exv10w1



 






Exhibit 10.1




STOCK PURCHASE AGREEMENT




between




COLLEGIATE PACIFIC INC.,




and




ALBERT A. MESSIER




and




DANIEL F. SALKELD




May 11, 2005




 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	Article 1. Definitions
	 	 	1	 
	 
	 	 	 	 
	1.1. Definitions
	 	 	1	 
	 
	 	 	 	 
	Article 2. Purchase and Sale of Shares
	 	 	1	 
	 
	 	 	 	 
	2.1. Purchase and Sale
	 	 	1	 
	2.2. Purchase Price
	 	 	1	 
	2.3. Payment of Purchase Price
	 	 	2	 
	 
	 	 	 	 
	Article 3. Closing
	 	 	2	 
	 
	 	 	 	 
	3.1. Closing
	 	 	2	 
	3.2. Closing Deliveries of Buyer
	 	 	2	 
	3.3. Closing Deliveries of the Selling Stockholders
	 	 	3	 
	 
	 	 	 	 
	Article 4. Representations and Warranties of the Selling Stockholders
	 	 	4	 
	 
	 	 	 	 
	4.1. Organization and Authority
	 	 	4	 
	4.2. Subsidiaries
	 	 	4	 
	4.3. Capital Structure
	 	 	4	 
	4.4. No Conflict or Violations
	 	 	4	 
	4.5. Consents
	 	 	4	 
	4.6. Title to Shares
	 	 	5	 
	4.7. Financial Statements
	 	 	5	 
	4.8. Absence of Undisclosed Liabilities
	 	 	5	 
	4.9. Absence of Changes
	 	 	5	 
	4.10.
Accounts Receivable; Inventories
	 	 	5	 
	4.11. Litigation
	 	 	6	 
	4.12. Compliance
	 	 	6	 
	4.13. Taxes
	 	 	6	 
	4.14. Environmental Matters
	 	 	7	 
	4.15. Contracts
	 	 	7	 
	4.16. Insurance
	 	 	8	 
	4.17. Assets
	 	 	8	 
	4.18. Intellectual Property
	 	 	8	 
	4.19. Employment Arrangements
	 	 	8	 
	4.20. Employee Benefit Plans
	 	 	8	 
	4.21. Customers and Suppliers
	 	 	9	 
	4.22. Brokers
	 	 	9	 
	4.2.3. Dealings with Affiliates
	 	 	9	 
	4.24. Projections
	 	 	10	 
	4.25. Systems Performance
	 	 	10	 
	4.26. Securities Laws Matters
	 	 	10	 
	4.27. Disclosure
	 	 	10	 






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	 	 	Page
	Article 5. Representations and Warranties of the Buyer
	 	 	11	 
	 
	 	 	 	 
	5.1.
Organization, Standing and Power
	 	 	11	 
	5.2. Capitalization
	 	 	11	 
	5.3. Authority
	 	 	11	 
	5.4. No Conflicts or Violations
	 	 	11	 
	5.5. Consents
	 	 	12	 
	5.6. Litigation
	 	 	12	 
	5.7. SEC Filings
	 	 	12	 
	5.8. Brokers
	 	 	12	 
	 
	 	 	 	 
	Article 6. Covenants and Agreements
	 	 	12	 
	 
	 	 	 	 
	6.1. Public Information
	 	 	12	 
	6.2. Notification of Certain Matters
	 	 	12	 
	6.3. Tax Matters
	 	 	13	 
	6.4.
Noncompetition; Nonsolicitation
	 	 	14	 
	6.5. Team Print
	 	 	15	 
	 
	 	 	 	 
	Article 7. Indemnification
	 	 	15	 
	 
	 	 	 	 
	7.1. Indemnification of Buyer
	 	 	15	 
	7.2. Indemnification of Selling Stockholders
	 	 	15	 
	7.3. Defense of Third-Party Claims
	 	 	15	 
	7.4. Direct Claims
	 	 	17	 
	7.5. Limitations
	 	 	17	 
	7.6. Tax Treatment
	 	 	18	 
	 
	 	 	 	 
	Article 8. General Provisions
	 	 	18	 
	 
	 	 	 	 
	8.1. Survival of Representations, Warranties, and Covenants
	 	 	18	 
	8.2. No Waiver Relating to Claims for Fraud
	 	 	18	 
	8.3. Amendment and Modification
	 	 	18	 
	8.4. Waiver of Compliance
	 	 	18	 
	8.5. Specific Performance
	 	 	19	 
	8.6. Severability
	 	 	19	 
	8.7. Expenses and Obligations
	 	 	19	 
	8.8. Notices
	 	 	19	 
	8.9. Assignment
	 	 	20	 
	8.10. Counterparts
	 	 	21	 
	8.11. Entire Agreement
	 	 	21	 
	8.12. Governing Law; Choice of Forum
	 	 	21	 
	8.13. Headings.
	 	 	21	 






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	APPENDIX
A-Certain Defined Terms
	 	 	 	 
	 
	 	 	 	 
	SCHEDULES
	 	 	 	 
	 
	 	 	 	 
	I Allocation of Closing Payment
	 	 	 	 
	II Allocation of Earnout Payment
	 	 	 	 
	3.3(b)   Consent
	 	 	 	 
	3.3(c)   Certification
	 	 	 	 
	4          Confirmation of Representations and Warranties
	 	 	 	 
	 
	 	 	 	 
	EXHIBITS
	 	 	 	 
	 
	 	 	 	 
	Exhibit A – Form of Promissory Note
	 	 	 	 
	Exhibit B - Form of Legal Opinion (counsel to the Buyer)

	 	 	 	 
	Exhibit C - Form of Legal Opinion (counsel to the Company and the Selling Stockholders)
	 	 	 	 






iii









 






STOCK PURCHASE AGREEMENT




     THIS
STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into this 11th day of May,
2005, between COLLEGIATE PACIFIC INC., a Delaware corporation
(“Buyer”), and ALBERT A. MESSIER and
DANIEL F. SALKELD (the “Selling
Stockholders”).



R E C I T A L S:




     WHEREAS, Buyer desires to purchase from the Selling Stockholders, and the Selling
Stockholders desire to sell to Buyer, all of the outstanding shares of Common Stock, no par value
per share (collectively, the “Company Common Stock”), of Salkeld and Sons Inc. a Delaware
corporation (the “Company”) (such common shares being referred to herein as the “Shares”);



     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:



Article 1. Definitions




     1.1. Definitions. The capitalized terms used in this Agreement will have the
meanings set forth in Appendix A hereto.



Article 2. Purchase and Sale of Shares




     2.1.
Purchase and Sale. Upon the terms and subject to the conditions of this
Agreement, at the Closing (as defined in Section 3.1), each Selling Stockholder shall sell to
Buyer, and Buyer shall purchase from each Selling Stockholder, all of the Shares on the Closing
Date, free and clear of all Liens.



     2.2.
Purchase Price. The aggregate purchase price payable to the Selling Stockholders
in consideration for the sale of the Shares (the “Purchase
Price”) shall be an amount equal to the
Closing Payment and the Earnout Payment.




     (a) The “Closing Payment shall be equal to (i) cash in the amount of $2,140,000 (the
“Cash Consideration”), (ii) a number of
shares of fully paid and non-assessable shares of
common stock, $0.01 par value per share, of Buyer (“Buyer
Common Stock”) equal to $360,000
divided by the average closing price of Buyer Common Stock on AMEX for the five trading days
immediately prior to May 10, 2005 (the “Stock
Consideration”), and (iii) promissory notes in
the form attached as Exhibit A in the aggregate principal amount of $230,000 (the
“Notes”).




     (b)
The “Earnout Payment” shall be an amount equal to $1,100,000 in the event Total
Sales for the Earnout Period less Total Cost of Sales for the Earnout
Period (“Gross Margin”) is at least
$2,409,000 (the “Earnout Target”). In the event Gross Margin for the
Earnout Period is not at least equal to the Earnout Target, the Earnout Payment of
$1,100,000 shall be reduced by an amount equal to (a) the amount by which the Earnout Target
exceeds Gross Margin, multiplied by (b) five. The “Earnout Period” shall be the twelve-month
period from May 1, 2005 through April 31, 2006. Two-thirds



 









 







of the Earnout Payment shall be payable in cash and one-third of the Earnout Payment shall
be payable in fully paid and non-assessable shares of Buyer Common Stock valued at the
average closing price of the Buyer Common Stock on AMEX for the five trading days
immediately prior to May 11,2006.



     The Purchase Price shall be allocated between the Selling Stockholders as set forth on
Schedule I and Schedule II.



     2.3. Payment of Purchase Price.




     (a) At the Closing, Buyer shall (i) pay the Cash Consideration to the Selling
Stockholders by wire transfer of immediately available funds to accounts designated by the
Selling Stockholders, (ii) deliver the Notes to the Selling Stockholders, and (iii) cause
its transfer agent to issue in the name of the Selling Stockholders and shall deliver to the
Selling Stockholders that number of fully paid and non-assessable shares of Buyer Common
Stock equal to the Stock Consideration; and




     (b) In the event the Earnout Payment is earned, as soon as practical after (but in no
event later than 60 days after) May 11, 2006 Buyer shall cause its transfer agent to issue
in the name of the Selling Stockholders and shall deliver to the Selling Stockholders that
number of fully paid and non-assessable shares of Buyer Common Stock equal to the Earnout
Payment. Notwithstanding the preceding, Buyer may elect to pay the Earnout Payment in cash
instead of in Buyer Common Stock in which case Buyer shall pay the Earnout Payment by wire
transfer of immediately available funds to accounts designated by the Selling Stockholders.



