Exhibit 10.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT"), dated as of
February 18, 2005, by and among Fast Xxxxx Racing Stables, Inc., a Florida
corporation ("FERS"), Xxxxx X. Little, an individual ("PRINCIPAL"), Xxxxxx
Capital Financial Group, Inc., a Delaware corporation ("COMPANY"), and FERS
Acquisition Corp., a Delaware corporation ("Mergerco").
R E C I T A L S
A. Company has issued an aggregate of (i) 12,040,000 shares ("COMPANY
COMMON SHARES") of its common stock, par value $.001 per share ("COMPANY COMMON
STOCK"), and (ii) 3,820,000 shares ("COMPANY PREFERRED SHARES") of its Series A
Cumulative Convertible Preferred Stock, par value $.001 per share ("COMPANY
PREFERRED STOCK").
B. FERS is authorized to issue 100,000,000 shares of common stock, par
value $.01 per share (the "FERS COMMON STOCK"), of which 834,000 shares (the
"FERS COMMON SHARES") shall be issued and outstanding immediately prior to the
Closing (as defined below).
C. Mergerco is a wholly owned subsidiary of FERS and is authorized to issue
100 shares of common stock, par value $0.001 per share (the "MERGERCO SHARES"),
all of which Mergerco Shares are issued and outstanding and owned by FERS.
D. The respective Boards of Directors of FERS, Mergerco and Company deem it
advisable and generally to the advantage and welfare of FERS, Mergerco and
Company, and their respective shareholders, that Mergerco be merged with and
into Company under the terms and conditions hereinafter set forth (the
"MERGER"), the Merger to be effected pursuant to the Delaware General
Corporation Law and the Merger to be a tax free reorganization under Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I.
MERGER AND RELATED MATTERS
1.1. MERGER. Mergerco and Company (the "CONSTITUENT CORPORATIONS") shall
each, as soon as practicable but prior to Closing (as defined below) (i) cause a
special meeting of its shareholders to be called to consider and vote upon the
Merger on the terms and conditions hereinafter set forth, or (ii) obtain the
written consent of such shareholders, as applicable, as is necessary to approve
the Merger. If the Merger is approved in accordance with applicable law, subject
to the further conditions and provisions of this Agreement, a closing of this
Agreement shall be held (the "CLOSING") and a Certificate of Merger
("CERTIFICATE OF MERGER") and all other documents or instruments deemed
necessary or appropriate by the parties hereto to effect the Merger, shall be
executed and filed with the Secretary of State of the State of Delaware (and, if
required, the Secretary of State of the State of Florida) as promptly as
possible thereafter. The terms and conditions of the Merger, the mode of
carrying the same into effect, and the manner and basis of converting the
securities of each of the Constituent Corporations are as set forth below in
this Article I. Unless this Agreement shall have been terminated pursuant to
Article VIII hereof, the Closing shall take place at the offices of Xxxxx Xxxxxx
Xxxxxxxx & Xxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, at a time and date to be specified by the parties.
1.2. TREATMENT OF SHARES. At the effective date of the Merger ("EFFECTIVE
DATE"), (a) the Company Common Shares shall be exchanged, by virtue of the
Merger, for an aggregate of Twelve Million Forty Thousand (12,040,000) fully
paid and nonassessable shares of FERS Common Stock ("CONVERSION SHARES"), on the
basis of one (1) share of FERS Common Stock for each Company Common Share (the
"CONVERSION RATIO"), without any action on the part of the holders thereof, and
(b) each Mergerco Share shall be converted into 50,000 shares of Company Common
Stock, without any action on the part of the holder thereof. Upon exchange, any
fractional Conversion Shares resulting from conversion shall be rounded up to
the next highest whole number. The Company Preferred Shares shall remain
outstanding and unchanged, subject to Section 1.8 below.
1.3. CHANGES IN CAPITAL STRUCTURE. If, between the date hereof and the
Effective Date, either FERS or Company (i) recapitalizes either through a
split-up of its outstanding shares into a greater number of shares or through a
combination of its outstanding shares into a lesser number of shares (excluding
the 1:20 reverse split of the shares of FERS Common Stock to be effective on or
about February 24, 2005), (ii) reorganizes, reclassifies or otherwise changes
its outstanding shares into the same or a different number of shares of other
classes, or (iii) declares a dividend on its outstanding shares payable in
shares or securities convertible into shares, the calculation of the Conversion
Ratio will be adjusted appropriately.
1.4. TREATMENT OF COMPANY WARRANTS. Up to 3,056,200 Company Common Shares
issuable upon exercise of warrants to purchase Company Common Shares shall be
replaced at Closing by warrants to purchase FERS Common Stock on the same basis
of conversion as set forth in Section 1.3 above.
1.5. RESTRICTED NATURE OF CONVERSION SHARES. The Conversion Shares, when
issued, shall be restricted shares and may not be sold, transferred or otherwise
disposed of by the holders thereof without registration under the Securities Act
of 1933, as amended ("SECURITIES ACT") or an available exemption from
registration under the Securities Act. The certificates representing the
Conversion Shares will contain the appropriate restrictive legends.
1.6. EXISTENCE OF MERGERCO. The separate existence and corporate
organization of Mergerco, except insofar as it may be continued by statute,
shall cease on Effective Date and Company shall become a subsidiary of FERS.
1.7. RIGHTS AND LIABILITIES OF SURVIVING CORPORATION IN MERGER. The
surviving entity in the Merger shall be Company. Company's name, identities,
certificate of incorporation, bylaws, existence, purposes, powers, objects,
franchises, rights and immunities shall be unaffected and unimpaired by the
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Merger, except as described in the Certificate of Merger. Accordingly, (i) the
Certificate of Incorporation and by-laws of Company immediately prior to the
Effective Date shall be the Certificate of Incorporation and by-laws,
respectively, of Company, as the surviving entity, in effect immediately as of
the Effective Date, and (ii) the directors and officers of Company prior to the
Effective Date shall be the directors and officers of Company, as the surviving
entity, on and after the Effective Date, in each case until their respective
successors are duly elected and qualified. On and after the Effective Date,
Company, as the surviving corporation of the Merger, shall succeed to and
possess, without further act or deed, all of the estate, rights, privileges,
powers and franchises, both public and private, and all of the property, real,
personal, and mixed, of Mergerco; all debts due to Mergerco on whatever account
shall be vested in Company; all claims, demands, property, rights, privileges,
powers, franchises and every other interest of Mergerco shall be as effectively
the property of Company as they were of Mergerco; and all debts, liabilities and
duties of Mergerco shall thenceforth attach to Company and may be enforced
against it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it.
1.8. TREATMENT OF COMPANY PREFERRED STOCK. FERS does not currently have an
authorized class of preferred stock outstanding. The parties shall take such
actions as shall be necessary to cause FERS to file, as promptly as practicable,
an amendment to FERS's certificate of incorporation that shall provide for a
class of preferred stock with the same powers, designations, preferences,
rights, qualifications, limitations and restrictions as are currently in effect
with respect to the Company Preferred Stock, subject, however, to the approval,
if required, of holders of the required number of shares of the outstanding
voting securities of FERS entitled to vote in accordance with the Florida
Business Corporation Act.
1.9. TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Closing, any further action is necessary or desirable to carry out the purposes
of this Agreement, the parties will cooperate to take all such lawful and
necessary action.
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING MERGERCO
FERS, Principal and Mergerco each jointly and severally represents and
warrants to, and covenants with, Company as follows with respect to Mergerco:
2.1 ORGANIZATION; CAPITALIZATION. Mergerco is, and on the Effective Date
will be, a duly organized and validly existing corporation in good standing
under the laws of the State of Delaware, authorized to issue only the Mergerco
Shares. On the Effective Date there will be issued and outstanding all of the
Mergerco Shares, which shall be fully paid and nonassessable and all of which
shall be owned of record and beneficially solely by FERS. There are no, and on
the Effective Date there will be no, issued or outstanding options or warrants
to purchase Mergerco Shares or any issued or outstanding securities of any
nature convertible into Mergerco Shares, or any agreements or understandings to
issue any Mergerco Shares, options or warrants.
