ASSET PURCHASE AGREEMENT

Exhibit 10.1

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “ Agreement ”) dated as of the 20 ^th day of December, 2006, by and among (i) Forefront Devant Inc., a corporation organized and existing under the laws of the State of Florida (the “ Buyer ”), (ii) Devant Ltd., a corporation organized and existing under the laws of the State of North Carolina (the “ Seller ”), (iii) James M. Sheppard, Jr., Mary Ann Sheppard Chambers, Rebecca Sheppard Roberts and Deborah Ann Sheppard (each of such persons and Seller are collectively referred to herein as the “ Seller Responsible Parties ”), (iv) ForeFront Group, Inc., a Florida corporation (“ ForeFront Group ”) with respect to Sections 1.10(c)(vi) and (c)(x) and Articles 3 and 8 hereof, and (v) ForeFront Holdings, Inc., a Florida corporation (“ ForeFront Holdings ”) with respect to Sections 1.10(c)(vii) and (c)(x) and Articles 3, 3A and 8 hereof.

W I T N E S S E T H :

WHEREAS, the Seller is engaged in the business of manufacturing, marketing, distributing and selling high quality golf towels and other towels and related accessories (the “ Business ”);

WHEREAS, the Buyer desires to acquire from the Seller and the Seller desires to sell to the Buyer substantially all of the assets utilized in and associated with the operation of the Business (as presently conducted) upon the terms and subject to the conditions set forth in this Agreement (the “ Sale ”);

WHEREAS, the respective Board of Directors of the Seller and the Buyer have each approved the Sale, the terms of this Agreement and the transactions contemplated hereby.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties, intending legally to be bound, agree as follows:

AGREEMENT

[A list of defined terms is provided in Article 9 hereof]

Article 1. Purchase and Sale

1.1 General . On the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer shall purchase from Seller, and Seller shall sell, transfer, assign, convey and deliver to Buyer, all of Seller’s right, title and interest in and to the Business, including, without limitation, in and to all of the assets, properties, rights, goodwill, contracts and claims of the Business, other than the Excluded Assets, wherever located, whether tangible or intangible, real or personal, known or unknown, actual or contingent, as the same shall exist as of the Closing (such rights, title and interest in and to all such assets, properties, rights, contracts and claims, being collectively referred to herein as, the “ Purchased Assets ”). The Purchased Assets shall include, without limitation, the following assets:

(a) cash and cash equivalents, including petty cash accounts or cash on hand or in bank accounts, certificates of deposit, commercial paper and other similar securities related to the Business;

 

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(b) all inventory (including work in process, raw materials and finished goods), goods in transit, unbilled revenues and other properties and rights associated with the performance of contracts and the operation of the Business;

(c) all equipment and machinery owned by Seller related to the Business, including but not limited to computers and software, office furniture and fixtures, as well as the rights to all communication numbers and addresses (telephone, fax, toll-free, e-mail, web site, domain name), telephone systems, office equipment and the like;

(d) all marketing materials, office supplies and letterhead used in connection with the Business;

(e) all accounts and notes receivable as well as other claims for money or other obligations due (or which hereafter will become due) to Seller arising out of the Business;

(f) all of Seller’s ownership and rights to all, present and future, trade names, trademarks, trade dress, copyright, copy, marketing/advertising designs, and patents in all forms and languages, used in or related to the Business;

(g) all goodwill associated with the Business;

(h) all of Seller’s past or present business files or records (active or inactive) related to the Purchased Assets including, but not limited to, appropriate correspondence, inquiries, contracts, agreements, letters of intent, customer lists, publications, forms and sales leads, but excluding all files and records relating to Excluded Assets and employees and employee benefits; provided , however , that the Seller shall be entitled to retain copies of all financial and tax related files and records and the Buyer shall be given copies of all employee and employee benefit files and records to the extent permissible by law;

(i) all right, title and interest in, to and under all Material Contracts associated with the Business and assumed by the Buyer, subject in each case to the terms of such contracts (the “ Assumed Contracts ”), a list of such Assumed Contracts is set forth in Schedule 1.1(i) hereto;

(j) all Permits which are transferable and which are used in the Business, as presently conducted (other than those related to the Excluded Assets);

(k) all rights of the Seller pursuant to any express or implied warranties, representations or guaranties made by suppliers to the Business;

(l) all rights under non-disclosure agreements with employees and agents of Seller and under confidentiality agreements with prospective purchasers of the Business or with other third parties to the extent relating to the Business;

(m) all deposits, prepaid charges, insurance, sums and fees, offset credit balances in any country, refunds, and causes of action (other than those related to the Excluded Assets);

(n) all assets associated with the Sir Christopher Hatton business recently acquired by the Seller; and

 

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(o) any other assets of Seller which are used in the Business and which are of a nature not customarily reflected in the books and records of a business, such as assets which have been written off for accounting purposes but which are still used by or of value to the Business.

The Purchased Assets will be delivered to Buyer free and clear of any Encumbrances.

1.2 Excluded Assets . Notwithstanding anything herein to the contrary, the Purchased Assets shall not include any of the following assets related to the Business (collectively, the “ Excluded Assets ”):

(a) The fee owned Real Property located at 3011 Walkup Avenue, Monroe, North Carolina 28110 (the “ Premises ”);

(b) All fixtures relating to the operation of the building or improvements located on the Premises (i.e., HVAC, plumbing, elevators, etc.) (but not including any furniture located within such improvements);

(c) Life insurance policies that are held for the benefit of Sheppard family members;

(d) Any personal items and furniture belonging to the Sheppard family located in their respective offices at the Premises, including without limitation, items contained in the attic above the embroidery department and the flush rear door area (also know as the “boat area”);

(e) Jeep, Tahoe and Ford F350 vehicles identified on Schedule 1.2(e) ; and

(f) the items of property described on Schedule 1.2(f) .

1.3 Certain Provisions Relating to the Purchased Assets .

(a) To the extent that a contract, Permit or other asset which would otherwise be included within the definition of “Purchased Assets,” or any claim, right or benefit arising thereunder or resulting therefrom (each an “ Interest ” and collectively the “ Interests ”), is not capable of being sold, assigned, transferred or conveyed without the approval, consent or waiver of the issuer thereof or the other party thereto, or any third person (including a Governmental Authority), and such approval, consent or waiver has not been obtained prior to the Closing, or if such sale, assignment, transfer or conveyance or attempted sale, assignment, transfer or conveyance would constitute a breach thereof or a violation of any law, decree, order, regulation or other governmental edict, this Agreement shall not constitute a sale, assignment, transfer or conveyance thereof, or an attempted sale, assignment, transfer or conveyance thereof.

