EX-2.1 3 a2105128zex-2_1.txt EXHIBIT 2.1 EXHIBIT 2.1 PURCHASE AND SALE AGREEMENT THIS AGREEMENT is made and entered into the 23rd of December, 2002 by and between DIGITAL SERVICE, INC., a Washington Corporation ("DSI"), and CABLE CONCEPTS, INC., dba DIRECT DIGITAL COMMUNICATIONS, a Washington Corporation ("CCI") a wholly owned subsidiary of USA Broadband, a Delaware Corporation. RECITALS DSI is in the business of acquiring and owning rights of entry to construct, install, operate and maintain satellite master antenna television operations in multi-family residential developments (herein referred to as "Systems"). CCI is also in the business of designing, constructing, owning and managing Systems. DSI desires to purchase from CCI, and CCI is willing to sell to DSI or its assigns, all of its assets, including, Systems and Rights of Entry, for all systems listed on Exhibit "A" attached hereto, all pursuant to the terms and conditions set forth hereafter. Accordingly, in consideration of the mutual covenants herein, the parties agree as follows: 1. DEFINITIONS 1.01 "RIGHT OF ENTRY AGREEMENTS" shall mean agreements between CCI and apartment owners under which CCI has agreed to operate and maintain the Systems. 1.02 "BANK NOTES" shall mean the promissory notes held by Pacifica Bank, and Advanta Credit. Said notes are included in the list of Assumed Liabilities attached hereto as Exhibit B. These notes have outstanding balances of not more than $1,600,000.00 and $15,500 respectively. 1.03 "PURCHASED ASSETS" shall mean all of the property of CCI, real and personal, tangible and intangible, to be purchased by DSI hereunder, including but not limited to, CCI's Right of Entry Agreements, Systems, Management Agreements, inventory and equipment listed in Exhibit A. The inventory shall include, at a minimum, two hundred and twenty five (225) digital satellite receivers complete with access cards, or if access cards are not available, two hundred and twenty five (225) digital satellite receivers and the parts and materials currently stored in the mini-storage facilities in Dallas and Houston, Texas. Irrespective of where stored, inventory shall also include all of the test equipment and tools provided by CCI to its Texas based personnel and/or agents specific to the support and maintenance of any of the Systems located in the State of Texas. Provided that, at Closing, CCI's contractual obligations that relate to the above referenced mini- 1 storage are not in arrears, DSI shall assume all responsibility for CCI's said mini-storage contractual obligations. All programming agreements that pertain to the Purchased Asset are included in the Purchased Assets but may or may not be included on Exhibit A. To the extent that those agreements are not listed in Exhibit A, those items will be identified and transferred after the execution of this Agreement at or prior to Closing. (a) PINNACLE PROPERTY. In addition to the Purchased Assets, CCI shall transfer to DSI all of the property of CCI, real and personal, tangible and intangible, in the Pinnacle Property, including but not limited to, CCI's Right of Entry Agreements, Systems, Management Agreements, inventory and equipment that pertains thereto. The Pinnacle Property is more fully described in Exhibit C attached hereto. 1.07 "RETAINED ASSETS" shall mean the property of CCI, which is not being purchased by DSI hereunder, as described on Exhibit D attached hereto. 1.08 "RIGHTS OF ENTRY AGREEMENTS" shall mean the agreements between CCI and the owners of multi-family residential properties pursuant to which CCI has the exclusive right to construct, install, own and operate Systems on the properties. Provided, however, this definition shall also apply to the right of entry agreement for the Foxfire property which the parties acknowledge is a non-exclusive right of entry. 1.09 "SYSTEMS" shall mean all of the tangible and intangible assets relating to ownership, operation and maintenance of satellite master antenna television operations in multi-family residential properties, including but not limited to cable, head-end equipment, satellite dishes, subscriber boxes, amplifiers, structures, subscriber lists, subscriber agreements, subscriber accounts, leases, programming agreements, contract rights, spare parts, tools, Rights of Entry Agreements and Management Agreements. 