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2.2 AUTHORITY. Mergerco has, and on the Effective Date will have, full
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement and the transactions
contemplated hereby have been duly approved by the Board of Directors of
Mergerco.
2.3 NO BUSINESS ACTIVITY. Mergerco has been organized solely for the
purpose of consummating the Merger and, since its inception, has had no business
activity of any nature other than those related to its organization or as
contemplated by this Agreement.
2.4 ISSUANCE OF SECURITIES. Since its inception, Mergerco has not issued or
committed itself to issue, and to the Effective Date will not issue or commit to
issue, any Mergerco Shares or any options, rights, warrants, or other securities
convertible into Mergerco Shares, except for the issuance of the Mergerco Shares
to FERS.
2.5 CONSENTS AND APPROVALS. Except for the consent and approval of the
Board of Directors and shareholder of Mergerco, and the filing of the
Certificate of Merger, no consents or approvals of, or filings or registrations
with, any third party or any public body or authority are necessary in
connection with (i) the execution and delivery by Mergerco of this Agreement and
(ii) the consummation by Mergerco of the Merger and the other transactions
contemplated hereby.
2.6 NO CONFLICTS. The execution and delivery by Mergerco of this Agreement,
the consummation and performance of the transactions herein contemplated, and
compliance with the terms of this Agreement by Mergerco will not conflict with,
result in a breach of or constitute or give rise to a default under any
indenture, mortgage, deed of trust or other agreement, instrument or contract to
which Mergerco is now a party or by which it or any of its assets or properties
are bound or its Certificate of Incorporation or bylaws, or any law, order, rule
or regulation, writ, injunction, judgment or decree of any government,
governmental instrumentality or court, domestic or foreign, having jurisdiction
over Mergerco or any of its businesses or properties.
2.7 SUBSIDIARIES. Mergerco has, and on the Effective Date will have, no
subsidiaries, nor does it own any direct or indirect interest in any other
business entity.
2.8 FINANCIAL CONDITION. Except for (i) the incurring of expenses of its
organization, (ii) the issuance of the Mergerco Shares to FERS, (iii) the
incurring of expenses relating to this Agreement and the consummation of the
transactions contemplated by this Agreement, and (iv) the consummation of the
Merger, Mergerco has had, and on the Effective Date will have had, no business
and no financial or other transactions of any nature whatsoever.
2.9 LIABILITIES. Mergerco has, and on the Effective Date will have, no
liabilities (including, but not limited to, tax liabilities) nor are there, or
on the Effective Date will there be, any claims against Mergerco (whether such
liabilities or claims are contingent or absolute, direct or indirect, and
matured or unmatured) except for liabilities for its organization expenses or
expenses incurred in connection with the Merger and the consummation of the
transactions contemplated by this Agreement.
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2.10 ASSETS. Mergerco has, and on the Effective Date will have, no
fixtures, furniture, equipment, inventory, accounts receivable or other assets.
2.11 CONTRACTS. Mergerco has, and on the Effective Date will have, no
contracts or commitments to which it is, or on the Effective Date will be, a
party, except for this Agreement and other documents and instruments
contemplated hereby in connection with the Merger.
2.12 LEGAL PROCEEDINGS. There are, and on the Effective Date there will be,
no legal, administrative, arbitral or other proceedings, claims, actions or
governmental investigations of any nature against Mergerco, or challenging the
validity or propriety of the transactions contemplated by this Agreement and, to
Mergerco's best knowledge, there is no reasonable basis for any other
proceeding, claim, action or governmental investigation against Mergerco.
Mergerco is not a party to any order, judgment or decree that will, or might
reasonably be expected to, materially adversely affect the business, operations,
properties, assets or financial condition of Mergerco.
2.13 EMPLOYEE MATTERS; RELATED PARTY TRANSACTIONS. Since the inception of
Mergerco there have been, and to the Effective Date there will be (i) no
salaried or otherwise compensated employees and no bonuses paid to any officer
or director of Mergerco; (ii) no loans made to or any transactions with any
officer or director of Mergerco; (iii) no dividends or other distributions
declared or paid by Mergerco; and (iv) no purchase by Mergerco of any Mergerco
Shares.
2.14 INTELLECTUAL PROPERTY. Mergerco has no patents, patent applications,
trademarks, trademark registrations, tradenames, copyrights, copyright
registrations or applications therefor or any other intellectual property.
2.15 COMPLIANCE WITH LAWS. Since its inception, Mergerco has, and on the
Effective Date will have, in all material respects conducted its affairs in
compliance with all applicable laws, rules and regulations.
2.16 BENEFIT PLANS. Mergerco has no pension plan, profit sharing or similar
employee benefit plan.
2.17 CHARTER DOCUMENTS. The Certificate of Incorporation and by-laws of
Mergerco have not been altered since its incorporation, except as filed in the
record books of Mergerco.
2.18 CORPORATE MINUTE BOOKS. The corporate minute books of Mergerco are
complete and the minutes and consents contained therein accurately reflect the
actions that were taken at a duly called and held meeting or by consent without
a meeting. All actions by Mergerco that required director or stockholder
approval are reflected on the corporate minute books of Mergerco. Mergerco is
not in violation or breach of, or in default with respect to, any term of its
Certificate of Incorporation (or other charter documents) or by-laws.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to, and covenants with, FERS, as
follows:
3.1. ORGANIZATION AND QUALIFICATION.
(a) Company is a corporation duly incorporated or organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted.
Complete and correct copies of the certificate of incorporation and by-laws
(collectively, "CHARTER DOCUMENTS") of Company, as amended and currently in
effect, have been heretofore delivered to FERS. Company is not in violation of
any of the provisions of the Company's Charter Documents.
(b) Company is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Company and its Subsidiaries, taken as a whole.
3.2. SUBSIDIARIES. Set forth on SCHEDULE 3.2 hereto is a true and complete
list of all Subsidiaries stating, with respect to each Subsidiary, its
jurisdiction of incorporation or organization, date of incorporation or
organization, capitalization and equity ownership. Each Subsidiary is a
corporation duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its businesses as they are now being
conducted, and no Subsidiary is required to qualify to do business as a foreign
corporation in any other jurisdiction. All of the outstanding shares of capital
stock of each Subsidiary have been duly and validly authorized and issued, are
fully paid and non-assessable, have not been issued in violation of any
preemptive or other right of stockholders (or any other Person) or of any Legal
Requirements, and are owned beneficially and of record by Company as specified
on SCHEDULE 3.2, free and clear of any liens, claims, charges, encumbrances,
pledges, mortgages, security interests, options, rights to acquire, proxies,
voting trusts or similar agreements, restrictions on transfer or adverse claims
of any nature whatsoever ("LIENS"). "LEGAL REQUIREMENT" means any federal,
state, local, municipal, foreign or other law, statute, constitution, principle
of common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Entity
(as defined in Section 3.5(b)). Complete and correct copies of the Charter
Documents of each Subsidiary, as amended and currently in effect, have
heretofore been delivered to FERS. No Subsidiary is in violation of any of the
provisions of its Charter Documents.
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For purposes of this Agreement, (i) the term "SUBSIDIARY" shall mean any
Person in which the Company or any Subsidiary directly or indirectly, owns
beneficially securities or interests representing more than 50% of (x) the
aggregate equity or profit interests, or (y) the combined voting power of voting
interests ordinarily entitled to vote for management or otherwise, and (ii) the
term "PERSON" shall mean and include an individual, a corporation, a partnership
(general or limited), a joint venture, an association, a limited liability
company, a trust or any other organization or entity, including a government or
political subdivision or an agency or instrumentality thereof.
3.3. CAPITALIZATION. The authorized capital stock of Company consists of
(1) 50,000,000 shares of Company Common Stock and (2) 10,000,000 shares of
Company Preferred Stock. At the close of business on the business day prior to
the date hereof, (i) 12,040,000 shares of Company Common Stock and 3,820,000
shares of Company Preferred Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable; (ii) up to approximately 315,000
shares of Company Common Stock were reserved for issuance upon the exercise of
outstanding options to purchase Company Common Stock granted to certain
employees of Company or other parties, and (iii) 3,056,200 shares of Company
Common Stock were reserved for issuance upon the exercise of outstanding
warrants to purchase Company Common Stock.