(b) Seller Responsible Parties and Buyer shall use their commercially reasonable best efforts and shall cooperate to obtain all approvals, consents or waivers necessary to convey to Buyer each Interest as of the Closing. The failure to obtain any approval, consent or waiver necessary to convey any Interest to Buyer shall not affect the obligations of the parties to close hereunder. Subsequent to the Closing, the Seller Responsible Parties shall execute and deliver any other instruments and take any actions, which may be reasonably required for the implementation of this Agreement and the transactions contemplated hereby.

 

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1.4 Assumption of Liabilities . On the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer will assume and become responsible for the following liabilities and obligations of the Seller (the “ Assumed Liabilities ”):

(a) all of the Seller’s accounts payable (which have arisen in the ordinary course of the Business), accrued expenses and the third party liabilities and obligations set forth on Schedule 1.4(a) ;

(b) all liabilities and obligations arising out of the ownership by Buyer of the Purchased Assets or the operation by the Buyer of the Business after the Closing Date (other than any Excluded Liability); and

(c) the obligations under the Assumed Contracts being transferred to Buyer hereunder, a list of which is set forth on Schedule 1.1(i) (to the extent that such liabilities and obligations remain unsatisfied or are required to be performed on or after the Closing Date), including the salary and royalty obligations due to Sir Christopher Hatton (the amounts of which are tied to sales volume).

1.5 Excluded Liabilities . Except for the Assumed Liabilities, the Seller Responsible Parties and the Buyer expressly understand and agree that Buyer shall not assume, pay, perform or discharge or otherwise become liable for any obligations, commitments or liabilities of any and every nature whatsoever of the Seller, whether known or unknown, fixed or contingent, relating to the ownership of the Purchased Assets, the operation of the Business or otherwise (the “ Excluded Liabilities ”), including, without limitation, liabilities and obligations relating to or arising in connection with the following:

(a) all liabilities associated with the Real Property including the Premises including, without limitation, the note and mortgage thereon;

(b) liabilities resulting from Environmental Claims relating to the operation of the Business prior to the Closing;

(c) Seller’s bank debt and other funded debt, including overdrafts, all of which will be paid or discharged in full by Seller at or prior to Closing;

(d) any liability or obligation arising out of any claim of or for injury to persons or property by reason of the improper performance or malfunctioning, improper design or manufacture, or failure to adequately package, label or provide warnings as to the hazards of, any product of the Business, where the injury giving rise to such claim occurred on or prior to the Closing Date;

(e) any liability of the Seller to any plan, individual or governmental agency arising out of any failure of the Seller to comply with the applicable provisions of any Employee Benefit Plans, ERISA, the Code, or other applicable Laws with respect to its employees, including any obligation or liability of the Seller for any penalty, fine or similar amount due from the Seller on account of any breach of fiduciary duty or failure to comply with applicable laws or regulations;

(f) any liability associated with the hiring, employment or termination of any employees of Seller at any time prior to Closing including obligations under any severance,

 

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deferred compensation or employment agreements, guaranteed fixed terms of employment or retirement benefits beyond those provided under applicable law, collective bargaining agreements, or any Employee Benefit Plan applicable to employees of the Business generally, which arises out of any acts or omissions of Sellers prior to the Closing Date;

(g) any liability associated with the Excluded Assets; and

(h) all liabilities of Seller or any Affiliate of Seller for Taxes.

1.6 Purchase Price; Payment . On the terms and subject to the conditions set forth in this Agreement, and subject to adjustment as provided herein, at the Closing the Buyer shall acquire the Purchased Assets from the Seller for an aggregate consideration ranging from approximately Five Million Dollars ($5,000,000) up to Five Million Seven Hundred and Fifty Thousand Dollars ($5,750,000) (the “ Purchase Price ”), dependent upon the amount paid by the Buyer with respect to the Seller’s loan payable to RBC Centura described in Section 1.6(b), below. In addition, the Purchase Price may be adjusted as provided in Section 1.8 below. The Purchase Price shall be payable as follows:

(a) The Closing Cash Payment in cash by wire transfer to the account or accounts designated by the Seller Responsible Parties not later than three Business Days prior to the Closing Date;

(b) On the Closing Date, the Buyer shall pay, on behalf of the Seller, the Seller’s loan payable to RBC Centura in the outstanding amount of $1,019,472;

(c) On the Closing Date, the Buyer shall deliver to the Seller the executed Promissory Note A in the principal amount of $250,000;

(d) On the Closing Date, the Buyer shall deliver to the Seller the executed Promissory Note B in the principal amount of $1,250,000 (or such lesser amount as provided herein);

(e) On the Closing Date, the Buyer shall deliver to the Seller the executed Promissory Note C in the principal amount of $150,000;

(f) 250,000 shares of the common stock of ForeFront Holdings (the “ Common Shares ”).

1.7 Closing Balance Sheet and Net Asset Value Statement . At the Closing, the Buyer and the Seller shall jointly cause to be prepared a balance sheet of the Business as it existed immediately prior to the Closing (the “ Closing Date Balance Sheet ”), prepared in accordance with GAAP. The Closing Date Balance Sheet shall be accompanied by an additional schedule of information (the “ Closing Date Schedule of Net Assets ”) which shall accurately present the Net Assets purchased by the Buyer as at the Closing Date (the “ Closing Date Net Assets ”).

 

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1.8 Purchase Price Adjustments; Deemed Satisfaction of Promissory Note B . The Purchase Price may be adjusted in accordance with the following:

(a) The principal amount of Promissory Note B may be adjusted as follows:

(i) Any amounts in excess of $1,750,000 paid by the Buyer to pay off the Seller’s line of credit with RBC Centura shall be deducted from the original principal amount of Promissory Note B;

(ii) Intentionally deleted.

(iii) In the event that any other mutually agreeable adjustments are necessary, then the Purchase Price will be further adjusted by increasing or decreasing the principal amount of Promissory Note B. For example, if the Buyer and the Seller disagree as to the value of any Purchased Asset, then the Buyer will pay the Seller the stated book value for the subject Purchased Asset. The Seller will then have a period of 24 months following the Closing to sell such Purchased Asset. If the Seller is unable to sell such Purchased Asset for at least the stated book value, then the Purchase Price shall be reduced dollar for dollar and shall be reflected by a reduction in Promissory Note B. If the Seller is able to sell the subject Purchased Asset for more than the stated book value, then the difference between the stated book value and the sales proceeds for such Purchased Asset shall be divided equally between the Buyer and the Seller and paid to the Seller within 10 days after sale.

