities of Micron entered into a settlement agreement, pursuant to which the parties have agreed that they will release all claims against each other with respect to all outstanding litigation between them and certain other potential claims. Pursuant to the settlement agreement, Rambus and Micron entered into a semiconductor patent license agreement on December 9, 2013. Under the license agreement, Rambus has granted to Micron and its subsidiaries and certain affiliated entities (i) a paid-up perpetual patent license for certain identified Micron DRAM products and (ii) a seven -year term patent license to other memory and semiconductor products.

The agreements with Micron are considered a multiple element arrangement for accounting purposes. For a multiple element arrangement under the applicable accounting rules, the Company is required to identify specific elements of the arrangement and then determine when those elements should be recognized. The Company identified three elements in the arrangement: antitrust litigation settlement, settlement of past infringement, and license agreement. The Company considered several factors in determining the accounting fair value of the elements of the Micron agreements which included a third party valuation using an income approach (collectively the “Micron Fair Value”). The inputs and assumptions used in this accounting valuation were from a market participant perspective and included projected customer revenue, royalty rates, estimated discount rates, useful lives and income tax rates, among others. The development of a number of these inputs and assumptions in the model requires a significant amount of management judgment and discretion, and is based upon a number of factors, including the selection of industry comparables, market growth rates and other relevant factors. Changes in any number of these assumptions may have a substantial impact on the Micron Fair Value as assigned to each element. These inputs and assumptions represent management’s best estimates at the time of the transaction.

During the first quarter of 2016, the Company received cash consideration of $10.0 million from Micron. The amount was allocated between royalty revenue ( $9.7 million ) and gain from settlement ( $0.3 million ) based on the elements’ Micron Fair Value.

The remaining $184.5 million is expected to be paid in successive quarterly payments of $10.0 million , concluding in the fourth quarter of 2020.

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The cumulative cash receipts through March 31, 2016 and the remaining future cash receipts from the agreements with Micron are expected to be recognized as follows assuming no adjustments to the payments under the terms of the agreements:



	Cumulative Received to-date as of March 31,		Estimated to Be Received in										Total Estimated Cash Receipts
	2016		Remainder of 2016		2017		2018		2019		2020		Total Estimated Cash Receipts
(in millions)
Royalty revenue	$	92.3	$	29.9	$	40.0	$	40.0	$	40.0	$	34.5	$	276.7
Gain from settlement	3.2		0.1		—		—		—		—		3.3
Total	$	95.5	$	30.0	$	40.0	$	40.0	$	40.0	$	34.5	$	280.0

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15. Restructuring Charges

The 2015 Plan

During 2015, the Company initiated a restructuring program to reduce overall corporate expenses which is expected to improve future profitability by reducing spending on sales, general and administrative programs and refining some of its research and development efforts ("the 2015 Plan"). In connection with this restructuring program, the Company initiated a plan of termination resulting in a reduction of 8% of the Company's headcount. The Company estimated that it would incur a cash payout related to the reduction in force of approximately $3.0 million , which is related to severance and termination benefits. The estimated non-cash expense was expected to be approximately $1.0 million . During the year ended December 31, 2015, the Company recorded a charge of $3.6 million related primarily to the reduction in workforce, of which $1.4 million was related to the MID reportable segment, $0.1 million was related to the CRD reportable segment, $1.2 million was related to the Other segment and $0.9 million was related to corporate support functions. The majority of the 2015 Plan was completed in the first quarter of 2016.

The following table summarizes the 2015 Plan restructuring activities during the three months ended March 31, 2016:



	Employee Severance and Related Benefits			Facilities				Total
	(In thousands)
Balance at December 31, 2014	$	—		$	—			$	—
Charges	2,993			583				3,576
Payments	(1,765		)	—				(1,765		)
Non-cash settlements	—			(583		)	*	(583		)
Balance at December 31, 2015	$	1,228		$	—			$	1,228
Payments	(1,181		)	—				(1,181		)
Balance at March 31, 2016	$	47		—				$	47

______________________________________

*The non-cash charge of $583 thousand is related to the write down of fixed assets related to the Other segment.

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16. Acquisition

Smart Card Software Limited

On January 25, 2016, the Company completed its acquisition of Smart Card Software Limited (“SCS”), a privately-held company incorporated in the United Kingdom, by acquiring all issued and outstanding shares of capital stock of SCS. Pursuant to the merger agreement on January 25, 2016, SCS was merged into Rambus, Inc. The transaction was denominated in British pounds. Under the terms of the merger agreement, the total consideration in U.S. dollar equivalent was $104.7 million which included the purchase price of $92.6 million paid on January 25, 2016 and purchase adjustments to be paid in the second quarter of 2016 totaling $12.1 million and comprised of $11.6 million in cash, $4.0 million in working capital, offset by $3.5 million in debt assumed from SCS. Of the purchase price, approximately $17.1 million of the consideration was deposited into an escrow account to fund indemnification obligations and other contractual provisions, with releases of portions of the escrow at various intervals through 18 months . SCS is a leader in mobile payments and a leading supplier of smart ticketing systems, which includes Bell Identification Ltd. and Ecebs Ltd. SCS is part of the CRD reporting unit. This acquisition will complement the Company's CRD reporting unit by allowing the Company to leverage its foundational security technology to offer differentiated, value-added security solutions to its customers. As of March 31, 2016 , the Company has incurred approximately $2.0 million in direct acquisition costs in connection with the acquisition which were expensed as incurred.

The initial purchase price allocation and related accounting for this acquisition is preliminary. The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations and the Company's estimates and assumptions for the acquisition are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The primary area of the preliminary estimates that are not yet finalized, relate to working capital adjustments and valuation of net assets.

The fair value of the assets acquired has been determined primarily by using valuation methods that discount the expected future cash flows to present value using estimates and assumptions determined by management. The Company performed a valuation of the net assets acquired as of the January 25, 2016 closing date. The total consideration from the business combination was allocated as follows:



	Total
	(in thousands)
Cash	$	12,056
Accounts receivable	6,563
Property and equipment	524
Other tangible assets	1,462
Identified intangible assets	59,700
Goodwill	47,239
Accounts payable and accrued liabilities	(5,996		)
Deferred income taxes	(15,556		)
Deferred revenue	(1,313		)
Total	$	104,679

The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the Company and the assembled workforce of SCS. This goodwill is not expected to be deductible for tax purposes.

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The identified intangible assets assumed in the acquisition of SCS were recognized as follows based upon their estimated fair values as of the acquisition date:



	Total		Estimated Weighted Average Useful Life
	(in thousands)		(in years)
Existing technology	$	24,600	6
Customer contracts and contractual relationships (1)	35,100		6
Total	$	59,700

(1) Includes favorable contracts of $8.3 million with an estimated useful life of 5 years . The favorable contracts are acquired software and service agreements where the Company has no performance obligations. Cash received from these acquired favorable contracts reduces the favorable contract intangible asset.

Disclosure of proforma earnings attributable to SCS is excluded as it would be impracticable, since the acquired company was a closely-held foreign private entity, its historical financial records are not available in U.S. GAAP and the Company is still in the preliminary stages of the acquisition and related integration efforts.

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

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 as described in more detail under “Note Regarding Forward-Looking Statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks, uncertainties and changes in condition, significance, value and effect. As a result of the factors described herein, and in the documents incorporated herein by reference, including, in particular, those factors described under “Risk Factors,” we undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission.

Rambus, RDRAM ™ , XDR ™ , FlexIO ™ and FlexPhase ™ are trademarks or registered trademarks of Rambus Inc. Other trademarks that may be mentioned in this quarterly report on Form 10-Q are the property of their respective owners.

Industry terminology, used widely throughout this report, has been abbreviated and, as such, these abbreviations are defined below for your convenience:



Differential Power Analysis	DPA
Dynamic Random Access Memory	DRAM
Light Emitting Diodes	LED
Rambus Dynamic Random Access Memory	RDRAM ™
eXtreme Data Rate	XDR ™

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From time to time we will refer to the abbreviated names of certain entities and, as such, have provided a chart to indicate the full names of those entities for your convenience.



Advanced Micro Devices Inc.	AMD
Broadcom Corporation	Broadcom
Cryptography Research Division	CRD
Eaton Corporation plc	Eaton
Elpida Memory, Inc.	Elpida
Emerging Solutions Division	ESD
Freescale Semiconductor Inc.	Freescale
Fujitsu Limited	Fujitsu
General Electric Company	GE
Intel Corporation	Intel
International Business Machines Corporation	IBM
Lighting and Display Technology	LDT
LSI Corporation (now a division of Avago Technologies Limited)	LSI
Memory and Interfaces Division	MID
Micron Technologies, Inc.	Micron
Nanya Technology Corporation	Nanya
Qualcomm Incorporated	Qualcomm
Panasonic Corporation	Panasonic
Renesas Electronics	Renesas
Samsung Electronics Co., Ltd.	Samsung
SK hynix, Inc.	SK hynix
Smart Card Software Ltd.	SCS
Sony Computer Electronics	Sony
ST Microelectronics N.V.	STMicroelectronics
Toshiba Corporation	Toshiba

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Business Overview

Rambus creates cutting-edge semiconductor and IP products, spanning memory and interfaces to security, smart sensors and lighting. Our chips, customizable IP cores, architecture licenses, tools, services, software, training and innovations improve the competitive advantage of our customers. We collaborate with the industry, partnering with leading ASIC and SoC designers, foundries, IP developers, EDA companies and validation labs. Our products are integrated into tens of billions of devices and systems, powering and securing diverse applications, including Big Data, Internet of Things (IoT), mobile, consumer and media platforms. We generate revenue by licensing our inventions and solutions, selling our semiconductor and security products and providing services to market-leading companies.

While we have historically focused our efforts on the development of technologies for electronics memory and chip interfaces, we have expanded our portfolio of inventions and solutions to address additional markets in lighting, chip and system security, as well as new areas within the semiconductor industry, such as computational sensing and imaging. We intend to continue our growth into new technology fields, consistent with our mission to create great value through our innovations and to make those technologies available through both our licensing and non-licensing business models. Key to our efforts will be hiring and retaining world-class inventors, scientists and engineers to lead the development of inventions and technology solutions for our fields of focus, and the management and business support personnel necessary to execute our plans and strategies.

We have four operational units: (1) Memory and Interfaces Division, or MID, which focuses on the design, development and licensing of technology that is related to memory and interfaces; (2) Cryptography Research Division, or CRD, which focuses on the design, development and licensing of technologies for chip and system security, anti-counterfeiting, smart ticketing and mobile payments; (3) Emerging Solutions Division, or ESD, which includes our computational sensing and imaging group along with our development efforts in the area of emerging technologies; and (4) Lighting and Display Technologies, or LDT, which focuses on the design, development and licensing of technologies for lighting. As of March 31, 2016, MID and CRD were considered reportable segments as they met the quantitative thresholds for disclosure as a reportable segment. The results of the remaining operating segments were shown under “Other.” For additional information concerning segment reporting, see Note 5, “Segments and Major Customers,” of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q.

Our inventions and technology solutions are primarily offered to our customers through either a patent license or a technology license. Royalties from patent licenses accounted for 81% and 89% of our consolidated revenue for the three months ended March 31, 2016 and 2015, respectively. Royalties from technology licenses accounted for 5% and 3% of our consolidated revenue for the three months ended March 31, 2016 and 2015, respectively. Today, a majority of our revenues are derived from patent licenses, through which we provide our customers a license to use a certain portion of our broad portfolio of patented inventions. The license provides our customers with a defined right to use our innovations in the customer's own digital electronics products, systems or services, as applicable. The licenses may also define the specific field of use where our customers may use or employ our inventions in their products. License agreements are structured with fixed, variable or a hybrid of fixed and variable royalty payments over certain defined periods ranging for periods of up to ten years. Leading consumer product, semiconductor and system companies such as AMD, Broadcom, Cisco, Freescale, Fujitsu, GE, IBM, Intel, LSI, Micron, Nanya, Panasonic, Qualcomm, Renesas, Samsung, SK hynix, STMicroelectronics and Toshiba have licensed our patents for use in their own products. The majority of our intellectual property was developed in-house and we have expanded our business strategy of monetizing our intellectual property to include the sale of select intellectual property. As any sales executed under this expanded strategy represent a component of our ongoing major or central operations and activities, we will record the related proceeds as revenue.

We also offer our customers technology licenses to support the implementation and adoption of our technology in their products or services. Our customers include leading companies such as Eaton, GE, IBM, Panasonic, Qualcomm, Samsung, Sony and Toshiba. Our technology license offerings include a range of technologies for incorporation into our customers' products and systems. We also offer a range of services as part of our technology licenses which can include know-how and technology transfer, product design and development, system integration, and other services. These technology license agreements may have both a fixed price (non-recurring) component and ongoing royalties. Further, under technology licenses, our customers typically receive licenses to our patents necessary to implement these solutions in their products with specific rights and restrictions to the applicable patents elaborated in their individual contracts with us.

The remainder of our revenue is contract services revenue which includes license fees and engineering services fees. The timing and amounts invoiced to customers can vary significantly depending on specific contract terms and can therefore have a significant impact on deferred revenue or account receivables in any given period.

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We intend to continue making significant expenditures associated with engineering, sales, general and administration and expect that these costs and expenses will continue to be a significant percentage of revenue in future periods. Whether such expenses increase or decrease as a percentage of revenue will be substantially dependent upon the rate at which our revenue or expenses change.

Our strategy is to evolve from providing primarily patent licenses to providing additional technology, products and services while creating and leveraging strategic synergies to increase revenue. One of our goals is to supplement our patent licensing business with additional licensing opportunities for our technologies, products and services to be incorporated into our customers’ products and/or systems. Our technology licenses are designed to support the implementation and adoption of our technology into our customers’ products or services. As part of these offerings, we can provide a range of services that can include access to technical experts, advanced system design and analysis, hardware and software to enhance design and validation, system IP and specifications, and process-specific hard and soft macros, along with other services. These technology license agreements may have both a fixed price (non-recurring) component and ongoing royalties. Further, under technology licenses, our customers typically receive licenses to our patents necessary to implement these solutions in their products with specific rights and restrictions to the applicable patents elaborated in their individual contracts with us.

As of March 31, 2016, our semiconductor, lighting, security and other technologies are covered by 1,871 U.S. and foreign patents. Additionally, we have 671 patent applications pending. Some of the patents and pending patent applications are derived from a common parent patent application or are foreign counterpart patent applications. We have a program to file applications for and obtain patents in the United States and in selected foreign countries where we believe filing for such protection is appropriate and would further our overall business strategy and objectives. In some instances, obtaining appropriate levels of protection may involve prosecuting continuation and counterpart patent applications based on a common parent application. We believe our patented innovations provide our customers with the ability to achieve improved performance, lower risk, greater cost-effectiveness and other benefits in their products and services.

Executive Summary

During the first quarter of 2016, we acquired Smart Card Software Ltd., or SCS, a privately held company who is a leader in mobile payments and a leading supplier of smart ticketing systems, which includes Bell Identification Ltd., or Bell ID, and Ecebs Ltd. through the purchase of all outstanding shares of SCS, for approximately $105 million. We expect the acquisition of SCS to be accretive to revenue within the first twelve months from the date of acquisition. Our Bell ID group will support international issuing banks, payment schemes and processors to integrate with Android Pay. Bell ID customers can utilize its Token Service Provider (TSP) software to enable and secure near field communication (NFC) payments functionality on Android phones.

Additionally, we have extended our patent license agreement with AMD. Under the terms of the agreement, AMD will continue to be licensed for its integrated circuit and circuit board products for an additional five years.

Engineering expenses continue to play a key role in our efforts to maintain product innovations. Our engineering expenses for the three months ended March 31, 2016 increased $1.4 million as compared to the same period in 2015 primarily due to increased headcount related expenses of $0.7 million, increased expenses related to software design tools of $0.8 million, increased amortization costs of $0.6 million due to the acquisition of SCS and increased stock-based compensation expense of $0.3 million, offset by decreased bonus accrual expense of $0.4 million, decreased prototyping costs of $0.3 million, decreased consulting costs of $0.2 million and decreased depreciation expense of $0.2 million.

Sales, general and administrative expenses for the three months ended March 31, 2016 increased $4.6 million as compared to the same period in 2015 primarily due to increased headcount related expenses of $0.7 million, increased stock-based compensation expense of $0.8 million, increased amortization costs of $0.7 million due to the acquisition of SCS, and various acquisition related costs of $1.8 million, including legal, accounting and other compliance fees.

Trends

There are a number of trends that may have a material impact on us in the future, including but not limited to, the evolution of memory technology, adoption of LEDs in general lighting, the use and adoption of our inventions or technologies and global economic conditions with the resulting impact on sales of consumer electronic systems.

We have a high degree of revenue concentration. Our top five customers for each reporting period represented approximately 70% and 66% of our revenue for the three months ended March 31, 2016 and 2015, respectively. As a result of renewing with Samsung in 2013 and settling with SK hynix and Micron in 2013, as well as extending our license agreement with SK hynix in June 2015, Samsung, SK hynix and Micron are expected to account for a significant portion of our ongoing

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licensing revenue. For both the three months ended March 31, 2016 and 2015, revenue from Micron, Samsung and SK hynix each accounted for 10% or more of our total revenue.

The particular customers which account for revenue concentration have varied from period to period as a result of the addition of new contracts, expiration of existing contracts, renewals of existing contracts, industry consolidation and the volumes and prices at which the customers have recently sold to their customers. These variations are expected to continue in the foreseeable future.

Our licensing cycle is lengthy, costly and unpredictable with any degree of certainty. We may incur costs in any particular period before any associated revenue stream begins, if at all. Our lengthy license negotiation cycles could make our future revenue difficult to predict because we may not be successful in entering into licenses with our customers in the amounts projected, or on our anticipated timelines. In addition, while some of our license agreements provide for fixed, quarterly royalty payments, many of our license agreements provide for volume-based royalties, and may also be subject to caps on royalties in a given period. The sales volume and prices of our customers' products in any given period can be difficult to predict. As a result, our actual results may differ substantially from analyst estimates or our forecasts in any given quarter or over the next year.

The semiconductor industry is intensely competitive and highly cyclical, limiting our visibility with respect to future sales. To the extent that macroeconomic fluctuations negatively affect our principal customers, the demand for our technology may be significantly and adversely impacted and we may experience substantial period-to-period fluctuations in our operating results. The royalties we receive from our semiconductor customers are partly a function of the adoption of our technologies by system companies. Many system companies purchase semiconductors containing our technologies from our customers and do not have a direct contractual relationship with us. Our customers generally do not provide us with details as to the identity or volume of licensed semiconductors purchased by particular system companies. As a result, we face difficulty in analyzing the extent to which our future revenue will be dependent upon particular system companies. System companies face intense competitive pressure in their markets, which are characterized by extreme volatility, frequent new product introductions and rapidly shifting consumer preferences.

During the third quarter of 2015 we announced that we are in technical development of the buffer chipset which we are currently sampling to key potential customers and critical ecosystem partners. We are currently working to make the chipset commercially available, but we do not expect any material contribution to revenue from the chipset in 2016.

Global demand for effective security technologies continues to increase. In particular, highly integrated devices such as smart phones and tablets are increasingly used for applications requiring security such as mobile payments, content protection, corporate information and user data. Our CRD is primarily focused on positioning its DPA countermeasures, CryptoFirewall™ and CryptoManager™ technology solutions, and the introduction of mobile payments and smart ticketing solutions to our offerings to capitalize on these trends and growing adoption among technology partners and customers.

The highly fragmented general lighting industry is undergoing a fundamental shift from incandescent technology to cold cathode fluorescent lights and LED driven technology due to the need to reduce energy consumption and to comply with government mandates. LED lighting typically saves energy costs as compared to existing installed lighting. Our LDT group's patents in LED edge-lit light guide technology can be applied in the design of next generation LED lighting products.

The strategy of the LDT group focuses on providing the market with novel, patented light guide technologies and products to customers who are leading the transition to solid-state LED-based general lighting fixtures.

In 2013, we sold a set of patent assets related to our core display patents where the purchaser of the patents can proceed independently with a licensing program. We have a net proceeds-sharing program in place with the purchaser of the patents upon their licensing of these patent assets. We retain the rights to use certain application techniques and may selectively engage with customers to license our intellectual property and technology for use and applications as permitted under our agreement, including without limitation, display panel and designs.

Our revenue from companies headquartered outside of the United States accounted for approximately 65% and 62% of our total revenue for the three months ended March 31, 2016 and 2015, respectively. We expect that revenue derived from international customers will continue to represent a significant portion of our total revenue in the future. To date, the majority of the revenue from international customers has been denominated in U.S. dollars. However, to the extent that such customers’ sales to their customers are not denominated in U.S. dollars, any revenue that we receive as a result of such sales could be subject to fluctuations in currency exchange rates. In addition, if the effective price of licensed products sold by our foreign customers were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for licensed products could fall, which in turn would reduce our revenue. We do not use financial instruments to hedge foreign exchange rate risk.

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For additional information concerning international revenue, see Note 5, “Segments and Major Customers,” of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q.

Engineering costs in the aggregate and as a percentage of revenue increased for the three months ended March 31, 2016 as compared to the same period in the prior year. In the near term, we expect engineering costs in the aggregate to be higher as we intend to continue to make investments in the infrastructure and technologies required to maintain our product innovation in semiconductor, lighting, security and other technologies, including costs related to the acquisition of SCS.

Sales, general and administrative expenses in the aggregate and as a percentage of revenue increased for the three months ended March 31, 2016 as compared to the same period in the prior year. In the past, our litigation expenses have been high and difficult to predict. Because we successfully negotiated settlements and license agreements with SK hynix, Micron and Nanya during the course of 2013 and 2014, we have settled all outstanding litigation and should no longer have material litigation expenses related to these specific matters. To the extent litigation is again necessary, our expectations on the amount and timing of any future general and administrative costs is uncertain. In the near term, we expect our sales, general and administrative costs in the aggregate to be lower as the acquisition costs associated with SCS occurred primarily during the first quarter of 2016.

Our continued investment in research and development projects, involvement in any future litigation or other legal proceedings and any lower revenue from our customers in the future, will negatively affect our cash from operations.

As a part of our overall business strategy, from time to time, we evaluate businesses and technologies for potential acquisition that are aligned with our core business and designed to supplement our growth, including the acquisition of SCS.

To provide us with more flexibility in returning capital back to our shareholders, on January 21, 2015, our Board authorized a share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares. In the fourth quarter of 2015, we entered into an accelerated share repurchase program to repurchase an aggregate of $100.0 million of our common stock and received an initial delivery of 7.8 million shares. We may continue to tactically execute the share repurchase program from time to time.

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Results of Operations

The following table sets forth, for the periods indicated, the percentage of total revenue represented by certain items reflected in our unaudited condensed consolidated statements of operations:



	Three Months Ended
	March 31,
	2016		2015
Revenue:
Royalties	86.5	%	91.8	%
Contract and other revenue	13.5	%	8.2	%
Total revenue	100.0	%	100.0	%
Operating costs and expenses:
Cost of revenue*	16.8	%	14.8	%
Research and development*	39.2	%	39.1	%
Sales, general and administrative*	31.8	%	25.4	%
Gain from sale of intellectual property	—	%	(3.1	)%
Gain from settlement	(0.6	)%	(0.7	)%
Total operating costs and expenses	87.2	%	75.5	%
Operating income	12.8	%	24.5	%
Interest income and other income (expense), net	0.3	%	0.2	%
Interest expense	(4.3	)%	(4.2	)%
Interest and other income (expense), net	(4.0	)%	(4.0	)%
Income before income taxes	8.8	%	20.5	%
Provision for income taxes	6.2	%	7.5	%
Net income	2.6	%	13.0	%

_________________________________________

* Includes stock-based compensation:



Cost of revenue	0.0	%	0.0	%
Research and development	2.9	%	2.4	%
Sales, general and administrative	3.8	%	2.7	%



	Three Months
	Ended March 31,				Change in
(Dollars in millions)	2016		2015		Percentage
Total Revenue
Royalties	$	62.9	$	67.0	(6.1	)%
Contract and other revenue	9.8		5.9		64.8	%
Total revenue	$	72.7	$	72.9	(0.3	)%

Royalty Revenue

Patent Licenses

Our patent royalties decreased approximately $5.9 million to $59.1 million for the three months ended March 31, 2016 from $65.0 million for the same period in 2015. The decrease was primarily due to lower royalty revenue from AMD, IBM, Renesas and STMicroelectronics, offset by higher royalty revenue recognized from SK hynix and Toshiba. Of the $59.1 million patent royalties for the three months ended March 31, 2016, $17.3 million is related to royalty revenue from settlement of past legal proceedings with SK Hynix and Micron.

We are continuously in negotiations for licenses with prospective customers. We expect patent royalties will continue to vary from period to period based on our success in adding new customers, renewing or extending existing agreements, as well

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as the level of variation in our customers' reported shipment volumes, sales price and mix, offset in part by the proportion of customer payments that are fixed or hybrid in nature.

Technology Licenses

Royalties from technology licenses increased approximately $1.8 million to $3.8 million for the three months ended March 31, 2016 from $2.0 million for the same period in 2015. The increase was primarily due to higher royalties from Eaton and Qualcomm.

In the future, we expect technology royalties will continue to vary from period to period based on our customers’ shipment volumes, sales prices, and product mix.

Royalty Revenue by Reportable Segments

Royalty revenue from the MID reportable segment, which includes patent and technology license royalties, decreased approximately $2.4 million to $51.8 million for the three months ended March 31, 2016 from $54.2 million for the same period in 2015. The decrease was primarily due to lower royalty revenue from AMD, IBM, Renesas and STMicroelectronics, offset by higher royalty revenue recognized from SK hynix and Toshiba.

Royalty revenue from the CRD reportable segment, which includes patent and technology license royalties, decreased approximately $2.3 million to $10.1 million for the three months ended March 31, 2016 from $12.4 million for the same period in 2015. The decrease was primarily due to lower royalty revenue from Renesas and STMicroelectronics, offset by higher royalty revenue recognized from Qualcomm.

Royalty revenue from the Other segment was immaterial for both the three months ended March 31, 2016 and 2015, and increased period over period due to increased royalties from technology licenses associated with increased shipments of lighting products.

Contract and Other Revenue

Contract and other revenue consists of revenue from technology development and sale of security and lighting products. Contract and other revenue increased approximately $3.9 million to $9.8 million for the three months ended March 31, 2016 from $5.9 million for the same period in 2015. The increase was primarily due to increased security technology development projects, including revenue from the acquisition of SCS, offset by decreased lighting technology development projects and sales of light guides.

We believe that contract and other revenue will fluctuate over time based on our ongoing technology development contractual requirements, the amount of work performed, the timing of completing engineering deliverables, and the changes to work required, as well as new technology development contracts booked in the future.

Contract and Other Revenue by Reportable Segments

Contract and other revenue from the MID reportable segment increased approximately $1.2 million to $1.7 million for the three months ended March 31, 2016 from $0.5 million for the same period in 2015, primarily due to various new development projects.

Contract and other revenue from the CRD reportable segment increased approximately $3.6 million to $4.0 million for the three months ended March 31, 2016 from $0.4 million for the same period in 2015, primarily due to revenue from security products, including revenue from the acquisition of SCS.

Contract and other revenue from the Other segment decreased approximately $0.9 million to $4.1 million for the three months ended March 31, 2016 from $5.0 million for the same period in 2015. The decrease was primarily due to decreased lighting technology development projects and sales of light guides.

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Engineering costs:



	Three Months Ended
	March 31,				Change in
(Dollars in millions)	2016		2015		Percentage
Engineering costs
Cost of revenue	$	5.8	$	5.1	15.9	%
Amortization of intangible assets	6.4		5.7		11.4	%
Stock-based compensation	0.0		0.0		—	%
Total cost of revenue	12.2		10.8		13.5	%
Research and development	26.4		26.7		(1.2	)%
Stock-based compensation	2.1		1.8		17.7	%
Total research and development	28.5		28.5		—	%
Total engineering costs	$	40.7	$	39.3	3.7	%

Total engineering costs increased $1.4 million for the three months ended March 31, 2016 as compared to the same period in 2015 primarily due to increased headcount related expenses of $0.7 million, increased expenses related to software design tools of $0.8 million, increased amortization costs of $0.6 million due to the acquisition of SCS and increased stock-based compensation expense of $0.3 million, offset by decreased bonus accrual expense of $0.4 million, decreased prototyping costs of $0.3 million, decreased consulting costs of $0.2 million and decreased depreciation expense of $0.2 million.

In the near term, we expect engineering costs to be higher as we continue to make investments in the infrastructure and technologies required to maintain our product innovation in semiconductor, lighting, security and other technologies, including costs related to the acquisition of SCS.

Sales, general and administrative costs:



	Three Months Ended
	March 31,				Change in
(Dollars in millions)	2016		2015		Percentage
Sales, general and administrative costs
Sales, general and administrative costs	$	20.3	$	16.5	23.1	%
Stock-based compensation	2.8		2.0		39.4	%
Total sales, general and administrative costs	$	23.1	$	18.5	24.8	%

Total sales, general and administrative costs increased $4.6 million for the three months ended March 31, 2016 as compared to the same period in 2015 primarily due to increased headcount related expenses of $0.7 million, increased stock-based compensation expense of $0.8 million, increased amortization costs of $0.7 million due to the acquisition of SCS, and various acquisition related costs of $1.8 million, including legal, accounting and other compliance fees.

In the future, sales, general and administrative costs will vary from period to period based on the trade shows, advertising, legal, acquisition and other sales, marketing and administrative activities undertaken, and the change in sales, marketing and administrative headcount in any given period. In the near term, we expect our sales, general and administrative costs to be lower as the acquisition costs associated with SCS occurred primarily during the first quarter of 2016.

Gain from sale of intellectual property:



	Three Months Ended
	March 31,				Change in
(Dollars in millions)	2016		2015		Percentage
Gain from sale of intellectual property	$	—	$	2.3	(100.0	)%

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During 2013, we sold portfolios of our patent assets covering lighting technologies. As part of these transactions, we received an initial upfront payment and expect to receive subsequent payments if and when the purchaser of the patents is successful in licensing that portfolio. During the first quarter of 2016, we did not receive any payment from the purchaser of the patents related to this transaction.

Gain from settlement:



	Three Months Ended
	March 31,				Change in
(Dollars in millions)	2016		2015		Percentage
Gain from settlement	$	0.4	$	0.5	(13.5	)%

The settlements with SK hynix and Micron are multiple element arrangements for accounting purposes. For a multiple element arrangement, we are required to determine the fair value of the elements. We considered several factors in determining the accounting fair value of the elements of the settlement with SK hynix and the settlement with Micron which included a third party valuation using an income approach (the “SK hynix Fair Value” and "Micron Fair Value", respectively). The total gain from settlement related to the settlements with SK hynix and Micron was $1.9 million and $3.3 million, respectively. During the three months ended March 31, 2016 and 2015, we recognized $0.4 million and $0.5 million, respectively, in each period as gain from settlement, which represents the portion of the SK hynix Fair Value and Micron Fair Value of the cash consideration allocated to the resolution of the antitrust litigation settlements. Refer to Note 14, “Agreements with SK hynix and Micron,” of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for further discussion.

Interest and other income (expense), net:



	Three Months
	Ended March 31,						Change in
(Dollars in millions)	2016			2015			Percentage
Interest income and other income (expense), net	$	0.2		$	0.1		83.3	%
Interest expense	(3.1		)	(3.1		)	1.9	%
Interest and other income (expense), net	$	(2.9	)	$	(3.0	)	(1.8	)%

Interest income and other income (expense), net, consists primarily of interest income generated from investments in high quality fixed income securities.

Interest expense primarily consists of interest expense associated with our imputed facility lease obligations on the Sunnyvale and Ohio facilities and non-cash interest expense related to the amortization of the debt discount and issuance costs on the 1.125% convertible senior notes due 2018 (the “2018 Notes”) as well as the coupon interest related to the 2018 Notes. We expect our non-cash interest expense to increase steadily as the 2018 Notes reach maturity.

Provision for income taxes:



	Three Months Ended
	March 31,						Change in
(Dollars in millions)	2016			2015			Percentage
Provision for income taxes	$	4.5		$	5.4		(17.0	)%
Effective tax rate	70.6		%	36.4		%

Our effective tax rate for the three months ended March 31, 2016 was different from the U.S. statutory tax rate primarily due to income tax expense recognized from exercises and expiration of vested shares from our equity incentive plans. Similarly, the effective tax rate was different for the three months ended March 31, 2016 as compared to the same period in 2015, due to the exhaustion of our excess tax benefits pool (from equity incentive plan exercises and expirations) in 2015. As such, we recognized income tax expense in situations when the stock-based compensation costs from equity incentive plans exceeded the tax benefits received from the tax deduction from equity incentive plan exercises.

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We recorded a provision for income taxes of $4.5 million and $5.4 million for the three months ended March 31, 2016 and 2015, respectively. During the three months ended March 31, 2016 and 2015, we paid withholding taxes of $5.5 million and $4.8 million, respectively.

Our effective tax rate for the three months ended March 31, 2015 was different from the U.S. statutory tax rate applied to our pretax income primarily due to a full valuation allowance on our U.S. deferred tax assets, foreign withholding and income taxes.

As of March 31, 2016, we continue to maintain a valuation allowance against the majority of our state deferred tax assets. We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative. The realizability of our net deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets.

Liquidity and Capital Resources



	As of
	March 31, 2016		December 31, 2015
	(In millions)
Cash and cash equivalents	$	136.6	$	143.8
Marketable securities	89.0		143.9
Total cash, cash equivalents, and marketable securities	$	225.6	$	287.7



	Three Months Ended
	March 31,
	2016			2015
	(In millions)
Net cash provided by operating activities	$	16.3		$	15.1
Net cash provided by (used in) investing activities	$	(27.5	)	$	1.1
Net cash provided by financing activities	$	4.1		$	1.3

Liquidity

We currently anticipate that existing cash, cash equivalents and marketable securities balances and cash flows from operations will be adequate to meet our cash needs for at least the next 12 months. Additionally, the majority of our cash and cash equivalents is in the United States. Our cash needs for the three months ended March 31, 2016 were funded primarily from cash collected from our customers.

