Exhibit 10.2
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is made as of January __, 2010
by and between USppp, Inc. ("Seller") and Omnicity, Incorporated, an Indiana
corporation ("Buyer").
RECITALS
A. Seller owns and operates certain telecommunication systems located in and
around Decatur, Indiana.
B. Seller desires to sell and Buyer wishes to buy substantially all the assets
used or useful in the operation of those telecommunication systems for the
price and on the terms set forth in this Agreement.
AGREEMENTS
In consideration of the above recitals and of the mutual agreements and
covenants contained herein, Buyer and Seller agree as follows:
SECTION 1. DEFINITIONS.
The following terms as used in this Agreement, shall have the meanings
set forth in this Section:
"ACCOUNTS RECEIVABLE" means all rights of Seller to payment from the
Subscribers of the Systems arising from Seller's operation of the Systems prior
to the Closing Date.
"ASSETS" means all the tangible and intangible assets, real, personal,
or mixed, owned or held by Seller and used or useful in the business or
operations of the Systems, including the Personal Property, Real Property, the
Assumed Contracts and Grants of Authority, the Accounts Receivable, the
Intangibles, and all Subscriber and customer lists and other information
relating to the Systems, but not including the Excluded Assets.
"ASSUMED CONTRACTS AND GRANTS OF AUTHORITY" means (a) those Contracts
and Grants of Authority listed in Schedule E hereto designated by Buyer to
indicate that they will be assumed by Buyer at Closing, and (b) and Contracts
and Grants of Authority entered into by Seller in the ordinary course of
business between the date hereof and the Closing Date that Buyer expressly
agrees to assume at Closing.
"CLOSING" means the consummation of the transaction contemplated by
this Agreement in accordance with the provisions of Section 9.
"CLOSING DATE" means the date on which the Closing occurs, as
determined pursuant to Section 9.
"COMMON STOCK" means the common stock of Omnicity Corp, a Nevada
corporation, par value $.001 per share, the parent corporation of Buyer.
"CONSENTS" means the consents, permits, or approvals of third parties,
including governmental authorities, necessary to transfer any of the Assets to
Buyer or otherwise to consummate the transaction contemplated hereby.
"CONTRACTS" means all contracts, leases, non-governmental licenses, and
other agreements (including leases for personal or real property and employment
agreements), written or oral, including any amendments or other modifications
thereto, that relate to the Assets or the operation of any of the Systems,
including, without limitation, those described in Schedule E hereto, together
with any additions thereto between the date hereof and the Closing Date.
"EFFECTIVE TIME" means 12:01 a.m. local Indiana time, on the Closing Date.
"ENVIRONMENTAL LAW" has the meaning set forth in Section 3.5 below.
"EXCLUDED ASSETS" means:
(a) Seller's cash on hand or in any of Seller's bank accounts as of the
Effective Time;
(b) Any insurance policies, bonds, letters of credit, or other similar
items of Seller, and any cash surrender value in regard thereto;
(c) All books and records that Seller is required by law to retain or that
relate solely to internal corporate matters;
(d) All claims, rights, and interest in and to any refund for federal,
state, or local franchise, income, or other taxes or fees of any
nature whatsoever for periods prior to the Effective Time; and
(e) Any pension, profit sharing, or employee benefit plans.
"FCC" means the Federal Communications Commission.
"GRANTS OF AUTHORITY" means all municipal, state, and federal grants of
authority and applications therefore, which are used or useful in connection
with the operation of the Systems, including those listed on Schedule E,
2
together with any additions thereto between the date hereof and the Closing
Date.
"GOVERNMENTAL LICENSES" means all licenses, permits, and other
authorizations issued by federal, state, or local governmental authorities to
Seller in connection with the business operations of the Systems, including
those set forth in Schedule B, together with any additions thereto between the
date hereof and the Closing Date.
"HAZARDOUS MATERIAL" has the meaning set forth in Section 3.5 below.
"INTANGIBLES" means all copyrights, trademarks, service marks, trade names,
licenses, patents, permits, privileges, proprietary information, technical
information and data, trade secrets, machinery and equipment warranties, and all
other intangible property rights and interests, whether or not applied for by,
or issued to, Seller or under which Seller is licensed or franchised and used or
which are, or may be, useful in, or in any way related to, the business and
operations of the Systems, including those listed in Schedule G hereto, together
with any additions thereto between the date hereof and the Closing Date, and all
goodwill relating to all of the foregoing and the Systems.
"PER SHARE PRICE" means the average of the last transaction prices for the
15 trading days immediately prior to the date of determination for a share of
Common Stock of Omnicity Corp (OMCY.OB) on a national securities exchange or the
NASDAQ National Market System on which the Common Stock is then principally
trading, or, in case a sale does not take place on a trading day during such
15-trading-day period, the average of the last reported representative bid and
asked prices quoted by such national securities exchange or the NASDAQ National
Market System on which the Common Stock is then principally trading.
"PERSONAL PROPERTY" means all machinery, equipment, modems and related
equipment, tools, vehicles, furniture, leasehold improvements, office equipment,
plant, lines, cable, transmitters, repeaters, cable, inventory, and other
tangible personal property used or useful in the operation of the Systems,
including the property identified and described in Schedule D hereto and all
computer discs and tapes, plans, diagrams, blueprints, schematics, and books and
records relating to the operation of the Systems, filings with governmental
agencies, and executed copies of the Contracts and Grants of Authority, together
with any additions thereto between the date hereof and the Closing Date.
"PURCHASE PRICE" has the meaning set forth in Section 2.2 below.
"REAL PROPERTY" means all real estate and all interest in real property,
including all leaseholds, easements, licenses, rights to access, and rights of
way, and all improvements thereon, used or useful in the operation of the
Systems, including the property identified and described in Schedule C hereto,
together with any additions thereto between the date hereof and the Closing
Date.
"SECURITIES ACT" has the meaning set forth in Section 3.17 below.
"SHAREHOLDER" means Xx Xxxxxxxxxxxxx, Xxx Xxxxxxxxx, Xxxxx Xxxxxx, the
shareholders of Seller.
"SHARES" has the meaning set forth in Section 2.3(b) (3) below.
3
"SUBSCRIBERS" means, at any time (a) those active subscribers to a System
at the regular monthly subscription rates for a single household who have
subscribed and paid for at least sixty days of continuous service and who are
not forty-five days or more past due with respect to any amounts owed to Seller,
and who have paid all applicable installation fees, plus (b) the result obtained
by dividing the total subscription revenues received by Seller during the last
full calendar month preceding the month in which the Closing Date occurs for
service to bulk or commercial accounts by the standard average service rate
charged to individual residential subscribers of such System.
"SYSTEMS" means the telecommunication systems and basic aggregated delivery
platforms Buyer is buying from Seller, including the market (the serviceable
homes), the subscribers, and the minimum acceptable signal strength at each of
the serviceable homes with a tower site footprint or a hard wire or fiber
feeder, as further described on Schedule A.
SECTION 2. SALE AND PURCHASE OF ASSETS.
2.1. AGREEMENT TO SELL AND BUY. Subject to the terms and conditions set forth
in this Agreement, Seller hereby agrees to transfer and deliver to Buyer
on the Closing Date, and Buyer agrees to purchase, the Assets, free and
clear of any liabilities, liens, security interests, pledges, conditions
or encumbrances (except for those permitted in accordance with Sections
3.5 and 3.6 below).
2.2 PURCHASE PRICE. The total consideration to be paid for the Assets shall be
Two Hundred Twenty-Five Thousand Dollars ($225,000.00) (the "Purchase
Price"), subject to adjustments as provided below:
(a) Purchase Price and Prorations. The Purchase Price shall be adjusted as
provided in this Section to give effect to the proration between Buyer
and Seller of all revenues and expenses arising from the operation of
the Systems. The expenses to be prorated shall include business,
franchise, and license fees (including any retroactive adjustments
thereof), utility charges, real and personal property taxes and
assessments levied against the Assets, property and equipment rentals,
amounts due under any of the Assumed Contracts and Grants of Authority
and taxes. The proration shall be made in accordance with the
principle that Seller shall receive all revenues and be responsible
for all expenses, costs, and liabilities allocable to the period prior
to the Effective Time, and Buyer shall receive all revenues and be
responsible for all expenses, costs, and obligations allocable to the
period after the Effective Time, except that there shall be no
adjustment and Seller shall remain solely liable with respect to any
obligation or liability not being assumed by Buyer in accordance with
Section 2.4.
