ASSET PURCHASE AGREEMENT

Exhibit 2.1

 

Execution Copy

 

ASSET PURCHASE AGREEMENT

 

Dated as of February 16, 2005,

 

By and Among

 

FTI CONSULTING, INC.,

 

FTI, LLC,

 

FTI REPOSITORY SERVICES, LLC,

 

FTI CONSULTING LTD.,

 

FTI AUSTRALIA PTY LTD,

ACN 112 944 439

 

EDWARD J. O’BRIEN,

 

CHRISTOPHER R. PRIESTLEY,

 

RINGTAIL SOLUTIONS PTY LTD,

ACN 078 393 683

 

RINGTAIL SOLUTIONS, INC.,

 

AND

 

RINGTAIL SOLUTIONS LIMITED

TABLE OF CONTENTS

 

 

 

 

 

 

Schedules:

 

 

This A SSET P URCHASE A GREEMENT (this “Agreement” ) is entered into as of February 16, 2005, by and among FTI C ONSULTING , I NC ., a Maryland corporation ( “FTI” ), FTI, LLC, a Maryland limited liability company and a wholly-owned subsidiary of FTI ( “FTI LLC” ), FTI R EPOSITORY S ERVICES , LLC, a Maryland limited liability company and a wholly-owned subsidiary of FTI ( “FTIRS” ), FTI C ONSULTING L TD ., a corporation incorporated in England and Wales and a wholly-owned subsidiary of FTI ( “FTIC” ), FTI A USTRALIA P TY L TD , an Australian corporation and a wholly-owned subsidiary of FTI ( “FTIAU” ; collectively, FTI LLC, FTIRS, FTIC and FTIAU are referred to herein as the “Buyers” ), E DWARD J. O’B RIEN and C HRISTOPHER R. P RIESTLEY (in their individual capacity, collectively, Messrs. O’Brien and Priestley are referred to herein as the “Principals” ), Messrs. Edward J. O’Brien and Christopher R. Priestley trading as the R INGTAIL S UITE P ARTNERSHIP , an Australian partnership ( “RSP” ), R INGTAIL S OLUTIONS P TY L TD , an Australian corporation ( “RSPL” ), on its behalf and as trustee for RINGTAIL UNIT TRUST, an Australian unit trust ( “RUT” ), R INGTAIL S OLUTIONS , I NC ., a Delaware corporation ( “RSI” ), and R INGTAIL S OLUTIONS L IMITED , a corporation incorporated in England and Wales ( “RSL;” collectively, RSP, RUT, RSPL, RSI and RSL are referred to herein as the “Sellers” ).

 

RECITALS

 

WHEREAS, the Sellers collectively provide products and services related to litigation support and knowledge management technologies (together with all other business that is being conducted by the Sellers as of the date hereof, the “Ringtail Business” );

 

WHEREAS, the Principals and their family entities own or control all of the outstanding equity, ownership and beneficial interests of each of the Sellers;

 

WHEREAS, FTI and its Affiliates desire to acquire substantially all of the assets and assume specified liabilities of the Sellers for the consideration specified in this Agreement; and

 

WHEREAS, FTIRS acknowledges and agrees that it is acquiring (and the Sellers acknowledge and agree (where appropriate) that they are supplying) the FTIRS Acquired Assets and assuming the FTIRS Assumed Liabilities for the purposes of operating the Ringtail Business as a going concern and that it will register under Australian law for purposes of GST. Further, the Sellers acknowledge that, on the Closing Date, they must supply to FTIRS and FTIAU all of the things that are necessary for the continued operation of the enterprise(s) and that they must carry on the enterprise(s) until the day of the supply.

 

PROVISIONS

 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

“Accountants” means the firm of independent public accountants of national reputation in the U.S. or Australia or of international reputation (other than Ernst & Young LLP) selected by FTI and the Buyers and approved by the Sellers’ Representative (which approval shall not be unreasonably withheld).

 

“Accounts Receivable” means accounts receivable of the Sellers.

 

“Acquired Assets” means the FTIRS Acquired Assets and the FTIC Acquired Assets.

 

“Action” means any action, claim, suit, arbitration, inquiry, investigation or other proceeding of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any arbitrator or Governmental Body or similar person or body.

 

“Affiliate” as to a specified person, means any person which directly or indirectly through one or more intermediaries, controls ( id est , possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of a person whether through ownership of voting securities, by contract, through membership or otherwise), is controlled by, or is under common control with, the specified person.

 

“Agreement” has the meaning set forth in the preface above.

 

“Allocation” has the meaning set forth in Section 5.11(b).

 

“Applicable Rate” means the floating and fluctuating rate of interest per annum announced by Bank of America, N.A. from time to time as its prime rate.

 

“Asset Acquisition Statement” has the meaning set forth in Section 5.11(c).

 

“Assumed Liabilities” means the FTIRS Assumed Liabilities, FTIAU Assumed Liabilities, FTIC Assumed Liabilities and FTI LLC Assumed Liabilities.

 

“Business Day” means any day other than a Saturday, Sunday or a day on which banks in Maryland or the State of Victoria are authorized or obligated by applicable law or executive order to close or are otherwise generally closed.

 

“Business Records” means all books, records, ledgers and files or other similar information of the Sellers (in any form or medium) related to the Ringtail Business and Tax Returns.

 

“Buyer Breach Notice” has the meaning set forth in Section 5.4(b).

 

“Buyers” has the meaning set forth in the preface above.

 

“Buyer Indemnified Party” has the meaning set forth in Section 7.1.

 

“Cash” means cash and cash equivalents (including marketable securities and short-term investments) calculated in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements.

 

“Cash Payment” has the meaning set forth in Section 2.4(a)(1).

 

“CCH Purchase Agreement” means the Agreement for Purchase of Business dated August 7, 2001, by and among RAP, RSPL, and the other parties named therein.

 

“CCH Regional Rights” means the express license rights to the Ringtail Intellectual Property and the Ringtail Software Programs granted to RAP with respect to the Asia Pacific Region pursuant to the provisions of the CCH Purchase Agreement. The term “Asia Pacific Region” shall have the meaning set forth in the CCH Purchase Agreement.

 

“Closing” has the meaning set forth in Section 2.6.