Article 3. Closing




     3.1.
Closing. The sale and delivery of the Shares to Buyer, the payment of the
Closing Payment to the Selling Stockholders, and the consummation of the other respective
obligations of the parties contemplated by this Agreement (the
“Closing”) shall take place at the
offices of Vinson & Elkins LLP, in Dallas, Texas, at 1:00 p.m. on May 11, 2005, or at such other
earlier time and place as may be mutually agreed upon (the
“Closing Date”).



     3.2.
Closing Deliveries of Buyer. At the Closing:




     (a) Buyer will make the Closing Payment in accordance with Section 2.3.




     (b) The Buyer shall deliver to the Selling Stockholders a certificate by the secretary
of Buyer certifying the Certificate of Incorporation and Bylaws of Buyer, the resolutions
adopted by the directors of Buyer in connection with this Agreement, and the incumbency of
certain officers of Buyer.




     (c) The Selling Stockholders shall receive from Vinson & Elkins L.L.P., special counsel
to Buyer, an opinion dated the Closing Date, in substantially the form attached as
Exhibit B.



2









 





     3.3.
Closing Deliveries of the Selling Stockholders. At the Closing:




     (a) The Selling Stockholders will deliver or cause to be delivered to Buyer the certificates
representing the Shares duly endorsed in blank or together with duly executed stock powers in favor
of Buyer.




     (b) The Selling Stockholders shall furnish Buyer with evidence satisfactory to Buyer of the
consent or approval of each person that is a party to a Material Contract (including evidence of
the payment or any required payment) and whose consent or approval shall be required to permit the
consummation of the transactions contemplated hereby or to prevent a breach of such Contract or the
creation of a right to terminate such Contract, and such consent or approval shall be in form and
substance reasonably satisfactory to Buyer.




     (c) The Selling Stockholders shall deliver to Buyer a certificate of the secretary of the
Company certifying the Certificate of Incorporation and Bylaws of the Company, any resolutions
adopted by the directors or stockholders of the Company in connection with this Agreement, the
incumbency of certain officers of the Company and the jurisdictions in which the Company is
qualified to conduct business.




     (d) The Selling Stockholders shall deliver to Buyer certificates issued by the appropriate
Governmental Entities evidencing the good standing of the Company as a corporation organized under
the laws of the state or as a foreign corporation authorized to do business under the laws of the
jurisdictions listed in the schedules hereto, including with respect to the payment of all Taxes,
in each case as of a date not more than 15 days prior to the Closing Date.




     (e) The Selling Stockholders shall deliver to Buyer evidence, in a form reasonably
satisfactory to Buyer, that all amounts owing to First Trust Bank of Illinois under the SBA Note
have been paid in full or otherwise assumed by the Selling Stockholders with no further liability
to the Company.




     (f) The Selling Stockholders shall deliver noncompetition and nonsolicitation agreements, on
Buyer’s standard form of agreement, executed by each employee of the Company.




     (g) The Selling Stockholders shall deliver a noncompetition and nonsoliciation
agreement executed by and among Buyer, Team Print, a sole proprietorship, and Albert A.
Messier and in a form acceptable to Buyer.




     (h) Buyer shall receive from Ackman, Marek, Meyer & Boyd, Ltd., counsel to the Selling
Stockholders, an opinion dated the Closing Date, in substantially the form attached as Exhibit
C.




     (i) Each Selling Stockholder shall deliver a certificate of non-foreign status which meets
the requirements of Treasury Regulation Section 1.14452(b)(2).



3









 






     (j) The Selling Stockholders shall furnish Buyer with such other and further
documents and certificates, including certificates of the Company’s officers and others,
as Buyer shall reasonably request to consummate the transactions contemplated by this
Agreement.



Article 4. Representations and Warranties of the Selling Stockholders




     Each Selling Stockholder, jointly and severally, represents and warrants to Buyer as of
the date hereof as follows:



     4.1. Organization and Authority. The Company is validly existing as a corporation in
good standing under the laws of the State of Delaware and has all power and authority to own and
operate its properties and to carry on its business as currently conducted, and is duly qualified
and in good standing in Delaware and Illinois, which states represent every jurisdiction where the
failure to be so qualified would have a Material Adverse Effect on the Company. The Selling
Stockholders have delivered to Buyer true and complete copies of the Certificate of Incorporation,
Bylaws, minute books and stock issuance and transfer records of the Company. The Company is not in
violation of any provisions of its Certificate of Incorporation or Bylaws.



     4.2. Subsidiaries. The Company does not own, directly or indirectly, any subsidiaries
or own or have the right, or obligation, pursuant to a contract or otherwise, to acquire any
capital stock, equity interest or other similar investment in any corporation, partnership, joint
venture, association, limited liability company, trust or other entity.



     4.3. Capital Structure. The authorized capital stock of the Company consists solely of
5,000 shares of Common Stock of the Company, 200 of which are issued and outstanding. All of the
outstanding shares of Company Common Stock are owned by the Selling Stockholders and are validly
issued, fully paid and non-assessable. There is no authorized or outstanding option, subscription,
warrant, right (preemptive or other), commitment or other agreement obligating the Company to
repurchase, issue or transfer any shares of Company Common Stock or any securities convertible into
or exchangeable for any shares of Company Common Stock.



     4.4. No Conflict or Violations. The execution and delivery of this Agreement by the
Selling Stockholders does not, and the performance by the Selling
Stockholders of their obligations
hereunder will not (a) conflict with or violate in any material respect any term or provision of
any Applicable Law or any writ, judgment, decree or injunction applicable to the Company or to the
Selling Stockholders or by which any of their properties is bound or subject, (b) conflict with or
result in a violation or breach of any of the provisions of the Certificate of Incorporation or the
Bylaws of the Company, or (c) conflict with or result in a material breach of, or constitute a
material default under, any Material Contract to which the Company is a party or by which any of
its properties is bound or subject.



     4.5. Consents. The execution and delivery by the Selling Stockholders of this
Agreement do not, and the consummation of the transactions contemplated hereby will not, require
the Consent of any person.



4









 





     4.6. Title to Shares. The Selling Stockholders own, beneficially and of record
and free and clear of any Lien, all of the Shares. Upon the sale of the Shares to Buyer at the
Closing, Buyer will acquire the good and marketable title to all of the Shares free and clear of
any Lien.



     4.7. Financial Statements. The Selling Stockholders have delivered to Buyer the
unaudited balance sheet and statements of operation and cash flows of the Company as of December
31, 2003 and 2004 and for the 12-month periods then ended, and the Company’s unaudited balance
sheet as of March 31, 2005 (the “Most Recent Balance Sheet”) and the Company’s unaudited statements
of operations and cash flow for the three-month period then ended (collectively, the “Financial
Statements”). The Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the period involved (except to the extent required by changes in GAAP)
and the Financial Statements present fairly in all material respects the financial condition and
operating results and cash flows of the Company in accordance with GAAP as of the dates, and for
the periods, indicated in the Agreement, subject in the case of the March 31,2005 statements to
normal year-end audit adjustments.



     4.8. Absence of Undisclosed Liabilities. There are no liabilities or obligations of
any nature (known or unknown, fixed, absolute, accrued, contingent or otherwise) of the Company
except (a) those reflected in the Most Recent Balance Sheet, and (b) those incurred in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet, which individually or in the
aggregate have not resulted in or could not reasonably be expected to result in a Material Adverse
Effect.



     4.9. Absence of Changes. Since the date of the Most Recent Balance Sheet, the
Company has conducted its business only in the Ordinary Course of Business and there has not been
(a) any event or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect on the Company, (b) any material change by the Company in its accounting methods,
principles or practices, (c) any entry by the Company or the Selling Stockholders into any
commitment or transaction material to the Company, except in the Ordinary Course of Business or
except in connection with the negotiation and execution and delivery of this Agreement and the
other Transaction Documents, (d) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any redemption, purchase or other
acquisition of any of the Company’s securities, (e) any material increase in, amendment to, or
establishment of any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option, stock purchase or other employee benefit plan, (f) granted any
increase in compensation, bonus or other benefits payable to the employees of the Company, except
for increases occurring in the Ordinary Course of Business, (g) paid any bonus to the directors,
officers or employees of the Company except for bonuses accrued on the Most Recent Balance Sheet,
(h) any incurrence, assumption or guaranty of any indebtedness by the Company, or the grant of any
Lien on the material Assets of the Company to secure any indebtedness, (i) any sale or transfer of
any material Assets of the Company other than in the Ordinary Course of Business, or (j) any loan,
advance or Investment in any person by the Company (excluding any loan, advance or capital
contribution to, or investment in, the Company).



     4.10.
Accounts Receivable; Inventories. The accounts receivable of the Company are
valid and genuine, have arisen solely out of bona fide sales and deliveries of goods, performance



5









 





of services or other business transactions in the Ordinary Course of Business, and are not
subject to valid defenses, set-offs or counterclaims. The allowances for collection losses
associated with such accounts receivable reflected on the Company’s books have been determined in
accordance with GAAP and are consistent with past practice. The inventories reflected on the Most
Recent Balance Sheet and held by the Company on the date hereof do not include any items that are
not usable or saleable in the Ordinary Course of Business of the Company or are obsolete or
discontinued items. Such inventories have been reflected on the Most Recent Balance Sheet at the
lower of cost or market value (taking into account the usability or salability thereof) in
accordance with GAAP. Since the date of the Most Recent Balance Sheet, inventories of raw
materials, supplies and products have been purchased by the Company in the Ordinary Course of
Business, and the volumes of purchases thereof and orders therefor have not been materially changed
in anticipation of the transactions contemplated by this Agreement. The Selling Stockholders do not
have any Knowledge of any conditions materially affecting the supply of materials or products
available to the Company, and, to the Knowledge of the Selling Stockholders, the consummation of
the transactions contemplated hereby will not adversely affect any such supply.



