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STOCK PURCHASE AGREEMENT
BY AND AMONG
SIGNAL APPAREL COMPANY, INC.
LEE ELLIS AND JIMMY METYKO
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") dated
as of October 31, 1997 (the "Effective Date"), is by and among
SIGNAL APPAREL COMPANY, INC., an Indiana corporation (the "Pur-
chaser"), LEE ELLIS, an individual residing in Houston, Texas
("Ellis"), and JIMMY METYKO, an individual residing in Houston,
Texas ("Metyko") (Ellis and Metyko being collectively referred to
herein as the "Selling Shareholders").
W I T N E S S E T H:
WHEREAS, Big Ball Sports, Inc., a Texas corporation
("Big Ball"), has issued 1,000 shares of common stock, no par
value ("BB Stock"), which constitutes all of the issued and
outstanding shares of capital stock of Big Ball;
WHEREAS, as of the Effective Date, the Selling
Shareholders own 666 2/3 shares of BB Stock, constituting sixty-
six and two thirds percent (66-2/3%) of the issued and
outstanding shares of BB Stock;
WHEREAS, Print The Planet, Inc., a Texas corporation
("Print The Planet"), has issued 1,000 shares of common stock, no
par value ("PTP Stock"), which constitutes all of the issued and
outstanding shares of capital stock of Print the Planet;
WHEREAS, as of the Effective Date, Ellis owns 1,000
shares of PTP Stock, constituting one hundred percent (100%) of
the issued and outstanding shares of PTP Stock;
WHEREAS, the Selling Shareholders desire to sell to the
Purchaser, and the Purchaser desires to acquire from the Selling
Shareholders, all shares of BB Stock owned by the Selling
Shareholders, on the terms and subject to the conditions set
forth herein;
WHEREAS, Ellis desires to sell to the Purchaser, and
the Purchaser desires to acquire from Ellis, all shares of PTP
Stock owned by Ellis (all of such shares of BB Stock and PTP
Stock to be acquired by the Purchaser pursuant to this Agreement
are collectively referred to herein as the "Purchased Shares"),
on the terms and subject to the conditions set forth herein;
WHEREAS, the Selling Shareholders and the Purchaser
desire to set forth certain representations, warranties and
covenants made by each to the other as an inducement to the
execution and delivery of this Agreement and certain additional
agreements related to the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of
the mutual representations, warranties and covenants herein
contained, the parties hereby agree as follows:
1. PURCHASE AND SALE.
a. CONSIDERATION. On the Closing Date (as
defined in Section 3), the Selling Shareholders agree to convey
and deliver or cause to be conveyed and delivered to the
Purchaser, free and clear of any liens, security interests,
claims and encumbrances, certificates
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representing the Purchased Shares. In consideration for the
Purchased Shares and in reliance upon the representations and
warranties of the Selling Shareholders contained herein, the
Purchaser agrees to pay to each of the Selling Shareholders the
sum of $10.00 and to perform the other covenants and agreements
set forth herein.
b. CERTIFICATES. The certificates representing
the Purchased Shares shall each be duly endorsed in blank by the
Selling Shareholder in whose name the applicable certificate is
registered, or accompanied by stock powers duly executed in
blank. Each of the Selling Shareholders agrees to cure or to
cause to be cured any deficiencies with respect to the
endorsement of the certificate(s) representing the Purchased
Shares held by such Selling Shareholder or with respect to the
stock powers accompanying any such certificate(s).
c. EMPLOYMENT AGREEMENTS. At the Closing, Big
Ball, the Purchaser and the Selling Shareholders will execute and
deliver employment agreements in the form attached hereto as
EXHIBIT 1(C).
2. ASSETS. At the Closing (as defined in Section 3),
the assets of the Companies (the "Companies' Assets") will
consist of all of the properties, assets and other rights owned
or leased by Big Ball and Print the Planet (individually, a
"Company" and collectively, the "Companies"), whether or not used
in connection with the Companies' business, including, without
limitation, the following:
a. All apparatus, computers and other electronic
data processing equipment, fixtures, machinery, equipment,
furniture, office equipment, motor vehicles, tools, memorabilia,
art, artifacts (including all memorabilia, art and artifacts
addressed to one or more of the Companies) and other tangible
personal property owned or utilized by either of the Companies
(collectively, the Tangible Personal Property"), which Tangible
Personal Property shall include the Tangible Personal Property
described on SCHEDULE 2.A. attached hereto;
b. All inventories (whether on hand, on order or
in the hands of third parties) and supplies, including
inventories and supplies that are works-in-process, that are
owned by either of the Companies (collectively, the "Inventory"),
which Inventory shall consist in all material respects of the
Inventory described on SCHEDULE 2.B. attached hereto, together
with all records relating to such Inventory (it being recognized
and agreed that Inventory sold in the ordinary course of business
since September 30 will not be included within the Inventory of
the Companies even though reflected on SCHEDULE 2.B., and
Inventory acquired since September 30, 1997 [but not yet sold]
will be included within Inventory even though not reflected on
SCHEDULE 2.B);
c. All contracts, agreements, leases of personal
property, leases of real property, service agreements, licenses
granted to third parties and other contracts, agreements or
commitments, whether oral or written, to which either of the
Companies is a party which are in effect on the Closing Date
(collectively, the "Contracts"), which Contracts shall include
the contracts and agreements described on SCHEDULE 2.C. attached
hereto; together with all deposits made by either of the
Companies with third parties in connection with any Contract or
made by third parties with either of the Companies in connection
with any Contract
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(collectively, the "Companies' Deposits"), which Companies'
Deposits shall include, without limitation, the deposits
described on SCHEDULE 2.C.;
d. All letters of credit and performance bonds
issued on behalf of the business of either of the Companies and
pursuant to which the business of either of the Companies is a
sole beneficiary, including, without limitation, the letters of
credit and performance bonds described on SCHEDULE 2.D. attached
hereto;
e. All proprietary information and licenses from
third persons, which shall consist in all material respects of
the proprietary information and licenses described on SCHEDULE
2.E. attached hereto;
f. All computer operating applications and
programs, source codes and object codes, including systems
documentation and instructions utilized by the Companies,
including without limitation, the computer operating applications
and programs described on SCHEDULE 2.F. attached hereto;
g. All existing accounting books and records,
cost information, sales and pricing data, customer demographic
studies, quality records and reports and other books, records,
studies, surveys, reports, plans and documents;
h. All lists of the suppliers and contractors of
both Companies, together with all contracts and agreements with
the foregoing to which the Companies (or either of them) are a
party which are in effect on the Closing Date;
i. Any prepaid expenses for periods after the
Closing Date;
j. All accounts and notes receivable, including
without limitation, the accounts and notes receivable described
on SCHEDULE 2.J. attached hereto;
k. All licenses, permits, certifications,
approvals and authorizations which are owned, held or utilized by
either of the Companies, including, without limitation, the
licenses and permits described on SCHEDULE 2.K. attached hereto;
l. All claims and rights which either of the
Companies may have against any person or entity;
m. All marketing plans and campaigns,
endorsement arrangements, and advertising contracts and
commitments and all market and customer demographic analyses,
including, but not limited to, arrangements with athletes and
other sports related celebrities as set forth on SCHEDULE 2.M.;
n. All rights possessed by either of the
Companies with respect to all logos, patents, patent applica-
tions, patent licenses, trademarks, service marks, trademark
applications, trademark licenses, trade names, brand names,
copyrights and inventions and other intellectual property owned,
applied for or used by the Companies described on SCHEDULE 2.N.
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attached hereto (together with the goodwill associated
therewith), and all marketing literature and other materials
owned, licensed or otherwise utilized by the Companies;
o. All other tangible and intangible property
and assets owned by either of the Companies; and
p. All cash on hand, including cash on deposit
and petty cash.
