Exhibit 2.1
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ASSET PURCHASE AGREEMENT
dated as of January 21, 2004
entered into by
eNucleus Inc.
and
Financial ASPx Inc.
and
PrimeWire, Inc.
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Asset Purchase Agreement
This Agreement is entered into as of January 21, 2004 by eNucleus Inc., a
Delaware corporation ("eNucleus"), Financial ASPx Inc., a Delaware corporation
("Buyer"), and PrimeWire, Inc., a Delaware corporation ("PrimeWire").
Recitals
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PrimeWire is engaged in the business of providing employee benefits
administration and information via the Internet (the "Business").
PrimeWire desires to sell, and Buyer desires to purchase, substantially all
the assets of PrimeWire, upon the terms and subject to the condition of this
Agreement.
Now, therefore, in consideration of their mutual promises and intending to
be legally bound, the Parties agree as follows:
Article 1
Definitions
Certain capitalized terms used in this Agreement are defined in Annex I.
Article 2
The Transaction
2.1 Asset Purchase
At Closing, Buyer shall purchase all the Acquired Assets from PrimeWire,
and PrimeWire shall sell and transfer all the Acquired Assets to Buyer, free and
clear of all Liens other than the Permitted Liens, upon the terms and subject to
the conditions of this Agreement.
2.2 Purchase Price
The purchase price for the Acquired Assets (the "Purchase Price") shall
be the sum of: (x) $50,000 (the "Closing Amount") plus (y) the amounts set forth
in Section 2.4 (the "Earnout Amounts").
2.3 Payment
(a) Buyer shall deposit the Closing Amount in escrow with Buyer's counsel,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLC ("CR&M"), upon the execution and delivery of
this Agreement and shall pay, or caused to be paid, the Earnout Amounts to
PrimeWire as provided in Section 2.4. Buyer shall pay, or cause to be paid, the
Closing Amount (at the Closing), the First Year Cash Earnout, the Second Year
Cash Earnout, the Third Year Cash Earnout, the Large License Earnout and the
Online Benefit Payments to PrimeWire by wire transfers of immediately available
funds in accordance with wire transfer instructions that PrimeWire provides by
Notice to Buyer given at least two Business Days prior to the date that the
payment is due.
(b) In the event the Closing of the Contemplated Transaction does not take
place by the Closing Date, CR&M shall, upon demand, promptly repay to eNucleus
the Closing Amount.
2.4 Earnout Amounts
(a) Buyer shall pay PrimeWire in cash an amount (the "First Year Cash
Earnout") equal to 10% of the amount of the Net Revenues for the First
Accounting Year.
(b) eNucleus shall pay PrimeWire an amount (the "First Year Stock Earnout")
equal to15% of the amount of the Net Revenues for the First Accounting Year.
eNucleus shall pay the First Year Stock Earnout to PrimeWire by issuance to
PrimeWire of eNucleus' shares of common stock, .001 par value per share
("eNucleus Common Stock"), based upon the Fair Market Value of the eNucleus
Common Stock on the applicable Valuation Date.
(c) The sum of the First Year Cash Earnout and the First Year Stock Earnout
shall be referred to as the "First Year Earnout". The First Year Earnout shall
be determined and paid as follows:
(1) No later than 45 days after the end of each calendar quarter
during the First Accounting Year, Buyer shall furnish PrimeWire with a
report of Net Revenues for such quarter and its calculation of the proposed
earnout to be paid by Buyer and eNucleus for such quarter (the "Proposed
First Year Earnout to Date"). Concurrently with furnishing such report and
calculation, Buyer and eNucleus shall pay the Proposed First Year Earnout
to Date to PrimeWire as provided above.
(2) If PrimeWire accepts all the Proposed First Year Earnouts to Date
paid for the First Accounting Year, or if it fails to give Notice to Buyer
of any objection within 10 Business Days after receipt of a copy of Buyer's
report and calculation to be provided pursuant to Section 2.4(c)(1), the
Proposed First Year Earnouts to Date paid for such calendar quarters of the
First Accounting Year shall be final and binding (the "Final First Year
Earnout to Date").
(3) If PrimeWire so gives Notice to Buyer of an objection to the
Proposed First Year Earnout to Date within 10 Business Days after receipt
of a copy of Buyer's report and calculation for the applicable calendar
quarter in the First Accounting Year, Buyer and PrimeWire shall attempt in
good faith to resolve their differences. In this regard, Buyer shall make
copies of its workpapers available to PrimeWire and its accounting
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representatives. If Buyer and PrimeWire are able to resolve all their
differences, the Proposed First Year Earnout to Date, as modified to
reflect the Parties' resolution of their differences, shall be the Final
First Year Earnout to Date. Buyer and eNucleus shall pay an amount, in cash
and eNucleus Common Stock, respectively, equal to the amount by which (i)
the Final First Year Earnout to Date exceeds (ii) the Proposed First Year
Earnout to Date by a wire transfer to PrimeWire, or delivery of shares of
eNucleus Common Stock, as the case may be, no later than ten Business Days
after the Final First Year Earnout to Date is determined.
(4) If Buyer and PrimeWire are unable to resolve all their differences
within 20 Business Days after PrimeWire gives Notice to Buyer of an
objection to the Proposed First Year Earnout to Date, Buyer and PrimeWire
shall submit any remaining disputed matters for determination by a mutually
acceptable "Big Four" or regional accounting firm (other than any firm that
eNucleus has used in the past two years). The accounting firm's
determination shall be binding on Buyer and PrimeWire, and the Proposed
First Year Earnout to Date, as modified to reflect (i) those differences,
if any, that the Parties were able to resolve and (ii) the accounting
firm's determination with regard to the remaining disputed matters, shall
be the Final First Year Earnout to Date. Buyer and PrimeWire shall each pay
one-half of the accounting firm's fees and expenses. Buyer and eNucleus
shall pay an amount, in cash and eNucleus Common Stock, respectively, equal
to the amount by which (i) the Final First Year Earnout to Date exceeds
(ii) the Proposed First Year Earnout to Date by a wire transfer to
PrimeWire, or delivery of shares of eNucleus Common Stock, as the case may
be, no later than three Business Days after its receipt of a copy of the
accounting firm's determination of the disputed matters.
(d) The Second Year Earnout and the Third Year Earnout, respectively, shall
be determined and paid in the same manner as the First Year Earnout as described
in Section 2.4(a), (b) and (c) (as if "Second" and "Third", respectively, were
substituted for "First" throughout Section 2.4(a), (b) and (c)).
(e) Notwithstanding Sections 2.4(a), 2.4(b) and 2.4(c):
(1) if the Net Revenues in calendar year 2004 are at least $1,500,000
on an annualized basis, the Third Year Cash Earnout shall be no less than
the difference between (x) $2,000,000 and (y) the sum of the First Year
Cash Earnout, the Second Year Cash Earnout, the Large License Earnout and
the Online Benefit Payments; and the Third Year Stock Earnout shall be no
less than the difference between (x) $1,000,000 of eNucleus Common Stock
and (y) the Fair Market Value of the First Year Stock Earnout plus the
Second Year Stock Earnout (as of their respective Valuation Dates);
(2) if (A) the Net Revenues in calendar year 2004 are less than
$1,500,000 on an annualized basis and (B) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") has
not voluntarily terminated his employment with the Company other than for
Good Reason as of the end of such calendar year, the Third Year Cash
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Earnout shall be no less than the difference between (x) $1,000,000 and (y)
the sum of the First Year Cash Earnout, the Second Year Cash Earnout, the
Large License Earnout and the Online Benefit Payments; and the Third Year
Stock Earnout shall be no less than the difference between (x) $500,000 of
eNucleus Common Stock and (y) the Fair Market Value of the First Year Stock
Earnout plus the Second Year Stock Earnout (as of their respective
Valuation Dates); and
(3) If the total amount of the First Year Earnout, the Second Year
Earnout, the Third Year Earnout, the Large License Earnout and the Online
Benefit Payments is less than $4,000,000, the Third Accounting Year shall
automatically extend for a period equal to the shorter of (i) nine months
or (ii) the period that results in the total amount of the First Year
Earnout, the Second Year Earnout, the Third Year Earnout, the Large License
Earnout and the Online Benefit Payments equaling $4,000,000, and the
calculation of the Third Year Earnout shall include such extended period.
(f) Buyer shall pay to PrimeWire by April 30, 2004 an advance against the
First Year Cash Earnout which shall be used by PrimeWire to pay in full
PrimeWire's outstanding debt of approximately $282,000 to the holders of those
certain Convertible Promissory Notes, issued July 25, 2003 and due June 30,
2004.
(g) In addition to the First Year Earnout, the Second Year Earnout and the
Third Year Earnout calculated pursuant to Sections 2.4(a), 2.4(b), 2.4(c) and
2.4(d), Buyer shall pay PrimeWire in cash an amount (the "Large License
Earnout") equal to 7% of Net Revenues generated by Large License Deals that are
executed on or before the last day of the First Accounting Year. The Large
License Earnout shall be paid during the term of each Large License Deal through
the First Accounting Year, the Second Accounting Year and the Third Accounting
Year. The Large License Earnout shall be determined and paid as follows:
(1) No later than 45 days after the end of each calendar quarter,
Buyer shall furnish PrimeWire with a report of Net Revenues from Large
License Deals for such quarter and its calculation of the proposed Large
License Earnout to be paid by Buyer and eNucleus for such quarter (the
"Proposed Large License Earnout"). Concurrently with furnishing such report
and calculation, Buyer and eNucleus shall pay the Proposed Large License
Earnout to PrimeWire as provided above.
(2) If PrimeWire accepts the Proposed Large License Earnout paid for
such quarter, or if it fails to give Notice to Buyer of any objection
within 10 Business Days after receipt of a copy of Buyer's report and
calculation to be provided pursuant to Section 2.4(g)(1), the Proposed
Large License Earnout paid for such quarter shall be final and binding (the
"Final Quarterly Large License Earnout").
(3) If PrimeWire so gives Notice to Buyer of an objection to the
Proposed Large License Earnout within 10 Business Days after receipt of a
copy of Buyer's report and calculation for such quarter, Buyer and
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PrimeWire shall attempt in good faith to resolve their differences. In this
regard, Buyer shall make copies of its workpapers available to PrimeWire
and its accounting representatives. If Buyer and PrimeWire are able to
resolve all their differences, the Proposed Large License Earnout, as
modified to reflect the Parties' resolution of their differences, shall be
the Final Quarterly Large License Earnout. Buyer shall pay an amount equal
to the amount by which (i) the Final Quarterly Large License Earnout
exceeds (ii) the Proposed Large License Earnout by a wire transfer to
PrimeWire no later than ten Business Days after the Final Quarterly Large
License Earnout is determined.
(h) In addition to the First Year Earnout, the Second Year Earnout, the
Third Year Earnout and the Large License Earnout calculated pursuant to Sections
2.4(a), 2.4(b), 2.4(c), 2.4(d) and 2.4(g), and further to establish the priority
of the security interest granted Seller pursuant to Section 2.4(m), Buyer shall
direct Online Benefits, Inc. to pay directly to PrimeWire the first $300,000 in
payments (the "Online Benefit Payments") due under any source code license which
Buyer or Seller may enter with Online Benefits, Inc. (the "Online Benefits
Agreement").
(i) The Parties agree and acknowledge that the Net Revenues generated from
the Online Benefits Agreement will not be included in the determination of Net
Revenues for purposes of calculating any other Earnout Amounts hereunder.
(j) Any payments due and payable hereunder from Buyer shall accrue interest
at the rate of 8% per annum from and after the 30th day from the date such
payment is due and payable.
(k) PrimeWire and an accounting firm selected by PrimeWire shall have the
right, during business hours upon prior reasonable notice to Buyer, to audit any
statements of the Earn Out Amounts delivered by Buyer and, in connection with
such audit, to examine Buyer's Books and Records as they relate to the Earn Out
Amounts.
(l) The Parties acknowledge that the shares of eNucleus Common Stock to be
issued pursuant to this Section 2.4 are not and will not be registered under the
Securities Act of 1933 as amended (the "Act") and all stock certificates will
contain the following restrictive legend which will prohibit public sale, except
pursuant to a public registration under the Act or an exemption therefrom:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act"), and are
"restricted securities" as that term is defined in Rule 144 under
the Act. The shares may not be offered for sale, sold or
otherwise transferred, except pursuant to an effective
registration statement under the Act or pursuant to an exemption
from registration under the Act."
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(m) As security for the payment obligations of Buyer and eNucleus under
this Section 2.4, and to fund the Operating Budget as set forth in Section 3.2
(c)(3), Buyer shall grant to PrimeWire at Closing a security interest in the
Acquired Assets and in payments, if there be any, with respect to the Online
Benefits Agreement, which, other than the Permitted Liens, shall be a
first-in-priority security interest. If Buyer or eNucleus fails to fully fund
the Operating Budget on a year to date basis for the first six months after
Closing, within 10 days of the date such amounts are to be so funded, for any
reason other than an Overriding Event, such action shall constitute an event of
default under this Agreement and PrimeWire, or an assignee of the right under
this Section 2.4, shall have the right to demand and receive a transfer back of
the Acquired Assets (and any source code license with Online Benefits, Inc.) and
PrimeWire alone will own any improvements to Acquired Assets and not owe any
payment to Buyer or eNucleus. Notwithstanding the foregoing, no payment default
under this Section 2.4 by Buyer or eNucleus shall be deemed to have occurred if
PrimeWire and eNucleus and/or Buyer have a bona-fide, good faith dispute as to
whether some or all of the Earnout Amounts are due and payable.
