MERGER AGREEMENT

EXHIBIT 2.1

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MERGER AGREEMENT

THIS AGREEMENT AND PLAN OF MERGER, dated as of the ____ of March, 2005

(the "Agreement"), by and among CSM, Inc., a Tennessee corporation ("Company"),

Marc Fortune ("Fortune"), Greg Daily ("Daily"), Harbinger Mezzanine Partners,

L.P. ("Harbinger"), Doug Altenbern ("Altenbern"), Jeff Gould ("Gould"), Bob

Boston ("Boston"), Don Denbo ("Denbo"), (Fortune, Daily, Harbinger, Altenbern,

Gould, Boston and Denbo collectively being the owners of all of the outstanding

common stock of the Company, __ par value (the "Common Stock") and hereinafter

referred to individually as a "Shareholder" and collectively as the

"Shareholders"), Fortune Diversified Industries, Inc., a Delaware corporation

("FDI"); CSM Merger Corporation, a Tennessee corporation and wholly-owned

subsidiary of FDI ("Merger Sub"); and Carter M. Fortune ("CMF").

W I T N E S S E T H:

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WHEREAS, the Boards of Directors of Company, FDI, and Merger Sub deem

advisable, consistent with their respective business strategies and in the best

interests of their respective shareholders the merger of Merger Sub with and

into Company (the "Merger") upon the terms and conditions set forth herein and

in accordance with the Tennessee Business Corporation Act (the "TBCA") (Company,

following the effectiveness of the Merger, being hereinafter sometimes referred

to as the "Surviving Corporation"); and

WHEREAS, the Boards of Directors of Company, FDI and Merger Sub have

approved the Merger pursuant to this Agreement, upon the terms and conditions

set forth herein; and

WHEREAS, each of the Shareholders has approved this Agreement and the

Merger on the terms and conditions set forth herein.

WHEREAS, Fortune, Daily and Harbinger (collectively the "Indemnifying

Shareholders") agree to make certain representations, warranties, covenants and

agreements for the benefit of FDI.

NOW, THEREFORE, in consideration of the mutual representations,

warranties, covenants, agreements and conditions contained herein, and in order

to set forth the terms and conditions of the Merger and the method of carrying

the same into effect, the parties hereby agree as follows:

1. THE MERGER

1.1 The Merger. At the Effective Time (as hereinafter defined), Merger

Sub will merge with and into the Company, with the Company being the Surviving

Corporation, with all of the effects as described in Section 48-21-108 of the

TBCA.

1.2 The Effective Time of the Merger. On such date as shall be mutually

acceptable to FDI and Company within five days after the date on which the last

of the conditions set forth in Sections 6 and 7 has been satisfied or waived by

the appropriate parties (or by such later date as may be agreed by the parties),

Company and Merger Sub shall execute articles of merger (the "Merger

Certificate") to effect the Merger in accordance with all appropriate legal

requirements

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and deliver and file such Merger Articles as required by the TBCA. The Merger

shall become effective upon the filing of the Merger Certificate or at such

later time and date satisfactory to Company and FDI as may be specified in the

Merger Certificate (the time and date of such filing or such later time and date

being herein called the "Effective Time").

1.3 Charter and By-laws. The Charter and By-laws of the Company, as in

effect immediately prior to the Effective Time, shall be the Charter and By-laws

of the Surviving Corporation until thereafter changed or amended as provided

therein or by applicable law.

1.4 Officers and Directors. The officers and directors of Merger Sub

immediately prior to the Effective Time shall be the officers and directors of

the Surviving Corporation until their respective successors are duly elected and

qualified.

1.5 Merger Consideration. The Merger Consideration shall consist of the

Per Share Cash Merger Consideration and the Contingent Share Merger

Consideration, each of which shall be calculated and distributed as set forth

herein. For administrative purposes, the indebtedness referred to in Section 7.8

shall be considered consideration received by the Company in the Merger.

1.6 Effect on Capital Stock. The manner and basis of converting the

shares of the Common Stock and any options or warrants shall be as follows:

(a) Common Stock. At the Effective Time, each share of Common

Stock issued and outstanding immediately prior to the Effective Time shall, by

virtue of the Merger and without any action on the part of the holder thereof,

be converted into, and represent the right to receive, the Merger Consideration.

(b) Options. At the Effective Time, any option outstanding

immediately prior to the Effective Time shall be: (i) cancelled; (ii) or

cancelled and converted into, and represent, the right to receive the Contingent

Share Merger Consideration, as calculated in Section 1.8.

(c) Warrants. At the Effective Time, any warrant outstanding

immediately prior to the Effective Time shall be: (i) cancelled; or (ii)

cancelled and converted into, and represent the right to receive the Merger

Consideration.

1.7 Conversion of Shares of Merger Sub. Upon the terms and subject to

the conditions of this Agreement, at the Effective Time, by virtue of the

Merger, each share of common stock of Merger Sub issued and outstanding

immediately prior to the Effective Time shall be converted into one validly

issued, fully paid and nonassessable share of common stock of the Company.

