EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
GLOBALOPTIONS, INC.
AND
CONFIDENTIAL BUSINESS RESOURCES, INC.,
HALSEY R. FISCHER,
FISCHER & ASSOCIATES, INC.
DATED AS OF MAY 19, 2005
TABLE OF CONTENTS
ARTICLE 1. SALE AND TRANSFER OF ASSETS;
CLOSING..................................2
Section 1.1
Assets to Be Sold................................................2
Section 1.2
Excluded Assets..................................................2
Section 1.3
Purchase Price...................................................3
Section 1.4
Liabilities......................................................4
Section 1.5
Allocation.......................................................4
Section 1.6
Closing..........................................................4
Section 1.7
Closing Obligations..............................................4
Section 1.8
Consents.........................................................6
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF
SELLER AND
SHAREHOLDERS...............................................7
Section 2.1
Organization and Good Standing...................................7
Section 2.2
Authority; No Conflict...........................................7
Section 2.3
Capitalization...................................................8
Section 2.4
Financial Statements.............................................8
Section 2.5
Sufficiency of Assets............................................8
Section 2.6
Real Property Leases.............................................8
Section 2.7
Personal Property................................................8
Section 2.8
Taxes............................................................9
Section 2.9
Employees........................................................9
Section 2.10
Employee Benefits................................................9
Section 2.11
Compliance With Legal Requirements, Governmental Authorizations.10
Section 2.12
Legal Proceedings, Orders.......................................10
Section 2.13
Insurance.......................................................10
Section 2.14
Contracts; No Defaults..........................................10
Section 2.15
Intellectual Property...........................................11
Section 2.16
Relationships with Related Persons..............................11
Section 2.17
No Undisclosed Liabilities......................................11
Section 2.18
No Material Adverse Change......................................12
Section 2.19
Brokers or Finders..............................................12
Section 2.20
Accounts Receivable.............................................12
Section 2.21
Customers and Suppliers.........................................12
Section 2.22
Books and Records...............................................12
Section 2.23
Bank Accounts...................................................12
Section 2.24
Prepayments and Deposits........................................13
Section 2.25
Disclosure......................................................13
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF
BUYER..............................13
Section 3.1
Organization and Good Standing..................................13
Section 3.2
Authority, No Conflict..........................................13
Section 3.3
Consents and Approvals..........................................14
Section 3.4
Regulatory Approvals............................................14
Section 3.5
Availability of Financing.......................................14
Section 3.6
Brokers or Finders..............................................14
-i-
ARTICLE 4. COVENANTS OF SELLER PRIOR TO
CLOSING.................................14
Section 4.1
Access and Investigation........................................14
Section 4.2
Operation of the Business of Seller.............................14
Section 4.3
Negative Covenant...............................................15
Section 4.4
Notification....................................................15
Section 4.5
No Negotiation..................................................16
Section 4.6
Best Efforts....................................................16
Section 4.7
Payment of Liabilities..........................................16
Section 4.8
Change of Name..................................................16
Section 4.9
Audited Financial Statements....................................16
ARTICLE 5. COVENANTS OF BUYER PRIOR TO
CLOSING..................................16
Section 5.1
Required Approvals..............................................16
Section 5.2
Best Efforts....................................................16
ARTICLE 6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO
CLOSE..................17
Section 6.1
Accuracy of Representations.....................................17
Section 6.2
Seller's Performance............................................17
Section 6.3
Consents........................................................17
Section 6.4
Availability of Financing.......................................17
Section 6.5
Additional Documents............................................17
Section 6.6
No Proceedings..................................................17
Section 6.7
Governmental Authorizations.....................................18
Section 6.8
Purchase Price Adjustment.......................................18
ARTICLE 7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO
CLOSE.................18
Section 7.1
Accuracy of Representations.....................................18
Section 7.2
Buyer's Performance.............................................18
Section 7.3
Consents........................................................18
Section 7.4
Additional Documents............................................18
Section 7.5
Purchase Price..................................................19
ARTICLE 8. ADDITIONAL
COVENANTS.................................................19
Section 8.1
Employees and Employee Benefits.................................19
Section 8.2
Payment of Taxes Resulting From Sale of Assets by Seller........19
Section 8.3
Payment of Other Retained Liabilities...........................20
Section 8.4
Covenant Not to Compete.........................................20
Section 8.5
Customer and Other Business Relationships.......................20
Section 8.6
Retention and Access to Records.................................21
Section 8.7
Uncollected Accounts Receivable.................................21
ARTICLE 9.
