EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
between
COLLEGIATE PACIFIC INC.,
and
XXXXXXX X. XXXXXXXX
and
C. XXXXXXX XXXXXXXX
Effective as of
July 23, 2004
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS................................................... 1
1.1. Definitions................................................... 1
ARTICLE 2. PURCHASE AND SALE OF SHARES................................... 1
2.1. Purchase and Sale............................................. 1
2.2. Purchase Price................................................ 1
2.3. Purchase Price Adjustments.................................... 2
2.4. Payment of Purchase Price..................................... 3
ARTICLE 3. CLOSING....................................................... 4
3.1. Closing....................................................... 4
3.2. Closing Deliveries of Buyer................................... 4
3.3. Closing Deliveries of the Selling Stockholders................ 4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS.... 6
4.1. Organization and Authority.................................... 6
4.2. Subsidiaries.................................................. 6
4.3. Capital Structure............................................. 6
4.4. No Conflict or Violations..................................... 6
4.5. Consents...................................................... 6
4.6. Title to Shares............................................... 7
4.7. Financial Statements.......................................... 7
4.8. Absence of Undisclosed Liabilities............................ 7
4.9. Absence of Changes............................................ 7
4.10. Accounts Receivable; Inventories........................... 8
4.11. Litigation................................................. 8
4.12. Compliance................................................. 8
4.13. Taxes...................................................... 8
4.14. Environmental Matters...................................... 9
4.15. Contracts.................................................. 9
4.16. Insurance.................................................. 10
4.17. Assets..................................................... 10
4.18. Intellectual Property...................................... 10
4.19. Employment Arrangements.................................... 10
4.20. Employee Benefit Plans..................................... 11
4.21. Customers and Suppliers.................................... 12
4.22. Brokers.................................................... 12
4.23. Dealings with Affiliates................................... 12
4.24. Projections................................................ 12
i
4.25. Systems Performance........................................ 12
4.26. Securities Laws Matters.................................... 13
4.27. Disclosure................................................. 13
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER................... 13
5.1. Organization, Standing and Power.............................. 13
5.2. Capitalization................................................ 13
5.3. Authority..................................................... 14
5.4. No Conflicts or Violations.................................... 14
5.5. Consents...................................................... 14
5.6. Litigation.................................................... 14
5.7. SEC Filings................................................... 14
5.8. Brokers....................................................... 15
5.9. Disclosure.................................................... 15
ARTICLE 6. COVENANTS AND AGREEMENTS...................................... 15
6.1. Registration Statement........................................ 15
6.2. Listing....................................................... 18
6.3. Public Information............................................ 18
6.4. Notification of Certain Matters............................... 19
6.5. Stock Options................................................. 19
6.6. 401(k) Plan................................................... 19
6.7. Employee Matters.............................................. 19
6.8. Tax Matters................................................... 19
6.9. Noncompetition; Nonsolicitation............................... 20
ARTICLE 7. INDEMNIFICATION............................................... 22
7.1. Indemnification of Buyer...................................... 22
7.2. Indemnification of Selling Stockholders....................... 22
7.3. Defense of Third-Party Claims................................. 22
7.4. Direct Claims................................................. 23
7.5. Escrow........................................................ 23
7.6. Limitations................................................... 23
7.7. Instructions to Escrow Agent.................................. 24
7.8. Tax Treatment................................................. 24
ARTICLE 8. GENERAL PROVISIONS............................................ 25
8.1. Survival of Representations, Warranties, and Covenants........ 25
8.2. No Waiver Relating to Claims for Fraud........................ 25
8.3. Amendment and Modification.................................... 25
8.4. Waiver of Compliance.......................................... 25
8.5. Specific Performance.......................................... 25
8.6. Severability.................................................. 26
8.7. Expenses and Obligations...................................... 26
ii
8.8. Notices....................................................... 26
8.9. Assignment.................................................... 27
8.10. Counterparts............................................... 27
8.11. Entire Agreement........................................... 28
8.12. Governing Law; Choice of Forum............................. 28
8.13. Headings................................................... 28
APPENDIX A - Certain Defined Terms
SCHEDULES
2 Selling Stockholders
3.3(d) Dividends and Distributions
4.1 Foreign Qualification of the Company
4.2 Ownership Interests in Other Entities
4.3 Repurchase Obligations of the Company
4.4 Conflicts and Violations
4.5 Consents
4.7(a) Financial Statements of the Company
4.7(b) Exceptions to Financial Statements of the Company
4.8 Undisclosed Liabilities
4.9 Changes Since the Date of the Most Recent Balance Sheet
4.11 Litigation
4.13 Taxes
4.13(c) Acquisitions Related to Tax Matters
4.14 Environmental Matters
4.15 Material Contracts
4.16 Insurance
4.17 Ownership of Assets
4.19 Employees
4.20 Employee Benefit Plans
4.21 Customers and Suppliers
4.25 Systems Performance
6.5 Stock Options
6.8(f) Fair Market Value of the Assets
EXHIBITS
Exhibit A - Form of Promissory Note
Exhibit B - Escrow Agreement
Exhibit C - Form of Legal Opinion (counsel to the Buyer)
Exhibit D - Form of Legal Opinion (counsel to the Company and the Selling Stockholders)
Exhibit E - Employment Agreements
iii
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into effective
as of the 23rd day of July, 2004, between COLLEGIATE PACIFIC INC., a Delaware
corporation ("BUYER"), and XXXXXXX X. XXXXXXXX and C. XXXXXXX XXXXXXXX (the
"SELLING STOCKHOLDERS").
R E C I T A L S:
WHEREAS, Buyer desires to purchase from the Selling Stockholders, and the
Selling Stockholders desire to sell to Buyer, all of the outstanding shares of
Class A Common Stock, par value $100.00 per share, and all of the outstanding
shares of Class B Common Stock, par value $100.00 per share (collectively, the
"COMPANY COMMON STOCK"), of Xxxxx Sporting Goods Co., Inc., a Virginia
corporation (the "COMPANY") (such common shares being referred to herein as the
"SHARES");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1. DEFINITIONS
1.1. Definitions. The capitalized terms used in this Agreement will have
the meanings set forth in Appendix A hereto.
ARTICLE 2. PURCHASE AND SALE OF SHARES
2.1. Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement, at the Closing (as defined in Section 3.1), each Selling
Stockholder shall sell to Buyer, and Buyer shall purchase from each Selling
Stockholder, all of the Shares on the Closing Date, free and clear of all Liens.
2.2. Purchase Price. The aggregate purchase price payable to the Selling
Stockholders in consideration for the sale of the Shares (the "PURCHASE PRICE")
shall be an amount equal to the Closing Payment and the Earnout Payment.
(a) The "CLOSING PAYMENT" shall be equal to (i) $4,000,000 (as
adjusted pursuant to Section 2.3 below); (ii) 148,662 fully paid and
non-assessable shares of common stock, $0.01 par value per share, of Buyer
("BUYER COMMON STOCK"), and (iii) promissory notes in the form attached as
Exhibit A in the aggregate principal amount of $500,000 (the "NOTES").
(b) The "EARNOUT PAYMENT" shall be payable only in the event Net
Income of the Company during the Earnout Period exceeds $807,000 and shall
be equal to the lesser of:
(i) $1,000,000, in the event the Net Income during the
Earnout Period exceeds $2,386,000; and
(ii) $1,000,000 multiplied by the quotient of (x) the amount
by which Net Income during the Earnout Period exceeds $807,000,
divided by (y) $1,579.000.
The Earnout Payment will be due and payable on March 31, 2006, or as soon
as practical after (but in no event later than 60 days after) the Net
Income of the Company during the Earnout Period or the Net Income of the
Company for such Period reaches $2,386,000, whichever is the first to
occur. Selling Stockholders shall be entitled to the Earnout Payment if
Net Income for the Earnout Period reaches $2,386,000 at any time during
the Earnout Period, regardless of fluctuations in Net Income after such
time. Net Income for the Earnout Period shall be calculated on a quarterly
basis (except that the first quarterly period shall consist of the two
months ended September 30, 2004). Buyer shall maintain separate books and
records for the Company for the entire Earnout Period and the Selling
Stockholders shall have reasonable access to such books and records until
March 31, 2006, or such later time as any disputes with respect to the
Earnout Payment have been resolved, at all reasonable times and in a
manner so as not to interfere with the normal business operations of the
Company.
(c) The Purchase Price shall be allocated between the Selling
Stockholders in accordance with the Percentage Interest set forth opposite
each Selling Stockholder's name on Schedule 2.
2.3. Purchase Price Adjustments.
(a) At the Closing, Buyer shall withhold $100,000 of the cash
portion of the Purchase Price (the "HOLDBACK AMOUNT") pending the final
determination of the June 30 Stockholders' Equity.
(b) If the June 30 Stockholders' Equity is below $3,400,000 by
more than $400,000 (i.e., less than $3,000,000), such shortfall amount in
excess of $400,000 being referred to herein as the "PURCHASE PRICE
ADJUSTMENT AMOUNT," the Purchase Price will be decreased by the Purchase
Price Adjustment Amount. For illustration purposes, if June 30
Stockholders' Equity is $2,900,000, the Purchase Price Adjustment Amount
would be $100,000.
(c) Within 45 days after the Closing, Buyer will furnish the
Selling Stockholders with (i) a balance sheet for the Company as of June
30, 2004, (the "JUNE BALANCE SHEET"), (ii) a statement of June 30
Stockholders' Equity, and (iii) a calculation of the Purchase Price
Adjustment Amount. The June Balance Sheet shall be prepared in accordance
with GAAP, applied in a manner consistent with the preparation of the Most
Recent Balance Sheet (as defined in Section 4.7), and shall fairly present
the financial position of the Company as of June 30, 2004. The Selling
Stockholders shall have a period of 15 business days after receipt of
Buyer's calculation of the Purchase Price Adjustment Amount to notify
Buyer of their election to accept or reject (and in the case of a
rejection, there shall be included in such notice the reasons for such
rejection in reasonable detail) the calculation of the
2
Purchase Price Adjustment Amount. In the event no notice is received by
Buyer during such 15 business day period, the calculation of the Purchase
Price Adjustment Amount shall be deemed accepted by the Selling
Stockholders and final and binding on the parties.
(d) In the event the Selling Stockholders timely reject the
calculation of the Purchase Price Adjustment Amount, Buyer and the Selling
Stockholders will promptly (and in any event within 20 business days
following the date upon which the Selling Stockholders rejected the
calculation of the Purchase Price Adjustment Amount) attempt to make a
joint determination of the Purchase Price Adjustment Amount. If Buyer and
the Selling Stockholders are able to jointly determine the Purchase Price
Adjustment Amount, any required adjustment to the Purchase Price resulting
therefrom will be made immediately after such determination and will be
final and binding on the parties. In the event Buyer and the Selling
Stockholders are unable to agree upon the final determination of the
calculation of the Purchase Price Adjustment Amount as herein provided
within such 20 business day period, the parties shall select a nationally
recognized accounting firm within 10 business days thereof to resolve only
the specific issue or issues in dispute, which accounting firm shall be
jointly selected by the parties, or if the parties are unable to agree
upon an accounting firm, selected by lot (the "INDEPENDENT FIRM"). The
Independent Firm shall resolve the disputed issue or issues within 20
business days of its selection, and such determination of the disputed
issue or issues by the Independent Firm shall be final and binding on the
parties. The Independent Firm will allocate its costs and expenses in
reviewing the issue or issues in dispute to Buyer and the Selling
Stockholders based on the percentage determined by dividing (i) that
portion of the contested amount not awarded to such party, by (ii) the
amount actually contested by the parties. For example, if Buyer claims
that June 30 Stockholders' Equity should be $1,000 lower, and the Selling
Stockholders contest only $500 of the amount claimed by Buyer, and if the
dispute is ultimately resolved by the Independent Firm by lowering June 30
Stockholders' Equity by $800, the costs and expenses of the Independent
Firm will be allocated 60% (i.e., 300 / 500) to the Selling Stockholders
and 40% (i.e., 200 / 500) to Buyer.
