Document:

exv10w1

 

Exhibit 10.1

STOCK PURCHASE AGREEMENT

     This Stock Purchase Agreement, to be effective as of July 1, 2006 (the “Effective Date”), is
entered into between Trade Source International, Inc. (“Purchaser”), Robert Lackey (“Shareholder”)
and Craftmade International, Inc., a Delaware corporation and parent of Purchaser (“Parent), as of
September 15, 2006 (the “Signing Date”). The foregoing individuals and entities are each a “Party”
and are referred to collectively herein as the “Parties.”

R E C I T A L S

     WHEREAS, Shareholder owns all of the issued and outstanding shares (the “Shares”) of capital
stock, $1.00 par value, of MARKETING IMPRESSIONS, INC., a Georgia corporation (the “Corporation”),
and desires to sell the Shares to Purchaser on the terms and conditions set forth in this Stock
Purchase Agreement (hereinafter called “Agreement”); and

     WHEREAS, contemporaneously herewith, Purchaser desires to purchase all of the Shares on the
terms and conditions set forth herein;

     NOW THEREFORE, in consideration of the premises and respective mutual agreements, covenants,
representations and warranties herein contained, it is agreed between the Parties hereto as
follows:

ARTICLE I

DEFINITIONS

     1.01 The following terms used herein, unless the context otherwise requires, shall be defined
as follows:

     1.01.01 “AAA” has the meaning set forth in Section 7.14(a).

     1.01.02 “Acceleration Amount” means:

     (i) with respect to an acceleration pursuant to Section 2.06(a)(i) or
Section 2.06(a)(ii), an amount equal to (A) the amount that would be present on the last
day of the last month in which an Additional Amount payment would have been due in an
account earning interest at a monthly rate of 0.8% compounded monthly if monthly deposits
equaling 22% of the average Adjusted Gross Profit for the Relevant 12-Month Period were
deposited into such account on the first day of each month beginning with the month in which
the Triggering Event occurred and continuing through and including the last month in which
an Additional Amount payment would have been due plus (B) the amount that would be
present on the last day of the last month in which a

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Settlement Amount payment would have
been due in an account earning interest at a monthly rate of 0.8% compounded monthly if monthly deposits equaling 15% of the average Adjusted Gross
Profit for the Relevant 12-Month Period were deposited into such account on the first day of
each month beginning with the month in which the Triggering Event occurred and continuing
through and including the last month in which an Settlement Amount payment would have been
due; or

     (ii) with respect to an acceleration pursuant to Section 2.06(a)(iii), an
amount equal to (A) 22% of the average Adjusted Gross Profit for the Relevant 12-Month
Period multiplied by the remaining number of monthly payments (beginning with the month in
which the Triggering Event occurred) required to satisfy the Additional Amount in full
plus (B) 15% of the average Adjusted Gross Profit for the Relevant 12-Month Period
multiplied by the remaining number of monthly payments (beginning with the month in which
the Triggering Event occurred) required to satisfy the Settlement Amount in full.

     1.01.03 “Additional Amount” means with respect to each of the first 62 calendar
months, commencing with July 2006, an amount equal to 22% of the Adjusted Gross Profit for
such month.

     1.01.04 “Additional Payments” has the meaning set forth in Section
5.09(h).

     1.01.05 “Adjusted Gross Profit” means Gross Profit without the deduction of
reset labor, displays or point-of-purchase materials.

     1.01.06 “Affiliate” of a Party means any individual or business entity
(including, without limitation, a corporation, limited liability company, partnership or
sole proprietorship) that controls, is controlled by or is under common control with the
Party. As used herein, “control” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such individual or
entity, whether through ownership of voting securities or other interests, by contract or
otherwise.

     1.01.07 “Agreed Text” has the meaning set forth in Section 5.07.

     1.01.08 “Asserted Liability” has the meaning set forth in Section
6.06.01.

     1.01.09 “Assigned Intellectual Property” has the meaning set forth in
Section 2.01(b)

     1.01.10 “Balance Sheet” has the meaning set forth in Section 4.01.19.

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     1.01.11 “Business” means the business of developing, procuring, and supplying
Ceiling Medallions to any customer and developing, procuring and supplying Fan Parts and
Lamp Parts to Mass Merchants.

     1.01.12 “CERCLA” has the meaning set forth in Section 4.01.21(e).

     1.01.13 “Closing Payment” means $2,199,010.

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

     1.01.14 “Confidential Information” means, to the extent not generally available
to the public, any and all of the following (i) trade secrets (within the meaning of
applicable trade secret laws) concerning the Business as conducted by the TSI Group; (ii)
information concerning the Business as conducted by the TSI Group (which includes historical
financial statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel, personnel
training and techniques and materials), however documented; and (iii) notes, analysis,
compilations, studies, summaries, and other material prepared by or for any member of the
TSI Group, containing or based, in whole or in part, on any information included in the
foregoing clauses (i) and (ii).

     1.01.16 “Consulting Agreement” has the meaning set forth in Section
2.01(g).

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

     1.01.18 “Corporation” has the meaning set forth in the Preface above.

     1.01.19 “Defense Costs” has the meaning set forth in Section 6.06.02.

     1.01.20 “Dispute Amount” has the meaning set forth in Section 2.07(a).

     1.01.21 “Dispute Notice” has the meaning set forth in Section 2.07(a).

     1.01.22 “Effective Date” has the meaning set forth in the Preface above.

     1.01.23 “Environmental, Health, and Safety Laws” means all federal, state,
local, and foreign statutes, regulations, ordinances, and other provisions having the force
or effect of law, all judicial and administrative orders and determinations, all permits,
and all common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including, without limitation, all those
relating

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to the presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any Hazardous Materials.

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

     1.01.25 “Established Loss” has the meaning set forth in Section 6.05.

     1.01.26 “Estimated Acceleration Amount” has the meaning set forth in
Section 2.06(b).

     1.01.27 “Fan Accessories” means Fan Parts, Lamp Parts and/or Ceiling
Medallions. “Fan Parts” shall mean the major categories of fan pulls, pull chains
and cords, connectors, fan blades and irons, electrical wires and wiring kits, swag kits
with chains and/or cords and switches, fan controls, light kit sockets and switches, fan
hardware including balance kits, adaptors, brackets, screws, canopies, hanger balls and
hardware, downrods and sleeves, covers, connectors for downrods, fan cleaning and freshener
products, including brushes and filters, fan light kit glass and replacement parts, fan
light bulbs and any other parts sold for the purpose of repair or add on to fans. “Lamp
Parts” shall mean the major categories of lamp finials, decorative lamp add-on pieces
such as tassels, fringes, decals, chains for light pulls, chains for swags, chains for
hanging, swag kits, hooks, harps, loops, finial caps, lock caps, knobs, shade holders,
prisms, socket covers, wire covers, connectors, cleaning products used for fans and lights,
including but not limited to brushes and chemicals, canopies, cords, switches, repair kits,
sockets, keys, cluster kits, screws, nuts, crossbars, threaded pipes, nipples, check rings,
dimmers, and other parts for the repair or decoration of lamps. “Ceiling
Medallions” shall mean any decorative products for the ceiling that are generally sold
to use with light fixtures and fans or as a stand alone medallion for adding an
architectural element to the ceiling in the form of a medallion. Medallions may be made of
any material including plastic, wood, metal, glass and plaster. The list attached as
Schedule 1 is a detailed list of the Fan Accessories currently being sold in
connection with the Business.

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

     1.01.29 “Gross Profit” means, with respect to any month, the gross revenue from
the Business as conducted by the TSI Group less (i) deductions given by the TSI
Group to customers in conjunction with the sales that generated such gross revenue (as
addressed in SEC Staff Accounting Bulletin No. 101; SEC Staff Accounting
Bulletin No. 104; Statement of Financial Accounting Standards (“FASB”) No. 48;
and as interpreted in the FASB Emerging Issues Task Force (“EITF”) Issues No. 99-19,
00-10 and 01-9 provided that such deductions were (a) provided in conjunction with the
sales that generated such gross revenue in the ordinary course of business consistent with
industry

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practices (such as vendor agreement allowances) and (b) used by such customer
contemporaneously with the sale for which such deduction was provided) and (ii) the direct
cost to the TSI Group of the products or services that were sold to generate such gross
revenue, all as calculated and applied in accordance with GAAP. Deductions given to
customers include service group allowances, advertising allowances, volume allowances,
allowances for returned items, allowances for defective items, markdowns associated with
non-performing items, sustained growth incentives, new store free goods, new warehouse free
goods, volume incentive rebates, reset labor, comprehensive vendor allowances, freight
allowances, truckload allowances, display allowances, early buy allowances, new
item/replacement allowances, promotional allowances, warehouse fulfillment service
allowances, and other allowances on a Customer’s Vendor Information Sheet or similar
document. Direct cost of products does not include increases in product cost that are
attributable to fees and other charges between any of Purchaser’s Affiliates and will be
reduced by the amount of any rebates, discounts and/or allowances received from vendors.
Direct cost includes cost for inbound and outbound freight related to the gross revenue.

     1.01.30 “Hazardous Materials” means any hazardous materials, substances, or
wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise,
mold or radiation.

     1.01.31 “HI” means Home Impressions, Inc. d/b/a Delstar.

     1.01.32 “Indemnified Party” has the meaning set forth in Section
6.06.01.

     1.01.33 “Indemnifying Party” has the meaning set forth in Section
6.06.01.

     1.01.34 “Indemnitor” has the meaning set forth in Section 6.05.

     1.01.35 “Indemnitee” has the meaning set forth in Section 6.05.

     1.01.36 “Intellectual Property Assignment” has the meaning set forth in
Section 2.01(b).

     1.01.37 “Intellectual Property Purchase Price” has the meaning set forth in
Section 2.03(b).

     1.01.38 “Intellectual Property Rights” has the meaning set forth in Section
4.01.07.

     1.01.39 “IP Purchase Price” has the meaning set forth in Section
2.03(b).

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     1.01.40 “IRS” means the Internal Revenue Service.

     1.01.41 “Knowledge” means, with respect to Shareholder, the actual knowledge of
Shareholder and Robert W. Lackey, Jr., after reasonable inquiry into matters about which
they are uncertain.

     1.01.42 “Lackey Parties” has the meaning set forth in Section 2.01(b).

     1.01.43 “Lien” means any mortgage, pledge, lien, encumbrance, charge, claim or
other security interest, other than liens for Taxes not yet due and payable.

     1.01.44 “Losses” has the meaning set forth in Section 6.03.

     1.01.45 “LLC” means Prime/Home Impressions, LLC, a North Carolina limited
liability company.

     1.01.46 “Major Customer” means, with respect to any particular point in time:
(i) Lowe’s Companies, Inc. and its Affiliates; (ii) Wal-Mart Stores, Inc. and its Affiliates
and (iii) any other customer of the Business with respect to which the TSI Group had no less
than $1,000,000 in gross sales of Fan Accessories during the preceding twelve full calendar
months, or forecast not less than $1,000,000 in gross sales of Fan Accessories during the
subsequent 12 full calendar months.

     1.01.47 “Mass Merchant” means any (i) top 500 home center (such as Lowes),
other than Yardbirds, (ii) discounter such as Wal-Mart, K-Mart, Fred Meyer and Ames, (iii)
home decor store, such as Pottery Barn, Pier I Imports, Cost Plus, the Bombay Company, Bed,
Bath and Beyond, and Linens and Things, (iv) clubs, such as Costco, Sam’s and BJ’s, or (v)
department store catalog, such as J.C. Penney.

     1.01.48 “Material Adverse Effect” means a material adverse effect on the
results of operations, assets or condition (financial or otherwise) of the Corporation as a
whole, after excluding the results of operations, assets or condition (financial or
otherwise) of the LLC.

     1.01.49 “Material Contracts” has the meaning set forth in Section 4.01.17.

     1.01.50 “Net Assets Amount” has the meaning set forth in Section 5.10.

     1.01.51 “Net Assets True-up Amount” has the meaning set forth in Section 5.10.

     1.01.52 “New Party” has the meaning set forth in Section 2.06(a)(i).

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     1.01.53 “Parent” has the meaning set forth in the Preface above.

     1.01.54 “Party” or “Parties” has the meaning set forth in the Preface
above.

     1.01.55 “PCAOB” means Public Company Accounting Oversight Board.

     1.01.56 “Personal Properties” means those properties identified in Schedule
4.01.06.

     1.01.57 “Plan” means an “employee benefit plan” within the meaning given such
term under Section 3(3) of ERISA, that as of or prior to the Signing Date is sponsored,
maintained, or contributed to by the Corporation or any other trade or business which is
treated as a single employer with the Corporation under Section 414(b), (c), (m) or (o) of
the Code (“ERISA Affiliate”).

     1.01.58 “Post-Effective Date Periods” has the meaning set forth in Section
5.09(a).

     1.01.59 “Pre-Effective Date Period” has the meaning set forth in Section
5.09(a).

     1.01.60 “Partially Subordinate Security Agreement” has the meaning set
forth in Section 3.01.14.

     1.01.61 “Prime Rate” means the per annum rate of interest announced from time
to time by Bank of America, N.A. (or, if such bank discontinues its practice of announcing
its prime rate, such other institution approved by the Purchaser and Shareholder) as its
prime rate of interest, in effect from time to time.

     1.01.62 “Purchaser Documents” has the meaning set forth in Section
4.02.01.

     1.01.63 “Re-acquired Business” has the meaning set forth in Section
5.04(c).