3.4. AUTHORITY RELATIVE TO THIS AGREEMENT. Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and, to consummate the transactions
contemplated hereby (including the Merger). The execution and delivery of this
Agreement and the performance by Company of its obligations hereunder have been
duly and validly authorized by all necessary corporate action on the part of
Company, subject to the approval of such actions by Company's shareholders. This
Agreement has been duly and validly executed and delivered by Company and,
assuming the due authorization, execution and delivery thereof by FERS,
Principal and Mergerco, constitutes the legal and binding obligation of Company,
enforceable against Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity and public policy.
3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Company do not, and
the performance of this Agreement by the Company shall not, (i) conflict with or
violate the Company's Charter Documents, (ii) subject to obtaining the adoption
of this Agreement and the transactions contemplated hereby by the stockholders
of Company, conflict with or violate any Legal Requirements to which the Company
is bound, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
materially impair Company's rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Company pursuant to, any
material contracts to which the Company is a party (collectively, "COMPANY
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CONTRACTS"), except, with respect to clauses (ii) or (iii), for any such
conflicts, violations, breaches, defaults or other occurrences that would not,
individually and in the aggregate, have a Material Adverse Effect (as defined in
Section 9.3(b) hereof) on Company and its Subsidiaries, taken as a whole.
(b) The execution and delivery of this Agreement by Company does not,
and the performance of its obligations hereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
domestic or foreign (a "GOVERNMENTAL ENTITY"), except (i) for applicable
requirements, if any, of the Securities Act, the Exchange, state securities laws
("BLUE SKY LAWS"), and the rules and regulations thereunder, and appropriate
documents with the relevant authorities of other jurisdictions in which Company
is qualified to do business, (ii) consents, approvals, authorizations, permits,
filings and notices to be obtained or made prior to Closing, and (iii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Company and its
Subsidiaries, taken as a whole, or prevent consummation of the Merger or
otherwise prevent the parties hereto from performing their obligations under
this Agreement.
3.6. COMPLIANCE. Company and each Subsidiary has complied with, and is not
in violation of, any Legal Requirements with respect to the conduct of its
respective business, or the ownership or operation of its business, except for
failures to comply or violations which, individually or in the aggregate, have
not had and are not reasonably expected to have a Material Adverse Effect on
Company or its Subsidiaries. Neither Company nor any Subsidiary is in default or
violation of any term, condition or provision of any applicable Charter
Documents or Company Contracts, except with respect to such defaults or
violations under Company Contracts which would not reasonably be expected to
have a Material Adverse Effect on the Company or its Subsidiaries, taken as a
whole.
3.7. FINANCIAL STATEMENTS. Company has provided to FERS a correct and
complete copy of the audited financial statements of its Subsidiaries, on a
combined basis as of, and for the periods ended, December 31, 2002 and 2003
("AUDITED COMPANY FINANCIAL STATEMENTS"), which financial statements were
prepared in accordance with generally accepted accounting principles, applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) ("GAAP"). The Audited Company Financial Statements fairly
present in all material respects the financial position of the Subsidiaries at
the respective dates thereof and the results of their respective operations and
cash flows for the periods indicated. The Audited Company Financial Statements
for the 2002 and 2003 fiscal years of Company have been audited by Xxxxxxxxx
Xxxx & Co. ("ACCOUNTANT"). Company commenced operations in the fourth quarter of
2004 and has not yet published financial statements on a Company stand-alone
basis as of the date hereof.
3.8. NO UNDISCLOSED LIABILITIES. Except as set forth in the Audited Company
Financial Statements or on SCHEDULE 3.8 hereto and except for liabilities
incurred in connection with the financing of the acquisitions of the
Subsidiaries by the Company, Company and each Subsidiary have no liabilities
(absolute, accrued, contingent or otherwise) outside of the ordinary course of
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business of a nature required to be disclosed on a balance sheet or in the
related notes to the financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, results of
operations or financial condition of Company or any such Subsidiary.
3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 2004, there
has not been: (i) any Material Adverse Effect on Company or any Subsidiary, (ii)
any split, combination or reclassification of any of Company's capital stock, or
(iii) any material change by Company or any Subsidiary in its accounting
methods, principles or practices.
3.10. LITIGATION. Except as disclosed in the Audited Company Financial
Statements, there are no claims, suits, actions or proceedings pending
threatened in writing against Company or any Subsidiary, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions or
proceedings, to have a Material Adverse Effect on Company and its Subsidiaries
taken as a whole or have a Material Adverse Effect on the ability of the parties
hereto to consummate the transactions contemplated hereby.
3.11. EMPLOYEE BENEFIT PLANS. All employee compensation, incentive, fringe
or benefit plans, programs, policies, commitments or other arrangements (whether
or not set forth in a written document) covering any active or former employee,
director or consultant of Company or any Subsidiary (collectively, the "PLANS")
has been maintained and administered in all material respects in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Plans, and all liabilities
with respect to the Plans have been properly reflected in the financial
statements of Company and it Subsidiaries.
3.12. LABOR MATTERS. Company and its Subsidiaries are not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by Company or a Subsidiary.
3.13. RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
commitment, judgment, injunction, order or decree binding upon Company or any
Subsidiary or to which Company or a Subsidiary is a party which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Company or any such Subsidiary, any acquisition of
property by Company or any such Subsidiary or the conduct of business by Company
or any such Subsidiary as currently conducted other than such effects,
individually or in the aggregate, which have not had and could not reasonably be
expected to have a Material Adverse Effect on Company or a Subsidiary.
3.14. TITLE TO PROPERTY.
(a) No real property is owned by Company or any Subsidiary.
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(b) All leases of real property held by Company and each Subsidiary and
all personal property and other property and assets of Company and each
Subsidiary (other than Real Property) owned, used or held for use in connection
with the business of Company and Subsidiaries (the "PERSONAL PROPERTY") are
shown or reflected on the Audited Company Financial Statements. Company and each
Subsidiary own and have good and marketable title to the Personal Property, and
all such assets and properties are in each case held free and clear of all
Liens, except for Liens disclosed in the Audited Company Financial Statements or
in SCHEDULE 3.14 hereto.
(c) All leases pursuant to which Company or a Subsidiary leases from
others material real or personal property are valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any
existing material default or event of default of Company or a Subsidiary or, to
Company's knowledge, any other party (or any event which with notice or lapse of
time, or both, would constitute a material default), except where the lack of
such validity and effectiveness or the existence of such default or event of
default could not reasonably be expected to have a Material Adverse Effect on
Company or its Subsidiaries, taken as a whole.
3.15. TAXES.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX" or
"TAXES" refers to any and all federal, state and local taxes, including, without
limitation, gross receipts, income, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, assessments, governmental charges and
duties together with all interest, penalties and additions imposed with respect
to any such amounts and any obligations under any agreements or arrangements
with any other person with respect to any such amounts and including any
liability of a predecessor entity for any such amounts.
(b) TAX RETURNS AND AUDITS.
(i) Company and each Subsidiary have timely filed all federal, state
and local returns, estimates, information statements and reports
relating to Taxes ("RETURNS") required to be filed by Company or
any Subsidiary with any Tax authority prior to the date hereof,
except such Returns which are not material to Company or such
Subsidiary. All such Returns are true, correct and complete in
all material respects. Company and each Subsidiary have paid all
Taxes shown to be due on such Returns.
(ii) All Taxes that Company or any Subsidiary is required by law to
withhold or collect have been duly withheld or collected, and
have been timely paid over to the proper governmental authorities
to the extent due and payable.
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(iii) Company and each Subsidiary have not been delinquent in the
payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against Company or
any Subsidiary, nor has Company or any Subsidiary executed any
unexpired waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Company or any
Subsidiary by any Tax authority is presently in progress, nor has
Company or any Subsidiary been notified of any request for such
an audit or other examination.