1.10 "UNITS" shall mean the right to provide cable television service to an apartment residential unit pursuant to a Right of Entry Agreement purchased by DSI hereunder. 2. PURCHASE AND SALE CCI will sell and transfer to DSI, and DSI will purchase and take delivery from CCI, all of the Purchased Assets, pursuant to the terms and subject to the conditions set forth in this Agreement. 3. PURCHASE PRICE 2 The purchase price for the Purchased Assets shall be described and applied as follows: 3.01 UNITS. The purchase price per unit which are so identified on Exhibit A shall be one hundred ninety seven dollars and 50/100 ($197.50) per Unit. Based on the units reflected on Exhibit A, there are a total 8,533 units, excluding Pinnacle on Lake Washington, valued at $1,685,267.50. 3.02 APPLICATION OF PURCHASE PRICE. Eighty percent (80%) of the purchase price shall be paid hereunder shall be applied to the acquisition of the Rights of Entry and twenty percent (20%) to the equipment and the rest of the assets purchased by DSI hereunder. 3.03 ASSUMPTION OF PACIFICA BANK AND ADVANTA CREDIT OBLIGATION NOTES. CCI has certain financial obligations owed to Pacifica Bank, and Advanta Credit. Said obligations are based on and arise out of the documentation attached hereto as Exhibit E. DSI shall assume said obligations. PROVIDED, HOWEVER, the obligation owed to Pacifica Bank by CCI shall not exceed one million six hundred thousand dollars ($1,600,000.00); the CCI obligation owed to Advanta Credit shall not exceed fifteen thousand five hundred dollars ($15,500.00). 3.04 ASSUMPTION OF ADDITIONAL LIABILITIES. Other than the assuming set forth herein above, if an excess balance due to CCI exists, determined by deducting the Pacifica Bank Note and Advanta Credit from the gross transaction value, this balance will be reduced by assigning additional debt or liabilities equivalent to this remaining balance and agreeable to both CCI and DSI. DSI shall not assume, and shall have no liability for, any obligations of CCI which do not arise under the Right of Entry Agreements or under the Management Agreements, and shall not assume the obligations under the Right of Entry Agreements or the Management Agreements which were required to be performed prior to the respective dates of transfer of such assets or with respect to which CCI is in default as of the respective dates of transfer of such assets unless agreed upon between DSI and CCI. 3.05 TAXES. The purchase price for the Purchased Assets set forth in this Section 4 excludes all sales, use, excise transfer and similar taxes which may be imposed by any governmental agency as a result of the transfer of the Purchased Assets to DSI. CCI shall pay all sales, use, property, or other taxes associated with respect to cable television service and related sales to the subscribers of each property due at the time of transfer of each System, and shall provide evidence thereof to DSI. In lieu of such evidence, DSI may, in its sole discretion, pay any tax owed and deduct any tax it so paid from the purchase price or deposit in escrow the tax amount. The amount of such taxes shall be separately identified in each transfer document. In any event, CCI shall indemnify DSI and hold it harmless from and against any such tax liability, including interest and penalties, and from any costs 3 and expenses of defending against any such claimed deficiency, including reasonable attorneys' fees and costs. 3.06 CALCULATION OF AMOUNT OWED TO CCI. The entire Purchase Price Subtotal shall be calculated by the number of Units on Exhibit A times the per door amount as described in 4.01 herein. All liabilities assumed by DSI or owed to DSI by CCI pursuant to this contract or otherwise, shall be subtracted from the Purchase Price Subtotal. Further, the subscriber deposits addressed in paragraph 17 shall be deducted from the Purchase Price Subtotal. After said deductions, the result of this calculation shall be the total Amount Owed by DSI to CCI. 3.07 ACCOUNTS RECEIVABLE: all subscriber accounts receivable prior to December 1, 2002 remain the property of CCI. DSI will provide to CCI assistance and access to subscriber accounts to facilitate collection efforts. 