(b) The principal amount of Promissory Note B may also be adjusted as follows: The Purchase Price is based on the assumption that adjusted EBITDA of the Seller for the 2007 fiscal year will be at least $930,000. In the event that adjusted EBITDA for fiscal year 2007 is less than $930,000, the Purchase Price will be adjusted downward dollar for dollar for each dollar by which adjusted EBITDA is less than $930,000 for such fiscal year. The amount of any such adjustment shall be deducted from the principal amount due under Promissory Note B. In the event that adjusted EBITDA for fiscal year 2007 is greater than $930,000, the Purchase Price will be adjusted upward dollar for dollar for each dollar by which EBITDA exceeds $930,000 for such fiscal year. The amount of any such adjustment shall be added to the principal amount due under Promissory Note B. By way of illustration, (A) if the adjusted EBITDA amount is $630,000 for the 2007 fiscal year, the Purchase Price shall be decreased by $300,000 and the principal amount of Promissory Note B shall be likewise reduced; and (b) if the adjusted EBITDA amount is $1,230,000, the Purchase Price shall be increased by $300,000 and the principal amount of Promissory Note B shall be likewise increased. Such adjustment, if any, shall be determined based on the Devant division’s adjusted EBITDA for the year ended December 31, 2007 as set forth in Forefront Holdings’ Annual Report on Form 10-KSB for the year then ended, and the amount of such adjustment shall be finalized within 10 days of the filing of such Annual Report on Form 10-KSB with the SEC.

In determining the EBITDA for the 2007 fiscal year, the Buyer shall prepare an income statement of the Devant division of the Buyer normalized to reflect what the income statement of the Seller for such period would have been had the Purchased Assets not been sold to the Buyer and had such income statement been prepared in the same manner as the Seller’s income statements were prepared prior to Closing (including, without limitation, year-end adjustments to inventory balances, reserves and allowances and year-end accruals consistent with past practices of the Company) (the “ Normalized Income Statement ”). The following are examples of some of the types of adjustments to the income statement for such period that will be reflected in the Normalized Income Statement: (i) the Normalized Income Statement will not include any

 

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expenses or taxes paid, accrued or incurred by the Buyer in connection with the transactions contemplated by this Agreement; (ii) in the event that a facility of the Buyer is closed or merged into or consolidated with the operations of another facility, the Normalized Income Statement will reflect what the consolidated income statement of the Devant division for such period would have been had such closing, merger or consolidation had not occurred; (iii) in the event that the Buyer acquires any other business or product line, the results of such acquisition and all expenses related to the acquisition and operation thereof shall be excluded from the Normalized Income Statement; (iv) in the event of any dispute relating to this Agreement, all expenses of the Buyer related to the resolution of such dispute shall be excluded from the Normalized Income Statement; (v) to the extent that any related party transactions occurring after the Closing Date are reflected on the books of the Buyer on terms other than arms length terms, such transactions will be reflected in the Normalized Income Statement as if they had been made on arms length terms; (vi) to the extent that after the Closing the compensation paid to employees is increased (other than increases of compensation in the ordinary course of business consistent with the Seller’s past practices), the Normalized Income Statement will reflect the level of compensation expense that would have been realized had such increase in compensation not occurred; and (vii) to the extent that after the Closing, the Buyer acquires any new capital equipment for any purpose other than to replace existing equipment, the earnings and expenses related to such new equipment will be excluded from the Normalized Income Statement to the extent that such earnings and equipment are used to process (a) business for a new customer that has not been a customer of Seller during the twelve (12) month period immediately preceding the Closing or (b) business for an existing customer of the Company that is in excess of the average monthly volumes processed for such customer during the preceding twelve-month period.

(c) In addition to the foregoing, Promissory Note B may be satisfied with the Common Shares as set forth herein. As of April 15, 2009, the Buyer has a good faith belief that the fair market value of the Common Shares will be at least $5.00 per share (based on the 30 day moving average trading price of Forefront Holdings’ common stock as quoted on the OTC Bulletin Board or other established market (the “ 30-Day Value ”)) and that such Common Shares will be saleable at such price on a national exchange or other established market on April 15, 2009.

(i) In the event that on April 15, 2009, the aggregate value of the Common Shares (based on the 30-Day Value) is less than the then outstanding principal amount of Promissory Note B, then (1) the principal balance of Promissory Note B (as such amount may be adjusted as provided herein) shall be reduced by the value of the Common Shares as of such date (based on the 30-Day Value), and (2) the Buyer shall pay the residual balance of Promissory Note B in cash (provided that, any such payment is subject to the subordination agreement entered into between the Seller and the Buyer’s senior lender).

(ii) In the event that on April 15, 2009, the aggregate value of such Common Shares (based on the 30-Day Value) is equal to or greater than the then outstanding principal amount of Promissory Note B, then Promissory Note B shall be deemed paid and satisfied in full. In the event that there has been one or more downward adjustments to Promissory Note B in accordance with this Section 1.8 and the aggregate value of the Common Shares (based on the 30-Day Value) is greater than the then outstanding principal amount of Promissory Note B, then the Seller shall immediately pay to the Buyer an amount in cash equal to the lesser of (1) the shortfall amount between

 

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the aggregate value of the Common Shares and the then outstanding principal amount of Promissory Note B and (2) the aggregate dollar amount of all downward adjustments to Promissory Note B;

provided , however , that the Seller may pay such amount by transferring to the Buyer that amount of Common Shares having a value (based on the 30-Day Value) equal to the difference between the aggregate value of all of the Common Shares and the then outstanding principal amount of Promissory Note B in lieu of paying such amount in cash.

If at any time prior April 15, 2009, the Seller shall sell all or a portion of the Common Shares, which sale shall require the prior written consent of the Buyer, then Promissory Note B shall be reduced by an amount equal to the product of $5.00 and the amount of Common Shares sold.

1.9 Pro-rations . All obligations due in respect of periods prior to Closing shall be paid in full or otherwise satisfied by the Seller and all obligations due in respect of periods after Closing shall be paid in full or otherwise satisfied by Buyer. Taxes, customer deposits, prepayments, employee accruals and similar items identified on Schedule 1.9 hereto will be prorated at Closing.

