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Title:

Asset Purchase Agreement

Entities:

Warminster Arden LLC

Date:

2006

Size:

249KB total

Price:

$79

ID:

#2523752

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ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (Agreement) is dated August 14, 2006, by and among River Hawk Aviation, Inc., closely held Nevada corporation (Seller or the Company); and Calvin Humphrey, a resident of Texas (Humphrey or the Shareholder); and Viva International, Inc. a Nevada corporation (Buyer).

RECITALS

The Company is engaged in the business of selling or otherwise transacting in a broad range of aviation airframes, engines, parts, and components.

Shareholder owns 75,000,000 (par value $.001) shares of the common stock of Seller, no par value per share, which constitutes one hundred percent (100%) of the issued and outstanding shares of capital stock of Seller. Seller desires to sell, and Buyer desires to purchase, the Assets of Seller for the consideration and subject to the terms set forth in this Agreement.

The parties, intending to be legally bound, agree as follows:

SECTION 1 DEFINITIONS AND USAGE

1.1 DEFINITIONS

For purposes of this Agreement, the following terms and variations thereof have the meanings specified or referred to in this Section 1.1:

Accounts Receivable--(a) all trade accounts receivable and other rights to payment from customers of Seller and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of Seller, (b) all other accounts or notes receivable of Seller and the full benefit of all security for such accounts or notes and (c) any claim, remedy or other right related to any of the foregoing.

Accounts Receivable Assignment - as defined in Section 2.11.

Adjustment Amount-- as defined in Section 2.8.

Agreed Working Capital-- as defined in Section 2.9(b).

Allocation of Purchase Price -- the agreed values of the Assets and Assumed Liabilities to be transferred from Seller to Buyer hereunder, which allocation shall be used by the parties for all Tax purposes and in all filings, declarations and reports with the IRS in respect thereof, including the reports required to be filed under Section 1060 of the Code.

Assets-- as defined in Section 2.1.

Assignment and Assumption Agreement-- as defined in Section 2.7(a)(ii).

Assumed Liabilities--as defined in Section 2.4(a).

Balance Sheet-- as defined in Section 3.4.

Best Efforts-- the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to achieve that result as expeditiously as possible, provided, however, that a Person required to use Best Efforts under this Agreement will not be thereby required to take actions that would result in a material adverse change in the benefits to such Person of this Agreement and the Contemplated Transactions or to dispose of or make any change to its business, expend any material funds or incur any other material burden.

Bill of Sale-- as defined in Section 2.7(a)(i).

Breach-- any breach of, or any material inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant or obligation, in or of this Agreement or any other Contract, or any event which with the passing of time or the giving of notice, or both, would constitute such a breach, inaccuracy or failure.

Bulk Sales Laws-- as defined in Section 5.10.

Business of the Seller -Seller is a stocking distributor of aircraft, engines, parts, and components, focusing on high-quality, domestically-manufactured products. The Companys products are used primarily for aerospace and military applications and/or for industrial/commercial applications that require a high level of certified/assured quality.

Business Day-- any day other than (a) Saturday or Sunday or (b) any other day on which banks in New York are permitted or required to be closed.

Buyer-- as defined in the first paragraph of this Agreement.

Buyer Indemnified Persons-- as defined in Section 11.2.

Closing--as defined in Section 2.6.

Closing Date-- the date on which the Closing actually takes place.

Closing Financial Statements--as defined in Section 3.9.

Closing Working Capital-- as defined in Section 2.9(c).

COBRA-- as defined in Section 3.14(f).

Code-- the Internal Revenue Code of 1986.

Confidential Information--as defined in Section 12.1.

Consent-- any approval, consent, ratification, waiver or other authorization.

Consulting Agreement--as defined in Section 2.7(a)(v).

Contemplated Transactions-- all of the transactions contemplated by this Agreement.

Contract-- any agreement, contract, Lease, consensual obligation, promise or undertaking (whether written or oral and whether express or implied),

whether or not legally binding.

Copyrights-- as defined in Section 3.23(a)(iii).

Damages-- as defined in Section 11.2.

Employee Plans-- as defined in Section 3.14(a).

Encumbrance--any charge, claim, community or other marital property interest, condition, equitable interest, lien, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal or similar restriction, including any restriction on use, voting (in the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership.

Environment-- soil, land surface or subsurface strata, surface waters (including navigable waters and ocean waters), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource.

