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EXHIBIT 10.19
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
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THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (the
"Agreement"), made and
entered into as of this 16th day of October, 2006, 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 Wireless Bundled Services,
Inc.., a Texas
corporation ("Subsidiary").
As used in this Agreement, the term "Seller" means NetYeti, Inc., a
Texas
corporation, with its principal place of business in Lake Jackson,
Texas.
W I T N E S S E T H:
WHEREAS, Seller presently operates a business engaged in providing
fixed
wireless broadband Internet solutions and bandwidth to residential
and
commercial businesses (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
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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:
All cash, cash equivalents, accounts (including without limitation,
any
accounts, deposit accounts;
all inventory, equipment, goods, documents pertaining to
operations,
instruments (including, without limitation, promissory notes);
all rights to equipment, tower and office space leases;
all contract rights including ISP Subscriber Agreements, all
Design
Agreements, Equipment Purchase Agreements, Internet Access and
Monitoring and
Maintenance Agreements with commercial customers, including the
existing dial-up
customers;
all general intangibles, chattel paper, supporting obligations,
investment property (including without limitation, all equity
interests owned by
Seller);
all letter of credit rights;
all accounts and notes receivable, all work in progress, and all
other
contracts and agreements relating to the conduct of the
Business;
all equipment and software;
the 1996 Ford and 1993 GMC bucket trucks;
the 40 foot trailer mounted tower;
the BDN 70 foot crank-up tower;
all legally assignable government permits, licenses and
certifications
("Governmental Permits"); and
all proceeds and products thereof, all documents, files and
records
containing technical support, all additions, accessions and
substitutions
thereto 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."
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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 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.
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: $300,000, (the
"Initial
Payment"), plus an Earnout to be calculated as follows, (the
"Purchase Price"):
>> One
(1) times Gross Revenue Incremental Growth of 36db for the
time period after closing until December 31, 2006. plus
>> One
(1) times Gross Revenue Incremental Growth of 36db for the
calendar year ending December 31, 2007; plus
>> One
(1) times Gross Revenue Incremental Growth of 36db for the
calendar year ending December 31, 2008.
1.4 PAYMENT TERMS. The Initial Payment of the Purchase Price will
be payable to
Seller by Buyer on the Closing date and shall be paid through the
issuance of
shares in Parent Restricted Common Stock. Subsequent annual
payments for Earnout
based on Incremental Revenue will 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"). The Initial Payment will be paid by the issuance of
750,000
shares of Parent Restricted Stock and each Annual Payment will be
paid by
issuance of Parent Restricted Common Stock; the number of shares of
which would
be calculated based on the average closing price for the 20 trading
days
immediately preceding each respective payment. For purposes of the
calculating
the Initial Payment, the number of shares was calculated based on
the average
closing price for the 20 trading immediately preceding the date of
the original
agreement; October 2, 2006. The Parent 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, following the 12-month
holding period
that begins on the share issuance date. Further, the Parent
Restricted Common
Stock shall be distributed to NetYeti, Inc. or alternatively as
instructed by
the Seller pursuant to Schedule 1.4. All fractional shares
resulting from a
prorated distribution calculation shall be rounded up to the next
whole share
amount.
The Buyer shall provide the Seller with a two year guaranty,
secured by the
Assets purchased herewith, in an amount not to exceed $175,000 for
covering any
documented shortfalls realized from the open market sale of the
Restricted Stock
before the end of the guarantee period. The Seller's legal counsel
shall prepare
a UCC-1 acceptable to Buyer; covering the assets conveyed herewith
and all new
wireless broadband assets acquired post Closing that are specific
to the
exclusive territory set forth in Section 6.4.1 and customers
accounts placed by
the Seller. Further, presuming that the Seller has not realized at
least
$175,000 in cash from the sale of the Restricted Stock issued for
the Purchase
Price by the end of the guaranty period, the Parent Company shall
be obligated
to issue additional shares to the Seller to cover any shortfall.
Following the
Sellers realization of $175,000 in proceeds from the sale of
Restricted Stock or
the end of the guarantee period, whichever occurs first, the Seller
shall be
obligated to release the guaranty and liens on the Assets purchased
herein.
Further, the Seller shall have the option to retain the stock at
the end of the
two year guarantee, although the Seller shall be obligated to
release the
guaranty and liens on the Assets set forth in the UCC-1 at the end
of the
guarantee period.
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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,
Equipment Purchase, and Monitoring and Maintenance Agreements in
existence with
commercial customers, (iii) a payment obligation to NetYeti, Inc.
in the amount
of $25,000 at a 6% interest rate with 24 monthly payments in the
amount of
$1,108.02 beginning on November 16, 2006 to cover certain
liabilities being
retained by the Seller or Sellers principals, (iv) the note (lease)
payable to
the CPE financier, (v) all tower and lease agreements, (vi) certain
sales and
property taxes payable and (vii) certain billings in excess of
earnings
(customer prepayments). Items (iii), (v), (vi) and (vii) shall be
limited to the
amount of cash and cash collected from accounts receivable
transferred to the
Purchaser on the Closing Date. Should the Purchaser not realize
enough cash and
cash collected from accounts receivable transferred to the
Purchaser at Closing
or within 90 days of Closing with respect to the accounts
receivable transferred
and that are sufficient to offset the liabilities assumed in items
(iii), (v),
(vi) and (vii), the Seller shall be obligated to pay the Purchaser
any shortfall
that exists. Subsidiary 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 obligations, notes and trade
accounts payable
and other accrued interest and expenses payable to affiliates; (ii)
all notes
and interest payable to either David Davenport or family members,
(iii) 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); (iv) 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 (v) 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.
ARTICLE TWO: CLOSING
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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
October 16, 2006 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."
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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 not have billed November services in advance as of the
Closing.
Seller shall have entered into a new lease with Lease Corporation
of America,
("LCA") for an additional 50 radios and this debt obligation will
be assumed by
the Buyer along with the other four existing lease schedules in
existence with
LCA. With respect to such leases, Buyers payment obligations will
begin with the
applicable November 2006 payment obligation.
Seller, PCCare, Inc., David Davenport, Pat Davenport and their
adult children
shall have executed and delivered, subject to Closing, 3 year
non-competition
agreements limited to the ISP segment of the fixed wireless
broadband industry.
The non-compete obligations shall not include the future and
continued business
services currently being provided by PCCare, Inc. to residential,
commercial
businesses, municipalities, government and quasi-governmental
agencies.
Notwithstanding this exception, both David Davenport and PCCare,
Inc. will also
agree not to own or operate ISP operations designed and constructed
for such
entities. Additionally, the immediate family members of David
Davenport agree to
be bound by the above conditions for a period of 3 years from the
date of
Closing.
Seller shall have provided the Buyer with certifications from the
state and
local taxing jurisdictions that all taxes have been paid.
Buyer shall have received from Seller all of the following:
A bill 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 "Bill 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 2
(the "Assignment
and Assumption Agreement"), duly executed by Seller;
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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
A legal opinion from Seller's counsel that (1) Seller is bound by
this Agreement
and (2) subject to Closing, the Bill 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.
Seller shall have received from Buyer all of the following:
The Payment of the Purchase Price in the form of Parent's
Restricted Common
Stock Certificates to those shareholders listed on Schedule
1.4;
Buyer shall issue $25,000 in free-trading shares to David Davenport
for
consulting services at the Closing for integration and transition
period
services through December 31, 2006.
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.
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;
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(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 3 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:
(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 3
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
Cl