1.10 Closing and Closing Date .

(a) The closing (the “ Closing ”) of the transactions herein contemplated shall occur no later than ten Business Days following the satisfaction of the conditions to Closing set forth herein (such time and date being referred to herein as the “ Closing Date ”), at such place or places and in such manner as the parties shall reasonably agree. Notwithstanding the foregoing, the Closing shall be held no later than December 19, 2006 (unless otherwise agreed in writing by the parties).

(b) At the Closing, the Seller Responsible Parties shall deliver, or caused to be delivered, to the Buyer the following items:

(i) a duly executed bill of sale and such other executed assignments, bills of sale or certificates of title, each dated the Closing Date and in form and substance reasonably satisfactory to counsel to Buyer, as are reasonably necessary to transfer to Buyer all of Seller’s right, title and interest in, to and under the Purchased Assets and the Assumed Contracts;

(ii) duly executed assignments, sufficient to transfer all of Seller’s right, title and interest in and to the Intellectual Property Rights to Buyer, in a form suitable for recording in the various appropriate national or regional patent, trademark, copyright offices or other governmental offices;

(iii) certificate of the secretary of the Seller, dated the Closing Date, (A) as to the incumbency and signatures of the officers or representatives of the Seller executing this Agreement and each of the agreements and any other certificate or other document to be delivered pursuant hereto or thereto, together with evidence of the incumbency of such Secretary, and (B) certifying attached resolutions of the Board of Directors and shareholders of the Seller, which authorize and approve the execution and delivery of this Agreement and each of the agreements to which Seller is a party and the consummation of the transactions contemplated hereby and thereby;

 

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(iv) duly executed letters, in the form of Exhibit D attached hereto, whereby the Seller notifies its customers and distributors of the consummation of the Sale and instructs such customers and distributors to remit payment relating to the Purchased Assets directly to the Buyer;

(v) duly executed letters, in the form of Exhibit E attached hereto, whereby the Seller notifies its suppliers, vendors and lessors of the consummation of the Sale;

(vi) duly executed lease agreement and landlord waiver, in the form of Exhibit F attached hereto, for the Premises; and

(vii) duly executed subordination agreement in form and content acceptable to the Seller and principal lender of Buyer and ForeFront Holdings (along with any other documents which such lender may reasonably request).

(c) At the Closing, the Buyer shall deliver, or caused to be delivered, to the Seller the following items:

(i) the Closing Cash Payment;

(ii) the duly executed Promissory Note A in the form of Exhibit A attached hereto;

(iii) the duly executed Promissory Note B in the form of Exhibit B attached hereto;

(iv) the duly executed Promissory Note C in the form of Exhibit C attached hereto;

(v) stock certificate(s) evidencing the Common Shares;

(vi) certificate of the secretary of the Buyer, dated the Closing Date, (A) as to the incumbency and signatures of the officers or representatives of Buyer executing this Agreement and each of the agreements and any other certificate or other document to be delivered pursuant hereto or thereto, together with evidence of the incumbency of such Secretary, and (B) certifying attached resolutions of the Board of Directors of the Buyer, which authorize and approve the execution and delivery of this Agreement and each of the agreements to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby;

(vii) certificate of the secretary of ForeFront Group, dated the Closing Date, (A) as to the incumbency and signatures of the officers or representatives of ForeFront Group executing this Agreement and each of the agreements and any other certificate or other document to be delivered pursuant hereto or thereto, together with

 

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evidence of the incumbency of such Secretary, and (B) certifying attached resolutions of the Board of Directors of ForeFront Group, which authorize and approve the execution and delivery of this Agreement and each of the agreements to which ForeFront Group is a party and the consummation of the transactions contemplated hereby and thereby;

(viii) certificate of the secretary of ForeFront Holdings, dated the Closing Date, (A) as to the incumbency and signatures of the officers or representatives of ForeFront Holdings executing this Agreement and each of the agreements and any other certificate or other document to be delivered pursuant hereto or thereto, together with evidence of the incumbency of such Secretary, and (B) certifying attached resolutions of the Board of Directors of ForeFront Holdings, which authorize and approve the execution and delivery of this Agreement and each of the agreements to which ForeFront Holdings is a party and the consummation of the transactions contemplated hereby and thereby;

(ix) duly executed employment agreement, in the form of Exhibit G attached hereto, entered into between the Buyer and James M. Sheppard, Jr.;

(x) duly executed lease agreement, in the form of Exhibit F attached hereto, for the Premises; and

(xi) duly executed Guaranty Agreements executed by ForeFront Group and ForeFront Holdings, each in the form of Exhibit H attached hereto, whereby ForeFront Group and ForeFront Holdings guarantee the obligations of the Buyer under Promissory Note A, Promissory Note B and Promissory Note C which Guaranty Agreements shall be subject to the terms of the subordination agreement executed by Seller and Buyer’s senior lender.

(d) At the Closing, each of the parties hereto shall take, or cause to be taken, all such actions and deliver, or cause to be delivered, all such other documents, instruments, certificates and other items as may be required under this Agreement or otherwise, in order to perform or fulfill all covenants and agreements on its part to be performed at or prior to the Closing Date.

1.11 Taking of Necessary Action; Further Action; Cooperation .

(a) Each of the parties shall use its respective reasonable best efforts to take all such action as may be necessary or appropriate in order to effectuate the Closing as promptly as possible. If, on or at any time after the Closing Date, any further reasonable action is necessary or desirable to carry out the purposes of this Agreement and to vest the Buyer with full right, title and possession to all assets, property, rights, privileges, powers, and franchises of the Purchased Assets, the Seller Responsible Parties shall take, and shall ensure that the officers of the Seller are fully authorized, in the name of the Seller or otherwise, to take, and shall take, all such lawful and necessary action, all at the expense of the Buyer.

(b) The Seller Responsible Parties and the Buyer shall generally cooperate with each other and their respective officers, employees, attorneys, accountants and other agents and do such other acts and things in good faith as may be reasonable, necessary or appropriate to timely effectuate the intent and purposes of this Agreement and the consummation of the Sale. In connection with these efforts, each of the parties hereto shall use its commercially reasonable

 

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efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under any Law or otherwise to consummate and make effective the transactions contemplated by this Agreement; (ii) obtain any third party consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, including the consents set forth on Schedule 1.10 , approvals or waivers in respect of contracts which are being assumed by the Buyer; and (iii) make all filings and give any notice, and thereafter make any other submissions either required or reasonably deemed appropriate by each of the parties, with respect to this Agreement and the transactions contemplated hereby required under any Law, including applicable securities and antitrust Laws.