(e) If there is no Purchase Price Adjustment Amount pursuant to
Section 2.3(b), Buyer shall pay the Holdback Amount to the Selling
Stockholders within five days after the June 30 Stockholders' Equity is
finally determined as above. If the Purchase Price is decreased pursuant
to Section 2.3(b), Buyer shall apply the Holdback Amount to pay the
Purchase Price Adjustment Amount and pay the remainder of the Holdback
Amount, if any, to the Selling Stockholders within five days after the
June 30 Stockholders' Equity is finally determined as above. In the event
the Purchase Price Adjustment Amount exceeds $100,000, the Selling
Stockholders shall, within five days after notice from Buyer, pay Buyer
the difference between (x) the Purchase Price Adjustment Amount, and (y)
$100,000.
2.4. Payment of Purchase Price. At the Closing, Buyer shall pay the
Purchase Price to the Selling Stockholders as follows:
(a) Buyer shall pay $4,000,000, less the Holdback Amount, to the
Selling Stockholders by wire transfer of immediately available funds to
accounts designated by the Selling Stockholders;
3
(b) Buyer shall cause its transfer agent to issue in the name of
the Selling Stockholders that number of fully paid and non-assessable
shares of Buyer Common Stock as determined under Section 2.2, (i) deposit
9,910 shares of Buyer Common Stock (the "ESCROW STOCK") into an escrow
account subject to the escrow agreement (the "ESCROW AGREEMENT")
substantially in the form of Exhibit B hereto, and (ii) deliver the
remainder of such shares of Buyer Common Stock to the Selling
Stockholders; and
(c) Buyer shall deliver the Notes to the Selling Stockholders.
Buyer shall retain the Holdback Amount until the determination of the
Purchase Price Adjustment Amount and deliver such Holdback Amount in accordance
with Section 2.3(e).
ARTICLE 3. CLOSING
3.1. Closing. The sale and delivery of the Shares to Buyer, the payment
of the Purchase Price to the Selling Stockholders, and the consummation of the
other respective obligations of the parties contemplated by this Agreement (the
"CLOSING") shall take place at the offices of Xxxxxx & Xxxxxx L.L.P., in Dallas,
Texas, at 10:00 a.m. on July 30, 2004, or at such other earlier time and place
as may be mutually agreed upon (the "CLOSING Date").
3.2. Closing Deliveries of Buyer. At the Closing:
(a) Buyer will pay the Purchase Price in accordance with Section
2.4.
(b) The Buyer shall deliver to the Selling Stockholders a
certificate by the secretary of Buyer certifying the Certificate of
Incorporation and Bylaws of Buyer, the resolutions adopted by the
directors of Buyer in connection with this Agreement, and the incumbency
of certain officers of Buyer.
(c) The Selling Stockholders shall receive from Xxxxxx & Xxxxxx
L.L.P., special counsel to Buyer, an opinion dated the Closing Date, in
substantially the form attached as Exhibit C.
(d) The Company shall execute and deliver, and Buyer shall
acknowledge its obligations under, the employment agreements substantially
in the form of Exhibits E-1 and E-2 hereto.
(e) The Buyer shall execute the Escrow Agreement in substantially
the form of Exhibit B hereto.
3.3. Closing Deliveries of the Selling Stockholders. At the Closing:
(a) The Selling Stockholders will deliver or cause to be delivered
to Buyer the certificates representing the Shares duly endorsed in blank
or together with duly executed stock powers in favor of Buyer.
(b) The Selling Stockholders shall furnish Buyer with evidence
satisfactory to Buyer of the consent or approval of each person that is a
party to a Material Contract
4
(including evidence of the payment or any required payment) and whose
consent or approval shall be required to permit the consummation of the
transactions contemplated hereby or to prevent a breach of such Contract
or the creation of a right to terminate such Contract, and such consent or
approval shall be in form and substance reasonably satisfactory to Buyer.
(c) The Selling Stockholders shall deliver to Buyer a certificate
of the secretary of the Company certifying the Articles of Incorporation
and Bylaws of the Company, any resolutions adopted by the directors or
stockholders of the Company in connection with this Agreement, the
incumbency of certain officers of the Company and the jurisdictions in
which the Company is qualified to conduct business.
(d) The Selling Stockholders shall deliver to Buyer a certificate
certifying that, except as listed on Schedule 3.3(d), no dividend or
distribution in respect of any capital stock of the Company has been
declared, set aside or paid since March 31, 2004, that no redemption,
purchase or other acquisition of any of the Company's securities has
occurred since March 31, 2004, and that the Company has contributed
$30,000 to the Company's 401(k) Plan matching contributions made by
employees of the Company during the period beginning January 1, 2004 and
ending June 30, 2004.
(e) The Selling Stockholders shall deliver to Buyer certificates
issued by the appropriate Governmental Entities evidencing the good
standing of the Company as a corporation organized under the laws of the
state or as a foreign corporation authorized to do business under the laws
of the jurisdictions listed in the schedules hereto, including with
respect to the payment of all Taxes, in each case as of a date not more
than 15 days prior to the Closing Date.
(f) Buyer shall receive from Xxxxxxxx Xxxxxxx LLP, counsel to the
Selling Stockholders, an opinion dated the Closing Date, in substantially
the form attached as Exhibit D.
(g) The Selling Stockholders shall each execute and deliver an
employment agreement substantially in the form of Exhibits E-1 and E-2
hereto (the "EMPLOYMENT AGREEMENTS").
(h) The Selling Stockholders shall each execute the Escrow
Agreement in substantially the form of Exhibit B hereto.
(i) Each Selling Stockholder shall deliver a certificate of
non-foreign status which meets the requirements of Treasury Regulation
Section 1.14452(b)(2).
(j) The Selling Stockholders shall furnish Buyer with such other
and further documents and certificates, including certificates of the
Company's officers and others, as Buyer shall reasonably request to
consummate the transactions contemplated by this Agreement.
5
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS
Each Selling Stockholder, jointly and severally, represents and warrants
to Buyer as of the date hereof as follows:
4.1. Organization and Authority. The Company is validly existing as a
corporation in good standing under the laws of the Commonwealth of Virginia and
has all power and authority to own and operate its properties and to carry on
its business as currently conducted, and is duly qualified and in good standing
in each state listed on Schedule 4.1, which states represent every jurisdiction
where the failure to be so qualified would have a Material Adverse Effect on the
Company. The Selling Stockholders have delivered to Buyer true and complete
copies of the Articles of Incorporation, Bylaws, minute books and stock issuance
and transfer records of the Company. The Company is not in violation of any
provisions of its Articles of Incorporation or Bylaws, except where such
violation has not resulted in or could not reasonably be expected to result in a
Material Adverse Effect.
4.2. Subsidiaries. The Company does not own, directly or indirectly, any
subsidiaries or, except as listed on Schedule 4.2, own or have the right, or
obligation, pursuant to a contract or otherwise, to acquire any capital stock,
equity interest or other similar investment in any corporation, partnership,
joint venture, association, limited liability company, trust or other entity.
4.3. Capital Structure. The authorized capital stock of the Company
consists of 50 shares of Class A Common Stock of the Company, all of which are
issued and outstanding, and 450 shares of Class B Common Stock, all of which are
issued and outstanding. All of the outstanding shares of Company Common Stock
are owned by the Selling Stockholders and are validly issued, fully paid and
non-assessable. Except as listed on Schedule 4.3, there is no authorized or
outstanding option, subscription, warrant, right (preemptive or other),
commitment or other agreement obligating the Company to repurchase, issue or
transfer any shares of Company Common Stock or any securities convertible into
or exchangeable for any shares of Company Common Stock.
4.4. No Conflict or Violations. Subject to the Consents described on
Schedule 4.5 and except as otherwise provided on Schedule 4.4, the execution and
delivery of this Agreement by the Selling Stockholders do not, and the
performance by the Selling Stockholders of their obligations hereunder will not
(a) conflict with or violate in any material respect any term or provision of
any Applicable Law or any writ, judgment, decree or injunction applicable to the
Company or to the Selling Stockholders or by which any of their properties is
bound or subject, (b) conflict with or result in a violation or breach of any of
the provisions of the Articles of Incorporation or the Bylaws of the Company, or
(c) result in a material breach of, or constitute a material default under, any
Material Contract to which the Company is a party or by which any of its
properties is bound or subject.
4.5. Consents. The execution and delivery by the Selling Stockholders of
this Agreement do not, and the consummation of the transactions contemplated
hereby will not, require the Consent of any person except for the Consents
listed on Schedule 4.5.
6
4.6. Title to Shares. The Selling Stockholders own, beneficially and of
record and free and clear of any Lien, all of the Shares. Upon the sale of the
Shares to Buyer at the Closing, Buyer will acquire the legal and beneficial
interest in all of the Shares free and clear of any Lien.
4.7. Financial Statements. Attached as Schedule 4.7(a) are the unaudited
balance sheet and statements of operation and cash flows of the Company as of
the last regular business day of December, 2001, 2002 and 2003 and for the
12-month periods then ended and its unaudited balance sheet as of March 31, 2004
(the "MOST RECENT BALANCE SHEET") and its unaudited statements of operations and
cash flow for the three-month period then ended (collectively, the "FINANCIAL
STATEMENTS"). Except as set forth on Schedule 4.7(b), the Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis
throughout the period involved (except to the extent required by changes in
GAAP) and the Financial Statements present fairly in all material respects the
financial condition and operating results and cash flows of the Company in
accordance with GAAP as of the dates, and for the periods, indicated in the
Agreement, subject in the case of the March 31, 2004 statements to normal
year-end audit adjustments.
4.8. Absence of Undisclosed Liabilities. There are no liabilities or
obligations of any nature (fixed, absolute, accrued, contingent or otherwise) of
the Company except (a) those reflected in the Most Recent Balance Sheet, (b)
those set forth in Schedule 4.8, and (c) those incurred in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet, which individually
or in the aggregate have not resulted in or could not reasonably be expected to
result in a Material Adverse Effect.
4.9. Absence of Changes. Except as disclosed in Schedule 4.9, since the
date of the Most Recent Balance Sheet, the Company has conducted its business
only in the Ordinary Course of Business and there has not been (a) any event or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect on the Company, (b) any material change by the Company in its
accounting methods, principles or practices, (c) any entry by the Company or the
Selling Stockholders into any commitment or transaction material to the Company,
except in the Ordinary Course of Business or except in connection with the
negotiation and execution and delivery of this Agreement and the other
Transaction Documents, (d) any declaration, setting aside or payment of any
dividend or distribution in respect of any capital stock of the Company or any
redemption, purchase or other acquisition of any of the Company's securities,
(e) any material increase in, amendment to, or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option, stock purchase or other employee benefit plan, (f)
granted any increase in compensation, bonus or other benefits payable to the
employees of the Company, except for increases occurring in the Ordinary Course
of Business, (g) paid any bonus to the directors, officers or employees of the
Company except for bonuses accrued on the Most Recent Balance Sheet, (h) any
incurrence, assumption or guaranty of any indebtedness by the Company, or the
grant of any Lien on the material Assets of the Company to secure any
indebtedness, (i) any sale or transfer of any material Assets of the Company
other than in the Ordinary Course of Business, or (j) any loan, advance or
Investment in any person by the Company (excluding any loan, advance or capital
contribution to, or investment in, the Company).