Following the Effective Time, each certificate evidencing ownership of shares of

Merger Sub common stock shall evidence ownership of such shares of common stock

of the Company.

1.8 Contingent Shares.

(a) Within sixty (60) days after each Distribution Date set

forth below, FDI will cause to be delivered to those individuals or entities

("Contingent Share Recipients") in the respective percentages set forth on

Schedule 1.8 hereto. one share of FDI $.01 par value

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common stock (each a "Contingent Share" and, collectively, the "Contingent

Shares") for every $1.70 of EBITDA in excess of $850,000 during each twelve

month period (April 1 to March 31) of the Contingency Period (as defined below)

prior to the applicable Distribution Date. Such Contingent Shares shall be

issued to the Contingent Share Recipients pursuant to the percentages set forth

on Schedule 1.8 unless the Disbursing Agent (as defined in Section 1.12)

receives instructions to the contrary signed by each Contingent Share Recipient.

(b) The Distribution Dates shall be June 1, 2006, June 1, 2007

and June 1, 2008. The period from April 1, 2005 until March 31, 2008 shall be

referred to herein as the "Contingency Period."

(c) Notwithstanding the foregoing, subject to section

1.8(d)(ii) below: (i) not more than 500,000 Contingent Shares shall be earned

and distributed in regards to the first twelve month period; (ii) not more than

500,000 Contingent Shares shall be earned and distributed in regards to the

second twelve month period; and (iii) not more than 500,000 Contingent Shares

shall be earned and distributed in regards to the third twelve month period.

(d) Terms of Contingent Shares. The Contingent Shares, when

earned and distributed, shall entitle the holder to all of rights of a holder of

any other share of FDI's common stock, but shall be entitled and subject to the

following additional rights and obligations:

(i) "Put." Each holder of Contingent Shares may, in

his/her sole discretion, sell any or all of his/her earned Contingent Shares to

CMF and CMF shall purchase any of such Contingent Shares offered by any holder

thereof pursuant to the terms of this Section 1.8 (d)(i) (the "Put"). The

purchase price shall be $1.033 per share (the "Put Price"). Any holder of

Contingent Shares may only exercise his/her Put during the period June 1, 2008

to September 30, 2008 (the "Exercise Period"). In addition, any holder of

Contingent Shares may only exercise his/her Put if FDI's common stock is not

listed on the OTC Bulletin Board, the New York Stock Exchange, NASDAQ or another

nationally-recognized securities market or exchange during the thirty (30) day

period preceding the Exercise Period or if the average bid price per share

during the thirty (30) day period preceding the Exercise Period on any such

nationally recognized securities market or exchange is less than the Put Price.

Any closing on a Put of Contingent Shares to CMF shall occur within thirty (30)

days of CMF's receipt of written notice from any holder of Contingent Shares

exercising his/her Put.

(ii) Adjustments. The number of Contingent Shares

under this Section 1.8 shall be proportionately adjusted to reflect any stock

dividend, stock split or share combination of FDI's common stock or any

recapitalization of FDI occurring prior to a Distribution Date. Except as

provided in the preceding sentence, no adjustment shall be made as to any

dividends or other rights for which the record date occurred prior to a

Distribution Date.

(iii) Legends. Any certificates issued for Contingent

Shares shall contain restrictive legends evidencing, among other things, the

restrictions and provisions regarding mandatory purchases and sales contained in

this Section 1.8.

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1.9 No Further Ownership Rights in Common Stock. All Merger

Consideration issued upon the surrender for exchange of certificates evidencing

Common Stock or to be issued in the future as Contingent Shares in accordance

with the terms of this Section 1 shall be deemed to have been issued in full

satisfaction of all rights pertaining to the Common Stock and any options or

warrants. The Company shall not have any further obligations to any holder of

Common Stock, holder of any option or holder of any warrant. At the Effective

Time, holders of Common Stock, holders of any options and holders of any

warrants immediately prior to the Effective Time shall cease to be, and shall

have no rights as, shareholders, options holders or warrant holders of Company

other than the right to receive the Merger Consideration set forth in Section

1.5, and holders of certificates of Common Stock, holders of any options and

holders of any warrants shall not be treated as shareholders of the Company

thereafter for any purpose.

1.10 The Closing. The closing of the transactions contemplated by the

Agreement (the "Closing") shall take place at the offices of Drewry Simmons

Vornehm, LLP, 8888 Keystone Crossing, Suite 1200, Indianapolis, Indiana 46240,

commencing at 9:00 a.m. local time on March 31, 2005 or such other date and/or

time as FDI and the Shareholders may mutually agree (the "Closing Date").

