Exhibit 10.36
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement"), made and entered into as of
this 11th day of January, 2008, 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 and wholly-owned subsidiary of Parent, ("Subsidiary").
As used in this Agreement, the term "Seller" means Crosswind Enterprises, Inc.
("Crosswind"), a Texas corporation headquartered in Plains
W I T N E S S E T H:
WHEREAS, Seller presently operates a business engaged in providing a
comprehensive full range of Internet services including Internet Access,
dial-in, ISDN, wireless, and networking solutions to commercial businesses and
residential customers (the "Business"); and
WHEREAS, Seller desires to sell substantially all of the assets and contracts of
the Business to Buyer, and Buyer desires to purchase such assets and contracts
from Seller, on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, Buyer and Seller, in consideration of the mutual promises
hereinafter set forth, do hereby promise, and agree as follows:
ARTICLE ONE: ASSETS TO BE PURCHASED
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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:
Substantially all of the assets associated with the Business,
including the name Crosswind, all cash, cash equivalents,
accounts (including, without limitation, any accounts, deposit
accounts, inventory, equipment, vehicles, goods, documents,
instruments (including, without limitation, promissory notes),
contract rights including ISP Subscriber Agreements, general
intangibles, chattel paper, supporting obligations, investment
property (including, without limitation, all equity interests
owned by Seller), letter-of-credit rights, trademarks,
trademark applications, trade styles, patents, patent
applications, copyrights, copyright applications and other
intellectual property in which Seller now has or hereafter may
acquire any right, title or interest, all proceeds and
products thereof (including, without limitation, proceeds of
insurance), all documents, files and records containing
technical support, all additions, accessions and substitutions
thereto or therefore and other information pertaining to the
operation of the business (collective, "Purchased Assets"),
including those listed in Schedule 1.1.
Documentation that will be provided pursuant to 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.
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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
documents relating to the organization, maintenance and
existence of Seller 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 is 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: $600,000. The Purchase
Price shall be subject to adjustment as set forth in Section 1.7 below as so
adjusted.
1.4 PAYMENT TERMS. The Purchase Price shall be payable at the Closing date as
follows:
1. $100,000 cash,
2. $350,000 of Restricted Stock of the Parent (with the number of
shares of Restricted Stock determined by using a stock price of
the 10-day trailing average immediately preceding closing, with
the number of shares to be determined subject to adjustment as
contained in Section 1.7 hereof); and
3. the execution of a $150,000 Secured Promissory Note to Crosswind,
("Note") attached hereto as Exhibit 1.4.3, which terms of said
Note are incorporated herein at this point as if set forth in
full. Parent agrees to grant Seller piggy-back registration rights
to all Restricted Stock issued to Seller as part of the Definitive
Agreements and will agree 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.
In accordance with the Pledge Agreement (Exhibit 1.4.4.1) and the Security
Agreement (Exhibit 1.4.4.2) to this Agreement, Parent agrees to guarantee the
faithful payment of the Purchase Price by pledging Buyer the first lien position
in the assets acquired and set forth in the Bill of Sale back to Seller through
the date that the Purchase Price (including all components and payment terms of
the Purchase Price) has been paid in full.
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, office lease and
utilities in effect pertaining to the Business, equipment and tower leases, and
the Equipment Purchase, Monitoring and Maintenance Agreements in existence with
customers, (iii) accounts payable outstanding or accrued as of the closing date
as limited and subject to the adjustments set forth in section 1.7 - Adjustments
to Purchase Price, and (iv) the Plains State Bank Note Payable for approximately
$71,200.00, which shall be paid in cash at the time of closing. 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.
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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) ) 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); (ii) any liability or obligation to Seller's employees for salaries and
wages whether relating to the termination of their employment or otherwise
arising, relating to periods prior to and including the Closing; and (iii) 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. Internal Revenue Code, as amended, the allocation of
the Purchase Price and the liabilities of Seller (plus other relevant items)
among the Subject Assets as of the Closing Date. Such allocation shall be made
in a manner consistent with the fair market value of such assets. Each of the
parties will file all tax returns and information reports (including the IRS
Form 8594 and any disclosures that are required under Section 1060 of the
Internal Revenue Code) in a manner consistent with such allocation.
1.7 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be subject to the
following additional credits and adjustments (either as additions or reductions
to the Purchase Price, as the case may be), which shall be reflected in the
closing statements to be executed and delivered by Buyer and Seller as
hereinafter provided: (a) Cash plus accounts receivable plus any prepaid
expenses, (including but not limited to taxes and other similar items directly
related to the Assumed Liabilities which shall be prorated at Closing) less (b)
trade accounts payable. The amount of this adjustment shall be identified as
Purchase Price Adjustment (PPA). At the end of a ninety-day period immediately
after Closing, Purchaser and Seller shall review the PPA and revise it as
follows:
>> Reduce or increase the PPA as the case may be by an amount equal
to any customer accounts receivable purchased at Closing that are
deemed uncollectible or understated;
>> Decrease or increase the PPA as the case may be by an amount equal
to any increase in the accounts payable assumed by Purchaser at
Closing which resulted from such accounts payable having been
understated-yet-due by Seller as of the Closing date or
overstated.
