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STOCK PURCHASE AGREEMENT

Distribution Agreement
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BOASSO AMERICA CORPORATION | Federal Trade Commission | QUALITY DISTRIBUTION, LLC

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Title: STOCK PURCHASE AGREEMENT
Governing Law: Michigan     Date: 11/8/2007
Industry: TRUCKS     Sector: Transportation

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Exhibit 2.1

STOCK PURCHASE AGREEMENT

AMONG

QUALITY DISTRIBUTION, LLC

AND

THE STOCKHOLDERS OF

BOASSO AMERICA CORPORATION

 

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “ Agreement ”) is entered into as of August 2, 2007, by and among (a) Quality Distribution, LLC, a Delaware limited liability company (“ Buyer ”), and (b) (i) Walter J. Boasso, an individual of the full age of majority resident in St. Bernard Parish, (ii) Scott Leonard, an individual of the full age of majority resident in St. Tammany Parish, (iii) Scott D. Giroir, an individual of the full age of majority resident in St. Tammany Parish, (iv) Robert E. Showalter, an individual of the full age of majority resident in St. Bernard Parish, (v) Robert E. Showalter , as trustee for The Boasso Inter Vivos Trust for Brittany Anne Boasso and resident in St. Bernard Parish, (vi) Robert E. Showalter, as trustee for The Boasso Inter Vivos Trust for Walter Joseph Boasso, Jr. and resident in St. Bernard Parish, (vii) Robert E. Showalter, as trustee for The Boasso Inter Vivos Trust for Rory James Boasso and resident in St. Bernard Parish, and (viii) Rose Mary Doyle, an individual of the full age of majority resident in Harris County, Texas (each a “ Seller ” and collectively, “ Sellers ”). Buyer and Sellers are referred to collectively herein as the “ Parties .”

Sellers in the aggregate own all of the issued and outstanding capital stock of Boasso America Corporation (“ Target ”).

This Agreement contemplates a transaction in which (among other things) Buyer will purchase from Sellers, and Sellers will sell to Buyer, all of the outstanding capital stock of Target in return for cash, on the terms and subject to the provisions of this Agreement.

Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows:

ARTICLE 1. DEFINITIONS

The definitions provided in this Section 2 shall apply for the purposes of this Agreement. Other terms are defined elsewhere in this Agreement.

“ Actual Value ” is defined in Section 2.6.

“ Adjusted Current Assets ” means the total amount of current assets of Target, including without limitation inventory, accounts receivable, marketable securities, and prepaid expenses, and any other acceptable current assets, in each case as recorded on Target’s balance sheet prepared in accordance with GAAP, but specifically excluding (a) all Cash and Cash Equivalents and (b) accounts receivable aged more than 90 days.

“ Adjusted Current Liabilities ” means the total amount of current liabilities of Target, including without limitation trade payables, taxes, employee compensation, commissions, interest, amounts payable in respect of goods purchased or services received, and any other current liabilities, in each case as recorded on Target’s balance sheet prepared in accordance with GAAP, but specifically excluding the current portion of Long-Term Debt.

“ Adjusted Net Working Capital ” means the excess of Adjusted Current Assets over (minus) Adjusted Current Liabilities as shown on Target’s balance sheet prepared in accordance with GAAP. Adjusted Net Working Capital may be either a positive number or a negative number.

 

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“ Adverse Consequences ” means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, liabilities, obligations, diminution in value, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses.

“ Affiliate ” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act.

“ Annual Financial Statements ” is defined in Section 3.13.

“ Boasso Employment Agreement ” is defined in Section 2.4(c).

“ Buyer ” is defined in the preface to this Agreement.

“ Buyer Indemnified Persons ” is defined in Section 8.2(a).

“ Closing ” is defined in Section 2.3.

“ Closing Date ” is defined in Section 2.3.

“ Closing Date Balance Sheet ” is defined in Section 2.6(d).

“ Closing Long-Term Debt ” is defined in Section 2.6(d).

“ Closing Net Working Capital ” is defined in Section 2.6(d).

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Confidential Information ” means any information concerning the businesses and affairs of Target, any Affiliate, or Sellers that is not already generally available to the public, except (a) information that was available to Buyer on a non-confidential basis prior to its disclosure by Target, any Affiliate, or Sellers, (b) becomes available to Buyer on a non-confidential basis from a Person (other than Target, any Affiliate, or Sellers) who to Buyer’s knowledge is not prohibited from disclosing such information to Buyer by a legal, contractual or fiduciary obligation to Target, (c) was independently developed by Buyer, or (d) is, upon the advice of Buyer’s legal counsel, required to be disclosed by applicable law.

“ Confidentiality Agreement ” means the Confidentiality Agreement dated December 7, 2006 between Buyer and Target.

“ Contract ” means any agreement, contract, lease, license, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding.

“ CPA Firm ” is defined in Section 2.6(c).

“ Disclosure Schedule ” is defined in Section 3.1.

 

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“ Disputed Amount ” is defined in Section 9.3.

“ Draft Closing Date Balance Sheet ” is defined in Section 2.6(a).

“ Employee Benefit Plan ” means any “employee benefit plan” (as such term is defined in ERISA § 3(3)) and any other material employee benefit plan, program or arrangement.

“ Employee Pension Benefit Plan ” has the meaning set forth in ERISA § 3(2).

“ Employee Welfare Benefit Plan ” has the meaning set forth in ERISA § 3(1).

“ Employment Agreements ” means collectively the Boasso Employment Agreement, the Giroir Employment Agreement, the Showalter Employment Agreement, and the Schneida Employment Agreement.

“ End Date ” is defined in Section 11.1(d).

“ Environmental, Health, and Safety Requirements ” means all health, safety, land use, ecological, occupational, environmental, and natural resource Laws and Orders, including all Laws, Orders, and private land use restrictions (such as covenants, conditions, and restrictions) relating to the following: (a) noise and odors; (b) the pollution or protection of the air, soil, surface water, ground water, or other elements of the environment; (c) the use, release, storage, disposal, emission, handling, discharge, transport, treatment, processing, distribution, or manufacturing of any Hazardous Materials; and (d) the cleanup, removal, recovery, assessment, or remediation of any damage, release, emission, discharge, pollution, or contamination of or into air, soil, buildings, surface water, groundwater, or personal property; and includes the following specific statutory laws: the Clean Air Act; the Clean Water Act; the Oil Pollution Act; the River and Harbor Act; the Deep-Water Port Act; the Safe Drinking Water Act; the Water Pollution Control Act; the Toxic Substances Control Act; the Federal Water Pollution Control Act; the Mineral Lands and Leasing Act; the Resource Conservation and Recovery Act; the Marine Protection Research and Sanctuaries Act; the Hazardous Materials Transportation Act; the Superfund Amendments and Reauthorization Act of 1986; the Federal Insecticide, Fungicide and Rodenticide Act; the Surface Mining Control and Reclamation Act; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, and the Occupational Health and Safety Act, all as amended.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” means each entity that is treated as a single employer with Target or any former Subsidiary of Target for purposes of Code § 414.