1.11 Deliveries at the Closing. At the closing, (i) the Shareholders

will deliver to FDI the various certificates, instruments and documents referred

to in Section 6 below, (ii) FDI will deliver to the Shareholders the various

certificates, instruments and documents referred to in Section 7 below, (iii)

each of the Shareholders will deliver to FDI stock certificates representing all

of such Shareholder's Common Stock, endorsed in blank or accompanied by duly

executed assignment documents, and (iv) FDI and Merger Sub will deliver the Per

Share Cash Merger Consideration specified in Section 1.5 above as set forth in

Section 1.12 by wire transfer of immediately available funds.

1.12 Payment of Cash Merger Consideration.

(a) At Closing, FDI and Merger Sub shall deposit or cause to

be deposited in immediately available funds with Drewry Simmons Vornehm, LLP

(the "Disbursing Agent") cash in an amount equal to the Aggregate Merger

Consideration.

(b) The Disbursing Agent shall immediately disburse

$200,550.25 from the Aggregate Merger Consideration to the Shareholders pursuant

to written instructions from the Shareholders as to the respective amounts and

account information.

(c) The Disbursing Agent shall hold the remaining $450,000 of

the Aggregate Merger Consideration (the "Escrow Funds") pursuant to an escrow

agreement in form and substance acceptable to the parties providing that the

Escrow Funds to be used, if necessary, to pay certain taxes interest and

penalties for which the Company might have a liability and, to the extent that

the Company does not have a liability for such taxes interest and penalties, for

such Escrow Funds to be distributed to the Shareholders.

2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE INDEMNIFYING

SHAREHOLDERS. Each of the Shareholders represents and warrants to FDI and Merger

Sub that, with respect to himself or itself and each of the Indemnifying

Shareholders

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represents and warrants to FDI and Merger Sub that the statements contained in

this Section 2 are true, correct and complete as of the date of this Agreement.

2.1 Power and Authorization. The Company and each Shareholder have full

power and authority to execute and deliver this Agreement and to perform his or

its obligations hereunder. This Agreement constitutes the valid and legally

binding obligation of the Company and each Shareholder, enforceable in

accordance with its terms except as the same may be limited by bankruptcy,

insolvency, reorganization, fraudulent conveyance, moratorium or other laws

affecting the enforcement of creditor's rights in general, and except that the

enforceability of this Agreement also is subject to general principles of equity

(regardless of whether such enforceability is considered in a proceeding in

equity or law). The individuals executing this Agreement on behalf of and in the

name of the Company and Harbinger are duly authorized and empowered to so act.

Neither the Company nor any Shareholder need give any notice to, make any filing

with, or obtain any authorization, consent or approval of any government or

government agency in order to consummate the transactions contemplated by this

Agreement.

2.2 Noncontravention. Neither the execution and the delivery of this

Agreement, nor the consummation of the transactions contemplated hereby, does or

will, after the giving of notice, lapse of time or otherwise: (i) violate any

statute, regulation, rule, judgment, order, decree, stipulation, injunction,

charge or other restriction of any government, governmental agency, or court to

which any Shareholder is subject, (ii) conflict with, result in a breach of,

amend or modify, constitute a default under, result in the acceleration or

termination of, create in any party the right to accelerate, terminate, modify,

abandon, or cancel, or require any notice under, any contract, lease, sublease,

license, sublicense, franchise, permit, indenture, agreement, mortgage,

instrument of indebtedness or other arrangement to which any Shareholder is a

party or by which he or it is bound or to which any of his or its assets is

subject, or (iii) if applicable, conflict with, result in a breach of or

constitute a default under, the charter or bylaws or other governing instrument

applicable to any Shareholder.

2.3 Broker Fees. Except as set forth in Section 2.3 of the disclosure

schedule accompanying this Agreement (the "Disclosure Schedule"), neither the

Company nor any Shareholder has any liability or obligation to pay any fees or

commissions to any broker, finder or agent with respect to the transactions

contemplated by this Agreement for which FDI or the Company could become liable

or obligated. Any fees or commissions due to any such broker, finder or agent

shall be paid by Shareholders and by the Company as set forth in Section 2.3 of

the Disclosure Schedule. In no event, however, shall the Company or any of its

subsidiaries have paid or be obligated to pay any amount in excess of one

hundred thousand dollars ($100,000.00).

2.4 Ownership of Common Stock. The Shareholders hold of record and own

beneficially the number and type of shares of Common Stock set forth next to his

or its name in Section 3.3 of the Disclosure Schedule, and each Shareholder has

the right and power to transfer and assign his or its Common Stock, free and

clear of any restrictions on transfer, claims, taxes, liens, security interests,

encumbrances, options or other demands or liabilities; Except for any options or

warrants that are cancelled at the Effective Time, neither the Company nor any

Shareholder is a party to any option, warrant, right, contract, call, put or

other agreement or commitment providing for the disposition or acquisition of

any capital stock of the Company

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(other than this Agreement). Each Shareholder has the exclusive right, power and

authority to vote the shares of Common Stock owned by that Shareholder and no

Shareholder is a party to any voting trust, proxy, or other agreement or

understanding with respect to voting of any capital stock of the Company. The

Shareholders are the only shareholders of Company, and will (except for

exercises of options or warrants prior to the Closing Date) remain and continue

to be the only shareholders through the Closing Date and will not sell, pledge

or otherwise transfer or assign any of their shares of Common Stock prior to the

Closing Date.

