Exhibit 10.5 Asset Purchase Agreement dated August 8, 2005, by and among
ERF Wireless, Inc., a Nevada corporation, ERF Enterprise
Network Services, Inc., a Texas corporation, and SkyvueUSA
East Central Texas, Inc., a Texas corporation
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), made and entered into as of
this 8th day of August, 2005, by and between the Buyer, as defined below, and
the Seller, as defined below.
As used in this Agreement, the term "Buyer" includes ERF Wireless, Inc., a
Nevada corporation ("Parent"), and ERF Enterprise Network Services, Inc., a
Texas corporation ("Subsidiary") a newly formed wholly owned subsidiary of
Parent created for the purposes of this Agreement.
As used in this Agreement, the term "Seller" means SkyvueUSA East Central Texas,
Inc., a Texas corporation.
W I T N E S S E T H:
WHEREAS, Seller presently operates a business engaged in designing, building and
supporting encrypted wireless networks for financial institutions and providing
fixed wireless broadband Internet solutions to commercial businesses and
residential customers (the "Business"); and
WHEREAS, Seller desires to sell substantially all of the assets and contracts of
the Business to Buyer, and Buyer desires to purchase such assets and contracts
from Seller, on the terms and subject to the conditions set forth herein. NOW,
THEREFORE, Buyer and Seller, in consideration of the mutual promises hereinafter
set forth, do hereby promise, and agree as follows:
ARTICLE ONE: ASSETS TO BE PURCHASED
1.1 Subject Assets. Upon the terms and subject to the conditions set forth in
this Agreement, Seller hereby sells to Subsidiary and Subsidiary hereby
purchases from Seller, at the Closing, all of Seller's right, title, and
interest in substantially all of the assets associated with the Business,
including the following:
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all inventories;
all intellectual property (including but not limited to patents and
pending patent applications, copyrights, trade names, and trade marks, and all
other intellectual property);
all assets acquired from Netzah Inc. and MoneyVue Financial, Inc.
including non-compete agreements;
all rights to equipment, tower and office space leases;
all ISP Subscriber Agreements, all Design Agreements, Equipment
Purchase Agreements, and Monitoring and Maintenance Agreements with banking
customers;
the revenue sharing agreements with ▇▇▇▇▇▇ CNET, First National Bank of
Cameron, and City National Bank of ▇▇▇▇▇▇;
all accounts and notes receivable, all work in progress, and all other
contracts and agreements relating to the conduct of the Business;
all distribution rights and intellectual property rights to the
CryptoVue System originally developed by Netzah, Inc.;
all equipment and software;
all legally assignable government permits, licenses and certifications
("Governmental Permits"); and
all documents, files and records containing technical support and other
information pertaining to the operation of the Business.
All of the assets being purchased by Buyer as described in this Paragraph 1.1
are hereinafter referred to as the "Subject Assets."
Documentation that will be provided under the purchase will include copies of
the following books, records, manuals and other materials in any tangible form
to the extent relating to the Business and/or the Subject Assets: records
relating to customers that are parties to any contracts, records relating to
vendors, and all other books, records, files, correspondence, documents and
information owned by Seller relating to the Business that are currently in the
possession of the employees of the Business, however maintained or stored
(collectively, the "Records"), it being understood that the Seller may cause to
be deleted confidential information that does not relate to the Subject Assets
or the Business.
1.2 Excluded Assets. The Subject Assets shall not include the following (herein
referred to as the "Excluded Assets"):
all cash, bank deposits and cash equivalents of Seller;
all corporate minute books, stock transfer books and other document
relating to the organization, maintenance and existence of Sellers as a
corporation ("Corporate Documents");
all rights of Seller pursuant to this Agreement, including the
consideration paid to Seller pursuant to this Agreement;
all originals of personnel records and other records that Seller are
required by applicable law to retain in its possession;
all tax refunds which Seller is due;
all capital stock in Seller; and
any other item specifically listed in Schedule 1.2.
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1.3 Purchase Price; Payment of Purchase Price. In addition to the Assumed
Liabilities described below, the aggregate consideration for the Subject Assets
(the "Purchase Price") shall be the amount equal to: $600,000 (the "Initial
Payment") plus the "Earn out Payment" equal to the following: Four (4) times
Adjusted EBITDA of the Subsidiary for the period of Closing through December 31,
2005; plus Two (2) times Adjusted EBITDA of the Subsidiary for the calendar year
ending December 31, 2006; plus One (1) times Adjusted EBITDA of the Subsidiary
for the calendar year ending December 31, 2007. The Purchase Price shall be
subject to adjustment as set forth in Section 1.7 below as so adjusted.
Revenue relating to accounts receivables more than 90 days past due shall not be
treated as earned for purposes of calculating Adjusted EBITDA for the Earn out
Payment portion of the Purchase Price. Adjusted EBITDA shall be defined as
EBITDA, as defined by GAAP, less all capital expenditures and less all capital
investments mutually agreed to by Seller Representative and Parent and made by
the Parent to the Subsidiary during the Earn out Payment period; amortized over
the co-terminus period ending December 31, 2007. The failure of Parent to
provide $50,000 per month to Subsidiary in secured working capital loans, as
more fully described in Section 6.4.1, starting no later than fifteen days
following Closing and continuing for a total of five months will be considered
an event of default by Parent under this Agreement.
1.4 Payment Terms.
1.4.1 The Initial Payment will be payable to Seller by Buyer on the Closing date
as follows: (a) $125,000 cash at Closing (less $10,000 previously paid to Seller
pursuant to the Letter of Intent dated May 4, 2005, as an "exclusive dealing or
non-shop payment and $10,000 advance payable by Parent concurrently with the
execution of this Agreement), (b) $75,000 in cash paid in equal monthly
increments over a ninety day period following Closing. The first such payment of
$25,000 will be made one month following Closing, the second payment will be
made two months following Closing, and the final $25,000 payment will be made
three months following Closing; and (c) the execution of a $400,000 Promissory
Note ("Note") by Buyer secured by a pledge of Subsidiary's stock. Such Note
shall be in form and substance substantially as set for forth in Exhibit 1 and
having the following terms and other terms that may be mutually agreed to by the
parties: (i) the annual rate of interest on the unpaid portion of the Note shall
be 6% per annum; (ii) installment payments of accrued interest and principal
shall be made over 10 quarters, with the quarterly payments being in the amount
of $43,175.06 and the first payment due ninety days after Closing, and every
ninety days thereafter,; (iii) Buyer may prepay the Note at any time without
penalty; and (iv) in the event of default under the Note or under the material
terms or conditions of this Agreement which survive Closing, Seller may take
actions necessary to protect its interest, including the exercise of the
security interest as defined in the Pledge Agreement. Such Pledge Agreement
shall be in form and substance substantially as set forth in Exhibit 2. The
Buyer may elect to make the quarterly payments on the Note in cash or Freely
Tradable common stock of the Parent. Should the Buyer elect to pay the quarterly
payments in Freely Tradable common stock of the Parent, the Parent will
guarantee to the Seller the underlying value of the Parent common stock as of
the quarterly payment due date for a period of 60 days from the payment date
should Seller elect to sell the stock during this time period. "Freely Tradable
common stock" shall mean fully registered securities which are not subject to
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any contractual, regulatory or other legal restrictions on their transfer, are
free and clear of all liens and encumbrances and are freely tradable to members
of the general public. $25,000 of the quarterly payments on the Note shall be
subject to offset by Buyer (if consented to by Seller Representative, such
consent not to be unreasonably withheld or delayed) to address any post-closing
Purchase Price adjustments and potential indemnification claims provided in
writing to Seller. The Parent shall be obligated to prepay the $400,000 Note in
the event that the Seller or its designated representatives causes to be closed
and made available to the Parent at least $1,000,000 in proceeds from the
Parent's securities offering pursuant to its Private Placement Memorandum,
("PPM"), dated June 25, 2005 or as hereafter modified. In the event that the
Seller or its designated representatives close less than $1,000,000 in funding
against Parent's PPM; then the Buyer will be obligated to prepay to Seller on
the Note $1.00 in cash for every $2.00 in funds received by Parent or its
designated representatives up to the full amount of the unpaid amount of the
Note.
