Exhibit 5.1
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STOCK EXCHANGE AGREEMENT
by and among
FORTUNE DIVERSIFIED INDUSTRIES, INC.;
NOR-COTE INTERNATIONAL, INC.;
XXXXXX X. XXXXXXX, XX.;
XXXXXX X. XXXXXXX, XX. AND XXXXXX X. XXXXXXX, XX.,
AS CO-TRUSTEES OF THE XXXXXX X. XXXXXXX, XX. AND
XXXXXX X. XXXXXXX REVOCABLE TRUST OF 1995
and
FIRST BANKERS TRUST COMPANY, AS TRUSTEE
UNDER THE TRUST AGREEMENT FOR THE
NOR-COTE INTERNATIONAL, INC.
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (this "Agreement") is entered into this
____ day of June 2003 by and among NOR-COTE INTERNATIONAL, INC., an Illinois
corporation ("Company"); XXXXXX X. XXXXXXX, XX., individually ("Xxxx Xxxxxxx");
XXXXXX X. XXXXXXX, XX. AND XXXXXX X. XXXXXXX, XX., AS CO-TRUSTEES OF THE XXXXXX
X. XXXXXXX, XX. AND XXXXXX X. XXXXXXX REVOCABLE TRUST OF 1995 ("Xxxxxxx Trust");
FIRST BANKERS TRUST COMPANY, AS TRUSTEE UNDER THE TRUST AGREEMENT FOR THE
NOR-COTE INTERNATIONAL, INC. EMPLOYEE STOCK OWNERSHIP PLAN TRUST ("Preferred
Stock Seller"); and FORTUNE DIVERSIFIED INDUSTRIES, INC., a Delaware corporation
("Buyer").
BACKGROUND
Company is engaged in the business (the "Business") of developing,
producing and selling ultraviolet ink products.
Company has four (4) subsidiaries which are identified on Schedule 1
(individually "Subsidiary" and collectively "Subsidiaries").
The parties hereto desire to provide for the acquisition by Buyer of
Company through the transfer by Xxxx Xxxxxxx and the Xxxxxxx Trust
(collectively, "Common Stock Sellers") and Preferred Stock Seller (collectively
"Sellers") to Buyer of all the outstanding shares of capital stock of Company,
which are owned beneficially and of record by Sellers, all on the terms and
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
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SECTION 1. EXCHANGE OF SHARES.
1.1. Exchange of Shares of Company. Subject to the terms and conditions
of this Agreement, at the Closing (as herein defined), Common Stock Sellers
shall transfer and deliver to Buyer 1,451,985.47 shares of the common stock, no
par value, of Company, constituting all of the outstanding shares of Company's
common stock (the "Common Shares"), Preferred Stock Seller shall transfer and
deliver to Buyer, 747,992.51 shares of the preferred stock, no par value, of
Company, constituting all of the outstanding shares of Company's preferred stock
(the "Preferred Shares") and Buyer shall acquire the Common Shares and Preferred
Shares (collectively "Shares") for the consideration set forth in Section 2.
SECTION 2. EXCHANGE RATIOS AND ADDITIONAL CONSIDERATION.
2.1. Exchange Ratio and Additional Consideration.
(a) The Common Shares shall be exchanged for (i) eight and five hundred
and thirty four thousandths (8.534) shares of Buyer's common stock for each
Common Share of Company owned by Common Stock Sellers and (ii) cash in the
amount set forth in Section 2.2(a). At Closing, Buyer shall therefore issue to
Common Stock Sellers, on a fully-paid and non-assessable basis, an aggregate of
twelve million, three hundred ninety one thousand, two hundred forty four
(12,391,244) shares of Buyer's common stock and make the cash payment set forth
in Section 2.2(a). Such shares of Buyer's common stock and such cash payment
shall be allocated between Xxxx Xxxxxxx and the Xxxxxxx Trust as set forth in
the attached Schedule 2.1.
(b) The exchange ratio for the five hundred seventy eight thousand,
eight hundred seventy five and 512/1000 (578,875.512) shares of the Preferred
Shares that have not been allocated to the participants in the Company's
Employee Stock Ownership Plan and Trust ("ESOP") shall be thirteen and two
hundred and forty seven thousandths (13.247) shares of Buyer's common stock for
each unallocated Preferred Share of Company owned by Preferred Stock Seller. The
number of Preferred Shares allocated to ESOP participants is 169,116.998, with
the balance of 578,875.512 Preferred Shares remaining unallocated and thus
collateral securing the Inside Loan (as hereinafter defined). At Closing, Buyer
shall therefore issue to Preferred Stock Seller, on a fully-paid and
non-assessable basis, seven million, six hundred sixty eight thousand, three
hundred sixty four (7,668,364) shares of FDI Stock. The one hundred sixty nine
thousand one hundred sixteen and 998/1000 (169,116.998) Preferred Shares of the
Company held by the Preferred Stock Seller that have been allocated to ESOP
participants shall be exchanged for the cash payment to the Preferred Stock
Seller at Closing set forth in Section 2.2(b).
(c) The shares of Buyer's common stock to be issued to Sellers pursuant
to this Agreement are hereinafter referred to as the "FDI Stock".
2.2. Payment of Additional Consideration. As additional consideration,
Buyer shall at Closing:
(a) Pay one million eight hundred thousand dollars ($1,800,000.00) in
cash by wire transfer of immediately available funds to an account specified by
Common Stock Seller(s), with such payment to be allocated between the Common
Stock Sellers as set forth in the attached Schedule 2.1; and
(b) Pay eight hundred ninety three thousand, six hundred eight dollars
($893,608.00) in cash by wire transfer of immediately available funds to an
account specified by the Preferred Stock Seller.
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2.3. Put/Call Options. The Common Stock Sellers shall have the option
to put the FDI Stock to Carter Fortune, and Carter Fortune shall have the option
to call such shares of FDI Stock from the Common Stock Sellers, on the terms and
subject to the conditions set forth in the Option Agreement, substantially in
the form attached hereto as Exhibit C, which Option Agreement shall be executed
and delivered at the Closing.
2.4. Special Adjustment Relative to Any Additional Inside Loan
Payments. Unless otherwise prohibited by the "prohibited transaction" or
"fiduciary responsibility" rules contained in ERISA and the Code, to the extent
the Company at any time receives payment of or in respect of the Inside Loan in
excess of the $2,683,927.40 contemplated by Section 6.2(c), including without
limitation any payments in respect of the Inside Loan contemplated in Section
6.2(c), the consideration to be paid by the Buyer to the Common Stock Sellers
shall be increased by the amount of such excess, which shall thereupon be
promptly paid to the Common Stock Sellers in cash.
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING COMMON STOCK SELLERS.
Each of the Common Stock Sellers hereby jointly and severally
represents and warrants (1) to Buyer as follows and (2) to the Preferred Stock
Seller with respect to Sections 3.1, 3.2, 3.4 and 3.5:
3.1. Power and Authorization. Each of the Common Stock Sellers has full
capacity, legal right, power and authority to enter into and perform Sellers'
obligations under this Agreement and under the other agreements and documents
(the "Common Stock Sellers Transaction Documents") required to be executed and
delivered by Sellers prior to or at the Closing. This Agreement has been duly
and validly executed and delivered by each of the Common Stock Sellers and
constitutes the legal, valid and binding obligation of each of the Common Stock
Sellers enforceable against each of the Common Stock Sellers in accordance with
its terms except as the same may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting the
enforcement of creditor's rights in general, and except that the enforceability
of this Agreement is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or law) and
of public policy. When executed and delivered as contemplated herein, and
assuming enforceability thereof against all other parties, each of the Common
Stock Sellers Transaction Documents shall constitute the legal, valid and
binding obligation of each of the Common Stock Sellers, enforceable against each
of the Common Stock Sellers in accordance with its terms except as the same may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws affecting the enforcement of creditor's rights in
general, and except that the enforceability of the Common Stock Sellers
Transaction Documents is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or law) and
of public policy.
3.2. No Conflicts.
(a) Except as set forth in Schedule 3.3, the execution, delivery and
performance of this Agreement and the Common Stock Sellers Transaction Documents
do not and will not (with or without the passage of time or the giving of
notice):
(i) violate or conflict with any law binding upon Common Stock
Sellers;
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any
material agreement or other material obligation to which any of the
Common Stock Sellers is a party or by which any of the Common Stock
Sellers or any of Common Stock Sellers' assets are bound, or give to
others any rights (including rights of termination, foreclosure,
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cancellation or acceleration), in or with respect to any of the Common
Stock Sellers or any of his/its assets, including, without limitation,
any of the Common Shares; or
(iii) result in, require or permit the creation or imposition
of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance of any nature upon or
with respect to the Common Shares.
(b) Each consent or approval of, or registration, notification, filing
and/or declaration with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person required to be given or made
by any of the Common Stock Sellers in connection with the execution, delivery
and performance of this Agreement and the other agreements and instruments
contemplated herein, which are to be obtained or made in order for transfer of
the Common Shares to be effective as contemplated herein, has been obtained or
made, or will be obtained or made prior to the Closing.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the actual knowledge of
any of the Common Stock Sellers, threatened, that question any of the
transactions contemplated by, or the validity of, this Agreement or any of the
Common Stock Sellers Transaction Documents or which, if adversely determined,
would have a material adverse effect upon the ability of any of the Common Stock
Sellers to enter into or perform his/its obligations under this Agreement or any
of Common Stock Sellers Transaction Documents. None of the Common Stock Sellers
has received any request from any governmental agency or instrumentality for
information with respect to the transactions contemplated hereby.
3.3. Ownership of the Shares. Except as set forth in Schedule 3.3: (a)
each of the Common Stock Sellers own the Common Shares beneficially and of
record, free and clear of any restriction, mortgage, deed of trust, pledge,
lien, security interest or other charge, claim or encumbrance; (b) there are no
shareholder or other agreements affecting the right of any of the Common Stock
Sellers to convey the Common Shares to Buyer or any other right of any of the
Common Stock Sellers with respect to the Common Shares, and each of the Common
Stock Sellers have the right, authority, power and capacity to sell, assign and
transfer the Common Shares to Buyer free and clear of any restriction, mortgage,
deed of trust, pledge, lien, security interest or other charge, claim or
encumbrance (except for restrictions imposed generally by applicable securities
laws); and (c) upon delivery to Buyer of the certificates for the Common Shares
at the Closing, each of the Common Stock Sellers will transfer good, valid and
marketable title to the Common Shares, free and clear of any restriction,
mortgage, deed of trust, pledge, lien, security interest or other charge, claim
or encumbrance.
3.4. Brokers. No person acting on behalf of any of the Common Stock
Sellers or under the authority of any of the Common Stock Sellers is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee,
directly or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement.
3.5. Full Disclosure. All documents and other papers (or copies
thereof) delivered by or on behalf of the Common Stock Sellers in connection
with the transactions contemplated by this Agreement are in the same form as
they were maintained by the Common Stock Sellers, without alteration and are
accurate and complete as to items in the custody of the Common Stock Sellers in
all material respects; provided, however, that certain documents provided on
behalf of the Common Stock Sellers were never maintained by the Common Stock
Sellers.
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3.6. Investment Representations and Covenants.
(i) Each of the Common Stock Sellers understand that as of the
Closing Date the FDI Stock will not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), or any state securities
laws on the grounds that the issuance of the FDI Stock is exempt from
registration pursuant to Section 4(2) of the Securities Act or
Regulation D promulgated under the Securities Act and applicable state
securities laws, and that the reliance of Buyer on such exemptions is
predicated in part on each of the Common Stock Sellers'
representations, warranties, covenants and acknowledgments set forth in
this Section 3.6.