2.5 Liabilities
The following provisions shall apply in respect of Buyer's assumption of
PrimeWire's Liabilities:
(a) Buyer shall assume only the following Liabilities of PrimeWire (the
"Assumed Liabilities"):
(1) Assumed Contract Obligations; and
(2) any other Liabilities that Buyer, in its sole discretion,
specifically elects to accept and confirms its acceptance in writing at
Closing.
(b) With the sole exception of the Assumed Liabilities, Buyer shall not
assume any Liabilities of PrimeWire of any kind. All Liabilities of PrimeWire
not specifically assumed by Buyer pursuant to Section 2.5(a) are collectively
referred to herein as the "Excluded Liabilities". PrimeWire shall as promptly as
possible discharge, pay and perform all the Excluded Liabilities; provided,
however that PrimeWire shall have the right to contest, in good faith, the
existence or maturity of any of the Excluded Liabilities.
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2.6 No Expansion of Third Party Rights
The assumption by Buyer of the Assumed Liabilities shall not expand the
rights or remedies of any third party against Buyer or PrimeWire.
Article 3
Closing
3.1 Closing
The closing ("Closing") of the Contemplated Transaction shall take place on
January 30, 2004 at 10:00 a.m., at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, or on such earlier date
or at such other time and place as the Parties may agree in writing (the date of
Closing shall be referred to as the "Closing Date"). The Parties agree that the
delivery of executed documents at Closing may be made by facsimile with delivery
of the originals the next two Business Days by overnight courier service.
3.2 Closing Events
At Closing, the following events shall take place, all of which shall be
considered to take place concurrently:
(a) Deliveries by PrimeWire
PrimeWire shall make the following deliveries:
(1) PrimeWire shall deliver to Buyer a ▇▇▇▇ of sale and assignment,
together with such other instruments of assignment and conveyance as Buyer
reasonably requests, transferring and conveying the Acquired Assets to
Buyer;
(2) PrimeWire shall deliver to Buyer an Officer's Certificate
certifying to Buyer and eNucleus that:
(A) the representations and warranties of PrimeWire in Article 4,
as qualified or limited by any exceptions in the Schedules to Article
4, were true and correct in all material respects as of the date of
this Agreement;
(B) the representations and warranties of PrimeWire in Article 4,
as qualified or limited by any exceptions in the Schedules to Article
4, are true and correct in all material respects on the Closing Date
as if made at and as of Closing;
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(C) PrimeWire has performed, complied with or satisfied in all
material respects all the obligations, agreements and conditions under
this Agreement that it is required to perform, comply with or satisfy
prior to or at Closing; and
(D) resolutions in the form attached to the Officer's Certificate
were duly adopted by the board of directors of PrimeWire and by the
stockholders of PrimeWire to authorize its execution, delivery and
performance of this Agreement;
(3) PrimeWire shall deliver an assignment in form recordable in the
U.S. Patent and Trademark Office of the trademark "PrimeWire," Reg. No.
2335608 from its wholly owned subsidiary, Prime Financial Group, Inc.;
(4) PrimeWire shall deliver to Buyer an Officer's Certificate
containing a specimen signature or signatures of the Authorized Officer or
Officers signing PrimeWire's Closing Documents;
(5) PrimeWire shall deliver to Buyer an opinion of its counsel,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP; and
(6) PrimeWire shall deliver to Buyer any other documents and
instruments that Buyer or its counsel reasonably requests.
(b) Wire Transfers and Deliveries by Buyer
Buyer shall make the following wire transfers, payments and
deliveries:
(1) Buyer shall deliver to PrimeWire an assumption agreement
confirming Buyer's assumption of the Assumed Liabilities;
(2) Buyer shall deliver to PrimeWire an Officer's Certificate, joined
in by eNucleus, certifying to PrimeWire that:
(A) the representations and warranties of Buyer and eNucleus in
Article 5 were true and correct in all material respects as of the
date of this Agreement;
(B) the representations and warranties of Buyer and eNucleus in
Article 5 are true and correct in all material respects on the Closing
Date as if made at and as of Closing;
(C) Buyer and eNucleus have performed, complied with or satisfied
in all material respects all the obligations, agreements and
conditions under this Agreement that each is required to perform,
comply with or satisfy prior to or at Closing; and
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(D) resolutions in the form attached to the Officer's Certificate
were duly adopted by the board of directors of Buyer and eNucleus,
respectively, to authorize the execution, delivery and performance of
this Agreement;
(3) Buyer shall deliver to PrimeWire an Officer's Certificate
containing a specimen signature or signatures of the Authorized Officer or
Officers signing Buyer's and eNucleus' Closing Documents;
(4) Buyer shall deliver to PrimeWire a security agreement granting a
security interest in the Acquired Assets;
(5) eNucleus shall deliver to PrimeWire a guaranty of the performance
and payment by Buyer of its obligations hereunder;
(6) Buyer and eNucleus shall deliver to PrimeWire an opinion of its
counsel, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLC; and
(7) Buyer shall deliver to PrimeWire any other documents and
instruments that PrimeWire or its counsel reasonably requests.
(c) Additional Agreements and Actions.
At the Closing:
(1) Buyer and ▇▇▇▇▇▇ shall enter into an employment agreement mutually
agreeable to Buyer and ▇▇▇▇▇▇ in substantially the form attached hereto as
Exhibit A;
(2) Buyer shall have the right but not the obligation to hire any
other employee of PrimeWire upon terms and conditions acceptable to Buyer
in its sole discretion;
(3) Buyer, eNucleus and PrimeWire shall approve in writing the
operating budget of Buyer for the 12 month period following the Closing
Date (the "Operating Budget"). Subject to an Overriding Event, Buyer agrees
to fully fund the Operating Budget on a year to date basis; and
(4) eNucleus and PrimeWire shall enter into a registration rights
agreement mutually agreeable to the Parties in substantially the form
attached hereto as Exhibit B.
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(d) Closing Documents
All Closing Documents delivered at Closing pursuant to Sections 3.2(a), (b)
and (c) shall be in form and substance reasonably satisfactory to both the
delivering and receiving Parties and their respective counsel.
(e) Future Deliveries
PrimeWire agrees to deliver to Buyer following the Closing any additional
documents or instruments that Buyer reasonably requests in order to evidence and
confirm the sale and transfer of the Acquired Assets and the other transactions
under or pursuant to this Agreement. Buyer and eNucleus agree to deliver to
PrimeWire following the Closing any additional documents or instruments that
PrimeWire reasonably requests in order to evidence and confirm the sale and
transfer of the Acquired Assets and the other transactions under or pursuant to
this Agreement.
Article 4
Representations and Warranties
of PrimeWire and
In order to induce Buyer and eNucleus to enter into this Agreement,
PrimeWire represents and warrants to Buyer and eNucleus that the statements in
this Article 4 are true and correct as of the date of this Agreement, and will
be true and correct on the Closing Date as if made at and as of Closing, except
to the extent that any statement in this Article 4 is qualified or limited by an
exception in a Schedule:
4.1 Authorization
(a) PrimeWire has the full corporate power and authority to execute and
deliver this Agreement and each of its Closing Documents and to perform its
obligations under this Agreement and each of its Closing Documents. PrimeWire's
execution, delivery and performance of this Agreement and each of its Closing
Documents has been duly authorized by all necessary corporate action required by
its Organizational Documents.
(b) This Agreement constitutes, and upon PrimeWire's execution and delivery
of its Closing Documents (and assuming execution and delivery by the other party
or parties, if any), each of PrimeWire's Closing Documents will constitute, a
legal, valid and binding obligation of PrimeWire enforceable against it in
accordance with its terms, except as enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
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4.2 Organization and Ownership
(a) PrimeWire is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware, with full corporate power and
authority to conduct its Business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform its
obligations under all Contracts.
(b) PrimeWire is duly qualified to do business as a foreign corporation and
is in good standing under the Laws of each state or other jurisdiction in which
qualification is required by applicable Law and where failure to so qualify
would result in a Material Adverse Effect.
(c) PrimeWire has delivered copies to Buyer of its Organizational
Documents.
4.3 No Violation
Except as disclosed on Schedule 4.3, PrimeWire's execution, delivery and
performance of this Agreement, and the consummation the Contemplated
Transaction, will not, either directly or indirectly (and with or without Notice
or the passage of time or both):
(a) violate or conflict with any of its Organizational Documents or any
resolution adopted by its board of directors or by its stockholders;
(b) result in a Default under any Customer Contract or other Contract to
which it is a party or by which it is bound;
(c) result in the imposition or creation of a Lien upon any of the assets
that it owns or uses;
(d) violate or conflict with, or give any Governmental Authority or other
Person the right to challenge the Contemplated Transaction or to obtain any
other relief under, any Law or Order to which it is subject;
(e) violate or conflict with, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Permit that it
holds; or
(f) cause it to become subject to or liable for the payment of any Tax.
4.4 Consents
Except as disclosed on Schedule 4.4, PrimeWire's execution, delivery and
performance of this Agreement and each of its Closing Documents does not require
any Notice to, filing with, Permit from or other Consent of any Governmental
Authority or other Person.
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4.5 Financial Statements
(a) Except as disclosed on Schedule 4.5(a), the Financial Statements fairly
present in all material respects the financial position and results of
operations of PrimeWire as of the dates indicated and for the periods then
ended, in conformity with GAAP applied on a consistent basis.
(b) Except as disclosed on Schedule 4.5(b), the Interim Financial
Statements fairly present in all material respects the financial position and
results of operations of PrimeWire as of December 31, 2003, in conformity with
GAAP applied on a basis consistent with the Financial Statements, subject to
normal year-end adjustments and to the lack of footnotes and other presentation
items (none of which, either individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect).
(c) PrimeWire has delivered copies to Buyer of the Financial Statements and
Interim Financial Statements.
4.6 Books and Records
PrimeWire's Books and Records are complete and correct in all material
respects and have been maintained in accordance with sound business practices.
4.7 Title to Assets
(a) PrimeWire owns or has a license or a leasehold interest in all the
tangible and intangible assets of any type or kind that it purports to own,
license or lease.
(b) Except as disclosed on Schedule 4.7(b), PrimeWire has good and
marketable title to all its assets, free and clear of any Liens other than
Permitted Liens.
(c) PrimeWire's assets constitute, collectively, all the tangible and
intangible assets relating to or used, held for use or useful in the conduct of
the Business and are sufficient to enable the Business to be operated in the
same manner that it is currently operated.
4.8 Accounts Receivable
Except as disclosed in Schedule 4.8, PrimeWire's Accounts Receivable
represent valid obligations and have arisen solely out of bona fide sales and
deliveries of goods, performance of services and other business transactions in
the Ordinary Course of Business, are not subject to valid defenses, set-off or
counterclaims, and are collectible in full at their recorded amounts.
4.9 Equipment and Vehicles
(a) Schedule 4.9(a) consists of two subschedules containing complete and
accurate lists of the following assets owned by PrimeWire as of the date of this
Agreement:
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(1) all Equipment, identifying each piece of Equipment by description
and location (Schedule 4.9(a)(1)); and
(2) all Vehicles, identifying each Vehicle by make, year, model and
location (Schedule 4.9(a)(2)).
(b) Except as disclosed in Schedule 4.9(b), each piece of Equipment or
Vehicle listed on Schedule 4.9(a), (i) has been maintained in accordance with
normal industry practice, (ii) is in good operating condition and repair (except
for normal wear and tear), (iii) is free from patent defects other than minor
defects that do not interfere with its continued use and (iv) is suitable for
the purposes for which it is currently used.
4.10 Inventory
Except as disclosed in Schedule 4.10, PrimeWire's Inventory is fit for the
purpose for which it was purchased and is not obsolete, damaged or defective.
4.11 Real Property
PrimeWire does not own any Real Property.
4.12 Contracts
(a) Schedule 4.12(a) consists of 15 subschedules containing complete and
accurate lists of the following Contracts of PrimeWire as of the date of this
Agreement:
(1) all Customer Contracts (Schedule 4.12(a)(1));
(2) all Facility Leases (Schedule 4.12(a)(2));
(3) all Equipment Leases (Schedule 4.12(a)(3));
(4) all Vehicle Leases (Schedule 4.12(a)(4));
(5) all Contracts (or series of related Contracts) for the purchase or
sale of raw materials, parts, supplies, products or other personal
property, or for the furnishing or receipt of services other than
PrimeWire's providing services to customers, the performance of which will
extend over a period of more than one year or involve payments in an amount
exceeding $10,000 (Schedule 4.12(a)(5));
(6) all Contracts with lenders evidencing or securing any loan or
other Liability (Schedule 4.12(a)(6));
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(7) all Contracts with any Related Party (Schedule 4.12(a)(7));
(8) all Contracts by which PrimeWire has guaranteed the contractual
performance of or any payment by another Person (Schedule 4.12(a)(8);
(9) all powers of attorney and other Contracts by which PrimeWire has
authorized another Person to act as its attorney-in-fact or agent (Schedule
4.12(a)(9));
(10) all Contracts creating a partnership or joint venture with
another Person or involving a sharing of profits, losses, costs or
Liabilities with another Person (Schedule 4.12(a)(10));
(11) all Contracts that restrict or purport to restrict the
geographical area or scope of PrimeWire's business activities or that
restrict the geographical area or scope of business activities of another
Person for PrimeWire's benefit (Schedule 4.12(a)(11));
(12) all Contracts granting a right of first refusal or first
negotiation (Schedule 4.12(a)(12));
(13) all Contracts relating to employment, employee compensation,
termination of employment or consulting services that are not terminable at
will by PrimeWire (Schedule 4.12(a)(13));
(14) all Contracts relating to the license of, or the payment of a
royalty for the use of, any Software or Intangible (Schedule 4.12(a)(14));
and
(15) all Contracts (or series of related Contracts) entered into
outside of the Ordinary Course of Business and involving the expenditure or
receipt by any party of an amount exceeding $10,000 (Schedule 4.12(a)(15)).