     4.11.
Litigation. Since January 1, 2000, no Orders involving the Company have been issued.
There is no Claim pending, or to the Knowledge of the Selling Stockholders, threatened against the
Company nor is there any reasonable basis therefor.



     4.12.
Compliance. The Company has complied in all material respects with all
Applicable Laws and no Claim has been made or, to the Knowledge of the Selling Stockholders,
threatened against the Company alleging any material failure so to comply.



     4.13.
Taxes.




     (a) (i) All material Tax Returns required to be filed by the Company have been duly and
timely filed and all such Tax Returns are true, correct and complete in all material
respects, (ii) none of such Tax Returns are now under audit or examination by any
Governmental Entity, (iii) all Taxes owed by the Company that are or have become due have
been timely paid in full, (iv) there are no agreements, waivers or other arrangements
providing for an extension of time with respect to the filing of any such Tax Return or the
assessment or collection of any such Tax, (v) no penalty, interest or other charge is or
will become due with respect to the late filing of any such Tax Return or late payment of
any such Tax, (vi) there is no material Claim pending or, to the Knowledge of the Selling
Stockholders, threatened by any Governmental Entity in connection with any such Tax, (vii)
all Tax withholding and deposit requirements imposed on the Company have been satisfied in
full in all respects, and (viii) there are no Tax allocation, indemnity or sharing
agreements or arrangements affecting the Company.




     (b) The Company will not be required to include any amount in income for any taxable
period (or portion thereof) beginning after the Closing Date as a result of a change in
accounting method for any taxable period beginning on or before the Closing Date. The
Company will not be required to include in any taxable period (or portion thereof) beginning
after the Closing Date any income that accrued on or prior to the Closing Date but was not
recognized prior to the Closing Date as a result of the




6










 






installment method of accounting, the completed contract method of accounting, the
long-term contract method of accounting or the cash method of accounting,




     (c) The Company (and any predecessor of the Company) has been a validly electing S
corporation within the meaning of Sections 1361 and 1362 of the Code since February 1,
2001. The Company (and any predecessor of the Company) does not own and has never owned a
“qualified Subchapter S subsidiary” within the meaning of Section 1361(b)(3)(B) of the
Code. The Company will not be liable for any Tax under Section 1374 of the Code or any
other applicable state or local law in connection with the transactions contemplated by the
Transaction Documents. The Company has not, since its inception, (i) acquired assets from
another corporation in a transaction in which the Company’s Tax basis for the acquired
assets was determined, in whole or in part, by reference to the Tax basis of the acquired
assets (or any other property) in the hands of the transferor or (ii) acquired the stock of
any corporation which became a “qualified subchapter S subsidiary” within the meaning of
Section 1361(b)(3)(B) of the Code.



     4.14.
Environmental Matters. To the Knowledge of the Selling Stockholders, (a) the
Company is in compliance in all material respects with all applicable Environmental Laws; (b) the
Company has not received any written notices, demand letters or requests for information from any
Governmental Entity or other person indicating that it may be in violation of, or liable under, any
Environmental Law in any material respect; (c) no reports have been filed by the Company concerning
the release of any Hazardous Substance or the threatened or actual violation of any Environmental
Law; (d) no Hazardous Substance has been disposed of, released or transported by the Company in
violation of any applicable Environmental Law; (e) there have been no environmental studies or
audits regarding compliance or noncompliance with any Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company or any of the real
property used by the Company that have not been delivered to Buyer; and (f) the Company is not
subject to any material liabilities or expenditures relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or claim asserted or arising under any
Environmental Law.



     4.15.
Contracts. Except for Contracts terminable upon 90 days or less notice without
penalty, Schedule 4 sets forth all of the following Contracts to which the Company is a
party or by which any of its Assets are bound (collectively, the
“Material Contracts”): (a)
Contracts pertaining to the borrowing of money or indebtedness; (b) Contracts creating guaranties;
(c) Contracts relating to any single capital expenditure in excess of $25,000; (d) Contracts for
the purchase or sale of real property, any business or line of business or for any merger or
consolidation; (e) joint venture, limited liability company or partnership agreements; (f) Material
Leases; (g) employment agreements not terminable upon one month’s notice without further severance
and involving annual compensation in excess of $50,000; and (h) other Contracts that individually
require by their respective terms after the date hereof the payment or receipt of more than $50,000
during any 12-month period or $100,000 in the aggregate. The Company has complied in all material
respects with all of the terms and conditions of the Material Contracts to which it is a party and
has not done or performed any act which would invalidate or impair in any material respect its
rights under any Material Contract. There are no pending written assertions or claims that the
Company has breached, violated or defaulted under any Material



7









 





Contract in any material respect. True, correct and complete copies of all Material
Contracts have been delivered to Buyer.



     4.16.
Insurance. The Company has Policies in full force and effect that insure the
Company against such risks as companies engaged in a similar business would, in accordance with
good business practice, customarily be insured against. With respect to each Policy: (a) the Policy
is in full force and effect; (b) neither the Company nor, to the Knowledge of the Selling
Stockholders, any party to the Policy is in material breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has occurred that, with notice or
the lapse of time, would constitute such a material breach or default, or permit termination,
modification, or acceleration under the Policy, and (c) no party to the Policy has repudiated any
material provisions thereof nor has the Company, during the last five years been refused any
insurance with respect to its Assets or operations, nor has coverage ever been limited by any
insurance carrier to which the Company has applied for any Policy or with which it has carried a
Policy.



     4.17.
Assets. The Company owns or leases all material Assets necessary for the
conduct of the business of the Company as presently conducted. The Company has good and marketable
title to, or an adequate leasehold interest in, all of its material Assets, free and clear of all
Liens.



     4.18. Intellectual Property. To the Knowledge of the Selling Stockholders, the
Company is not infringing upon or violating in any material respect any intellectual property
right, including without limitation any trademark, trade name, domain name, patent, industrial
design, trade secret, or copyright or any registration or pending application therefor of any other
person (collectively, “Intangible Rights”), and the Selling Stockholders do not have Knowledge of
any pending or threatened claims thereof. To the Knowledge of the Selling Stockholders, no person
is infringing any Intangible Rights of the Company in any material respect.



     4.19. Employment Arrangements. The Company has no obligation, contingent or
otherwise, under any employment agreement, collective bargaining or other labor agreement, any
agreement containing severance or termination pay arrangements, deferred compensation agreement,
retainer or consulting arrangements, pension or retirement plan, bonus or profit sharing plan,
stock option or purchase plan, or other employee contract or non terminable arrangement (whether or
not that arrangement imposes a penalty for termination), group life, health, medical or
hospitalization insurance plan or program, or other employee or fringe benefit plan, including
vacation plans or programs and sick leave plans or programs. The Company is not now and for the
past five years has not been subject to or involved in or, to the Knowledge of the Selling
Stockholders, threatened with any union elections, petitions therefor or other organizing
activities.



     4.20. Employee Benefit Plans.




     (a) List of Plans. The Selling Stockholders have delivered to Buyer correct
and complete copies of (i) the plan documents and summary plan descriptions for each
Employee Benefit Plan, (ii) the most recent determination letter received from the IRS for
each Employee Benefit Plan intended to qualify under Section 401 (a) of the Code, (iii)



8









 





the most recent Form 5500 Annual Report, and (iv) all related trust agreements,
insurance contracts, and other funding agreements which implement each Employee Benefit
Plan of the Company that have been established, maintained or contributed to by the Company
within the past five years.




     (b)
Status of Plans. The Company has not and does not maintain or contribute to any
Employee Benefit Plan that is not in substantial compliance with all Applicable Law,
including ERISA and the Code, nor has the Company or any Commonly Controlled Entity (as
defined below) maintained or contributed to (i) any defined benefit plan, as defined in
Section 3(35) of ERISA, (ii) any multiemployer plan, as defined in Section 3(37) of ERISA,
or (iii) any other Employee Benefit Plan subject to the minimum funding requirement of
Section 412 of the Code, in each case within the past five years. All obligations of the
Company and each Commonly Controlled Entity, whether arising by operation of law or by
contract, required to be performed under Section 4980B of the Code (or similar state law),
including, but not limited to, such obligations that may arise by virtue of the transaction
contemplated by this Agreement, have been or will be timely performed. The term “Commonly
Controlled Entity” shall mean any corporation, trade, business, or entity under common
control with the Company within the meaning of Section 414(b), (c), (m), or (o) of the Code
or Section 4001 of ERISA.




     (c) Contributions. Full payment has been made of all amounts, which the
Company is required, under applicable law or under any Employee Benefit Plan or any
agreement relating to any Employee Benefit Plan to which the Company is a party, to have
paid as contributions thereto as of the date hereof. The Company has made adequate
provision for reserves in the Financial Statements to meet any contributions that have not
been made because they are not yet due under the terms of any Employee Benefit Plan or
related agreements.