(ii) Each of the Common Stock Sellers represents and warrants
that he/it is an "accredited investor" as defined in Rule 501
promulgated as part of Regulation D under the Securities Act.
(iii) Each of the Common Stock Sellers represents and warrants
that the FDI Stock to be acquired by him/it upon consummation of the
transactions contemplated herein will be acquired by him/it for his/its
own account, not as a nominee or agent, and without a view to resale or
other distribution within the meaning of the Securities Act and the
rules and regulations thereunder other than as contemplated by this
Agreement and the Option Agreement, and that he/it will not distribute
all or any portion of the FDI Stock in violation of the Securities Act.
(iv) Each of the Common Stock Sellers acknowledges that the
shares of FDI Stock are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired in a
transaction not involving a public offering and that under such laws
and applicable regulations such securities may be resold without
registration under the Securities Act, only in certain limited
circumstances.
(v) Each of the Common Stock Sellers represents and warrants
that he/it has such knowledge and experience in financial and business
matters such that he/it is capable of evaluating the merits and risks
of his/its investment in the FDI Stock.
(vi) Each of the Common Stock Sellers is in a financial
position to afford to hold the FDI Stock indefinitely, each of the
Common Stock Sellers' financial condition being such that he/it is not
presently under (and does not contemplate any future) necessity or
constraint to dispose of the FDI Stock to satisfy any existing or
contemplated debt or undertaking. Each of the Common Stock Sellers
recognizes that it may not be possible for him/it to liquidate his/its
investment in the FDI Stock and, accordingly, he/it may have to hold
the FDI Stock, and bear the economic risk of this investment,
indefinitely.
(vii) Each of the Common Stock Sellers understands that
neither the Securities and Exchange Commission nor any other federal or
state agency has recommended, approved or endorsed the purchase of the
FDI Stock as an investment.
(viii) Each of the Common Stock Sellers confirms that the FDI
Stock was not offered to him/it by any means of general solicitation or
general advertising, and that he/it has received no representations or
warranties with respect to the FDI Stock other than those contained or
described in this Agreement or in Buyer's public filings.
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(ix) Each of the Common Stock Sellers acknowledges that he/it
has been provided or that Buyer has made available to him/it copies of
Buyer's most recent Form 10-KSB, Form 10-QSB and any Form 8-KS and Form
4s filed since the most recent Form 10-QSB was filed.
(x) Each of the Common Stock Sellers acknowledges that Buyer
has given him/it a reasonable opportunity to ask questions and receive
answers concerning his/its receipt of FDI Stock and to obtain any
additional information which Buyer possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy
of information.
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING PREFERRED STOCK
SELLER.
Preferred Stock Seller hereby represents and warrants (1) to Buyer as
follows and (2) to Common Stock Sellers with respect to Sections 4.1, 4.2, 4.4
and 4.5:
4.1. Power and Authorization. Preferred Stock Seller has full capacity,
legal right, power and authority to enter into and perform its obligations under
this Agreement and under the other agreements and documents (the "Preferred
Stock Seller Transaction Documents") required to be executed and delivered by it
prior to or at the Closing. This Agreement has been duly and validly executed
and delivered by Preferred Stock Seller and constitutes the legal, valid and
binding obligation of Preferred Stock Seller enforceable against Preferred Stock
Seller in accordance with its terms except as the same may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws affecting the enforcement of creditor's rights in general, and except
that the enforceability of the Preferred Stock Seller Transaction Documents is
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law) and of public
policy. When executed and delivered as contemplated herein, and assuming
enforceability thereof against all other parties, each of the Preferred Stock
Seller Transaction Documents shall constitute the legal, valid and binding
obligation of Preferred Stock Seller, enforceable against Preferred Stock Seller
in accordance with its terms except as the same may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws
affecting the enforcement of creditor's rights in general, and except that the
enforceability of the Preferred Stock Seller Transaction Documents is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or law) and of public policy.
4.2. No Conflicts.
(a) The execution, delivery and performance of this Agreement and the
Preferred Stock Seller Transaction Documents do not and will not (with or
without the passage of time or the giving of notice):
(i) violate or conflict with any law binding upon Preferred
Stock Seller;
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any
material agreement (other than the Stock Pledge Agreement dated
December 28, 2000 by and between First Bankers Trust Company, as
Trustee under the Trust Agreement for the Nor-Cote International, Inc.
Employee Stock Ownership Plan, and Nor-Cote International, Inc. (the
"Pledge Agreement")) or other material obligation to which Preferred
Stock Seller is a party or by which Preferred Stock Seller or any of
the ESOP's assets are bound, or give to others any rights (including
rights of termination, foreclosure, cancellation or acceleration), in
or with respect to Preferred Stock Seller or any of its assets
including, without limitation, any of the Preferred Shares; or
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(iii) result in, require or permit the creation or imposition of any
restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance of any nature
upon or with respect to the Preferred Shares.
(b) Each consent or approval of, or registration, notification, filing
and/or declaration with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person required to be given or made
by Preferred Stock Seller in connection with the execution, delivery and
performance of this Agreement and the other agreements and instruments
contemplated herein, which are to be obtained or made in order for transfer of
the Preferred Shares to be effective as contemplated herein, has been obtained
or made, or will be obtained or made prior to the Closing.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of Preferred
Stock Seller, threatened, that question any of the transactions contemplated by,
or the validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, would have an adverse
effect upon the ability of Preferred Stock Seller to enter into or perform its
obligations under this Agreement or any such other agreements or instruments.
Preferred Stock Seller has received any request from any governmental agency or
instrumentality for information with respect to the transactions contemplated
hereby.
4.3. Ownership of the Preferred Shares. Except as set forth in Schedule
4.3, Preferred Stock Seller owns the Preferred Shares beneficially and of
record, free and clear of any restriction, mortgage, deed of trust, pledge,
lien, security interest or other charge, claim or encumbrance. Except as
described on Schedule 4.3, there are no shareholder or other agreements
affecting the right of Preferred Stock Seller to convey the Preferred Shares to
Buyer or any other right of Preferred Stock Seller with respect to the Preferred
Shares, and Preferred Stock Seller has the right, authority, power and capacity
to sell, assign and transfer the Preferred Shares to Buyer free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance (except for restrictions imposed generally by
applicable securities laws). Upon delivery to Buyer of the certificates for the
Preferred Shares at the Closing, Preferred Stock Seller will transfer good,
valid and marketable title to the Preferred Shares, free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance.
4.4. Brokers. No person acting on behalf of Preferred Stock Seller or
under the authority of Preferred Stock Seller is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee, directly or
indirectly, from any of such parties in connection with any of the transactions
contemplated by this Agreement.
4.5. Full Disclosure. All documents and other papers (or copies
thereof) delivered by or on behalf of Preferred Stock Seller in connection with
the transactions contemplated by this Agreement are in the same form as they
were maintained by Preferred Stock Seller, without alteration and are accurate
and complete as to items in the custody of Preferred Stock Seller in all
material respects; provided, however, that certain documents provided on behalf
of the Preferred Stock Seller were never maintained by the Preferred Stock
Seller.
4.6. Investment Representations and Covenants.
(i) Preferred Stock Seller understands that as of the Closing
Date the FDI Stock will not be registered under the Securities Act, or
any state securities laws on the grounds that the issuance of the FDI
Stock is exempt from registration pursuant to Section 4(2) of the
Securities Act or Regulation D promulgated under the Securities Act and
applicable state securities laws, and that the reliance of Buyer on
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such exemptions is predicated in part on each of the Preferred Stock
Seller's representations, warranties, covenants and acknowledgments set
forth in this Section 4.6.
(ii) Preferred Stock Seller represents and warrants that it is
an "accredited investor" as defined in Rule 501 promulgated as part of
Regulation D under the Securities Act.
(iii) Preferred Stock Seller represents and warrants that the
FDI Stock to be acquired by it upon consummation of the transactions
contemplated herein will be acquired by it for its own account, but in
its capacity as a trustee, not as a nominee or agent, and without a
view to resale or other distribution within the meaning of the
Securities Act and the rules and regulations thereunder other than as
contemplated by this Agreement, and that it will not distribute all or
any portion of the FDI Stock in violation of the Securities Act.
(iv) Preferred Stock Seller acknowledges that the shares of
FDI Stock are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired in a
transaction not involving a public offering and that under such laws
and applicable regulations such securities may be resold without
registration under the Securities Act, only in certain limited
circumstances.
(v) Preferred Stock Seller represents and warrants that it has
such knowledge and experience in financial and business matters such
that it is capable of evaluating the merits and risks of its investment
in the FDI Stock.
(vi) Preferred Stock Seller understands that neither the
Securities and Exchange Commission nor any other federal or state
agency has recommended, approved or endorsed the purchase of the FDI
Stock as an investment.
(vii) Preferred Stock Seller confirms that the FDI Stock was
not offered to it by any means of general solicitation or general
advertising, and that it has received no representations, warranties or
written communications with respect to the FDI Stock other than those
contained or described in this Agreement or in Buyer's public filings.
(viii) Preferred Stock Seller acknowledges that it has been
provided or that Buyer has made available to it copies of Buyer's most
recent Form 10-KSB, Form 10-QSB and any Form 8-KS and Form 4s filed
since the most recent Form 10-QSB was filed.
SECTION 5. Representations and Warranties Regarding Company and subsidiaries
Common Stock Sellers hereby jointly and severally represent and warrant
to Buyer (1) with respect to Sections 5.1, 5.2, 5.3, 5.8 and 5.9, as of the date
of this Agreement and as of the Closing Date and (2) with respect to all other
Sections contained in this Section 5 that (a) as of January 9, 2003, there was
no breach which, as of the Closing Date, remains uncured and (b) to the actual
knowledge of any of the Common Stock Sellers, as of the date of this Agreement
and as of the Closing Date, there is no breach:
5.1. Organization and Good Standing.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized and validly existing under the laws of the jurisdiction of its
organization (as set forth in Schedule 5.1(a)) and has all necessary corporate
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power and authority to carry on its business, to own and lease the assets which
it owns and leases, and to perform all of its obligations.
(b) Each of the Company and its Subsidiaries is duly qualified to do
business and is in good standing (if and to the extent the concept of good
standing is recognized) under the laws of each jurisdiction in which its
ownership or leasing of assets or properties or the nature of its activities
reasonably require such qualification, except as set forth in Schedule 5.1(b).
5.2. Power and Authorization. Company has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Company Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
delivery and performance by Company of this Agreement and the Company
Transaction Documents have been duly authorized by all necessary corporate
action. This Agreement has been duly and validly executed and delivered by
Company and constitutes its legal, valid and binding obligation, enforceable
against Company in accordance with its terms except as the same may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws affecting the enforcement of creditor's rights in general, and except
that the enforceability of this Agreement is subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or law) and of public policy. When executed and delivered as
contemplated herein, and assuming enforceability thereof against all other
parties, each of the Company Transaction Documents shall constitute the legal,
valid and binding obligation of Company, enforceable against Company in
accordance with its terms except as the same may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws
affecting the enforcement of creditor's rights in general, and except that the
enforceability of the Company Transaction Documents is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or law) and of public policy.