(b) Except as disclosed in Schedule 4.12(b), each Contract listed on
Schedule 4.12(a) is legal, valid, binding and enforceable in accordance with its
terms by PrimeWire, (ii) is in full force and effect, (iii) may be assigned to
Buyer by PrimeWire and (iv) when so assigned at Closing, will remain in full
force and effect on identical terms and will be enforceable by Buyer in
accordance with its terms.
(c) Except as disclosed in Schedule 4.12(c), and, in the case of a Facility
Lease, except for any landlord's or other statutory lien incidental to the
Ordinary Course of Business, PrimeWire's interest in each Contract listed on
Schedule 4.12(a) is free and clear of any Liens.
(d) Except as disclosed in Schedule 4.12(d):
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(1) (i) neither PrimeWire nor, to the Knowledge of PrimeWire, no other
party to a Contract listed on Schedule 4.12(a) is in Default in a material
respect under the Contract, and (ii) no event has occurred or circumstance
exists (other than a provision in a Contract that permits a party to
terminate the Contract solely by giving Notice) that (with or without
Notice or the passage of time or both) could result in a Default in a
material respect under a Contract listed on Schedule 4.12(a) or could give
any party to a Contract listed on Schedule 4.12(a) the right to exercise
any remedy under the Contract or to cancel, terminate or modify the
Contract;
(2) PrimeWire has not given Notice to or received Notice from any
other Person relating to an alleged, possible or potential Default under
any Contract listed on Schedule 4.12(a);
(3) each Customer Contract listed on Schedule 4.12(a)(1) has been
entered into by PrimeWire in the Ordinary Course of Business and without
the commission of any act, either alone or in concert with any other
Person, and without any consideration having been paid or promised, that is
or would be in violation of any Law or Order; and
(4) each piece of Equipment leased under an Equipment Lease listed on
Schedule 4.12(a)(3) and each Vehicle leased under a Vehicle Lease listed on
Schedule 4.12(a)(4) (i) has been maintained in accordance with normal
industry practice, (ii) is in good operating condition and repair (except
for normal wear and tear), (iii) is free from patent defects other than
minor defects that do not interfere with its continued use and (iv) is
suitable for the purposes for which it is currently used.
(e) PrimeWire has delivered to Buyer (i) copies of all written Contracts
listed on Schedule 4.12(a), (ii) a written description of all oral Contracts, if
any, listed on Schedule 4.12(a), (iii) copies of all written amendments or
modifications of or supplements to the Contracts listed on Schedule 4.12(a) and
(iv) a written description of all oral amendments or modifications of or
supplements to the Contracts listed on Schedule 4.12(a), if any.
4.13 Software and Other Intangibles
(a) Schedule 4.13(a) contains two subschedules:
(i) a complete and accurate list and description of all Software and
other Intangibles (other than Proprietary Information) owned, marketed,
licensed, supported, maintained, used or under development by PrimeWire
(including, in the case of Software, a product description, the language in
which it is written and the type of hardware platform or platforms on which
it runs) (Schedule 4.13(a)(1)); and
(ii) a complete and accurate list of all licenses, sublicenses and
other Contracts covering or relating to any of PrimeWire's Intangibles
(Schedule 4.13(a)(2)).
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(b) Except as disclosed on Schedule 4.13(b), PrimeWire has good and
marketable title to all its Intangibles, free and clear of any Liens other than
Permitted Liens. No rights of any third party are necessary to market, license,
sell, modify or update PrimeWire's Software and other Intangibles.
(c) Except as disclosed on Schedule 4.13(c), all of PrimeWire's Software
was created as a "work for hire" (as defined under U.S. copyright Law) by
regular full-time employees of PrimeWire. To the extent that any author or
developer was not a regular full-time employee of PrimeWire at the time that he
or she contributed to PrimeWire's Software, the author or developer has
irrevocably assigned to PrimeWire in writing all copyrights and other
proprietary rights in his or her work in respect of PrimeWire's Software.
(d) In respect of the Software listed on Schedule 4.13(a)(1), PrimeWire
maintains machine-readable master-reproducible copies, source code listings,
technical documentation and user manuals for the current releases or versions
and for all earlier releases or versions that PrimeWire currently supports. In
each case, the machine-readable copy substantially conforms to the corresponding
source code listing; is written in the language described on Schedule 4.13(a)(1)
for use on the hardware listed with standard operating systems; and can be
maintained and modified by reasonably competent programmers.
(e) None of PrimeWire's Intangibles, or their past or current uses,
including their preparation, distribution, marketing or licensing, has violated
or infringed upon, or is violating or infringing upon, any Software, ▇▇▇▇,
Copyright or Proprietary Information of any other Person, and to the Knowledge
of PrimeWire, none of PrimeWire's Intangibles, or their past or current uses,
including their preparation, distribution, marketing or licensing, has violated
or infringed upon, or is violating or infringing upon, any Patent of any other
Person. None of PrimeWire's Intangibles is subject to any Order. No Suit is
pending or Threatened, nor has any claim or demand been made, that challenges or
challenged the legality, validity, enforceability, use or exclusive ownership by
PrimeWire of any of PrimeWire's Intangibles. To the Knowledge of PrimeWire, no
Person is violating or infringing upon, or at any time has violated or infringed
upon, any of PrimeWire's Intangibles.
(f) PrimeWire has adequately maintained all Copyrights and trade secrets
and other Proprietary Information in respect of PrimeWire's Intangibles. Except
as set forth on Schedule 4.13(f), PrimeWire has not disclosed or delivered to
any escrow agent or other Person, or permitted the disclosure to any escrow
agent or other Person of, the source code (or any aspect or portion of the
source code) for or relating to any past, present or future product of
PrimeWire.
(g) Except as disclosed on Schedule 4.13(g), in respect of each license,
sublicense or other Contract listed on Schedule 4.13(a)(2):
(1) (i) the Contract is legal, valid, binding and enforceable in
accordance with its terms by and against PrimeWire, (ii) the Contract is in
full force and effect, (iii) PrimeWire's interest in the Contract may be
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assigned to Buyer and (iv), when so assigned at Closing, the Contract will
remain in full force and effect on identical terms and will be enforceable
by Buyer in accordance with its terms;
(2) neither PrimeWire nor, to the Knowledge of PrimeWire, no other
party to the Contract is in Default in a material respect under the
Contract, and no event has occurred or circumstance exists (other than a
provision in the Contract that permits a party to terminate the Contract
solely by giving Notice) that (with or without Notice or the passage of
time or both) could result in a Default in a material respect under the
Contract or could give any party to the Contract the right to exercise any
remedy under the Contract or to cancel, terminate or modify the Contract;
and
(3) PrimeWire has not given Notice to or received Notice from any
other Person relating to an alleged, possible or potential Default under
the Contract.
(h) No Suit is pending or is being or has been Threatened that challenges
the legality, validity, enforceability or ownership of any license, sublicense
or other Contract covering or relating to any of PrimeWire's Intangibles.
(i) Except for demonstration or trial copies, no portion of any of
PrimeWire's Intangibles contains any "back door," "time bomb," "Trojan horse,"
"worm," "drop dead device," "virus" or other software routines or hardware
components designed to permit unauthorized access or to disable or erase
software, hardware, or data without the consent of the user.
(j) There is no Law or Order prohibiting or restricting the use of any of
PrimeWire's Seller Intangibles in any jurisdiction or on the export or import of
any of PrimeWire's Intangibles from or to any jurisdiction.
(k) PrimeWire has delivered to Buyer (i) copies of all written Contracts
listed on Schedule 4.13(a)(1) and (ii) copies of all written amendments or
modifications of or supplements to the Contracts listed on Schedule 4.13(a)(1).
4.14 Permits
(a) Schedule 4.14(a) contains a complete and accurate list of all Permits
held by PrimeWire as of the date of this Agreement.
(b) Except as disclosed in Schedule 4.14(b):
(1) all Permits listed on Schedule 4.14(a) are valid and in full force
and effect, and no other Permits are required for the lawful conduct of the
Business as it is currently conducted;
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(2) PrimeWire has conducted the Business in all material respects in
compliance with the applicable Permits listed on Schedule 4.14(a);
(3) no event has occurred or, to the Knowledge of PrimeWire,
circumstance exists that (with or without Notice or the passage of time or
both) could (i) constitute or result in a violation of or failure to comply
with any Permit listed on Schedule 4.14(a) or (ii) result in the
revocation, withdrawal, suspension, cancellation, termination (other than
on the normal termination or expiration date) or material modification of
any Permit listed;
(4) PrimeWire has not received Notice from any Governmental Authority
or other Person regarding (i) any actual, alleged or potential violation of
or failure to comply with any applicable Permit listed on Schedule 4.14(a)
or (ii) any actual, proposed or potential revocation, withdrawal,
suspension, cancellation, termination or modification of any Permit listed;
and
(5) PrimeWire has duly filed on a timely basis all applications that
were required to be filed for the renewal of the applicable Permits listed
on Schedule 4.14(a), and has duly made on a timely basis all other filings
required to have been made in respect of the applicable Permits listed.
(c) PrimeWire has delivered copies to Buyer of all Permits listed on
Schedule 4.14(a).
4.15 Undisclosed Liabilities
Except as disclosed on Schedule 4.15, as of the date of this Agreement,
PrimeWire does not have, and as of Closing PrimeWire will not have, any
Liabilities except for (i) Liabilities reflected on the balance sheet contained
in the Interim Financial Statements and (ii) Liabilities that have arisen since
December 31, 2003 in the Ordinary Course of Business.
4.16 Taxes
(a) PrimeWire has filed all Tax Returns that it was required to file prior
to the date of this Agreement and will timely file all Tax Returns that it may
be required to file on or after the date of this Agreement and prior to the
Closing Date as set forth in Schedule 4.16(a). All Tax Returns that PrimeWire
filed prior to the date of this Agreement were correct and complete in all
material respects, and all Taxes due in connection with these returns have been
paid. All Tax Returns that PrimeWire files on or after the date of this
Agreement and prior to the Closing Date will be correct and complete in all
material respects, and all Taxes due in connection with these returns will be
paid when due.
(b) To the Knowledge of PrimeWire, no Tax Return that PrimeWire filed prior
to the date of this Agreement is currently under audit or examination, and
neither PrimeWire has received Notice from any Governmental Authority that (i)
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any Tax Return that PrimeWire filed will be audited or examined or (ii)
PrimeWire is or may be liable for additional Taxes in respect of any Tax Return
or for the payment of Taxes in respect of a Tax Return that it did not file
(because, for example, it believed that it was not subject to taxation by the
jurisdiction in question).
(c) PrimeWire has withheld and paid to the proper Governmental Authority
all Taxes that it was required to withhold and pay in respect of compensation or
other amounts paid to any employee or independent contractor.
(d) Except as disclosed on Schedule 4.16(d), PrimeWire has not extended the
time in which to file any Tax Return, waived the statute of limitations for any
Tax or agreed to any extension of time for a Tax assessment or deficiency.
(e) PrimeWire has not filed a consent under ss. 341(f) of the Internal
Revenue Code (relating to collapsible corporations) or made any payments, or is
or could become obligated under an existing Contract to make any payments, that
are not deductible under ss.280G of the Internal Revenue Code (relating to
"golden parachute" payments).
(f) Except as disclosed on Schedule 4.16(f), PrimeWire is not a party to
any agreement providing for the allocation or sharing of Taxes, and PrimeWire
has no liability under Treasury Regulation ss. 1.1502-6 or any similar provision
of Law for U.S. federal income Taxes or any other Tax of any Person other than
itself.
4.17 No Material Adverse Change
Since January 1, 2003, there has not been any material adverse change in
the Business or in PrimeWire's financial position, results of operations or
assets. The Parties acknowledge that PrimeWire has never operated profitably and
has not had adequate capital for much of its existence; provided, however, that
based on Buyer funding the Operating Budget as provided herein and the
reductions in overhead in development of the Software, Buyer anticipates that
the Business will be profitable in calendar year 2004.
4.18 Employee Benefits
(a) Schedule 4.18(a) contains a complete and accurate list of all Employee
Benefit Plans under which PrimeWire has any Liability or obligation, or had any
Liability or obligation at any time since January 1, 2002, whether contingent or
otherwise.