We do not anticipate any liquidity constraints as a result of either the current credit environment or investment fair value fluctuations. Additionally, we have the intent and ability to hold our debt investments that have unrealized losses in accumulated other comprehensive gain (loss) for a sufficient period of time to allow for recovery of the principal amounts invested. Additionally, we have no significant exposure to European sovereign debt. We continually monitor the credit risk in our portfolio and mitigate our credit risk exposures in accordance with our policies.

As of March 31, 2016, there remained an outstanding authorization to repurchase approximately 12.2 million shares of our outstanding common stock under the current share repurchase program.

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Operating Activities

Cash provided by operating activities of $16.3 million for the three months ended March 31, 2016 was primarily attributable to the cash generated from customer licensing. Changes in operating assets and liabilities for the three months ended March 31, 2016 primarily included a decrease in accrued salaries and benefits and other liabilities mainly due to the payout of the Corporate Incentive Plan, a decrease in accounts receivable and an increase in prepaids and other current assets.

Cash provided by operating activities of $15.1 million for the three months ended March 31, 2015 was primarily attributable to the cash generated from customer licensing. Changes in operating assets and liabilities for the three months ended March 31, 2015 primarily included a decrease in accrued salaries and benefits and other liabilities mainly due to the payout of the 2014 Corporate Incentive Plan, an increase in deferred revenue and an increase in prepaids and other current assets.

Investing Activities

Cash used in investing activities of $27.5 million for the three months ended March 31, 2016 primarily consisted of cash paid for the acquisition of SCS of $92.6 million, net of cash acquired of $12.1 million, $1.6 million paid to acquire property, plant and equipment, offset by proceeds from the maturities of available-for-sale marketable securities of $54.6 million.

Cash provided by investing activities of $1.1 million for the three months ended March 31, 2015 primarily consisted of proceeds from the maturities and sales of available-for-sale marketable securities of $40.1 million and $6.6 million, respectively, offset by cash paid for purchases of available-for-sale marketable securities of $46.8 million. In addition, we received $2.3 million from the sale of intellectual property. We also paid $1.1 million to acquire property, plant and equipment.

Financing Activities

Cash provided by financing activities was $4.1 million for the three months ended March 31, 2016. We received proceeds of $3.8 million from the issuance of common stock under equity incentive plans.

Cash provided by financing activities was $1.3 million for the three months ended March 31, 2015. We received proceeds of $1.4 million from the issuance of common stock under equity incentive plans and paid $0.1 million due to principal payments against the lease financing obligation.

Contractual Obligations

As of March 31, 2016 , our material contractual obligations were (in thousands):



	Total		Remainder of 2016		2017		2018		2019		2020		Thereafter
Contractual obligations (1)
Imputed financing obligation (2)	$	26,856	$	4,636	$	6,302	$	6,447	$	6,602	$	2,869	$	—
Leases and other contractual obligations	10,425		3,847		2,823		1,798		1,040		456		461
Software licenses (3)	3,562		1,497		1,300		765		—		—		—
Convertible notes	138,000		—		—		138,000		—		—		—
Interest payments related to convertible notes	3,881		776		1,553		1,552		—		—		—
Total	$	182,724	$	10,756	$	11,978	$	148,562	$	7,642	$	3,325	$	461

_________________________________________

(1)

The above table does not reflect possible payments in connection with uncertain tax benefits of approximately $22.1 million including $19.6 million recorded as a reduction of long-term deferred tax assets and $2.5 million in long-term income taxes payable as of March 31, 2016 . As noted in Note 12, “Income Taxes,” of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q, although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months, we cannot reasonably estimate the outcome at this time.

(2)

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(3)	We have commitments with various software vendors for non-cancellable agreements generally having terms longer than one year.

Share Repurchase Program

During the three months ended March 31, 2016, we did not repurchase any shares of our common stock.

On January 21, 2015, our Board approved a share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares. Share repurchases under the plan may be made through the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules, and regulations. There is no expiration date applicable to the plan.

On October 26, 2015, we initiated an accelerated share repurchase program with Citibank, N.A. The accelerated share repurchase program is part of the broader share repurchase program previously authorized by our Board on January 21, 2015. Under the accelerated share repurchase program, we pre-paid to Citibank, N.A., the $100.0 million purchase price for our common stock and, in turn, we received an initial delivery of approximately 7.8 million shares of our common stock from Citibank, N.A, which were retired and recorded as a $80.0 million reduction to stockholders' equity. The remaining $20.0 million of the initial payment was recorded as a reduction to stockholders’ equity as an unsettled forward contract indexed to our stock. The number of shares to be ultimately purchased by us will be determined based on the volume weighted average price of the common stock during the terms of the transaction, minus an agreed upon discount between the parties. The program is expected to be completed by June 2016.

As of March 31, 2016, there remained an outstanding authorization to repurchase approximately 12.2 million shares of our outstanding common stock under the current share repurchase program.

We record stock repurchases as a reduction to stockholders’ equity. We record a portion of the purchase price of the repurchased shares as an increase to accumulated deficit when the price of the shares repurchased exceeds the average original proceeds per share received from the issuance of common stock.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, expense accrual, investments, income taxes and other contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting estimates include those regarding (1) revenue recognition, (2) goodwill and intangible assets, (3) income taxes and (4) stock-based compensation. For a discussion of our critical accounting estimates, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2015.

Recent Accounting Pronouncements

See Note 2, “Recent Accounting Pronouncements,” of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for discussion of recent accounting pronouncements including the respective expected dates of adoption.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to financial market risks, primarily arising from the effect of interest rate fluctuations on our investment portfolio. Interest rate fluctuation may arise from changes in the market’s view of the quality of the security issuer, the overall economic outlook, and the time to maturity of our portfolio. We mitigate this risk by investing only in high quality, highly liquid instruments. Securities with original maturities of one year or less must be rated by two of the three industry standard rating agencies as follows: A1 by Standard & Poor’s, P1 by Moody’s and/or F-1 by Fitch. Securities with original maturities of greater than one year must be rated by two of the following industry standard rating agencies as follows: AA- by Standard & Poor’s, Aa3 by Moody’s and/or AA- by Fitch. By corporate investment policy, we limit the amount of exposure to $15.0 million or 10% of the portfolio, whichever is lower, for any single non-U.S. Government issuer. A single U.S. Agency can represent up to 25% of the portfolio. No more than 20% of the total portfolio may be invested in the securities of an industry

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sector, with money market fund investments evaluated separately. Our policy requires that at least 10% of the portfolio be in securities with a maturity of 90 days or less. We may make investments in U.S. Treasuries, U.S. Agencies, corporate bonds and municipal bonds and notes with maturities up to 36 months. However, the bias of our investment portfolio is shorter maturities. All investments must be U.S. dollar denominated. Additionally, we have no significant exposure to European sovereign debt.

We invest our cash equivalents and marketable securities in a variety of U.S. dollar financial instruments such as U.S. Treasuries, U.S. Government Agencies, commercial paper and corporate notes. Our policy specifically prohibits trading securities for the sole purposes of realizing trading profits. However, we may liquidate a portion of our portfolio if we experience unforeseen liquidity requirements. In such a case, if the environment has been one of rising interest rates we may experience a realized loss, similarly, if the environment has been one of declining interest rates we may experience a realized gain. As of March 31, 2016, we had an investment portfolio of fixed income marketable securities of $179.3 million including cash equivalents. If market interest rates were to increase immedia tely and uniformly by 1.0% from the levels as of March 31, 2016, the fair value of the portfolio would decline by approximately $0.3 m illion. Actual results may differ materially from this sensitivity analysis.

The fair value of our convertible notes is subject to interest rate risk, market risk and other factors due to the convertible feature. The fair value of the convertible notes will generally increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of the convertible notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines in value. The interest and market value changes affect the fair value of our convertible notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation.

We invoice the majority of our customers in U.S. dollars. Although the fluctuation of currency exchange rates may impact our customers, and thus indirectly impact us, we do not attempt to hedge this indirect and speculative risk. Our overseas operations consist primarily of international business operations in the United Kingdom and the Netherlands, design centers in Canada, India, Finland and France and small business development offices in Japan, Korea and Taiwan. We monitor our foreign currency exposure; however, as of March 31, 2016, we believe our foreign currency exposure is not material enough to warrant foreign currency hedging.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2016, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any material pending legal proceeding; however, from time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business, operating results, financial position or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors

Because of the following factors, as well as other variables affecting our operating results, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. See also “Note Regarding Forward-Looking Statements” at the beginning of this report.

Risks Associated With Our Business, Industry and Market Conditions

The success of our business depends on sustaining or growing our licensing revenue and the failure to achieve such revenue would lead to a material decline in our results of operations.

Our revenue consists mainly of patent and technology license fees paid for access to our patents, developed technology and development and support services provided to our customers. Our ability to secure and renew the licenses from which our revenues are derived depends on our customers adopting our technology and using it in the products they sell. Once secured, license revenue may be negatively affected by factors within and outside our control, including reductions in our customers’ sales prices, sales volumes, our failure to timely complete engineering deliverables, and the terms of such licenses. In addition, we cannot provide any assurance that we will be successful in renewing existing license agreements on equal or favorable terms or at all. As an example, for the year ended December 31, 2015, our revenue attributable to royalties declined 3.4% from the year ended December 31, 2014. If we do not achieve our revenue goals, our results of operations could decline.

We have traditionally operated in, and may enter other, industries that are highly cyclical and competitive.

Our target customers are companies that develop and market high volume business and consumer products in semiconductors, computing, tablets, handheld devices, mobile applications, gaming and graphics, high-definition televisions and displays, general lighting, cryptography and data security. The electronics industry is intensely competitive and has been impacted by price erosion, rapid technological change, short product life cycles, cyclical market patterns and increasing foreign and domestic competition. We are subject to many risks beyond our control that influence whether or not we are successful in winning target customers or retaining existing customers, including, primarily, competition in a particular industry, market acceptance of such customers' products and the financial resources of such customers. In particular, DRAM manufacturers, which make up a significant part of our revenue, have suffered material losses and other adverse effects to their businesses, leading to industry consolidation from time-to-time that may result in loss of revenues under our existing license agreements or loss of target customers. As a result of ongoing competition in the industries in which we operate and volatility in various economies around the world, we may achieve a reduced number of licenses or may experience tightening of customers' operating budgets, difficulty or inability of our customers to pay our licensing fees, lengthening of the approval process for new licenses and consolidation among our customers. All of these factors may adversely affect the demand for our technology and may cause us to experience substantial fluctuations in our operating results.

We face competition from semiconductor and digital electronics products and systems companies, other semiconductor intellectual property companies that provide security cores and non-edge lit LED lighting options that are available to the market. We believe the principal competition for our technologies may come from our prospective customers, some of whom are evaluating and developing products based on technologies that they contend or may contend will not require a license from us. Some of our competitors use a system-level design approach similar to ours, including activities such as board and package design, power and signal integrity analysis, and thermal management. Many of these companies are larger and may have better access to financial, technical and other resources than we possess.

To the extent that alternatives might provide comparable system performance at lower or similar cost to our technologies, or are perceived to require the payment of no or lower royalties, or to the extent other factors influence the industry, our customers and prospective customers may adopt and promote alternative technologies. Even to the extent we determine that such

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alternative technologies infringe our patents, there can be no assurance that we would be able to negotiate agreements that would result in royalties being paid to us without litigation, which could be costly and the results of which would be uncertain.

In addition, our expansion into new markets subjects us to additional risks. We may have limited or no experience in new products and markets, including our recently announced buffer chip set, our CryptoManager platform and new offerings that will result from our acquisition of SCS in the mobile credential and smart card solution spaces, and our customers may not adopt our new offerings. These and other new offerings may present new and difficult challenges, which could negatively affect our operating results.

We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively impact our operating results.

If new competitors, technological advances by existing competitors, and/or development of new technologies or other competitive factors require us to invest significantly greater resources than anticipated in our research and development efforts, our operating expenses could increase. If we are required to invest significantly greater resources than anticipated in research and development efforts without an increase in revenue, our operating results would decline. We expect these expenses to increase in the foreseeable future as our technology development efforts continue.

Our revenue is concentrated in a few customers, and if we lose any of these customers through contract terminations or acquisitions, our revenue may decrease substantially.

We have a high degree of revenue concentration. Our top five customers for each reporting period represented approximately 70% and 66% of our revenue for the three months ended March 31, 2016 and 2015, respectively. For both of the three months ended March 31, 2016 and 2015, revenue from Micron, Samsung and SK hynix each accounted for 10% or more of our total revenue. Additionally, our top five customers represented approximately 65% and 62% of our revenues for the years ended December 31, 2015 and 2014, respectively. For both of the years ended December 31, 2015 and 2014, revenues from Micron, Samsung and SK hynix each accounted for 10% or more of our total revenue in each year. We extended our license agreement with Samsung in December 2013, and we expect Samsung to continue to account for a significant portion of our licensing revenue. We also entered into settlement agreements with each of SK hynix and Micron (which included Elpida, which Micron had acquired in July 2013) in June 2013 and December 2013, respectively. In June 2015, we also extended our license agreement with SK hynix. As a result of the renewal and such settlements, we expect each of Samsung, SK hynix and Micron to account for a significant portion of our licensing revenue in the future. We expect to continue to experience significant revenue concentration for the foreseeable future.

In addition, our license agreements are complex and some contain terms that require us to provide certain customers with the lowest royalty rate that we provide to other customers for similar technologies, volumes and schedules. These clauses may limit our ability to effectively price differently among our customers, to respond quickly to market forces, or otherwise to compete on the basis of price. These clauses may also require us to reduce royalties payable by existing customers when we enter into or amend agreements with other customers. Any adjustment that reduces royalties from current customers or licensees may have a material adverse effect on our operating results and financial condition.

We continue to negotiate with customers and prospective customers to enter into license agreements. Any future agreement may trigger our obligation to offer comparable terms or modifications to agreements with our existing customers, which may be less favorable to us than the existing license terms. We expect licensing fees will continue to vary based on our success in renewing existing license agreements and adding new customers, as well as the level of variation in our customers' reported shipment volumes, sales price and mix, offset in part by the proportion of customer payments that are fixed. In particular, under our license agreement with Samsung, the license fees payable by Samsung are subject to certain adjustments and conditions, and we therefore cannot provide assurances that the revenues generated by this license will not decline in the future. In addition, some of our material license agreements may contain rights by the customer to terminate for convenience, or upon certain other events, such as change of control, material breach, insolvency or bankruptcy proceedings. If we are unsuccessful in entering into license agreements with new customers or renewing license agreements with existing customers, on favorable terms or at all, or if they are terminated, our results of operations may decline significantly.

Our business and operations could suffer in the event of security breaches.

Attempts by others to gain unauthorized access to our information technology systems are becoming more sophisticated. These attempts, which might be related to industrial or other espionage, include covertly introducing malware to our computers and networks and impersonating authorized users, among others. We seek to detect and investigate all security incidents and to prevent their recurrence, but in some cases, we might be unaware of an incident or its magnitude and effects. While we have not identified any material incidents of unauthorized access to date, the theft, unauthorized use or publication of our intellectual property and/or confidential business information could harm our competitive position and reputation, reduce the value of our

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investment in research and development and other strategic initiatives or otherwise adversely affect our business. To the extent that any future security breach results in inappropriate disclosure of our customers' confidential information, we may incur liability.

Failures in our products and services or in the products of our customers, including those resulting from security vulnerabilities, defects, bugs or errors, could harm our business.

Our products and services are highly technical and complex, and among our various businesses our products and services are crucial to providing security, payment and other critical functions for our customers’ operations. Our products and services have from time to time contained and may in the future contain undetected errors, bugs defects or other security vulnerabilities. Some errors in our products and services may only be discovered after a product or service has been deployed and used by customers, and may in some cases only be detected under certain circumstances or after extended use. In addition, because the techniques used by hackers to access or sabotage our products and services and other technologies change and evolve frequently and generally are not recognized until launched against a target, we may be unable to anticipate, detect or prevent these techniques and may not address them in our data security technologies. Any errors, bugs, defects or security vulnerabilities discovered in our solutions after commercial release could adversely affect our revenue, our customer relationships and the market's perception of our products and services. We may not be able to correct any errors, bugs, defects, security flaws or vulnerabilities promptly, or at all. Any breaches, defects, errors or vulnerabilities in our products and services could result in:


•	expenditure of significant financial and research and development resources in efforts to analyze, correct, eliminate or work around breaches, errors, bugs or defects or to address and eliminate vulnerabilities;


•	financial liability to customers for breach of certain contract provisions, including indemnification obligations;


•	loss of existing or potential customers;


•	delayed or lost revenue;


•	delay or failure to attain market acceptance;


•	negative publicity, which would harm our reputation; and


•	litigation, regulatory inquiries or investigations that would be costly and harm our reputation.

Some of our revenue is subject to the pricing policies of our customers over whom we have no control.

We have no control over our customers' pricing of their products and there can be no assurance that licensed products will be competitively priced or will sell in significant volumes. Any premium charged by our customers in the price of memory and controller chips or other products over alternatives must be reasonable. If the benefits of our technology do not match the price premium charged by our customers, the resulting decline in sales of products incorporating our technology could harm our operating results.

Our licensing cycle is lengthy and costly, and our marketing and licensing efforts may be unsuccessful.

The process of persuading customers to adopt and license our chip interface, lighting, data security, and other technologies can be lengthy. Even if successful, there can be no assurance that our technologies will be used in a product that is ultimately brought to market, achieves commercial acceptance or results in significant royalties to us. We generally incur significant marketing and sales expenses prior to entering into our license agreements, generating a license fee and establishing a royalty stream from each customer. The length of time it takes to establish a new licensing relationship can take many months or even years. We may incur costs in any particular period before any associated revenue stream begins, if at all. If our marketing and sales efforts are very lengthy or unsuccessful, then we may face a material adverse effect on our business and results of operations as a result of failure to obtain or an undue delay in obtaining royalties.

Future revenue is difficult to predict for several reasons, and our failure to predict revenue accurately may result in our stock price declining.

Our lengthy license negotiation cycles could make our future revenue difficult to predict because we may not be successful in entering into licenses with our customers on our anticipated timelines.

In addition, while some of our license agreements provide for fixed, quarterly royalty payments, many of our license agreements provide for volume-based royalties, and may also be subject to caps on royalties in a given period. The sales volume and prices of our customers' products in any given period can be difficult to predict. As a result, our actual results may differ substantially from analyst estimates or our forecasts in any given quarter.

Furthermore, a portion of our revenue comes from development and support services provided to our customers. Depending upon the nature of the services, a portion of the related revenue may be recognized ratably over the support period, or may be recognized according to contract revenue accounting. Contract revenue accounting may result in deferral of the service fees to

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the completion of the contract, or may result in the recognition of service fees over the period in which services are performed on a percentage-of-completion basis.

We may not be successful in entering into new markets, and our new product offerings, such as our recently announced buffer chip set, our CryptoManager platform and new offerings in the mobile credential and smart card solution spaces, may not be adopted. In addition, once we commercially launch our products, the sales volume of such products in any given period will be difficult to predict.

We may fail to meet our publicly announced guidance or other expectations about our business, which would likely cause our stock price to decline.

We provide guidance regarding our expected financial and business performance including our anticipated future revenues and operating expenses. Correctly identifying the key factors affecting business conditions and predicting future events is inherently an uncertain process.

Such guidance may not always be accurate or may vary from actual results due to our inability to meet our assumptions and the impact on our financial performance that could occur as a result of the various risks and uncertainties to our business as set forth in these risk factors. We offer no assurance that such guidance will ultimately be accurate, and investors should treat any such guidance with appropriate caution. If we fail to meet our guidance or if we find it necessary to revise such guidance, even if such failure or revision is seemingly insignificant, investors and analysts may lose confidence in us and the market value of our common stock could be materially adversely affected.

We have in the past made and may in the future make acquisitions or enter into mergers, strategic investments, sales of assets or other arrangements that may not produce expected operating and financial results.

From time to time, we engage in acquisitions, strategic transactions and strategic investments, such as our acquisition of SCS. Many of our acquisitions or strategic investments entail a high degree of risk, including those involving new areas of technology and such investments may not become liquid for several years after the date of the investment, if at all. Our acquisitions or strategic investments may not provide the advantages that we anticipated or generate the financial returns we expect, we may discover unidentified issues not discovered in due diligence, and we may be subject to liabilities that either are not covered by indemnification protection we may obtain or become subject to litigation. Achieving the anticipated benefits of business acquisitions depends in part upon our ability to integrate the acquired businesses in an efficient and effective manner. The integration of companies that have previously operated independently may result in significant challenges, including, among others: retaining key employees; successfully integrating new employees, business systems and technology; retaining customers of the acquired business; minimizing the diversion of management's and other employees’ attention from ongoing business matters; coordinating geographically separate organizations; consolidating research and development operations; and consolidating corporate and administrative infrastructures.

Our strategic investments in new areas of technology may involve significant risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate return of capital, and unidentified issues not discovered in due diligence. These investments are inherently risky and may not be successful.

In addition, we may record impairment charges related to our acquisitions or strategic investments. Any losses or impairment charges that we incur related to acquisitions, strategic investments or sales of assets will have a negative impact on our financial results, and we may continue to incur new or additional losses related to acquisitions or strategic investments.

We may have to incur debt or issue equity securities to pay for any future acquisition, which debt could involve restrictive covenants or which equity security issuance could be dilutive to our existing stockholders.

From time to time, we may also divest certain assets, where we may be required to provide certain representations, warranties and covenants to their buyers. While we would seek to ensure the accuracy of such representations and warranties and fulfillment of any ongoing obligations, we may not be completely successful and consequently may be subject to claims by a purchaser of such assets.

A substantial portion of our revenue is derived from sources outside of the United States and this revenue and our business generally are subject to risks related to international operations that are often beyond our control.

For the three months ended March 31, 2016 and 2015, revenues received from our international customers constituted approximately 65% and 62%, respectively, of our total revenue. Additionally, for the years ended December 31, 2015 and 2014, revenues received from our international customers constituted approximately 60% and 63%, respectively, of our total revenue. We expect that future revenue derived from international sources will continue to represent a significant portion of our total revenue.

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To the extent that customer sales are not denominated in U.S. dollars, any royalties which are based on a percentage of the customers' sales that we receive as a result of such sales could be subject to fluctuations in currency exchange rates. In addition, if the effective price of licensed products sold by our foreign customers were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for licensed products could fall, which in turn would reduce our royalties. We do not use financial instruments to hedge foreign exchange rate risk.

We currently have international business operations in the United Kingdom and the Netherlands, international design operations in Canada, India, Finland and France, and business development operations in Japan, Korea, Singapore and Taiwan. Our international operations and revenue are subject to a variety of risks which are beyond our control, including:


•	hiring, maintaining and managing a workforce and facilities remotely and under various legal systems, including compliance with local labor and employment laws;


•	non-compliance with our code of conduct or other corporate policies;


•	natural disasters, acts of war, terrorism, widespread illness or security breaches;


•	export controls, tariffs, import and licensing restrictions and other trade barriers;


•	profits, if any, earned abroad being subject to local tax laws and not being repatriated to the United States or, if repatriation is possible, limited in amount;


•	adverse tax treatment of revenue from international sources and changes to tax codes, including being subject to foreign tax laws and being liable for paying withholding, income or other taxes in foreign jurisdictions;


•	unanticipated changes in foreign government laws and regulations;


•	increased financial accounting and reporting burdens and complexities;


•	lack of protection of our intellectual property and other contract rights by jurisdictions in which we may do business to the same extent as the laws of the United States;


•	potential vulnerability to computer system, internet or other systemic attacks, such as denial of service, viruses or other malware which may be caused by criminals, terrorists or other sophisticated organizations;


•	social, political and economic instability;


•	geopolitical issues, including changes in diplomatic and trade relationships; and


•	cultural differences in the conduct of business both with customers and in conducting business in our international facilities and international sales offices.

We and our customers are subject to many of the risks described above with respect to companies which are located in different countries. There can be no assurance that one or more of the risks associated with our international operations will not result in a material adverse effect on our business, financial condition or results of operations.

Weak global economic conditions may adversely affect demand for the products and services of our customers.

Our operations and performance depend significantly on worldwide economic conditions. Uncertainty about global or regional economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, negative financial news and declines in income or asset values, which could have a material negative effect on the demand for the products of our customers in the foreseeable future. If our customers experience reduced demand for their products as a result of global or regional economic conditions or otherwise, this could result in reduced royalty revenue and our business and results of operations could be harmed.

If our counterparties are unable to fulfill their financial and other obligations to us, our business and results of operations may be affected adversely .

Any downturn in economic conditions or other business factors could threaten the financial health of our counterparties, including companies with whom we have entered into licensing and/or settlement agreements, and their ability to fulfill their financial and other obligations to us. Such financial pressures on our counterparties may eventually lead to bankruptcy proceedings or other attempts to avoid financial obligations that are due to us. Because bankruptcy courts have the power to modify or cancel contracts of the petitioner which remain subject to future performance and alter or discharge payment obligations related to pre-petition debts, we may receive less than all of the payments that we would otherwise be entitled to receive from any such counterparty as a result of bankruptcy proceedings.

If we are unable to attract and retain qualified personnel, our business and operations could suffer.

Our success is dependent upon our ability to identify, attract, compensate, motivate and retain qualified personnel, especially engineers, senior management and other key personnel. We recently have faced retention issues, such as when our employee turnover accelerated after our reduction-in-force efforts in 2012 and 2013 and subsequent voluntary and involuntary separations. We may experience a similar acceleration in employee turnover due to the restructuring and plan of termination instituted in the fourth quarter of 2015. The loss of the services of any key employees could be disruptive to our development efforts or business relationships and could cause our business and operations to suffer.

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We are subject to various government restrictions and regulations, including on the sale of products and services that use encryption technology and those related to privacy and other consumer protection matters.

Various countries have adopted controls, license requirements and restrictions on the export, import and use of products or services that contain encryption technology. In addition, governmental agencies have proposed additional requirements for encryption technology, such as requiring the escrow and governmental recovery of private encryption keys. Restrictions on the sale or distribution of products or services containing encryption technology may impact the ability of CRD to license its data security technologies to the manufacturers and providers of such products and services in certain markets or may require CRD or its customers to make changes to the licensed data security technology that is embedded in such products to comply with such restrictions. Government restrictions, or changes to the products or services of CRD's customers to comply with such restrictions, could delay or prevent the acceptance and use of such customers' products and services. In addition, the United States and other countries have imposed export controls that prohibit the export of encryption technology to certain countries, entities and individuals. Our failure to comply with export and use regulations concerning encryption technology of CRD could subject us to sanctions and penalties, including fines, and suspension or revocation of export or import privileges.

We are subject to a variety of laws and regulations in the United States, the European Union and other countries that involve, for example, user privacy, data protection and security, content and consumer protection. A number of proposals are pending before federal, state, and foreign legislative and regulatory bodies that could significantly affect our business. Existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase our operating costs and subject us to claims or other remedies.

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC established new disclosure and reporting requirements for those companies who use "conflict" minerals mined from the Democratic Republic of Congo and adjoining countries in their products, whether or not these products are manufactured by third parties. These requirements could affect the sourcing and availability of minerals that are used in the manufacture of our products. We have to date incurred costs and expect to incur significant additional costs associated with complying with the disclosure requirements, including for example, due diligence in regard to the sources of any conflict minerals used in our products, in addition to the cost of remediation and other changes to products, processes, or sources of supply as a consequence of such verification activities. Additionally, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence procedures that we implement. We may also face challenges with government regulators and our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free.

Our operations are subject to risks of natural disasters, acts of war, terrorism, widespread illness or security breach at our domestic and international locations, any one of which could result in a business stoppage and negatively affect our operating results.

Our business operations depend on our ability to maintain and protect our facilities, computer systems and personnel, which are primarily located in the San Francisco Bay Area in the United States, the United Kingdom, the Netherlands and India. The San Francisco Bay Area is in close proximity to known earthquake fault zones. Our facilities and transportation for our employees are susceptible to damage from earthquakes and other natural disasters such as fires, floods and similar events. Should a catastrophe disable our facilities, we do not have readily available alternative facilities from which we could conduct our business, so any resultant work stoppage could have a negative effect on our operating results. We also rely on our network infrastructure and technology systems for operational support and business activities which are subject to physical and cyber damage, and also susceptible to other related vulnerabilities common to networks and computer systems. Acts of terrorism, widespread illness, war and any event that causes failures or interruption in our network infrastructure and technology systems could have a negative effect at our international and domestic facilities and could harm our business, financial condition, and operating results.

We do not have extensive experience in manufacturing and marketing products and, as a result, may be unable to sustain and grow a profitable commercial market for new and existing products.

We do not have extensive experience in creating, manufacturing and marketing products, including our recently announced buffer chip set, our CryptoManager platform and new offerings that will result from our acquisition of SCS in the mobile credential and smart card solution spaces. These and other new offerings may present new and difficult challenges, and we may be subject to claims if customers of these offerings experience failures or other quality issues. In particular, we may experience difficulties with product design, qualification, manufacturing, marketing or certification that could delay or prevent our development, introduction or marketing of new products. Although we intend to design our products to be fully compliant with applicable industry standards, proprietary enhancements may not in the future result in full conformance with existing industry standards under all circumstances.

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If we fail to introduce products that meet the demand of our customers or penetrate new markets in which we expend significant resources, our revenues will decrease over time and our financial condition could suffer. Additionally, if we concentrate resources on a new market that does not prove profitable or sustainable, it could damage our reputation and limit our growth, and our financial condition could decline.

We rely on a number of third-party providers for data center hosting facilities, equipment, maintenance and other services, and the loss of, or problems with, one or more of these providers may impede our growth or cause us to lose customers.

We rely on third-party providers to supply data center hosting facilities, equipment, maintenance and other services in order to provide some of our services, including in our offerings of our advanced mobile payment platform and smart ticketing platform, and have entered into various agreements for such services. The continuous availability of our service depends on the operations of those facilities, on a variety of network service providers and on third-party vendors. In addition, we depend on our third-party facility providers’ ability to protect these facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts, cyber-attacks and similar events. If there are any lapses of service or damage to a facility, we could experience lengthy interruptions in our service as well as delays and additional expenses in arranging new facilities and services. Even with current and planned disaster recovery arrangements, our business could be harmed. Any interruptions or delays in our service, whether as a result of third-party error, our own error, natural disasters, criminal acts, security breaches or other causes, whether accidental or willful, could harm our relationships with customers, harm our reputation and cause our revenue to decrease and/or our expenses to increase. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to liability and cause us to issue credits or cause us to lose customers, any of which could materially adversely affect our business.

We rely on third parties for a variety of services, including manufacturing, and these third parties’ failure to perform these services adequately could materially and adversely affect our business.

We rely on third parties for a variety of services, including our manufacturing supply chain partners and third parties within our sales and distribution channels. Certain of these third parties are, and may be, our sole manufacturer or sole source of production materials. If we fail to manage our relationship with these manufacturers and suppliers effectively, or if they experience delays, disruptions, capacity constraints or quality control problems in their operations, our ability to ship products to our customers could be impaired and our competitive position and reputation could be harmed. In addition, any adverse change in any of our manufacturers and suppliers’ financial or business condition could disrupt our ability to supply quality products to our customers. If we are required to change our manufacturers, we may lose revenue, incur increased costs and damage our end-customer relationships. In addition, qualifying a new manufacturer and commencing production can be an expensive and lengthy process. If our third party manufacturers or suppliers are unable to provide us with adequate supplies of high-quality products for any other reason, we could experience a delay in our order fulfillment, and our business, operating results and financial condition would be adversely affected. In the event these and other third parties we rely on fail to provide their services adequately, including as a result of errors in their systems or events beyond their control, or refuse to provide these services on terms acceptable to us or at all, and we are not able to find suitable alternatives, our business may be materially and adversely affected. In addition, our orders may represent a relatively small percentage of the overall orders received by our manufacturers from their customers. As a result, fulfilling our orders may not be considered a priority in the event our manufacturers are constrained in their ability to fulfill all of their customer obligations in a timely manner. If our manufacturers are unable to provide us with adequate supplies of high-quality products, or if we or our manufacturers are unable to obtain adequate quantities of components, it could cause a delay in our order fulfillment, in which case our business, operating results and financial condition could be adversely affected.

Warranty and product liability claims brought against us could cause us to incur significant costs and adversely affect our operating results as well as our reputation and relationships with customers.

We may from time to time be subject to warranty and product liability claims with regard to product performance and our services. We could incur losses as a result of warranty, support, repair or replacement costs in response to customer complaints or in connection with the resolution of contemplated or actual legal proceedings relating to such claims. In addition to potential losses arising from claims and related legal proceedings, warranty and product liability claims could affect our reputation and our relationship with customers.

Any failure in our delivery of high-quality technical support services may adversely affect our relationships with our customers and our financial results.

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Our customers depend on our support organization to resolve technical issues and provide ongoing maintenance relating to our products and services. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our offerings and business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective customers, and our business, operating results and financial position.

Certain software that we use in certain of our products is licensed from third parties and, for that reason, may not be available to us in the future, which has the potential to delay product development and production or cause us to incur additional expense, which could materially adversely affect our business, financial condition, operating results and cash flow.

Some of our products and services contain software licensed from third parties. Some of these licenses may not be available to us in the future on terms that are acceptable to us or allow our products to remain competitive. The loss of these licenses or the inability to maintain any of them on commercially acceptable terms could delay development of future offerings or the enhancement of existing products and services. We may also choose to pay a premium price for such a license in certain circumstances where continuity of the licensed product would outweigh the premium cost of the license. The unavailability of these licenses or the necessity of agreeing to commercially unreasonable terms for such licenses could materially adversely affect our business, financial condition, operating results and cash flow.

Certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences and, therefore, could materially adversely affect our business, financial condition, operating results and cash flow.