5.3. No Conflicts.
(a) Except as set forth on Schedule 5.3, the execution, delivery and
performance of this Agreement and the Company Transaction Documents do not and
will not (with or without the passage of time or the giving of notice):
(i) violate or conflict with the Articles of Incorporation or
Bylaws (or other organizational documents) of Company or any law
binding upon Company;
(ii) to actual knowledge of any of the Common Stock Sellers,
violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under any material
agreement or other material obligation to which Company is a party or
by which it or its assets are bound, or give to others any right
(including rights of termination, foreclosure, cancellation or
acceleration), in or with respect to Company or any of its assets; or
(iii) result in, require or permit the creation or imposition
of any restriction, mortgage, deed of trust, pledge, lien, security
interest or other charge, claim or encumbrance of any nature upon or
with respect to the Shares or, to the actual knowledge of any of the
Common Stock Sellers, upon or with respect to Company or any of
Company's assets, other than the outstanding Credit Agreement with
National City Bank of Indiana ("Lender"), which the Common Stock
Sellers understand the Buyer intends to pay off at Closing in
connection with the consummation of this transaction.
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(b) Each consent or approval of, or registration, notification, filing
and/or declaration with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person required to be given or made
by Company in connection with the execution, delivery and performance of this
Agreement and the Company Transaction Documents has been made or will be
obtained or made prior to the Closing. To the actual knowledge of any of the
Common Stock Sellers, (i) there are no such consents, approvals, registrations,
notifications, filings or declarations which have been obtained or made
involving payment of premium or penalty by, or loss of benefit to, Company, and
(ii) upon consummation of the transactions contemplated by this Agreement,
Company will be entitled to continue to use all of the assets and properties now
used by it in the same manner such assets and properties were used prior to
Closing.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the actual knowledge of
any of the Common Stock Sellers, threatened that question any of the
transactions contemplated by, or the validity of, this Agreement or any of the
Company Transaction Documents or which, if adversely determined, would
materially interfere with Company's ability to enter into or perform its
obligations under this Agreement or any of the Company Transaction Documents. To
the actual knowledge of any of the Common Stock Sellers, Company has not
received any request from any governmental agency or instrumentality for
information with respect to the transactions contemplated hereby at any office
located outside of Indiana.
5.4. Capitalization.
(a) Schedule 5.4 fully and accurately describes the authorized, issued
and outstanding capital stock and other securities of (i) the Company and (ii)
to the actual knowledge of any of the Common Stock Sellers, each of the
Subsidiaries
(b) Except as described in Schedule 5.4, (i) no person has any
preemptive or other right with respect to any such equity interests or other
securities; (ii) there are no offers, options, warrants, rights, agreements or
commitments of any kind (contingent or otherwise) relating to the issuance,
conversion, registration, voting, sale or transfer of any equity interests or
other securities of Company (including, without limitation, the Shares) or
obligating Company or any other person to purchase or redeem any such equity
interests or other securities and (iii) the Shares constitute all of the issued
and outstanding shares of capital stock of Company and have been duly authorized
and are validly issued and outstanding, fully paid and nonassessable, and have
been issued in compliance with applicable securities and other laws.
5.5. Investments and Subsidiaries. To the actual knowledge of any of
the Common Stock Sellers, the business of Company and Subsidiaries is and has
been conducted solely by and through Company and Subsidiaries and no other
person. Except for Company's ownership of Subsidiaries or as set forth in
Schedule 5.5, Company and Subsidiaries do not directly or indirectly own,
control or have any investment or other interest in any corporation,
partnership, joint venture, business trust or other entity.
5.6. Compliance with Laws.
(a) Company and Subsidiaries have complied in all material respects
with all applicable domestic and foreign laws; and Company, Subsidiaries or any
of the Common Stock Sellers has not received any written notice, order or other
10
written communication from any governmental agency or instrumentality of any
alleged, actual or potential violation of or failure to comply with any law.
(b) Except to the extent that it would not have a Material Adverse
Effect (as hereinafter defined): (i) all federal, foreign, state, local and
other governmental consents, licenses, permits, franchises, grants and
authorizations (collectively, "Authorizations") required for the operation of
the Business as currently conducted, are in full force and effect without any
default or violation thereunder by Company or any Subsidiary, by any other party
thereto; and (ii) Company or any Subsidiary has not received any notice of any
claim or charge that Company or any Subsidiary is in violation of or in default
under any such Authorization; (iii) no proceeding is pending or, to the actual
knowledge of any of the Common Stock Sellers, threatened by any person to revoke
or deny the renewal of any Authorization of Company, any Subsidiary or Common
Stock Sellers; and (iv) Company, any Subsidiary or any of the Common Stock
Sellers has not been notified that any such Authorization may not in the
ordinary course be renewed upon its expiration or that by virtue of the
transactions contemplated hereby any such Authorization may not be granted or
renewed.
5.7. Litigation. Except as set forth in Schedule 5.7: (a) there are no
claims, actions, suits, proceedings (arbitration or otherwise) or, to the actual
knowledge of any of the Common Stock Sellers, investigations involving or
affecting Company, any Subsidiary or their businesses or assets, or their
directors, officers or shareholders in their capacities as such, before or by
any court or governmental agency or instrumentality, or before an arbitrator of
any kind; (b) no pending claim, action, suit, proceeding or investigation, if
determined adversely, would either individually or in the aggregate have a
Material Adverse Effect; (c) to the actual knowledge of any of the Common Stock
Sellers, no such claim, action, suit, proceeding or investigation is presently
threatened or contemplated; and (d) to the actual knowledge of any of the Common
Stock Sellers, there are no unsatisfied judgments, penalties or awards against
or affecting Company, any Subsidiary or any of their businesses, properties or
assets, that in the aggregate or individually will have a Material Adverse
Effect.
5.8. Financial Statements.
(a) Schedule 5.8(a) includes the audited consolidated balance sheet of
Company as of December 31, 2002 (including the notes thereto, if any, the
"Company December Consolidated Balance Sheet"), and the related consolidated
statement of income for the calendar year then ended (the "Company Consolidated
Financial Statements"). The Company Consolidated Financial Statements accurately
and fairly present the financial condition and results of the consolidated
operations of Company and Subsidiaries as of the date thereof and for the period
referred to, all in accordance with GAAP consistently applied.
(b) Schedule 5.8(b) includes the Company's unaudited consolidated
balance sheet as of May 31, 2003 (the "Company May Consolidated Interim Balance
Sheet") and the related consolidated statement of income for the five months
then ended (collectively the "Company May Consolidated Interim Financial
Statements"). The Company May Consolidated Interim Financial Statements
accurately and fairly present the financial condition and results of the
consolidated operations of Company and Subsidiaries as of the date thereof and
for the period referred to, all in accordance with GAAP consistently applied.
(c) The Company May Consolidated Interim Balance Sheet reflects all
material liabilities of Company and Subsidiaries, whether absolute, accrued or
contingent, as of the date thereof. Except as set forth in Schedule 5.8(c), as
of the date of Closing, Company and Subsidiaries will not have any material
liability or material obligation of any nature that is not reflected on the
Company May Consolidated Interim Balance Sheet other than current liabilities
11
(within the meaning of GAAP) incurred since the date thereof arising in the
ordinary course of business consistent with past practice.
5.9. Full Disclosure. Except as provided on Schedule 5.9, to the actual
knowledge of any of the Common Stock Sellers, (a) all documents and other papers
(or copies thereof) delivered by or on behalf of the Common Stock Sellers in
connection with the transactions contemplated by this Agreement are in the same
form as maintained by Company or any Subsidiary internally, without alteration,
and (b) are accurate and complete as to items in the custody of Company or any
Subsidiary in all material respects.
5.10. Directors and Officers. Except as described on Schedule 5.10, all
agreements with its directors and officers are terminable at will by Company or
a Subsidiary and there are no contracts, arrangements or agreements in place
with any director or officer which would require the payment of any severance or
change of control payment.
5.11. Affiliate Agreements. Except as described on Schedule 5.11, (a)
there are no agreements, arrangements or understandings between Company or any
Subsidiary on the one hand and any of the Common Stock Sellers or any present or
former director, shareholder or officer of Company or any Subsidiary or any
member of the immediate family of or any person or entity controlling or
controlled by any of such persons (a "Related Party"); (b) all agreements and
arrangements between Company, any Subsidiary and all Related Parties are
terminable by Company or the Subsidiary, upon written notice, without payment of
penalty or premium of any kind and (c) none of the Common Stock Sellers has any
claim or right against Company or any Subsidiary.
5.12. Environmental Matters.
(a) To the actual knowledge of any of the Common Stock Sellers, except
as set forth on Schedule 5.12:
(i) Company and Subsidiaries have no liability under, nor have
they violated, any Environmental Law, which may reasonably be expected
to have a Material Adverse Effect;
(ii) any property owned, operated, leased, or used by Company
or any Subsidiary, and any facilities and operations thereon, are
presently in material compliance with all applicable Environmental
Laws, except for any non-compliance which may reasonably not be
expected to have a Material Adverse Effect; and
(iii) there have been no past unresolved, and there are no
pending or threatened, (A) claims, complaints, notices or inquiries,
to, or written requests for information received by, the Company or any
Subsidiary with respect to any alleged violation of any applicable
Environmental Law, that, singly or in the aggregate, have or may
reasonably be expected to have a Material Adverse Effect, or (B)
claims, complaints, notices or inquiries to, or written requests for
information received by, the Company and Subsidiaries regarding
potential liability under any applicable Environmental Law or under any
common law theories relating to operations or the condition of any
facilities or property by the Company and Subsidiaries that, singly or
in the aggregate, have, or may reasonably be expected to have, a
Material Adverse Effect;
(b) For purposes of this Section 5.12 only, (i) "Environmental Law"
shall mean any environmental law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level existing as of the date hereof and (ii)
"Company and Subsidiaries" shall mean and include Company and Subsidiaries and
12
all other entities for whose conduct Company or any Subsidiary is or may be held
responsible under any Environmental Law.
5.13. Material Adverse Change. Except as set forth on Schedule 5.13,
(a) since May 31, 2003, there has been no material change in the business,
assets, prospects, condition (financial or otherwise) or results of operations
of the Company or any Subsidiary, except as reflected in the Company May
Consolidated Interim Financial Statements and (b) the Company, for itself and on
behalf of each Subsidiary, has not omitted or failed to disclose any material
fact or contingency.
5.14. Taxes. Except as set forth on Schedule 5.14, the Company and each
Subsidiary has filed, or caused to be filed, all United States Federal tax
returns and all other tax returns required to be filed and has paid all taxes
due pursuant to said returns or pursuant to any assessment against the Company
or any Subsidiary, except such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided in accordance with
GAAP and as to which no mortgage, pledge, security interest, hypothecation,
assignment, encumbrance or preference, priority or other security agreement,
preferential arrangement, lien, charge or deposit arrangement of any kind or
nature whatsoever (a "Lien") exists. No tax liens have been filed and no claims
are being asserted with respect to any such taxes. The charges, accruals and
reserves on the Company May Consolidated Interim Financial Statements of the
Company in respect of any taxes or other governmental charges are adequate with
respect to the operations of the Company during the period for which such taxes
or other governmental charges are assessed.
5.15. ERISA. Except as set forth on Schedule 5.15, neither the Company
nor any Subsidiary has, maintains or contributes to any employee pension benefit
plan of the Company or any Subsidiary which is covered by Title IV of the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and any rule or regulation thereunder ("ERISA") or subject to minimum funding
standards under Section 412 of the Code as to which the Company or any
Subsidiary has any liability (a "Plan") and none of the Plans required to be
listed on Schedule 5.15 is a "defined benefit plan" (as defined in Section 3(35)
of ERISA). The Company (and each individual, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof (a "Person"), who together with the Company, would be
treated as a single employer under ERISA) is in compliance in all material
respects with all applicable provisions of ERISA, and none of such Persons has
incurred any material liability to the Pension Benefit Guaranty Corporation, or
its successor. No reportable event (as defined in ERISA) has occurred under, nor
has there occurred any complete or partial withdrawal from, nor any other event
which would constitute grounds for termination of or the appointment of a
trustee to administer, any Plan (including any multi-employer plan) maintained
for employees of the Company (and each Person, who together with the Company,
would be treated as a single employer under ERISA).