1.4.2 With respect to the Earn out Payment, subsequent Annual Payments based on
multiples of Adjusted EBITDA performance shall be payable on the 1st of April
following the close of each calendar year for which payment is to be made (each
an "Annual Payment Date"). Each Annual Payment will be paid, at Parent's
election, either in cash or by issuance of the Parent's restricted common stock,
the number of shares of which would be calculated based on the average closing
price for the 60 trading days immediately preceding each respective Annual
Payment. Parent agrees to grant Seller piggyback registration rights in
connection with the restricted common stock issued to Seller and agrees to
provide its transfer agent with an opinion letter and instructions to remove the
restricted legend from Seller's shares in accordance with SEC Rule 144. Until
the final Annual Payment in Parent common stock associated with the Adjusted
EBITDA performance under this Agreement has been calculated and, if due, paid to
Seller on or before April 1, 2008, Parent agrees to place restrictions on the
Series A Preferred shareholders (or other Preferred shareholders having the
right to convert their shares of Preferred into multiple shares of common stock)
such that no Preferred shareholder may convert an amount of his Preferred stock,
on a quarterly basis, that would result in an amount of new common shares that
can then be sold in the marketplace that would represent more than 4.9% of the
then issued and outstanding common shares of Parent.
1.5 Assumed Liabilities; No Other Assumption of Liabilities. As partial
consideration for the Subject Assets, Subsidiary shall deliver to Seller at
Closing an Assignment and Assumption Agreement pursuant to which Subsidiary
shall assume and pay, perform or discharge, as appropriate, the liabilities and
obligations of Seller (the "Assumed Liabilities") (i) arising in connection with
the operation of the Business by the Subsidiary after the Closing date, (ii)
arising after the Closing date in connection with the performance by the
Subsidiary of the contracts and agreements associated with the Business assigned
to Subsidiary, including the ISP Subscriber Contracts, equipment and tower
leases, office lease and utilities in effect pertaining to the Business, the
Design, Equipment Purchase, Monitoring and Maintenance Agreements in existence
with banking customers, the revenue sharing agreements with ▇▇▇▇▇▇ CNET, First
National Bank of Cameron, and City National Bank of ▇▇▇▇▇▇, and (iii) the
$25,000 promissory note with the ▇▇▇▇▇▇ Economic Development Corporation used to
purchase inventory and certain operating equipment as it becomes due. Subsidiary
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shall not assume or be responsible for any such liabilities or obligations that
arise from breaches thereof or defaults by Seller prior to the Closing, all of
which liabilities and obligations shall constitute "Specified Retained
Liabilities" and all such liabilities shall either be retained by Seller or be
fully paid prior to Closing.
Except for the Assumed Liabilities, Buyer shall not assume or be obligated
under, or become liable for, any debt, liability, contract or obligation
whatsoever of Seller or the Business, and Seller shall be responsible for the
payment or performance and full discharge of all debts, liabilities, contracts
and obligations whatsoever of Seller, including those of the Business accruing
prior to the Closing and the Specified Retained Liabilities. In particular (and
by way only of example and not by way of limitation), Seller shall be and remain
solely responsible for, and shall timely pay or perform and discharge, all
debts, liabilities, contracts and obligations with respect to the Business other
than the Assumed Liabilities (collectively, together with those liabilities and
obligations described in Section 2.2 as constituting the same, "Specified
Retained Liabilities"): (i) all trade accounts payable and other accrued
expenses; (ii) any tax liability or obligation relating to transactions or
periods prior to and including the Closing Date (but excluding any sales, use,
transfer or other tax obligation resulting from the transactions contemplated by
this Agreement, which Subsidiary hereby agrees to be responsible for); (iii) any
liability or obligation to Seller's employees whatsoever, whether for salaries
and wages, sick pay, or any other employee benefit and whether relating to the
termination of their employment or otherwise arising, relating to periods prior
to and including the Closing; and (iv) any legal claim or any other liability or
obligation whatsoever incurred by Seller relating to the Business for periods or
occurrences prior to and including the Closing Date.
1.6 Allocation of Purchase Price. Seller and Buyer shall cooperate to determine
(in accordance with applicable U.S. Treasury regulations promulgated under
Section 1060 of the U.S. Internet Revenue Code, as amended, the allocation of
the Purchase Price and the liabilities of Seller (plus other relevant items)
among the Subject Assets as of the Closing Date. Such allocation shall be made
in a manner consistent with the fair market value of such assets. Each of the
parties will file all tax returns and information reports (including the IRS
Form 8594 and any disclosures that are required under Section 1060 of the
Internal Revenue Code) in a manner consistent with such allocation.
1.7 Adjustments to Purchase Price.
(a) The monthly note payment(s) portion of the Purchase Price
shall be subject to the following adjustments related to work
in process, which shall be reflected in the closing statements
to be executed and delivered by Buyer and Seller as
hereinafter provided: Any remaining net cash proceeds specific
to the Iberville Network Design contract following a
reconciliation of all cash received less expenses incurred or
accrued as related to such contract and an estimate prepared
by Seller reflecting remaining costs and expenses related to
any other work in process for which monies have been collected
prior to closing for which there are ongoing costs and
expenses.
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(b) The Purchase Price shall be subject to the following
additional credits and adjustments (either as additions or
reductions to the Purchase Price, as the case may be), which
shall be reflected in the closing statements to be executed
and delivered by Buyer and Seller as hereinafter provided: Any
rents, prepaid items, taxes and other similar items with
respect to the Assumed Liabilities shall be prorated as of the
Closing.
ARTICLE TWO: CLOSING
2.1 Time and Place of Closing; Closing Deliveries. The closing of the purchase
and sale contemplated herein (the "Closing") shall take place at 10:00 a.m., on
Aug 5, 2005 at the offices of Parent, located at League City, Texas, or such
time and date as the parties may agree upon. The date of Closing is hereinafter
referred to as the "Closing Date."
At the Closing, Seller shall deliver to Buyer the documents, certificates,
agreements and instruments described in Section 2.2, and Buyer shall deliver to
Seller the documents, certificates, agreements and instruments described in
Section 2.3.
2.2 Conditions Precedent to Buyer's Obligation. The obligation of Buyer to
consummate the transactions contemplated herein is subject to the satisfaction
(or, in Buyer's sole discretion, written waiver thereof) as of the Closing of
the following conditions:
The representations and warranties of Seller made in this Agreement shall be
true and correct in all material respects at Closing.