Purchaser and Seller shall, 90 days after the closing, conduct this review, and
upon mutual agreement, the amount of Rule 144 Restricted Stock described in
Section 1.4 hereof, and the determination made as of the date of closing, may be
increased or decreased accordingly.
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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 11:00 a.m., on
January 11, 2008 at the offices of Parent, located at League City, Texas, or
such time and date as the parties may agree upon. The date of Closing is
hereinafter referred to as the "Closing Date."
At the Closing, Seller shall deliver to Buyer according to Buyer's instructions:
(a) by wire transfer or certified bank check, an amount equal to $100,000, in
U.S. Dollars,
(b) $350,000 of Restricted Stock of the Parent, and
(c) an executed, Secured $150,000 Promissory Note and Pledge and Security
Agreement;
(d) the payment of the approximate $71,200.00 due Plains State Bank; and
(e) the documents, certificates, agreements and instruments described in Section
2.2. Buyer shall deliver to Seller the documents, certificates, agreements and
instruments described in Sections 2.2 and 2.3.
2.2 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION. The obligation of Buyer to
consummate the transactions contemplated herein is subject to the satisfaction
(or, in Buyer's sole discretion, written waiver thereof) as of the Closing of
the following conditions:
The representations and warranties of Seller made in this Agreement shall be
true and correct in all material respects at Closing.
No demand, action, suit, audit, investigation, review, claim or other legal or
administrative proceeding (collectively, a "Proceeding") by any nation or
government, any state or other political subdivision thereof, including any
governmental agency, department, commission, or instrumentality of the United
States, any State of the United States or any political subdivision thereof or,
any self-regulatory agency or authority (collectively, "Governmental Authority")
or other person shall have been instituted or threatened against Seller which
seeks to enjoin, restrain or prohibit, or which questions the validity or
legality of, the transactions contemplated hereby or which otherwise seeks to
affect or could reasonably be expected to affect the transactions contemplated
hereby.
Seller's shareholders shall have approved this Agreement and the transactions
contemplated thereby.
Seller shall have performed in all material respects its obligations described
in Section 5.1.
Seller shall have executed and delivered, subject to Closing, a 3 year
non-competition provision in the Employment Agreement between Subsidiary and
Shayne Griffiths and except for providing services to benefit the Buyer, that
Shayne Griffiths will agree not to compete in the Internet Access industry until
3 years from the Closing.
Buyer shall have received from Seller all of the following:
A bill of sale including a complete listing of assets, 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,
lender's, lessor's, or other Encumbrances arising by operation of law in the
ordinary course of business for sums not due and which do not materially detract
from the value of such assets or properties or materially impair the operation
of the Business, and (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") ;
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An assignment and assumption agreement in the form of Exhibit 4 (the "Assignment
and Assumption Agreement"), duly executed by Seller;
Trademark, copyright and other intellectual property assignment documents
reasonably requested by Buyer to fully effectuate use or transfer of the
intellectual property within the Subject Assets, each duly executed by Seller;
Actual or constructive physical possession of all of the Subject Assets and the
Records; A certificate of the Secretary of Seller certifying, as complete and
accurate as of the Closing, attached copies of the governing documents of
Seller, certifying and attaching all requisite resolutions or actions of
Seller's board of directors and shareholders approving the execution and
delivery of this Agreement and the consummation of the contemplated transactions
and the change of name contemplated by Section 1.1 and certifying to the
incumbency and signatures of the officers of Seller executing this Agreement and
any other document relating to the contemplated transactions and accompanied by
the requisite documents for amending the relevant governing documents of Seller
required to effect such change of name in form sufficient for filing with the
appropriate Governmental Body
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.
Buyer's operations have been in compliance with all applicable laws and
regulations that could have a material adverse impact on the Business.
Buyer shall have performed in all material respects its obligations described in
Section 5.1 and elsewhere in this Agreement.
Subsidiary shall have entered, subject to Closing, a 36 month written Employment
Agreement with Shayne Griffiths providing for a minimum of $75,000 per annum
compensation as Area General Manager of ERF Wireless Bundled Services
Lubbock-area operations. The Employment Agreement shall include a 3-year
non-competition agreement.
Seller shall have received from Buyer all of the following:
The Purchase Price (including the Secured Promissory Notes, and Pledge and
Security Agreements, all duly executed by Buyer) as provided in Sections 1.4 and
2.1; and
The Assignment and Assumption Agreement, duly executed by Subsidiary;
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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 as amended and restated, 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
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;
Seller shall have obtained all necessary consents from any utility companies,
landlords, lenders, suppliers and other third parties in connection with the
material contracts described in Exhibit 5 to be assumed by Subsidiary at Closing
("Material Consents"). If there are any Material Consents that have not yet been
obtained (or otherwise are not in full force and effect) as of the Closing, in
the case of each Seller contract as to which such Material Consents were not
obtained (or otherwise are not in full force and effect) (the "RESTRICTED
MATERIAL CONTRACTS"), Buyer may waive the closing conditions as to any such
Material Consent and either:
(i) elect to have Seller continue its efforts to obtain the Material
Consents; or
(ii) elect to have Seller retain that Restricted Material Contract and
all Liabilities arising therefrom or relating thereto.