(v) No adjustment relating to any Returns filed by Company or any
Subsidiary has been proposed in writing, formally or informally,
by any Tax authority to the Company or any Subsidiary or any
representative thereof.
(vi) Company and its Subsidiaries have no liability for any material
unpaid Taxes which have not been accrued for or reserved on
Company's or Subsidiary's balance sheets included in the Audited
Company Financial Statements, whether asserted or unasserted,
contingent or otherwise, which is material to Company or a
Subsidiary, other than any liability for unpaid Taxes that may
have accrued since the end of the most recent fiscal year in
connection with the operation of the business of Company or its
Subsidiaries in the ordinary course of business, none of which is
material to the business, results of operations or financial
condition of Company or its Subsidiaries.
11
3.16. ENVIRONMENTAL MATTERS.
(a) To Company's knowledge: (i) Company and each Subsidiary has
complied with all applicable Environmental Laws; (ii) neither Company nor any
Subsidiary has received any notice, demand, letter, claim or request for
information alleging that Company or a Subsidiary may be in violation of or
liable under any Environmental Law; and (iii) neither Company nor any Subsidiary
is subject to any order, decree, injunction or other arrangement with any
Governmental Entity or subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances.
(b) As used in this Agreement, the term "ENVIRONMENTAL LAW" means any
law, regulation, order, decree, permit, authorization, opinion, common law or
agency requirement relating to: (A) the protection, investigation or restoration
of the environment, health and safety, or natural resources; (B) the handling,
use, presence, disposal, release or threatened release of any Hazardous
Substance or (C) noise, odor, wetlands, pollution, contamination or any injury
or threat of injury to persons or property.
(c) As used in this Agreement, the term "Hazardous Substance" means any
substance that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is the
subject of regulatory action by any Governmental Entity having jurisdiction over
the properties or operations of the Company or its Subsidiaries pursuant to any
Environmental Law.
3.17. BROKERS; THIRD PARTY EXPENSES. Company and its Subsidiaries have not
incurred, nor will they incur, directly or indirectly, any liability for
brokerage, finders' fees, agent's commissions, financial advisory fees or any
similar charges in connection with this Agreement or any transactions
contemplated hereby, except for a certain agreement by and between Xxxx Xxxx
("XXXX") and the Company, pursuant to which Rice shall be entitled to receive
approximately 149,700 shares of FERS Common Stock (the "RICE SHARES") at Closing
as previously disclosed to FERS.
3.18. BOARD APPROVAL. The board of directors of Company (including any
required committee) has, as of the date of this Agreement, unanimously (i)
declared the advisability of the Merger and approved, subject to the approval of
its stockholders, this Agreement and the transactions contemplated hereby, (ii)
determined that the Merger is in the best interests of its stockholders and is
on terms that are fair to such stockholders, and (iii) recommended that its
stockholders approve and adopt this Agreement and approve the Merger.
3.19. INVESTMENT COMPANY ACT. Company is not an "investment company" or an
"affiliated person" of or "promoter" or "principal underwriter" or an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended, nor is Company otherwise subject to regulation thereunder.
12
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF FERS AND PRINCIPAL
FERS and Principal represent and warrant to, and covenant with, Company as
follows:
4.1 ORGANIZATION AND QUALIFICATION.
(a) FERS is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Florida and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. FERS does
not presently conduct, and as of the Closing shall not be conducting, any active
business operations. Complete and correct copies of the Charter Documents of
FERS, as amended and currently in effect, have heretofore been delivered to
Company. FERS is not in violation of any of the provisions of FERS's Charter
Documents.
(b) FERS is duly qualified or licensed to do business as a foreign
corporation and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
FERS.
(c) The minute books of FERS dated on and after August 1, 2004 contain
true, complete and accurate records of all meetings and consents in lieu of
meetings of its Board of Directors (and any committees thereof) and stockholders
("CORPORATE RECORDS"). Copies of such Corporate Records of FERS have been
heretofore delivered to Company.
(d) The stock ownership records of FERS contain true, complete and
accurate records of the ownership of the FERS Common Stock at the close of
business on the business day prior to the date hereof ("STOCK RECORDS"). Copies
of such Stock Records of FERS been heretofore delivered to Company.
4.2 SUBSIDIARIES. Except for its ownership of Mergerco, FERS has no
Subsidiaries and does not own, directly or indirectly, any ownership, equity,
profits or voting interest in any Person or has any agreement or commitment to
purchase any such interest, and FERS has not agreed and is not obligated to make
nor is bound by any written, oral or other agreement, contract, subcontract,
lease, binding understanding, instrument, commitment or undertaking of any
nature, as of the date hereof or as may hereafter be in effect under which it
may become obligated to make, any future investment in or capital contribution
to any other entity.
4.3 CAPITALIZATION.
(a) The authorized capital stock of FERS consists of 100,000,000 shares
of common stock, par value $0.01 per share. At the close of business on the
business day prior to the Effective Date, 834,000 shares of FERS Common Stock
shall be issued and outstanding, all of which shall have been validly issued,
13
fully paid and nonassessable. All outstanding shares of FERS Common Stock have
been and shall be issued and granted in compliance with (i) all applicable
securities laws and (in all material respects) other applicable Legal
Requirements, and (ii) all requirements set forth in applicable FERS Contracts
(as hereinafter defined).
(b) There are no equity securities or similar ownership interests of
any class of any equity security of FERS, or any securities exchangeable or
convertible into or exercisable for such equity securities or similar ownership
interests, issued, reserved for issuance or outstanding. There are no
subscriptions, options, warrants, equity securities or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which FERS is a party or by which it is bound
obligating FERS to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock or similar ownership
interests of FERS or obligating FERS to grant, extend, accelerate the vesting of
or enter into any such subscription, option, warrant, equity security, call,
right, commitment or agreement.
(c) There are no registration rights, and there is no voting trust,
proxy, rights plan, antitakeover plan or other agreement or understanding to
which FERS is a party or by which it is bound with respect to any equity
security of any class of FERS.
4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. FERS has full corporate power and
authority to: (i) execute, deliver and perform this Agreement, and each
ancillary document which FERS has executed or delivered or is to execute or
deliver pursuant to this Agreement, and (ii) carry out FERS's obligations
hereunder and thereunder and, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation by
FERS of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of FERS (including the
approval by its Board of Directors), and no other corporate proceedings on the
part of FERS are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by FERS and, assuming the due authorization, execution
and delivery thereof by Company and Mergerco, constitutes the legal and binding
obligation of FERS, enforceable against FERS in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity and public policy.
4.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by FERS do not, and
the performance of this Agreement by FERS shall not: (i) conflict with or
violate FERS's Charter Documents, (ii) conflict with or violate any Legal
Requirements to which the FERS is bound, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or materially impair FERS's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of FERS
pursuant to, any FERS Contracts (as defined in Section 4.18(a)).
14
(b) The execution and delivery of this Agreement by FERS does not, and
the performance of its obligations hereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for applicable requirements, if any, of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act") Act, Blue Sky Laws, and the rules and regulations thereunder, and
appropriate documents with the relevant authorities of other jurisdictions in
which FERS is qualified to do business, or (ii) consents, approvals,
authorizations, permits, filings and notices to be obtained or made prior to
Closing.
4.6 COMPLIANCE. FERS has complied with, is not in violation of, any Legal
Requirement with respect to the conduct of its business, or the ownership or
operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to
have a Material Adverse Effect on FERS. The businesses and activities of FERS
have not been and are not being conducted in violation of any Legal
Requirements. FERS is not in default or violation of any term, condition or
provision of its Charter Documents or FERS Contracts.