7
4.10. Accounts Receivable; Inventories. The accounts receivable of the
Company are valid and genuine, have arisen solely out of bona fide sales and
deliveries of goods, performance of services or other business transactions in
the Ordinary Course of Business, and are not subject to valid defenses, set-offs
or counterclaims; provided that, without limiting the representation made in the
following sentence, neither Selling Stockholder makes any representation or
warranty regarding the collectibility of any such account receivable. The
allowances for collection losses associated with such accounts receivable
reflected on the Company's books have been determined in accordance with GAAP
and are consistent with past practice. The inventories reflected on the Most
Recent Balance Sheet and held by the Company on the date hereof do not include
any items that are not usable or saleable in the Ordinary Course of Business of
the Company or are obsolete or discontinued items. Such inventories have been
reflected on the Most Recent Balance Sheet at the lower of cost or market value
(taking into account the usability or salability thereof) in accordance with
GAAP. Since the date of the Most Recent Balance Sheet, inventories of raw
materials, supplies and products have been purchased by the Company in the
Ordinary Course of Business, and the volumes of purchases thereof and orders
therefor have not been materially changed in anticipation of the transactions
contemplated by this Agreement. The Selling Stockholders do not have any
Knowledge of any conditions materially affecting the supply of materials or
products available to the Company, and, to the Knowledge of the Selling
Stockholders, the consummation of the transactions contemplated hereby will not
materially adversely affect any such supply.
4.11. Litigation. Schedule 4.11 sets forth a true and complete list of all
Orders involving the Company since January 1, 1999. Except as disclosed in
Schedule 4.11, there is no Claim pending, or to the Knowledge of the Selling
Stockholders, threatened against the Company nor is there any reasonable basis
therefor.
4.12. Compliance. The Company has complied in all material respects with
all Applicable Laws and no Claim has been made or, to the Knowledge of the
Selling Stockholders, threatened against the Company alleging any material
failure so to comply.
4.13. Taxes.
(a) Except as disclosed on Schedule 4.13: (i) all material Tax
Returns required to be filed by the Company have been duly and timely
filed and all such Tax Returns are true, correct and complete in all
material respects, (ii) none of such Tax Returns are now under audit or
examination by any Governmental Entity, (iii) all Taxes owed by the
Company that are or have become due have been timely paid in full, (iv)
there are no agreements, waivers or other arrangements providing for an
extension of time with respect to the filing of any such Tax Return or the
assessment or collection of any such Tax, (v) no penalty, interest or
other charge is or will become due with respect to the late filing of any
such Tax Return or late payment of any such Tax, (vi) there is no material
Claim pending or, to the Knowledge of the Selling Stockholders, threatened
by any Governmental Entity in connection with any such Tax, (vii) all Tax
withholding and deposit requirements imposed on the Company have been
satisfied in full in all respects, and (viii) there are no Tax allocation,
indemnity or sharing agreements or arrangements affecting the Company.
8
(b) The Company will not be required to include any amount in
income for any taxable period (or portion thereof) beginning after the
Closing Date as a result of a change in accounting method for any taxable
period beginning on or before the Closing Date. The Company will not be
required to include in any taxable period (or portion thereof) beginning
after the Closing Date any income that accrued on or prior to the Closing
Date but was not recognized prior to the Closing Date as a result of the
installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting or the cash method
of accounting.
(c) The Company (and any predecessor of the Company) has been a
validly electing S corporation within the meaning of Sections 1361 and
1362 of the Code at all times since January 1, 1999. The Company (and any
predecessor of the Company) does not own and has never owned a "qualified
Subchapter S subsidiary" within the meaning of Section 1361(b)(3)(B) of
the Code. The Company will not be liable for any Tax under Section 1374 of
the Code or any other applicable state or local law in connection with the
transactions contemplated by the Transaction Documents. Except as listed
on Schedule 4.13(c), the Company has not, since its inception, (i)
acquired assets from another corporation in a transaction in which the
Company's Tax basis for the acquired assets was determined, in whole or in
part, by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (ii) acquired the stock of any
corporation which became a "qualified subchapter S subsidiary" within the
meaning of Section 1361(b)(3)(B) of the Code.
4.14. Environmental Matters. To the Knowledge of the Selling Stockholders,
except as described in Schedule 4.14 (a) the Company is in compliance in all
material respects with all applicable Environmental Laws; (b) the Company has
not received any written notices, demand letters or requests for information
from any Governmental Entity or other person indicating that it may be in
violation of, or liable under, any Environmental Law in any material respect;
(c) no reports have been filed by the Company concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law; (d) no Hazardous Substance has been disposed of, released or transported by
the Company in violation of any applicable Environmental Law; (e) there have
been no environmental studies or audits regarding compliance or noncompliance
with any Environmental Law conducted by or which are in the possession of the
Company relating to the activities of the Company or any of the real property
used by the Company that have not been delivered to Buyer; and (f) the Company
is not subject to any material liabilities or expenditures relating to any suit,
settlement, court order, administrative order, regulatory requirement, judgment
or claim asserted or arising under any Environmental Law.
4.15. Contracts. Except for Contracts terminable upon 90 days or less
notice without penalty, Schedule 4.15 sets forth all of the following Contracts
to which the Company is a party or by which any of its Assets are bound
(collectively, the "MATERIAL CONTRACTS"): (a) Contracts pertaining to the
borrowing of money or indebtedness; (b) Contracts creating guaranties; (c)
Contracts relating to any single capital expenditure in excess of $25,000; (d)
Contracts for the purchase or sale of real property, any business or line of
business or for any merger or consolidation; (e) joint venture, limited
liability company or partnership agreements; (f) Material Leases; (g) employment
agreements not terminable upon one month's notice without further
9
severance and involving annual compensation in excess of $50,000; and (h) other
Contracts that individually require by their respective terms after the date
hereof the payment or receipt of more than $50,000 during any 12-month period or
$100,000 in the aggregate. The Company has complied in all material respects
with all of the terms and conditions of the Material Contracts to which it is a
party and has not done or performed any act which would invalidate or impair in
any material respect its rights under any Material Contract. There are no
pending written assertions or claims that the Company has breached, violated or
defaulted under any Material Contract in any material respect. True, correct and
complete copies of all Material Contracts have been delivered to Buyer.
4.16. Insurance. Schedule 4.16 sets forth a complete and accurate summary
of all Policies, including name of insurer, the types, dates and amounts of
coverage, any material coverage exclusions and a statement of the Claims paid
out, and Claims pending, as to each Policy for each of the last three full
fiscal years and any interim period. With respect to each Policy: (a) the Policy
is in full force and effect; (b) neither the Company nor, to the Knowledge of
the Selling Stockholders, any party to the Policy is in material breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred that, with notice or the lapse of time,
would constitute such a material breach or default, or permit termination,
modification, or acceleration under the Policy, and (c) no party to the Policy
has repudiated any material provisions thereof nor has the Company, during the
last five years been refused any insurance with respect to its Assets or
operations, nor has coverage ever been limited by any insurance carrier to which
the Company has applied for any Policy or with which it has carried a Policy.
4.17. Assets. The Company owns or leases all material Assets necessary for
the conduct of the business of the Company as presently conducted. Except as set
forth in Schedule 4.17, the Company has sufficiently good and valid title to, or
an adequate leasehold interest in, all of its material Assets, free and clear of
Liens, other than Liens set forth on Schedule 4.17 (the "PERMITTED LIENS").
4.18. Intellectual Property. To the Knowledge of the Selling Stockholders,
the Company is not infringing upon or violating in any material respect any
intellectual property right, including without limitation any trademark, trade
name, domain name, patent, industrial design, trade secret, or copyright or any
registration or pending application therefor of any other person (collectively,
"INTANGIBLE RIGHTS"), and the Selling Stockholders do not have Knowledge of any
pending or threatened claims thereof. To the Knowledge of the Selling
Stockholders, no person is infringing any Intangible Rights of the Company in
any material respect.
4.19. Employment Arrangements. Schedule 4.19 attached hereto contains a
list of all employees of the Company with annual compensation in excess of
$50,000, together with their age, date of employment, job titles, amount of
compensation, fringe benefits and the amount of any outstanding advances and/or
loans from the Company to such employees. Except as set forth on Schedule 4.19,
the Company has no obligation, contingent or otherwise, under any employment
agreement, collective bargaining or other labor agreement, any agreement
containing severance or termination pay arrangements, deferred compensation
agreement, retainer or consulting arrangements, pension or retirement plan,
bonus or profit sharing plan, stock option or purchase plan, or other employee
contract or non terminable arrangement
10
(whether or not that arrangement imposes a penalty for termination), group life,
health, medical or hospitalization insurance plan or program, or other employee
or fringe benefit plan, including vacation plans or programs and sick leave
plans or programs. Except as set forth on Schedule 4.19, the Company is not now
and for the past five years has not been subject to or involved in or, to the
Knowledge of the Selling Stockholders, threatened with any union elections,
petitions therefor or other organizing activities.
4.20. Employee Benefit Plans.
(a) List of Plans. Set forth on Schedule 4.20 is an accurate and
complete list of all employee benefit plans ("EMPLOYEE BENEFIT PLANS"),
including Employee Benefit Plans as defined by ERISA and other
compensation and benefit plans not contemplated by ERISA, that have been
established, maintained or contributed to by the Company within the past
five years, whether or not any such Employee Benefit Plans are otherwise
exempt from the provisions of ERISA. The Selling Stockholders have
delivered to Buyer correct and complete copies of (i) the plan documents
and summary plan descriptions, (ii) the most recent determination letter
received from the IRS for each plan intended to qualify under Section
401(a) of the Code, (iii) the most recent Form 5500 Annual Report, and
(iv) all related trust agreements, insurance contracts, and other funding
agreements which implement each Employee Benefit Plan.
(b) Status of Plans. Except as set forth on Schedule 4.20(b), the
Company has not and does not maintain or contribute to any Employee
Benefit Plan that is not in substantial compliance with all Applicable
Law, including ERISA and the Code, nor has the Company or any Commonly
Controlled Entity (as defined below) maintained or contributed to (i) any
defined benefit plan, as defined in Section 3(35) of ERISA, (ii) any
multiemployer plan, as defined in Section 3(37) of ERISA, or (iii) any
other Employee Benefit Plan subject to the minimum funding requirement of
Section 412 of the Code, in each case within the past five years. All
obligations of the Company and each Commonly Controlled Entity, whether
arising by operation of law or by contract, required to be performed under
Section 4980B of the Code (or similar state law), including, but not
limited to, such obligations that may arise by virtue of the transaction
contemplated by this Agreement, have been or will be timely performed. The
term "COMMONLY CONTROLLED ENTITY" shall mean any corporation, trade,
business, or entity under common control with the Company within the
meaning of Section 414(b), (c), (m), or (o) of the Code or Section 4001 of
ERISA.
(c) Contributions. Full payment has been made of all amounts,
which the Company is required, under applicable law or under any Employee
Benefit Plan or any agreement relating to any Employee Benefit Plan to
which the Company is a party, to have paid as contributions thereto as of
the date hereof. The Company has made adequate provision for reserves in
the Financial Statements to meet any contributions that have not been made
because they are not yet due under the terms of any Employee Benefit Plan
or related agreements.