 

“Closing Date” has the meaning set forth in Section 2.6.

 

“Closing Statement” has the meaning set forth in Section 2.5(a).

 

“Closing Working Capital Statement” has the meaning set forth in Section 2.5(c).

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Confidential Information” means any information concerning the businesses and affairs of the Ringtail Business or the Acquired Assets that is not already generally available to the public, including any trade secrets and non-public confidential information, knowledge, data and similar information relating to any Seller’s Intellectual Property and the confidential information included therein.

 

“Damages” has the meaning set forth in Section 7.1.

 

“Deferred Maintenance Schedule” means a schedule listing, as of the Closing Date, the unexpired portion of all maintenance contracts between any of the Sellers and any customer setting out the customer name, date of agreement, date of expiry, original maintenance fee paid, number of months between the Closing Date and the date of expiry and calculation of the unexpired portion.

 

“Deferred Maintenance Schedule Payment” has the meaning set forth in Section 5.15.

 

“Deficit Amount” has the meaning set forth in Section 2.5(e).

 

“Earnout Payment” means the amount, if any, paid in accordance with Exhibit A .

 

“Earnout Shares” means the FTI Stock, if any, issued in accordance with Exhibit A .

 

“Employee Benefit Plan” means any “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, and any other employee benefit plan, program or arrangement of any kind, maintained by a Seller in which any Ringtail Employee participates (including any bonus or incentive plans).

 

“Employer” has the meaning set forth in Section 5.10(a).

 

“Employment Agreement” means the employment agreements set forth as a form of agreement in Exhibits D-1 and D-2.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Excess Amount” has the meaning set forth in Section 2.5(e).

 

“Excluded Assets” has the meaning set forth in Section 2.2.

 

“Excluded Contracts” has the meaning set forth in Section 2.2(1). All pre-Closing employment agreements between any Seller and a Ringtail Employee shall be deemed an Excluded Contract.

 

“Final Working Capital” has the meaning set forth in Section 2.5(e).

 

“Financial Statements” has the meaning set forth in Section 3.5.

 

“Fiscal Year End Financial Statements” has the meaning set forth in Section 3.5.

 

“FMLA” means the Family and Medical Leave Act.

 

“FTI” has the meaning set forth in the preface above.

 

“FTI SEC Document” has the meaning set forth in Section 4.4(a).

 

“FTIAU” has the meaning set forth in the preface above.

 

“FTIAU Assumed Liabilities” has the meaning set forth in Section 2.3(b).

 

“FTIC” has the meaning set forth in the preface above.

 

“FTIC Acquired Assets” has the meaning set forth in Section 2.1(b).

 

“FTIC Assumed Liabilities” has the meaning set forth in Section 2.3(c).

 

“FTI LLC” has the meaning set forth in the preface above.

 

“FTI LLC Assumed Liabilities” has the meaning set forth in Section 2.3(d).

 

“FTIRS” has the meaning set forth in the preface above.

 

“FTIRS Acquired Assets” has the meaning set forth in Section 2.1(a).

 

“FTIRS Assumed Liabilities” has the meaning set forth in Section 2.3(a).

 

“GAAP” means generally accepted accounting principles as in effect from time to time, in the United States except as otherwise noted.

 

“Governmental Body” means any nation or government, any state or other political subdivision thereof, any legislative, executive or judicial unit or instrumentality of any governmental entity (foreign, federal, state or local) or any department, commission, board, agency, bureau, official or other regulatory, administrative or judicial authority thereof or any entity (including a court or self-regulatory organization) exercising executive, legislative, judicial, Tax, regulatory or administrative functions of or pertaining to government.

 

“GST” has the meaning set forth under the A New Tax System (Goods and Services Tax) Act 1999.

 

“Income Tax” means any federal, state, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not.

 

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

 

“Indemnified Party” has the meaning set forth in Section 7.5(a).

 

“Indemnifying Party” has the meaning set forth in Section 7.5(a).

 

“Intellectual Property” has the meaning set forth in Section 3.10(a).

 

“Intellectual Property Registrations” has the meaning set forth in Section 3.10(b).

 

“Intellectual Property Rights” means collectively, rights under patent, trademark, copyright, and trade secret laws, and any other intellectual property, industrial, or proprietary rights worldwide, however designated, including moral rights, rights of attribution, integrity, paternity, and similar rights ( “Moral Rights” ).

 

“Knowledge” means, in connection with any representation and warranty contained in this Agreement that is expressly qualified by reference to the Knowledge of a party: (1) in the case of any Seller, the actual knowledge of each of the Principals after reasonable investigation, (2) in the case of any Principal, the actual knowledge of such Principal after reasonable investigation or (3) in the case of FTI or the Buyers, the actual knowledge after reasonable investigation of one or more of the executive officers of FTI named as such in FTI’s most recent proxy statement filed with the SEC.

 

“Legal Claims” has the meaning set forth in Section 2.3(e).

 

“Licensed Intellectual Property” has the meaning set forth in Section 3.10(b).

 

“Major Customers” has the meaning set forth in Section 3.11(d).

 

“Major Suppliers” has the meaning set forth in Section 3.11(d).

 

“Market Value” means the closing price per share of FTI common stock on the New York Stock Exchange (or if FTI common stock is not listed on the New York Stock Exchange, then such other exchange or quotation system upon which FTI common stock is then listed or quoted) one trading day prior to the date of determination thereof; provided, however, with regard to the Share Payment Date specified in Section 2.4(b), it means the average closing price per share of FTI common stock on the New York Stock Exchange (or if FTI common stock is not listed on the New York Stock Exchange, then such other exchange or quotation system upon which FTI common stock is then listed or quoted) for the five day trading period ending one day prior to the date of determination thereof.

 

“Material Adverse Effect” means an effect that is, or is reasonably likely to be, materially adverse to the Ringtail Business or the financial condition, assets, liabilities, business, results of operations or property of the Sellers or FTI and the Buyers, as applicable, taken as a whole, or on the ability of a Seller or Buyer to perform its obligations hereunder.

 

“Material Contract” has the meaning set forth in Section 3.11(a).

 

“Most Recent Financial Statements” has the meaning set forth in Section 3.5.

