Exhibit 10.1
ASSET PURCHASE
AGREEMENT
THIS ASSET
PURCHASE AGREEMENT (the
“Agreement”), made and entered into as of this 29th day
of May, 2009, by and between ERF Wireless, Inc., a Nevada
corporation (“Parent”), and ERF Wireless Bundled
Services, Inc., a Texas corporation and wholly-owned subsidiary of
Parent, (“Subsidiary”) (Parent and Subsidiary
hereinafter collectively referred to and jointly and severally
liable as “Buyer”), and
Frontier Internet, LLC, a Texas limited liability company
headquartered in Granbury, Texas (“Seller”).
W I T N E S S E T
H:
WHEREAS , Seller presently operates a business engaged
in providing a comprehensive full range of internet services
including internet access, dial-in, ISDN, wireless, and networking
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
|
|
Purchased
Assets. Upon the terms and subject to the
conditions set forth in this Agreement, Seller hereby agrees to
sell to Subsidiary and Subsidiary hereby agrees to purchase 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 (collectively, the “Purchased
Assets”):
|
The assets
being acquired include the rights, title, and interest in
substantially all of the assets associated with the Business,
including:
|
|
all (i)
wireless network infrastructure equipment, including subscriber
units, access nodes, backhaul links, towers, radios, antennas,
switches, routers and servers with related software, (ii) all
vehicles and trailers, (iii) all transferable equipment and
software, (iv) all inventory, goods, and documents, (v)
all documents, files and records containing technical support,
including all additions, accessions and substitutions thereto, and
all other information, and (vi) all cash in bank accounts and
accounts receivable of Seller, pertaining to the operation of the
Business that are in Seller’s possession or control;
(collectively, the “Assigned Tangible
Property”);
|
|
|
all rights to
equipment, tower and facilities space leases, including real
property leases, related to the Business (“Assigned
Leases”);
|
|
|
all
transferable customer and contractual rights held by the Seller
related to the Business, including (i) all ISP Subscriber
Agreements, (ii) all Design Agreements, (iii) all Equipment
Purchase Agreements, (iv) all Internet Access and Monitoring and
Maintenance Agreements with customers with fixed wireless
broadband, (v) all other work in progress and (vi) all other
contracts and agreements, (collectively, the “Assigned
Contracts”);
|
|
|
all general
intangibles related to the Business, including (i) trademarks,
trade names and symbols used in connection with Frontier Internet,
LLC and (ii) all internet address space registered with the
American Registry for Internet Numbers, (“ARIN”) by
Frontier Internet, LLC and its internet suppliers that is
transferable according to the rules, regulations or procedures
promulgated by ARIN (collectively, the “Assigned Intangible
Property”);
|
|
|
all legally
assignable government permits, licenses and certifications related
to the Business (“Governmental Permits”).
|
Seller will
provide to Buyer copies of the following books, records, manuals
and other materials in any tangible form to the extent such books,
records, manuals and other materials relate to the Business and/or
the Purchased Assets: (i) records relating to customers that are
parties to any contracts, (ii) records relating to vendors, and
(iii) 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 Seller, however
maintained or stored (collectively, the “Records”), it
being understood that the Seller may delete confidential
information that does not relate to the Purchased Assets or the
Business.
|
|
Excluded
Assets. The
Purchased Assets shall not include the following (herein referred
to as the “Excluded Assets”):
|
|
|
|
all corporate
minute books, stock transfer books and other documents relating to
the organization, maintenance and existence of Seller as a limited
liability company;
|
|
|
|
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 is required by
applicable law to retain in its possession;
|
|
|
all tax refunds
which are due to Seller;
|
|
|
|
all membership
interests in Seller; and
|
|
f.
|
any other item
specifically listed in Schedule 1.2 .
|
1.3 Purchase Price; Payment of
Purchase Price . In addition to the Assumed
Liabilities described below, the aggregate consideration for the
Purchased Assets (the “Purchase Price”) shall
be the amount equal to $1,350,000. The Purchase Price shall be
subject to adjustment as set forth in Section 1.7
below.