     1.01.64 “Relevant 12-Month Period” means whichever of the following periods
produces the highest monthly average of Adjusted Gross Profit for such period:

     (a) the 12 calendar months (or if shorter, the calendar months, commencing with
July 2006) immediately preceding the month in which the Triggering Event occurred;
or

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     (b) the 12 calendar months commencing with the month in which the Triggering
Event occurred.

     1.01.65 “Remaining Monthly Additional Amount” has the meaning set forth in
Section 2.03(h).

     1.01.66 “Resolution Accountant” means a mutually agreeable independent
certified public accounting firm registered with the PCAOB; provided, that in the event that
the parties cannot agree on an independent certified public accounting firm, such term shall
mean an independent public accounting firm registered with the PCAOB selected by Grant
Thornton, LLP.

     1.01.67 “RLJ Goodwill Agreement” has the meaning set forth in Section
2.01(f).

     1.01.68 “Responsible Parties” has the meaning set forth in Section
5.09(h).

     1.01.69 “RLJ Non-Competition Agreement” has the meaning set forth in
Section 2.01(e).

     1.01.70 “RWL” means RWL Corporation.

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

     1.01.72 “Service Agreement” means the Services Agreement, dated January 1,
1998, between the LLC and HI, as amended.

     1.01.73 “Settlement Amount” means with respect to each of the first 12 calendar
months commencing with July 2006, an amount equal to 15% of the Adjusted Gross Profit for
such month; provided, however, that in no event shall the aggregate Settlement Amount under
this Agreement exceed $750,000.

     1.01.74 “Shareholder Account” has the meaning set forth in Section
2.03(a).

     1.01.75 “Shareholder Goodwill Agreement” has the meaning set forth in
Section 2.01(d).

     1.01.76 “Shareholder Non-Competition Agreement” has the meaning set forth in
Section 2.01(c).

     1.01.77 “Shares” has the meaning set forth in the Preface above.

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     1.01.78 “Signing Date” has the meaning set forth in the Preface above.

     1.01.79 “Stock Purchase Price” has the meaning set forth in Section
2.03(a).

     1.01.80 “Subordination Agreement” has the meaning set forth in Section
3.01.15.

     1.01.81 “SWDA” has the meaning set forth in Section 4.01.21(e).

     1.01.82 “Tax” or “Taxes” means (i) any and all taxes, customs, duties,
tariffs, imposts, charges, deficiencies, assessments, levies or other like governmental
charges, including, without limitation, income, gross receipts, excise, real or personal
property, ad valorem, value added, estimated, alternative minimum, stamp, sales,
withholding, social security, occupation, use, service, service use, license, net worth,
payroll, franchise, transfer and recording taxes and charges, imposed by the IRS or any
other taxing authority (whether domestic or foreign including, without limitation, any
state, county, local or foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include any interest, fines,
penalties or additional amounts attributable to, or imposed upon, or with respect to, any
such amounts, (ii) any liability for the payment of any amounts described in (i) as a result
of being a member of an affiliated, consolidated, combined, unitary, or similar group or as
a result of transferor or successor liability, and (iii) any liability for the payment of
any amounts as a result of being a party to any tax sharing agreement or as a result of any
obligation to indemnify any other person with respect to the payment of any amounts of the
type described in (i) or (ii).

     1.01.83 “Tax Return” means any report, return, document, declaration, election
or other information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without limitation,
information returns and any documents with respect to or accompanying payments of estimated
Taxes or requests for the extension of time in which to file any such report, return,
document, declaration or other information.

     1.01.84 “True-up Amount” has the meaning set forth in Section 2.06(b).

     1.01.85 “TSI Group” means Purchaser, the Corporation and the LLC, collectively.

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ARTICLE II

SALE AND PURCHASE OF THE SHARES AND OTHER ASSETS

     2.01 Purchase and Sale of the Shares and Other Assets.

     (a) Purchase and Sale of the Shares. On the basis of the representations, warranties
and agreements set forth herein, Shareholder hereby sells, conveys, transfers, assigns and delivers
to Purchaser, effective as of the Effective Date, all of the Shares free and clear of all Liens,
and Purchaser hereby purchases the Shares from the Shareholder for the consideration described in
Section 2.03(a).

     (b) Purchase and Sale of the Intellectual Property. Contemporaneously with the
execution of this Agreement, the Purchaser, on one hand, and Shareholder and certain entities that
he controls (including RWL) (collectively, the “Lackey Parties”), on the other hand, shall enter
into an intellectual property assignment (the “Intellectual Property Assignment”), the form for
which is attached hereto as Exhibit A, pursuant to which the Lackey Parties will transfer
to the Purchaser the intellectual property rights owned by them and used in any Fan Accessories
that were, are, or have been conceived to be manufactured, marketed or sold in connection with the
Business as conducted by the LLC and/or the Corporation (the “Assigned Intellectual Property”) for
the consideration described in Section 2.03(b).

     (c) Shareholder Non-Competition Agreement. Contemporaneously with the execution of
this Agreement, Purchaser and Shareholder shall enter into a non-competition agreement (the
"Shareholder Non-Competition Agreement”), the form for which is attached hereto as Exhibit
B, for the consideration described in Section 2.03(c).

     (d) Shareholder Goodwill. Contemporaneously with the execution of this Agreement,
Purchaser and Shareholder shall enter into an agreement for the purchase and sale of personal
goodwill (the “Shareholder Goodwill Agreement”), the form for which is attached hereto as
Exhibit C, for the consideration described in Section 2.03(d).

     (e) Robert W. Lackey, Jr. Non-Competition Agreement. Contemporaneously with the
execution of this Agreement, Purchaser and Robert W. Lackey, Jr. shall enter into a non-competition
agreement (the “RLJ Non-Competition Agreement”), the form for which is attached hereto as
Exhibit D, for the consideration described in Section 2.03(e).

     (f) Robert W. Lackey, Jr. Goodwill. Contemporaneously with the execution of this
Agreement, Purchaser and Robert W. Lackey, Jr. shall enter into an agreement for the purchase and
sale of personal goodwill (the “RLJ Goodwill Agreement”), the form for which is attached hereto as
Exhibit E, for the consideration described in Section 2.03(f).

     (g) Imagine One Resources, LLC Consulting Agreement. Contemporaneously with the
execution of this Agreement, Purchaser and Imagine One Resources, LLC shall enter into a

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consulting agreement (the “Consulting Agreement”), the form for which is attached hereto as
Exhibit F, for the consideration described in Section 2.03(g).

     2.02 Instruments of Conveyance and Transfer of the Shares. Contemporaneously with the
execution of this Agreement, Shareholder is delivering to Purchaser stock certificates representing
the Shares, duly endorsed (or accompanied by duly executed stock power(s)).

     2.03 Consideration and Payment for the Shares and Other Assets.

     (a) As consideration for the purchase and sale of the Shares, Purchaser and Parent shall,
jointly and severally, pay to Shareholder $4,750,000 (subject to adjustment as described in
Section 2.03(h)) (the “Stock Purchase Price”). Purchaser and/or Parent shall pay the Stock
Purchase Price by paying (i) the Closing Payment to Shareholder by wire transfer of
immediately-available funds no later than 3:00 PM CDT on the Signing Date to the account(s)
previously designated in writing by the Shareholder to Purchaser (the “Shareholder Account”), (ii)
each monthly installment of the Settlement Amount to Shareholder in accordance with Section
2.04 and (iii) subject to adjustment as described in Section 2.03(h), $50,000 of each
monthly installment of the Additional Amount to Shareholder in accordance with Section 2.04
until the Stock Purchase Price is paid in full. In no event shall the amount paid by Purchaser for
the Shares exceed $4,750,000.

     (b) As consideration for the purchase and sale of the Assigned Intellectual Property pursuant
to the Intellectual Property Assignment, Purchaser and Parent shall, jointly and severally, pay to
the Lackey Parties $1,000,000 ((subject to adjustment as described in Section 2.03(h)) (the
“IP Purchase Price”). Purchaser shall pay the IP Purchase Price by paying $30,000 (subject to
adjustment as described in Section 2.03(h)) of each monthly installment of the Additional
Amount to the Lackey Parties in accordance with Section 2.04 until the IP Purchase Price is
paid in full. In no event shall the amount paid by Purchaser for the Assigned Intellectual
Property exceed $1,000,000.

     (c) As consideration for the Shareholder Non-Competition Agreement, Purchaser and Parent
shall, jointly and severally, pay to Shareholder an amount equal to 15.79% of the Remaining Monthly
Additional Amount (as defined in Section 2.03(h)) in accordance with Section 2.04.

     (d) As consideration for the Shareholder Goodwill Agreement, Purchaser and Parent shall,
jointly and severally, pay to Shareholder an amount equal to 21.05% of the Remaining Monthly
Additional Amount in accordance with Section 2.04.

     (e) As consideration for the RLJ Non-Competition Agreement, Purchaser and Parent shall,
jointly and severally, pay to Robert W. Lackey, Jr. an amount equal to 10.53% of the Remaining
Monthly Additional Amount in accordance with Section 2.04.

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     (f) As consideration for the RLJ Goodwill Agreement, Purchaser and Parent shall, jointly and
severally, pay to Robert W. Lackey, Jr. an amount equal to 10.53% of the Remaining Monthly
Additional Amount in accordance with Section 2.04.

     (g) As consideration for the Consulting Agreement, Purchaser and Parent shall, jointly and
severally, pay to Imagine One Resources, LLC an amount equal to 42.1% of the Remaining Monthly
Additional Amount in accordance with Section 2.04.

     (h) The available Additional Amount for each month shall be allocated (i) first, to any
deficit created by the Additional Amount from prior months being insufficient to pay in full the
$50,000 fixed monthly amount due for the Shares pursuant to Section 2.03(a)(iii) for such
prior months, (ii) second, to any deficit created by the Additional Amount from prior months being
insufficient to pay in full the $30,000 fixed monthly amount due for the Intellectual Property
pursuant to Section 2.03(b) for such prior months, (iii) third, to the $50,000 fixed
monthly amount due for the Shares pursuant to Section 2.03(a)(iii) and (iv) fourth, to the
$30,000 fixed monthly amount due for the Assigned Intellectual Property pursuant to Section
2.03(b), with the remaining Additional Amount for each month (the “Remaining Monthly Additional
Amount”) being allocated and paid pursuant to Sections 2.03(c)-(g). Should the cumulative
available Additional Amount with respect to the entire sixty-three month period be insufficient to
pay the full amounts due for the Shares pursuant to Section 2.03(a)(iii) and the
Intellectual Property pursuant to Section 2.03(b), the total consideration for those items
shall be automatically reduced by such deficit and the unfunded portion of each such amount shall
no longer be payable by Purchaser. In the event that there is no Remaining Monthly Additional
Amount for any month, no amounts will be paid by Purchaser pursuant to Sections
2.03(c)-(g).

     2.04 Payments of Amounts Due.

     (a) Each calendar month (and upon the Signing Date with respect to calendar months beginning
with the Effective Date and ending prior to the Signing Date), Purchaser and Parent shall, jointly
and severally, pay to Shareholder an amount equal to the sum of the Settlement Amount and
Additional Amount for the preceding month, which payment must be received by Shareholder on or
before the 15th day of such month. Payments not received by the 25th day of
such month shall accrue interest in accordance with Section 2.05. Purchaser and/or Parent
may make such payments by mailing a check to Shareholder; provided, however, that if on more than 2
occasions a check mailed to Shareholder by Purchaser and/or Parent is not postmarked by the
15th day of the applicable month or Shareholder receives any such payment after the
25th day of the applicable month, then Purchaser and/or Parent shall make all future
payments to Shareholder by either sending a check by nationally recognized overnight courier,
next-day delivery (in which case it shall be deemed to be received by Shareholder in accordance
with Section 7.01 of this Agreement), or by wire transfer of immediately available funds to
the Shareholder Account. Shareholder shall notify Purchaser of each check not postmarked by the
15th day of the applicable month and each payment that is not received by the
25th day of the applicable month.

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     (b) Shareholder shall accept such amounts on behalf of himself, and as agent for Robert W.
Lackey, Jr., Imagine One Resources, LLC and the Lackey Parties. Shareholder shall allocate and
disburse all such amounts in the manner specified in Section 2.03, and shall provide
Purchaser with a report specifying the allocations.

     2.05 Interest. Purchaser and Parent shall, jointly and severally, pay interest on any
amounts they owe under this Agreement that are not received by Shareholder (in his personal
capacity and as agent for certain other Parties, as described above) by the 25th day of
the applicable month at a rate equal to the Prime Rate plus one percent (1%) for the first 15 days
after the applicable due date and thereafter at a rate equal to the Prime Rate plus four percent
(4%) per annum.

     2.06 Acceleration of Amounts Due.

     (a) Upon the occurrence of any of the following events (each a “Triggering Event”),
Shareholder may elect, by providing written notice to Purchaser within 90 days of the occurrence of
such event, to accelerate all amounts due hereunder (in the manner described in Section
2.06(b)):

     (i) Purchaser or any other member of the TSI Group sells, assigns or otherwise
transfers all or substantially all of the Business to anyone who is not a member of the TSI
Group (the “New Party”) without providing written notice to Shareholder at least 90 days
prior to the effectiveness of such transaction, in which case, Adjusted Gross Profit will
thereafter be calculated by substituting for the TSI Group the New Party and such of its
Affiliates as is necessary to achieve the same economic effect set forth herein;

     (ii) Purchaser fails to pay any amount when due hereunder (including any amount due
under any other agreement listed in Section 3.02 hereof) and such failure is not
cured within thirty days after notice thereof is provided by Shareholder to Purchaser in the
manner required in Section 7.01; or

     (iii) Purchaser or any other member of the TSI Group sells, assigns or otherwise
transfers all or substantially all of the Business to a New Party, provided that Shareholder
shall have received written notice thereof at least 90 days prior to the effectiveness of
any such transaction, in which case, Adjusted Gross Profit will thereafter be calculated by
substituting for the TSI Group the New Party and such of its Affiliates as is necessary to
achieve the same economic effect set forth herein.