If Buyer elects to have Seller continue its efforts to obtain any Material
Consents and the Closing occurs, notwithstanding Sections 1.1 and 1.5, neither
this Agreement nor the Assignment and Assumption Agreement nor any other
document related to the consummation of the contemplated transactions shall
constitute a sale, assignment, assumption, transfer, conveyance or delivery or
an attempted sale, assignment, assumption, transfer, conveyance or delivery of
the Restricted Material Contracts, and following the Closing, the parties shall
use Best Efforts (other than that Seller and Buyer shall have no obligation to
offer or pay any consideration in order to obtain any such Material Consents),
and cooperate with each other, to obtain the Material Consent relating to each
Restricted Material Contract as quickly as practicable. Pending the obtaining of
such Material Consents relating to any Restricted Material Contract, the parties
shall cooperate with each other in any reasonable and lawful arrangements
designed to provide to Buyer the benefits of use of the Restricted Material
Contract for its term (or any right or benefit arising thereunder, including the
enforcement for the benefit of Buyer of any and all rights of Seller against a
third party thereunder). Once a Material Consent for the sale, assignment,
assumption, transfer, conveyance and delivery of a Restricted Material Contract
is obtained, Seller shall promptly assign, transfer, convey and deliver such
Restricted Material Contract to Buyer, and Buyer shall assume the obligations
under such Restricted Material Contract assigned to Buyer from and after the
date of assignment to Buyer pursuant to a special-purpose assignment and
assumption agreement substantially similar in terms to those of the Assignment
and Assumption Agreement (which special-purpose agreement the parties shall
prepare, execute and deliver in good faith at the time of such transfer, all at
no additional cost to Buyer). If there are any Consents not listed on Exhibit 5
necessary for the assignment and transfer of any Seller contracts to Buyer (the
"NONMATERIAL CONSENTS") which have not yet been obtained (or otherwise are not
in full force and effect) as of the Closing, Buyer shall elect at the Closing,
in the case of each of the Seller contracts as to which such Nonmaterial
Consents were not obtained (or otherwise are not in full force and effect) (the
"RESTRICTED NONMATERIAL CONTRACTS"), whether to:
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(i) accept the assignment of such Restricted Nonmaterial Contract, in
which case, as between Buyer and Seller, such Restricted Nonmaterial Contract
shall, to the maximum extent practicable and notwithstanding the failure to
obtain the applicable Nonmaterial Consent, be transferred at the Closing
pursuant to the Assignment and Assumption Agreement as elsewhere provided under
this Agreement; or
(ii) reject the assignment of such Restricted Nonmaterial Contracts, in
which case, notwithstanding Sections 1.1 and 1.5, (A) neither this Agreement nor
the Assignment and Assumption Agreement nor any other document related to the
consummation of the Contemplated Transactions shall constitute a sale,
assignment, assumption, conveyance or delivery or an attempted sale, assignment,
assumption, transfer, conveyance or delivery of such Restricted Nonmaterial
Contract, and (B) Seller shall retain such Restricted Nonmaterial Contract and
all liabilities arising therefrom or relating thereto.
2.5 FAILURE OF CONDITIONS. If any of the material conditions to Closing set
forth in Sections 2.2, 2.3 and 2.4 have not been satisfied, the party or parties
entitled to the benefit of such material conditions may elect to waive the
requirement or terminate this Agreement without further liability of the
terminating party or to consummate the transactions contemplated hereby.
ARTICLE THREE: WARRANTIES AND REPRESENTATIONS OF SELLER
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Seller hereby warrants and represents to Buyer, which warranties and
representations shall survive the Closing for one year, as follows:
3.1 CORPORATE MATTERS; NO CONFLICT. Seller is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of Texas and
has the authority and power, corporate and otherwise, to carry on the Business
in the places and in the manner presently conducted. Seller has the corporate
power and authority to enter into this Agreement and the agreements and
documents to be executed and delivered pursuant to this Agreement (the
"Ancillary Agreements") by Seller and to consummate the transactions
contemplated hereby.
The execution, delivery and performance of this Agreement and the Ancillary
Agreements to be executed by Seller and the consummation of the transactions
contemplated hereby have been approved by all necessary corporate action, other
than the Seller's shareholders. This Agreement and the Ancillary Agreements to
be executed by Seller constitute, or, in the case of such Ancillary Agreements,
upon their execution and delivery by Seller, will constitute, valid and legally
binding obligations of Seller, enforceable against it in accordance with their
respective terms except as such enforceability may be limited by bankruptcy and
other Laws generally affecting the rights of creditors and general principles of
equity.
To Seller's knowledge, there are no material adverse environmental liabilities
associated with the Seller's Business or the Subject Assets.