(b) Adjustments for Subscriber Deposits and Prepayments. The Purchase
Price shall be adjusted further by deducting there from the amount of
4
Subscribers' deposits and prepayments, as disclosed in Exhibit E, the
responsibility for which is assumed by Buyer under this Agreement.
(c) System Adjustments. If the number of Subscribers is less than 450 at
the Effective Time, and Buyer has waived the condition of Closing in
Section 8.1(e) below, the Purchase Price shall be reduced by $500 for
each Subscriber less than 450.
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be determined, insofar
as feasible, on the Closing Date, and paid as follows:
(a) Payment at Closing. Buyer shall pay to Seller the Purchase Price, as
determined on the Closing Date, in the following manner:
(1) Cash consideration of Seventy-Five Thousand Dollars ($75,000.00)
by check or federal wire transfer to a bank which shall be
designated by Seller at least two days prior to the date such
payment becomes due under Section 2.3(c) below.
(2) A promissory note in the form attached as Exhibit A for
Sixty-Seven Thousand Five Hundred Dollars ($67,500.00), payable
with interest at five percent (5%) over a twenty-four (24) month
period in monthly payments, with the first payment being due and
payable one hundred eighty (180) days after the Closing.
(3) Eighty-Two Thousand Five Hundred Dollars ($82,500.00), payable in
the form of and in that number of the shares (the "Shares") of
the Common Stock determined by dividing Eighty-Two Thousand Five
Hundred Dollars ($82,500.00) by the Per Share Price for the
Common Stock as of the close of business on the date that is
sixty (60) days after the Closing Date. Said Shares will be
transferred to the Seller after the Closing in accordance with
written instructions provided to Buyer by Seller.
The remaining Purchase Price to be refunded, if any, after giving
effect to the adjustments in Section 2.2 (c) above will refunded
pursuant to the provisions of Section 2.3 (b) below.
(b) Final Determination of Purchase Price. The Purchase Price, taking into
account all adjustments and prorations, will be determined finally,
and additional payment by Buyer to Seller or refund by Seller to
Buyer, as appropriate, will be made, in accordance with the following
procedures:
(1) Within 60 days after the Closing Date, Buyer will deliver to
Seller a statement setting forth Buyer's determination of the
amount of the Purchase Price and the calculation thereof, taking
into account all prorations. If Seller disputes the amount of the
Purchase Price determined by Buyer, Seller shall deliver to Buyer
within 30 days after his receipt of Buyer's statement a statement
5
setting forth his determination of the amount thereof. If Seller
notifies Buyer of his acceptance of Buyer's statement, or if
Seller otherwise fails to deliver his own statement within the 30
day period specified in the preceding sentence, Buyer's
determination shall be final and payment shall be made thereon.
Debit adjustments, if any, to the Purchase Price, shall be
applied to the promissory note.
(2) Buyer and Seller shall use their good faith efforts to resolve
any dispute involving the determination of the Purchase Price. If
the parties are unable to resolve the dispute within 15 days
following the delivery of Seller's statement, each of Buyer and
Seller shall select an independent arbitrator who shall be
knowledgeable and experienced in the operation of
telecommunication systems, and the two arbitrators so chosen
shall attempt to resolve the dispute. If they are not able to do
so within 45 days following the delivery of Seller's statement,
the two arbitrators shall agree upon a third arbitrator and the
dispute shall be resolved by the decision of the majority of the
arbitrators, which shall be conclusive and binding on the
parties. Any fees of the arbitrators shall be split equally
between the parties.
(c) Allocation of Purchase Price. The Purchase Price shall be allocated as
set forth on Form 8594, attached hereto as Exhibit A.
2.4 ASSUMPTION OF LIABILITIES AND OBLIGATIONS.
(a) Assumption. Except as provided in paragraph (b) of this Section 2.4,
as of the Effective Time, Buyer shall assume and undertake to pay,
discharge, and perform all obligations and liabilities arising out of
events occurring after the Effective Time related to Buyer's ownership
of the Assets or its operation of the Systems after the Effective
Time, including, insofar as they relate to the period after the
Effective Time and arise out of events occurring after the Effective
Time, all the obligations and liabilities of Seller under the Assumed
Contracts and Grants of Authority. Buyer shall also assume Seller's
obligations and liabilities as of the Effective Time with respect to
customer deposits and prepayments from Subscribers. Other than as
specified herein, Buyer shall assume no obligations or liabilities of
Seller.
(b) Limitation. Notwithstanding any provision of this Agreement to the
contrary, Buyer shall not assume: (1) any obligations or liabilities
under any Contract or Grant of Authority not included in the Assumed
Contracts and Grants of Authority; (2) any obligations or liabilities
under the Assumed Contracts and Grants of Authority relating to the
time period prior to the Effective Time; (3) any claims or pending
litigation or proceedings relating to any action with respect to the
operation of the Systems prior to the Effective Time; (4) any
obligation or liabilities arising under capitalized leases or other
financing agreements; (5) any obligations or liabilities of Seller
6
under collective bargaining agreements, multi-employer plans or any
other employee benefit plan of Seller; and (6) any obligations or
liabilities caused by, arising out of, or resulting from any action or
omission of Seller prior to the Effective Time, and all such
obligations and liabilities shall remain and be the obligations and
liabilities solely of Seller.
2.5 EMPLOYEES. To the extent Seller has employees, Seller shall terminate such
employees working in the business effective as the close of business the
day before the Closing and Seller shall be responsible without exception
for all compensation, taxes, insurance, accrued sick and vacation days and
other benefits and amounts relating to such employees, and Seller shall
indemnify, defend and hold harmless Buyer from any claims made against
Buyer with respect to such obligations. Buyer shall not assume or in any
way become responsible or liable for any compensation, taxes, insurance or
other benefits and amounts payable by Seller on account of such employees.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION, STANDING, AND AUTHORITY. Seller is a corporation organized,
validly existing, and in good standing under the laws of the State of
Indiana. Seller has the requisite corporate power and authority to: (a)
own, lease, and use the Assets as now owned, leased, and used; (b) conduct
the business of operating the Systems as now conducted; (c) execute,
deliver, and perform this Agreement and the documents contemplated hereby
according to their respective terms; and (d) transfer the Assets in
accordance with the terms and conditions of this Agreement. Seller is not a
participant in any joint venture or partnership with any other person or
party with respect to the Systems or any part of the Assets.
3.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery, and
performance of this Agreement by Seller have been duly authorized by all
necessary corporate actions, including stockholder approval if required, on
the part of Seller. This Agreement has been duly executed and delivered by
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable against Seller in accordance with its terms except as the
enforceability hereof may be affected by bankruptcy, insolvency, or similar
law affecting creditors' rights generally and by judicial discretion in the
enforcement of equitable remedies.
3.3 ABSENCE OF CONFLICTING AGREEMENTS OR CONSENTS. Subject to obtaining those
Consents listed on Schedule F, the execution, delivery, and performance of
this Agreement, the Shares and the documents contemplated hereby (with or
without the giving of notice, the lapse of time, or both): (a) do not
require the consent of any third party; (b) will not conflict with any
provision of the Articles of Incorporation or By-Laws of Seller; (c) will
not conflict with, result in a breach of, or constitute a default under any
applicable law, judgment, order, ordinance, injunction, decree, rule,
7
regulation, or ruling of any court or governmental instrumentality; (d)
will not conflict with, constitute grounds for termination of, result in a
breach of, constitute a default under, or accelerate or permit the
acceleration of any performance requirement by the terms of any agreement,
governmental authority, instrument, license, or permit to which Seller is a
party or by which Seller is bound; and (e) will not create any claim, lien,
charge, or encumbrance upon any of the Assets.
3.4 GOVERNMENTAL LICENSES. Schedule B includes a true and complete list of the
Governmental Licenses. Seller has delivered to Buyer true and complete
copies of the Governmental Licenses. Seller is the authorized legal holder
of the Governmental Licenses. The Governmental Licenses comprise all the
licenses, permits, and other authorizations required from governmental and
regulatory authorities for the lawful conduct of the business and
operations of the Systems in the manner and to the full extent they are now
conducted, and none of the Governmental Licenses is subject to any
restriction or condition that would limit the operations of the Systems as
they are now conducted. The Governmental Licenses are in full force and
effect, and the operations of the Systems are in compliance therewith.