3.08 PINNACLE PROPERTY. The purchase price for the Pinnacle Property shall not be included in the calculations set forth in paragraph 4.06 above. In consideration for the transfer of the Pinnacle Property, DSI shall assume and hold CCI harmless from CCI's obligations to pay Broadband Concepts for CCI's outstanding account payable obligations to Broadband Concept, Inc. The amount of said obligation is not more than one hundred twenty thousand dollars ($120,732.17). CCI's account payable obligations to Broadband Concepts in more fully described in the documents attached hereto as Exhibit F. 4. PAYMENT TERMS The Amount Owed described in Section 4 above shall be paid as follows: 4.01 PROMISSORY NOTE. It the Amount Owed is a positive number, DSI shall execute a promissory note (hereinafter referred to as the "Promissory Note") payable to CCI in the Amount Owed. Said Promissory Note shall not bare any interest. If, after the making of the Promissory Note CCI is, for any reason, obligated to DSI for any additional sums not previously included in the agreed calculation of the sum owed in the Promissory Note then DSI, in its sole discretion, may deduct said additional sums from the balance of the Promissory Note as if paid. 4.02 PROMISSORY NOTE TERMS. DSI shall pay the Promissory Note balance in quarterly payments that shall be equal to twenty five percent (25%) of the net profits it generates in its operation of the Purchased Assets until the earlier of the balance having been paid in full or 18 months from the closing of this Purchase and Sale Agreement. The first payment shall be due ninety days (90) after the Closing of this Purchase and Sale Agreement. 4 4.03 TRANSFER OF PURCHASED ASSETS. CCI specifically acknowledges that it will not have any interest in the Purchased Assets after the Closing of this Purchase and Sale Agreement. CCI further specifically agrees that DSI, in its sole discretion, may sell some, or all, of the Purchased Assets to third parties. However, if any of the Purchased Assets are sold, all of the net proceeds therefrom shall be applied to the balances of the obligations set forth in paragraph 4.03 hereinabove. If any of the net proceeds are not so applied then twenty five percent (25%) of the net proceeds that are not so applied shall be paid to CCI, and the balance of the Promissory Note shall be reduced by an equal amount. If all of the Purchased Assets are sold, and after all payments are made and applied to the Promissory Note balance as required herein, there are still sums owing pursuant to the Promissory Note, then the balance shall be paid in equal quarterly payments over a period not to exceed six months from the date of the last transfer of a Purchased Asset by DSI to a third party. 4.05 IF AMOUNT OWED IS A NEGATIVE NUMBER. CCI warrants that the Amount Owed is not a negative. 5. SIGNORS GUARANTY/WARRANTEE 5.01 SIGNOR'S AUTHORITY. The person who executes this Purchase and Sale Agreement on behalf of CCI hereby warrants and guarantees that said person is duly and fully authorized by CCI to execute this agreement on CCI's behalf. 6. CLOSING 6.01 CLOSING DATE. Closing of all of the Purchased Assets shall occur on the _____ day of _______ 200__ even though the transfer of some of the Purchased Assets may occur before or after that date. As used in this Purchase and Sale Agreement, the term "Closing Date" shall be the 1st day of December, 2002. The transfer of all assets shall be done in such a manner to preserve in DSI any priority to title to any Purchased Asset in any government record where such interest is recorded. Closing, shall occur at the Santa Fe Springs office or at such other place, as CCI and DSI shall mutually agree. 7. REPRESENTATIONS OF SELLER CCI represents and warrants to DSI, as of the date of this Agreement and as of the Closing Date, as follows: 7.01 ORGANIZATION, GOOD STANDING AND POWER. CCI: (a) is a corporation duly organized, validly existing and in good 5 standing under the laws of the State of Washington; (b) is not required to be authorized or licensed to do business as a foreign corporation in any other jurisdiction by reason of the nature of the business conducted by it or the properties owned or leased or operated by it; and (c) has the requisite power and authority to own, lease and operate its properties, and to carry on its business as currently conducted. 