TERMINATION..........................................................21
Section 9.1
Termination Events..............................................21
Section 9.2
Effect of Termination...........................................22
Section 9.3
Financing Fees..................................................22
ARTICLE 10.
INDEMNIFICATION.....................................................22
Section 10.1
Survival........................................................22
Section 10.2
Indemnification and Reimbursement By Seller, Fischer
and the Shareholder.............................................22
Section 10.3
Indemnification and Reimbursement by Buyer......................23
Section 10.4
Limitations on Amount - Seller, Fischer and Shareholder.........23
-ii-
Section 10.5
Time Limitations................................................24
Section 10.6
Procedure for Indemnification - Third Party Claims..............24
Section 10.7
Procedure For Indemnification - Other Claims....................25
ARTICLE 11. GENERAL
PROVISIONS..................................................25
Section 11.1
Expenses........................................................25
Section 11.2
Notices.........................................................25
Section 11.3
Jurisdiction....................................................26
Section 11.4
Waiver..........................................................26
Section 11.5
Entire Agreement and Modification...............................26
Section 11.6
Assignments, Successors, and No Third-Party Rights..............26
Section 11.7
Severability....................................................26
Section 11.8
Section Headings, Construction..................................26
Section 11.9
Governing Law...................................................27
Section 11.10
Counterparts....................................................27
Section 11.11
Further Assurances..............................................27
Section 11.12
Legal Fees......................................................27
-iii-
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the
"AGREEMENT"),
is made as of May
19, 2005, by and among GLOBALOPTIONS,
INC., a Delaware
corporation
("BUYER"),
CONFIDENTIAL
BUSINESS
RESOURCES,
INC.,
a
Delaware
corporation
("SELLER"),
FISCHER & ASSOCIATES,
INC., a Tennessee
corporation
(the
"SHAREHOLDER")
and
HALSEY R. FISCHER, an individual resident of Tennessee ("FISCHER").
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 1.
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, but effective as of the
Effective
Date (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 private
investigations and surveillance business (the "BUSINESS"),
including the following (but excluding the Excluded Assets):
(a) all leasehold
interest in all real
property
leased or used 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) all trade
accounts
receivable
and all other accounts or notes
receivable of Seller (the "ACCOUNTS RECEIVABLE");
(d) 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"), including those Seller Contracts listed on
SCHEDULE 2.14;
(e) 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;
(f) all data and records
related to the
operations of Seller,
and
copies of all records referenced in SECTION 1.2(E) below;
(g) 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
"Confidential
Business
Resources,
Inc." and abbreviations
thereof;
(h) all insurance benefits,
including rights and proceeds,
arising
from or relating to the Assets prior to the Closing Date;
(i) all
claims of Seller
against
third
parties
relating
to the
Assets;
(j) all cash and cash
equivalents and all securities and short term
investments;
(k) 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
(l) all other
properties
and assets of every kind,
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, stock records and corporate seal of Seller;
(b) the shares of capital stock of Seller held in treasury;
-2-
(c) all of Seller's 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;
(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 and assets expressly designated in SCHEDULE
2.7(A).
SECTION 1.3 PURCHASE PRICE.
The
consideration
for the Assets (the
"PURCHASE PRICE") will be Five Million and No/100 Dollars
($5,000,000),
and the
assumption
of the
Assumed
Liabilities
(as
defined
in SECTION
1.4
below);
PROVIDED,
HOWEVER,
there shall be a dollar for dollar
adjustment
to the cash
component of the Purchase
Price,
if at the Closing
Date,
the current
assets
(comprising
the following
items:
(1) cash; (2) Accounts
Receivable;
and (3)
advances and prepaid items,
hereinafter
defined as "CURRENT
ASSETS") are less
than the
aggregate of the amount
outstanding
under the Seller's
Bank Line of
Credit (as defined in SECTION
1.4(A)(III)),
accrued
expenses and the Seller's
accounts
payable (the "CURRENT
LIABILITIES").
In the event the Current Assets
are less than the Current Liabilities,
the cash component of the Purchase Price
shall then be
reduced
by an amount
equal to the
difference
between
Current
Liabilities
and the
Current
Assets (the
"PURCHASE
PRICE
ADJUSTMENT").