“ Escrow Agent ” means JP Morgan Chase Bank, N.A.

“ Escrow Agreement ” means the escrow agreement in substantially the form attached hereto as Exhibit A , executed by Sellers, Buyer and the Escrow Agent.

“ Escrow Amount ” means Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00).

 

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“ Escrow Fund ” is defined in Section 9.1.

“ Estimated Long-Term Debt ” means $2,147,400.

“ Estimated Purchase Price ” means Fifty-Nine Million Eight Hundred Fifty Thousand and no/100 Dollars ($59,850,000.00) minus the Target’s Long-Term Debt as of the Closing Date, as evidenced by letters in form reasonably acceptable to Buyer delivered to Buyer by the holders of such Long-Term Debt at least five Business Days before the Closing Date.

“ Financial Statements ” is defined in Section 3.13.

“ GAAP ” means United States generally accepted accounting principles as in effect from time to time, consistently applied with prior periods.

“ Giroir Employment Agreement ” is defined in Section 2.4(d).

“ Governmental Body ” means any federal, state, local, municipal, foreign, or other governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), or other body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

“ Hart-Scott-Rodino Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“ Hazardous Activity ” means 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 Materials in, on, under, about, or from any facility owned or used by Target or any of its past or present Subsidiaries or Affiliates at any time before the Closing into the air, soil, surface water, groundwater, or other parts of 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 such facilities, or that may affect the value of such facilities or Target.

“ Hazardous Materials ” means, collectively, urea, asbestos, radon gas, pesticides, hydrocarbons, petroleum substances, flammable explosives, paint containing lead, natural or synthetic gas, solid, liquid, or gaseous wastes, polychlorinated biphenyls (PCBs), formaldehyde foam insulation, discharges of sewage or effluent, any material containing hydrated silicate (including amosite, actinolite, tremolite, chrysolite, crocidolite, and anthophylite, whether friable or non-friable), and all toxic, hazardous, and radioactive wastes, chemicals, materials, pollutants, substances, and contaminants that are regulated or controlled by any Environmental, Health, and Safety Requirement, whether or not defined, classified, or identified as hazardous under those laws.

“ Income Tax ” means any federal, state, local, or foreign income tax measured by or imposed on net income, including any interest, penalty, or addition thereto, whether disputed or not.

 

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“ Income Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Income Taxes, including any schedule or attachment thereto.

“ Indemnified Person ” is defined in Section 8.4(a).

“ Indemnifying Party ” is defined in Section 8.4(a).

“ Interim Financial Statements ” is defined in Section 3.13.

“ Law ” means any federal, state, local, municipal, foreign, international, multinational, or other constitution, statute, code, ordinance, administrative order, principle or rule of common law, case law or jurisprudence, regulation, treaty or other law as amended from time to time.

“ Leased Real Property ” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures, or other similar interest in real property.

“ Leases ” means all leases, subleases, licenses, concessions and other agreements (written or oral), including all amendments, extensions, renewals, guaranties, and other agreements with respect thereto, pursuant to which Target is the lessee of any property, movable or immovable.

“ Lien ” means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) liens for taxes not yet due and payable and (b) purchase money liens and liens securing rental payments under capital lease arrangements.

“ Long-Term Debt ” means all long term liabilities, including capitalized leases, plus the current portion of long term liabilities and capitalized leases, in each case as recorded on Target’s balance sheet prepared in accordance with GAAP.

“ Material Contracts ” is defined in Section 3.20.

“ Minimum Net Working Capital ” means Adjusted Net Working Capital as of October 31, 2006, which is the sum of $11,840,339.66.

“ Most Recent Interim Financial Statements ” means Target’s unaudited balance sheet as of June 30, 2007 and the related statements of income, shareholders’ equity and changes in stockholders’ equity and cash flow for the two-month period then ended.

“ Multiemployer Plan ” is defined in ERISA § 3(37).

“ Non-Competition Agreements “ is defined in Section 2.4(d).

“ Note ” means the unsecured, non-negotiable, convertible promissory note made by Buyer payable to the order of Walter J. Boasso containing the terms described in the attached Exhibit B and such other terms as are customarily included in such instruments.

“ Notice of Objection ” is defined in Section 9.2.

 

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“ Order ” means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.

“ Ordinary Course of Business ” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

“ Owned Real Property ” means all buildings, structures, improvements, and fixtures located on land owned by third parties and leased by Target, and all easements and other rights and interests appurtenant thereto, owned by Target.

“ Party ” is defined in the preface to this Agreement.

“ PBGC ” means the Pension Benefit Guaranty Corporation.

“ Permit ” means any approval, consent, license, permit, franchise, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law.

“ Permitted Real Estate Encumbrances ” means with respect to each parcel of Owned Real Property: (a) liens for real estate taxes not yet due and payable at the time of Closing; (b) mechanics liens and similar liens for labor, materials, or supplies provided with respect to such Owned Real Property incurred in the Ordinary Course of Business for amounts that are not delinquent and that are reflected on the Closing Date Balance Sheet as current liabilities of the Target; and (c) zoning, building code, and other land use laws regulating the use or occupancy of such Owned Real Property or the activities conducted thereon that are imposed by any Governmental Body having jurisdiction over such Owned Real Property and that do not adversely affect or limit the conduct of the businesses of Target on such Owned Real Property.

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity or a Governmental Body (or any department, agency, or political subdivision thereof).

“ Pre-Closing Tax Period ” is defined in Section 8.2(c).

“ Proceeding ” means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“ Purchase Price ” is defined in Section 2.2.

“ Real Estate Purchase Agreement ” is defined in Section 2.4(g).

“ Requisite Sellers ” means Sellers holding a 66-2/3% interest of the Shares as set forth in Section 3.8 of the Disclosure Schedule.

“ Securities Act ” means the Securities Act of 1933, as amended.

 

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“ Securities Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Seller Confidential Information ” means information concerning any Seller that: (i) is of a type that ordinarily is maintained in confidence; (ii) was disclosed to Buyer by Sellers; and (iii) is not available on a non-confidential basis from a source other than the Sellers or Target; provided that Seller Confidential Information shall not include any information concerning the business and affairs of Target even if such information also may pertain to Sellers.

“ Sellers ” is defined in the preface to this Agreement.

“ Sellers’ Representative ” means Robert E. Showalter, provided that upon his resignation as Sellers’ Representative or his incapacity to serve as Sellers’ Representative, a successor Sellers’ Representative shall be appointed by the Requisite Sellers.