3. THE CLOSING. Unless this Agreement shall have
been earlier terminated pursuant to Section 11, the closing of
the transactions provided for in Section 1 of this Agreement
(herein called the "Closing") shall take place at the offices of
Boyar, Simon & Miller, 4265 San Felipe, Suite 1200, Houston,
Texas 77027, at 10:00 a.m. on November 3, 1997, or such other
place or date as the parties may approve in writing (the "Closing
Date").
4. REPRESENTATIONS AND WARRANTIES OF THE SELLING
SHAREHOLDERS. The Selling Shareholders, jointly and severally
(except that the representations of Metyko contained herein shall
not be applicable to Print the Planet), represent and warrant to
the Purchaser that:
a. REPRESENTATIONS WITH RESPECT TO THE PURCHASED
SHARES. The shares listed to the right of their name on SCHEDULE
4.A. attached hereto are owned of record and beneficially by the
applicable Selling Shareholder; the Selling Shareholders have
full legal right, power and authority to enter into this
Agreement; at the Closing, the Selling Shareholders will each
have full legal right, power and authority to transfer and
deliver to the Purchaser the shares listed to the right of their
names on SCHEDULE 4.A.; and the delivery to the Purchaser of the
shares owned by the Selling Shareholder pursuant to the
provisions of this Agreement will transfer valid title thereto,
free and clear of all liens, encumbrances, preemptive rights and
claims of every kind; provided, however, notwithstanding any
provision to the contrary contained herein, the representations
and warranties contained in this paragraph a. shall not be joint
and several and shall only apply to the Purchased Shares
represented to be owned by the applicable Selling Shareholder
making the representation and warranty.
b. ORGANIZATION AND EXISTENCE. Each of the
Companies is a corporation duly organized and validly existing
and in good standing under the laws of the State of Texas, and
each has all requisite corporate power to own, lease and
otherwise operate its respective properties and assets, and are
each duly authorized and licensed and have all licenses,
franchises, permits and other governmental authorizations
required under all applicable laws, regulations, ordinances and
orders of public authorities to carry on its respective business
in the places and in the manner as now conducted, except for
omissions which have no material adverse effect on the Companies.
The Selling Shareholders have delivered the Purchaser complete
and correct copies of the Articles of Incorporation and by-laws
of the Companies as in effect on the Effective Date. SCHEDULE
4.B. attached hereto sets forth (i) all subsidiaries, affiliates,
officers and directors of the Companies and, (ii) if applicable,
each of the jurisdictions in which the Companies and each of
their respective subsidiaries is qualified to do business.
c. NO CONFLICT WITH OTHER INSTRUMENTS. Except
for the matters listed on SCHEDULE 4.C. attached hereto, the
execution, delivery and performance of this Agreement by the
Selling Shareholders will not result in a violation or breach of
any term or
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provision of, or constitute a default or accelerate the
performance required under, any indenture, mortgage, deed of
trust or other contract or agreement to which either of the
Companies is a party or by which either of the Companies or any
of the Companies' assets are bound, or violate any order, writ,
injunction or decree of any court, administrative agency or
governmental body.
d. CAPITALIZATION; OWNERSHIP OF PURCHASED
SHARES; AUTHORIZATION. The authorized capital stock of Big Ball
consists of 1,000 shares of common stock, no par value, of which
1,000 shares are issued and outstanding on the Effective Date.
The authorized capital stock of Print The Planet consists of
1,000 shares of common stock, no par value, of which 1,000 shares
are issued and outstanding on the Effective Date. The Companies
have no treasury shares. All of the Purchased Shares are validly
issued, fully paid and non-assessable and are owned of record by
the Selling Shareholders, and were not issued in violation of the
preemptive rights of any shareholder of the Companies. There are
no existing subscriptions, options, warrants, calls, obligations
or agreements (voting or otherwise) relating to any of the
authorized or outstanding capital stock of either of the
Companies.
e. SUBSIDIARIES. Other than short-term
investments and as listed on SCHEDULE 4.B., the Companies have no
subsidiaries and do not, directly or indirectly, own or control
any capital stock, bonds or other securities of, or have any
proprietary interest in, any corporation, association,
partnership, firm, joint venture or other business organization
or enterprise, and neither of the Companies, directly or
indirectly, control the management of any such entities. Between
the Effective Date and the Closing Date, the Companies will not
create or acquire any subsidiary or make any investments in any
corporation, association, partnership, firm, joint venture or
other business organization or enterprise.
f. FINANCIAL STATEMENTS. The Selling
Shareholders have delivered to the Purchaser copies of the
following financial statements of the Companies:
(1) Audited financial statements of each oF
the Companies as of and for the calendar years ended
December 31, 1995 and 1996 (the audited financial statements
for 1996 shall hereinafter be referred to as the "Annual
Report"), and
(2) Unaudited financial statements of each
of the Companies as of and for the nine months ended
September 30, 1997 (the "Nine Month Report"),
together, in each case, with the notes related thereto. All
figures in the audited financial statements have been prepared in
accordance with generally accepted accounting principles,
consistently applied ("GAAP"), except as indicated in such
financial statements. All of the above described financial
statements are true, complete and correct and in accordance with
the books of account and records of the Companies, and present
fairly, in all material respects, the financial position of the
Companies at the date indicated and the results of operations
and, if applicable, the changes in financial position for the
periods then ended. Notwithstanding the foregoing, no
representation is made herein with regard to the ability of the
Purchaser or the Companies to use any net loss carry forwards
reflected in the financial statements.
g. TITLE TO PROPERTIES, ETC. Each of the
Companies has such title to, or right to possession of, all such
Company's Assets, including those reflected in the Annual
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Report of the Companies (other than the Companies' Assets
reflected in the Annual Report that have since been sold or
otherwise disposed of in the ordinary course of business,
consistent with past practice, and not involving any
misrepresentation or breach of warranty or covenant in this
Agreement), that is material to the operation of its business as
currently conducted, free and clear of all material liens,
mortgages, pledges, conditional sales agreements, title retention
agreements, charges, easements, covenants, assessments,
restrictions, security interests and encumbrances, except as set
forth in SCHEDULE 4.G.-1. Except as set forth on SCHEDULE 4.G.-2
and except as would not have a material adverse effect on the
operation of each Company's' business as currently conducted (i)
the buildings, plants, structures, appurtenances, equipment and
other properties owned or used by each Company have been
maintained and repaired in accordance with the Companies'
customary practices; (ii) all such buildings, plants, structures,
appurtenances, equipment and other properties and their operation
and maintenance conform in all material respects to all
applicable laws, including building and zoning laws and
ordinances and regulations (whether or not permitted because of
prior nonconforming use), and do not violate any restrictive
covenants or provisions of law, the effect of which would
interfere with or prevent the continued use of the properties for
the purposes for which they are now being used or would
materially affect the value thereof; (iii) no notice of any
violation of building or zoning laws, ordinances or regulations
or restrictive covenants or other provisions of law relating to
such assets and their use have been received by either Company;
and (iv) neither the whole nor any portion of any real property
currently occupied by either Company has any proceeding for
condemnation or other taking by any public authority presently
pending, nor do the Selling Shareholders know or have reasonable
grounds to believe that any such condemnation or taking is
threatened. Notwithstanding the foregoing, the Companies do not
own, in fee simple or otherwise, any real property.
h. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except
as described on SCHEDULE 4.H., since September 30, 1997, neither
of the Companies has:
(1) Made any change in its authorized
capital or outstanding securities;
(2) Issued, sold, delivered or agreed to
issue, sell or deliver any capital stock, bonds or other
corporate securities of such Company (whether authorized and
unissued or held in the treasury), or granted or agreed to
grant any options, warrants or other rights calling for the
issue, sale or delivery thereof;
(3) Except with respect to funds borrowed
from Purchaser, borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or
liability (absolute or contingent), other than in the
ordinary course of business or trade accounts payable
incurred in the ordinary course of business, which trade
accounts payable have been incurred consistently with the
manner in which trade accounts payable were incurred during
the calendar year ended December 31, 1996;
(4) Declared or made, or agreed to declare
or make, any payment of dividends or distributions of any
assets of any kind whatsoever in respect of its capital
stock, or purchased, redeemed or otherwise acquired, or
agreed to purchase, redeem or otherwise acquire, any of its
outstanding capital stock;
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(5) Except (i) in the ordinary course of
business and consistent with past practice or as
contemplated by this Agreement, (ii) for certain sales of
inventory at what may be considered distressed prices, and
(iii) for releases of claims consented to by the Purchaser,
sold, transferred or otherwise disposed of, or agreed to
sell, transfer or otherwise dispose of any of its material
assets, property or rights, including inventories, or
cancelled or otherwise terminated, or agreed to cancel or
otherwise terminate, any debts or claims;
(6) Except for certain sales of inventory at
what may be considered distressed prices, entered or agreed
to enter into any agreement or arrangement granting any
preferential rights to purchase any of its material assets,
property or rights, including inventories, or requiring the
consent of any party to the transfer and assignment of any
of such material assets, property or rights;
(7) Suffered any material destruction or
losses of its Tangible Personal Property or its Inventory or
waived any material rights of value;
(8) Other than the Assignment of Factoring
Credit Balances Agreement dated October 9, 1997 among Big
Ball, First Factors Corporation and Purchaser, made or
permitted any amendment or termination of any material
contract, agreement or license to which it is a party or to
which it or any of its properties are subject;
(9) Made, directly or indirectly, any
accrual or arrangement for or payment of bonuses or special
compensation of any kind or any severance or termination pay
to any present or former officer or director or employee of
the Companies;
(10) Other than increases in the ordinary
course of business to four employees in the art department,
increased the rate of compensation payable or to become
payable by it to any of its officers or directors or adopted
any new, or made any increase in any payment or accrual to
any, profit sharing, bonus, deferred compensation, savings,
insurance, pension, stock option, retirement or other
employee benefit plan or arrangement made to, for or with
any of such officers or directors or its employees;
(11) Experienced or had threatened any work
stoppages, labor problems, disputes or strikes or any other
occurrence, event or condition of any similar or dissimilar
character affecting the employees of such Company which
adversely affects or may materially adversely affect its
condition (financial or otherwise) or its properties,
assets, liabilities, business or prospects;
(12) Received any claims alleging damages for
any actual or alleged negligence or other tort or breach of
contract that could have a materially adverse effect on the
business of such Company;
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(13) Made any material capital expenditures
(or commitment therefor) other than in the ordinary course
of such Company's business;
(14) Other than as identified in the
financial statements for the Nine Month Report, made any
change in the accounting methods or practices followed by
such Company or any change in depreciation or amortization
policies or rates heretofore adopted; or
(15) Entered into any sale, lease,
abandonment or other disposition of any material interest in
real property or of any machinery, equipment or other
operating properties, or entered into any sale, encumbrance,
lien, assignment, transfer, license or other disposition of
any material patent, trademark, trade name, brand name,
copyright (or pending application for any material patent,
trademark or copyright), invention, process, know-how,
formula, pattern, design, trade secret or interest
thereunder or other intangible asset (other than security
interest granted in favor of the Purchaser).
i. INDEBTEDNESS. SCHEDULE 4.I is an accurate
list of all material indebtedness as of September 30, 1997, owed
by the Companies, or to which any of their assets or properties
are subject, including a description of the assets pledged or
otherwise subject thereto. A complete and correct copy of each
loan agreement, credit agreement or other similar instrument
pursuant to which any such indebtedness was incurred has been
delivered to the Purchaser prior to the Effective Date.
j. GUARANTIES; SURETYSHIPS; CONTINGENT LIABIL-
ITIES. Attached hereto as SCHEDULE 4.J-1. is a list and brief
description of all material guaranties, matters of suretyship and
contingent liabilities of the Companies. Attached hereto as
SCHEDULE 4.J.-2. is a list and brief description of all
guaranties of liabilities executed by the Selling Shareholders or
either of them, relating to the debts of either of the Companies.
The Selling Shareholders have previously delivered a copy of such
guaranty to the Purchaser.
k. ABSENCE OF UNDISCLOSED LIABILITIES. Except
as set forth in SCHEDULES 4.Ior 4.J-1. attached hereto, neither
of the Companies have, and none of the Assets of the Companies
are subject to, any material liabilities, debts or obligations
of any nature incurred by the Companies, whether accrued,
absolute, contingent or otherwise, whether due or to become due,
including, without limitation, liabilities, debts or obligations
on account of taxes or other governmental charges, or penalties,
interest or fines thereon or in respect hereof (excluding taxes
in an amount less than $5,000 that are not yet due and payable),
and whether such liabilities are normally shown or reflected on a
balance sheet. Neither of the Companies is in default in respect
of any material term or condition of any indebtedness or
liability, except as set forth on SCHEDULE 4.I.
l. TAX MATTERS. Except as described in SCHEDULE
4.6, each of the Companies has timely filed all federal, foreign,
state, county, and local tax returns required to be filed by it
for periods ending on or before the Effective Date, and each of
the Companies has paid all Taxes shown to be due on such returns.
For purposes of this paragraph, the term "Taxes" shall mean,
without limitation, income taxes, corporate franchise taxes,
payroll taxes, sales taxes,
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and ad valorem taxes. The liabilities for such taxes reflected
in the Annual Report for each Company represent, as of the date
thereof, reasonable provision for the payment of all accrued and
unpaid taxes of each of the Companies accrued through that date,
whether or not disputed, as well as deferred taxes required under
GAAP. The income tax returns of the Companies are not currently
under audit by any federal, state or foreign taxing authorities
and have never been so audited except as described in SCHEDULE
4.L, nor have either of the Companies received notice of any such
audit. There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the payment of
any tax or the assessment of any tax or deficiency of any nature
against either of the Companies, nor are any suits or any other
actions, proceedings, investigations or claims now pending or
threatened against either of the Companies with respect to any
tax or assessment, nor are any matters under discussion with any
federal, state, foreign or local authority relating to any such
taxes or assessments, or to any claims for additional taxes or
assessments asserted by any such authority. The Selling
Shareholders have delivered to the Purchaser the federal income
tax returns and schedules thereto or requests for extensions
thereof of each of the Companies for the three most recent
calendar years ending on or prior to the date of the Annual
Report as such returns and schedules were filed with the Internal
Revenue Service. The Selling Shareholders will not cause or
voluntarily permit a change in any federal income tax method of
accounting by either of the Companies or in the method of
allocation of the federal income tax liability of either of the
Companies during or applicable to its current tax year which
would render inaccurate, misleading or incomplete the information
concerning taxes set forth or referred to in this SECTION 4.L.,
or which would have a material adverse effect on either of the
Companies for any period prior to the Closing Date.
m. NOTES AND ACCOUNTS RECEIVABLE. The allowance
for doubtful accounts shown on SCHEDULE 2.J. has been determined
in a manner consistent with that applied in the preparation of
the financial statements of each of the Companies for the
calendar year ended December 31, 1996. SCHEDULE 2.J. sets forth
in full all notes and accounts receivable payable to the
Companies. In no case shall this representation or any other
statement made by the Selling Shareholders, within this Agreement
or otherwise, constitute an absolute guarantee of the collection
or collectability of any debt owed to either of the Companies.
n. INVENTORIES. SCHEDULE 2.B. contains a true
and accurate list of the Inventory of the Companies as of
September 30, 1997, including the original cost of each item of
Inventory listed theron. SCHEDULE 2.B. has been marked to
reflect those items that are (i) offered in the August 1, 1997
line sheet, as adjusted on October 15, 1997 ("Current Line"),
(ii) in the Current Line which are excess quantities and are
expected to sell at below regular price, (iii) not in the Current
Line which are excess quantities and are expected to sell at
below regular price, and (iv) irregulars.