          (b) Should Shareholder elect to accelerate the amounts due hereunder pursuant to Section
2.06(a), Purchaser shall calculate an estimated Acceleration Amount based on the Relevant
12-Month Period described in Section 1.01.64(a) (the “Estimated Acceleration Amount”).
Purchaser and Parent shall, jointly and severally, pay the Estimated Acceleration Amount to
Shareholder by check mailed within 30 days of the date of the notice described in Section
2.06(a). If the Purchaser and Parent fail to pay the Estimated Acceleration Amount

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within 45 days of the date of the notice described in Section 2.06(a), Shareholder and
Robert W. Lackey, Jr. shall be automatically released from their obligations under the Shareholder
Non-Competition Agreement and the RLJ Non-Competition Agreement, respectively, and Imagine One
Resources, LLC shall be automatically released from its obligations under the Consulting Agreement.
Within 30 days after the end of the Relevant 12-Month Period described in Section
1.01.64(b), Purchaser shall calculate the Acceleration Amount. If the Acceleration Amount
exceeds the Estimated Acceleration Amount (such excess, if any, being the “True-up Amount”),
Purchaser and Parent shall, jointly and severally, pay the True-up Amount to Shareholder by check
mailed within such 30-day period.

     (c) The occurrence of a Triggering Event shall not suspend Purchaser’s or Parent’s payment
obligations under this Agreement; provided, however, that the payment of the Estimated Acceleration
Amount shall suspend Purchaser’s and Parent’s payment obligations under Sections 2.03 and
2.04 pending payment of the True-up Amount, if any. The payments made by Purchaser and/or
Parent pursuant to Sections 2.03 and 2.04 in respect of the month in which the
Triggering Event occurred and any month thereafter shall be credited against the Acceleration
Amount. The payment of the Acceleration Amount in full shall discharge Purchaser and Parent from
the payment of any other remaining amounts payable under Sections 2.03 and 2.04.
The Shareholder shall be solely responsible for allocating the Acceleration Amount among, and
paying the appropriate portions of the Acceleration Amount to, himself, Robert W. Lackey, Jr.,
Imagine One Resources, LLC and the Lackey Parties, in the manner required by Section 2.04.
If the amounts due under Sections 2.03 and 2.04 are accelerated, all
representations, warranties and covenants (including without limitation the payment obligations
under all Sections of this Agreement other than Sections 2.03 and 2.04) made by the
Parties herein (and the corresponding indemnification provisions) shall survive for the remainder
of the respective periods set forth herein. Notwithstanding the foregoing, in the event that
Shareholder does not elect to accelerate the payments due under Sections 2.03 and
2.04 as a result of a Triggering Event and if the New Party expressly assumes in writing
all of the Purchaser’s and Parent’s obligations under this Agreement, Purchaser’s and Parent’s
liability to Shareholder for payments due under Sections 2.03 and 2.04 shall not
exceed the Acceleration Amount that would have been payable as a result of such Triggering Event.

     2.07 Payment Calculation Dispute Resolution.

     (a) Purchaser and Shareholder shall use their reasonable efforts to resolve any dispute that
arises with respect to amounts that are payable under Sections 2.03, 2.04,
2.05 and 2.06. If Purchaser and Shareholder are unable to agree as to the amount
of any such payment within 45 days following the due date thereof, Purchaser and Shareholder shall
within such 45-day period jointly prepare and submit to a Resolution Accountant for resolution a
signed statement (each a “Dispute Notice”) setting forth (i) the amount(s) as to which the parties
agree, (ii) each party’s proposed amount(s) for the items as to which they do not agree, (iii) with
respect to the items in dispute, a reasonably detailed description of how each party arrived at its
amount and its objections to the other’s proposed amounts and (iv) the amount that each party
considers in dispute (the “Dispute Amount”). Each party shall promptly provide to the Resolution
Accountant

14

 

any additional requested information with respect to any matter covered by the Dispute Notice,
including without limitation any supporting documentation used by that party in preparing its
portion of the Dispute Notice. The Resolution Accountant shall decide all of such matters in
dispute, and its determination shall be final, conclusive and binding on Purchaser and Shareholder
with respect to the matters in dispute.

     (b) If any dispute is submitted to the Resolution Accountant for resolution as provided above,
the fees and disbursements of the Resolution Accountant shall be borne equally, one-half (1/2) by
Purchaser and one-half (1/2) by Shareholder; provided, however, that if the amount determined by
the Resolution Accountant is exactly the same amount proposed by one of the Parties, then the other
Party shall be responsible for 100% of the fees and disbursements owed to the Resolution
Accountant.

     (c) If a dispute has been referred to the Resolution Accountant, any amounts determined by the
Resolution Accountant to be owed by a party shall be paid to the other within ten (10) days of the
date on which the Resolution Accountant renders its decision.

ARTICLE III

DELIVERIES

     3.01 Shareholder’s Deliveries. Unless otherwise stated below, contemporaneously
herewith and subject to the terms and conditions set forth herein, Shareholder is hereby delivering
to Purchaser the following items:

     3.01.01 Shares. The stock certificates representing the Shares and all
instruments of conveyance and transfer required by Section 2.02.

     3.01.02 Corporate Minute Book. The Corporation’s minute book, containing a
file-stamped copy of the Corporation’s Articles of Incorporation, plus the Minutes, Bylaws
and all other contents thereof.

     3.01.03 Good Standing Certificates. Certificates from the Secretary of State
of the State of Georgia and each jurisdiction in which the Corporation is qualified to do
business, evidencing that the Corporation is existing and in good standing under the laws of
each such jurisdiction.

     3.01.04 Account Transfer Documents. All such instruments as may be necessary
to authorize Purchaser to become a signatory on the Corporation’s bank accounts.

     3.01.05 Resignations. Executed resignations of each officer and director of
the Corporation, effective upon the Signing Date.

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     3.01.06 Shareholder Non-Competition Agreement. A copy of the Shareholder
Non-Competition Agreement, dated and effective as of the Effective Date, executed by
Shareholder.

     3.01.07 RLJ Non-Competition Agreement. A copy of the RLJ Non-Competition
Agreement, dated and effective as of the Effective Date, executed by Robert W. Lackey, Jr.

     3.01.08 Intellectual Property Assignment. A copy of the Intellectual Property
Assignment, dated and effective as of the Effective Date, executed by the applicable Lackey
Parties.

     3.01.09 Goodwill Agreements. A copy of each of the Shareholder Goodwill
Agreement and the RLJ Goodwill Agreement, dated and effective as of the Effective Date,
executed by Shareholder and Robert W. Lackey, Jr., respectively.

     3.01.10 Services Agreement. Evidence of the assignment of the Services
Agreement by HI to the Corporation.

     3.01.11 Assignment Agreement. Evidence of the assignment of a 50% membership
interest in the LLC by HI to the Corporation.

     3.01.12 Appointment of Shareholder as Agent. A copy of a appointment and
release, dated and effective as of the Signing Date, and executed by Robert W. Lackey, Jr.,
Image One Resources, LLC and the Lackey Parties, in which each such person appoints
Shareholder as its agent for receipt of all monies due to it pursuant to Sections
2.03, 2.04 and 2.05 of this Agreement and releases Purchaser from any
and all liability with regard to Shareholder’s failure to properly pay and distribute such
amounts to such persons.

     3.01.13 Consulting Agreement. A copy of the Consulting Agreement, dated and
effective as of the Effective Date, executed by Imagine One Resources, LLC.

     3.01.14 Security Agreement. A copy of the security agreement (the “Partially
Subordinate Security Agreement”) granting Shareholder, Robert W. Lackey, Jr., Imagine One
Resources, LLC and the other Lackey Parties a security interest in (i) all of the assets of
the Business as conducted by any member of the TSI Group and (ii) all of the membership
interest in the LLC, dated as of the Signing Date, and executed by Shareholder, on behalf of
himself and as agent for Robert W. Lackey, Jr., Imagine One Resources, LLC and the other
Lackey Parties, the form for which is attached hereto as Exhibit G.

     3.01.15 Subordination Agreement. A copy of the subordination agreement (the
“Subordination Agreement”), dated as of the Signing Date, and executed by Shareholder, on
behalf of himself and as agent for Robert W. Lackey, Jr., Imagine One

16

 

Resources, LLC and the other Lackey Parties, the form for which is attached hereto as
Exhibit H.

     3.02 Purchaser’s Deliveries. Unless otherwise stated below, contemporaneously
herewith and subject to the terms and conditions set forth herein, Purchaser is hereby delivering
the following to Shareholder:

     3.02.01 Closing Payment. The Closing Payment, which shall be paid in
accordance with Section 2.03(a)(i).

     3.02.02 Corporate Resolutions. Resolutions of the board of directors of
Purchaser and Parent, dated on or before the Signing Date, authorizing the purchase of the
Shares and the other transactions contemplated by this Agreement and the performance of
Purchaser’s and Parent’s other obligations under this Agreement.

     3.02.03 Shareholder Non-Competition Agreement. A copy of the Shareholder
Non-Competition Agreement, dated and effective as of the Signing Date, executed by
Purchaser.

     3.02.04 RLJ Non-Competition Agreement. A copy of the RLJ Non-Competition
Agreement, dated and effective as of the Signing Date, executed by Purchaser.

     3.02.05 Intellectual Property Assignment. A copy of the Intellectual Property
Assignment, dated and effective as of the Signing Date, executed by Purchaser.

     3.02.06 Consulting Agreement. A copy of the Consulting Agreement, dated and
effective as of the Signing Date, executed by Purchaser.

     3.02.07 Goodwill Agreements. A copy of each of the Shareholder Goodwill
Agreement and the RLJ Goodwill Agreement, dated and effective as of the Signing Date, each
executed by Purchaser.

     3.02.08 Security Agreement. A copy of the Partially Subordinate Security
Agreement, dated as of the Signing Date, and executed by Purchaser, the Corporation and the
LLC.

     3.02.08 Subordination Agreement. A copy of the Subordination Agreement, dated
as of the Signing Date, and executed by Parent, Purchaser, the Corporation, the LLC and THE
FROST NATIONAL BANK, a national banking association,.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     4.01 Representations and Warranties of the Shareholder. To induce Purchaser to enter
into this Agreement and to consummate the transactions contemplated hereby, Shareholder represents
and warrants, as of the Signing Date, as follows (except with respect to the LLC and the Business
conducted by the LLC, which are each expressly excluded from the scope of each and every
representation and warranty hereunder except as provided in Sections 4.01.07, 4.01.10, 4.01.26
and 4.01.27):

     4.01.01 Authorization. Shareholder has full power, capacity and authority to
execute and deliver this Agreement and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Shareholder enforceable in
accordance with its terms and conditions. Shareholder need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government,
governmental agency or other third party in connection with the execution of this Agreement
or the consummation of the transactions contemplated hereby.

     4.01.02 Corporate Existence and Authority. The Corporation is a corporation
duly organized, validly existing and in good standing under the laws of the State of
Georgia. It has all requisite corporate power and authority to own its assets and to
conduct its business as currently conducted. The Corporation is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned or used by
it, or in the nature of the activities conducted by it, requires such qualification, except
where the failure to so qualify would not reasonably be expected to have a Material Adverse
Effect.

     4.01.03 Capitalization of the Corporation. The authorized capital stock of the
Corporation consists of One Hundred Thousand (100,000) shares of common stock, par value $1
per share, of which one thousand (1,000) shares are issued and outstanding and constitute
the Shares. All of the Shares have been duly and validly issued in accordance and
compliance with all applicable laws, rules and regulations and are fully paid and
nonassessable. There are no options, warrants, rights, calls, commitments, plans, contracts
or other agreements of any character granted or issued by the Corporation which provide for
the purchase, issuance or transfer of any shares of the capital stock of the Corporation,
nor are there any outstanding securities granted or issued by the Corporation that are
convertible into any shares of the capital stock of the Corporation, and none is authorized.
The Corporation is not obligated or committed to purchase, redeem or otherwise acquire any
of its capital stock. All presently exercisable voting rights in the Corporation are vested
exclusively in its outstanding shares of common stock, each share of which is entitled to
one vote on every matter to come before the Corporation‘s shareholders, and other
than as may be contemplated by this Agreement,

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and there are no voting trusts or other voting arrangements with respect to any of the
Corporation‘s capital stock.

     4.01.04 No Conflict. Neither the execution and delivery of this Agreement by
the Shareholder nor the consummation or performance of the Shareholder’s or Corporation’s
obligations hereunder will, directly or indirectly (with or without notice or lapse of
time): (i) contravene, conflict with, or result in a violation of (A) any provision of the
Articles of Incorporation of the Corporation, or (B) any resolution adopted by the board of
directors or the stockholders of the Corporation; (ii) contravene, conflict with, or result
in a violation of, or give any third party the right to challenge any of the transactions
contemplated hereby or to exercise any remedy or obtain any relief under, any law or any
order to which the Corporation or Shareholder, or any of the assets owned or used by the
Corporation may be subject; (iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any governmental authority the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any governmental authorization that is held
by the Corporation or that otherwise relates to the business conducted by the Corporation or
any of the assets owned or used by the Corporation; (iv) cause the Corporation to become
subject to, or become liable for, the payment of any Tax, (v) contravene, conflict with, or
result in a violation or breach of any provision of, or give any third party the right to
declare a default or exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any contract to which the Corporation or Shareholder
is a party; or (vi) result in the imposition or creation of any Lien upon the Shares.

