Exhibit 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE
AGREEMENT (the
"AGREEMENT") is made January 9, 2007,
by and among GLOBALOPTIONS GROUP, INC., a Delaware corporation
("BUYER") and SPZ
OAKLAND
CORPORATION dba Online Consulting
Services,
a California
corporation
("SELLER").
RECITALS
Seller
desires to sell,
and Buyer
desires to
purchase,
the Assets (as
defined
below) of Seller
for the
consideration
and on the terms set forth in
this Agreement.
AGREEMENT
The parties, intending to be legally bound, hereby agree as
follows:
ARTICLE I
SALE AND TRANSFER OF ASSETS; CLOSING
SECTION
1.1
ASSETS
TO BE
SOLD.
Upon
the
terms
and
subject
to the
conditions
set forth in this
Agreement,
at the Closing (as defined in Section
1.6 below),
Seller shall sell, convey,
assign,
transfer and deliver to Buyer,
and Buyer shall purchase and acquire from Seller,
free and clear of any charge,
claim, equitable interest,
lien, option, pledge,
security interest,
mortgage,
encroachment,
or
restriction
of any kind (an
"ENCUMBRANCE"),
other than any
Encumbrance
identified
on
ANNEX
A
as
acceptable
to
Buyer
(a
"PERMITTED
ENCUMBRANCE"),
all of Seller's
property and assets,
real,
personal or mixed,
tangible
and
intangible,
of every
kind and
description,
wherever
located,
belonging to Seller and used in the conduct of the Seller's
security
consulting
business (the
"BUSINESS"),
including the following (but excluding the Excluded
Assets):
(a) all
leasehold
interest in all real
property
leased by Seller
(the "REAL PROPERTY"), including the Real Property described in
SCHEDULE 2.6;
(b) all equipment,
furniture, office equipment,
computer hardware,
supplies,
materials,
vehicles,
and other items of tangible
personal property
(other than
inventory)
of every kind owned or leased by Seller (the
"TANGIBLE
PERSONAL PROPERTY"), including those items described in SCHEDULE
2.7(B);
(c) any oral or
written
contracts
or
agreement
(i) under
which
Seller has or may acquire any rights or benefits, (ii) under which
Seller has or
may become subject to any
obligation or liability,
or (iii) by which Seller or
any of the Assets is or may become
bound (any such
contract
or
agreement,
a
"SELLER CONTRACT"), that are listed on SCHEDULE 2.14;
(d) all Governmental
Authorizations (as defined in SECTION 2.11(b))
and all pending
applications
therefor or renewals thereof, in each case to the
extent transferable to Buyer;
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(e) all data and records
related to the
operations of Seller,
and
copies of all records referenced in SECTION 1.2(E) below;
(f) all of the intangible
rights and property of Seller,
including
the
Intellectual
Property
Assets
(as
defined
in
SECTION
2.16)
and
the
Proprietary Assets (as defined in SECTION 2.16), going concern
value,
goodwill,
telephone,
telecopy, and e-mail addresses, websites, domain names, and
listings
including the name "On Line Consulting Services,"
abbreviations thereof, and On
Line
Consulting
Services,
Inc., or any previous name or names utilized by the
Seller, but not Seller's corporate name;
(g) all insurance benefits,
including rights and proceeds,
arising
from or relating to the Assets prior to the Closing Date;
(h) all
claims of Seller
against
third
parties
relating
to the
Assets;
(i) all rights of Seller relating to deposits and prepaid
expenses,
claims
for
refunds
and
rights
to offset in
respect
thereof
which are not
excluded under SECTION 1.2(F); and
(j) all other
properties
and assets of every
kind,
including
an
amount of cash and/or accounts receivable equal to the trade
accounts identified
in Section
1.4(a)(ii),
below less any price
adjustment
as defined in Section
1.3(c), below, character and description,
tangible or intangible, of every kind
and
description,
owned
by
Seller,
whether
or
not
similar
to
the
items
specifically set forth above.
All of the property and assets to be transferred to Buyer hereunder
are referred
to collectively as the "ASSETS".