We use open source software in our services, including our advanced mobile payment platform and smart ticketing platform, and we intend to continue to use open source software in the future. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products or alleging that these companies have violated the terms of an open source license. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software or alleging that we have violated the terms of an open source license. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our solutions. In addition, if we were to combine our proprietary software solutions with open source software in certain manners, we could, under certain open source licenses, be required to publicly release the source code of our proprietary software solutions. If we inappropriately use open source software, we may be required to re-engineer our solutions, discontinue the sale of our solutions, release the source code of our proprietary software to the public at no cost or take other remedial actions. There is a risk that open source licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions, which could adversely affect our business, operating results and financial condition.

Our business and operating results could be harmed if we undertake any restructuring activities.

From time to time, we may undertake restructurings of our business, such as the restructuring and plan of termination that we undertook in the fourth quarter of 2015. There are several factors that could cause restructurings to have adverse effects on our business, financial condition and results of operations. These include potential disruption of our operations, the development of our technology, the deliveries to our customers and other aspects of our business. Loss of sales, service and engineering talent, in particular, could damage our business. Any restructuring would require substantial management time and attention and may divert management from other important work. Employee reductions or other restructuring activities also would cause us to incur restructuring and related expenses such as severance expenses. Moreover, we could encounter delays in executing any restructuring plans, which could cause further disruption and additional unanticipated expense.

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Risks Related to Capitalization Matters and Corporate Governance

The price of our common stock may continue to fluctuate.

Our common stock is listed on The NASDAQ Global Select Market under the symbol “RMBS.” The trading price of our common stock has at times experienced price volatility and may continue to fluctuate significantly in response to various factors, some of which are beyond our control. Some of these factors include:


•	any progress, or lack of progress, real or perceived, in the development of products that incorporate our innovations and technology companies' acceptance of our products, including the results of our efforts to expand into new target markets;


•	our signing or not signing new licenses and the loss of strategic relationships with any customer;


•	announcements of technological innovations or new products by us, our customers or our competitors;


•	changes in our strategies, including changes in our licensing focus and/or acquisitions of companies with business models or target markets different from our own;


•	positive or negative reports by securities analysts as to our expected financial results and business developments;


•	developments with respect to patents or proprietary rights and other events or factors;


•	new litigation and the unpredictability of litigation results or settlements; and


•	issuance of additional securities by us, including in acquisitions.

In addition, the stock market in general, and prices for companies in our industry in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our common stock, regardless of our operating performance.

We have outstanding senior convertible notes in an aggregate principal amount totaling $138.0 million. Because these notes are convertible into shares of our common stock, volatility or depressed prices of our common stock could have a similar effect on the trading price of such notes. In addition, the existence of these notes may encourage short selling in our common stock by market participants because the conversion of the notes could depress the price of our common stock.

We have been party to, and may in the future be subject to, lawsuits relating to securities law matters which may result in unfavorable outcomes and significant judgments, settlements and legal expenses which could cause our business, financial condition and results of operations to suffer.

We and certain of our current and former officers and directors, as well as our current auditors, were subject from 2006 to 2011 to several stockholder derivative actions, securities fraud class actions and/or individual lawsuits filed in federal court against us and certain of our current and former officers and directors. The complaints generally alleged that the defendants violated the federal and state securities laws and stated state law claims for fraud and breach of fiduciary duty. Although to date these complaints have either been settled or dismissed, the amount of time to resolve any future lawsuits is uncertain, and these matters could require significant management and financial resources. Unfavorable outcomes and significant judgments, settlements and legal expenses in litigation related to any future securities law claims could have material adverse impacts on our business, financial condition, results of operations, cash flows and the trading price of our common stock.

We are leveraged financially, which could adversely affect our ability to adjust our business to respond to competitive pressures and to obtain sufficient funds to satisfy our future research and development needs, to protect and enforce our intellectual property, and to meet other needs.

We have material indebtedness. In August 2013, we issued $138.0 million aggregate principal amount of our 2018 Notes which remain outstanding. The degree to which we are leveraged could have negative consequences, including, but not limited to, the following:


•	we may be more vulnerable to economic downturns, less able to withstand competitive pressures and less flexible in responding to changing business and economic conditions;


•	our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, litigation, general corporate or other purposes may be limited;


•	a substantial portion of our cash flows from operations in the future may be required for the payment of the principal amount of our existing indebtedness when it becomes due at maturity in August 2018; and


•	we may be required to make cash payments upon any conversion of the 2018 Notes, which would reduce our cash on hand.

A failure to comply with the covenants and other provisions of our debt instruments could result in events of default under such instruments, which could permit acceleration of all of our outstanding 2018 Notes. Any required repurchase of the 2018 Notes as a result of a fundamental change or acceleration of the 2018 Notes would reduce our cash on hand such that we would not have those funds available for use in our business.

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If we are at any time unable to generate sufficient cash flows from operations to service our indebtedness when payment is due, we may be required to attempt to renegotiate the terms of the instruments relating to the indebtedness, seek to refinance all or a portion of the indebtedness or obtain additional financing. There can be no assurance that we will be able to successfully renegotiate such terms, that any such refinancing would be possible or that any additional financing could be obtained on terms that are favorable or acceptable to us.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure have historically created uncertainty for companies such as ours. Any new or changed laws, regulations and standards are subject to varying interpretations due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Our certificate of incorporation and bylaws, Delaware law and our outstanding convertible notes contain provisions that could discourage transactions resulting in a change in control, which may negatively affect the market price of our common stock.

Our certificate of incorporation, our bylaws and Delaware law contain provisions that might enable our management to discourage, delay or prevent a change in control. In addition, these provisions could limit the price that investors would be willing to pay in the future for shares of our common stock. Pursuant to such provisions:


•	our board of directors is authorized, without prior stockholder approval, to create and issue preferred stock, commonly referred to as “blank check” preferred stock, with rights senior to those of common stock, which means that a stockholder rights plan could be implemented by our board;


•	our board of directors is staggered into two classes, only one of which is elected at each annual meeting;


•	stockholder action by written consent is prohibited;


•	nominations for election to our board of directors and the submission of matters to be acted upon by stockholders at a meeting are subject to advance notice requirements;


•	certain provisions in our bylaws and certificate of incorporation such as notice to stockholders, the ability to call a stockholder meeting, advance notice requirements and action of stockholders by written consent may only be amended with the approval of stockholders holding 66 2/3% of our outstanding voting stock;


•	our stockholders have no authority to call special meetings of stockholders; and


•	our board of directors is expressly authorized to make, alter or repeal our bylaws.

We are also subject to Section 203 of the Delaware General Corporation Law, which provides, subject to enumerated exceptions, that if a person acquires 15% or more of our outstanding voting stock, the person is an “interested stockholder” and may not engage in any “business combination” with us for a period of three years from the time the person acquired 15% or more of our outstanding voting stock.

Certain provisions of our outstanding 2018 Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of such 2018 Notes will have the right, at their option, to require us to repurchase, at a cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest on such 2018 Notes, all or a portion of their 2018 Notes. We may also be required to increase the conversion rate of such 2018 Notes in the event of certain fundamental changes.

Unanticipated changes in our tax rates or in the tax laws and regulations could expose us to additional income tax liabilities which could affect our operating results and financial condition.

We are subject to income taxes in both the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. Our effective tax rate could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and regulations as well as other factors. Our tax determinations are regularly subject to audit by tax authorities and developments in those audits could adversely affect our income tax provision, and we are currently undergoing such audits of certain of our tax returns. Although we believe that our tax estimates are reasonable, the final determination of tax audits or tax disputes may be different from what is reflected in our historical income tax provisions which could affect our operating results.

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Litigation, Regulation and Business Risks Related to our Intellectual Property

We have in the past, and may in the future, become engaged in litigation stemming from our efforts to protect and enforce our patents and intellectual property and make other claims, which could adversely affect our intellectual property rights, distract our management and cause substantial expenses and declines in our revenue and stock price.

We seek to diligently protect our intellectual property rights and will continue to do so. While we are not currently involved in intellectual property litigation, any future litigation, whether or not determined in our favor or settled by us, would be expected to be costly, may cause delays applicable to our business (including delays in negotiating licenses with other actual or potential customers), would be expected to tend to discourage future design partners, would tend to impair adoption of our existing technologies and would divert the efforts and attention of our management and technical personnel from other business operations. In addition, we may be unsuccessful in any litigation if we have difficulty obtaining the cooperation of former employees and agents who were involved in our business during the relevant periods related to our litigation and are now needed to assist in cases or testify on our behalf. Furthermore, any adverse determination or other resolution in litigation could result in our losing certain rights beyond the rights at issue in a particular case, including, among other things: our being effectively barred from suing others for violating certain or all of our intellectual property rights; our patents being held invalid or unenforceable or not infringed; our being subjected to significant liabilities; our being required to seek licenses from third parties; our being prevented from licensing our patented technology; or our being required to renegotiate with current customers on a temporary or permanent basis.

From time to time, we are subject to proceedings by government agencies that may result in adverse determinations against us and could cause our revenue to decline substantially.

An adverse resolution by or with a governmental agency could result in severe limitations on our ability to protect and license our intellectual property, and could cause our revenue to decline substantially. Third parties have and may attempt to use adverse findings by a government agency to limit our ability to enforce or license our patents in private litigations, to challenge or otherwise act against us with respect to such government agency proceedings.

Further, third parties have sought and may seek review and reconsideration of the patentability of inventions claimed in certain of our patents by the U.S. Patent and Trademark Office (“PTO”) and/or the European Patent Office (the “EPO”). Any re-examination proceedings may be reviewed by the PTO's Patent Trial and Appeal Board (“PTAB”). The PTAB and the related former Board of Patent Appeals and Interferences ("BPAI") have previously issued decisions in a few cases, finding some challenged claims of Rambus' patents to be valid, and others to be invalid. Decisions of the PTAB are subject to further PTO proceedings and/or appeal to the Court of Appeals for the Federal Circuit. A final adverse decision, not subject to further review and/or appeal, could invalidate some or all of the challenged patent claims and could also result in additional adverse consequences affecting other related U.S. or European patents, including in any intellectual property litigation. If a sufficient number of such patents are impaired, our ability to enforce or license our intellectual property would be significantly weakened and could cause our revenue to decline substantially.

The pendency of any governmental agency acting as described above may impair our ability to enforce or license our patents or collect royalties from existing or potential customers, as any litigation opponents may attempt to use such proceedings to delay or otherwise impair any pending cases and our existing or potential customers may await the final outcome of any proceedings before agreeing to new licenses or to paying royalties.

Litigation or other third-party claims of intellectual property infringement could require us to expend substantial resources and could prevent us from developing or licensing our technology on a cost-effective basis.

Our research and development programs are in highly competitive fields in which numerous third parties have issued patents and patent applications with claims closely related to the subject matter of our programs. We have also been named in the past, and may in the future be named, as a defendant in lawsuits claiming that our technology infringes upon the intellectual property rights of third parties. As we develop additional products and technology, we may face claims of infringement of various patents and other intellectual property rights by third parties. In the event of a third-party claim or a successful infringement action against us, we may be required to pay substantial damages, to stop developing and licensing our infringing technology, to develop non-infringing technology, and to obtain licenses, which could result in our paying substantial royalties or our granting of cross licenses to our technologies. We may not be able to obtain licenses from other parties at a reasonable cost, or at all, which could cause us to expend substantial resources, or result in delays in, or the cancellation of, new products.

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If we are unable to protect our inventions successfully through the issuance and enforcement of patents, our operating results could be adversely affected.

We have an active program to protect our proprietary inventions through the filing of patents. There can be no assurance, however, that:


•	any current or future U.S. or foreign patent applications will be approved and not be challenged by third parties;


•	our issued patents will protect our intellectual property and not be challenged by third parties;


•	the validity of our patents will be upheld;


•	our patents will not be declared unenforceable;


•	the patents of others will not have an adverse effect on our ability to do business;


•	Congress or the U.S. courts or foreign countries will not change the nature or scope of rights afforded patents or patent owners or alter in an adverse way the process for seeking or enforcing patents;


•	changes in law will not be implemented, or changes in interpretation of such laws will occur, that will affect our ability to protect and enforce our patents and other intellectual property;


•	new legal theories and strategies utilized by our competitors will not be successful;


•	others will not independently develop similar or competing chip interfaces or design around any patents that may be issued to us; or


•	factors such as difficulty in obtaining cooperation from inventors, pre-existing challenges or litigation, or license or other contract issues will not present additional challenges in securing protection with respect to patents and other intellectual property that we acquire.

If any of the above were to occur, our operating results could be adversely affected.

Furthermore, recent patent reform legislation, such as the Leahy-Smith America Invents Act, could increase the uncertainties and costs surrounding the prosecution of any patent applications and the enforcement or defense of our licensed patents. The federal courts, the USPTO, the Federal Trade Commission, and the U.S. International Trade Commission have also recently taken certain actions and issued rulings that have been viewed as unfavorable to patentees. While we cannot predict what form any new patent reform laws or regulations may ultimately take, or what impact recent or future reforms may have on our business, any laws or regulations that restrict or negatively impact our ability to enforce our patent rights against third parties could have a material adverse effect on our business.

In addition, our patents will continue to expire according to their terms, with expiration dates ranging from 2016 to 2038. Our failure to continuously develop or acquire successful innovations and obtain patents on those innovations could significantly harm our business, financial condition, results of operations, or cash flows.

Our inability to protect and own the intellectual property we create would cause our business to suffer.

We rely primarily on a combination of license, development and nondisclosure agreements, trademark, trade secret and copyright law and contractual provisions to protect our non-patentable intellectual property rights. If we fail to protect these intellectual property rights, our customers and others may seek to use our technology without the payment of license fees and royalties, which could weaken our competitive position, reduce our operating results and increase the likelihood of costly litigation. The growth of our business depends in part on the use of our intellectual property in the products of third party manufacturers, and our ability to enforce intellectual property rights against them to obtain appropriate compensation. In addition, effective trade secret protection may be unavailable or limited in certain foreign countries. Although we intend to protect our rights vigorously, if we fail to do so, our business will suffer.

Effective protection of trademarks, copyrights, domain names, patent rights, and other intellectual property rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights. The efforts we have taken to protect our intellectual property rights may not be sufficient or effective. Our intellectual property rights may be infringed, misappropriated, or challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. In addition, the laws or practices of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States. Significant impairments of our intellectual property rights, and limitations on our ability to assert our intellectual property rights against others, could have a material and adverse effect on our business.

Third parties may claim that our products or services infringe on their intellectual property rights, exposing us to litigation that, regardless of merit, may be costly to defend.

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Our success and ability to compete are also dependent upon our ability to operate without infringing upon the patent, trademark and other intellectual property rights of others. Third parties may claim that our current or future products or services infringe upon their intellectual property rights. Any such claim, with or without merit, could be time consuming, divert management’s attention from our business operations and result in significant expenses. We cannot assure you that we would be successful in defending against any such claims. In addition, parties making these claims may be able to obtain injunctive or other equitable relief affecting our ability to license the products that incorporate the challenged intellectual property. As a result of such claims, we may be required to obtain licenses from third parties, develop alternative technology or redesign our products. We cannot be sure that such licenses would be available on terms acceptable to us, if at all. If a successful claim is made against us and we are unable to develop or license alternative technology, our business, financial condition, operating results and cash flows could be materially adversely affected.

We rely upon the accuracy of our customers' recordkeeping, and any inaccuracies or payment disputes for amounts owed to us under our licensing agreements may harm our results of operations.

Many of our license agreements require our customers to document the manufacture and sale of products that incorporate our technology and report this data to us on a quarterly basis. While licenses with such terms give us the right to audit books and records of our customers to verify this information, audits rarely are undertaken because they can be expensive, time consuming, and potentially detrimental to our ongoing business relationship with our customers. Therefore, we typically rely on the accuracy of the reports from customers without independently verifying the information in them. Our failure to audit our customers' books and records may result in our receiving more or less royalty revenue than we are entitled to under the terms of our license agreements. If we conduct royalty audits in the future, such audits may trigger disagreements over contract terms with our customers and such disagreements could hamper customer relations, divert the efforts and attention of our management from normal operations and impact our business operations and financial condition.

Any dispute regarding our intellectual property may require us to indemnify certain customers, the cost of which could severely hamper our business operations and financial condition.

In any potential dispute involving our patents or other intellectual property, our customers could also become the target of litigation. While we generally do not indemnify our customers, some of our license agreements provide indemnities, and some require us to provide technical support and information to a customer that is involved in litigation involving use of our technology. In addition, we may be exposed to indemnification obligations, risks and liabilities that were unknown at the time of acquisitions, including with respect to our acquisition of SCS, and we may agree to indemnify others in the future. Any of these indemnification and support obligations could result in substantial expenses. In addition to the time and expense required for us to indemnify or supply such support to our customers, a customer's development, marketing and sales of licensed semiconductors, lighting, mobile communications and data security technologies could be severely disrupted or shut down as a result of litigation, which in turn could severely hamper our business operations and financial condition as a result of lower or no royalty payments.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

A list of exhibits to this Quarterly Report on Form 10-Q is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.

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SIGNATURE

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



	RAMBUS INC.

Date: April 22, 2016	By:	/s/ Satish Rishi
		Satish Rishi
		Senior Vice President, Finance and Chief Financial Officer
		(Principal Financial Officer and Duly Authorized Officer)

Table of Contents

INDEX TO EXHIBITS



Exhibit Number		Description of Document

2.1		Purchase Agreement, dated January 25, 2016, by and between Rambus Inc. and the shareholders of Smart Card Software Limited.

31.1		Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

_________________________________________

The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.




	Dated 25 January	2016
PATRICK CURRAN AND OTHERS RAMBUS INC.




	Sale and purchase of the entire issued share capital of Smart Card Software Limited



	Contents
	Clause	Page
1	Interpretation and definitions	1
2	Sale and purchase of the Shares	1
3	Purchase Price	2
4	Completion	4
5	Warranties	4
6	Indemnities	5
7	Restrictive covenants	7
8	Post-completion actions	8
9	Further assurance	9
10	Payments	9
11	Notices	10
12	Sellers' Representative	11
13	Assignment	12
14	Third party rights	12
15	Announcements	12
16	Confidentiality	13
17	Entire agreement	14
18	Alterations	14
19	Severability	14
20	Counterparts	15
21	Payment of costs	15
22	Continuing effect of this Deed	15
23	Governing law	15
24	Submission to jurisdiction	15
25	Process agent	16
1	The Sellers, Option Holders and Warrantors	17
	Part 1 – The Sellers	17
	Part 2 – The Option Holders	19
	Part 3 - The Warrantors	20
2	The Group	21
	Part 1 – The Company	21
	Part 2 – Subsidiaries and subsidiary undertakings of the Company	23
3	Completion obligations	30
4	Warranties and Fundamental Warranties	34
5	Limitations on liability	49
6	Retention provisions	59
	Part 1 – Definitions	59
	Part 2 – Payments into and from the Retention Account	61
7	Completion Statement	65
	Part 1 – Definitions	65
	Part 2 – Purchase price adjustment	67
	Part 3 – Preparation and agreement/determination of the Completion Statement	68
	Part 4 – Specific accounting policies	72
	Part 5 – Format of the Completion Statement	76
8	Leasehold Properties	80



9	Taxation	82
	Part 1 — Interpretation and Buyer Protections	82
	Part 2 — Credit Mechanisms	89
	Part 3 — Procedure	92
	Part 4 — Taxation Warranties	95
10	Buyer Warranties	98
11	Interpretation and definitions	99

This Deed is made on 25 January 2016

Between


(1)	The persons whose names and addresses are set out in parts 1 and 2 of schedule 1 (together the Sellers ); and


(2)	Rambus Inc. (No. 2713545) a company registered in Delaware, USA whose office is at Delaware, USA whose office is at 1050 Enterprise Way, Suite 700, Sunnyvale, CA 94089 ( Buyer ).

Background


(A)	The Sellers have agreed to sell, and the Buyer has agreed to buy, the entire issued share capital of Smart Card Software Limited and the Sellers and the Buyer have agreed to be bound by the obligations undertaken by them under this Deed.

It is agreed as follows


1	Interpretation and definitions


1.1	Interpretation

This Deed will be interpreted in accordance with the provisions set out in paragraph 1 of schedule 11 (Interpretation and definitions) unless the context otherwise requires.


1.2	Defined terms

A number of terms used in this Deed are defined in schedule 11 (Interpretation and definitions) at the end of this Deed and all such defined terms will apply throughout this Deed. In addition to the terms defined in schedule 11 (Interpretation and definitions), a number of other terms are defined elsewhere in this Deed, and those defined terms will also apply throughout this Deed unless the context otherwise requires.


1.3	Incorporation of the schedules

The schedules form part of this Deed and will have the same effect as if they had been set out in full in the body of this Deed.


2	Sale and purchase of the Shares


2.1	Agreement to sell

Each Seller agrees to sell the Shares set out against that Seller's name in column (3) of part 1 of schedule 1 and the Buyer agrees to buy such Shares, in each case with effect from Completion.


2.2	Rights attaching to the Shares

Each Seller covenants with the Buyer that the Shares to be sold by him will be sold:


(a)	with full title guarantee;


(b)	free from any Security Interest; and


(c)	together with all rights and benefits attaching or accruing to the Shares on or after the date of Completion including the right to receive all dividends and distributions declared, paid or made on or after the date of Completion.


2.3	Waiver of pre-emption rights and consent to transfer


(a)	Each Seller waives any pre-emption, first refusal or similar rights conferred on him by the articles of association of the Company or otherwise over any of the Shares.


(b)	Each Seller consents to and waives any pre-emption, first refusal or similar rights conferred on him by the articles of association of the Company or otherwise over the transfer of 14,120,000 ordinary shares in the capital of the Company from being jointly held by Patrick Curran and Glynnis Curran to Patrick Curran as sole holder of such shares.


2.4	Warranties relating to the Shares

Each Seller warrants to the Buyer as at the date of this Deed that:


(a)	he is the sole legal and beneficial owner of the Shares being sold by him;


(b)	the Shares being sold by him will be sold free from any Security Interest;


(c)	he has the right to transfer the full legal and beneficial title to the Shares being sold by him to the Buyer without the consent of any third party;


(d)	he has full legal power and authority to enter into and perform his obligations under this Deed and each other Transaction Document to which he is to be a party; and


(e)	the obligations undertaken by him under this Deed and the other Transaction Documents to which he is to be a party are legally binding on him.


3	Purchase Price


3.1	Purchase Price amount

The consideration for the sale of the Shares ( Purchase Price ) will be £64,700,000.00 (which amount includes the Retention Sum), subject to any adjustment in accordance with this Deed.


3.2	Purchase Price allocation

The Purchase Price will be divided between the Sellers as set out in column (4) of parts 1 and 2 of schedule 1 (The Sellers).


3.3	Retention Sum

The Retention Sum will be dealt with as set out in schedule 6 (Retention provisions).


3.4	Purchase Price adjustment

The Purchase Price will be subject to adjustment as set out in schedule 7 (Completion Statement).


3.5	Reduction in Purchase Price

Any payment made by any of the Sellers to the Buyer under this Deed will, to the extent possible, take effect as a reduction in the Purchase Price.


3.6	Consideration for the Shares held by the Option Holders

Each of the Option Holders hereby severally agrees and acknowledges with the Buyer that he has not paid to the Company the necessary amount to exercise his Option, pursuant to the exercise of which, Shares were allotted and issued to such Option Holders, such amount being set out opposite his name in column (5) of part 2 of schedule 1 ( Option Exercise Price ) nor any Option Tax Liability, if relevant. Accordingly:


(a)	each of the Option Holders agrees that the Company may deduct the Option Exercise Price and Option Tax Liability, if relevant, in respect of the Shares held by the relevant Option Holder in accordance with clause 3.6(b); and


(b)	each of the Option Holders and the Buyer hereby severally agrees that (and the Buyer agrees to procure that following Completion the Company will take the necessary actions to ensure that):


(i)	the aggregate Purchase Price due to the Option Holders in respect of the Shares sold by the Option Holders will be paid by the Buyer to the Company by electronic funds transfer for same day value into the Company Account;


(ii)	an amount equal to the aggregate Option Exercise Price shall be deducted by the Company from the aggregate Purchase Price due to the Option Holders in respect of the Shares sold by the Option Holders;


(iii)	an amount equal to the aggregate Option Tax Liability shall be deducted by the Company from the aggregate Purchase Price due to the Employee Option Holders in respect of the Shares sold by the Employee Option Holders and paid by the Company or relevant Group Company to the relevant Tax Authority within the required time limits;

(iv)

the balance of the aggregate Purchase Price due to the Consultant Option Holders in respect of the Shares sold by the Consultant Option Holders following the deductions made pursuant to clause 3.6(b)(ii) will be payable by the Company to the Consultant Option Holders shortly following the Completion Date by electronic funds transfer for same day value to the bank account nominated by the Consultant Option Holder as set out in the terms of their contract for the provision of services in their respective proportions;

(v)

each Consultant Option Holder agrees with the Buyer that he will reimburse the Company for any income tax, social security charges, employee's national insurance contributions, or other amounts as appropriate for which he would or may be liable and which are required to be accounted for by the Company (or, if appropriate, by such Option Holder's employer) as a result of the exercise of his Options or payment of the Purchase Price to any relevant authority, together with any related fines, penalties and interest; and


(vi)	the balance of the aggregate Purchase Price due to the Employee Option Holders in respect of the Shares sold by the Employee Option Holders following the deductions made pursuant to clauses 3.6(b)(ii) and 3.6(b)(iii) shall be paid by the Company to the relevant Group Companies which are the employers of

the Employee Option Holders and will be payable by those relevant Group Companies to the Employee Option Holders through the payroll shortly following the Completion Date in their respective proportions.


4	Completion


4.1	Completion Date

Completion will take place on the Completion Date at the Sellers' Solicitors' offices.


4.2	Completion obligations

At Completion, each party will comply with its obligations in schedule 3 (Completion obligations).


4.3	Sale of all the Shares to be simultaneous

The Buyer is not obliged to purchase any of the Shares unless the purchase of all the Shares is completed simultaneously.


4.4	Power of Attorney

Each Seller irrevocably and unconditionally appoints the Buyer as his lawful attorney (and to the complete exclusion of any rights that he may have in that regard) for the purpose of:


(a)	exercising any voting and other rights and receiving any benefits and entitlements which attach to or arise in respect of any of the Shares;


(b)	agreeing to any compromise or arrangement affecting the Shares and to use any lawful means that may appear to the Buyer necessary or desirable in order to safeguard the interests, or enforce the rights, of the registered holder of the Shares;


(c)	receiving notices of and attending all meetings of any members of the Company; and


(d)	generally approving or executing documents and doing any acts or things in relation to any of the Shares as the attorney thinks fit,

in each case from Completion to the day on which the Buyer or its nominee is entered in the register of members as the holder of the Shares. For this purpose, each Seller authorises and instructs the Company to send all communications and payments in respect of the Shares to the Buyer during such period.


4.5	Tax schedule

The provisions of schedule 9 (Tax) shall have effect from Completion.


5	Warranties


5.1	Giving of Warranties

The Warrantors warrant to the Buyer in the terms of the Warranties, Fundamental Warranties and Tax Warranties as at the date of this Deed.


5.2	Disclosure


(a)	The Warranties and the Tax Warranties are qualified to the extent of the matters fairly disclosed in the Disclosure Letter. For this purpose, fairly disclosed means disclosed in such a manner as would enable a reasonably diligent purchaser of the Shares to make a reasonable assessment of the matter concerned.


(b)	The Indemnities are not qualified by matters disclosed in the Disclosure Letter or any knowledge (deemed, actual or otherwise) on the part of the Buyer or any of its officers, employees, advisers or agents.


5.3	Limitations on liability

The liability of the Sellers under this Deed is limited by the limitations as set out in schedule 5 (Limitations on liability).


5.4	Buyer Warranties

The Buyer warrants to the Sellers in the terms of the Buyer Warranties.


5.5	IP Warranties on an indemnity basis

Each Warrantor agrees to indemnify on an after-Tax basis and hold harmless the Buyer against all losses it or any member of the Group may suffer or incur relating to or arising from any claims or allegations (including reasonable legal fees incurred in investigating or defending against any such claim or allegation) by any third party based upon, arising out of or otherwise in respect of any matter or circumstance which represents or would, if such claim or allegation were substantiated, represent a breach of any of the Warranties at paragraph 9 of Schedule 4 (Warranties and Fundamental Warranties) ( Indemnified IP Warranties ).


6	Indemnities

(A) Accrington joint venture

Each Warrantor agrees to indemnify on an after-Tax basis and hold harmless the Buyer against all losses (including reasonable legal fees incurred in investigating or defending against any such claim or proceedings) it or any member of the Group may suffer or incur relating to or arising from any claims or proceedings issued or brought against Ecebs or any member of the Buyer’s Group by:


(a)	MPTE or their successors or assigns for the repayment of any sum provided by MPTE to Accrington pursuant to the Accrington Facility Agreement and/or for the enforcement of any security under the Accrington Debenture;

(b)

MPTE or any of their successors or assigns for the infringement of MPTE’s, Accrington’s or a successor’s or assignee’s Intellectual Property (including any Intellectual Property assigned by Ecebs to Accrington under the Accrington Joint Venture Agreement or the Accrington Software Development Agreement), where such a claim or proceeding relates to (i) the use of such Intellectual Property by any member of the Group prior to or at Completion; or (ii) the Buyer’s or any member of the Buyer’s Group’s use of such Intellectual Property in the same manner that it was used in the Business at Completion; and


(c)	MPTE or any of their successors or assigns for breach of the Accrington Joint Venture Agreement, the Accrington Software Development Agreement and/or the Accrington Escrow Agreement.

(B) Bell Trade Mark Dispute

Each Warrantor agrees to indemnify on an after-Tax basis and hold harmless the Buyer against all losses (including reasonable legal fees incurred in investigating or defending any such claim or proceedings) it or any member of the Group may suffer or incur in relation to any claims or proceedings issued or brought by Bell Canada (or any affiliate of Bell Canada) arising out of or otherwise in respect of Bell Identification B.V. (or any member of the Group):

(a)

having infringed or made unauthorised use of the Intellectual Property of Bell Canada (or any affiliate of Bell Canada), including having made any unlawful, improper or inappropriate use of such Intellectual Property, where such a claim or proceedings relates to (i) the use of such Intellectual Property by any member of the Group prior to or at Completion; or (ii) the Buyer’s or any member of the Buyer’s Group’s use of such Intellectual Property in the same manner that it was used in the Business at Completion;

(b)

having breached any of its obligations under any coexistence agreement or similar arrangement that may be deemed to exist between Bell Identification B.V. (or any affiliate of Bell Identification B.V.) and Bell Canada (or any affiliate of Bell Canada), including any contract deemed to exist pursuant to the terms of the co-existence and license agreement contained as documents 4.1.1, 4.1.2, 4.1.3, 4.1.4 and 4.1.5 in sub-subfolder 4.1 (Pending or threatened litigation, legal proceedings) of Legal subfolder (4) of the Bell Identification folder (3) of the Data Room.

Each Warrantor agrees to indemnify on an after-Tax basis and hold harmless the Buyer against all losses it or any member of the Group may suffer or incur relating to or arising from any claims or allegations (including reasonable legal fees incurred in investigating or defending against any such claim or allegation) by any third party based upon, arising out of or otherwise in respect of the use by Ecebs of the Jasper Intelligence-Reporting code in its Proprietary Software.

(D) Works Council

Each Warrantor agrees to indemnify on an after-Tax basis and hold harmless the Buyer against all losses (including reasonable legal fees incurred in investigating or defending any such claim or proceedings) it or any member of the Group may suffer or incur in relation to any claim or proceedings issued or brought arising out of or otherwise in respect of any failure of any Group Company prior to Completion to establish a works council or other employee representative body in the Netherlands where such is required by law or regulation.


6.2	Limitations on liability

Notwithstanding any other provision of this Deed, the provisions of schedule 5 (Limitations of liability) will only apply to Indemnity Claims, Third Party Software Indemnity Claims and Third Party IP Claims where expressly stated.


6.3	Wrong Pockets

If any of the Sellers owns, has in his possession or controls after Completion any Intellectual Property which is used in or, or is necessary to carry on the Business at Completion, or in the year prior to Completion, the relevant Seller shall transfer such Intellectual Property to the Company, or another company nominated by the Buyer, for nominal consideration as soon as practicable after becoming aware of such rights.


7	Restrictive covenants


7.1	Definitions

In this clause 7, unless the context otherwise requires:

Restricted Area means UK, Netherlands, Singapore, Canada, Greece, India, Australia, New Zealand, Germany, Denmark, Saudi Arabia and the United States of America

Restricted Period means the period of 3 years beginning on the Completion Date

Restricted Person means Patrick Curran

Restricted Services means token services, virtual payment gateway services, secure element in the cloud services and smart ticketing services, together with each other service provided by the Business in the 12 months prior to Completion


7.2	Giving of restrictive covenants

The Restricted Person agrees with the Buyer that he will not during the Restricted Period:


(a)	in the Restricted Area be engaged or directly or indirectly interested in carrying on, or be employed in, any business which is involved in the supply of Restricted Services and which is in competition with the business of any Group Company as carried on at, or during the year prior to, the Completion Date;


(b)	in competition with the business of any Group Company as carried on at the Completion Date, deal in relation to the supply of Restricted Services with any person in the Restricted Area who has within the year prior to the Completion Date been a customer of any Group Company;


(c)	disclose to any other person (in any way which may be detrimental to the business of any Group Company as carried on at the Completion Date) any Confidential Business Information for so long as the information remains Confidential Business Information;


(d)	solicit or entice away from the employment of any Group Company any person who is an employee of any Group Company at Completion; nor


(e)	knowingly assist any other person to do any of the foregoing things.

Each undertaking contained in this clause 7.2 shall be construed as a separate undertaking and if one or more of the undertakings is held to be against the public interest or unlawful or in any way an unreasonable restraint of trade, the remaining undertakings shall continue to bind the Restricted Person.