     4.01.05 No Brokers Fees; No Commissions. All negotiations relative hereto and
the transactions contemplated hereby have been carried on by Shareholder directly with
Purchaser without any act by Shareholder that would give rise to any claim against Purchaser
or the Corporation for a brokerage commission, finder’s fee or other similar payment.

     4.01.06 Title to and Condition of Properties. The Corporation owns no real
property. Except as set forth in Schedule 4.01.06, the Corporation has good and
indefeasible title to all of its Personal Properties, including those reflected on the
Balance Sheet and any personal properties purchased or otherwise acquired since the date of
the Balance Sheet, free and clear of all Liens. All such personal properties are free from
material defects, have been maintained in accordance with normal industry practice, and are
in good operating condition (subject to normal wear and tear). Schedule 4.01.06
sets forth a list of all personal properties owned by the Corporation that currently have a
fair market value of at least $500.

     4.01.07 Intellectual Property. The Assigned Intellectual Property constitutes
all of the intellectual property rights owned by Shareholder or any of his Affiliates that
are used in any Fan Accessories that were, are, or have been conceived to be manufactured,
marketed or sold in connection with the Business as conducted by the

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LLC and/or the Corporation. Except as set forth in Schedule 4.01.07, the
intellectual property rights owned or licensed by the Corporation, together with the
Assigned Intellectual Property (collectively, the “Intellectual Property Rights”) are free
and clear of all Liens. To the Knowledge of Shareholder, none of the Intellectual Property
Rights have been infringed by any third party. To the Knowledge of Shareholder, the
Intellectual Property Rights are valid and enforceable, are in full force and effect, and
neither the Corporation nor Shareholder has taken any action, or failed to take an action,
that might have the effect of estopping or otherwise limiting the Corporation’s or
Shareholder’s right to enforce the Intellectual Property Rights against others. To the
Knowledge of Shareholder, neither the Corporation nor the LLC has infringed, misappropriated
or otherwise violated any intellectual property rights of any third party, and neither the
Corporation nor Shareholder has received any notice alleging such infringement,
misappropriation or violation.

     4.01.08 Receivables. All accounts receivable of the Corporation represent
valid and bona fide claims and were acquired or arose in the ordinary course of business.

     4.01.09 Inventory. All inventory of the Corporation, whether or not reflected
in the Balance Sheet, consists of a quality and quantity usable and salable in the ordinary
course of business, except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in the Balance Sheet.

     4.01.10 Ownership of the LLC. The Corporation owns 50% of the Membership
Interests (as defined in the operating agreement of the LLC) in the LLC free and clear of
all Liens.

     4.01.11 Operation of the Business. Since its existence, the Corporation has
not engaged in any material business other than the businesses of (i) buying, selling and/or
designing medallions and (ii) owning a membership interest in the LLC.

     4.01.12 Absence of Certain Liabilities. The Corporation has no liabilities or
obligations of any nature (whether known or unknown and whether absolute, accrued,
contingent or otherwise) except for liabilities (i) that are reflected in the Balance Sheet,
(ii) that have arisen after the date of the Balance Sheet in the ordinary course of business
or (iii) that are the Corporation’s obligations under the contracts to which it is a party,
excluding liabilities for breaches thereof occurring prior to the Signing Date.

     4.01.13 Compliance with Laws. Except with respect to compliance with Tax Laws
and Environmental, Health, and Safety Laws, which are covered exclusively in Sections
4.01.14 and 4.01.21, respectively, and are not covered by this Section 4.01.13:

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     (a) The Corporation has at all times since January 1, 2001 been, and presently is, in
material compliance with, and has not received notice of any claimed violation of, any
applicable federal, state, local, foreign and other laws, rules and regulations.

     (b) The Corporation has filed all returns, reports and other documents and furnished
all information required or requested by any federal, state, local or foreign governmental
agency, and all such returns, reports, documents and information are true and complete in
all material respects. To the Knowledge of Shareholder, all permits, licenses, orders,
franchises and approvals of all federal, state, local and foreign governmental or regulatory
bodies required of the Corporation to conduct its business have been obtained, and timely
renewal applications filed, and no violations are or have been recorded in respect of any
such permits, licenses, orders, franchises and approvals. Such permits, licenses, orders,
franchises and approvals are valid and sufficient for all activities presently carried on by
the Corporation, except for matters that would not reasonably be expected to have a Material
Adverse Effect.

     4.01.14 Taxes. Except as set forth on Schedule 4.01.14:

     (a) The Corporation has (I) timely filed (or there has been timely filed on its behalf)
with the appropriate governmental entities all income and other Tax Returns required to be
filed by it (giving effect to all extensions) and such Tax Returns are true, correct and
complete in all material respects; (II) timely paid in full (or there has been timely paid
in full on its behalf) all income and other Taxes reflected on its Tax Returns or otherwise
required to have been paid by it; and (III) complied in all material respects with all
applicable laws, rules and regulations relating to the filing of Tax Returns, the payment
and withholding of Taxes and has, within the time and in the manner prescribed by law,
withheld and paid over to the proper governmental entities all amounts required to be so
withheld and paid over under applicable laws.

     (b) (I) No federal, state, local or foreign audits or other administrative proceedings
or court proceedings are presently pending with regard to any Taxes or Tax Returns of the
Corporation, and the Corporation has not received a written notice of any pending or
proposed claims, audits or proceedings with respect to Taxes, (II) the Corporation has not
received any notice of deficiency or assessment from any governmental entity for any amount
of Tax that has not been fully settled or satisfied, and, to the Knowledge of Shareholder,
no such deficiency or assessment is proposed or threatened, (III) no claim has been made in
writing by any governmental entity in a jurisdiction where the Corporation does not file Tax
Returns that any such entity is, or may be, subject to taxation by that jurisdiction, (IV)
there are no Liens for Taxes upon any property or assets of the Corporation, except for
Liens for Taxes not yet due or for Taxes which are being contested in good faith by
appropriate proceedings, (VI) no currently effective waivers, extensions, or comparable
consents regarding the application of the statute of limitations with respect to Taxes or
Tax Returns has been given by or on behalf of the Corporation, (VII) the Corporation is not
a party to any agreement or

21

 

understanding providing for the allocation or sharing of Taxes and (VIII) the
Corporation has not granted in writing any power of attorney which is currently in force
with respect to any Taxes or Tax Return.

     (c) The Corporation (I) has not constituted either a “distributing corporation” or a
“controlled corporation” (within the meaning of Code Section 355(a)(1)(A)) in a distribution
of stock to which Code Section 355 (or so much of Code Section 356 as relates to Code
Section 355) applies and which occurred within two years of the date of this Agreement, (II)
has not agreed and is not required, to make any material adjustment under Code Section 481
affecting any taxable year, (III) will not be required to include any amount in income for
any taxable period (or portion thereof) ending after the Effective Date as a result to a
change in the method of accounting for a taxable period ending prior to the Effective Date,
(IV) has not made any payments, is not obligated to make any payments, and is not a party to
any agreement that under certain circumstances could obligate it to make any payments that
will not be deductible under Code Section 280G or 162(m), (V) has not been a United States
real property holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii), and (VI) has not been included
in any “consolidated,” “unitary” or “combined” Tax Return provided for under the laws of the
United States, any foreign jurisdiction or any state or locality with respect to Taxes for
any taxable year.

     (d) The Corporation has made available to Purchaser correct and complete copies of (I)
all of its Tax Returns filed within the past three years, (II) all audit reports, letter
rulings, technical advice memoranda and similar documents issued by a governmental entity
within the past five years relating to the federal, state, local or foreign Taxes due from
or with respect to the Corporation, and (III) any closing letters or agreements entered into
by the Corporation with any governmental entities within the past five years with respect to
Taxes.

     4.01.15 No Material Adverse Changes. Since the date of the Balance Sheet,
there has not been any event or condition that has had, or would reasonably be expected to
have, a Material Adverse Effect.

     4.01.16 Disputes and Litigation. Except as noted on Schedule 4.01.16:

     (a) There is no suit, action, litigation, proceeding, investigation, claim, complaint
or accusation pending or, to the Knowledge of Shareholder, threatened against or affecting
the Corporation or any of its properties, assets or its business or to which the Corporation
is a party, in any court or before any arbitrator of any kind or before or by any
governmental agency (including, without limitation, any federal, state, local, foreign or
other governmental department, commission, board, bureau, agency or instrumentality), and to
the Knowledge of Shareholder, there is no basis for any such suit, action, litigation,
proceeding, investigation, claim, complaint or accusation.

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     (b) There is no outstanding order, writ, injunction, decree, judgment or award by any
court, arbitrator or governmental body against or affecting the Corporation or any of its
properties, assets or its business that would have a Material Adverse Effect.

     4.01.17 Contracts. Schedule 4.01.17 contains a true and complete list
of all Contracts to which the Corporation is a party or by which its properties may be bound
and under which the Corporation is entitled to receive (in money, services or property) or
is obligated to pay (in money, services or property) at least $2,000 (the “Material
Contracts”). All of the Material Contracts were entered into in the ordinary course of
business, are in full force and effect and are valid, binding and enforceable against the
Corporation in accordance with their respective terms. The Corporation has not materially
breached any Material Contract and, to the Knowledge of the Shareholder: (i) no other party
thereto has materially breached any Material Contract and (ii) no event has occurred which,
with notice or lapse of time or both, would constitute a material breach of any Material
Contract by any party thereto.

     4.01.18 Banking Arrangements and Powers of Attorney. Schedule 4.01.18
sets forth a true and complete list of the name of each bank in or with which the
Corporation has an account and a brief description of each such account; and the names of
all persons, if any, now holding powers of attorney from the Corporation and a summary
statement of the terms thereof.

     4.01.19 Financial Statements; Books and Records. Attached as Exhibit I
is the unaudited balance sheet of the Corporation as of June 30, 2006 (the “Balance Sheet”).
The Balance Sheet is true and correct in all material respects as of that date, and there
are no material liabilities, obligations or indebtedness that were owed or owing by the
Corporation as of that date that are not shown on the Balance Sheet. The Balance Sheet was
prepared in accordance with GAAP, subject to normal recurring year-end adjustments ((the
effect of which will not, individually or in the aggregate, be materially adverse) and the
absence of notes). Since the date of the Balance Sheet, the Corporation has not incurred
any liabilities, obligations or indebtedness except in the ordinary course of business and
as provided on Schedule 4.01.19. The Balance Sheet accurately presents the
financial condition of the Corporation in all material respects as of the date thereof.

     Except as otherwise provided in Schedule 4.01.19, the Corporation’s books and
records (including without limitation, all financial records, business records, minute
books, stock transfer records, client lists, referral source lists and records pertaining to
services or products delivered to clients) (i) are complete and correct in all material
respects, and all transactions to which the Corporation is a party are accurately reflected
therein, (ii) have been maintained in accordance with customary and sound business practices
in the Corporation’s industry, (iii) form the basis for all of the Corporation’s financial
statements and (iv) accurately reflect the assets, liabilities, financial position and
results of operations of the Corporation in all material respects.

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     4.01.20 Insurance. Schedule 4.01.20 sets forth the following
information with respect to each material insurance policy (including policies providing
property, casualty, liability, and workers’ compensation coverage and bond and surety
arrangements) to which the Corporation is a party, a named insured, or otherwise the
beneficiary of coverage: (i) the name of the insurer, the name of the policyholder, and the
name of each covered insured; (ii) the policy number; and (iii) the amount (including a
description of how deductibles and ceilings are calculated and operate) of coverage.

With respect to each such insurance policy: (i) the policy is legal, valid, binding,
enforceable, and in full force and effect in all material respects; (ii) neither the
Corporation nor any other 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
which, 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 (iii) no party
to the policy has repudiated any material provision thereof. Each such policy is issued by
an insurer that is financially sound and reputable.

     4.01.21 Environmental, Health and Safety Matters.

     (a) The Corporation has complied and is in compliance, in each case in all material
respects, with all Environmental, Health, and Safety Laws.

     (b) Without limiting the generality of the foregoing, the Corporation has obtained, has
complied, and is in compliance with, in each case in all material respects, all material
permits, licenses and other authorizations that are required pursuant to Environmental,
Health, and Safety Laws for the occupation of its facilities and the operation of its
business. Further, the Corporation has timely applied for the renewal of such permits so
that such permits will remain in full force and effect during the pendency of the renewal
application. Included in Schedule 4.01.21 is a list of those permits.

     (c) The Corporation has not received and is not aware of any facts that reasonably
would form the basis for any written or oral notice, report or other information regarding
any actual or alleged material violation of Environmental, Health, and Safety Laws, or any
material liabilities or potential material liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any material investigatory, remedial or
corrective obligations, relating to it or its facilities arising under Environmental,
Health, and Safety Laws.

     (d) No (I) underground storage tanks, (II) asbestos-containing material in any friable
and damaged form or condition, (III) materials or equipment containing polychlorinated
biphenyls, or (IV) landfills, surface impoundments, or disposal areas exists at any property
or facility owned or operated by the Corporation or, to the Knowledge of Shareholder,
existed, during its period of ownership or operation, at any property or facility formerly
owned or operated by the Corporation.

24

 

     (e) The Corporation has not treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any Hazardous Material at any property or
facility owned or operated by it in a manner that has given or would give rise to material
liabilities, including any material liability for response costs, corrective action costs,
personal injury, property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
(“CERCLA”) or the Solid Waste Disposal Act, as amended (“SWDA”) or any other Environmental,
Health, and Safety Laws. The Corporation does not own or operate any facility upon which
there has been a release of any Hazardous Materials that occurred during the time the
Corporation owned or operated such facility. There was no release or threatened release of
Hazardous Materials on any site formerly owned or operated by the Corporation that occurred
during the time the Corporation owned or operated such site. To the Knowledge of
Shareholder, no asbestos containing material in a friable or damaged condition is located on
any property owned or operated by the Corporation.