Except as set forth in Schedule 3, the execution, delivery and performance of
this Agreement and such Ancillary Agreements to be executed by Seller and the
consummation of the transactions contemplated hereby by such party: (i) does not
and will not violate, conflict with, or result in the breach of, or default
under, any term, condition or provision of, give rise to any right to terminate,
cancel, modify, accelerate or otherwise change the existing rights or
obligations of such party with respect to, (A) any domestic or foreign Federal,
state or local statute, law, ordinance, rule, administrative interpretation,
regulation, policy, guideline or other requirement of or by any Governmental
Authority, each as amended through the date hereof (collectively, "Laws") which
is applicable to such party, the Business and/or the Subject Assets, (B) any
judgment, order, writ, injunction, decree, directive or award of any arbitrator
or Governmental Authority (collectively, an "Order") which is applicable to such
party, the Business and/or the Subject Assets, (C) the charter documents of
Seller or any securities issued by Seller, or (D) any authorization, approval,
consent, qualification, permit or license (collectively, an "Authorization") of
any Governmental Authority, or any material agreement, or other material
instrument, document or understanding, oral or written, to which such party is a
party, by which Seller may have rights or by which any of the Subject Assets may
be bound or affected; or (ii) result in the creation or imposition of any
Encumbrance except Permitted Encumbrances, on the Subject Assets.
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No Authorization or other action of, or registration, declaration, recording or
filing with, any Governmental Authority or other person (other than the approval
of the Board of Directors and shareholders of Seller) is required in connection
with the execution and delivery of this Agreement and/or any Ancillary
Agreements to be executed and delivered pursuant hereto by Seller and/or the
consummation by Seller of the transactions contemplated hereby.
3.2 TITLE TO THE SUBJECT ASSETS. Seller has good and valid title to all of the
assets constituting the Subject Assets described in Section 1.1, free and clear
of all Encumbrances except Permitted Encumbrances.
3.3 COMMITMENTS; CUSTOMERS AND VENDORS. To the knowledge of Seller, the
obligations listed on Exhibit 5 are all of the material agreements,
arrangements, and other commitments of the Business with its customers (whether
written, oral or otherwise) which, if not assigned to or assumed by Buyer as an
"Assumed Contract" hereunder, would result in liabilities or obligations of
Seller accruing after the Closing. True and correct copies of each of the
contracts and all amendments and modifications thereof, have been delivered to
Buyer. Assuming that the consent of the customers who are parties to the
contracts is obtained pursuant to consents (as defined in 5.1), all of the
contracts are assignable by Seller.
3.4 EACH ASSUMED CONTRACT IS IN FULL FORCE AND EFFECT. To the knowledge of
Seller, Seller has not been made aware of any facts that would suggest that any
of the material contracts within Subject Assets is not valid and binding or
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy and other Laws generally affecting the rights of creditors
and general principles of equity. Except as set forth in Schedule 3, neither
Seller nor, to the knowledge of Seller, any other party to a contract is in
breach or default under any contract (with or without the lapse of time, or the
giving of notice, or both).
3.5 BROKERS, AGENTS. Seller has not dealt with any agent, finder, broker or
other representative (other than representatives of Buyer) in any manner which
could result in Buyer being liable for any finder's, broker's or other fee or
commission in connection with the subject matter of this Agreement.
3.6 WARRANTIES TRUE AND CORRECT. No representation or warranty by Seller
contained in this Agreement or in any writing to be furnished pursuant hereto
contains or will contain any untrue statement of fact or omits or will omit to
state any material fact required to make the statements herein or therein
complete and not misleading.
Exclusion of Implied Warranties. SELLER EXCLUDES AND DISCLAIMS ANY AND ALL
IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SUBJECT ASSETS AND EACH
OF THEM. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, SELLER MAKES NO
WARRANTIES TO BUYER IN CONNECTION WITH THE SALE OR TRANSFER OF THE SUBJECT
ASSETS TO SUBSIDIARY OR THE CONDITION OR PROSPECTS OF THE BUSINESS OTHER THAN
THOSE EXPRESSLY SET FORTH IN THIS ARTICLE THREE.
ARTICLE FOUR: WARRANTIES AND REPRESENTATIONS OF BUYER
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Buyer hereby warrants and represents to Seller, which warranties and
representations shall survive the Closing for a period of three (3) years
following Closing as follows:
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4.1 CORPORATE MATTERS; NO CONFLICT. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the state where it was
incorporated. Buyer has the authority and power, corporate or otherwise, to
carry on all business activities in the places and in the manner currently
conducted by it. Buyer has the corporate power and authority to enter into this
Agreement and the Ancillary Agreements to be executed and delivered by it and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the Ancillary Agreements by Buyer have been
approved by all necessary corporate action. This Agreement and the Ancillary
Agreements to be executed and delivered by Buyer constitute, or in the case of
the Ancillary Agreements, upon their execution and delivery by Buyer, will
constitute, valid and legally binding obligations of Buyer, enforceable against
it in accordance with their respective terms except as such enforceability may
be limited by bankruptcy and other Laws generally affecting the rights of
creditors and general principles of equity.