Notwithstanding the foregoing, the transfer of
the Assets
pursuant to this
Agreement
will not include the
assumption of any
liability or obligation in respect
thereof unless the Buyer
expressly
assumes
such liability or obligation pursuant to SECTION 1.4(A).
SECTION 1.2
EXCLUDED
ASSETS.
Notwithstanding
anything to the
contrary
contained in Section 1.1 or elsewhere in this
Agreement,
the
following
items
(collectively,
the
"EXCLUDED
ASSETS")
are not part of the sale and
purchase
contemplated
hereunder,
are
excluded
from the
Assets,
and will
remain the
property of Seller after the Closing:
(a) the minute book, shareholder records, and company seal of
Seller
and Seller's corporate name;
(b) the
equity of Seller and the
remaining
cash
and/or
accounts
receivable,
plus any price adjustment as defined in Section 1.3(c), below after
the
necessary
amount
of cash to equal to the
trade
accounts
identified
in
Section 1.4(a)(ii), below;
(c) all of Seller's life
insurance
policies and rights
thereunder
(except to the extent specified in Sections 1.1(h) and (i));
(d) all personnel
records and other records that Seller is required
by law to retain in its possession;
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(e) all claims for refund of taxes and other governmental charges
of
whatever nature;
(f) all rights in connection with and assets of any Employee
Benefit
Plans (as defined in Section 2.10 below);
(g) all
rights
of
Seller
in
connection
with
the
transactions
contemplated hereby; and
(h) the property,
accounts
receivables and other assets
expressly
designated in SCHEDULE 2.7(A).
SECTION
1.3
PURCHASE
PRICE.
The
consideration
for
the
Assets
(the
"PURCHASE
PRICE") will be Two Million Seven Hundred Thousand and No/100
Dollars
($2,700,000) wherein the Purchase Price shall include: (i) cash in
the amount of
One Million Three Hundred and Fifty Thousand and No/ Dollars
($1,350,000) ("Cash
Portion"); and (ii) Buyer's stock in the amount of One Million
Three Hundred and
Fifty
Thousand
and
No/
Dollars
($1,350,000)
("Stock
Portion"),
and
the
assumption of the Assumed Liabilities (as defined in Section 1.4
below).
(a) In accordance
with SECTION
1.7(B),
at the Closing or other date specified
below, the Purchase Price shall be delivered by Buyer to Seller, as
follows: (A)
at Closing,
the payment of Seven Hundred and Fifty
Thousand and No/100 Dollars
($750,000) by wire transfer to an account
specified by Seller;
(B) at Closing,
an
amount
equal to
Seven
Hundred
and
Fifty
Thousand
and
No/100
Dollars
($750,000) of the Stock Portion of the Purchase
Price
delivered to Seller,
as
such Stock
Portion is
determined in
accordance
with SECTION
1.3(B);
(C) at
Closing,
a promissory
Note in the amount of Three Hundred
Thousand and No/100
Dollars
($300,000) (in the form of Exhibit 1.3(a),
the "Promissory Note 1") of
the Cash
Portion of the
Purchase
Price to be
delivered to the Law Offices of
Morton S.
Taubman,
as escrow
agent
(the
"ESCROW
AGENT")
under the
Escrow
Agreement (as defined in SECTION
1.7(A)
below);
(D) at Closing,
a promissory
note providing for the payment of an amount equal to Three Hundred
Thousand and
No/100
Dollars
($300,000)
of the Cash
Portion of the
Purchase
price to the
Seller,
of which One Hundred and Fifty
Thousand and
No/Dollars
($150,000) is
payable one year from the date of the Closing Date, and the same
amount one year
thereafter (in the form of Exhibit 1.3 (b), the "Promissory Note
2"); and (E) at
Closing, the remaining Stock Portion ($600,000) shall be placed in
escrow by the
Buyer
and held by the
Buyer
for the
benefit
of the
Seller
(the
"Escrowed
Stock"),
and said Escrowed Stock,
subject to the last sentence of this Section
1.3(a),
shall be
distributed
to the Seller as follows:
(i) one year from the
date of Closing,
an amount equal to Three Hundred
Thousand and No/100
Dollars
($300,000)
of the
Escrowed
Stock , as such
Stock
Portion is
determined
in
accordance with SECTION 1.3(B),
of the Purchase Price ; and (ii) two years from
the date of
Closing,
an amount
equal to Three
Hundred
Thousand
and
No/100
Dollars
($300,000) of the Escrowed
Stock , as such Stock Portion is determined
in accordance with SECTION 1.3(B),
of the Purchase Price The Promissory Notes 1
and 2 shall provide if the
Employment
of Sandor P. Zirulnik is terminated
for
cause (as that term is defined in the
Employment
Agreement)
and/or
Sandor P.