     (f) Neither this Agreement nor the consummation of the transaction that is the subject
of this Agreement will result in any material obligations for site investigation or cleanup,
or notification to or consent of government agencies or third parties, pursuant to any of
the so-called “transaction-triggered” or “responsible property transfer” Environmental,
Health, and Safety Laws.

     4.01.22 Absence of Certain Changes and Events. Except as set forth in
Schedule 4.01.22, since the date of the Balance Sheet, the Corporation has conducted
its business only in the ordinary course of business and there has not been any: (i) change
in the Corporation’s authorized or issued capital stock; (ii) amendment to the Articles of
Incorporation, Bylaws or other organizational documents of the Corporation; (iii) payment or
increase by the Corporation of any bonuses, salaries, or other compensation to any
stockholder, director or officer; (iv) damage to or destruction or loss of any asset or
property of the Corporation, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of the
Corporation; (v) except for the acquisition of the Membership Interest (as defined in the
operating agreement of the LLC) in the LLC, entry into, termination of, or receipt of notice
of termination of any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or any Contract or transaction involving a total remaining
commitment by or to the Corporation of at least $10,000; (vi) sale (other than sales of
inventory in the ordinary course of business), lease, or other disposition of any asset or
property of the Corporation or imposition of any Lien on any material asset or property of
the Corporation; (vii) cancellation or waiver of any claims or rights with a value to the
Corporation in excess of $10,000; (viii) material change in the accounting methods used by
the Corporation; or (ix) agreement, whether oral or written, by the Corporation to do any of
the foregoing.

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     4.01.23 Relationship with Related Persons. Neither Shareholder nor an
Affiliate of Shareholder has any claim or right against the Corporation.

     4.01.24 Customers and Suppliers.

     (a) Schedule 4.01.24 lists all of the direct customers of the Corporation for
each of the two most recent fiscal years and sets forth opposite the name of each such
customer the percentage of net sales attributable to such customer.

     (b) Since the date of the Balance Sheet, no supplier, vendor or service provider of the
Corporation, including but not limited to Technimark, Inc. and Big E, has indicated that it
shall stop, or decrease the rate of, supplying materials, products or services to the
Corporation, and no customer listed on Schedule 4.01.24 has indicated that it shall
stop, or decrease the rate of, buying materials, products or services from the Corporation.

     4.01.25 Employees and Benefit Plans. The Corporation has no employees. No
liability with respect to any Plan will become an obligation or liability of the Corporation
or Purchaser. Neither the Corporation nor any of its ERISA Affiliates has ever sponsored,
contributed, maintained, been required to contribute to or had any liability, contingent or
otherwise with respect to any Plan subject to Title IV of ERISA or Section 412 of the Code,
including, without limitation, any “multiemployer plan” (as defined in Section 3(37) of
ERISA).

     4.01.26 Relationship with Customers. Except for items listed on Schedule
4.01.26, Shareholder has no Knowledge of any plans or intentions of any Major Customer
of the Corporation or the LLC that could adversely affect the future earnings of the
Business as presently conducted by the LLC.

     4.01.27 LLC Operating Agreement. Except for Fan Accessories sold by HI and/or
the Corporation to Starcrest of California located in Perris, California, to Shareholder’s
Knowledge, neither the Corporation nor HI has breached the operating agreement of the LLC,
and no event has occurred which, with notice or lapse of time or both, would constitute a
breach of the operating agreement of the LLC by the Corporation or HI.

     4.01.28 Disclosure. No representation or warranty of Shareholder in this
Agreement and no statement in any Schedule hereto omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in which they were
made, not misleading.

     4.02 Representations and Warranties of Purchaser. To induce Shareholder to enter into
this Agreement and to consummate the transactions contemplated hereby, Purchaser represents and
warrants, as of the Signing Date, as follows:

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     4.02.01 Power and Authority. Purchaser and Parent each has the requisite power
and authority to enter into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and each certificate, document and agreement to be
executed and delivered by Purchaser and Parent in connection herewith (the “Purchaser
Documents”) and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by Purchaser and Parent, as applicable, and no other
proceedings on the part of Purchaser or Parent are necessary to authorize this Agreement or
the Purchaser Documents or to consummate the transactions contemplated hereby or thereby.
This Agreement and the Purchaser Documents have been duly executed and delivered by
Purchaser and Parent and are legal, valid and binding obligations of Purchaser and Parent,
enforceable against them in accordance with their terms. Except as required by the federal
securities laws, Purchaser need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government, governmental agency or other third
party in connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby. Neither the execution and delivery of this Agreement nor
the consummation or performance of the transaction contemplated hereby will, directly or
indirectly (with or without notice or lapse of time): (i) contravene, conflict with, or
result in a violation of (A) any provision of the Articles of Incorporation of Purchaser or
Parent, or (B) any resolution adopted by the board of directors or the stockholders of
Purchaser or Parent; (ii) contravene, conflict with, or result in a violation of, or give
any third party the right to challenge any of the transactions contemplated hereby or to
exercise any remedy or obtain any relief under, any law or any order to which the Purchaser
or Parent, or any of the assets owned or used by them may be subject; (iii) contravene,
conflict with, or result in a violation of any of the terms or requirements of, or give any
governmental authority the right to revoke, withdraw, suspend, cancel, terminate, or modify,
any governmental authorization that is held by Purchaser or Parent or that otherwise relates
to their businesses, or any of the assets owned or used by them.

     4.02.02 No Brokers Fees; No Commissions. All negotiations relative hereto and
the transactions contemplated hereby have been carried on by Purchaser directly with
Shareholder without any act by Purchaser that would give rise to any claim against
Shareholder or the Corporation for a brokerage commission, finder’s fee or other similar
payment.

     4.02.03 Acquisition of Shares. Purchaser is acquiring the Shares for
investment for its own account, not as a nominee or agent, and not with a view to, or sale
or resale in connection with, any distribution within the meaning of Section 2(11) of the
Securities Act. Purchaser has no present intention of selling, granting any participation
in or otherwise distributing the Shares, and Purchaser has no contract, undertaking,
agreement or arrangement with any person to sell, transfer, grant participations to such
person or to any third person, with respect to any of the Shares. Purchaser understands
that the Shares are characterized as “restricted securities” under the federal securities
laws inasmuch as they are being acquired from Shareholder in a transaction not involving

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a public offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act, as amended, only in certain limited
circumstances.

     4.02.04 Other Buyers. Except as set forth in Schedule 4.02.04, no
other business entity has notified Purchaser or any of its Affiliates that it is interested
in purchasing the Business of the LLC, or any material part thereof, and, to the knowledge
of Purchaser and any of its Affiliates, no other business entity is interested in purchasing
the Business of the LLC, or any material part thereof. Neither Purchaser nor any of its
Affiliates has conducted any negotiations with any other person or entity with respect to
the purchase of the Business of the LLC, and neither Purchaser nor any of its Affiliates has
any current plans to sell the Business of the LLC to another person or entity.

     4.02.05 LLC Operating Agreement. Except with regard to late payments and the
failure to pay interest on such late payments, Purchaser has not breached the operating
agreement of the LLC, and no event has occurred which, with notice or lapse of time or both,
would constitute a breach of the operating agreement of the LLC by Purchaser.

ARTICLE V

COVENANTS

     5.01 Further Actions. If, after the Effective Date, any further action is necessary
to carry out the purposes of this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and documents) at their own
expense (unless and to the extent such Parties are entitled to indemnification therefor under
Article VI of this Agreement) as one or more of the other Parties reasonably may request.

     5.02 Litigation Support. In the event and for so long as Purchaser or the Corporation
is actively contesting or defending against any action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand in connection with any transaction contemplated under this
Agreement or any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction that exists on or prior to the
Effective Date involving the Corporation, Shareholder will cooperate with Purchaser or the
Corporation and its counsel in the contest or defense, and provide such testimony and access to
those books and records as shall be necessary in connection with the contest or defense, all at the
sole cost and expense of Purchaser (unless and to the extent the Purchaser is entitled to
indemnification therefor under Article VI of this Agreement).

     5.03 Transition. Shareholder will refer all customer inquiries relating to the
Business to Purchaser from and after the Effective Date until the end of the Restricted Period (as
defined in the Shareholder Non-Competition Agreement).

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     5.04 Operation of Business.

     (a) Purchaser shall use commercially reasonable efforts to maintain and grow the Business as
conducted by the TSI Group. Until such time as all amounts to be paid by Purchaser pursuant to
Sections 2.03, 2.04 and 2.05 of this Agreement have been paid in full, (i)
no member of the TSI Group shall purchase Fan Accessories from anyone other than a non-Affiliate of
the Parent, (ii) no member of the TSI Group shall sell Fan Accessories to anyone other than a
non-Affiliate of Parent and (iii) Parent shall not, and Parent shall cause its Affiliates to not,
directly or indirectly, except through any TSI Group member, engage or invest in, own, manage,
operate, finance, control, or participate in the ownership, management, operation, financing, or
control of, lend credit to or render services or advice to, any business that competes with the
Business as conducted by one or more members of the TSI Group.

     (b) Until such time as all amounts to be paid by Purchaser pursuant to Sections 2.03,
2.04 and 2.05 of this Agreement have been paid in full, (i) Purchaser shall
promptly notify Shareholder should the TSI Group decide to decline to pursue or continue all or any
material part of the Business then being conducted with a Major Customer or any Major Customer
indicates that it may discontinue all or any material part of the Business then being conducted
with the TSI Group, (ii) each of Purchaser and Shareholder shall promptly notify the other of any
facts or circumstances (including the request by a Major Customer for terms and conditions, or
changes to terms and conditions, that are unacceptable to any member of the TSI Group) that could
reasonably result in the loss or discontinuance of all or any material part of the Business then
being conducted with the TSI Group by any Major Customer and (iii) if Purchaser requests,
Shareholder shall provide advice and consultation to Purchaser to assist it and/or the other
members of the TSI Group in trying to retain such Business.

     (c) Until all amounts to be paid by Purchaser pursuant to Sections 2.03, 2.04
and 2.05 of this Agreement have been paid in full, should the TSI Group decide to decline
to pursue or continue all or any material part of the Business then being conducted with a Major
Customer or a Major Customer indicates that it may discontinue all or any material part of the
Business then being conducted with the TSI Group, then provided that (i) Shareholder has not
defaulted with respect to his obligations under Section 5.04(b), (ii) Shareholder has not defaulted
with respect to any of his obligations under the Shareholder Non-Competition Agreement, (iii)
Robert W. Lackey, Jr. has not defaulted with respect to any of his obligations under the RLJ
Non-Competition Agreement, (iv) Imagine One Resources, LLC has not defaulted with respect to any of
its obligation under the Imagine One Resources, LLC Consulting Agreement and (v) if requested by
the TSI Group, Shareholder has tried in good faith to assist the TSI Group in retaining such
Business but, despite such efforts, the Major Customer continues to indicate or maintain that it
will not continue such Business with the TSI Group, Shareholder may elect to pursue such Business
with such Major Customer (the “Re-acquired Business”) for his own account upon providing a
certificate to Purchaser stating that Shareholder has satisfied the conditions of this Section
5.04(c) and identifying the Re-acquired Business that Shareholder intends to pursue. If Purchaser
does not agree that Shareholder has the right to pursue such Re-acquired Business, Purchaser shall
give written notice to Shareholder prior to 6:00 p.m.

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Charlotte, North Carolina, time on the 15th day after delivery of such certificate, and
Shareholder shall be deemed to have the right to pursue such Re-acquired Business if Purchaser has
not by then given Shareholder written notice of objection. Any notice of objection shall set forth
in reasonable detail the basis for each objection. Notwithstanding the foregoing, if such Major
Customer gives such Re-acquired Business to a third party as evidenced by the delivery of products
to such Major Customer, then Shareholder may not thereafter during the Restricted Period (as
defined in the Shareholder Non-Competition Agreement) pursue or obtain such Re-acquired Business
unless he has first tried in good faith to assist the TSI Group in regaining such Re-acquired
Business and either (i) the TSI Group has declined to pursue such Re-acquired Business or (ii)
despite such efforts, such Major Customer has indicated that it will not give such Re-acquired
Business to the TSI Group.

In the event that Shareholder elects to pursue any Re-acquired Business, in accordance with the
terms and conditions of this Section 5.04(c), except as provided below, (i) Shareholder and
Robert W. Lackey, Jr. shall be released from their obligations under the Shareholder
Non-Competition Agreement and the RLJ Non-Competition Agreement, respectively, but only to the
extent that such obligations relate to the Re-acquired Business with such Major Customer and (ii)
Shareholder and his Affiliates shall be deemed to have received a nonexclusive license with respect
to the intellectual property rights owned or licensed by Parent and its Affiliates to the extent
such intellectual property rights are required to pursue the Re-acquired Business and (iii) until
the end of the Restricted Period (as defined in the Shareholder Non-Competition Agreement),
Shareholder shall pay to Parent or Parent’s designee within 20 days following the end of each month
a royalty fee, together with a full written report which is subject to audit, equal to 22% of
Adjusted Gross Profit of the Re-acquired Business (calculated by substituting for the TSI Group,
Shareholder and such of his Affiliates as is necessary to achieve the same economic effect set
forth herein). Notwithstanding the foregoing, for so long as the TSI Group retains any material
line(s) of Business with any such Major Customer, Shareholder’s and Robert W. Lackey, Jr.’s
obligations under the Shareholder Non-Competition Agreement and the RLJ Non-Competition Agreement,
respectively, shall continue to apply with respect to such retained line(s) of Business.