No demand, action, suit, audit, investigation, review, claim or other legal or
administrative proceeding (collectively, a "Proceeding") by any nation or
government, any state or other political subdivision thereof, including any
governmental agency, department, commission, or instrumentality of the United
States, any State of the United States or any political subdivision thereof or,
any self-regulatory agency or authority (collectively, "Governmental Authority")
or other person shall have been instituted or threatened against Seller which
seeks to enjoin, restrain or prohibit, or which questions the validity or
legality of, the transactions contemplated hereby or which otherwise seeks to
affect or could reasonably be expected to affect the transactions contemplated
hereby.
Seller's shareholders shall have approved this Agreement and the transactions
contemplated thereby.
Seller shall have performed in all material respects its obligations described
in Section 5.1.
Seller shall have negotiated and closed a new contract (or a series of related
contracts) for the design, construction, and monitoring of an encrypted wireless
network with a financial institution at a cumulative contract value of not less
than $450,000 and has received an initial down payment of not less than $200,000
under such contract(s).
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Seller, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇▇▇ shall have executed and delivered,
subject to Closing, 3 year non-competition agreements limited to (i) encrypted
wireless networks and (ii) broadband wireless networks.
Seller shall also furnish to Buyer documentation of all assets within Subject
Assets acquired from Netzah Inc. and MoneyVue Financial, Inc., Seller will
furnish to Buyer a complete listing of such transferred assets in the form of
Exhibit 3, in form and substance satisfactory to Buyer.
Buyer shall have received from Seller all of the following:
A ▇▇▇▇ of sale including a complete listing of assets in the form of Exhibit 1,
in form and substance satisfactory to Buyer, duly executed by Seller
(collectively, the "▇▇▇▇ of Sale"), conveying to Buyer the Subject Assets free
and clear of all pledges, security interests, or other similar liens granted by
Seller and free and clear of all other adverse claims of any kind whatsoever
known by Seller (collectively, "Encumbrances"), except (i) encumbrances for
taxes, the payment of which is not delinquent, (ii) materialmen's,
warehousemen's, mechanic's or other Encumbrances arising by operation of law in
the ordinary course of business for sums not due and which do not materially
detract from the value of such assets or properties or materially impair the
operation of the Business, and (iii) statutory Encumbrances incurred in the
ordinary course of business in connection with worker's compensation,
unemployment insurance or other forms of governmental insurance or benefits
(collectively "Permitted Encumbrances") ;
An assignment and assumption agreement in the form of Exhibit 4 (the "Assignment
and Assumption Agreement"), duly executed by Seller;
Trademark, copyright and other intellectual property assignment documents
reasonably requested by Buyer to fully effectuate the transfer of the
intellectual property within the Subject Assets, each duly executed by Seller;
Actual or constructive physical possession of all of the Subject Assets and the
Records;
A certificate of the Secretary of Seller certifying, as complete and accurate as
of the Closing, attached copies of the governing documents of Seller, certifying
and attaching all requisite resolutions or actions of Seller's board of
directors and shareholders approving the execution and delivery of this
Agreement and the consummation of the contemplated transactions and the change
of name contemplated by Section 1.1 and certifying to the incumbency and
signatures of the officers of Seller executing this Agreement and any other
document relating to the contemplated transactions and accompanied by the
requisite documents for amending the relevant governing documents of Seller
required to effect such change of name in form sufficient for filing with the
appropriate Governmental Body; and
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A legal opinion from Seller's counsel that (1) Seller is bound by this Agreement
and (2) subject to Closing, the ▇▇▇▇ of Sale and Assignment and Assumption
Agreement are in a form legally sufficient to convey to Buyer the Subject Assets
free and clear of all Encumbrances, except Permitted Encumbrances.
2.3 Conditions Precedent to Seller's Obligations. The obligation of Seller to
consummate the transactions contemplated hereby is subject to satisfaction as of
the Closing of the following conditions (or, in the sole discretion of Seller,
written waiver thereof):
The representations and warranties of Buyer made in this Agreement shall be true
and correct in all material respects at Closing.
No proceeding by any Governmental Authority or other person shall have been
instituted or threatened against Buyer which seeks to enjoin, restrain or
prohibit, or which questions the validity or legality of, the transactions
contemplated hereby or which otherwise seeks to affect or could reasonably be
expected to affect the transactions contemplated hereby.
Seller's historical operations have been in compliance with all applicable laws
and regulations that could have a material adverse impact on the Business.
Buyer shall have performed in all material respects its obligations described in
Section 5.1.
Parent shall have taken all actions to satisfy its commitment to allow either
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or their designee to serve on the Parent's board
of directors until the full Purchase Price has been delivered to Seller.
Subsidiary shall have taken all action to appoint one person nominated by ▇▇▇
▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ to its board of directors and to allow such person
to serve on its board of directors until the full Purchase Price has been
delivered to Seller.
Subsidiary shall have entered, subject to Closing, a 30 month written consulting
agreement with ▇▇▇ ▇▇▇▇▇▇▇▇ that pays ▇▇▇ ▇▇▇▇▇▇▇▇ $3,000 per month for not more
than 20 hours of services per month and as partial consideration for 3 year
non-competition agreement. The consulting agreement will provide for reasonable
and customary reimbursement for out of pocket expenses incurred by ▇▇▇ ▇▇▇▇▇▇▇▇
at the Subsidiary's request.
Subsidiary shall have entered, subject to Closing, a 30 month written Employment
Agreement with ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ to serve as the Chairman of the Board and CEO
of Subsidiary. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇' compensation shall be $15,000 per month plus
benefits and performance incentives. The Employment Agreement shall include as
partial consideration a 3 year non-competition agreement.
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Subsidiary shall have entered, subject to Closing a 30 month written Employment
Agreement with ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ to serve as the President of Subsidiary. ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇' compensation shall be $12,500 per month plus benefits and
performance incentives. The Employment Agreement shall include as partial
consideration a 3 year non-competition agreement.
Seller shall have received from Buyer all of the following:
The Initial Payment of the Purchase Price (including the Promissory Note and
Pledge Agreement, both duly executed by Buyer) as provided in Section 2.1; and
The Assignment and Assumption Agreement, duly executed by Subsidiary;
A certificate of the Secretary of each of Parent and Subsidiary certifying, as
complete and accurate as of the Closing, attached copies of the governing
documents of Parent and Subsidiary, respectively, and certifying and attaching
all requisite resolutions or actions of Buyer's board of directors approving the
execution and delivery of this Agreement and the consummation of the
contemplated transactions and certifying to the incumbency and signatures of the
officers of Buyer executing this Agreement and any other document relating to
the contemplated transactions; and
A legal opinion from Buyer's counsel that (1) Buyer is bound by this Agreement
and (2) subject to Closing, Subsidiary is obligated for the Assumed Liabilities
and Buyer is obligated under the Promissory Note and under this Agreement for
the balance of the Purchase Price based upon the earnings of the Subsidiary.