Zirulnik
terminates
the
Employment
prior
to the
term
of
said
Employment
4
Agreement (the
"Termination of
Employment"),
all payments due by the Buyer to
the
Seller
under
the
Promissory
Notes
shall
terminate
as of said date of
termination.
Provided
further,
the
Escrowed
Stock shall be forfeited by the
Buyer,
if the Employment of Sandor P. Zirulnik is terminated for cause (as
that
term
is
defined
in
the
Employment
Agreement)
and/or
Sandor
P.
Zirulnik
terminates the Employment
prior to the term of said
Employment
Agreement (the
"Termination of Employment").
Buyer
agrees to make every
effort to include all stock
delivered
under
this
Agreement
(or
to be
delivered
under
this
Agreement)
in
any
future
registration
of Buyer's common stock,
without cost or expense to Seller.
This
obligation shall survive the Closing.
(b)
Subject
to Section
1.3(c),
the
number of shares of Buyer
Common
Stock
comprising
the Stock Portion shall be equal to number of shares
resulting from
$1,350,000
divided by the higher of: (i) the Fair Market
Value of a Share;
or
(ii) $2.00. "FAIR MARKET VALUE OF A SHARE" shall mean the average
of the closing
prices of the sales of Buyer Common Stock on all
securities
exchanges on which
Buyer Common Stock may at the time be listed, or, if there have
been no sales on
any such
exchange on any day,
the average of the highest bid and lowest
asked
prices on all such
exchanges
at the end of such
day,
or, if on any day Buyer
Common Stock are not so listed,
the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any
day Buyer Common Stock are not quoted in the NASDAQ
System,
the average of the
highest bid and lowest asked prices on such day in the domestic
over-the-counter
market as reported by the National Quotation Bureau Incorporated,
or any similar
successor
organization,
in each such case averaged over a period of 30 trading
days
consisting of the trading day as of which the Fair Market Value of
a Share
is being determined and the 29 consecutive trading days prior to
such day.
(c) In the event the Fair
Market
Value of a Share,
as
determined
in Section
1.3(b),
above, is less than $2.00, such lesser amount (the "Fall Short
Amount")
shall be a price adjustment in an amount equal to the Fall Short
Amount and such
amount
shall
reduce
the
cash
and/or
accounts
receivable
required
to
be
transferred
by the Seller to the Buyer to offset any
Seller's
trade
accounts
assumed by the Buyer, as set forth in Sections 1.1(j), 1.2(b) and
1.4(a).
SECTION 1.4 LIABILITIES.
(a) At the Closing, Buyer shall assume and be obligated to
discharge
only the following specifically enumerated liabilities and
obligations of Seller
(the "ASSUMED LIABILITIES"):
(i) any trade
account
payable
that is incurred by Seller in
the Ordinary
Course of Business at the Closing Date, in each case which remains
unpaid as of the Closing, providing such account payables are
described and aged
in Schedule 1.4(a)(i); and
(ii) any liability
arising after the Closing under any Seller
Contract
included
in the Assets
(other than any
liability
arising out of or
relating to a breach which occurred prior to the Closing);
(b) All liabilities and obligations of Seller, whether arising
prior
to the Closing Date, other than the Assumed Liabilities,
are referred to as the
"RETAINED
LIABILITIES".
All of the Retained
Liabilities
will remain the sole
5
responsibility
of and will be retained solely by Seller.
Retained
Liabilities
include,
but not
limited
to, the legal and
accounting
fees
incurred by the
Seller as a result of the anticipated transaction under this
Agreement,
whether
such fees are
incurred
before or after the Closing
Date,
and accrued
profit
sharing liabilities.