     4.21. Customers and Suppliers. No customer of the Company has advised the Company
that it will stop, or materially decrease the rate of, buying materials, products or services from
the Company. No supplier of the Company has advised the Company that it will stop, or materially
decrease the rate of, supplying materials, products, or services to the Company. To the Knowledge
of the Selling Stockholders, the consummation of the transactions contemplated hereby will not have
a Material Adverse Effect on the Company’s relationship with any customer or supplier.



     4.22.
Brokers. No person is entitled to receive any brokerage, finder’s or financial
advisory fee or commission in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Selling Stockholders or the Company.



     4.23. Dealings with Affiliates. The Company is not a party to any Contract with any
one or more of (a) the Selling Stockholders, (b) the Company’s Affiliates, (c) an Affiliate of a
Selling Stockholder, or (d) any person in which a Selling Stockholder or an Affiliate of the
Company or a Selling Stockholder has, directly or indirectly, made an Investment, is also a party.
The Company has no ongoing obligations to make any payments, loaned or borrowed any funds or
property or made any credit arrangement or accommodation with any Selling Stockholder,



9









 





Affiliate or employee of the Company, except for the payment of employee salaries and
director compensation in the Ordinary Course of Business.



     4.24. Projections. The projections relating to the operations of the Company for the
fiscal years ending December 31, 2005 and December 31, 2006
(the “Projections”), previously
delivered to Buyer, have been prepared in good faith and using reasonable assumptions. Nothing has
come to the attention of the Selling Stockholders to indicate that the Projections or the
assumptions upon which they are based are not reasonable.



     4.25. Systems Performance. None of the computer software, computer hardware
(whether general or special purpose), telecommunications capabilities (including all voice, data
and video networks) and other similar or related items of automated, computerized, and/or software
systems and any other networks or systems and related services that are used or relied on by the
Company (collectively, the “Systems”) have experienced bugs, failures, breakdowns or continued
substandard performance in the past 12 months that has caused any substantial disruption or
interruption in or to the use of any such Systems by the Company.



     4.26. Securities Laws Matters. Each Selling Stockholder is acquiring the Earnout
Payment and the shares of Buyer Common Stock issuable upon delivery of the Earnout Payment (the
“Earnout Securities”) for his own account for investment and not with a view to, or for sale in
connection with, any “distribution” of the Earnout Securities, as such term is used in Section
2(11) of the Securities Act, Each Selling Stockholder has had the opportunity to discuss the
transactions contemplated by this Agreement with Buyer and has been afforded, prior to the
execution of this Agreement, the opportunity to ask questions of, and receive answers from Buyer
and to obtain any additional information relating to the transactions contemplated hereby as such
Selling Stockholder has requested. Each Selling Stockholder has received copies of an reviewed
Buyer’s Annual Report on Form 10-K for the year ended June 30, 2004 and Buyer’s SEC Filings made
since the filing of such Annual Report. Each Selling Stockholder is an “accredited investor”
within the meaning of Regulation D promulgated under the Securities Act and has such knowledge and
experience in business or financial matters that he is capable of evaluating the merits and risks
of an investment in the Buyer Common Stock. Each Selling Stockholder acknowledges and agrees that
the Earnout Securities are “restricted securities” within the meaning of Rule 144 under the
Securities Act and cannot be sold or otherwise disposed of, except (a) pursuant to an exemption
from the registration requirements under applicable state securities laws and the Securities Act,
(b) in accordance with Rule 144, or (c) pursuant to an effective registration statement filed by
Buyer with the SEC under applicable state securities laws and the Securities Act. Each Selling
Stockholder acknowledges and agrees that Buyer may place stop transfer orders with its transfer
agent with respect to such certificates in accordance with federal
securities laws.


     4.27. Disclosure. Neither this Agreement nor any of the schedules, exhibits,
attachments or certificates prepared for or supplied to Buyer by or on behalf of the Selling
Stockholders with respect to the transactions contemplated hereby contains any untrue statement of
a material fact or omits a material fact necessary to make each statement contained herein or
therein not misleading. The Selling Stockholders are not aware of any fact or condition which could
reasonably be anticipated to have a Material Adverse Effect on the
Company.



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Article 5. Representations and Warranties of the Buyer




     Buyer represents and warrants to each Selling Stockholder as follows:



     5.1. Organization, Standing and Power. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to execute, deliver and perform its obligations under this Agreement
and the other Transaction Documents, and to own, lease, and operate its properties and to carry on
its business as now being conducted.



     5.2. Capitalization. As of the date hereof, the authorized capital stock of Buyer
consists of 50,000,000 shares of Buyer Common Stock and 1,000,000 shares of preferred stock, par
value $0.01 per share (“Buyer Preferred Stock”). At the close of business on March 31, 2005 (a)
10,196,780 shares of Buyer Common Stock were issued and outstanding and no shares of Buyer
Preferred Stock were issued and outstanding, and (b) 86,026 shares of Buyer Common Stock and no
shares of Buyer Preferred Stock were held in treasury by Buyer or by
subsidiaries of Buyer. All of
the outstanding shares of Buyer Common Stock are validly issued, fully paid and non-assessable.
Other than (i) options to purchase 1,165,850 shares of Buyer Common Stock issued pursuant to
employee benefit plans and agreements of Buyer and
(ii) Buyer’s 5.75% Convertible Senior
Subordinated Notes due 2009, as of March 31, 2005 there was no authorized or outstanding option,
subscription, warrant, right (preemptive or other), commitment or other agreement obligating the
Company to repurchase, issue or transfer any shares of capital stock of the Buyer or any
securities convertible into or exchangeable for any shares of capital
stock of the Buyer. Upon the
issuance of the Buyer Common Stock to the Selling Stockholders as provided in Section 2.3(b), such
Buyer Common Stock will be validly issued, fully paid and nonassessable and will be free and clear
of all Liens created by or on behalf of Buyer, other than restrictions on transfer under Federal
and state securities laws.



     5.3. Authority. The execution and delivery of this Agreement and the other Transaction
Documents by Buyer and the performance by Buyer of its obligations hereunder and thereunder have
been duly and validly authorized by all necessary corporate action on the part of Buyer. This
Agreement and each other Transaction Document has been duly executed and delivered by Buyer and
(assuming that this Agreement constitutes a legal, valid, and binding obligation of the Selling
Stockholders) constitutes a legal, valid, and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except to the extent that (a) enforcement may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium, or similar Applicable Laws now
or hereafter in effect relating to or limiting creditors’ rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court or other similar person before which any
proceeding therefor may be brought.



     5.4.
No Conflicts or Violations. Subject to obtaining the Consents contemplated by
Schedule 5.5, the execution and delivery of this Agreement and the other Transaction
Documents by Buyer do not, and the performance by Buyer of its obligations hereunder and
thereunder will not (a) conflict with or violate in any material respect any term or provision of
any Applicable Law or any writ, judgment, decree, or injunction applicable to Buyer; (b) conflict
with or result in a violation or breach of the Certificate of Incorporation or Bylaws of Buyer; or
(c) result in a



11









 





material breach of, or constitute a default under, any material Contract to which Buyer is a
party or by which any of its properties is bound or subject.



     5.5.
Consents. Except as set forth on Schedule 5.5, the execution and delivery
of this Agreement and the other Transaction Documents by Buyer do not, and consummation of the
transactions contemplated hereby will not, require Buyer to obtain any Consent except for such
Consents the failure of which to be made or obtained could not reasonably be expected to have a
material adverse effect on the validity or enforceability of this
Agreement.



     5.6. Litigation. There are no pending, or to the Knowledge of Buyer, threatened,
claims, actions, suits, proceedings, written inquiries or investigations by any Governmental Entity
or any other person against Buyer, except such claims, actions, suits, proceedings written
inquiries or investigations that could not reasonably be expected to have a material adverse effect
on the validity or enforceability of this Agreement.



     5.7. SEC Filings. Buyer has filed all forms, reports and documents required to be
filed by it with the SEC (collectively, the “SEC
Filings”) on a timely basis. The SEC Filings
filed prior to the date hereof or the Closing Date (a) were prepared in all material respects in
accordance with the requirements of the Securities Act and the Exchange Act, as the case may be,
and (b) did not at the time they were filed (or if amended or superseded by a filing prior to the
date of this agreement, then on the date of such filing) contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.



     5.8. Brokers. No person is or will become entitled to receive any brokerage, finder’s
or financial advisory fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made on or on behalf of Buyer.



Article 6. Covenants and Agreements




     6.1. Public Information. During the two year period following the issuance of the
Earnout Payment, to the extent that Rule 144 may be utilized for the resale of the Buyer Common
Stock delivered as the Earnout Payment, Buyer shall (a) use commercially reasonable efforts to make
current public information available that may be required by Rule 144(c) and (b) furnish to either
Selling Stockholder upon written request, (i) a written statement as to its compliance with the
requirements of Rule 144(c) and the reporting requirements of the Securities Act and the Exchange
Act and (ii) a copy of the most recent annual or quarterly report of Buyer.



     6.2. Notification of Certain Matters. Each of the Selling Stockholders and Buyer shall
give prompt notice to the other parties of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be likely to cause (a) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect at any time from the
date of this Agreement to the Closing Date, or (b) any material failure of the Selling Stockholders
or Buyer, as the case may be, or of any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it under
this Agreement. Notwithstanding the foregoing, the delivery of any notice pursuant to



12









 





this Section 6.2 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice,



     6.3.
Tax Matters.




     (a) The Selling Stockholders shall prepare or cause to be prepared, and Buyer shall file
or cause to be filed, all Tax Returns for the Company for all periods ending on or prior to
the Closing Date which are filed after the Closing Date. Not less than 30 days prior to the
due date for filing any such Tax Return, the Selling Stockholders shall permit Buyer to
review and comment thereon and shall make such revisions to such Tax Return as are reasonably
requested by Buyer, Not less than five days prior to the due date for payment of Taxes with
respect to any such Tax Return, the Selling Stockholders shall pay to Buyer the amount of any
Buyer Indemnified Tax Costs with respect to such Tax Return.