Environmental, Health and Safety Liabilities-- any cost, damages, expense, liability, obligation or other responsibility arising from or under any Environmental Law or Occupational Safety and Health Law, including those consisting of or relating to:

a.	any environmental, health or safety matter or condition (including on-site or off-site contamination, occupational safety and health and regulation of any chemical substance or product);

b.	any fine, penalty, judgment, award, settlement, legal or administrative proceeding, damages, loss, claim, demand or response, remedial or inspection cost or expense arising under any Environmental Law or Occupational Safety and Health Law;

financial responsibility under any Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any cleanup, removal, containment or other remediation or response actions (Cleanup) required by any Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or any other Person) and for any natural resource damages; or

any other compliance, corrective or remedial measure required under any Environmental Law or Occupational Safety and Health Law. The terms removal, remedial and response action include the types of activities covered by the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA).

Environmental Law-- any Legal Requirement that requires or relates to:

advising appropriate authorities, employees or the public of intended or actual Releases of pollutants or hazardous substances or materials, violations of discharge limits or other prohibitions and the commencement of activities, such as resource extraction or construction, that could have significant impact on the Environment;

b.	preventing or reducing to acceptable levels the Release of pollutants or hazardous substances or materials into the Environment;

c.	reducing the quantities, preventing the Release or minimizing the hazardous characteristics of wastes that are generated;

d.	assuring that products are designed, formulated, packaged and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of;

e.	protecting resources, species or ecological amenities;

f.	reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil or other potentially harmful substances;

g.	cleaning up pollutants that have been Released, preventing the Threat of Release or paying the costs of such clean up or prevention; or

h.	making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.

ERISA-- the Employee Retirement Income Security Act of 1974.

Escrow Agent-- as defined in Section 2.3(b)

Escrow Deposit --as defined in Section 2.3(b).

Exchange Act-- the Securities Exchange Act of 1934.

Excluded Assets--as defined in Section 2.2.

Facilities-- any real property, leasehold or other interest in real property currently owned or operated by Seller, including the Tangible Personal Property used or operated by Seller. Notwithstanding the foregoing, for purposes of the definitions of Hazardous Activity and Remedial Action and Sections 3.20 and 11.3, Facilities shall mean any real property, leasehold or other interest in real property currently or formerly owned or

operated by Seller, including the Tangible Personal Property used or operated by Seller at the Facilities specified in Section 3.8.

GAAP-- generally accepted accounting principles for financial reporting in the United States, applied on a basis consistent with the basis on which the Balance Sheet and the other financial statements referred to in Section 3.4 were prepared.

Governing Documents--with respect to any particular entity, (a) if a corporation, the articles or certificate of incorporation and the bylaws; (b) if a general partnership, the partnership agreement and any statement of partnership; (c) if a limited partnership, the limited partnership agreement and the certificate of limited partnership; (d) if a limited liability company, the articles of organization and operating agreement; (e) if another type of Person, any other charter or similar document adopted or filed in connection with the creation, formation or organization of the Person; (f) all equity holders agreements, voting agreements, voting trust agreements, joint venture agreements, registration rights agreements or other agreements or documents relating to the organization, management or operation of any Person or relating to the rights, duties and obligations of the equity holders of any Person; and (g) any amendment or supplement to any of the foregoing.

Governmental Authorization--any Consent, license, registration or permit issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

Governmental Body-- any:

a.	nation, state, county, city, town, borough, village, district or other jurisdiction;

b.	federal, state, local, municipal, foreign or other government;

c.	governmental or quasi-governmental authority of any nature (including any agency, branch, department, board, commission, court, tribunal or other entity exercising governmental or quasi-governmental powers);

d.	multinational organization or body;

e.	body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; or

f.	official of any of the foregoing.

Hazardous Activity-- the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment or use (including any withdrawal or other use of groundwater) of Hazardous Material in, on, under, about or from any of the Facilities or any part thereof into the Environment and any other act, business, operation or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm, to persons or property on or off the Facilities.

Hazardous Material-- any substance, material or waste which is or will foreseeably be regulated by any Governmental Body, including any material, substance or waste which is defined as a hazardous waste, hazardous material, hazardous substance, extremely hazardous waste, restricted hazardous waste, contaminant, toxic waste or toxic substance under any provision of Environmental Law, and including petroleum, petroleum products, asbestos, presumed asbestos-containing material or asbestos-containing material, urea formaldehyde and polychlorinated biphenyls.