4.7 SEC FILINGS; FINANCIAL STATEMENTS.
(a) FERS has made available to Company a correct and complete copy of
each report, registration statement and definitive proxy statement filed by FERS
with the United States Securities and Exchange Commission ("SEC") for the five
(5) years prior to the date of this Agreement (the "FERS SEC REPORTS"). FERS is,
and as of the date immediately prior to the Effective Date, shall be current in
all filings required by the SEC. Except as set forth in Section 4.7(b) below
with respect to the Delinquent SEC Reports (as defined in Section 4.7(b), the
FERS SEC Reports and all filings required to be made by or on behalf of FERS
with the SEC through the Effective Date (other than any filings required to be
made with the SEC with respect to or in connection with the transactions
contemplated hereby): (i) were, and shall be, prepared in accordance and
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such FERS SEC Reports, and (ii) did not, or will not,
at the time they were filed (and if amended or superseded by a filing prior to
the date of this Agreement then on the date of such filing and as so amended or
superseded) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The FERS SEC Reports listed on SCHEDULE 4.7 hereto (the "DELINQUENT
SEC REPORTS") were not filed on their respective due dates. FERS has not
received any communication, written or otherwise, from the SEC or any other
regulatory authority, or from any present or former stockholder of FERS, with
respect to any Delinquent SEC Report. FERS has since filed each such Delinquent
SEC Report. To the knowledge of Principal and FERS, based on information
provided to Principal and FERS by former management of FERS, (i) each Delinquent
SEC Report complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Delinquent SEC Report, and
(ii) the Delinquent SEC reports did not, at the time they were filed, contain
15
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) Each set of financial statements (including, in each case, any
related notes thereto) contained in FERS SEC Reports and all filings required to
be made with the SEC from the date hereof through the Effective Date (other than
any filings required to be made with the SEC with respect to or in connection
with the transactions contemplated hereby) complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited statements, do not contain footnotes as permitted
by Form 10-QSB of the Exchange Act) and each fairly presents in all material
respects the financial position of FERS at the respective dates thereof and the
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal
adjustments which were not or are not expected to have a Material Adverse Effect
on FERS taken as a whole.
4.8 NO INDEBTEDNESS OR LIABILITIES; FERS ASSETS. FERS has no indebtedness
for borrowed money. Except as set forth in SCHEDULE 4.8 hereto, FERS has no, and
as of the Effective Date shall have no, liabilities of any nature whatsoever,
whether absolute, accrued, contingent or otherwise, except for the obligation of
FERS to Principal in the amount of $200,000 with respect to certain consulting
and advisory services provided by Principal to FERS prior to the Closing (the
"PRINCIPAL PAYMENT OBLIGATION"). Immediately prior to the Closing, FERS will
have no assets, except for cash reserves earmarked for the payment of accounts
payable and accrued expenses of FERS with respect to the period prior to Closing
as set forth on SCHEDULE 4.8 attached hereto, all of which shall have been paid
no later than the Effective Date.
4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in any FERS
SEC Reports, or in any filings made with the SEC from the date hereof through
the Effective Date, since December 31, 2004, there has not been: (i) any event
which has had or could reasonably be expected to have a Material Adverse Effect
on FERS, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
FERS's capital stock, or any purchase, redemption or other acquisition of any of
FERS's capital stock or any other securities of FERS or any options, warrants,
calls or rights to acquire any such shares or other securities, (iii) any split,
combination or reclassification of any of FERS's capital stock, (iv) any
material change by FERS in its accounting methods, principles or practices,
except as required by concurrent changes in GAAP, (v) any change in the auditors
of FERS, or (vi) any issuance of capital stock of FERS.
4.10 LITIGATION. There are no claims, suits, actions or proceedings pending
or, to FERS's knowledge, threatened against FERS, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator.
4.11 EMPLOYEE BENEFIT PLANS. FERS does not maintain, and has no liability
under, any Plan, and neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any stockholder, director or employee of FERS.
16
4.12 LABOR MATTERS. FERS is not a party to or bound by any collective
bargaining agreement or other labor union contract. FERS has no employees.
4.13 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
commitment, judgment, injunction, order or decree binding upon FERS or to which
FERS is a party which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of FERS, any
acquisition of property by FERS or the conduct of business by FERS.
4.14 TITLE TO PROPERTY. FERS does not own or lease any Real Property or
Personal Property. There are no options or other contracts under which FERS has
a right or obligation to acquire or lease any interest in Real Property or
Personal Property.
4.15 TAXES.
(a) FERS has filed all Returns required to be filed by FERS with any
Tax authority prior to the date hereof. All such Returns are true, correct and
complete in all material respects. FERS has paid all Taxes shown to be due on
such Returns.
(b) All Taxes that FERS is required by law to withhold or collect have
been duly withheld or collected, and have been timely paid over to the proper
governmental authorities to the extent due and payable.
(c) FERS has not been delinquent in the payment of any Tax nor is there
any Tax deficiency outstanding, proposed or assessed against FERS, nor has FERS
executed any unexpired waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax.
(d) No audit or other examination of any Return of FERS by any Tax
authority is presently in progress, nor has FERS been notified of any request
for such an audit or other examination.
(e) No adjustment relating to any Returns filed by FERS has been
proposed in writing, formally or informally, by any Tax authority to FERS or any
representative thereof.
(f) FERS has no liability for any unpaid Taxes which have not been
accrued for or reserved on FERS's balance sheets included in the audited
financial statements for the most recent fiscal year ended, whether asserted or
unasserted, contingent or otherwise, other than any liability for unpaid Taxes
that may have accrued since the end of the most recent fiscal year in connection
with the operation of the business of FERS in the ordinary course of business.
4.16 ENVIRONMENTAL MATTERS. To FERS's and Principal's knowledge: (i) FERS
has complied with all applicable Environmental Laws; (iii) FERS has not received
any notice, demand, letter, claim or request for information alleging that FERS
17
may be in violation of or liable under any Environmental Law; and (iii) FERS is
not subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances.
4.17 BROKERS. FERS has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agent's commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
4.18 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except for any agreements with
Transfer Agent, and except for the Principal Payment Obligation, there are no
contracts, agreements, leases, mortgages, indentures, notes, bonds, arbitration
awards, judgments, decrees, orders, understandings and binding commitments, or
other instrument or obligation (including, without limitation, outstanding
offers or proposals) of any kind, whether written or oral, to which FERS is a
party or by or to which any of the properties or assets of FERS may be bound,
subject or affected ("FERS CONTRACTS").
4.19 INSURANCE. FERS does not maintain any insurance policies.
4.20 OVER-THE-COUNTER BULLETIN BOARD QUOTATION; EXCHANGE ACT REGISTRATION.
FERS Common Stock is quoted on the Over-the-Counter Bulletin Board ("OTC BB")
under the symbol "FEST.OB". There is no action or proceeding pending or, to
FERS's knowledge, threatened against FERS by NASDAQ or NASD, Inc. ("NASD") with
respect to any intention by such entities to prohibit or terminate the quotation
of FERS Common Stock on the OTC BB. FERS has duly registered the FERS Common
Stock under Section 12(b) of the Exchange Act.
4.21 BOARD APPROVAL. The Board of Directors of FERS (including any required
committee or subgroup of the Board of Directors of FERS) has, as of the date of
this Agreement, unanimously declared the advisability of the Merger and approved
this Agreement and the transactions contemplated hereby and has determined that
the Merger is in the best interests of the stockholders of FERS and is on terms
that are fair to such stockholders.
4.22 OFFICERS AND DIRECTORS. During the past five year period, to FERS's
knowledge, no current officer or director of FERS has been the subject of:
(a) a petition under the Federal bankruptcy laws or any other
insolvency or moratorium law or has a receiver, fiscal agent or similar officer
been appointed by a court for such person, or any partnership in which such
person was a general partner at or within two years before the time of such
filing, or any corporation or business association of which such person was an
executive officer at or within two years before the time of such filing;
(b) a conviction in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations which do not relate to
driving while intoxicated or driving under the influence);
18
(c) any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining any such person from, or otherwise limiting, the following activities:
(i) acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
United States Commodity Futures Trading Commission or an
associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company,
or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) engaging in any type of business practice; or
(iii)engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation
of Federal, state or other securities laws or commodities laws;
(d) any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any Federal, state or local authority barring, suspending or
otherwise limiting for more than 60 days the right of any such person to engage
in any activity described in the preceding sub-paragraph, or to be associated
with persons engaged in any such activity;
(e) a finding by a court of competent jurisdiction in a civil action or
by the SEC to have violated any securities law, regulation or decree and the
judgment in such civil action or finding by the SEC has not been subsequently
reversed, suspended or vacated; or
(f) a finding by a court of competent jurisdiction in a civil action or
by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding has not been
subsequently reversed, suspended or vacated.