 

“Most Recent Fiscal Month End” has the meaning set forth in Section 3.5.

 

“Most Recent Fiscal Year End” has the meaning set forth in Section 3.5.

 

“Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice.

 

“Owned Intellectual Property” has the meaning set forth in Section 3.10(b).

 

“Permit” has the meaning set forth in Section 3.17.

 

“Principals” has the meaning set forth in the preface above.

 

“Purchase Price” has the meaning set forth in Section 2.4(a).

 

“RAP” means Ringtail Asia Pacific Pty Limited (ACN 097 593 630).

 

“Real Property Leases” has the meaning set forth in Section 3.21(a).

 

“Related Agreements” means the Bill of Sale and Assignment Agreement, the Assumption Agreement, the Employment Agreements and such other documents and instruments to be executed and delivered to effect the transfer of the Acquired Assets, the assumption of the Assumed Liabilities and the other transactions contemplated herein.

 

“Representatives” means, with respect to any party to this Agreement, such party’s principals, partners, directors, officers, Affiliates, employees, lawyers, accountants, lenders, consultants, independent contractors and other similar agents.

 

“Required Working Capital Amount” has the meaning set forth in Section 2.5(b).

 

“Ringtail Business” has the meaning set forth in the preface above.

 

“Ringtail Employees” means the employees of any Seller who continue to be employees of such Seller before the Closing and employees hired by any Seller between the date of this Agreement and the Closing Date.

 

“Ringtail Intellectual Property” has the meaning set forth in Section 2.1(a)(1).

 

“Ringtail Software Programs” has the meaning set forth in Section 2.1(a)(2).

 

“RSI” has the meaning set forth in the preface above.

 

“RSL” has the meaning set forth in the preface above.

 

“RSP” has the meaning set forth in the preface above.

 

“RSPL” has the meaning set forth in the preface above.

 

“RUT” has the meaning set forth in the preface above.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Security Interest” means any mortgage, pledge, lien, encumbrance, charge, security interest, claim, community property interest, condition, equitable interest, right-of-way, easement, encroachment, security interest, preemptive right, right of first refusal or similar restriction or right, option, judgment, title defect or encumbrance of any kind, other than (a) mechanic’s, materialmen’s, and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings, (c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money.

 

“Seller Breach Notice” has the meaning set forth in Section 5.4(a).

 

“Seller Indemnified Party” has the meaning set forth in Section 7.3.

 

“Sellers” has the meaning set forth in the preface above.

 

“Sellers’ Book Debts” has the meaning set forth in Section 5.9(f).

 

“Sellers’ Representative” means Edward J. O’Brien.

 

“Share Payment Date” has the meaning set forth in Section 2.4(b).

 

“Share Payment Deficiency” has the meaning set forth in Section 2.4(b).

 

“Share Sale Deficiency” has the meaning set forth in Section 2.4(b).

 

“Shares” has the meaning set forth in Section 2.4(a)(2).

 

“Tax” means (a) all Australia, United States, foreign, federal, state, local and other taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (whether or not imposed on a

 

Seller) imposed by any Governmental Body, including, without limitation, taxes or other charges on, measured by, or with respect to income, gross receipts, sales, use, ad valorem, value-added, intangible, unitary, transfer, franchise, license, payroll, employment, social security, workers’ compensation, unemployed compensation, net worth, estimated, excise, environmental, stamp, occupation, premium, property, prohibited transactions, windfall or excess profits, customs, duties, capital gains, withholding, value added or other taxes, levies, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto, (b) any liability for payment of amounts described in clause (a) as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period, or otherwise through operation of law, (c) any liability for payment of amounts described in clause (a) as a result of being a person required by law to withhold or collect taxes imposed on another person, or (d) any liability for payment of amounts described in clause (a), (b) or (c) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any other person for any of the foregoing.

 

“Tax Return” means any return (including any information return), report, statement, schedule, notice, form, estimate, declaration of estimated or other documentation of (including any additional or supporting material and any amendments or supplements) Tax relating to or required to be filed with any Governmental Body in connection with the calculation, determination, assessment, collection or payment of any Tax.

 

“Third Party Consents” has the meaning set forth in Section 3.11(c).

 

“Transfer Date” has the meaning set forth in Section 5.10(f).

 

“Transferred Ringtail Employees” means all Ringtail Employees who at the Closing accept an offer of employment from the Buyers or any of their Affiliates.

 

“UK Assets” means all of the assets related to the Ringtail Business and directly connected to the Sellers’ operations in the United Kingdom.

 

“Work-In-Process” means all work related to the Ringtail Business that has been performed and has not been billed by the Sellers and which is reasonably expected to be ultimately billed by Sellers in the Ordinary Course of Business.

 

“Working Capital” has the meaning set forth in Section 2.5(d).

 

“XML Software Programs” means all computer software programs or applications, in both source and object code form, related to XML technologies.

 

ARTICLE II

PURCHASE AND ASSUMPTION

 

Section 2.1 Purchase and Sale of Assets.

 

(a) Subject to the terms and conditions of this Agreement, at the Closing, FTIRS (or its permitted assigns) hereby agrees to purchase from the Sellers, and the Sellers hereby agree to sell, assign, transfer, convey and deliver to FTIRS (or its permitted assigns), free and clear of all Security Interests, all their respective rights, titles, and interests in and to all of the assets constituting the Ringtail Business (except for the Excluded Assets and the UK Assets), including all of the following assets (the “FTIRS Acquired Assets” ):

 

(1) all Intellectual Property, goodwill associated therewith, licenses and sublicenses granted or obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions (collectively, the “Ringtail Intellectual Property” ), subject to the CCH Regional Rights; the Ringtail Intellectual Property does not include the Ringtail Software Programs;

 

(2) all computer software programs or applications, in both source and object code form, used in the Ringtail Business, the goodwill associated therewith, licenses and sublicenses granted or obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions (the “Ringtail Software Programs” ), subject to the CCH Regional Rights;

 

(3) all agreements, contracts, indentures, mortgages, instruments, other similar arrangements, and rights thereunder, excluding the Excluded Contracts;

 

(4) leases, subleases and licenses with respect to real property located in Melbourne, Australia and Williamsburg, Virginia;

 