2.5 No Litigation. There are no judicial, administrative or other

governmental actions, proceedings or investigations pending or, to the knowledge

of any of Shareholders, threatened, that question any of the transactions

contemplated by, or the validity of, this Agreement or which, if adversely

determined, would have an adverse effect upon the ability of any of the

Shareholders to enter into or perform his/her/its obligations under this

Agreement. No Seller has received any request from any governmental agency or

instrumentality for information with respect to the transactions contemplated

hereby.

2.6 Securities Matters.

(a) Each Shareholder understands that the Contingent Shares,

when issued by FDI, will not be registered under the Securities Act of 1933, as

amended (the "Securities Act"), or any state securities laws on the grounds that

the issuance of the Contingent Shares is exempt from registration, and that the

reliance of FDI on such exemptions is predicated in part on each of

Shareholders' representations, warranties, covenants and acknowledgments set

forth in this Section 2.6.

(b) Each Shareholder represents and warrants that the

Contingent Shares to be acquired as contemplated herein will be acquired by

him/her/it for his/her/its own account, not as a nominee or agent, and without a

view to resale or other distribution within the meaning of the Securities Act

and the rules and regulations thereunder, and that he/she/it will not distribute

all or any portion of the Contingent Shares that may be received in violation of

the Securities Act.

(c) Each Shareholder acknowledges that the Contingent Shares,

when issued, will be "restricted securities" under the federal securities laws

inasmuch as they are being acquired in a transaction not involving a public

offering and that under such laws and applicable regulations such securities may

be resold only if such shares are registered for sale under the Securities Act

or if such sale is exempt from registration.

(d) Each Shareholder represents and warrants that he/she/it,

either alone, or together with a business or other representative or advisor,

has such knowledge and experience in financial and business matters such that

he/she is capable of evaluating the merits and risks of his/her/its receipt of

the Contingent Shares.

(e) Each Shareholder is in a financial position to afford to

hold the Contingent Shares indefinitely, each Shareholder's financial condition

being such that he/she/it is not presently under necessity or constraint to

dispose of the Contingent Shares to satisfy any existing or contemplated debt or

undertaking. Each Shareholder recognizes that it may not be possible for

him/her/it to liquidate his/her/its investment in the Contingent Shares and,

accordingly,

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he/she/it may have to hold the Contingent Shares, and bear the economic risk of

this investment, indefinitely.

(f) Each Shareholders confirms that the Contingent Shares were

not offered to him/her/it by any means of general solicitation or general

advertising, and that he/she/it has received no representations, warranties or

written communications upon which he/she/it has relied with respect to the

Contingent Shares other than those contained or described in this Agreement.

(g) Each Shareholder acknowledges that he/she/it has been

provided or that FDI has made available to him/her/it copies of FDI's most

recent Form 10-KSB, Form 10-QSB and any Form 8-Ks filed since the most recent

Form 10-QSB was filed.

(h) Each Shareholder acknowledges that FDI has given

him/her/it a reasonable opportunity to ask questions and receive answers

concerning his/her/its receipt of Contingent Shares and to obtain any additional

information which FDI possesses or can acquire without unreasonable effort or

expense that is necessary to verify the accuracy of information.

2.7 No Other Claims. Except for their claims to the Merger

Consideration, no Shareholder, option holder or warrant holder has any claim or

right of action against the Company or any of its subsidiaries.

2.8 Continuation of Existence. Harbinger shall: (i) continue its

existence and shall not terminate, liquidate or dissolve; and (ii) retain at

least five hundred thousand dollars ($500,000) of liquid assets until the later

of: (a) March 31, 2006; or (b) such date as any Claim filed against Harbinger

(pursuant to Section 9.1 of this Agreement) is finally resolved.

3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE INDEMNIFYING

SHAREHOLDERS CONCERNING THE COMPANY. Each of the Shareholders represents and

warrants to FDI and Merger Sub that, with respect to himself or itself and each

of the Indemnifying Shareholders represents and warrants to FDI and Merger Sub

that the statements contained in this Section 3 are true, correct and complete,

except as set forth in the Disclosure Schedule, and except for changes in the

business and properties of the Company expressly permitted by the terms hereof.