o. TANGIBLE PERSONAL PROPERTY. All Tangible
Personal Property has been maintained and repaired in accordance
with the customary practices for each of the Companies. SCHEDULE
2.A. sets forth in full all material Tangible Personal Property
of the Companies, including all memorabilia, art and artifacts
addressed to one or more of the Companies.
p. CONTRACTS. Except for contracts and
documents listed in SCHEDULE 2.C., neither of the Companies is a
party to or bound by any material written or oral (i) contract
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not made in the ordinary course of business; (ii) employment
contract, consulting contract or contract providing for the
services of an independent contractor; (iii) contract with any
labor union or association; (iv) bonus, pension, profit sharing,
retirement, stock purchase, hospitalization, insurance or other
plan providing employee benefits; (v) lease with respect to any
property, real or personal, whether as lessor or lessee; (vi)
contract or commitment for the purchase of materials, supplies or
equipment which contract or commitment provides for expenditures
in excess of $15,000 in any twelve month period; (vii) agreement
or legally enforceable commitment or obligation with respect
thereto; (viii) contract or commitment for capital expenditures;
(ix) contract relating to patents, trademarks, trade names,
copyrights, inventions, processes, know-how, formulae or trade
secrets; (x) contract or commitment for sale of the services of
either of the Companies; or (xi) contract continuing over a
period of more than twelve months from the Effective Date. A
true copy of each contract listed in SCHEDULE 2.C. has heretofore
been delivered to the Purchaser, and each contract listed in
SCHEDULE 2.C. is in full force and effect and the parties thereto
are not in default thereunder nor does there exist any condition
which with the passage of time or notice or both might constitute
such a default by any party thereto, except as set forth in
SCHEDULE 2.C. Except as indicated in SCHEDULE 2.C., no such
contract will be breached or give any other party a right of
termination as a result of the transactions contemplated by this
Agreement.
q. PATENTS AND TRADEMARKS. SCHEDULE 2.N.
includes a list of the patents, patent applications, registered
trademarks, trademark applications, and registered copyrights for
each of the Companies. Except as disclosed on SCHEDULE 2.N., to
the extent such exist, each Company owns, is validly licensed
under, or has legal right to use, all logos, patents, patent
applications, trademarks, trademark applications, trade names,
brand names, inventions, processes, know-how, trade secrets,
copyrights and other intellectual property which are necessary to
conduct its business as conducted as of the Effective Date, and,
except as set forth on SCHEDULE 2.N., all such rights are free
and clear of all liens and encumbrances and, except as set forth
on SCHEDULE 2.N., have not been the subject of a claim of
infringement of another's rights or the subject of any
interference, opposition or cancellation proceedings. To the
knowledge of the Selling Shareholders, the conduct of the
business of each of the Companies as conducted as of the
Effective Date does not infringe any third party's logo, patent,
trademark, trade name, copyright or other intellectual property.
Except as set forth on SCHEDULE 2.N., no stockholder, director,
officer, employee or consultant of the Companies owns, directly
or indirectly, in whole or in part, any inventions or logos,
patents, trademarks, trade names, brand names, copyrights or
third party test results or applications therefor which either of
the Companies is presently using and the use of which is
necessary for the business of the Companies as now conducted or
has made any invention not assigned to the one of the Companies
which is necessary for the business of either of the Companies as
conducted as of the Effective Date (provided, however, the
foregoing representation is limited to the knowledge of the
Selling Shareholders to the extent it relates to Elizabeth
Miller). The Selling Shareholders do not know of any officer,
director or employee of the Companies that has entered into any
written agreement regarding know how, trade secrets or inventions
with any person, firm, association, corporation or business
organization or enterprise other than the Companies.
r. INSURANCE. SCHEDULE 4.R. sets forth a list
and brief description of all of the policies of insurance held by
or for the benefit of each of the Companies on its property,
assets, business or personnel. True and correct copies of such
policies or certificates
- 10 -
evidencing such policies have heretofore been delivered to the
Purchaser. Neither of the Companies is in default with respect
to any provision contained in any such insurance policy and all
such policies carried by the Companies are in full force and in
effect except as noted on SCHEDULE 4.Q. The policies designated
on SCHEDULE 4.R. as carried by the Companies or comparable
policies will be outstanding and in force on the Closing Date.
s. LICENSES AND PERMITS. Each of the Companies
has available all material licenses, corporate franchises,
permits and certificates necessary to conduct its business.
t. LITIGATION. Except as described on SCHEDULE
4.T., neither of the Companies has received actual notice of any
material claims, actions, suits, investigations or proceedings,
pending against or threatened against the Selling Shareholders or
the Companies or any of their respective assets or properties, or
which question the validity or legality of the transactions
contemplated hereby, at law or in equity or before or by any
court or federal, state, municipal or other governmental
department, commission, board, agency or instrumentality. Except
as described on SCHEDULE 4.T., neither the Companies nor the
Companies' Assets are subject to any court or administrative
order, writ, injunction or decree to which the Companies is a
party, and is not in violation of or in default with respect to
any material order, writ, injunction or decree of any court or
federal, state, municipal or other governmental department,
commission, board, agency, instrumentality or arbitrator to which
either of the Companies is a party.
u. COMPLIANCE WITH LAWS.
(1) Each of the Companies has made a good
faith effort to comply in all respects with all applicable
foreign, federal, state, municipal and other political
subdivision or governmental agency statutes, ordinances and
regulations, including, without limitation, those imposing
taxes, in every applicable jurisdiction, in respect of the
ownership of its properties and the conduct of its
businesses, where the failure to do so would have a material
adverse effect on the Companies, and neither of the
Companies is a party to any investigation or inquiry by any
foreign, federal, state or local governmental body or agency
pending or threatened into the business, operations, affairs
or properties of the Companies .
(2) Neither the Selling Shareholders, the
Companies, nor to the knowledge of the Selling Shareholders,
any shareholder, director, officer, partner, employee or
agent of neither of the Companies, has, directly or
indirectly, given or agreed to give any illegal payment (in
kind or in cash), gift or similar benefit to any customer,
supplier, governmental employee, lobbyist, labor union,
political action committee, candidate for public office or
other person or entity who is or may be in a position to
help or hinder the business of the Companies which (i) might
subject the Companies to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if
not given in the past, might have had a material adverse
effect on the Assets of the Companies, their business or
their operations, or (iii) if not continued in the future,
might adversely affect the Companies' Assets, their business
or the Purchaser, or might subject the Purchaser to suit or
penalty in any private or governmental litigation or
proceeding.
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v. EMPLOYEES; PENSION PLANS. Attached hereto as
SCHEDULE 4..-1 is a schedule listing (i) the names and annual
rates of compensation of each of the present officers, employees
and agents of the Companies whose current annual rate of
compensation from the Companies or either of them aggregates
$50,000 or more, and (ii) the names of all officers and directors
who have received raises since the date of the Annual Report and
their previous and present salaries. SCHEDULE 4.V.-1 summarizes
the bonuses, profit sharing, incentive compensation, Company
cars, club memberships and other like benefits, if any, paid or
payable to such officers, employees and agents for the calendar
year ended December 31, 1996, and for the period from December
31, 1996, to the Effective Date. Except as set forth and
described on SCHEDULE 4.V.-2 attached hereto, there are no
"employee pension benefit plans", as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended, or any other pension, profit sharing, savings,
bonus, incentive, option, insurance, welfare, stock purchase,
stock option, deferred compensation or other employee benefit
plan or arrangement maintained by either of the Companies or to
which either of the Companies contributes or is required to
contribute.
w. BANK ACCOUNTS; POWERS OF ATTORNEY; LINES OF
CREDIT. Attached hereto as SCHEDULE 4.W. is a list setting forth
(i) the name of each bank, savings and loan or other financial
institution in which either of the Companies has any account or
safe deposit box, the style and number of each such account or
safe deposit box and the names of all persons authorized to draw
thereon or have access thereto, (ii) the name of each person,
corporation, firm, association or business entity or enterprise
holding a general power of attorney from either of the Companies
and the summary of the terms thereof and (iii) the names of all
persons authorized to execute notes, agreements or other
instruments relating to the borrowing of money or the extension
of credit from or by such banks or lending institutions.