Shareholder’s pursuit and assumption of the Re-acquired Business shall not reduce, or be a credit
against, any amounts due from Parent or Purchaser under Sections 2.03 and 2.04 of this Agreement.
In the event that Shareholder elects to pursue and obtains the Re-acquired Business, as evidenced
by the receipt of purchase orders or the delivery of products to the Major Customer, Purchaser and
Parent shall not, and Parent shall cause its Affiliates to not, directly or indirectly, solicit or
obtain such Re-acquired Business; provided, however, that Purchaser, Parent and/or their Affiliates
shall be entitled to solicit and obtain the Re-acquired Business upon the earlier to occur of the
following: (i) the termination of the Restricted Period, (ii) Shareholder or his Affiliates
declines to pursue or continue all or any material part of the Re-acquired Business then being
conducted with the Major Customer or (iii) the Major Customer discontinues all or any material part
of the Re-acquired Business then being conducted with the Shareholder and/or his Affiliates.

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     5.05 Modular Medallions. Shareholder has recently invented a new concept referred to
as “Modular Medallions” and is transferring all right, title and interest in and to the Modular
Medallions concept to Purchaser or its designee by the Intellectual Property Assignment. Purchaser
shall, and shall cause any such designee to, at their expense, file for and take all reasonable
steps to secure, maintain and enforce broad U.S. patent protection covering the Modular Medallions
concept and products. Shareholder shall authorize his patent attorney to deliver to Purchaser
copies of all correspondence to and from his patent attorney and to and from the Patent Office
related to any Modular Medallions patent applications. If Purchaser or its designee, after taking
all reasonable steps to secure U.S. patent protection for the Modular Medallion concept, decides to
abandon its attempt to obtain such patent protection, Purchaser or its designee, as applicable,
shall, prior to the abandonment of any patent application and at no cost to Shareholder, assign all
right, title and interest in and to the Modular Medallions concept and any related patent
applications to Shareholder. Purchaser and/or Parent shall pay to Shareholder, commencing with the
63rd month after the Effective Date and ending during the month in which the last of any U.S.
patents covering the Modular Medallions expires or otherwise terminates, 5% of the TSI Group’s
total net sales of products covered by any enforceable claim of any such Modular Medallions patent,
excluding sales made to Wal-Mart or Lowe’s. Amounts payable to Shareholder under this Section
5.05 shall be paid by Purchaser and/or Parent with a check postmarked no later than 15 days
after the end of the preceding month.

     5.06 Confidentiality. Shareholder shall not disclose any of the Confidential
Information in his possession as of the Effective Date to any third party and shall refrain from
using such Confidential Information except, in either case, to the extent (i) such disclosure or
use is reasonably necessary for Shareholder to perform any of his duties, carry out any of his
expressly permitted activities and/or enforce any of his rights under this Agreement and/or the
other agreements entered in connection with this Agreement, (ii) such information becomes publicly
available or obtainable from independent sources not in breach of Shareholder’s obligation under
this Agreement (iii) such information is required to be disclosed by the securities laws, or in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process or (iv)
Purchaser has consented to such use or disclosure. In the event that Shareholder is requested or
required pursuant to written or oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar process to disclose any
Confidential Information, he will notify Purchaser promptly of the request or requirement so that
Purchaser may seek an appropriate protective order or waive compliance with the provisions of this
Section 5.04. The above notwithstanding, Shareholder may disclose any Confidential
Information that he deems appropriate to his financial sources, and financial, legal and other
advisors involved with the transactions contemplated by this Agreement. Neither Party shall
disclose the terms of this Agreement, or any of the other agreements set forth herein, or the
financial terms hereof, to any third party unless the exception set forth in (iii) above applies.

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     5.07 Press Release. Attached hereto as Exhibit J is a press release regarding
the execution of this Agreement and the transactions contemplated hereby (the “Agreed Text”). No
Party shall use any language other than the Agreed Text in any press release or public
announcement, including announcements by any Party for general reception by or dissemination to the
employees, agents, customers or suppliers with respect to the transactions contemplated by this
Agreement without the prior consent of Shareholder and Purchaser; provided, however, that: (i)
each Party may make any additional disclosure or announcement which such Party, in the opinion of
its counsel, is obligated to make pursuant to applicable law, in which case if possible such Party
shall consult with Shareholder and Purchaser, as applicable, and incorporate changes suggested by
Shareholder and Purchaser, as applicable, prior to making such disclosure or announcements; (ii)
each Party may disclose any matters it deems appropriate to financial analysts, its financial
sources and financial, legal and other advisors involved with the transactions contemplated by this
Agreement on earnings conference calls or in any other appropriate setting; and (iii) upon
consummation of the transactions contemplated by this Agreement, the Parties will use reasonable
efforts to agree upon the text of any further disclosure or announcement that the Parties mutually
desire to make relating to such transactions.

     5.08 Information; Inspection Rights. Until such time as all amounts to be paid by
Purchaser pursuant to Sections 2.03, 2.04 and 2.05 of this Agreement have
been paid in full:

     (a) Purchaser shall provide to Shareholder with each payment that is made to Shareholder
pursuant to Sections 2.03 and 2.04, a report describing the calculation of the
amounts being paid, in sufficient detail for the Shareholder to confirm the accuracy of each such
payment and including, without limitation, (i) the cumulative Gross Profit, gross sales and
Adjusted Gross Profit of the Business for the month and (ii) the gross sales of the Business by
customer for the month;

     (b) Purchaser shall deliver to Shareholder no later than 50 days after the end of each
calendar quarter commencing and ending after June 30, 2006, unaudited financial statements
reflecting the Gross Profit and Adjusted Gross Profit of the Business as conducted by the TSI
Group, for each calendar month during such quarter; and

     (c) Upon reasonable notice, Purchaser shall afford Shareholder and his attorneys, accountants
and other representatives (to the extent that such persons execute a confidentiality agreement, the
terms of which shall be reasonably acceptable to Purchaser) full reasonable access during normal
business hours to all relevant books and records of the TSI Group relating to cumulative Adjusted
Gross Profit. Shareholder shall have the right, at his sole expense, to engage a third-party
independent auditing firm, provided that such auditing firm is a public accounting firm registered
with the PCAOB, to audit all the financial records of TSI Group relating to the Business, and
Purchaser shall reasonably cooperate with any such third-party independent auditor.

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     5.09 Tax Matters.

     (a) Liability for Taxes. Shareholder shall be liable for all Taxes of the Corporation
with respect to any and all periods, or portions thereof, ending on or before the Effective Date
(“Pre-Effective Date Period”) and for all claims, losses, liabilities, obligations, damages,
impositions, assessments, demands, judgments, settlements, costs and expenses with respect to such
Taxes (unless and to the extent Shareholder is entitled to a gross-up and to be indemnified and
held harmless pursuant to Section 5.09(h) of this Agreement). Purchaser shall be liable
for Taxes of the Corporation with respect to any and all periods, or portions thereof, beginning
after the Effective Date (“Post-Effective Date Periods”) and for any and all claims, losses,
liabilities, obligations, damages, impositions, assessments, demands, judgments, settlements, costs
and expenses with respect to such Taxes. Any and all transactions or events contemplated by this
Agreement that occur at or prior to the Effective Date shall be deemed to have occurred in the
Pre-Effective Date Periods.

     (b) Allocation of Liability for Taxes. In the case of any Taxes that are attributable
to a taxable period which begins before the Effective Date and ends after the Effective Date, the
amount of Taxes attributable to the Pre-Effective Date Period shall be determined as follows:

     (c) Franchise Taxes. In the case of franchise or similar Taxes imposed on the
Corporation based on capital (including net worth or long-term debt) or number of shares of stock
authorized, issued or outstanding, the portion attributable to the Pre-Effective Date Period shall
be the amount of such Taxes for the entire taxable period multiplied by a fraction, the numerator
of which is the number of days in the Pre-Effective Date Period and the denominator of which is the
number of days in the entire taxable period; provided, however, the amount of Tax attributable to
the Pre-Effective Date Period shall not exceed the amount of Tax the Corporation would have paid if
its taxable period ended immediately prior to the Effective Date.

     (d) Other Taxes. In the case of all other Taxes, the portion attributable to the
Pre-Effective Date Period shall be determined on the basis of an interim closing of the books of
the Corporation as of the Effective Date, and the determination of the hypothetical Tax for such
Pre-Effective Date Period shall be determined on the basis of such interim closing of the books,
without annualization. The hypothetical Tax for any period shall in no case be less than zero
($0). Taxes attributable to the Pre-Effective Date Period shall be determined under the same
method of accounting used by the Corporation during that period.

     (e) Administration of Tax Matters. Shareholder shall prepare and timely file, or
cause to be timely filed, for the Corporation, with reasonable assistance of the Corporation, Tax
Returns that are required by law to be filed for the taxable period ended on or before the
Effective Date including, but not limited to, federal income Tax Returns. Shareholder shall, at
least 30 days prior to filing such Tax Return(s), provide a copy of such Tax Return(s) to
Purchaser. Purchaser shall, within 10 days of receiving such Tax Return(s), advise Shareholder
regarding any matters in such Tax Return(s) that it considers detrimental to Purchaser and/or the
Corporation, and with which it disagrees. In such case, Shareholder and Purchaser shall

33

 

reasonably cooperate with each other to reach a timely and mutually satisfactory solution to
the disputed matters. If Purchaser and Shareholder are unable to resolve the disagreement within
30 days after delivery of the written notice from Purchaser, the Purchaser and Shareholder shall
engage a mutually agreeable independent certified public accounting firm to resolve the issues in
dispute. The scope of review by the accounting firm shall be limited to the matters in dispute.
The decision of the accounting firm shall be rendered within 20 days of the engagement and shall be
binding on Purchaser and Shareholder. Purchaser and Shareholder shall each pay one-half of the
cost of the accounting firm. Purchaser shall be deemed to have accepted the Tax Returns proposed
by Shareholder at 5:00 p.m. Charlotte, North Carolina time on the 10th day after delivery thereof
if Purchaser has not by then given Shareholder timely written notice of objection. Purchaser, the
Corporation and Shareholder shall cooperate fully, as and to the extent reasonably requested, in
connection with the filing of Tax Returns and any audit, litigation or other proceeding with
respect to Taxes and Tax Returns (which Shareholder shall control and remain responsible for with
respect to the Pre-Effective Date Periods). 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 audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of any material
provided hereunder; provided that the Party requesting assistance shall pay the reasonable
out-or-pocket expenses incurred by the Party providing such assistance; and provided further that
no Party shall be required to provide assistance at times or in amounts that would interfere
unreasonably with the Business and operations of such Party. Purchaser agrees to retain all books
and records, with respect to Tax matters pertinent to the Corporation relating to any Pre-Effective
Date Periods, and to any Tax periods beginning before the Effective Date and ending after the
Effective Date, until the expiration of any applicable statute of limitations or extensions
thereof.

     (f) Amended Tax Returns and Refund Claims. Shareholder may not file any amended Tax
Returns or refund claims in respect of any taxable period of the Corporation ending on or prior to
the Effective Date without the prior written consent of Purchaser, which shall not be unreasonably
withheld. Purchaser shall not, and shall cause the Corporation to not (and shall not permit or
cause the Corporation to) amend any Tax Return of the Corporation in respect of any taxable period
of the Corporation ending on or prior to the Effective Date without the prior written consent of
Shareholder, which shall not be unreasonably withheld. The Corporation shall (and Purchaser shall
cause the Corporation to) indemnify Shareholder for any liability Shareholder incurs as a result of
any such amendment filed by the Corporation or Purchaser; provided, however, that the Corporation
shall not be required to indemnify Shareholder (and Purchaser shall not be required to cause the
Corporation to indemnify Shareholder) for any liability Shareholder incurs as a result of any
amendment filed with Shareholder’s consent.

     (g) 338(h)(10) Election. Purchaser and Shareholder shall make an election under Code
Section 338(h)(10) (and any comparable elections under state, local or foreign tax law) with
respect to the acquisition of the Corporation by Purchaser. Purchaser and Shareholder shall
cooperate fully with each other, in the making of such election. In particular, but not by way of

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limitation, in a timely manner, Purchaser and Shareholder shall jointly execute necessary
copies of IRS Form 8023 and all ancillary documents relating thereto. The calculation of the
aggregate deemed sales price and its allocation among the assets of the Corporation shall be made
in accordance with Schedule 5.09. The allocation set forth in such schedule is intended to
comply, and all adjustments thereto to reflect additional payments of the Stock Purchase Price
shall comply, with the requirements of Sections 338 and 1060 of the Code and the Treasury
Regulations thereunder. Purchaser and Shareholder agree to file all income Tax Returns or reports,
including without limitation IRS Form 8883, for their respective taxable years in which the Closing
occurs, to reflect the allocation described in Schedule 5.09, and all adjustments thereto
to reflect additional payments of the Stock Purchase Price, and agree not to take any position
inconsistent therewith before any governmental authority charged with the collection of any Tax or
in any other proceeding.

