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EXHIBIT 10.11
ASSET PURCHASE AGREEMENT
dated October 15, 2007
by and among
BEACON ENTERPRISE SOLUTIONS GROUP, INC.,
RFK COMMUNICATIONS, LLC
and
all of the Members of RFK Communications, LLC
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TABLE OF CONTENTS
Page
Exhibits
Exhibit A - Secured Promissory Note
Exhibit B - Security Agreement
Exhibit C - Bill of Sale
Exhibit D - Instrument of Assumption
Exhibit E - Opinion of the Seller's counsel
Schedules
Schedule 1.6 - Allocation of Purchase Price
Schedule 2.2 - Capitalization/Ownership and Management
Schedule 2.6 - Commission Schedule
Schedule 2.10 - Security Interest of National City Bank
Schedule 2.14 - Agent and Subagent Agreements and Residuals
Schedule 2.23 - Commission Reports for Assigned Contracts
Schedule 2.25 - Transactions with Affiliates
(i)
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of October 15,
2007 by
and among BEACON ENTERPRISE SOLUTIONS GROUP, INC., an Indiana
corporation (the
"Buyer"), RFK COMMUNICATIONS, LLC, a Kentucky limited liability
company ("RFK"
or the "Seller") and the members of the Seller (collectively,
the "Members").
This Agreement contemplates a transaction in which the Buyer
will purchase
certain assets and assume certain of the liabilities of the
Seller (the "Assumed
Liabilities" as defined in Article IX, below).
Capitalized terms used in this Agreement shall have the meanings
ascribed
to them in Article IX.
In consideration of the representations, warranties and
covenants herein
contained, the Parties agree as follows.
ARTICLE I
THE ASSET PURCHASE
1.1 Purchase and Sale of Assets.
(a) Upon and subject to the terms and conditions of this
Agreement,
the Buyer shall purchase from the Seller, and the Seller shall
sell, transfer,
convey, assign and deliver to the Buyer, at the Closing, for the
consideration
specified below in this Article I, all right, title and interest
in, to and
under the Acquired Assets.
(b) Notwithstanding the provisions of Section 1.1(a), the
Acquired
Assets shall not include the Excluded Assets.
1.2 Assumption of Liabilities.
(a) Upon and subject to the terms and conditions of this
Agreement,
the Buyer shall assume and become responsible for, from and
after the Closing,
the Assumed Liabilities.
(b) Notwithstanding the terms of Section 1.2(a) or any other
provision of this Agreement to the contrary, the Buyer shall not
assume or
become responsible for, and the Seller shall remain liable for,
the Retained
Liabilities.
1.3 Purchase Price. The Purchase Price to be paid by the Buyer
for the
Acquired Assets shall be (a) 300,000 shares (the "Shares") of
Buyer Common
Stock; and (b) a Secured Promissory Note in the principal amount
of $562,500.00,
with a maturity date of sixty (60) months from the date of
Closing, and in the
form attached hereto as Exhibit A.
1.4 [RESERVED]
1.5 The Closing.
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(a) The Closing shall take place at the offices of Frost Brown
Todd
LLC in Louisville, Kentucky commencing at 9:00 a.m. local time
on the Closing
Date, or at such other place as the parties may mutually agree.
All transactions
at the Closing shall be deemed to take place simultaneously, and
no transaction
shall be deemed to have been completed and no documents or
certificates shall be
deemed to have been delivered until all other transactions are
completed and all
other documents and certificates are delivered.
(b) At the Closing:
(i) the Seller shall deliver to the Buyer the various
certificates, instruments and documents referred to in Section
5.1;
(ii) the Buyer shall deliver to the Seller the various
certificates, instruments and documents referred to in Section
5.2;
(iii) the Buyer shall execute and deliver to the Seller the
Secured Promissory Note in substantially the form attached
hereto as Exhibit A;
(iv) the Buyer and the Seller shall execute and deliver to
each other the Security Agreement in substantially the form
attached hereto as
Exhibit B;
(v) the Seller shall execute and deliver to the Buyer a bill
of sale in substantially the form attached hereto as Exhibit C
and such other
instruments of conveyance as the Buyer may reasonably request in
order to effect
the sale, transfer, conveyance and assignment to the Buyer of
valid ownership of
the Acquired Assets;
(vi) the Buyer shall execute and deliver to the Seller an
instrument of assumption in substantially the form attached
hereto as Exhibit D
and such other instruments as the Seller may reasonably request
in order to
effect the assumption by the Buyer of the Assumed
Liabilities;
(vii) the Buyer shall deliver to the Seller a stock
certificate registered in the name of the Seller representing a
number of shares
of Buyer Common Stock as is equal to the number of Shares;
and
(viii) the Buyer and the Seller shall execute and deliver to
each other a cross-receipt evidencing the transactions referred
to above.
1.6 Allocation. The Buyer and the Seller agree to allocate the
Purchase
Price (and all other capitalizable costs) among the Acquired
Assets and the
non-solicitation and non-competition covenants set forth in
Sections 6.2 and 6.3
for all purposes (including financial accounting and tax
purposes) in accordance
with the allocation schedule attached hereto as Schedule 1.6.
The Buyer and the
Seller agree to use the allocations determined pursuant to this
Section 1.6 for
all tax purposes, including without limitation, those matters
subject to Section
1060 of the Code, and the Treasury regulations promulgated
thereunder. The Buyer
and the Seller shall prepare and submit to the other for review
their IRS Forms
8594 within ninety (90) days after Closing. Each party shall
have thirty (30)
days to complete its review.