5.16. Accuracy of Information. No information, exhibit or report
furnished by the Common Stock Sellers for themselves or on behalf of the Company
or any Subsidiary, to Buyer in connection with the negotiation of, or compliance
with, this Agreement, the Common Stock Sellers Transaction Documents and the
Company Transaction Documents contained any material misstatement of fact or
omitted to state a material fact or any material fact necessary to make the
statements contained therein not misleading.
5.17. Material Agreements. The Company and each Subsidiary are not a
party to any agreement or instrument or subject to any charter or other
corporate restriction which is reasonably expected to have a Material Adverse
Effect. The Company and each Subsidiary are not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in (a) any agreement to which it is a party which default could
reasonably be expected to have a Material Adverse Effect, or (b) any agreement
or instrument evidencing or governing indebtedness, except as set forth on
Schedule 5.17.
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5.18. Ownership of Properties. Except as disclosed on Schedule 5.18,
("Permitted Liens") on the date of this Agreement, the Company and each
Subsidiary have good title, free and clear of all Liens other than Permitted
Liens, to all of their respective assets.
5.19. Indebtedness. Except as shown on the Company May Consolidated
Interim Financial Statements and except trade debt incurred in the ordinary
course of business since the date of the Company May Consolidated Interim
Financial Statements neither the Company nor any of its Subsidiaries has any
indebtedness.
5.20. Intellectual Property.
(a) Except as set forth on Schedule 5.20(a), to the actual knowledge of
any of the Common Stock Sellers, Company and Subsidiaries have exclusive
ownership of, or valid license or authority to use, all United States and
foreign patents, patent applications, copyrights, licenses, trademarks,
trademark applications and registrations, service marks, trade or product names,
company names and logos (collectively, "Intellectual Property") used in the
Business as presently conducted, except where such failure will not have a
Material Adverse Effect. To the actual knowledge of any of the Common Stock
Sellers, Schedule 5.20(a) contains a correct and complete list of the Company's
United States and foreign patent, trademarks and copyrights, both registered and
pending.
(b) To the actual knowledge of any of the Common Stock Sellers, except
as set forth in Schedule 5.20(b), all licenses or other agreements under which
Company or any Subsidiary is granted rights in any of the Intellectual Property
are in full force and effect and there is no material default by any party
thereto, except where such failure or default will not have a Material Adverse
Effect.
(c) To the actual knowledge of any of the Common Stock Sellers: (i)
Company's and Subsidiary's use of any Intellectual Property does not infringe on
any rights of any other person; except as set forth on Schedule 5.20(a) and (ii)
Company and Subsidiaries are not making unauthorized use of any confidential
information or trade secrets of any person, including without limitation any
former employer or any past or present employee of Company or any Subsidiary.
5.21. Force Majeure. Neither the business nor the assets of the Company
or any Subsidiary are presently affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty that, singly or in
the aggregate, is reasonably expected to have a Material Adverse Effect.
5.22. Labor Matters. As of the Closing Date, no attempt to organize the
employees of Company or any Subsidiary, and no labor disputes, strikes or
walkouts affecting the operations of the Company or any of its Subsidiaries, is
pending, or, to the Company's knowledge, threatened, planned or contemplated.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING COMPANY'S
EMPLOYEE STOCK OWNERSHIP PLAN
6.1. By Preferred Stock Seller and Common Stock Sellers. Preferred
Stock Seller and the Common Stock Sellers hereby severally, and not jointly,
represent and warrant to Buyer and to one another as of the date of this
Agreement and as of the Closing Date as follows:
(a) Compliance. Company's Employee Stock Ownership Plan and Trust
("ESOP") has been administered in compliance with its terms in all material
14
respects, and is in compliance in all material respects with the applicable
provisions of ERISA, and the Internal Revenue Code of 1986, as amended (the
"Code"); (ii) Company and Subsidiaries have made or provided for all
contributions required under the terms of the ESOP; (iii) except as set forth on
Schedule 6.1(a), there have been no "prohibited transactions" (as described in
Section 4975 of the Code or in Part 4 of Subtitle B of Title I of ERISA) with
respect to the ESOP; (iv) except as set forth on Schedule 6.1(a), there are and
during the past three years there have been no inquiries, proceedings, claims or
suits pending or, to Sellers' knowledge, threatened by any governmental agency
or authority or by any participant or beneficiary against the ESOP, the assets
of any of the trusts under the ESOP or the Plan sponsor or the Plan
administrator, or against any fiduciary of the ESOP with respect to the design
or operation of the ESOP; (v) the ESOP has from its inception been qualified,
and any trust created pursuant to the ESOP is exempt from federal income tax
under Section 501(a) of the Code and the Internal Revenue Service has issued the
ESOP a favorable determination letter, which is currently applicable; and (vi)
except as set forth on Schedule 6.1(a), there is not any circumstance or event
which would reasonably be expected to jeopardize the tax-qualified status of the
ESOP or the tax-exempt status of any related trust, or which would cause the
imposition of any liability, penalty or tax under ERISA or the Code with respect
to the ESOP. The foregoing representations and warranties in this Section 6.1(a)
are made by the Preferred Stock Seller only to the knowledge of the Preferred
Stock Seller after reasonable inquiry with respect thereto.
(b) Liabilities. With respect to the ESOP, Company or any Subsidiary,
there are no unsatisfied liabilities to participants, the IRS or the United
States Department of Labor ("DOL"), except as set forth on Schedule 6.1(a).
(c) Reports. All reports and information required to be filed with the
DOL and IRS or with plan participants and their beneficiaries with respect to
the ESOP have been filed.
(d) Bonding. Any bonding required under ERISA with respect to the ESOP
has been obtained and is in full force and effect and no funds held by or under
the control of Company or any Subsidiary are plan assets.
(e) Termination. Common Stock Sellers and Preferred Stock Seller,
respectively, are not a party to any agreement and have no knowledge of any
agreement or impediment, other than compliance with applicable law and with the
applicable provisions of the ESOP Documents, that would prevent amendment,
termination or discontinuation of the ESOP.
6.2. By Preferred Stock Seller. Preferred Stock Seller hereby
represents and warrants to, and covenants with, Buyer, Common Stock Sellers and
the Company as of the date of this Agreement and as of the Closing Date as
follows:
(a) Allocated/Unallocated Shares. One hundred sixty nine thousand, one
hundred sixteen and 998/1000 (169,116.998) of the Preferred Shares have been
allocated to the ESOP's plan participants and five hundred seventy eight
thousand, eight hundred seventy five and 512/1000 (578,875.512) of the Preferred
Shares have not been allocated to the ESOP's plan participants.
(b) Inside Loan. As of the Closing Date, the ESOP has indebtedness
outstanding to Company in the stated principal amount of $6,028,991.01, which is
non-recourse to the ESOP but is collateralized by the unallocated shares and
proceeds thereof (the "Inside Loan").
(c) Repayment of Inside Loan. Upon termination of the ESOP, which is
expected to occur on the Closing Date, the seven million, six hundred sixty
eight thousand, three hundred sixty four (7,668,364) shares of FDI Stock
(together with any and all other collateral for the Inside Loan) to be received
by Preferred Stock Seller on the Closing Date shall be transferred and delivered
to Company and applied toward payment of the Inside Loan. Regardless of any
15
change in the bid/ask price of the FDI Stock, these shares shall continue to
have the assigned value of two million, six hundred eighty-three thousand, nine
hundred twenty seven and 40/100 dollars ($2,683,927.40). In addition, while the
parties agree that the consideration to be paid to the Preferred Stock Seller
constitutes full and complete payment and satisfaction to the Preferred Stock
Seller, it is conceivable that despite the belief that no grounds exist, a
governmental agency, department or entity may nonetheless assert that additional
amounts are to be paid to the Preferred Stock Seller. If this were to occur, any
amounts received by or for the benefit of Preferred Stock Seller in respect of
the Preferred Shares that have not been allocated to the accounts of ESOP plan
participants or any other portion of the collateral securing the Inside Loan
(including, but not limited to, any additional proceeds received as a result of
any inquiry, investigation, ruling or demand by any governmental agency,
department or entity) shall, whether before or at any time after termination of
the ESOP or payment of the Inside Loan, also be paid to Company, subject only to
the following sentence. If and to the extent any such additional consideration,
when added to the amount of $2,683,927.40, exceeds the unpaid principal balance
of, and all unpaid accrued interest on, the Inside Loan immediately prior to
Closing, such excess amount shall be for the account and benefit of the ESOP
plan participants.
(d) Expenses. Neither Company nor Common Stock sellers shall be liable
for any of Preferred Stock Seller's expenses (including, but not limited to,
Trustee fees, legal fees and appraisal fees) incurred in connection with the
transaction described herein unless such expenses are promptly reimbursed to
Company. Any necessary and reasonable expenses previously paid by Company with
respect to the transaction contemplated by this Agreement shall be promptly
reimbursed to Company. This Section 6.2(d) shall apply only with respect to
expenses related to the sale and exchange of the Preferred Stock as provided in
this Agreement and shall not apply to expenses otherwise incurred by the
Preferred Stock Seller (including any incurred in connection with the Plan), the
payment or reimbursement of which shall be controlled by the ESOP plan
documents.
(e) Waiver. Preferred Stock Seller waives any and all rights and/or
claims it may have: (i) to purchase any of Company's preferred shares or common
shares; and/or (ii) against the Common Stock Sellers arising out of or in
connection with the formation, organization or operation of the ESOP (but only
to the extent such waiver is permitted by applicable law, including Section 404
of ERISA) or, except for any rights expressly created by the Preferred Stock
Seller Transaction Documents, the transactions contemplated by this Agreement.
(f) Consent to Sale of Common Shares. Pursuant to Section 12.1 of the
Company's By-Laws, the Preferred Stock Seller hereby consents to the sale of the
Shares to the Buyer.
(g) Cooperation. To the extent reasonably requested by Buyer and/or
Company, subject to the provisions of Section 16 of this Agreement, and to the
extent not otherwise in conflict with its duties as Trustee of the ESOP,
Preferred Stock Seller agrees to cooperate with Buyer and Company in the prompt
and efficient termination of the ESOP, the prompt payment of the Inside Loan and
the prompt payment of the ESOP's assets to the plan participants.
(h) Full Consideration. The consideration to be received by the
Preferred Stock Seller, the other rights and benefits of the Preferred Stock
Seller and the obligations undertaken by the other parties for the benefit of
the Preferred Stock Seller all pursuant to this Agreement constitute full,
complete and adequate consideration to the Preferred Stock Seller for the
Preferred Shares and all rights of the Preferred Stock Seller pursuant to the
terms of the ESOP and related documents.
16
SECTION 7. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Sellers as of the date of this
Agreement and as of the Closing Date as follows:
7.1. Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all necessary corporate power and authority to carry on its
business as presently conducted, to own and lease the assets which it owns and
leases and to perform all its obligations under each agreement and instrument by
which it is bound.