2.4 Consents and Other Conditions to Closing. It shall also be a condition
precedent to closing that:
(a) Buyer and Seller shall have obtained all necessary material
consents or approvals from all governmental or regulatory
authorities that are necessary to acquire the Subject Assets
and to continue the historical operations of the Seller in the
Subsidiary;
(b) Seller shall not be involved in or threatened with any
litigation that would have a material adverse effect on the
Subject Assets;
(c) an environmental inspection (where applicable) by a licensed
environmental inspection firm selected by Parent or Subsidiary
shall have reasonably determined the Subject Assets to be free
from significant environmental liabilities;
Seller shall have obtained all necessary consents from any utility companies,
landlords, lenders, suppliers and other third parties in connection with the
material contracts described in Exhibit 5 to be assumed by Subsidiary at Closing
("Material Consents"). If there are any Material Consents that have not yet been
obtained (or otherwise are not in full force and effect) as of the Closing, in
the case of each Seller contract as to which such Material Consents were not
obtained (or otherwise are not in full force and effect) (the "RESTRICTED
MATERIAL CONTRACTS"), Buyer may waive the closing conditions as to any such
Material Consent and either:
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(i) elect to have Seller continue its efforts to obtain the
Material Consents; or
(ii) elect to have Seller retain that Restricted Material Contract
and all Liabilities arising therefrom or relating thereto.
If Buyer elects to have Seller continue its efforts to obtain any Material
Consents and the Closing occurs, notwithstanding Sections 1.1 and 1.5, neither
this Agreement nor the Assignment and Assumption Agreement nor any other
document related to the consummation of the contemplated transactions shall
constitute a sale, assignment, assumption, transfer, conveyance or delivery or
an attempted sale, assignment, assumption, transfer, conveyance or delivery of
the Restricted Material Contracts, and following the Closing, the parties shall
use Best Efforts (other than that Seller and Buyer shall have no obligation to
offer or pay any consideration in order to obtain any such Material Consents),
and cooperate with each other, to obtain the Material Consent relating to each
Restricted Material Contract as quickly as practicable. Pending the obtaining of
such Material Consents relating to any Restricted Material Contract, the parties
shall cooperate with each other in any reasonable and lawful arrangements
designed to provide to Buyer the benefits of use of the Restricted Material
Contract for its term (or any right or benefit arising thereunder, including the
enforcement for the benefit of Buyer of any and all rights of Seller against a
third party thereunder). Once a Material Consent for the sale, assignment,
assumption, transfer, conveyance and delivery of a Restricted Material Contract
is obtained, Seller shall promptly assign, transfer, convey and deliver such
Restricted Material Contract to Buyer, and Buyer shall assume the obligations
under such Restricted Material Contract assigned to Buyer from and after the
date of assignment to Buyer pursuant to a special-purpose assignment and
assumption agreement substantially similar in terms to those of the Assignment
and Assumption Agreement (which special-purpose agreement the parties shall
prepare, execute and deliver in good faith at the time of such transfer, all at
no additional cost to Buyer). If there are any Consents not listed on Exhibit 5
necessary for the assignment and transfer of any Seller contracts to Buyer (the
"NONMATERIAL CONSENTS") which have not yet been obtained (or otherwise are not
in full force and effect) as of the Closing, Buyer shall elect at the Closing,
in the case of each of the Seller contracts as to which such Nonmaterial
Consents were not obtained (or otherwise are not in full force and effect) (the
"RESTRICTED NONMATERIAL CONTRACTS"), whether to:
(i) accept the assignment of such Restricted Nonmaterial Contract, in
which case, as between Buyer and Seller, such Restricted Nonmaterial Contract
shall, to the maximum extent practicable and notwithstanding the failure to
obtain the applicable Nonmaterial Consent, be transferred at the Closing
pursuant to the Assignment and Assumption Agreement as elsewhere provided under
this Agreement; or
(ii) reject the assignment of such Restricted Nonmaterial Contract, in
which case, notwithstanding Sections 1.1 and 1.5, (A) neither this Agreement nor
the Assignment and Assumption Agreement nor any other document related to the
consummation of the Contemplated Transactions shall constitute a sale,
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assignment, assumption, conveyance or delivery or an attempted sale, assignment,
assumption, transfer, conveyance or delivery of such Restricted Nonmaterial
Contract, and (B) Seller shall retain such Restricted Nonmaterial Contract and
all liabilities arising therefrom or relating thereto.
2.5 Failure of Conditions. If any of the conditions to Closing set forth in
Sections 2.2 and 2.3 have not been satisfied, the party or parties entitled to
the benefit of such conditions may elect to terminate this Agreement without
further liability of the terminating party or to consummate the transactions
contemplated hereby and, if any such failure is a result of a breach of any
provision of this Agreement, including the failure of any party to execute
and/or deliver any item required to be executed and/or delivered pursuant to
Sections 2.2 and 2.3, the party or adversely affected thereby may seek
appropriate remedies for any and all damages, costs and expenses incurred by
reason of such breach. Notwithstanding the above provisions, if either party
terminates this agreement prior to Closing, Seller shall remain obligated to
repay to Buyer all advance payments that have been made from Buyer to Seller
prior to Closing; provided, however that the initial $10,000 paid to Seller upon
the execution of the Letter of Intent by Seller and Parent dated May 4, 2005 may
be retained by Seller as a breakup fee as described in the Letter of Intent.
ARTICLE THREE: WARRANTIES AND REPRESENTATIONS OF SELLER
Seller hereby warrants and represents to Buyer, which warranties and
representations shall survive the Closing for one year, as follows:
Corporate Matters; No Conflict. Seller is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of Texas and
has the authority and power, corporate and otherwise, to carry on the Business
in the places and in the manner presently conducted. Seller has the corporate
power and authority to enter into this Agreement and the agreements and
documents to be executed and delivered pursuant to this Agreement (the
"Ancillary Agreements") by Seller and to consummate the transactions
contemplated hereby.
The execution, delivery and performance of this Agreement and the Ancillary
Documents to be executed by Seller and the consummation of the transactions
contemplated hereby have been approved by all necessary corporate action, other
than the Seller's shareholders. This Agreement and the Ancillary Documents to be
executed by Seller constitute, or, in the case of such Ancillary Documents, upon
their execution and delivery by Seller, will constitute, valid and legally
binding obligations of Seller, enforceable against it in accordance with their
respective terms except as such enforceability may be limited by bankruptcy and
other Laws generally affecting the rights of creditors and general principles of
equity.
To Seller's knowledge, there are no material adverse environmental liabilities
associated with the Seller's Business or the Subject Assets.
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Except as set forth in Schedule 3, the execution, delivery and performance of
this Agreement and such Ancillary Documents to be executed by Seller and the
consummation of the transactions contemplated hereby by such party: (i) does not
and will not violate, conflict with, or result in the breach of, or default
under, any term, condition or provision of, give rise to any right to terminate,
cancel, modify, accelerate or otherwise change the existing rights or
obligations of such party with respect to, (A) any domestic or foreign Federal,
state or local statute, law, ordinance, rule, administrative interpretation,
regulation, policy, guideline or other requirement of or by any Governmental
Authority, each as amended through the date hereof (collectively, "Laws") which
is applicable to such party, the Business and/or the Subject Assets, (B) any
judgment, order, writ, injunction, decree, directive or award of any arbitrator
or Governmental Authority (collectively, an "Order") which is applicable to such
party, the Business and/or the Subject Assets, (C) the charter documents of
Seller or any securities issued by Seller, or (D) any authorization, approval,
consent, qualification, permit or license (collectively, an "Authorization") of
any Governmental Authority, or any material agreement, or other material
instrument, document or understanding, oral or written, to which such party is a
party, by which Seller may have rights or by which any of the Subject Assets may
be bound or affected; or (ii) result in the creation or imposition of any
Encumbrance except Permitted Encumbrances, on the Subject Assets. No
Authorization or other action of, or registration, declaration, recording or
filing with, any Governmental Authority or other person (other than the approval
of the Board of Directors and shareholders of Seller) is required in connection
with the execution and delivery of this Agreement and/or any Ancillary Document
to be executed and delivered pursuant hereto by Seller and/or the consummation
by Seller of the transactions contemplated hereby.