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1.7 Further Assurances. At any time and from time to time after
the
Closing, at the request of the Buyer and without further
consideration, the
Seller shall execute and deliver such other instruments of sale,
transfer,
conveyance and assignment and take such actions as the Buyer may
reasonably
request to more effectively transfer, convey and assign to the
Buyer, and to
confirm the Buyer's rights to, title in and ownership of, the
Acquired Assets
and to place the Buyer in actual possession and operating
control thereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that, except as
set forth
in the Disclosure Schedule, the statements contained in this
Article II are true
and correct as of the date of this Agreement and will be true
and correct as of
the Closing as though made as of the Closing, except to the
extent such
representations and warranties are specifically made as of a
particular date (in
which case such representations and warranties will be true and
correct as of
such date). The Disclosure Schedule shall be arranged in
sections and
subsections corresponding to the numbered and lettered sections
and subsections
contained in this Article II. Disclosures in any section or
subsection of the
Disclosure Schedule shall qualify such other sections or
subsections of the
Disclosure Schedule to the extent it is reasonably apparent from
the content of
such disclosure that such disclosure is relevant to such other
sections or
subsections.
2.1 Organization, Qualification and Corporate Power. The Seller
is a
limited liability company validly existing and in good standing
under the laws
of the Commonwealth of Kentucky. The Seller is duly qualified to
conduct
business and is in good standing under the laws of the
Commonwealth of Kentucky,
which jurisdiction constitutes the only jurisdiction in which
the nature of the
Seller's business or the ownership or leasing of Seller's
properties requires
such qualification. The Seller has all requisite power and
authority to carry on
the business in which it is engaged and to own and use the
properties owned and
used by it. The Seller has furnished to the Buyer complete and
accurate copies
of its Articles of Organization, as amended, and its Operating
Agreement. The
Seller is not in default under or in violation of any provision
of its Articles
of Organization, as amended, or its Operating Agreement. There
are no other
agreements or instruments setting forth (i) rights, preferences
and privileges
of the Members with respect to the Seller and/or among the
Members, or (ii)
matters relating to the operation and governance of the
Seller.
2.2 Capitalization. Section 2.2 of the Disclosure Schedule sets
forth a
complete and accurate list, as of the date of this Agreement, of
(i) all
Members, indicating the number of shares or membership interests
or units, as
applicable, of the Seller held by each Member and (ii) all
outstanding options,
warrants or other instruments giving any party the right to
acquire any shares,
membership interests or units or equity securities of the
Seller. There are no
outstanding agreements or commitments to which the Seller is a
party or which
are binding upon the Seller for the redemption of any of its
equity. The Seller
has only one class of shares outstanding. There are no
outstanding options,
warrants or similar rights relating to the Seller or their
respective equity
securities.
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2.3 Authorization of Transaction. The Seller has all requisite
power and
authority to execute and deliver this Agreement and the
Ancillary Agreements and
to perform its obligations hereunder and thereunder. The
performance by the
Seller of this Agreement and the Ancillary Agreements and the
consummation by
the Seller of the transactions contemplated hereby and thereby
have been duly
and validly authorized by all necessary actions on the part of
the Seller.
This Agreement has been duly and validly executed and delivered
by the
Seller and constitutes, and each of the Ancillary Agreements,
upon its execution
and delivery by the Seller, will constitute, a valid and binding
obligation of
the Seller, enforceable against The Seller in accordance with
its terms, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization,
moratorium, arrangement or other similar laws from time to time
in effect and
except as to the remedy of specific performance which may not be
available under
the laws of various jurisdictions.
2.4 Noncontravention. Except for obtaining the written consent
of
Lightyear, TNCI and Paytek, neither the execution and delivery
by the Seller of
this Agreement or the Ancillary Agreements, nor the consummation
by the Seller
of the transactions contemplated hereby or thereby, will (a)
conflict with or
violate any provision of the Articles of Organization or
Operating Agreement of
the Seller, (b) require on the part of the Seller any notice to
or filing with,
or any permit, authorization, consent or approval of, any
Governmental Entity,
(c) conflict with, result in a breach of, constitute (with or
without due notice
or lapse of time or both) a default under, result in the
acceleration of
obligations under, create in any party the right to terminate,
modify or cancel,
or require any notice, consent or waiver under, any contract or
instrument to
which the Seller is a party or by which the Seller is bound or
to which any of
its assets is subject, (d) result in the imposition of any
Security Interest
upon any asset or assets of the Seller or (e) violate any order,
writ,
injunction, decree, statute, rule or regulation applicable to
the Seller or any
of its properties or assets.
2.5 Subsidiaries. The Seller has no Subsidiaries. The Seller
does not
directly or indirectly control or have any direct or indirect
equity
participation or similar interest in any corporation,
partnership, limited
liability company, joint venture, trust or other business
association or entity.
2.6 Financial Statements. The Seller has provided to the Buyer
the
Financial Statements. The Financial Statements (i) were prepared
on a consistent
basis throughout the periods covered thereby in accordance with
reasonable
accounting practices, and (ii) fairly and accurately present the
cash flows from
the Agent Contracts for the periods indicated, consistent with
the books and
records of the Seller.
2.7 Absence of Certain Changes. Since the Most Recent Balance
Sheet Date,
(a) there has occurred no event or development which,
individually or in the
aggregate, has had, or could reasonably be expected to have in
the future, a
Seller Material Adverse Effect, and (b) the Seller has not taken
any of the
actions set forth in paragraphs (a) through (n) of Section
4.4.