(b) Except as disclosed on Schedule 4.18(b), in the case of each Employee
Benefit Plan listed on Schedule 4.18(a):
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(1) the plan (and each related trust or insurance policy) complies in
form and in operation in all material respects with the applicable
requirements of ERISA and the Internal Revenue Code, as the case may be (or
complied in form and operation while PrimeWire maintained or contributed to
or was bound by the plan or its employees participated in the plan);
(2) all required contributions to or premiums or other payments in
respect of the plan have been timely paid, and all required reports and
descriptions have been filed with the proper Governmental Authority or
distributed to participants as appropriate;
(3) there have been no "reportable events" (as defined in ss. 4043 of
ERISA) or "prohibited transactions" (as defined in ss. 406 of ERISA and ss.
4975 of the Internal Revenue Code) in respect of the plan; and
(4) no Suit in respect of the administration of the plan or the
investment of plan assets is pending or, to the Knowledge of PrimeWire,
Threatened, and there is no basis for any such Suit.
(c) Except as disclosed on Schedule 4.18(c) or to the extent required by
ss. 4980B of the Internal Revenue Code, PrimeWire provides no health or other
welfare benefits to any retired or former employee and is not obligated to
provide health or other welfare benefits to any active employee following his or
her retirement or other termination of service.
(d) Except as disclosed on Schedule 4.18(d), PrimeWire does not maintain
and has never maintained an Employee Benefit Plan that is or was subject to the
"minimum funding standards" under ss. 302 of ERISA or that is or was subject to
Title IV of ERISA.
(e) Except as disclosed on Schedule 4.18(e), PrimeWire is not a member of a
group of trades or businesses under common control or treated as a single
employer for purposes of ▇▇.▇▇. 414(b), (c) or (m) of the Internal Revenue Code.
(f) Except as disclosed on Schedule 4.18(f), PrimeWire does not contribute
to and has never been required to contribute to any "multiemployer plan" (as
defined in ss. 3(37) of ERISA), or has incurred any "withdrawal liability" (as
defined in ss. 4021 of ERISA) in respect of any multiemployer plan, or withdrawn
from any multiemployer plan in a "complete withdrawal" or a "partial withdrawal"
(as respectively defined in ▇▇.▇▇. 4203 and 4205 of ERISA).
(g) Except as disclosed on Schedule 4.18(g), neither the execution of this
Agreement nor the consummation of the Contemplated Transaction will result in an
increase in benefits under any Employee Benefit Plan listed on Schedule 4.18(a)
or any Contract with any current, former or retired employee of PrimeWire or an
acceleration of the time of payment or vesting of any benefits.
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(h) PrimeWire has delivered to Buyer copies of all written Employee Benefit
Plans listed on Schedule 4.18(a) (including the plan documents and all related
trust agreements, insurance policies and other Contracts) and a written
description of all oral Employee Benefit Plans listed. PrimeWire has also
delivered copies to Buyer of the most recent summary plan description, annual
report (IRS Form 5500 series), summary annual report, financial statements,
actuarial report and IRS favorable determination letter for each plan listed (to
the extent applicable).
4.19 Insurance
(a) Schedule 4.19(a) consists of four subschedules containing complete and
accurate lists of:
(1) all insurance policies under which PrimeWire or any director or
officer of PrimeWire (in his or her capacity as a director or officer) is
insured or covered or was insured or covered at any time since January 1,
2002 (Schedule 4.19(a)(1));
(2) all self-insurance arrangements by PrimeWire at any time since
January 1, 2000 (Schedule 4.19(a)(2));
(3) all Contracts and arrangements, other than insurance policies and
self-insurance arrangements, for the transfer or sharing of any risk by
PrimeWire (Schedule 4.19(a)(3)); and
(4) all obligations of PrimeWire to provide insurance coverage to any
Person other than an employee of PrimeWire (Schedule 4.19(a)(4)).
(b) Schedule 4.19(b) consists of three subschedules containing complete and
accurate lists of or providing:
(1) [Intentionally Deleted] ;
(2) the amount and a brief description of each claim in excess of
$25,000 under each insurance policy listed on Schedule 4.19(a)(1) (Schedule
4.19(b)(2)); and
(3) a summary of the loss experience for all claims under each
self-insurance arrangement listed on Schedule 4.19(a)(2), including the
number and aggregate cost of the claims (Schedule 4.19(b)(3)).
(c) Except as disclosed on Schedule 4.19(c), with respect to each current
insurance policy listed on Schedule 4.19(a)(1) under which PrimeWire is insured,
PrimeWire has not received any refusal of coverage, any Notice that a defense
will be afforded with a reservation of rights, or any Notice of cancellation or
any other indication that the policy is no longer in full force or effect or
will not be renewed or that the insurance company is unwilling or unable to
perform its obligations.
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(d) PrimeWire has delivered to Buyer (i) copies of all insurance policies
listed on Schedule 4.19(a)(1) and all Contracts listed on Schedule 4.19(a)(3)
and (ii) a written description of all self-insurance arrangements listed on
Schedule 4.19(a)(2).
4.20 Compliance
Except as disclosed on Schedule 4.20:
(a) PrimeWire is conducting the Business, and has conducted the Business
since January 1, 2000, in compliance in all material respects with each Law and
Order that is or was applicable to PrimeWire or to the conduct of the Business.
(b) no event has occurred or circumstance exists that (with or without
Notice or the passage of time or both) could, to the Knowledge of PrimeWire, (i)
constitute or result in a violation by PrimeWire of, or its failure to comply
with, any applicable Law or Order or (ii) give rise to any legal obligation of
PrimeWire to undertake or bear all or any portion of the cost of any remedial
action of any kind; and
(c) since January 1, 2000, PrimeWire has not received written or oral
Notice from any Governmental Authority or other Person regarding (i) any actual,
alleged or potential violation of, or its failure to comply with, any applicable
Law or Order or (ii) any actual, alleged or potential obligation to undertake or
bear all or any portion of the cost of any remedial action of any kind.
4.21 Legal Proceedings
(a) Schedule 4.21(a) consists of two subschedules containing complete and
accurate lists of:
(1) all pending Suits in which PrimeWire is a party or which relate to
PrimeWire or the Business (Schedule 4.21(a)(1)); and
(2) all other Suits at any time since January 1, 2000 in which
PrimeWire was a party or which related to PrimeWire or the Business
(Schedule 4.21(a)(2)).
(b) Except as disclosed on Schedule 4.21(b):
(1) none of the pending Suits listed on Schedule 4.21(a)(1) would
reasonably be expected to have a Material Adverse Effect;
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(2) to the Knowledge of PrimeWire, there is no Threatened Suit against
PrimeWire or otherwise relating to PrimeWire or the Business;
(3) to the Knowledge of PrimeWire, no event has occurred or
circumstance exists that a reasonable person would conclude would
result in a suit probably being brought against PrimeWire; and
(4) to the Knowledge of PrimeWire, there is no Suit Threatened against
PrimeWire that challenges the Contemplated Transaction or that could
have the effect of preventing, delaying, making illegal or otherwise
interfering with the Contemplated Transaction.
(c) PrimeWire has delivered to Buyer (i) copies of all pleadings,
correspondence and other documents relating to each Suit listed on Schedule
4.21(a)(1) and (ii) a written description in reasonable detail of each Suit
listed on Schedule 4.21(a)(2).
4.22 Events Subsequent to July 1, 2003
Except as disclosed on Schedule 4.22, since July 1, 2003, PrimeWire has
not:
(a) sold, leased, transferred or disposed of any of its assets used, held
for use or useful in the conduct of the Business except in the Ordinary Course
of Business;
(b) entered into any Contract relating to the Business except in the
Ordinary Course of Business;
(c) terminated, accelerated or modified any material Contract relating to
the Business to which it is or was a party or by which it is or was bound, or
has agreed to do so, or has received Notice that another party had done so or
intends to do so, except in the case of Contracts which expired in accordance
with their terms or which were terminated, accelerated or modified in the
Ordinary Course of Business;
(d) imposed or permitted any Lien, other than Permitted Liens, on any of
its assets except in the Ordinary Course of Business;
(e) cancelled, compromised, waived or released any claim or right outside
of the Ordinary Course of Business;
(f) experienced any material damage, destruction or loss to any of its
assets used, held for use or useful in conduct of the Business (whether or not
covered by insurance);
(g) changed the base compensation or other terms of employment of any of
its employees except in the Ordinary Course of Business or as required by any
employment agreement;
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(h) paid a bonus to any employee;
(i) adopted a new Employee Benefit Plan, terminated any existing plan or
increased the benefits under or otherwise modified any existing plan except as
contemplated in this Agreement;
(j) amended its Organizational Documents;
(k) issued, sold, redeemed or repurchased any shares of its capital stock
or other securities or retired any indebtedness;
(l) granted any options to purchase shares of its capital stock or other
securities;
(m) declared or paid any dividends or made any other distributions in
respect of its capital stock;
(n) made, or guaranteed, any loans or advances to another Person or made
any investment or commitment for investment in any Person;
(o) made any capital expenditures in excess of $25,000 in the aggregate;
(p) made any change in its accounting principles or methods;
(q) entered into any Contract to do any of the matters described in the
preceding clauses (a)-(p); or
(r) entered into or engaged in any other transaction or activity outside of
the Ordinary Course of Business, or suffered the occurrence or any other event
involving the Business occurring outside of the Ordinary Course of Business.
4.23 Environmental Matters
Except as disclosed on Schedule 4.23:
(a) PrimeWire is, and has been at all times since January 1, 2000, in
compliance with all applicable Environmental Laws except where the failure to
comply did not have or could not reasonably be expected to have a Material
Adverse Effect; and
(b) PrimeWire has not received, and to the Knowledge of PrimeWire, there is
no basis to expect PrimeWire to receive, Notice from any Governmental Authority,
any private citizen acting in the public interest, the current or prior owner or
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operator of any current or former Facility, or any other Person, of (i) any
actual or potential violation or failure to comply with any Environmental Law or
(ii) any actual or potential Cleanup Liability or other Environmental Liability.
4.24 Employees
(a) Schedule 4.24(a) contains a complete and accurate list of the following
information for the employees of PrimeWire as of the date of this Agreement,
including employees on leave of absence: name, job title, date of hire, current
base compensation, bonus targets, accrued vacation and sick pay; and whether
employed under a written Contract.
(b) PrimeWire has complied with all applicable documentation requirements
of the U.S. Immigration and Naturalization Service in respect of its employees.
(c) To the Knowledge of PrimeWire, no employee of PrimeWire is a party to
or is otherwise bound by any Contract or arrangement, including any
confidentiality, noncompetition or proprietary rights agreement, that would
limit or restrict the scope of his or her duties as an employee following
Closing.
(d) PrimeWire has delivered copies to Buyer of all written employment
Contracts listed on Schedule 4.24(a).
4.25 Labor Relations
Except as disclosed on Schedule 4.25:
(a) PrimeWire is not, nor has it been in the last five years, a party to
any collective bargaining agreement or other labor Contract; and
(b) PrimeWire is not experiencing, nor has it experienced at any time since
January 1, 2000, and to the Knowledge of PrimeWire, there is no basis to expect
PrimeWire to experience: (i) any strike, slowdown, picketing or work stoppage by
or lockout of its employees; (ii) any Suit relating to the alleged violation of
any Law or Order relating to labor relations or employment matters (including
any charge or complaint filed by an employee or union with the U.S. National
Labor Relations Board or Equal Employment Opportunity Commission or any other
comparable Governmental Authority); (iii) any other labor or employment dispute
(other than issues in connection with individual employees that have not had and
could not reasonably be expected to have a Material Adverse Effect); or (iv) any
activity to organize or establish a collective bargaining unit, trade union or
employee association.
4.26 Certain Payments
Neither PrimeWire nor any director, officer, employee or agent of
PrimeWire, or any other Person associated with or acting for or on PrimeWire's
behalf, has directly or indirectly made or paid any contribution, gift, bribe,
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rebate, payoff, kickback or other payment (whether in money, property or
services or any other form) to any Person in order to gain or pay for favorable
treatment in obtaining business or special concessions or in violation of any
Law.
4.27 Related Parties
Except as disclosed on Schedule 4.27, no Related Party has, or had at any
time since January 1, 2000, a direct or indirect financial or other interest in
any assets of PrimeWire, any transaction with PrimeWire or, to the Knowledge of
PrimeWire, any Person who has or had business dealings with any company.
4.28 Broker's Fee
PrimeWire has no Liability or obligation to pay any fees or commissions to
any broker, finder or agent with respect to the Contemplated Transaction.
4.29 Disclosure
(a) No Notice given pursuant to Section 6.4 will contain an untrue
statement or omit to state a material fact necessary to make any statement in
the Notice, in light of the circumstances in which it was made, not misleading.
(b) All copies of documents that PrimeWire has delivered to Buyer under
this Agreement have been or will be true and complete copies of authentic
originals.
(c) Except as qualified or limited by an exception in a Schedule, and
solely as so qualified or limited, no statement in this Article 4 is untrue or
omits to state any material fact necessary to make the statement, in light of
the circumstances in which it was made, not misleading. When read in conjunction
with this Article 4, no statement in any Schedule is untrue or omits to state
any material fact necessary to make any statement in this Article 4 or in the
Schedule itself, in light of the circumstances in which it was made, not
misleading.
Article 5
Representations and Warranties
of Buyer and eNucleus
In order to induce PrimeWire to enter into this Agreement, Buyer and
eNucleus jointly and severally represent and warrant to PrimeWire that the
statements in this Article 5 are true and correct as of the date of this
Agreement, and will be true and correct on the Closing Date as if made at and as
of Closing.