1.12 Allocation of Consideration . The parties agree that the Purchase Price for the Purchased Assets shall be allocated to and among the Purchased Assets, in a manner consistent with Sections 338 and 1060 of the Code and the regulations thereunder and as set forth in Forefront Holdings’ Current Report on Form 8-K and any amendments thereto to be filed with the SEC in connection with the transactions contemplated hereby. The parties shall file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with such allocation. The parties agree to provide such cooperation and information as may be required by the other for the purpose of preparing such reports. The parties further agree that a portion of the Purchase Price equal to the value of the Closing Date Net Assets shall be allocated to the Purchased Assets based on the book values of such Purchased Assets, and that the remaining portion of the Purchase Price shall be allocated to goodwill.

Article 2. Representations and Warranties of the Seller Responsible Parties.

In order to induce the Buyer to enter into this Agreement and purchase the Purchased Assets, each of the Seller and James M. Sheppard, Jr., jointly and severally, makes the following representations and warranties to the Buyer, which representations and warranties shall be true and correct as of the date hereof:

2.1 Disclosure Schedules; Due Diligence Information; Access .

(a) The Seller Responsible Parties have delivered to the Buyer the Disclosure Schedule, which includes the numbered schedules specifically referred to in this Article 2 (the “ Disclosure Schedule ”). The information contained in the Disclosure Schedule is complete and accurate, and all documents that are attached to or form a part of the Disclosure Schedule are complete and accurate copies of the genuine original documents they purport to represent. References to Schedules in this Agreement shall be to Schedules included in the Disclosure Schedule.

(b) All of the documents, financial statements, reports, compilations, management and statistical reports and other information provided by the Seller to the Buyer in response to Buyer’s due diligence investigation of the Business and the Purchased Assets are true, correct and complete in all material respects.

(c) The Seller has given the Buyer and its representatives reasonable access to Seller’s employees (including appropriate experts and other knowledgeable personnel), attorneys, accountants, agents, independent contractors, properties, books and records of the

 

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Seller and has furnished the Buyer and its representatives with such information concerning the Seller as the Buyer has reasonably requested, including such access and cooperation as may be necessary to allow the Buyer and its representatives to:

(i) identify those contracts and Permits that require third party consent to the transactions contemplated hereby, those that expire or may be terminated prior to or soon after the Closing and those that may require special documentation at the Closing; and

(ii) review any arrangements with respect to those assets that will be assigned or transferred to the Buyer at the Closing in accordance with the terms of this Agreement.

2.2 Organization and Standing . The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of North Carolina and has all requisite corporate power and authority to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state in which the operation of its business or ownership of its assets makes such qualification necessary, except where the failure to so qualify or be in good standing could not reasonably be expected to have a Material Adverse Effect. The copies of the articles of incorporation and bylaws or other organizational documents which have been delivered to the Buyer are true, accurate and complete in all material respects. The Seller does not have any subsidiaries and does not own or have any right to acquire any equity interest in any other Person. The Seller does not presently own or control, directly or indirectly, any interest in any other corporation, association, or other business entity. The Seller is not a participant in any joint venture, partnership or similar arrangement.

2.3 Binding Agreement . The Seller has all requisite corporate power and authority to enter into this Agreement, to execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Seller and the consummation by the Seller of its obligations hereunder have been duly and validly authorized by all necessary corporate and stockholder action on the part of the Seller. This Agreement has been duly executed and delivered on behalf of the Seller and, assuming the due authorization, execution and delivery by the Buyer, constitutes a legal, valid and binding obligation of the Seller enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights and remedies generally and to general principles of equity. As of the Closing Date, each of the agreements, instruments and other documents to be delivered hereunder to the Buyer at the Closing will have been duly and validly executed and delivered by the Seller and will be enforceable against the Seller in accordance with its terms.

2.4 Absence of Violations; Required Consents .

(a) The execution, delivery and performance by the Seller of this Agreement and the consummation of the transactions contemplated hereby do not and will not (a) violate or result in the breach or default of any provision of articles, certificates of incorporation, by-laws or other charter or corporate governance documents of the Seller, (b) violate any Law or Governmental Order applicable to the Seller or any of its properties or assets, (c) except for the Required Consents, require any consent, approval, authorization or other order of, action by,

 

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registration or filing with or declaration or notification to any Governmental Authority or any other Person or (d) result in any violation or breach of, constitute a default (or event which with the giving of notice, or lapse of time or both, could reasonably be expected to become a default) under, require any consent under, or give to others any rights of notice, termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on the Purchased Assets, or result in the imposition or acceleration of any payment, time of payment, vesting or increase in the amount of compensation or benefit payable, pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license or permit, or franchise to which the Seller is a party or by which its assets are bound.

(b) The Seller has obtained all of the Required Consents. The Seller does not need to give any notice to, make any filing with or obtain any authorization, consent or approval of any Governmental Authority in order for the parties to consummate the transactions contemplated by this Agreement. A true and complete list of all third party (including, without limitation, lenders, lessors, licensees, licensors, distributors and vendors) consents, licenses, permits, waivers, approvals, authorizations or orders obtained or made in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and the continuation in force of any rights, licenses, permits, authorizations, agreements, instruments or documents of the Seller is set forth on Schedule 2.4(b) attached hereto. Without limiting the generality of the foregoing, the Seller has obtained the consent and release of liens from RBC Centura. Except as disclosed in Schedule 2.4(b), the Assumed Contracts are assignable by the Seller without any consent of any third parties and the assignment of the Assumed Contracts will not cause any default in the performance of any of the terms, covenants, conditions or agreements under the Assumed Contracts.

(c) Neither any statute, rule, regulation, order, stipulation, decree, judgment, or injunction has been enacted, promulgated, entered, or enforced to the purchase nor any other action has been taken by any Government Entity (i) which prohibits the consummation of the transactions contemplated by this Agreement; (ii) which prohibits Buyer’s ownership or operation of all or any material portion of the Business or the Purchased Assets, or which compels the Buyer to dispose of or hold separately all or any portion of the Purchased Assets as a result of the transaction contemplated herein; (iii) which makes the purchase of, or payment for, some or all of the Purchased Assets illegal; (iv) which imposes material limitations on the ability of the Buyer to acquire or hold or to exercise effectively all rights of ownership of the Purchased Assets; or (v) which imposes any limitations on the ability of the Buyer effectively to control in any material respect the Business or operations of the Seller.