7.02 AGREEMENTS RELATING TO STOCK. Neither CCI, nor any of its shareholders, is or are a party or parties to any written or oral agreement, understanding, arrangement or commitment, or is bound by any certification of incorporation, bylaws or other instrument, which creates any rights with respect to the voting of any securities of CCI. 7.03 AUTHORIZATIONS AND ENFORCEABILITY. CCI has the requisite power and authority to execute, deliver and perform this Purchase and Sale Agreement and to consummate the transactions contemplated hereby. This Purchase and Sale Agreement has been duly and validly executed and delivered by CCI, and has been duly and validly authorized by each shareholder of CCI, and it constitutes the valid and binding obligation of CCI fully enforceable in accordance with its terms. 7.04 EFFECTIVENESS OF AGREEMENT. The execution, delivery and performance of this Purchase and Sale Agreement by CCI and the consummation of the transactions contemplated hereby will not, with or without the giving of notice or the lapse of time, or both: (a) Violate any provision of law, statute, rule or regulation to which CCI is subject; (b) Violate any judgment, writ or decree of any court, arbitrator or governmental agency applicable to CCI; (c) Have any adverse effect on any of the Purchased Assets; or (d) Result in the breach of or conflict with any term, covenant, condition or provision of, or result in the modification or termination of, constitute a default under, or result in the creation or imposition of any lien, security interest, charge or encumbrance upon any of the Purchased Assets. 6 7.05 RESTRICTIONS. CCI is not a party to any contract, commitment or agreement, and none of the Purchased Assets are subject to or bound or affected by any bylaw or other corporate restriction, or any order, judgment, decree, law, statute, ordinance, rule, regulation or other restriction of any kind, which would: (a) Prevent CCI from entering into this Purchase and Sale Agreement or from consummating the transactions contemplated hereby; or (b) materially and adversely affect, or in the future may materially and adversely affect, the Purchased Assets or the ability of DSI to carry on a business similar to that presently conducted by CCI, or the ability of DSI to use the Purchased Assets in the manner in which they are presently used. 7.06 GOVERNMENT AND OTHER CONSENTS. No consent, authorization or approval, or exemption by, or filing with any governmental, public or self-regulatory body or authority is required in connection with the execution, delivery and performance by CCI of this Agreement or any of the instruments or agreements herein referred to, or the taking of any action contemplated by this Agreement. 7.07 VIOLATION OF LAWS. CCI is not in default or in violation of any executive, legislative, judicial or administrative ruling, order, injunction or decree. 7.08 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES. CCI owns and has good and marketable title to the Purchased Assets, free and clear of all mortgages, security interests, liens, encumbrances, use restrictions and other defects in title, except liens, easements, restrictions and other encumbrances on the property subject to the Right of Entry Agreements which are part of the Purchased Assets. By way of illustration of the foregoing exception, a permitted lien would include a lender's mortgage, which constitutes a lien on the apartment complex covered by a Right of Entry Agreement. A second exception hereto shall be those security interests that are listed on Exhibit E. Each of the agreements and other instruments constituting part of the Purchased Assets, including but not limited to, the Right of Entry Agreements and the Management Agreements, is in full force and effect. 7.12 CONDITION OF EQUIPMENT. All of the equipment and other tangible personal property constituting part of the Purchased Assets are in good condition and repair (ordinary wear and tear which are not such as to adversely affect the operation of any such property excepted) and are suitable for the uses for which they are intended. All such property is operative in conformity with all applicable laws, 7 ordinances, regulations and other governmental requirements currently in effect. 7.13 ACCURACY OF REPRESENTATIONS. No representation, covenant or warranty by CCI contained in this Purchase and Sale Agreement contains or will contain at Closing any untrue statement of a material fact or will omit to state a material fact necessary in order to make the statements contained therein not misleading. 