(5) all tangible personal property;

 

(6) Accounts Receivable (which may include accounts receivable related to FTI and a reasonable estimate of commissions receivable from FTI consulting income), notes, and other rights to receive money, Work-In-Process, retainers, deposits, prepayments, refunds and similar claims and Cash sufficient for the Required Working Capital Amount requirements in Section 2.5(b);

 

(7) all causes of action, choses in action, rights of recovery, rights of set off, and rights of recoupment (excluding any such item relating to the payment of Taxes);

 

(8) all Permits and similar rights obtained from any Governmental Body that are transferable;

 

(9) all advertising and promotional materials, studies, reports, and other printed or written materials;

 

(10) any insurance policies or insurance agreements that are transferable; and

 

(11) all goodwill incident to the Ringtail Business (excluding the United Kingdom), including the value of the names associated with the Ringtail Business (excluding the United Kingdom) that are transferred to FTIRS hereunder and the value of good customer relations.

 

(b) Subject to the terms and conditions of this Agreement, at the Closing, FTIC (or its permitted assigns) hereby agrees to purchase from the Sellers, and the Sellers hereby agree to sell, assign, transfer, convey and deliver to FTIC (or its permitted assigns), free and clear of all Security Interests, all their respective rights, titles, and interests in and to the UK Assets (except for the Excluded Assets), including all of the following related assets (the “FTIC Acquired Assets” ):

 

(1) all agreements, contracts, indentures, mortgages, instruments, other similar arrangements, and rights thereunder, excluding the Excluded Contracts;

 

(2) all tangible personal property;

 

(3) all causes of action, choses in action, rights of recovery, rights of set off, and rights of recoupment (excluding any such item relating to the payment of Taxes);

 

(4) all Permits and similar rights obtained from any Governmental Body that are transferable;

 

(5) all advertising and promotional materials, studies, reports, and other printed or written materials;

 

(6) any insurance policies or insurance agreements that are transferable; and

 

(7) all goodwill incident to the Ringtail Business in the United Kingdom, including the value of the names associated with the Ringtail Business in the United Kingdom that are transferred to FTIC hereunder and the value of good customer relations.

 

Section 2.2 Excluded Assets. The Sellers shall not sell and deliver to the Buyers their respective rights, titles, and interests in and to the following assets (the “Excluded Assets” ):

 

(1) any agreements, contracts, indentures, mortgages, instruments, other similar arrangements, and rights thereunder, listed on Schedule 2.2 (the “Excluded Contracts” );

 

(2) any of the rights of the Sellers under this Agreement or any document or instrument related to the transactions contemplated herein;

 

(3) all Business Records, charter documents, qualifications to conduct business as a foreign entity, arrangements with registered agents, taxpayer and other identification numbers, minute books, stock or similar records, and corporate seals of the Sellers, and all other documents relating to the organization, maintenance and existence of the Sellers provided, however, that the Buyers and their Representatives shall have access to such books and records as is reasonably necessary after the Closing during regular business hours and upon reasonable notice and be entitled to take or make reasonable request for copies to be provided; and

 

(4) the tax attributes of the Sellers and all claims or entitlements of the Sellers to any Tax refunds (including any related interest, penalties or additions to Tax) or deposits.

 

Section 2.3 Assumption of Liabilities.

 

(a) Subject to the terms and conditions of this Agreement, at the Closing, FTIRS agrees to assume and become responsible for all obligations of the Sellers under the agreements, contracts, mortgages, instruments, licenses, and other arrangements that are FTIRS Acquired Assets (1) to provide goods or furnish services to another party after the Closing or (2) to pay for goods or services that another party will furnish to FTIRS in connection with the Ringtail Business after the Closing and no other liabilities (the “FTIRS Assumed Liabilities” ).

 

(b) Subject to the terms and conditions of this Agreement, at the Closing, FTIAU agrees to assume and become responsible for all liabilities and obligations of RSPL with respect to any accrued vacation or leave (including accrued annual leave or long service leave) due to Transferred Ringtail Employees employed by RSPL in Australia in accordance with RSPL’s normal policies regarding such accrual (the “FTIAU Assumed Liabilities” ). FTIAU shall not assume any other liabilities.

 

(c) Subject to the terms and conditions of this Agreement, at the Closing, FTIC agrees to assume and become responsible for all obligations of the Sellers under the agreements, contracts, mortgages, instruments, licenses, and other arrangements that are FTIC Acquired Assets (1) to provide goods or furnish services to another party after the Closing or (2) to pay for goods or services that another party will furnish to FTIC in connection with the Ringtail Business after the Closing (the “FTIC Assumed Liabilities” ). FTIC shall not assume any other liabilities.

 

(d) Subject to the terms and conditions of this Agreement, at the Closing, FTI LLC agrees to assume and become responsible for all liabilities and obligations of RSI with respect to any accrued vacation or leave due to Transferred Ringtail Employees employed by RSI in the United States in accordance with RSI’s normal policies regarding such accrual (the “FTI LLC Assumed Liabilities” ). FTI LLC shall not assume any other liabilities.

 

(e) The Assumed Liabilities shall not include (a) any liability of the Sellers for Taxes (with respect to the Ringtail Business or otherwise), (b) any liability of the Sellers for Taxes arising in connection with the consummation of the transactions contemplated hereby (including any Income Taxes, GST or other Taxes arising because the Sellers are transferring the Acquired Assets), (c) any liability of the Sellers for the unpaid Taxes of any person other than the Sellers under Treasury Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise, (d) any obligation of the Sellers to indemnify any person by reason of the fact that such person was a partner, principal, trustee, director, officer, employee, agent or beneficiary of any of the Sellers or was serving at the request of any of the Sellers as a partner, principal, trustee, director, officer, employee, or agent of another entity (whether such indemnification is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such indemnification is pursuant to any statute, charter document, bylaw, agreement, or otherwise), (e) any liability of the Sellers for costs and expenses incurred in connection with this Agreement, any Related Agreement or the transactions contemplated hereby, (f) any liability or contingency of the Sellers arising out of, or in any way related to, any actual or alleged breach of contract or warranty, tort, infringement, violation of law or regulation, employee-related claim or obligation to defend in any civil, criminal or other legal proceeding ( “Legal Claims” ) or (g) any liability or obligation of the Sellers under this Agreement, any Related Agreement or other document or instrument related to the transactions contemplated herein. FTI and the Buyers shall not assume or have any responsibility with respect to any obligation or liability of the Sellers or the Principals not specifically included within the definition of Assumed Liabilities.