2.8 Undisclosed Liabilities. The Seller has no knowledge of any
liability
(whether known or unknown to the Buyer, whether absolute or
contingent, whether
liquidated or unliquidated and whether due or to become due),
except for (a)
liabilities shown on the Most
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Recent Balance Sheet, (b) contractual and other liabilities
incurred in the
Ordinary Course of Business which are not required by GAAP to be
reflected on a
balance sheet and which are not material, and (c) liabilities
which have arisen
since the Most Recent Balance Sheet Date in the Ordinary Course
of Business.
2.9 Tax Matters.
(a) The Seller has: (i) properly filed all material Tax Returns
that
it is and was required to file, and all such Tax Returns were
true, correct and
complete in all material respects; (ii) has properly paid on a
timely basis all
material Taxes, whether or not shown on its Tax Returns, that
were due and
payable; has withheld or collected all material Taxes that the
Seller is or was
required by law to withhold or collect and, to the extent
required, have been
properly paid on a timely basis to the appropriate Governmental
Entity; and (iv)
has complied with all information reporting and back-up
withholding requirements
in all material respects, including maintenance of the required
records with
respect thereto, in connection with amounts paid to any
employee, independent
contractor, creditor or other third party.
(b) The unpaid Taxes of the Seller for periods through the date
of
the Most Recent Balance Sheet Date do not materially exceed the
accruals and
reserves for Taxes (excluding accruals and reserves for deferred
Taxes
established to reflect timing differences between book and Tax
income) set forth
on the Most Recent Balance Sheet. All Taxes attributable to the
period from and
after the Most Recent Balance Sheet Date and continuing through
the Closing Date
are, or will be, attributable to the conduct by the Seller of
its operations in
the Ordinary Course of Business.
(c) No examination or audit of any Tax Return of the Seller by
any
Governmental Entity is currently in progress or, to the
knowledge of the Seller,
threatened or contemplated. Kentucky and its local subdivisions
are the only
jurisdictions (other than United States federal) in which the
Seller files, or
is required to file or has been required to file a material Tax
Return or is or
has been liable for material Taxes on a "nexus" basis. The
Seller has not been
informed by any jurisdiction that the jurisdiction believes that
the Seller was
required to file any Tax Return that was not filed.
(d) RFK is, and has been since its inception, validly classified
and
treated as a "partnership" for federal income tax purposes and
has been validly
treated in a similar manner for purposes of the income Tax laws
of all states in
which it has been subject to taxation.
(e) The Seller has delivered or made available to the Buyer
(i)
complete and correct copies of all Tax Returns relating to Taxes
for all Taxable
periods ending December 31, 2006, 2005 and 2004 and (ii)
complete and correct
copies of all private letter rulings, revenue agent reports,
information
document requests, notices of assessment, notices of proposed
deficiencies,
deficiency notices, protests, petitions, closing agreements,
settlement
agreements, pending ruling requests and any similar documents
submitted by,
received by or agreed to by or on behalf of the Seller relating
to Taxes for all
Taxable periods for which the applicable statute of limitations
has not yet
expired.
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(f) The Seller has not (i) waived any statute of limitations
with
respect to Taxes or agreed to extend the period for assessment
or collection of
any Taxes, (ii) requested any extension of time within which to
file any Tax
Return, which Tax Return has not yet been filed, or (iii)
executed or filed any
power of attorney relating to Taxes with any Governmental
Entity.
(g) The Seller is not a party to any litigation regarding
Taxes.
(h) (i) There are no Security Interests with respect to Taxes
upon
any of the Acquired Assets, other than with respect to Taxes not
yet due and
payable; and (ii) to the Seller's and Members' knowledge, there
is no basis for
the assertion of any claim relating or attributable to Taxes,
which, if
adversely determined, would result in any Security Interest on
the Acquired
Assets, or would reasonably be expected to have, individually or
in the
aggregate, a Seller Material Adverse Effect.
(i) None of the Acquired Assets (i) is property that is required
to
be treated as being owned by any other person pursuant to the
provisions of
former Section 168(f)(8) of the Internal Revenue Code of 1954,
or (ii) is "tax
exempt use property" within the meaning of Section 168(h) of the
Code.
(j) The Seller has maintained complete and accurate records,
including all applicable exemption, resale or other
certificates, of (i) all
sales to purchasers claiming to be exempt from sale and use
Taxes based on the
exempt status of the purchaser, and (ii) all other sales for
which sales Tax or
use Tax was not collected by the Seller and as to which the
Seller is required
to receive and retain resale certificates or other certificates
relating to the
exempt nature of the sale or use or non-applicability of the
sale and use Taxes.
(k) The Seller is not bound by any Tax indemnity, Tax sharing or
Tax
allocation agreement. The Seller is not a "foreign person"
within the meaning of
Section 1445 of the Code.
2.10 Ownership and Condition of Assets.
(a) Except for the Security Interest of National City Bank
identified in the Disclosure Schedules, the Seller is the true
and lawful owner,
and has good title to, all of the Acquired Assets, free and
clear of all
Security Interests. Upon execution and delivery by the Seller to
the Buyer of
the instruments of conveyance referred to in Section
1.5(b)(iii), the Buyer will
become the true and lawful owner of, and will receive good title
to, the
Acquired Assets, free and clear of all Security Interests,
except for Security
Interests created by the Buyer.
(b) The Acquired Assets are sufficient for the conduct of
the
Seller's business as presently conducted.
2.11 Owned Real Property. The Seller does not own, and has never
owned,
any real property.
2.12 Real Property Leases. The Seller is not a party to any
Leases, has no
obligations under any Leases, and Seller is not a party to any
dispute, oral
agreement or forbearance program with respect to any Lease.
