Exhibit 10.21
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SALE AND PURCHASE AGREEMENT
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THIS SALE AND PURCHASE AGREEMENT (this "Agreement") is among
Videolocity International, Inc., a Nevada corporation ("Seller"), and Summit
Media Group LLC, a Delaware limited liability company ("Purchaser"), which was
previously agreed to in principle during September 2006, and is executed as of
the 11th day of December, 2006 ("Effective Date").
In consideration of the mutual covenants herein contained, Seller and
Purchaser agree as follows:
ARTICLE 1
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PURCHASE AND SALE
1.1 Subject to the terms and conditions of this Agreement, Seller hereby sells,
conveys and assigns to Purchaser, and Purchaser hereby purchases from Seller,
all of Seller's right, title and interest in all of the properties and rights of
the Seller described in Schedule 1 annexed hereto (the "Assets").
ARTICLE 2
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PURCHASE PRICE
2.1 Purchase Price. The purchase price ("Purchase Price") for the
Assets of Seller as documented in Schedule 1 of this agreement shall be
$18,719,000 a price that has been mutually agreed upon by both the Seller and
the Purchaser and is further supported by the Preliminary Indication of Value as
prepared by IPA Advisory & Intermediary Services, an independent, third party
company. The Purchase Price was derived from various factors including but not
limited to (i) nature of the business; (ii) outlook of the economy and specific
industry; (iii) financial condition of the Seller; (iv) nature and value of the
tangible and intangible assets of the business; and (v) market price for similar
corporations, industry ratios, and other industry comparisons. Purchase Price
shall be payable to Seller based on the following schedule and use of the
assets: (i) twenty-five percent (25%) of the technical transfer fees and the
first 10% of the net licensing fees derived by Purchaser in licensing of the
Assets currently in development or any subsequent version thereof; (ii) ten
percent 10% of the net revenues derived by Purchasers deployment any of the
technologies beginning one year after effective date of this agreement; (iii)
ten percent (10%) of the net revenues from all other products or services that
uses a portion or all of the Intellectual Property Technology. The Purchase
Price will be paid by Purchaser to Seller as provided in Article 4 below. For
purposes of this agreement Net Revenue shall be defined as "Revenue derived from
use of all or a portion of the Intellectual Property Technology less direct
costs customarily used in cost of sales calculations; or as commonly referred to
as gross margin, these costs shall include the direct incremental cost of sales
including per use cost of content, costs of T-1 or other delivery method, costs
of interest on equipment deployed to generate revenues with the technology.
Until purchase price is paid in full the Seller shall hold preferred
shares of the Purchaser and will retain the option of the Seller as per section
2.2. Seller shall be a Non Voting Member of the Purchaser. Nonvoting Members
shall have no voting rights attached to them and each member holding Nonvoting
shares shall not be entitled to vote on any Purchaser company matter.
2.2 Option of the Seller: In the event that Purchaser elects to sell
its Company and or assets prior to payment in full of the Purchase Price for the
Assets of the Seller as outlined in Article 2 Purchase Price, 2.1 Purchase Price
above; Seller retains the right to either 1) require Purchaser to pay the
remaining balance of the Purchase Price upon its closing of the sale or 2) prior
to sale, the Seller may convert the remaining balance of the Purchase Price to
equity in Purchaser's company at fair market value not to exceed five percent
(5%) of purchaser's company.
ARTICLE 3
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OBLIGATIONS OF PURCHASER
3.1 Obligations of Purchaser. Purchaser shall continue developing and licensing
the Assets worldwide, including the current business opportunities within the
Caribbean, the United States, and the European markets.
Purchaser shall not be allowed to sell all or a portion of the technologies
until the Purchase Price has been paid in full unless approved in writing by the
Seller.
Purchaser shall grant Seller a non-exclusive licensed use of the technologies
for the pursuit of business opportunities by Seller. In the event that Seller
uses any of the purchased technologies that are covered by this agreement,
Seller agrees to pay Purchaser on a per unit, lump sum, or other mutually
agreeable basis at a mutually agreed upon rate not to exceed the then usual and
customary rate applicable to such products at that time. However, in no
circumstance will the amount be greater than rates that Purchaser would have to
pay Seller under terms of this agreement.
ARTICLE 4
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PAYMENT OF PURCHASE AGREEMENT
4.1. Payment of Purchase Agreement. Purchaser has advanced to Seller one hundred
and fifty thousand dollars ($ 150,000) toward the purchase price of the
purchased assets and will also make a monthly thirty thousand dollar ($
30,000.00) payment until such time that the net licensing fees set forth in
Section 2.1 paid by the Purchaser exceeds $30,000.00 per month or the revenues
from the Seller's licensed use of the technology set fourth in Section 3.1
exceeds monthly installments of $30,000.00 and shall be remitted to Seller five
days prior to the month when it is due to Seller. The amounts due to Seller Set
forth in Section 2.1 shall be paid monthly through December 31, 2007 and
quarterly thereafter. The monthly funding requirement will begin January 1, 2007
which will be due December 26, 2006. All payments whether technical transfer
fees, net licensing revenues, or monthly advances will decrease the amount owed
on the purchase price. In the event that Purchaser is unable or unwilling to
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make payments and/or advances to Seller in accordance to Section 4.1, Seller may
provide a notice of default and will provide no more than 60 days for Purchaser
to cure the default. If Purchaser is unable to cure the default within the
allotted time following notification, Seller shall be granted a lien on
available Summit Media Group LLC assets until the remaining balance of the
Purchase Price has been paid in full.