1.4
Payment Terms . The Purchase Price shall be payable
by Buyer to Seller on the Closing Date as follows:
|
|
$
150,000 in cash, by wire transfer of immediately available
funds, to the account designated by Seller (the “Cash
Amount”);
|
|
|
$369,010 payable by a Secured Convertible Promissory Note
in the form attached hereto as Exhibit 1.4(b) (the
“Promissory Note”);
|
|
|
Approximately
$29,817.93 to be paid by the assumption of the following
liabilities: (i) the Erving Leasing obligation totaling $1,414.13
at May 14, 2009 (the “Erving Obligation”), (ii) Delage
Landen note payable totaling $13,852.58 at May 14, 2009 (the
“Delage Landen Obligation”), and (iii) Toyota
Motor Credit obligations totaling $14,551.22 at May 14, 2009
(collectively, the “Toyota Obligations”) (the Toyota
Obligations, the Erving Obligation and the Delage Landen Obligation
are sometimes referred to herein as the “Assigned
Obligations”); provided, however, that in the event creditors
of any of the Assigned Obligations do not agree to the assignment
and assumption of such Assigned Obligations by Buyer (the
“Restricted Obligations”), Buyer and Seller agree to
enter into a mutually agreed upon side letter, whereby Buyer agrees
to pay to Seller in cash, an amount equal to the value of the
aggregate monthly payments of such Restricted Obligations until
they have been paid in full; and
|
|
|
$801,172.07 to be paid by issuance of Rule 144 Restricted
Stock valued on the basis of the average closing price for
Parent’s Common Stock (hereinafter defined) as quoted on the
OTC Bulletin Board Market (“OBB”) for the ten (10)
trading days immediately prior to Closing. In the event that all of
the shares of Rule 144 Restricted Stock that are issued to Seller
are sold in open market transactions and the aggregate value of
such sales totals less than $799,948, Buyer agrees to make up for
this shortfall in the value of the Rule 144 Restricted Stock issued
to Seller by issuing Freely Tradable Common Stock to Seller within
five business days following Seller’s written notice with
documentation evidencing such shortfall to the Buyer, unless this
shortfall guarantee
(the “Shortfall Guarantee”) expires according
the following provisions. The Shortfall Guarantee shall
expire on the earliest to occur of: (i) following the expiration of
the six (6) month holding period for Rule 144 Restricted Stock, the
sale of the Rule 144 Restricted Stock by Seller for an aggregate
value of $799,948, (ii) following the expiration of the six (6)
month holding period for Rule 144 Restricted Stock, the aggregate
market value of the sold and unsold Rule 144 Restricted Shares
reaches $850,000, or (iii) eighteen (18) months following the
Closing.
|
For purposes of
this Agreement, “Rule 144 Restricted Stock” shall mean
shares of the common stock, par value $.001, of Parent (the
“Common Stock”) the issuance of which to Seller has not
been registered under the Securities Act of 1933, as amended (the
“Securities Act”) and that are considered
“restricted securities” as defined in Section 144 of
the Securities Act.
For purposes of
this Agreement, “Freely Tradable Common Stock” shall
refer to Common Stock of Parent the issuance of which to Seller has
been registered under the Securities Act, and that has not subject
to any contractual, regulatory or other legal restrictions on
transfer, is free and clear of all liens and encumbrances, and is
freely tradable to members of the general public.
1.5
Assumed Liabilities; No Other Assumption of
Liabilities . As partial consideration for the
Purchased Assets, Buyer shall assume and agree to pay, perform and
discharge the following liabilities and obligations of Seller (the
“Assumed Liabilities”):
|
|
any liability
arising after the Closing in connection with the operation, use, or
performance of any of the Purchased Assets by the Buyer;
|
|
|
the Delage
Landen Obligation;
|
|
|
the Toyota
Obligations; and
|
|
|
all outstanding
accounts payable, if any, that remain unpaid by Seller, as of
Closing, subject to the adjustments set forth in Section 1.7
.
|
The Assumed
Liabilities shall expressly exclude (i) any accrued payroll and
payroll taxes, (ii) any unpaid obligations of Seller to 1
st Tel, (iii) all vendor obligations arising prior
to November 1, 2007, (iv) any accounts payable obligations for
goods and services delivered or rendered prior to the Closing Date
that are not covered by cash and accounts receivable for service
periods prior to the Closing Date, (v) any liabilities or
obligations related to the Assigned Leases or Assigned Contracts
that arise from breach of contract, default or other such tortious
claim occurring prior to Closing, (collectively, the
“Specified Retained Liabilities”). The
Specified Retained Liabilities shall either be retained by Seller
after Closing or fully paid by Seller 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 related to the Business, that arise 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, including (i) the
Specified Retained Liabilities, (ii) any tax liability or
obligation arising in connection with transactions occurring prior
to the Closing, but excluding any sales, use, transfer or other tax
obligation arising out of or in connection with the transactions
contemplated by this Agreement or the performance, use or operation
of the Purchased Assets by Buyer, which Buyer hereby agrees to be
responsible for; (iii) any liability or obligation to Seller's
employees for salaries and wages, whether relating to the
termination of their employment or otherwise, arising 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 . The Purchase Price shall be allocated
for federal income tax purposes in accordance with
Schedule 1.6 . After the Closing, the
parties shall make consistent use of the allocation specified on
Schedule 1.6 for all federal income tax purposes and in
all filings, declarations and reports with the Internal Revenue
Service (the “IRS”) in respect thereof, including the
reports required to be filed under Section 1060 of the
Internal Revenue Code, as amended (the
“Code”). 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
Code, in a manner consistent with the allocation specified in
Schedule 1.6 . In any Proceeding (hereinafter
defined) related to the determination of any tax, neither Buyer nor
Seller shall contend or represent that such allocation is not a
correct allocation.