7.3	Exceptions to the restrictive covenants

Clause 7.2 will not prevent the Restricted Person:


(a)	holding or being interested in up to 5% of the issued share capital of a company listed on a recognised investment exchange (as defined by section 285 of the Financial Services and Markets Act 2000) or the Alternative Investment Market of the London Stock Exchange;


(b)	performing any of his obligations under this Deed or any other Transaction Document;


(c)	carrying out any relevant duties or activities in the Restricted Person's capacity as an employee, consultant and/or director of any Group Company at any time;


(d)	employing or engaging any person responding to a bona fide advertisement for a post available to the public generally or through an employment agency (provided such employment agency's activities are not specifically directed or targeted towards any employee, consultant or director of any Group Company who is a director, employee or consultant of the Group at Completion); or


(e)	carrying on or being engaged, employed or otherwise interested in any business which is involved in the supply of Restricted Services after such time as the Buyer and any affiliate of the Buyer ceases to carry on or be engaged or economically interested in such activities.


7.4	Restrictions relating to business names

Each Seller agrees with the Buyer that for:


(a)	a minimum period of five (5) years after the Completion Date; and


(b)	thereafter for so long as any present or future member of the Buyer’s Group continues to retain an interest in them,

he will not use or procure the use in connection with any business (other than the business of any Group Company) of:

(i) the name Smart Card Software, Bell ID or Ecebs;


(ii)	any other trade marks, names or logos used by the Business as a mark, name or logo of the Business or any Group Product at the Completion Date; or


(iii)	any other trade marks, names or logos which are reasonably likely to be confused with any such trade marks, names or logos referred to in clause 7.4(i) or (ii).


7.5	Amendment of restrictions

The Restricted Person agrees that the restrictions in this clause 7 are reasonable. Nevertheless, if any of the restrictions are found to be void but would be valid if reduced in scope or deleted in part, the relevant restriction will apply with such reduction or deletion as is necessary to make it valid and enforceable.


8	Post-completion actions


8.1	To the extent that any Seller remains appointed as a director of any Group Company following Completion:

(a)

such Seller shall (i) tender their resignation from such position at the next board meeting of the relevant Group Company and (ii) confirm in writing to the relevant Group Company that all the remuneration and expenses due to such Seller as a result of such position has been duly paid to that date (other than accrued salary and expenses for the month in which the resignation takes effect) and that such Seller has no claim or right of action against the relevant Group Company or any of its subsidiaries, officers or employees for breach of contract, compensation for loss of office or on any other account whatsoever and that there is no agreement or arrangement outstanding under which the relevant Group Company or any of its subsidiaries, officers or employees has or could have any obligation to such Seller and such Seller shall irrevocably waive any such claim or right of action and release and forever discharge the relevant Group Company, its officers and employees from all and any liability in respect thereof;


(b)	such Seller shall execute any documents and do all such acts and things as the Buyer may reasonable require to obtain approval of their resignation and appoint in their stead the Buyer’s nominated directors to the board of the relevant Group Company;


(c)	such Seller shall obtain the prior written (including by email) consent of the Buyer before exercising any of the rights, powers and privileges attaching to their position or taking any action in their capacity as director of secretary of any Group Company following Completion unless such action is already provided for, or contemplated by, this clause 8; and


(d)	such Seller shall indemnify and hold harmless the Buyer against all losses it or any member of the Group may suffer or incur relating to or arising from any action referred to in (c) above which is undertaken not in accordance with the provisions of that clause.


9	Further assurance

Each Seller will, on written request by the Buyer served during the period of 12 months following Completion, execute such documents and do such acts and things as the Buyer may reasonably require to transfer the Shares to the Buyer on the terms set out in this Deed provided always that nothing in this Deed will oblige the Sellers to pay stamp duty or stamp duty reserve tax in respect of the transfer of the Shares which will be the sole responsibility of the Buyer.


10	Payments


10.1	Any amounts payable to any of the Sellers under this Deed must be paid by electronic funds transfer for same day value into the following account of the Sellers' Solicitors (or any other account notified to the Buyer in writing by the Sellers for this purpose from time to time) ( Seller Account ):



Account name:
Name of bank:
Bank address:
Sort code:
Account number:


10.2	The Sellers' Solicitors are irrevocably authorised by each Seller to receive any amount payable to the Sellers under this Deed and the receipt of any amount so paid in the Seller Account will be a valid discharge for the Buyer for the relevant amount.


10.3	Any amounts payable to the Company under this Deed must be paid by electronic funds transfer for same day value into the following account (or any other account notified to the Buyer in writing by the Company for this purposes from time to time) ( Company Account ):



Account name:
Name of bank:
Swift code:
CHAPS code:
Faster Payments/BACS Code:
Account number:


10.4	Receipt of any amount so paid in the Company Account will be a valid discharge for the Buyer for the relevant amount.


10.5	The Buyer will have no obligation relating to the distribution of any payment made under clause 10.1 between any of the Sellers.


10.6	Any amounts payable to the Buyer under this Deed must be paid by electronic funds transfer for same day value into such account as is notified to the Sellers’ Representative in writing by the Buyer for this purpose from time to time ( Buyer Account ).


10.7	Receipt of any amount paid into the Buyer Account will be a valid discharge for the Sellers for the relevant amount.


11	Notices


11.1	Any notice, consent, request, approval, settlement, election, proposal, claim form (including particulars of claim) for the purpose of serving proceedings or other communication under or in connection with this Deed ( Notice ) will be:


(a)	in English;


(b)	in writing; and


(c)	delivered by hand or internationally recognised courier service or, if such Notice is posted in the UK to an address in the UK, by first class post.


11.2	Notices may not be delivered by fax or e-mail.


11.3	Any Notice to any Seller will be sent to the Sellers' Representative at the following address, or such other address in the UK as notified to the Buyer from time to time in accordance with clause 12.2:



Party:	Patrick Curran, as the Sellers' Representative
Address:


11.4	Any Notice to the Buyer will be sent to the following address, or such other address in the UK as the Buyer may notify to the Sellers' Representative from time to time:



Party:	Rambus Inc.
Address:	1050 Enterprise Way, Suite 700, Sunnyvale, CA 94089, United States of America
For the attention of:	General Counsel


11.5	A Notice will be effective on receipt and, in the absence of evidence of earlier receipt, will be deemed to have been received:


(a)	at the time of delivery if delivered by hand or courier service; or


(b)	2 Business Days after posting if sent by first class post;

save that if this means that any Notice would otherwise be deemed to be received outside normal business hours (normal business hours for this purpose being between 9.00 am and 5.00 pm on a Business Day at the place of receipt of the Notice), such Notice will be deemed to be received at the start of normal business hours on the next Business Day.


11.6	The Civil Procedure Rules will not apply to the service of any Notice under this Deed.


12	Sellers' Representative


12.1	The Sellers appoint Patrick Curran of Corringales, to be their representative for the purposes of this Deed (whether as Sellers or as Warrantors) on the terms set out in this clause 12 ( Sellers' Representative ) and undertake to the Buyer not to revoke the authority of the Sellers' Representative to act as such. Notice details for the Sellers' Representative are set out in clause 11.3.


12.2	The Sellers:


(a)	may on one or more occasions; and


(b)	if the Sellers' Representative dies or is otherwise unwilling to continue to act in that capacity, will promptly,

appoint a replacement Sellers' Representative, in either case by notice to the Buyer signed by all the Sellers, such appointment to take effect 5 Business Days after the notice is given.


12.3	References in this Deed to the Sellers' Representative will be deemed to refer to the Sellers' Representative for the time being appointed under clauses 12.1 and 12.2 above.


12.4	Each Seller irrevocably authorises the Sellers' Representative:


(a)	to negotiate, compromise, settle or agree any matter arising out of this Deed with the Buyer;


(b)	without affecting clause 12.4(a), to act in relation to any matter which this Deed provides is to be dealt with, done or agreed by the Sellers' Representative; and


(c)	give any Notice,

on behalf of any one or more of the Sellers.


12.5	Except for a notice given by the Sellers under clause 12.2, Notices given on behalf of any one or more of the Sellers will only be valid if they have been given by the Sellers' Representative.


12.6	The Buyer may:


(a)	treat any matter negotiated, compromised, settled or agreed by the Sellers' Representative as having been done on behalf of, and as being binding on, all of the Sellers;


(b)	treat a Notice given by the Sellers' Representative as having been given on behalf of, and as being binding on, all of the Sellers; and


(c)	give a Notice to any one or more Sellers by sending it to the Sellers' Representative, indicating in such notice to which of the Sellers it is addressed.


12.7	Service of a Notice on the Sellers' Representative will constitute valid service of that Notice on those of the Sellers to whom it is addressed.


13	Assignment


13.1	No right or obligation arising under this Deed may be assigned, transferred or otherwise disposed of, in whole or in part, by any party without the prior written agreement of the other parties.


13.2	If there is an assignment or encumbrance under this clause 13, the amount of loss or damage or other amount recoverable by the assignee or encumbrancer will be no greater than would have been the case had such assignment or encumbrance not taken place.


14	Third party rights


14.1	Subject to clause 14.2, and unless this Deed expressly states otherwise (which includes any provision expressed to be in favour of any person who is not a party), a person who is not a party to this Deed has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of, or enjoy any benefit under, this Deed.


14.2	A valid assignee of the Buyer under clause 13 (Assignment) may enforce the obligations of the Sellers set out in this Deed, and a valid assignee of the Sellers under clause 13 (Assignment) may enforce the obligations of the Buyer set out in this Deed.


14.3	This Deed may be terminated, and any provision of it amended or waived, without the consent of any person who is not a party to this Deed but who has the right to enforce any of its terms under this clause 14.


15	Announcements


15.1	Subject to clause 15.2 and save for any press announcement agreed between the Buyer and the Sellers' Representative, no announcement relating to the existence or subject matter of this Deed or any other Transaction Document will be made or issued by or on behalf of:


(a)	the Sellers without the prior written approval of the Buyer; or


(b)	the Buyer or any member of the Buyer's Group without the prior written approval of the Sellers' Representative,

in either case, such approval not to be unreasonably withheld or delayed.


15.2	Any party may make an announcement concerning the sale or purchase of the Shares or any ancillary matter:


(a)	if required by the law of any relevant jurisdiction;


(b)	if required by any regulatory body to which it is subject; or


(c)	if required by any securities exchange on which its securities (or those of its holding company) are listed,

provided that the relevant party will notify the other party of any such announcement being made.


16	Confidentiality


16.1	Subject to clause 16.2, each party will treat as strictly confidential, and not disclose or use, any information received or obtained as a result of entering into or performing this Deed and the other Transaction Documents which relates to:


(a)	the existence and the provisions of this Deed and the other Transaction Documents;


(b)	the negotiations relating to this Deed and the other Transaction Documents;


(c)	(in the case of the Buyer only) the business, financial and other affairs of the Sellers; and


(d)	(in the case of the Sellers only) the business, financial and other affairs of the Group and the Buyer’s Group.


16.2	Clause 16.1 will not prohibit disclosure or use of any information which would otherwise be treated as confidential if and to the extent:


(a)	the disclosure or use is required by the law of any relevant jurisdiction;


(b)	the disclosure or use is required for the purpose of any judicial proceedings arising out of this Deed or any other Transaction Document;


(c)	the disclosure or use is required by any regulatory body to which any party is subject (including, in the case of the Buyer, the requirement to publicly file this Deed (redacted to the extent legally permissible) with the SEC on Edgar);


(d)	the disclosure or use is required by any securities exchange on which the shares or other securities of the disclosing party or its holding company are listed;


(e)	the disclosure is made to any Tax Authority in connection with the Tax affairs of the disclosing party;


(f)	the disclosure is made on a strictly confidential basis to the professional advisers, auditors and/or bankers of the disclosing party;


(g)	the information has become publicly available through no fault of the disclosing party;


(h)	the other party has given prior written approval to the disclosure or use by the disclosing party; or


(i)	it does so to a member of the Buyer’s Group (in the case of the Buyer) which accepts restrictions in the terms of this clause 16,

provided that any disclosure or use of any information under any of clauses 16.2(a) to 16.2(e) (inclusive) will, to the extent permitted by law and subject to litigation privilege and/or legal professional privilege and as is otherwise reasonable and practicable in the circumstances, be made by the disclosing party only after notice to the other party.

16.3

Nothing in this clause 16 shall prohibit the Buyer from conducting any investor or customer road-show activity or other investor or customer education of any kind provided that during each investor or customer road-show or other investor or customer education (i) the confidentiality of the Sellers' personal business, financial and other affairs is maintained as far as reasonably practicable and (ii) the Buyer makes no adverse remarks or statements that may reasonably damage the reputation of any Seller who has advised the Group or acted as part of any Group member's management team at any time before Completion.


17	Entire agreement


17.1	This Deed (together with the other Transaction Documents) sets out the entire agreement and understanding between the parties to them in connection with the subject matter of this Deed and matters described in the other Transaction Documents.

17.2

Without affecting clause 17.1, this Deed (together with the other Transaction Documents) supersedes the non-disclosure agreement dated 22 December 2014 and heads of agreement dated 27 November 2015 and all, if any, other prior negotiations, representations, undertakings and agreements (whether oral or written) on any matter which is the subject of this Deed or any of the other Transaction Documents.

17.3

Each of the parties acknowledges that it is not relying on any statement, warranty, representation, undertaking, collateral contract or other assurance given or made by or on behalf of any of the other parties or the Group (or any of their respective agents, officers, employees and advisers) in relation to the subject matter of this Deed which is not expressly set out in this Deed or the other Transaction Documents ( Non-contractual Assurance ).


17.4	No party will have any claim or remedy in respect of any Non-contractual Assurance. To the extent that any of the parties has been given any Non-contractual Assurance (including, for the avoidance of doubt, any innocent or negligent misrepresentation or misstatement), the relevant party unconditionally waives any claims, rights or remedies which it might otherwise have in relation thereto.


17.5	Nothing in this clause 17 or otherwise under this Deed will exclude or limit any liability for, or remedy in respect of, fraud or fraudulent misrepresentation.


18	Alterations

Any alteration to this Deed must be in writing, refer specifically to this Deed and be duly executed by each party.


19	Severability


19.1	If any provision in this Deed is or at any time becomes invalid, illegal or unenforceable in whole or in part, the relevant provision (or part of it), to the extent that it is invalid, illegal or unenforceable, will not apply and will be deemed not to form part of this Deed.


19.2	The validity, legality and enforceability of the remainder of this Deed will not, subject to any modification or deletion under clause 19.1, be affected, provided that the operation of this clause 19 would not negate the commercial intention of the parties in entering into this Deed.


20	Counterparts


20.1	This Deed may be entered into in the form of two or more counterparts, each executed by one or more of the parties but will not be effective until all parties have executed at least one counterpart.


20.2	Each counterpart will be an original of this Deed and all the counterparts taken together will constitute one instrument.


21	Payment of costs


21.1	Except where this Deed or another Transaction Document provides otherwise, each party will pay his/its own costs and expenses incurred in relation to the preparation, negotiation, entering into and completion of this Deed and each Transaction Document.


22	Continuing effect of this Deed


22.1	All provisions of this Deed and each other Transaction Document will, so far as they are capable of being performed or observed, continue in full force notwithstanding Completion.


23	Governing law


23.1	This Deed will be governed by and construed in accordance with English law.


23.2	All claims and disputes (including non-contractual claims and disputes) arising out of or in connection with this Deed, its subject matter, negotiation or formation will be determined in accordance with English law.

23.3

If in any court any party argues that a court other than the courts of England and Wales has jurisdiction to determine any claims or disputes (including any non-contractual claims or disputes) arising out of or in connection with this Deed, that issue will be determined in accordance with English law, and any right that any person might otherwise have to rely upon the law of the forum or any other law is irrevocably and unconditionally waived.


24	Submission to jurisdiction


24.1	Each party irrevocably submits to the exclusive jurisdiction of the English courts in relation to all matters (including non-contractual matters) arising out of or in connection with this Deed, provided that nothing in this clause 24 will prevent the Buyer, in its absolute discretion, from commencing proceedings against the Sellers in any court of competent jurisdiction.

24.2

Each party irrevocably waives any right that it may have to object on any ground to an action being brought in the English courts, to claim that the action brought in the English courts has been brought in an inconvenient forum, or to claim that the English courts do not have jurisdiction (and the waiver contained in this clause 24.2 includes a waiver of all formal and substantive requirements of any otherwise competent jurisdiction in relation to this clause 24.2).


24.3	Each party undertakes not to contest in any court in any jurisdiction the enforcement in that jurisdiction of any judgment of the courts of England and Wales against it on the ground that the

English courts did not have jurisdiction over it or that service of process (being service in accordance with clause 11 (Notices)) was invalid or ineffective or resulted in it not having due or adequate notice of the proceedings.


25	Process agent


25.1	The Buyer:


(a)	irrevocably appoints the Company and any successor in business of the Company ( Process Agent ) as its agent to accept service of process in the United Kingdom in relation to any document initiating or otherwise connected with any court proceedings arising out of or in connection with this Deed;


(b)	agrees to notify the Sellers' Representative in writing of any change of address of such Process Agent within 10 Business Days of the change of address; and

(c)

if such Process Agent ceases to be able to act under this clause 25 or ceases to have an address in England and Wales, irrevocably agrees to appoint a replacement process agent ( New Process Agent ) reasonably acceptable to the Sellers' Representative of such appointment, and after such appointment reference to the Process Agent in this clause will be read as reference to the New Process Agent and to give to the Sellers' Representative notice of such appointment within 10 Business Days.


25.2	Any such document will be validly served on the Buyer by being sent by pre-paid first class post to or delivered to the Process Agent or left at the Process Agent's address set out in this clause 24, whether or not forwarded to or received by the Buyer.


25.3	Without affecting the effectiveness of service under any other method set out in clause 11 (Notices) service of such process upon the Process Agent at its address given in clause 25.1 or elsewhere within the jurisdiction of the courts of England and Wales for the time being in force will constitute good service on the Buyer.

Executed and delivered as a deed by the parties on the date stated on page 1 of this Deed.

Schedule 2

The Group

Part 1 – The Company



Name:	Smart Card Software Limited
Registered number:	5258105
Date of incorporation:	13 October 2004
Country of incorporation	England and Wales
Registered office:	5 White Oak Square, London Road, Swanley, Kent, BR8 7AG, England
Tax Residence	UK
Authorised share capital:	£2,000
Issued share capital:	Prior to Completion 43,098,000 Shares held: At and after Completion 43,828,000 Shares held as set out in part 1 of Schedule 1
Directors:	Patrick Curran (resigning on completion)
Secretary:	Christopher Harvey (resigning on completion)
Auditors:	Sargeant Partnership
Accounting reference date:	31 December
Mortgages/charges:	None

Part 2 – Subsidiaries and subsidiary undertakings of the Company

Bell Identification B.V.



Name:	Bell Identification B.V.
Registered number:	24236705
Date of incorporation:	15 June 1993
Country of incorporation	Netherlands
Registered office:	Stationsplein 45 Unit A6.002 3013AK, Rotterdam, Netherlands
Tax Residence	Netherlands
Authorised share capital:	€90,000 divided into 900 ordinary shares of €100 each
Issued share capital:	182 ordinary shares of €100 each which are held by the Company
Directors:	Ignatius Peters (resigning on completion) Patrick Curran (resigning on completion)
Secretary:	None
Auditors:	PKF
Accounting reference date:	31 December
Mortgages/charges:	None

Bell ID, LLC



Name:	Bell ID, LLC
Registered number:	F228310-1
Date of incorporation:	10 July 2007
Country of incorporation	Virginia, United States
Registered office:	526 King Street, Suite 211, Alexandria, Virginia, 22314
Tax Residence	N/A
Authorised share capital:	N/A
Membership Interest:	100% of membership interest held by Bell Identification B.V.
Directors:	Ignatius Peters (resigning on completion)
Secretary:	None
Auditors:	None
Accounting reference date:	31 December
Mortgages/charges:	None

Bell ID Singapore PTE. Limited



Name:	Bell ID Singapore PTE. Limited
Registered number:	201539810M
Date of incorporation:	5 November 2015
Country of incorporation	Republic of Singapore
Registered office:	30 Cecil Street, 19-08 Prudential Tower, Singapore, 049712
Tax Residence	Singapore
Authorised share capital:	N/A
Issued share capital:	SGD 100, comprised of 100 ordinary shares of SGD 1 which are held by Bell Identification B.V.
Directors:	Patrick Brian Curran (resigning on completion) Haslina Binte Abu Bakar
Secretary:	Lim Soh Sea
Auditors:	None (not trading)
Accounting reference date:	31 December
Mortgages/charges:	None

Ecebs Limited



Name:	Ecebs Limited
Registered number:	3974521
Date of incorporation:	17 April 2000
Country of incorporation	England and Wales
Registered office:	5 White Oak Square, London Road, Swanley, Kent, BR8 7AG, England
Tax Residence	UK
Authorised share capital:	No authorised share capital
Issued share capital:	Prior to Completion 100,000 ordinary shares of £1 each of which are held by: - Smart Card Software Limited (87,000) - Ian Atherfold (3,000) - Russell McCullagh (3,000) - Brian McGuiness (2,000) - William McSpadden (2,000) - Mike Peters (3,000). At and after Completion 100,000 ordinary shares of £1 each of which are held by the Company.
Directors:	Patrick Curran (resigning on completion) Christopher Harvey (resigning on completion) Russell McCullagh (resigning on completion)
Secretary:	None
Auditors:	Sargeant Partnership
Accounting reference date:	31 December
Mortgages/charges:	None

Multefile Limited



Name:	Multefile Limited
Registered number:	3974526
Date of incorporation:	17 April 2000
Country of incorporation	England and Wales
Registered office:	5 White Oak Square, London Road, Swanley, Kent BR8 7AG, England
Tax Residence	UK
Authorised share capital:	£10,000
Issued share capital:	2 ordinary shares of £1 each which are held by Ecebs Limited
Directors:	Patrick Curran (resigning on completion) Christopher Harvey (resigning on completion)
Secretary:	Sean Curran (resigning on completion)
Auditors:	None
Accounting reference date:	31 December
Mortgages/charges:	None

Accrington Technologies Limited



Name:	Accrington Technologies Limited
Registered number:	5089372
Date of incorporation:	31 March 2004
Country of incorporation	England and Wales
Registered office:	5 White Oak Square, London Road, Swanley, Kent BR8 7AG, England
Tax Residence	UK
Authorised share capital:	£1,000
Issued share capital:	999 ordinary shares of £1 each which are held by Ecebs Limited (499) and Merseyside Passenger Transport Executive (500)
Directors:	James Barclay Russell McCullagh (resigning on completion)
Secretary:	None
Auditors:	None
Accounting reference date:	31 March
Mortgages/charges:	Debenture in favour of Merseyside Passenger Transport Executive created 1 October 2004

Nevis Technologies Limited



Name:	Nevis Technologies Limited
Registered number:	SC405196
Date of incorporation:	11 August 2011
Country of incorporation	Scotland
Registered office:	c/o Ecebs Ltd (R. McCullagh), The Torus Building, Rankine Avenue, East Kilbride, Glasgow G75 0QF
Tax Residence	UK
Authorised share capital:	No authorised share capital
Issued share capital:	10,000 ordinary shares of £1 each divided into: - 4,999 ordinary A shares of £1 each which are held by Strathclyde Partnership for Transport; and - 5,001 ordinary B shares of £1 each which are held by Ecebs Limited
Directors:	Ian Atherfold (resigning on completion) David Braddock Kaye Harmon Gordon Maclennan Russell McCullagh (resigning on completion) Denis McKenna Eric Stewart
Secretary:	Valerie Davidson
Auditors:	Johnston Carmichael LLP
Accounting reference date:	28 February
Mortgages/charges:	None

Schedule 3

Completion obligations


1	The Sellers' obligations


1.1	The Sellers will deliver to, or will procure that the following documents or other items are delivered to or in the control of, the Buyer:


(a)	Stock transfer forms:

Duly executed stock transfer forms for the Shares in favour of the Buyer;


(b)	Share certificates:


(i)	the share certificate(s) for the Shares in the name of the relevant Seller; or


(ii)	a duly executed indemnity for a lost share certificate, in the agreed form;


(c)	Transaction Documents:

The following Transaction Documents duly executed by, or on behalf of, each relevant Seller:


(i)	the Disclosure Letter; and


(ii)	the Escrow Agreement;


(d)	Powers of attorney

Duly executed powers of attorney or other authorities in the agreed form under which this Deed or any of the other Transaction Documents (including the stock transfer forms referred to above) has been executed by any Seller or by the Sellers’ Representative;


(e)	Purchase of Ecebs minority shareholding


(i)	Duly executed share sale and purchase agreement between the Company and each of Ian Atherfold, Russell McCullagh, Brian McGuinness, William McSpadden and Mike Peters in relation to the purchase of the shares held by them in Ecebs ( Ecebs Sellers );


(ii)	Duly executed stock transfer forms for the shares held by the Ecebs Sellers in Ecebs in favour of the Company;


(iii)	the share certificate(s) for the Ecebs Shares in the name of the relevant Ecebs Seller or a duly executed indemnity for a lost share certificate, in the agreed form;


(f)	Exercise of Options:


(i)	Duly executed letter in the agreed form to each Option Holder in relation to the exercise of their Options in connection with the transaction contemplated in this Deed;


(ii)	Duly executed notices of exercise in the name of each Option Holder in relation to their Option;


(g)	Books, documents and records:

The statutory and minute books (written up to the time immediately prior to Completion), the corporate seal (if any) and the certificate of incorporation and any certificates of incorporation on change of name of each Group Company;


(h)	Directors and secretaries:


(i)	written resignations in the agreed form from each director and secretary of each Group Company identified in schedule 2 as resigning on Completion;


(i)	Properties:


(i)	the leases for the Properties;


(j)	Other:


(i)	for each Group Company that is registered to PROtected Online Filing at Companies House (PROOF) the PROOF log-in details comprising email address, security code, and login password and any further information to enable the Buyer to de-register from PROOF on Completion so as to allow certain paper based filings to be made;


(ii)	a CD/USB initialled on behalf of both the Buyer and the Sellers’ Representative containing a copy of the Data Room.


1.2	At Completion, or in the case of, Bell Identification B.V., Bell ID LLC, Bell ID Singapore PTE Limited, Accrington Technologies Limited and Nevis Technologies Limited shortly following Completion, the Sellers will procure that a duly convened and quorate board meeting of each Group Company is held at which:


(a)	(in respect of the Company only) the transfers of the Shares are resolved to be registered (subject only to their being duly stamped) notwithstanding any provision to the contrary in the articles of association of the Company;


(b)	the following persons are validly appointed as additional directors of the relevant Group Companies:



Name of new director	Relevant Group Company
Satish Rishi Jae Kim Martin Scott	Smart Card Software Limited
Satish Rishi Jae Kim Martin Scott	Bell Identification B.V.
Satish Rishi Jae Kim Martin Scott	Bell ID, Inc LLC
Satish Rishi Jae Kim Martin Scott	Bell ID Singapore PTE. Limited
Satish Rishi Jae Kim Martin Scott	Ecebs Limited
Satish Rishi Jae Kim Martin Scott	Multefile Limited
Satish Rishi Jae Kim Martin Scott	Accrington Technologies Limited
Satish Rishi Jae Kim Martin Scott	Nevis Technologies Limited


(c)	on the appointments referred to in paragraph 1.2(b) being made, the persons identified in schedule 2 as resigning on Completion cease to be directors of the relevant Group Company;


(d)	the following persons are appointed as secretary of the relevant Group Companies in place of the relevant retiring secretary:



Name of new secretary	Relevant Group Company
Jae Kim	Smart Card Software Limited
Jae Kim	Bell ID, LLC
Jae Kim	Bell ID Singapore PTE. Limited
Jae Kim	Nevis Technologies Limited


(e)	the execution of all relevant Transaction Documents is approved (where relevant to each member of the Group).


2	The Buyer's obligations


2.1	The Buyer will deliver or make available to the Sellers the following:


(a)	Transaction Documents:

The following Transaction Documents duly executed by the Buyer:


(i)	the Disclosure Letter; and


(ii)	the Escrow Agreement.


(b)	A duly executed secretary’s certificate from the Buyer recording:


(i)	the resolution of the board of directors of the Buyer authorising the purchase of the Shares; and


(ii)	the execution of this Deed and all relevant Transaction Documents to be executed by the Buyer.


2.2	The Buyer shall:


(a)	pay the Purchase Price in accordance with clause 10 (Payments) less the Retention Sum;


(b)	pay the Retention Sum into the Retention Account in accordance with part 2 of schedule 6 (Retention provisions).


3	Joint obligations of the Buyer and the Sellers


3.1	The Buyer and the Sellers will join in procuring that all existing bank mandates in force for each Group Company be altered (in such manner as the Buyer requires at Completion) to reflect the resignations and appointments referred to in paragraph 1.2.

Schedule 4

Warranties and Fundamental Warranties


1	Fundamental Warranties


1.1	No finder's fees or brokerage payable by the Group

No-one is entitled to receive from any Group Company any finder's fee, brokerage or commission in connection with the sale of the Shares.


1.2	Details concerning the Group


(a)	Each Group Company (other than Bell Identification B.V., Bell ID, LLC, Bell ID Singapore PTE. Limited and Nevis Technologies Limited) is a private company limited by shares properly incorporated and validly existing under the laws of England and Wales.


(b)	Bell Identification B.V is a private company limited by shares properly incorporated and validly existing under the laws of the Netherlands.


(c)	Bell ID, LLC is a private company limited by shares properly incorporated and validly existing under the laws of Virginia, United States of America.


(d)	Bell ID Singapore PTE. Limited is a private company limited by shares properly incorporated and validly existing under the laws of Singapore.


(e)	Nevis Technologies Limited is a private company limited by shares properly incorporated and validly existing under the laws of Scotland.


(f)	The Shares constitute the entire issued share capital of the Company.


(g)	Other than the articles of association of the Company, there is no agreement or arrangement in place governing the relationship between the shareholders of the Company.


(h)	The Shares and all shares held by any Group Company have been validly issued and allotted and are fully paid up.


(i)	There is no agreement or commitment outstanding which calls for the allotment, issue or transfer of, or affords to any person the right to call for the allotment, issue or transfer of, any shares (including the Shares) or debentures in or securities of any Group Company.


(j)	All the information in schedule 1 (The Sellers, Option Holders and the Warrantors) and in schedule 2 (The Group) is complete and accurate and identifies all share capital (including the Shares) or debentures in or securities of any Group Company and the payments to be made to each Seller.


1.3	Save as set out in schedule 2 (The Group), none of the Group Companies have any:


(a)	interest in the share capital of, or other investment in, any body corporate;


(b)	interest in any partnership, joint venture, consortium or other unincorporated association or arrangement for sharing profit or losses; or


(c)	branch, agency, place of business or permanent establishment outside the United Kingdom.


1.4	Authority

The Company has the requisite power and authority to enter into and perform, and has taken all necessary corporate action to authorise the execution and performance of, its obligations under this Deed and any other Transaction Document to which it is a party.


2	Accounts and Management Accounts


2.1	The Accounts:


(a)	were prepared in accordance with applicable law and accounting principles and practices generally accepted in the United Kingdom at the time they were audited and, so far as the Warrantors are aware, commonly adopted at that time by companies carrying on businesses similar to those carried on by the Group;


(b)	apply bases and policies of accounting which have been applied on a basis consistent with the audited consolidated financial statements of the Group for the previous two financial periods; and


(c)	give a true and fair view of:


(i)	the state of affairs and the financial position of the Group as at the Accounts Date;


(ii)	the assets and liabilities of the Group as at the Accounts Date; and


(iii)	the profit or losses of the Group for the financial year ended on the Accounts Date.


2.2	The Management Accounts:


(a)	have been prepared in good faith and with such skill and care as is reasonable for the preparation of unaudited management accounts;


(b)	were prepared on a basis consistent with the Accounts so far as applicable to unaudited management accounts and in accordance with applicable law and consistent with accounting principles generally accepted in the United Kingdom;


(c)	are not misleading in any material respect and show with material accuracy the assets and liabilities and profit or loss of the Group taken as a whole as at and for the period in respect of which, and taking into account the purpose of which, they have been prepared;


(d)	have been prepared using policies and principles consistently applied throughout the period to which they relate; and


(e)	those policies and principles are the same as those applied in the preparation of the Accounts.


2.3	The accounting records of each Group Company have, in all material respects, been kept on a proper and consistent basis, are up to date and contain all matters required to be entered in them by United Kingdom legislation in force or equivalent legislation in a foreign jurisdiction applicable to each Group Company (as relevant).


2.4	Since 30 September 2015:


(a)	so far as the Warrantors are aware, there has been no material adverse change in the financial or trading position of any Group Company;


(b)	the Business has been carried on in the ordinary course and, so far as the Warrantors are aware, no unusual or onerous contract (which is material in the context of the Group taken as a whole) differing from contracts entered into in the ordinary course has been entered into by any Group Company;


(c)	no change in the accounting reference period of any Group Company has been made;


(d)	no loan or loan capital has been repaid by any Group Company in whole or in part or has become liable to be so repaid;


(e)	no Group Company has factored, sold or agreed to sell a debt;


(f)	no Group Company has entered into any mortgage or created any charge or other security interest over the assets of the Group;


(g)	no Group Company has entered into any long term contract (in the context of the contracts entered into by the Group in the ordinary course of business), materially amended any Material Contract or terminated any Material Contract;


(h)	no material fixed assets have been acquired or disposed of and no Group Company has made, agreed to make or incurred a commitment to make capital expenditure exceeding in total £100,000; and


(i)	no Group Company has declared, paid or made any dividend or other distribution.


3	Finance, borrowings and liabilities


3.1	Financial facilities


(a)	Details of the only overdraft, loan and other financial facility available to the Group (including the approximate amount drawn) are contained in the Disclosure Letter.


(b)	Details of all agreements or arrangements for hire or rent, hire-purchase, conditional sale or purchase by way of credit or instalment payment entered into by the Group are contained in folders 2.7 (Supply Chain), 4.11 (Supply Chain) and 3.10 (Supply Chain) of the Data Room ( Lease Agreements ).


(c)	No member of the Group has any other facilities or financing other than as disclosed pursuant to Warranty 3.1(a) or 3.1(b).