The execution, delivery and performance of this Agreement and the Ancillary
Agreements to be executed and delivered by Buyer, the consummation of the
transactions contemplated hereby, and the compliance herewith, by Buyer: (i)
does not, and will not violate, conflict with or result in the breach of, or
default under, any term, condition or provision of, give rise to any right to
terminate, cancel, modify, accelerate or otherwise change the existing rights or
obligations of such party with respect to, (A) any domestic or foreign federal,
state or local statute, law, ordinance, rule, administrative interpretation,
regulation, policy, guideline or other requirement of or by any governmental
authority, each as amended through the date hereof (collectively, "Laws") which
is applicable to such party, the business and/or the subject assets, (B) any
judgment, writ, injunction, decree, directive or order of any arbitrator or
governmental authority (collectively, an "Order") which is applicable to such
party, the business and/or the subject assets, (C) the charter documents of
Buyer or any securities issued by Buyer, or (D) any authorization, approval,
consent, qualification, permit or license (collectively an "Authorization") of
any governmental authority, or any material agreement, or other material
instrument, document or understanding, oral or written, to which such party is a
party, by which Seller may have rights or by which any of the subject assets may
be bound or affected.
No Authorization or other action of, or registration, declaration, recording or
filing with, any Governmental Authority or other person is required in
connection with the execution and delivery of this Agreement and/or any
Ancillary Agreement to be executed and delivered pursuant hereto by Buyer and/or
the consummation by Buyer of the transactions contemplated hereby.
4.2 SEC FILINGS; FINANCIAL STATEMENTS
(a) The Parent has made available to the Seller, upon request of the
Seller, accurate and complete copies (excluding copies of
exhibits) of each report, registration statement and definitive
proxy statement filed by the Parent with the Securities Exchange
Commission (the "SEC") between December 31, 2004 and the date of
this Agreement (the "Parent SEC Documents"). As of the time it was
filed with the SEC (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing):
(i) each of the Parent SEC Documents complied in all material
respects with the applicable requirements of the Securities Act of
1933 or the Securities Exchange Act of 1934 (as the case may be);
and (ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
(b) Between the date of the most recently filed Parent SEC Document
and the date of this Agreement, there has been no material adverse
change in the Parent's affairs that has not been disclosed in the
Parent's SEC Documents, PROVIDED, HOWEVER, that for purposes of
determining whether there shall have been any such material
adverse change, (i) any adverse change resulting from or relating
to worldwide general business or economic conditions shall be
disregarded, (ii) any adverse change resulting from or relating to
conditions generally affecting the industry in which Parent
competes shall be disregarded, and (iii) any adverse change to the
stock price of the Parent's Common Stock, as quoted on any
nationally recognized stock quotation system, shall be
disregarded.
9
(c) The consolidated financial statements contained in the Parent's
SEC Documents: (i) complied as to form in all material respects
with the published rules and regulations of the SEC applicable
thereto; (ii) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the
periods covered, except as may be indicated in the notes to such
financial statements and (in the case of unaudited statements) as
permitted by Form 10-Q of the SEC, and except that unaudited
financial statements may not contain footnotes and are subject to
year-end audit adjustments; and (iii) fairly present the
consolidated financial position of the Parent and its subsidiaries
as of the respective dates thereof and the consolidated results of
operations of the Parent and its subsidiaries for the periods
covered thereby.
(d) The Parent qualifies as a registrant whose securities may be
resold pursuant to Form S-1 or SB-2 promulgated by the SEC
pursuant to the Securities Act of 1933, as amended.
4.3 ACQUISITION SUBSIDIARY. Subsidiary was formed in October, 2005 and is
principally engaged in providing Internet Access to commercial and residential
clients. Immediately following the Closing, Subsidiary will continue to operate
as a wholly owned subsidiary of Parent, ERF Wireless, Inc.
4.4 BROKERS; AGENTS. Buyer has not dealt with any agent, finder, broker or other
representative in any manner other than International Business Exchange, as
authorized by Seller, which could result in Seller being liable for any fee or
commission in the nature of a finder's or originator's fee in connection with
the subject matter of this Agreement.
4.5 WARRANTIES TRUE AND CORRECT. No warranty or representation by Buyer
contained in this Agreement or in any writing to be furnished pursuant hereto
contains or will contain any untrue statement of fact or omits or will omit to
state any material fact required to make the statements therein contained not
misleading.
ARTICLE FIVE: ADDITIONAL COVENANTS
- ----------------------------------
5.1 GENERAL Buyer and Seller understand and agree to cooperate on the completion
of comprehensive due diligence, including the preparation of Parent audited
financial statements covering the assets to be purchased and liabilities assumed
for inclusion in a report on Form 8-K to be filed by Parent with the U.S.
Securities and Exchange Commission. Buyer and Seller acknowledge that the
satisfactory completion of due diligence is a condition precedent to the closing
obligation of either party.
5.2 BEST EFFORTS. Buyer shall use its best efforts to obtain within sixty (60)
days after the Closing from each party (other than Seller) to a contract such
customer's written agreement to the assignment of its contract to Buyer, and
Seller shall use its best efforts, together with Buyer, in obtaining all such
Consents. "Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously as possible, provided, however, that a Person required to use Best
Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this
Agreement and the contemplated transactions or to dispose of or make any change
to its business, expend any material funds or incur any other material burden.