Seller has no reason to believe that any of the Governmental Licenses would
not be assignable to Buyer subject to any required approval of the granting
authority in the ordinary course.
3.5 REAL PROPERTY. Schedule C contains a complete description of all Real
Property and Seller's interests therein, including street address, legal
description, owner, and use. None of the Real Property is subject to any
lien, mortgage, pledge, covenant, easement, restriction, encroachment,
lease, charge, or other claim or encumbrance of any nature whatsoever that
would adversely affect the use or usefulness of the Real Property in the
operation of the Systems. Seller has delivered to Buyer true and complete
copies of all leases or other instruments pertaining to the Real Property.
All leases pertaining to the Real Property are, or prior to Closing will
be, in recordable form. All Real Property is marketable, in good condition
and repair consistent with its present use, and available for immediate use
in the conduct of the business and operations of the Systems. Seller has
full legal and practical access to all Real Property. All easements, rights
of way, and real property licenses have been properly recorded in the
appropriate public recording offices. The Real Property described in
Schedule C includes all easements, rights of way, and other real property
interests necessary to conduct the business and operations of the Systems
as they are now conducted. No Hazardous Material (as defined below) has
been used, generated, manufactured, stored, treated, released or disposed
of by Seller, or to Seller's actual knowledge without inquiry, by any other
party, at, in, on or under the Real Property leased or owned by Seller for
the business of operation of the Systems in violation of Environmental Law
(as defined below). The term "Hazardous Material" means any substance or
material that is or becomes regulated, defined or designated by any
federal, state or local governmental authority as hazardous, extremely
hazardous, imminently hazardous, dangerous or toxic, or as a pollutant,
contaminant or waste, and shall include, without limitation, PCBs,
asbestos, asbestos containing materials, oil and petroleum products and
8
byproducts. The term, "Environmental Law" means all current and future
federal, state and local statutes, regulations, ordinances and rules
relating to (1) the emission, discharge, release or threatened release of
Hazardous Material into the air, surface water, groundwater or land; (ii)
the manufacturing, processing, use, generation, treatment, storage,
disposal, transportation, handling, removal, remediation or investigation
of Hazardous Material; or (iii) the protection of human health, safety or
the indoor or outdoor environment, including without limitation, the Clean
Air Act, the Federal Water Pollution Control Act, the Resource Conservation
and Recovery Act, the Comprehensive Environmental Response, Compensation
and Liability Act, the Occupational Safety and Health Act, all amendments
thereto, all regulations promulgated thereunder, and their state statutory
and regulatory counterparts. The zoning classifications of the leased
properties on which the Systems operate permit the operation of the
Systems. The improvements on such leased properties have been constructed
and are presently used and operated in compliance with all licenses and all
legal requirements, and with all covenants, easements and restrictions
affecting those properties, and all obligations of Seller with regard to
the legal requirements, covenants, easements and restrictions have been and
are being performed in a proper and timely manner.
3.6 PERSONAL PROPERTY. Without material exception, Schedule D contains
descriptions of all Personal Property. Except as set forth in Schedule D,
Seller owns and has good title to each item of Personal Property, and none
of the Personal Property is subject to any security interest, mortgage,
pledge, conditional sales agreement, or other lien or encumbrance, except
for liens for current taxes not yet due and payable. The Personal Property
is in good operating condition and repair (ordinary wear and tear
excepted), and is available for immediate use in the business and
operations of the Systems. The Personal Property listed in Schedule D
includes all personal property necessary to conduct the business and
operations of the Systems as they are now conducted.
3.7 CONTRACTS AND GRANTS OF AUTHORITY. The Contracts and Grants of Authority
listed in Schedule E comprise all Contracts and Grants of Authority used or
useful in the operation of the Systems, except Contracts entered into in
the ordinary course of business that do not involve payments or receipts by
Seller in excess of $1,000 individually or $5,000 in the aggregate. Seller
has delivered to Buyer true and complete copies of all Contracts and Grants
of Authority. Other than the Contracts and Grants of Authority listed on
Schedule E, Seller requires no contract, grant of authority, permit, lease,
or other agreement to enable it to carry on its business as now conducted.
All the Contracts and Grants of Authority are, and all Assumed Contract and
Grants of Authority will be, as of the Closing Date, in full force and
effect and are valid, binding, and enforceable in accordance with their
terms. There is not under any Contract of Grant of Authority any default by
any party thereto (including Seller) or any event that, after notice or
lapse of time or both, would constitute a default. Seller is not aware of
any intent by any party to any Contract or Grant of Authority: (a) to
terminate or amend the terms thereof; (b) to refuse to renew the Contract
or Grant of Authority upon expiration of its terms; or (c) to renew the
9
Contract or Grant of Authority upon expiration only on terms and conditions
that could be less advantageous to the Systems than those currently
pertaining. Except for the need to obtain those Consents listed in Schedule
F, Seller has full legal power and authority to assign its rights under the
Contracts and Grants of Authority to Buyer in accordance with this
Agreement, and the assignment of the Contracts and Grants of Authority to
Buyer will not affect the validity, enforceability, or continuation of any
of the Contracts or Grants of Authority. Except as set forth on Schedule F,
no Contract contains any unfulfilled requirement that Seller make any
capital expenditures.
3.8 CONSENTS. Except for those Consents listed in Schedule F, no consent,
approval, permit, or authorization or declaration to or filing with any
governmental or regulatory authority or any other third party is required:
(a) to render this Agreement and the transactions contemplated hereby valid
and effective; (b) to permit this Agreement and the transactions
contemplated hereby to be consummated; (c) to permit Seller to assign or
transfer the Assets (including each of the Contracts and Grants of
Authority) to Buyer; or (d) to enable Buyer to operate the Systems and the
business of Seller in essentially the same manner that they are now
conducted. Seller reasonably believes that all Consents will be obtained.
3.9 INTANGIBLES. Schedule G is a true and complete list of all the Intangibles
(exclusive of those required to be listed in Schedule B), all of which are
valid, in good standing, and uncontested. Seller has delivered to Buyer
copies of all documents establishing the Intangibles. Seller is not
infringing upon or otherwise acting adversely to any trademarks, trade
names, copyrights, patents, patent applications, know-how, methods, or
processes owned by any other person or persons, and there is no claim or
action pending, or to the knowledge of Seller threatened, with respect
thereto.
3.10 FINANCIAL STATEMENTS AND TAX RETURNS. Schedule H contains copies of the
following financial statements of Seller, all of which are complete and
correct, have been prepared from the books and records of Seller in
accordance with generally accepted accounting principles consistently
applied and maintained throughout the periods indicated, accurately reflect
the books, records, and accounts of the Systems, and present fairly the
financial condition, assets, liabilities, and results of operation of the
Systems as at their respective dates and the results of operations for the
periods then ended:
(a) Balance Sheets, as at December 31, 2008 and November 30, 2009;
(b) Statements of Income and Expense, for the twelve-month period ended
December 31, 2008 and each of the months of January through November,
2009; and
(c) Tax returns for the years 2006, 2007 and 2008.
10
None of the foregoing financial statements understates the true costs and
expenses of conducting the business and operations of the Systems, fails to
disclose any material contingent liability, or inflates the revenues of the
Systems for any reason.
Seller has filed, in accordance with applicable law, all federal, state,
county and local income and franchise tax returns and all real and personal
property tax returns that are required to be filed. The information shown
on the federal income tax returns delivered to Buyer is true, accurate, and
complete and fairly presents the information purported to be shown. Seller
has paid, or shall pay prior to the date it is due, all taxes owed by
Seller on account of the Business.
3.11 INSURANCE. Schedule I is a true and complete list of all policies of
insurance owned by Seller that insure any part of the Assets or the
business of the Systems. All policies of insurance listed in Schedule I are
in full force and effect. The insurance policies listed in Schedule I are
adequate in amount with respect to, and for the full value (subject to
customary deductibles) of the Assets, and insure the Assets and the
business of the Systems against all foreseeable risk. No insurance policy
of Seller has been canceled and no application of Seller for any insurance
policy has been rejected during the past three years.