SECTION 1.5 ALLOCATION.
The Purchase Price will be allocated,
based upon
current
accounting
rules, as set forth in EXHIBIT 1.5. After the Closing,
the
parties shall make consistent use of the allocation specified in
EXHIBIT 1.5 for
all tax purposes and in any tax returns filed with the Internal
Revenue Service
in respect thereof, including IRS Form 8594.
SECTION 1.6 CLOSING.
The
consummation
of the purchase and sale provided
for in this Agreement (the
"CLOSING") will take place at Buyer's offices at New
York
City,
at 10:00
a.m.
(local
time) on a date
mutually
agreed to by the
parties
but not later than
January 31, 2007 (the
"CLOSING
DATE").
Provided,
however,
the Closing Date shall be automatically
extended to permit the Seller
sufficient time to provide the audited financial
statements
required in a form
in
compliance
with Section 2.4 of this
Agreement,
but in no event later than
February 28, 2007.
Delivery of documents at the Closing may be
accomplished by
facsimile
and/or PDF electronic
files, to be followed by delivery of originals
by overnight courier, of national reputation, the day after
Closing.
SECTION 1.7 CLOSING OBLIGATIONS.
(a) At the Closing, Seller shall deliver to Buyer:
(i) a bill of sale for all of the Assets in the form
attached
hereto as EXHIBIT 1.7(A)(I) (the "BILL OF SALE"), executed by
Seller;
(ii) an assignment
of all of the Assets which are
intangible
personal property in the form of EXHIBIT 1.7(A)(II), which
assignment shall also
contain
Buyer's
undertaking
and
assumption of the Assumed
Liabilities
(the
"ASSIGNMENT AND ASSUMPTION AGREEMENT"), executed by Seller;
(iii) with respect to each interest in real property leased by
Seller as set forth in SCHEDULE
2.6(B) below,
an Assignment
and Assumption of
Lease in the form of EXHIBIT
1.7(A)(III)
(the
"ASSIGNMENT
AND
ASSUMPTION OF
Lease"), executed by Seller and the applicable lessor;
(iv) copies of any other consent (excluding
consents relating
to the
Non-Material
Contracts (as defined in SECTION 1.8 below) required to be
obtained in connection with the execution and delivery of this
Agreement and the
consummation of the
transactions
contemplated
hereby as disclosed on SCHEDULE
2.2(C);
(v) an
escrow
agreement
in the form of
EXHIBIT
1.7(A)(V),
executed by Seller, Buyer and the Escrow Agent (the "ESCROW
AGREEMENT");
(vi)
the
employment
agreement
in
the
form
of
EXHIBIT
1.7(A)(VI), executed by Sandor P. Zirulnik (the "EMPLOYMENT
AGREEMENT");
6
(vii) a certificate of the Secretary of Seller certifying,
as
complete
and
accurate as of the
Closing,
attached
copies of the Articles of
Incorporation
and the bylaws of Seller,
certifying and attaching all requisite
resolutions
or actions of Seller's
shareholders
approving
the
execution and
delivery of this Agreement and the consummation of the transactions
contemplated
hereby and the change of name
contemplated by SECTION 4.5 and certifying to the
incumbency
of the officers of Seller
executing
this
Agreement
and any other
document relating to the transactions contemplated hereby and
accompanied by the
requisite documents for abandoning Seller's fictitious business
name;
(viii) an opinion of counsel of the Seller,
dated the Closing
Date,
in a form
customary
for a similar
transactions;
(ix) the Articles of Incorporation and all amendments
thereto
of Seller,
duly
certified
as of a recent
date by the
Secretary
of State of
California;
(x) certificates as to the good standing of Seller and payment
of all applicable state taxes by Seller,
executed by the appropriate
officials
of the
jurisdiction of Seller's
incorporation
and each
jurisdiction in which
Seller is licensed or
qualified
to do
business
as a foreign
corporation
as
specified
in
SCHEDULE
2.1 To the
extent
that
such
certificates
cannot be
provided
prior to Closing,
seller agrees to indemnify and hold harmless
Buyer
for the non-payment of sales taxes for any of the
jurisdictions in which Seller
is licensed and qualified to do business as a foreign corporation;
and
(xi)
such
other
deeds,
bills
of
sale,
assignments,
certificates
of
title,
documents
and
other
instruments
of
transfer
and
conveyance as may
reasonably be requested by Buyer,
each in form and substance
reasonably
satisfactory to Buyer and its counsel and executed by Seller for
the
purpose of
facilitating
the
consummation
or performance of the
transactions
contemplated hereby.