x. LABOR MATTERS. Neither of the Companies has
a collective bargaining agreement with any labor unions. There
have not been and there are not pending or threatened, any labor
disputes, strikes or work stoppages which may have an adverse
effect upon the continued business or operation of either of the
Companies. No union organizing efforts are currently underway
for either of the Companies, nor have any such activities taken
place since the inception of either of the Companies. Both of
the Companies is in substantial compliance with all federal and
state laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and is not
engaged in any material unfair labor practices under applicable
federal or state law.
y. BROKERS. Neither the Selling Shareholders
nor either of the Companies is a party to or in any way obligated
under any contract or other agreement relating to, and there are
no outstanding claims against any of them for the payment of, any
broker's or finder's fee in connection with the origin,
negotiation, execution or performance of this Agreement. The
Selling Shareholders hereby agree to indemnify, defend and hold
harmless Purchaser from and against any and all claims
(including, without limitation, reasonable attorneys' fees, court
costs and other costs incurred in defense thereof) of any agent,
broker, finder or other similar party claiming through the
Companies or the Selling Shareholders.
- 12 -
z. INTERESTS IN COMPETITORS, SUPPLIERS AND
CUSTOMERS. Except as disclosed on SCHEDULE 4.Z., to the
knowledge of the Selling Shareholders, no officer or director of
either of the Companies, nor any spouse or child of any such
officer or director, nor any trust of which any such officer or
director is a grantor, trustee or beneficiary, has any ownership
in (except for ownership of less than five percent of any
publicly traded company) or is a director, officer or employee
of, or consultant to, any entity which is a competitor, potential
competitor, customer or supplier of either of the Companies, or
has any ownership interest, in whole or in part, in any property,
asset or right which is associated with any property, asset or
right owned or purported to be owned by either of the Companies
or which either of the Companies is at present operating or using
or the use of which is necessary or material to the Companies'
business, or has, directly or indirectly, engaged in any
transaction with either of the Companies other than transactions
inherent in the capacities of director, officer, employee,
consultant or stockholder.
aa. HAZARDOUS MATERIALS.
(1) DEFINITIONS. For the purposes of this
Agreement, unless the context otherwise specifies or requires,
the following terms shall have the meaning herein specified:
(a) "Environmental Requirements" shall
mean all laws, ordinances, rules and regulations of the
United States, the State, the County, the City, or any other
political subdivision, agency, or instrumentality exercising
jurisdiction over the Companies or any real property owned
by the Companies, which laws, ordinances, rules and
regulations are designed to protect the environment and
applicable to the Companies or the Companion's leased
premises, including, without limitation, the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. Section
6901 et seq.) ("RCRA"), as amended, and the Comprehensive
Environmental Response Compensation and Liability Act of
1980 (42 U.S.C. Section 9601 et seq.) ("CERCLA"), as
amended, the Federal Water Pollution Control Act, the
Federal Insecticide, Fungicide, and Rodenticide Act, the
Clean Water Act, the Clean Air Act, the Texas Natural
Resources Code, the Texas Water Code, the Texas Solid Waste
Disposal Act, and the Texas Hazardous Substances Spill
Prevention and Control Act.
(b) "Hazardous Materials" shall mean
(i) any "hazardous waste" as defined by RCRA, and
regulations promulgated thereunder; (ii) any "hazardous
substance" as defined by CERCLA, and regulations promulgated
thereunder; (iii) friable asbestos; (iv) polychlorinated
biphenyls; (v) underground storage tanks subject to
regulation under RCRA, and regulations promulgated
thereunder; (vi) any substance the presence of which is
prohibited by any Environmental Requirements; and (vii) any
other substance which by any Environmental Requirements
requires special handling or notification of any federal,
state or local governmental entity in its collection,
storage, treatment, or disposal.
- 13 -
(c) "Hazardous Materials Contamination"
shall mean any presently existing contamination of the
facilities, soil, groundwater, air or other elements in, on
or of any of the Companies' leased premises by Hazardous
Materials, or any contamination of the buildings,
facilities, soil, groundwater, air or other elements on or
of any other property as a result of Hazardous Materials
emanating from any property owned by either of the Companies
before the Effective Date.
(2) HAZARDOUS MATERIALS WARRANTIES. Except
as described on SCHEDULE 4.AA.(2), the Selling Shareholders,
severally but not jointly, hereby represent and warrant to
Purchaser that to the best of their knowledge:
(a) Neither the Selling Shareholders,
nor the Companies has ever caused or permitted any Hazardous
Materials Contamination to be located on, under or at the
leased premises of either of the Companies or any part
thereof in a manner that could give rise to material
liability under Environmental Requirements;
(b) No part of the leased premises of
either of the Companies is being used or has been used at
any previous time for the disposal, treatment or processing
of Hazardous Materials;
(c) No investigation, administrative
order, consent order and agreement, litigation or settlement
with respect to Hazardous Materials or Hazardous Materials
Contamination is in existence or proposed, threatened or
anticipated with respect to any of the Companies' leased
premises. None of the Companies' leased premises is
currently on, and has ever been on, any federal or state
"Superfund" or "Superlien" list;
(d) The Companies have disposed of all
wastes, including those containing any Hazardous Materials,
in compliance in all material respects with all applicable
Environmental Requirements, and neither of the Companies has
received any notice or claim of liability for any off-site
Hazardous Materials Contamination;
(e) There are not now, and never have
been, any underground storage tanks subject to regulation
under RCRA, and regulations promulgated thereunder located
on any of the Companies' leased premises; and
(f) Neither of the Companies has
received any notice or claim that it is in violation of or
subject to liability under any Environmental Requirements.
bb. NO AGREEMENTS TO SELL THE COMPANY'S ASSETS.
Except for sales in the ordinary course of business, neither the
Selling Shareholders nor the Companies has any legal obligation,
absolute or contingent, to any person or entity to sell the
Assets of either of the Companies, the Purchased Shares, the BB
Stock, the PTP Stock or any portion of the
- 14 -
Companies' business or to effect any merger, consolidation or
other reorganization of either of the Companies or to enter into
any agreement with respect thereto
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to the Selling Shareholders
that:
a. AUTHORITY RELATIVE TO THIS AGREEMENT. The
Purchaser has all requisite power to enter into and perform this
Agreement. The execution, delivery and performance of this
Agreement by the Purchaser has been duly authorized, and no
further action is necessary on the part of the Purchaser to make
this Agreement valid and binding upon the Purchaser in accordance
with its terms.
b. INVESTMENT INTENT. The shares of BB Stock
and the PTP Stock to be purchased by the Purchaser hereunder are
being acquired solely for the account of the Purchaser or for the
affiliate (as such term is defined under the regulations
promulgated under the Securities Act of 1933) of the Purchaser to
which the rights of Purchaser under this Agreement may be
transferred pursuant to Section 12d hereof, and are for
investment purposes only, and are not being purchased with a view
to the resale, distribution, subdivision or fractionalization
thereof.
c. NO CONFLICT WITH OTHER INSTRUMENTS. The
execution, delivery and performance of this Agreement by the
Purchaser will not result in a violation or breach of any term or
provision of, or constitute a default or accelerate the
performance required under, any indenture, mortgage, deed of
trust or other contract or agreement to which the Purchaser is a
party or by which the Purchaser or his assets are bound, or
violate any order, writ, injunction or decree of any court,
administrative agency or governmental body.
d. VALIDITY OF AGREEMENT. This agreement has
been duly executed and delivered by the Purchaser and is the
legal, valid and binding obligation of the Purchaser in
accordance with its terms.
e. BROKERS. The Purchaser is not a party to or
in any way obligated under any contract or other agreement
relating to, and there are no outstanding claims against the
Purchaser for the payment of, any broker's or finder's fee in
connection with the origin, negotiation, execution or performance
of this Agreement other than in connection with the brokerage
services performed by Weatherly Financial (the "Broker"). The
Purchaser hereby agrees to make all payments due to the Broker
for its services to the Purchaser and to indemnify, defend and
hold harmless the Selling Shareholders from and against any and
all claims (including, without limitation, reasonable attorneys'
fees, court costs and other costs incurred in defense thereof) of
any agent, broker, finder or other similar party, including the
Broker, claiming through the Purchaser.
f. BANKRUPTCY RELIEF. The Purchaser has no
present intention to cause or allow either of the Companies to
seek protection under Title 11 of the United States Code.