7.2. Power and Authorization. Buyer has full capacity, legal right,
power and authority to enter into and perform its obligations under this
Agreement and under the other agreements and documents (the "Buyer Transaction
Documents") required to be executed and delivered by it prior to or at the
Closing. The execution, delivery and performance by Buyer of this Agreement and
the Buyer Transaction Documents have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms except as the same
may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws affecting the enforcement of creditor's rights in
general, and except that the enforceability of the Buyer Transaction Documents
is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law) and of public
policy. When executed and delivered as contemplated herein, and assuming
enforceability thereof against all other parties, each of the Buyer Transaction
Documents shall constitute the legal, valid and binding obligation of Buyer,
enforceable against Sellers in accordance with its terms except as the same may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws affecting the enforcement of creditor's rights in
general, and except that the enforceability of the Buyer Transaction Documents
is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law) and of public
policy.
7.3. No Conflicts.
(a) The execution, delivery and performance of this Agreement and the
Buyer Transaction Documents do not and will not (with or without the passage of
time or the giving of notice):
(i) violate or conflict with Buyer's Certificate of
Incorporation or Bylaws or any law binding upon Buyer;
(ii) violate or conflict with, result in a breach of, or
constitute a default or otherwise cause any loss of benefit under any
material agreement or other material obligation to which Buyer is a
party or by which it or its assets are bound, or give to others any
right (including rights of termination, foreclosure, cancellation or
acceleration), in or with respect to Buyer, its assets or any of its
Affiliates' assets; or
(iii) violate any resolution adopted by the board of directors
or stockholders of Buyer.
(b) Each consent or approval of, or registration, notification, filing
and/or declaration with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person required to be given or made
by Buyer in connection with the execution, delivery and performance of this
17
Agreement and the other agreements and instruments contemplated herein has been
obtained or made, or will be obtained or made prior to the Closing.
(c) There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of Buyer,
threatened, that question any of the transactions contemplated by, or the
validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, would have a material
adverse effect upon the ability of Buyer to enter into or perform its
obligations under this Agreement or any such other agreements or instruments.
Buyer has not received any request from any governmental agency or
instrumentality for information with respect to the transactions contemplated
hereby.
7.4. Compliance With Laws. Buyer is in compliance with all applicable
laws, orders, rules and regulations of all governmental bodies and agencies,
except where such noncompliance would not materially affect the ability of Buyer
to consummate the transactions contemplated by this Agreement. Buyer has not
received notice of any noncompliance with the foregoing.
7.5. Accuracy of Filings. All publicly-available filings made by Buyer
with the Securities and Exchange Commission since September 1, 2000 are true and
complete in all material respects, do not contain any untrue statement of
material fact and do not omit to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
7.6. Compliance With Securities Law. The shares of FDI Stock to be
issued to Sellers at Closing will be fully issued, non-assessable, valid and
outstanding as of the Closing, and will be validly issued in reliance upon an
exemption from registration under, and in material compliance with, applicable
federal and state securities laws, including without limitation the Securities
Act of 1933, as amended, and the Securities and Exchange Act of 1934, as
amended.
7.7. Brokers. No person acting on behalf of Buyer or any of its
affiliates or under the authority of any of the foregoing is or will be entitled
to any brokers' or finders' fee or any other commission or similar fee, directly
or indirectly, from any of such parties in connection with any of the
transactions contemplated by this Agreement.
7.8. Full Disclosure. All documents and other papers (or copies
thereof) delivered by or on behalf of Buyer in connection with the transactions
contemplated by this Agreement are in the same form as maintained by Buyer
internally, without alteration, and are accurate and complete as to items in the
custody of Buyer in all material respects.
7.9. Investment Representations and Covenants.
(i) Buyer understands that as of the Closing Date the Shares
will not be registered under the Securities Act, or any state
securities laws on the grounds that the issuance of the Shares is
exempt from registration pursuant to Section 4(2) of the Securities Act
or Regulation D promulgated under the Securities Act and applicable
state securities laws, and that the reliance of Sellers on such
exemptions is predicated in part on the Buyer's representations,
warranties, covenants and acknowledgments set forth in this Section
7.9.
(ii) Buyer represents and warrants that it is an "accredited
investor" as defined in rule 501 promulgated as part of Regulation D
under the Securities Act.
18
(iii) Buyer represents and warrants that the Shares to be
acquired by it upon consummation of the transactions contemplated
herein will be acquired by it for its own account, not as a nominee or
agent, and without a view to resale or other distribution within the
meaning of the Securities Act and the rules and regulations thereunder,
and that it will not distribute all or any portion of the Shares in
violation of the Securities Act.
(iv) Buyer acknowledges that the Shares are characterized as
"restricted securities" under the federal securities laws inasmuch as
they are being acquired in a transaction not involving a public
offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act
only in certain limited circumstances.
(v) Buyer represents and warrants that it has such knowledge
and experience in financial and business matters such that it is
capable of evaluating the merits and risks of its investment in the
Shares.
(vi) Buyer understands that neither the Securities and
Exchange Commission nor any other federal or state agency has
recommended, approved or endorsed the purchase of the Shares as an
investment.
(vii) Buyer confirms that the Shares were not offered to it by
any means of general solicitation or general advertising.
7.10. Excise Tax. Buyer is aware that the Preferred Shares were
acquired by the ESOP in connection with an election of nonrecognition of gain by
the Common Stock Sellers under Code Section 1042. Buyer is also aware that the
Company filed a consent to application of the excise tax under Code Section
4978, as required by Code Section 1042(b)(3), which applies on disposition of
stock prior to expiration of the three-year holding period required by Code
Section 1042(b)(4).
SECTION 8. CERTAIN AGREEMENTS OF THE PARTIES
8.1. Termination of Certain ESOP Documents. The parties hereto mutually
agree to terminate the Buy-Sell Agreement by and among the Company, the Common
Stock Sellers and the Preferred Stock Seller and the Stock Call Option and Put
Option Agreement among the Company, the Common Stock Sellers and the Preferred
Stock Seller, both dated December 28, 2000, and further agree that such
agreements shall be of no further force or effect as of Closing.
8.2. Company's Consent to Sale of Preferred Shares. The parties
acknowledge that the Preferred Shares held by the Preferred Stock Seller which
have not been allocated to the ESOP plan participants are subject to a pledge in
favor of the Company pursuant to the Stock Pledge Agreement dated December 28,
2000 between the Preferred Stock Seller as pledgor, and the Company, as pledgee.
The Company, as pledgee, hereby consents and agrees to the sale of such pledged
Preferred Shares by the Preferred Stock Seller to the Buyer.
8.3. Certain Rights of Xxxx Xxxxxxx Regarding Operations. At Closing,
Xxxx Xxxxxxx and Company shall enter into an Employment Agreement, substantially
in the form of Exhibit A attached hereto. In addition, Xxxx Xxxxxxx will be
elected as Chairman of the Board of the Company and, as long as he has the legal
capacity to do so, will be entitled to remain in that role until June 20, 2006
for the compensation set forth in such Employment Agreement. He will be entitled
to review and participate in the establishment of the Company's budget, and
attend and participate in all meetings of the Board of Directors of the Company,
as well as all monthly meetings of executives of the Company and/or Buyer to
review financial results, or relating to strategic or financial planning. He
will have the right to make proposals regarding the budget, financial planning
and strategy to maximize the Company's EBITDA, which Buyer and Company shall
19
consider in good faith and, to the extent reasonable and rational, implement as
appropriate. The Buyer and the Company shall use commercially reasonable good
faith efforts to cause the budgeted EBITDA for the Company to average at least
$1,600,000 for each of the three years immediately following the Closing, with a
goal to develop and implement a strategy reasonably designed to achieve such
results.
8.4. Xxxxxxx Incentive Compensation. The Buyer and the Company agree
that any and all incentive compensation payable, provided or made available by
Buyer and/or the Company for the benefit of Xxxxxx Xxxxxxx or his successor(s)
as President of the Company during the "Test Period" (as defined in the Option
Agreement of even date herewith among the Common Stock Sellers, Carter Fortune
and Buyer, substantially in the form attached hereto as Exhibit C) shall be
based upon the Company's attainment of specified amounts of "Adjusted EBITDA"
(as defined in such Option Agreement), which for purposes of any such incentive
compensation shall be calculated in the same manner and on the same basis as
Adjusted EBITDA is to be calculated under such Option Agreement.
8.5. National City Bank Loan. The consummation of this transaction will
constitute a Change of Control (as defined in that certain Credit Agreement
dated December 28, 2000 by and between Company and Lender), unless Lender
consents to the consummation of this transaction. Pursuant to the Credit
Agreement and the Loan Documents (as defined in the Credit Agreement), copies of
all of which have been furnished to the Buyer, Company granted certain security
interests to Lender, which are more fully described in the Credit Agreement and
Loan Documents. The parties hereto acknowledge that it is their mutual
understanding that such indebtedness to the Lender pursuant to the Credit
Agreement is to be paid off at Closing, with release of all security interests
to be obtained from Lender.
SECTION 9. CERTAIN CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
The obligation of Buyer to consummate the acquisition of the Shares is
subject to the fulfillment by or at the Closing of each of the following
conditions:
9.1. Representations and Warranties. Sellers' representations and
warranties contained in this Agreement shall be deemed to have been made again
at and as of the Closing and shall then be true and correct.
9.2. Performance of Covenants. Sellers shall have performed or complied
with all of the agreements, covenants and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing.
9.3. Approvals. The consent or approval of all persons necessary for
the consummation of the transactions contemplated hereby shall have been
obtained and no such consent or approval: (a) shall have been conditioned upon
the modification in any material respect, cancellation or termination of any
material lease, commitment, agreement, easement, right or Authorization of
Company or Sellers; or (b) shall impose on the Buyer or Company, any material
condition, provision or requirement not presently imposed upon Sellers or
Company or any condition that would be more restrictive after the Closing on
Buyer or Company than the conditions presently imposed on Sellers or Company, as
the case may be.
9.4. Legal Matters. The Closing shall not violate any order or decree
of any court or governmental body of competent jurisdiction and no suit, action,
proceeding or investigation, shall have been brought or threatened by any person
(other than the Buyer or an affiliate of Buyer) which questions the validity or
legality of this Agreement or the transactions contemplated hereby.
9.5. Due Diligence Review. Buyer's due diligence investigation and
review of Company's business prospects, contracts, obligations, liabilities,
capitalization and properties, including, but not limited to, an evaluation of
the stock record books, minute books, financial records, tax returns, contracts,
leases, Authorizations, employment agreements, employee benefit plans, all other
20
contracts material to the operation of the businesses of Company and
Subsidiaries in compliance with all domestic and foreign laws, and environmental
matters, shall have been completed to Buyer's sole satisfaction.
9.6. Resignation of Directors. Buyer shall have received resignations
from such of the directors of Company as it shall have requested.
SECTION 10. CERTAIN CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
The obligation of Sellers to consummate the sale of the Shares is
subject to the fulfillment by or at the Closing of each of the following
conditions:
10.1. Representations and Warranties. Buyer's representations and
warranties contained in this Agreement shall be deemed to have been made again
at and as at the Closing and shall then be true and correct in all material
respects.
10.2. Performance of Covenants. Buyer shall have performed or complied
in all material respects with all of the agreements, covenants and conditions
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
10.3. Legal Matters. The Closing shall not violate any order or decree
of any court or governmental body of competent jurisdiction and no suit, action,
investigation, or legal or administrative proceeding shall have been brought or
threatened by any person (other than Sellers or an affiliate of Sellers) which
questions the validity or legality of this Agreement or the transactions
contemplated hereby.
SECTION 11. [intentionally omitted.]
SECTION 12. CLOSING.