“ Shares ” means, collectively, all of the issued and outstanding shares of stock of Target, including without limitation Target’s common stock, no par value per share, but excluding any treasury shares which shall remain the property of the Target.

“ Schneida Employment Agreement ” is defined in Section 2.4(f).

“ Showalter Employment Agreement ” is defined in Section 2.4(e).

“ Specified Claims ” is defined in Section 8.2(a).

“ Specified Sections ” is defined in Section 8.2(a).

“ Straddle Period ” is defined in Section 6.6(a).

“ Subsidiary ” means, with respect to any Person (the “ parent ”), any corporation, limited liability company, partnership or other entity of which the parent holds directly, or indirectly through one or more intermediaries, securities or other interests having the power to elect a majority of that entity’s board of directors or other governing body, or otherwise having the power to direct the business and policies of that entity (other than securities or other interests having such power only upon the happening of a contingency that has not occurred). When used without reference to a particular Person, “Subsidiary” means a past or present Subsidiary of Target.

“ Target ” is defined in the preface to this Agreement.

“ Tax ” or “ Taxes ” means any federal, state, local, or foreign tax, including without limitation income, gross receipts, license, payroll, employment, excise, severance, stamp, capital gains, property, gift, estate, occupation, premium, windfall profits, environmental (including taxes under Code § 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, imposed, assessed or collected by or under the authority of any Governmental Body or payable pursuant to any tax-sharing agreement or any other Contract relating to sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency, or fee, and including any interest, penalty, or addition thereto, whether disputed or not.

 

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“ Tax Return ” means any form, notice, report, return, schedule, statement or declaration (including any related or supporting exhibit, schedule, statement, or other attachment, filed or required to be filed in connection with the reporting, collection, assessment, or determination of any Tax or the administration of any law or order relating to any Tax.

“ Third Party Claim ” is defined in Section 8.4(a).

“ Tilt Tank IP ” is defined in Section 5.8.

ARTICLE 2. PURCHASE AND SALE OF SHARES

2.1 Basic Transaction . On and subject to the terms and conditions of this Agreement, Buyer agrees to purchase from Sellers, and Sellers agree to sell to Buyer, all of the issued and outstanding Shares excluding treasury shares, which shall remain the property of Target, for the consideration specified in this Article 2.

2.2 Purchase Price . The purchase price for the Shares shall be an amount equal to the Estimated Purchase Price as adjusted post-closing pursuant to the provisions of this Agreement, including without limitation the provisions of Sections 2.6 and 2.7 (the “ Purchase Price ”). At the Closing, Buyer will pay Sellers the Estimated Purchase Price, as follows:

 

  (i) $2,500,000 of the Estimated Purchase Price will be delivered to the Escrow Agent as the Escrow Amount;

 

  (ii) $2,500,000 of the Estimated Purchase Price shall be paid by delivering the Note to Walter J. Boasso, as the price payable for a portion of his Shares; and

 

  (iii) the balance of the Estimated Purchase Price will be paid by wire transfer of immediately available funds to the account or accounts designated by Sellers by written notice to Buyer given at least five business days before the Closing Date.

The Escrow Amount plus any interest accrued thereon will be available to satisfy any amounts owed by Sellers to Buyer under this Agreement in accordance with the terms of this Agreement and the Escrow Agreement, subject, however, to any applicable limitations provided in Section 8.2. Prior to Closing, Sellers will provide Buyer with a schedule signed by Sellers allocating the Purchase Price among Sellers.

2.3 The Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Buyer’s counsel, Stone Pigman Walther Wittmann L.L.C., 546 Carondelet Street, New Orleans, Louisiana 70130, commencing at 10:00 a.m. local time, on a day selected by Buyer by notice given to Sellers and that is not sooner than two business days following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as Buyer and Requisite Sellers may mutually determine (the “ Closing Date ”).

2.4 Sellers’ Closing Deliverables . At the Closing, Sellers will deliver to Buyer the following documents dated Closing Date and conditioned upon full execution of all documents and finalization of all transactions between the Parties as contemplated by this Agreement:

(a) certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers) for transfer to Buyer;

 

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(b) a release in the form of Exhibit C executed by all of the Sellers;

(c) The employment agreement in the form attached as Exhibit D (the “ Boasso Employment Agreement ”), executed by Walter Boasso;

(d) The employment agreement in the form attached as Exhibit E (the “ Giroir Employment Agreement ”), executed by Scott Giroir;

(e) The employment agreement in the form attached as Exhibit F (the “ Showalter Employment Agreement ”), executed by Robert Showalter;

(f) The employment agreement in the form attached as Exhibit G (the “ Schneida Employment Agreement ”), executed by Robert Schneida;

(g) Non-competition agreements in the form of Exhibit H , executed by those shareholders or employees of Target designated by Buyer before the Closing (collectively, the “ Non-Competition Agreement ”);

(h) The right of first refusal in the form attached as Exhibit I , executed by W.J.B. Realty, L.L.C., a Louisiana limited liability company, in favor of Buyer, granting Buyer the first right to purchase certain property located in Houston, Texas, all as is more fully provided in the right of first refusal;

(i) The agreement to purchase and sell in the form attached as Exhibit J (the “ Real Estate Purchase Agreement ”), executed by B.W.R. Realty, L.L.C., a Louisiana limited liability company, pursuant to which B.W.R. Realty, L.L.C. will agree to sell and Buyer will agree to purchase certain property located in Detroit, Michigan, all as is more fully provided in the Real Estate Purchase Agreement;

(j) Written instructions executed by all Sellers stating the specific portions of the Estimated Purchase Price and Purchase Price to be paid to each Seller;

(k) The Escrow Agreement executed by Sellers;

(l) A license to Buyer and Target to use the Tilt Tank IP granted executed by Walter J. Boasso incorporating the terms provided in the attached Exhibit K ;

(m) duly executed payoff letters reasonably satisfactory to Buyer in respect of all capital leases and funded indebtedness of Target from each applicable lender addressed to Target evidencing or specifying the amount necessary to effect the repayment in full of the indebtedness owing to such lessors or lenders (the “Payoff Letters”);

(n) upon the payment by Target at the Closing of the indebtedness reflected in the Payoff Letters, Target shall receive evidence satisfactory to Buyer that Target has satisfied all of the requirements set forth in the Payoff Letters necessary for the release of all Liens against the assets of Target in favor of the secured parties delivering such Payoff Letters, which evidence shall include without limitation Uniform Commercial Code termination statements;

 

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(o) The certificate contemplated by Section 7.1(e), executed by Sellers; and

(p) The additional certificates, instruments and other documents contemplated by this Agreement or reasonably necessary to consummate the transactions contemplated hereby.