Title to the Subject Assets. Seller has good and valid title to all of the
assets constituting the Subject Assets described in Section 1.1, free and clear
of all Encumbrances except Permitted Encumbrances.
Commitments; Customers and Vendors. To the knowledge of Seller, the Assets
listed on Exhibit 1 are all of the material agreements, arrangements, and other
commitments of the Business with its customers (whether written, oral or
otherwise) which, if not assigned to or assumed by Buyer as an "Assumed
Contract" hereunder, would result in liabilities or obligations of Seller
accruing after the Closing. True and correct copies of each of the contracts and
all amendments and modifications thereof, have been delivered to Buyer. Assuming
that the consent of the customers who are parties to the contracts is obtained
pursuant to consents (as defined in 5.1), all of the contracts are assignable by
Seller.
Each Assumed Contract is in full force and effect. To the knowledge of Seller,
Seller has not been made aware of any facts that would suggest that any of the
material contracts within Subject Assets is not valid and binding or enforceable
in accordance with its terms, except as such enforceability may be limited by
bankruptcy and other Laws generally affecting the rights of creditors and
general principles of equity. Except as set forth in Schedule 3, neither Seller
nor, to the knowledge of Seller, any other party to a contract is in breach or
default under any contract (with or without the lapse of time, or the giving of
notice, or both).
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Brokers, Agents. Seller has not dealt with any agent, finder, broker or other
representative (other than representatives of Buyer) in any manner which could
result in Buyer being liable for any finder's, broker's or other fee or
commission in connection with the subject matter of this Agreement.
Warranties True and Correct. No representation or warranty by Seller contained
in this Agreement or in any writing to be furnished pursuant hereto contains or
will contain any untrue statement of fact or omits or will omit to state any
material fact required to make the statements herein or therein complete and not
misleading.
Exclusion of Implied Warranties. SELLER EXCLUDES AND DISCLAIMS ANY AND ALL
IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SUBJECT ASSETS AND EACH
OF THEM. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, SELLER MAKES NO
WARRANTIES TO BUYER IN CONNECTION WITH THE SALE OR TRANSFER OF THE SUBJECT
ASSETS TO SUBSIDIARY OR THE CONDITION OR PROSPECTS OF THE BUSINESS OTHER THAN
THOSE EXPRESSLY SET FORTH IN THIS ARTICLE THREE.
ARTICLE FOUR: WARRANTIES AND REPRESENTATIONS OF BUYER
Buyer hereby warrants and represents to Seller, which warranties and
representations shall survive the Closing for a period of three years following
Closing or one year following the last Earn out Payment, whichever is longer, as
follows:
Corporate Matters; No Conflict. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state where it was
incorporated. Buyer has the authority and power, corporate or otherwise, to
carry on all business activities in the places and in the manner currently
conducted by it. Buyer has the corporate power and authority to enter into this
Agreement and the Ancillary Agreements to be executed and delivered by it and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the Ancillary Agreements by Buyer have been
approved by all necessary corporate action. This Agreement and the Ancillary
Documents to be executed and delivered by Buyer constitute, or in the case of
the Ancillary Documents, upon their execution and delivery by Buyer, will
constitute, valid and legally binding obligations of Buyer, enforceable against
it in accordance with their respective terms except as such enforceability may
be limited by bankruptcy and other Laws generally affecting the rights of
creditors and general principles of equity.
The execution, delivery and performance of this Agreement and the Ancillary
Agreements to be executed and delivered by Buyer, the consummation of the
transactions contemplated hereby, and the compliance herewith, by Buyer: (i)
does not, and will not violate, conflict with or result in the breach of, or
default under, any term, condition or provision of, give rise to any right to
15
terminate, cancel, modify, accelerate or otherwise change the existing rights or
obligations of such party with respect to, (a) any Laws which is applicable to
Buyer, (b) Order which is applicable to Buyer, (c) the charter documents of
Buyer or any securities issued by Buyer, or (d) any Authorization of any
Governmental Authority, or any agreement, or other instrument, document or
understanding, oral or written, to which Buyer is a party.
No Authorization or other action of, or registration, declaration, recording or
filing with, any Governmental Authority or other person is required in
connection with the execution and delivery of this Agreement and/or any
Ancillary Document to be executed and delivered pursuant hereto by Buyer and/or
the consummation by Buyer of the transactions contemplated hereby. SEC Filings;
Financial Statements
(a) The Parent has made available to the Seller, upon request of
the Seller, accurate and complete copies (excluding copies of
exhibits) of each report, registration statement and
definitive proxy statement filed by the Parent with the
Securities Exchange Commission (the "SEC") between December
31, 2002 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the
Parent SEC Documents complied in all material respects with
the applicable requirements of the Securities Act of 1933 or
the Securities Exchange Act of 1934 (as the case may be); and
(ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) Between the date of the most recently filed Parent SEC
Document and the date of this Agreement, there has been no
material adverse change in the Parent's affairs that has not
been disclosed in the Parent's SEC Documents, PROVIDED,
HOWEVER, that for purposes of determining whether there shall
have been any such material adverse change, (i) any adverse
change resulting from or relating to worldwide general
business or economic conditions shall be disregarded, (ii) any
adverse change resulting from or relating to conditions
generally affecting the industry in which Parent competes
shall be disregarded, and (iii) any adverse change to the
stock price of the Parent's Common Stock, as quoted on any
nationally recognized stock quotation system, shall be
disregarded.
(c) The consolidated financial statements contained in the
Parent's SEC Documents: (i) complied as to form in all
material respects with the published rules and regulations of
the SEC applicable thereto; (ii) were prepared in accordance
with generally accepted accounting principles applied on a
consistent basis throughout the periods covered, except as may
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be indicated in the notes to such financial statements and (in
the case of unaudited statements) as permitted by Form 10-Q of
the SEC, and except that unaudited financial statements may
not contain footnotes and are subject to year-end audit
adjustments; and (iii) fairly present the consolidated
financial position of the Parent and its subsidiaries as of
the respective dates thereof and the consolidated results of
operations of the Parent and its subsidiaries for the periods
covered thereby.
(d) The Parent qualifies as a registrant whose securities may be
resold pursuant to Form S-1 or SB-2 promulgated by the SEC
pursuant to the Securities Act of 1933, as amended.
Acquisition Subsidiary. Subsidiary was formed in June, 2005 and has transacted
no business other than matters relating to its formation or the entry into this
Agreement. Immediately following the Closing, Subsidiary will be a wholly owned
subsidiary of Parent.
Brokers; Agents. Buyer has not dealt with any agent, finder, broker or other
representative in any manner which could result in Seller being liable for any
fee or commission in the nature of a finder's or originator's fee in connection
with the subject matter of this Agreement.