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2.13 Intellectual Property. Except for the confidential
business
information of the Seller, which has been disclosed to the
Buyer, there is no
Seller Intellectual Property.
2.14 Contracts.
(a) Section 2.14 of the Disclosure Schedule lists the
following
agreements (written or oral) to which the Seller is a party as
of the date of
this Agreement (other than this Agreement and the Ancillary
Agreements):
(i) any agreement (or group of related agreements) for the
lease of personal property from or to third parties providing
for lease payments
in excess of $5,000 per annum or having a remaining term longer
than three
months;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of
services (A)
which calls for performance over a period of more than one year,
(B) which
involves more than the sum of $5,000, or (C) in which the Seller
has granted
manufacturing rights, "most favored nation" pricing provisions
or marketing or
distribution rights relating to any products or territory or has
agreed to
purchase a minimum quantity of goods or services or has agreed
to purchase goods
or services exclusively from a certain party;
(iii) any agreement concerning the establishment or
operation
of a partnership, joint venture or limited liability
company;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed or guaranteed (or may
create, incur,
assume or guarantee) indebtedness (including capitalized lease
obligations)
involving more than $5,000 or under which it has imposed (or may
impose) a
Security Interest on any of its assets, tangible or
intangible;
(v) any agreement for the disposition of any significant
portion of the assets or business of the Seller (other than
sales of products in
the Ordinary Course of Business) or any agreement for the
acquisition of the
assets or business of any other entity (other than purchases of
inventory or
components in the Ordinary Course of Business);
(vi) any agreement concerning exclusivity or
confidentiality;
(vii) any employment or consulting agreement;
(viii) any agreement involving any current or former
officer,
manager or Member or an Affiliate thereof;
(ix) any agreement under which the consequences of a default
or termination would reasonably be expected to have a Seller
Material Adverse
Effect;
(x) any agreement which contains any provisions requiring
the
Seller to indemnify any other party (excluding indemnities
contained in
agreements for the purchase, sale or license of products entered
into in the
Ordinary Course of Business);
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(xi) any agreement that could reasonably be expected to have
the effect of prohibiting or impairing the conduct of the
business of the Seller
or of the Buyer or any of its subsidiaries as currently
conducted and as
currently proposed to be conducted;
(xii) any agreement under which the Seller is restricted
from
selling, licensing or otherwise distributing any of its
technology or products,
or providing services to, customers or potential customers or
any class of
customers, in any geographic area, during any period of time or
any segment of
the market or line of business;
(xiii) any agreement which would entitle any third party to
receive a license or any other right to intellectual property of
the Buyer or
any of the Buyer's Affiliates following the Closing; and
(xiv) any other agreement (or group of related agreements)
either involving more than $10,000 or not entered into in the
Ordinary Course of
Business.
(b) The Seller has delivered to the Buyer a complete and
accurate
copy of each agreement listed in Section 2.14 of the Disclosure
Schedule. With
respect to each Assigned Contract so listed and except as
disclosed in Section
2.14 of the Disclosure Schedules: (i) the agreement is legal,
valid, binding and
enforceable and in full force and effect; (ii) for those
agreements to which the
Seller is a party, the agreement is assignable by the Seller to
the Buyer
without the consent or approval of any party and will continue
to be legal,
valid, binding and enforceable and in full force and effect
immediately
following the Closing in accordance with the terms thereof as in
effect
immediately prior to the Closing; and (iii) neither the Seller
nor, to the
knowledge of the Seller, any other party, is in breach or
violation of, or
default under, any such agreement, and no event has occurred, is
pending or, to
the knowledge of the Seller, is threatened, which, after the
giving of notice,
with lapse of time, or otherwise, would constitute a breach or
default by the
Seller or, to the knowledge of the Seller, any other party under
such agreement.
2.15 Accounts Receivable. Seller does not have any accounts
receivable.
2.16 Insurance. Seller is not a party to any insurance policy
(including
fire, theft, casualty, comprehensive general liability, workers
compensation,
business interruption, environmental, product liability, errors
and omissions,
professional liability, and automobile insurance policies and
bond and surety
arrangements).
2.17 Litigation. There is no Legal Proceeding which is pending
or has been
threatened in writing against the Seller. There are no
judgments, orders or
decrees outstanding against the Seller.
2.18 Warranties. No service or product delivered, made, sold,
leased or
licensed by the Seller is subject to any guaranty, warranty,
right of return,
right of credit or other indemnity.
2.19 Employees.
(a) The Seller has no employees and has not had any
employees.
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(b) The Seller is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes,
grievances, claims of
unfair labor practices or other collective bargaining disputes.
The Seller has
no knowledge of any organizational effort made or threatened,
either currently
or within the past two years, by or on behalf of any labor union
with respect to
employees of the Seller.
2.20 Employee Benefits.
(a) There are no Seller Plans. Neither the Seller nor any
ERISA
Affiliate has ever maintained an Employee Benefit Plan subject
to Section 412 of
the Code or Title IV of ERISA. At no time has the Seller or any
ERISA Affiliate
been obligated to contribute to any "multiemployer plan" (as
defined in Section
4001(a)(3) of ERISA).