 

Section 2.4 Purchase Price.

 

(a) Subject to the terms and conditions of this Agreement, the Buyers agree to pay to the Sellers the following aggregate consideration (the “Purchase Price” ):

 

(1) $20 million in cash (subject to adjustment pursuant to Section 2.5 and Section 5.15) (the “Cash Payment” ) by wire transfer of immediately available funds, allocated among the Sellers as set forth on Schedule 2.4(a) ;

 

(2) that number of shares of FTI’s common stock having a Market Value on the date hereof of $15 million (the “Shares” ), allocated among the Sellers as set forth on Schedule 2.4(a) ;

 

(3) the Earnout Payments, if any; and

 

(4) the assumption of the Assumed Liabilities.

 

(b) If on the date all or any portion of the Shares first become eligible for sale under Rule 144 under the Securities Act (the “Share Payment Date” ), the aggregate Market Value of the Shares is less than $16.5 million (any such deficiency, the “Share Payment Deficiency” ), then FTI shall pay such Share Payment Deficiency to the Sellers with regard to the Shares owned by the Sellers, which shall be paid in a lump sum in cash upon the expiration of the four-week period specified in the next sentence. With regard to any Shares sold by the Sellers during the four-week period immediately following the Share Payment Date, if the aggregate gross proceeds from such sales are less than an amount equal to 110% of the Market Value of such Shares on the date hereof (excluding any currency exchange issues) (any such deficiency, a “Share Sale Deficiency” ), then FTI shall pay such Share Sale Deficiency to the Sellers, which shall be paid in a lump sum in cash promptly following the Sellers’ Representative’s written request to FTI (which shall include information regarding the sales transaction); provided, however, that FTI shall only be required to pay the Share Sale Deficiency with respect to sales of 25% or less of the total Shares during each week of such four-week period following the Share Payment Date. The Share Payment Deficiency payable by FTI, if any, shall be reduced by the amount of any Share Sale Deficiency paid to the Sellers pursuant this Section 2.4(b).

 

(c) The Earnout Payments shall be calculated and paid to the Sellers in accordance with the provisions set forth in Exhibit A .

 

Section 2.5 Closing Statement; Working Capital Adjustment.

 

(a) The Sellers shall deliver to FTI and the Buyers at least three, but no more than seven, Business Days, prior to the Closing Date combined unaudited statements of assets and liabilities setting forth their good faith estimate of the combined assets and liabilities of the Sellers as of the Closing Date (the “Closing Statement” ). The Closing Statement shall be prepared in accordance with GAAP, determined on the same basis as the Most Recent Financial Statements, and shall present fairly the combined financial condition of the Sellers at the date presented.

 

(b) FTI, the Buyers and the Sellers have agreed that the Sellers’ combined Working Capital as of the Closing Date shall be $450,000 (the “Required Working Capital Amount” ). If the amount of such Working Capital as shown on the Closing Statement is more or less than the Required Working Capital Amount, the Cash Payment shall be increased or decreased, as the case may be, by the amount by which such Working Capital is more or less than the Required Working Capital Amount.

 

(c) Within 30 days after Closing, the Sellers shall prepare and deliver to FTI and the Buyers an actual unaudited statement of Acquired Assets and Assumed Liabilities (the “Closing

 

Working Capital Statement” ), prepared as of the Closing Date on the same basis as the Closing Statement. FTI and the Buyers shall have 14 days thereafter to dispute the Closing Working Capital Statement by FTI or a Buyer providing written notice to the Sellers’ Representative, which shall indicate in reasonable detail the basis for FTI’s and the Buyers’ belief that the Closing Working Capital Statement is incorrect. FTI, the Buyers and the Sellers’ Representative shall attempt in good faith to resolve any disputes regarding the Closing Working Capital Statement, and any disputes not resolved by the parties within 14 days after FTI’s or a Buyer’s notice shall be submitted to the Accountants for resolution. The parties shall instruct the Accountants promptly to review the Closing Working Capital Statement and to determine solely with respect to the disputed items and amounts so submitted whether and to what extent, if any, the Closing Working Capital Statement requires adjustment. The Accountants shall base their determination solely on written submissions by FTI, the Buyers and the Sellers’ Representative and not on an independent review. FTI, the Buyers and the Sellers’ Representative shall make available to the Accountants all relevant books and records and other items reasonably requested by the Accountants. As promptly as practicable but in no event later than 30 days after their retention, the Accountants shall deliver to FTI, the Buyers and the Sellers’ Representative a report which sets forth their resolution of the disputed items and amounts and their calculation of the Closing Working Capital Statement and Working Capital as of the Closing Date. The decision of the Accountants shall be final, conclusive and binding on all parties. The costs and expenses of the Accountants shall be allocated between FTI and the Buyers, on the one hand, and the Sellers and Principals, on the other hand, based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party.

 

(d) For purposes of this Section 2.5, the Sellers’ combined “Working Capital” is the difference, positive or negative, between the Acquired Assets that are current assets and the Assumed Liabilities that are current liabilities.

 

(e) “Final Working Capital” means the Working Capital (i) as shown in the Closing Working Capital Statement delivered pursuant to Section 2.5(c), if no notice of objection with respect thereto is timely delivered by FTI or the Buyers; or (ii) if a notice of objection is so delivered, (A) as agreed by FTI, the Buyers and the Sellers’ Representative pursuant to Section 2.5(c) or (B) in the absence of such agreement, as shown in the Accountants’ calculation delivered pursuant to Section 2.5(c). If Final Working Capital is less that the Required Working Capital Amount, the Sellers and the Principals shall pay to the Buyers, as an adjustment to the Purchase Price, in the manner as provided in Section 2.5(f), an amount of cash equal to the difference between the Required Working Capital and Final Working Capital (the “Deficit Amount” ). If Final Working Capital exceeds the Required Working Capital Amount, the Buyers shall pay to the Sellers, as an adjustment to the Purchase Price, in the manner as provided in Section 2.5(f), an amount of cash equal to the difference between Final Working Capital and the Required Working Capital Amount (the “Excess Amount” ).