12.1. Time and Place of Closing. The closing of the exchange of the
Shares (the "Closing") pursuant to this Agreement shall take place on June 30,
2003, at the offices of Xxxxxx Xxxxxxx Xxxxx & Vornehm, LLP, 0000 Xxxxxxxx
Xxxxxxxx, Xxxxx 0000, Xxxxxxxxxxxx, XX 00000, commencing at 10:00 a.m. local
time or at such other date, time or place as may be agreed to by Buyer and
Sellers (the "Closing Date"). The Closing shall be effective on the Effective
Date except as otherwise specified in this Agreement.
12.2. Deliveries at the Closing. At the Closing, in addition to the
other actions contemplated elsewhere herein:
(a) Sellers shall deliver, or shall cause to be delivered, to Buyer the
following:
(i) certificates representing all of the Shares, duly endorsed
for transfer or with stock powers affixed thereto, executed in blank in
proper form for transfer; and
(ii) such other documents and instruments as Buyer may
reasonably request to effectuate or evidence the transactions
contemplated by this Agreement.
(b) Common Stock Sellers shall deliver, or cause to be delivered, to
Buyer the following:
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(i) Company's Articles of Incorporation certified as of a
recent date by the Secretary of State of Illinois and by the Secretary
of the Company, Subsidiaries' Articles of Incorporation (or similar
document in foreign jurisdictions) certified as of a recent date by the
Secretary of Company, and Company's and Subsidiaries' By-laws (or
similar document in foreign jurisdictions) certified by the Secretary
of Company, each including any and all amendments to date;
(ii) a Certificate of Existence (or similar document in
Illinois) of a recent date for Company, certified by the appropriate
governmental agency;
(iii) resolutions of the board of directors or corresponding
governing body of Company and Subsidiaries authorizing the execution,
delivery and performance of this Agreement and the other agreements and
instruments referred to herein, certified as of the Closing Date by the
Secretary or an Assistant Secretary of Company;
(iv) the original corporate minute books and stock transfer
and record books of Company and Subsidiaries as they exist on the
Closing and such of its files, books and records as Buyer may
reasonably request;
(v) a counterpart, duly executed by Xxxx Xxxxxxx, of the
Employment Agreement between the Company and Xxxx Xxxxxxx, in
substantially the form of that attached hereto as Exhibit A;
(vi) such other documents and instruments as Buyer may
reasonably request to effectuate or evidence the transactions
contemplated by this Agreement.
(c) Buyer shall deliver, or shall cause to be delivered, to Sellers the
items described below:
(i) certificates representing the FDI Stock, duly and validly
issued in the respective names of Sellers as set forth in Section 2.1
and Schedule 2.1;
(ii) a wire transfer of immediately available funds in the
amount of $1,800,000.00 to the accounts specified by Common Stock
Seller(s), as set forth in Schedule 2.1;
(iii) a wire transfer of immediately available funds in the
amount of $893,608 to the accounts specified by Preferred Stock Seller;
(iv) a copy of the resolutions of the Board of Directors of
Buyer authorizing the execution, delivery and performance by Buyer of
this Agreement and the other agreements and instruments referred to
herein, certified as of the Closing by the Secretary or an Assistant
Secretary of Buyer;
(v) a Certificate of Good Standing of a recent date for Buyer,
certified by the Secretary of State of the State of Delaware;
(vi) a duly executed Option Agreement, executed by Carter
Fortune, wherein Xx. Xxxxxxx agrees to perform his obligations with
respect to the put options described in Section 2.3, in substantially
the form of that attached hereto as Exhibit C;
(vii) a counterpart, duly executed by the Company, of the
Employment Agreement between the Company and Xxxx Xxxxxxx, in
substantially the form of that attached hereto as Exhibit A;
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(viii) a counterpart, duly executed by the Company, of the
Agreement for Purchase and Sale of Real Estate between the Company and
W&W Services, an affiliate of the Common Stock Sellers, regarding the
purchase of certain real estate located at 000 Xxxxxxxxx Xxxxxx,
Xxxxxxxxxxxxxx, Xxxxxxx, by the Company from W&W Services, in
substantially the form of that attached hereto as Exhibit B; and
(ix) such other documents and instruments as Sellers may
reasonably request to effectuate or evidence the transactions
contemplated by this Agreement.
12.3. Confidential Information. For purposes of this Agreement,
"Confidential Information" shall be deemed to include all information and
materials with respect to the Business, including, but not limited to, all
proprietary information, specifications, models, diagrams, flow charts,
videotapes, audio tapes, forms, data structures, graphics, other original works
of authorship, product plans, technologies, formulas, trade secrets, trade names
or proposed trade names, knowhow, ideas, marketing materials, lists of potential
or actual customers, contracts, pricing information, financial information,
business plans and strategies, and other financial and intellectual property
with respect to the Business.
Except as authorized in writing by Buyer, Xxxx Xxxxxxx shall not
disclose, communicate, publish or use for the benefit of himself or any third
party any Confidential Information received, acquired, or obtained with respect
to the Business. Xxxx Xxxxxxx also agrees that: a) the Confidential Information
will be held in confidence by Xxxx Xxxxxxx using the same degree of care, but no
less than a reasonable degree of care, as Xxxx Xxxxxxx uses to protect his own
confidential information of a like nature; b) he will take such steps as may be
reasonably necessary to prevent disclosure of the Confidential Information to
others; and c) in the event Xxxx Xxxxxxx is legally required to disclose any
portion of the Confidential Information, Xxxx Xxxxxxx shall promptly notify
Buyer so that Buyer may take steps to protect its Confidential Information.
The obligations of this Section 12.3 shall terminate with respect to
any particular portion of Confidential Information which: a) is in the public
domain; b) entered the public domain through no fault of Xxxx Xxxxxxx; or c) was
rightfully communicated by a third party to Xxxx Xxxxxxx free of any obligation
of confidence.
In no event shall Xxxx Xxxxxxx be deemed by virtue hereof to have
acquired any right or interest in or to the Confidential Information. Xxxx
Xxxxxxx agrees that for a period of five (5) years following the date of this
Agreement, he will use his best efforts to maintain the confidentiality of the
Confidential Information.
The parties acknowledge that the Preferred Stock Seller has no
obligations under this Section 12.3 and shall have no liability to the Buyer or
any other person, and the Buyer shall have no remedy or recourse against the
Preferred Stock Seller, for any violation of this Section by Xxxx Xxxxxxx or
otherwise.
SECTION 13. NON-COMPETITION.
For a period commencing on the Closing Date and ending on the fifth
(5th) anniversary of the Closing Date, without the prior written consent of
Buyer (which consent may be withheld in Buyer's sole and absolute discretion)
Xxxx Xxxxxxx shall not, directly or indirectly, for himself/itself or for any
other person, proprietorship, partnership, corporation or trust, or any other
entity, as an individual or as an owner, employee, agent, officer, director,
trustee, or in any other capacity:
(a) solicit, participate or aid in the solicitation of orders for
Restricted Products, or sell any Restricted Products to any of Company's or
Subsidiaries' customers who were serviced by any of the Sellers, solicited by
23
any of the Sellers or who became customers of Company or any Subsidiary as a
result of any actions taken by any of the Sellers;
(b) solicit, participate or aid in the solicitation of, or sell any
Restricted Products to any of Company's or Subsidiaries' customers who were
customers, or had an ongoing business relationship with Company or any
Subsidiary, at any time during the one (1) year period preceding the Closing
Date;
(c) contact, or aid or participate in the contact, including allowing
the use of any of the Sellers' names in connection with the contact of, any of
Company's or Subsidiaries' customers who were customers, or had an ongoing
business relationship with Company or any Subsidiary, at any time during the one
(1) year period preceding the Closing Date, for the purpose of diverting their
purchases of Restricted Products from Company or any Subsidiary;
(d) develop, produce, manufacture or license any Restricted Product; or
(e) engage in, conduct, promote, or participate in either as an owner,
investor, employee, officer, director, trustee, or agent, or in any other
capacity whatsoever, a business engaged in the sale and offering of Restricted
Products either directly or indirectly. The prohibitions and covenants
enumerated in this Section 14(e) shall bind Sellers in the following geographic
area: Any North American, South American, Central American, European, African,
Australian or Asian market where the Company, its subsidiaries or licensees were
engaged in business during the preceding three (3) years.
For a period commencing on the Closing Date and ending on the third
(3rd) anniversary of the Closing Date, without the prior written consent of
Buyer (which consent may be withheld in Buyer's sole and absolute discretion)
Xxxx Xxxxxxx shall not, directly or indirectly, for himself/itself or for any
other person, proprietorship, partnership, corporation or trust, or any other
entity, as an individual or as an owner, employee, agent, officer, director,
trustee, or in any other capacity solicit or contact or aid or participate in
the contact, including allowing the use of any of the Sellers' names in
connection with the contact of, Company's or any Subsidiary's employees, other
than Xxxxx Xxxxxxx and/or Xxxx Xxxxxxx, for the purpose of inducing them to
terminate their employment with the Company or any Subsidiary.
"Restricted Products" shall be defined as any product manufactured by
the Company during the one-year period prior to this Agreement and the Electric
Beam Ink Business (as hereinafter defined).
Nothing in the provisions of this Section 14 shall prohibit Xxxx
Xxxxxxx from:
(a) purchasing for investment purposes only any stock or corporate
security traded or quoted on a national securities exchange or national market
system; and/or
(b) pursuing and participating in, in any way and in any capacity he
may deem appropriate, the business of developing, producing, selling, marketing
and otherwise commercializing electric beam cured screen printed inks (the
"Electric Beam Ink Business") if (i) the Company does not notify Xxxx Xxxxxxx in
writing within three (3) months following the date of this Agreement that the
Company intends in good faith to pursue and participate in the Electric Beam Ink
Business or (ii) having so notified Xxxx Xxxxxxx, the Company does not have a
product in the market in the Electric Beam Ink Business within three (3) years
following the date of this Agreement.
Buyer and Xxxx Xxxxxxx agree that due to the nature of Company's
business and its international scope of operations, and due to the nature of
Xxxx Xxxxxxx'x position within Company and his access to and knowledge of
24
Confidential Information of Company, and in further consideration of Buyer's and
Company's legitimate protectible interests in a highly competitive business
environment nationally and internationally, the covenants and restrictions,
including but not limited to, the geographic areas set forth above and other
restrictions placed on Xxxx Xxxxxxx'x ability to engage in any activity
competitive with Company, are required to be broad in scope and the parties
acknowledge that such breadth is reasonable. Xxxx Xxxxxxx further acknowledges
and agrees that the breadth of such restrictions is reasonable because he has
become acquainted with the affairs of Company, its officers and employees, its
services, products, business practices, business relationships, and the needs
and requirements of its customers and prospective customers, trade secrets,
intellectual property, Confidential Information, and other information
proprietary to Company. Xxxx Xxxxxxx acknowledges and agrees that Buyer and
Company have a need to protect, through the above restrictions, each of the
foregoing interests and Company's goodwill, and to prevent unfair competition
and the inevitable use or disclosure of Confidential Information or trade
secrets.