- 15 -
6. COVENANTS OF THE PARTIES. The parties named below
hereby covenant as follows:
a. CONDUCT OF BUSINESS. From the Effective Date
to the Closing Date, the Selling Shareholders will not (i) enter
into any long-term contract or commitment involving Big Ball or
Print The Planet outside the ordinary course of business, or
subject the assets of such companies to any additional lien or
encumbrance; (ii) permit any material contract of the Companies
to expire, other than by the terms of such contract; or (iii)
increase the rate of compensation or benefits to employees of the
Companies or make any payments to the Selling Shareholders other
than base salary being currently earned; and will cause the
Companies (y) to be operated in a manner consistent with its
normal procedure and practices (to the extent permitted by
applicable cash flow); and (z) not to issue additional shares of
capital stock or other securities.
b. ACCESS TO INFORMATION. From and after the
Effective Date, the Selling Shareholders shall use their
reasonable efforts to cause the Companies to give to the
Purchaser, its counsel, accountants, and other representatives,
full and free access to all the properties, books, contracts,
personnel, commitments and records of the Companies so that the
Purchaser may have full opportunity to make such investigation as
it shall desire to make of the affairs of the Companies, provided
that such assistance provided by the Selling Shareholders or the
Companies does not inhibit their ability to properly manage the
affairs of the Companies. Any such investigation shall not
affect the representations and warranties of the Selling
Shareholders contained in this Agreement. The Selling
Shareholders shall use their reasonable efforts to cooperate with
the Purchaser, his representatives and counsel in the preparation
of any documents or other material which may be required by any
governmental agency, provided that such assistance provided by
the Selling Shareholders or the Companies does not inhibit their
ability to properly manage the affairs of the Companies.
c. PRESERVATION OF BUSINESS ORGANIZATION. The
Selling Shareholders will use their reasonable efforts to
preserve the business organization of the Companies, to keep
available to the Purchaser the services of the respective
officers and employees of the Companies and to preserve for the
Purchaser its existing relationship with all suppliers, customers
and others having business relations with the Companies.
d. SALE OF PURCHASED SHARES. Until the
termination of this Agreement, the Selling Shareholders will not
sell, transfer, assign, pledge, hypothecate or otherwise dispose
of or encumber any shares of the Purchased Shares, or enter into
negotiations in connection with any of the foregoing, other than
pursuant to this Agreement.
e. COMPLIANCE WITH CONDITIONS. The Selling
Shareholders shall, and shall cause the Companies to, use their
reasonable efforts to bring about the satisfaction of the
conditions to the obligations of the Purchaser specified in
Section 7.
f. INDEBTEDNESS GUARANTEED BY SELLING
SHAREHOLDERS. Conditioned upon the Closing, the Purchaser agrees
to guaranty the payment of the obligations guaranteed by the
Selling Shareholders to the extent such obligations are described
on SCHEDULE 4.J-2. and to indemnify the Selling Shareholders for
all claims based on such obligations; provided, however,
- 16 -
this covenant shall not be construed to prohibit the Companies or
the Purchaser from negotiating other payment terms or possible
debt reductions either prior to or following the Closing.
g. INDEBTEDNESS OF THE COMPANIES. Conditioned
upon the Closing, the Purchaser agrees to pay or cause to be paid
the obligations of the Companies to the extent such obligations
are described on SCHEDULE 4.I.; provided, however, this covenant
shall not be construed to prohibit the Companies or the Purchaser
from negotiating other payment terms or possible debt reductions
either prior to or following the Closing. The provisions of this
paragraph g. shall not include the obligations of the Companies
to the Selling Shareholders which obligations are to be covered
pursuant to paragraph h. below.
h. INDEBTEDNESS OF THE COMPANIES TO THE SELLING
SHAREHOLDERS. Included on SCHEDULE 4.H. is a detailed
description of the obligations of the Companies to the Selling
Shareholders. Conditioned upon the Closing, and in full and
final settlement of all obligations of the Sellers to the Selling
Shareholders existing immediately prior to the Closing, the
Purchaser agrees to pay to Ellis the sum $47,500 in cash and to
issue 73,860 shares of Signal common stock to Ellis, and to pay
to Metyko the sum of up to $52,500 in cash; provided, however,
that the check representing $47,500 to Ellis shall be payable
jointly to Ellis and Citizens National Bank of Texas
("Citizens"), and used to pay in full the amount owed on the
Chevrolet Tahoe, Jeep Cherokee, Mitsubishi Bobtail truck, and the
trailer owned by Big Ball, and the entire cash payment to Metyko
will be payable jointly to Metyko and Citizens. In addition,
within ten (10) days after Closing, Ellis and Metyko shall
provide to Purchaser release of liens from Citizens.
7. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser under Section 1 of this Agreement
shall, at the option of the Purchaser, be subject to the follow-
ing conditions:
a. GENERAL CONDITIONS.
(1) At the Closing, the Selling Shareholders
have and are willing to convey to the Purchaser good and
marketable title to the Purchased Shares, free and clear of
all liens, claims and encumbrances.
(2) The Purchaser shall have obtained
written agreements from First Factors Corporation, Endless
Summer, Inc., and other trade and professional creditors
acceptable to Purchaser, in connection with the payment and
reduction of the amounts owed to such companies by the
Companies.
(3) The only liabilities of the Companies
will be those reflected in the Annual Report, the
liabilities of the Companies reflected in the Schedules
attached hereto, and unsecured liabilities of the Companies
incurred in the ordinary course of business subsequent to
August 31, 1997 (less indebtedness to be forgiven at
Closing).
(4) All existing employment agreements
between either of the Companies, on the one hand, and the
Selling Shareholders, on the other hand, shall have been
terminated effective as of the Closing Date at no cost to
the Companies.
- 17 -
(5) Other than as listed on SCHEDULE 4.T.,
there shall be no litigation pending against the Companies.
(6) The members of the Board of Directors
and the officers of the Companies shall have resigned
effective as of the Closing.
(7) The Selling Shareholders shall have
entered into those certain Employment Agreements, as of the
Closing Date.
(8) The Selling Shareholders shall have
delivered to the Purchaser the unaudited financial
statements of the Companies for the months ended August 31,
1997, and September 30, 1997.
(9) The Purchaser shall have obtained any
applicable governmental or regulatory agency approval of the
transactions described herein.
(10) The Purchaser shall have obtained a full
and final release of all claims among the Companies, the
Selling Shareholders and Elizabeth Miller;
(11) The Purchaser shall have acquired (or
shall acquire simultaneous with the Closing) the outstanding
capital stock of Big Ball owned by Elizabeth Miller.