Warranties True and Correct. No warranty or representation by Buyer contained in
this Agreement or in any writing to be furnished pursuant hereto contains or
will contain any untrue statement of fact or omits or will omit to state any
material fact required to make the statements therein contained not misleading.
ARTICLE FIVE: ADDITIONAL COVENANTS
5.1 General Buyer and Seller understand and agree to cooperate on the completion
of comprehensive due diligence, including the preparation of Parent audited
financial statements covering the assets to be purchased and liabilities assumed
for inclusion in a report on Form 8-K to be filed by Parent with the U.S.
Securities and Exchange Commission. Buyer and Seller acknowledge that the
satisfactory completion of due diligence is a condition precedent to the closing
obligation of either party.
5.2 Best Efforts. Buyer shall use its best efforts to obtain within sixty (60)
days after the Closing from each party (other than Seller) to a contract such
customer's written agreement to the assignment of its contract to Buyer, and
Seller shall use its best efforts, together with Buyer, in obtaining all such
Consents. "Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously as possible, provided, however, that a Person required to use Best
Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this
Agreement and the contemplated transactions or to dispose of or make any change
to its business, expend any material funds or incur any other material burden.
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5.3 Publicity. Seller (nor any agent or representative of Seller) shall make any
public statements, including any press releases with respect to this Agreement
and/or the transactions contemplated hereby or any of the terms thereof without
the express prior written consent of the Parent, (it being understood that in no
event shall any statement by Seller or Buyer with respect to this Agreement
and/or the transactions contemplated hereby or any of the terms thereof that is
consistent with the communication plan specified by Parent and agreed upon by
the parties and made after the Closing to customers or vendors of the Business
constitute a public statement restricted hereby). Seller understands that Parent
of Buyer is a public company and Parent will issue all public statements
regarding this transaction as well as information releases for all future public
releases.
5.4 Cooperation. Seller shall cooperate with Buyer and use its best efforts to
cause respective officers, employees, agents, accountants and representatives,
if any, of Seller to cooperate with Buyer after the Closing to facilitate the
orderly transition of the Business and the Subject Assets to Buyer and to
minimize any disruption to the Business that might result from the transactions
contemplated hereby. Without limiting the generality of the foregoing provision,
during the ninety (90) day period commencing on the Closing Date, Seller shall
perform the transition services as reasonably specified by Buyer.
5.5 Execution of Additional Documents. From time to time, as and when requested
by Buyer, Seller shall execute and deliver, or cause to be executed and
delivered, all such documents and instruments of conveyance and shall take, or
cause to be taken, all such further or other actions as are necessary to
consummate the transactions contemplated by this Agreement and to convey,
assign, transfer and deliver to Buyer any of the properties or assets intended
to be conveyed, assigned, transferred and delivered pursuant to this Agreement.
5.7 Records. For the five (5) year period commencing on the Closing Date, upon
reasonable notice, Buyer and Seller agree to furnish or cause to be furnished,
during normal business hours, to each other and their respective
representatives, employees, counsel and accountants access to such information
and assistance relating to the Business as is reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any returns,
reports or forms, or the defense of any tax claim or assessment, relating to the
Business; provided, however, that such access does not unreasonably disrupt the
normal operations of Buyer or Seller.
5.8 Default Provisions. Buyer and seller agree to negotiate mutually acceptable
default provisions that will be included in the Pledge Agreement.
ARTICLE SIX: INDEMNIFICATION & POST CLOSING CONDITIONS
6.1 Indemnification of Buyer. Seller agrees to indemnify Buyer and its
Affiliates and their respective members, managers, shareholders, directors,
officers, employees and agents (collectively, the "Buyer Indemnified Parties")
against, and to hold each such person harmless from, any and all damages,
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losses, deficiencies, actions, demands, judgments, diminution in value, costs
and expenses (including reasonable attorneys' and accountants' fees)
(collectively, "Losses") of or against such person resulting from (i) any
misrepresentation or breach of warranty on the part of Seller in this Agreement
or in any Ancillary Agreement; (ii) any breach or non-fulfillment of any
agreement or covenant contained herein or in any Ancillary Agreement on the part
of Seller; (iii) any failure of Seller to pay and/or perform any liabilities or
obligations of Seller or the Business (including the Specified Retained
Liabilities and any such liability arising by operation of law) other than the
Assumed Liabilities; and (iv) any claims and liabilities to the extent related
to both (A) Seller's operation of the Business and (B) periods or occurrences
prior to the Closing or, as Seller's operation of the Business relates to an
Assumed Contract, prior to the deferred transfer date, if any, applicable to
such Restricted Material Contract. For purposes hereof, "Affiliate" shall mean,
as to any person, any other person which, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, such person.
6.2 Indemnification of Seller. Buyer agrees to indemnify Seller and its
Affiliates and their respective shareholders, directors, officers, employees and
agents (collectively, the "Seller Indemnified Parties") against, and to hold
each such person harmless from, any and all Losses of or against such person
resulting from (i) any misrepresentation or breach of warranty on the part of
Buyer in this Agreement or in any Ancillary Agreement; (ii) any breach or
non-fulfillment of any agreement or covenant contained herein or in any
Ancillary Agreement on the part of Buyer; (iii) any failure by Buyer to pay,
discharge and/or perform any of the Assumed Liabilities; (iv) any claims and
liabilities to the extent related to both (A) Buyer's operation of the Business
and (B) periods or occurrences after the Closing or, as Buyer's operation of the
Business relates to a Restricted Material Contract, after the deferred transfer
date if any, applicable to such Restricted Material Contract.
6.3 Procedure Relative to Indemnification. The following procedure shall govern
indemnification:
(a) If either party hereto shall claim that it is entitled to be indemnified
pursuant to the terms of this Article Six, it (the "Claiming Party") shall so
notify Seller in the case of a claim for indemnification hereunder (a "Claim")
by any Claiming Party who or which is a Buyer Indemnified Party or Buyer in the
case of a Claim by a Claiming Party who or which is a Seller Indemnified Party
(the "Indemnifying Party") in writing of such claim promptly within ninety (90)
days after receipt of a notice of such claim or notice of any claim of a third
party that may reasonably be expected to result in a claim by the Claiming Party
against the Indemnifying Party except that notice shall be given to the
Indemnifying Party within such earlier period of time as may be reasonably
necessary to allow the Indemnifying Party to respond to any pleading or other
document for which a timely response is required; provided, however, that
failure to timely give such notification shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure. Such notice shall specify the
breach of representation, warranty, or agreement claimed by the Claiming Party
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and the Losses incurred by, or imposed upon, the Claiming Party on account
thereof. If such Losses are liquidated in amount, the notice shall so state and
such amount shall be deemed the amount of the Claim of the Claiming Party. If
such Losses are not liquidated in amount, the notice shall so state and, in such
event, a Claim shall be deemed asserted against the Indemnifying Party by the
Claiming Party, but no payment shall be made on account thereof until the amount
of such Claim is liquidated and the Claim is finally determined. In the case of
a Claim other than one which is based upon a Proceeding by any third party,
including any Proceeding by any Governmental Authority (a "Third Party Claim"),
if the Indemnifying Party agrees with such Claim for indemnification, it shall
remit payment for the amount of such Claim promptly after receipt from the
Claiming Party of the notice and invoice therefore. In the event of a dispute,
the Claiming Party and the Indemnifying Party shall proceed in good faith and
attempt to negotiate a resolution of such dispute, and if not resolved through
negotiations, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction.