3.2	Details of bank accounts

Details of all bank accounts maintained or used by the Group (including, in each case, the name and sort code of the bank with whom the account is kept and the number and nature of the account) is contained in the Disclosure Letter.


3.3	Grants, subsidies or other financial assistance in favour of the Group

Details of grants, subsidies and other financial assistance or support received, or to be received or which has been applied for, by any Group Company from any governmental or quasi-governmental or other body or authority are contained in the Disclosure Letter. Completion will not result in any liability arising that will be owed by any Group Company to any aforementioned governmental or quasi-governmental or other body or authority in relation to such grants, subsidies or financial assistance.


4	The Business and trading


4.1	Standard terms of business


(a)	Copies of the Group's standard terms of business for customers and suppliers are contained in the Data Room Documents.


4.2	Customers and suppliers

(a)

Copies of agreements between certain Group Companies and various customers have been provided in folders 03.A.A8 (Fin-005a Fin-006 Customer contracts) and 04.A.A8 (Customer contracts) within the Data Room, including the 10 largest customers by revenue to the Group in 2015 (the 10 largest by revenue, collectively, being the Material Customers ) and copies of agreements between certain Group Companies and various suppliers have been provided in folders 02.7 (Supply Chain), 03.10 (Supply Chain) and 04.11 (Supply Chain) within the Data Room, including the 10 largest suppliers by cost to the Group in 2015 for the 12 month period preceding Completion (the 10 largest by cost being, collectively, the Material Suppliers ).


(b)	No Material Customer or Material Supplier has ceased trading with or supplies to the Company in the 12 month period preceding Completion and so far as the Warrantors are aware neither this Deed nor Completion is likely to cause any person who normally does business with the Company not to continue to do so.


(c)	So far as the Warrantors are aware there has been no breach, invalidity, or grounds for determination, rescission, avoidance or repudiation of any Material Customer contract or Material Supplier Contract or any allegation of such a thing.


4.3	Terms of contracts to which a Group Company is a party

Other than as provided in the Disclosure Letter, no Group Company is a party to any contract which:


(a)	has been entered into outside the ordinary and normal course of trading;


(b)	imposes any commitment on the relevant Group Company to obtain or supply goods or services exclusively from or to any person;


(c)	other than the Lease Agreements, contains any commitment for the supply of goods or services to any Group Company where the supply may take place more than 12 months after the time of fixing of the price;


(d)	by its terms restricts its freedom to carry on its business in any part of the world in such manner as it may think fit or the ability to transfer the whole or any part of its business;


(e)	can be terminated in the event of any change in the underlying ownership or control of that Group Company or would be materially affected by such change;


(f)	purports to assure the counterparty that they will obtain treatment no less favourable than the most favourable treatment accorded to any other party privy to contract with any Group Company;


(g)	results in (or entitles the counterparty for a right to call for) any amount to become due, be increased or accelerated as a consequence of Completion (including any contractual arrangements with respect to any joint venture, association or partnership);


(h)	is incapable of termination by the relevant Group Company in accordance with its terms on no more than 6 months' notice; or


(i)	involves or is likely to involve outstanding annual capital expenditure by the relevant Group Company of more than £100,000.


4.4	Other than as provided in the Disclosure Letter, no Group Company is a party to any contract which involves or is likely to involve the supply of goods or services the aggregate sales value of which will represent in excess of 10% of the turnover of the Group for the preceding financial year.


4.5	Confidentiality or secrecy arrangements which restrict the Group's activities

Other than as set out in the Disclosure Letter, no Group Company is a party to any confidentiality or secrecy agreement or undertaking or other arrangement which may restrict its use or disclosure of any information.


4.6	Rights in relation to disposal of assets

Other than an agreement to place source code into escrow entered into by any Group Company in the ordinary course of business, there is no outstanding agreement or arrangement by virtue of which any Group Company is under a prospective or contingent liability to dispose of its assets (other than in the ordinary course) or its business.


5	Assets


5.1	Ownership of assets

Save for assets held under any Lease Agreement and Permitted Security Interests, the fixed assets used by it in connection with, the Business ( Fixed Assets ) are legally and beneficially owned by the Group free from any Security Interest. For these purposes Permitted Security Interest means:


(a)	any lien arising in the ordinary course of the Business to secure amounts which are not material;


(b)	any unpaid vendor's or supplier's lien arising in the ordinary course of the Business to secure amounts due for goods or services sold or supplied; and


(c)	liens arising by operation of law, including a banker's lien.

This shall not be construed as a Warranty relating to any Information Technology of the Group. Such Warranty relating to Information Technology is set out at paragraph 8.


6	Directors and employees


6.1	Details of employees

The Data Room Documents set out in folders 2.4 (Management and Employees), 3.5 (Management and Employees) and 4.4 (Employees) of the Data Room contain the following information:


(a)	the names of all employees of each Group Company ( Employees ) and each Employee’s job title, basic salary and length of service, all remuneration and benefits provided to them;


(b)	full details of all agency workers, consultants, contractors, workers and other personnel currently engaged by each Group Company, including their principal terms and conditions, length of assignment and notice provisions;


(c)	copies of each standard contract of employment between each Group Company and each of its designated categories of Employees currently in force; and


(d)	all staff handbooks, policies and other agreements applying to the Employees.


6.2	Changes since the Heads of Term Date


(a)	Since the Heads of Term Date, no material change has been made by any Group Company to the terms of employment of any of its directors or Employees.


(b)	So far as the Warrantors are aware, since the Heads of Term Date, no director or Employee has given notice terminating his contract of employment or is under notice of dismissal.


6.3	Termination by serving notice

The contract of employment of each Employee may be terminated by the employing company without damages or compensation (other than that payable by statute) by giving at any time the minimum period of notice applicable to that contract which is specified in section 86 of the Employment Rights Act 1996.


6.4	No employment terms affected by transaction

There are no terms or conditions of employment (whether contractual or not) for any Employee which are in any way linked to or dependent on the transaction contemplated by this Deed.


6.5	No disputes in relation to employees

No Group Company is currently involved in any legal proceedings, material dispute or grievance investigation or procedure with any of its Employees or former employees and, so far as the

Warrantors are aware, there are no present circumstances in existence which are reasonably likely to give rise to any such legal proceedings, material dispute or grievance investigation or procedure.


6.6	No arrears

There is no obligation or amount due to or in respect of any Employee or other personnel or former employee or personnel of any Group Company in connection with or arising from his employment or engagement, which is in arrears or unsatisfied at the date of this Deed (other than his normal salary for the month current).


6.7	Collective agreements

No Group Company recognises any trade union or works council or other employee representative body and there are no outstanding applications for recognition or information and consultation rights and no such application is required.


6.8	Compliance

Each Group Company has materially complied with the terms of all relevant contracts of employment, policies, benefit or bonus schemes and all applicable laws, codes of conduct, collective agreements, orders, declarations and awards relevant to their employees or other personnel.


6.9	Share options/incentive plans

No Group Company has or is proposing to introduce any share incentive scheme, share option scheme or profit sharing bonus or other incentive scheme for any director, officer or Employee.


7	Pension arrangements


7.1	The following definitions are used in this paragraph 7:

Contract Based Schemes means the Auto-Enrollment group pension scheme provided by Standard Life for employees of Ecebs, the pension plan with Delta Lloyd for employees of Bell Identification B.V. and the personal pension schemes to which any Group Company currently contributes

Disclosed Schemes means the Life Assurance Scheme and the Contract Based Schemes or such one of them as the context requires

Life Assurance Scheme means the personal life assurance schemes to which any Group Company currently contributes

Money Purchase Benefits means benefits as defined in section 181 of the Pension Schemes Act 1993

Relevant Benefits means any relevant benefits as defined in section 393B of the Income Tax Earnings and Pensions Act 2003 except that it will include the benefits specified in sections 393B(2)


7.2	Save for the Disclosed Schemes, there is no obligation, agreement or arrangement (whether funded or unfunded), nor is there any contractual commitment or custom or practice (whether as a legal commitment or on a voluntary basis) to or in respect of which the Company or any

Group Company contributes, or has contributed to, or is or has become liable to satisfy, under which Relevant Benefits are or may be payable.

7.3

Details of each of the Disclosed Schemes have been disclosed to the Buyer including details of the entitlement to benefits under that Disclosed Scheme and the amounts or rates at which the Company and the Employees contribute (including expenses and premiums) and the due dates for payment, and in respect of each of the Life Assurance Scheme copies of the trust deeds and rules and any other documents containing the provisions currently governing the scheme. All copy documents disclosed in connection with this warranty are accurate copies in all material respects.


7.4	All benefits (other than lump sum benefits on death in service) payable under the Disclosed Schemes are Money Purchase Benefits.


7.5	There is no contribution, premium, charge or expense payable to or in respect of any Disclosed Scheme which has fallen due but is unpaid.


7.6	So far as the Warrantors are aware, the Life Assurance Scheme and the Contract Based Schemes are registered pension schemes for the purposes of Part 4 of the Finance Act 2004.

7.7

No person with which any Group Company is connected or of which any Group Company is an associate participates, or has participated, as an employer in an occupational pension scheme other than (a) the Disclosed Schemes or (b) a money purchase scheme (as defined in section 181 of the Pension Schemes Act 1993). For the purposes of this paragraph, "connected" and "associate" are to be interpreted in accordance with sections 249 and 435 respectively of the Insolvency Act 1986.


7.8	There are no claims existing or, so far as the Warrantors are aware, threatened in relation to any Group Company by or in respect of any Employees or former employees in relation to their participation, or exclusion from participation, in the Disclosed Schemes.


7.9	The Group has at all times materially complied with all applicable UK and European legal and regulatory requirements so far as they impose obligations on it in respect of:


(a)	the operation of the Disclosed Schemes; and


(b)	its obligations under Part 1 of the Pensions Act 2008 on and from the date those provisions apply to it.


8	Information Technology and Data Protection


8.1	Details of Information Technology


(a)	Details of all material Information Technology which is owned by any Group Company are set out in folders 2.9 (Information Technology), 3.9 (Information Technology) and 4.9 (Information Technology) of the Data Room and a Group Company is the sole legal and beneficial owner of such Information Technology free from all charges, options, encumbrances and other rights.


(b)	Each Group Company either solely legally and beneficially owns, or has a contractual right to use (under a contract disclosed pursuant to paragraph 8.2(a)), all material Information Technology used currently in, or necessary to carry on, the business conducted by that Group Company in the manner carried on at Completion.


8.2	Information Technology Agreements

(a)

Copies (or, in the case of unwritten agreements or arrangements, details) of all material agreements and arrangements relating to Information Technology entered into by any Group Company (or under which any Group Company obtains any benefit, or is bound, or which otherwise relate to the material Information Technology owned by any Group Company) are set out in folders 2.9 (Information Technology), 3.9 (Information Technology) and 4.9 (Information Technology) of the Data Room.


(b)	No Group Company nor, so far as the Warrantors are aware, any other party is in material breach of any agreement or arrangement required to be disclosed pursuant to paragraph 8.2(a).


8.3	Information Technology disruptions and security breaches


(a)	All Information Technology which is owned by, or used by, or on behalf of, any Group Company is (and has been in the previous twelve months) (i) in good working order (ii) operated and maintained in accordance with good industry practice.


(b)	The Group has not experienced any material disruption in its operations as a result of:


(i)	any security breach or other unauthorised access or acts in relation to any Information Technology;


(ii)	any failure or other sub-standard performance of any Information Technology howsoever arising (including as a result of (I) the existence of any software bug, virus, worm, trojan or other malicious code or software based defect, or (II) any insufficiency of hardware data storage or hardware processing capacity, or (III) the occurrence or processing of any date or dates); or


(iii)	any other Information Technology-related matter,

and, so far as the Warrantors are aware, no circumstance exists which is likely or expected to give rise to any such disruption.


(c)	No Group Company has experienced any information security breach or other unauthorised access of, or unauthorised act in relation to, Information Technology owned by, or used by, or on behalf of, any Group Company.


8.4	Computer software used by the Group


(a)	The Group does not use any computer software other than standard off the shelf packages generally available to the public ( Standard Software ) and no Standard Software used by the Group has been materially modified.


(b)	The Group possesses all necessary licences with respect to its use of Standard Software and, so far as the Warrantors are aware, no licence terms have been breached in any material respect.


8.5	Data protection


(a)	The Group has complied in all material respects with the Data Protection Act 1998 and the Privacy and Electronic Communications (EC Directive) Regulations 2003 ( Data Protection Laws ) to the extent applicable to each Group Company.

(b)

So far as the Warrantors are aware, no Group Company has received a written notice or allegation from any relevant data protection supervisory authority, a data subject or other individual alleging non-compliance with the Data Protection Laws or requesting information relating to its data protection policies or practices and the Warrantors have not been informed in writing of any circumstances which exist which might give rise to any such notice, letter or compliant being served, given or made.


(c)	No individual has been awarded compensation from any Group Company under the Data Protection Laws, the Warrantors are not aware of any outstanding claim for such compensation and the Warrantors have not been informed in writing of any circumstances which exist which might lead to any claim for compensation being made.


(d)	Details of the means used by the Group to obtain the necessary consents to process the personal data of customers, suppliers or other data subjects are set out in the Disclosure Letter.


9	Intellectual property


9.1	Group IP


(a)	The Group IP that is owned by the Group and, so far as the Warrantors are aware, Group IP that is licensed to the Group, is valid, subsisting and enforceable.


(b)	The Group IP that is owned by the Group and, so far as the Warrantors are aware, Group IP that is licensed to the Group, is not subject to any application for cancellation, amendment, licence of right of compulsory licence.


(c)	The Group either solely legally and beneficially owns, or has a licence to use, all Intellectual Property used currently in, or necessary to carry on, the Business in the manner currently carried on at Completion and, so far as the Sellers are aware, to fulfil any existing plans or proposals for carrying on the Business in a materially similar manner as it is carried on at Completion.

(d)


(i)	No item of Group IP owned by a Group Company is (or has during the three years prior to Completion) the subject of a claim or opposition from any person as to title or ownership, validity, enforceability or entitlement.


(ii)	There is no (or has not been during the three years prior to Completion) litigation, dispute, claim or other proceedings (in each case notified in writing and whether legal or administrative) pending involving any of the Group IP owned by the Group.


(iii)	So far as the Warrantors are aware, there are no circumstances likely to give rise to any such litigation, dispute, claim or other proceedings referred to in paragraphs 9.1(d)(i) or 9.1(d)(ii).

(e)

Complete and accurate details of all registered Group IP (and applications for any such rights) and all material unregistered Group IP, in each case that are owned by any Group Company, are set out in folders 3.11 (Intellectual Property) and 4.14 (Intellectual Property) of the Data Room and the specified Group Company is the sole legal and beneficial owner of such rights free from all charges, options, encumbrances and other rights.


(f)	All application, renewal and other official statutory and regulatory fees rendered to and received by the Group before the date of this Deed relating to the administration of the Group IP or for the protection or enforcement of the Group IP have been duly paid and all steps have been taken for their maintenance and protection.


9.2	No disposals of Intellectual Property since the Accounts Date

Since the Accounts Date, no Group Company has sold or otherwise disposed of any Intellectual Property owned or used by the Group.


9.3	No infringement of Intellectual Property of third parties

So far as the Warrantors are aware, the carrying on of the Business by the Group does not infringe or make unauthorised use of, and has not infringed or made unauthorised use of, the Intellectual Property of any other person.


9.4	No infringement of Group IP


(a)	So far as the Warrantors are aware, there is, and within the past 12 months there has been, no actual or threatened infringement, misuse or unauthorised use, or any event likely to constitute an infringement, misuse or unauthorised use, by any third party of any of the Group IP owned by any Group Company.


(b)	No use of Group IP by any Group Company gives rise, or will give rise, to any royalty or like payment obligation (other than under any agreement disclosed pursuant to paragraph 9.5(a)) and, so far as the Warrantors are aware, there is no liability to any employee to pay compensation pursuant to section 40 Patents Act 1977, or any like provision in any other jurisdiction.


9.5	Intellectual Property Agreements

(a)

Copies (or, in the case of unwritten licences, agreements or arrangements, details) of all material licences, agreements and arrangements relating to Group IP (including, without limitation, research and development agreements, letters of consent, settlement agreements, undertakings and co-operation agreements) entered into by any Group Company (or under which any Group Company obtains any benefit, or is bound, or which otherwise relate to the Intellectual Property owned by any Group Company) are set out in folders 3.11 (Intellectual Property) and 4.14 (Intellectual Property) of the Data Room, and so far as the Warrantors are aware all such licences, agreement and arrangements are valid and subsisting.


(b)	No Group Company nor, so far as the Warrantors are aware, any other party is in material breach of any agreement or arrangement required to be disclosed pursuant to paragraph 9.5(a).

(c)

Each Group Company has required, at all times prior to the Completion Date, each of its employees, individual consultants and individual contractors who have developed Intellectual Property for the Business to execute any agreements required to (i) vest ownership of such Intellectual Property in the relevant Group Company and (ii) maintain the confidentiality of any confidential information, know-how or trade secrets relating to such Intellectual Property (if applicable).


9.6	Proprietary Software and Open Source Software


(a)	The Group is the sole legal and beneficial owner of the Proprietary Software (including all Intellectual Property subsisting in such software).

(b)

Other than agreements to place source code into escrow entered into by any Group Company in the ordinary course of business and the disclosure of source code to Black Duck Software Inc. at the request of the Buyer in relation to the transactions contemplated by this Deed, no source code relating to any Proprietary Software has been disclosed to, or otherwise become known by, any third party and no Group Company is a party to any agreement or arrangement, or otherwise subject to any duty, which (in either case) (a) requires any of them to disclose any source code relating to any of the Proprietary Software, or (b) restricts the free use or disclosure by each of them of any source code relating to any of the Proprietary Software

(c)

The Group has not used or benefitted from any Open Source Software in relation to the Business except as set out in the Data Room and the Black Duck Report. Any Open Source Software used by or on behalf of the Seller in relation to the Business has been used in accordance with the applicable licence terms relevant to that Open Source Software, and (if applicable) is not subject to restrictions on charging a fee in connection with its distribution with any Group Product.


(d)	No Open Source Software used by or behalf of any Group Company has been embedded or integrated into, and does not form part of, any Proprietary Software and no Proprietary Software has otherwise become subject to the terms of, or required to be disclosed or made available (whether in source code or object code form) pursuant to, any licence applying to any Open Source Software.


(e)	The Group does not own any software other than the Proprietary Software.


10	Properties, environmental and health and safety


10.1	No Group Company owns any real property.


10.2	The Properties are:


(a)	the only real property occupied or used by the Group; and


(b)	used and occupied solely for the Business.


10.3	No Group Company has any contingent liability or obligation in respect of any real property anywhere in the world, whether freehold, leasehold, licensed or occupied, other than the Properties.


10.4	The details of the Properties set out in schedule 8 are complete and accurate in all material respects.


10.5	So far as the Warrantors are aware no EHS Permits are required to be held by the Group for the carrying on of the Business in the places and in the manner in which the Business is carried on as at the date of this Deed.


10.6	So far as the Warrantors are aware:


(a)	no Group Company is involved in any civil, administrative or criminal litigation, proceedings or appeal, and no Group Company is the subject of any formal enforcement action brought by an Authority, in each case which concerns or alleges a breach of or liability under any EHS Laws; and


(b)	no Group Company has received in the last 3 years any written notice, claim or complaint from any third party or any Authority alleging a breach of or liability under EHS Laws which is outstanding.


11	Litigation and disputes

11.1

Apart from (if relevant) the collection of debts in the ordinary course of the Business (involving debts of not more than £10,000 in any individual case or £100,000 in aggregate), no Group Company is engaged, or has been engaged at any point in the three years prior to Completion, in any litigation, arbitration, mediation, prosecution or other legal proceedings or in any proceedings or hearings before any Authority, and so far as the Warrantors are aware, no such matters are pending or threatened..


11.2	There is no outstanding judgment, order, decree, arbitral or mediation award or decision of any court, tribunal, arbitrator or Authority against any Group Company.


11.3	In the three years prior to Completion no Group Company has received written notification that any investigation or enquiry is being or has been conducted by any Authority in respect of its affairs.


12	Insurance


12.1	Details of insurance cover


(a)	Material details of the insurance policies in respect of which any Group Company has an interest ( Policies ) are contained in the Data Room folders 3.7 and 4.7 and, so far as the Warrantors are aware, all Policies are in full force and effect.


(b)	All premiums due in respect of the Policies have been paid.


12.2	Claims


(a)	No claim or claims exceeding £10,000 in any single case or in aggregate £100,000 is/are outstanding either by the insurer or the insured under any of the Policies.


(b)	Details of any material claims made by any Group Company under any of the Policies (or any other insurance policy) in the last 3 years are set out in the Disclosure Letter.


13	Compliance and regulatory


13.1	Authorities required to carry on the Business and compliance


(a)	So far as the Warrantors are aware no Authorities are necessary to enable the Group to carry on the Business.


(b)	So far as the Warrantors are aware, each Group Company’s business has been carried on, and is being carried on, in compliance with all applicable laws in all material respects.


13.2	Competition matters


(a)	So far as the Warrantors are aware, the Group conducts the Business in accordance with the requirements of all Competition Laws applicable to the Business and has not been notified in writing of any investigation for any alleged non-compliance or infringement of such Competition Laws.


(b)	So far as the Warrantors are aware, the Group is not subject to any prohibition, order, condition, undertaking, assurance or similar measure or obligation imposed by or under any Competition Laws.

(c)

For the purposes of this paragraph 13.2 the term Competition Laws means any applicable laws, regulations, rules dealing with anti-competitive agreements or concerted practices (as contained in Article 101 of the Treaty on the Functioning of the EU or the Chapter I prohibition in the Competition Act 1998 or equivalent national laws) or abuse of dominant position (as contained in Article 102 of the Treaty on the Functioning of the EU or the Chapter II prohibition in the Competition Act 1998 or equivalent national laws).


13.3	Register and minute books

All registers required by law to be kept by each Group Company are:


(i)	in its possession or are otherwise under its control; and


(ii)	contain an up to date record of the matters which are required by law to be dealt with in them.

and no Group Company has received any application or request for rectification of its statutory registers or any notice or allegation that any of them is incorrect.


13.4	Bribery and Sanctions


(a)	So far as the Warrantors are aware no Group Company nor any of their officers, directors or employees has at any time prior to the date of this Deed committed any offence under the Bribery Act 2010.

(b)

So far as the Warrantors are aware, no unlawful inducement (financial or otherwise) has been given to any person by or on behalf of any Group Company with a view to that Group Company entering into any contract or other arrangement or obtaining any benefit nor has any such inducement been received by any Group Company or any director or employee of any Group Company or any associate of such person.


(c)	So far as the Warrantors are aware, no Group Company nor customer or supplier of the Group (i) is currently a designated target of any Sanctions (ii) is organised or resident in a Sanctioned Country or (iii) has considered business prohibited by Sanctions.


13.5	Disclosure of confidential information and Group Products

(a)

So far as the Warrantors are aware no confidential information, know-how or trade secrets proprietary to any Group Company have been disclosed to, or otherwise become known by, any third party other than in the ordinary course of business and under an obligation of confidentiality and, so far as the Warrantors are aware, there have been no unauthorised disclosures of any such confidential information, know-how or trade secrets made by a third party under an obligation of confidentiality to the relevant Group Company or any other breaches of any such obligations of confidentiality by any third parties.


(b)	The Group has taken all reasonable steps to protect its rights in, and maintain the confidentiality of, any confidential information, know-how or trade secrets proprietary to any Group Company.


14	Group Products

All Group Products perform in all material respects in compliance with the functions, performance and other requirements described in any product warranty, published specifications or end user documentation provided by any Group Company to customers and licensees.


15	Insolvency


15.1	No order has been made and no resolution has been proposed or passed for the winding up of any Group Company and so far as the Warrantors are aware no petition has been presented for the purpose of winding up any Group Company.


15.2	No application has been issued or order made for the provisional liquidation of any Group Company or the appointment of a provisional liquidator in respect of any Group Company.


15.3	No administration order has been made in respect of any Group Company and so far as the Warrantors are aware no petition has been presented for such an order and no administrator has been appointed in respect of any Group Company.


15.4	No receiver (which expression will include an administrative receiver) has been appointed in respect of any Group Company or in respect of all or any part of its assets.


15.5	No voluntary arrangement has been proposed or approved under Part I of the Insolvency Act 1986 in respect of any Group Company.


15.6	No event analogous to any of the circumstances mentioned in any of the foregoing sub paragraphs of this paragraph 15 has occurred in relation to any Group Company outside England.

Schedule 5

Limitations on liability


1	Definitions


1.1	In this schedule 5, unless the context otherwise requires:

Claims means all and any Fundamental Claims and Warranty Claims, and a Claim means any one of such Claims

Expenses means reasonable and proper third party costs and expenses

Fundamental Claims means all and any claims against any of the Warrantors for breach of any of the Fundamental Warranties or Tax Claims, and a Fundamental Claim means any one of such Fundamental Claims

Indemnity Claims means all and any claims against any of the Warrantors arising out of any of the Indemnities, other than Third Party IP Claims and Third Party Software Indemnity Claims, and an Indemnity Claim means any one of such Indemnity Claims

Tax Claims means all and any claims under the Tax Covenant or Tax Warranties, and a Tax Claim means any one of such Tax Claims

Third Party Claims means all and any claims by, or alleged liability to, a third party which may give rise to a Claim (other than a Tax Claim) or Indemnity Claim, including a Third Party Software Indemnity Claim, Third Party IP Claim, and a Third Party Claim means any one of such Third Party Claims

Third Party IP Claims means all and any claims against any of the Warrantors arising out of the indemnity given under clause 5.5, and a Third Party IP Claim means any one of such Third Party IP Claims

Third Party Software Indemnity Claims means all and any claims against any of the Warrantors arising out of the indemnity given under clause 6.1(C) and a Third Party Software Indemnity Claim means any one of such Third Party Software Indemnity Claims

Warranty Claims means all and any claims against any of the Warrantors for breach of any of the Warranties, and a Warranty Claim means any one of such Warranty Claims


2	Application of this schedule

The provisions of this schedule apply notwithstanding, and in priority to, any other provisions of this Deed in respect of any Claim (other than a claim under the Tax Covenant, which the provisions of Schedule 9 shall take precedence) and, where expressly stated, any Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim.


3	Maximum liability


3.1	The maximum liability of each of the Warrantors for:


(a)	all Fundamental Claims will not exceed his Relevant Warranty and Indemnity Proportion of the Purchase Price, as adjusted in accordance with clause 3;


(b)	all Warranty Claims and Indemnity Claims will not exceed 40% of his Relevant Warranty and Indemnity Proportion of the Purchase Price, as adjusted in accordance with clause 3; and


(c)	all Third Party IP Claims and Third Party Software Indemnity Claims will not exceed his Relevant Warranty and Indemnity Proportion of the Purchase Price, as adjusted in accordance with clause 3.


3.2	The maximum liability of each of the Option Holders for all and any claims for breach of any of the warranties contained in clause 2.4 ( Option Holder Claim ) will not exceed that part of the Purchase Price, as adjusted in accordance with clause 3, received by him.


4	Liability of each Warrantor or Option Holder


4.1	Each Warrantor will only be liable for their Relevant Warranty and Indemnity Proportion of each individual Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim.


4.2	Notwithstanding any other provision of this Deed the maximum aggregate liability of each Warrantor for all Claims, Indemnity Claims, Third Party Software Indemnity Claims and Third Party IP Claims will not exceed that Seller's Relevant Warranty and Indemnity Proportion of the Purchase Price as adjusted in accordance with clause 3.


4.3	Each Option Holder will only be liable for their Relevant Proportion of each Option Holder Claim and, notwithstanding any other provision of this Deed, the maximum aggregate liability of each Option Holder for all Option Holder Claims will not exceed that Option Holder's Relevant Proportion of the Purchase Price as adjusted in accordance with clause 3.


5	Claims threshold


5.1	The Warrantors (or any of them) will not be liable for any Warranty Claim unless the aggregate liability for all Warranty Claims, following application of the other provisions of this schedule, exceeds £500,000 in which case the Warrantors (or any of them) will, subject to the other provisions of this schedule, be liable for the whole of such amounts.


5.2	The Buyer shall be entitled to make a Fundamental Claim, Third Party IP Claim, Third Party Software Indemnity Claim and Indemnity Claim against the Warrantors (or any of them) for any amount in which case the Warrantors (or any of them) will be liable, subject to the other provisions of this schedule, for the whole of such amounts. without applying paragraph 5.1 above.


6	Time limits

6.1

The Warrantors (or any of them) will not be liable for a Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim unless the Buyer serves notice of such claim on the Sellers' Representative (specifying in reasonable detail the nature of such claim and, so far as is practicable, the amount claimed in respect of it) as soon as reasonably practicable after deciding to make a Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim and in any case:


(a)	for any Fundamental Claim or Tax Claim on or before the seventh anniversary of Completion;


(b)	for any Warranty Claim and Indemnity Claim on or before the second anniversary of Completion; and


(c)	for any Third Party IP Claim or Third Party Software Indemnity Claim on or before the second anniversary of Completion.

6.2

Unless the Sellers’ Representative otherwise agrees, a Claim (other than a Tax Claim), Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim notified in accordance with paragraph 6.1 and not satisfied, settled or withdrawn will be unenforceable against the Warrantors (or any of them) on the expiry of the period of 12 months starting on the day of notification, unless proceedings (including particulars of claim) in respect of such Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim have been both issued and validly served in accordance with clause 11 (Notices) on the Sellers' Representative within that period.


7	Rights to information

If the Buyer gives any notice under paragraphs 6.1, 14 or 13, the Buyer will, and will ensure that every Group Company will, allow the Sellers' Representative and his duly authorised representatives and professional advisers reasonable access for the purposes of the relevant Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim to the premises and personnel of the Buyer and every Group Company, and to any relevant records and information of the Buyer or every Group Company and permit the Sellers' Representative and his representatives and advisers to make copies (at their own cost) of those records and information.


8	Buyer's knowledge and awareness Warranties

8.1

The Warrantors will not be liable for any Claim (other than a claim under the Tax Covenant, an Indemnity Claim or Third Party Software Indemnity Claim) where and to the extent that the Claim arises out of or in connection with any fact, matter or circumstance of which the Buyer was aware on or before the date of this Deed and for this purpose the Buyer will be considered aware only of those facts, matters and circumstances of which Martin Scott, Amit Kapoor, Bill Krause, Laura Stark, Rasika Weerasooriya, Ron Black, Simon Blake-Wilson and Paul Valentino had actual knowledge.


8.2	The Buyer confirms to the Warrantors that it has no knowledge of any fact, matter or circumstance which may give rise to a valid Claim (other than a claim under the Tax Covenant, an Indemnity Claim, a Third Party IP Claim or a Third Party Software Indemnity Claim) and to the extent that such invalid Claim is within its actual knowledge it waives and releases that invalid Claim.

8.3

Any Warranty, Fundamental Warranty or Tax Warranty which is qualified by the expression "so far as the Warrantors are aware" or any similar expression will be treated as referring to the actual knowledge of the Warrantors (having made enquiry of the individuals listed below, to the extent that such enquiry is reasonable in the context of the Warranty in question and having regard to the role of such individuals in relation to the Business): Patrick Curran, Christopher Harvey, Ignatius Peters, Sean Curran, Russell McCullagh, David Orme, Chakib Bouda, Mike Peters and David Peacock .

8.4

Each of the Warrantors confirm to the Buyer that he does not have knowledge of any fact, matter or circumstance which may give rise to a valid Claim (other than a claim under the Tax Covenant, an Indemnity Claim, a Third Party IP Claim or a Third Party Software Indemnity Claim). If such confirmation is incorrect, subject to fraud or fraudulent misrepresentation, the sole remedies for the Buyer will be a claim under the Tax Covenant, an Indemnity Claim, a Third Party IP Claim or a Third Party Software Indemnity Claim (as relevant).


9	General limitations


9.1	The Warrantors will not be liable for any Claim (other than a Tax Claim, Fundamental Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim) and accordingly no such Claim may be brought:

(a)

to the extent that any Group Company is entitled to be indemnified against any loss or damage under the terms of any insurance policy for the time being in force or which could have been so recovered under the policies of insurance of any Group Company in force at the date of this Deed had they been maintained in force for the benefit of any Group Company, in each case in respect of the matter giving rise to the relevant Claim;


(b)	to the extent that it has been taken into account in the preparation of the Completion Statement or a specific provision was made in the Accounts or the Management Accounts and the facts, matters or circumstances relating to such Claim were referred to in the notes to any such accounts;


(c)	to the extent that the Claim arises out of or in connection with, or the amount of the Claim is increased by:


(i)	any fact, matter or circumstance provided for, or contemplated by, this Deed or any other Transaction Document or arising from the implementation of this Deed or any other Transaction Document;


(ii)	any voluntary act, omission, transaction or arrangement carried out by, at the written request of or with the written (including by email) approval of the Buyer before or at Completion;


(iii)	any voluntary act, omission, transaction or arrangement of the Buyer or any Group Company or any other member of the Buyer's Group or any of their respective officers, employees, agents or successors in title after Completion;


(iv)	any breach by the Buyer of any of its obligations under this Deed or any other Transaction Document;


(v)	any reorganisation of the Buyer or any member of the Buyer's Group or change in ownership of the Buyer (to a person outside of the Buyer’s Group) or any member of the Buyer's Group (in either case which results in the transfer of the Company outside of the Buyer’s Group) after Completion;


(vi)	any asset acquired by any Group Company after Completion;


(vii)	the disposal by any Group Company of any asset after Completion;


(viii)	the passing of a resolution for the winding up of any Group Company;


(ix)	any:


(A)	passing of or change in any statutory or other binding or advisory legislative or regulatory provision after the date of this Deed;


(B)	publication or withdrawal of any decision of the courts or any other Authority after the date of this Deed; or


(C)	withdrawal after the date of this Deed of any extra statutory or other concession previously made by or any change in practice of the Inland Revenue or other taxation authority or other Authority or any increase in the rates of Tax in force at the date of this Deed; or


(x)	any change after the date of this Deed in the principles, policies or methods used in the preparation of the audited accounts of the Group;


(xi)	any change on or after Completion to the accounting reference date of any Group Company;

(xii)

the loss or liability suffered or incurred by the Buyer to which the Claim, Indemnity Claim, Third Party IP Claim or Third Party Software Indemnity Claim relates is contingent, future or unascertainable and no Claim, Indemnity Claim, Third Party IP Claim or Third Party Software Indemnity Claim may be brought for such loss or liability until the Buyer actually suffers the loss or incurs the liability in question;


(d)	to the extent that the loss or liability to which the Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim relates has been or is made good or otherwise compensated for at no expense to the Buyer or any member of the Buyer's Group.