 

(f) Within three Business Days after the Final Working Capital has been determined pursuant to Section 2.5(c), if there is an Excess Amount the Buyers shall pay to the Sellers the

 

Excess Amount and if there is a Deficit Amount the Sellers and the Principals shall pay to the Buyers the Deficit Amount. Any such payment shall be made by wire transfer of immediately available funds to one or more accounts designated in writing by FTI or the Sellers’ Representative, as applicable, at least one Business Day prior to such transfer. If payment is not made within the three Business Days referred to above, such payment shall bear interest from its due date to but excluding the date of payment at the Applicable Rate in effect on such due date. Such interest shall be calculated daily on the basis of a year of 365 days and the actual number of days elapsed, without compounding.

 

Section 2.6 The Closing. The closing of the transactions contemplated by this Agreement (the “Closing” ) shall take place at the offices of DLA Piper Rudnick Gray Cary US LLP in Baltimore, Maryland, commencing at 9:00 a.m. local time on February 28, 2005 (assuming the satisfaction or waiver of all conditions to the obligations of the parties to consummate the transactions contemplated hereby has occurred, other than conditions with respect to actions the respective parties shall take at the Closing itself) or such other date as the parties may mutually determine (the “Closing Date” ).

 

Section 2.7 Deliveries at the Closing. At the Closing, (a) the Sellers and Principals shall deliver to FTI and the Buyers each of the various certificates, instruments, and documents referred to in Section 6.1; (b) FTI and the Buyers shall deliver to the Sellers each of the various certificates, instruments, and documents referred to in Section 6.2; (c) the Sellers shall execute, acknowledge and deliver to FTI and the Buyers (1) general assignments and bills of sale in the form attached hereto as Exhibit B , (2) the Deferred Maintenance Schedule and (3) such other instruments of sale, transfer, conveyance, and assignment as FTI or the Buyers reasonably may request; (d) the Buyers shall execute, acknowledge, and deliver to the Sellers (1) agreements of assignment and assumption in the form attached hereto as Exhibit C and (2) such other instruments of assumption as the Sellers reasonably may request; and (e) the Buyers shall deliver to the Sellers the Cash Payment and certificates representing the Shares.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES RELATED TO SELLERS AND PRINCIPALS

 

Each of the Sellers and the Principals hereby jointly and severally represents and warrants to FTI and the Buyers that the statements contained in this Article III are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article III), except as set forth in the disclosure schedule accompanying this Agreement.

 

Section 3.1 Organization; Qualification. The state of formation of each of the Sellers is set forth on Schedule 3.1 . Each of the Sellers has been duly formed and is validly existing and in good standing under the laws of its respective state of formation. The Principals

 

are all of the partners trading as RSP. None of the Sellers owns a Subsidiary. Each of the Sellers has all requisite power and authority, corporate or otherwise, to own, lease and operate its properties and to carry on the Ringtail Business as it is now being conducted. Each of the Sellers is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities and to carry on the Ringtail Business in the places and in the manner as now conducted, except for where the failure to be so authorized and qualified would not have a Material Adverse Effect on the Ringtail Business.

 

Section 3.2 Authorization; Validity of Obligations. Each of the Sellers has full power and authority to execute and deliver this Agreement and the Related Agreements and to perform its obligations hereunder and thereunder. This Agreement and the Related Agreements have been duly authorized by all necessary action under each of the Seller’s charter or formation documents and constitute the valid and legally binding obligations of each of the Sellers, enforceable against each of the Sellers in accordance with their respective terms and conditions, subject only to applicable bankruptcy, reorganization, insolvency, moratorium, and other rights affecting creditors’ rights generally from time to time in effect and as to enforceability, general equitable principles.

 

Section 3.3 Noncontravention. The execution and delivery by the Sellers of this Agreement and the Related Agreements, and the consummation of the transactions contemplated herein, will not (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Body to which any Seller is subject, or any provision of the charter or formation documents of any Seller or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Material Contract or result in the imposition of any Security Interest upon any of the Acquired Assets, except where the violation, conflict, breach, default, acceleration, termination, modification, cancellation, failure to give notice, or Security Interest would not have a Material Adverse Effect on the Acquired Assets or the Ringtail Business or on the ability of the parties to consummate the transactions contemplated by this Agreement.

 

Section 3.4 Title to Assets; Tangible Assets. Each of the Sellers has good and marketable title to, or a valid leasehold interest or license in, the Acquired Assets owned by such Seller, free and clear of all Security Interests or restrictions on transfer. The Acquired Assets that are tangible assets are free from material defects (patent and latent), have been maintained in accordance with normal industry practice, and are in good operating condition and repair (subject to normal wear and tear). The Sellers currently own, or have a valid leasehold interest or license in, all assets necessary to conduct the business and operations of the Ringtail Business as currently being conducted (and as to be conducted in connection with currently contemplated upgrades or new versions of any of the Ringtail Intellectual Property or the Ringtail Software Programs). The Acquired Assets constitute all the assets necessary to operate the Ringtail Business in the same manner as it has been operated by the Sellers (and as it would be operated by the Sellers in connection with currently contemplated upgrades or new versions of any of the Ringtail Intellectual Property or the Ringtail Software Programs). The Sellers do not own any interest in real property.

 

Section 3.5 Financial Statements. Attached to Schedule 3.5 are (a) true, complete and correct copies of RUT’s unaudited financial statements (collectively, the “Fiscal Year End Financial Statements” ) for and as of the fiscal year ended June 30, 2004 (the “Most Recent Fiscal Year End” ) and (b) true, complete and correct copies of RUT’s unaudited financial statements for the six month period ended and as of December 31, 2004 (the “Most Recent Fiscal Month End” ) (collectively, the “Most Recent Financial Statements,” and together with the Fiscal Year End Financial Statements, the “Financial Statements” ). The Financial Statements have been prepared from the books and records of RUT, and except as set forth in the notes thereto or as set forth on Schedule 3.5 , in accordance with GAAP consistently applied and present fairly the financial condition and results of operations of RUT as of and for the periods presented. Since the Most Recent Fiscal Year End, there have been no material changes in the accounting policies for any Seller. The Most Recent Financial Statements are subject to normal fiscal year-end adjustments (which will not be material in the aggregate). The Financial Statements lack certain footnotes and other presentation items.