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5.1 Corporate Organization
(a) Each of Buyer and eNucleus is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform its obligations under all Contracts.
(b) eNucleus is duly qualified to do business as a foreign corporation and
is in good standing under the Laws of each state or other jurisdiction in which
qualification is required by applicable Law and where failure to so qualify
would result in a Material Adverse Effect.
5.2 Authority
Each of Buyer and eNucleus has full corporate power and authority to
execute and deliver this Agreement and each of its Closing Documents and to
perform its obligations under this Agreement and each of its Closing Documents.
Each of Buyer's and eNucleus's execution, delivery and performance of this
Agreement and each of its Closing Documents has been duly authorized by all
necessary corporate action required by its Organizational Documents.
5.3 Enforceability
This Agreement constitutes, and upon each of Buyer's and eNucleus's
execution and delivery of its Closing Documents (and assuming execution and
delivery by the other party or parties, if any), each of Buyer's and eNucleus's
Closing Documents will constitute, a legal, valid and binding obligation of
Buyer and eNucleus, as the case may be, enforceable against it in accordance
with its terms except, as enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
5.4 No Violation
Each of Buyer's and eNucleus's execution, delivery and performance of this
Agreement, and the consummation of the Contemplated Transaction, will not,
either directly or indirectly (and with or without Notice or the passage of time
or both):
(a) violate or conflict with the Organizational Documents of Buyer or
eNucleus, as the case may be, or any resolution adopted by the board of
directors of Buyer or eNucleus, as the case may be;
(b) result in a Default under any Contract to which Buyer or eNucleus, as
the case may be, is a party or by which it is bound; or
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(c) violate or conflict with, or give any Governmental Authority or other
Person the right to challenge the Contemplated Transaction or to obtain any
other relief under, any Law or Order to which it is subject.
5.5 Subsidiaries and Affiliates
eNucleus does not Control, directly or indirectly, any corporation,
partnership, association or other form of business entity, other than Buyer,
Alliance Net, Inc., an Illinois corporation, and eNucleus Pro, Inc., an Illinois
corporation. eNucleus owns all the issued and outstanding capital stock of
Buyer, and there are no rights, options, warrants, conversion rights or
agreements for the purchase or acquisition of any shares of the capital stock or
other securities of Buyer.
5.6 Capitalization
The authorized capital stock of eNucleus consists of 100,000,000 shares of
Common Stock, $.001 par value, 100,000,000 shares of which are issued and
outstanding, and 20,000,000 shares of Series A Preferred Stock, $.001 par value,
none of which are issued and outstanding. All such issued and outstanding shares
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned beneficially and of record by the shareholders and have been offered,
issued, sold and delivered by eNucleus in compliance with applicable federal and
state security laws.
5.7 Validity of Stock
Subject to Section 2.4(j), the eNucleus Common Stock, when issued, sold and
delivered in compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable, will be free of any liens or encumbrances,
and will not be subject to any preemptive rights, rights of first refusal or
redemption rights and will be validly issued, fully paid and nonassessable.
5.8 Financial Statements
(a) The financial statement of eNucleus for the periods ending December 31,
2002 and December 31, 2001 delivered to PrimeWire fairly present in all material
respects the financial position and results of operations of eNucleus on a
consolidated basis as of the dates indicated and for the periods then ended, in
conformity with GAAP applied on a consistent basis.
(b) The interim financial statements of eNucleus delivered to PrimeWire
fairly present in all material respects the financial position and results of
operations of eNucleus on a consolidated basis as of December 31, 2003, in
conformity with GAAP applied on a basis consistent with the financial
statements, subject to normal year-end adjustments and to the lack of footnotes
and other presentation items (none of which, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect).
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5.9 No Consent Required
Each of Buyer's and eNucleus's execution, delivery and performance of this
Agreement and each of its Closing Documents does not require any Notice to,
filing with, Permit from or other Consent of, any Governmental Authority or
other Person other than such Consents which have been obtained or will be
obtained as of the Closing Date.
5.10 Broker's Fee
Neither Buyer nor eNucleus has any Liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the Contemplated
Transaction.
5.11 Compliance
Except as disclosed on Schedule 5.12:
(a) both Buyer and eNucleus are conducting their businesses, and have
conducted their businesses since January 1, 2000, in compliance in all material
respects with each Law and Order that is or was applicable to them or to the
conduct of their businesses.
(b) no event has occurred or circumstance exists that (with or without
Notice or the passage of time or both) could, to the Knowledge of Buyer or
eNucleus, (i) constitute or result in a violation by Buyer or eNucleus of, or
its failure to comply with, any applicable Law or Order or (ii) give rise to any
legal obligation of Buyer or eNucleus to undertake or bear all or any portion of
the cost of any remedial action of any kind; and
(c) since January 1, 2000, neither Buyer nor eNucleus has received written
or oral Notice from any Governmental Authority or other Person regarding (i) any
actual, alleged or potential violation of, or its failure to comply with, any
applicable Law or Order or (ii) any actual, alleged or potential obligation to
undertake or bear all or any portion of the cost of any remedial action of any
kind.
5.12 Litigation in general.
There is no Suit in which Buyer or eNucleus is a party or which relate to
either of them or their businesses pending and, to the Knowledge of Buyer and
eNucleus, there is no Threatened Suit against either of them or otherwise
relating to either of them or their businesses. To the Knowledge of Buyer and
eNucleus, no event has occurred or circumstance exists that may give rise to or
serve as a basis for any Suit to be brought or Threatened against either Buyer
or eNucleus. To the Knowledge of Buyer and eNucleus, there is no Suit Threatened
against either of them that challenges the Contemplated Transaction or that
could have the effect of preventing, delaying, making illegal or otherwise
interfering with the Contemplated Transaction.
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5.13 SEC Documents
eNucleus has made timely filings (collectively, the "SEC Documents") with
the U.S. Securities & Exchange Commission as required by federal securities Law
and the regulations promulgated thereunder. As of their respective filing dates,
each of the SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended or the Securities
Exchange Act of 1934, as amended and the rules and regulations of the Securities
& Exchange Commission promulgated thereunder. eNucleus represents and warrants
to PrimeWire that the representations contained in the SEC Documents as of their
respective filing dates were true and correct in all material respects and did
not fail to omit to state a material fact necessary to make the statements
therein in light of the circumstances not misleading.
5.14 Bankruptcy Proceeding
eNucleus and its subsidiaries have emerged from the bankruptcy proceeding
styled In Re: eNucleus, Inc. (Case No. 01 B17108) (the "Bankruptcy Proceeding")
filed in the United States Bankruptcy Court Northern District of Illinois
Eastern Division and is no longer under the jurisdiction of said bankruptcy
court. eNucleus has provided Seller a true, correct and complete copy of the
Modified Second Amended Plan of Reorganization of eNucleus, Inc. dated November
8, 2003 (the "Plan"), the Order Confirming the Plan, and the Order of final
decree entered Nov. 6, 2003 and filed on the docket with respect to the
Bankruptcy Proceeding. The Plan is in full force and effect and eNucleus is not
in default under any of its obligations or payments due under the Plan. eNucleus
represents and warrants that no Tax Claim (as defined in the Plan) against
eNucleus was excepted from discharge under the Plan pursuant to 11 U.S.C.
Section 523.
Article 6
Events Prior to Closing
6.1 General
Pending Closing, the Parties shall make reasonable good faith efforts to
take all actions and to do all things necessary in order to consummate the
Contemplated Transaction (including, in the case of Buyer, satisfaction, but not
waiver, of the Buyer Closing Conditions, and in the case of PrimeWire,
satisfaction, but not waiver, of the PrimeWire Closing Conditions).
6.2 Conduct of Business
Pending Closing, PrimeWire shall:
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(a) to the extent Buyer authorizes the Closing Payment to be released from
escrow to PrimeWire, use the Closing Payment to pay certain employees, trade
vendors and indebtedness for borrowed money necessary for the continuation of
the Business;
(b) to the best of its ability in light of its current financial situation,
conduct the Business only in the Ordinary Course of Business, and use
commercially reasonable efforts to maintain the Business substantially intact
and to preserve its goodwill and advantageous relationships with customers,
employees, suppliers and other Persons having business dealings with the
Business;
(c) use its best efforts to obtain all Consents required for the assignment
of, or alternate arrangements reasonably satisfactory to Buyer with respect to,
any Contract which may be required for such assignment to be effective; and
(d) not take any affirmative action that results in the occurrence of an
event described in Section 4.22 as qualified by Schedule 4.22, and to take any
reasonable action within PrimeWire's control that would avoid the occurrence of
an event described in Section 4.22, as qualified by Schedule 4.22.
6.3 Access to Information
(a) Pending Closing, PrimeWire shall:
(i) afford eNucleus and its representatives (including counsel,
financial advisors and accountants) access during normal business hours
(but without unreasonable interference with operations) to PrimeWire's
offices and other Facilities and its Books and Records and other documents;
(ii) make its officers, managers and key employees available to
respond to reasonable inquires by eNucleus regarding PrimeWire, the
Business and the Acquired Assets;
(iii) furnish eNucleus and its representatives with all information
and copies of all documents concerning PrimeWire, the Business and the
Acquired Assets that eNucleus and its representatives reasonably request;
and
(iv) otherwise cooperate with eNucleus in its due diligence
activities.
(b) Pending Closing, each of Buyer and eNucleus shall:
(i) afford PrimeWire and its representatives (including counsel,
financial advisors and accountants) access during normal business hours
(but without unreasonable interference with operations) to eNucleus'
offices and its Books and Records and other documents;
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(ii) make its officers, managers and key employees available to
respond to reasonable inquires by PrimeWire regarding eNucleus, the Buyer
and their respective businesses and assets; and
(iii) otherwise cooperate with PrimeWire in its due diligence
activities.
6.4 Notice of Developments
(a) Pending Closing, PrimeWire shall promptly give Notice to eNucleus of:
(i) any fact or circumstance of which it becomes aware that causes or
constitutes an inaccuracy in or breach of any of the representations and
warranties by PrimeWire in Article 4 as of the date of this Agreement;
(ii) any fact or circumstance of which it becomes aware that would
cause or constitute an inaccuracy in or breach of any of the
representations and warranties by PrimeWire in Article 4 if those
representations and warranties were made on and as of the date of
occurrence or discovery of the fact or circumstance;
(iii) any breach of or default under Section 6.2, or under any of the
other obligations of PrimeWire in this Article 6, of which it becomes
aware; or
(iv) the occurrence of any event of which it becomes aware that may
make satisfaction of any of the Buyer Closing Conditions impossible or
unlikely.
(b) Pending Closing, each of Buyer and eNucleus shall promptly give Notice
to PrimeWire of:
(i) any fact or circumstance of which it becomes aware that causes or
constitutes an inaccuracy in or breach of any of the representations and
warranties by eNucleus or Buyer in Article 5 as of the date of this
Agreement;
(ii) any fact or circumstance of which it becomes aware that would
cause or constitute an inaccuracy in or breach of any of the
representations and warranties by eNucleus or Buyer in Article 5 if those
representations and warranties were made on and as of the date of
occurrence or discovery of the fact or circumstance; or
(iii) the occurrence of any event of which it becomes aware that may
make satisfaction of any of the PrimeWire Closing Conditions impossible or
unlikely.
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6.5 Exclusivity
From the date of this Agreement until Closing, PrimeWire shall not directly
or indirectly solicit, initiate or encourage any inquiries or proposals from,
discuss or negotiate with, or provide any information to, any Person (other than
eNucleus) relating to any transaction involving (i) the sale of the Business or
any of the Acquired Assets (other than sales in the Ordinary Course of
Business), (ii) any merger, consolidation, business combination or similar
transaction involving PrimeWire or (iii) any issuance or sale of capital stock
or other securities of PrimeWire, other than an issuance of capital stock or
securities representing less than ten (10%) percent of capital stock of
PrimeWire on a fully diluted basis.
6.6 Additional Excluded Assets
Buyer, prior to the Closing Date, may, in its sole discretion, amend Annex
III hereto to include as an Excluded Asset the capital stock of any subsidiary
of PrimeWire.
Article 7
Events Subsequent to Closing
7.1 Customer Payments
PrimeWire shall promptly (and in no event less often than monthly) turn
over to Buyer any amounts collected by PrimeWire after Closing for services
provided by Buyer after Closing.
7.2 Cooperation
To the extent that the Contemplated Transaction entails or would be
considered to entail the transfer of a Permit or Contract for the transfer of
which any required Consent has not been obtained, or for which the transfer is
prohibited by applicable Law, the closing of the Contemplated Transaction shall
not operate as a transfer of the Permit or Contract, or constitute an attempt to
do so, notwithstanding any apparent transfer at Closing. Following Closing,
PrimeWire and Buyer shall use reasonable efforts in cooperation with one another
to obtain the required Consent or a waiver of any prohibition on transfer.
Pending the actual transfer of the Permit or Contract, PrimeWire and Buyer agree
to make appropriate economic payments and adjustments to put themselves in the
same economic position that they would have been if the transfer had actually
taken place at Closing. In this regard, PrimeWire's performance obligations in
respect of any such Permit or Contract shall be considered subcontracted to
Buyer. If any Permit or Contract still cannot be assigned or transferred despite
the efforts of the PrimeWire and Buyer following Closing in accordance with this
Section 7.2, they shall negotiate in good faith to achieve a mutually acceptable
resolution regarding the Permit or Contract.