5.3 PUBLICITY. No party will make any public disclosure or issue any press
releases pertaining to the existence of this Agreement without having first
obtained the consent of the other party, except for communications with
employees, customers, suppliers, governmental agencies, and other groups as may
be legally required or necessary or appropriate (i.e., any securities filings or
notices), and which are not inconsistent with the prompt consummation of the
transactions contemplated in this Agreement. However, Parent is a public company
and Seller agrees that it will not unreasonably withhold consent for Parent to
issue a public press release, provided to Seller in advance, if requested by
Parent.
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5.4 COOPERATION. Seller shall cooperate with Buyer and use its best efforts to
cause respective officers, employees, agents, accountants and representatives,
if any, of Seller to cooperate with Buyer after the Closing to facilitate the
orderly transition of the Business and the Subject Assets to Buyer and to
minimize any disruption to the Business that might result from the transactions
contemplated hereby.
5.5 EXECUTION OF ADDITIONAL DOCUMENTS. From time to time, as and when requested
by Buyer, Seller shall execute and deliver, or cause to be executed and
delivered, all such documents and instruments of conveyance and shall take, or
cause to be taken, all such further or other actions as are necessary to
consummate the transactions contemplated by this Agreement and to convey,
assign, transfer and deliver to Buyer any of the properties or assets intended
to be conveyed, assigned, transferred and delivered pursuant to this Agreement.
5.7 RECORDS. For the five (5) year period commencing on the Closing Date, upon
reasonable notice, Buyer and Seller agree to furnish or cause to be furnished,
during normal business hours, to each other and their respective
representatives, employees, counsel and accountants access to such information
and assistance relating to the Business as is reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any returns,
reports or forms, or the defense of any tax claim or assessment, relating to the
Business; provided, however, that such access does not unreasonably disrupt the
normal operations of Buyer or Seller.
5.8 DEFAULT PROVISIONS. Buyer and Seller have agreed to the default provisions
that are included in the Secured Promissory Notes, Pledge and Security
Agreements.
ARTICLE SIX: INDEMNIFICATION & POST CLOSING CONDITIONS
- ------------------------------------------------------
6.1 INDEMNIFICATION OF BUYER. Seller agrees to indemnify Buyer and its
Affiliates and their respective members, managers, shareholders, directors,
officers, employees, accountants, attorneys and agents (collectively, the "Buyer
Indemnified Parties") against, and to hold each such person harmless from, any
and all damages, losses, deficiencies, actions, demands, judgments, diminution
in value, costs and expenses (including reasonable attorneys' and accountants'
fees) (collectively, "Losses") of or against such person resulting from (i) any
misrepresentation or breach of warranty on the part of Seller in this Agreement
or in any Ancillary Agreement; (ii) any breach or non-fulfillment of any
agreement or covenant contained herein or in any Ancillary Agreement on the part
of Seller; (iii) any failure of Seller to pay and/or perform any liabilities or
obligations of Seller or the Business (including the Specified Retained
Liabilities and any such liability arising by operation of law) other than the
Assumed Liabilities; and (iv) any claims and liabilities to the extent related
to both (A) Seller's operation of the Business and (B) periods or occurrences
prior to the Closing or, as Seller's operation of the Business relates to an
Assumed Contract, prior to the deferred transfer date, if any, applicable to
such Restricted Material Contract. For purposes hereof, "Affiliate" shall mean,
as to any person, any other person which, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, such person.
6.2 INDEMNIFICATION OF SELLER. Buyer agrees to indemnify Seller and its
Affiliates and their respective shareholders, directors, officers, employees,
accountants, attorneys and agents (collectively, the "Seller Indemnified
Parties") against, and to hold each such person harmless from, any and all
Losses of or against such person resulting from (i) any misrepresentation or
breach of warranty on the part of Buyer in this Agreement or in any Ancillary
Agreement; (ii) any breach or non-fulfillment of any agreement or covenant
contained herein or in any Ancillary Agreement on the part of Buyer; (iii) any
failure by Buyer to pay, discharge and/or perform any of the Assumed
Liabilities; (iv) any claims and liabilities to the extent related to both (A)
Buyer's operation of the Business and (B) periods or occurrences after the
Closing or, as Buyer's operation of the Business relates to a Restricted
Material Contract, after the deferred transfer date if any, applicable to such
Restricted Material Contract.
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6.3 PROCEDURE RELATIVE TO INDEMNIFICATION. The following procedure shall govern
indemnification:
(a) If either party hereto shall claim that it is entitled to be indemnified
pursuant to the terms of this Article Six, it (the "Claiming Party") shall so
notify Seller in the case of a claim for indemnification hereunder (a "Claim")
by any Claiming Party who or which is a Buyer Indemnified Party or Buyer in the
case of a Claim by a Claiming Party who or which is a Seller Indemnified Party
(the "Indemnifying Party") in writing of such claim promptly within ninety (90)
days after receipt of a notice of such claim or notice of any claim of a third
party that may reasonably be expected to result in a claim by the Claiming Party
against the Indemnifying Party except that notice shall be given to the
Indemnifying Party within such earlier period of time as may be reasonably
necessary to allow the Indemnifying Party to respond to any pleading or other
document for which a timely response is required; provided, however, that
failure to timely give such notification shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure. Such notice shall specify the
breach of representation, warranty, or agreement claimed by the Claiming Party
and the Losses incurred by, or imposed upon, the Claiming Party on account
thereof. If such Losses are liquidated in amount, the notice shall so state and
such amount shall be deemed the amount of the Claim of the Claiming Party. If
such Losses are not liquidated in amount, the notice shall so state and, in such
event, a Claim shall be deemed asserted against the Indemnifying Party by the
Claiming Party, but no payment shall be made on account thereof until the amount
of such Claim is liquidated and the Claim is finally determined. In the case of
a Claim other than one which is based upon a Proceeding by any third party,
including any Proceeding by any Governmental Authority (a "Third Party Claim"),
if the Indemnifying Party agrees with such Claim for indemnification, it shall
remit payment for the amount of such Claim promptly after receipt from the
Claiming Party of the notice and invoice therefore. In the event of a dispute,
the Claiming Party and the Indemnifying Party shall proceed in good faith and
attempt to negotiate a resolution of such dispute, and if not resolved through
negotiations, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction.