 

Section 3.6 Events Subsequent to Most Recent Fiscal Year End. Since the Most Recent Fiscal Year End, the Sellers have operated the Ringtail Business only in the Ordinary Course of Business and neither the Sellers nor the Ringtail Business has suffered a Material Adverse Effect. In addition to and without limiting the generality of the foregoing, since that date, except as set forth on Schedule 3.6 :

 

(a) none of the Sellers has sold, leased, transferred, or assigned any material asset that would be included within the definition of Acquired Assets, other than assets disposed of in the Ordinary Course of Business;

 

(b) none of the Sellers has entered into any Material Contract relating to the Ringtail Business outside the Ordinary Course of Business;

 

(c) no Seller, and to each Seller’s Knowledge no other party thereto, has accelerated, terminated, made material modifications to, or cancelled any Material Contract relating to the Ringtail Business;

 

(d) none of the Sellers has imposed any Security Interest upon any of the Acquired Assets;

 

(e) none of the Sellers has made any capital expenditures in excess of $50,000 relating to the Ringtail Business outside the Ordinary Course of Business;

 

(f) none of the Sellers has granted any license or sublicense of any material rights under or with respect to any Intellectual Property outside the Ordinary Course of Business;

 

(g) none of the Sellers has experienced any material damage, destruction, or loss (whether or not covered by insurance) to the Acquired Assets;

 

(h) none of the Sellers has made any loan to, or entered into any other transaction with, any of the Ringtail Employees outside the Ordinary Course of Business;

 

(i) none of the Sellers has granted any material increase in the compensation of any of the Ringtail Employees outside the Ordinary Course of Business;

 

(j) none of the Sellers has made any other material change in employment terms for any of the Ringtail Employees outside the Ordinary Course of Business; and

 

(k) none of the Sellers has committed to any of the foregoing in the future.

 

Section 3.7 Undisclosed Liabilities. None of the Sellers has any known material liability (whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including any liability for Taxes), except for (a) liabilities set forth on the face of the Most Recent Financial Statements (rather than solely in any note thereto); (b) liabilities of the same type set forth on the Most Recent Financial Statements (rather than solely in any note thereto) that have arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business, other than Legal Claims; and (c) the Assumed Liabilities and liabilities under the Excluded Contracts.

 

Section 3.8 Legal Compliance. Each of the Sellers has complied with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of all Governmental Bodies, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been threatened, filed or commenced against any of the Sellers alleging any failure so to comply, except where the failure to comply would not have a Material Adverse Effect on the Ringtail Business.

 

Section 3.9 Tax Matters.

 

(a) Each Seller, and any consolidated, combined, unitary or aggregate group for Tax purposes of which any Seller is or has been a member, has timely (taking into account extensions of time to file) filed Tax Returns required to be filed by it, and all such Tax Returns were true, correct and complete. Each Seller and each such group has paid all Taxes shown on such Tax Returns or otherwise due. Each Seller has provided adequate accruals (without taking into account any reserve for deferred taxes) in the Most Recent Financial Statements for any Taxes that have not been paid, whether or not shown as being due on any Tax Returns. Other than Taxes incurred in the Ordinary Course of Business, no Seller has any liability for unpaid Taxes accruing after the date of the Most Recent Financial Statements.

 

(b) None of the Acquired Assets is subject to any liens for Taxes, other than liens for Taxes not yet due and payable.

 

(c) Except as set forth in Schedule 3.9 , no audit of any Tax Returns of any Seller is being conducted or, to the Knowledge of any Seller, threatened by a Governmental Body.

 

(d) Except as set forth on Schedule 3.9 , no extensions of the statute of limitations on the assessment of any Taxes has been granted by any Seller and is currently in effect.

 

(e) No agreement, contract or arrangement to which RSI is a party may result in the payment of any amount that would not be deductible by reason of Section 280G or Section 407 of the Code.

 

(f) No Seller is or has ever been a party to any tax sharing or tax allocation agreement, nor does any Seller have any liability or potential liability to another person under such agreement.

 

(g) Except as set forth on Schedule 3.9 , no Governmental Body has raised in writing any issue with respect to Taxes which, by application of similar principles, could result in the issuance of a notice of deficiency or similar notice of intention to assess Taxes by any Governmental Body or other taxing authority.

 

(h) All transactions between two or more Sellers, or between any Seller and any person related to, or under common control with, such Seller, have complied with all applicable rules of law with respect to transfer pricing, except where the failure to comply would not have a Material Adverse Effect.

 

Section 3.10 Intellectual Property.

 

(a) The term “Intellectual Property” means, collectively, the following and all worldwide rights, title and interests in and to the following:

 

(1) inventions, invention disclosures, designs, algorithms, mask works, and other industrial property, and all enhancements and improvements thereto, whether patentable or unpatentable and whether or not reduced to practice, and all patent rights in connection therewith (including all U.S. and foreign patents, patent applications, patent disclosures, mask works, and all divisions, continuations, continuations-in-part, reissues, re-examinations, and extensions thereof), whether or not any of the foregoing are registered;

 

(2) trademarks, trade names and service marks, trade dress, logos, Internet domain names, and other commercial product or service designations, together with all translations, adaptations, derivations and combinations thereof, and all goodwill and similar value associated with any of the foregoing, and all applications, registrations, and renewals in connection therewith;

 

(3) copyrights (whether or not registered), copyrightable works (including but not limited to computer software, software compilations, databases and similar materials), Moral Rights, and all registrations and applications for registration thereof, as well as rights to renew copyrights;

 

(4) trade secrets (as such are determined under applicable law), know-how and other confidential business information, including technical information, marketing plans, research, designs, plans, methods, techniques, and processes, any and all technology, supplier lists, computer software programs or applications, in both source and object code form, technical documentation of such software programs, statistical models, supplier lists, e-mail lists, inventions, sui generis database rights, databases, compilations, and data, whether in tangible or intangible form and whether or not stored, compiled or memorialized physically, electronically, graphically, photographically or in writing;

 

(5) any and all assets similar to those described in this definition, and any other rights to existing and future registrations and applications for any of the foregoing and all other Intellectual Property Rights in, or relating to, any of the foregoing, including remedies against and rights to sue for past infringements, and rights to damages and profits due or accrued in or relating to any of the foregoing;

 

(6) all web sites, internet addresses, web site domain names and related content and underlying technologies;

 

(7) any and all versions, derivatives, enhancements and improvements of any of the assets described in this definition; and

 

(8) any and all other tangible or intangible proprietary property, information and materials that are or have been used in (including in the development of) the Ringtail Business and/or in any product, technology or process (i) currently being or formerly manufactured, published, marketed or used by any Seller, or (ii) previously or currently under development for possible future manufacturing, publication, marketing or other use by any Seller.