(b) Seller is not a party to any: (i) agreement with any
Member,
manager, executive officer or other key employee of the Seller
(A) the benefits
of which are contingent, or the terms of which are altered, upon
the occurrence
of a transaction involving the Seller of the nature of any of
the transactions
contemplated by this Agreement, (B) providing any term of
employment or
compensation guarantee or (C) providing severance benefits or
other benefits
after the termination of employment of such manager, executive
officer or key
employee; (ii) agreement, plan or arrangement under which any
person may receive
payments from the Seller that may be subject to the tax imposed
by Section 4999
of the Code or included in the determination of such person's
"parachute
payment" under Section 280G of the Code; and (iii) agreement or
plan binding the
Seller, including any stock option plan, stock appreciation
right plan,
restricted stock plan, stock purchase plan, severance benefit
plan or Seller
Plan, any of the benefits of which will be increased, or the
vesting of the
benefits of which will be accelerated, by the occurrence of any
of the
transactions contemplated by this Agreement or the value of any
of the benefits
of which will be calculated on the basis of any of the
transactions contemplated
by this Agreement..
2.21 Environmental Matters.
(a) To its knowledge, the Seller has complied with all
applicable
Environmental Laws except where failure to do so would not have
a Seller
Material Adverse Effect. There is no pending or, to the
knowledge of the Seller,
threatened civil or criminal litigation, written notice of
violation, formal
administrative proceeding, or investigation, inquiry or
information request by
any Governmental Entity, relating to any Environmental Law
involving the Seller.
(b) To its knowledge, the Seller does not have any liabilities
or
obligations arising from the release of any Materials of
Environmental Concern
into the environment.
(c) The Seller is not a party to or bound by any court
order,
administrative order, consent order or other agreement with any
Governmental
Entity entered into in connection with any legal obligation or
liability arising
under any Environmental Law.
(d) The Seller does not have possession of, or access to, or
knowledge of, any documents (whether in hard copy or electronic
form) that
contain any environmental reports, investigations and audits
relating to
premises currently or previously owned or operated by the
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Seller (whether conducted by or on behalf of the Seller or a
third party, and
whether done at the initiative of the Seller or directed by a
Governmental
Entity or other third party).
(e) The Seller is not aware of any material environmental
liability
of any solid or hazardous waste transporter or treatment,
storage or disposal
facility that has been used by the Seller.
2.22 Legal Compliance. The Seller is currently conducting, and
has at all
times conducted, its business in material compliance with each
applicable law
(including rules and regulations thereunder) of any federal,
state, local or
foreign government, or any Governmental Entity, and the Seller
has had valid
Permits to conduct such business with respect to each
jurisdiction (and at such
times) for which it has been required to have such Permits
except where the lack
of any such Permit would not have a Seller Material Adverse
Effect. The Seller
has not received any notice or communication from any
Governmental Entity
alleging noncompliance with any applicable law, rule or
regulation.
2.23 Customers and Suppliers. Section 2.23 of the Disclosure
Schedule sets
forth a commission report for each of the Assigned Contracts. No
carrier that is
a party to any of the Assigned Contracts has provided written or
verbal notice
to the Seller within the past year that it will stop, or
materially reduce its
activity below historic levels in connection with the Assigned
Contract to which
the carrier is a party.
2.24 Permits. There are no Permits issued to or held by the
Seller. Such
listed Permits are the only Permits that are required for the
Seller to conduct
its business as presently conducted or as proposed to be
conducted. Each such
Permit is in full force and effect; the Seller is in material
compliance with
the terms of each such Permit; and, to the knowledge of the
Seller, no
suspension or cancellation of such Permit is threatened.
2.25 Certain Business Relationships With Affiliates. No
Affiliate of the
Seller (a) owns any property or right, tangible or intangible,
which is used in
the business of the Seller, (b) has any claim or cause of action
against The
Seller, or (c) owes any money to, or is owed any money by, the
Seller. Section
2.25 of the Disclosure Schedule describes any transactions or
relationships
between the Seller and any Affiliate thereof which occurred or
have existed
since the beginning of the time period covered by the Financial
Statements.
2.26 Brokers' Fees. The Seller do not have any liability or
obligation to
pay any fees or commissions to any broker, finder or agent with
respect to the
transactions contemplated by this Agreement.
2.27 [RESERVED]
2.28 Disclosure. No representation or warranty by the Seller
contained in
this Agreement, and no statement contained in the Disclosure
Schedule or any
other document, certificate or other instrument delivered or to
be delivered by
or on behalf of the Seller pursuant to this Agreement, contains
or will contain
any untrue statement of a material fact or omits or will omit to
state any
material fact necessary, in light of the circumstances under
which it was or
will be made, in order to make the statements herein or therein
not misleading.
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<PAGE>
2.29 [RESERVED].
2.30 Government Contracts.
(a) The Seller has not been suspended or debarred from bidding
on
contracts or subcontracts with any Governmental Entity; and to
Seller's
knowledge no such suspension or debarment has been threatened or
initiated; and
the consummation of the transactions contemplated by this
Agreement will not
result in any such suspension or debarment of the Seller or the
Buyer (assuming
that no such suspension or debarment will result solely from the
identity of the
Buyer). The Seller has not been nor is now being audited or
investigated by the
United States Government Accounting Office, the United States
Department of
Defense or any of its agencies, the Defense Contract Audit
Agency, the
contracting or auditing function of any Governmental Entity with
which it is
contracting, the United States Department of Justice, the
Inspector General of
the United States, or any prime contractor with a Governmental
Entity; nor, to
the knowledge of the Seller, has any such audit or investigation
been
threatened. To the knowledge of the Seller, there is no valid
basis for (i) the
suspension or debarment of the Seller from bidding on contracts
or subcontracts
with any Governmental Entity or (ii) any claim (including any
claim for return
of funds to the Government) pursuant to an audit or
investigation by any of the
entities named in the foregoing sentence. The Seller has no
agreements,
contracts or commitments which require the Seller to obtain or
maintain a
security clearance with any Governmental Entity.