9.2	A breach of Warranty which is capable of remedy will not entitle the Buyer to compensation unless (and then only to the extent that) such breach has not been remedied to the satisfaction of the Buyer (acting reasonably) by the Warrantors (or any of them) within 60 Business Days after the date of service of the notice of the Claim under this schedule.


9.3	The Buyer will not be entitled to claim for any punitive, indirect or consequential loss.


10	Netting off corresponding benefits

In assessing any damages or other amounts recoverable for any Claim (other than a claim under the Tax Covenant), Indemnity Claim or Third Party IP Claim, there will be taken into account any corresponding savings by or benefit (excluding any relief or other benefits arising in relation to Tax) to the Buyer, any Group Company or any member of the Buyer's Group.


11	Waiver of right of set off

Save to the extent of any deduction or withholding required by law, the Buyer waives and relinquishes any right of set off or counterclaim, deduction or retention which the Buyer might otherwise have had in respect of any Claim (other than a claim under the Tax Covenant), Indemnity Claim or Third Party IP Claim against or out of any payments which the Buyer may be obliged to make (or procure to be made) to any Seller under this Agreement or otherwise.


12	Subsequent recovery from third party

12.1

The Buyer will reimburse the Warrantors (or any of them) forthwith an amount equal to any sum paid by the Warrantors (or any of them) in respect of any Claim (other than a Tax Claim), Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim which is subsequently recovered by or paid to the Buyer, any Group Company, or any other member of the Buyer's Group by any third party in respect of the matter giving rise to the Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim (less any Expenses incurred in making such recovery, together with any Tax payable in respect of such recovery (or which would have

been payable but for the use of any Buyer’s Relief), but to avoid doubt including any interest received by the Buyer from such third party as part of such recovery).

12.2

Any amount paid by the Buyer under paragraph 12.1 will be taken into account, with retrospective effect, in ascertaining whether the amounts in paragraph 5 of this schedule 5 are exceeded. Any amount previously paid by the Warrantors (or any of them) in respect of any Claim (other than a Tax Claim), Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim which would not otherwise have been payable as a consequence of this paragraph 12.2 will be repaid immediately.


13	Claims by third party


13.1	If grounds for a Third Party Claim arise where the subject of the Third Party Claim is £300,000 or more, the Buyer will (subject to applicable legal or regulatory constraints):


(a)	notify the Sellers' Representative of the Third Party Claim as soon as reasonably practicable, and in any event within 20 Business Days, upon the Buyer or any Group Company becoming aware of the Third Party Claim, and in any event prior to taking any material step to defend the Third Party Claim or to compromise, settle or waive any right in relation to the Third Party Claim;


(b)	will provide the Sellers' Representative with such information as the Sellers' Representative may reasonably require relating to the Third Party Claim and will keep the Sellers' Representative fully informed of any material development in the conduct of the Third Party Claim;


(c)	will not (and will procure that the Group and member of the Buyer's Group do not) compromise, settle or waive any right or admit any liability in relation to the Third Party Clam without having consulted and taken reasonable account of any alternative course of action which is reasonably proposed by the Sellers' Representative;

(d)

take the sole conduct of such Third Party Claim and shall, subject to paragraph 13.1(e), deal with the same as the Buyer shall deem appropriate and, in that connection, the Warrantors shall (at the Buyer’s cost and insofar as they are able to do so) give or cause to be given to the Buyer such assistance as the Buyer may reasonably require in avoiding, resisting, settling, compromising, defending or appealing any such Third Party Claim; and


(e)	conduct such Third Party Claim in good faith in accordance with its usual business practices as if the Warranties had not been given.


13.2	If grounds for a Third Party Claim arise where the subject of the Third Party Claim is less than £300,000, the Buyer will (subject to applicable legal or regulatory constraints):


(a)	notify the Sellers' Representative of the Third Party Claim as soon as reasonably practicable, and in any event within 20 Business Days, upon the Buyer or any Group Company becoming aware of the Third Party Claim;


(b)	will provide the Sellers' Representative with such information as the Sellers' Representative may reasonably require relating to the Third Party Claim and will keep the Sellers' Representative fully informed of any material development in the conduct of the Third Party Claim;

(c)

take the sole conduct of such Third Party Claim and shall, subject to paragraph 13.2(d), deal with the same as the Buyer shall deem appropriate and, in that connection, the Warrantors shall (at the Buyer’s cost and insofar as they are able to do so) give or cause to be given to the Buyer such assistance as the Buyer may reasonably require in avoiding, resisting, settling, compromising, defending or appealing any such Third Party Claim; and


(d)	conduct such Third Party Claim in good faith in accordance with its usual business practices as if the Warranties had not been given.

13.3

Any failure by the Buyer or any member of the Buyer’s Group to comply with the provisions of this paragraph 13 shall not prevent any Claim by the Buyer or any member of the Buyer’s Group or extinguish any liability of the Warrantors under the Warranty in question but may be taken into account in calculating any such liability of the Warrantors to the extent that the Warrantors’ liability is increased by such failure.


14	Claims against third party

Where the Buyer or any Group Company or any member of the Buyer's Group may be entitled (whether by reason of insurance, payment, discount, credit, relief or otherwise) to recover from a third party any sum for any damage or liability which is the subject of a Claim (other than a Tax Claim), Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim ( Third Party Recovery ), the Buyer will (subject to applicable legal or regulatory constraints):


(a)	notify the Sellers' Representative of the Third Party Recovery as soon as reasonably practicable following the Buyer or any Group Company or any other member of the Buyer's Group deciding to make the Third Party Recovery and in any event prior to taking any material step to enforce, compromise, settle or waive any right in relation to that Third Party Recovery;


(b)	provide reasonable information to the Sellers' Representative in relation to any Third Party Claim and consult with and take account of the Sellers' Representative’s reasonable comments or requests in relation to any Third Party Claim (but this shall not oblige the Buyer or any member of the Buyer’s Group to give access to any of its legally privileged information); and

(c)

first take steps or procure that the relevant member of the Buyer's Group use all reasonable endeavours to enforce such Third Party Recovery (taking account of any reasonable requests made by the Sellers' Representative) before taking any steps (other than the notification of the Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim under paragraph 6.1) to pursue the Claim (other than a Tax Claim), Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim against the Warrantors.


14.2	Whether before or after the Warrantors discharge any Claim (other than a Tax Claim), Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim, the Buyer will, at the reasonable request of the Warrantors (subject to applicable legal or regulatory constraints):


(a)	take, and procure that each Group Company and each other member of the Buyer's Group take, all reasonable steps (whether by way of claim against its insurers or otherwise) in relation to such Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim, consult with and take account of the Sellers'

Representative’s reasonable comments or requests in relation to such Third Party Recovery and pay over to the Warrantors all amounts recovered up to the amount of the relevant Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim previously discharged by it/them; and


(b)	procure that the Warrantors are placed in a position to take over the conduct of all negotiations and proceedings arising in relation to the Third Party Recovery.

14.3

Any Claim (other than a Tax Claim), Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim will be limited (in addition to the other limitations on the Warrantors' liability referred to in this schedule) to the amount by which the loss or damage suffered by the Buyer as a result of such breach (including all Expenses) exceeds the amount (if any) so recovered by way of the Third Party Recovery (less any Expenses incurred in making such recovery, together with any Tax payable in respect of such recovery or which would have been payable but for the use of any Buyer’s Relief).


15	Assignment of Third Party Recovery

Where the Warrantors have discharged any Claim (other than a Tax Claim), Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim and the Buyer or a Group Company or any other member of the Buyer's Group may be entitled to make a Third Party Recovery in respect of the loss or liability in respect of which the Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim was made and discharged, the Buyer will, if requested in writing by the Sellers' Representative (or any of them) assign or procure the assignment to the relevant Warrantors of any right of the Buyer, a Group Company or any other member of the Buyer's Group to make the Third Party Recovery.


16	Duty to mitigate


16.1	The Buyer, each member of the Buyer’s Group (and the Buyer’s officers or the officers of the relevant member of the Buyer’s Group as applicable) shall take all reasonable and necessary steps to mitigate any Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim.

16.2

Any failure by the Buyer or any member of the Buyer’s Group to comply with the provisions of this paragraph 16 shall not prevent any Claim by the Buyer or any member of the Buyer’s Group or extinguish any liability of the Warrantors under the Warranty in question but may be taken into account in calculating any such liability of the Warrantors to the extent that the Warrantors’ liability is increased by such failure.


16.3	Nothing in this Deed will be deemed to relieve the Buyer from the common law duty to mitigate its loss.


17	No double recovery

Neither the Buyer nor any member of the Buyer's Group will be entitled to recover damages or any other amount in respect of any Claim, Indemnity Claim, Third Party Software Indemnity Claim or Third Party IP Claim or otherwise obtain reimbursement or restitution more than once in respect of the same matter, loss or liability and for this purpose any payment by the Warrantors under the Tax Covenant will be deemed to satisfy any Warranty Claim in respect of the same matter and vice versa.


18	Remedies and rescission


18.1	The sole remedy of the Buyer for any breach of this Deed will be an action for damages.


18.2	The Buyer will not be entitled to rescind or terminate this Deed in any circumstances whatsoever whether before or after Completion.


18.3	The provisions of this schedule will remain in full force and be fully applicable to all circumstances and, in particular, will not be discharged by any breach of this Deed.


18.4	Notwithstanding any other provision, nothing in this schedule limits the rights of the Buyer in respect of fraud or fraudulent misrepresentation.


19	Restriction on specific Claims

The Warrantors will not be liable for any Claim if and to the extent that the Claim arises in relation to Tax or any Deemed Tax Liability (as defined in part 1 of schedule 9) or the unavailability of any Relief unless the Claim is brought under the Tax Warranties, any of the Warranties in schedule 4, paragraph 5 (Accounts and Management Accounts), schedule 4, paragraph 9 (Directors and employees), schedule 4, paragraph 10 (Pension arrangements) or the Tax Covenant.


20	Application to third parties

Any third party which is entitled under the terms of this Deed to claim against the Warrantors (or any of them) will be subject to this schedule as if it were the Buyer.


21	No Claims by the Group or the Sellers


21.1	The Buyer covenants that it shall procure that no Group Company will make any claim or take any proceedings against the Sellers (or any of them) at any time in respect of any event or circumstance prior to Completion.


21.2	The Buyer will indemnify and keep indemnified the Sellers in respect of any loss, liability, damage or expense suffered or received by any of them as a consequence of any claim made or proceedings issued by any Group Company against any of them at any time after Completion in respect of any event or circumstance prior to Completion.


21.3	Each Seller covenants that it will not make any claim or take any proceedings against any Group Company at any time in respect of any event or circumstance prior to Completion.


21.4	Each Seller will indemnify and keep indemnified the Buyer and each member of the Group in respect of any loss, liability, damage or expense suffered or received by any of them as a consequence of any claim made or proceedings issued by any Seller against any member of the Group at any time after Completion in respect of any event or circumstance prior to Completion.

Schedule 6

Retention provisions

Part 1 – Definitions


1	Definitions


1.1	In this schedule 6, unless the context otherwise requires:

Adjusted Deferral Sum means, in respect of a Deferred Contract, the total amount due to be paid to Bell ID under that relevant Deferred Contract (as set out opposite the relevant Deferred Contract in the column headed "Deferral Sum" in the table under the heading "Deferred Contract Sums"), less the aggregate of any sums that (i) Bell ID has been required to refund to the customer; and (ii) the customer is entitled not to pay, in each case pursuant to the customers rights under the relevant Deferred Contract;

Contract Acceptance Date means, in respect of a Deferred Contract, the date on which that Deferred Contract has been accepted/signed off by the relevant customer in accordance with the terms of the relevant Deferred Contract;

DC Payment Date means in relation to each Deferred Contract the earlier of the end of the relevant DC Retention Period (as set out in the column headed "DC Retention Period" in the table under the heading "Deferred Contract Sums") and the Contract Acceptance Date for that Deferred Contract;

Deferred Contract means a contract listed in the column headed "Deferred Contract" in the table under the heading "Deferred Contract Sums";

Deferred Contract Sums means as follows:



Deferral Sum	DC Retention Period (Completion until)
£2.85m	July 29, 2016
£1.24m	December 20, 2016
£1.08m	July 29, 2016
£0.51m	December 20, 2016
£5.68m

Escrow Agent means, Wells Fargo Bank, N.A., London Branch, the agent to be appointed prior to Completion jointly by the Sellers' Representative and Buyer pursuant to the Escrow Agreement

Escrow Agreement means the agreement in the agreed form to be entered into at or before Completion between the Sellers' Representative, the Buyer and the Escrow Agent setting out terms relating to the operation of the Retention Account and the holding and distribution of any part of the Retention Sum

Qualifying Counsel means an independent barrister of at least 10 years' call in commercial chambers with experience of dealing in matters which form the subject matter of the Retention Claim and appointed jointly by the Buyer and the Sellers' Representative, or, where the Buyer and the Sellers’ Representative cannot reach agreement on an appointee, an independent barrister of at least 10 years’ call in commercial chambers appointed by the President of the Law Society of England and Wales

Retention Account means the interest bearing deposit account held with the Escrow Agent to be opened prior to Completion in the name of the Sellers’ Representative for the purposes of holding the Retention Sum on deposit in accordance with this schedule 6

Retention Sum means the sum of £11,930,000 to be paid by the Buyer into the Retention Account in accordance with this schedule 6, being the aggregate of (i) the Warranty, Indemnity and Completion Statement Sum; and (ii) the Deferred Contract Sums

Warranty, Indemnity and Completion Statement Sum mean £6,250,000

Warranty, Indemnity and Completion Statement Retention Period means the period of 18 months beginning on the Completion Date

Part 2 – Payments into and from the Retention Account


2	Payment into the Retention Account


2.1	The Buyer will at Completion pay the Retention Sum in sterling into the Retention Account and the amount for the time being standing to the credit of the Retention Account (including any accrued interest) will be dealt with only as set out in this schedule 6 and the Escrow Agreement.


2.2	If there is any conflict between the provisions of this schedule 6 and the provisions of the Escrow Agreement, the parties agree that as between themselves the provisions of this schedule 6 will prevail.


2.3	The Buyer and the Sellers will procure, so far as they are respectively able, that all rights to the Retention Account remain free from any Security Interest except as set out in this schedule 6 or the Escrow Agreement.


3	Administration of the Retention Account


3.1	The costs of the Escrow Agent relating to opening, closure and operation of the Retention Account will be borne by the Buyer and the Sellers’ Representative (on behalf of the Sellers) equally.


3.2	The Buyer and the Sellers' Representative will:


(a)	promptly give all necessary instructions and notifications to the Escrow Agent and do all acts and things reasonably required to ensure that the Retention Account, and the principal amount and interest standing to its credit, are administered as set out in this schedule 6 and the Escrow Agreement; and


(b)	procure, so far as they are respectively able, that the Escrow Agent is not required to, and does not, take any action with respect to the Retention Account except on the joint written instructions of the Buyer and the Sellers' Representative.


3.3	All:


(a)	interest which accrues on the Retention Sum (or any part of it) whilst in the Retention Account will be credited to the Retention Account; and


(b)	bank charges payable in respect of the Retention Account will be paid out of the Retention Account.


3.4	In relation to any payment made from the Retention Account under this schedule 6, accrued interest will follow the principal amount and will be paid to the Sellers’ Representative (on behalf of the Sellers) or the Buyer (as the case may be) at the same time as payment of the corresponding principal amount from the Retention Account.


3.5	Any payment to be made out of the Retention Account under this schedule 6 will be made:


(a)	as set out in clause 10.1 in the case of a payment to the Sellers’s Representative; and


(b)	as set out in clause 10.6 in the case of a payment to the Buyer.


3.6	Any payment made by the Escrow Agent to the Buyer out of the Retention Account under this schedule 6 will, save in respect of interest, be treated for all purposes as a reduction in the Purchase Price payable to the Sellers.


4	Payments out of the Retention Account relating to the Completion Statement


4.1	If, when the Completion Statement is agreed or determined under schedule 7 (Completion Statement), any payment is due to be made to the Buyer under part 2 of schedule 7:


(a)	to the extent that the Warranty, Indemnity and Completion Statement Sum has not been reduced to zero by previous payments, such payment will be made out of the Retention Account up to the lower of the amount of such payment and the amount of the Warranty, Indemnity and Completion Statement Sum as reduced by any such previous payments; and


(b)	the Sellers' Representative and the Buyer will within 10 Business Days of the date on which the Completion Statement is agreed or determined under part 3 of schedule 7 jointly instruct the Escrow Agent to pay the relevant amount to the Buyer.


5	Payments out of the Retention Account relating to the Buyer claims


5.1	The Buyer may use the Warranty, Indemnity and Completion Statement Sum to satisfy any liabilities of the Sellers to the Buyer under the Warranties, the Indemnities and the Tax Covenant and the Buyer will give prior written notice of its intention to do so to the Sellers' Representative prior to the end of the Warranty, Indemnity and Completion Statement Retention Period.


5.2	Any notice given by the Buyer under paragraph 5.1 will set out:


(a)	all details then available to the Buyer concerning the matter or circumstances giving rise to the claim ( Warranty and Indemnity Retention Claim ); and


(b)	a reasonable estimate of the liability of the Sellers in respect of the Retention Claim ( Warranty and Indemnity Retention Claim Amount ).


5.3	Within 10 Business Days of any Warranty and Indemnity Retention Claim being agreed between the Buyer and the Sellers' Representative in writing or judicially determined by a court of competent jurisdiction which is not subject to appeal:

(a)

if the amount so determined or agreed to be paid to the Buyer in respect of such Warranty and Indemnity Retention Claim ( Agreed Warranty and Indemnity Retention Amount ) is more than or equal to the Warranty, Indemnity and Completion Statement Sum (as, if relevant, such amount been reduced by any previous payments), the Buyer and the Sellers' Representative will jointly instruct the Escrow Agent to pay to the Buyer from the Retention Account the amount of the Warranty, Indemnity and Completion Statement Sum as reduced by any such previous payments, which payment will discharge all obligations of the Sellers relating to the Warranty and Indemnity Retention Claim to the extent of the amount actually paid; or


(b)	if an Agreed Warranty and Indemnity Retention Amount is less than the Warranty, Indemnity and Completion Statement Sum (as, if relevant, such amount been reduced by any previous payments), the Buyer and the Sellers' Representative will jointly instruct the Escrow Agent to:


(i)	pay to the Buyer from the Retention Account an amount equal to the relevant Agreed Warranty and Indemnity Retention Amount, which payment will be in full and final satisfaction of all obligations of the Sellers in respect of the relevant Retention Claim; and

(ii)

after payment of the amount referred to in paragraph 5.3(b)(i), if there are no outstanding Warranty and Indemnity Retention Claims and the Warranty and Indemnity Retention Period has ended the Buyer and the Sellers' Representative will, subject to paragraph 7 below, jointly instruct the Escrow Agent to pay to the Sellers’ Representative on behalf of the Sellers from the Retention Account, the remaining amount standing to the credit of the Retention Account.


6	Payment Out of the Retention Account in relation a Deferral Sum


6.1	Subject to 5.3, within 10 Business Days of a DC Payment Date arising in respect of a Deferred Contract the Buyer and the Sellers' Representative will jointly instruct the Escrow Agent to pay to the Sellers’ Representative the Adjusted Deferral Sum (if any) due on that Deferred Contract.


6.2	Immediately thereafter, if the Deferral Sum due on the relevant Deferred Contract less the Adjusted Deferral Sum (if any) paid out under paragraph 5.1 is greater than zero, the Buyer and the Sellers' Representative will jointly instruct the Escrow Agent to pay that amount to the Buyer.

6.3

Following a DC Payment Date arising an amount may be retained in the Retention Account in respect of any claim by a customer for a refund that has not yet been agreed between the Company and that customer, provided that the claim has been considered by Qualifying Counsel who has given confirmation in writing that the claim has a reasonable prospect of succeeding, and that the amount claimed is a fair assessment of the amount payable in respect of the claim if such claim was successful..


7	Payments out of the Retention Account at the end of the Warranty, Indemnity and Completion Statement Retention Period


7.1	Subject to paragraphs 4 and 6.2, the Buyer and the Sellers' Representative will jointly instruct the Escrow Agent to pay to the Sellers’s Representative within 5 Business Days of the end of the Warranty, Indemnity and Completion Statement Retention Period the Warranty, Indemnity and Completion Statement Sum as reduced by any previous payments.

7.2

At the end of the Warranty, Indemnity and Completion Statement Retention Period an amount may be retained in the Retention Account in respect of any claim against the Warranty, Indemnity and Completion Statement Sum that has not yet been agreed between the Buyer and the Sellers' Representative in writing or judicially determined by a court of competent jurisdiction which is not subject to appeal until the date on which such claim has been so agreed or determined, provided that:


(a)	the amount of such claim has been agreed between the Buyer and the Sellers' Representative; or


(b)	the claim has been considered by Qualifying Counsel who has given confirmation in writing that the claim has a reasonable prospect of succeeding, and that the amount claimed is a fair assessment of the amount payable in respect of the claim if such claim was successful.

Schedule 7

Completion Statement

Part 1 – Definitions


1	Definitions


1.1	In this schedule 7, unless the context otherwise requires:

Base Completion Working Capital means £3,101,000

Cash means, in respect of each Group Company, the aggregate of all cash and cash equivalents owned by such Group Company and interest accrued on any such cash or cash equivalents. Cash includes amounts received by any Group Company before the Effective Time but that do not reach the Group Company’s bank account until after the Effective Time. Cash excludes amounts that have not cleared a Group Company’s bank account in respect of payments reflected as made in the relevant Group Company’s books and records prior to the Effective Time (i.e. if the liability has been settled in the books but the settlement monies have not yet left the bank account). Cash also excludes any amounts received by the Company from the Buyer in connection with Completion

Completion Statement means the accounting statement to be prepared in accordance with part 3 of this schedule 7

Debt means: (i) borrowings and outstanding indebtedness in the nature of borrowings of any Group Company for the payment or repayment of money, including any overdrafts, bank loans or finance leases and any interest costs accrued on the foregoing; and (ii) the liabilities of each Group Company for Tax, accounted for in accordance with part 4 of this Schedule 7

draft Completion Statement has the meaning given to it in paragraph 3 of part 3 of this schedule 7

Effective Time means close of business (UK time) on the Completion Date

Effective Time Cash means the Cash at the Effective Time

Effective Time Debt means the Debt at the Effective Time

Effective Time Working Capital means the Working Capital at the Effective Time

Further Review Period has the meaning given to it in paragraph 5.4 of part 3 of this schedule 7

Price Adjustment Experts means the firm of independent chartered accountants selected or nominated in accordance with paragraph 6.1 of part 3 of this schedule 7

Review Period has the meaning given to it in paragraph 4 of part 3 of this schedule 7

Working Capital means, in respect of each Group Company, and subject to the specific exclusions listed below, the aggregate value of the following assets and liabilities: trade and other receivables (less provision for bad & doubtful debts); licence receivables; accrued income (net of attributable cost of sales thereof); receivables in respect of turnover invoiced in advance; other advances; prepayments; other current assets including inventory; deferred revenue (long and short term); trade payables and accruals; trade or other payables or accruals in respect of

tangible or intangible fixed assets; other creditors; VAT and other sales taxes; payroll and other employment taxes and social security. These categories represent the account balances within working capital as classified in the management accounts of Bell ID and Ecebs Limited together with the equivalent balances within the Company. Working Capital specifically excludes balances in respect of: tangible and intangible fixed assets including investments (including the provision held within the Company against the investment in Ecebs Limited); Cash; Debt; dividends payable or receivable; intercompany accounts; corporate income taxes whether current or deferred.

Part 2 – Purchase price adjustment


1	Completion Statement


1.1	The Completion Statement will be prepared and agreed or determined under part 3 of this schedule 7.


1.2	The Completion Statement, as agreed or determined under part 3 of this schedule 7, will be:


(a)	the Completion Statement for the purposes of this Deed; and


(b)	final and binding on the Buyer and the Sellers in the absence of manifest error.


1.3	The Effective Time Cash, Effective Time Debt and Effective Time Working Capital will be the amounts specified in the Completion Statement.


2	Purchase Price Adjustment


2.1	The Purchase Price Adjustment shall be the aggregate of:


(a)	Effective Time Cash; less


(b)	Effective Time Debt; plus


(c)	the Working Capital Adjustment, calculated in accordance with paragraph 2.2 below.

2.2

The Working Capital Adjustment shall be calculated by deducting the Base Completion Working Capital from the Effective Time Working Capital. If the Effective Time Working Capital is greater than the Base Completion Working Capital, the Working Capital Adjustment shall be a positive number and if the Effective Time Working Capital is less than the Base Completion Working Capital, the Working Capital Adjustment shall be a negative number.

2.3

If the Purchase Price Adjustment is a positive number the Purchase Price will be increased by (and the Buyer will pay to the Sellers’ Representative on behalf of the Sellers an amount equal to) the Purchase Price Adjustment. If the Purchase Price Adjustment is a negative number, the Purchase Price will be reduced by (and the Sellers’ Representative on behalf of the Sellers will pay to the Buyer an amount equal to) the Purchase Price Adjustment.


2.4	Any adjustment to the Purchase Price under this paragraph 2 will be receivable or borne by the Sellers in their Relevant Proportion.


3	Payment


3.1	Any sum payable under paragraph 2 will be paid by the relevant party within 10 Business Days of the date on which the Completion Statement is agreed or determined under part 3 of this schedule 7.

Part 3 – Preparation and agreement/determination of the Completion Statement


1	Content and Format of the Completion Statement

1.1

The Completion Statement will be prepared in the format of the pro forma set out in part 5 of this schedule 7 and will set out as at the Effective Time (the Balance Sheet Date ) the aggregated Working Capital, Cash and Debt of the Group (in each case, respectively, the Balance Sheet Date Working Capital, the Balance Sheet Date Cash and the Balance Sheet Date Debt ), in accordance with the principles set out in paragraph 2 of this part 3 of schedule 7


1.2	In calculating amounts in currencies other than sterling those amounts shall be translated into sterling according to the provisions of paragraph 7 of part 4 to this schedule 7.


2	Accounting policies


2.1	The Completion Statement will be prepared in accordance with the following principles:


(a)	the specific accounting policies set out in part 4 of this schedule 7;

(b)

to the extent not inconsistent with paragraph 2.1(a), using the same accounting principles, policies, practices, evaluation rules and procedures, methods and bases (including the exercise of management judgement and degree of prudence) as applied in the Management Accounts ( Reference Accounting Policies ), but only to the extent those Reference Accounting Policies are in accordance with UK generally accepted accounting practice as at the Completion Date; and


(c)	to the extent not inconsistent with paragraphs 2.1(a) and/or 2.1(b), in accordance with UK generally accepted accounting practice as at the Completion Date.


2.2	For the avoidance of doubt, the provisions of subparagraph 2.1(a) above take precedence over those of subparagraphs 2.1(b) and (c), and the provisions of subparagraph 2.1(b) take precedence over those of subparagraph 2.1(c).


3	Preparation and delivery of the Completion Statement


3.1	The Buyer will prepare and deliver to the Sellers' Representative a draft of the Completion Statement ( draft Completion Statement ) within 60 Business Days after the Balance Sheet Date. The date on which such draft is delivered to the Sellers’ Representative is the Delivery Date .


4	Agreement/deemed agreement of the Completion Statement


4.1	If during the period of 30 Business Days after the Delivery Date ( Review Period ):


(a)	the Sellers' Representative notifies the Buyer in writing that no adjustment needs to be made to the draft Completion Statement; or


(b)	the Sellers' Representative does not notify the Buyer of any proposed adjustment to the draft Completion Statement,

then the draft Completion Statement will be final and binding on the Buyer and the Sellers for the purposes of this Deed:


(c)	in the case of paragraph 4.1(a), on the date of such notification; or


(d)	in the case of paragraph 4.1(b), on the date of expiry of the Review Period.


5	Disagreement relating to the Completion Statement


5.1	If the Sellers’ Representative disagrees with any element of the draft Completion Statement and wishes to propose a consequential adjustment thereto, then before expiry of the Review Period the Sellers' Representative shall notify the Buyer, in writing (a Disagreement Notice) setting out in reasonable detail:


(a)	the matters or elements within the draft Completion Statement with which he disagrees;


(b)	the reason(s) for such disagreement; and


(c)	the nature and value of any consequential adjustments he considers need to be made to the draft Completion Statement.


5.2	Items with an individual consequential adjustment value of less than £1,000 may not be included in the Disagreement Notice unless the aggregate value of such items exceeds £10,000.


5.3	Other than for the matters set out in the Disagreement Notice, the draft Completion Statement will be final and binding on the Buyer and the Sellers for the purposes of this Deed.


5.4	The Buyer and the Sellers' Representative will attempt in good faith to agree the draft Completion Statement within a period of 30 Business Days from, and excluding the date of, such delivery of a Disagreement Notice ( Further Review Period ).

5.5

If during the Further Review Period the Buyer and the Sellers' Representative agree, in writing, on all adjustments to be made to the Completion Statement, they will jointly incorporate such adjustments into the draft Completion Statement. The draft Completion Statement, as so adjusted, will be final and binding on the Buyer and the Sellers for the purposes of this Deed on the date of such agreement in writing.


5.6	If the Buyer and the Sellers' Representative are unable to so agree during the Further Review Period, the Buyer or the Sellers' Representative may, by written notice to the other require that the adjustment proposed by the Sellers’ Representative pursuant to paragraph 5.1 be referred for expert determination under paragraph 6 below.


6	Expert determination of the Completion Statement


6.1	Any matters in dispute relating to the Completion Statement which are to be determined under this paragraph 6 will be referred to:


(a)	the firm of leading international independent chartered accountants agreed between the Buyer and the Sellers' Representative within 10 Business Days of a request by either of them to the other, or, failing such agreement within such time,


(b)	the firm of leading international independent chartered accountants nominated by the President for the time being of the Institute of Chartered Accountants in England and Wales (or by such person as the President specifies for the purpose of making such nomination) on the written application of either the Buyer or the Sellers' Representative,

the firm so agreed or nominated being the Price Adjustment Experts for the purposes of this schedule 7.

6.2

The Price Adjustment Experts will be appointed jointly by the Buyer and the Sellers' Representative on the terms set out in this paragraph 6 and/or on such other terms as may be agreed. For this purpose, the Buyer and the Sellers' Representative will not unreasonably refuse to agree to the terms of engagement proposed by the Price Adjustment Experts (which may include hold harmless or similar provisions).


6.3	If:


(a)	the terms of engagement of the Price Adjustment Experts have not been agreed within 20 Business Days of the identity of the relevant firm being agreed or nominated under paragraph 6.1, and no party is withholding its agreement to the terms of engagement proposed; or


(b)	any firm agreed or nominated pursuant to paragraph 6.1 refuses to accept the appointment,

the relevant firm will be treated as never having become the Price Adjustment Experts for the purposes of this Deed and the procedure set out in paragraphs 6.1 and 6.2 will be repeated as often as is necessary until a valid appointment is made.


6.4	Save as otherwise agreed between the Buyer and the Sellers' Representative, the following provisions will apply to the role of Price Adjustment Experts under this paragraph 6:


(a)	the Price Adjustment Experts will be requested to make their determination as soon as reasonably practicable following their appointment;


(b)	the Price Adjustment Experts will act as experts and not as arbitrators;


(c)	subject to the other provisions of this paragraph 6.4, the Price Adjustment Experts may establish their own procedure for their determination and the parties will be bound by such procedures;


(d)	the Price Adjustment Experts:


(i)	will give the Buyer and the Sellers' Representative a reasonable opportunity to make written submissions to the Price Adjustment Experts;


(ii)	will give the Buyer and the Sellers' Representative a reasonable opportunity to make a written response to the Price Adjustment Experts on the other's submissions to the Price Adjustment Experts;


(iii)	may request further information from any party at any time (which information will be delivered by the relevant party within the time specified by the Price Adjustment Experts); and


(iv)	will deliver a copy of any such written representations and response made to it, or further information supplied to it, by a party to the other party as soon as reasonably practicable after receipt;


(e)	the Price Adjustment Experts:


(i)	will apply the accounting policies and other matters referred to in paragraph 2 above;


(ii)	will only determine whether and to what extent any of the proposed adjustments to the draft Completion Statement comply with paragraph 2 above; and


(iii)	may not determine the scope of their own jurisdiction;


(f)	the Price Adjustment Experts' decision as to any matter referred to them for determination will be final and binding on the Buyer and the Sellers, save in the case of manifest error, in which case the relevant part of their determination will not be effective and will be referred back to the Price Adjustment Experts for correction;


(g)	the Price Adjustment Experts will make their determination (including any adjustments to be made to the draft Completion Statement and the reasons for their determination) in writing and deliver a copy to the Buyer and the Sellers' Representative;


(h)	the determination of the Price Adjustment Experts will be deemed to be incorporated in the draft Completion Statement; and


(i)	the fees and expenses of the Price Adjustment Experts, and any other professional fees incurred by them, will be borne as they may direct at the time of making their determination or, if there is no such direction, equally between the Buyer on the one hand and the Sellers (each in their Relevant Proportion) on the other.


6.5	The provisions of this schedule 7 will not give any party access to any information or document protected by litigation privilege and/or legal professional privilege.