(b) The following provisions shall apply to any Claim of the Claiming Party that
is based upon a Third Party Claim:
(1) The Indemnifying Party shall, upon receipt of such written notice and at its
expense, defend such Third Party Claim in its own name or, if necessary, in the
name of the Claiming Party. The Claiming Party will cooperate with and make
available to the Indemnifying Party such assistance and materials as may be
reasonably requested of it and the Claiming Party shall have the right, at its
expense, to participate in such defense. The Indemnifying Party shall have the
right to settle and compromise such Third Party Claim only with the consent of
the Claiming Party, which consent shall not be unreasonably withheld; provided,
however, that, in making its determination as to whether to grant such consent,
the Claiming Party shall be entitled to consider the impact of the proposed
settlement upon its reputation and/or the goodwill of the businesses which it
conducts.
(2) If the Indemnifying Party shall notify the Claiming Party that it disputes
any Claim made by the Claiming Party with respect to, and/or it shall refuse or
choose not to conduct a defense against, such Third Party Claim, then the
Claiming Party shall have the right to conduct a defense against such Third
Party Claim and shall have the right to settle and compromise such Third Party
Claim without the consent of the Indemnifying Party. Once the amount of such
Claim is liquidated and the Claim is finally determined, the Claiming Party
shall be entitled to pursue each and every remedy available to it at law or in
equity to enforce the indemnification provisions of this Article Six and, if it
is determined, or the Indemnifying Party agrees, that it is obligated to
indemnify the Claiming Party for such Claim, the Indemnifying Party agrees to
pay all costs, expenses and fees, including all reasonable attorneys' fees,
which may be incurred by the Claiming Party in attempting to enforce
indemnification under this Article Six, whether the same shall be enforced by
suit or otherwise.
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6.4 POST CLOSING CONDITIONS.
6.4.1 BUYER'S OBLIGATIONS TO SELLER Following the Closing, Buyer shall have the
ongoing obligations and duties to Seller concerning the operations of Subsidiary
set forth below.
(1) Subsidiary's Lubbock-area operation will be domiciled and operated
from Plains or Lubbock, Texas, unless otherwise agreed to in writing by both
Parent and Seller, until December 31, 2010 or the date Buyer pays in full the
Purchase Price.
(2) Parent will operate the Subsidiary as a wholly owned subsidiary of
Parent until December 31, 2010 or the date Buyer pays in full the Purchase
Price. Parent shall also not, without the written approval of Seller cause the
Subsidiary to sell or otherwise dispose of any of its assets or of any Subject
Assets acquired from Seller until December 31, 2010 or the date Buyer pays in
full the Purchase Price, except in each case for dispositions made in the
ordinary course of business or payment of expenses incurred by the Subsidiary
pursuant to the transactions contemplated by this Agreement.
(3) Buyer shall cause the Seller's employees listed on Exhibit 6 to be
offered at will employment with Subsidiary, subject to Closing, on terms no less
favorable to such employees than they currently enjoy with Seller.
6.4.2 SELLERS OBLIGATIONS TO BUYER. Following the Closing, Seller shall have the
ongoing understanding concerning the operations of Crosswind and the Buyers
existing Lubbock area operation, (collectively, "the West Texas Network") as set
forth below.
(1) Following the Closing, the operation of the West Texas Network will
be focused on the sales, design, installation, and implementation aspects of the
business and all "shared service " aspects of the Business will be provided by
Parent to Subsidiary as a support function in order to reduce costs and achieve
economies of scale. Examples of such shared services include, but are not
limited to, (1) administrative and financial transactions such as billing,
collections, purchase orders, payments, accounting, etc., (2) administrative
matters related to personnel, such as payroll, insurance, stock plans and 401K
plan, (3) legal, tax, leasing, public releases, investor relations, and human
relations functions.
(2) Following the Closing, all operations of the West Texas Network wireless
broadband ISP service as well as all future ISP services to commercial
businesses and residential customers will be conducted as a part of the ERF
Wireless Bundled Services, Inc. Subsidiary operations.