3.12 PERSONNEL.
(a) Plans. Seller does not maintain, nor has it at any time established or
maintained, nor has it at any time been obligated to make, nor has
made, contributions to or under any plan which provides
post-retirement medical or health benefits with respect to employees
or former employees of Seller. Seller has complied, and will have, as
of the Closing, complied with the Worker Adjustment and Retraining
Notification Act (WARN Act) in connection with the termination of
Seller's employees.
(b) Agreements and Collective Bargaining. Seller is not a party to or
subject to any collective bargaining agreement, multi-employer pension
fund or other labor union agreement with respect to any persons
employed by Seller in connection with Seller's operation of the Assets
and with respect to the Systems. Seller has no written or oral
contracts of employment with any employee of the Systems, other than
those listed in Schedule E. No controversies, disputes, or proceedings
are pending or, to the best of its knowledge, threatened, between it
and any employees (singly or collectively) of the Systems. No labor
union or other collective bargaining unit represents or claims to
represent any of the employees of the Systems. There is no union
campaign being conducted to solicit cards from employees to authorize
a union to request a national labor Relations Board certification
election with respect to any employees of the Systems.
(c) Liabilities. Seller has no liability of any kind to or in respect of
any employee benefit plan, including withdrawal liability under
Section 4201 of ERISA. Seller has not incurred any accumulated funding
deficiency within the meaning of ERISA or Section 4971 of the Internal
11
Revenue Code of 1986. Seller has not failed to make any required
contributions to any employee benefit plan. The Pension Benefit
Guaranty Corporation has not asserted that Seller has incurred any
liability in connection with any such plan. No lien has been attached
and no person has threatened to attach a lien on any property of the
Seller as a result of a failure to comply with ERISA.
3.13 CLAIMS AND LEGAL ACTIONS. Except as set forth in schedule K, and except for
investigations and rulemaking proceedings affecting the telecommunications
industry generally, there is no claim, legal action, counterclaim, suit,
arbitration, governmental investigation, or other legal, administrative, or
tax proceeding, nor any order, decree, or judgment, in progress or pending,
or, to the knowledge of Seller, threatened, against or relating to Seller,
its properties, the Assets, or the business of the Systems, nor does Seller
know or have reason to be aware of any basis for the same. There are no
governmental investigations or other legal, administrative, or tax
proceedings pursuant to which Seller is or could be made liable for any
taxes, penalties, interest, or other charges, the liability for which could
extend to Buyer as transferee of the business of the Systems.
3.14 COMPLIANCE WITH LAWS. In its operation of the System and its ownership and
maintenance of the Assets, Seller has complied and is complying fully with
the terms of all Governmental Licenses and Grants of Authority and with all
laws, rules, regulations, and ordinances, including all trademark, trade
name, or copyright rules and regulations, all building and zoning laws,
codes, and regulations, all rules and regulations of the Federal Aviation
Administration relating to tower heights, and all laws relating to the
employment of labor. Neither the ownership nor use of Seller's properties
nor the conduct of its business conflicts with the rights of any other
person or entity.
3.15 CONDUCT OF BUSINESS IN ORDINARY COURSE; ADVERSE CHANGE. Since December 31,
2008, Seller has conducted the business of the Systems only in the ordinary
course and has not:
(a) Adverse Change. Suffered any material adverse change in the business,
assets, properties, prospects, or condition (financial or otherwise)
of Seller or the Systems, or any damage, destruction, or loss
affecting any of the Assets used or useful in the conduct of the
business of the Systems;
(b) Liens. Created, assumed, or suffered any mortgage, pledge, lien, or
encumbrance on any of the Assets;
(c) Employee Compensation. Suffered any material increase in compensation
payable or to become payable to any of the employees of Seller, or any
bonus payment made or promised to any employee of Seller, or any
material change in personnel policies, insurance benefits, or other
compensation arrangements affecting the employees of Seller;
12
(d) Dispositions. Suffered any sale, assignment, lease, material depletion
of inventory, or other transfer of any of Seller's properties without
suitable replacements being obtained therefore;
(e) Cancellation of Debts. Cancelled any debts owed to or claims held by
Seller;
(f) Write-Down. Suffered any significant write-down of the value of any
Assets or any significant write-off as uncollectible of any Accounts
Receivable; and
(g) Rights. Transferred or granted any right under, or entered into any
settlement regarding the breach or infringement of, any license,
patent, copyright, trademark, trade name, grant of authority, or other
intellectual property or proprietary right, or modified any existing
right relating to the Systems.
3.16. INFORMATION REGARDING THE SYSTEMS.
(a) Subscribers. The Systems have at least four hundred fifty (450)
Subscribers.
(b) Rates; Fees; Reports; Signals. Schedule L sets forth or includes:
(1) The rates being charged by Seller to Subscribers for each class
of service for each of the Systems;
(2) All fees for Grants of Authority and all fees or payments
relating to the use of access points and/or tower sites;
(3) A list of all reports filed by Seller with the FCC or any other
governmental agency or municipal authority within the past three
years in connection with the operation of the Systems;
(4) A list of all signals and services carried and delivered by the
Systems;
(5) A list of all aeronautical frequencies (together with geographic
coordinates, radius, and power levels) used by Seller in
connection with the Systems; and
(6) The number of Subscribers in each System.
(c) Accounts. All the account balances of Subscribers to the Systems are
actual and bona fide receivables representing obligations for the
total dollar amount thereof, as shown on the books of Seller, resulted
from the regular course of the Seller's business, and are fully
collectible in accordance with their terms, subject to no offset or
reduction whatsoever. Seller has no monetary obligations or
liabilities to any of its Subscribers except with respect to the
deposits and prepayments disclosed in Exhibit E. Uncollectable
Accounts Receivable may be set off by Buyer from the promissory note
or Common Stock at any time prior to payment in full.
(d) Operational Order. The Systems are fully operational with all required
electronics, are in good working order, and are delivering a signal of
good quality and strength to all Subscribers using only the Assets.
13
The Systems, when fully loaded, will perform to minimum standards of
FCC rules and regulations.
Signal Carriage; Aeronautical Frequencies. Seller has the legal right
and authority, including all necessary authorizations from the FCC, to
carry and continue to carry and use in the conduct of the business of
the Systems all the signals and transmissions now being carried. No
notices or demands (oral or written) have been received from the FCC,
or from any other person or entity challenging the right of Seller to
carry or deliver any signal. Seller has obtained all required FCC
clearances for the operation of the Systems in all necessary
aeronautical frequency bands.
3.17 Investment Representations.
(a) Seller and Shareholder acknowledge and agree that the references to
Buyer in this Section 3.17 fully extend to Omnicity Corp inasmuch as Omnicity
Corp is specifically contemplated to succeed to all rights and obligations of
Buyer pursuant to this Agreement prior to the Closing Date and inasmuch as the
Shares will be an interest in Omnicity Corp. Seller is obtaining the Shares
solely for its own account and for investment and not with a view to, or for
resale in connection with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). Seller further
represents that it does not have any present intention of selling, offering to
sell or otherwise disposing of or distributing the Shares or any portion
thereof, other than any distribution of Shares to its Shareholder within thirty
(30) days of the Closing; and that the entire legal and beneficial interest of
the Shares it is receiving will be held for the account of, itself only and
neither in whole nor in part for any other person. The Shareholder adopts, and
makes all representations, warranties and covenants to Buyer that Seller makes
in this Section 3.17 for the benefit of Buyer. Shareholder agrees to be bound by
all of this Section 3.17 individually.
(b) Knowledge of Buyer's Business. Seller is aware of Buyer's business
affairs and financial condition and as of the Closing Date, will have acquired
sufficient information about Buyer to reach an informed and knowledgeable
decision to acquire the Shares from Buyer. Seller further represents and
warrants that it has discussed, or has had the opportunity to discuss, Buyer and
its plans, operations and financial condition with its officers, has, or will
have, as of the Closing Date, received all such information as it deems
necessary and appropriate to enable it to evaluate the financial risk inherent
in making an investment in the Shares and has received satisfactory and complete
information concerning the business and financial condition of Buyer in response
to all inquiries in respect thereof.
(c) Speculative Investment. Seller realizes that its acquisition of the
Shares will be a highly speculative investment, and it is able, without
impairing its financial condition, to hold the Shares for an indefinite period
of time and to suffer a complete loss on its investment.