4.23 INVESTMENT COMPANY ACT. FERS is not an "investment company" or an
"affiliated person" of or "promoter" or "principal underwriter" or an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended, nor is FERS otherwise subject to regulation thereunder.
4.24 ACCURACY OF INFORMATION. The representations, warranties and
certifications of FERS in this Agreement, and the FERS SEC Reports, are true,
complete and correct in all material respects as of the date hereof, and do not
contain any untrue statement of a material fact, or omit to state a material
fact necessary in order to make the statements herein and therein made, in light
of the circumstances under which they were made, not misleading.
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ARTICLE V.
[INTENTIONALLY OMITTED]
ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1 BOARD OF DIRECTORS OF FERS. At Closing, the current board of directors
of FERS shall deliver duly adopted resolutions to: (a) elect Xxxxxxx X.
Xxxxxxxxx and Xxxxxxx Xxxxxx to the FERS board of directors effective as of the
Closing; and (b) accept the resignations of the current officers and directors
of the FERS effective as of the Closing ("FERS RESOLUTIONS"). At Closing, the
current officers and director of FERS shall deliver their resignations, as
appropriate, as officers and directors of FERS to be effective upon the Closing
(the "RESIGNATIONS").
6.2 UNDERTAKING BY COMPANY ACCOUNTANT. On or before the Effective Date, the
Company shall obtain, and deliver to FERS, an undertaking from the Accountant
providing that: (i) the Accountant has agreed to an engagement with FERS to
serve as its certified public accountants following the Closing for purposes of
auditing and reviewing the financial statements of the FERS, the Company and the
Company's Subsidiaries to comply with the FERS's ongoing reporting requirements
under the Exchange Act including, without limitation, the filing of Forms 10-QSB
and 10-KSB, (ii) the transaction contemplated hereunder will not disqualify or
otherwise prohibit the Accountant from rendering the foregoing engagement
services or from undertaking such services in a timely manner, (iii) the
Accountant is duly registered with the U.S. Public Company Accounting Oversight
Board ("PCAOB"), (iv) the Accountant shall provide its consent to the use of its
audited financial statements and accompanying reports for the FERS, the Company
and the Company's Subsidiaries, as applicable, in any regulatory filing by the
FERS prior to or following the Closing, and (v) the Accountant has consented to
the use of its name and the disclosure of its engagement by FERS in the Change
of Accountant Form 8-K (as defined in Section 6.3) ("ACCOUNTANT UNDERTAKING"). A
signed copy of the engagement letter between FERS and Accountant shall be
attached to the Accountant Undertaking.
6.3 CHANGE OF ACCOUNTANTS. Prior to the Closing, the Company shall prepare
the Form 8-K announcing the change in the FERS's certifying accountants from
X.X. Xxxxxxxx, CPA ("FERS'S ACCOUNTANT") to the Accountant effective as of the
Closing ("CHANGE OF ACCOUNTANT FORM 8-K"), in a form reasonably acceptable to
FERS and in a format acceptable for XXXXX filing. The Change of Accountant Form
8-K shall be filed with the SEC at or promptly following Closing.
6.4 OTHER ACTIONS. FERS and Company will cooperate to enable FERS to
prepare and file a Current Report on Form 8-K pursuant to the Exchange Act to
report the execution of this Agreement ("EXECUTION FORM 8-K"), which shall be in
a form reasonably acceptable to FERS and in a format acceptable for XXXXX
20
filing. FERS and FERS's stockholders may file any reports as required by the
Exchange Act including, without limitation, any reports on Schedule 13D or 13G.
Company shall prepare the Form 8-K announcing the Closing, together with all
information that may be required to be disclosed with respect to the
transactions contemplated hereby in any report or form to be filed with the SEC
("TRANSACTION FORM 8-K").. Company shall prepare the press release announcing
the consummation of the Merger hereunder ("PRESS RELEASE"). At or promptly
following the Closing, FERS shall file the Transaction Form 8-K with the SEC and
distribute the Press Release. At least ten (10) days prior to the Closing, the
Company shall prepare the information statement required by Rule 14f-1
promulgated under the Exchange Act ("INFORMATION STATEMENT"), which shall be in
a form reasonably acceptable to FERS, and FERS shall file the Information
Statement with the SEC and mail the same to each of FERS's stockholders.
Company and FERS shall further cooperate with each other and use their
respective reasonable best efforts to take or cause to be taken all actions, and
do or cause to be done all things, necessary, proper or advisable on its part
under this Agreement and applicable laws to consummate the transactions
contemplated hereby and the other transactions contemplated hereby as soon as
practicable, including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as soon as practicable all consents, registrations, approvals, permits
and authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the transactions
contemplated hereby or any of the other transactions contemplated hereby.
Subject to applicable laws relating to the exchange of information and the
preservation of any applicable attorney-client privilege, work-product doctrine,
self-audit privilege or other similar privilege, each of Company and FERS shall
have the right to review and comment on in advance, and to the extent
practicable each will consult the other on, all the information relating to such
party, and any of Company's Subsidiaries, that appear in any filing made with,
or written materials submitted to, any third party and/or any Governmental
Entity in connection with the Merger and the other transactions contemplated
hereby. In exercising the foregoing right, each of Company and FERS shall act
reasonably and as promptly as practicable.
6.5 REQUIRED INFORMATION. In connection with the preparation of the
Execution Form 8-K, Transaction Form 8-K, Information Statement and Press
Release, and for such other reasonable purposes, Company and FERS each shall,
upon request by the other, furnish the other with all information concerning
themselves, their respective Subsidiaries, directors, officers and stockholders
and such other matters as may be reasonably necessary or advisable in connection
with the transactions contemplated hereby, or any other statement, filing,
notice or application made by or on behalf of Company and FERS or any of their
respective Subsidiaries to any third party and/or any Governmental Entity in
connection with the Merger and the other transactions contemplated hereby. Each
party warrants and represents to the other party that all such information shall
be true and correct in all material respects and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
21
6.6 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) Each party agrees to maintain in confidence any non-public
information received from the other party, and to use such non-public
information only for purposes of consummating the transactions contemplated by
this Agreement. Such confidentiality obligations will not apply to (i)
information which was known to the one party or their respective agents prior to
receipt from the other party; (ii) information which is or becomes generally
known; (iii) information acquired by a party or their respective agents from a
third party who was not bound to an obligation of confidentiality; and (iv)
disclosure required by law, regulation or court order. In the event this
Agreement is terminated as provided in Article VIII hereof, each party will
return or cause to be returned to the other all documents and other material
obtained from the other in connection with the transactions contemplated hereby.
(b) ACCESS TO INFORMATION.
(i) Company will afford FERS and its financial advisors, accountants,
counsel and other representatives reasonable access during normal
business hours, upon reasonable notice, to the properties, books,
records and personnel of Company and its Subsidiaries during the
period prior to the Closing to obtain all information concerning
the business, properties, results of operations and personnel of
Company and its Subsidiaries, as FERS may reasonably request. No
information or knowledge obtained by FERS in any investigation
pursuant to this Section 6.6 will affect or be deemed to modify
any representation or warranty contained herein or the conditions
to the obligations of the parties to consummate the transactions
contemplated hereby.
(ii) FERS will afford Company and its financial advisors,
underwriters, accountants, counsel and other representatives
reasonable access during normal business hours, upon reasonable
notice, to the properties, books, records and personnel of FERS
during the period prior to the Closing to obtain all information
concerning the business, properties, results of operations and
personnel of FERS, as Company may reasonably request. No
information or knowledge obtained by Company in any investigation
pursuant to this Section 6.6 will affect or be deemed to modify
any representation or warranty contained herein or the conditions
to the obligations of the parties to consummate the transactions
contemplated hereby.