7.15 SYSTEMS. Each of the Systems set forth on Exhibit A is fully contained within the property covered by a related Right of Entry Agreement. Each of the Systems is fully operational and currently delivering all of the channel line-ups that CCI publishes in its promotional material specific to each Unit. All Systems are functioning under standard operating procedures. All programming fees for community service and basic service are paid current by CCI at or before Closing. If said fees are not paid at or prior to Closing, DSI, in it's sole discretion, may pay the same and deduct an amount equal thereto from the Amount Owed pursuant to paragraph 4.06 hereinabove. All of CCI's revenue sharing obligations shall be paid in full prior to or at the time of Closing. If said obligations not paid prior to or at Closing, DSI, in its sole discretion, may pay the same and deduct an amount equal thereto from the Amount Owed pursuant to paragraph 4.06 hereinabove. 7.16 MAINTENANCE OF BUSINESS RECORDS. Until Closing, CCI shall continue to maintain the Systems that have not been previously transferred to DSI to operate pending Closing and CCI shall keep all of its business books, records and files, all in the ordinary course of business, in accordance with past practices consistently applied. 8. REPRESENTATIONS AND WARRANTIES OF DSI DSI represents and warrants to CCI, as follows: 8.01 ORGANIZATION, GOOD STANDING AND POWER. DSI: (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington; (d) has the requisite power and authority to own, lease and operate the Purchased Assets, and to carry on its business as currently conducted. 8.02 AUTHORIZATION AND ENFORCEABILITY. DSI has the requisite power and authority to execute, deliver and perform this Purchase and Sale Agreement and to consummate the transactions contemplated hereby. This Purchase and Sale Agreement has been duly and validly executed and delivered by DSI, and has 8 been duly and validly authorized by each shareholder of DSI, and it constitutes the valid and binding obligation of DSI fully enforceable in accordance with its terms. 8.03 EFFECTIVE AGREEMENT, CONSENTS. No consent, authorization or approval or exemption by, or filing with, any governmental or public body or authority is required in connection with execution, delivery and performance by DSI of this Agreement or the taking of any actions contemplated herein. 9. CONDITIONS PRECEDENT TO DSI'S OBLIGATION TO CLOSE DSI's obligation to close the transactions contemplated herein are subject to the fulfillment, at or prior to Closing, of each of the following condition, any one or more of which may be waived by DSI: 9.01 REPRESENTATION AND WARRANTIES. All representations and warranties of CCI made hereunder shall be true and correct at Closing. 9.05 FORM OF AGREEMENTS. The form and substance of the documents constituting the Right of Entry Agreements and the Management Agreements shall be satisfactory to DSI. 9.06 TRANSFER OF PURCHASED ASSETS. The Purchased Assets shall have been transferred and delivered to DSI, in such form as is satisfactory to DSI. 9.07 SALES TAX. CCI shall have provided to DSI evidence satisfactory to DSI that CCI has paid all sales taxes, which it is required to pay by virtue of the transfer of Right of Entry Agreements to DSI pursuant to this Agreement. 10. CONDITIONS PRECEDENT TO CCI'S OBLIGATIONS TO CLOSE CCI's obligation to close the transactions contemplated herein are subject to the fulfillment, at or prior to Closing, of each of the following conditions, any one or more of which may be waived by CCI: 10.01 NOTE. CCI shall have received the Promissory Note in the amount described in paragraph 5.01 hereinabove. 11. CCI'S INDEMNITY CCI shall defend, indemnify and hold DSI and its shareholders, successors and assigns, 9 harmless from and against: (a) All debts, liabilities, damages, losses, costs, taxes, attorneys' fees, judgments, assessments, expense, or claims owing by, incurred or accrued against CCI or DSI or against any of the Purchased Assets as of or prior to Closing, or arising out of the sale of any Purchased Assets or CCI's business operations or ownership of the Purchased Assets by CCI prior to Closing, or any obligation of CCI under the Purchased Assets which are required to be performed prior to Closing. (b) All liabilities, costs, damages, expenses and losses paid or incurred, or to be paid or incurred hereafter, by DSI