ARTICLE SEVEN: MISCELLANEOUS
- ----------------------------
7.1 EXPENSES. The parties hereto shall pay their own expenses, including
accountants' and attorneys' fees, incurred in connection with the negotiation
and consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements. Buyer shall be liable for and shall pay and discharge when
due any sales or transfer taxes incurred in connection with the purchase and
sale of the Subject Assets pursuant to this Agreement.
7.2 HEADINGS; USE OF CERTAIN WORDS. The headings in this Agreement are for
purposes of convenience and ease of reference only and shall not be construed to
limit or otherwise affect the meaning of any part of this Agreement. Unless the
context clearly otherwise requires, as used herein, the term "Agreement" shall
mean this Agreement, including the Exhibits attached hereto. The words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision, and, except as expressly provided otherwise herein, references
herein to Articles or Sections or Schedules or Exhibits shall mean the Articles
and Paragraphs hereof and the Schedules and Exhibits attached hereto. The use of
the neuter pronoun "it" shall also refer as appropriate to the masculine and/or
feminine gender, and vice versa. The use of the singular herein shall, where
appropriate, be deemed to include the plural and vice versa. As used herein, the
word "person" refers to any individual, corporation, limited liability company,
partnership, trust, Governmental Authority or other organization or entity. As
used herein, the term "including" shall mean "including, without limitation. For
those warranties and representations set forth in Article Three which are
subject to the qualification "to the Knowledge of Seller" or similar language,
Seller shall be deemed to have knowledge of a matter if any executive officer
has knowledge of the matter. For those warranties and representations set forth
in Article Four which are subject to the qualification "to the Knowledge of
Buyer" or similar language, Buyer shall be deemed to have knowledge of a matter
if any executive officer has knowledge of the matter.
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7.3 NOTICES. All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be considered to be given and
received in all respects when personally delivered, when sent by facsimile
transmission actually received by the receiving equipment, when sent by
reputable express or courier delivery service, delivery charges prepaid, or
three (3) days after being deposited in the United States mail, certified mail,
postage prepaid, return receipt requested, addressed as set forth on the
signature page, or to such other address as shall be designated by the addressee
by notice duly given in accordance herewith.
7.4 ASSIGNMENT. This Agreement and the rights hereunder shall not be assignable
or transferable by Buyer or Seller prior to or following the Closing without the
prior written consent of the other party hereto.
7.5 BINDING EFFECT. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective legal representatives, heirs,
beneficiaries, successors and permitted assigns. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give any
person other than the parties hereto and their permitted successors or assigns
any rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
7.6 ENTIRE AGREEMENT; AMENDMENT OR WAIVER; CUMULATIVE REMEDIES. This Agreement,
the Schedules and Exhibits attached hereto and the agreements executed and
delivered in connection herewith constitute the entire agreement between the
parties hereto relating to the subject matter hereof, and all prior agreements,
correspondence, discussions, negotiations, agreements and understandings of the
parties (whether oral or written) are merged herein and superseded hereby. No
amendment, modification, or waiver hereto or hereunder shall be valid unless
made in writing and signed by an authorized signatory of each party to be
affected thereby against whom enforcement thereof is being sought. The failure
of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part hereof or the
right of such party thereafter to enforce each and every such provision. No
waiver of any breach of, or failure to comply with, this Agreement shall be held
to be a waiver of any other or subsequent breach or failure to comply. All
rights and remedies under this Agreement are cumulative to all other rights and
remedies that may be available to each party, including all rights and remedies,
whether in tort or otherwise, whatsoever at law or in equity with respect
hereto, which each party hereby expressly reserves.
7.7 SEVERABILITY. The parties agree that if any provision of this Agreement
shall under any circumstances be deemed invalid or inoperative, this Agreement
shall be construed with the invalid or inoperative provision deleted, and the
rights and obligations of the parties shall be construed and enforced
accordingly.
7.8 APPLICABLE LAW. This Agreement in all respects, including as to its
validity, interpretation, enforcement and effect, shall be governed by the
internal Laws of the State of Texas without regard to the Laws which otherwise
would govern under principles of conflicts of laws thereof.
7.9 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which shall be considered but one and the same agreement, and shall
become effective when one or more such counterparts have been signed by each of
the parties and delivered to the other party.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day,
month and year first above written.
BUYER
ERF Wireless, Inc., a Nevada
corporation ("Parent")
By: /s/ H. Dean Cubley
--------------------------------
Name: Dr. H. Dean Cubley
Title: Chief Executive Officer
ERF Wireless Bundled Services, Inc. a
Texas corporation ("Subsidiary")
By: /s/ R. Greg Smith
--------------------------------
Name: R. Greg Smith
Title: Chief Executive Officer
(Acting)
Send Notices to:
Dr. H. Dean Cubley, CEO
ERF Wireless, Inc.
2911 South Shore Blvd., Suite 100
League City, TX 77573
Telephone 281.538.2101
Facsimile 281.538.2121
Email hdc@erfwireless.com
SELLER
Crosswind Enterprises, Inc.
By: /s/ Shayne Griffiths
----------------------------
Name: Shayne Griffiths
Title: President
Send Notices to:
Mr. Shayne Griffiths
1008 Avenue F
Plains, Texas 79355
Bradford L. Moore
Attorney at Law
P.O. Box 352
Brownfield, Texas 79316