3.1 Organization, Qualification and Corporate Power. The Company and

each of its subsidiaries is a corporation duly organized, validly existing and

in good standing under the laws of the State of Tennessee. The Company and each

of its subsidiaries is duly authorized to conduct business and is in good

standing under the laws of each jurisdiction in which the nature of its business

or the ownership or leasing of its properties requires such qualification. The

Company and each of its subsidiaries has all requisite power and authority to

carry on its business as now conducted and to own or lease and to operate its

properties as such properties are now owned, leased or operated. Section 3.1 of

the Disclosure Schedule lists the directors and officers of the Company and each

of its subsidiaries. The Company and each of its subsidiaries has delivered to

FDI true, correct and complete copies of the charter and by-laws of the Company

and each of its subsidiaries. The minute books containing the records of

meetings of the stockholders, the board of directors, the stock certificate

books, and the stock record books of the

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Company and each of its subsidiaries are correct and complete. The Company and

each of its subsidiaries is not in default under, or in violation of, any

provision of its charter or by-laws.

3.2 Non-Contravention. Neither the execution and the delivery of this

Agreement, nor the consummation of the transactions contemplated hereby, does or

will, after the giving of notice, lapse of time or otherwise: (i) violate any

statute, regulation, rule, judgment, order, decree, stipulation, injunction,

charge or other restriction of any government, governmental agency, or court to

which the Company or any of its subsidiaries is subject, (ii) conflict with,

result in a breach of, amend or modify, constitute a default under, result in

the acceleration or termination of, create in any party the right to accelerate,

terminate, modify, abandon, or cancel, or require any notice under, any

contract, lease, sublease, license, sublicense, franchise, permit, indenture,

agreement, mortgage, instrument of indebtedness or other arrangement to which

Company or any of its subsidiaries is a party or by which it is bound or to

which any of it assets is subject, or (iii) conflict with, result in a breach of

or constitute a default under, the charter or bylaws or other governing

instrument applicable to the Company or any of its subsidiaries.

3.3 Capitalization. The entire authorized capital stock of the Company

and each of its subsidiaries is set forth in Section 3.3 of the Disclosure

Schedule. There are no shares of capital stock held in the treasury of the

Company or any of its subsidiaries. All of the issued and outstanding Common

Stock and the common stock issued by each of Company's subsidiaries has been

duly authorized and is validly issued, fully paid and nonassessable. All of the

issued and outstanding Common Stock and the common stock issued by each of the

Company's subsidiaries is held of record by the persons or entities set forth in

Section 3.3 of the Disclosure Schedule in the amounts indicated therein. Except

for any options or warrants that are cancelled at the Effective Time, there are

no outstanding or authorized options, warrants, rights, contracts, calls, puts,

rights to subscribe, conversion rights, or other agreements or commitments to

which the Company or any of its subsidiaries is a party or which are binding

upon the Company or any of its subsidiaries providing for the issuance,

disposition or acquisition of any of its capital stock. There are no outstanding

or authorized stock appreciation, phantom stock, or similar rights with respect

to the Company or any of its subsidiaries and there are no outstanding or

existing securities of any kind convertible into or exchangeable for shares of

stock in the Company or any of its subsidiaries. There are no voting trusts,

proxies or any other agreements or understandings with respect to the voting of

the capital stock of the Company or any of its subsidiaries. By executing this

Agreement, each Shareholder waives any right that he, she or it may have to

dissent from, and hereby consents to, the Merger. No former shareholder, option

holder or warrant holder of Company or any corporation heretofore merged with or

into Company has any claim or cause of action whatsoever against Company or any

of its subsidiaries arising or in any way connected with any occurrence or state

of facts in existence prior to the date hereof, and no such former shareholder,

option holder or warrant holder shall come to have any claim or cause of action

whatsoever against Company, any of its subsidiaries or FDI, or any officer,

director or shareholder of any such corporations, by virtue of, or in any way

connected with, the transactions contemplated by this Agreement. All of the

outstanding capital stock of Company and each of its subsidiaries has been

issued and sold in compliance with all federal and state securities laws. There

are no preemptive rights in respect of Company's or any of its subsidiaries'

capital stock.

3.4 Subsidiaries and Investments. Except as disclosed in Section 3.4 of

the Disclosure Schedule:

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(a) the Company has no subsidiaries and does not own or

control, directly or indirectly, any of the capital stock of any corporation;

(b) the Company and each of its subsidiaries does not own any

interest in any partnership or other entity;

(c) there are no outstanding contractual obligations of

Company or any of its subsidiaries to acquire any shares of capital stock or

other ownership interest of any corporation, partnership or other entity; and

(d) the Company and each of its subsidiaries does not have any

investment (either debt or equity), or commitments to make such an investment,

in any corporation, joint venture, general or limited partnership, business

enterprise or other person or entity.

3.5 Permits; Compliance with Laws

(a) The Company and each of its subsidiaries has and maintains

all licenses, permits and other authorizations from all such governmental

authorities as are necessary or desirable for the conduct of its business. The

validity of each such license, permit or other authorization will not be

affected by the consummation of the transactions contemplated hereby. All such

permits, licenses and authorizations are in full force and effect and no

suspension or cancellation of any of them is threatened. Company and each of its

subsidiaries has complied, in respect of its operations, real property,

equipment, all other property, practices and all other aspects of its business,

in all material respects, with all the requirements of all permits, licenses and

authorizations.