arising out of any inaccurate representations or breaches of representations or warranties by CCI herein, or any attempt by any person to cause or require DSI to pay or discharge, obligation, liability or commitment of CCI which is not specifically assumed by DSI pursuant to this Agreement. (c) Any reasonable costs and expenses of DSI related to the foregoing, including reasonable attorneys' fees in connection with the protection, defense or appeal of any demand, suit or action in connection with the foregoing, or for enforcing this indemnity. (d) In addition to any other remedies which DSI may have against CCI at law or pursuant to this Purchase and Sale Agreement, DSI may offset against payment of any amount of the purchase price hereunder, including the payment of any amounts payable pursuant to the Promissory Note described in paragraph 5.01, any and all amounts to which DSI is entitled to indemnification pursuant to this paragraph. 12. DSI'S INDEMNITY DSI shall indemnify and hold CCI harmless from and against: (a) All damages, expenses and losses suffered, paid or incurred, or to be suffered, paid or incurred after Closing by CCI arising out of any inaccurate representations or breaches of warranties or representations by DSI hereunder. (b) DSI's ownership, operation and conduct of any Purchased Assets after Closing. (c) All reasonable costs and expenses of CCI related to the foregoing, including reasonable attorneys' fees in connection with the prosecution, 10 defense or appeal of any demand, suit or action in connection with the foregoing or enforcing this indemnity. 13. ASSIGNMENT OF CONTRACT RIGHTS DSI agrees to pay all or any portion of the Purchase Price required hereunder, and make the Promissory Note described in paragraph 5.01 hereof payable to any party designated by CCI, to the extent that CCI directs in writing, and provided that DSI is held harmless from any liability for having responded to such direction. Any payment by DSI hereunder pursuant to such direction shall be deemed payment for the Purchased Assets hereunder as fully as though it were made to CCI. The foregoing shall not obligate DSI to make any payment in total amounts greater than, or on dates prior to, amounts or dates required under this Purchase and Sale Agreement. 14. PROGRAMMING AGREEMENTS To the extent that programming agreements held by CCI affecting any of the Systems acquired by DSI hereunder are retained by CCI, CCI agrees to take such actions, including executing such amendments, and providing such notices and other communications to the other parties to the programming agreements, as may be requested by DSI, for so long as such programming agreements affect programs provided to Systems acquired by DSI hereunder. 15. MISCELLANEOUS 15.01 DISCLOSURE. CCI shall disclose and make available to DSI, all documents, data and other information within CCI's possession and control relating to the Purchased Assets. 15.02 SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns. 15.03 REPRESENTATIONS AND WARRANTIES SHALL SURVIVE. All representations and warranties by the parties contained herein, and otherwise made in writing pursuant to this Purchase and Sale Agreement, shall survive Closing. 15.04 ENTIRE AGREEMENT. This Purchase and Agreement contains the entire agreement of the parties relating to the rights granted and obligations assumed under this Purchase and Sale Agreement, and supersedes all prior agreements, understanding or representations, whether written or oral, with respect to the subject matter hereof. There are no other verbal or other agreements which modify or affect this Purchase and Sale Agreement. This Purchase and Sale Agreement may only be amended in writing, signed by the parties hereto. 11 15.05 NOTICES. All notices or other communications hereunder, shall be deemed to have been given, when personally delivered or when deposited in the U.S. Mail, registered or certified, postage prepaid and addressed as follows: To CCI: USA Broadband 1111 Orange Avenue Coronado, California 92118 Attn: Grant Miller, CFO To DSI: Digital Service, Inc. 1320 26th Street NW Auburn, WA 98001 Attn: Jay Gordon, President 15.06 CCI SHALL EXECUTE ALL DOCUMENTS. CCI shall execute all documents that are reasonably necessary to fulfill the intent of this Purchase and Sale Agreement and to complete the transfer of any of the Purchased Assets. Any such documents shall be in such form as is acceptable to DSI. CCI's obligations hereunder shall survive Closing. 