1.7 Adjustments to Purchase
Price . 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 a closing statement to be agreed upon
and to be executed and delivered by Buyer and Seller at Closing:
(a) cash plus accounts receivable plus any prepaid expenses
(including but not limited to taxes and other similar expenses
directly related to the Purchased Assets and Assumed Liabilities
which shall be prorated at Closing) less (b) any accounts
receivable collected and not set aside in Seller’s bank
account(s) for any services to be performed post-Closing that have
been prepaid prior to Closing and (c) trade accounts payable and
credit card obligations for Business expenses paid by Buyer on
behalf of Seller for obligations and services rendered prior to the
Closing. Notwithstanding the above provision, Seller
agrees to track and set aside in the Seller’s bank account(s)
those funds received prior to Closing for services to be performed
post-Closing. The amount of the adjustment described in this
Section 1.7 shall be identified as Purchase Price Adjustment
(“PPA”). At the end of the ninety (90) day
period immediately following Closing, Buyer and Seller shall review
the PPA and revise it as follows:
|
|
Reduce or
increase the PPA, as the case may be, by an amount equal to any
customer accounts receivable purchased at Closing that are deemed
uncollectible or understated; and
|
|
|
Decrease or
increase the PPA, as the case may be, by an amount equal to any
increase in the accounts payable assumed by Buyer at Closing which
resulted from such accounts payable having been understated-yet-due
by Seller as of the Closing date, or overstated.
|
Upon mutual
agreement by the parties of the revision to the PPA, Buyer shall
execute and deliver a post-closing statement reflecting such
revision to the PPA (the “Post-Closing Statement”) to
the Seller. If after thirty (30) days, the
parties are unable to reach an agreement as to how to revise the
PPA, the parties will refer the matter to a certified public
accounting firm that has not previously done work for Buyer or
Seller (the “Independent Accountant”) as mutually
agreed upon by the parties. The Independent Accountant
will resolve the disputed matter in a manner consistent with this
Section 1.7 , and the determination of the Independent
Accountant regarding such disputed matter will be final, binding
and conclusive on the Buyer and the Seller. Upon final
determination of the matter by the Independent Accountant, the
Post-Closing Statement will be executed and delivered by the Buyer
and the Seller. The fees and expenses of the Independent
Accountant will be paid one-half by the Buyer and one-half by the
Seller. Upon execution and delivery of the Post-Closing
Statement by Buyer and Seller, the amount of the Rule 144
Restricted Stock issuable to Seller as described in Section
1.4 shall be increased or decreased, as applicable, to reflect
such revisions to the PPA. The price of the Rule 144
Restricted Stock to be added to or subtracted from the Purchase
Price shall be valued on the basis of the average closing price for
Parent’s Common Stock as quoted on the OBB for the ten (10)
trading days immediately prior to the execution and delivery of the
Post-Closing Statement
2.1 Time and Place of Closing;
Closing Deliveries. The closing of the purchase and sale
contemplated herein (the “Closing”) shall take place at
11:00 a.m., on May 29, 2009 at the offices of Parent, located in
League City, Texas. The date of Closing is hereinafter referred to
as the “Closing Date.”
At the Closing,
Buyer shall deliver to Seller according to Seller’s
instructions:
|
|
the Cash Amount
by wire transfer or certified bank check;
|
|
|
certificates
representing a number of shares of Rule 144 Restricted Stock of the
Parent, as determined in accordance with Section 1.4 (the
“Stock Certificates”), or evidence satisfactory to
Seller that Buyer has instructed its transfer agent to prepare and
deliver such Stock Certificates and that such Stock Certificates
will be delivered to Seller no later than five (5) days following
Closing;
|
|
|
the executed
Promissory Note; ;
|
|
|
the executed
Security Agreement, the form of which is attached hereto as
Exhibit 2.1(d) (the “Security Agreement”);
and
|
|
|
the documents,
certificates, agreements and instruments described below 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) of the
following conditions as of the Closing:
|
|
|
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
members shall have approved this Agreement and the transactions
contemplated hereby;
|
|
|
|
Seller shall
have performed in all material respects its obligations described
in Section 5.1;
|
|
|
|
Buyer and
Cresson Crossroads shall have entered into an agreement for
providing broadband services in the Cresson Crossroads development
on a post-closing basis.