The
parties
agree that the cash
component of the Purchase
Price shall not be less
than Four Million Five Hundred Thousand and No/100 Dollars
($4,500,000).
In the
event the Purchase
Price
Adjustment
exceeds Five Hundred
Thousand and No/100
Dollars
($500,000),
the
Buyer
shall
be
responsible
for
such
excess
of
liabilities
up to an additional
Two Hundred Fifty
Thousand and No/100 Dollars
($250,000).
In the event the Purchase
Price
Adjustment
is greater than Seven
Hundred Fifty Thousand and No/100 Dollars ($750,000) ("MAXIMUM
BUYER'S AMOUNT"),
then the Buyer shall have an option to terminate this Agreement
without further
obligation.
Seller
shall
prepare
a
Closing
Date
Statement
based
upon the
Seller's
books and
records as of the close of
business
on the
business
day
immediately
preceding
the Closing
Date,
which shall set forth the
foregoing
matters and the adjustment, if any, in the Purchase Price,
substantially in the
form of EXHIBIT 1.3. In
accordance
with SECTION
1.7(B),
at the Closing,
the
Purchase Price shall be delivered by Buyer to Seller as follows:
(A) the payment
of Four Million Five Hundred
Thousand and No/100 Dollars
($4,500,000) (or such
lesser amount to reflect any adjustments pursuant to this SECTION
1.3, but in no
event, less than $4,000,000) by wire transfer to an account
specified by Seller,
and (B) the payment of Five Hundred
Thousand and No/100
Dollars
($500,000) at
Closing to Silicon
Valley Bank, as escrow agent (the "ESCROW
AGENT") under the
Escrow Agreement (as defined in SECTION 1.7(A) below).
-3-
SECTION 1.4 LIABILITIES.
(a) At the Closing,
but effective as of the Effective
Time,
Buyer
shall assume and agree to discharge only the following
specifically
enumerated
liabilities and obligations of Seller (the "ASSUMED LIABILITIES"):
(i) any trade account payable (including a trade account payable
to any shareholder of Seller (A) reflected on the Interim Balance
Sheet, and (B)
that is incurred by Seller in the Ordinary
Course of Business
between the date
of the Interim
Balance
Sheet and the Closing
Date, in each case which remains
unpaid at and is not delinquent as of the Closing;
(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; and
(iii) any liability of Seller described in SCHEDULE 1.4(A)(III),
including
amounts
owed to SunTrust
Bank under the Seller's
revolving
credit
facility (the "SELLER'S BANK LINE OF CREDIT").
(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
responsibility of and will be retained, paid, performed and
discharged solely by
Seller.
SECTION 1.5 ALLOCATION.
The Purchase Price will be allocated 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
the offices of
Buyer's counsel at 1201 15th Street, N.W., Washington, D.C. 20005,
at 10:00 a.m.
(local
time) on such date as the parties may
mutually
agree but no later than
June 30, 2005 (the "CLOSING DATE").
SECTION 1.7 CLOSING OBLIGATIONS.
(a) At the Closing, Seller, Fischer and the Shareholder, as the
case
may be, shall deliver to Buyer:
(i) a bill of sale for all of the
Assets in a form to be agreed
upon (the "BILL OF SALE"), executed by Seller;
(ii) an
assignment
of all of the Assets
which are
intangible
personal
property in form to be agreed upon, which assignment will also
contain
Buyer's
undertaking and assumption of the Assumed
Liabilities (the "ASSIGNMENT
AND ASSUMPTION AGREEMENT"), executed by Seller;
-4-
(iii) with respect to each interest in real
property
leased by
Seller as set forth in SCHEDULE 2.6, an Assignment
and Assumption of Lease in a
form to be agreed upon (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,
the
Shareholder
and
the
Escrow
Agent
(the
"ESCROW
AGREEMENT");
(vi) an employment
agreement in the form of EXHIBIT 1.7(A)(VI),
executed by Fischer (the "EMPLOYMENT AGREEMENT");
(vii)
noncompetition,
nondisclosure
and
nonsolicitation
agreements
in the a form to be agreed
upon,
executed by the
Shareholder
and
certain
employees to be agreed upon no later than ten (10)
business days prior
to the Closing Date;
(viii) a certificate of the Secretary of Seller
certifying,
as
complete
and
accurate
as of the
Closing,
attached
copies of the
bylaws 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 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 amending the
Certificate
of
Incorporation
of Seller
required to effect such
change of name in form
sufficient
for filing with the
Delaware Secretary of State;
(ix) an opinion of Donald I.N. McKenzie, Esq., dated the Closing
Date, in a form customary for similar transactions;
(x) the certificate of incorporation and all amendments
thereto
of Seller,
duly
certified
as of a recent
date by the
Secretary
of State of
Delaware;
(xi)
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; and
(xii) 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
satisfactory
to
Buyer and its counsel and executed by Seller for the purpose of
facilitating the
consummation or performance of the transactions contemplated
hereby.