(d) 401(k) Plan. The Company's 401(k) Plan is intended to satisfy
the requirements of Section 401(a) of the Code, and neither the Company
nor the Selling
11
Stockholders are aware of any plan provision or operation that would
result in the disqualification of the Company's 401(k) Plan.
4.21. Customers and Suppliers. Schedule 4.21 hereto sets forth a complete
and accurate list of (a) the top 20 customers of the Company, by revenue during
the last full fiscal year and during the interim period for the current fiscal
year and the amount of revenues accounted for by each such customer during such
periods and (b) the top 20 suppliers by amounts paid to suppliers by the Company
during the last full fiscal year and during the interim period for the current
fiscal year and the amounts paid to each such supplier during such periods. None
of the top 10 customers of the Company listed on Schedule 4.21 has advised the
Company that it will stop, or materially decrease the rate of, buying materials,
products or services from the Company. None of the top 10 suppliers of the
Company listed on Schedule 4.21 has advised the Company that it will stop, or
materially decrease the rate of, supplying materials, products, or services to
the Company.
4.22. Brokers. No person is entitled to receive any brokerage, finder's or
financial advisory fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Selling Stockholders or the Company.
4.23. Dealings with Affiliates. Schedule 4.23 sets forth a complete and
accurate list and description of the economic terms, including the parties, of
all Contracts to which the Company is, will be or has been a party, at any time
from December 31, 2000 to the Closing Date, and to which any one or more of (a)
the Selling Stockholders, (b) the Company's Affiliates, (c) an Affiliate of a
Selling Stockholder, or (d) any person in which a Selling Stockholder or an
Affiliate of the Company or a Selling Stockholder has, directly or indirectly,
made an Investment, is also a party. Except as set forth in Schedule 4.23, since
December 31, 2000, the Company has not made any payments, loaned or borrowed any
funds or property or made any credit arrangement or accommodation with any
Selling Stockholder, Affiliate or employee of the Company, except for the
payment of employee salaries and director compensation in the Ordinary Course of
Business.
4.24. Projections. The projections relating to the operations of the
Company during the fiscal years ending December 31, 2004 and December 31, 2005
(the "PROJECTIONS"), previously delivered to Buyer, have been prepared in good
faith and using reasonable assumptions. While nothing has come to the attention
of the Selling Stockholders to indicate that the Projections or the assumptions
upon which they are based are not reasonable, neither Selling Stockholder makes
any representation or warranty, or gives any other assurance, that such
projections will be met.
4.25. Systems Performance. Except as described in Schedule 4.25, none of
the computer software, computer hardware (whether general or special purpose),
telecommunications capabilities (including all voice, data and video networks)
and other similar or related items of automated, computerized, and/or software
systems and any other networks or systems and related services that are used or
relied on by the Company (collectively, the "SYSTEMS") have experienced bugs,
failures, breakdowns or continued substandard performance in the past 12 months
that has caused any substantial disruption or interruption in or to the use of
any such Systems by the Company.
12
4.26. Securities Laws Matters. Each Selling Stockholder is acquiring the
Buyer Common Stock hereunder for his own account for investment and not with a
view to, or for sale in connection with, any "distribution" of the Buyer Common
Stock, as such term is used in Section 2(11) of the Securities Act. Each Selling
Stockholder has had the opportunity to discuss the transactions contemplated by
this Agreement with Buyer and has been afforded, prior to the execution of this
Agreement, the opportunity to ask questions of, and receive answers from Buyer
and to obtain any additional information relating to the transactions
contemplated hereby as such Selling Stockholder has requested. Each Selling
Stockholder is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act and has such knowledge and experience in
business or financial matters that he is capable of evaluating the merits and
risks of an investment in the Buyer Common Stock. Each Selling Stockholder
acknowledges and agrees that the Buyer Common Stock will be "restricted
securities" within the meaning of Rule 144 under the Securities Act and cannot
be sold or otherwise disposed of, except (a) pursuant to an exemption from the
registration requirements under applicable state securities laws and the
Securities Act, (b) in accordance with Rule 144, or (c) pursuant to an effective
registration statement filed by Buyer with the SEC under applicable state
securities laws and the Securities Act. Each Selling Stockholder acknowledges
and agrees that Buyer may, unless a registration statement is in effect covering
such Buyer Common Stock or unless the holders thereof comply with Rule 144,
place stop transfer orders with its transfer agent with respect to such
certificates in accordance with federal securities laws.
4.27. Disclosure. Neither this Agreement nor any of the schedules,
exhibits, attachments or certificates prepared for or supplied to Buyer by or on
behalf of the Selling Stockholders with respect to the transactions contemplated
hereby contains any untrue statement of a material fact or omits a material fact
necessary to make each statement contained herein or therein not misleading. The
Selling Stockholders are not aware of any fact which could reasonably be
anticipated to have a Material Adverse Effect on the Company.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER
Buyer represents and warrants to each Selling Stockholder as follows:
5.1. Organization, Standing and Power. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement and the other Transaction
Documents, and to own, lease, and operate its properties and to carry on its
business as now being conducted.
5.2. Capitalization. As of the date hereof, the authorized capital stock
of Buyer consists of 50,000,000 shares of Buyer Common Stock and 1,000,000
shares of preferred stock, par value $0.01 per share ("BUYER PREFERRED STOCK").
At the close of business on June 30, 2004 (a) 9,979,042 shares of Buyer Common
Stock were issued and outstanding and no shares of Buyer Preferred Stock were
issued and outstanding, and (b) 86,026 shares of Buyer Common Stock and no
shares of Buyer Preferred Stock were held in treasury by Buyer or by
subsidiaries of Buyer. All of the outstanding shares of Buyer Common Stock are
validly issued, fully paid and non-assessable. Other than options to purchase
873,600 shares of Buyer Common Stock issued pursuant to employee benefit plans
and agreements of Buyer, as of the date hereof there is
13
no authorized or outstanding option, subscription, warrant, right (preemptive or
other), commitment or other agreement obligating the Company to repurchase,
issue or transfer any shares of capital stock of the Buyer or any securities
convertible into or exchangeable for any shares of capital stock of the Buyer.
Upon the issuance of the Buyer Common Stock to the Selling Stockholders as
provided in Section 2.4(b), such Buyer Common Stock will be validly issued,
fully paid and non-assessable and will be free and clear of all Liens, other
than restrictions on transfer under Federal and state securities laws.
5.3. Authority. The execution and delivery of this Agreement and the
other Transaction Documents by Buyer and the performance by Buyer of its
obligations hereunder and thereunder have been duly and validly authorized by
all necessary corporate action on the part of Buyer. This Agreement and each
other Transaction Document has been duly executed and delivered by Buyer and
(assuming that this Agreement constitutes a legal, valid, and binding obligation
of the Selling Stockholders) constitutes a legal, valid, and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms, except to the
extent that (a) enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium, or similar Applicable Laws now or
hereafter in effect relating to or limiting creditors' rights generally and (b)
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court or other similar person before which any proceeding therefor may be
brought.
5.4. No Conflicts or Violations. Subject to obtaining the Consents
contemplated by Schedule 5.5, the execution and delivery of this Agreement and
the other Transaction Documents by Buyer do not, and the performance by Buyer of
its obligations hereunder and thereunder will not (a) conflict with or violate
in any material respect any term or provision of any Applicable Law or any writ,
judgment, decree, or injunction applicable to Buyer; (b) conflict with or result
in a violation or breach of the Certificate of Incorporation or Bylaws of Buyer;
or (c) result in a material breach of, or constitute a default under, any
material Contract to which Buyer is a party or by which any of its properties is
bound or subject.
5.5. Consents. Except as set forth on Schedule 5.5, the execution and
delivery of this Agreement and the other Transaction Documents by Buyer do not,
and consummation of the transactions contemplated hereby will not, require Buyer
to obtain any Consent except for such Consents the failure of which to be made
or obtained could not reasonably be expected to have a material adverse effect
on the validity or enforceability of this Agreement.
5.6. Litigation. There are no pending, or to the Knowledge of Buyer,
threatened, claims, actions, suits, proceedings, written inquiries or
investigations by any Governmental Entity or any other person against Buyer,
except such claims, actions, suits, proceedings written inquiries or
investigations that could not reasonably be expected to have a material adverse
effect on the validity or enforceability of this Agreement.
5.7. SEC Filings. Buyer has filed all forms, reports and documents
required to be filed by it with the SEC (collectively, the "SEC FILINGS") on a
timely basis. The SEC Filings filed prior to the date hereof or the Closing Date
(a) were prepared in all material respects in accordance with the requirements
of the Securities Act and the Exchange Act, as the case may be, and (b) did not
at the time they were filed (or if amended or superseded by a filing prior to
14
the date of this agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading.
5.8. Brokers. No person is or will become entitled to receive any
brokerage, finder's or financial advisory fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made on
or on behalf of Buyer.
5.9. Disclosure. Neither this Agreement nor any of the schedules,
exhibits, attachment or certificates prepared for or supplied to the Selling
Stockholders by or on behalf of the Buyer with respect to the transactions
contemplated hereby contains any untrue statement of a material fact or omits a
material fact necessary to make each statement contained herein or therein not
misleading.
ARTICLE 6. COVENANTS AND AGREEMENTS
6.1. Registration Statement.
(a) Buyer shall use all commercially reasonable efforts to prepare
and file with the SEC, within 30 days after the Closing Date, a
registration statement on Form S-3 or other applicable form (the
"REGISTRATION STATEMENT"), covering the resale of the Buyer Common Stock
issued to the Selling Stockholders in connection with the transactions
contemplated by this Agreement. Buyer shall use commercially reasonable
efforts to respond to any comments of the SEC, to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing (the "EFFECTIVE TIME") and to maintain the
effectiveness of the Registration Statement until the first anniversary of
the Closing Date. As promptly as practicable after the Closing Date, Buyer
shall prepare and file any other filings required under the Exchange Act,
the Securities Act or any other Applicable Law relating to the
transactions contemplated by this Agreement (the "OTHER FILINGS"). The
Selling Stockholders agree to provide Buyer with any information regarding
themselves, the shares of Buyer Common Stock held by them, and the
intended method of disposition of such securities as requested by the SEC
or its staff or any other government officials for amendments or
supplements to the Registration Statement or the Other Filings.
(b) Buyer shall also:
(i) furnish to the Selling Stockholders such number of
copies of each preliminary and final prospectus and such other
documents as the Selling Stockholders may reasonable request to
facilitate the resale of the Buyer Common Stock covered by the
Registration Statement (the "REGISTERED Shares");
(ii) advise the Selling Stockholders promptly after it
receives notice thereof, of the time when the Registration Statement
has been declared effective, the issuance of any stop order, or the
suspension of the qualification of Buyer Common Stock issuable in
connection with this Agreement for offering or sale in any
jurisdiction;
15
(iii) if required under applicable law at the time, use
commercially reasonable efforts to register and qualify the
Registered Shares under such other securities or blue sky laws of
such jurisdictions as shall be reasonably requested by the Selling
Stockholders; provided that Buyer shall not be required in
connection with such registration and qualification or as a
condition to such registration and qualification (x) to qualify to
do business or to file a general consent to service of process in
any such states or jurisdictions or (y) to subject itself to
taxation in any jurisdiction;
(iv) notify the Selling Stockholders of any request by the
SEC for the amendment or supplement of the Registration Statement or
prospectus or for additional information; and
(v) prepare and file with the SEC, promptly upon the request
of the Selling Stockholders, any amendments or supplements to the
Registration Statement or prospectus which may be reasonably
necessary or advisable in connection with the resale of the
Registered Shares by the Selling Stockholders.