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7.3 Transition Assistance
Following Closing, PrimeWire shall provide reasonable assistance to Buyer
with Buyer's initial contact with PrimeWire's customers. PrimeWire shall also
provide other reasonable transition assistance to Buyer at its request and
without charge, except for PrimeWire's actual out-of-pocket expenses.
7.4 Change of Name
Promptly following Closing, PrimeWire shall change its name to a name which
does not contain and is not likely to be confused with "PrimeWire."
7.5 Access to Books and Records
To facilitate PrimeWire's response to post-Closing administrative or civil
proceedings, Buyer shall permit PrimeWire to have reasonable access to its
pre-Closing Books and Records included in the Acquired Assets.
7.6 Accounts Receivable
Any Accounts Receivable included in the Acquired Assets that remain
uncollected 120 days after the Closing Date shall be considered uncollectible.
Buyer may reassign to PrimeWire any such Accounts Receivable, and the amount of
the Earnout Amounts otherwise payable shall be reduced by the amount by which
the Accounts Receivable so reassigned.
7.7 Use of Proceeds
PrimeWire shall use at least 75% of the First Year Cash Earnout, the
Second Year Cash Earnout, the Third Year Cash Earnout, the Large License Earnout
and the Online Benefits Payments received from Buyer to pay the principal and
interest of the Related Party Secured Debt .
7.8 Related Party Security Interest
The Parties acknowledge that the security interest held by ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇ (the "Related Secured Parties") in PrimeWire's Software granted by
PrimeWire to secure the payment of approximately $1,200,000 (the "Related Party
Secured Debt") owed to the Related Secured Parties will not be discharged as of
the Closing; provided that such security interest shall be discharged and the
Related Party Secured Debt shall be paid from the First Year Cash Earnout, the
Second Year Cash Earnout, the Third Year Cash Earnout, the Large License Earnout
and the Online Benefit Payments.
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Article 8
Conditions to Closing
8.1 Buyer's Closing Conditions
The obligation of Buyer and eNucleus to consummate the Contemplated
Transaction is subject to the satisfaction of each of the following conditions
(the "Buyer Closing Conditions") prior to or at Closing:
(a) the representations and warranties of PrimeWire in Article 4, as
qualified or limited by any exceptions in a Schedule, are true and correct in
all material respects on the Closing Date as if made at and as of Closing;
(b) PrimeWire has executed and delivered all of the documents and
instruments that they are respectively required to execute and deliver or enter
into prior to or at Closing, and have performed, complied with or satisfied in
all material respects all the other material obligations, agreements and
conditions under this Agreement that they are respectively required to perform,
comply with or satisfy prior to or at Closing;
(c) each Permit or other Consent listed on Schedule 4.4 or otherwise
required to be obtained by PrimeWire has been obtained and is in full force; and
(d) eNucleus has obtained approval of this Agreement and the Contemplated
Transaction by its stockholders and board of directors;
(e) eNucleus is satisfied, in its sole discretion, with the results of its
due diligence investigation of PrimeWire and the Contemplated Transactions,
including all items disclosed on the Schedules hereto qualifying PrimeWire's
representations and warranties set forth in Article 4 hereof and the items set
forth on Annex II hereof as Assumed Contract Obligations;
(f) eNucleus has determined, in its sole discretion, that the Contemplated
Transaction may be consummated without exposing eNucleus' officers, directors or
shareholders to any material liability, including with respect to such
directors, any liability for breach of fiduciary duty to eNucleus;
(g) since the date of this Agreement, no Governmental Authority has
initiated any inquiry or investigation or requested any information from any
Party regarding the Contemplated Transaction, and no Suit has been initiated or
Threatened that challenges or seeks damages or other relief in connection with
the Contemplated Transaction or that could have the effect of preventing,
delaying, making illegal or otherwise interfering with the Contemplated
Transaction;
(h) no material adverse charge in the Business has occurred; and
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(i) eNucleus has obtained, upon terms and conditions satisfactory to
eNucleus in its sole discretion, sufficient equity capital to comply with
Buyer's payment obligations to PrimeWire hereunder and for working capital for
the Business.
Buyer may waive any condition specified in this Section 8.1 by a written
waiver delivered to PrimeWire at any time prior to or at Closing.
8.2 PrimeWire Closing Conditions
PrimeWire's obligation to consummate the Contemplated Transaction is
subject to the satisfaction of each of the following conditions (the "Company
Closing Conditions") prior to or at Closing:
(a) the representations and warranties of Buyer and eNucleus in Article 5
are true and correct in all material respects on the Closing Date as if made at
and as of Closing;
(b) Buyer and eNucleus have executed and delivered all of the documents and
instruments that they are required to execute and deliver or enter into prior to
or at Closing, and have performed, complied with or satisfied in all material
respects all the other material obligations, agreements and conditions under
this Agreement that they are required to perform, comply with or satisfy prior
to or at Closing; and
(c) PrimeWire has obtained approval of this Agreement and the Contemplated
Transaction by its shareholders and board of directors;
(d) PrimeWire has determined, in its sole discretion, that the Contemplated
Transaction may be consummated without exposing PrimeWire's officers, directors
or shareholders to any material liability, including with respect to such
directors, any liability for breach of fiduciary duty to PrimeWire;
(e) PrimeWire is satisfied, in its sole discretion, with the results of its
due diligence investigation of eNucleus, the Operating Budget and the
Contemplated Transaction; and
(f) since the date of this Agreement, no Governmental Authority has
initiated any inquiry or investigation or requested any information from any
Party regarding the Contemplated Transaction, and no Suit has been initiated or
Threatened that challenges or seeks damages or other relief in connection with
the Contemplated Transaction or that could have the effect of preventing,
delaying, making illegal or otherwise interfering with the Contemplated
Transaction.
PrimeWire may waive any condition specified in this Section 8.2 by a
written waiver delivered to Buyer at any time prior to or at Closing.
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8.3 Casualty
If prior to the Closing, any material damage to or loss or any of the
Acquired Assets occurs due to fire, flood, riot, theft, act of God or other
casualty, and if Buyer does not elect to terminate this Agreement, (a) PrimeWire
shall assign to Buyer its rights in any insurance proceeds with respect to the
Acquired Assets and (b) PrimeWire shall assign to Buyer the proceeds, if any, of
all business interruption insurance payable by reason of such occurrence with
respect to the period commencing at the Closing Date.
Article 9
Termination and Remedies
9.1 Termination
This Agreement may be terminated prior to or at Closing:
(a) by Buyer, upon Notice to PrimeWire, if:
(1) PrimeWire breaches or defaults in the performance of any of its
material obligations under this Agreement and the breach or default is not
waived; or
(2) any Buyer Closing Condition is not satisfied as of Closing, or
satisfaction of any Buyer Closing Condition is or becomes impossible (other
than as a result of Buyer's or eNucleus' failure to perform its obligations
under this Agreement) and Buyer does not waive satisfaction of the
condition;
(b) by PrimeWire, upon Notice to Buyer, if:
(1) Buyer or eNucleus breaches or defaults in the performance of any
of its material obligations under this Agreement and the breach or default
is not waived;
(2) any PrimeWire Closing Condition is not satisfied as of Closing, or
satisfaction of any PrimeWire Closing Condition is or becomes impossible
(other than as a result of the failure by PrimeWire to perform its
obligations under this Agreement) and PrimeWire does not waive satisfaction
of the condition; or
(c) by written agreement of the Parties.
9.2 Effect of Termination
The right of termination under Section 9.1 is in addition to any other
rights that a Party may have under this Agreement or otherwise, and a Party's
exercise of a right of termination shall not be considered an election of
remedies. Notwithstanding the termination of this Agreement pursuant to Section
9.1, the Parties' obligations under Section 11.5 shall survive and continue
indefinitely.
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Article 10
Indemnification
10.1 Indemnification by PrimeWire
Subject to Sections 10.3 and 10.4, PrimeWire agrees to indemnify Buyer and
eNucleus and their respective officers, directors, stockholders, employees,
representatives and agents against and hold Buyer and eNucleus and such parties
harmless from:
(a) any Indemnifiable Loss that Buyer, eNucleus or such parties may suffer
or incur which is caused by, arises out of or relates to any inaccuracy in or
breach of any representation and warranty by PrimeWire in Article 4, or in the
Officer's Certificate delivered at Closing pursuant to Section 3.2(a)(2), other
than the representations and warranties in Section 4.8 ("Accounts Receivable");
(b) any breach by PrimeWire of, or failure by PrimeWire to comply with, any
of the covenants or obligations to be performed by PrimeWire under this
Agreement, including its obligations under this Article 10;
(c) any Excluded Liability;
(d) claims of third parties arising from the operation of the Business
before the Closing; or
(e) without limiting the foregoing, one half of any Indemnifiable Loss that
Buyer, eNucleus or such parties may suffer or incur which is caused by, arises
out of or relates to any violation or infringement by PrimeWire's Intangibles,
or their past or current uses, including their preparation, distribution,
marketing or licensing, upon any Patent or any Person, of which PrimeWire had no
Knowledge.
The benefit of the indemnification obligations of PrimeWire under this
Section 10.1 shall extend to the respective officers, directors, employees and
agents of Buyer, eNucleus and its Affiliates.
10.2 Indemnification by Buyer
Subject to Sections 10.3 and 10.4, Buyer and eNucleus jointly and severally
agree to indemnify PrimeWire and its officers, directors, stockholders,
employees, representatives and agents against and hold each of them harmless
from:
(a) any Indemnifiable Loss that PrimeWire or such parties may suffer or
incur which is caused by, arises out of or relates to any inaccuracy in or
breach of any representation and warranty by Buyer or eNucleus in Article 5 or
in the Officer's Certificate that Buyer delivered at Closing pursuant to Section
3.2(b)(2);
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(b) any breach by Buyer or eNucleus of, or failure by Buyer or eNucleus to
comply with, any of the covenants or obligations to be performed by Buyer or
eNucleus under this Agreement, including Buyer's obligations under this Article
10;
(c) all Assumed Liabilities; or
(d) claims of third parties arising from the operation of the Business from
and after the Closing.
The benefit of Buyer's indemnification obligation under this Section 10.2
shall extend to the officers, directors, employees and agents of PrimeWire and
its Affiliates.
10.3 Threshold
(a) In respect of Buyer's or eNucleus's assertion of an Indemnification
Claim under Section 10.1(a), Buyer and eNucleus shall not be entitled to
indemnification until the aggregate amount for which indemnification is sought
exceeds $25,000 (the "Threshold"). If the Threshold is reached, Buyer and
eNucleus may assert an Indemnification Claim for the full amount of the Claim
(back to the first dollar) and may assert any subsequent Indemnification Claim
under Section 10.1(a) without regard to the Threshold.
(b) No Threshold shall apply to Buyer's or eNucleus' assertion of an
Indemnification Claim under Sections 10.1(b), 10.1(c), 10(d) or 10(e).
(c) No Threshold shall apply to the assertion of an Indemnification Claim
by PrimeWire under Section 10.2.
10.4 Cap and Other Limits
(a) The aggregate liability of PrimeWire shall not exceed the Purchase
Price.
(b) No Indemnification Claim under Section 10.1(a) may be asserted after
the close of the Third Accounting Year except in respect of the representations
and warranties in Sections 4.1 ("Authorization"), 4.2 ("Organization and
Ownership"), 4.7 ("Title to Assets") and 4.16 ("Taxes"). An Indemnification
Claim under Sections 10.1(a) in respect of these representations and warranties,
and any Indemnification Claim under Sections 10.1(b), 10.1(c), 10.1(d) or
10.1(e), may be asserted at any time, without expiration.
(c) No Indemnification Claim under Section 10.2(a) may be asserted after
the close of the Third Accounting Year except in respect of the representations
and warranties in Sections 5.1 ("Corporate Organization") and 5.2 ("Authority").
An Indemnification Claim under Section 10.2(a) in respect of these
representations and warranties, and any Indemnification Claim under Sections
10.2(b), 10.2(c) or 10.2(d), may be asserted at any time, without expiration.
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10.5 Assertion of Indemnification Claim
(a) The Indemnified Party may assert an Indemnification Claim by giving
Notice of the Indemnification Claim to the Indemnifying Party. The Indemnified
Party's Notice shall provide reasonable detail of the facts giving rise to the
Indemnification Claim and a statement of the Indemnified Party's Indemnifiable
Loss or an estimate of the Indemnifiable Loss that the Indemnified Party
reasonably anticipates that it will suffer or incur. The Indemnified Party may
amend or supplement its Indemnification Claim at any time (and more than once)
by Notice to the Indemnifying Party. The failure to so notify the Indemnifying
Party shall not relieve the Indemnifying Party of any liability that it may have
to the Indemnified Party, except to the extent the Indemnifying Party
demonstrates that it has been materially prejudiced thereby.
(b) If the Indemnifying Party does not object to an Indemnification Claim
during the 30-day period following receipt of the Indemnified Party's Notice of
its Indemnification Claim (the "Objection Period"), the Indemnified Party's
Indemnification Claim shall be considered undisputed, and the Indemnified Party
shall be entitled to recover the full amount of its Indemnifiable Loss (or
estimate of its Indemnifiable Loss), subject, in the case of an Indemnification
Claim by Buyer or eNucleus, to the limitation in Section 10.4(a).