(b) At the Closing, Buyer shall deliver to Seller:
(i) The Cash Portion and the Stock Portion in accordance
with
Section 1.3 of this Agreement, by wire transfer to accounts
specified in writing
by Seller (which wire transfer instructions must be delivered by
Seller to Buyer
at least one (1) Business Day prior to Closing);
(ii) the
Assignment
and
Assumption
Agreement,
executed by
Buyer;
(iii) The Escrow
Agreement,
executed by Buyer and the Escrow
Agent,
together with the delivery of the Promissory Note 1, in the amount
equal
to Three Hundred Thousand and No/100 Dollars ($300,000) to the
Escrow Agent;
(iv) the Employment Agreement executed by Buyer;
(v) a
certificate
of the Secretary of Buyer
certifying,
as
complete and accurate as of the Closing,
attached copies of the bylaws of Buyer
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 transactions
contemplated
hereby and certifying to the
7
incumbency
of the
officers of Buyer
executing
this
Agreement
and any other
document relating to the transactions contemplated hereby;
(vi) a stock option plan for the
executives
and employees of
the Seller to be available to said
employees
subsequent to the Closing Date in
the form attached hereto as EXHIBIT 1.7(B)(V), and said option plan
will contain
in part: (a) stock options for executives
priced at the end of the Closing Date
at the market
value of $225,000 as of the end of the
Closing
Date;
(b) stock
options for managers and employees
priced at the end of the Closing Date at the
market value of $75,000;
(c) with a vesting
schedule of three
years;
and (d)
distribution
list of said stock options to
executives,
managers and employees
determined
by Sandor P.
Zirulnik
in his sole
discretion
(which may
include
Sandor P. Zirulnik); and
(vi) Promissory Note 2 in the amount of $300,000.
SECTION 1.8 CONSENTS.
Buyer may waive the requirement
that Seller obtain
consents
to
assignment
with
respect to any and all of the
Seller
Contracts
disclosed on SCHEDULE
2.2(C) (the
contracts with respect to which Buyer grants
such waiver, the "Non-Material Contracts"),
in which case any such Non-Material
Contracts will be identified as such on SCHEDULE 2.2(C).
Seller and Buyer agree
to use
commercially
reasonable
efforts
prior to the
Closing
to obtain
any
consents to assignment of the Seller
Contracts that Buyer deems to be necessary
or desirable. Notwithstanding anything to the contrary in this
Agreement, if any
consents to
assignment
relating to the
Non-Material
Contracts
have not been
obtained at or prior to the
Closing,
this
Agreement
will not
constitute
an
assignment or an agreement to assign if such assignment or
attempted
assignment
would constitute a breach of the Non-Material
Contract or result in the loss or
diminution thereof; PROVIDED, HOWEVER, that in each such case,
Seller shall take
commercially
reasonable
steps
after the Closing to obtain the consent of such
other party to the Non-Material
Contract to the assignment of such Non-Material
Contract to the Buyer.
If such consent is not obtained,
Seller shall cooperate
with the Buyer to the extent legally
permissible and feasible in any reasonable
arrangement
designed
to provide
for Buyer the
benefits
of any
Non-Material
Contract,
including,
without limitation, the enforcement,
for the account and
benefit of the Buyer,
of any and all rights of Seller
against any other person
with respect to a Non-Material Contract.
SECTION 1.9 POST-CLOSING
RECONCILIATION.
[Subject to Section 1.3(c),
at
the Closing Date, the sum of (x) the Accounts
Receivable
and/or (y) Cash equal
to the sum of (1) the Trade Accounts Payable and (2) Accrued
Expenses,
shall be
transferred to the Buyer by the Seller ("Closing Date
Statement").