|
|
|
|
Buyer shall
have received from Seller all of the following:
|
(i) A duly
executed bill of sale, the form of which is attached hereto as
Exhibit 2.2(e)(i) (the “Bill of Sale”),
which includes a complete list of the Assigned Tangible Assets,
conveying to Buyer the Assigned Tangible 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 (A) Encumbrances for taxes, the
payment of which are not delinquent, (B) materialmen's,
warehousemen's, mechanic's, lender’s, lessor’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 (C) 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”);
(ii) A duly
executed assignment and assumption agreement, the form of which is
attached hereto as Exhibit 2.2(f)(ii) (the “Assignment
and Assumption Agreement”), which includes a complete list of
all Assigned Leases, Assigned Contracts and Governmental
Permits;
(iii) Duly
executed trademark, copyright and other intellectual property
assignment documents, as reasonably requested by Buyer to fully
effectuate the use by or transfer to Buyer of the intellectual
property;
(iv) Actual or
constructive physical possession of the Purchased Assets and the
Records;
(v) An executed
certificate of amendment to Seller’s Certificate of Formation
effecting a change in Seller’s name (the
“Amendment”); and
(vi) A
certificate of the managers of Seller certifying, as complete and
accurate as of the Closing (A) copies of the governing documents of
Seller, (B) all requisite resolutions or actions of Seller's
managers and members approving the execution and delivery of this
Agreement and the consummation of the contemplated transactions,
and (C) the incumbency and signatures of the managers of Seller
executing this Agreement and any other document relating to the
contemplated transactions.
2.3 Conditions Precedent to
Seller's Obligations. The obligation of Seller to consummate the
transactions contemplated herein is subject to the satisfaction
(or, in Seller’s sole discretion, written waiver thereof) of
the following conditions as of the Closing:
|
|
|
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;
|
|
|
|
Buyer’s
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 and elsewhere in this Agreement;
|
|
|
|
Seller shall
have received from Buyer all of the following:
|
(i) The
Purchase Price (including the duly executed Promissory Note,
Security Agreement, and the stock certificates representing the
shares of Rule 144 Restricted Stock as described in Section
1.4(d) );
(ii) The
Assignment and Assumption Agreement, duly executed by Subsidiary;
and
(iii) A
certificate of the Secretary of each of Parent and Subsidiary
certifying, as complete and accurate as of the Closing (A) attached
copies of the governing documents of each of Parent and Subsidiary,
as amended and restated, as applicable, (B) all requisite
resolutions or actions of each of Parent’s and
Subsidiary’s board of directors approving the execution and
delivery of this Agreement and the consummation of the contemplated
transactions, and (C) the incumbency and signatures of the officers
of each of Parent and Subsidiary executing this Agreement and any
other document relating to the contemplated
transactions.
2.4
Consents and Other Conditions to
Closing. It shall also be a condition precedent to
closing that:
|
|
Buyer and
Seller shall have obtained all necessary written consents or
approvals from all governmental or regulatory authorities that are
necessary to acquire the Purchased Assets and for Subsidiary to
continue the historical operations of the Seller;
|
|
|
Seller shall
not be involved in or threatened with any litigation that would
have a material adverse effect on the Purchased Assets;
and
|
|
|
Seller shall
have obtained all necessary consents from any utility companies,
governmental or regulatory authorities, landlords, lenders,
suppliers and other third parties in connection with the material
contracts described in Schedule 2.4 (the “Material
Contracts”) to be assumed by Subsidiary at Closing (the
“Material Consents”). If Seller is unable to
obtain any Material Consents as of the Closing Date (each such
Material Contract for which a Material Consent was not obtained as
of the Closing Date shall be referred to as a “Restricted
Material Contract”), Buyer may waive the closing conditions
as to any such Material Consent and either:
|
(i) elect to
have Seller continue its efforts to obtain the Material Consents;
or
(ii) elect to
have Seller retain such 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
to the contrary, neither this Agreement nor the Assignment and
Assumption Agreement nor any other document related to the
consummation of the transactions contemplated in this Agreement
shall constitute a sale, assignment, assumption, transfer,
conveyance, delivery, or an attempted sale, assignment, assumption,
transfer, conveyance or delivery of the Restricted Material
Contracts. Following the Closing, the parties shall use their Best
Efforts (hereinafter defined) (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 Consents relating to the Restricted Material
Contracts as quickly as practicable. Pending the
obtainment of such Material Consents relating to the Restricted
Material Contracts, the parties shall cooperate with each other in
any reasonable and lawful arrangements designed to provide to Buyer
the benefits of use of each Restricted Material Contract for the
term of such agreement (or any right or benefit arisi
|