(12) The Purchaser shall have entered into an
agreement with Karen and Lee Fairchild (93,333 shares),
Frank Adams (160,667 shares) and Fred Cunill (160,667
shares), providing for a full and final release of any
claims such persons may have against the Companies in
exchange for issuance of the number of shares of Signal
common stock and/or the cash payment following their name in
parentheses.
b. SELLING SHAREHOLDERS' REPRESENTATIONS AND
WARRANTIES TRUE AT CLOSING. The representations and warranties
made by the Selling Shareholders in Section 4 of this Agreement
shall be true on and as of the Closing Date in every material
respect with the same effect as though such representations and
warranties had been made on and as of such date, except for
changes which this Agreement and the schedules hereto disclose
may occur or will occur; and each and all of the agreements and
covenants of the Selling Shareholders and the Selling
Shareholders to be performed or complied with on or before the
Closing Date pursuant to the terms hereof shall have been
performed or complied with by the Closing Date. Upon request of
the Purchaser, the Selling Shareholders will provide to the
Purchaser a certificate as to the foregoing at the Closing.
c. ABSENCE OF RESTRAINT. No order to restrain,
enjoin or otherwise prevent the consummation of this Agreement or
transactions in connection herewith shall have been entered and,
on the Closing Date, there shall not be any pending or threatened
litigation in any court, or any proceeding by or before any
governmental commission, board or agency, making a colorable
claim to restrain or prohibit consummation of the transactions
contemplated hereby or in which divestiture, rescission or
significant damages are sought in connection with
- 18 -
the transactions hereby, and no investigation by a governmental
agency shall be pending which could result in any such litigation
or other proceeding.
8. CONDITIONS TO OBLIGATIONS OF THE SELLING
SHAREHOLDERS. The obligations of the Selling Shareholders under
Section 1 of this Agreement shall, be subject to the following
conditions:
a. PURCHASER'S REPRESENTATIONS AND WARRANTIES
TRUE AT CLOSING. The representations and warranties made by the
Purchaser in this Agreement shall be true on and as of the
Closing Date in every material respect as if such representations
and warranties were made on and as of the Closing Date, and the
Purchaser shall have performed all agreements and covenants
required by this Agreement to be performed by it on or prior to
the Closing Date.
b. ABSENCE OF RESTRAINT. No order to restrain,
enjoin or otherwise prevent the consummation of this Agreement or
transactions in connection herewith shall have been entered and,
on the Closing Date, there shall not be any pending or threatened
litigation in any court, or any proceedings by or before any
governmental commission, board or agency, with a view to seeking
to restrain or prohibit consummation of the transactions
contemplated hereby or in which divestiture, rescission or
significant damages are sought in connection with the
transactions contemplated hereby, and no investigation by any
governmental agency shall be pending which could result in any
such litigation or other proceeding.
c. EMPLOYMENT CONTRACTS. Big Ball and the
Purchaser shall have executed and delivered to the Selling
Shareholders the Employment Agreements, as of the Closing Date.
d. PERMITS AND LICENSES. Appropriate action
shall have been taken as necessary to transfer any permits or
licenses held for the Companies in the name of one or more of the
Selling Shareholders to a new person or persons designated by the
Purchaser.
e. RELEASE. Each of the Selling Shareholders
shall have entered into the Mutual Release in the form attached
hereto as EXHIBIT 8.E. and shall have received an original of
such release, fully executed by each of the parties thereto.
f. RELEASE OF JUDGEMENT. Purchaser shall
deliver to the Selling Shareholders a fully executed Release of
Judgement in the form attached hereto as EXHIBIT 8.F.-1 and an
Agreed Motion to Dissolve Permanent Injunction in the form
attached hereto as EXHIBIT 8.F.-2, both of which will be filed by
counsel for Purchaser with the appropriate court.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF
SELLING SHAREHOLDERS. Regardless of any investigation at any
time made by or on behalf of the Purchaser or of any information
the Purchaser may have in respect thereof, all covenants,
agreements, representations and warranties made by the Selling
Shareholders hereunder or pursuant hereto or in connection with
the transactions contemplated hereby shall survive the Closing
Date and for a period of two (2) years thereafter; provided,
however, that any bona fide claim that a representation, warranty
or agreement herein contained has been breached which shall have
been asserted during any survival period shall continue the
applicable representations, warranties and agreements in effect
- 19 -
with respect to each matter covered by such claim until such time
as such claim shall have been resolved or settled.
10. INDEMNIFICATION BY THE SELLING SHAREHOLDERS
a. GENERAL. Each of the Selling Shareholders
covenants and agrees, severally but not jointly, to indemnify and
save and hold harmless the Purchaser and the Companies (except
that Metyko shall not be obligated to provide any indemnify
relating to Print the Planet) from and against any loss, damage
or expense (including reasonable attorneys' fees) caused by or
arising out of or resulting from (i) any breach or default, in
the performance by such Selling Shareholder of any covenant or
agreement of such Selling Shareholder contained in this
Agreement, (ii) any breach of warranty or representation made by
such Selling Shareholder herein, in any schedule attached or to
be delivered pursuant hereto or in any certificate or other
instrument delivered by such Selling Shareholder pursuant hereto,
or (iii) any obligations of the Companies or the Selling
Shareholders arising out of illegal dividends made prior to the
Closing Date. For purposes of this paragraph, the phrase "loss,
damage or expense," in the case of indemnification claims (i) for
additional Taxes, shall include only additional liability for
tax, interest, and penalty arising in the taxable period under
audit or any prior taxable period affected thereby, but shall be
reduced by the value of any net operating loss carryforward,
credit carryforward, or similar tax attribute, or any liability
for Taxes caused thereby; and (ii) in any case shall be net of
the cost effect to Purchaser or the Companies of any reduction in
Taxes arising as a result of such loss, damage or expense. If
any third party shall assert any claim against the Purchaser or
the Companies which, if successful, might result in a breach or
default of this Agreement by the Selling Shareholders, or a claim
against the Selling Shareholders under this indemnification, the
Selling Shareholders shall be given prompt written notice thereof
and shall have the right to assume the defense thereof and to be
represented, at their expense, by counsel to be selected by them.
Purchaser and the Companies shall provide full access to all of
Purchaser and the Companies' books, records, and personnel to
enable the Selling Shareholders and their counsel to advance the
best possible defense of the matter. The Selling Shareholders
shall permit Purchaser and the Companies to retain advisory
counsel, at Purchaser's and the Companies' cost and expense, to
monitor the proceedings. Compliance with each undertaking by
Purchaser and the Companies pursuant to this paragraph shall be a
condition precedent to the obligation of the Selling Shareholders
to indemnify Purchaser for any loss, damage or expense under this
Agreement. To the extent any of the representations contained
herein that impact the financial statements of the Companies are
incorrect, Purchaser shall only be deemed damaged to the extent
the net changes in assets and liabilities described in such
representations result in a decrease in net assets of the
Companies as of the date hereof.
b. AMOUNT OF MINIMUM CLAIM. No claim or claims
in the aggregate for indemnity shall be made under this Section
10 for the first $50,000 in aggregate indemnified loss or losses.
c. MAXIMUM LIABILITY. The aggregate total
liability of each Selling Shareholder under this Agreement shall
not exceed $200,000.
d. STOCK OPTIONS. To the extent Purchaser has
made claims against a Selling Shareholder for indemnification
pursuant to clause a. above and such Selling Shareholder
- 20 -
has not satisfied such claims, such Selling Shareholder agrees to
escrow any shares of common stock of Purchaser issued as a result
of the exercise of stock options granted by Purchaser to such
Selling Shareholder until such claims have been fully and finally
resolved. The foregoing shall not keep such Selling Shareholder
from selling any such shares; however, following such sale, the
net proceeds from the sale shall be held in escrow in place of
the applicable shares. In connection with the foregoing, the
applicable Selling Shareholder and Purchaser agree to appoint
counsel to Signal as the escrow agent for such shares and agree
that they will enter into an escrow agreement reasonably
acceptable to both parties and to such counsel at the time the
escrow is funded with shares and/or the proceeds from the sale of
shares.