(d) No Obligation to Register. Buyer has disclosed to Seller that:
14
(i) The Shares have not been registered under the Securities
Act, and the Shares must be held indefinitely unless a transfer of such
Shares is subsequently registered under the Securities Act or an
exemption from such registration is available, and that Buyer is under
no obligation to register the Shares; and
(ii) Buyer will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(e) Rule 144. Seller and Shareholder are aware of the provisions of Rule
144, promulgated under the Securities Act, which, in substance, permits limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, including among other things:
the resale occurring not less than one year from the date Seller receives the
Shares; the availability of certain public information concerning Buyer; the
sale being through a broker in an unsolicited "broker's transaction" or in a
transaction directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and that any sale of the Shares may be made by
it only in limited amounts during any three-month period not exceeding specified
limitations. Seller and each of the Shareholders further represent that they
understands that at the time it wishes to sell the Shares there may be no public
market upon which to make such a sale, and that, even if such a public market
then exists, Buyer may not be satisfying the current public information
requirements of Rule 144, and that, in such event, it would be precluded from
selling the Shares under Rule 144 even if the one-year minimum holding period
had been satisfied. Seller and each of the Shareholders represent that they
understands that in the event all of the requirements of Rule 144 are not
satisfied, registration under the Securities Act or compliance with an exemption
from registration will be required; and that, notwithstanding the fact that Rule
144 is not exclusive, the staff of the Securities Exchange Commission has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(f) Acknowledgement of Legends. Seller and Shareholder acknowledge that the
certificate representing the Shares will bear the following restrictive legends:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT") OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
15
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES RERESENTED HEREBY ARE SUBJECT TO CERTAIN REPURCHASE RIGHTS AND
RIGHTS OF FIRST REFUSAL GRANTED TO OMNICITY, INCORPORATED, ITS SUCCESSORS
AND ASSIGNS, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR IN ANY MANNER
DISPOSED OF EXCEPT IN CONFORMITY WITH THE TERMS OF THE ASSET PURCHASE
AGREEMENT DATED DECEMBER ___, 2009, A COPY OF WHICH AGREEMENT IS
MAINTAINED AT THE PRINCIPAL CORPORATE OFFICES OF OMNICITY, INCORPORATED.
(g) Right of First Refusal. Seller and Shareholder acknowledge that the
Buyer shall have, and they hereby grant, to Buyer a right of first refusal to
acquire any of the Shares that the Seller or any of the Shareholders wish to
sale, transfer or otherwise dispose of, upon the following terms:
(1) Seller and Shareholder shall deliver to Buyer a notice stating (i)
Seller's or Shareholder's bona fide intent to sell or otherwise transfer
the Shares; (ii) the number of Shares and the bona fide price or other
consideration to be paid for the Shares ("Offered Price"), and Seller and
Shareholder shall offer the Shares at the Offered Price to the Buyer or its
assignees.
(2) At any time within ten (10) days after receipt of the notice,
Buyer or its assignees may, by giving notice to Seller or the Shareholder,
elect to purchase the Shares proposed to be sold or transferred for the
Offered Price. Payment of the Offered Price by Buyer shall be made by check
or as otherwise agreed by the Buyer and Seller or Shareholder, and shall be
made within thirty (30) days after receipt of the notice from Seller or
Shareholder.
3.18 BROKER. Neither Seller nor any person or entity acting on its behalf has
agreed to pay a commission, finder's fee, or similar payment in connection with
this Agreement or any matter related hereto to any person or entity, nor has it
or any person or entity acting on its behalf taken any action on which a claim
for any such payment could be based.
3.19 FULL DISCLOSURE. No representation or warranty made by Seller or
Shareholder in this Agreement or in any certificate, document, or other
instrument furnished or to be furnished by Seller or Shareholder pursuant hereto
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact required to make any statement contained
herein or therein not misleading. Seller and Shareholder are not aware of any
impending or contemplated event or occurrence that would cause any of the
foregoing representations not to be true and complete on the date of such event
or occurrence as if made on that date.
16
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION, STANDING, AND AUTHORITY. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Indiana. On the Closing Date, Buyer will be duly qualified to
conduct its business in the State of Indiana, subject to any permitted
transfer, in particular, the transfer to Omnicity Corp, which is a Nevada
corporation. Buyer has the requisite power and authority to execute,
deliver, and perform this Agreement and the documents contemplated hereby
according to their respective terms.
4.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery, and
performance of this Agreement by Buyer have been duly authorized by all
necessary action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes a legal, valid, and
binding obligation of Buyer, enforceable against Buyer in accordance with
its terms except as the enforceability hereof may be affected by
bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by judicial discretion in the enforcement of equitable
remedies.
4.3 ABSENCE OF CONFLICTING AGREEMENTS AND REQUIRED CONSENTS. Subject to
obtaining the Consents, the execution, delivery, and performance of this
Agreement and the documents contemplated hereby (with or without the
giving of notice, the lapse of time, or both): (a) do not require the
consent of any third party; (b) will not conflict with the by-laws of the
Buyer; (c) will not conflict with, result in a breach of, or constitute a
default under, any applicable law, judgment, order, ordinance, injunction,
decree, rule, regulation, or ruling of any court or governmental
instrumentality; and (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or
accelerate or permit the acceleration of any performance required by the
terms of any agreement, instrument, license or permit to which Buyer is a
party or by which Buyer may be bound, such that Buyer could not acquire or
operate the Assets.
4.4 BROKER. Neither Buyer nor any person or entity acting on its behalf has
agreed to pay a commission, finder's fee, or similar payment in connection
with this Agreement or any matter related hereto to any person or entity,
nor has it or any person or entity acting on its behalf taken any action
on which a claim for any such payment could be based.
4.5 FULL DISCLOSURE. No representation or warranty made by Buyer in this
Agreement or in any certificate, document, or other instrument furnished
or to be furnished by Buyer pursuant hereto contains or will contain any
untrue statement of a material fact, or omits or will omit to state any
material fact required to make any statement contained herein or therein
not misleading. Buyer is not aware of any impending or contemplated event
or occurrence that would cause any of the foregoing representations not to
be true and complete on the date of such event or occurrence as if made on
that date.
17
SECTION 5. COVENANTS OF SELLER
5.1 PRE-CLOSING COVENANTS. Seller covenants and agrees that from and after the
close of the financial period ending December 31, 2008 as reflected by the
financial statements provided pursuant to Section 3.10 above and between
the date hereof and the Closing Date, Seller has conducted, and will
conduct, its business diligently, in the ordinary course, and in such a
manner so that the representations and warranties contained in Section 3
shall continue to be true on and as of the Closing Date as if made on and
as of the Closing Date, and, except with the prior written consent of
Buyer, Seller has acted, and will act, in accordance with the following:
(a) Contracts. Seller will not enter into any contract or commitment
relating to the Systems or the Assets, or amend or terminate any
Contract of Grant of Authority (or waive any substantial right
thereunder), or incur any obligation (including obligations relating
to the borrowing of money or guarantee of indebtedness).
(b) Encumbrances. Seller will not create, assume, or permit to exist any
mortgage, pledge, lien, or other charge or encumbrance of rights
affecting any of the Assets, except for those in existence on the date
of this Agreement and disclosed in Schedules B and C and except for
mechanics' liens and other similar liens which will be discharged
prior to the Closing Date.
(c) Dispositions. Seller will not sell, assign, lease, or otherwise
transfer or dispose of any of the Assets except in the ordinary course
of business where no longer used or useful or in connection with the
acquisition of replacement property of equivalent kind and value.
(d) Governmental Licenses and Grants of Authority. Seller will not cause
or permit, by any act or failure to act, any of the Governmental
Licenses or Grants of Authority to expire or to be surrendered or
modified, or take any action that would cause any governmental
authority to institute proceedings for the suspension, revocation, or
adverse modification of any of the Governmental Licenses or Grants of
Authority, or fail to prosecute with due diligence any pending
applications to any governmental authority in connection with the
operation of the Systems, or take any other action within its control
that would result in the Systems being in noncompliance with the
requirements of any law, the rules and regulations of any governmental
authority, or the terms of any Governmental License or Grant of
Authority.
(e) Consents. Seller will obtain the Consents, without any change in the
terms or conditions of any Contract that could be less advantageous to
18
the Systems than those pertaining under the Contract as in effect on
the date hereof. Seller will promptly advise Buyer of any difficulties
experienced in obtaining any of the Consents and of any conditions
proposed, considered, or requested for any of the Consents.