7	Co-operation and access

Until the Completion Statement is agreed or determined under this schedule 7, the Buyer and the Sellers will each (at their own cost):


(a)	maintain in their possession or under their control, and not destroy, all books and records held by them (including, in the case of the Buyer, the Group), which are relevant to the determination of the Purchase Price Adjustment;


(b)	ensure that the other party is given such access during normal office hours to all books and records which are relevant to the determination of the Purchase Price Adjustment and which are in their respective possession or control (including, in the case of the Buyer, the Group) as they may reasonably require in relation to the review, agreement or determination of the Completion Statement; and


(c)	if relevant, co-operate with the Price Adjustment Experts and comply with any reasonable requests made by them in relation to their determination.

Part 4 – Specific accounting policies


1	General

The Completion Statement shall be prepared on a going concern basis.

The Completion Statement shall not, unless required otherwise by this Part 4, take into account any action taken or decision made by the Buyer in respect of the post-Closing conduct or operations of the Group that may affect the value at which any asset or liability would otherwise be presented in the Completion Statement. The Completion Statement shall exclude any effect of the change of control or ownership of the Group.

For the avoidance of doubt, apart from the Cash used by the Company to purchase the shares held by the Ecebs minority shareholders and pay for the stamp duty arising thereon, the Completion Statement shall not reflect the effect of any funds flow arising as a consequence of Completion of this transaction, including payments received by the Company on behalf of any Option Holder.


2	Cut-off

The Completion Statement shall take into account information in respect of “Adjusting Events” as defined in IAS 10 “Events after the Balance Sheet date” only to the extent that such “Adjusting Event” occurs and/or the relevant information arises up to and including the date of delivery of the Disagreement Notice to the Buyer.


3	Materiality and no double count

No materiality is to be applied in the Completion Statement. No item shall be included more than once in the aggregated Completion Statement and an asset shall only be written-off or provided against once.


4	Revenue recognition

31 December 2015 - Cut-off

For the purpose of the Completion Statement, no revenue shall be treated as recognised in the part month from 1 January 2016 until Completion, except an aggregate sum of £1,590,000 shall be accrued as an asset within Working Capital.

Capital Licences

Subject to the provisions of the above paragraph “31 December 2015 - Cut-off”, revenue in respect of a capital licence is recognised once a contract has been signed and the customer has access to the software (i.e. it has been delivered to the customer’s server or to the hosted server that the customer will use).

Annual Licences

Subject to the provisions of the above paragraph “31 December 2015 - Cut-off”, revenue in respect of the first 12 months of an annual licence is recognised 100% in the first month in which both (a) the customer has signed the contract and (b) the software has been delivered to the customer’s server (or to the hosted server that the customer will use). No further revenue is recognised in that first reporting year (to 31 December). Revenue in respect of subsequent

years of an annual licence is recognised monthly in the subsequent reporting years (1/12 of the annual fee being recognised each month), until all of the contracted revenue has been recognised.

Professional Services

Subject to the provisions of the above paragraph “31 December 2015 - Cut-off”, revenue in respect of Professional Services contracts (and contracts of a similar nature) is recognised on a monthly basis as the contract proceeds. The cumulative amount recognised on a contract at the end of any given month is the percentage of total contract revenue completed to date which is equivalent to the project manager’s assessment at each month end of the percentage of contract completion achieved by the end of that month. The costs of Professional Service and similar contracts are expensed to the income statement as incurred.

Support and Maintenance contracts

Subject to the provisions of the above paragraph “31 December 2015 - Cut-off”, revenue in respect of support and maintenance contracts (and contracts of a similar nature) is recognised monthly, with the first revenue recognised in accordance with the relevant contractual start date. The costs of maintenance contracts are expensed to the income statement as incurred.

Supply of other goods and services

Subject to the provisions of the above paragraph “31 December 2015 - Cut-off”, revenue in respect of other goods and services is recognised as the goods or services are delivered to the customer.


5	Grants

The benefit of grant income is recognised once documentary evidence exists that the grant is to be received.


6	Provision against receivables

Receivables are reviewed for indications of potential doubtful recoverability. Where positive evidence exists to suggest probable non-recoverability of some or all of a receivable balance, a provision is established for the doubtful element of the balance.

No provision shall be made against any receivable balance, or element thereof, covered by credit insurance.


7	Forex

Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction and exchange differences will be written off to the income statement.

Assets and liabilities within Ecebs Limited and the Company denominated in foreign currencies shall be translated into sterling at the closing mid-point rate at the Balance Sheet Date, as published in the London edition of the Financial Times.

Assets and liabilities within Bell ID denominated in currencies other than Euros shall first be translated into Euros at the closing mid-point rate at the Balance Sheet Date, as published in the London edition of the Financial Times. The Bell ID Completion Statement, in Euros, shall then be translated into sterling for aggregation purposes at the rate of GBP 1 : EUR 1.38..


8	Provisions

No impairment or other provisions shall be recognised in the Completion Statement, except for the following:


(i)	any provision that may be required against receivables pursuant to paragraph 6 above;


(ii)	a liability of £100,000 shall be included in Debt in respect of the Accrington consideration (to the extent not settled before the Effective Time); and


(iii)	a liability of £30,000 shall be included in Debt in respect of the obligation to Michelle Lehouk (to the extent not settled before the Effective Time) following her surrender of share options.

In particular, there shall be no provision against inventories.


9	Contingent liabilities

No liability shall be recognised in the Completion Statement in respect of contingent liabilities as defined in IAS 37.


10	Bonus

For each Group Company, all amounts owed in respect of profit-related bonuses for periods ending on or before 31 December 2015 but not paid by the Effective Time shall be included as a liability in Debt and excluded from Working Capital.

No provision or other liability shall be recognised in the Completion Statement in respect of bonuses for any period beginning on or after 1 January 2016, reflecting the fact that no profit related bonus scheme has yet been agreed for 2016.


11	Intercompany balances

Intercompany balances (if any) between any two Group Companies shall be reconciled and any unreconciled differences shall be investigated. Following such investigation, if unreconciled differences remain, the originating Group Company’s balance shall be considered correct and such remaining unreconciled differences shall be written off to the income statement.


12	Taxation

A corporate income tax liability shall be included within Debt. The balance to be included in the Completion Statement in respect of this liability shall be the Group’s consolidated current

corporate income tax liability for the year ended 31 December 2015 (less any amount paid in respect of such liability prior to the Effective Time), calculated in accordance with the Group’s revenue and cost recognition policies as applied in the Group’s audited 2014 statutory accounts and tax computations.


13	Audit fee

An aggregate accrual of £42,000 shall be made in the Completion Statement as a liability within Working Capital in respect of the costs for auditing the 2015 statutory accounts of the Group Companies.


14	Transaction Costs and adviser fees

A liability shall be included in Debt in respect of any costs (over and above the normal salary costs of Group employees) charged to any Group Company, that have not been paid or settled prior to the Effective Time, that are in respect of preparing, negotiating, entering into and completing any of the Transaction Documents, any transaction contemplated in any of the Transaction Documents or the costs and expenses of any of the Sellers’ advisers.


15	Indemnities and retentions

Unless explicitly stated to the contrary in this Part 4, the Completion Statement will include no provision or other liability for either (a) any matter which is the subject of a warranty or indemnity from the Sellers in favour of the Buyer or any member of the Buyer Group or (b) any matter that is the subject of a specific retention within a Retention or Escrow Account.


16	Payments to Michelle Lehouk

An aggregate accrual equal to the amount payable by the Group in connection with the cancellation of Michelle Lehouk’s options over ordinary shares in the Company and the surrender of her rights to those options (including any amounts payable as a result of income tax and social security contribution liability) and the cash bonuses to which she is entitled shall be made in the Completion Statement as a liability within Working Capital.


17	Accrington consideration

An aggregate accrual equal to the £100,000 of consideration payable to Trainline Investment Holdings Limited or their successors or assigns for the £100,000 of consideration payable, but withheld, by the Company under the Advanced Smartcard Technologies Share Purchase Agreement shall be made in the Completion Statement as a liability within Working Capital.

Part 5– Format of the Completion Statement



COMPLETION STATEMENT
Aggregation and Adjustment schedule
("As at Balance Sheet Date" figures to be brought forward from SCS, Bell and Ecebs sheets according to referencing letters E, F, G and H)

All figures in £'000s
	Working Capital [E]	Cash [F]	Debt [G]	Intercompany [H]

Company	X	X	X	X
Bell ID	X	X	X	X
Ecebs	X	X	X	X
Subtotal	X	X	X	X
Taxation (Schedule 7 Part 4 paragraph 12)	-	-	X	-
as at Balance Sheet Date:	X	X	X	X



Memorandum
Intercompany balances should reconcile (or be written off) to zero as per Schedule 7 Part 4



The Company
Balance sheet as at Balance Sheet Date

			£'000s

1. WORKING CAPITAL
	Trade Debtors		X
	Provision for Bad Debts		(X)
	Trade debtors	[A]	X

	Prepayments		X
	VAT		X
	Other Debtors		X
	Other current assets	[C]	X

	Deferred Revenue		X
	Trade Creditors		X
	Other creditors		X
	Accruals		X
	Payroll taxes & Social Security		X
	Current liabilities	[D]	X

	[E] = [A + C - D]		X

2. CASH
	Barclays Current (if positive)		X
	UBS Deposit		X
	UBS Euro Account		X
	UBS Interest receivable		X
	Barclays Deposit		X
	Arbuthnot Latham		X
		[F]	X

3. DEBT
	Current Account (if overdrawn)		X
	Bank loans		X
	Other loans and borrowings		X
	2015 bonus costs		X
	Transaction costs		X
		[G]	X

4. INTERCOMPANY
	Treasury Loan from Ecebs		(X)
	Treasury Loan from Bell		(X)
	Other intercompany debtors		X
	Other intercompany creditors		(X)
		[H]	X



Bell ID
Balance sheet as at Balance Sheet Date

			EUR 000s	£'000s

1. WORKING CAPITAL
	Trade Debtors		X	X
	Provision for Bad Debts		(X)	(X)
	Trade debtors	[A]	X	X

	Sales not invoiced - taken to P&L		X	X
	Sales Invoiced - not taken to P&L		(X)	(X)
	Cost of sales not invoiced (accrued) - taken to P&L		(X)	(X)
	Cost of sales invoiced (prepaid) - not taken to P&L		X	X
	Work in progress	[B]	X	X

	Prepayments		X	X
	Other Debtors		X	X
	Other current assets	[C]	X	X


	Trade Creditors		X	X
	Maintenance - invoiced in advance		X	X
	Accruals - Other costs		X	X
	Other Creditors		X	X
	V.A.T.		X	X
	Payroll taxes & Social Security		X	X
	Current liabilities	[D]	X	X

	[E] = [A + B + C - D]		X	X

2. CASH
	Cash (if net positive)		X	X
		[F]	X	X

3. DEBT
	Cash (if net negative)		X	X
	Bank loans		X	X
	Other loans and borrowings		X	X
	2015 bonus costs		X	X
	Transaction costs		X	X
		[G]	X	X

4. INTERCOMPANY
	Treasury deposit with SCS		X	X
	Other intercompany debtors		X	X
	Other intercompany creditors		(X)	(X)
		[H]	X	X



Ecebs Ltd
Balance sheet as at Balance Sheet Date
			£'000s
1. WORKING CAPITAL
	Trade Debtors		X
	Provision for Bad Debts		(X)
	Trade debtors	[A]	X

	Accrued Income		X
	Work in progress	[B]	X

	Prepayments		X
	Stock cards		X
	Other Debtors		X
	Other current assets	[C]	X


	Trade Creditors		X
	Deferred Revenue		X
	Accruals - Other costs		X
	SEFT/Cubic set up		X
	Other Creditors		X
	V.A.T.		X
	Payroll taxes & Social Security		X
	Current liabilities	[D]	X

	[E] = [A + B + C - D]		X

2. CASH
	Cash (if positive)		X
		[F]	X

3. DEBT
	Cash (if net negative)		X
	Bank loans		X
	Other loans and borrowings		X
	2015 bonus costs
	Transaction costs		X
		[G]	X

4. INTERCOMPANY
	Treasury deposit with SCS		X
	Other intercompany debtors		X
	Other intercompany creditors		(X)
		[H]	X

Schedule 8

Leasehold Properties



Property	Date of Lease	Original Parties	Current Tenant	Term	Current Rent	Rent Deposit	Outstanding Rent Reviews
5,770 square feet of the Ground Floor Premises, Torus Building, Scottish Enterprise Technology Part, East Kilbride (described by the Company as the Main Office ). NB the premises which is the subject of this lease was extended from 4,145 square feet to 5,770 square feet by the variation dated 15 January 2016.	5 February 2007 and 30 March 2007 and registered in the Books of Council and Session on 5 April 2007. A variation for the extension and addition of office space was signed on 15 January 2016 and effective from 18 January 2016.	Speyroc Limited ( Tenant ) and Ecebs Limited ( Sub-Tenant ) .	Ecebs Limited	Valid until 18 January 2027.	£83,664.00 per annum (exclusive of VAT).	None provided for in lease.	19 January 2022.



1,625 square feet of the Ground Floor Premises, Torus Building, Scottish Enterprise Technology Part, East Kilbride (described by the Company as the Atrium Office)	28 February 2008 and 6 March 2008, registered in the Books of Council and Session on 31 March 2008	Speyroc Limited (Tenant) and Ecebs Limited (Sub-Tenant).	Ecebs Limited	29 January 2016	£21,937.50 per annum (exclusive of VAT).	None provided for in lease.	Every fourth anniversary from 30 January 2012.
Stationsplein 45 A6.016, 3013 AK, Rotterdam, The Netherlands	1 January 2015	Groothandelsgebouwen N.V.; Groothandelsgebouwen Parking B.V.; and Bell Identification B.V.	Bell Identification B.V.	Seven years from 1 January 2015 until 31 December 2021.	Rent per annum is 356,019,80 Euros (including 21% VAT); rent is paid quarterly in advance	3 months = Euro 89,004.95 Euros (including 21% VAT)	None outstanding.

Schedule 9

Taxation

Part 1— Interpretation and Buyer Protections


1	Interpretation


1.1	In this schedule (unless the context otherwise requires):

Accounts Relief means any Relief which is treated as an asset in preparing the Relevant Accounts or is taken into account in computing (and so reducing or eliminating) any provision which appears, or which but for the presumed availability of the Relief would have appeared, in the Relevant Accounts

Actual Taxation Liability means a liability to make an actual payment of Taxation whether or not such Taxation is also or alternatively chargeable against or attributable to any other person

Buyer’s Group Relief means any Relief of the Buyer’s Group (other than the Company)

Buyer’s Relief means any:


(a)	Accounts Relief;


(b)	Post-Completion Relief; and


(c)	Buyer’s Group Relief

Company Account has the meaning in clause 10.3

CTA 2009 means the Corporation Tax Act 2009

CTA 2010 means the Corporation Tax Act 2010

Deemed Taxation Liability means:

(a)

the use or set off of a Buyer’s Relief in circumstances where but for such use or set off the Company would have an Actual Taxation Liability in respect of which the Buyer would have been able to make a claim against the Sellers under the Tax Covenant, in which event the amount of the Deemed Taxation Liability shall be the amount for which the Sellers would have been liable under the Tax Covenant in respect of such Actual Taxation Liability but for such use or set off


(b)	the Loss of an Accounts Relief, in which event the amount of the Deemed Taxation Liability shall be the Relevant Tax Proportion of:


(i)	where the Relief that is subject of the Loss is a deduction from, or credit or offset against, Tax, the amount of that Relief so lost;


(ii)	where the Relief that is the subject of the Loss is a deduction from or offset against income, profit or gains, the amount of Tax which but for such Loss would have been saved by virtue of the Relief so lost;


(iii)	where the Relief that is subject of the Loss is a repayment of Tax, the amount of the repayment that would have been obtained but for the Loss

Demand means any assessment, notice, letter, demand or other document issued or action taken by or on behalf of any Tax Authority or any form of return, computation, account, other document or self‑assessment required by law from which it appears that the Company is subject to, or is sought to be made subject to, or will or might become subject to, any Taxation Liability

Event means any event, transaction, act or omission including, without limitation, any change in the residence of any person for the purposes of any Tax and shall also include Completion

IHTA means the Inheritance Tax Act 1984

Loss means, in relation to a Relief, the loss, reduction, unavailability, modification, claw back, counteraction, non-existence, disallowance or cancellation of or failure to obtain all or part of that Relief and "lost" shall be construed accordingly

Post-Completion Relief means any Relief which arises in respect of an Event occurring, or a period ending, after Completion

Relevant Accounts means the Completion Statement

Relevant Accounts Date means Completion

Relevant Tax Proportion means, in respect of a Company:


(a)	499 divided by 999, where the Company is Accrington Technologies Limited;


(b)	50.01%, where the Company is Nevis Technologies Limited; and


(c)	100%, for any other Company

Relief means any loss, allowance, exemption, set off, deduction, credit, refund or other relief from or relating to any Taxation or to the computation of income, profits or gains for the purpose of any Taxation and any right to a repayment of Taxation

Tax or Taxation means:

(a)

any form of tax, and any levy, duty, impost, deduction, or withholding in the nature of tax and whether of the United Kingdom or elsewhere including, for the avoidance of doubt, employers NICs, social security and PAYE or any other equivalent taxes in jurisdictions outside the United Kingdom, but not including, in the United Kingdom, uniform business rates, water rates, community charge or council tax; and


(b)	all charges, surcharges, interest, penalties and fines relating to any taxation falling within paragraph (a) of this definition

Tax Authority means any authority or person, whether of the United Kingdom, part of the United Kingdom or elsewhere, competent to impose, assess or collect any Taxation

Tax Covenant means paragraph 2 of part 1

Taxation Liability means any Actual Taxation Liability and any Deemed Taxation Liability

VAT means:


(a)	within the European Union, any Tax imposed by any Member State in conformity with the Directive of the Council of the European Union or the common system of value added tax (2006) 112 (EC); and


(b)	outside the European Union, any Tax corresponding to, or substantially similar to, the common system of value added tax referred in paragraph (a) of this definition


1.2	In this schedule (unless the context otherwise requires):


(b)	references to any "income, profits or gains earned, accrued or received" (or to any similar expression) shall include any income, profits and gains which are deemed or treated, for any Tax purposes, as being, or having been, earned, accrued or received;


(c)	references to any income, profits or gains earned, accrued or received on or prior to a given date or time or by reference to or in respect of a specified period, shall include income, profits or gains which are deemed, for any Tax purposes, as being, or having been, earned, accrued or received on or before that date or time or in respect of that period, as the case may be;


(d)	references to any Event occurring or having occurred on or prior to a given date or time or by reference to or in respect of a specified period, shall include any Event which is deemed, for any Tax purposes, as occurring, or as having occurred on or before that date or time or in respect of that period, as the case may be;


(e)	reference to Company shall include each member of the Group, and the provisions of this schedule shall apply as if they were set out in full for each of those members;


(f)	references to parts are references to parts of this schedule and references to a paragraph shall, unless otherwise stated, be to a paragraph of this schedule and of the part in which the paragraph is contained.

1.3

In determining for the purposes of this schedule whether a charge on or power to sell, mortgage or charge any of the shares in or assets of the Company exists at any time, the fact that any amount of Taxation is not yet payable or may be paid by instalments shall be disregarded and such amount of Taxation shall be treated as becoming due and the charge or power to sell, mortgage or charge as arising on the date of the transfer of value or other Event on or in respect of which it becomes payable or arises, and the provisions of section 213 of the IHTA shall not apply.


2	Covenant by Warrantors


2.1	Subject to the provisions of paragraph 3 of this part and schedule 4 of the Deed, the Warrantors hereby covenant severally with the Buyer to pay to the Buyer an amount equal to his or her Relevant Warranty and Indemnity Proportion of:


(a)	the Relevant Tax Proportion of any Actual Taxation Liability of the Company arising as a result of or in connection with:


(i)	any Event having occurred on or before Completion; or


(ii)	any income, profits or gains earned, accrued or received on or before Completion; or


(iii)	the failure by any person connected with the Sellers for Tax purposes (where such connection arose prior to Completion) to pay or discharge any amount of Taxation for which such person was primarily liable; or


(b)	any Deemed Taxation Liability;


(c)	the Relevant Tax Proportion of any liability of the Company to make a payment in respect of Taxation to any person (other than to another company falling within the definition of the Company) under any indemnity, covenant, guarantee, charge, agreement or arrangement entered into on or before Completion;


(d)	the Relevant Tax Proportion of any Actual Taxation Liability in respect of inheritance tax which:


(i)	is at Completion a charge on, or gives rise to a power to sell, mortgage or charge, any of the shares or assets of the Company; or

(ii)

after Completion becomes a charge on, or gives rise to a power to sell, mortgage or charge, any of the shares or assets of the Company being an Actual Taxation Liability arising as a result of the death of any person within 7 years after a transfer of value (or a deemed transfer of value) if a charge on or power to sell, mortgage or charge any such shares or assets could, if the death had occurred immediately before Completion and the inheritance tax payable as a result thereof had not been paid, have existed at Completion; or


(iii)	arises as a result of a transfer of value occurring or being deemed to occur on or before Completion (whether or not in conjunction with the death of any person whenever occurring) which increased or decreased the value of the estate of the Company;

(e)

the Relevant Tax Proportion of any Actual Taxation Liability that is a liability of the Company to account for income tax or National Insurance contributions (NICs), whether arising before or after Completion, in respect of the grant, exercise, surrender, exchange or other disposal of an option or other right to acquire securities, or in respect of any acquisition, holding, variation or disposal of employment-related securities (as defined for the purposes of Part 7 of the Income Tax (Employment and Pensions) Act 2003) where the acquisition of the security or the grant of the option or other right to acquire the security occurred on or before Completion;

(f)

any Actual Taxation Liability of the Company under Part 7A of ITEPA 2003, whether arising before or after Completion, including any liability arising as a consequence of any payments or loans made to, any assets made available or transferred to, or any assets earmarked (however informally) for the benefit of any employee or former employee of the Company, or for the benefit of any relevant person, by an employee benefit trust (EBT) or another third party where the arrangement giving rise to the charge was entered into at a time when the third party was acting on the instructions of, or for the benefit of, the Sellers or an associate of any of the Sellers;


(g)	any third party costs, fees and expenses reasonably and properly incurred by the Buyer or the Company in connection with any such liability or amount as is referred to in any

of paragraphs 2(a) to 2(f) inclusive or in successfully taking or defending any action under this schedule.


2	Limitations


2.1	The Warrantors shall not be liable under the covenant contained in paragraph 2 of this part, or for breach of any Tax Warranty, in respect of any Taxation Liability to the extent that:


(a)	provision or reserve is made for such Taxation Liability in the Relevant Accounts; or


(b)	such Taxation Liability was paid or discharged on or before the Relevant Accounts Date and such payment or discharge was reflected in the Relevant Accounts; or


(c)	any Relief (other than a Buyer’s Relief) is available to the Company to reduce or eliminate the Taxation Liability; or


(d)	such Taxation Liability arises as a result of, or in connection with, any actual (as opposed to deemed) income, profits or gains actually earned, accrued or received by the Company before the Relevant Accounts Date and not reflected in the Relevant Accounts but should have been so reflected; or

(e)

such Taxation Liability arises as a result of or in connection with a voluntary transaction, action or omission carried out or effected by the Company, the Buyer or any member of the Buyer's Group after Completion where such company or business knew (or ought reasonably to have known) that such transaction, action or omission would give rise to the Taxation Liability in question, except that this exclusion shall not apply where such transaction, action or omission:


(i)	is required by any legislation or other statutory requirement; or


(ii)	is carried out or effected pursuant to a legally binding obligation of the Company entered into on or before Completion; or


(iii)	is carried out by the Company in its ordinary course of business as conducted at Completion; or


(iv)	at the written request of the Sellers; or


(f)	such Taxation Liability arises or is increased as a result of or in connection with:


(i)	any change in the rates of Taxation; or


(ii)	any change in legislation, regulation or directive; or


(iii)	any change in the published practice of general application of, or published concession of general application operated by, any Tax Authority or withdrawal of any extra statutory or other concession previously made by any Tax Authority or change in interpretation of the law (whether or not as a result of any case law); or

in each case taking effect after Completion, except to the extent that such change was announced before Completion; or


(g)	such Taxation Liability arises as a result of a change to the date to which the Company makes up its accounts or changing any of its accounting policies or practices, in either case, after Completion, but excluding any change required to comply with any law or generally accepted accounting practices or principles applicable to the Company in force at Completion; or


(h)	such Taxation Liability would not have arisen but for:

(i)

the failure by the Company after Completion (other than at the written request of the Sellers) to make any such valid claim, election, surrender or disclaimer or to give any notice or consent the making, giving or doing of which was permitted by law, is taken into account in computing the provision for Tax in the Relevant Accounts and is notified to the Buyer in writing at least ten Business Days prior to the last date on which the claim, election, surrender, disclaimer, notice or consent can be made, given or done; or


(ii)	any failure by the Buyer to comply with its obligations under paragraphs 1 and 2 of part 3 but only to the extent such failure gives rises to a liability to any fine, penalty, interest or surcharge.


3	Payment

3.1

If the Sellers are or become liable to make a payment under paragraph 5 or the Tax Covenant in respect of an Actual Taxation Liability or a Deemed Taxation Liability falling within paragraph (a) of that definition, the Sellers shall pay such on or before the date 10 Business Days after the date of written notice from the Buyer of the amount which the Sellers are required to pay or, if later, the date 20 Business Days before the date on which the Actual Taxation Liability in question is, or as the case may be would have been, due for payment.


3.2	If the Sellers are or become liable to make a payment under the Tax Covenant in respect of any other amount not being an Actual Taxation Liability or a Deemed Taxation Liability falling within paragraph (b) of that definition, the Buyer will notify the Sellers in writing of the amount which the Sellers are required to pay and the Sellers shall pay such amount on or before the date:


(a)	in the case of a Deemed Taxation Liability falling within paragraph b(iii) of that definition, the later of the date upon which such repayment would have been payable and 20 Business Days after the date of such notice;


(b)	in the case of a Deemed Taxation Liability falling within paragraph (b) of that definition where the Accounts Relief unavailable is not a right to repayment of Taxation, the later of the date 20 Business Days before the date upon which any Taxation (which would have been saved but for such unavailability) is due for payment and 10 Business Days after the date of such notice;


(c)	in any other case, 10 Business Days after the date of such notice.


4	Gross-up


4.1	All sums payable by the Sellers under this Deed shall be paid:


(a)	without any counter claim or set-off; and


(b)	free and clear of all deductions or withholdings whatsoever, save only as may be required by law.

4.2

If any amount paid or due by the Sellers to the Buyer under this Deed results in a Taxation Liability of the Buyer, the Sellers covenant with the Buyer to pay the Buyer such further sum as will ensure that the net amount received and retained by the Buyer after such Taxation Liability is taken into account shall equal the full amount which would have been received and retained by the Buyer in the absence of such Taxation Liability.

4.3

If the Sellers are required to make any deduction or withholding from any payment due from the Sellers under this Deed, the amount so due shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Buyer receives, on the due date for such payment, a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made.


4.4	Paragraphs 4.2 and 4.3 shall not apply to the extent that the deduction, withholding or Taxation Liability would not have arisen but for:


(a)	the Buyer not being Tax resident in the United States or having some connection with a territory outside the United States or the United Kingdom; or


(b)	an assignment by the Buyer of any of its rights under this Deed.

4.5

In the event the Buyer becomes entitled to a Tax credit for any amount paid by the Sellers under paragraph 4.3 above (a Tax Saving ), it shall take reasonable steps to obtain such Tax Saving and in the event the Buyer receives a Tax Saving it shall repay to the Sellers the amount of such saving less any reasonable costs or expenses properly incurred in obtaining such Tax Saving within 10 Business Days of so obtaining the Tax Saving.

Part 2 — Credit Mechanisms


1	Rebate

1.1

If the Buyer, the Company or any member of the Buyer's Group becomes aware that the Company is entitled to receive from any person (other than the Company, any member of the Buyer's Group, or the Sellers) a payment which would not have been payable but for any Actual Taxation Liability in respect of which the Sellers have made, or are liable to make, a payment under the Tax Covenant or in respect of the Tax Warranties it shall:


(a)	inform the Sellers of that entitlement in writing; and

(b)

subject to the Buyer and the Company first being indemnified by the Sellers against all reasonable losses, liabilities (including any additional Taxation Liability), interest, costs, damages and expenses which may thereby be incurred, procure that the Company shall take all reasonable steps (if requested in writing to do so by the Sellers) to receive such payment, provided that neither the Buyer nor the Company shall be required to take any action which would be materially prejudicial to its relationship with any Tax Authority.


1.2	If the Sellers make any such request as is referred to in paragraph 1.1(b) and the Company actually receives a payment as is referred to in paragraph 1.1 then:


(a)	in a case where the Sellers have already discharged their liability under the Tax Covenant or in respect of the Tax Warranties in respect of the Actual Taxation Liability referred to in paragraph 1.1, the Buyer shall repay to the Sellers a sum equal to the lesser of:


(i)	the Relevant Tax Proportion of the amount of any payment so received, after deduction there from of an amount equal to any reasonable costs, fees and expenses incurred in obtaining it (and not previously reimbursed by the Sellers to the Buyer) and any Taxation Liability incurred in respect of it or which would have been incurred but for the use of any Buyer’s Relief; and


(ii)	the amount paid by the Sellers under the Tax Covenant or in respect of the Tax Warranties in respect of the Actual Taxation Liability in question; and


(b)	in a case where the Sellers have not already discharged their liability under the Tax Covenant or in respect of the Tax Warranties in respect of the Actual Taxation Liability referred to in paragraph 1.1, an amount equal to the amount referred to in paragraph 1.2(a)(i) shall be set off against the Sellers liability.


2	Overprovisions

2.1

If the Buyer, the Company or any member of the Buyer's Group becomes aware that any provision for Taxation (not being a provision for deferred Tax) in the Relevant Accounts has proved to be an overprovision (other than in consequence of an Event occurring after Completion or the set off or utilization of any Buyer’s Relief) ( Overprovision ) it shall promptly inform the Sellers in writing of such Overprovision and its reasonable estimate of the amount of such Overprovision.


2.2	Without prejudice to the provisions or paragraph 6.1, the Buyer shall, at the written request of the Sellers, require the auditors of the Company ( Auditors ) to determine (as experts and not as arbitrators and at the expense of the Sellers) whether an Overprovision has arisen and, if so, the amount of such Overprovision. If the Auditors determine that there has proved to be such

an Overprovision, the Relevant Tax Proportion of the amount of such Overprovision shall be dealt with in accordance with paragraph 2.3.


2.3	Where it is provided under paragraph 2.2 that any amount is to be dealt with in accordance with this paragraph:


(a)	the amount shall first be set off against any payment then due from the Sellers under the Tax Covenant or in respect of the Tax Warranties;


(b)	to the extent there is an excess after the application of paragraph 2.3(a) above, a refund shall be made to the Sellers of any previous payment made by the Sellers under the Tax Covenant or in respect of the Tax Warranties and not previously refunded under this paragraph 2 up to the amount of such excess; and


(c)	to the extent that the excess referred to in paragraph 2.3(b) is not exhausted thereunder, the remainder of that excess shall be promptly refunded to the Sellers.

2.4

Where such determination by the Auditors as is mentioned in paragraph 2.2 has been made, the Sellers or the Buyer may request the Auditors to review such determination (at the expense of the person making the request) in the light of all relevant circumstances, including any facts which have become known only since such determination, and to determine whether such determination remains correct or whether, in the light of those circumstances, the amount that was the subject of such determination should be amended.

2.5

If the Auditors determine under paragraph 2.4 that an amount previously determined should be amended, that amended amount shall be substituted for the purposes of paragraph 2.2,, in place of the amount originally determined and such adjusting payment (if any) as may be required by virtue of such substitution shall forthwith be made by the Sellers to the Buyer or, as the case may be, by the Buyer to the Sellers.


3	Corresponding Benefits

3.1

If the Buyer, the Company or any member of the Buyer's Group becomes aware that any Taxation Liability which has resulted in any sum having been paid by the Sellers under the Tax Covenant (such sum being the Relevant Amount), or the Event that gave rise to such Taxation Liability, has given or could reasonably give rise to a Relief which is not an Accounts Relief and which would not otherwise have arisen (a Windfall Relief ), it shall promptly inform the Sellers in writing of such Windfall Relief and shall take reasonable steps to utilise such Relief.

3.2

The Buyer shall at the written request of the Sellers require the Auditors to determine (as experts and not as arbitrators and at the expense of the Sellers) whether a Windfall Relief has arisen and, if so, whether a liability of the Company to make an actual payment of Tax (not being a liability in respect of which the Sellers are liable to make a payment under the Tax Covenant or for a breach of the Tax Warranties) has been satisfied or avoided by the use of that Windfall Relief ( Saving ). If the Auditors determine that a Saving has arisen, the lesser of the Relevant Tax Proportion of the amount of such Saving and the Relevant Amount shall be dealt with in accordance with paragraph 3.3.


3.3	Where it is provided under paragraph 3.2 that any amount is to be dealt with in accordance with this paragraph 3.3:


(a)	the amount shall first be set off against any payment then due from the Sellers under the Tax Covenant or in respect of the Tax Warranties;


(b)	to the extent there is an excess after the application of paragraph 3.3(a) above, a refund shall be made to the Sellers of any previous payment made by the Sellers under the Tax Covenant or in respect of the Tax Warranties and not previously refunded under this paragraph 3 up to the amount of such excess; and


(c)	to the extent that the excess referred to in paragraph 3.3(b) is not exhausted thereunder, the remainder of that excess shall be promptly repaid to the Sellers.


4	Buyer's Covenant


4.1	The Buyer covenants with the Sellers to pay to the Sellers an amount equivalent to any Tax which the Sellers are required to pay as a result of a failure by the Company or any member of the Buyer's Group to discharge that Tax and for which it was primarily liable.