(b) The Company and each of its subsidiaries has complied in

all material respects with all laws (including rules and regulations thereunder)

of federal, state, local, and foreign governments (and all agencies thereof),

and no unresolved charge, complaint, action, suit, proceeding, hearing,

investigation, claim, demand, or notice has been received by the Company or any

of its subsidiaries, alleging any failure to comply with any such law or

regulation.

3.6 Litigation. Section 3.6 of the Disclosure Schedule sets forth each

instance in which the Company or any of its subsidiaries (i) is subject to any

unsatisfied or currently effective judgment, order, decree, stipulation,

injunction, or charge or (ii) is a party or, to the knowledge of any of the

Shareholders, is threatened to be made a party to, any charge, complaint,

action, suit, proceeding, hearing, or investigation of, or in any court or

quasi-judicial or administrative agency of, any federal, state, local, or

foreign jurisdiction or before any arbitrator. None of the charges, complaints,

actions, suits, proceedings, hearings, and investigations that are required to

be set forth in Section 3.6 of the Disclosure Schedule could result in any

material adverse change in the assets, liabilities, business, financial

condition, operations, results of operations, or future prospects of the

Company, or any of its subsidiaries, taken as a whole (a "Material Adverse

Change").

3.7 Financial Statements.

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(a) Section 3.7(a) of the Disclosure Schedule includes the

unaudited consolidated balance sheet of Company and each of its subsidiaries as

of December 31, 2004 (including the notes thereto, if any, the "Company December

Balance Sheet"), and the related consolidated statement of income for the

calendar year then ended (collectively the "Company Financial Statements"). The

Company Financial Statements accurately and fairly present the financial

condition of the Company and each of its subsidiaries as of the date thereof and

the results of its consolidated operations for the year then ended, all in

accordance with GAAP consistently applied.

(b) Section 3.7(b) of the Disclosure Schedule includes the

unaudited consolidated balance sheet of Company and each of its subsidiaries as

of January 31, 2005, which contains certain agreed-upon adjustments that are

described in Section 3.7(b) of the Disclosure Schedule (the "Company Interim

Balance Sheet") and the related consolidated statement of income for the one

month then ended (collectively the "Company Interim Financial Statements"). The

Company Interim Financial Statements accurately and fairly present the financial

condition of the Company and each of its subsidiaries as of the date thereof and

the results of its operations for that portion of the fiscal year then elapsed,

all in accordance with GAAP consistently applied.

(c) Except as described in Section 3.7(c) of the Disclosure

Schedule, the Company Interim Balance Sheet reflects all liabilities of Company

and each of its subsidiaries whether absolute, accrued or contingent, as of the

date hereof. As of the date of Closing, Company and each of its subsidiaries

will not have any liability or obligation of any nature that is not reflected on

the Company Interim Balance Sheet other than current liabilities (within the

meaning of GAAP) incurred since the date thereof arising in the ordinary course

of business consistent with past practice.

(d) The line item "Cash and Cash Equivalents" on the Company

Interim Balance Sheet accurately reflects the cash on hand as of its date.

(e) On the Company Interim Balance Sheet, Company has

established certain medical reserves and workers compensation reserves under the

line items "Accrued Workers Compensation Claims" and "Accrued Benefit Plan

Claims". The medical reserves and workers compensation reserves established on

the Company Interim Balance Sheet accurately reflect the Company's and each of

its subsidiaries' estimated liability exposure to such claims.

(f) The Company's and each of its subsidiaries' liability for

unpaid insurance premium tax (including penalties and interest, if any) for all

services provided or income received prior to the Closing Date does not exceed

four hundred thousand dollars ($400,000.00). The Company's and each of its

subsidiaries' liability for unpaid employment taxes due to the State of North

Carolina and or any governmental bodies related to the State of North Carolina

(including penalties and interest, if any) for any such amounts accruing prior

to the Closing Date does not exceed seventy-five thousand dollars ($75,000.00).

The Company or any of its subsidiaries has not paid any insurance premium tax

prior to Closing. If the unpaid insurance premium tax exceeds four hundred

thousand dollars ($400,000.00), or if there are insufficient Escrow Funds to pay

the amount of the unpaid insurance premium tax then any amount of the insurance

premium tax in excess of four hundred thousand dollars ($400,000.00) or in

excess of

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the remaining Escrow Funds shall then be paid by the Indemnifying Shareholders

according to the provisions of this Agreement. . If the unpaid employment taxes

referred to in this Subsection exceed seventy-five thousand dollars

($75,000.00), or if there are insufficient Escrow Funds to pay the amount of the

unpaid employment taxes then the amount of any such remaining unpaid employment

taxes shall then be paid out of the one hundred fifty thousand dollars

($150,000.00) in accrued legal expenses stated on the Company Interim Balance

Sheet to the extent that such accrued expenses have not already been depleted,

the Indemnifying Shareholders shall then pay any remaining amount of the unpaid

employment taxes according to the terms of this Agreement. Amounts deducted from

the Escrow Funds for payment of either the insurance premium tax or the

employment tax (including penalties and interest, if any) shall be withdrawn

from Escrow Funds at the time of final settlement of either matter.