Buyer and Xxxx Xxxxxxx agree that in the event of a breach of any of
the covenants and prohibitions contained in Section 13 by Xxxx Xxxxxxx, Buyer
shall suffer immediate, immeasurable and irreparable harm and damage, and
accordingly, the parties agree as follows:
(a) These covenants shall be construed as agreements independent of any
other provision of this Agreement, and the existence of any claim or cause of
action by any of Sellers against Buyer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement of these covenants
by Buyer;
(b) In the event of a violation of any of these covenants, the terms of
all covenants shall be automatically extended for a period equal to the
violation, and Buyer shall be entitled to recover reasonable attorney's fees
incurred in the enforcement of these covenants;
(c) Each covenant is separate and distinct from every other covenant,
and in the event of the invalidity of any one covenant, the remaining covenants
shall be deemed independent and enforceable. Further, although the parties agree
that the scope, duration and territorial restrictions herein are reasonable and
necessary for the protection of Buyer, the parties agree that the obligations
with respect to each country and the duration thereof are a separate covenant,
and in the event a Court should consider the territorial restrictions or
duration too extensive, the Court shall consider the reasonableness and
enforceability of the covenants with respect to each individual country and the
duration thereof and shall modify the provisions so as to be valid and fully
enforceable for the maximum scope, duration and geographic areas (but never for
a larger scope, longer period or greater area than set forth above) as the Court
shall find to be reasonable, necessary valid and legally enforceable;
(d) These covenants are reasonable and necessary for the protection of
Buyer's business interests, that irreparable injury will result to Buyer if any
of the Sellers breaches any of these covenants, and that in the event of actual
or threatened breach of any of these covenants, Buyer will have no adequate
remedy at law. Xxxx Xxxxxxx accordingly agrees that in the event of any actual
or threatened breach by him of any of these covenants, Buyer shall be entitled
to immediate temporary injunctive and other equitable relief, subject to hearing
as soon thereafter as possible. Nothing contained herein shall be construed as
prohibiting Buyer from pursuing any other remedies available to it for such
breach or threatened breach, including the recovery of any damages which it is
able to prove; and
(e) Buyer would not have entered into this Agreement but for Xxxx
Xxxxxxx'x agreement to be bound by and comply with the terms and conditions of
this Agreement, including, without limitation, Section 13 hereof, and for Norm
25
Xxxxxxx'x agreement that the scope, duration and territorial restrictions of
these covenants are reasonable.
The parties acknowledge that the Preferred Stock Seller has no
obligations under this Section 13 and shall have no liability to the Buyer or
any other person, and the Buyer shall have no remedy or recourse against the
Preferred Stock Seller, for any violation of this Section by Xxxx Xxxxxxx or
otherwise.
SECTION 14. INDEMNIFICATION
14.1. Indemnification by Common Stock Sellers. Subject to Section 14.6,
each of the Common Stock Sellers shall, jointly and severally, indemnify and
hold Buyer and its officers, directors and shareholders harmless against and in
respect of any and all losses, costs, expenses, claims, damages, obligations and
liabilities, including interest, penalties and reasonable attorneys' fees and
disbursements ("Damages"), which Buyer or any such indemnitee may suffer, incur
or become subject to arising out of, based upon or otherwise in respect of: (a)
any inaccuracy in or breach of any representation or warranty of any of the
Common Stock Sellers made in or pursuant to this Agreement or any Transaction
Document; or (b) any breach or nonfulfillment of any covenant or obligation of
any of the Common Stock Sellers contained in this Agreement or any Transaction
Document.
14.2. [Intentionally Omitted.]
14.3. Indemnification by Buyer. Buyer shall indemnify and hold Sellers
and each of their successors, heirs and assigns harmless against and in respect
of any and all Damages which Sellers or any such indemnitee may suffer, incur or
become subject to arising out of, based upon or otherwise in respect of: (a) any
inaccuracy in or breach of any representation or warranty of Buyer made in or
pursuant to this Agreement or any Buyer Transaction Document; (b) any breach or
nonfulfillment of any covenant or obligation of Buyer contained in this
Agreement or any Buyer Transaction Document; and (c) the operation of Company or
any Subsidiary after the Closing Date.
14.4. Inter-Party Claims. Any party seeking indemnification pursuant to
this Section (the "Indemnified Party") shall promptly notify in writing the
other party or parties from whom such indemnification is sought (the
"Indemnifying Party") of the Indemnified Party's assertion of such claim for
indemnification, specifying the basis of such claim. The Indemnified Party shall
thereupon give the Indemnifying Party reasonable access to the books, records
and assets of the Indemnified Party which evidence or support such claim or the
act, omission or occurrence giving rise to such claim and the right, upon prior
notice during normal business hours, to interview any appropriate personnel of
the Indemnified Party related thereto.
14.5. Third Party Claims.
(a) Each Indemnified Party shall promptly notify the Indemnifying Party
of the assertion by any third party of any claim with respect to which the
indemnification set forth in this Section relates. The Indemnifying Party shall
have the right, upon notice to the Indemnified Party within twenty (20) business
days after the receipt of any such notice, to undertake the defense of such
claim with counsel reasonably acceptable to the Indemnified Party, or, with the
consent of the Indemnified Party (which consent shall not unreasonably be
withheld), to settle or compromise such claim. The failure of the Indemnifying
Party to give such notice and to undertake the defense of or to settle or
compromise such a claim shall constitute a waiver of the Indemnifying Party's
rights under this Section 14.5(a) and shall preclude the Indemnifying Party from
disputing the manner in which the Indemnified Party may conduct the defense of
such claim or the reasonableness of any amount paid by the Indemnified Party in
satisfaction of such claim.
26
(b) The election by the Indemnifying Party, pursuant to Section
14.5(a), to undertake the defense of a third-party claim shall not preclude the
party against which such claim has been made also from participating or
continuing to participate in such defense, so long as such party bears its own
legal fees and expenses for so doing.
14.6. Limitations and Requirements.
(a) Common Stock Sellers shall have no obligation to indemnify Company,
Buyer or any other person against Damages pursuant to Section 14.1 of this
Agreement unless and until the aggregate of all such Damages suffered or
incurred by Company, Buyer and such persons exceeds $250,000.00; in which event
Company, Buyer and such persons shall be entitled to indemnification for the
full amount of all Damages suffered or incurred to the extent such Damages
exceed $100,000.00 up to the maximum amount set forth in the following sentence.
The Common Stock Sellers' aggregate liability to Company, Buyer and such persons
under the indemnification obligations set forth in Section 14.1 shall in no
event exceed the dollar amount payable to the Common Stock Sellers upon exercise
of the put and call options pursuant to the Option Agreement referred to above
in Section 2.3. Provided, however, that any Damages pursuant to Section 14.1
directly resulting from the actual fraud of any of the Common Stock Sellers or
from a breach of any of the representations and warranties set forth in Section
3 of this Agreement shall not be subject to the limitations set forth above in
this Section 14.6(a).
(b) Common Stock Sellers shall have no obligation to indemnify Buyer,
Company or such persons unless written notice of the claim with respect to which
such indemnification is sought, is given in the manner provided in this
Agreement, by the party seeking such indemnification, to the Seller(s) from whom
such indemnification is sought within three (3) years following the Closing.
(c) Except as expressly provided herein, Sellers shall have no rights,
hereunder or otherwise, to indemnification or contribution from Company with
respect to any matter arising prior to the date of this Agreement, including,
without limitation, any inaccuracy in or breach of any representation or
warranty of Company made in or pursuant to this Agreement or any Transaction
Document, or any breach or nonfulfillment of any covenant or obligation of
Company contained in this Agreement or any Transaction Document, and Sellers
hereby irrevocably releases Company from any liability for any such claim (but
only to the extent permitted by applicable law, including Section 412 of ERISA).
(d) The indemnification obligations of the parties contained herein are
not intended to waive or preclude any other claims, rights or remedies which may
exist at law (whether statutory or otherwise) or in equity with respect to the
matters covered by the indemnifications.
(e) Notwithstanding any other provision of this Agreement or the Option
Agreement, the Company's Adjusted EBITDA (as defined in the Option Agreement)
shall be increased by an amount equal to the amount of any Damages so
indemnified by Common Stock Sellers, provided that such Damages relate to an
item or matter that decreased (or if not so indemnified by Common Stock Sellers
would have decreased) the Company's Adjusted EBITDA.
(f) Notwithstanding any other provision of this Agreement, in no event
shall Common Stock Sellers have any obligation to indemnify Buyer with respect
to a breach of the representations and warranties contained in Section 5, if, at
or prior to Closing, Buyer had actual knowledge of the breach based on written
information provided to Buyer or the existence of such breach had been disclosed
in writing to Buyer.
27
SECTION 15. TAX RETURNS
Buyer shall cause Company to prepare and file when due the Short-Year
Return. Buyer and Company shall permit Common Stock Sellers to review and
comment on the Short-Year Return within a reasonable period before the
Short-Year Return is filed. Buyer, Company and Common Stock Sellers shall
cooperate fully, as and to the extent required by any other party, in connection
with the preparation and filing of the Short-Year Return, and in connection with
any audit, litigation or other proceeding with respect to the Short-Year Return.
SECTION 16. OPERATION OF THE ESOP AND OTHER QUALIFIED PLANS POST-CLOSING.
16.1. Replacement of Trustee. Buyer shall not replace Preferred Stock
Seller as trustee of the ESOP unless Buyer determines in its reasonable
discretion that it and Preferred Stock Seller cannot efficiently and effectively
work together to terminate the ESOP.
16.2. Termination and Distributions. Promptly after the Closing, (i)
the Buyer shall cause the Company to (a) terminate the ESOP or (b) to merge the
ESOP into another qualified plan sponsored by the Company, and (ii) seek a
favorable determination letter from the IRS to the effect that the termination
or merger of the ESOP, consummated in accordance with the provisions of clause
(i) of this Section 16.2, does not adversely affect the qualification of the
ESOP under Section 401(a) of the Code or the exempt status of its related
employee benefit trust under Section 501(a) of the Code. Following the
termination of the ESOP by the Company's board of directors and the execution of
the appropriate plan termination amendments, the Company shall have no further
liability to make any contributions to the ESOP. Distributions from the ESOP to
participants will be made as provided by, and in conformity with, the plan and
trust documents and agreements governing the ESOP and applicable law.
16.3. Review. Preferred Stock Seller shall have the right to review and
comment, prior to finalization for distribution or filing, on any and all
documentation which Buyer, Company or any other party involved in the
termination may prepare in connection therewith.
16.4. 401(k) Plan. Buyer agrees to promptly offer a 401(k) plan to the
employees of Company. Buyer agrees to maintain such plan for at least eight (8)
years and two (2) months subject to modifications due to material changes in
current tax laws or regulations that would be disadvantageous to the continuing
existence of the plan. Pursuant to the terms of a Benefit Continuation Agreement
(the "Benefit Continuation Agreement") which shall be executed and delivered
promptly after Closing by Buyer, Company and the trustee of the Company's 401(k)
plan and shall be in form and substance reasonably satisfactory to Preferred
Stock Seller, Buyer agrees to provide a 100% match of the contributions made by
Company's employees if EBITDA for the Company is greater than $1,600,000.00
during the preceding fiscal year and a 50% match if EBITDA for the Company is
greater than $1,200,000.00 but less than or equal to $1,600,000.00 during the
preceding fiscal year. Buyer shall not be obligated to make any matching
contributions if EBITDA for Company is less than or equal to $1,200,000.00
during the preceding fiscal year. Such matching contributions shall not be
required until the fiscal year of the Company commencing September 1, 2004.
SECTION 17. MISCELLANEOUS.
17.1. Survival of Representations and Warranties. The representations
and warranties made by the parties in this Agreement and in the certificates,
documents and schedules delivered pursuant hereto shall survive the consummation
of the transactions herein contemplated; provided, however, that the
representations and warranties of the Sellers in this Agreement shall survive
and continue in effect for a period of three (3) years following the Closing and
shall thereafter have no further force or effect.
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17.2. Further Assurances. Each party hereto shall, from time to time
and without further consideration, either before or after the Closing, execute
such further instruments and take such other actions as any other party hereto
shall reasonably request in order to fulfill its obligations under this
Agreement and to effectuate the purposes of this Agreement and to provide for
the orderly and efficient transition of the ownership of Company and
Subsidiaries to Buyer.