6.7 NO SOLICITATION. Other than with respect to the Merger, until the
earlier to occur of the Closing or the termination of this Agreement, each of
Company and FERS agrees that neither it nor any of its officers and directors
shall, and that it shall direct and use its reasonable best efforts to cause its
agents and other representatives (including any investment banker, attorney or
accountant retained by it) not to, directly or indirectly, initiate, solicit,
22
encourage or otherwise facilitate any inquiries or the making of any proposal or
offer with respect to (i) a merger, reorganization, recapitalization, share
exchange, consolidation or similar transaction involving it or its Subsidiaries,
or (ii) any sale, lease, exchange, mortgage, pledge, transfer or purchase of all
or substantially all of its assets or any of its equity securities in a single
transaction or series of related transactions (any such proposal or offer being
hereinafter referred to as an "ACQUISITION PROPOSAL"). Each of Company and FERS
further agrees that neither it nor any of its officers and directors shall, and
that it shall direct and use its reasonable best efforts to cause its agents and
representatives not to, directly or indirectly, engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
Each of the Company and FERS agrees that it will immediately cease and cause to
be terminated any existing discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. Each of the
Company and FERS agrees that it will take the necessary steps to promptly inform
the individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this section.
6.8 PUBLIC DISCLOSURE. Except to the extent previously disclosed or to the
extent the parties believe that they are required by applicable law or
regulation to make disclosure, and subject to the actions and filings
contemplated by Section 6.4, prior to Closing, no party shall issue any
statement or communication to the public regarding the transactions contemplated
hereby without the consent of the other parties, which consent shall not be
unreasonably withheld.
6.9 REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using commercially reasonable efforts to accomplish the
following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VII to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all consents, approvals or waivers from third parties required as a result of
the transactions contemplated in this Agreement, (iv) the defending of any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, FERS and its board of directors and Company and
23
its board of directors shall, if any state takeover statute or similar statute
or regulation is or becomes applicable to the Merger, this Agreement or any of
the transactions contemplated by this Agreement, use its commercially reasonable
efforts to enable the Merger and the other transactions contemplated by this
Agreement to be consummated as promptly as practicable on the terms contemplated
by this Agreement. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall be deemed to require FERS or Company or any Subsidiary of
Company to agree to any divestiture by itself or any of its affiliates of shares
of capital stock or of any business, assets or property, or the imposition of
any material limitation on the ability of any of them to conduct their business
or to own or exercise control of such assets, properties and stock.
(b) Company shall give prompt notice to FERS and Principal upon
becoming aware that any representation or warranty made by them contained in
this Agreement has become untrue or inaccurate, or of any failure of Company to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Article VII would not be satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
(c) FERS and Principal shall give prompt notice to Company upon
becoming aware that any representation or warranty made by it contained in this
Agreement has become untrue or inaccurate, or of any failure of FERS to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Article VII would not be satisfied; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
6.10 TREATMENT AS A REORGANIZATION. None of FERS, Mergerco, Principal or
Company shall take any action prior to or following the Merger that could
reasonably be expected to cause the Merger to fail to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code.
6.11 ABSENCE OF LIABILITIES. Immediately prior to Closing, FERS shall have
no liabilities or obligations, whether or not requiring the payment of monies,
other than as set forth in Section 4.8 hereof.
6.12 BUSINESS RECORDS. At or prior to Closing, FERS shall have delivered to
Company all records and documents relating to FERS, which FERS possesses,
including, without limitation, books, records, government filings, Corporate
Records, Stock Records, Returns, Charter Documents, consent decrees, orders, and
correspondence, director and stockholder minutes and resolutions, stock
ownership records, financial information and records, electronic files
containing any financial information and records, and other documents used in or
associated with FERS ("BUSINESS RECORDS").
24
6.13 RESTRICTIONS ON SALES BY PRINCIPAL; REGISTRATION RIGHTS. Subject to
such limitations as shall be imposed by applicable securities laws, including,
without limitation Rule 144 under the Securities Act, the Principal may not
sell, transfer or otherwise dispose of (collectively, "TRANSFER") any shares of
common stock of FERS owned by Principal on the date hereof (the PRINCIPAL
SHARES") for a period of ninety (90) days after the Effective Date. In addition,
following the Closing, FERS shall effect a "piggyback" registration of the
Principal Shares and the Rice Shares for the account of the Principal and Rice,
respectively, which registration statement shall be declared effective no later
than the first anniversary of the Closing Date.
ARTICLE VII.
CONDITIONS TO THE TRANSACTION
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Date of the
following conditions:
(a) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger, substantially on the terms
contemplated by this Agreement.
(b) INFORMATION STATEMENT. At least ten (10) days prior to Closing,
FERS shall have filed the Information Statements with the SEC, and FERS shall
have mailed the Information Statement to each of the stockholders of FERS, and
FERS shall have otherwise compiled with all of the provisions under Rule 14f-1
under the Exchange Act.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Effective Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
FERS and Principal contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct on
and as of the Effective Date with the same force and effect as if made on the
Effective Date. Company shall have received a certificate with respect to the
foregoing signed on behalf of FERS by an authorized officer of FERS and by
Principal ("FERS CLOSING CERTIFICATE").
(b) AGREEMENTS AND COVENANTS. FERS shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Effective
Date.
25
(c) RESIGNATIONS AND RESOLUTIONS. FERS shall have delivered to Company
the Resignations and Resolutions, in a form satisfactory to Company, together
with evidence satisfactory to Company of the resignation of all directors and
officers of FERS, effective as of the Closing. FERS shall also have delivered to
Company evidence satisfactory to Company of the appointment of new directors of
FERS in accordance with Section 6.1 hereof.
(d) CONSENTS. FERS shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby, other than consents, waivers and approvals the absence of
which, either alone or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on FERS.
(e) MATERIAL ADVERSE EFFECT. No Material Adverse Effect with respect to
FERS shall have occurred since the date of this Agreement.
(f) NO OBLIGATIONS. Immediately prior to the Closing, FERS shall have
no liabilities or obligations, other than as set forth in Section 4.8 hereof.
(g) SEC COMPLIANCE; OTC BB QUOTATION. Immediately prior to Closing,
FERS shall be current in its reporting and other regulatory requirements under
the Exchange Act and other applicable securities laws and FERS Common Stock
shall continue to be listed under its current symbol on, and continue to be in
full compliance with the requirements of, the OTC BB. FERS shall have received
all approvals and permits required by any applicable governing bodies and
regulatory authorities to permit the continued listing of the capital stock of
FERS on the OTC BB following the Closing
(h) BUSINESS RECORDS; RESIGNATION LETTER. FERS shall have delivered to
Company the Business Records and the Resignation Letter from FERS's Accountant.
(i) DUE DILIGENCE. Company shall be satisfied, in its sole discretion,
with the results of its business, legal and financial due diligence examination
of FERS and its business.
(j) APPROVAL BY COMPANY BOARD OF DIRECTORS. The Board of Directors of
Company shall have approved the closing of the transactions contemplated hereby.
(k) APPROVAL BY COMPANY' SHAREHOLDERS. The Company's shareholders shall
have approved the transactions contemplated hereby.
(l) OPINION OF FERS'S COUNSEL. Company shall have received an opinion
of counsel for FERS, dated the Effective Date, to the effect that the FERS
Shares to be issued hereunder shall, when so issued, be validly issued, fully
paid and non-assessable.
(m) PRINCIPAL INDEMNITY LETTER. Principal shall have executed and
delivered to FERS and Company the indemnification undertaking in the form
annexed hereto as EXHIBIT 7.2.
26
(n) ACCOUNTANT RESIGNATION LETTER. FERS's Accountant shall have issued
its resignation letter to FERS resigning from the engagement and consenting to
the use of its name and the disclosure of its resignation in the Change of
Accountant Form 8-K.