Buyer shall
return, assign, transfer, convey and deliver to Seller and any all
such Accounts
Receivable
which have not been collected in full by Buyer as of the day that
is
ninety (90) days following the Closing Date,
and Buyer shall
relinquish all of
its rights
with
respect to such
Accounts
Receivable,
provided
that if such
Account
Receivable was included in the Closing Date Statement then such
Account
Receivable shall be replaced either by Cash delivered by the Seller
to the Buyer
or the Buyer
shall
have a right to reduce the funds in the Escrow by an amount
equal to the face value of such returned Accounts Receivable.
Seller shall have
the sole right to any amounts
collected by Seller with respect to such Accounts
Receivable returned to Seller by Buyer.
8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
SECTION 2.1 ORGANIZATION AND GOOD STANDING.
(a) Seller is a corporation duly organized, validly existing, and
in
good standing
under the laws of the State of
California,
with full
corporate
power and authority to conduct its business as it is now being
conducted, to own
or use its properties and assets,
and to perform all its obligations
under its
contracts.
Seller is duly qualified to do business as a foreign corporation
and
is in good standing under the laws of each state or other
jurisdiction set forth
in SCHEDULE 2.1.
(b) Complete and
accurate
copies of the articles of
incorporation
and bylaws of Seller (collectively,
the "GOVERNING DOCUMENTS"), as currently in
effect, have been delivered to Buyer.
(c) Seller does not own and has not entered
into any
agreement
or
contract to acquire,
any equity securities or other securities of any person or
any direct or indirect equity ownership interest in any other
business.
SECTION 2.2 AUTHORITY; NO CONFLICT.
(a)
This
Agreement
constitutes
the
legal,
valid,
and
binding
obligation
of Seller.
Upon the execution and delivery by Seller of each of the
documents
and
instruments
to be executed
and
delivered by Seller at Closing
pursuant to SECTION 1.7(A)
(collectively,
the "SELLER'S
CLOSING
DOCUMENTS"),
each of Seller's Closing Documents will constitute the legal,
valid, and binding
obligation
of
Seller,
enforceable
against
Seller in
accordance
with their
respective
terms.
Seller has the right,
power,
authority,
and
capacity
to
execute and deliver this Agreement and Seller's Closing Documents
and to perform
its obligations
under this Agreement and Seller's Closing
Documents,
and such
action
has
been
duly
authorized
by
all
necessary
action
by
Seller's
Shareholders.
(b) Neither the
execution
and delivery of this
Agreement
nor the
consummation or performance of any of the transactions
contemplated hereby will
(with or without
notice or lapse of time):
(i)
contravene,
conflict with, or
result in a violation
of any
provision
of any of the
Governing
Documents of
Seller,
(ii)
contravene,
conflict with, or result in a violation of any Legal
Requirement
(as
defined
in
SECTION
2.11(A)
below) or Order (as
defined in
SECTION 2.12(B) below) of any court or governmental authority to
which Seller or
any of the Assets are subject, or (iii) breach any provision of,
give any person
the right to declare a default or
exercise
any remedy
under,
accelerate
the
maturity
or
performance
of or
payment
under,
result
in
the
creation
or
imposition
of any
Encumbrance
upon
any
of
the
Assets
under,
or
cancel,
terminate, or modify, any contract to which Seller is a party or by
which Seller
or the Assets are bound.
(c) Except as set forth in SCHEDULE
2.2(C),
Seller is not and will
not be required
to give any notice to or obtain any consent
from any person in
9
connection with the execution and delivery of this Agreement or the
consummation
or performance of the transactions contemplated hereby (
includingthe assignment
of the Seller Contracts
hereunder,
and such assignment shall be, if necessary,
using commercial reasonable time subsequent to the Closing).
SECTION 2.3
CAPITALIZATION.
The authorized
equity of Seller consists of
common stock held entirely by the parties listed on SCHEDULE 2.3.
SECTION 2.4 FINANCIAL STATEMENTS.