(c) If at any time any information relating to the Selling
Stockholders or Buyer, or any of their respective affiliates, officers or
directors should be discovered by the Selling Stockholders or Buyer which
should be set forth in an amendment or supplement to the Registration
Statement or any Other Filing so that any of such documents would not
include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or an event
occurs which is required to be set forth in an amendment or supplement to
the Registration Statement, or any Other Filing, the party that discovers
such information shall promptly notify the other party and an amendment or
supplement describing such information shall be promptly filed by Buyer
with the SEC. Upon receipt of any notice from Buyer of any event or
condition as a result of which any prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, each Selling
Stockholder will forthwith discontinue such Selling Stockholder's
disposition of Registered Shares pursuant to the Registration Statement
until such Selling Stockholder receives copies of a supplemented or
amended prospectus from Buyer and, if so directed by Buyer, shall deliver
to Buyer (at Buyer's expense) all copies, other than permanent file
copies, then in such Selling Stockholder's possession of the prospectus
relating to such Registration Statement current at the time of receipt of
such notice.
(d) All expenses incurred in effecting the registration under
Registration Statement shall be borne by Buyer. All underwriting
discounts, selling commissions, and stock transfer taxes relating to the
Registered Shares shall be borne by the Selling Stockholders pro rata on
the basis of the number of shares of Registered Shares registered on their
behalf.
16
(e) Buyer shall, to the fullest extent permitted by law, indemnify
and hold harmless each Selling Stockholder included in the Registration
Statement against any expenses, claims, losses, damages or liabilities to
which such Selling Stockholder may become subject under the Securities Act
or otherwise, insofar as such expenses, claims, losses, damages or
liabilities or actions in respect thereof arise out of or are based upon
any untrue statement of any material fact contained in the Registration
Statement, final prospectus, preliminary prospectus, or prospectus
supplement contained therein or filed with the SEC, or any amendment or
supplement thereto, or any omission to state therein a material fact
required to be stated therein or. necessary to make the statements therein
(in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading; provided, that Buyer shall not be
liable in any such case to the extent that any such loss (or actions in
respect thereof) arises out of or is based upon an untrue statement or
omission made in any such Registration Statement, final prospectus,
amendment or supplement in reliance upon and in conformity with
information furnished in writing to Buyer by such Selling Stockholder. The
foregoing indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Selling Stockholders.
(f) Each Selling Stockholder shall, to the full extent permitted
by law, indemnify and hold harmless Buyer, its directors, officers,
employees, agents and each other person, if any, who controls Buyer within
the meaning of the Securities Act, against any expenses, claims, losses,
damages or liabilities to which Buyer or any such director, officer,
employee, agent or controlling person may become subject under the
Securities Act or otherwise, insofar as such expenses, claims, losses,
damages or liabilities arise out of or are based upon any untrue statement
of any material fact contained in the Registration Statement, final
prospectus or prospectus supplement contained therein or filed with the
SEC, or any amendment or supplement thereto, or any omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, if such untrue
statement or omission was made in reliance upon and in conformity with
written information furnished to Buyer by such Selling Stockholder. The
foregoing indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of Buyer or any such director,
officer, employee, agent or controlling person and shall survive the
transfer of such securities by such Selling Stockholder.
(g) Promptly after receipt by any party of notice of the
commencement of any action or proceeding involving a claim referred to in
Section 6.1(e) or 6.1(f), such party shall, if a claim in respect thereof
is to be made against another party pursuant to such paragraphs, give
written notice to the latter of the commencement of such action, provided
that any failure of any person to give notice as provided therein shall
not relieve any other person of its obligations under Section 6.1(e) or
6.1(f), as the case may be, except to the extent that such other person is
actually prejudiced by such failure. In case any such action is brought,
the party obligated to indemnify pursuant to Section 6.1(e) or 6.1(f), as
the case may be, shall be entitled to participate in and, unless, in the
reasonable judgment of counsel to any indemnified party, a conflict of
interest between such indemnified party and any indemnifying party exists
with respect to such claim, to
17
assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation; provided that the indemnified party may
participate in such defense at the indemnified party's expense. Without
the consent of the indemnified party, no indemnifying party shall consent
to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to each indemnified party of a release from all liability in
respect to such claim or litigation. No indemnifying party shall be
subject to any liability for any settlement made without its consent,
which consent shall not be unreasonably withheld.
(h) If the indemnity and reimbursement obligation provided for in
Section 6.1(e) or 6.1(f) is unavailable or insufficient to hold harmless a
party entitled to indemnification hereunder in respect of any expenses,
claims, losses, damages or liabilities (or actions with respect thereto)
referred to therein, the party obligated to indemnify hereunder shall
contribute to the amount paid or payable by the indemnified party as a
result of such expenses, claims, losses, damages or liabilities (or
actions) in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified party
on the other hand in connection with statements or omissions which
resulted in such expenses, claims, losses, damages or liabilities as well
as any other relevant equitable considerations. Relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The parties hereto agree that
it would not be just and equitable if contributions pursuant to this
paragraph were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this paragraph. No
person guilty of fraudulent misrepresentation within the meaning of the
Securities Act shall be entitled to contribution from any person not
guilty of such fraudulent misrepresentation.
6.2. Listing. Buyer shall use commercially reasonable efforts to cause
the shares of Buyer Common Stock issuable to the Selling Stockholders pursuant
to the terms of this Agreement to be approved for listing on the AMEX (or other
national market or exchange on which Buyer Common Stock is then traded or
quoted) as soon as practical but in no event after the Effective Time.
6.3. Public Information. During the two year period following the Closing
Date, Buyer shall (a) use commercially reasonable efforts to make current public
information available in accordance with Rule 144(c) under the Securities Act
and to maintain the continued listing of Buyer Common Stock on AMEX and (b)
furnish to either Selling Stockholder upon written request, (i) a written
statement as to its compliance with the requirements of Rule 144(c) and the
18
reporting requirements of the Securities Act and the Exchange Act and (ii) a
copy of the most recent annual or quarterly report of Buyer.
6.4. Notification of Certain Matters. Each of the Selling Stockholders
and Buyer shall give prompt notice to the other parties of the occurrence, or
failure to occur, of any event, which occurrence or failure to occur would be
likely to cause (a) any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect at any time from the date of
this Agreement to the Closing Date, or (b) any material failure of the Selling
Stockholders or Buyer, as the case may be, or of any officer, director, employee
or agent thereof, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement. Notwithstanding the
foregoing, the delivery of any notice pursuant to this Section 6.4 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
6.5. Stock Options. Buyer shall grant, effective as of the Closing Date,
options to acquire 65,000 shares of Buyer Common Stock pursuant to the Amended
and Restated 1998 Collegiate Pacific Inc. Stock Option Plan to those employees
of the Company, except for the Selling Stockholders, set forth on Schedule 6.5.
Such options shall have an exercise price equal to the closing price of the
Buyer Common Stock on AMEX as of the Closing Date.
6.6. 401(k) Plan. Notwithstanding Section 4.20(c), prior to the Closing,
the Company shall have contributed $30,000 to the Company's 401(k) Plan matching
contributions made by employees of the Company for the period beginning January
1, 2004 and ending June 30, 2004. In the event the Net Income of the Company for
the period beginning August 1, 2004 and ending December 31, 2004 is $730,000 or
greater, the Buyer shall fund the lesser of $30,000 of, or the remaining portion
of, the Company's optional matching contributions to the 401(k) Plan for
employee contributions during the period beginning July 1, 2004 and ending
December 31, 2004.
6.7. Employee Matters. Buyer covenants and agrees that the premiums and
deductibles, taken as a whole, for health and medical benefits offered to
employees of the Company will not increase from levels in effect immediately
prior to the Closing before January 1, 2006.
6.8. Tax Matters.
(a) The Selling Stockholders shall prepare or cause to be
prepared, and Buyer shall file or cause to be filed, all Tax Returns for
the Company for all periods ending on or prior to the Closing Date which
are filed after the Closing Date. Not less than 30 days prior to the due
date for filing any such Tax Return, the Selling Stockholders shall permit
Buyer to review and comment thereon and shall make such revisions to such
Tax Return as are reasonably requested by Buyer. Not less than five days
prior to the due date for payment of Taxes with respect to any such Tax
Return, the Selling Stockholders shall pay to Buyer the amount of any
Buyer Indemnified Tax Costs with respect to such Tax Return.
(b) With respect to any Tax Return covering a taxable period
beginning on or before the Closing Date and ending after the Closing Date
that is required to be filed after
19
the Closing Date with respect to the Company, Buyer shall cause such Tax
Return to be prepared and filed. Not later than 30 days prior to the due
date of each such Tax Return, Buyer shall deliver a copy of such Tax
Return to the Selling Stockholders together with a statement of the amount
of Buyer Indemnified Tax Costs with respect to such Tax Return and shall
permit Selling Stockholders to review and comment on such Tax Return and
shall make such revisions to such Tax Return as are reasonably requested
by the Selling Stockholders. Not later than 5 days prior to the due date
of such Tax Return, the Selling Stockholders shall pay to Buyer the amount
of Buyer Indemnified Tax Costs with respect to such Tax Return.
(c) From and after the date hereof, the Selling Stockholders shall
not, and shall not permit any of their respective affiliates to, amend any
Tax Return previously filed which includes information relating to the
Company without the prior written consent of Buyer.
(d) Notwithstanding anything to the contrary herein, any franchise
Tax paid or payable with respect to the Company shall be allocated to the
taxable period during which the income, operations, assets or capital
comprising the base of such Tax is measured, regardless of whether the
right to do business for another taxable period is obtained by the payment
of such franchise Tax.
(e) Buyer and the Selling Stockholders shall cooperate fully, and
shall cause the Company to cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section and any audit or proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon
the other party's request) the provision of records and information which
are reasonably relevant to any such proceeding and making employees
available on a mutually convenient basis to provide additional information
and explanation of any material provided hereunder. The Selling
Stockholders further agree, upon request, to use their best efforts to
obtain any certificate or other document from any Governmental Entity or
any other person as may be necessary to mitigate, reduce or eliminate any
Tax that could be imposed on Buyer or the Company (including, but not
limited to, with respect to the transactions contemplated hereby). Buyer
and the Selling Stockholders further agree, upon request, to provide the
other party with all information regarding the Company that either party
may be required to report to any taxing authority.
(f) The parties agree that no election shall be filed or otherwise
made under Section 338(h)(10) of the Code with respect to the Buyer's
acquisition of the Shares.