15.07 ATTORNEYS' FEES. In the event legal action is taken by either party to enforce this Purchase and Sale Agreement, or any action arising out of the representations, warranties, and covenants contained herein, all costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party shall be paid by the non prevailing party. 15.08 JURISDICTION AND VENUE. This Purchase and Sale agreement shall be construed in accordance with the laws of the State of Washington venue shall lie in Pierce County, WA Superior Court. 16. SUBSCRIBER DEPOSITS CCI shall provide DSI with complete and accurate accounting of all subscriber deposits that pertain to any of the Purchased Assets including the Pinnacle Property. DSI shall assume all responsibility to said subscribers for return of said deposit as is required by the subscriber agreements with CCI. The total amount of said deposits shall be deducted for the Amount Owed set forth in paragraph 4.06. 17. ESTOPPEL CERTIFICATES - ASSIGNMENT AGREEMENT 12 CCI shall obtain an executed Estoppel Certificate from each of the owners of each of the properties for each and every Right of Entry Agreement that is included in the Purchased Assets. The Estoppel Certificates shall include, but not necessarily be limited to, an owner affirmation that CCI's Rights of Entry Agreements that are included in the Purchased Assets are in full force and effect and that CCI is not in default in any of CCI's obligations owed to the respective property owner. The Estoppel Certificates shall be in the form of Exhibit G attached hereto. CCI shall deliver all Estoppel Certificates along with an assignment agreement as required hereunder to DSI within ninety (90) days of closing. 18. USA BROADBAND, INC.'S GUARANTEE USA Broadband, Inc., hereby guarantees performance of each and every obligation of CCI that arises out of this Purchase and Sale Agreement, including but not limited to all of CCI's duties, obligations and liabilities arising out of this contract that occur after Closing. 19. DEFAULT DECLARED BY APARTMENT OWNER IN 60 DAYS. In the event that within 60 days after Closing, any apartment owner of any of the Units shall in any manner notify any party hereto that said property owner believes that the operation of the System in said property owners apartment complex has not been maintained or operated in accordance with the applicable Right of Entry Agreement and provided that DSI is not able, after reasonable efforts that does not include any further financial expenditure by DSI, resolve the apartments owner's related concerns to the satisfaction of the apartment owner and the apartment owner declares the Right of Entry Agreement to be in default, then DSI may, within 30 days after the declared default, in its sole discretion, elect a remedy of returning said Units to CCI and the Amount Owed shall be reduced by a sum equal to the Purchase Price for said Units or secure additional units from CCI in exchange for the Units in default. All other remedies available to DSI for all other issues shall be unaffected hereby. 13 IN WITNESS WHEREOF, the parties have executed this Purchase and Sale Agreement as of the date first above written. CCI: CABLE CONCEPTS, INC. A WHOLLY OWNED SUBSIDIARY OF USA BROADBAND /s/ Grant Miller --------------------------------------- By: Grant Miller Title: CFO USA Broadband DSI: DIGITAL SERVICE, INC. /s/ Jay Gordon --------------------------------------- By: Jay Gordon Title: President. Digital Service, Inc. 14 Exhibit A Systems and Right of Entry Agreements
Number of Name of Property City State Units ---------------------------------------------------------------- Arizona Desert Mirage Gilbert AZ 106 Foxfire Tempe AZ 188 Hampton Court Mesa AZ 27 ------------------ 3 321 Dallas Bear Creek Euless TX 250 Bluebonnet Ennis TX 64 Home of Persimmons Dallas TX 180 Lakeland Lewis Ville TX 61 Legends of Eagle Mtn. Forth Worth TX 208 Tree Top Grand Prairie TX 128 Westchester Grand Prairie TX 244 Willows, The Ennis TX 84 5600 Dallas TX 13 Athenian Dallas TX 22 Beacon Hills Dallas TX 42 Buckingham Dallas TX 50 Casa Villa Dallas TX 34 Coral Gables Dallas TX 44 Driftwood Dallas TX 28 Gaston Village Dallas TX 10 Kahluha Dallas TX 29 Kings Quarters Dallas TX 22 Oaks, The Dallas TX 16 Paree Dallas TX 37 Pink Adobe Dallas