     (b) With respect to any Tax Return covering a taxable period beginning on or before the
Closing Date and ending after the Closing Date that is required to be filed after the Closing
Date with respect to the Company, Buyer shall cause such Tax Return to be prepared and filed.
Not later than 30 days prior to the due date of each such Tax Return, Buyer shall deliver a
copy of such Tax Return to the Selling Stockholders together with a statement of the amount
of Buyer Indemnified Tax Costs with respect to such Tax Return and shall permit the Selling
Stockholders to review and comment on such Tax Return and shall make such revisions to such
Tax Return as are reasonably requested by the Selling Stockholders . Not later than 5 days
prior to the due date of such Tax Return, the Selling Stockholders shall pay to Buyer the
amount of Buyer Indemnified Tax Costs with respect to such Tax Return.




     (c) From and after the date hereof, the Selling Stockholders shall not, and shall not
permit any of their respective affiliates to, amend any Tax Return previously filed which
includes information relating to the Company without the prior written consent of Buyer.




     (d) Notwithstanding anything to the contrary herein, any franchise Tax paid or payable
with respect to the Company shall be allocated to the taxable period during which the income,
operations, assets or capital comprising the base of such Tax is measured, regardless of
whether the right to do business for another taxable period is obtained by the payment of
such franchise Tax.




     (e) Buyer and the Selling Stockholders shall cooperate fully, and shall cause the
Company to cooperate fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section and any audit or
proceeding with respect to Taxes. Such cooperation shall include the retention and (upon
the other party’s request) the provision of records and information which are reasonably
relevant to any such proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided hereunder. The
Selling Stockholders further agree, upon request, to use their best efforts to obtain any
certificate or other document from any Governmental



13









 





Entity or any other person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed on Buyer or the Company (including, but not limited to, with respect to the
transactions contemplated hereby). Buyer and the Selling Stockholders further agree, upon request,
to provide the other party with all information regarding the Company that either party may be
required to report to any taxing authority.



     6.4. Noncompetition: Nonsolicitation.




     (a) As additional consideration for Buyer, and as a material inducement for Buyer to enter
into this Agreement and to consummate the transactions contemplated hereby, each of the Selling
Stockholders agrees that he or she shall not, during the five- year period beginning on the Closing
Date, in any manner except in the scope of his employment by the Company, directly or indirectly:




     (i) Own, engage in, manage, operate, join, control, or participate
in the ownership, management, operation, or control of, or be connected as a stockholder,
director, officer, employee, agent, partner, joint venturer, member, beneficiary, or
otherwise with, any corporation, limited liability company, partnership, sole
proprietorship, association, business, trust, or other organization, entity or individual
which conducts Company Activities in the Protected Area; provided, however, that each
Selling Stockholder may own, directly or indirectly, securities of any entity traded on
any national securities exchange or listed on any National Association of Securities
Dealers Automated Quotation System if the Selling Stockholder does not, directly or
indirectly, individually own 1% or more of any class of equity securities, or securities
convertible into or exercisable or exchangeable for 5% or more of any class of equity
securities, of such entity; provided further, however, that the ownership and operation of
the silk screening, embroidery and twill work business currently being done by Team Print,
a sole proprietorship, by Al Messier shall not be considered Company Activities for
purposes of this Section 6.4(a)(i);




     (ii) Solicit or attempt to solicit, any business from any customers
of Buyer or the Company or any of their Affiliates for purposes of engaging in any Company
Activities in any Protected Area;




     (iii) Recruit or hire away or attempt to recruit or hire away, on his
behalf or on behalf of any other organization, entity or person, any employee of Buyer,
the Company or any of their Affiliates, or induce or attempt to influence any such
employee to terminate his or her employment with Buyer, the Company or any of their
Affiliates; or




     (iv) Interfere with or otherwise attempt to affect Buyer’s or the
Company’s relationship with any vendor or customer of Buyer, the Company or any of their
Affiliates.




     (b) Each Selling Stockholder understands and acknowledges that the Company and Buyer
have made substantial investments to develop their respective



14









 





business interests and goodwill. Each Selling Stockholder agrees that such investments are
worthy of protection, and that the Company’s and Buyer’s need for the protection afforded
by this Section 6.4 is greater than any hardship the Selling Stockholder might experience
by complying with its terms. Each Selling Stockholder agrees that the limitations as to
time, geographic area, and scope of activity to be restrained contained in this Agreement
are reasonable and are not greater than necessary to protect the Company Activities and/or
the goodwill or other business interests of Buyer and the Company.




     (c) Although Buyer and the Selling Stockholders believe the limitations as to time,
geographic area, and scope of activity contained in this Section 6.4 are reasonable and do
not impose a greater restraint than necessary to protect the Company Activities, goodwill,
and other legitimate business interest of Buyer and the Company, if this is judicially
determined not to be the case, Buyer and the Selling Stockholders specifically request
that, notwithstanding Section 8.6, the limitations contained in this Section 6.4 be
reformed to the extent necessary to make this Agreement enforceable. It is the express
intent of Buyer and the Selling Stockholders that the terms of this Section 6.4 be
enforced to the full extent permitted by law.



     6.5. Team Print. During the five year period following the Closing Date, Buyer will
use good faith efforts to cause the Company to utilize Team Print for all of the Company’s silk
screening, embroidery and twill needs provided that (a) Team Print does not increase its prices
for such silk screening, embroidery and twill work by more than 4% each calendar year, (b) the
level, timeliness and quality of the services provided by Team Print remain consistent with the
level, timeliness and quality provided by Team Print to the Company prior to the date of this
Agreement and comparable with the level, timeliness and quality that could be obtained by the
Company from other silk screening, embroidery and twill work providers, and (c) Al Messier and
Team Print remain in compliance with the limitations set forth in Section 6.4.



Article 7. Indemnification




     7.1. Indemnification of Buyer. From and after the Closing and subject to the
provisions of this Article 7 and Section 8.2 below, each Selling Stockholder, jointly and
severally, agrees to indemnify and hold harmless the Buyer Indemnified Parties from and against any
and all Buyer Indemnified Costs.



     7.2. Indemnification of Selling Stockholders. From and after the Closing and subject
to the provisions of this Article 7 and Section 8.2 below, Buyer agrees to indemnify and hold
harmless each of the Selling Stockholder Indemnified Parties from and against any and all Selling
Stockholder Indemnified Costs.



     7.3. Defense of Third-Party Claims. An Indemnified Party shall give prompt written
notice to any Indemnifying Party of the commencement or assertion of any Claim by a third party
(collectively, a “Third Party Claim”) in respect of which such Indemnified Party shall seek
indemnification hereunder. Any failure so to notify an Indemnifying Party shall not relieve such
Indemnifying Party from any liability that it, he, or she may have to such Indemnified Party under
this Article 7 except to the extent the failure to give such notice materially and adversely
prejudices such Indemnifying Party. The Indemnifying Party shall have the right to assume



15









 





control of the defense of, settle, or otherwise dispose of such Third-Party Claim on such
terms as it deems appropriate; provided, however, that:




     (a) The Indemnified Party shall be entitled, at its own expense, to participate in the
defense of such Third-Party Claim (provided, however, that the Indemnifying Parties shall
pay the legal fees of the Indemnified Party if (i) the employment of separate counsel shall
have been authorized in writing by all indemnifying Parties in connection with the defense
of such Third-Party Claim, (ii) the Indemnifying Parties shall not have employed counsel
reasonably satisfactory to the Indemnified Party to defend such Third- Party Claim, (iii)
the Indemnified Party shall have reasonably concluded that there may be defenses available
to such Indemnified Party that are different from or additional to those available to the
Indemnifying Party, or (iv) the Indemnified Party’s counsel shall have advised the
Indemnified Party in writing, with a copy delivered to the Indemnifying Party, that there is
a material conflict of interest that could reasonably be expected to violate applicable
standards of professional conduct to have common counsel);




     (b) The Indemnifying Party shall obtain the prior written approval of the Indemnified
Party before entering into or making any settlement, compromise, admission, or
acknowledgment of the validity of such Third-Party Claim or any liability in respect thereof
if, pursuant to or as a result of such settlement, compromise, admission, or acknowledgment,
injunctive or other equitable relief would be imposed against the Indemnified Party or if,
in the opinion of the Indemnified Party, such settlement, compromise, admission, or
acknowledgment could have a material adverse effect on the Indemnified Party;




     (c) No Indemnifying Party shall consent to the entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by each
claimant or plaintiff to each Indemnified Party of a release from all liability in respect
of such Third-Party Claim; and




     (d) The Indemnifying Party shall not be entitled to control (but shall be entitled to
participate at its own expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement, compromise, admission, or
acknowledgment of any Third-Party Claim (i) as to which the Indemnifying Party fails
to assume the defense within a reasonable length of time; or (ii) to the extent the
Third-Party Claim seeks an order, injunction, or other equitable relief against the
Indemnified Party which, if successful, would materially adversely affect the business,
operations, assets, or financial condition of the Indemnified Party; provided, however, that
the Indemnified Party shall make no settlement, compromise, admission, or acknowledgment
that would give rise to liability on the part of any Indemnifying Party without the prior
written consent of such Indemnifying Party.