2.5 Buyer’s Closing Deliverables . At the Closing Buyer will deliver to Sellers:

(a) The Estimated Purchase Price (which includes the Note and Escrow Amount);

(b) The Employment Agreements and Non-competition Agreements executed by Buyer and Target;

(c) The Agreement to Purchase and Sell executed by Buyer;

(d) The Escrow Agreement executed by Buyer;

(e) An assignment to Walter J. Boasso, at no cost to Walter J. Boasso and without any payment by Target or Buyer, of Target’s interest in the life insurance policies listed on the attached Schedule 2.5 insuring the life of Walter J. Boasso;

(f) The certificate contemplated by Section 7.2(d), executed by Buyer; and

(g) The additional certificates, instruments and other documents contemplated by this Agreement or reasonably necessary to consummate the transactions contemplated hereby.

2.6 Preparation of Closing Date Balance Sheet .

(a) Within 95 days after the Closing Date, Buyer shall prepare and deliver to Sellers (i) a balance sheet of Target, prepared in accordance with GAAP, as of immediately after the Closing (the “ Draft Closing Date Balance Sheet ”), provided that accounts receivable existing as of the Closing Date will be included in the Draft Closing Date Balance Sheet and Closing Balance Sheet only to the extent they are actually collected within 90 days after the Closing Date; and (ii) a written calculation of the Adjusted Net Working Capital, as of immediately after the Closing based on the Draft Closing Date Balance Sheet. The Closing Date Balance Sheet will be prepared in substantially the form of the adjusted balance sheet of Target as of June 30, 2007, a copy of which is attached as Exhibit L , and the Buyer’s written calculation of the Adjusted Net Working Capital shall be in the form of the written calculation of the Adjusted Net Working Capital as of June 30, 2007, a copy of which is attached as Exhibit M . Contemporaneous with Buyer’s delivery of the above referenced documentation, Buyer shall prepare and deliver to Sellers supporting documents and work papers necessary to substantiate information contained in the Draft Closing Date Balance Sheet. Buyer will cause Target to continue to use its typical and customary collection efforts as were used by Target before the Closing to attempt to collect accounts receivable arising before the Closing Date (the “ Pre-Closing Accounts Receivable ”). On or before the tenth (10th) day of each month Buyer will cause Target to pay to Sellers the aggregate amount of Pre-Closing Accounts Receivable

 

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actually collected by Target during the immediately preceding month along with a report on the aging of Pre-Closing Accounts Receivable and collection status thereof. Any Pre-Closing Accounts Receivable not collected within one year after the Closing shall be assigned without warranty or recourse by Target to Sellers, at Sellers’ request.

(b) Buyer will make the books and records of Target, available to Sellers’ Representative and Sellers’ accountants and other advisers at reasonable times and upon reasonable notice following the delivery by Buyer to the Sellers’ Representative of the Draft Closing Date Balance Sheet and during the review by Sellers of the Draft Closing Date Balance Sheet and the resolution by the Parties of any objections thereto.

(c) If Sellers have any objection to the Draft Closing Date Balance Sheet, then, within 30 days after Sellers receive the Draft Closing Date Balance Sheet, Sellers’ Representative shall deliver to Buyer a detailed statement describing Sellers’ objections. Buyer and Sellers shall meet and use reasonable efforts to resolve any such objections. If within 30 days after Buyer receives the Sellers’ statement of objections Buyer and Sellers do not resolve Sellers’ objections, Buyer and Sellers shall jointly appoint the accounting firm of KPMG LLP (the “ CPA Firm ”) to resolve the dispute. The CPA Firm shall certify its independence to the Parties and that it has not performed accounting or consulting services for any of the Parties for at least five years. The CPA Firm shall be instructed to render a decision in writing within sixty (60) days after its appointment. The decision of the CPA Firm shall be final and binding on the parties. If the Parties engage the CPA Firm to resolve Sellers’ objections, Buyer and Sellers shall each pay one-half of the CPA Firm’s fees and expenses. If KPMG LLP is unable or unwilling to serve as the CPA Firm, Buyer and Seller’s Representative shall jointly name a different Person to act as the CPA Firm under this Section; provided that, if Buyer and Sellers’ Representative fail to agree on a substitute CPA Firm within 15 days either Party may petition the Court having jurisdiction to appoint the CPA Firm.

(d) Buyer shall revise the Draft Closing Date Balance Sheet, and the calculation of Adjusted Net Working Capital and Long-Term Debt, in each case as appropriate to reflect the resolution of any objections thereto pursuant to this Section 2.6. The “ Closing Date Balance Sheet ” shall mean the Draft Closing Date Balance Sheet as revised pursuant to this Section 2.6. The “ Closing Net Working Capital ” means the Adjusted Net Working Capital as of immediately after the Closing as determined based on the Closing Date Balance Sheet. The “ Closing Long-Term Debt “ means Target’s Long-Term Debt as of immediately after the Closing as determined based on the Closing Date Balance Sheet.

2.7 Adjustment to Estimated Purchase Price . Immediately after finalization of the Closing Date Balance Sheet, the Estimated Purchase Price shall be adjusted as follows:

(a) If the Closing Net Working Capital is greater than the Minimum Net Working Capital, then Buyer shall pay to Sellers the amount by which Closing Net Working Capital exceeds the Minimum Net Working Capital. If the Closing Net Working Capital is less than the Minimum Net Working Capital, then Sellers shall pay to Buyer the amount by which the Minimum Net Working Capital exceeds the Closing Net Working Capital.

(b) The net amount payable by Buyer to Sellers or by Sellers to Buyer on account of the adjustments made pursuant to the preceding clause (a) shall be paid by the party

 

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required to make the payment by wire transfer of immediately available funds within three business days after the date on which the Closing Date Balance Sheet is finally determined under Section 2.6.

2.8 Preemptive and Similar Rights . Each Seller hereby waives and releases any preemptive right, first right of refusal, option or other right such Seller may have under the articles of incorporation, by-laws, any shareholders’ agreement, or otherwise to acquire any shares of stock of Target, or any other securities of Target, in connection with this Agreement, the transactions contemplated by this Agreement, or any other agreement or transaction, including in connection with any past issuance or sale of securities by Target or any of its shareholders.

2.9 Withholding . Buyer shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Seller such amounts as Buyer is required to deduct and withhold under the Code, or any provisions of foreign, state or local Tax law, with respect to the making of such payment. To the extent that amounts are so withheld by Buyer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Seller, in respect of whom such deduction and withholding was made by Buyer.

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLERS

3.1 Statements True . Each Seller represents and warrants to Buyer that the statements contained in each of the following Sections of this Article 3 are true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article 3), except with respect to each such Section as set forth in the corresponding section of the disclosure schedule delivered by Sellers to Buyer on the date hereof (the “ Disclosure Schedule ”), a copy of which is attached as Schedule 3.1.