     (h) Indemnification for Additional Taxes Resulting from Section 338(h)(10) Election.
The Purchaser, Parent and the Corporation (referred to jointly as the “Responsible Parties”) shall,
from time to time as described below, make additional payments (the “Additional Payments”) to the
Shareholder so that the Shareholder will receive the same after-Tax proceeds from the sale of the
Shares that he would have received had no election under Section 338(h)(10) been made with
respect to the sale of the Shares. From time to time the Shareholder shall provide the Responsible
Parties with information describing Additional Payments that are due to the Shareholder pursuant to
the preceding sentence and an explanation of such additional amounts. If the Shareholder and the
Responsible Parties are unable to agree on any such Additional Payments, the matter shall be
submitted to a Resolution Accountant for resolution, whose determination shall be final, conclusive
and binding on Shareholder and Purchaser. All Additional Payments shall be made by the Responsible
Parties prior to the date the related Taxes owed by the Shareholder are due, unless the Parties
have been unable to agree on the amount of such payment, in which case the payment will be made
upon the determination of the Resolution Accountant as described above. Each of the Responsible
Parties shall be jointly and severably liable for the Additional Payments.

     On the Signing Date, an Additional Payment of $42,975 shall be paid by the Purchaser to the
Shareholder, which reflects the Parties’ agreement of the grossed-up amount that the Shareholder
must receive to be held harmless from the Tax effects of the Section 338(h)(10) election based on
the allocations set forth in Schedule 5.09. In the event of an audit by a taxing authority
or any other change in the allocation set forth in Schedule 5.09, Additional Payments may
be due as provided in this Section 5.09(h).

     For purposes of illustrating the operation of the provisions of this Section 5.09(h),
assume that as the result of a Tax audit and a resulting adjustment to the allocations set forth in
Schedule 5.09, the Shareholder becomes taxable on an additional $500,000 of income at a 35%
federal rate which had been taxable at a 15% federal rate based on the allocation described in
Schedule 5.09. Assume that the state Tax rate is not affected, the Shareholder incurs
$10,000 of legal and accounting fees in connection with the audit, and interest is accessed on the
additional Taxes. The additional federal Taxes would be $100,000. Assuming interest thereon of
$20,000 plus

35

 

$10,000 of professional fees as described above, assuming that the Additional Payment would be
taxed at long-term capital gains rates, and assuming an effective combined federal and state income
Tax rate of 21%, the Responsible Parties would have to make an Additional Payment to the
Shareholder of $164,557 ($130,000 divided by (1 minus .21)).

     5.10 Services Agreement and Net Assets. Purchaser acknowledges that it has provided
certain financial information related to the LLC to the Shareholder for purposes of determining the
amounts due to the Corporation (as the successor to HI) under the Services Agreement for the period
leading up to and including the Effective Date (the “Services Agreement Amount”). During the first
62 calendar months commencing with July 2006, the Purchaser shall upon 30 days advance notice allow
Shareholder and his attorneys, accountants and other representatives (to the extent that such
persons execute a confidentiality agreement, the terms of which are reasonably acceptable to
Purchaser and/or its Affiliates) to review, or have his accountants review, the financial records
of the LLC to confirm that the net assets of the LLC as of such date (the “Net Assets Amount”) and
accrued payments in relation to the Services Agreement were calculated correctly. The Purchaser’s
calculation of the Net Assets Amount is set forth on Exhibit K attached hereto. Should the
Shareholder discover as a result of any such review that the Net Assets Amount was calculated
incorrectly, Shareholder shall notify Purchaser thereof and provide in such notice a written
explanation of Shareholder’s calculation of the Net Assets Amount. If Purchaser agrees with
Shareholder’s calculation, Purchaser shall either increase or decrease, as the case may be, its
next payment of the Additional Amount by 50% of the difference between Purchaser’s original
calculation of the Net Assets Amount and the correct Net Assets Amount (the “Net Assets True-up
Amount”) or, if there are no more Additional Payments, the Net Assets True-up Amount shall be paid
by the applicable Party to the other Party within 10 days of the date that the Parties agree on the
Net Assets Amount. Purchaser and Shareholder shall use their reasonable efforts to resolve any
dispute as to the correct Net Assets Amount. If Shareholder and Purchaser are unable to agree as
to the Net Assets Amount within 30 days of Purchaser receiving such notice, the matter shall be
submitted to a Resolution Accountant for resolution, whose determination shall be final, conclusive
and binding on the Purchaser and the Shareholder. The Net Assets True-up Amount, if any, payable
as a result of the Resolution Accountant’s determination shall be paid to the applicable party
within ten (10) days of the date on which the Resolution Accountant renders its decision.

     5.11 Limitations on Use of Name. Except for the name “Prime/Home Impression”, neither
Purchaser, Parent nor any of their Affiliates shall use the name “Home Impressions”, either alone
or in conjunction with other words. Neither Purchaser, Parent nor any of their Affiliates shall
use the name “Prime/Home Impressions”, either alone or in conjunction with other words, as a legal
name, trade name and mark in connection with any business other than the Business.

36

 

ARTICLE VI

INDEMNIFICATION

     6.01. No Effect on Liability. None of (i) the consummation of the transactions
contemplated by this Agreement, (ii) the delay or omission of any Party to exercise any of its
rights under this Agreement or (iii) any investigation that any Party makes, any notice that any
Party gives, or any knowledge that any Party obtains as a result thereof, or otherwise, shall
affect the liability of the Parties to one another for breaches of this Agreement or prevent any
Party from relying on the representations or warranties contained in this Agreement.

     6.02. Survival. The representations and warranties of the Parties made in this
Agreement shall survive for the period ending on the two-year anniversary of the Signing Date;
provided, however, that the representations and warranties made in Section 4.01.03
(Capitalization of Corporation) and the first sentence of Section 4.01.06 (title to
personal property) shall survive indefinitely, and the representations and warranties made in
Sections 4.01.14 (Taxes), 4.01.21 (Environmental, Health and Safety Matters) and
4.01.25 (Employees and Benefit Plans) shall survive only for the applicable period of the statute
of limitations relating to such provisions. Notwithstanding anything set forth in this Article VI
to the contrary:

     (a) Shareholder shall have no liability (for indemnification or otherwise) with respect to any
representation or warranty unless on or before the two-year anniversary of the Signing Date,
Purchaser notifies Shareholder of a claim specifying the factual basis of that claim in reasonable
detail to the extent known to Purchaser; provided that with respect to breaches of the
representations and warranties set forth in Sections 4.01.14 (Taxes) and 4.01.21
(Environmental, Health and Safety Matters), indemnification shall be required if Shareholder shall
have received such notice prior to the date 30 days after the expiration of the statute of
limitations applicable to claims giving rise to the breach of such representations and warranties;
provided further that the foregoing limitation shall not apply to any breach or any representation
or warranty set forth in Section 4.01.03 (Capitalization of Corporation) or the first
sentence of Section 4.01.06 (Title to and Condition of Properties);

     (b) Shareholder shall have no liability under Sections 6.03(i) or 6.03(iii)
unless and until the aggregate amount of Losses under such subsections exceeds $50,000 and then
only to the extent of the amount of such excess; provided that the foregoing limitation shall not
apply to any breach of any representation or warranty by Shareholder set forth in the third
sentence of Section 4.01.02 (Corporate Existence and Authority), Section 4.01.03
(Capitalization of Corporation) or the first sentence of Section 4.01.06 (Title to and
Condition of Properties), and neither Purchaser nor Parent shall have any liability under
Section 6.04(i) unless and until the aggregate amount of Losses under such subsection
exceeds $50,000 and then only to the extent of the amount of such excess; and

     (c) Shareholder shall have no liability under Sections 6.03(i) or 6.03(iii) to
the extent that the aggregate amount of Losses under such subsections would exceed the amount of
the Stock Purchase Price actually received by Shareholder pursuant to Section 2.03(a), and
neither

37

 

Purchaser nor Parent shall have any liability under Section 6.04(i) to the extent that the
aggregate amount of Losses under such subsection would exceed the amount of the Stock Purchase
Price actually received by Shareholder pursuant to Section 2.03(a).

     6.03 Indemnification of Purchaser and the Corporation. Subject to the other
provisions of this Article VI, from and after the Signing Date, Shareholder shall defend,
indemnify and hold each of Parent, Purchaser, the Corporation and their respective officers,
directors, employees and agents harmless from and against, and promptly reimburse Parent,
Purchaser, the Corporation and their respective officers, directors, employees and agents, as the
case may be, for, any loss, expense, damage, deficiency, liability, claim or obligation, including
reasonable investigative costs, reasonable costs of defense, settlement costs (subject to approval
as provided below) and reasonable attorneys’ fees (collectively, “Losses”) that Parent, Purchaser,
the Corporation and/or their respective officers, directors, employees and agents incurs arising
out of (i) any breach of any representation or warranty made by Shareholder in this Agreement, (ii)
any breach by Shareholder of any covenant or obligation of Shareholder under this Agreement and
(iii) any claim asserted by any party (other than Parent, Purchaser or any other Affiliate of
Parent), based on any product sold or manufactured by, or any services provided by, the Corporation
prior to the Effective Date.

     6.04 Indemnification of Shareholder. Subject to the other provisions of this
Article VI, from and after the Signing Date, Purchaser and Parent shall, jointly and
severally, defend, indemnify and hold Shareholder and the other Lackey Parties harmless from and
against, and promptly reimburse it for, any Losses that Shareholder or the other Lackey Parties
incurs arising out of (i) any breach of any representation or warranty made by Purchaser in this
Agreement and (ii) any breach by Purchaser of any covenant or obligation or Purchaser under this
Agreement.

     6.05 Indemnification Procedure; Offsets. An indemnifying party (the “Indemnitor”)
shall promptly pay or reimburse to the indemnified party (the “Indemnitee”) the amount of all
Losses payable or reimbursable to the indemnified party pursuant to this Article VI after
the amount of any such Losses and the Indemnitor’s liability therefor is established by (i)
agreement in writing between Indemnitor and the Indemnitee or (ii) by a final judgment of a court
of competent jurisdiction (any Loss so determined is referred to herein as an “Established Loss”).
If the Indemnitor does not pay to the Indemnitee the amount of the Established Loss on or before
the 30th day after the determination described in item (i) or (ii) above then on the 31st day after
such determination, the amount of the Established Loss payable by the Indemnitor shall bear
interest at a rate equal to the Prime Rate plus four percent (4%) per annum. If any Established
Loss is outstanding and unpaid on the date on which the Indemnitee is obligated to pay any amount
to the Indemnitor (either pursuant to this Agreement or any other agreement between Indemnitor and
the Indemnitee), then the Indemnitee may set off such Established Loss against such amount due and
payable to the Indemnitor.

     6.06 Notice and Opportunity to Defend.

38

 

     6.06.01 Notice, Etc. If any Party entitled to indemnification from another
Party under Section 6.03 or Section 6.04 (the “Indemnified Party”) receives notice of any
third-party claim or commencement of any third-party action or proceeding (an “Asserted
Liability”) with respect to which the Indemnified Party is entitled to indemnification under
Section 6.03 or Section 6.04 from another Party hereto (an “Indemnifying Party”), the
Indemnified Party shall promptly give the Indemnifying Party notice thereof. The
Indemnified Party’s failure to notify an Indemnifying Party shall not cause the Indemnified
Party to lose its right to indemnification under this Article, except to the extent that
such failure materially prejudices the Indemnifying Party’s ability to defend against an
Asserted Liability that such Indemnifying Party has the right to defend against hereunder
(and except as otherwise set forth in this Article). Such notice shall describe the
Asserted Liability in reasonable detail, and if practicable shall indicate the amount (which
may be estimated) of the Losses that have been or may be asserted by the Indemnified Party.
The Indemnifying Party may defend against an Asserted Liability on behalf of the Indemnified
Party utilizing counsel reasonably acceptable to the Indemnified Party, unless (i) the
Indemnified Party reasonably objects to such assumption on the grounds that counsel for such
Indemnifying Party has indicated that, without a waiver, it cannot represent both the
Indemnified Party and the Indemnifying Party because such representation would be reasonably
likely to result in a conflict of interest or because there may be defenses available to the
Indemnified Party that are not available to such Indemnifying Party, (ii) the Indemnifying
Party is not capable (by reason of insufficient financial capacity, bankruptcy,
receivership, liquidation, managerial deadlock, managerial neglect or similar events) of
maintaining a reasonable defense of such action or proceeding, or (iii) the action or
proceeding seeks injunctive or other equitable relief against the Indemnified Party.

     6.06.02 Defense Costs. If any Indemnifying Party defends an Asserted
Liability, it shall do so at its own expense and shall not be responsible for the costs of
defense, investigative costs, attorney’s fees or other expenses incurred to defend the
Asserted Liability (collectively, “Defense Costs”) of the Indemnified Party (which may
continue to defend, at its own expense). If the Indemnified Party assumes the defense of an
Asserted Liability by reason of clauses (i) or (ii) of Section 6.06.01 above, or because the
Indemnifying Party has not elected to assume the defense, then such Indemnifying Party shall
indemnify the Indemnified Party for its reasonable Defense Costs; provided, however, the
Indemnifying Party shall not be liable for the costs of more than one counsel for all
Indemnified Parties in any one jurisdiction. An Indemnifying Party may settle any Asserted
Liability only with the consent of the Indemnified Party, which consent shall not be
unreasonably withheld.

     6.06.03 Third Party Claims. The Parties shall cooperate with each other with
respect to the defense of any claims or litigation made or commenced by third parties
subsequent to the Signing Date with respect to which indemnification is not available (for
any reason) under this Article VI, provided that the Party requesting

39

 

cooperation shall reimburse the other Party for such other Party’s reasonable
out-of-pocket costs and expenses of furnishing such cooperation.