Improvements-- all buildings, structures, fixtures and improvements located on the Land or included in the Assets, including those under construction.

Income Tax Refundsas defined in Section 2.1(j)

Indemnified Person--as defined in Section 11.9.

Indemnifying Person--as defined in Section 11.9.

Intellectual Property Assets-- as defined in Section 3.23(a).

Interim Balance Sheet-- as defined in Section 3.4.

Inventories-- all inventories of Seller, wherever located, including all finished goods, work in process, raw materials, spare parts and all other materials and supplies to be used or consumed by Seller in the ordinary course of its continuing business.

IRS-- the United States Internal Revenue Service and, to the extent relevant, the United States Department of the Treasury.

Knowledge-- an individual will be deemed to have Knowledge of a particular fact or other matter if:

a.	that individual is actually aware of that fact or matter; or

b.	a prudent individual could be expected to discover or otherwise become aware of that fact or matter in the course of conducting a reasonably comprehensive investigation regarding the accuracy of any representation or warranty contained in this Agreement.

A Person (other than an individual) will be deemed to have Knowledge of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer, partner, executor or trustee of that Person (or in any similar capacity) has, or at any time had, Knowledge of that fact or other matter (as set forth in (a) and (b) above), and any such individual (and any individual party to this Agreement) will be deemed to have conducted a reasonably comprehensive investigation regarding the accuracy of the representations and warranties made herein by that Person or individual.

Lease - as defined in Section 2.7(a)(iv).

Legal Requirement-- any federal, state, local, municipal, foreign, international, multinational or other constitution, law, ordinance, principle of common law, code, regulation, statute or treaty.

Liability-- with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.

Marks-- as defined in Section 3.23(a)(i).

Material Consents-- as defined in Section 7.3.

Occupational Safety and Health Law-- any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, including the Occupational Safety and Health Act, and any program, whether governmental or private (such as those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.

Order-- any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Body or arbitrator.

Ordinary Course of Business--an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action:

a.	is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person;

b.	does not require authorization by the board of directors or Shareholder of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature; and

c.	is similar in nature, scope and magnitude to actions customarily taken, without any separate or special authorization, in the ordinary course of the normal, day-to-day operations of other Persons that are in the same line of business as such Person.

Patents-- as defined in Section 3.23(a)(ii).

Permitted Encumbrances-- as defined in Section 3.7.

Person-- an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture or other entity or a Governmental Body.

Proceeding-- any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal, whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

Purchase Price-- as defined in Section 2.3.

Record-- information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

Related Person- With respect to a particular individual:

a.	each other member of such individuals Family;

b.	any Person that is directly or indirectly controlled by any one or more members of such individuals Family;

c.	any Person in which members of such individuals Family hold (individually or in the aggregate) a Material Interest; and

d.	any Person with respect to which one or more members of such individuals Family serves as a director, officer, partner, executor or trustee (or in a similar capacity).

With respect to a specified Person other than an individual:

a.	any Person that directly or indirectly controls, is directly or indirectly controlled by or is directly or indirectly under common control with such specified Person;

b.	any Person that holds a Material Interest in such specified Person;

c.	each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity);

d.	any Person in which such specified Person holds a Material Interest; and

e.	any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity).

For purposes of this definition, (a) control (including controlling, controlled by, and under common control with) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and shall be construed as such term is used in the rules promulgated under the Securities Act; (b) the Family of an individual includes (i) the individual, (ii) the individuals spouse, (iii) any other natural person who is related to the individual or the individuals spouse within the second degree and (iv) any other natural person who resides with such individual; and (c) Material Interest means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least ten percent (10%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least ten percent (10%) of the outstanding equity securities or equity interests in a Person.

Release-- any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the Environment or into or out of any property.

Remedial Action--all actions, including any capital expenditures, required or voluntarily undertaken (a) to clean up, remove, treat or in any other way address any Hazardous Material or other substance; (b) to prevent the Release or Threat of Release or to minimize the further Release of any Hazardous Material or other substance so it does not migrate or endanger or threaten to endanger public health or welfare or the Environment; (c) to perform pre-remedial studies and investigations or post-remedial monitoring and care; or (d) to bring all Facilities and the operations conducted thereon into compliance with Environmental Laws and environmental Governmental Authorizations.

Representative-- with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor, accountant, financial advisor, legal counsel or other representative of that Person.

Retained Liabilities-- as defined in Section 2.4(b).