3.2 Organization of Certain Sellers . Each Seller that is a corporation or other entity is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation (or other formation).

3.3 Organization, Qualification, and Corporate Power . Target is a corporation duly organization, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. Target is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required. Target has full corporate power and authority to carry on the business in which it is engaged and to own and use the properties owned and used by it. Section 3.3 of the Disclosure Schedule lists the directors and officers of Target. Sellers have delivered to Buyer true and complete copies of the articles of incorporation and by-laws of Target, as currently in effect, and any shareholders agreement among two or more shareholders thereof. All of the foregoing and all of the corporate minutes and stock transfer records of Target are current, complete and correct in all material respects and copies thereof have been delivered to Buyer.

3.4 Power and Authority . Each Seller has full right, power and authority to execute and deliver this Agreement and all other agreements contemplated hereby to which such Seller is a party and to perform his, her, or its obligations hereunder and thereunder. For any Seller that is a corporation, trust or other legal entity, the execution and delivery by such Seller of this

 

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Agreement and all other agreements contemplated hereby to which such Seller is a party, and the consummation by such Seller of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary corporate, trust or other action on the part of such Seller. This Agreement and all other agreements contemplated hereby to which such Seller is or will be a party have each been, or when executed and delivered by any Seller will be, validly executed and delivered by such Seller and each constitutes, or when executed will constitute, the valid and legally binding obligation of Sellers, enforceable against Sellers in accordance with its terms, except to the extent such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws now or hereafter in effect and except that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the arbitrator or court before which any proceeding may be brought. Except for appropriate filings under the Hart-Scott-Rodino Act, if required, no Seller is required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Body in order to consummate the transactions contemplated by this Agreement.

3.5 Absence of Conflict . Except as disclosed in Section 3.5 of the Disclosure Schedule, neither Target nor any Seller is a party to, subject to or bound by any Contract, Order, Permit or other restriction that would prevent or be violated by (a) the execution, delivery or performance by Sellers of this Agreement or any other agreement contemplated hereby, or (b) the transfer, conveyance and sale of any of the Shares to Buyer pursuant to the terms of this Agreement. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any Law, Order, Permit, or other restriction of any Governmental Body or any court, to which any Seller or Target is subject or, in the case of Target or any Seller that is an entity, any provision of its articles of incorporation, bylaws, or other governing documents, (ii) conflict with, result in a breach of, constitute (with or without notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice, consent or waiver under, any Contract, Permit, Order or other arrangement to which Target or Seller is a party or by which Target or Seller is bound, or to which any of their respective assets may be subject, or (iii) result in the imposition or creation of a Lien upon or with respect to the Shares or any assets or property of Target or Seller. Except for filings and approvals under the Hart-Scott-Rodino Act (if required) and except as set forth in Section 3.5 of the Disclosure Schedule, Target does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Person in order for the Parties to consummate the transactions contemplated by this Agreement.

3.6 Shares . Each Seller holds of record and owns beneficially and has good and marketable title to the number of Shares set forth next to his, her, or its name in Section 3.6 of the Disclosure Schedule, free and clear of any restrictions on transfer (other than restrictions on transferability under the Securities Act and state securities laws), taxes, Liens, options, warrants, purchase rights, contracts, commitments, equities, claims, conditions, voting trust arrangements, proxies, adverse claims and demands. No Seller is a party to any option, warrant, purchase right, or other contract or commitment that could require Seller to sell, transfer, or otherwise dispose of any capital stock of Target (other than pursuant to this Agreement). Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of Target. Upon consummation of the purchase contemplated hereby, Buyer will acquire from such Seller good and marketable title to such Shares held of record and owned beneficially

 

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by such Seller, free and clear of any and all restrictions on transfer (other than restrictions on transferability under the Securities Act and state securities laws), taxes, Liens, options, warrants, purchase rights, contracts, commitments, equities, claims, conditions, restrictions, voting trusts, arrangements, proxies, adverse claims and demands.

3.7 No Claims Against Target . No Seller has ever instituted any Proceeding against Target or any of their Affiliates, or any of its respective predecessors or Affiliates, as a holder of securities of Target or otherwise, and Sellers are not aware of any grounds for any such Proceeding.

3.8 Capitalization . The entire authorized capital stock of Target consists of 1,000 shares of common stock, no par value per share, of which 970 are issued and outstanding and 30 are held in treasury, and no other shares of stock, common or preferred, are issued or outstanding. All of the issued and outstanding Shares have been duly authorized, are validly issued, fully paid, and non-assessable, and are held of record by the respective Sellers as set forth in Section 3.8 of the Disclosure Schedule. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require Target to issue, sell, or otherwise cause to become outstanding any of its capital stock or to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof. There are no outstanding or authorized stock appreciation, phantom stock, restricted stock, profit participation, similar rights or interests in or with respect to Target. There is no agreement, written or oral, between Target and any holder of its securities or among any holders of its securities, relating to the sale or transfer (including agreements relating to rights of first refusal, co-sale rights or “drag-along” rights), registration under the Securities Act, or voting, of the capital stock of Target.

3.9 Broker’s Fees . Neither Sellers nor Target has any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transaction contemplated by this Agreement.

3.10 Title to Assets . Except as set forth in Section 3.10 of the Disclosure Schedule, Target has good and marketable title to, or valid leasehold interests in, all of their respective assets, tangible and intangible, free and clear of all Liens.

3.11 Condition and Sufficiency of Assets . Except as disclosed in Section 3.11 of the Disclosure Schedule, the buildings, plant, structures, equipment and other tangible movable (personal) and immovable (real) property of Target is in good operating condition, normal wear and tear excepted; comply with all Laws, Permits, and Orders; are not materially defective, damaged or deficient given their current or intended uses; have been properly maintained and are not in need of material maintenance or repairs; and are suitable for the purposes for which they are presently used. The tangible and intangible assets of Target are sufficient for the conduct of the businesses of Target as presently conducted.

3.12 Subsidiaries . Target has no Subsidiaries and Target does not own or have any interest in, or have any right to acquire, any shares of stock, membership interest, partnership interest or other equity interest in any Person.

 

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3.13 Financial Statements . Attached hereto as Exhibit N are Target’s audited balance sheets and statements of income, changes in stockholders’ equity, and cash flow as of and for the fiscal years ended March 31, 2005, 2006 and 2007, the related notes thereto and letters of Target’s independent accountants with respect thereto (collectively, the “ Annual Financial Statements ”) and (b) Target’s unaudited balance sheets as of June 30, 2007 and June 30, 2006, and the related statements of income, shareholders’ equity and changes in stockholders’ equity, and cash flow for the two-month periods then ended (collectively, the “ Interim Financial Statements ”). The Annual Financial Statements and Interim Financial Statements are referred to, collectively, as the “ Financial Statements .” The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and present fairly, in conformity with GAAP, the financial condition of Target as of such dates and the results of operations of Target for the respective periods covered thereby; provided that the Interim Financial Statements are subject to normal year-end adjustments and lack footnotes and other presentation items.