(o) OTHER DELIVERIES. At Closing, FERS shall have delivered to the
Company: (i) copies of resolutions and actions taken by FERS's board of
directors in connection with the approval of this Agreement and the transactions
contemplated hereunder, and (ii) such other documents or certificates as shall
reasonably be required by Company and its counsel in order to consummate the
transactions contemplated hereunder.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF FERS AND MERGERCO. The
obligations of FERS and Mergerco to consummate and effect the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Date of each of the following conditions, any of which may be waived,
in writing, exclusively by FERS:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Company contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Effective Date with the same force and effect as if made on and as of the
Closing. FERS shall have received a certificate with respect to the foregoing
signed on behalf of Company by an authorized officer of Company and by each
Stockholder or the Agent with respect to the warranties and representations
contained in Article II ("COMPANY CLOSING CERTIFICATE").
(b) AGREEMENTS AND COVENANTS. Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the Effective
Date.
(c) CONSENTS. Company and each of Company's Subsidiaries shall have
obtained all consents, waivers, permits and approvals required in connection
with the consummation of the transactions contemplated hereby, other than
consents, waivers and approvals the absence of which, either alone or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
Company and its Subsidiaries, taken as a whole.
(d) MATERIAL ADVERSE EFFECT. No Material Adverse Effect with respect to
Company and its Subsidiaries shall have occurred since the date of this
Agreement.
(e) ACCOUNTANT UNDERTAKING. Company shall have delivered to FERS on or
before the Compliance Date the Accountant Undertaking, in a form reasonably
satisfactory to FERS.
(f) OTHER DELIVERIES. At Closing, Company shall have delivered to FERS:
(i) copies of resolutions and actions taken by Company's board of directors in
connection with the approval of this Agreement and the transactions contemplated
hereunder, and (ii) such other documents or certificates as shall reasonably be
required by FERS and its counsel in order to consummate the transactions
contemplated hereunder.
27
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written agreement of FERS, Mergerco, Principal and
Company at any time;
(b) by either FERS, Principal or Company if the Merger shall not have
been consummated by March 15, 2005 for any reason; provided, however, that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(c) by either FERS, Principal or Company if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(d) by Company upon a material breach of any covenant or agreement on
the part of FERS set forth in this Agreement, or if any representation or
warranty of FERS shall have become materially untrue, in either case such that
the conditions set forth in this Agreement would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall have
become untrue;
(e) by Company if Company's shareholders shall not have approved the
transactions contemplated hereby by March 15, 2005; or
(f) by FERS or Principal upon a material breach of any covenant or
agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become materially untrue, in
either case such that the conditions set forth in this Agreement would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue.
8.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 8.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 8.1,
this Agreement shall be of no further force or effect and the Merger shall be
abandoned, except for and subject to the following: (i) Section 8.2, Section 8.3
and Article IX (General Provisions) shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party from liability for
any intentional or willful breach of this Agreement.
8.3 FEES AND EXPENSES. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses whether or not the Merger is consummated. The
28
parties further agree that, whether or not the Merger is consummated, Company
shall be responsible for any and costs and expenses incurred in connection with
the preparation, filing and mailing (if required) of the Form 8-K filings
hereunder, the Press Release and the Information Statement.
8.4 AMENDMENT. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of FERS,
Mergerco, Company and Principal.
8.5 EXTENSION; WAIVER. At any time prior to the Closing, any party hereto
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.
ARTICLE IX.
GENERAL PROVISIONS
9.1 SURVIVAL. None of the representations or warranties of the parties
contained in Articles III or IV hereof shall survive the Closing.
9.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Principal, Mergerco or, prior to Closing, to FERS, to:
000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Little
with a copy to:
Xxxxxx Xxxxxxx, Esq.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) if to Company or, after Closing, to FERS, to:
Xxxxxx Capital Financial Group, Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
29
with a copy to:
Xxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx,
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxx, Esq.
9.3 INTERPRETATION.
(a) When a reference is made in this Agreement to Exhibits or
Schedules, such reference shall be to an Exhibit or Schedule to this Agreement
unless otherwise indicated. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement. Unless
otherwise indicated the words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(b) For purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT"
when used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect, individually or when aggregated with other
changes, events, violations, inaccuracies, circumstances or effects, that is
materially adverse to the business, assets (including intangible assets),
revenues, financial condition or results of operations of such entity and its
Subsidiaries, if any, taken as a whole.
(c) For purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
9.4 COUNTERPARTS. This Agreement may be executed by facsimile signature in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart. 9.5 ENTIRE
AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement and the documents and
instruments and other agreements among the parties hereto as contemplated by or
referred to herein, including the Schedules hereto (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the letter of intent among FERS, Principal and Company, dated January 28, 2005,
as amended (as so amended, "LETTER OF INTENT") is hereby terminated in its
30
entirety; and (b) are not intended to confer upon any other person any rights or
remedies hereunder (except as specifically provided in this Agreement).
9.6 SEVERABILITY. In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.7 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
Any proceedings, claims or actions hereunder, if instituted by or on behalf of
(i) Company prior to the Closing, or (ii) FERS or Company after the Closing,
shall be brought in the state or federal courts located in Midland County,
Texas. Any proceedings, claims or actions hereunder, if instituted by or on
behalf of (i) FERS or Principal prior to the Closing, or (ii) Principal after
the Closing, shall be brought in the state or federal courts located in the
County of New York, State of New York.
9.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the first sentence of this Section, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
FAST XXXXX RACING STABLES, INC.
By: /s/ Xxxxx X. Little
-----------------------------
Name: Xxxxx X. Little
Title: President
PRINCIPAL:
/s/ Xxxxx X. Little
--------------------------------
XXXXX X. LITTLE
XXXXXX CAPITAL FINANCIAL GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
FERS ACQUISITION CORP.
By: /s/ Xxxxx X. Little
-----------------------------
Name: Xxxxx X. Little
Title: President
32
EXHIBIT 7.2
FORM OF PRINCIPAL LETTER OF INDEMNIFICATION
[CLOSING DATE]
Xxxxxx Capital Financial Group, Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fast Xxxxx Racing Stables, Inc.
000 Xxxx Xxxx
Xxxxxxx, Xxxxx 00000
Re: INDEMNIFICATION AND RELATED MATTERS
Ladies and Gentlemen:
Reference is made to Agreement and Plan of Reorganization, dated February
18, 2005 (the "AGREEMENT"), among Fast Xxxxx Racing Stables, Inc., a Florida
corporation (the "FERS"), Xxxxx X. Little, an individual ("PRINCIPAL"), Xxxxxx
Capital Financial Group, Inc., a Delaware corporation (the "COMPANY"), and FERS
Acquisition Corp., a Delaware corporation ("Mergerco"). Capitalized terms used
but not defined herein have the meanings given to them in the Agreement.
In accordance with Section 7.2 of the Agreement, Principal does hereby:
(i) release FERS from any outstanding liabilities and obligations of
any nature that may be due and owing by FERS to Principal with respect to
any period prior to the Effective Date, whether for advances or otherwise,
other than the Principal Payment Obligation;
(ii) agree to pay all other outstanding liabilities that were incurred
by or on behalf of FERS prior to the Closing (except for the Principal
Payment Obligation, as provided for in Section 4.8 of the Agreement),
(iii) represent and warrant that to his knowledge, there are no other
outstanding liabilities of the Company which are not specifically and
completely set forth in the financial statements of the Company as of
December 31, 2004; and
(iv) agree to indemnify and hold Company and FERS, and their
respective officers and directors (collectively, "Indemnified Parties"),
harmless from and against any and all liabilities, obligations, losses,
damages and claims which exist, or which may be imposed on, incurred by or
asserted against any one or more of the Indemnified Parties, and any cost
33
or expense (including reasonable attorneys' fees and court costs) incurred
by the Indemnified Parties in connection with the foregoing based upon,
resulting from or arising out of the Delinquent SEC Reports.
The rights and remedies of the Company and the FERS hereunder shall inure
to the benefit of their respective successors and assigns, and are in addition
to such other rights and remedies which they may have under the Agreement or
otherwise.
The indemnification obligations of Principal hereunder shall survive for a
period of twelve (12) months from the date hereof.
PRINCIPAL:
/s/ Xxxxx X. Little
-------------------------------
Xxxxx X. Little