(b) To the knowledge of the Seller, no basis exists for any of
the
following with respect to any of its contracts or subcontracts
with any
Governmental Entity: (i) a Termination for Default (as provided
in 48 C.F.R.
Ch.1 ss.52.249-8, 52.249-9 or similar sections), (ii) a
Termination for
Convenience (as provided in 48 C.F.R. Ch.1 ss.52.241-1, 52.249-2
or similar
sections), or a Stop Work Order (as provided in 48 C.F.R. Ch.1
ss.52.212-13 or
similar sections); and the Seller has no reason to believe that
funding may not
be provided under any contract or subcontract with any
Governmental Entity in
the upcoming federal fiscal year.
2.31 Securities Representations.
(a) The Seller is an "accredited investor" as defined in Rule
501(a)
under the Securities Act. The Seller has not been organized,
reorganized or
recapitalized specifically for the purpose of acquiring the
Shares.
(b) The Seller is acquiring the Shares for its own account
for
investment only, and not with a view to, or for sale in
connection with, any
distribution of the Shares in violation of the Securities Act,
or any rule or
regulation under the Securities Act.
(c) The Seller has had adequate opportunity to obtain from
representatives of the Buyer such information about the Buyer as
is necessary
for the undersigned to evaluate the merits and risks of its
acquisition of the
Shares.
(d) The Seller has sufficient expertise in business and
financial
matters to be able to evaluate the risks involved in the
acquisition of the
Shares and to make an informed investment decision with respect
to such
acquisition.
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<PAGE>
(e) The Seller understands that the Shares have not been
registered
under the Securities Act and are "restricted securities" within
the meaning of
Rule 144 under the Securities Act; and the Shares cannot be
sold, transferred or
otherwise disposed of unless they are subsequently registered
under the
Securities Act or an exemption from registration is then
available.
(f) A legend substantially in the following form will be placed
on
the certificate(s) representing the Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the
statements
contained in this Article III are true and correct as of the
date of this
Agreement and will be true and correct as of the Closing as
though made as of
the Closing.
3.1 Organization and Corporate Power. The Buyer is a corporation
duly
organized, validly existing and in good standing under the laws
of the State of
Indiana. The Buyer has all requisite corporate power and
authority to carry on
the business in which it is engaged and to own and use the
properties owned and
used by it.
3.2 Authorization of the Transaction. The Buyer has all
requisite power
and authority to execute and deliver this Agreement, the Secured
Promissory Note
and the Ancillary Agreements and to perform its obligations
hereunder and
thereunder. The execution and delivery by the Buyer of this
Agreement, the
Secured Promissory Note and the Ancillary Agreements and the
performance by the
Buyer of this Agreement and the Ancillary Agreements and the
consummation by the
Buyer of the transactions contemplated hereby and thereby have
been duly and
validly authorized by all necessary action on the part of the
Buyer. This
Agreement has been duly and validly executed and delivered by
the Buyer and
constitutes, and each of the Secured Promissory Note and the
Ancillary
Agreements, upon its execution and delivery by the Buyer will
constitute, a
valid and binding obligation of the Buyer, enforceable against
it in accordance
with its terms, except as enforceability may be limited by
bankruptcy,
insolvency, reorganization, moratorium, arrangement or other
similar laws from
time to time in effect.
3.3 Noncontravention. Neither the execution and delivery by the
Buyer of
this Agreement, the Secured Promissory Note or the Ancillary
Agreements, nor the
consummation by the Buyer of the transactions contemplated
hereby or thereby,
will (a) conflict with or violate any provision of the Articles
of Incorporation
or by-laws of the Buyer, (b) require on the part of the
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Buyer any notice to or filing with, or permit, authorization,
consent or
approval of, any Governmental Entity, (c) conflict with, result
in breach of,
constitute (with or without due notice or lapse of time or both)
a default
under, result in the acceleration of obligations under, create
in any party any
right to terminate, modify or cancel, or require any notice,
consent or waiver
under, any contract or instrument to which the Buyer is a party
or by which it
is bound or to which any of its assets is subject, or (d)
violate any order,
writ, injunction, decree, statute, rule or regulation applicable
to the Buyer or
any of its properties or assets.
3.4 Capitalization. The authorized capital stock of the Buyer
consists of
20,000,000 shares of Buyer Common Stock, of which 3,937,500
shares were issued
and outstanding, and options, warrants or other rights (the
"Equity Rights") to
acquire 865,000 shares of Buyer Common Stock were outstanding,
in each case, as
of October __, 2007. As of October __, 2007, there are no
outstanding options,
warrants or similar rights relating to the Buyer or its equity
other than the
Convertible Promissory Notes of the Buyer dated July 16, 2007
convertible into
an aggregate of up to 833,333 shares of Buyer Common Stock and
the Equity
Rights. The rights and privileges of each class of the Buyer's
capital stock are
set forth in the Buyer's Articles of Incorporation, a copy of
which has been
made available to the Seller. All of the issued and outstanding
shares of Buyer
Common Stock have been duly authorized and validly issued and
are fully paid and
nonassessable. The Shares will be, when issued on the terms and
conditions of
this Agreement, duly authorized, validly issued, fully paid and
nonassessable
and not subject to or issued in violation of any purchase
option, call option,
right of first refusal, preemptive right, subscription right or
any similar
right under any provision of the Buyer's Articles of
Incorporation or Bylaws or
any agreement to which the Buyer is a party or is otherwise
bound.
3.5 No Prior Activities. As of the date of this Agreement, the
Buyer has
not engaged in any business operations.