(c) If the Indemnifying Party gives Notice to the Indemnified Party within
the Objection Period that the Indemnifying Party objects to the Indemnified
Party's Indemnification Claim, the Indemnifying Party and the Indemnified Party
shall attempt in good faith to resolve their differences during the 30-day
period following the Indemnified Party's receipt of the Indemnifying Party's
Notice of its objection. If they fail to resolve their disagreement during this
30-day period, either of them may unilaterally submit the disputed
Indemnification Claim for binding arbitration before the American Arbitration
Association in Chicago, Illinois, in accordance with its rules for commercial
arbitration in effect at the time. The award of the arbitrator or panel of
arbitrators may include attorneys' fees to the prevailing party and may be
enforced in the Circuit Court of ▇▇▇▇ County, Illinois or the U.S. District
Court for the Northern District of Illinois.
(d) To the extent that any Indemnification Claim by Buyer or eNucleus is
undisputed or is resolved in Buyer's or eNucleus's favor, either by the
agreement of the Indemnifying Party or by an award of an arbitrator or panel of
arbitrators pursuant to Section 10.5(c), eNucleus may elect, by Notice to
PrimeWire, to apply the Indemnification Claim first to reduce,
dollar-for-dollar, the First Year Earnout otherwise payable; and if the First
Year Earnout has already been paid or if the amount of the Indemnification Claim
exceeds the First Year Earnout, then to reduce, dollar-for-dollar, the Second
Year Earnout otherwise payable; and if the Second Year Earnout has already been
paid or if the amount of the Indemnification Claim exceeds the Second Year
Earnout, then to reduce, dollar-for-dollar, the Third Year Earnout.
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10.6 Exclusive Remedies.
If the Closing occurs, then the remedies provided in this Article 10
constitute the sole and exclusive remedies for recoveries by one Party against
the other Party for any matter relating to this Agreement or the Contemplated
Transaction, including without limitation breaches of the representations,
warranties, covenants and agreements set forth in this Agreement and for the
matters specifically listed in this Article 10 as being indemnified against;
provided however, that neither the foregoing nor anything else in this Agreement
will limit the right of any Party to enforce the performance of this Agreement,
or performance of any security agreement, contract or other document executed
and delivered pursuant to this Agreement, by any remedy available to it in
equity.
Article 11
Miscellaneous
11.1 Expenses
Each Party shall pay its own expenses in connection with the negotiation
and preparation of this Agreement and the consummation of the Contemplated
Transaction. In the event of termination of this Agreement prior to Closing
pursuant to Section 8.1 or 8.2, each Party's obligation to pay its own expenses
shall be subject to any right of recovery as a result of a breach of or default
under this Agreement by another Party.
11.2 Schedules
Nothing in any Schedule to Article 4 shall be considered adequate to
constitute an exception to the related representation and warranty in Article 4
unless the Schedule describes the relevant facts in reasonable detail. Any
exception in a Schedule to Article 4 which is adequately described in the
Schedule shall be considered an exception to all other applicable
representations and warranties in Article 4.
11.3 Parties' Review
Any Knowledge acquired by a Party (or that should have been or could have
been acquired) as a result of any due diligence or other review or investigation
in connection with the negotiation and execution of this Agreement and the
consummation of the Contemplated Transaction shall not limit that Party's right
to rely on another Party's representations and warranties in this Agreement or
circumscribe that Party's entitlement to indemnification under this Agreement. A
Party acquiring Knowledge prior to Closing that one or more of another Party's
representations and warranties is inaccurate in any material respect shall give
Notice to the other Party of the relevant facts.
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11.4 Publicity
Any public announcement or similar publicity regarding this Agreement or
the Contemplated Transaction shall be issued as, when and in the manner and form
that eNucleus and PrimeWire agree on, with the exception that eNucleus may make
any public disclosure that it believes in good faith to be required by
applicable securities Laws without PrimeWire's prior agreement.
11.5 Confidentiality
Pending Closing, and subject to eNucleus's requirements to make public
disclosures that eNucleus believes in good faith to be required by applicable
securities Laws, each Party shall maintain in confidence, and shall cause its
directors, officers, employees, agents and advisors to maintain in confidence,
and use only for the purposes contemplated by this Agreement, all written, oral
or other information obtained in confidence from the other Party in connection
with this Agreement or the consummation of the Contemplated Transaction. If the
Contemplated Transaction is not consummated, each Party shall return or destroy
so much of this information as exists in written or tangible form as the
furnishing or disclosing Party reasonably requests.
11.6 Notices
All Notices under this Agreement shall be in writing and sent by certified
or registered mail, overnight messenger service, telecopier or personal
delivery, as follows:
(a) if to PrimeWire, to:
Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇ PrimeWire, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a required copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) if to Buyer or eNucleus, to:
eNucleus, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a required copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Notices sent by certified or registered mail shall be considered to have
been given three business days after being deposited in the mail. All Notices
sent by overnight courier service, telecopier or personal delivery shall be
considered to have been given when actually received by the intended recipient.
A Party may change its or his address for purposes of this Agreement by Notice
in accordance with this Section 11.6.
11.7 Further Assurances
Each Party agrees to furnish to the other Party such further information,
to execute and deliver to the other Party such other documents and to do such
other acts and things, as the other Party reasonably requests for the purpose of
carrying out the intent of this Agreement and the documents and instruments
referred to in this Agreement.
11.8 Waiver
The rights and remedies of the Parties are cumulative and not
alternative. The failure or any delay by any Party in exercising any right under
this Agreement or any document referred to in this Agreement shall not operate
as a waiver of that right, and no single or partial exercise of any right shall
preclude any other or further exercise of that right or the exercise of any
other right. All waivers shall be in writing signed by the Party to be charged
with the waiver, and no waiver that may be given by a Party shall be applicable
except in the specific instance for which it is given.
11.9 Entire Agreement
This Agreement supersedes all prior agreements between the Parties with
respect to its subject matter and constitutes (together with (i) Annex I, Annex
II, Annex III, the Exhibits and the Schedules, which are part of this Agreement
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and (ii) the Parties' Closing Documents) a complete and exclusive statement of
the terms of the agreement between the Parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement signed
by the Party to be charged with the amendment.
11.10 Assignment
A Party may not assign any of its rights under this Agreement without the
prior written consent of the other Party, with the exception that eNucleus,
without being released from any of its obligations under this Agreement, may
assign any of its rights to an Affiliate.
11.11 No Third Party Beneficiaries
Nothing in this Agreement shall be considered to give any Person other than
the Parties any legal or equitable right, claim or remedy under or in respect of
this Agreement or any provision of this Agreement. This Agreement and all of its
provisions are for the sole and exclusive benefit of the Parties and their
respective successors and permitted assigns.
11.12 Construction
(a) All references in this Agreement to "Section" or "Sections" refer to
the corresponding section or sections of this Agreement.
(b) All words used in this Agreement shall be construed to be of the
appropriate gender or number as the context requires.
(c) Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
(d) The captions of articles and sections of this Agreement are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
11.13 Severability
If any provision of this Agreement is held invalid or unenforceable by a
court of competent jurisdiction, the other provisions of this Agreement shall
remain in full force and effect. Any provision of this Agreement that is held
invalid or unenforceable only in part shall remain in full force and effect to
the extent not held invalid or unenforceable.
11.14 Governing Law
This Agreement shall be governed by the Laws of the State of Illinois
without regard to conflicts of laws principles.
11.15 Binding Effect
This Agreement shall apply to, be binding in all respects upon and inure to
the benefit of Parties and their respective heirs, legal representatives,
successors and permitted assigns.
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In witness, the Parties have executed this Agreement.
ENUCLEUS INC.
By: /s/
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer
FINANCIAL ASPx INC.
By: /s/
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer
PRIMEWIRE, INC.
By: /s/
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
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Annex I
Definitions
Accounts Receivable means trade receivables from sale of services or goods
in the Ordinary Course of Business.
Acquired Assets means all of PrimeWire's assets of any type or kind
relating to or used, held for use or useful in the conduct of the Business, but
not including the Excluded Assets. The term "Acquired Assets" includes the
following assets of PrimeWire:
(a) Cash Equivalents;
(b) Accounts Receivable;
(c) Customer Contracts;
(d) Equipment;
(e) Inventory
(f) Other Assets;
(g) Permits;
(h) Software and other Intangibles; and
(i) the capital stock of AYB Insurance Services, Inc. and, subject to
Section 6.6, any other subsidiaries of PrimeWire.
Act is defined in Section 2.4(i).
Affiliate means, in respect of any Person, any other Person that directly
or indirectly through one or more intermediaries controls, is controlled by or
is under common control with the first Person. As used in this definition,
"control" means the direct or indirect possession of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
Assumed Contract Obligations means the Liabilities and obligations of
PrimeWire under a Contract set forth on Annex II hereto that arise on or after
the Closing Date in the ordinary course of performing the Contract in accordance
with its terms, and that are not due to a Default by PrimeWire prior to Closing.
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Assumed Liabilities is defined in Section 2.5(a).
Authorized Officer means a corporate officer of a corporation, a partner of
a general partnership, a general partner of a limited partnership, a manager or
member of a limited liability company, or a holder of a similar position in any
other type of entity, who is duly authorized to perform the specified action.
Books and Records means books, records, ledgers, files, documents, lists,
reports, creative materials, advertising and promotional materials and other
printed or written materials relating to the Acquired Assets, but shall not
include minute books or other records relating to stock ownership or monetary
loans to PrimeWire.
Business is defined in the Recitals.
Business Day means any day other than a Saturday, Sunday or federal legal
holiday.
Buyer means Financial ASPx, Inc., a Delaware corporation with its principal
executive offices at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Buyer Closing Conditions is defined in Section 8.1.
Cash Equivalents means certificates of deposit, prepaid items, utility or
lease deposits, credits with vendors, and other items which are functionally
equivalent to cash when utilized in the Ordinary Course of Business.
Cleanup Liability means any Liability under any Environmental Law for
corrective action, including any investigation, cleanup, removal, containment or
other remedial or response action or activity of the type covered by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980.
Closing is defined in Section 3.1.
Closing Amount is defined in Section 2.2.
Closing Date is defined in Section 3.1.
Closing Documents means, in respect of a Party, the documents, instruments
and agreements that the Party is required to deliver or enter into or join in at
Closing pursuant to the terms of this Agreement.
Consent means any approval, consent, ratification, waiver or other
authorization (including any Permit).
Contemplated Transaction means the transactions contemplated by this
Agreement, including (i) PrimeWire's sale of the Acquired Assets to Buyer and
(ii) the Parties' execution, delivery and performance of their respective
-I-2-
Closing Documents and the other documents, instruments, agreements and
obligations that they are respectively required to execute, deliver and perform
pursuant to the terms of this Agreement.
Contract means any legally binding contract, agreement or obligation
(whether written or oral, and whether express or implied).
Control means the power to directly or indirectly direct or cause the
direction of the management or policies of any Person by ownership of equity or
otherwise.
Copyrights means all copyrights and copyrightable works, and all related
applications, registrations and renewals (other than literary works not
routinely used in the Business).
Customer Contract means a Contract of PrimeWire with a customer of the
Business.
Default means, in respect of a Contract, a breach or violation of or
default under the Contract, or the occurrence of an event which, with notice or
the passage of time or both, would constitute a breach, violation or default or
permit termination, modification or acceleration of the Contract.
Earnout Amounts is defined in Section 2.2.
Employee Benefit Plan means (i) an "employee pension plan" as defined in
ss. 3(2) of ERISA, (ii) an "employee welfare benefit plan" as defined in ss.
3(1) of ERISA or (iii) any other employee benefit or fringe benefit plan or
program, whether established by Law, a written agreement or other instrument, or
custom or informal understanding.
Environmental Law means, in respect of a Facility or other Real Property,
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
and Resource Conservation and Recovery Act of 1976, and any other applicable Law
or Order relating to or imposing Liability or standards of conduct for the use,
handling, generation, manufacturing, distribution, processing, collection,
transportation, transfer, storage, treatment, disposal, clean-up, or Release of
Hazardous Materials.
Environmental Liability means any Cleanup Liability or any other Liability
under any Environmental Law or Occupational Safety and Health Law relating to
environmental matters, including any Liability arising from a Release of
Hazardous Materials at, on, in or under any Facility or other Real Property.
eNucleus means eNucleus Inc., a Delaware corporation with its principal
executive offices at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
eNucleus Common Stock is defined in Section 2.4(b).
-I-3-
Equipment means machinery, equipment, spare parts, furniture, fixtures and
other items of tangible personal property of any type or kind used, held for use
or useful in the conduct of the Business (but not including any Vehicles or
Inventory).
Equipment Lease means a Contract for the lease of Equipment or for the
purchase of Equipment under a conditional sales or title retention agreement.
Excluded Assets means the items set forth on Annex III hereto.
Excluded Liabilities is defined in Section 2.5(b).
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations issued by the Internal Revenue Service and
the Department of Labor.
Facility means any office, manufacturing facility, warehouse or other
location or site that PrimeWire currently owns, leases, operates, occupies or
uses, or that it formerly owned, leased, operated, occupied or used, in the
conduct of the Business.
Facility Lease means a lease of or other right to operate, occupy or use a
Facility.