     The parties hereto shall extend reasonable cooperation in connection with the defense of any
Third-Party Claim pursuant to this Article 7 and, in connection therewith, shall furnish such
records, information, and testimony and attend such conferences, discovery proceedings, hearings,
trials, and appeals as may be reasonably requested.





16










 






     7.4. Direct Claims. In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 7.3 because no Third-Party Claim is
involved, the Indemnified Party shall notify the Indemnifying Party in writing of any Indemnified
Costs which such Indemnified Party claims are subject to indemnification under the terms hereof.
Subject to the limitations set forth in Sections 7.5 and 8.2, the failure of the Indemnified Party
to exercise promptness in such notification shall not amount to a waiver of such claim except to
the extent the resulting delay materially prejudices the position of the Indemnifying Party with
respect to such claim.



     7.5. Limitations. Subject to Section 8.2 hereof, the following provisions of this
Section 7.5 shall be applicable after the time of the Closing:




     (a) Minimum Loss. Except with respect to Buyer Indemnified Tax Costs, Buyer
Indemnified Liabilities, Buyer Indemnified Representation Costs arising out of any breach or
default of the representations and warranties contained in Section 4.22 (relating to
brokers’ fees) and Selling Stockholders Indemnified Representation Costs arising out of any
breach or default of the representations and warranties contained in the last sentence of
Section 5.2 (relating to the issuance of the shares of Buyer Common Stock to the Selling
Stockholders) or in Section 5.8 (relating to brokers’ fees), no Indemnifying Party shall be
required to indemnify an Indemnified Party for Indemnified Representation Costs unless and
until the aggregate amount of such Indemnified Representation Costs for which the
Indemnified Party is otherwise entitled to indemnification pursuant to this Article 7
exceeds $50,000 (the “Minimum Loss”). After the Minimum Loss is exceeded, the Indemnified
Party shall be entitled to be paid the entire amount of its Indemnified Representation
Costs, including the Minimum Loss, subject to the limitations on recovery and recourse set
forth in this Section 7.5.




     (b) Limitation as to Time. No Indemnifying Party shall be liable for any
Indemnified Representation Costs pursuant to this Article 7 unless a written claim for
indemnification in accordance with Section 7.3 or 7.4 is given by the Indemnified Party to
the Indemnifying Party with respect thereto on or before the eighteen-month anniversary of
the Closing Date, except that this time limitation shall not apply to any (i) Claims for
fraud pursuant to Section 8.2; (ii) claims for breaches of the representations and
warranties contained in Section 4.3 (relating to capital structure), Section 4.6 (relating
to ownership of the Shares) and Section 4.13 (relating to Taxes), which representations and
warranties shall survive until the expiration of the applicable statute of limitations.
Except for Claims for fraud pursuant to Section 8.2, no Indemnifying Party shall be liable
for any Indemnified Costs in excess of the Purchase Price.




     (c) No Contribution. The Selling Stockholders shall be liable for any Buyer
Indemnified Costs sustained by any Buyer Indemnified Parties subject to the terms,
limitations and conditions of this to Article 7. The Selling Stockholders hereby waive and
release any and all rights that they may have under this Agreement or any other Transaction
Document to assert claims of contribution against the Company.



17










 





     7.6. Tax Treatment. The parties agree that any payment required under this Article 7
or Section 6.3 shall be treated by the parties for all Tax purposes as an adjustment to the
Purchase Price.



Article 8. General Provisions




     8.1.
Survival of Representations, Warranties, and Covenants. Regardless of
any investigation at any time made by or on behalf of any party hereto or of any information any
party may have in respect thereof, each of the representations and warranties made in this
Agreement or any other Transaction Document shall survive the Closing except as provided below.
The representations and warranties set forth in this Agreement (other than the representations and
warranties contained in Section 4.3 (relating to capital structure), Section 4.6 (relating to
ownership of the Shares), and Section 4.13 (relating to Taxes), which representations and
warranties shall survive until the expiration of the applicable statute of limitations) or any
other Transaction Document shall terminate at 5:00 p.m. Central time on the eighteen month
anniversary of the Closing Date. Following the date of termination of a representation or
warranty, no claim can be brought with respect to a breach of such representation or warranty, but
no such termination shall affect any claim for a breach of a representation or warranty that was
asserted in writing pursuant to Section 7.3 or Section 7.4 hereof before the date of termination.
To the extent that such are performable after the Closing, each of the covenants and agreements
contained in each of the Transaction Documents shall survive the Closing indefinitely.



     8.2. No Waiver Relating to Claims for Fraud. The liability of any party under Article
7 shall be in addition to, and not exclusive of, any other liability that such party may have at
law or equity based on such party’s acts or omissions which constitute fraud under Applicable Law.
None of the provisions set forth in this Agreement, including but not limited to the provisions set
forth in Sections 7.5, shall be deemed a waiver by any party to this Agreement of any right or
remedy which such party may have at law or equity based on any other party’s acts or omissions
which constitute fraud under Applicable Law, nor shall any such provisions limit, or be deemed to
limit, (a) the amounts of recovery sought or awarded in any such claim for fraud, (b) the time
period during which a claim for fraud may be brought, or (c) the recourse which any such party may
seek against another party with respect to a claim for fraud; provided, that with respect to such
rights and remedies at law or equity, the parties further acknowledge and agree that none of the
provisions of this Section 8.2, nor any reference to this Section 8.2 throughout this Agreement,
shall be deemed a waiver of any defenses which may be available in respect of actions or claims for
fraud, including but not limited to, defenses of statutes of limitations or limitations of damages.



     8.3. Amendment and Modification. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.



     8.4. Waiver of Compliance. Any failure of Buyer on the one hand, or a Selling
Stockholder, on the other hand, to comply with any obligation, covenant, agreement, or condition
contained herein may be waived only if set forth in an instrument in writing signed by the party or
parties to be bound by such waiver, but such waiver or failure to insist upon strict compliance



18









 





with such obligation, covenant, agreement, or condition shall not operate as a waiver of, or
estoppel with respect to, any other failure.



     8.5. Specific Performance. The parties recognize that in the event a Selling
Stockholder should refuse to perform under the provisions of this Agreement, monetary damages alone
will not be adequate. Buyer shall therefore be entitled, in addition to any other remedies which
may be available, including money damages, to obtain specific performance of the terms of this
Agreement. In the event of any action to enforce this Agreement specifically, the Selling
Stockholders hereby waive the defense that there is an adequate remedy at law. In no event shall
the Selling Stockholders be entitled to seek specific performance with respect to any of the
Buyer’s obligations arising under this Agreement.



     8.6. Severability. If any term or other provision of this Agreement is determined by a
court of competent jurisdiction to be invalid, illegal, or incapable of being enforced under any
rule of applicable law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or legal substance of
the transactions contemplated herein are not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid, illegal, or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in a mutually acceptable manner
in order that the transactions contemplated herein are consummated as originally contemplated to
the fullest extent possible.



     8.7. Expenses and Obligations. Except as otherwise expressly provided in this
Agreement, all costs and expenses incurred by the Company and the Selling Stockholders, on the one
hand, and Buyer, on the other, in connection with this Agreement and the other Transactions
Documents shall be borne by each respectively; provided, however, the Company will bear the costs
and expenses incurred by the Selling Stockholders in connection with this Agreement in the event
the transactions contemplated by this Agreement are consummated; and, provided further that, in the
event of a dispute between the parties in connection with this Agreement and the transactions
contemplated hereby, each of the parties hereto hereby agrees that the prevailing party shall be
entitled to reimbursement by the other party or parties of reasonable legal fees and expenses
incurred in connection with any such action or proceeding.



     8.8. Notices. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied, or mailed by registered or certified
mail (return receipt requested), or sent by Federal Express or other recognized overnight courier,
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 the Selling Stockholders:



Albert A. Messier

1605 Commerce Drive

Bourbonnais, Illinois 60914



19









 







Daniel F. Salkeld

575 William Latham Drive

Bourbonnais, Illinois 60914


with a copy to:


Dennis Marek

Ackman, Marek, Meyer & Boyd, Ltd. 

1 Dearborn Square, Suite 400 

Kankakee, Illinois 60901

Facsimile: 815.933.6623



          (b) If to Buyer, to:



Collegiate Pacific Inc.

13950 Senlac

Suite 100

Farmers Branch, TX 75234

Fax: 972.243.8316

Attention: Michael J. Blumenfeld


with a copy to:


Vinson & Elkins LLP

3700 Trammel Crow Center

2001 Ross Avenue

Dallas, TX 75201

Fax: 214.999.7857

Attention: Alan J. Bogdanow



     Any of the above addresses may be changed at any time by notice given as provided
above; provided, however, that any such notice of change of address shall be effective only upon
receipt. All notices, requests or instructions given in accordance herewith shall be deemed
received on the date of delivery, if hand delivered, on the date of receipt, if telecopied, three
business days after the date of mailing, if mailed by registered or certified mail, return receipt
requested, and one business day after the date of sending, if sent by Federal Express or other
recognized overnight courier.