     6.07 Delays or Omissions; Other Remedies. No delay or omission to exercise any right,
power or remedy inuring to any Party upon any breach or default of any Party under this Agreement
shall impair any such right, power or remedy of such Party nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Neither the exercise of
nor the failure to exercise any remedy under this Agreement by a Party shall constitute an election
of remedies or limit in any manner the availability of any remedies that may be available to such
Party. All remedies either under this Agreement or by law or otherwise afforded to the Parties
shall be cumulative and not alternative, but the limitations set forth in Section 6.02
shall apply to any claims based on breaches of representations and warranties.

ARTICLE VII

MISCELLANEOUS

     7.01 Notices. Any notice, request, instruction or other document required by the
terms of this Agreement, or deemed by any of the Parties hereto to be desirable, to be given to any
other Party hereto shall be in writing and shall be sent by facsimile transmission or by a
nationally recognized overnight delivery service, charges prepaid, to the following addresses:

	 	 	 
	If to Purchaser:

	 	Copy to:
	 
	 	 
	Attn: Marcus Scrudder

	 	Brian D. Barnard
	650 South Royal Lane, Suite 100

	 	201 Main Street, Suite 2200
	Coppell, TX 75019

	 	Fort Worth, TX 76102
	Facsimile: (972) 304-3754

	 	Facsimile: 817-348-2303
	 
	 	 
	If to the Lackey Parties:

	 	Copy to:
	 
	 	 
	Robert Lackey and

	 	Robinson, Bradshaw & Hinson, P.A.
	Robert Lackey, Jr.

	 	Attn: Robert. M. Bryan
	420 Third Avenue NW

	 	101 North Tryon Street, Suite 1900
	Hickory, NC 28601

	 	Charlotte, NC 28246
	Facsimile: 828-328-5250

	 	Facsimile: 704-373-3910

The persons and addresses set forth above may be changed from time to time by a notice sent as
aforesaid. If notice is given by nationally recognized overnight delivery service in accordance
with the provisions of this Section, said notice shall be conclusively deemed given at the time of
such delivery. If notice is given by facsimile in accordance with the provisions of this Section,

40

 

such notice shall be conclusively deemed given immediately upon confirmation that such transmission
has been successfully transmitted.

     7.02 No Third-Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any person other than the Parties, the Lackey Parties and their respective successors
and permitted assigns.

     7.03 Entire Agreement. This Agreement (including the documents referred to herein)
constitutes the entire agreement among the Parties and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the extent they relate
in any way to the subject matter hereof.

     7.04 Succession and Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties named herein and their respective successors and permitted assigns. No Party
may assign this Agreement or any of his or its rights, interests, or obligations hereunder without
the prior written approval of all the other Parties.

     7.05 Counterparts. This Agreement may be executed in one or more counterparts
(including by means of facsimile or electronic mail), each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.

     7.06 Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

     7.07 Governing Law. This Agreement shall be governed by and construed in accordance
with the domestic laws of the State of Delaware without giving effect to any choice or conflict of
law provision or rule that would cause the application of the laws of any jurisdiction other than
the State of Delaware.

     7.08 Submission to Jurisdiction. Each of the Parties submits to the jurisdiction of
any state or federal court sitting in New Castle County, Delaware, in any action or proceeding
arising out of or relating to this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court.

     7.09 Amendments and Waivers. No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by all of the Parties. No waiver by any Party
of any provision of this Agreement or any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be valid unless the same shall be in writing
and signed by the Party making such waiver nor shall such waiver be deemed to extend to any prior
or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in
any way any rights arising by virtue of any prior or subsequent such default, misrepresentation, or
breach of warranty or covenant.

41

 

     7.10 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.

     7.11 Expenses. Each of Purchaser and Shareholder will bear its or his own respective
costs and expenses (including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.

     7.12 Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption
or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.

     7.13 Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified
in this Agreement are incorporated herein by reference and made a part hereof.

     7.14 Mediation.

     (a) If any claim, controversy or dispute arises out of or relates to this Agreement, or its
breach (other than a payment calculation dispute to be resolved pursuant to the procedures in
Section 2.07 or a tax gross-up dispute to be resolved pursuant to the procedures in
Section 5.09(h)), and the parties have not been successful in resolving such dispute
through negotiation, either party may request mediation by giving the other party written notice
thereof, and the parties shall submit the dispute to mediation as provided herein. The dispute
shall be submitted to a sole mediator selected by the parties or, at the request of either party,
selected by, and conducted pursuant to the rules of, the American Arbitration Association (“AAA”).
Each party shall bear its own expenses and an equal share of the fees and expenses of the mediator
and the fees of the AAA. All defenses based on passage of time shall be suspended pending the
termination of the mediation. Nothing in this clause shall be construed to preclude any party from
seeking injunctive relief in order to protect its rights pending mediation. Each party shall bear
its own costs and attorneys’ fees associated with mediation.

     (b) Any mediation proceeding will take place in Wilmington, Delaware, or such other place as
the Purchaser and Shareholder may mutually agree.

     (c) No party shall suspend or delay its performance under this Agreement during or pending the
resolution of any negotiation, mediation or other dispute proceeding. A party’s continued
performance hereunder shall not be construed as a waiver or concessions of any claim, defense,
issue of fact or other right or remedy provided for hereunder or otherwise available to a party.

42

 

IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement, as of the date
first written above.

	 	 	 	 	 	 	 
	 	 	SHAREHOLDER:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Robert Lackey	 	 
	 	 	 	 	 
	 	 	ROBERT LACKEY	 	 
	 
	 	 	 	 	 	 
	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 
	 	 	TRADE SOURCE INTERNATIONAL, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Marcus Scrudder	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Marcus Scrudder	 	 
	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	PARENT:	 	 
	 
	 	 	 	 	 	 
	 	 	CRAFTMADE INTERNATIONAL, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Marcus Scrudder	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Marcus Scrudder	 	 
	 	 	Title: Chief Financial Officer	 	 

43exv10w2

 

Exhibit 10.2

AGREEMENT FOR THE PURCHASE AND SALE OF PERSONAL GOODWILL

     This AGREEMENT FOR THE PURCHASE AND SALE OF PERSONAL GOODWILL (this “Agreement”) is entered
into as of the 15th day of September, 2006 (the “Signing Date”), to be effective as of
July 1, 2006 (the “Effective Date”), between Trade Source International, Inc., a Delaware
corporation (“Purchaser”) and Robert W. Lackey (“Seller”).

RECITALS

     WHEREAS, Purchaser and Home Impressions, Inc. (“HI”) were parties to that Operating Agreement
of Prime/Home Impressions, LLC (the “LLC”), dated as of January 1, 1998 (the “LLC Agreement”).
Pursuant to the LLC Agreement, Purchaser and HI each owned 50% of the membership interests in the
LLC.

     WHEREAS, prior to the date hereof, HI transferred all of its interest in the LLC to MARKETING
IMPRESSIONS, INC., a Georgia corporation (“MI”);

     WHEREAS, Seller owns all of the outstanding capital stock in MI;

     WHEREAS, contemporaneously with this Agreement, Purchaser and Seller are entering into that
certain Stock Purchase Agreement, to be effective as of the Effective Date, (the “Stock Purchase
Agreement”), pursuant to which Purchaser will acquire all of Seller’s interest in MI;

     WHEREAS, Seller has independently developed and owns close personal and ongoing business
relationships, in connection with the business conducted by MI, including without limitation the
business conducted by the LLC, through his personal ability, personality, reputation, skill and
integrity, and other information relating thereto (collectively, the “Personal Goodwill”), which
Seller desires to sell to Purchaser as hereinafter provided; and

     WHEREAS, Purchaser desires to acquire all of the Personal Goodwill, as hereinafter provided.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:

     1. Assignment of Goodwill. In exchange for the consideration set forth in Section
2.03(d) of the Stock Purchase Agreement, Seller hereby sells, assigns, transfers, conveys and
delivers to Purchaser, all of Seller’s right, title and interest in the Personal Goodwill.

     2. Representations and Warranties of Seller. Seller represents and warrants to
Purchaser as follows:

     2.1 Personal Goodwill. All of the Personal Goodwill owned by Seller is free
and clear of all liens, encumbrances, claims, options, security interests, calls and

 

 

commitments of any kind, and the sale and assignment of the Personal Goodwill to
Purchaser hereunder will transfer to Purchaser all of Seller’s title thereto, free and clear
of all liens, encumbrances, claims, options, security interests and commitments of any kind.

     2.2 Approval and Authorization. Seller has full legal rights, power, capacity
and authority to enter into this Agreement and to sell, assign and transfer all of his
right, title and interest in the Personal Goodwill to Purchaser, and this Agreement is a
legal, valid and binding obligation of Seller, enforceable against Seller in accordance with
its respective terms.

     2.3 No Conflicts. The execution and delivery of this Agreement by Seller does
not, and the consummation by Seller of the transactions contemplated hereby does not and
will not, violate or conflict with, or result (with the giving of notice or the lapse of
time or both) in the violation of, or constitute a default under any provision of, or result
in the acceleration or termination of, or entitle any party to accelerate or terminate
(whether after giving of notice or lapse of time or both), any obligation or benefit under,
or result in the creation or imposition of any lien, pledge, security interest or other
encumbrance upon the Personal Goodwill pursuant to any material contract, law, ordinance,
regulation, order, arbitration award, judgment or decree to which Seller is a party, or by
which Seller or his assets (including the Personal Goodwill) are bound and does not and will
not violate or conflict with any other material restriction of any kind or character to
which Seller is subject or by which any of Seller’s assets (including the Personal Goodwill)
may be bound.

     3. Representations and Warranties of Purchaser. Purchaser represents and warrants as
follows:

     3.1 Existence and Good Standing. Purchaser has been duly organized and validly
exists in good standing as a corporation under the laws of the State of Delaware.

     3.2 No Default. The execution of this Agreement by Purchaser and the
performance of its obligations hereunder will not violate or result in a breach of, or
constitute a default under any material agreement to which Purchaser is a party or by which
it or its assets are bound.

     3.3 Approval and Authorization. The execution and delivery of this Agreement
and the performance of the transactions contemplated herein have been duly and validly
authorized by all necessary action on the part of Purchaser, and this Agreement is a legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with
its terms.

     4. Additional Agreements and Covenants: Seller shall cooperate with Purchaser after
the Signing Date in connection with all reasonable actions deemed necessary by Purchaser to vest in
Purchaser title to the Personal Goodwill.

2

 

     5. Survival. The representations, warranties and covenants of the parties contained
in this Agreement shall survive for the period ending two years after the Effective Date.

     6. General.

     6.1 Execution. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original and all of which together shall
constitute but one and the same instrument. Execution and delivery of this Agreement by
facsimile or as an attachment to an electronic mail shall constitute a valid and binding
execution and delivery of this Agreement by such party. Such facsimile copies or electronic
mail attachments shall constitute enforceable original documents.

     6.2 Brokers. Each party represents and warrants that it employed no broker or
agent in connection with this transaction and shall indemnify the other against all loss,
cost, damage or expense arising out of claims for fees or commissions of brokers or agents
employed or alleged to have been employed by such indemnifying party.

     6.3 Notices. Any notice or communication required or permitted hereunder shall
be sufficiently given if sent by facsimile, or first class mail, postage prepaid to:

	 	 	 
	If to Purchaser:

	 	Copy to:
	 
	 	 
	Attn: Marcus Scrudder

	 	Brian D. Barnard
	650 South Royal Lane, Suite 100

	 	201 Main Street, Suite 2200
	Coppell, TX 75019

	 	Fort Worth, TX 76102
	Facsimile: (972) 304-3754

	 	Facsimile: 817-348-2303
	 
	 	 
	If to Seller:

	 	Copy to:
	 
	 	 
	Robert Lackey

	 	Robinson, Bradshaw & Hinson, P.A.
	420 Third Avenue NW

	 	Attn: Robert. M. Bryan
	Hickory, NC 28601

	 	101 North Tryon Street, Suite 1900
	Facsimile: 828-328-5250

	 	Charlotte, NC 28246
	 

	 	Facsimile: 704-373-3910

     6.4 Applicable Law. This Agreement will be governed by the laws of the State
of Delaware without regard to conflicts of laws principles.

     6.5 Captions. The captions in this Agreement are for convenience only and
shall not be considered a part hereof, or affect the construction or interpretation of any
provisions of this Agreement.

     6.6 Construction. Each party acknowledges that such party and its attorneys
have been given an equal opportunity to negotiate the terms and conditions of this Agreement
and that any rule of construction to the effect that ambiguities are to be

3

 

resolved against the drafting party or any similar rule operating against the drafter
of an agreement shall not be applicable to the construction or interpretation of this
Agreement.

     6.7 Entire Agreement. This Agreement shall constitute the entire agreement and
understanding between Seller and Purchaser and supersedes any prior agreement and
understanding, written or oral, relating to the subject matter of this Agreement. Seller
acknowledges that he has (a) had the opportunity to seek the advice of independent counsel,
including independent tax counsel, regarding the consequences of this Agreement; and (b)
received no representations from Purchaser or its counsel regarding the tax consequences of
this Agreement. This Agreement may be modified or amended only by a written instrument
executed by the parties hereto.

*****

4

 

     IN WITNESS WHEREOF, the parties have entered into this Agreement for the Purchase and Sale of
Personal Goodwill as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	SELLER:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Robert W. Lackey	 	 
	 	 	 	 	 
	 	 	Robert W. Lackey, individually	 	 
	 
	 	 	 	 	 	 
	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 
	 	 	TRADE SOURCE INTERNATIONAL, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Marcus Scrudder
 

	 	 
	 	 	Name: Marcus Scrudder	 	 
	 	 	Title: Chief Financial Officer	 	 

LACKEY
AGREEMENT FOR THE PURCHASE AND SALE OF PERSONAL GOODWILL

5

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