 

(b) Schedule 3.10(b) contains a true and complete list of the Intellectual Property owned (the “Owned Intellectual Property” ) that comprises the Ringtail Intellectual Property and the Ringtail Software Programs or that is licensed by each Seller (the “Licensed Intellectual Property” ), and includes (specifying by Seller and by region) details regarding the ownership of such Owned Intellectual Property and all known due dates for further filings, maintenance and other payments or other actions falling due in respect of the Owned Intellectual Property within 12 months following the Closing Date, and the current status of all corresponding registrations, filings, applications and payments, and all inventions for which a patent application has not been

 

filed. All of the registrations, applications and similar filings arising from or relating to the Owned Intellectual Property included in the Acquired Assets (the “ Intellectual Property Registrations ”) are listed in Schedule 3.10(b) ; all Intellectual Property Registrations are and remain valid and subsisting, in good standing, with all fees, payments and filings due as of the Closing Date duly made, and the due dates specified on Schedule 3.10(b) are accurate and complete in all material respects. To the Knowledge of each Seller, all of the Intellectual Property Registrations are enforceable. The Sellers have delivered to FTI and/or the Buyers correct and complete copies of all of the Intellectual Property Registrations, and have made available for review by FTI and the Buyers correct and complete copies of all other written documentation evidencing ownership and prosecution (if applicable) of each of the foregoing. The Sellers have made all other registrations relating to the Ringtail Business which were required to have been made and are in good standing with respect to such registrations with all fees due as of the Closing duly made.

 

(c) Each of the Ringtail Intellectual Property and the Ringtail Software Programs consists solely of items and rights which are: (i) owned exclusively by the Sellers, free and clear of any Security Interest; (ii) in the public domain; or (iii) rightfully used by the Sellers pursuant to a valid license, sublicense, consent or other similar written agreement. The parties and date of each such agreement are set forth on Schedule 3.10(c) . The Ringtail Intellectual Property and the Ringtail Software Programs constitute all of the material Intellectual Property used in or necessary to conduct the Ringtail Business (and as to be used in or conducted in connection with currently contemplated upgrades or new versions of any of the Ringtail Intellectual Property or the Ringtail Software Programs). The Sellers have all rights in the Ringtail Intellectual Property and the Ringtail Software Programs necessary and sufficient to carry out each Seller’s current activities and proposed activities (and had all rights necessary to carry out its former activities at the time such activities were being conducted), including and to the extent required to carry out such activities, rights to make, use, reproduce, modify, adapt, create derivative works based on, translate, distribute (directly and indirectly), transmit, display and perform publicly, license, rent and lease and, as applicable, assign and sell, the Intellectual Property. The Sellers have delivered correct and complete copies of all material agreements related to the Ringtail Intellectual Property and the Ringtail Software Programs to FTI and/or the Buyers, including with respect to any Licensed Intellectual Property, and, as applicable, have made available for review correct and complete copies of all other written documentation evidencing that the Sellers have the necessary and sufficient rights in each of the foregoing.

 

The Sellers also have identified in Schedule 3.10(c) all material agreements under which the Sellers have licensed or otherwise granted rights in or to any Ringtail Intellectual Property and/or any Ringtail Software Program to any third party, and has separately identified: (1) any exclusive rights granted by or agreed to by the Sellers, and (2) agreements to which the Sellers grant another party the right to use, market or otherwise exploit or commercialize any of the Owned Intellectual Property or related products or services. The Sellers have not breached any of the agreements referenced in this Section, and to none of the Seller’s Knowledge, no other party to those agreements has breached any of those agreements.

 

Except as set forth on Schedule 3.10(c) , no Ringtail Intellectual Property or Ringtail Software Program was developed using government or university funding or facilities; neither was it obtained from any government or university. Except as set forth on Schedule 3.10(c) , no Ringtail Intellectual Property or Ringtail Software Program includes any software of the type commonly referred to as “open source” (including without limitation, software licensed or distributed under any of the following or similar licenses or distribution models: GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL); The Artistic License ( e.g. PERL); the Mozilla Public License; the Netscape Public License; the Sun Community Source License (SCSL); the Sun Industry Standards License; and any other licenses approved by the Open Source Initiative).

 

(d) None of the Sellers has infringed upon or misappropriated any Intellectual Property Rights or personal right of any person anywhere in the world, and to each Seller’s Knowledge, there is no basis for such a claim to be made. No claims or written notice (i) challenging the validity, effectiveness or ownership by the Sellers of any of the Ringtail Intellectual Property or the Ringtail Software Programs, or (ii) to the effect that the use, distribution, licensing, sublicensing, sale or any other exercise of rights in any product, service, work, technology or process as now used or offered or proposed for use, licensing, sublicensing, sale or other manner of commercial exploitation by the Sellers infringes or will infringe on any Intellectual Property Rights or personal right of any person have been asserted or, to any Seller’s Knowledge, are threatened by any person, nor are there, to any Seller’s Knowledge, any valid grounds for any bona fide claim of any such kind. To any Seller’s Knowledge, there is and has been no unauthorized use, infringement or misappropriation of any Ringtail Intellectual Property or Ringtail Software Program by any third party, employee or former employee.

 

(e) Except as identified in Schedule 3.10(e) , the Sellers developed or created all of the Owned Intellectual Property. All personnel (including employees, agents, consultants and contractors), who have contributed to or partici