4.2	The covenant contained in paragraph 4.1 shall:


(a)	extend to any reasonable third party costs, fees and expenses reasonably and properly incurred in connection with such Tax or a claim under paragraph 4.1;


(b)	not apply to Tax to the extent the Buyer could claim payment in respect of it under the Tax Covenant (or would have been able to claim but for the limitations in paragraph 2.1 of part 1, except to the extent a payment has been made pursuant to any Tax Claim and the Tax to which it relates was not paid to the relevant Tax Authority by the company concerned);


4.3	Paragraph 3 of part 1 (due date of payment) and paragraph 1 of part 3 (conduct of claims) shall apply to the covenant contained in paragraph 4.1 as they apply to the covenants contained in paragraph 2 of part 1, replacing reference to the Sellers by the Buyer where appropriate and vice versa, and making any other necessary modification.

Part 3 — Procedure


1	Conduct of claims

1.1

If the Buyer, the Company or any member of the Buyer's Group becomes aware of any Demand which will or is reasonably likely to give rise to a liability of the Sellers under the Tax Covenant or in respect of the Tax Warranties the Buyer shall, but not as a condition precedent to the liability of the Sellers under the Tax Covenant or in respect of the Tax Warranties, promptly give written notice thereof to the Sellers' Representative. The Buyer shall give such notice to the Sellers' Representative within 15 Business Days of becoming aware of such Demand pursuant to this paragraph 1.1 provided that where a statutory time limit is applicable for responding to or appealing against the Demand, the Buyer shall give written notice of the Demand to the Sellers' Representative:


(a)	if the Buyer first became aware of such demand more than ten Business Days prior to the expiry of such time limit, no later than the tenth Business Day prior to its expiry; and


(b)	otherwise, the fifth Business Day after the Buyer first became aware of the Demand.


1.2	The Buyer shall, to the extent possible, procure that the Company shall take such action which it shall be reasonable for the Company to take and which the Sellers' Representative may by written notice given to the Buyer reasonably request to dispute, resist, appeal against, compromise or defend a Demand (any such action being an Action ), provided always that:


(a)	in each case, the Buyer and the Company shall be indemnified by the Sellers against all reasonable losses, costs, damages, liabilities and expenses which may be incurred by the Buyer or the Company as a result of, or in taking the Action;

(b)

if on the expiry of a period of 25 Business Days commencing on the date of any notice given by the Buyer to the Sellers' Representative pursuant to paragraph 1.1, the Sellers' Representative shall not have given to the Buyer written notice pursuant to this paragraph 1.2 requesting any Action to be taken, the Buyer and the Company shall be entitled to deal with the Demand on such terms as they shall in their absolute discretion think fit, without prejudice to their rights and remedies under this schedule or in respect of the Tax Warranties;

(c)

the Buyer and the Company shall not be obliged to comply with any request of the Sellers' Representative which involves appealing, or otherwise taking any action in respect of, any Demand before any tribunal, court or any other appellate body (or contesting any determination in respect of any Demand by any tribunal, court or other appellate body) unless Tax counsel of at least five years’ call instructed by agreement between the Buyer and the Sellers (at the sole expense of the Sellers) advises in writing that such appeal has a reasonable prospect of success; and


(d)	the Buyer shall not be obliged to take any Action in relation to a Demand where any Tax Authority has established in writing a prima facie case that fraudulent conduct, or conduct involving dishonesty has been committed by the Sellers.


1.3	Subject to paragraph 1.2, the Buyer hereby undertakes to the Sellers that, in relation to any Action it shall, to the extent possible:


(a)	keep the Sellers' Representative informed of all matters relating to the Action and deliver to the Sellers' Representative copies of all documents and correspondence relating to the Action;


(b)	obtain the prior written approval of the Sellers' Representative (not to be unreasonably withheld or delayed) to the content and sending of written communications relating to the Action to a Tax Authority; and


(c)	obtain the prior written approval of the Sellers' Representative (not to be unreasonably withheld or delayed) to:


(i)	the settlement or compromise of the Demand which is the subject of the Action; and


(ii)	the agreement of any matter in the conduct of the Action which is likely to affect the amount of the Demand.

1.4

If there is a dispute between the Sellers and the Buyer as to whether or not any action requested by the Sellers' Representative under paragraph 1.2 is reasonable or whether or not the withholding or delay of any approval required pursuant to paragraph 1.3(b)or 1.3(c) is reasonable and the dispute is not resolved between the Sellers and the Buyer, such dispute shall be referred for determination to an independent member of the Chartered Institute of Taxation or to an independent accountant specialising in Tax matters, in either case, of at least 6 years' experience, appointed by agreement between the Sellers' Representative and the Buyer or (if they do not agree) upon the application made by either party to the President, for the time being, of the Chartered Institute of Taxation who shall also be authorised to determine how the costs of obtaining his opinion should be allocated between the parties hereto.


2	Tax computations


2.1	The Buyer covenants with the Sellers:


(a)	to keep the Sellers' Representative informed of all matters relating to the submission, negotiation and agreement of the corporation tax returns and computations of the Company for the accounting period ended 31 December 2015 ( the Relevant Accounting Period );


(b)	that, to the extent possible, no such computations or returns nor any material correspondence relating to such computations or returns shall be transmitted to any Taxation Authority without first being submitted to the Sellers' Representative for its comments and the Buyer shall not unreasonably refuse to incorporate any reasonable comments of the Sellers' Representative.

2.2

If so requested by the Sellers' Representative in writing, the Buyer shall, to the extent possible, be obliged to procure that the Company makes or gives any return, claim, election, surrender and/or consent in relation to Taxation to the extent that, in computing any provision for Tax or deferred Tax which appears in the Relevant Accounts (or in eliminating any provision which would have so appeared), it was assumed that any such return, claim, election, surrender or consent would be made or given, provided that the Buyer and the Company shall not be obliged to make or give any such return, claim, surrender or consent that is not to the best of the Buyer or the Company’s knowledge correct and complete.


2.3	The Buyer shall, to the extent possible, procure that the Company provides the Sellers' Representative, at the expense of the Sellers, with such documents and information (including, without limitation, access to books, accounts, personnel and records), as the Sellers' Representative may reasonably require in writing, in connection with its rights pursuant to this paragraph 8.


2.4	In respect of the accounting period of the Company ended 31 December 2016 ( Straddle Period ) the Buyer shall, to the extent possible, procure that the corporation tax returns of the Company shall be prepared on the basis which is consistent with the manner in which corporation tax returns of the Company are or have been prepared for all accounting periods ended prior to Completion.

2.5

The Buyer shall, to the extent possible, procure that the Company keeps the Sellers' Representative fully informed of the Taxation affairs of the Company in respect of the Straddle Period and shall provide the Sellers' Representative with copies of all relevant documents and shall not submit any correspondence or submit or agree any return or computation for such period, to any Taxation Authority without first being submitted to the Sellers' Representative for its comments and the Buyer shall not unreasonably refuse to incorporate any reasonable comments of the Sellers' Representative insofar as they relate to the portion of the Straddle Period before Completion.


2.6	The provisions of paragraph 1 shall apply in priority to the provisions of this paragraph 2.

Part 4 — Taxation Warranties

For the purposes of this Part, a reference to any English statute, statutory provision or type of Tax will, for any jurisdiction other than England and Wales, include a reference to the statute, statutory provision or type of Tax which most nearly corresponds to it in that jurisdiction.


1	Provision in the Accounts

All liabilities of the Company for Taxation by reference to, or in consequence of, any income, profits or gains earned, accrued or received on or before the Accounts Date or any Event which occurred on or before the Accounts Date are properly provided for in the Accounts.


2	Compliance


2.1	Within the last six years, the Company has properly made all returns and computations and supplied all other information in relation to Taxation which it is or has been required to make or supply and all such returns, computations and information were and remain materially complete and accurate and were made or supplied punctually.


2.2	The Company is not involved in any current dispute with any Tax Authority and, so far as the Sellers are aware, there are no facts which are likely to give rise to any such dispute.


2.3	The Company is not and has not at any time within the last six years been liable to pay any penalty, fine, surcharge or interest in relation to Taxation which in aggregate exceeds £10,000 and, so far as the Sellers are aware, there are no facts which are likely to cause it to become liable to pay any such penalty, fine, surcharge or interest which in aggregate exceed £10,000.


2.4	The Company has duly and punctually complied with all its obligations to deduct Taxation from payments made by it and to account for such Taxation to any Tax Authority.


2.5	The Company has sufficient records relating to past events, including any elections made, to calculate the Tax liability or Relief which would arise on any disposal or on the realisation of any asset owned at the Accounts Date by the Company or acquired by any the Company since that date but before Completion.


2.6	The amount of Tax chargeable on the Company during any accounting period ended on or within six years before the Accounts Date has not, to any material extent, depended on any concession, agreement or other formal or informal arrangement with any Tax Authority or any other treatment which has been constructed as state aid.


2.7	The Company has not been a party to any transaction forming part of notifiable arrangements (as defined for the purposes of Part 7 Finance Act 2004 (Disclosure of Tax Avoidance Schemes)).


2.8	The Company has not received a follower notice under section 204 Finance Act 2014, or an accelerated payment notice under section 219 Finance Act 2014, and there are no circumstances which make it likely that either such notice will be issued.


2.9	The Company has not made an election under section 357A CTA 2010 (Election for special treatment of profits from patents etc).


2.10	The payment of the Purchase Price to the Sellers will not give rise to any obligation to account for National Insurance Contributions or incomes tax and/or PAYE.


2.11	Bell ID LLC is and has been since its creation treated as a disregarded entity for US Tax purposes and no election has been or will be made prior to Completion to treat this entity as other than a disregarded entity (e.g. as a corporation or a partnership) for US Tax purposes.


2.12	The Company has not been involved in any reportable, listed or similar transactions as defined for US Tax purposes.


2.13	The Company has never been, and the Company will not be prior to Completion, a “controlled foreign corporation” within the meaning of section 957 of the U.S. Internal Revenue Code of 1986, as amended.


2.14	The Company has never been, and the Company will not be prior to Completion, a “passive foreign investment company” within the meaning of section 1297 of the U.S. Internal Revenue Code of 1986, as amended.


3	Close companies


3.1	The Company has not:


(a)	since the Accounts Date done anything so as to give rise to an assessment or any charge to Tax, under section 455 CTA 2010 (as extended by section 460 CTA 2010);


(b)	within the last six years been a close investment-holding company as defined in section 34 CTA 2010; or


(c)	within the last six years been a party to an arrangement to which section 375 CTA 2009 (late interest) or section 409 CTA 2009 (discounted securities) applies.


4	Distributions and payments


4.1	The Company has not been concerned in any exempt distribution within the meaning of section 1075 CTA 2010.


4.2	The Company has not received any dividend or other distribution which was not exempt from the charge to corporation tax under section 931A(3) CTA 2009.


5	Branch Election


5.1	The Company has not made any election under section 18A CTA 2009.


6	Group transactions


6.1	The Company has not at any time within the last 6 years acquired any asset from any company (other than a company falling within the definition of Company) which at the time of the acquisition was a member of the same group of companies as defined in section 170 TCGA.


6.2	The Company has not within the last six years made any election under section 171A or 179A TCGA or section 792 CTA 2009.


7	Inheritance Tax


7.1	There is no outstanding HM Revenue & Customs charge (as defined in section 237 IHTA) over any asset of the Company or over any of the Shares and, so far as the Sellers are aware, there are no circumstances in which such a charge could arise.


7.2	There are in existence no circumstances by virtue of which any such power as is mentioned in section 212 IHTA could be exercised in relation to any asset of the Company or to any of the Shares or by virtue of which any such power could be exercised but for the provisions of section 204(6) IHTA.


8	VAT


8.1	The Company is a taxable person for the purposes of VAT and is duly registered for VAT and has been so registered at all times that it has been required to be registered for the purpose of the VAT legislation. Such registration is not subject to any conditions imposed by or agreed with a Tax Authority.


8.2	The Company is not and has never been a member of a group for the purpose of VAT legislation, and has not applied for such treatment.


8.3	Within the last three years the Company has not been subject to any penalty liability notice, written warning of failure to comply, surcharge liability notice or requirement to give security as a condition of making taxable supplies.


8.4	The Company has not registered in any country other than their jurisdiction of Tax Residence, and is not required to register, for VAT purposes (or for the purposes of any similar tax on added value or turnover, for the avoidance of doubt, including sales and use taxes within the United States) in any other country.


9	Residence

The country which is given in schedule 2 as the Tax Residence of the Company is the only jurisdiction in which the Company is resident for Tax purposes and the Company has never been treated as resident in any other jurisdiction for Tax purposes (including under a double taxation agreement).

The Company does not have any permanent establishments or pay Tax on income, profits or gains in any jurisdictions other than the country which is given in schedule 2 as its Tax Residence.


10	Stamp duty and stamp duty reserve tax


10.1	All documents on which stamp duty or any other transfer, registration or documentary Tax or duty is chargeable and which are in the possession of the Company or by virtue of which the Company has any right have been duly stamped (or, as the case may be, such transfer, registration or documentary Tax or duty has been duly paid).


10.2	Since the Accounts Date the Company has not incurred any liability to pay stamp duty reserve tax.


10.3	Since the Accounts Date the Company has not incurred any liability to pay stamp duty land tax.


11	Duties, etc.

All VAT, import duty and other Tax payable to a Tax Authority upon the importation of goods and all excise duties payable to any Tax Authority in respect of any assets (including trading stock) imported, owned or used by the Company have been paid in full.

Schedule 10

Buyer Warranties


1	The obligations undertaken by the Buyer under this Deed and the other Transaction Documents to which the Buyer is to be a party are legally binding on the Buyer.


2	The Buyer is a company duly incorporated and validly existing under the laws of the State of Delaware, USA and has the full legal power and authority to enter into and perform, and has taken all necessary corporate action to authorise the execution and performance of, its obligations under this Deed and any other Transaction Document to which it is a party.


3	In relation to the Buyer and each member of the Buyer's Group:


(a)	no order has been made and no resolution has been proposed or passed for the winding up of or for a provisional liquidator to be appointed in respect of any of them and no petition has been presented for the purpose of winding up any of them;


(b)	no administration order has been made in respect of any of them and no petition or other application to the court for such an order has been presented or made and no administrator has been appointed (or notice of intention so to appoint filed in court) in respect of any of them;


(c)	no receiver (which expression will include an administrative receiver) has been appointed in respect of any of them or in respect of all or any material part of their respective assets;


(d)	no voluntary arrangement has been proposed under section 1 of the Insolvency Act 1986 in respect of any of them;


(e)	no distress, execution or other process has been levied or threatened in respect of any of their respective assets.


4	The Buyer has available cash or loan facilities which will at Completion provide in immediately available funds the necessary cash resources to meet its obligations under this Agreement and, in the case of loan facilities, they involve no material pre-conditions and the Buyer will be able to satisfy all conditions of drawdown to such loan facilities at or before Completion.

Schedule 11

Interpretation and definitions


1	Interpretation


1.1	General

In this Deed, unless the context otherwise requires:


(a)	references to clauses and schedules are to clauses of, and schedules to, this Deed respectively;


(b)	a reference in a schedule or part of a schedule to paragraphs are to paragraphs of the schedule or part of a schedule in which the reference appears;


(c)	references to this Deed include its recitals and schedules;


(d)	references to this Deed or any other document are to this Deed or that document as amended from time to time;


(e)	references to writing include any method of reproducing words in a legible and non-transitory form, including fax, but exclude any other electronic form (as defined in section 1168 Companies Act 2006);


(f)	references to times of the day are to London time;


(g)	references to one gender include all genders;


(h)	references to the singular include the plural and vice versa ;


(i)	references to a person include any individual, firm, company, government, state, state agency, partnership, association or other body (with or without separate legal personality);


(j)	references to a company include any company, corporation or body corporate, wherever incorporated or established;


(k)	references to any document being in the agreed form means that document in the form agreed between the Buyer and the Sellers' Representative and, for the purposes of identification, signed or initialled by or on behalf of the Buyer and the Sellers' Representative;


(l)	the expressions holding company , parent undertaking , subsidiary , subsidiary undertaking and wholly-owned subsidiary will have the meanings given to them in the Companies Act 2006 (in each case ignoring any security existing over shares in the relevant undertaking);


(m)	the word will shall be deemed to impose obligations in the same way as if the word shall had been used in its place;


(n)	the words other , includes , including , in particular and words of similar effect will not limit any general words which precede them and any words which follow them will not be limited in scope to the same class as the preceding words;


(o)	a person will be deemed to be connected with another person if the person is connected with such other person within the meaning of sections 1122 and 1123 Corporation Taxes Act 2010; and


(p)	references to a party will include his/its successors in title and permitted assigns.


1.2	Statutory references

In this Deed, unless the context otherwise requires, a reference to a statute or statutory provision includes:


(a)	a reference to any subordinate legislation made under that statute or statutory provision;


(b)	any past statute or statutory provision which that statute or statutory provision has replaced (directly or indirectly and whether with or without modification); and


(c)	that statute or statutory provision as from time to time amended, modified, consolidated or re-enacted (whether before or after the date of this Deed),

save to the extent that any amendment, modification, consolidation or re-enactment made after the date of this Deed would increase or alter the liability of any party under this Deed.


1.3	Several liability

All obligations of the Sellers under this Deed are several unless expressly stated to the contrary.


1.4	Overseas legal terms and references to statutes or statutory provisions


(a)	A reference to any English legal term will, for any jurisdiction other than England and Wales, include a reference to the term or concept which most nearly corresponds to it in that jurisdiction.


(b)	A reference to any English statute or statutory provision will, for any jurisdiction other than England and Wales, include a reference to the statute or statutory provision which most nearly corresponds to it in that jurisdiction.


1.5	Headings

The headings and contents table in this Deed are for convenience only and do not affect its interpretation.


1.6	Conflicting provisions

If there is a conflict or inconsistency between any clause and any schedule, the clause prevails. For this purpose, an omission (whether deliberate or inadvertent) is not, by itself, to be construed as giving rise to a conflict or inconsistency.


2	Definitions


2.1	In this Deed, unless the context otherwise requires:

Accounts means the audited consolidated accounts for the Company, its subsidiaries and its subsidiary undertakings, in each case for the financial year ended on the Accounts Date

Accounts Date means 31 December 2014

Accrington means Accrington Technologies Limited, the details of which are set out in part 2 of schedule 2

Accrington Debenture means the debenture entered into by Accrington in favour of MPTE and dated 1 October 2004 in respect of the Accrington Facility Agreement;

Accrington Escrow Agreement means the Escrow Agreement between Accrington, Ecebs, MPTE and NCC Escrow International Limited dated 1 October 2004

Accrington Facility Agreement means the Facility Agreement entered into between by Accrington and MPTE and dated 1 October 2004, under which MPTE made a loan facility of £479,000 available to Accrington

Accrington Joint Venture Agreement means the Joint Venture Agreement entered into by MPTE and Ecebs, relating to the Accrington joint venture for the development of smartcard technology, which is dated 1 October 2004

Accrington Software Development Agreement means the Software Development Agreement entered into by Accrington and Ecebs and dated 1 October 2004

Actual Taxation Liability has the meaning given in part 1 of schedule 9

Advanced Smartcard Technologies Share Purchase Agreement means the share sale agreement executed between Trainline Investments Holdings Limited (company number: 05776685) and the Company, relating to the sale and purchase of the entire issued share capital of Advanced Smartcard Technologies Limited (company number: SC293461) and dated 13 November 2012

Auditors means the auditors of the Company, being the Sargeant Partnership of 5 White Oak Square, London Road, Swanley, Kent BR8 7AG

Authority means any local, national or multinational governmental authority or other public or regulatory body which has jurisdiction over the Business, or (where the context requires) any decision, consent or licence which is required to be granted by any such person for the carrying on of the Business, and Authorities will be construed accordingly

Base Completion Working Capital has the meaning given in part 1 of schedule 7

Black Duck Report means the reports addressed to the Buyer by Black Duck Software Inc. in relation to the Group’s use of Open Source Software

Business means the business carried on by the Group as at Completion

Business Day means any day on which banks are open for business in London (excluding Saturdays, Sundays and public holidays)

Business Information means all information (in whatever form held) relating to the Business, including (without limitation) all: (i) formulas, designs, specifications, drawings, manuals and instructions; (ii) customer lists, sales, marketing and promotional information; (iii) business plans and forecasts; and (iv) all accounting and tax records, correspondence, orders and inquiries

Buyer Account has the meaning given in clause 10.6

Buyer's Group means the Buyer, any subsidiary or subsidiary undertaking of the Buyer (including, following Completion, each Group Company), any holding company of the Buyer and any subsidiary or subsidiary undertaking of any holding company of the Buyer, in each case for the time being and member of the Buyer's Group will be construed accordingly

Buyer Warranties means the warranties given by the Buyer under clause 5.4 and as set out in schedule 10

Cash has the meaning given in part 1 of schedule 7

Claims has the meaning given in paragraph 1 of schedule 5

Company means Smart Card Software Limited, further details of which are set out in part 1 of schedule 2

Company Account has the meaning given in paragraph 10.3

Competition Laws has the meaning given in paragraph 13.2(c) of schedule 4

Completion means completion of the sale and purchase of the Shares under this Deed

Completion Date means the date on which each party has satisfied its obligations in schedule 3 (unless such obligations have been waived by agreement in writing between the parties)

Completion Statement has the meaning given in part 1 of schedule 7

draft Completion Statement has the meaning given in paragraph 3 of part 3 of schedule 7

Confidential Business Information means Business Information of the Group which is confidential and not publicly available

Consultant Option Holders means Sean Curran, Christopher Harvey and Grant Evans

Contract Based Schemes has the meaning given in paragraph 7 of schedule 4f

CTA 2010 has the meaning given in part 1 of schedule 9

Data Protection Laws has the meaning given in paragraph 8.5 of schedule 4

Data Room means the electronic data room prepared in connection with the transaction contemplated by this Deed and administered by Warners as at 20 January 2016 and contained on CD/USB initialled by both the Buyer and the Sellers’ Representative

Data Room Documents means the documents relating to the Business uploaded in the Data Room

Debt has the meaning given in part 1 of schedule 7

Delivery Date has the meaning given in part 3 of schedule 7

Disclosed Schemes has the meaning given in paragraph 7 of schedule 4

Disclosure Bundle Document has the meaning given to it in the Disclosure Letter

Disclosure Letter means the letter dated the same date as this Deed from the Sellers to the Buyer relating to the Warranties

Ecebs means Ecebs Limited, the details of which are set out in part 2 of schedule 2

Effective Time has the meaning given in part 1 of schedule 7

Effective Time Cash has the meaning given in part 1 of schedule 7

Effective Time Debt has the meaning given in part 1 of schedule 7

Effective Time Working Capital has the meaning given in part 1 of schedule 7

EFTPOS and TCH Sum has the meaning given in part 1 of schedule 6

EFTPOS and TCH Retention Period has the meaning given in part 1 of schedule 6

EHS Laws means to the extent that they are legally binding and in force in the relevant jurisdiction(s) in which the Business is carried on at Completion all:


(a)	supranational, national, European Union, federal, state or local statutes, directives, regulation, legislation, subordinate legislation and other laws and


(b)	common laws or civil codes

to the extent that they relate to the protection of the environment from pollution or the protection of human health and safety in the workplace or they provide remedies in relation to pollution of the environment or harm to worker health or safety (save to the extent that the same relate to land use planning)

EHS Permits means any permit, licence or consent required under EHS Laws

Employee Option Holders means Gini Lindsay, Todd Freyman and Hugo Crawford

Employees has the meaning given in paragraph 6.1(a) of schedule 4

Escrow Agent has the meaning given in paragraph part 1 of schedule 6

Escrow Agreement has the meaning given in part 1 of schedule 6

Expenses has the meaning given in paragraph 1.1 of schedule 5

Fundamental Claims has the meaning given in paragraph 1 of schedule 5

Fundamental Warranties means the warranties contained in clause 2.4 and paragraph 1 of Schedule 4

Further Review Period has the meaning given in paragraph 5.4 of part 3 of schedule 7

Group means the Company and each of its subsidiaries and subsidiary undertakings listed in part 2 of schedule 2 and Group Company will be construed accordingly

Group IP means all Intellectual Property owned or otherwise used by the Group in connection with the Business

Group Products means all products and service offerings that are being marketed, offered, sold, distributed, made commercially available or otherwise provided to customers by a member of the Group, in each case at the Completion Date

Heads of Terms Date means 27 November 2015

Indemnified IP Warranties has the meaning given in clause 5.5

Indemnities means the indemnities given under clauses 5.5 and 6

Indemnity Claim has the meaning given in paragraph 1 of schedule 5

Information Technology means hardware (being computer, telecommunications and network equipment) and software

Intellectual Property means patents, rights in designs, trade marks and service marks, copyrights (including rights in computer software), database rights, topography rights and rights in and to confidential information, know-how and trade secrets, domain names (whether or not any of these is registered and including applications for registration of any of the foregoing) and all rights or forms of protection of a similar nature or having equivalent or similar effect to any of these which may subsist anywhere in the world (including, in all cases, in relation to computer software)

Lease Agreements has the meaning given in paragraph 3.1(b) of schedule 4

Life Assurance Scheme has the meaning given in paragraph 7 of schedule 4

Management Accounts means the unaudited management accounts relating to the Group for the period from 1 January 2015 to 31 December 2015, a copy of which is attached to the Disclosure Letter

Material Contracts means the contracts entered into by the Group with each of its Material Customers and Material Suppliers

Money Purchase Benefits has the meaning given in paragraph 7 of schedule 4

MPTE means Merseyside Passenger Transport Executive

New Process Agent has the meaning given in clause 25.1(c)

Non-contractual Assurance has the meaning given in clause 17.3

Notice has the meaning given in clause 11.1

Open Source Software means any software which is available, together with its source code, under the terms of an open source licence, such licence allowing users of the software to study, modify, develop and redistribute the software as they wish, provided that any software they create using the Open Source Software is licensed on the same terms. Open Source Software includes, without limitation, software licensed under the “General Public Licence” or any licence which is substantially similar in operation to the General Public Licence (including, for the avoidance of doubt, the Creative Commons Licence, Open Database licence, Apache Licence, Mozilla Public Licence or the Lesser General Public Licence)

Options means the options granted by the Company to certain consultants and employees of the Group to acquire an aggregate of 730,000 ordinary shares in the share capital of the Company

Option Exercise Price has the meaning given in clause 3.6

Option Holders means the holders of the Options, being the Employee Option Holders and the Consultant Option Holders, as set out in part 2 of schedule 1

Option Tax Liability means the amount of income tax and social security contribution liability incurred by the relevant Employee Option Holder on the exercise of that Employee Option Holder's Option or the payment of the Purchase Price

Permitted Security Interests has the meaning given in paragraph 5.1 of schedule 4

Policies has the meaning given in paragraph 12.1(a) of schedule 4

Post-Termination Provisions means the provisions in clauses 11, 12, 13, 15, 16, 17, 18, 19, 20, 21, 23, 24 and 25 and, to the extent necessary to give effect to those provisions, schedule 11 (Interpretation and definitions)

Price Adjustment Experts has the meaning given in paragraph 6.1(b) of part 3 of schedule 7

Process Agent has the meaning given in clause 25.1(a)

Properties means the leasehold properties, details of which are set out in schedule 8 (Leasehold Properties) respectively and Property means any of them and, in each case, includes each and every part of, and any building on, the relevant Property

Proprietary Software means the software referred to in Disclosure Bundle Documents 30 and 31

Purchase Price has the meaning given in clause 3.1

Purchase Price Adjustment has the meaning given in clause 2.1 of part 2 of schedule 7

Qualifying Counsel has the meaning given in part 1 of schedule 6

Relevant Benefits has the meaning given in paragraph 7 of schedule 4

Relevant Proportion means in respect of each Seller means his 'Relevant Proportion' as set out in column (6) of part 1 of Schedule 1

Relevant Warranty and Indemnity Proportion means in respect of each Warrantor his ‘Relevant Warranty and Indemnity Proportion’ as set out in column (3) of part 3 of schedule 1

Relevant Surrender has the meaning given in part 1 of schedule 9

Restricted Area has the meaning given in clause 6.1

Restricted Period has the meaning given in clause 6.1

Restricted Person has the meaning given in clause 6.1

Restricted Services has the meaning given in clause 6.1

Retention Account has the meaning given in part 1 of schedule 6

Retention Claim has the meaning given in paragraph 5.2(a) of part 2 of schedule 6

Retention Claim Amount has the meaning given in paragraph 5.2(b) of part 2 of schedule 6

Retention Period has the meaning given in part 1 of schedule 6

Retention Sum has the meaning given in part 1 of schedule 6

Review Period has the meaning given in paragraph 4 of part 3 of schedule 7

Sanctions means


(a)	United Nations sanctions imposed pursuant to any United Nations Security Council Resolution;


(b)	U.S. sanctions administered or enforced by the Office of Foreign Assets Control of the U.S. Department of the Treasury;


(c)	EU restrictive measures implemented pursuant to any EU Council or Commission Regulation or Decision adopted pursuant to a Common Position in furtherance of the EU's Common Foreign and Security Policy; and


(d)	UK sanctions (i) enacted by statutory instrument pursuant to the United Nations Act 1946 or the European Communities Act 1972; and/or (ii) administered or enforced by Her Majesty’s Treasury of the UK

Sanctioned Country means any country or territory that is the subject of country-wide or territory-wide Sanctions

Security Interest means any claim, mortgage, lien, pledge, charge, encumbrance, hypothecation, trust, right of pre-emption or other third party right or interest

Seller Account has the meaning given in clause 10.1

Sellers' Representative has the meaning given in clause 12.1

Sellers' Solicitors means Addleshaw Goddard LLP of Milton Gate, 60 Chiswell Street, London EC1Y 4AG

Shares means the 43,098,000 ordinary shares of £0.00005 each held by the Sellers whose details are set out in part 1 of schedule 1 and the 730,000 ordinary shares of £0.00005 each issued on the exercise of the Options immediately prior to Completion to the Option Holders, which together comprise the whole of the issued share capital of the Company at Completion

Standard Software has the meaning given in paragraph 8.4(a) of schedule 4

Tax Authority has the meaning given in part 1 of schedule 9

Tax and Taxation have the meanings given in part 1 of schedule 9

Tax Claim has the meaning given in paragraph 1 of schedule 5

Tax Covenant means the tax covenant set out in part 2 of schedule 9

Tax Warranties means the warranties set out in Part 4 of schedule 9

Third Party Claim has the meaning given in paragraph 1 of schedule 5

Third Party IP Claim has the meaning given in paragraph 1 of schedule 5

Third Party Recovery has the meaning given in paragraph 14 of schedule 5

Third Party Software Indemnity Claim has the meaning given in paragraph 1 of schedule 5

Transaction Documents means this Deed, the Disclosure Letter, the Escrow Agreement and any other documents referred to in this Deed as being in the agreed form and any document from time to time entered into under or in connection with this Deed

UOB and Paypal Sum has the meaning given in part 1 of schedule 6

UOB and Paypal Retention Period has the meaning given in part 1 of schedule 6

Warranties means the warranties given under clause 5 and set out in schedule 4 (other than the warranties contained at clause 2.4 and paragraph 1 of Schedule 4). For the avoidance of doubt, this does not include any Fundamental Warranty or Tax Warranty

Warranty Claim has the meaning given in paragraph 1 of schedule 5

Warranty, Indemnity and Completion Statement Sum has the meaning given in part 1 of schedule 6

Warranty, Indemnity and Completion Statement Retention Period has the meaning given in part 1 of schedule 6

Warrantors means those Sellers listed in part 3 of schedule 1 (The Sellers)

Working Capital has the meaning given in part 1 of schedule 7



Executed as a deed by PATRICK CURRAN in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed on behalf of the P CURRAN FAMILY TRUST 2016


By PATRICK CURRAN	)
in the presence of	)	/s/ Patrick Curran
/s/ Elle Catrall	)	.......................................................................
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................

- and -

By SEAN CURRAN	)
in the presence of	)	/s/ Sean Curran
/s/ Jade Johns	)	.......................................................................
.......................................................................
Signature of witness
Name Jade Johns
............................................................
Address
........................................................

.......................................................................



Executed as a deed by OLIVER BURKE in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by MARTIN COX in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by DAVID CURRAN in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by CHRISTOPHER HARVEY in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by BERNARD MCMAHON in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by DAVID ORME in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by IGNATIUS PETERS in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by LEONARD SMITH in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by EDWARD STRANG in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by GREG STROHFELDT in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by HENDRIK WELLEN in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by JOHANNES WELLEN in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by ADAM PEACOCK in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by BARBARA PEACOCK in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by DAVID PEACOCK in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by ZAOUNI MERIEME in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by JAN DART in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by HUGO CRAWFORD in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by GRANT EVANS in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by TODD FREYMAN in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by GINI LINDSAY in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Executed as a deed by SEAN CURRAN in the presence of	)
	)	/s/ Patrick Curran
	)	.......................................................................
/s/ Elle Catrall
.......................................................................
Signature of witness
Name Elle Catrall
............................................................
Address Addleshaw Goddard LLP, 60 Chiswell Street, London EC1Y, 4AG
........................................................

.......................................................................



Signed as a deed on behalf of RAMBUS INC. , a company incorporated in Delaware, USA by Laura S. Stark _________________________________ [ Full name(s) of person signing ] being a person who, in accordance with the laws of that territory, is acting under the authority of the company	) ) ) ) ) ) )	/s/ Laura S. Stark Authorised signatory

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald Black, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Rambus Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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

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



	Date: April 22, 2016

	By:	/s/ Ronald Black
	Name:	Ronald Black, Ph.D.
	Title:	Chief Executive Officer and President

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Satish Rishi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Rambus Inc.;

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



	Date: April 22, 2016

	By:	/s/ Satish Rishi
	Name:	Satish Rishi
	Title:	Senior Vice President, Finance and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Ronald Black, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Rambus Inc. on Form 10-Q for the quarter ended March 31, 2016 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Rambus Inc.

Date: April 22, 2016



	By:	/s/ Ronald Black
	Name:	Ronald Black, Ph.D.
	Title:	Chief Executive Officer and President

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Satish Rishi, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Rambus Inc. on Form 10-Q for the quarter ended March 31, 2016 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Rambus Inc.

Date: April 22, 2016



	By:	/s/ Satish Rishi
	Name:	Satish Rishi
	Title:	Senior Vice President, Finance and Chief Financial Officer