-5-
(b) At the Closing, Buyer shall deliver to Seller:
(i) Four
Million
Five
Hundred
Thousand
and
No/100
Dollars
($4,500,000) or such lesser amount as may be adjusted in accordance
with SECTION
1.3 of this
Agreement but in no event less than Four Million and No/100 Dollars
($4,000,000), 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 Five Hundred
Thousand and No/100
Dollars
($500,000) to the Escrow Agent by wire
transfer to an account
specified by the
Escrow Agent;
(iv) the Employment Agreement, executed by Buyer;
(v) the Noncompetition Agreements, executed by Buyer; and
(vi) 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
incumbency
of the
officers of Buyer
executing
this
Agreement
and any other
document relating to the transactions contemplated hereby.
SECTION 1.8 CONSENTS.
Buyer may waive the
requirement
that Seller
obtain
consents
to
assignment
with
respect to any 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).
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.
-6-
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
Seller,
Fischer and the
Shareholder
represent and warrant,
jointly and
severally, 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
Delaware,
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
certificate
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,
Fischer and the Shareholder,
enforceable against each of
them in
accordance
with its terms.
Upon the execution and delivery by Seller,
Fischer and the
Shareholder
of each of the
documents
and
instruments
to be
executed
and
delivered
by
Seller,
Fischer
and the
Shareholder
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 each of Seller,
Fischer
and the
Shareholder
a party
thereto,
enforceable
against each of them 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
and
board of
directors.
Fischer and the
Shareholder
have all necessary
legal
capacity to
enter into this
Agreement
and the
Seller's
Closing
Documents
to which such
person is a party and to perform his obligations hereunder and
thereunder.
(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
-7-
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
connection
with
the
execution
and
delivery
of
this
Agreement
or the
consummation or performance of the transactions
contemplated
hereby (including
the assignment of the Seller Contracts hereunder).
SECTION 2.3
CAPITALIZATION.
The
authorized
equity
securities of
Seller consist of 10,000,000
shares of common stock, par value $.001 per share,
of which 1,932,241.1 shares are issued and outstanding,
and 1,000,000 shares of
preferred
stock,
$.001 par value, of which 187,600 shares have been designated
as Series A
Convertible
Preferred
Stock of which 93,000 shares are issued and
outstanding.
SECTION 2.4 FINANCIAL
STATEMENTS.
Attached
hereto as SCHEDULE 2.4
are the Seller's
unaudited
balance
sheet as of December
31, 2004,
unaudited
profit and loss
statement
for the
twelve
months
ended
December
31,
2004,
unaudited
balance
sheet as of March 31,
2005 and
unaudited
profit
and loss
statement
for the 3 months ended March 31, 2005 (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,
all in
accordance
with
generally
accepted accounting principals ("GAAP") 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.
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.
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.
-8-
(b) SCHEDULE
2.7(B) sets forth all items of Tangible
Personal
Property with an initial, nondepreciated book value in excess of
$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.
All of such tax returns are
accurate and complete in al 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.
Except
as set forth in
SCHEDULE 2.8, there is no dispute or claim concerning any taxes of
Seller either
claimed or raised by any governmental authority in writing.
Except as set forth
in SCHEDULE
2.8,
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.
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"),
(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, Fischer and the Shareholder,
there
is no
strike,
labor
dispute
or
union
organization
activities
pending
or
threatened
affecting
Seller.
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, 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
past
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.
-9-
SECTION
2.11
COMPLIANCE
WITH
LEGAL
REQUIREMENTS,
GOVERNMENTAL
AUTHORIZATIONS.
(a)
Seller
is, and at all times
since
January 1, 2001,
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 in SCHEDULE 2.11(A).
Except as set
forth on SCHEDULE 2.11(A), Seller has not received, at any time
since January 1,
2001,
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.
(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