Attached hereto as SCHEDULE 2.4 are the
Seller's
unaudited
Balance Sheets and unaudited
profit and loss statement for
the twelve
months ended
December
31, 2004 and
December
31, 2005,
unaudited
balance sheet as of September 30, 2006, and unaudited
profit and loss statement
for the 9 months ended
September
30, 2006 (the
"FINANCIAL
STATEMENTS").
The
Financial
Statements fairly present the financial
condition and the results of
operations of Seller as at the respective
dates of and for the periods referred
to in such
financial
statements,
except as set
forth on
SCHEDULE
2.4.
The
Financial
Statements
have been prepared
from and are in
accordance
with the
books and records of Seller.
Seller
shall
provide to the Buyer,
on or before
Closing,
audited
financial
statements
for the years ended December 31, 2004,
December 31, 2005,
December 31, 2006 and for the stub period
through and up to
the Closing Date, and such financial
statements shall be materially
consistent
with the
previously
submitted
unaudited
financial
statements
and
shall be
prepared in
accordance
with
generally
accepted
accounting
principals.
The
aforementioned
audited financial
statements must be in the form and an opinion
of an independent
certified
public
accountant
attached to meet the standards
required
by
the
Securities
and
Exchange
Commission,
and
the
independent
certified public
accountant must provide its consent to the use of the Seller's
audited financial
statements in the Buyer's 8-K and other registration
filings
with the Securities and Exchange
Commission.
Further, the Seller's independent
public
accountant
shall
make
all of its work
papers
and
other
supporting
documents it utilized in proving its opinion available,
if needed for review by
the Buyer's independent public accountant.
SECTION 2.5
SUFFICIENCY
OF ASSETS.
The Assets (a) constitute all of the
assets,
tangible and intangible,
necessary to conduct Seller's business in the
manner
presently
operated by Seller,
and (b)
constitute all of the operating
assets of Seller.
SECTION 2.6 REAL
PROPERTY
LEASES.
SCHEDULE 2.6 sets forth all leases of
real
property
to which the
Seller is a party
(the
"LEASES").
Complete
and
accurate
copies of the Leases,
as amended or modified,
have been delivered to
Buyer.
The Leases are in full force and effect,
are
binding
and
enforceable
against each of the parties thereto in accordance with their
respective
terms,
and have not been
amended or modified
since the date of delivery to the Buyer.
No party to any Lease has sent written
notice to the other
claiming
that such
party is in default
thereunder,
which alleged default remains uncured.
Seller
enjoys peaceful and undisturbed possession of all such real
property. The Leases
contain terms and conditions
(including
rent) that are comparable to leases in
the same market with comparable premises.
SECTION 2.7 PERSONAL PROPERTY.
(a) Except as set forth on
SCHEDULE
2.7(A),
Seller
owns good and
transferable
title to all of its Assets
(excluding
its
interest
in the real
property
described in SCHEDULE 2.6), free and clear of any
Encumbrances
other
than Permitted Encumbrances.
10
(b)
SCHEDULE
2.7(B)
sets
forth
all items of
Tangible
Personal
Property with an initial,
nondepreciated
book value in excess of $2,500.
Each
item
of
Tangible
Personal
Property
is in good
repair
and
good
operating
condition, ordinary wear and tear excepted, and is suitable for
immediate use in
the ordinary
course of business.
No item of Tangible
Personal
Property is in
need of repair or replacement
other than as part of routine
maintenance in the
ordinary course of business. All Tangible Personal Property is in
the possession
of Seller.
SECTION 2.8 TAXES. Seller has timely filed all tax returns
(federal, state
or
local)
required
to be
filed by it in
accordance
with
applicable
Legal
Requirements
(AS
DEFINED
IN SECTION
2.11(A)).
All of such tax
returns
are
accurate
and
complete
in all
material
respects.
Seller
has
paid
or made
provision
for the
payment
of all taxes
that have or may
become
due for all
periods
covered by the tax returns or otherwise,
or pursuant to any assessment
received by Seller.