(f) Books. Seller will maintain the books and records of the Systems in
accordance with prior practice.
(g) Access to Information. Seller will give to Buyer and its counsel,
accountants, engineers, and other authorized representatives,
reasonable access to the Assets, to the officers, employees, and
agents of Seller, and to all books and records relating thereto, and
will furnish or cause to be furnished to Buyer and its authorized
representatives all information relating to the Assets and Seller that
they reasonably request (including any financial reports and
operations reports produced with respect to the Systems).
(h) Notification. Seller will give Buyer prompt written notice of any
material change in any of the information contained in its
representations and warranties in this Agreement or in the Schedules
referred to herein and of any occurrence involving the Systems or any
Assets and not arising in the ordinary course of the Systems'
business.
(i) Maintenance of Assets. Seller will maintain all of the Systems'
property and Assets or replacements thereof in their present condition
as represented in this Agreement, ordinary wear and tear excepted.
Seller will maintain supplies of inventory and spare parts consistent
with past practice. If any loss, damage, impairment, confiscation, or
condemnation to any of the Assets occurs, Seller shall repair,
replace, or restore the Assets to their prior condition as represented
herein as soon thereafter as possible, and Seller will use the
proceeds of any claim under any insurance policy solely to repair,
replace, or restore any of the Assets that are lost, damaged,
impaired, or destroyed.
(j) Compliance with Laws. Seller will comply with all laws, rules, and
regulations. Upon receipt of notice of violation of any law, rule, or
regulation, Seller will contest in good faith or cure the violation
prior to the Closing Date.
(k) Insurance. Seller will maintain in force the existing hazard and
liability insurance policies, or comparable coverage, for the Systems
and the Assets as set forth in Schedule I hereto, and it will use the
proceeds of any claims for loss payable under those insurance policies
to repair, replace, or restore any of the Assets destroyed by fire or
other casualty to their former condition as soon as possible after the
loss.
(l) Financial Information. Within fifteen days after the close of each
calendar month, Seller will furnish to Buyer an unaudited statement of
income and expense of Seller for the month and an unaudited balance
sheet of Seller as at the close of the month. The financial statements
to be delivered hereunder shall be complete and correct, shall be
19
prepared in accordance with generally accepted accounting principles
applied and maintained on a basis consistent with prior periods, shall
accurately reflect the books, records, and accounts of the Systems,
and shall present fairly the financial condition, assets, liabilities,
and results of operations of the Systems as of the dates and for the
periods indicated. Seller shall furnish to Buyer as it becomes
available any other information prepared by Seller concerning the
financial condition of the Systems.
(m) Preservation of Business. Seller will preserve the business and
organization of the Systems intact and use its best efforts to keep
available to the Systems their present employees and to preserve for
the Systems their present relationships with suppliers and customers
and others having business relations with them, to the end that the
business, operations, and prospects of the Systems shall be unimpaired
at the Closing Date. The ordinary and customary operating, marketing,
promotional, sales, and advertising practices of the Systems shall be
maintained.
(n) Collection of Accounts Receivable. Seller shall collect its Accounts
Receivable only in the ordinary course consistent with its past
practices and without extraordinary efforts of any kind.
(o) Rates. Seller will not directly or indirectly modify or amend any
rate, charge, deposit, or other material condition under which it does
business with its Subscribers and potential Subscribers.
(p) No Inconsistent Action. Seller will not take any action that is
inconsistent with its obligations under this Agreement or that could
hinder or delay the consummation of the transactions contemplated by
this Agreement.
(q) Financing Leases. Seller will satisfy prior to Closing all outstanding
obligations under capital and financing leases with respect to any of
the Assets and obtain good title to the Assets leased by Seller
pursuant to those leases so that those Assets shall be transferred to
Buyer at Closing free of any interest of the lessors.
5.2 CLOSING COVENANT. On the Closing Date, if the conditions set forth in
Section 8.2 have been satisfied, Seller shall transfer, convey, assign, and
deliver to Buyer the Assets as provided in Section 2 of this Agreement and make
the deliveries provided in Section 9.2 of this Agreement.
5.3 POST-CLOSING COVENANT. For a period of up to ninety (90) days after the
Closing Date, or such longer period as may be necessitated by any network
repairs and transition, Seller, at Seller's expense, and Shareholder shall make
available to Buyer the personnel of Seller, including Shareholder, as may be
requested by Buyer to assist in the migration of the network and business of
Seller to Buyer, including any necessary network repairs, network mapping,
billing and any other similar tasks.
20
SECTION 6. CLOSING COVENANT OF BUYER
On the Closing Date, if the conditions set forth in Section 8.1 have been
satisfied, Buyer shall purchase the Assets from Seller as provided in Section 2
of this Agreement and shall make the deliveries provided in Section 9.3 of this
Agreement.
SECTION 7. SPECIAL COVENANTS AND AGREEMENTS
7.1 RISK OF LOSS. The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the Assets from any cause whatsoever shall be borne
by Seller at all times prior to the Closing.
7.2 BULK SALES LAW. If applicable, the bulk sales law of the State of Indiana
shall be complied with by Seller. Any loss, liability, obligation, or cost
suffered by Seller or Buyer as the result of the failure of any party to
comply with the provisions of any bulk sales law applicable to the
transfer of the Assets as contemplated by this Agreement shall be borne by
Seller.
7.3 CONFIDENTIALITY. Each party hereto will keep confidential any information
obtained from the other party in connection with the transactions
contemplated by this Agreement, except as and to the extent required by
applicable law and, in the case of Buyer, as disclosure may be reasonably
required in connection with Buyer's review and financing of this
transaction. If this Agreement is terminated, each party will return to
the other party all information obtained from the other party in
connection with the transactions contemplated hereby.
7.4 COOPERATION. Buyer and Seller shall cooperate fully with each other and
their respective counsel and accountants in connection with any actions
required to be taken as part of their obligations under this Agreement,
and Buyer and Seller will use their best efforts to consummate the
transactions contemplated hereby and to fulfill their obligations
hereunder.
7.5 ACCESS. For a period of five years after the Closing Date, Seller shall
provide Buyer access and the right to copy any books and records relating
to the Assets that are not included in the Assets, and Buyer will provide
Seller access to any books and records relating to the Assets that are
included in the Assets.
7.6 COVENANT NOT TO COMPETE.
(a) Seller. In consideration of the sums to be paid pursuant to the terms
of this Agreement, and in order to protect the Assets (and the value
of the Assets), Seller and Shareholder agree that if the Closing
occurs they shall not, either, directly or indirectly through other
persons or their respective affiliates, engage in, carry on, or be
connected to any telecommunications business in the State of Indiana
(the "Restricted Territory"); provided, however, nothing herein shall
prohibit Seller or Shareholder from being a passive owner of not more
than two percent (2%) of the outstanding stock of any class of any
21
corporation that engages in such business, so long as (i) such Seller
or Shareholder have no active participation in the business of such
corporation, and (ii) such stock is traded on a nationally-recognized
stock market or on NASDAQ. The provisions of this Section 7.6 shall be
binding upon Seller and Shareholder for a period of three (3) years
from the date of the Closing and shall apply to the Restricted
Territory. It is the intent and understanding of each party hereto
that if, in any action before any court or agency legally empowered to
enforce this Section 7.6, any term, restriction, covenant or promise
shall be deemed modified to the extent necessary to make it
enforceable to the greatest extent possible by such court or agency.
Seller represents and warrants that the Shareholder signing this
Agreement below as to this Section 7.6 comprises all of the
shareholders of Seller.
(b) Other Provisions. For purposes of this Section, an affiliate means (a)
any partnership, corporation, or other entity directly or indirectly
controlling, controlled by, or under common control with Seller or
Shareholder signing below, or (b) any officer, director, manager,
trustee, or principal of Seller or of any partnership, corporation, or
other entity that is an affiliate under this definition. The parties
acknowledge and agree that the covenants set forth in this Section 7.6
are ancillary to the sale of the Assets and are reasonable and
necessary to protect Buyer's purchase of the Assets.
SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER
8.1 CONDITIONS TO OBLIGATIONS OF BUYER. All obligations of Buyer at the Closing
hereunder are subject at Buyer's option to the fulfillment prior to or at
the Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and warranties of
Seller contained in this Agreement shall be true and complete in all
material respects at and as of the Closing Date as though made at and
as of that time.
(b) Covenants and Conditions. Seller shall have performed and complied in
all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it prior
to or at the Closing Date.
(c) Consents. All Consents shall have been obtained and delivered to Buyer,
without any change in the terms or conditions of any Contract that
could be less advantageous to the Systems than those pertaining under
the Contract as in effect on the date hereof.
(d) Governmental Authorizations. Seller shall be the holder of all Grants
of Authority and Governmental Licenses, and there shall not have been
any modification of any of the Grants of Authority or Governmental
Licenses that could have an adverse effect on the Systems or the
conduct of its business and operations. No proceeding shall be pending,
22
the effect of which would be to revoke, cancel, fail to renew, suspend,
or modify adversely any of the Grants of Authority or Governmental
Licenses.
(e) System. At the Effective Time, the Systems shall have at least four
hundred fifty (450) Subscribers.
(f) Deliveries. Seller shall have made or stand willing to make all the
deliveries to Buyer set forth in Section 9.2.
8.2. CONDITIONS TO OBLIGATIONS OF SELLER. All obligations of Seller at the
Closing hereunder are subject at Seller's option to the fulfillment prior
to or at the Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and warranties of
Buyer contained in this Agreement shall be true and complete in all
material respects at and as of the Closing Date as though made at and
as of that time.
(b) Covenants and Conditions. Buyer shall have performed and complied in
all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
(c) Deliveries. Buyer shall have made or stand willing to make all the
deliveries set forth in Section 9.3.
SECTION 9. CLOSING AND CLOSING DELIVERIES
9.1 CLOSING.
(a) Closing Date. The Closing shall take place at 10:00 a.m. on a date to
be set by Buyer which is within thirty days following the satisfaction
or waiver of all conditions to closing set forth in this Agreement.
(b) Closing Place. The Closing shall be held at the offices of the Buyer
in Rushville, Indiana, or any other place that is agreed upon by Buyer
and Seller.
9.2 DELIVERIES BY SELLER. Prior to or on the Closing Date, Seller shall
deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) Transfer Documents. Duly executed warranty deeds, bills of sale,
assignments, and other transfer documents which shall be sufficient to
vest good title to the Assets in the name of Buyer, free and clear of
all mortgages, liens, restrictions, encumbrances, claims, and
obligations except as permitted in this Agreement;
23
(b) Consents. A manually executed copy of each Consent;
(c) Resolutions. Copies of resolutions adopted by the Board of Directors
and, if required, shareholders of Seller, authorizing and approving
the execution of this Agreement and the consummation of the
transactions contemplated hereby, certified by the Secretary of Seller
as being true and complete on the Closing Date;
(d) Certificate of Compliance. A certificate, dated as of the Closing
Date, executed by the President of Seller, certifying: (1) that Seller
has obtained proper corporate authorization, including the consent of
stockholders, necessary to the consummation of this Agreement; (2)
that the representations and warranties of Seller contained in this
Agreement are true and complete in all material respects as of the
Closing Date as though made on and as of that date; and (3) that
Seller has, in all material respects, performed and complied with all
of its obligations, covenants, and agreements set forth in this
Agreement to be performed and complied with on or prior to the Closing
Date;
(e) Certificate as to Systems. A certificate, dated as of the Closing
Date, executed by the President of Seller, certifying: (1) the number
of Subscribers of the Systems as of the Closing Date; and (2) the
standard average service rate charged to individual subscribers of
such system during the last full calendar month preceding the month in
which the Closing Date occurs;
(f) UCC Search. A search for UCC-1 filings in the records of the Secretary
of State of the State of Indiana and any appropriate local filing
office and in the records of each county in which any of the Assets
are located;
(g) Title Insurance. A title insurance policy, obtained at Seller's
expense, from a title insurance company satisfactory to Buyer for an
ALTA owner's policy of title insurance covering each parcel of Real
Property included in the Assets, insuring fee simple title subject
only to liens and encumbrances expressly permitted by this Agreement,
in an amount equal to the fair market value of the Real Property;
(h) Licenses, Contracts, Business Records, Etc. Copies of all Grants of
Authority, Governmental Licenses, Contracts, blueprints, schematics,
working drawings, plans, projections, statistics, engineering records,
and all files and records used by Seller in the operations of the
System;
(i) Accounts Receivable. A complete and accurate list of the Accounts
Receivable, including, with respect to each account Receivable, the
account number, date of issuance, name and address of account debtor,
aggregate amount, and balance due, together with any resolution or
other documents that Buyer reasonably requests to permit Buyer to
24
deposit any collections on any Accounts Receivable into its bank
accounts; and
9.3 DELIVERIES BY BUYER. Prior to or on the Closing Date, or subsequent to the
Closing Date as may be provided in Section 2.3(a) (3) above, Buyer shall
deliver to Seller the following, in form and substance reasonably
satisfactory to Seller and its counsel:
(a) Consideration. The consideration for the Assets as provided in Section
2.3, subject to Sections 2.2(c) and 2.3(b) above;
(b) Assumption Agreement. An assumption agreement, pursuant to which Buyer
will assume and undertake to perform Seller's obligations under the
Assumed Contracts and Grants of Authority arising after the Effective
Time, to the extent specified in Section 2.4; and
(c) Certificate of Compliance. A certificate, dated as of the Closing
Date, executed on behalf of Buyer by its President, certifying (1)
that the representations and warranties of Buyer contained in this
Agreement are true and complete in all material respects as of the
Closing Date as though made on and as of that date, and (2) that Buyer
has, in all material respects, performed and complied with all of its
obligations, covenants, and agreements set forth in this Agreement to
be performed and complied with on or prior to the Closing Date.
SECTION 10. TERMINATION
This Agreement may be terminated by either Buyer or Seller, if the
terminating party is not then in material default, upon written notice to the
other party, upon the occurrence of any of the following:
(a) Conditions. If on the Closing Date any of the conditions precedent to
the obligations of the terminating party set forth in this Agreement
have not been satisfied or waived in writing by the terminating party.
(b) Judgments. If there shall be in effect on the Closing Date any
judgment, decree, or order that would prevent or make unlawful the
Closing of this Agreement.
(c) Upset Date. If the Closing shall not have occurred prior to December
30, 2009, provided, however that Buyer may elect to extend this date
by 30 days upon giving written notice to Seller pursuant to section
13.2 herein.
25
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND INDEMNIFICATION.
11.1 REPRESENTATION AND WARRANTIES. All representations, warranties and
covenants not to compete contained in this Agreement shall be deemed
continuing representations, warranties and covenants and shall survive
the Closing. Any investigations by or on behalf of any party hereto shall
not constitute a waiver as to enforcement of any representation,
warranty, or covenant contained herein. No notice or information
delivered by Seller pursuant to Section 5.1(g) or Section 5.1(h) shall
modify or limit any of Seller's representations and warranties, affect
Buyer's right to rely on any representation or warranty made by Seller,
or relieve Seller of any obligations hereunder as the result of a breach
of any of its representations and warranties.
11.2 INDEMNIFICATION BY SELLER. Notwithstanding the Closing, and regardless of
any investigation made at any time by or on behalf of Buyer or any
information Buyer may have, Seller agrees to indemnify and hold Buyer
harmless against and with respect to, and shall reimburse Buyer for:
(a) Breach. Any and all losses, liabilities, or damages resulting from
any untrue representation, breach of warranty, or nonfulfillment of
any covenant by Seller contained herein or in any certificate,
document, or instrument delivered to Buyer hereunder;
(b) Obligations. Any and all obligations of Seller not assumed by Buyer
pursuant to the terms of this Agreement, including any and all
liabilities arising at any time under any Contract or Grant of
Authority not included in the Assumed Contracts and Grants of
Authority;
(c) Ownership. Any and all losses, liabilities, or damages resulting from
the operation or ownership of the Systems prior to the Effective
Time, including any and all liabilities arising under the Grants of
Authority, Governmental Licenses, or the Contracts which relate to
events occurring prior to the Effective Time; and
(d) Legal Matters. Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses, including
reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity.