6.9. Noncompetition; Nonsolicitation.
(a) As additional consideration for Buyer, and as a material
inducement for Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, each of the Selling Stockholders agrees
that he shall not, except as otherwise provided in the Employment
Agreements, during the five-year period beginning on the Closing Date, in
any manner except in the scope of his employment by the Company, directly
or indirectly:
20
(i) Own, engage in, manage, operate, join, control, or
participate in the ownership, management, operation, or control of,
or be connected as a stockholder, director, officer, employee,
agent, partner, joint venturer, member, beneficiary, or otherwise
with, any corporation, limited liability company, partnership, sole
proprietorship, association, business, trust, or other organization,
entity or individual which conducts Company Activities in the
Protected Area; provided, however, that each Selling Stockholder may
own, directly or indirectly, securities of any entity traded on any
national securities exchange or listed on any National Association
of Securities Dealers Automated Quotation System if the Selling
Stockholder does not, directly or indirectly, individually own 5% or
more of any class of equity securities, or securities convertible
into or exercisable or exchangeable for 5% or more of any class of
equity securities, of such entity;
(ii) Solicit or attempt to solicit, any business from any
customers of Buyer or the Company or any of their Affiliates for
purposes of engaging in any Company Activities in any Protected
Area;
(iii) Recruit or hire away or attempt to recruit or hire away,
on his behalf or on behalf of any other organization, entity or
person, any employee of Buyer, the Company or any of their
Affiliates, or induce or attempt to influence any such employee to
terminate his or her employment with Buyer, the Company or any of
their Affiliates; or
(iv) Interfere with or otherwise attempt to affect Buyer's or
the Company's relationship with any vendor or customer of Buyer, the
Company or any of their Affiliates.
(b) Each Selling Stockholder understands and acknowledges that the
Company and Buyer have made substantial investments to develop their
respective business interests and goodwill. Each Selling Stockholder
agrees that such investments are worthy of protection, and that the
Company's and Buyer's need for the protection afforded by this Section 6.9
is greater than any hardship the Selling Stockholder might experience by
complying with its terms. Each Selling Stockholder agrees that the
limitations as to time, geographic area, and scope of activity to be
restrained contained in this Agreement are reasonable and are not greater
than necessary to protect the Company Activities and/or the goodwill or
other business interests of Buyer and the Company.
(c) Although Buyer and the Selling Stockholders believe the
limitations as to time, geographic area, and scope of activity contained
in this Section 6.9 are reasonable and do not impose a greater restraint
than necessary to protect the Company Activities, goodwill, and other
legitimate business interest of Buyer and the Company, if this is
judicially determined not to be the case, Buyer and the Selling
Stockholders specifically request that the limitations contained in this
Section 6.9 be reformed to the extent necessary to make this Agreement
enforceable. It is the express intent of Buyer and the Selling
Stockholders that the terms of this Section 6.9 be enforced to the full
extent permitted by law.
21
ARTICLE 7. INDEMNIFICATION
7.1. Indemnification of Buyer. From and after the Closing and subject to
the provisions of this Article 7 and Section 8.2 below, each Selling
Stockholder, jointly and severally, agree to indemnify and hold harmless the
Buyer Indemnified Parties from and against any and all Buyer Indemnified Costs.
7.2. Indemnification of Selling Stockholders. From and after the Closing
and subject to the provisions of this Article 7 and Section 8.2 below, Buyer
agrees to indemnify and hold harmless each of the Selling Stockholders
Indemnified Parties from and against any and all Selling Stockholders
Indemnified Costs.
7.3. Defense of Third-Party Claims. An Indemnified Party shall give
prompt written notice to any Indemnifying Party of the commencement or assertion
of any Claim by a third party (collectively, a "THIRD PARTY CLAIM") in respect
of which such Indemnified Party shall seek indemnification hereunder. Any
failure so to notify an Indemnifying Party shall not relieve such Indemnifying
Party from any liability that it, he, or she may have to such Indemnified Party
under this Article 7 except to the extent the failure to give such notice
materially and adversely prejudices such Indemnifying Party. The Indemnifying
Party shall have the right to assume control of the defense of, settle, or
otherwise dispose of such Third-Party Claim on such terms as it deems
appropriate; provided, however, that:
(a) The Indemnified Party shall be entitled, at its own expense,
to participate in the defense of such Third-Party Claim (provided,
however, that the Indemnifying Parties shall pay the legal fees of the
Indemnified Party if (i) the employment of separate counsel shall have
been authorized in writing by all Indemnifying Parties in connection with
the defense of such Third-Party Claim, (ii) the Indemnifying Parties shall
not have employed counsel reasonably satisfactory to the Indemnified Party
to defend such Third-Party Claim, or (iii) the Indemnified Party's counsel
shall have advised the Indemnified Party in writing, with a copy delivered
to the Indemnifying Party, that there is a material conflict of interest
that could reasonably be expected to violate applicable standards of
professional conduct to have common counsel);
(b) The Indemnifying Party shall obtain the prior written approval
of the Indemnified Party before entering into or making any settlement,
compromise, admission, or acknowledgment of the validity of such
Third-Party Claim or any liability in respect thereof if, pursuant to or
as a result of such settlement, compromise, admission, or acknowledgment,
injunctive or other equitable relief would be imposed against the
Indemnified Party or if, in the opinion of the Indemnified Party, such
settlement, compromise, admission, or acknowledgment could have a material
adverse effect on the Indemnified Party;
(c) No Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of such
Third-Party Claim; and
22
(d) The Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of),
and the Indemnified Party shall be entitled to have sole control over, the
defense or settlement, compromise, admission, or acknowledgment of any
Third-Party Claim (i) as to which the Indemnifying Party fails to assume
the defense within a reasonable length of time; or (ii) to the extent the
Third-Party Claim seeks an order, injunction, or other equitable relief
against the Indemnified Party which, if successful, would materially
adversely affect the business, operations, assets, or financial condition
of the Indemnified Party; provided, however, that the Indemnified Party
shall make no settlement, compromise, admission, or acknowledgment that
would give rise to liability on the part of any Indemnifying Party without
the prior written consent of such Indemnifying Party.
The parties hereto shall extend reasonable cooperation in connection with
the defense of any Third-Party Claim pursuant to this Article 7 and, in
connection therewith, shall furnish such records, information, and testimony and
attend such conferences, discovery proceedings, hearings, trials, and appeals as
may be reasonably requested.
7.4. Direct Claims. In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 7.3 because no
Third-Party Claim is involved, the Indemnified Party shall notify the
Indemnifying Party in writing of any Indemnified Costs which such Indemnified
Party claims are subject to indemnification under the terms hereof. Subject to
the limitations set forth in Sections 7.6 and 8.2, the failure of the
Indemnified Party to exercise promptness in such notification shall not amount
to a waiver of such claim except to the extent the resulting delay materially
prejudices the position of the Indemnifying Party with respect to such claim.
7.5. Escrow. On the Closing Date, Buyer, the Selling Stockholders and the
Escrow Agent will enter into the Escrow Agreement in accordance with which Buyer
shall, at Closing, deposit the Escrow Shares with the Escrow Agent.
7.6. Limitations. Subject to Section 8.2 hereof, the following provisions
of this Section 7.6 shall be applicable after the time of the Closing:
(a) Minimum Loss. Except with respect to Buyer Indemnified
Certificate Costs, Buyer Indemnified Tax Costs, Buyer Indemnified
Representation Costs arising out of any breach or default of the
representations and warranties contained in Section 4.22 (relating to
brokers' fees) and Selling Stockholders Indemnified Representation Costs
arising out of any breach or default of the representations and warranties
contained in the last sentence of Section 5.2 (relating to the issuance of
the shares of Buyer Common Stock to the Selling Stockholders) or in
Section 5.8 (relating to brokers' fees), no Indemnifying Party shall be
required to indemnify an Indemnified Party for Indemnified Representation
Costs unless and until the aggregate amount of such Indemnified
Representation Costs for which the Indemnified Party is otherwise entitled
to indemnification pursuant to this Article 7 exceeds $100,000 (the
"MINIMUM LOSS"). After the Minimum Loss is exceeded, the Indemnified Party
shall be entitled to be paid the entire amount of its Indemnified
Representation Costs in excess of (but not including)
23
the Minimum Loss, subject to the limitations on recovery and recourse set
forth in this Section 7.6.
(b) Limitation as to Time. No Indemnifying Party shall be liable
for any Indemnified Representation Costs pursuant to this Article 7 unless
a written claim for indemnification in accordance with Section 7.3 or 7.4
is given by the Indemnified Party to the Indemnifying Party with respect
thereto on or before the eighteen-month anniversary of the Closing Date,
except that this time limitation shall not apply to any (i) Claims for
fraud pursuant to Section 8.2; (ii) claims for breaches of the
representations and warranties contained in Section 4.3 (relating to
capital structure), Section 4.6 (relating to ownership of the Shares) and
Section 4.13 (relating to Taxes), which representations and warranties
shall survive until the expiration of the applicable statute of
limitations. Except for Claims for fraud pursuant to Section 8.2, no
Indemnifying Party shall be liable for any Indemnified Costs in excess of
the Purchase Price.
(c) No Contribution. The Selling Stockholders shall be liable for
any Buyer Indemnified Costs sustained by any Buyer Indemnified Parties
subject to the terms, limitations and conditions of this to Article 7. The
Selling Stockholders hereby waive and release any and all rights that they
may have under this Agreement or any other Transaction Document to assert
claims of contribution against the Company.
(d) Recourse against Escrow Funds. A Buyer Indemnified Party shall
be entitled to payment first out of the Escrow Stock pursuant to the terms
of this Article 7 and the Escrow Agreement for all amounts due to a Buyer
Indemnified Party with respect to any claim by a Buyer Indemnified Party
against a Selling Stockholder for Buyer Indemnified Costs payable under
this Article 7. Thereafter, the Buyer Indemnified Party shall be free to
pursue Buyer Indemnified Costs directly against the Selling Stockholders
subject to the limitations set forth in Section 7.6(b). Any Escrow Stock
used to satisfy Buyer Indemnified Costs shall be valued at the lower of
(x) the closing price of the Buyer Common Stock on AMEX on the last
trading day prior to the Closing Date or (y) $10.43.
7.7. Instructions to Escrow Agent. Each Selling Stockholder hereby
covenants and agrees that at any time such Selling Stockholder is obligated to
indemnify a Buyer Indemnified Party for Buyer Indemnified Costs under this
Article 7 and such Buyer Indemnified Costs are to be paid out of the Escrow
Stock, if requested by Buyer, such Selling Stockholder will execute and deliver
to the Escrow Agent written instructions to release to the Buyer Indemnified
Party such portion of the Escrow Stock as is necessary to indemnify the Buyer
Indemnified Party for such Buyer Indemnified Costs. Buyer hereby covenants and
agrees that on July 23, 2005 it will deliver to the Escrow Agent written
instructions to release to the Selling Stockholders any Escrow Stock in excess
of the amount of any pending claims by Buyer for payment out of the Escrow Stock
for which the Escrow Agent has received notice in accordance with this Agreement
and the Escrow Agreement until such matter is resolved pursuant to the Escrow
Agreement.
7.8. Tax Treatment. The parties agree that any payment required under
this Article 7 or Section 6.8 shall be treated by the parties for all Tax
purposes as an adjustment to the Purchase Price.
24
ARTICLE 8. GENERAL PROVISIONS
8.1. Survival of Representations, Warranties, and Covenants. Regardless
of any investigation at any time made by or on behalf of any party hereto or of
any information any party may have in respect thereof, each of the
representations and warranties made in this Agreement or any other Transaction
Document shall survive the Closing except as provided below. The representations
and warranties set forth in this Agreement (other than the representations and
warranties contained in Section 4.3 (relating to capital structure), Section 4.6
(relating to ownership of the Shares), and Section 4.13 (relating to Taxes),
which representations and warranties shall survive until the expiration of the
applicable statute of limitations) or any other Transaction Document shall
terminate at 5:00 p.m. Central time on the eighteen month anniversary of the
Closing Date. Following the date of termination of a representation or warranty,
no claim can be brought with respect to a breach of such representation or
warranty, but no such termination shall affect any claim for a breach of a
representation or warranty that was asserted in writing pursuant to Section 7.3
or Section 7.4 hereof before the date of termination. To the extent that such
are performable after the Closing, each of the covenants and agreements
contained in each of the Transaction Documents shall survive the Closing
indefinitely.