17.3. Costs and Expenses. Except as otherwise expressly provided
herein, each party shall bear its own expenses in connection herewith. Any and
all legal and accounting fees, transfer, sales, use, documentary and similar
taxes and recording and filing fees, incurred in connection with the
transactions contemplated herein on behalf of Sellers or Company prior to
Closing shall be paid by Sellers and not by Company.
17.4. Notices. All notices or other communications permitted or
required under this Agreement shall be in writing and shall be sufficiently
given if and when hand delivered to the persons set forth below or if sent by
documented overnight delivery service or registered or certified mail, postage
prepaid, return receipt requested, or by facsimile, receipt acknowledged,
addressed as set forth below or to such other person or persons and/or at such
other address or addresses as shall be furnished in writing by any party hereto
to the others. Any such notice or communication shall be deemed to have been
given as of the date received, in the case of personal delivery, or on the date
shown on the receipt or confirmation therefor in all other cases.
To Common Stock Sellers:
Xxxxxx X. Xxxxxxx, Xx.
Xxxx Xxxxxx Xxx 000
00 Xxxxx Xxxx
Xxxxxxxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
Xxxxxx X. Xxxxxxx, Xx. and Xxxxxx X. Xxxxxxx, Xx., as
Co-Trustees of the Xxxxxx X. Xxxxxxx, Xx. and Xxxxxx X.
Xxxxxxx Revocable Trust of 1995
Post Xxxxxx Xxx 000
00 Xxxxx Xxxx
Xxxxxxxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxx
Ice Xxxxxx
Xxx Xxxxxxxx Xxxxxx
Xxx 00000
Xxxxxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
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To Preferred Stock Seller:
First Bankers Trust Company
0000 Xxxxx Xxxx
X.X. Xxx 0000
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
Fax No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxxx
Xxxxx XxXxxxx, LLP
Suite 0000
Xxx Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Fax No.: (000) 000-0000
To Buyer:
Fortune Diversified Industries, Inc.
Attention: Carter Fortune
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Fax No.: _______________
With a copy to:
Xxxxxx X. Xxxxxxx
Xxxxxx Xxxxxxx Xxxxx & Vornehm, LLP
0000 Xxxxxxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
17.5. Assignment and Benefit.
(a) Buyer may assign this Agreement in whole or in part to any
subsidiary or to any person which becomes a successor in interest (by purchase
of assets or membership interests, or by merger, or otherwise) to Buyer;
provided, however, that, notwithstanding any such assignment, Buyer shall remain
liable for its obligations hereunder. Sellers shall not assign this Agreement or
any rights hereunder, or delegate any obligations hereunder, without prior
written consent of Buyer. Subject to the foregoing, this Agreement and the
rights and obligations set forth herein shall inure to the benefit of, and be
binding upon, the parties hereto, and each of their respective successors, heirs
and assigns.
(b) This Agreement shall not be construed as giving any person, other
than the parties hereto and their permitted successors, heirs and assigns, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any of the provisions herein contained, this Agreement and all provisions and
conditions hereof being intended to be, and being, for the sole and exclusive
benefit of such parties, and permitted successors, heirs and assigns and for the
benefit of no other person or entity.
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17.6. Arbitration.
(a) All disputes arising out of or relating to this Agreement, the
Company Transaction Documents, the Common Stock Sellers Transaction Documents,
the Preferred Stock Seller Transaction Documents or the Buyer Transaction
Documents which cannot be settled by the parties shall promptly be submitted to
and determined by binding arbitration in Indianapolis, Indiana by a single
arbitrator mutually agreed upon by the parties, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the date that the demand for arbitration is given; provided that nothing
herein shall preclude either party from seeking, in any court of competent
jurisdiction, injunctive relief or other equitable remedies in the case of any
breach or threatened breach by Sellers of Section 1 hereof. In the event that
the parties cannot mutually agree upon a single arbitrator within ten (10)
business days of a demand for arbitration, then the American Arbitration
Association arbitrator selection rules shall apply; provided that any arbitrator
selected shall be a member in good standing of the bar of the State of Indiana.
The decision of the arbitrators shall be final and binding upon the parties and
judgment upon such decision may be entered in any court of competent
jurisdiction; provided, however, that errors of law may be appealed to a court
of competent jurisdiction for review.
(b) Any demand for arbitration shall include detail sufficient to
establish the nature of the dispute (including claims asserted and the material
issues with respect thereto) and shall be delivered to the other party
concurrently with delivery to AAA. Discovery shall be allowed pursuant to the
United States Federal Rules of Civil Procedure and as the arbitrators determine
appropriate under the circumstances.
(c) The arbitrator's decision shall be in writing, and shall describe
in detail the legal reasoning adopted by the arbitrator in support of the
decision. In rendering a decision, the arbitrator shall follow the substantive
law of the State of Indiana, and shall not use equitable or other principles
which would permit the arbitrator to ignore this agreement, the Company
Transaction Documents, the Common Stock Sellers Transaction Documents, the
Preferred Stock Seller Transaction Documents, the Buyer Transaction Documents or
the law of the State of Indiana. Any award by the arbitrator shall be subject to
all dollar and other limitations set forth in this Agreement. The arbitrator
shall have no authority to award treble, exemplary or punitive damages of any
type under any circumstances.
17.7. Amendment, Modification and Waiver. The parties may amend or
modify this Agreement in any respect. Any such amendment, modification,
extension or waiver shall be in writing and signed by all parties hereto. The
waiver by a party of any breach of any provision of this Agreement shall not
constitute or operate as a waiver of any other breach of such provision or of
any other provision hereof, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
17.8. Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of Indiana (and
United States federal law, to the extent applicable), irrespective of the
principal place of business, residence or domicile of the parties hereto, and
without giving effect to otherwise applicable principles of conflicts of law.
Nothing contained herein or in the Company Transaction Documents, Common Stock
Sellers Transaction Documents, Preferred Stock Seller Transaction Documents or
Buyer Transaction Document shall prevent or delay any party from seeking, in any
court of competent jurisdiction, specific performance or other equitable
remedies in the event of any breach or intended breach by any other party of any
of its obligations hereunder.
17.9. Section Headings and Defined Terms. The section headings
contained herein are for reference purposes only and shall not in any way affect
the meaning and interpretation of this Agreement. The terms defined herein and
in any agreement executed in connection herewith include the plural as well as
31
the singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith.
17.10. Severability. The invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions or
parts were omitted.
17.11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument.
17.12. Entire Agreement. This Agreement, together with the agreements,
exhibits, schedules and certificates referred to herein or delivered pursuant
hereto, constitute the entire agreement between the parties hereto with respect
to the purchase and sale of the Shares and supersede all prior agreements and
understandings. The submission of a draft of this Agreement or portions or
summaries thereof does not constitute an offer to purchase or sell the Shares,
it being understood and agreed that neither Buyer or Sellers shall be legally
obligated with respect to such a purchase or sale or to any other terms or
conditions set forth in such draft or portion or summary unless and until this
Agreement has been duly executed and delivered by all parties.
17.13. Actual Knowledge.
(a) As used in this Agreement, the phrase "actual knowledge of any of
the Common Stock Sellers" or any similar phrase means the conscious awareness of
Xxxx Xxxxxxx after reasonable inquiry, including review by, and discussions
with, Xxxx Xxxxx and Xxxxxxx X. XxXxxxxx, with respect to the applicable subject
matter.
(b) Further, any phrase in this Agreement referring to the knowledge of
the Preferred Stock Seller means the conscious awareness of the officers of the
Preferred Stock Seller who have been actively involved in the evaluation and
consideration of the transactions contemplated by this Agreement, after
reasonable review and inquiry with respect thereto.
17.14. Material Adverse Effect. As used in this Agreement, the term
"Material Adverse Effect" means a fact, occurrence, event, circumstance or other
matter that would have a material adverse effect on the business, operations,
financial conditions, earnings, assets or prospects of the Company or any of its
Subsidiaries.
17.15. Nonrecourse Against ESOP Plan Participants. Notwithstanding any
provision of this Agreement to the contrary, the Buyer, the Common Stock Sellers
and the Company agree that the obligations and liabilities of the Preferred
Stock Seller under this Agreement or any agreement, document or instrument
contemplated hereby (collectively, "Transaction Documents") shall be nonrecourse
to the participants of the ESOP, that in no event shall the participants of the
ESOP incur or otherwise have personal liability for any such obligations or
liabilities and that none of them shall have any recourse or remedies against
any of such participants for any loss, damage or claim of any kind arising out
of or in connection with any action, omission, breach or default of the
Preferred Stock Seller under this Agreement, any of the Transaction Documents,
or otherwise.
17.16. Exhibits and Schedules. The Exhibits and Schedules identified in
this Agreement are incorporated herein by reference and made a part hereof. Any
information disclosed in any Schedule shall be deemed disclosed in all other
applicable Schedules, even though not expressly set forth in such other
Schedules, provided that it is reasonably apparent that such disclosure is
applicable to the other Schedules.
[Signature Page Follows.]
32
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, under seal, all as of the date first above written.
FORTUNE DIVERSIFIED, INDUSTRIES, INC. ___________________________________
Xxxxxx X. Xxxxxxx, Xx.
XXXXXX X. XXXXXXX, XX. AND XXXXXX X.
XXXXXXX, Xx., AS CO-TRUSTEES OF THE
By: ________________________________ XXXXXX X. XXXXXXX, XX. AND XXXXXX X.
Xxxxxx Fortune, CEO XXXXXXX REVOCABLE TRUST OF 1995
By: ________________________________
Xxxxxx X. Xxxxxxx, Xx., Co-Trustee
NOR-COTE INTERNATIONAL, INC. FIRST BANKERS TRUST COMPANY, TRUSTEE
UNDER THE TRUST AGREEMENT FOR THE
By: _______________________________ NOR-COTE INTERNATIONAL, INC. EMPLOYEE
STOCK OWNERSHIP PLAN TRUST
By: _______________________________
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Listing of Schedules
Schedule 1 Subsidiaries
Schedule 2.1 Allocation of Consideration
Schedule 3.3 Ownership of Common Shares
Schedule 4.3 Ownership of Preferred Shares
Schedule 5.1(a) Corporate Existence
Schedule 5.1(b) Corporate Standing
Schedule 5.3 Company Conflicts
Schedule 5.4 Capitalization
Schedule 5.5 Investments
Schedule 5.7 Litigation
Schedule 5.8(a) Company Consolidated Financial Statements
Schedule 5.8(b) Company May Consolidated Interim Financial Statements
Schedule 5.8(c) Material Changes to Company May Consolidated
Interim Financial Statements
Schedule 5.9 Full Disclosure
Schedule 5.10 Directors, Officers and Employees
Schedule 5.11 Affiliate Agreements
Schedule 5.12 Environmental Matters
Schedule 5.13 Material Adverse Change
Schedule 5.14 Taxes
Schedule 5.15 ERISA
Schedule 5.17 Material Agreements
Schedule 5.18 Ownership of Property
Schedule 5.20(a) Patents, Trademarks and Copyrights
Schedule 5.20(b) License Agreements
Schedule 6.1(a) Compliance
Listing of Exhibits
Exhibit A Employment Agreement by and between Xxxxxx
X. Xxxxxxx and Company
Exhibit B Real Estate Purchase Agreement by and between
W & W Services and Company
Exhibit C Option Agreement by and among Common Stock
Sellers, Carter Fortune, and Buyer
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