     8.9. Assignment. Neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any of the parties hereto, whether by operation of law
or otherwise; provided, however, that upon notice to the Selling Stockholders and without
releasing Buyer from any of its obligations or liabilities hereunder Buyer may assign or delegate
any or all of its rights or obligations under this Agreement to any Affiliate of Buyer or any
person with or into which Buyer or any parent company of Buyer merges or consolidates. In the
event of such an assignment, the provisions of this Agreement shall inure to the benefit of and be
binding on Buyer’s assigns. Any attempted assignment in violation of this Section 8.9 shall be
null and void.



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     8.10. Counterparts. This Agreement may be executed and delivered (including
by facsimile transmission) 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 parties, it being understood that all parties need
not sign the same counterpart.



     8.11. Entire Agreement. This Agreement (which term shall be deemed to include the
exhibits and schedules hereto and the other certificates, documents and instruments delivered
hereunder) constitutes the entire agreement of the parties hereto and supersedes all prior
agreements, letters of intent and understandings, both written and oral, among the parties with
respect to the subject matter hereof. There are no representations or warranties, agreements, or
covenants other than those expressly set forth in this Agreement.



     8.12.
Governing Law; Choice of Forum. This Agreement shall be construed in
accordance with and governed by the internal law of the State of Delaware (without reference to its
rules as to conflicts of law). The parties hereby irrevocably submit to the non-exclusive
jurisdiction of any state or federal court in Dallas County, Texas with respect to any action or
proceeding arising out of or relating to this Agreement. The Selling Stockholders hereby
irrevocably waive any right that they otherwise might have (a) to remove such action or proceeding
(or any claims within such action or proceeding) to a federal court in the event that Buyer selects
a state court forum or (b) to transfer such action or proceeding (or any claims within such action
or proceeding) to any court other than the court selected by Buyer. The parties hereby consent to
and grant to any such court jurisdiction over the persons of such parties and over the subject
matter of any such dispute and agree that delivery or mailing of any process or other papers in the
manner provided herein, or in such other manner as may be permitted by law, shall be valid and
sufficient service thereof.



     8.13. Headings. The headings of this Agreement are for convenience of reference only
and are not part of the substance of this Agreement.



[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]




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     IN WITNESS WHEREOF, the Selling Stockholders and Buyer have caused this Agreement to be
executed as of the date first above written,



	 	 	 	 	 
	 	 	COLLEGIATE PACIFIC INC.
	 
	 	 	 	 
	

	 	By:	 	/s/ Adam Blumenfeld
	

	 	 	 	

	

	 	Name:	 	Adam Blumenfeld
	

	 	 	 	

	

	 	Title:	 	President
	 
	 	 	 	 
	

	 	 	 	/s/ Albert A. Messier
	 	 	 	 	

	

	 	 	 	ALBERT A. MESSIER
	 
	 	 	 	 
	

	 	 	 	/s/ Daniel F. Salkeld
	 	 	 	 	

	

	 	 	 	DANIEL F. SALKELD






Signature Page to Stock Purchase Agreement




 









 








APPENDIX A




Certain Defined Terms




     “Affiliate”  means, with respect to any person, any other person controlling, controlled by or
under common control with such person. For purposes of this definition and this Agreement, the term
“control” (and correlative terms) means the power, whether by contract, equity ownership or
otherwise, to direct the policies or management of a person.



     “AMEX”  means the American Stock Exchange.



     “Applicable Laws”  means, with respect to a party, all laws, statutes, rules, regulations,
ordinances, judgments, orders, decrees, injunctions, and writs of any Governmental Entity having
jurisdiction over such party.



     “Assets”  shall mean all assets or properties of every kind, nature, character and
description, including all tangible, intangible, personal, real or mixed of the Company.



     “Buyer”  has the meaning set forth in the first paragraph of this Agreement and includes its
permitted successors and assigns.



     “Buyer Common Stock” has the meaning set forth in Section 2.2.



     “Buyer Indemnified Costs”  means (a) all Buyer Indemnified Representation Costs, (b) all Buyer
Indemnified Liabilities (c) all Buyer Indemnified Tax Costs, and (d) all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and
reasonable legal fees and expenses incurred in investigating and preparing for any litigation or
proceeding) that any of the Buyer Indemnified Parties incurs and that arise out of any breach by
any Selling Stockholder of any other covenants or agreements of any Selling Stockholder under this
Agreement or any other Transaction Document executed in connection
herewith.



     “Buyer Indemnified Liabilities”  means (a) indebtedness under the SBA Note, (b) accounts
payable incurred other than in the Ordinary Course of Business, (c) accounts payable not paid in
the Ordinary Course of Business, and (d) obligations with respect to the period after the Closing
under lease agreements and other contractual commitments, whether oral or written, not listed in
the Schedules to this Agreement.



     “Buyer Indemnified Parties”  means Buyer and each officer and director of Buyer. After the
Closing, the Company shall be deemed to be one of the Buyer Indemnified Parties.



     “Buyer Indemnified Representation Costs”  means any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs, and expenses (including court costs and
reasonable legal fees and expenses incurred in investigating and preparing for any litigation or
proceeding) that any of the Buyer Indemnified Parties incurs and that arise out of any breach or
default by any Selling Stockholder of any of the representations or warranties under this
Agreement or any agreement or document executed in connection herewith.



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     “Buyer Indemnified Tax Costs” means any and all Taxes together with any costs, expenses,
losses or damages (including court and administrative costs and reasonable legal fees and expenses
incurred in investigating and preparing for any audit, litigation or other proceeding) arising out
of or incident to the determination, assessment or collection of such Taxes (a) imposed on the
Company in respect of its income, business, property or operations or for which it may otherwise be
liable for any taxable period or portion thereof ending on or prior to the Closing Date (determined
by an interim closing of the books as of the end of the Closing Date except for ad valorem Taxes
which shall be prorated on a daily basis), (b) imposed on or with respect to the Selling
Stockholders for any taxable period or portion thereof ending on or prior to the Closing Date, (c)
resulting from the breach of the representations and warranties set forth in Section 4.13 (without
regard to materiality or knowledge qualifiers that may be contained therein) or covenants set forth
in Section 6.3, (d) of any member of an affiliated, consolidated, combined or unitary group of
which the Company or any subsidiary (or any predecessor) is or was a member on or prior to the
Closing Date by reason of the liability of the Company or any subsidiary pursuant to Treasury
Regulation §1.1502-6(a) or any analogous or similar state, local or foreign law, (e) of any other
person for which the Company may be liable as a transferee or successor, by contract or otherwise,
(f) resulting from the Section 338(h)(10) Elections, or (g) imposed on Buyer, the Company or any
subsidiary of the Company under Code Section 1374 with respect to any taxable period or portion
thereof ending on or prior to the Closing Date including any such Tax resulting from transactions
contemplated by the Transaction Documents; provided, however, that any such Tax shall not be a
Buyer Indemnified Tax Cost to the extent such Tax was specifically reserved for in the Most Recent
Balance Sheet.



     “Buyer Preferred Stock” has the meaning set forth in Section 5.2.



     “Cash Consideration” has the meaning set forth in Section 2.2(a).



     “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. § 9601 et seq.).



     “Certificate of Incorporation” means that certain Certificate of Incorporation of the Company
filed with the Secretary of State of the State of Delaware.



     “Claim” means any action, suit, claim, lawsuit, charge, complaint, demand, inquiry, hearing,
investigation, notice of violation or noncompliance, litigation, proceeding, arbitrations, appeal
or other dispute, whether civil, criminal, administrative or otherwise.



     “Closing” has the meaning set forth in Section 3.1.

     “Closing
Date” has
the meaning set forth in Section 3.1.

     “Closing
Payment” has the
meaning set forth in Section 2.2(a).



     “Code” shall mean the United States Internal Revenue Code of 1986, as amended. All references
to the Code, U.S. Treasury regulations or other governmental pronouncements shall be deemed to
include references to any applicable successor regulations or amending pronouncement.



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     “Commonly
Controlled Entity” has the meaning set forth in Section 4.20(b).

     “Company” has the meaning set forth in the recitals.



     “Company
Activities” means (a) manufacturing, distributing, designing, selling or installing
sports equipment or sporting goods or related parts or supplies that are competitive with those
manufactured, distributed, designed, sold or installed by Buyer, the Company or their Affiliates,
or (b) engaging in any other business activities which are conducted, offered or provided by Buyer,
the Company or any of their Affiliates, in each case during the five-year period beginning on the
Closing Date.



     “Company
Adjusted Pre-Tax Income” means the Company’s net income before deducting income
taxes or year-end distributions to stockholders for the year ended
December 31,2004.



     “Company
Common Stock” has the meaning set forth in the recitals.



     “Consents” means all governmental consents and approvals, and all consents and approvals of
third parties, in each case that are necessary in order to transfer the Shares, or the control of
the Company and its properties and assets, to Buyer and otherwise to consummate the transactions
contemplated hereby.



     “Contracts” means, with respect to a party, all agreements, contracts, or other binding
commitments, arrangements or plans, written or oral (including any amendments and other
modifications thereto), to which such party is a party or is
otherwise bound.



     “Earnout
Payment” has the meaning set forth in Section 2.2(b).



     “Earnout
Period” has the meaning set forth in Section 2.2(b).



     “Earnout
Securities” has the meaning set forth in Section 4.26.


     “Earnout
Target” has the meaning set forth in Section 2.2(b).



     “Employee
Benefit Plans” means all employee benefit plans as defined in Section 3(3) of ERISA
and all bonus, stock option, stock purchase, stock appreciation right, restricted stock, phantom
stock, incentive, deferred compensation, medical, disability or life insurance, cafeteria benefit,
dependent care, disability, director or employee loan, fringe benefit, sabbatical, supplemental
retirement, severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements sponsored, maintained, contributed to or
agreed to by the Company for the benefit of employees, former employees, independent contractors
or agents of the Company.