3.14 Undisclosed Liabilities . Except as set forth in Section 3.14 of the Disclosure Schedule, Target has no liabilities or obligations of any nature or kind (whether known or unknown and whether absolute, accrued, contingent, or otherwise), except for liabilities or obligations reflected or reserved against in the balance sheet included as part of the Most Recent Interim Financial Statements and current liabilities incurred in the Ordinary Course of Business since the date thereof.

3.15 No Material Adverse Change . Since March 31, 2006, no material adverse change has occurred in the business, assets, properties, condition (financial or otherwise), results of operations, or prospects of Target and no event, condition or circumstance exists or has occurred which, individually or in the aggregate, could reasonably be expected to have such a material adverse change.

3.16 Legal Compliance . Target and each of its past or present Subsidiaries is, and at all times has been, in full compliance with all Laws, Permits and Orders applicable to Target or any such Subsidiary, or to the conduct or operation of its businesses or the ownership or use of any of its assets. No event has occurred or circumstance exists that (with or without notice or lapse of time) (i) may constitute or result in a violation by Target of, or a failure on its part to comply with, any Law, Permit or Order, (ii) may give rise to any obligation on the part of Target to undertake, or to bear all or any portion of the cost of, any remedial action of any nature, or (iii) may result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Permit.

3.17 Tax Matters .

(a) Target and each of its former Subsidiaries has filed with the proper Governmental Bodies all Tax Returns, Tax information returns, and reports required by Law and: (a) all filed Tax Returns have been prepared in compliance with all applicable Laws and are true and accurate in all material respects; (b) all Taxes reported on those Tax Returns have been fully paid; (c) no agreement for the extension of time or waiver of any statute of limitation has been given and is in effect with respect to the payment or assessment of any Tax by or against Target or any such Subsidiary; (d) no unpaid Tax deficiency has been assessed or is known by Sellers to be proposed against Target or any such Subsidiary by any taxing authority; (e) no basis

 

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exists for any taxing authority to claim or assess any additional Taxes against Target or any such Subsidiary for any period; (f) an audit of any Tax Return of Target or any former Subsidiary of Target by any taxing authority is not pending, in progress or threatened; (g) neither Target nor any of its former Subsidiaries has made any Tax election that reasonably could be expected to result in Buyer being liable for any Tax as a result of the transactions contemplated by this Agreement; and (h) neither Target nor any of its former Subsidiaries is a party to or bound by any Tax allocation or Tax sharing agreement and Target does not have any current or potential contractual obligation to indemnify any Person with respect to Taxes. All Taxes payable by Target and each of its former Subsidiaries attributable to Tax periods (or portions thereof) ending on or before the Closing Date that are not due and payable until after the Closing Date are reflected as a liability on the books of account of Target.

(b) Section 3.17(b) of the Disclosure Schedule lists all Income Tax Returns filed with respect to Target for taxable periods ended on or after December 31, 2002, indicates those Income Tax Returns that have been audited, and indicates those Income Tax Returns that currently are the subject of audit. Sellers have delivered or made available to Buyer correct and complete copies of all federal Income Tax Returns filed by Target since March 31, 2004.

3.18 Real Property .

(a) Section 3.18 of the Disclosure Schedule sets forth the address and a description of all Owned Real Property and all land buildings and other immovable property owned, leased operated or used by Target or any former Subsidiary of Target, or by any Affiliate in connection with Target’s businesses now or at any time in the past. With respect to each parcel of Owned Real Property:

 

  (i) Target has good and marketable fee simple title, free and clear of all Liens, except as set forth in Section 3.18(a)(i) of the Disclosure Schedule and except for Permitted Real Estate Encumbrances;

 

  (ii) except as set forth in Section 3.18(a)(ii) of the Disclosure Schedule, neither Target not any other Person has leased or otherwise granted to any Person the right to use or occupy such Owned Real Property or any portion thereof; and

 

  (iii) except as set forth in Section 3.18(a)(iii) of the Disclosure Schedule, there are no outstanding options, rights of first offer or rights of first refusal to purchase such Owned Real Property or any portion thereof or interest therein.

(b) Section 3.18(b) of the Disclosure Schedule sets forth the address of each parcel of Leased Real Property, and a true and complete list of all Leases for each such parcel of Leased Real Property. Sellers have delivered or made available to Buyer a true and complete copy of each such Lease document. With respect to each Lease:

 

  (i) such Lease is in full force and effect, and such Lease affords Target a valid leasehold interest to the real property that is the subject of the Lease;

 

  (ii) the transactions contemplated by this Agreement do not require the consent of any other party to such Lease, will not result in a breach of or default under such Lease, and will not otherwise cause such Lease to cease to be in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing;

 

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  (iii) Neither Target nor any other Person has collaterally assigned or granted any security interest in such Lease; and

 

  (iv) Target and, to the knowledge of Sellers, no other party, is in breach or violation of, or default under, any such Lease, and no event has occurred, is pending (including the transactions contemplated hereby) or, to the knowledge of Sellers, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would permit the termination, modification or acceleration of rent under such Lease or would constitute a breach or default by Target or, to the knowledge of Sellers, any other party under such Lease.

3.19 Intellectual Property . Section 3.19 of the Disclosure Schedule identifies each patent or domain name, trademark, service mark, trade name, copyright, or other registration that has been issued to Target with respect to any of its intellectual property, identifies each pending patent application or application for registration which Target has made with respect to any of its intellectual property, and identifies each material license, agreement, or other permission that Target has granted to any third party with respect to any of its intellectual property. Target owns or has the right to use all intellectual property necessary to conduct the business of Target as presently conducted. Each item of intellectual property will be owned or available for use by Buyer immediately following the Closing on substantially identical terms and conditions as it was immediately prior to the Closing. To the knowledge of Sellers, no other Person is, as of the date hereof, infringing, violating or misappropriating any of such intellectual property. The use by Target of any intellectual property does not infringe or violate, or constitute a misappropriation of, any intellectual property rights of any Person or entity. Section 3.19 of the Disclosure Schedule lists each written complaint, claim or notice, or written threat thereof, received by Target alleging any such infringement, violation or misappropriation since January 1, 2005. Target has made available to Buyer a summary of all written documentation in Target’s possession relating to claims or disputes known to Target concerning any intellectual property owned by Target. The Target owns, and shall retain after the Closing all rights in the name “Boasso America Corporation.”