8.2. No Waiver Relating to Claims for Fraud. The liability of any party
under Article 7 shall be in addition to, and not exclusive of, any other
liability that such party may have at law or equity based on such party's acts
or omissions which constitute fraud under Applicable Law. None of the provisions
set forth in this Agreement, including but not limited to the provisions set
forth in Sections 7.6 or 7.7, shall be deemed a waiver by any party to this
Agreement of any right or remedy which such party may have at law or equity
based on any other party's acts or omissions which constitute fraud under
Applicable Law, nor shall any such provisions limit, or be deemed to limit, (a)
the amounts of recovery sought or awarded in any such claim for fraud, (b) the
time period during which a claim for fraud may be brought, or (c) the recourse
which any such party may seek against another party with respect to a claim for
fraud; provided, that with respect to such rights and remedies at law or equity,
the parties further acknowledge and agree that none of the provisions of this
Section 8.2, nor any reference to this Section 8.2 throughout this Agreement,
shall be deemed a waiver of any defenses which may be available in respect of
actions or claims for fraud, including but not limited to, defenses of statutes
of limitations or limitations of damages.
8.3. Amendment and Modification. This Agreement may not be amended except
by an instrument in writing signed by the parties hereto. 8.4. Waiver of
Compliance. Any failure of Buyer on the one hand, or a Selling Stockholder, on
the other hand, to comply with any obligation, covenant, agreement, or condition
contained herein may be waived only if set forth in an instrument in writing
signed by the party or parties to be bound by such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement, or condition shall not operate as a waiver of, or estoppel with
respect to, any other failure.
8.5. Specific Performance. The parties recognize that in the event a
Selling Stockholder should refuse to perform under the provisions of this
Agreement, monetary damages
25
alone will not be adequate. Buyer shall therefore be entitled, in addition to
any other remedies which may be available, including money damages, to obtain
specific performance of the terms of this Agreement. In the event of any action
to enforce this Agreement specifically, the Selling Stockholders hereby waive
the defense that there is an adequate remedy at law. In no event shall the
Selling Stockholders be entitled to seek specific performance with respect to
any of the Buyer's obligations arising under this Agreement.
8.6. Severability. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal, or
incapable of being enforced under any rule of applicable law, or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated herein are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated herein are consummated as originally
contemplated to the fullest extent possible.
8.7. Expenses and Obligations. Except as otherwise expressly provided in
this Agreement, all costs and expenses incurred by the Company and the Selling
Stockholders, on the one hand, and Buyer, on the other, in connection with this
Agreement and the other Transactions Documents shall be borne by each
respectively; provided, however, the Company will bear the costs and expenses
incurred by the Selling Stockholders in connection with this Agreement in the
event the transactions contemplated by this Agreement are consummated; and,
provided further that, in the event of a dispute between the parties in
connection with this Agreement and the transactions contemplated hereby, each of
the parties hereto hereby agrees that the prevailing party shall be entitled to
reimbursement by the other party or parties of reasonable legal fees and
expenses incurred in connection with any such action or proceeding.
8.8. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied, or mailed
by registered or certified mail (return receipt requested), or sent by Federal
Express or other recognized overnight courier, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to the Selling Stockholders:
Xxxxxxx X. Xxxxxxxx
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
C. Xxxxxxx Xxxxxxxx
0000 Xxxxxxxx Xxxxxx Xxxxxxxx,
Xxxxxxxx 00000
Fax: (000) 000-0000
26
with a copy to:
Xxxxxxxx Xxxxxxx LLP
0000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
(b) If to Buyer, to:
Collegiate Pacific Inc.
00000 Xxxxxx
Xxxxx 000
Xxxxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxxx
with copies to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxxx Xxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three business days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one business day after the date of sending, if sent by
Federal Express or other recognized overnight courier.
8.9. Assignment. Neither this Agreement nor any of the rights, interests,
or obligations hereunder shall be assigned by any of the parties hereto, whether
by operation of law or otherwise; provided, however, that upon notice to the
Selling Stockholders and without releasing Buyer from any of its obligations or
liabilities hereunder Buyer may assign or delegate any or all of its rights or
obligations under this Agreement to any Affiliate of Buyer or any person with or
into which Buyer or any parent company of Buyer merges or consolidates. In the
event of such an assignment, the provisions of this Agreement shall inure to the
benefit of and be binding on Buyer's assigns. Any attempted assignment in
violation of this Section 8.9 shall be null and void.
8.10. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by
27
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
8.11. Entire Agreement. This Agreement (which term shall be deemed to
include the exhibits and schedules hereto and the other certificates, documents
and instruments delivered hereunder) constitutes the entire agreement of the
parties hereto and supersedes all prior agreements, letters of intent and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. There are no representations or warranties, agreements,
or covenants other than those expressly set forth in this Agreement.
8.12. Governing Law; Choice of Forum. This Agreement shall be construed in
accordance with and governed by the internal law of the State of Texas (without
reference to its rules as to conflicts of law). The parties hereby irrevocably
submit to the non-exclusive jurisdiction of any state or federal court in Texas
with respect to any action or proceeding arising out of or relating to this
Agreement. The parties hereby consent to and grant to any such court
jurisdiction over the persons of such parties and over the subject matter of any
such dispute and agree that delivery or mailing of any process or other papers
in the manner provided herein, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
8.13. Headings. The headings of this Agreement are for convenience of
reference only and are not part of the substance of this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
28
IN WITNESS WHEREOF, the Selling Stockholders and Buyer have caused this
Agreement to be executed as of the date first above written.
COLLEGIATE PACIFIC INC.
By: /s/
----------------------------------
Name: Xxxx Xxxxxxxxxx, President
Title: President
/s/
-----------------------------------------
XXXXXXX X. XXXXXXXX
/s/
-----------------------------------------
C. XXXXXXX XXXXXXXX
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
APPENDIX A
Certain Defined Terms
"AFFILIATE" means, with respect to any person, any other person
controlling, controlled by or under common control with such person. For
purposes of this definition and this Agreement, the term "control" (and
correlative terms) means the power, whether by contract, equity ownership or
otherwise, to direct the policies or management of a person.
"AMEX" has the meaning set forth in Section 2.2(a).
"APPLICABLE LAWS" means, with respect to a party, all laws, statutes,
rules, regulations, ordinances, judgments, orders, decrees, injunctions, and
writs of any Governmental Entity having jurisdiction over such party.
"ARTICLES OF INCORPORATION" means those certain Articles of Incorporation
of the Company filed with the State Corporation Commission of the Commonwealth
of Virginia.
"ASSETS" shall mean all assets or properties of every kind, nature,
character and description, including all tangible, intangible, personal, real or
mixed of the Company.
"BUYER" has the meaning set forth in the first paragraph of this Agreement
and includes its permitted successors and assigns.
"BUYER COMMON STOCK" has the meaning set forth in Section 2.2(a).
"BUYER INDEMNIFIED CERTIFICATE COSTS" means any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs, and expenses
(including court costs and reasonable legal fees and expenses incurred in
investigating and preparing for any litigation or proceeding) that any of the
Buyer Indemnified Parties incurs and that arise out of any breach or default by
any Selling Stockholder of any of the representations or warranties in, and any
inaccurate or incomplete statement made by the Selling Stockholders in, the
certificate delivered pursuant to Section 3.3(d).
"BUYER INDEMNIFIED COSTS" means (a) all Buyer Indemnified Representation
Costs, (b) all Buyer Indemnified Tax Costs, (c) all Buyer Indemnified
Certificate Costs, and (d) all damages, losses, claims, liabilities, demands,
charges, suits, penalties, costs, and expenses (including court costs and
reasonable legal fees and expenses incurred in investigating and preparing for
any litigation or proceeding) that any of the Buyer Indemnified Parties incurs
and that arise out of any breach by any Selling Stockholder of any of the
covenants or agreements of any Selling Stockholder under this Agreement or any
other Transaction Document executed in connection herewith.
"BUYER INDEMNIFIED PARTIES" means Buyer and each officer and director of
Buyer. After the Closing, the Company shall be deemed to be one of the Buyer
Indemnified Parties.
A-1
"BUYER INDEMNIFIED REPRESENTATION COSTS" means any and all damages,
losses, claims, liabilities, demands, charges, suits, penalties, costs, and
expenses (including court costs and reasonable legal fees and expenses incurred
in investigating and preparing for any litigation or proceeding) that any of the
Buyer Indemnified Parties incurs and (a) that arise out of any breach or default
by any Selling Stockholder of any of the representations or warranties under
this Agreement or any agreement or document executed in connection herewith and
(b) are not Buyer Indemnified Certificate Costs.
"BUYER INDEMNIFIED TAX COSTS" means any and all Taxes together with any
costs, expenses, losses or damages (including court and administrative costs and
reasonable legal fees and expenses incurred in investigating and preparing for
any audit, litigation or other proceeding) arising out of or incident to the
determination, assessment or collection of such Taxes (a) imposed on the Company
in respect of its income, business, property or operations or for which it may
otherwise be liable for any taxable period or portion thereof ending on or prior
to the Closing Date (determined by an interim closing of the books as of the end
of the Closing Date except for ad valorem Taxes which shall be prorated on a
daily basis), (b) imposed on or with respect to the Selling Stockholders for any
taxable period or portion thereof ending on or prior to the Closing Date, (c)
resulting from the breach of the representations and warranties set forth in
Section 4.13 (without regard to materiality or knowledge qualifiers that may be
contained therein) or covenants set forth in Section 6.8, (d) of any member of
an affiliated, consolidated, combined or unitary group of which the Company or
any subsidiary (or any predecessor) is or was a member on or prior to the
Closing Date by reason of the liability of the Company or any subsidiary
pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous or similar
state, local or foreign law, (e) of any other person for which the Company may
be liable as a transferee or successor, by contract or otherwise, or (f) imposed
on Buyer, the Company or any subsidiary of the Company under Code Section 1374
with respect to any taxable period or portion thereof ending on or prior to the
Closing Date including any such Tax resulting from transactions contemplated by
the Transaction Documents; provided, however, that any such Tax shall not be a
Buyer Indemnified Tax Cost to the extent such Tax was specifically reserved for
in the June Balance Sheet.
"BUYER PREFERRED STOCK" has the meaning set forth in Section 5.2.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.).
"CLAIM" means any action, suit, claim, lawsuit, charge, complaint, demand,
inquiry, hearing, investigation, notice of violation or noncompliance,
litigation, proceeding, arbitrations, appeal or other dispute, whether civil,
criminal, administrative or otherwise.
"CLOSING" has the meaning set forth in Section 3.1.
"CLOSING DATE" has the meaning set forth in Section 3.1.
"CLOSING PAYMENT" has the meaning set forth in Section 2.2(a).
A-2
"CODE" shall mean the United States Internal Revenue Code of 1986, as
amended. All references to the Code, U.S. Treasury regulations or other
governmental pronouncements shall be deemed to include references to any
applicable successor regulations or amending pronouncement.
"COMMONLY CONTROLLED ENTITY" has the meaning set forth in Section 4.20(b).
"COMPANY" has the meaning set forth in the recitals.