3.6 Litigation. As of the date of this Agreement, there is no
Legal
Proceeding which is pending or, to the Buyer's knowledge,
threatened against the
Buyer or any subsidiary of the Buyer which, if determined
adversely to the Buyer
or such subsidiary, could have, individually or in the
aggregate, a material
adverse effect on the business, assets, liabilities,
capitalization, prospects,
condition (financial or other), or results of operations of the
Seller.
3.7 Ownership and Management. (a) Schedule 3.7(a) attached
hereto
accurately sets forth the directors and officers of the Buyer as
of the date of
this Agreement.
(b) Schedule 3.7(b) attached hereto accurately sets forth
the
ownership and ownership percentages of the Buyer as of the date
of this
Agreement and a pro forma of the ownership and ownership
percentages of the
Buyer immediately after Closing after giving effect to the other
transactions
that the Buyer Currently contemplates; provided that, except to
the extent set
forth otherwise herein, the Buyer makes no representation or
warranty that all
or any such transactions will be consummated on the terms and
assumptions
underlying such pro forma, or at all..
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<PAGE>
(c) Except as set forth on Schedule 3.7(c) attached hereto,
Buyer
has not acquired, contracted to acquire or negotiated to acquire
any other
business, either through a purchase of assets or a purchase of
equity ownership.
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 Closing Efforts. Each of the Parties shall use its
Reasonable Best
Efforts to take all actions and to do all things necessary,
proper or advisable
to consummate the transactions contemplated by this Agreement,
including using
its Reasonable Best Efforts to cause (i) its representations and
warranties to
remain true and correct in all material respects through the
Closing Date and
(ii) the conditions to the obligations of the other Party to
consummate the
transactions contemplated by this Agreement to be satisfied.
4.2 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain,
at
its expense, all waivers, permits, consents, approvals or other
authorizations
from Governmental Entities, and to effect all registrations,
filings and notices
with or to Governmental Entities, as may be required for such
Party to
consummate the transactions contemplated by this Agreement and
to otherwise
comply with all applicable laws and regulations in connection
with the
consummation of the transactions contemplated by this
Agreement.
(b) The Seller shall use their Reasonable Best Efforts to
obtain, at
the Buyer's, all such waivers, consents or approvals from third
parties, and to
give all such notices to third parties, as listed or are
required to be listed
in the Disclosure Schedule. The Buyer shall reasonably cooperate
with the Seller
in the Seller's efforts to obtain such waivers, consents and
approvals.
(c) If (i) any of the Assigned Contracts or other assets or
rights
constituting Acquired Assets may not be assigned and transferred
by the Seller
to the Buyer (as a result of either the provisions thereof or
applicable law)
without the consent or approval of a third party, (ii) the
Seller, after using
their Reasonable Best Efforts, are unable to obtain such consent
or approval
prior to the Closing and (iii) the Closing occurs nevertheless,
then (A) such
Assigned Contracts and/or other assets or rights shall not be
assigned and
transferred by the Seller to the Buyer at the Closing and, the
Buyer shall not
assume the Seller's future liabilities or future obligations
with respect
thereto at the Closing until such approval or consent is
obtained and assignment
occurs, at which time Buyer will assume all such liabilities and
obligations
following the date of such approval or consent, (B) the Seller
shall continue to
use its Reasonable Best Efforts for a reasonable period of time
after the
Closing, and in any case not less than nine (9) months, to
obtain the necessary
consent or approval as soon as practicable after the Closing,
(C) upon the
obtaining of such consent or approval, the Buyer and the Seller
shall execute
such further instruments of conveyance (in substantially the
form executed at
the Closing) as may be necessary to assign and transfer such
Assigned Contracts
and/or other assets or rights (and the associated liabilities
and obligations of
the Seller) to the Buyer, and (D) from and after the Closing
until the
assignment or termination (at the end of any fixed term thereof
or by the Buyer
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<PAGE>
after nine (9) months from the date hereof) of each such
Assigned Contract
pursuant to clause (C) above, the Buyer shall perform and
fulfill, on a
subcontractor basis, the obligations of the Seller or the
applicable Subsidiary
to be performed under such Assigned Contract, and the Seller or
such Subsidiary
shall promptly remit to the Buyer all payments received by it
under such
Assigned Contract for services performed during such period, net
of associated
cost of sales and expenses. If the assignment of an Assigned
Contract is
approved by the carrier after, rather than before or concurrent
with, the
Closing, as between Seller and Buyer the date of Closing shall
be the effective
date of the sale and purchase of the rights under the Assigned
Contract and
Buyer's assumption of obligations under the Assigned Contract,
it being the
intent that all residuals collected after the Closing Date under
the Assigned
Contracts shall belong to Buyer.
4.3 Exclusivity.
(a) Neither the Seller nor the Members shall, directly or
indirectly, (i) initiate, solicit, encourage or otherwise
facilitate any
inquiry, proposal, offer or discussion with any party (other
than the Buyer)
concerning any merger, reorganization, consolidation,
recapitalization, business
combination, liquidation, dissolution, share exchange, sale of
shares, sale of
material assets or similar business transaction involving the
Seller, (ii)
furnish any non-public information concerning the business,
properties or assets
of the Seller to any party (other than the Buyer), (iii) engage
in discussions
or negotiations with any party (other than the Buyer) concerning
any such
transaction, (iv) vote any shares of the Seller in favor of any
such transaction
with any party (other than the Buyer), or (v) enter into any
agreement with any
party (other than the Buyer) concerning any such
transaction.