3.8 Accounts Receivable. Section 3.8 of the Disclosure Schedule

includes a correct and complete accounts receivable aging of Company and each of

its subsidiaries as of January 31, 2005 reflecting the aggregate dollar amount

of all accounts receivable of Company and each of its subsidiaries which have

been outstanding for: 30 days or less; more than 30 but less than 61 days; more

than 60 but less than 91 days; and more than 90 days. Company and each of its

subsidiaries have established what they consider to be reasonable reserves for

losses on their accounts receivable based on historic loss experience and

current economic conditions and such accounts receivable (net of reserves) are

collectible by Company and each of its subsidiaries in the ordinary course of

business within ninety (90) days of the date of this Agreement. Such reserve(s)

are included on the Company Interim Balance Sheet.

3.9 Client List. Company has provided to FDI a schedule listing the

twenty largest clients of the Company and each of its subsidiaries on a

consolidated basis for the calendar year 2004 and has set forth opposite the

name of each such client the percentage of gross revenues attributable to such

client ("Client List"). For purposes of confidentiality, the Client List shall

not be listed on the Disclosure Schedule to this Agreement, but shall be treated

as between parties as if it were Section 3.9 of the Disclosure Schedule to this

Agreement. No customer on the Client List has notified the Company that it

intends to discontinue or reduce significantly its business with the Company,

whether as a result of this Agreement or otherwise. Except as disclosed in

Section 3.9 of the Disclosure Schedule, the Company is not engaged in any

dispute with any such customer.

3.10 Real Property.

(a) Neither Company nor any of its subsidiaries own any real

property.

(b) The leases listed in Section 3.10(b) of the Disclosure

Schedule (the "Real Property Leases") constitute all leases, subleases, licenses

and other agreements under which the Company or any of its subsidiaries uses or

occupies or has any right to use or occupy, now or in the future, any real

property (the "Leased Real Property"). The Shareholders have heretofore

delivered to FDI true, correct and complete copies of all Real Property Leases

(including all modifications thereof and all amendments and supplements

thereto). Each of the Real Property Leases is valid, binding (assuming its

binding effect on the landlord thereunder) and in full force and effect, all

rent and other sums and charges payable by the Company or any of its

subsidiaries as a tenant thereunder is current, no notice of default or

termination under any Real Property

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Leases is outstanding, no termination event or condition or uncured default on

the part of the Company or any of its subsidiaries or, to the knowledge of the

Shareholders, the landlord, exists under any Real Property Lease, and no event

has occurred and no condition exists which, with the giving of notice or the

lapse of time or otherwise, would constitute such a default or termination event

or condition. The Company or one of its subsidiaries holds the Leased Real

Property free and clear of all liens, security interests or other encumbrances

except Permitted Encumbrances (as defined below). None of the Shareholders has

any ownership, financial or other interest in the landlord under any Real

Property Lease. The occupancy, operation or use of the Leased Real Property

(including the buildings, improvements, fixtures and equipment located thereon)

complies in all material respects with all applicable laws, statutes,

ordinances, rules, regulations, orders, decrees and determinations of any

governmental authority (whether or not permitted because of prior nonconforming

use), or any covenant in the associated Real Property Lease. The Leased Real

Property is adequate and suitable for the purposes for which it is currently

being used.

3.11 Title to Properties. The Company or one of its subsidiaries is the

lawful owner of, and has good and valid record and marketable title to, all of

the assets which it purports to own (including, without limitation, all real and

personal property reflected on the Balance Sheet), without any restrictions of

any kind whatsoever, and entirely free and clear of any liens, security

interests or other encumbrances, except as described in Section 3.11 of the

Disclosure Schedule ("Permitted Encumbrances").

3.12 List of Properties, etc. Section 3.12 of the Disclosure Schedule

lists or adequately describes the following:

(a) the Company's and each of its subsidiaries' fixed asset

depreciation schedule, which schedule accurately represents the fixed assets

owned by Company and each of its subsidiaries.

(b) a list of all assets leased by Company and each of its

subsidiaries that accurately represents the assets leased by Company and each of

its subsidiaries.

(c) the name and address of each bank in which the Company or

any of its subsidiaries has an account or safe deposit box, the number of any

such account or any such box and the names of all persons authorized to draw

thereon or to have access thereto.