"COMPANY ACTIVITIES" means (a) manufacturing, distributing, designing,
selling or installing sports equipment or sporting goods or related parts or
supplies that are competitive with those manufactured, distributed, designed,
sold or installed by Buyer, the Company or their Affiliates, or (b) engaging in
any other business activities which are conducted, offered or provided by Buyer,
the Company or any of their Affiliates, in each case during the period beginning
August 1, 2003 and ending on the fifth anniversary of the Closing Date.
"COMPANY COMMON STOCK" has the meaning set forth in the recitals.
"CONSENTS" means all governmental consents and approvals, and all consents
and approvals of third parties, in each case that are necessary in order to
transfer the Shares, or the control of the Company and its properties and
assets, to Buyer and otherwise to consummate the transactions contemplated
hereby.
"CONTRACTS" means, with respect to a party, all agreements, contracts, or
other binding commitments, arrangements or plans, written or oral (including any
amendments and other modifications thereto), to which such party is a party or
is otherwise bound.
"EARNOUT PAYMENT" has the meaning set forth in Section 2.2(b).
"EARNOUT PERIOD" means the period beginning August 1, 2004 and ending
December 31, 2005.
"EFFECTIVE TIME" has the meaning set forth in Section 6.1.
"EMPLOYEE BENEFIT PLANS" has the meaning set forth in Section 4.20(a).
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section 3.3(g).
"ENVIRONMENTAL LAWS" means all federal, state and local laws relating to
public health, or to pollution or protection of the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) including, without limitation, the Clean Air Act, as amended,
CERCLA, the RCRA, the Toxic Substances Control Act, the Federal Water Pollution
Control Act, as amended, the Safe Drinking Water Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Oil Pollution Act of 1990, any
state laws implementing the foregoing federal laws, and all other Applicable
Laws relating to or regulating (a) emissions, discharges, releases, or cleanup
of pollutants, contaminants, chemicals, polychlorinated biphenyls (PCB's), oil
and gas exploration and production wastes, brine, solid
A-3
wastes, or toxic or Hazardous Substances or wastes (collectively, the "POLLUTING
SUBSTANCES"), (b) the generation, processing, distribution, use, treatment,
handling, storage, disposal, or transportation of Polluting Substances, or (c)
environmental conservation or protection.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" shall be JPMorgan Chase Bank.
"ESCROW AGREEMENT" has the meaning set forth in Section 2.4(b).
"ESCROW STOCK" has the meaning set forth in Section 2.4(b).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.7.
"GAAP" means generally accepted accounting principles in the United
States.
"GUARANTEE" means any guarantee or other contingent liability (other than
any endorsement for collection or deposit in the Ordinary Course of Business),
direct or indirect with respect to any obligations of another person, through a
Contract or otherwise, including, without limitation, (a) any endorsement or
discount with recourse or undertaking substantially equivalent to or having
economic effect similar to a guarantee in respect of any such obligations and
(b) any Contract (i) to purchase, or to advance or supply funds for the payment
or purchase of, any such obligations, (ii) to purchase, sell or lease property,
products, materials or supplies, or transportation or services, in respect of
enabling such other person to pay any such obligation or to assure the owner
thereof against loss regardless of the delivery or non delivery of the property,
products, materials or supplies or transportation or services or (iii) to make
any loan, advance or capital contribution to or other Investment in, or to
otherwise provide funds to or for, such other person in respect of enabling such
person to satisfy an obligation (including any liability for a dividend, stock
liquidation payment or expense) or to assure a minimum equity, working capital
or other balance sheet condition in respect of any such obligation.
"GOVERNMENTAL ENTITY" means any governmental department, commission,
board, bureau, agency, court or other instrumentality of the United States or
any state, county, parish or municipality, jurisdiction, or other political
subdivision thereof.
"HAZARDOUS SUBSTANCES" means any substance or material which if present in
the environment would under Applicable Law require assessment, remediation, or
corrective action including, without limitation, chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products which
are classified as hazardous, toxic, radioactive, dangerous or otherwise
regulated by or form the basis for liability under any Environmental Law,
whether or not identified as hazardous wastes under the RCRA or hazardous
substances under CERCLA.
"HOLDBACK AMOUNT" has the meaning set forth in Section 2.3(a).
A-4
"INDEMNIFIED COSTS" means the Buyer Indemnified Costs or the Selling
Stockholders Indemnified Costs, as the case may be.
"INDEMNIFIED PARTIES" means the Buyer Indemnified Parties or the Selling
Stockholders Indemnified Parties, as the case may be.
"INDEMNIFIED REPRESENTATION COSTS" means the Buyer Indemnified
Representation Costs or the Selling Stockholders Indemnified Representation
Costs, as the case may be.
"INDEMNIFYING PARTY" means any person who is obligated to provide
indemnification hereunder.
"INDEPENDENT FIRM" has the meaning set forth in Section 2.3(d).
"INTANGIBLE RIGHTS" has the meaning set forth in Section 4.18.
"INVESTMENT" means (a) any direct or indirect ownership, purchase or other
acquisition by a person of any notes, obligations, instruments, capital stock,
options, warrants, securities or ownership interests (including partnership
interests and joint venture interests) of any other person, and (b) any capital
contribution or similar obligation by a person to any other person.
"IRS" means the Internal Revenue Service of the United States.
"JUNE BALANCE SHEET" has the meaning set forth in Section 2.3(c).
"JUNE 30 STOCKHOLDERS' EQUITY" means the stockholders' equity of the
Company as of June 30, 2004 determined in accordance with GAAP, applied in a
manner consistent with the preparation of the Most Recent Balance Sheet.
"KNOWLEDGE" means, with respect to a specified party hereto, the actual
knowledge of such party (including, but not limited to, the actual knowledge of
any officers, directors, employees, consultants or counsel of such party),
together with such additional knowledge as would be acquired by a reasonable
inquiry concerning the subject matter in question.
"LIENS" means all liens, pledges, voting agreements, voting trusts, proxy
agreements, claims, security interests, restrictions, mortgages, deeds of trust,
tenancies and other possessory interests, conditional sale or other title
retention agreements, assessments, easements, rights of way, covenants,
restrictions, rights of first refusal, defects in title, encroachments, and
other burdens, options or encumbrances of any kind.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
operations, properties, condition (financial or otherwise), results of
operations or assets, liabilities or prospects of the Company.
"MATERIAL CONTRACT" has the meaning set forth in Section 4.15.
A-5
"MATERIAL LEASES" shall mean any lease or sublease of real or personal
property of or by the Company involving a term of more than 12 months and
payment obligations exceeding $50,000per year.
"MINIMUM LOSS" has the meaning set forth in Section 7.6(a).
"MOST RECENT BALANCE SHEET" has the meaning set forth in Section 4.7.
"NET INCOME" means net income of the Company before taxes determined in
accordance with GAAP on a basis consistent with the Financial Statements except
that it shall be calculated without taking into account (a) amortization of any
goodwill arising as a result of the transactions contemplated by this Agreement,
and (b) any expenses allocated by Buyer to the Company for administrative
functions performed by Buyer for the Company after the Closing that do not
replace administrative functions previously performed by the Company; provided
that Buyer will use reasonable methods for allocating expenses for
administrative functions to the Company.
"NOTES" has the meaning set forth in Section 2.2(a).
"ORDER" means any writ, decree, order, judgment, injunction, rule, ruling,
Lien, voting right, consent of or by a Governmental Entity.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of the operations
of the Company consistent with past practices since the earliest time covered by
the Financial Statements.
"OTHER FILINGS" has the meaning set forth in Section 6.1.
"PERCENTAGE INTEREST" means, for each Selling Stockholder, the ratio
expressed as a percentage of the number of Shares held by such Selling
Stockholder to the aggregate Shares held by all Selling Stockholders.
"PERMITTED LIENS" has the meaning set forth in Section 4.17.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust, unincorporated organization, or other entity.
"POLICY" means any Contract that insures (a) the Company's properties,
plant and equipment for loss or damage, or (b) the Company or its officers,
directors, employees or agents against any liabilities, losses or damages (or
lost profits) for any reason or purpose.
"PROJECTIONS" has the meaning set forth in Section 4.24.
"PROTECTED AREA" means any jurisdiction in the United States in which
Buyer, the Company, or any Affiliate of either of them, conducts or conducted,
as the case may be, Company Activities at any time during the period beginning
August 1, 2003 and ending on the fifth anniversary of the Closing Date.
A-6
"PURCHASE PRICE" means the consideration payable by Buyer as provided in
Section 2.2.
"PURCHASE PRICE ADJUSTMENT AMOUNT" has the meaning set forth in Section
2.3(b).
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended.
"REGISTERED SHARES" has the meaning set forth in Section 6.1(b)(i).
"REGISTRATION STATEMENT" has the meaning set forth in Section 6.1.
"SEC" means the Securities and Exchange Commission.
"SEC FILINGS" has the meaning set forth in Section 5.7.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SELLING STOCKHOLDERS" has the meaning set forth in the first paragraph of
this Agreement.
"SELLING STOCKHOLDERS INDEMNIFIED COSTS" means (a) all Selling
Stockholders Indemnified Representation Costs, and (b) any and all damages,
losses, claims, liabilities, demands, charges, suits, penalties, costs, and
expenses (including court costs and reasonable legal fees and expenses incurred
in investigating and preparing for any litigation or proceeding) that any of the
Selling Stockholders Indemnified Parties incurs and that arise out of any breach
by Buyer of any of the covenants or agreements under this Agreement or any other
Transaction Documents.
"SELLING STOCKHOLDERS INDEMNIFIED PARTIES" means each of the Selling
Stockholders and each Affiliate of the Selling Stockholders.
"SELLING STOCKHOLDERS INDEMNIFIED REPRESENTATION COSTS" means any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties, costs,
and expenses (including court costs and reasonable legal fees and expenses
incurred in investigating and preparing for any litigation or proceeding) that
any of the Selling Stockholders Indemnified Parties incurs and that arise out of
any breach or default by Buyer of any of its representations or warranties under
this Agreement or any agreement or document executed in connection herewith.
"SHARES" has the meaning set forth in the recitals.
"SUBSIDIARY" or "SUBSIDIARIES" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the capital stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
"TAX" (or "TAXES") means (a) any net income, alternative or add-on
minimum, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding on amounts paid by the
Company, payroll, employment, excise, production,
A-7
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest and/or any penalty,
addition to tax or additional amount imposed by any taxing authority, (b) any
liability of the Company for the payment of any amounts of the type described in
clause (a) as a result of being a member of an affiliated or consolidated group
or arrangement whereby liability of the Company for the payment of such amounts
was determined or taken into account with reference to the liability of any
other person for any period and (c) liability of the Company with respect to the
payment of any amounts of the type described in clause (a) or (b) as a result of
any express or implied obligation to indemnify any other person.
"TAX RETURN" means any return, declaration, report, statement, estimate,
information return and statement required to be filed by or with respect to the
Company in respect of any Taxes, including, without limitation, (a) any
consolidated federal income Tax return in which the Company is included and (b)
any state, local or foreign income Tax returns filed on a consolidated, combined
or unitary basis (for purposes of determining tax liability) in which the
Company is included.
"THIRD PARTY CLAIM" has the meaning set forth in Section 7.3.
"TRANSACTION DOCUMENTS" means this Agreement, the Escrow Agreement, the
Notes, the Employment Agreements and all other documents to be executed by any
of the Selling Stockholders or Buyer in connection with the consummation of the
transactions contemplated in this Agreement.
A-8