SEC-- the United States Securities and Exchange Commission.

Secured Subordinated Promissory Note--as defined in Section 2.7(b)(ii).

Securities Act--as defined in Section 3.3.

Security Agreement - as defined in Section 2.7(b)(ii).

Seller-- as defined in the first paragraph of this Agreement.

Seller Contract--any Contract (a) under which Seller has or may acquire any rights or benefits; (b) under which Seller has or may become subject to any obligation or liability; or (c) by which Seller or any of the assets owned or used by Seller is or may become bound.

Shareholder-- as defined in the first paragraph of this Agreement.

Software-- all computer software and subsequent versions thereof, including source code, object, executable or binary code, objects, comments, screens, user interfaces, report formats, templates, menus, buttons and icons and all files, data, materials, manuals, design notes and other items and documentation related thereto or associated therewith.

Subsidiary-- with respect to any Person (the Owner), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporations or other Persons board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred), are held by the Owner or one or more of its Subsidiaries.

Tangible Personal Property-- all machinery, equipment, tools, furniture, office equipment, computer hardware, supplies, materials, vehicles and other items of tangible personal property (other than Inventories) of every kind owned or leased by Seller (wherever located and whether or not carried on Sellers books), together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component Part thereof and all maintenance records and other documents relating thereto.

Tax-- any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, part environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount

thereon imposed, assessed or collected by or under the authority of any Governmental Body or payable under any tax-sharing agreement or any other Contract.

Tax Return-- any return (including any information return), report, statement, schedule, notice, form, declaration, claim for refund or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

Third Party--a Person that is not a party to this Agreement.

Third-Party Claim-- any claim against any Indemnified Person by a Third Party, whether or not involving a Proceeding.

Threat of Release-- a reasonable likelihood of a Release that may require action in order to prevent or mitigate damage to the Environment that may result from such Release.

WARN Act-- as defined in Section 3.21(d).

1.2 USAGE

a.	Interpretation. In this Agreement, unless a clear contrary intention appears:

(i)	the singular number includes the plural number and vice versa;

(ii)	reference to any Person includes such Persons successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(iii)

reference to any gender includes each other gender;

(iv)	reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(v)

reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(vi)	hereunder, hereof, hereto, and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

(vii)

including (and with correlative meaning include) means including without limiting the generality of any description preceding such term;

(viii)

or is used in the inclusive sense of and/or;

(ix)	with respect to the determination of any period of time, from means from and including and to means to and including; and

(x)	references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

b.	Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.

Legal Representation of the Parties. This Agreement was negotiated by the parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation hereof.

SECTION 2 SALE AND TRANSFER OF ASSETS; CLOSING

2.1 ASSETS TO BE SOLD

Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of any Encumbrances other than Permitted Encumbrances, all of Sellers right, title and interest in and to all of Sellers personal property and assets, tangible and intangible, of every kind and description, wherever located, including the following (but excluding the Excluded Assets):

a.	all Tangible Personal Property, including those items described in Exhibit A;

b.	all Inventories; including but not limited to Exhibit A

c.	all Seller Contracts, including those listed in Exhibit B, and all outstanding offers or solicitations made by or to Seller to enter into any Contract;

d.	all Governmental Authorizations and all pending applications therefore or renewals thereof, in each case to the extent transferable to Buyer, including those listed in Exhibit C;

all data and Records related to the operations of Seller, including client and customer lists and Records, referral sources, research and development reports and Records, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and Records and, subject to Legal Requirements, copies of all personnel Records and other Records described in Section 2.2 and certification documentation for the Inventory;

f.	all of the intangible rights and property of Seller, including Intellectual Property Assets, company name, going concern value, goodwill, telephone, telecopy and e-mail addresses and listings and those items listed in Exhibits D;

g.	all insurance benefits, including rights and proceeds, arising from or relating to the Assets or the Assumed Liabilities prior to the Closing, unless expended in accordance with this Agreement;

h.	all claims of Seller against third parties relating to the Assets, whether choate or inchoate, known or unknown, contingent or noncontingent, including all such claims listed in Exhibit E; and

all rights of Seller relating to deposits and prepaid expenses, claims for refunds and rights to offset in respect thereof that are not listed in Exhibit F. As reflected in Exhibit F, Seller and the Shareholder may be entitled to certain Income Tax Refunds relating to the operations of Seller. Such Income Tax Refunds are not included in the Assets.

All of the property and assets to be transferred to Buyer hereunder are herein referred to collectively as the Assets.