3.13 Material Contracts. Except as set forth in Section 3.13 of the

Disclosure Schedule, neither the Company nor any of its subsidiaries has nor is

bound by, whether in writing or otherwise:

(a) any agreement, contract or commitment relating to the

employment of any person (including any contract or commitment to any labor

union), or any bonus, deferred compensation, pension, severance, profit sharing,

stock option, stock warrant, employee stock purchase, retirement or other

employee benefit plan,

(b) any agreement, indenture or other instrument under or

pursuant to which the Company or any of its subsidiaries has borrowed money or

guaranteed indebtedness for borrowed money,

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(c) any agreement, contract or commitment relating to present

or future capital expenditures (including equipment),

(d) any loan or advance to, or investment in, any other person

or entity or any

agreement, contract or commitment relating to the making of any such loan,

advance or investment (excluding advances to employees for ordinary and

necessary business expenses made in the ordinary course of business),

(e) any guarantee or other contingent liability or

subordination in respect of any indebtedness or obligation of any other person

or entity (other than the endorsement of negotiable instruments for collection

in the ordinary course of business),

(f) any management service, consulting or any other similar

type contract,

(g) any supply, manufacturing or similar type contract,

(h) any license agreement or power of attorney,

(i) any agreement, contract or commitment limiting the freedom

of the Company, or any of its subsidiaries to engage in any line of business or

to compete with any other person or entity or to use any particular information,

(j) any agreement, contract or commitment relating to the

lease of real or personal property (including capitalized leases),

(k) any service or maintenance agreements or any similar type

contract,

(l) any sales representative, manufacturer's representative or

distribution agreements or any similar type contract,

(m) any partnership agreement, joint venture agreement, or

other agreement involving the sharing of revenues or profits;

(n) any agreement, contract or commitment not entered into in

the ordinary course of business which involves amounts of $10,000 or more and is

not unilaterally cancelable by the Company or any of its subsidiaries without

penalty upon notice of not longer than 30 days; or

(o) outstanding offer or bid from the Company or any of its

subsidiaries that, if accepted by a third party, would result in (i) a contract

required to be disclosed pursuant to this Section 3.13, or (ii) any other

material contract or commitment.

Section 3.13 of the Disclosure Schedule describes the material terms of all oral

contracts required to be disclosed in Section 3.13 of the Disclosure Schedule.

Each contract or agreement described in Section 3.13 of the Disclosure Schedule

(or required to be set forth in Section 3.13 of the Disclosure Schedule) is in

full force and effect, and there exists no default or event of default or event,

occurrence, condition or act which, with the giving of notice or the lapse of

time, or otherwise, would become a default or event of default thereunder. The

Company has

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not violated any of the terms or conditions of any contract or agreement set

forth in Section 3.13 of the Disclosure Schedule (or required to be set forth in

Section 3.13 of the Disclosure Schedule) in any material respect, and all of the

covenants to be performed by any other party thereto have been fully performed

in all material respects. The Company is not bound by any agreements, contracts

or commitments (excluding those agreements, contracts or commitments set forth

in Section 3.13 of the Disclosure Schedule) which, in the aggregate, call for

payments in excess of $25,000.

3.14 Intellectual Property. Company does not currently utilize and has

never utilized any fictitious or assumed business name other than "Century II".

Company has no registered trademarks, copyrights or other intellectual property

rights. Company utilizes no proprietary or licensed software other than

commercially available word processing, accounting, database and similar

software programs, and Company has the right to use all such software programs

in the manner used on the date of this Agreement. To each of Shareholders'

knowledge, Company is the sole owner of all Company Intellectual Property (as

hereinafter defined), free and clear of any lien, security interest,

restriction, encumbrance or other adverse claim other than Permitted

Encumbrances. The Company has not granted or licensed to any person any right

with respect to any Company Intellectual Property. The rights of Company in and

to any of the Company Intellectual Property will not be limited or otherwise

affected by reason of any of the transactions contemplated hereby. As used in

this Agreement, "Company Intellectual Property" means all unregistered

trademarks and service marks, unregistered copyrights, trade names, customer

lists, trade secrets and proprietary trade practices owned by Company as of the

date of this Agreement.

3.15 Taxes.

(a) All federal, state, and local returns and reports relating

to Taxes (as defined herein), or extensions relating thereto, required to be

filed by or with respect to Company or any of its subsidiaries on or before

Closing have been timely and properly filed, and all such returns and reports

are materially correct and complete as to the period then ending.

(b) All federal, state, local and foreign income, profits,

franchise, sales, use, payroll, premium, occupancy, property, severance, excise,

withholding, customs, unemployment, transfer and other taxes, including

interest, additions to tax and penalties (collectively "Taxes") due or properly

shown to be due on any return referred to in Section 3.15(a) by Company or any

of its subsidiaries with respect to taxable periods ending on or prior to, and

the portion of any interim period up to, the date hereof have been fully and

timely paid or, in the case of Taxes not yet due, provided for on the Company

Interim Balance Sheet, or in the case of Taxes accruing after the date of the

Company Interim Balance Sheet date as reflected in Section 3.15(b) of the

Disclosure Schedule; and there are no levies, liens, or other encumbrances

relating to Taxes existing, threatened or pending with respect to any asset of

Company or a