4.1.1 Prepayment Option
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The Purchaser has the right to prepay the Purchase Price set fourth in Section
2.1 in full at any time with no penalties.
4.2 Right of Audit. Purchaser shall maintain, in accordance with standard
recognized accounting practices (US GAAP), accurate and complete records that
enable Purchaser to demonstrate full compliance with this Agreement. Purchaser
shall make all its books, accounts, memoranda, and other records relative to the
Agreement available for inspection and audit by Seller and/or its authorized
representatives at all reasonable times during the term the Purchase Price
amount set fourth in Section 2.1 is outstanding. If an audit discloses that
Purchaser has been paid by Seller an amount less than any amounts owing under
the Purchase Price Agreement set fourth in Section 2.1, Purchaser shall remit
such funds within 30 days of a formal claim to Seller. If an audit discloses
that Purchaser has under remitted funds exceeding five percent (5%) of the
requirement under this agreement, Purchaser will pay all reasonable costs for
the audit and all related collection efforts.
ARTICLE 5
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REPRESENTATIONS AND WARRANTIES
5.1 Seller. Seller represents and warrants to Purchaser that it is duly
incorporated in the State of Nevada and validly operating under the laws of the
State of Nevada and that Seller has the power and authority to complete, and has
properly authorized, the sale of the Assets and that it is conveying good and
marketable title to Assets being conveyed hereunder, free and clear from all
liens, claims, and encumbrances.
5.2 Purchaser. Purchaser represents and warrants to Seller that it has the power
and authority to complete, and has properly authorized, the purchase of the
Assets and the performance of its obligations hereunder.
5.3 All Parties. Each Party hereto represents and warrants to the others that
the execution of this Agreement and any other documents required or necessary to
be executed pursuant to the provisions hereof are valid and binding obligations
and are enforceable in accordance with their terms.
5.4 Indemnity. Seller agrees to hold Purchaser and in return, Purchaser agrees
to hold Seller harmless from and pay for any loss, damage, cost or expense,
including but not limited to legal fees and courts costs, which incurs by virtue
of inaccurate representation or warranty made by either party to the other or by
reason of any breach by either party of any covenants or obligations under this
Agreement.
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ARTICLE 6
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MISCELLANEOUS
6.1 Notices. All notices, demands and requests which may be given or which are
required to be given by any Party to the others under this Agreement must be in
writing and will be deemed effective either: (i) at 5:00 pm of the business day
next following the deposit thereof into the custody of a nationally recognized
overnight delivery service, addressed to such Party at the address specified
below; or (ii) immediately if sent during regular business hours by telegram or
telex, provided that receipt for such telegram or telex is verified by the
sender. For purposes of this Section 6.1, the addresses of the Parties for all
notices are as follows (unless changed by similar notice in writing given by the
particular person whose address is to be changed):
IF TO SELLER:
Videolocity International Inc.
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ATTN: ▇▇▇▇▇▇ ▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO PURCHASER:
Summit Media Group LLC
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Tel: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
Summit Media Group LLC
c/o Agents and Corporations, Inc.
Suite 600, One Commerce Center
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6.2 Changes. All changes to this agreement will be outlined in an amendment
that is mutually agreeable and will be attached hereto.
6.3 Entire Agreement. This Agreement embodies the entire agreement between
the parties relative to the subject matter hereof and supercedes all prior
agreements between the parties relative to the subject matter hereof.
6.4 Amendment. This Agreement may be amended only by a written instrument
executed by the Party or Parties to be bound hereby.
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6.5 Headings. The captions and headings used in this Agreement are for
convenience only and do not in any way limit, amplify or otherwise modify the
provisions of this Agreement.
6.6 Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Utah.
6.7 Successors and Assigns; Assignment. This Agreement will bind and insure
to the benefit of the Parties hereto and their respective legal representatives,
successors and assigns. Other than to an affiliate, a Party may not assign its
rights under this Agreement without the prior written consent of the other
Parties, which consent shall not be unreasonably withheld.
6.8 Invalid Provision. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provision
will be fully severable; this Agreement will be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part of
this Agreement, and the remaining provisions of this Agreement will remain in
full force and effect and will not be affected by such illegal, invalid or
unenforceable provision or by its severance from this Agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by persons duly empowered to bind the Parties to perform their
respective obligations hereunder, as of the day and year first above written.
SELLER:
VIDEOLOCITY INTERNATIONAL, INC.
By:__________________________________________
Name:________________________________________
Title:_______________________________________
PURCHASER:
Summit Media Group LLC
By:__________________________________________
Name:________________________________________
Title:_______________________________________
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SCHEDULE 1 - ASSETS
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All United States, United States Territories, and non US rights to all
intellectual property and technology, which shall include, but not be limited to
(i) its Videolocity Digital Entertainment System (DES tm), (ii) trademarks,
trademark applications, trade secrets, know-how, patents, patent applications,
copyrights and any other intellectual property rights, including High Speed
Internet Access together with digital streaming video technology, and (iii) its
existing license agreements, content agreements and agreements for
Video-On-Demand programming for the DES, including, but not limited to, digital
movie titles, other content and entertainment (including music and gaming
content).
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