(b) The Seller and each Member shall immediately notify any
party
with which discussions or negotiations of the nature described
in paragraph (a)
above were pending that the Seller or the Member, as applicable,
is terminating
such discussions or negotiations. If the Seller or a Member
receives any
inquiry, proposal or offer of the nature described in paragraph
(a) above, the
Seller or Member, as applicable, shall, within one business day
after such
receipt, notify the Buyer of such inquiry, proposal or offer,
including the
identity of the other party and the terms of such inquiry,
proposal or offer.
4.4 Operation of Business. Except as contemplated by this
Agreement,
during the period from the date of this Agreement to the
Closing, the Seller
shall conduct its operations in the Ordinary Course of Business
and in material
compliance with all applicable laws and regulations and, to the
extent
consistent therewith, use its Reasonable Best Efforts to
preserve intact its
current business organization, keep its physical assets in good
working
condition, keep available the services of its current officers
and employees and
preserve its relationships with customers, suppliers and others
having business
dealings with it to the end that its goodwill and ongoing
business shall not be
impaired in any material respect. Without limiting the
generality of the
foregoing, prior to the Closing, the Seller shall not, without
the written
consent of the Buyer:
(a) issue or sell any shares or other securities of the Seller
or
any options, warrants or other rights to acquire any such shares
or other
securities (except pursuant to the conversion or exercise of
options, warrants
or other convertible securities outstanding on the date
hereof);
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<PAGE>
(b) declare, set aside or pay any dividend or other
distribution
(whether in cash, stock or property or any combination thereof)
in respect of
its shares;
(c) create, incur or assume any indebtedness (including
obligations
in respect of capital leases); assume, guarantee, endorse or
otherwise become
liable or responsible (whether directly, contingently or
otherwise) for the
obligations of any other person or entity; or make any loans,
advances or
capital contributions to, or investments in, any other person or
entity;
(d) enter into, adopt or amend any Employee Benefit Plan or
any
employment or severance agreement or arrangement of the type
described in
Section 2.20 or (except for normal increases in the Ordinary
Course of Business
for employees who are not Affiliates) increase in any manner the
compensation or
fringe benefits of, or materially modify the employment terms
of, its managers,
officers or employees, generally or individually, or pay any
bonus or other
benefit to its managers, officers or employees or hire any new
officers or
(except in the Ordinary Course of Business) any new
employees;
(e) acquire, sell, lease, license or dispose of any assets
or
property, other than purchases and sales of assets in the
Ordinary Course of
Business;
(f) mortgage or pledge any of its property or assets or subject
any
such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any
obligation
or liability other than in the Ordinary Course of Business
without prior written
notice to Buyer;
(h) amend its Articles of Organization, Operating Agreement or
other
organizational documents in a manner that could have an adverse
effect on the
transactions contemplated by this Agreement;
(i) change its accounting methods, principles or practices,
except
insofar as may be required by law or regulatory accounting
requirements or make
any new elections, or changes to any current elections, with
respect to Taxes
that affect the Acquired Assets;
(j) enter into, amend, terminate, take or omit to take any
action
that would constitute a violation of or default under, or waive
any rights
under, any contract or agreement of a nature listed or required
to be listed in
Section 2.14 of the Disclosure Schedule;
(k) make or commit to make any capital expenditure in excess
of
$5,000 per item or $10,000 in the aggregate;
(l) institute any Legal Proceeding;
(m) take any action or fail to take any action permitted by
this
Agreement with the knowledge that such action or failure to take
action would
result in (i) any of the representations and warranties of the
Seller set forth
in this Agreement not being true and correct at the Closing or
(ii) any of the
conditions to the Closing set forth in Article V not being
satisfied; or
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<PAGE>
(n) agree in writing or otherwise to take any of the
foregoing
actions.
4.5 Access to Information.
(a) The Seller shall permit representatives of the Buyer to
have
full access (at all reasonable times, and in a manner so as not
to interfere
with the normal business operations of the Seller) to all
premises, properties,
financial, tax and accounting records (including the work papers
of the Seller's
independent accountants), contracts, other records and
documents, and personnel,
of or pertaining to the Seller, and contacts at Seller's
principal suppliers and
customers, for the purpose of performing such inspections and
tests as the Buyer
deems necessary or appropriate.
(b) If the Closing has not occurred by September 30, 2007,
within 15
days after the end of each month ending prior to the Closing,
beginning with
September 30, 2007, the Seller shall furnish to the Buyer an
unaudited income
statement for such month and a balance sheet as of the end of
such month,
prepared on a basis consistent with the Financial Statements.
Such financial
statements shall present fairly the financial condition and
results of
operations of the Seller as of the dates thereof and for the
periods covered
thereby, and shall be consistent with the books and records of
the Seller.
4.6 Notice of Breaches.
(a) From the date of this Agreement until the Closing, the
Seller
shall promptly deliver to the Buyer supplemental information
concerning material
events or circumstances occurring subsequent to the date hereof
which would
render any representation, warranty or statement in this
Agreement or the
Disclosure Schedule inaccurate or incomplete at any time after
the date of this
Agreement until the Closing. No such supplemental information
shall be deemed to
avoid or cure any misrepresentation or breach of warranty or
constitute an
amendment of any representation, warranty or statement in this
Agreement or the
Disclosure Schedule.
(b) From the date of this Agreement until the Closing, the
Buyer
shall promptly deliver to the Seller supplemental information
concerning
material events or circumstances occurring subsequent to the
date hereof which
would render any representation or warranty in this Agreement
inaccurate or
incomplete at any time after the date of this Agreement until
the Closing. No
such supplemental i
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