11.3 INDEMNIFICATION BY BUYER. Notwithstanding the Closing, and regardless of
any investigation made at any time by or on behalf of Seller or any
information Seller may have, Buyer hereby agrees to indemnify and hold
Seller harmless against and with respect to, and shall reimburse Seller
for:
(a) Breach. Any and all losses, liabilities, or damages resulting from
any untrue representation, breach of warranty, or nonfulfillment of
26
any covenant by Buyer contained herein or in any certificate,
document, or instrument delivered to Seller hereunder;
(b) Ownership. Any and all losses, liabilities, or damages resulting from
the operation or ownership of the Systems after the Effective Time,
including any and all liabilities arising under the Governmental
Licenses or the Assumed Contracts and Grants of Authority which
relate to events occurring after the Effective Time, but in all
instances excluding any liabilities arising under any Excluded
Assets; and
(c) Legal Matters. Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including
reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity.
11.4 PROCEDURE FOR INDEMNIFICATION. The procedure for indemnification shall be
as follows:
(a) Notice. The party claiming indemnification pursuant to this Agreement
(the "Claimant") shall promptly give notice to the party from whom
indemnification is claimed (the "Indemnitor") of any claim, whether
solely between the parties or brought by a third party, specifying the
factual basis for the claim, and the amount of the claim.
(b) Investigation. With respect to claims between the parties, following
receipt of notice from the Claimant of a claim, the Indemnitor shall
have thirty days to make any investigation of the claim that the
Indemnitor deems necessary or desirable. For the purposes of this
investigation, the Claimant agrees to make available to the Indemnitor
and/or its authorized representatives the information relied upon by
the Claimant to substantiate the claim. If the Claimant and the
Indemnitor cannot agree as to the validity and amount of the claim
within the 30-day period (or any mutually agreed upon extension
thereof), the Claimant may seek appropriate legal remedy. In the event
of any post-Closing claims by Seller, such amounts may be set-off
against amounts payable under the Note.
(c) Control. With respect to any claim by a third party as to which the
Claimant is entitled to indemnification hereunder, the Indemnitor shall
have the right at its own expense to participate in or assume control
of the defense of the claim, and the Claimant shall cooperate fully
with the Indemnitor, subject to reimbursement for actual out-of-pocket
expenses incurred by the Claimant as the result of a request by the
Indemnitor. If the Indemnitor elects to assume control of the defense
of any third-party claim, the Claimant shall have the right to
participate in the defense of the claim at its own expense. If the
Indemnitor does not elect to assume control or otherwise participate in
the defense of any third party claim, it shall be bound by the results
obtained by the Claimant with respect to the claim.
27
SECTION 12. CERTAIN REMEDIES
12.1 SPECIFIC PERFORMANCE. The parties recognize that if Seller refuses to
perform under the provisions of this Agreement, monetary damages alone
would not be adequate to compensate Buyer for its injury. Buyer shall
therefore be entitled, in addition to any other remedies that may be
available, including money damages, to obtain specific performance of the
terms of this Agreement. If any action is brought by Buyer to enforce
this Agreement, Seller shall waive the defense that there is an adequate
remedy at law.
12.2 ATTORNEYS' FEES. In the event of a default by Seller or Buyer which
results in the filing of a lawsuit for damages, specific performance, or
other remedy, the prevailing party shall be entitled to reimbursement by
the other party of reasonable legal fees and expenses incurred.
SECTION 13. MISCELLANEOUS
13.1 FEES AND EXPENSES. Seller shall pay any filing fees, transfer taxes,
sales taxes, document stamps, or other charges levied by any governmental
entity on account of the transfer of the Assets from Seller to Buyer.
Except as otherwise provided in this Agreement, each party shall pay its
own expenses incurred in connection with the authorization, preparation,
execution, and performance of this Agreement, including all fees and
expenses of counsel, accountants, agents, and representatives.
13.2 NOTICES. All notices, demands, and requests required or permitted to be
given under the provisions of this Agreement shall be in writing and
shall be deemed to have been duly delivered and received (a) on the date
of personal delivery, or (b) on the earlier of the date of receipt (as
shown on the return receipt) or refusal of delivery if mailed by
registered or certified mail, postage prepaid and return receipt
requested, in each case addressed as follows:
If to Seller: USppp, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxx Xxxxxxxxxxxxx
If to Buyer: Omnicity, Incorporated
X.X. Xxx 0
Xxxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxxx Xxxxxx
28
Or to any other or additional persons and addresses as the parties may
from time to time designate in a writing delivered in accordance with
this Section 13.2
13.3 BENEFIT AND BINDING EFFECT. Neither party hereto may assign this
Agreement without the prior written consent of the other party hereto,
except that, without the prior written consent of Seller, Buyer may
assign its rights under this Agreement to any entity controlling,
controlled by or under common control with Buyer or any successor of
Buyer by way of merger, acquisition, reorganization or other similar
corporate transaction (including, without limitation, Omnicity Corp),
and, upon the assumption by such assignee of all liabilities and
obligations of Buyer hereunder, Buyer shall be released from all
liabilities and obligations to Seller pursuant to this Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
13.4 FURTHER ASSURANCES. The parties shall take any actions and execute any
other documents that may be necessary or desirable to the implementation
and consummation of this Agreement, including, in the case of Seller, any
additional bills of sale, deeds, or other transfer documents that, in the
reasonable opinion of Buyer, may be necessary to ensure, complete, and
evidence the full and effective transfer of the Assets to Buyer pursuant
to this Agreement.
13.5 GOVERNING LAW. This Agreement shall be governed, construed, and enforced
in accordance with the laws of the State of Indiana (without regard to
the choice of law provisions thereof).
13.6 HEADINGS. The headings herein are included for ease of reference only and
shall not control or affect the meaning or construction of the provisions
of this Agreement.
13.7 GENDER AND NUMBER. Words used herein regardless of the gender and number
specifically used, shall be deemed and construed to include any other
gender, masculine, feminine, or neuter, and any other number, singular or
plural, as the context requires.
13.8 ENTIRE AGREEMENT. This Agreement, all schedules and exhibits hereto, and
all documents, certificates, and other documents to be delivered by the
parties pursuant hereto, collectively represent the entire understanding
and agreement between Buyer and Seller with respect to the subject matter
hereof. This Agreement supersedes all prior negotiations between the
parties and cannot be amended, supplemented, or changed except by an
agreement in writing that makes specific reference to this agreement and
which is signed by the party against which enforcement of any such
amendment, supplement, or modification is sought.
13.9 COUNTERPARTS. This Agreement may be signed in counterparts with the same
effect as if the signature on each counterpart were upon the same
instrument.
IN WITNESS WHEREOF, this Agreement has been executed by Buyer and Seller as of
the date first written above.
BUYER:
OMNICITY, INCORPORATED
By: /s/ Xxxx Xxxxxx
----------------------------------
Xxxx Xxxxxx, President
SELLER:
USppp, Inc.
By: /s/ Xxxx Xxxxxxxxxxxxx
----------------------------------
Xxxx Xxxxxxxxxxxxx, President
29
SCHEDULES
A. Systems (One paragraph defining each of the following):
1. A description of the Systems as defined in the Agreement, showing the
number of serviceable homes, subscribers and signal strengths
associated with each tower or hard wire or fiber feeder (e.g. System A
is tower located at (coordinates and address), covering (100) homes
with a minimum signal level of -xxx dbmv, serving 25 subscribers (list
number at each level of service and rate).
2. Monitoring
3. Billing
4. Email
5. Hosting
6. Ticketing
7. any other automation
B. Governmental Licenses (List if any)
C. Real Property
1. Rented Office/Storage Contracts
2. Owned Towers
D. Personal Property (Fixed Asset Listing, Inventory Listing)
1. Fixed Asset Listing
2. Inventory Listing
E. Assumed Contracts and Grants of Authority
1. Tower Contracts
2. Access Contracts (fiber, Internet)
3. Subscribers Contracts
4. Deposits and prepayments collected from Subscribers
F. Consents - Board
30
G. Intangibles - [List all]
H. Financials - Current month and YTD financials
I. Insurance - Copies of all current insurance plans
J. Employees and Plans
1. Name
2. Address
3. Pay
4. Job Description
5. Insurance Packages
K. Claims and Legal Actions - Listing any and all
L. Rates, Fees, Reports, and Signals
1. List current rates in use
EXHIBITS
A. Form 8594
31