There is no dispute or claim concerning any taxes of Seller
either claimed or raised by any governmental authority in writing
other than the
notification of a potential
franchise tax audit by the State of California (the
"Potential
Tax Audit")
Seller has not requested or been given any extension of
time within
which to file
returns in respect of any taxes for which Seller may
be liable.
All taxes that Seller is or was
required by Legal
Requirements
to
withhold, deduct or collect have been duly withheld, deducted and
collected and,
to the
extent
required,
have been paid to the proper
governmental
authority
subject to the Potential Tax Audit.
SECTION 2.9
EMPLOYEES.
SCHEDULE
2.9 sets forth a complete
and accurate
list, giving name, job title,
current
compensation
paid or payable,
sick and
vacation leave that is accrued but unused, and services credited
for purposes of
vesting and
eligibility
to
participate
under any
Employee
Benefit Plan (as
defined below) (in each case, to the extent
applicable),
(a) for each employee
of Seller,
including
each
employee on leave of absence or layoff
status (the
"EMPLOYEES"),
and (b) for any independent
contractors who render services on a
regular basis to, or are under contract with, Seller. Seller has
not experienced
any
organized
slowdown,
work
interruption
strike,
or work
stoppage by its
employees,
and, to the knowledge of Seller,
there is no strike, labor dispute,
or union
organization
activity
pending or
threatened
that affects
Seller's
Employees.
None of the Employees belongs to any union or collective
bargaining
unit. Except as set forth on SCHEDULE 2.9, no Employee of Seller is
bound by (a)
any employment or similar contract or agreement with Seller, or (b)
any contract
or agreement
that purports to limit or restrict the ability of such Employee to
(i) perform his duties as an employee of Seller,
or (ii) engage in any conduct,
activity, or practice relating to Seller's business.
SECTION
2.10
EMPLOYEE
BENEFITS.
SCHEDULE
2.10 sets
forth all
plans,
programs,
or arrangements that Seller has maintained,
sponsored,
adopted,
or
obligated itself under with respect to employees' benefits,
including pension or
retirement
plans,
medical
or
dental
plans,
life
or
long-term
disability
insurance,
bonus
or
incentive
compensation,
or
stock
option
or
equity
participation
plans (the "EMPLOYEE BENEFIT PLANS").
Seller has no liability or
obligation
with respect to any Employee
under any Employee
Benefit Plan other
than normal salary or wage accruals and paid vacation,
sick leave,
and holiday
accruals in accordance with Seller's
practice and policy.
Seller has performed
all obligations
required to be performed under, and has complied with all Legal
Requirements in connection
with, all such Employee
Benefit Plans and is not in
arrears under any of the terms thereof.
11
SECTION 2.11
COMPLIANCE
WITH
LEGAL
REQUIREMENTS,
GOVERNMENTAL
AUTHORIZATIONS.
(a) Seller is, and at all times since January 1, 2003,
has been, in
compliance
in all
material
respects
with any federal,
state,
or local law,
ordinance or regulation
(including with respect to
environmental,
disposal of
hazardous substances, or public health or safety) (a "LEGAL
REQUIREMENT"),
that
is or was applicable to the operation of its business or the
ownership or use of
any of its
assets.
Except as set forth on
SCHEDULE
2.11(A),
Seller
has not
received,
at any time since January 1, 2003, any notice or other
communication
(whether
oral or written) from any
governmental
authority or any other person
regarding
any actual or alleged
violation
of, or failure to comply with,
any
Legal Requirement with the exception of the Potential Tax Audit.
(b) SCHEDULE
2.11(B)
contains a complete and accurate list of each
approval, license or permit (the "GOVERNMENTAL
AUTHORIZATIONS") that is held by
Seller or that
otherwise
relates to the Seller's
business or the Assets.
The
Governmental
Authorizations listed in SCHEDULE 2.11(B) collectively
constitute
all of the
approvals,
licenses
and
permits
necessary
to
permit
Seller to
lawfully
conduct and operate its business in the manner it
currently
conducts
and operates such business and to permit Seller to own and use its
assets in the
manner in which it currently
owns and uses such assets.
Except as set forth on
SCHEDULE 2.11(B), each such license or permit is transferable to
Buyer as of the
Closing.
SECTION 2.12
LE