TX 30 Santa Clara Dallas TX 428 Sherman Oaks Dallas TX 25 Silver Sands Dallas TX 54 Strand, The Dallas TX 36 Bayou Bend Dallas TX 308 Warwick Dallas TX 320 ------------------ 27 2,767 Number of Name of Property City State Units ---------------------------------------------------------------- Houston Cornerstone Ranch Katy TX 352 Deerwood Houston TX 186 Fairmont Oaks Houston TX 188 Hidden Lakes New Orleans LA 461 Huntwick Houston TX 288 Oaks of Baytown Harris TX 248 Quail Chase Houston TX 248 Quay Point Houston TX 135 Royal Oaks Gardens Bryan TX 168 Bent Oaks Hitchcock TX 72 Brazoswood Clute TX 72 Brompton Square Houston TX 214 Burnett Place Taylor TX 72 Stable Chase Houston TX 150 Washington Courtyard Houston TX 74 Willow Falls Apartments Houston TX 174 Willows, The Houston TX 346 Park at Clear Creek Hemstead TX 76 ------------------ 17 3,524 Northern California Aspen Park Sacramento CA 280 California Place Sacramento CA 211 Oak Valley North Highlands CA 141 Stanford Heights Sacramento CA 170 Sun Valley Sacramento CA 128 Sierra Ridge Sacramento CA 134 Village Crossing Sacramento CA 196 Valley Green Sacramento CA 661 ------------------ 8 1,921
15 Exhibit B Financial Liabilities Pacifica Bank - Account # 200275 - Balance Due - $ 1,581,779.27 Advanta Credit - Account # - Balance Due - $ 15,445.87
16 Exhibit C Pinnacle on Lake Washington - 180 Units located in Renton, WA 17 Exhibit D Systems and Units Owned by Cable Concepts, Inc. dba Direct Digital Communications
PROPERTY NAME CITY ST UNITS -------------------------------------------------------------- Acropolis San Jose CA 20 Ashton Place San Jose CA 948 Cascades, The Sunnyvale CA 178 Eden Gardens (MHP) Hayward CA 138 Hayward (MHP) Hayward CA 237 Jackson Towers San Francisco CA 81 Landing @ Jack London Oakland CA 282 Masson Apts San Jose CA 15 San Pedro Square San Jose CA 32 Sun Valley (MHP) Livermore CA 163 Terracina Phase II Morgan Hill CA 148 Alhambra Apts Davis CA 160 Saratoga Vacaville CA 108 Sycamore Woodland CA 136 Larkspur Larkspur CA 248 St. Francis Place (bulk w/DTV) San Francisco CA 410 Vista Sonoma Seniors Santa Rosa CA 189 Chateau Marina Marina Del Ray CA 334 Fiji Villas Marina Del Ray CA 156 Regatta, The Marina Del Ray CA 224 Vintage Gardens West Covina CA 188 1221 Ocean Ave. Santa Monica CA 120 Vintage Grove La Verne CA 110 PROPERTY NAME CITY ST UNITS -------------------------------------------------------------- Kiowa Apartments Los Angeles CA 19 Legacy @ Westwood Los Angeles CA 187 Medici, The Los Angeles CA 335 Oak Tree Van Nuys CA 21 Corona La Linda Corona CA 132 Plaza @ Arboretum Santa Monica CA 350 Enclave Apts Lewisvile TX 356 Mission Pointe Euless TX 260 Paces Point Lewisville TX 300 Park Timbers Lewisville TX 230 Peachtree Garland TX 344 Pecan Ridge Mesquite TX 210 Belmont Village Memphis TN 121 Echelon @ the Ballpark Memphis TN 300 Preserve @ Southwind Memphis TN 306 Wesley Forest Memphis TN 100 Gardner Fargo ND 120 Glenwood Fargo ND 18 Park Place Fargo ND 72 Royal Court Fargo ND 106 South Pointe Fargo ND 140 Dakota Square Grand Forks ND 48
18 Exhibit E (Attach Bank Statements) 19 Exhibit F On December 31, 2002, [check date: should this be 2001 ???]Digital Service, Inc. acquired the assets of Broadband Concepts. Broadband Concepts had entered into a contractual agreement with Cable Concepts, Inc. dba Direct Digital Communications ("DDC"). The agreement was to purchase certain assets from DDC and to supply project management and engineering services. The outstanding balance due to Broadband Concepts for engineering and project management is $166,855.17. The outstanding debt owed to DDC for purchase of assets is $46,123.00 making the net due to Digital Service One Hundred Twenty Thousand Seven Hundred Thirty Two Dollars and 17/100 ($120,732.17). 20 Exhibit G Estopple Language On (roe date), (property name) entered into a Right of Entry Agreement with Cable Concepts, Inc. dba Direct Digital Communications, allowing access and the installation, operations for a video communications distribution system. I (owner's representative) hereby attest that the Right of Entry Agreement between (property name) and Cable Concepts, Inc. dba Direct Digital Communications attached hereto is operational and in good standing and all material covenants of the Right of Entry Agreement operational and or satisfied. ----------------------------------- Owner's Representative 21