2.5 Entire Business . The Seller’s ownership of the Business is evidenced solely by the Purchased Assets and the sale, assignment, conveyance and delivery of the Purchased Assets to the Buyer pursuant to this Agreement will transfer all of the Seller’s and its Affiliates’ ownership interests comprising such Business except for the Excluded Assets.

2.6 Financial Information . Attached hereto as Schedule 2.6 are copies of the Seller’s unaudited balance sheets and statements of income and cash flow as of and for the calendar years ended on December 31 of 2004 through 2005 (the “ Interim Financial Statements ”). All such financial statements are true, complete and correct in all material respects, were prepared in accordance with accounting practices and procedures historically used by the Seller applied on a consistent basis throughout the periods covered thereby and present fairly the financial condition of the Seller as of such dates and the results of operations and cash flows for the periods then ended.

 

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2.7 Absence of Certain Changes . Except as set forth in Schedule 2.7 and in the unaudited balance sheet of the Seller as at June 30, 2006 (“ Interim Balance Sheet ”) and the Interim Financial Statements previously delivered to the Buyer, since December 31, 2005 to the date of this Agreement there has not been any change in the financial condition or results of operations or cash flows of the Business or in the condition of the Purchased Assets and the Business has not suffered any damage, destruction or loss, in each case which has had or which could reasonably be expected to have a Material Adverse Effect.

2.8 No Undisclosed Liabilities . Except as set forth on Schedule 2.8 , there are no liabilities associated with the Business or the Purchased Assets (whether accrued, absolute, contingent or otherwise), except for (i) liabilities of the Business set forth or reserved against or disclosed in the December 31, 2005 Balance Sheet or the notes thereto, (ii) liabilities disclosed in this Agreement or the Disclosure Schedules hereto or the other agreements contemplated by this Agreement, (iii) liabilities incurred in the ordinary course of business since the date of the December 31, 2005 Balance Sheet and (iv) Excluded Liabilities.

2.9 Business Conduct . Neither the Seller nor any of its officers, directors, employees or agents, nor persons acting under the authority of any of the foregoing (i) have, to the Knowledge of the Seller Responsible Parties, made, or have been charged by any governmental authority with making, directly or indirectly, any domestic or foreign payments for bribes or kickbacks (governmental or commercial) or unlawful political contributions or other questionable or illegal payments with respect to the Business or to secure favorable treatment for the Business or (ii) have maintained or permitted to exist any use of “off the books” bookkeeping, secret accounts, unrecorded bank accounts, “slush” funds, falsified books, or any other device that could have been or could be utilized to distort records or reports of the true operating results and financial condition of the Business.

2.10 Title to Assets; Related Matters . (i) The Seller has good, valid and marketable title (as measured in the context of their current uses) to, or, in the case of leased or subleased assets or other possessory interests, valid and subsisting leasehold or other possessory interests (as measured in the context of their current uses) in all of the Purchased Assets in order to conduct the Business, free and clear of all Encumbrances, (ii) the Purchased Assets constitute all the assets and rights necessary for the operation of the Business as currently conducted, (iii) the Equipment is in good operating condition and repair, normal wear and tear excepted, and maintained in accordance with industry practices taking into account the age thereof, (iv) there are no assets, properties or rights necessary to conduct the Business as the same was conducted immediately prior to the date hereof that are owned by any Person other than the Seller which assets, properties or rights are not to be leased or licensed to Buyer under valid, current lease or license arrangements and (v) there are no contractual or legal restrictions to which the Seller is a party or by which the Equipment is otherwise bound that preclude or restrict the Seller’s ability to use the Equipment for the purposes for which it is currently being used. The Seller enjoys peaceful and undisturbed possession of all Equipment. The Equipment and other tangible assets owned or used by the Seller have no known material defects. None of the Purchased Assets is subject to any commitment or other arrangement for its sale or use by the Seller, its Affiliates or third parties. The assets reflected on the December 31, 2005 Balance Sheet or acquired thereafter shall be valued on the books of the Seller at or below the actual cost less an adequate and proper depreciation charge. The Seller has not depreciated any of the Purchased Assets on an accelerated basis (or in any other manner) inconsistent with applicable requirements of the Code.

 

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2.11 Equipment and Other Tangible Assets . The Equipment and other tangible assets which are included in the Purchased Assets are in all material respects adequate for the purposes for which such Purchased Assets are currently used or are held for use, and are in good repair and operating conditions (subject to normal wear and tear) and, to the Knowledge of the Seller Responsible Parties, there are no facts or conditions affecting the Purchased Assets which could, individually or in the aggregate, interfere with any material respect with the use, occupancy or operation thereof as currently used, occupied or operated, or their adequacy for such use.

2.12 Absence of Certain Changes, Events and Conditions . Since December 31, 2005, except as otherwise provided in or contemplated by this Agreement or as set forth on Schedule 2.12 , the Seller has not:

(a) other than in the ordinary course of business consistent with past practice, sold, transferred, leased, subleased, licensed, encumbered or otherwise disposed of any Purchased Assets, other than the sale of obsolete Equipment;

(b) permitted any of the Purchased Assets to be subjected to any Encumbrance;

(c) made any changes, including changes to collection practices, to be made in the operations of the Seller;

(d) made any commitments for the Seller to make capital expenditures in excess of $20,000 individually or in the aggregate;

(e) made any amendment of the articles of incorporation or bylaws of the Seller;

(f) permitted any new agreement, contract, commitment or arrangement, or amendments or modifications to any existing such agreement, contract, commitment or arrangement, to be entered into with any Affiliate of the Seller or any third parties that is material to the Seller or that will continue in effect after the Closing Date and not be terminable by the Seller on not more than 30 days’ written notice without payment of premium or penalty;

(g) other than in the ordinary course of business consistent with past practice, entered into any new Material Contract or any amendments or modifications to any existing such Material Contract;

(h) borrowed any amount or incurred or become subject to any liabilities, except trade payables incurred in the ordinary course of business and liabilities under contracts entered into in the ordinary course of business (excluding any capital lease obligations);

(i) discharged or satisfied any material Encumbrance or paid any material obligation or liability, other than in the ordinary course of business;

(j) declared, set aside or made any payment or distribution of cash or other property to its stockholders with respect to its capital stock or other equity securities or

 

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purchased or redeemed any shares of its capital stock or other equity securities (including, without limitation, any warrants, options or other rights to acquire its capital stock or other equity securities);

(k) sold, assigned or transferred any material Intellectual Property Rights or disclosed any proprietary confidential information to any Person;