3.20 Contracts .

(a) Section 3.20 of the Disclosure Schedule lists all written Contracts to which Target is a party, or by which Target, or any of its respective assets may be bound, (a) the performance of which will involve consideration in excess of $25,000.00 or that is otherwise material to the ownership, operations, business or assets of Target (collectively “ Material Contracts ”) or (b) that is not terminable by Target on notice of 30 days or less. Sellers have delivered or made available to Buyer a correct and complete copy of each Material Contract. Target and, to the knowledge of Sellers, no other party, is in breach or default under, any Contract to which Target is a party or by which Target or any of its assets may be bound, and no event has occurred, is pending (including the transactions contemplated hereby) or, to the knowledge of Sellers, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default on the part of Target, any Seller, or any other party under any such Contract.

 

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(b) Neither Target nor any officer, director, agent, or employee of Target is bound by any Contract that purports to limit the ability of Target or such officer, director, agent, or employee to (i) engage in any line of business, (ii) engage in or continue any conduct, activity, or practice relating to the business of Target, or (iii) assign to Target or to any other Person any rights to any invention, improvement, or discovery.

3.21 Litigation .

(a) Except as disclosed in Section 3.21 of the Disclosure Schedule, there is no pending or threatened Proceeding by or against Target or any of its former Subsidiaries, or that otherwise relates to or may affect the business of, or any of the assets owned or used by, Target; or that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement. To the extent not fully indemnified by insurance policies maintained by Target, there is an accrual on the Target’s Annual Financial Statement for the year ending March 31, 2007 and Most Recent Interim Financial Statement for the full amount of all liabilities and obligations of Target or Sellers for damages, expenses, costs or other amounts, arising out of or relating to the pending and threatened Proceedings and any other matters disclosed in Section 3.21 of the Disclosure Schedule. No event has occurred and to Sellers’ knowledge no circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding. There is no Order to which Target or any of its former Subsidiaries, or any Seller, is subject that relates to the business of, or any of the assets owned or used by, Target.

(b) Target is a defendant in the following two Proceedings: (i) Monica Ray Franques, wife of/and Gene Harold Franques vs. Larry Jones, et al, Civil District Court for the Parish of Orleans, docket no. 2000-4963 (the “ Franques Proceeding ”); and (ii) Anthony R. Polk and Veretta Griffin-Polk vs. Boasso America Corporation, et al, 23 rd Judicial District Court for the Parish of Ascension, docket no. 68,844 (the “ Polk Proceeding ”).

3.22 Employee Benefits .

(a) Section 3.22 of the Disclosure Schedule lists each Employee Benefit Plan that Target or any ERISA Affiliate has maintained or to which Target or any of its former Subsidiaries contributes or has contributed.

 

  (i) Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) has been maintained, funded and administered in all material respects in accordance with the terms of such Employee Benefit Plan and complies in form and in operation in all respects with the applicable requirements of ERISA and the Code.

 

  (ii) All contributions (including all employer contributions and employee salary reduction contributions) that are due have been timely made to each such Employee Benefit Plan that is an Employee Pension Benefit Plan. All premiums or other payments which are due have been paid with respect to each such Employee Benefit Plan that is an Employee Welfare Benefit Plan.

 

  (iii)

Each such Employee Benefit Plan which is intended to meet the requirements of a “qualified plan” under Code § 401(a) since its inception been so qualified and has

 

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received a favorable determination letter from the Internal Revenue Service as to its qualified status under the Code, including all amendments to the Code which are currently effective.

(b) With respect to each Employee Benefit Plan that Target or any ERISA Affiliate maintains, or has maintained during the prior six years or to which any of them contributes, or has been required to contribute during the prior six years:

 

  (i) As of the last day of the most recent prior plan year, the market value of assets under each such Employee Benefit Plan that is an Employee Pension Benefit Plan (other than any Multiemployer Plan) equaled or exceeded the present value of liabilities thereunder (determined in accordance with Code § 414(e) and the regulations thereunder).

 

  (ii) There has been no “prohibited transactions” as such term is defined in ERISA Section 406 or Section 4975 of the Code.

 

  (iii) Target does not have any obligation on account of under-funded, pension, retirement or similar liabilities nor has incurred any liability to the PBGC (other than PBGC premium payments) or otherwise under Title IV of ERISA (including any withdrawal liability) with respect to any such Employee Benefit Plan which is an Employee Pension Benefit Plan.

 

  (iv) For each Employee Benefits Plan that is a “multiemployer plan” within the meaning of Section 3(37) of ERISA, neither Target nor any ERISA Affiliate has incurred, and no facts or circumstances currently exist which could reasonably be expected to result in any withdrawal liability under Title IV of ERISA (either as a contributing employer or as a member of a controlled group which includes a contributing employer or as a member of a controlled group which includes a contributing employer) in connection with a complete or partial withdrawal from any such plan with respect to the transactions contemplated herein.

 

  (v) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement and the other Transaction Documents will (either alone or in conjunction with any other event, such as a termination of employment or other service) (i) entitle any current or former director, officer, employee or other service provider of Target or ERISA Affiliates to severance benefits or any other payment (including unemployment compensation, golden parachute, bonus, retention or benefits under any Seller Employee Plan) or forgiveness of indebtedness, (ii) accelerate the time of payment or vesting of any such benefits, or (iii) increase the amount of compensation due any such benefits which are otherwise unfunded.

3.23 Environmental, Health, and Safety Matters . Except as set forth in Section 3.23 of the Disclosure Schedule:

(a) Target is now, and at all times during the past five years has been, in compliance with all Environmental, Health, and Safety Requirements;

 

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(b) Target is not now, and at no time during the past five years has been, in violation of any Environmental, Health, and Safety Requirement and does not now have, and during the past five years has not had, any liabilities, obligations, or financial contingencies of any kind arising under or pursuant to any Environmental, Health, and Safety Requirement;

(c) Neither Target nor any former Subsidiary of Target has received at any time, now or in the past, from any Governmental Body, private land owner, or other Person, and no other Person for whose conduct Target is legally responsible has received at any time, now or in the past, any written claim, order, notice, inquiry, warning, citation, complaint, directive, summons, or other communication that relates (i) to Hazardous Materials, or (ii) to any alleged, actual, or potential obligation to undertake or bear the cost of any liabilities arising under any Environmental, Health, and Safety Requirement, or (iii) to any facility or property at or to which Hazardous Materials were used, stored, emitted, handled, treated, released, disposed, generated, processed, discharged, transported, or manufactured by Target or any other Person for whose conduct Target is legally responsible;

(d) Neither Target nor any former Subsidiary of Target has received, now or in the past, from any Governmental Body, private land owner, or other Person any notice, complaint, warning letter, or consent order relating to (i) an actual or potential violation of any Environmental, Health, and Safety Requirement or (ii) any actual or threatened obligation to bear any liability or loss arising under any Environmental, Health, and Safety Requirement;