Notwithstanding the foregoing, the transfer of the Assets pursuant to this Agreement shall not include the assumption of any Liability related to the Assets unless Buyer expressly assumes that Liability pursuant to Section 2.4(a).

2.2 EXCLUDED ASSETS

Notwithstanding anything to the contrary contained in Section 2.1 or elsewhere in this Agreement, the following assets of Seller (collectively, the Excluded Assets) are not part of the sale and purchase contemplated hereunder, are excluded from the Assets and shall remain the property of Seller after the Closing:

a.	all cash, cash equivalents and short-term investments;

b.	all minute books, stock Records and corporate seals;

c.	the shares of capital stock of Seller held in treasury;

d.	all Accounts Receivable;

e.	all rights of Seller under this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the Secured Promissory Note, the Security Agreement and all other documents to be delivered in connection with the Contemplated Transactions; and

f.	the property and assets expressly designated in Exhibit F, including but not limited to the Income Tax Refunds and real property owned by Seller or its affiliates.

2.3 CONSIDERATION

The consideration for the Assets (the Purchase Price) will be (a) Two million five hundred thousand dollars ($2,500,000.00) plus or minus the Adjustment Amount and (b) the issuance of Three million five hundred thousand shares (3,500,000 shares) pursuant to Section 4(2) of the Securities Act of Buyers Preferred Stock, the subsequent transfer of which is restricted, in whole for a minimum of one year or in part for a minimum of two years, in accordance with Section 144 of the Securities Act and the assumption of the Assumed Liabilities. In accordance with Section 2.7(b), at the Closing, the Purchase Price, prior to adjustment on account of the Adjustment Amount, shall be delivered by Buyer to Seller as follows:

(i)

One million dollars ($ 1,000,000.00) by means of one Secured Subordinated Promissory Note bearing an interest rate of eight percent (8%) per annum and shall mature on November 1, 2006; and will be retired as soon as practical through the receipt of funds raised through the sale of debentures or proceeds from a Private Placement Memorandum.

(ii)

the balance as adjusted payable in the form of a second Secured Subordinated Promissory Note bearing an interest rate of eight percent (8%) per annum which shall mature no later than December 31, 2006 (Attached as Exhibit H) and will be retired as soon as practical through the receipt of funds raised through the sale of debentures or proceeds from a Private Placement Memorandum. The security for the Secured Subordinated Promissory Note is defined in Section 2.7(b)(ii). The Adjustment Amount shall be paid in accordance with Section 2.8.

(iii)

Issued at the time of Closing, Three million five hundred thousand (3,500,000) shares of Preferred Stock (Shares), pursuant to Section 4(2) of the Securities Act of Buyers Preferred Stock, the subsequent transfer of which is restricted, in whole for a minimum of one year or in part for a minimum of two years, in accordance with Section 144 of the Securities Act, commencing from the date that consideration is provided for the Shares. After the Shares have been held for a minimum of one (1) year they shall become eligible for sale at the rate of one percent (1%) per quarter of the Companys total outstanding shares provided that the Company and the eligible sale of Shares meet the conditions of Section 144 of the Securities Act.

b. Conditions Precedent to Finality of the Transfer of the Assets. Until the Buyer tenders full payment of the Secured Subordinated Promissory Note, in the amount of $1,000,000 principal plus interest in the amount of 8% per annum, as detailed in section 2.3(a)(i) above (Payment Of The First Note), the Assets shall remain in the complete domain and control of the Seller and Shareholder, and all corporate decisions or actions regarding the use or application of the Assts shall require the consent of the Shareholder. Upon Payment Of The First Note the Assets will transfer to the complete domain and control of the Buyer, subject to the remain conditions of this Agreement.

2.4 LIABILITIES

a.	Assumed Liabilities. On the Closing Date, but effective as of the Closing, Buyer shall assume and agree to discharge only the following Liabilities of Seller (the Assumed Liabilities):

(i) any trade account payable reflected on the Interim Balance Sheet (other than a trade account payable to any Shareholder or a Related Person of Seller or any Shareholder) that remains unpaid at and is not delinquent as of the Closing;

(ii) any trade account payable (other than a trade account payable to any Shareholder or a Related Person of Seller or any Shareholder) incurred by Seller in the Ordinary Course of Business between the date of the Interim Balance Sheet and the Closing that remains unpaid at and is not delinquent as of the Closing;

End of Preview

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