(l) other than in the ordinary course of business consistent with past practice, granted any increase, or announced any increase, in the wages, salaries, compensation, bonuses, incentives, pension or other benefits payable to any of the officers, employees, independent contractors or agents, including, without limitation, any increase or change pursuant to any Employee Benefit Plan, or established, increased or accelerated the payment or vesting of any benefits under any Employee Benefit Plan with respect to officers or employees;

(m) made any material change in any method of accounting or accounting practice or policy, including, without limitation, material changes in assumptions underlying or methods of calculating bad debt, contingency or other reserves, or notes or accounts receivable write-offs, or in corporate allocation methodology, in each case other than changes required by Law or under GAAP;

(n) suffered any casualty loss or damage with respect to any assets, whether or not covered by insurance;

(o) incurred or guaranteed any indebtedness for borrowed money other than indebtedness repaid at or prior to the Closing or indebtedness that will constitute Excluded Liabilities;

(p) other than in the ordinary course of business consistent with past practice, deferred the payment of any accounts payable;

(q) made any loans, advances or capital contributions to, or investments in, any other Person, other than in the ordinary course of business;

(r) merged or consolidated with, or acquired any equity or all or substantially all of the assets of, any other Person;

(s) experienced any material adverse change in the condition, financial or otherwise, business, assets or rights of the Seller;

(t) conducted the Business outside of the ordinary and usual course consistent with past practice;

(u) compromised, settled, granted any waiver or release relating to, or otherwise adjusted any Action, Indebtedness or any other claims or rights; or

(v) entered into any agreement, contract, commitment or arrangement to do any of the foregoing.

 

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2.13 Litigation .

(a) Except as set forth on Schedule 2.13 , as of the date hereof: (i) there are no Actions against the Seller pending, or, to the Knowledge of the Seller Responsible Parties, threatened to be brought against the Seller or the Business, (ii) the Seller is not subject to any Governmental Order (nor, to the Knowledge of the Seller Responsible Parties, are there any such Governmental Orders threatened to be imposed by any Governmental Authority), in each case with respect to the Seller or the Business; and (iii) there is no Action pending, or, to the Knowledge of the Seller Responsible Parties, threatened to be brought that seeks to question, delay or prevent the consummation of the transactions contemplated hereby. As of the date hereof, no preliminary or permanent injunction or other order issued by any United States federal or state Governmental Authority, nor any Law promulgated or enacted by any United States federal or state Governmental Authority, that restrains, enjoins or otherwise prohibits the transactions contemplated hereby or limits the ability in any respect of the rights of the Seller to hold its assets and conduct its present, planned or prospective business, or imposes civil or criminal penalties on any stockholder, director or officer of the Buyer if such transactions are consummated, is in effect

(b) Schedule 2.13 lists the following for the period from January 1, 2003 to the present (and, in the case of clause (z), any other matter referred to therein which is currently in effect): (x) all fines (civil and criminal), penalties imposed by any governmental agency or authority (other than short or long-term disability or medical claims), (y) actions, administrative or arbitration proceedings requiring a payment by the Seller in excess of $10,000 (other than short or long-term disability claims) and (z) any final order, writ, judgment, injunction, decree, determination or other award of any court or any governmental agency which are related to the Business or the Purchased Assets.

2.14 Insurance . The insurance policies of the Seller are listed on Schedule 2.14 . The insurance policies to which the Seller is a party or under which the Seller is covered as an additional named insured or otherwise (or replacement policies therefor) are (i) in full force and effect, and the Seller has paid all premiums due and, to the Knowledge of the Seller, the Company is not in default of such policies; and (ii) sufficient for compliance by the Seller with all applicable requirements of Law and all agreements to which the Seller is a party or subject, in each case with respect to the Business. The Seller has not received any notice of cancellation or non-renewal with respect to, or disallowance of any claim under, any such policy. The Seller has not been refused insurance, nor has coverage been previously canceled or materially limited, by an insurer to which the Seller has applied for such insurance, or with which the Seller has held insurance, within the last three years.

2.15 Material Contracts .

(a) Schedule 2.15 sets forth all Material Contracts as of the date hereof.

(b) Each Material Contract of the Seller that is intended to be binding upon the parties thereto is legal, valid and binding on the Seller and, to the Knowledge of the Seller Responsible Parties, the other parties thereto, and is enforceable against the Seller and, to the Knowledge of the Seller Responsible Parties, the other parties thereto in accordance with the terms thereof.

 

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(c) The Seller has performed its obligations under each such Material Contract and the Seller is not in default under any such Material Contract and no condition exists nor event has occurred which with the passage of time or the giving of notice or both could reasonably be expected to result in a material default, material breach or event of material noncompliance by the Seller under any such Material Contract.

(d) The Seller does not have any present expectation or intention of not fully performing all its material obligations under each such Material Contract.

(e) To the Knowledge of the Seller Responsible Parties, no other party to any of the Material Contracts has breached or is in default thereunder.

(f) The Seller has delivered copies, which are true, correct and complete, of each Material Contract and all amendments thereto and documentation or correspondence modifying the terms thereof to the Buyer.

(g) Except for the Material Contracts, the Seller is not a party to (or, in the case of clause (v) below, the holder of) any written or oral: (i) commitment, contract, note, loan, evidence of indebtedness, purchase order or letter of credit involving any obligation or liability on the part of the Seller of more than $10,000 (and not more than $50,000 in the aggregate for related instruments) and not cancelable (without further liability) on not more than 30 days’ notice; (ii) lease of real property; (iii) lease of personal property involving any annual expense in excess of $5,000 and not cancelable without further liability within 30 days; (iv) contracts and commitments not otherwise described above which materially affect the Business and which are not entered into in the ordinary course of business; (v) contracts or agreements containing covenants limiting the freedom of the Seller to engage in any line of business or compete with any person; (vi) contracts, commitments, licenses or permits containing any “change in control” or “parachute payment” provision, as those terms are commonly understood, including without limitation those which would be triggered by the execution, delivery or consummation of the transactions contemplated by this Agreement, including without limitation, any right of termination, right of payment or acceleration of any other right under such contracts, commitments, licenses or permits; (vii) contracts, commitments or agreements which impose any duty of confidentiality or nondisclosure (other than customer agreements that contain confidentiality or nondisclosure provisions); (viii) employment or severance contracts, plans or arrangements; or (ix) Tax sharing or similar agreements.

(h) No customer which is a party to a Material Contract is entitled to any retroactive pricing, refund, rebate, price adjustment or other financial settlement for charges in excess of $5,000 relating to the sales by the Business.