(e) Neither Target nor any former Subsidiary of Target is now or in the past has been, a party to any Proceeding involving allegations of (i) a violation of any Environmental, Health, and Safety Requirement, (ii) the release of any Hazardous Material into the environment (whether in or outside the workplace), or (iii) any personal injury or property damage resulting from the use, release, storage, disposal, emission, handling, discharge, transport, treatment, manufacturing, of any Hazardous Material;

(f) There are not any pending or threatened claims against Target or any former Subsidiary of Target, or any Person for whom Target may be legally responsible, by any Governmental Body, private land owner, or other Person, and there are no Liens on Target’s assets, arising under or pursuant to any Environmental, Health, and Safety Requirement;

(g) Target has been issued, and will maintain in full force and effect through the Closing Date, and during the past five years Target has maintained, every license, Permit or other governmental authorization required for Target’s conduct of its business under all applicable Environmental, Health, and Safety Requirements;

(h) All Hazardous Materials used, stored, emitted, handled, treated, released, disposed, generated, processed, discharged, transported, or manufactured by Target or any former Subsidiary of Target, or any other Person for whose conduct Target is legally responsible, have been used, stored, emitted, handled, treated, released, disposed, generated, processed, discharged, transported, and manufactured at all times in compliance with all applicable Environmental, Health, and Safety Requirements, and none of the property owned, leased or used by Target, or any such Subsidiary or other Person, now or in the past has been used as a stationary dump or storage site (whether permanent or temporary) for any Hazardous Materials;

 

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(i) During the occupancy or operation of any property by Target or any former Subsidiary of Target, or any other Person for whose conduct Target is legally responsible, as owner, lessee, operator or otherwise, now or in the past, there has not been any well, septic system, subsurface disposal systems any above ground or underground storage tanks or surface impoundment on, in, or under such property or any surface water thereon, and neither Target nor any former Subsidiary has used a subsurface disposal system or any above ground or underground storage tanks or surface impoundment located on any property;

(j) There are not any wetlands (within the meaning of any Environmental, Health, and Safety Requirement) located on any part of the property owned or leased by Target;

(k) There are not any negotiations or agreements pending or planned, and no negotiations have taken place during the past five years, between Target and any Governmental Body relating to any Environmental, Health, and Safety Requirement or any assessment or remediation of any pollution;

(l) Sellers have made available to Buyer accurate and complete copies of all environmental tests, studies, and reports pertaining to all property owned, leased or used by Target or any former Subsidiary of Target, now or in the past that are under the control or custody of Target or any Seller; and

(m) None of the property owned, leased or used by Target or any of its former Subsidiaries is in violation of any Environmental, Health, and Safety Requirement or contaminated by any Hazardous Material; and no Hazardous Materials have ever been spilled, leaked, released, emitted, discharged, or otherwise disposed on any property owned, leased or used by Target or any of its former Subsidiaries now or in the past.

3.24 Labor Matters . Schedule 3.24 contains a list of all current employees of Target along with the position and the annual rate of compensation of each such Person. As of the date hereof, no officer or management level employee of Target has provided notice of such employee’s intent to terminate employment with Target and, as of the date hereof, no such employee presently plans to terminate employment with Target. Target is not a party to or bound by any collective bargaining-agreement or other labor union contract applicable to persons employed by Target, and currently there are no organizational campaigns, petitions or other unionization’ activities seeking recognition of a collective bargaining unit which could affect Target. There are no controversies, strikes, slowdowns or work stoppages pending or, to the knowledge of Sellers, threatened between Target and any of its respective employees, and Target has not experienced any such controversy, strike, slowdown or work stoppage within the past three years. Target has not breached or otherwise failed to comply with the provisions of any collective bargaining or union contract, and there are no grievances outstanding against Target under any such agreement or contract. There are no unfair labor practice complaints pending against Target before the National Labor Relations Board or any other Governmental Body or any current union representation questions involving employees of Target. Target is currently in compliance with all applicable laws relating to the employment of labor, including those related to wages, hours, collective bargaining and the payment and withholding of Taxes and other sums as required by the appropriate Governmental Body. Target has paid in full to all its respective employees or adequately accrued for in accordance with GAAP all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees. There is no

 

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claim with respect to payment of wages, salary or overtime pay that has been asserted or is now pending or threatened before any Governmental Body with respect to any Persons currently or formerly employed by Target. Target is not a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Body relating to employees or employment practices. There is no charge or proceeding with respect to a violation of any occupational safety or health standard that has been asserted or is now pending or threatened with respect to Target. There is no charge of discrimination in employment or employment practices, for any reason, including age, gender, race, religion or other legally protected category, which has been asserted or is now pending or threatened before the United States Equal Employment Opportunity Commission, or any other Governmental Body in any jurisdiction, against Target or any employee of Target.

3.25 Accounts Receivable . All accounts receivable of Target reflected on the Most Recent Interim Financial Statements (other than those collected since such date) are valid receivables and are not subject to setoffs or counterclaims, except as reflected in reserves on the Most Recent Interim Financial Statements. All accounts receivable of Target that have arisen since the date of the Most Recent Interim Financial Statements are valid receivables and to the knowledge of Target or Sellers are not subject to setoffs or counterclaims, are current and collectible, and will be collected in accordance with their terms, except as reflected in reserves for uncollectible accounts in Target’s books and records.

3.26 Inventory . Except as disclosed in Section 3.26 of the Disclosure Schedule, all inventory of Target consists of a quality and quantity that may be used, sold or leased in the Ordinary Course of Business, and consists of items that are not obsolete or below-standard quality. All inventories not written off have been priced at the lower of cost or market on a first in, first out basis. The quantities of each item of inventory (whether raw materials, work-in-process, or finished goods) are not excessive, but are reasonable in the present circumstances of Target.

3.27 Absence of Certain Changes or Events . Except as disclosed in Section 3.27 of the Disclosure Schedule, since March 31, 2006, Target has not:

(a) issued, sold, or otherwise disposed of any stock, bonds or other corporate securities or granted any option or issued any warrant to purchase or subscribe for any securities or issued any securities convertible into such securities;

(b) issued any note, bond, or other debt security or intentionally created, incurred, assumed or guaranteed any obligation or liability (absolute or contingent), except current liabilities incurred and obligations under contracts entered into in the Ordinary Course of Business;

(c) mortgaged, pledged, or subjected to any Lien, charge or any other encumbrance any of their assets, tangible or intangible;

(d) sold, leased, assigned, or transferred any of their assets, tangible or intangible, except in the Ordinary Course of Business;

(e) declared, set aside or paid any dividend or made any distribution with respect to capital stock (whether in cash or kind) or redeemed, purchased or otherwise acquired any of Target’s capital stock;

 

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(f) cancelled, compromised, waived or released any debts or claims, except in the Ordinary Course of Business;

(g) delayed or postponed the payment of acc