11. DEFAULTS AND REMEDIES.
a. DEFAULT BY THE SELLING SHAREHOLDERS; TERMINA-
TION. If before the Closing, the Selling Shareholders fail to
perform or abide by any of their obligations or covenants set
forth in this Agreement for any reason other than (i) the
termination of this Agreement by the Selling Shareholders or the
Purchaser pursuant to any right to terminate expressly set forth
in this Agreement, or (ii) the Purchaser's failure to perform the
Purchaser's obligations under this Agreement, or if any of the
Selling Shareholders representations or warranties set forth in
Section 4, are materially inaccurate or materially untrue, then
the Purchaser, in addition to any other remedies available to
Purchaser, shall have the right:
(1) To terminate this Agreement by giving
written notice thereof to the Selling Shareholders and neither
the Purchaser, nor the Selling Shareholders shall have any
further rights or obligations hereunder, PROVIDED, HOWEVER, that
if the Selling Shareholders enter into a letter or intent or any
other agreement relating to the acquisition of a material portion
of (i) the outstanding capital stock either of the Companies, or
(ii) the Companies' Assets, before March 3, 1998, whether
directly or indirectly through purchase, merger, consolidation or
otherwise, and such transaction is ultimately consummated, then,
upon the closing of such transaction, the Selling Shareholders
will pay, or cause the Companies to pay, to the Purchaser the
sum of $200,000.00 in cash; or
(2) To enforce specific performance of the
obligations of the Selling Shareholders under Section 1 of this
Agreement.
b. DEFAULT BY THE PURCHASER; TERMINATION. If
the Purchaser fails to perform any of the Purchaser's obligations
at the Closing for any reason other than (i) the termination of
this Agreement by the Selling Shareholders or the Purchaser
pursuant to any right to terminate expressly set forth in this
Agreement, or (ii) the Selling Shareholders' failure to perform
their obligations under this Agreement, then the Selling
Shareholders, as their sole and exclusive remedy, shall have the
right to either (1) terminate this Agreement by giving written
notice thereof to the Purchaser, and neither the Purchaser, nor
the Selling Shareholders shall have any further rights or
obligations under this Agreement, or (2) enforce specific
performance of the obligations of the Purchaser under Section 1
of this Agreement.
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12. MISCELLANEOUS.
a. EXPENSES. Whether or not the transactions
contemplated hereby shall be consummated, each of the Purchaser,
the Companies and the Selling Shareholders shall bear its own
costs and expenses as incurred through Closing in connection with
the negotiation, preparation, execution and consummation of this
Agreement and in connection with the performance of and
compliance with this Agreement including, but not limited to,
legal and accounting expenses.
b. NOTICES. All notices, requests, demands and
other communications required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given
upon receipt if personally delivered, or if mailed, first class,
registered or certified mail, postage prepaid, three (3) days
after mailing in the United States mails to the parties, or to
the extent receipt is confirmed, telecopy, telefax or other
electronic transmission service to the following addresses and
numbers or at such other address or number as shall be given in
writing by similar notice by any party to the other:
(1) if to the Selling Shareholders, to:
Mr. Lee Ellis
1602 Harold
Houston, Texas 77006
Mr. Jimmy Metyko
2205 Albans Road
Houston, Texas 77005
(2) if to Purchaser, to:
Signal Apparel Company, Inc.
200-A Manufacturers Road
Chattanooga, Tennessee 37405
Attention: David E. Houseman
Chief Executive Officer
Telecopy No. (423) 752-2048
with a copy to:
Gary W. Miller, Esquire
Boyar, Simon, & Miller
4265 San Felipe, Suite 1200
Houston, Texas 77027
Telecopy No. (713) 552-1758
d. ASSIGNMENT. It is anticipated that the
Purchaser may assign its rights under this Agreement to an
affiliate prior to the Closing Date. No such assignment shall be
made until such affiliate executes and delivers to the Companies
an instrument in writing pursuant to which the affiliate agrees
to all of the terms and provisions of this Agreement and
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confirms the representations and warranties made by the Purchaser
as if the affiliate were the Purchaser hereunder. Such
assignment shall not relieve Purchaser of its obligations
hereunder.
e. SUCCESSORS BOUND. Subject to the provisions
of Section 12.d., this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
f. SCHEDULES; SECTION AND PARAGRAPH HEADINGS;
CONSTRUCTION. All schedules attached hereto and referenced
herein shall clearly set forth which information contained
therein applies to Big Ball, which information applies to Print
the Planet and which information applies to both of the
Companies. The section and paragraph headings in this Agreement
are for reference purposes only and shall not be deemed to
constitute a part of this Agreement or used to construe the
meaning of this Agreement. Any references to a "Section" herein
shall mean to a section of this Agreement, unless specifically
provided to the contrary.
g. GENDER. Any gender used herein shall be
construed to include all other genders and the singular shall be
construed to include the plural and vice versa where necessary to
give effect to this Agreement.
h. ENTIRE AGREEMENT. This Agreement, the exhi-
bits, annexes and schedules hereto and the documents specifically
referred to herein constitute the entire agreement, understand-
ing, representations and warranties of the parties hereto with
respect to the transactions contemplated hereby, and supersede
all prior agreements, arrangements and understandings related to
the subject matter hereof. All the terms, provisions, covenants,
representations, warranties and conditions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable
by the parties hereto and their respective successors.
i. WAIVER. The failure of any party at any time
or times to require performance of any provision hereof shall in
no manner affect the right to enforce the same. No waiver by any
party of any condition, or of the breach of any term, provision,
covenant, representation or warranty contained in this Agreement,
whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further or continuing
waiver of any such condition or breach or a wavier of any other
condition or of the breach of any other term, provision,
covenant, representation or warranty.
j. AMENDMENTS AND WAIVERS IN WRITING. This
Agreement may be amended, modified, superseded or cancelled, and
any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or in the case of a
waiver, by the party waiving compliance.
k. COUNTERPARTS. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same
instrument.
l. GOVERNING LAW; VENUE. This Agreement shall
be construed in accordance with and governed by the laws of the
State of Texas. Venue for any cause of action,
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controversy or dispute regarding this Agreement or the subject
matter hereof shall be proper only in Harris County, Texas.
m. LIST OF SCHEDULES AND EXHIBITS. The
following is a list of the Schedules and Exhibits attached to
this Agreement:
SCHEDULE BRIEF DESCRIPTION
2.a. Tangible Personal Property
2.b. Inventory
2.c. Contracts and Deposits
2.d. Letters of Credit and Performance
Bonds
2.e. Licenses
2.f. Computer Programs
2.j. Accounts and Notes Receivable
2.k. Licenses and Permits
2.m. Arrangement with Athletes and other
Sports-Related Celebrities
2.n. Intellectual Property
4.a. List of Selling Shareholders and
Number of Shares Owned
4.b List of Subsidiaries and
Jurisdictions
4.c. Obligations and Agreements
Relating to Stock
4.g-1 Security Interests and Encumbrances
4.g.-2 Disclosures Relating to Buildings
and Equipment
4.h. Disclosure of Certain Charges or Events
4.i. Indebtedness
4.j-1 List of Guaranties and Contingent
Liabilities
4.j-2 List of Guaranties of Selling Shareholders
4.1. List of Company's Tax Audits
4.r. Policies of Insurance
4.t. Claims, Suits and Proceedings
4.v-1 Names and Rates of Compensation of
Officers and Employees
4.v.2 Employee Benefit Pension Plans
4.w. Banking, Safe Deposit and Credit
Arrangements and Powers of Attorney
4.z. Interests in Competitors, Suppliers and
Customers
4.aa.(2) Hazardous Materials Disclosures
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EXHIBITS DESCRIPTION
1(c) Employment Agreement
8.e. Mutual Release
8.f.-1 Release of Judgement
8.f.-2 Agreed Motion to Dissolve Permanent
Injunction
THE REGISTRANT HEREBY UNDERTAKES TO SUPPLEMENTALLY FURNISH COPIES
OF ANY OF THE ABOVE OMITTED SCHEDULES AND EXHIBITS UPON REQUEST
OF THE S.E.C. STAFF.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly
executed by the parties hereto, to be effective as of the date
first above written.
THE PURCHASER:
SIGNAL APPAREL COMPANY, INC.
/s/ David E. Houseman
By:_____________________________
David E. Houseman, Chief
Executive Officer
ELLIS:
/s/ Lee Ellis
________________________________
Lee Ellis
METYKO:
/s/ Jimmy Metyko
________________________________
Jimmy Metyko
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