(i) The sale of the Purchased Assets hereunder will not result in a default under or the termination of any Material Contract.

(j) Except as set forth on Schedule 2.15 , there are no contracts for the sale of goods or services by the Seller as to which at the time of the most recent scheduled contract milestone for any such Contract the work scheduled was more than sixty (60) days late.

(k) Except as set forth on Schedule 2.15 , there are no contracts, options or bids for the sale of goods or services by the Seller which include a liquidated damages clause for late delivery.

 

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2.16 Accounts Receivable . All of the accounts receivable of the Seller reflected on the Interim Balance Sheet are collectible, actual and bona fide receivables representing obligations for the total dollar amount thereof shown on its books, subject to no defenses or counterclaims; provided , however , that neither the Seller nor the Seller Responsible Parties makes any representation that such accounts receivable or other debts will actually be collected following the Closing. No reserves for bad debt in excess of the amounts thereof on June 30, 2006 are required by GAAP. The allowance for doubtful accounts set forth in the Interim Balance Sheet is adequate in accordance with GAAP. The revenue in respect of the sales that gave rise to such receivables have been properly invoiced to customers and properly recognized in accordance with GAAP. Schedule 2.16 hereto accurately lists as of the date hereof, all receivables arising out of or relating to the Business in excess of $2,500, the amount owing, and the aging of such receivable, the name and last known address of the party from whom such receivable is owing, and any security in favor of the Seller for the repayment of such receivable which the Seller purports to have. Since June 30, 2006, the Seller has collected its receivables and payments under all Contracts in accordance with past business practices and has not negotiated for or accepted advance payments nor accelerated the collection of any such receivables or payments.

2.17 Inventory . All of inventories are of good usable and merchantable quality in all material respects and do not include obsolete or discontinued items. All inventories: (i) are of such quality as to meet the quality controls of the Buyer and any applicable governmental quality control standards; (ii) that are finished goods are saleable as current inventories at the current prices thereof in the ordinary course of business; and (iii) are recorded in the books of the Business at the lower of cost or market value. No write-down in inventory has been made or should have been made in the past two years, except as set forth on Schedule 2.17 hereto.

2.18 Permits and Licenses; Compliance with Law .

(a) The Seller currently holds all foreign, federal, state and local permits, licenses, authorizations, certificates, exemptions and approvals of Governmental Authorities or other Persons including, without limitation, Environmental Permits, necessary to conduct the businesses in which they are engaged and to own and use the facilities and properties owned and used by them (collectively, “ Permits ”). Each such Permit is valid and in good standing with the issuer of the Permit and not subject to any proceedings for suspension, modification or revocation. Without limiting the generality of the foregoing: (i) the Seller has not received any written notice from any Governmental Authority revoking, canceling, rescinding, materially modifying or refusing to renew any Permit and (ii) the Seller is in compliance in all material respects with the requirements of all Permits. All such Permits held by the Seller are assignable to the Buyer, and no governmental approvals are required for such assignment, except in each case as set forth on Schedule 2.18 . The sale of the Purchased Assets hereunder will not result in a default under or the termination of any such Permit.

(b) (i) The Seller is in compliance with all Laws (including, without limitation, with respect to affiliate transactions) and Governmental Orders applicable to the Business and (ii) the Seller has not been charged at any time with a violation of any Law or any Governmental Order relating to the conduct of the Business. This Section 2.18(b) does not apply to Real Property (for which Section 2.18(c) applies), environmental matters (for which Section 2.19 applies), employee benefit matters (for which Sections 2.20 and 2.29 apply), health and safety conditions (for which Section 2.21 applies), labor relations (for which Section 2.23 applies) and securities laws (for which Section 2.30 applies).

 

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(c) The Seller has not received any written notice that the Seller is in violation in any respect of any zoning regulation, building restriction, restrictive covenant, ordinance or other Law relating to any Real Property that the Seller owns including the Premises. The Premises is not the subject of any condemnation action and there is no proposal under consideration by any Governmental Authority or entity to condemn the Premises.

2.19 Environmental Matters . Except as set forth in Schedule 2.19, (i) Hazardous Materials have not been Released on any Real Property except in compliance with applicable Law; (ii) there have been no events related to the Seller or the Real Property that could give rise to liability under any Environmental Law; (iii) the Seller is now, and has for the past three years been, in compliance in all material respects with all applicable Environmental Laws and there are no extant conditions that could reasonably be expected to constitute an impediment to such compliance in the future; (iv) the Seller has disposed of all wastes containing Hazardous Materials in compliance with all applicable Environmental Laws (including the filing of any required reports with respect thereto) and Environmental Permits; (v) there are no pending or, to the Knowledge of the Seller Responsible Parties, threatened Environmental Claims against the Seller relating to the Real Property or the operations of the Business; (vi) there is no environmental remediation or other environmental response occurring on any Real Property (including any easements, rights-of-way or other possessory interests in the real property of others) nor has the Seller issued a request for proposal or otherwise requested an environmental contractor to begin plans for any such environmental remediation or other environmental response; and (vii) the Seller has not received any notice and does not have Knowledge of any circumstances related to liability, under CERCLA or any analogous state law.

2.20 Employee Benefit Matters . The Seller has delivered true, accurate and complete copies of all Employee Benefit Plans applicable to any employee of the Seller. All such Employee Benefit Plans are in compliance with the terms of the applicable plan and the requirements prescribed by applicable law currently in effect with respect thereto, and the Seller has performed in all material respects all obligations required to be performed by it thereunder. The Seller has no Union Employees. The Seller has not incurred and no event, transaction or condition has occurred or exists which could result in the occurrence of, any liability to the Pension Benefit Guaranty Corporation or any “withdrawal liability” within the meaning of Section 4201 of ERISA, or any other liability pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code relating to employee benefit plans, in any such case relating to any Employee Benefit Plan or any pension plan maintained by any company that would be treated as a single employer with the Seller under Section 4001 of ERISA or Section 414 of the Code (an “ ERISA Affiliate ”). Except as set forth in Schedule 2.20 , the Seller does not have in effect an Employee Benefit Plan intended to be “qualified” within the meaning of Section 401(a) of the Code. The consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee or officer of the Seller or any ERISA Affiliate to severance pay, unemployment compensation or other payment, or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer. There are no pending, or, to the Knowledge of the Seller, threatened or anticipated claims by or on behalf of any Employee Benefit Plan, by any employee or beneficiary covered under any such plan, or otherwise involving any such p