Fair Market Value means:
(i) if traded on a securities exchange or through the NASDAQ National
Market, the value shall be deemed to be the average of the
closing prices of such securities on such quotation system over
the 20day period ending three days prior to the Valuation Date;
and
(ii) if actively traded over-the-counter, the value shall be deemed to
be the average of the closing bid or sale prices (whichever is
applicable) over the 20 day period ending three days prior to the
Valuation Date.
Final First Year Earnout to Date is defined in Section 2.3(c)(2).
Final Quarterly Large License Earnout is defined in Section 2.3(g)(2).
Financial Statements means PrimeWire's statements of income and expense and
its balance sheets for the periods ending June 30, 2003 and June 30, 2002.
First Accounting Year means the period of 12 consecutive calendar months
beginning with the first calendar month after the month in which Closing occurs.
First Year Cash Earnout is defined in Section 2.4(a).
First Year Stock Earnout is defined in Section 2.4(b).
-▇-▇-
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ generally accepted accounting principles.
Good Reason means (i) ▇▇▇▇▇▇ is assigned duties materially inconsistent
with the position of Chief Marketing Officer, (ii) ▇▇▇▇▇▇ is relocated to any
location outside of the Atlanta, Georgia area or (iii) Buyer defaults in its
obligations to pay ▇▇▇▇▇▇ his compensation during his employment with Buyer.
Governmental Authority means (i) any federal, state, provincial, local,
municipal, foreign or other government and (ii) any governmental or
quasi-governmental body of any kind (including any administrative or regulatory
agency, department, branch, commission or other entity).
Hazardous Activity means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment or use of Hazardous Materials.
Hazardous Materials means any waste or other substance of any kind that is
or was listed, defined, designated or classified under any Law or Order as
hazardous, radioactive or toxic or as a pollutant or contaminant.
Indemnifiable Loss means any actual loss, liability, damage, cost or
expense, including reasonable attorneys' fees and costs of investigation and
litigation.
Indemnification Claim means a written claim or demand for indemnification
pursuant to Sections 10.1 or 10.2. A single Indemnification Claim may be
asserted in respect of any number of matters.
Indemnified Party means:
(a) Buyer and eNucleus in respect of an Indemnification Claim under Section
10.1;
(b) PrimeWire in respect of an Indemnification Claim under Section 10.2.
Indemnifying Party means:
(a) PrimeWire in respect of an Indemnification Claim under Section 10.1;
(b) Buyer in respect of an Indemnification Claim under Section 10.2.
Interim Financial Statements means PrimeWire's unaudited interim financial
statements for the six months ending December 31, 2003.
Intangibles means any Software, Marks, Patents, Copyrights or Proprietary
Information, whether in use, under development or design, or inactive.
-I-5-
Internal Revenue Code means the U.S. Internal Revenue Code of 1986, as
amended.
Inventory means inventories of materials and supplies.
Knowledge means the actual awareness of a particular fact or other
specified matter. As applied to PrimeWire, the term means the actual awareness
of the particular fact or other specified matter by ▇▇▇▇▇▇, ▇▇▇▇▇ Resor or
▇▇▇▇▇▇ ▇▇▇▇▇▇; and as applied to Buyer or eNucleus, the term means the actual
awareness of the particular fact or other specified matter by an executive
officer of eNucleus.
Large License Deals means a license entered into by Buyer or its Affiliates
which meets all the following requirements: (i) such license uses the Software;
(ii) such license generates Net Revenues or cash payments of at least $200,000
within the first 12 months after the effective date of such license; (iii) such
license has a contract term of at least 24 months; and (iv) the development work
required by Buyer's or its Affiliates' programmers regarding such license shall
be less than 90 days with only nominal ongoing support thereafter needed.
Large License Earnout is defined in Section 2.3(g).
Law means any law, ordinance, code, regulation, rule, guideline or policy
of any Governmental Authority or any principle or rule of common law.
Liability means any liability or obligation, whether known or unknown,
absolute or contingent, liquidated or unliquidated, or due or to become due.
Lien means any lien, security interest, claim, community property interest,
equitable interest, option, pledge, right of first refusal or other encumbrance
or restriction of any kind.
Marks means trade marks, service marks, trade names, assumed names, brand
names, product names, slogans and logotypes (including translations,
adaptations, derivations and combinations) and related applications,
registrations and renewals.
Material Adverse Effect means a material adverse effect on the Business or
the financial condition, operations, assets and prospects of PrimeWire.
Net Revenues means the net revenues, determined in accordance with
eNucleus's standard revenue recognition policies as permitted by GAAP,
attributable to the operation of the Business as a separate subsidiary or
division of eNucleus (or accounted for in good faith as a separate subsidiary or
division whether or not eNucleus actually operates the Business as such). For
these purposes:
(a) the "Business" includes any new line of business that eNucleus develops
and operates which uses the Acquired Assets prior to the expiration of the Third
Accounting Year; and
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(b) the term "net revenues" means gross revenues, exclusive of sales and
use taxes and shipping and handling charges, less discounts, rebates, refunds
and returns.
Notice means any notice, demand, charge, complaint or other communication
from any Person.
Objection Period is defined in Section 10.5(b).
Occupational Safety and Health Law means the Occupational Safety and Health
Act of 1970, as amended, and any other applicable Law or Order intended to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards.
Officer's Certificate means a certificate signed by an Authorized Officer
whose responsibilities extend to the subject matter of the certificate.
Online Benefits Payments is defined in Section 2.4(h).
Online Benefits Agreement is defined in Section 2.4(h).
Operating Budget is defined in Section 3.2(c)(3).
Order means any order, judgment, decree, ruling, consent decree, settlement
agreement, stipulation, injunction or subpoena entered or issued by any court,
Governmental Authority or arbitrator.
Ordinary Course of Business means, in respect of PrimeWire, an action taken
by it which (i) is consistent with its past practices and is taken in the
ordinary course of normal day-to-day operations and (ii) is not required by
applicable Law or its Organizational Documents to be authorized by its board of
directors.
Organizational Documents means (i) the certificate or articles of
incorporation and by-laws of a corporation, (ii) the partnership agreement of a
general partnership, (iii) the limited partnership agreement and certificate of
limited partnership of a limited partnership, (iv) the articles of organization
or certificate of formation and operating agreement of a limited liability
company, (v) the trust agreement establishing an inter vivos trust or the will
establishing a testamentary trust, (vi) the charter or similar document adopted
or filed in connection with the creation, formation or organization of any other
type of entity. Any reference in this Agreement to a Person's Organization
Documents means each of those documents as amended to date.
Other Assets means the following assets of PrimeWire:
(a) its customer lists and other customer information;
(b) to the extent assignable, all warranties and guaranties regarding the
operation or performance of Equipment and Vehicles;
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(c) its interest as a beneficiary in all unexpired confidentiality
agreements and covenants not to compete;
(d) its goodwill and its interest in all telephone and telecopier numbers
and related listings in telephone books and directories; and
(f) its Books and Records relating to any of the other Acquired Assets.
Overriding Event means (a) the occurrence of a breach by PrimeWire of any
representation or warranty in Article 4 of this Agreement or a default by
PrimeWire of any covenant in this Agreement, (b) an event that causes the
nonperformance of Buyer to be excused to the extent that such nonperformance is
due to governmental acts or orders or restrictions, or any other reason where
failure to perform is beyond the reasonable control and not caused by the
negligence of Buyer or (c) an event that causes the nonperformance of Buyer to
be excused due to such performance being the violation of any Law, including a
breach of fiduciary duty or duty of loyalty.
Party means Buyer, eNucleus or PrimeWire, and Parties means all of them. As
the context may require, Party may also mean Buyer and eNucleus on the one hand
and PrimeWire on the other.
Patents mean any patents, patent applications and patent disclosures and
related reissuances, continuations, continuations-in-part, revisions, extensions
and reexaminations.
Permit means any approval, consent, license, permit, registration,
certificate, waiver, confirmation or other authorization issued, granted or
otherwise made available by any Governmental Authority.
Permitted Lien means (i) any Lien for Taxes that are not yet due and
payable or (ii) any carrier's, warehouseman's, mechanic's, materialman's,
repairman's, landlord's, lessor's or similar statutory Lien incidental to the
Ordinary Course of Business, or (iii) the security interest securing the Related
Party Secured Debt.
Person means any individual, corporation, general or limited partnership,
limited liability company, joint venture, association, organization, estate,
trust or other entity or any Governmental Authority.
Proprietary Information means trade secrets and proprietary or confidential
business information, including: (i) ideas, formulas, discoveries and inventions
(whether patentable or unpatentable, and whether or not reduced to practice),
(ii) know-how, (iii) regulated medical waste treatment processes and techniques,
and (iv) computer source codes, programs, software and documentation (other than
those that are commercially available).
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Proposed First Year Earnout to Date is defined in Section 2.4(c)(1).
Proposed Large License Earnout is defined in Section 2.4(g)(1).
PrimeWire means PrimeWire, Inc., a Delaware corporation with its principal
executive offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇.
PrimeWire Closing Conditions is defined in Section 8.2.
Purchase Price is defined in Section 2.1.
Real Property means land or an interest in land (other than an interest in
a Facility Lease). As the context requires, the term "Real Property" includes:
(i) all buildings and other improvements on the land; (ii) all mechanical and
other equipment systems (whether or not "fixtures" under local Law) providing
heat, ventilation, air-conditioning, light, plumbing, utility services and fire
and other protection to the land or any building or improvement on the land; and
(iii) all privileges, rights, easements, hereditaments and appurtenances related
to or for the benefit of the land.
Related Party means (i) any Affiliate of PrimeWire or (ii) any Person for
which any officer or director of PrimeWire is serving as an officer, director,
partner, manager, executor, trustee or in a similar capacity or in which any
officer or director of PrimeWire has an equity, beneficial or other financial
interest.
Related Party Secured Debt is defined in Section 7.8.
Related Secured Parties is defined in Section 7.8.
Release means a spill, leak, emission, discharge, deposit, dumping or other
release into the environment, whether intentional or unintentional.
Schedule means a schedule to this Agreement referred to in Article 4.
SEC Documents is defined in Section 5.13.
Second Accounting Year means the period of 12 consecutive calendar months
beginning with the month after the last month of the First Accounting Year.
Second Year Cash Earnout is defined in Section 2.3(b).
Second Year Stock Earnout is defined in Section 2.3(b).
Software means any computer program, operating system, applications system,
firmware or software of any nature, whether operational, under development or
inactive, including all object code, source code, technical manuals, test
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scripts, user manuals and other documentation, whether in machine-readable form,
programming language or any other language or symbols, and whether stored,
encoded, recorded or written on disk, tape, film, memory device, paper or other
media of any nature and any data bases necessary to operate any such computer
program, operating system, application system, firmware or software, but does
not include Software which is commercially available for $5,000 or less.
▇▇▇▇▇▇ is defined in Section 2.4(e)(2).
Suit means any action, suit, proceeding, arbitration, audit, hearing or
investigation (whether civil, criminal, administrative or investigative in
nature, and whether formal or informal) by, before or in any court, Governmental
Authority or arbitrator.
Tax means any federal, state, provincial, local, municipal or foreign
income, gross receipts, capital stock, profits, withholding, social security,
unemployment, real property, personal property, stamp, excise, occupation,
sales, use, value added, estimated or other tax (including any related interest,
fines, penalties and additions), whether disputed or not.
Tax Return means any return (including any information return), report,
statement, form or other document required to be filed with or submitted to any
Governmental Authority in connection with the determination, assessment,
collection or payment of any Tax.
Third Accounting Year means the period of 12 consecutive months beginning
with the month after the last month of the Second Accounting Year. Third Year
Cash Earnout is defined in Section 2.3(b).
Third Year Stock Earnout is defined in Section 2.3(b).
Threatened means, in respect of a Suit, that Notice has been given, or an
other event has occurred or any other circumstance exists, that would lead a
prudent individual to conclude that the Suit is likely to be initiated or
otherwise pursued in the future.
Threshold is defined in Section 10.3(a).
Valuation Date means the last day of the applicable calendar quarter for
which the First Year Earnout, the Second Year Earnout or the Third Year Earnout,
as the case may be, is being determined.
Vehicles means trucks, trailers, automobiles and other vehicles used,
held for use or useful in the conduct of the Business.
Vehicle Lease means a Contract for the lease of a Truck or for the purchase
of a Vehicle under a conditional sales or title retention agreement.
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Annex II
Assumed Contract Obligations
1. Hosting Agreement with Inflow, pursuant to that certain Data Network
Exchange Facility Services Agreement, dated December 4, 2000 between Inflow,
Inc. and Prime Financial Group, Inc.
2. Office lease for Marietta, Georgia office with Parkaire Medical, at a
monthly rental of $5,000 per month.
3. Agreement with Webex Communications for sales presentation service.
4. Agreement with Synchrologic for data synchronization software.
5. Agreement with Data Junction, now called Pervasive Corp. for data
exchange software and service.
6. Lease agreement No. 1971 with C.I.T. Technology Financial Services.
7. Lease Agreement No. 1554 with C.I.T. Technology Financial Services.
8. Lease with Citicorp Vendor Finance.
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Annex III
Excluded Assets
Color copier leased from Minolta Business Services.
Office furniture, laptop computer and printer in Rockville, Maryland
location.
Any employee compensation tax credits or refunds received from the
Internal Revenue Service.
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