(b) The following provisions shall apply to any Claim of the Claiming Party that
is based upon a Third Party Claim:
(1) The Indemnifying Party shall, upon receipt of such written notice and at its
expense, defend such Third Party Claim in its own name or, if necessary, in the
name of the Claiming Party. The Claiming Party will cooperate with and make
available to the Indemnifying Party such assistance and materials as may be
reasonably requested of it and the Claiming Party shall have the right, at its
expense, to participate in such defense. The Indemnifying Party shall have the
right to settle and compromise such Third Party Claim only with the consent of
the Claiming Party, which consent shall not be unreasonably withheld; provided,
however, that, in making its determination as to whether to grant such consent,
the Claiming Party shall be entitled to consider the impact of the proposed
settlement upon its reputation and/or the goodwill of the businesses which it
conducts.
(2) If the Indemnifying Party shall notify the Claiming Party that it disputes
any Claim made by the Claiming Party with respect to, and/or it shall refuse or
choose not to conduct a defense against, such Third Party Claim, then the
Claiming Party shall have the right to conduct a defense against such Third
Party Claim and shall have the right to settle and compromise such Third Party
Claim without the consent of the Indemnifying Party. Once the amount of such
Claim is liquidated and the Claim is finally determined, the Claiming Party
shall be entitled to pursue each and every remedy available to it at law or in
equity to enforce the indemnification provisions of this Article Six and, if it
is determined, or the Indemnifying Party agrees, that it is obligated to
indemnify the Claiming Party for such Claim, the Indemnifying Party agrees to
pay all costs, expenses and fees, including all reasonable attorneys' fees,
which may be incurred by the Claiming Party in attempting to enforce
indemnification under this Article Six, whether the same shall be enforced by
suit or otherwise.
6.4 Post Closing Conditions.
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6.4.1 Buyer's Obligations To Seller Following the Closing, Buyer shall have the
ongoing obligations and duties to Seller concerning the operations of Subsidiary
set forth below.
(1) Subsidiary will be domiciled and operated from Taylor, Texas,
unless otherwise agreed to in writing by both Parent and Seller Representative,
until April 1, 2008 or the date Buyer pays in full the Purchase Price.
(2) Parent will operate the Subsidiary as a wholly owned subsidiary
until April 1, 2008 or the date Buyer pays in full the Purchase Price. Parent
shall also not, without the written approval of Seller Representative cause the
Subsidiary to sell or otherwise dispose of any of its assets or of any Subject
Assets acquired from Seller until April 1, 2008 or the date Buyer pays in full
the Purchase Price, except in each case for dispositions made in the ordinary
course of business or payment of expenses incurred by the Subsidiary pursuant to
the transactions contemplated by this Agreement.
(3) While ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ is employed by Subsidiary, he will be
allowed to continue as a member of the Board of Directors of Moneyvue Financial,
Inc. and consult with Moneyvue Financial, Inc., its successors and assigns, from
time to time so long as such board or consulting activities do not unreasonably
interfere (in the reasonable opinion of Parent) with ▇▇. ▇▇▇▇▇ duties and
responsibilities to the Subsidiary or Parent.
(4) Parent shall elect ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Chairman and CEO of Subsidiary
and elect ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ President. Further, Seller Representative will have
veto power over decisions to materially increase or decrease spending or
capitalization above or below the budgets forecasted in the "SkyvueUSA 5 Year
Proforma v 6.5" until April 1, 2008 or the date Buyer pays in full the Purchase
Price.
(5) Parent agrees to fund the $250,000 in forecasted working capital
needs of the Subsidiary in $50,000 monthly increments in each of the first five
months after Closing with the first installment due fifteen days following
Closing. Parent shall receive a Condition Precedent Demand Note substantially in
the Form of Exhibit 1A for all funds advanced to Subsidiary at any time and from
time to time. Further, Parent shall be granted a security interest in all assets
of the Subsidiary under a Security Agreement substantially in the Form of
Exhibit 2A. The Condition Precedent Demand Note(s) shall be subordinated to
Seller's note described in Section 1.4.1 above and the Pledge Agreement executed
to secure payment of Seller's note. The holder of the Condition Precedent Demand
Note(s) shall not be entitled to demand payment until such time as the Note to
Seller has been paid in full or 30 months from closing, whichever is later.
(6) Buyer shall cause the Seller employees listed on Exhibit 6 to be
offered at will employment with Subsidiary, subject to Closing, on terms no less
favorable to such employees than they currently enjoy with Seller.
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(7) Until the final Annual Payment in Parent common stock associated
with the Purchase Price under this Agreement has been calculated and, if due,
paid to Seller on or before April 1, 2008, Parent agrees to place restrictions
on the Series A Preferred shareholders (or other Preferred shareholders having
the right to convert their shares of Preferred stock into multiple shares of
common stock) such that any Preferred shareholder, may not convert an amount of
their Preferred stock, on a quarterly basis, that would result in an amount of
new common shares that can then be sold in the marketplace that would represent
more than 4.9% of the then issued and outstanding voting common shares of
Parent.
6.4.2 Sellers Obligations To Buyer. Following the Closing, Seller shall have the
ongoing obligations and duties to Buyer concerning the operations of Subsidiary
set forth below.
(1) Following the Closing, the operation of Subsidiary will be focused
on the sales, design, installation, and implementation aspects of the business
and all "shared service " aspects of the Business will be provided by Parent to
Subsidiary as a support function in order to reduce costs and achieve economies
of scale. Examples of such shared services include, but are not limited to, (1)
administrative financial transactions such as billing, collections, purchase
orders, payments, accounting, etc. (2) administrative matters related to
personnel, such as payroll, insurance, stock plans and 401K plan, when
implemented. (3) legal, tax, leasing, public releases, investor relations, and
human relations functions. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ as CEO of Subsidiary will make all
day-to-day operational decisions of Subsidiary and agrees to use reasonable
efforts not to duplicate these administrative "shared services" within
Subsidiary to the extent that Parent agrees with Subsidiary to provide and does,
in fact, provide such shared services.
(2) Following the Closing, all operations of the ▇▇▇▇▇▇ wireless
broadband ISP service as well as all future ISP services to commercial
businesses and residential customers will be transferred to the Parent or
another operating subsidiary of Parent in order to let Subsidiary focus on
developing the enterprise level wireless banking business.
(3) Subsidiary shall use reasonable commercial effort to have all
future contracts for providing encrypted wireless broadband networks negotiated
by Subsidiary with financial institutions or other commercial entities contain a
provision giving Subsidiary ( with transfer rights to the Parent) an option to
resell the excess capacity of the communication links to such institutions under
a mutually agreeable revenue sharing agreement.
(4) Parent will construct, within first ninety days following Closing,
a second network operations center (NOC) at Parent's League City facility that
will initially serve as the backup for the Taylor Texas NOC. After suitable
testing, training, and staffing the League City NOC will become the primary NOC
for the encrypted wireless broadband networks and the Taylor Texas NOC will
become the backup NOC.