     “Environmental Laws” means all federal, state and local laws relating to public health, or to
pollution or protection of the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) including, without limitation, the Clean
Air Act, as amended, CERCLA, the RCRA, the Toxic Substances Control Act, the Federal Water
Pollution Control Act, as amended, the Safe Drinking Water Act, as amended, the




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Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of 1990, any state laws
implementing the foregoing federal laws, and all other Applicable Laws relating to or regulating
(a) emissions, discharges, releases, or cleanup of pollutants, contaminants, chemicals,
polychlorinated biphenyls (PCB’s), oil and gas exploration and production wastes, brine, solid
wastes, or toxic or Hazardous Substances or wastes (collectively, the
“Polluting Substances”), (b)
the generation, processing, distribution, use, treatment, handling, storage, disposal, or
transportation of Polluting Substances, or (c) environmental
conservation or protection.



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



     “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.



     “Financial
Statements” has the meaning set forth in Section 4.7.



     “GAAP” means generally accepted accounting principles in the United States.



     “Gross
Margin” has the meaning set forth in Section 2.2(b).



     “Guarantee”
means any guarantee or other contingent liability (other than any endorsement for
collection or deposit in the Ordinary Course of Business), direct or indirect with respect to any
obligations of another person, through a Contract or otherwise, including, without limitation, (a)
any endorsement or discount with recourse or undertaking substantially equivalent to or having
economic effect similar to a guarantee in respect of any such obligations and (b) any Contract (i)
to purchase, or to advance or supply funds for the payment or purchase of, any such obligations,
(ii) to purchase, sell or lease property, products, materials or supplies, or transportation or
services, in respect of enabling such other person to pay any such obligation or to assure the
owner thereof against loss regardless of the delivery or non delivery of the property, products,
materials or supplies or transportation or services or (iii) to make any loan, advance or capital
contribution to or other Investment in, or to otherwise provide funds to or for, such other person
in respect of enabling such person to satisfy an obligation (including any liability for a
dividend, stock liquidation payment or expense) or to assure a minimum equity, working capital or
other balance sheet condition in respect of any such obligation.



     “Governmental
Entity” means any governmental department, commission, board, bureau, agency,
court or other instrumentality of the United States or any state, county, parish or municipality,
jurisdiction, or other political subdivision thereof.



     “Hazardous Substances” means any substance or material which if present in the environment
would under Applicable Law require assessment, remediation, or corrective action including,
without limitation, chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products which are classified as hazardous, toxic, radioactive, dangerous or otherwise
regulated by or form the basis for liability under any Environmental Law, whether or not
identified as hazardous wastes under the RCRA or hazardous substances under CERCLA.



     “Indemnified
Costs” means the Buyer Indemnified Costs or the Selling Stockholders Indemnified
Costs, as the case may be.



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     “Indemnified Parties” means the Buyer Indemnified Parties or the Selling Stockholders
Indemnified Parties, as the case may be.



     “Indemnified Representation Costs” means the Buyer Indemnified Representation Costs or the
Selling Stockholders Indemnified Representation Costs, as the case may be.



     “Indemnifying
Party” means any person who is obligated to provide indemnification hereunder.



     “Intangible
Rights” has the meaning set forth in Section 4.18.



     “Investment” means (a) any direct or indirect ownership, purchase or other acquisition by a
person of any notes, obligations, instruments, capital stock, options, warrants, securities or
ownership interests (including partnership interests and joint venture interests) of any other
person, and (b) any capital contribution or similar obligation by a person to any other person.



     “IRS” means the Internal Revenue Service of the United States.



     “Knowledge” means, with respect to a specified party hereto, the actual knowledge of such
party (including, but not limited to, the actual knowledge of any officers, directors, employees,
consultants or counsel of such party), together with such additional knowledge as would be
acquired by a reasonable inquiry concerning the subject matter in question.



     “Lease
Agreement” means the Lease Agreement made as of October 1, 2004 by and between First
American Bank, as Trustee under Trust Agreement dated March 13, 1992 and known as Trust No.
3-92-001, and Salkeld & Sons, Inc.



     “Liens” means all liens, pledges, voting agreements, voting trusts, proxy agreements,
claims, security interests, restrictions, mortgages, deeds of trust, tenancies and other
possessory interests, conditional sale or other title retention agreements, assessments,
easements, rights of way, covenants, restrictions, rights of first refusal, defects in title,
encroachments, and other burdens, options or encumbrances of any kind.



     “Material Adverse Effect” means a material adverse effect on the business, operations,
properties, condition (financial or otherwise), results of operations or assets, liabilities or
prospects of the Company.



     “Material
Contract” has the meaning set forth in Section 4.15.



     “Material Leases” shall mean any lease or sublease of real or personal property of or by the
Company involving a term of more than 12 months and payment obligations exceeding $50,000 per
year.



     “Minimum Loss” has the meaning set forth in Section 7.5(a).



     “Most
Recent Balance Sheet” has the meaning set forth in Section 4.7.




     “Notes” has the meaning set forth in Section 2.2(a).



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     “Order” means any writ, decree, order, judgment, injunction, rule, ruling, Lien, voting
right, consent of or by a Governmental Entity.



     “Ordinary Course of Business” means the ordinary course of the operations of the Company
consistent with past practices since the earliest time covered by the
Financial Statements.



     “person” means an individual, corporation, partnership, limited liability company,
association, trust, unincorporated organization, or other entity.



     “Policy” means any Contract that insures (a) the Company’s properties, plant and equipment
for loss or damage, or (b) the Company or its officers, directors, employees or agents against any
liabilities, losses or damages (or lost profits) for any reason or
purpose.



     “Projections”
has the meaning set forth in Section 4.24.



     “Protected Area” means any jurisdiction in the United States in which Buyer, the Company, or
any Affiliate of either of them, conducts or conducted, as the case may be, Company Activities at
any time during the period beginning May 11, 2004 and ending on the fifth anniversary of the
Closing Date.



     “Purchase Price” means the consideration payable by Buyer as provided in Section 2.2.



     “RCRA” means the Resource Conservation and Recovery Act of 1976, as amended.



     “SBA Note” means the U.S. Small Business Administration Note dated October 2, 2000 in
principal amount of $875,000 issued by Salkeld & Sons, Inc. and Albert Messier to First Trust Bank
of Illinois.



     “SEC” means the Securities and Exchange Commission.



     “SEC Filings” has the meaning set forth in Section 5.7.



     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.



     “Selling Stockholder Indemnified Costs” means (a) all Selling Stockholder Indemnified
Representation Costs, and (b) any and all damages, losses, claims, liabilities, demands, charges,
suits, penalties, costs, and expenses (including court costs and reasonable legal fees and
expenses incurred in investigating and preparing for any litigation or proceeding) that any of the
Selling Stockholder Indemnified Parties incurs and that arise out of any breach by Buyer of any of
the covenants or agreements under this Agreement or any other Transaction Documents.



     “Selling Stockholder Indemnified Parties” means each of the Selling Stockholders and each
Affiliate of the Selling Stockholders.



     “Selling Stockholder Indemnified Representation Costs” means any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs, and expenses (including court



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costs and reasonable legal fees and expenses incurred in investigating and preparing for
any litigation or proceeding) that any of the Selling Stockholder Indemnified Parties incurs and
that arise out of any breach or default by Buyer of any of its representations or warranties under
this Agreement or any agreement or document executed in connection herewith.



     “Selling
Stockholders” has the meaning set forth in the first
paragraph of this Agreement.



     “Shares” has the meaning set forth in the recitals.



     “Stock Consideration” has the meaning set forth in Section 2.2(a).



     “subsidiary” or “subsidiaries” of any person means any corporation, partnership, joint
venture or other legal entity of which such person (either alone or through or together with any
other subsidiary), owns, directly or indirectly, 50% or more of the capital stock or other equity
interests the holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity.



     “Tax”
(or “Taxes”) means (a) any net income, alternative or add-on minimum, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid by the Company, payroll, employment, excise, production, severance,
stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any
interest and/or any penalty, addition to tax or additional amount imposed by any taxing authority,
(b) any liability of the Company for the payment of any amounts of the type described in clause
(a) as a result of being a member of an affiliated or consolidated group or arrangement whereby
liability of the Company for the payment of such amounts was determined or taken into account with
reference to the liability of any other person for any period and (c) liability of the Company
with respect to the payment of any amounts of the type described in clause (a) or (b) as a result
of any express or implied obligation to indemnify any other person.



     “Tax Return” means any return, declaration, report, statement, estimate, information return
and statement required to be filed by or with respect to the Company in respect of any Taxes,
including, without limitation, (a) any consolidated federal income Tax return in which the Company
is included and (b) any state, local or foreign income Tax returns filed on a consolidated,
combined or unitary basis (for purposes of determining tax liability) in which the Company is
included.



     “Third Party Claim” has the meaning set forth in Section 7.3.



     “Total Cost of Sales” means the total cost of sales of the Company determined in accordance
with GAAP on a basis consistent with the Financial Statements.



     “Total Sales” means the total sales of the Company determined in accordance with GAAP on a
basis consistent with the Financial Statements



     “Transaction Documents” means this Agreement, and all other documents to be executed by any
of the Selling Stockholders or Buyer in connection with the consummation of the transactions
contemplated in this Agreement.




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