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(5) All operations of Subsidiary, following Closing, will be conducted
in accordance with the mutually agreed Seller provided Proforma v6.5 is a
baseline budget for operations unless changes to this baseline are mutually
agreed to by both Seller Representative and Parent. This budget will be measured
against actual operational numbers on a monthly basis as a management tool to
determine performance of Subsidiary. Proforma v6.5 is shown as Exhibit 7 to this
document.
ARTICLE SEVEN: MISCELLANEOUS
7.1 Expenses. The parties hereto shall pay their own expenses, including
accountants' and attorneys' fees, incurred in connection with the negotiation
and consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements. Buyer shall be liable for and shall pay and discharge when
due any sales or transfer taxes incurred in connection with the purchase and
sale of the Subject Assets pursuant to this Agreement.
7.2 Headings; Use of Certain Words. The headings in this Agreement are for
purposes of convenience and ease of reference only and shall not be construed to
limit or otherwise affect the meaning of any part of this Agreement. Unless the
context clearly otherwise requires, as used herein, the term "Agreement" shall
mean this Agreement, including the Exhibits attached hereto. The words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision, and, except as expressly provided otherwise herein, references
herein to Articles or Sections or Schedules or Exhibits shall mean the Articles
and Paragraphs hereof and the Schedules and Exhibits attached hereto. The use of
the neuter pronoun "it" shall also refer as appropriate to the masculine and/or
feminine gender, and vice versa. The use of the singular herein shall, where
appropriate, be deemed to include the plural and vice versa. As used herein, the
word "person" refers to any individual, corporation limited liability company,
partnership, trust, Governmental Authority or other organization or entity. As
used herein, the term "including" shall mean "including, without limitation. For
those warranties and representations set forth in Article Three which are
subject to the qualification "to the Knowledge of Seller" or similar language,
Seller shall be deemed to have knowledge of a matter if any executive officer
has knowledge of the matter. For those warranties and representations set forth
in Article Four which are subject to the qualification "to the Knowledge of
Buyer" or similar language, Buyer shall be deemed to have knowledge of a matter
if any executive officer has knowledge of the matter.
7.3 Notices. All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be considered to be given and
received in all respects when personally delivered, when sent by facsimile
transmission actually received by the receiving equipment, when sent by
reputable express or courier delivery service, delivery charges prepaid, or
three (3) days after being deposited in the United States mail, certified mail,
postage prepaid, return receipt requested, addressed as set forth on the
signature page, or to such other address as shall be designated by the addressee
by notice duly given in accordance herewith.
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7.4 Assignment. This Agreement and the rights hereunder shall not be assignable
or transferable by Buyer or Seller prior to the Closing without the prior
written consent of the other party hereto.
7.5 Binding Effect. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective legal representatives, heirs,
beneficiaries, successors and permitted assigns. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give any
person other than the parties hereto and their permitted successors or assigns
any rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
7.6 Entire Agreement; Amendment or Waiver; Cumulative Remedies. This Agreement,
the Schedules and Exhibits attached hereto and the agreements executed and
delivered in connection herewith constitute the entire agreement between the
parties hereto relating to the subject matter hereof, and all prior agreements,
correspondence, discussions, negotiations, agreements and understandings of the
parties (whether oral or written) are merged herein and superseded hereby. No
amendment, modification, or waiver hereto or hereunder shall be valid unless in
a writing signed by an authorized signatory of each party to be affected thereby
against whom enforcement thereof is being sought. The failure of any party
hereto to enforce at any time any of the provisions of this Agreement shall in
no way be construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any part hereof or the right of such
party thereafter to enforce each and every such provision. No waiver of any
breach of, or failure to comply with, this Agreement shall be held to be a
waiver of any other or subsequent breach or failure to comply. All rights and
remedies under this Agreement are cumulative to all other rights and remedies
that may be available to each party, including all rights and remedies, whether
in tort or otherwise, whatsoever at law or in equity with respect hereto, which
each party hereby expressly reserves.
7.7 Severability. The parties agree that if any provision of this Agreement
shall under any circumstances be deemed invalid or inoperative, this Agreement
shall be construed with the invalid or inoperative provision deleted, and the
rights and obligations of the parties shall be construed and enforced
accordingly.
7.8 Applicable Law. This Agreement in all respects, including as to its
validity, interpretation, enforcement and effect, shall be governed by the
internal Laws of the State of Texas without regard to the Laws which otherwise
would govern under principles of conflicts of laws thereof.
7.9 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered but one and the same agreement, and shall
become effective when one or more such counterparts have been signed by each of
the parties and delivered to the other party.
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7.10 Representative of Seller. Seller hereby constitutes and appoints ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ as their representative ("Seller Representative") and their true
and lawful attorney in fact, with full power and authority in each of their
names and on behalf of each of them:
(a) to act on behalf of Seller in the absolute discretion of the Seller
Representative, but only with respect to the following provisions of this
Agreement, with the power to: (A) agree to capital expenditures and capital
investments to be considered in connection with the Earn out Payment pursuant to
Section 1.3; (B) act pursuant to Section 1.7 with respect to any Purchase Price
adjustment; (C) consent to deductions in the quarterly payments to be paid to
Seller as a result of any post-closing Purchase Price adjustment and
indemnification claims by Buyer pursuant to Section 1.4 ; (D) consent to any
waiver or exception to Buyer's obligations pursuant to Section 6.4.1 (1), (2) or
(4); and (E) consent to changes in the baseline budget for Subsidiary following
Closing; and
(b) in general, to do all things and to perform all acts, including
executing and delivering all agreements, certificates, receipts, instructions
and other instruments contemplated by or deemed advisable to effectuate the
provisions of this Section 7.10.
This appointment and grant of power and authority is coupled with an interest
and is in consideration of the mutual covenants made herein and is irrevocable
and shall not be terminated by any act of Seller or by operation of law. Seller
hereby consents to the taking of any and all actions and the making of any
decisions required or permitted to be taken or made by the Seller Representative
pursuant to this Section 7.10. Seller agrees that the Seller Representative
shall have no obligation or liability to any Person for any action or omission
taken or omitted by the Seller Representative in good faith hereunder, and
Seller shall indemnify and hold the Seller Representative harmless from and
against any and all loss, damage, expense or liability (including reasonable
counsel fees and expenses) which the Seller Representative may sustain as a
result of any such action or omission by the Seller Representative hereunder.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day,
month and year first above written.
BUYER
ERF Wireless, Inc., a Nevada
corporation ("Parent")
By: /S/ R. ▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: R. ▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
ERF Enterprise Network Services,
a Texas corporation ("Subsidiary")
By: /S/ R. ▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: R. ▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
(Acting)
Send Notices to:
Mr. R. ▇▇▇▇ ▇▇▇▇▇, CEO
ERF Wireless, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone ▇▇▇.▇▇▇.▇▇▇▇
Facsimile 281.538.2155
Email ▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
With a copy to
▇▇. ▇▇▇▇ ▇▇▇▇
Weed & Co. LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone ▇▇▇.▇▇▇.▇▇▇▇
Facsimile 949.475.9087
Email ▇▇▇▇@▇▇▇▇▇▇.▇▇▇
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SELLER
SkyvueUSA East Central Texas, Inc.
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
Send Notices to:
▇▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Chairman & CEO
SkyvueUSA East Central Texas, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Via Email: ▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
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