SIGNAL APPAREL COMPANY, INC.
200-A Manufacturers Road
Post Office Box 4296
Chattanooga, Tennessee 37405
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 11, 1995
Notice is hereby given that the Annual Meeting of
Shareholders of Signal Apparel Company, Inc. (the "Company"),
will be held at 200-A Manufacturers Road, Chattanooga, Tennessee,
on May 11, 1995 at 10:00 a.m. for the following purposes:
1. To elect six directors;
2. To approve the amendment, described in the accompanying
proxy statement, to the Company's Restated Articles of
Incorporation increasing the number of authorized shares of
Common Stock from 20,000,000 shares to 40,000,000 shares;
3. To approve the amendment, described in the accompanying
proxy statement, to the Company's 1985 Stock Option Plan to
increase the number of shares of the Company's Common Stock
issuable thereunder from 1,160,000 shares to 1,910,000;
4. To approve the issuance of warrants to purchase
3,000,000 shares of the Company's Common Stock to Walsh Greenwood
& Co. in connection with the Credit Agreement between the Company
and Walsh Greenwood & Co. described in the accompanying proxy
statement; and
5. To transact such other business as may properly come
before the meeting or any adjournments thereof.
The Board of Directors has fixed March 24, 1995 as the
record date for the determination of shareholders entitled to
vote at the Annual Meeting and to receive notice thereof.
Shareholders are cordially invited to attend the meeting in
person. IF YOU CANNOT ATTEND, PLEASE RECORD YOUR VOTE AND SIGN
AND DATE THE ACCOMPANYING PROXY WHICH IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS AND RETURN IT IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
Robert J. Powell
Secretary
Chattanooga, Tennessee
April 10, 1995
SIGNAL APPAREL COMPANY, INC.
200-A Manufacturers Road
Post Office Box 4296
Chattanooga, Tennessee 37405
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 11, 1995
This Proxy Statement, which is to be mailed on or about
April 10, 1995, is furnished to shareholders on behalf of the
Board of Directors for solicitation of proxies for use at the
Annual Meeting of Shareholders of Signal Apparel Company, Inc.
(the "Company") to be held on May 11, 1995 at 10:00 a.m., and at
all adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. Any proxy
given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by giving written
notice to the Secretary of the Company.
The cost of this solicitation will be paid by the Company.
In addition to solicitation by mail, certain officers, directors
and regular employees of the Company, who will receive no
additional compensation for their services, may solicit proxies
by telephone, telegraph or personal call. The Company has
engaged [Corporate Communications, Inc.] to distribute soliciting
material to shareholders of record and to solicit brokers and
other persons holding shares beneficially owned by others to
procure from such beneficial owners consents to the execution of
proxies. In addition to a fee of approximately [$4,000] to be
paid to [Corporate Communications, Inc.,] the Company will
reimburse brokers and others for their expense in sending proxy
material to beneficial owners.
On March 24, 1995, the outstanding securities of the Company
consisted of 10,364,076 shares of Common Stock, par value $.01
per share; 327.087 shares of Series A Preferred Stock, par value
$100,000 per share; and 217.678 shares of Series C Preferred
Stock, par value $100,000 per share. Each outstanding share of
the Common Stock is entitled to one vote per share on each matter
to be brought before the Annual Meeting. Neither the Series A
Preferred Stock nor the Series C Preferred Stock is entitled to
vote on any matter scheduled to be brought before the Annual
Meeting.
If no instructions are indicated, such shares will be voted:
(i) FOR electing the Board of Directors' six nominees for
director; (ii) FOR amending the Company's Restated Articles of
Incorporation to increase the number of authorized shares of
Common Stock from 20,000,000 to 40,000,000; (iii) FOR amending
the Company's 1985 Stock Option Plan to increase the number of
issuable shares thereunder from 1,160,000 to 1,910,000; and (iv)
FOR approving the issuance of 3,000,000 warrants to purchase the
Company's Common Stock to Walsh Greenwood & Co. in connection
with the Credit Agreement between the Company and Walsh Greenwood
& Co.
Any proxy given pursuant to this solicitation may be revoked
at any time by the shareholder giving it, insofar as it has not
been exercised, by delivering to the Secretary of the Company a
written notice of revocation bearing a later date than the proxy
or by submission of a later-dated, properly executed proxy.
Attendance at the Annual Meeting will not, in and of itself,
constitute a revocation of a proxy. Any written notice revoking
a proxy should be sent to Signal Apparel Company, Inc., 200-A
Manufacturers Road, Chattanooga, Tennessee 37405, Attention:
Robert J. Powell, Secretary.
The Board of Directors expects all nominees named below to
be available for election. In case any nominee is not available,
the proxy holders may vote for a substitute. The Company knows
of no specific matter to be brought before the meeting that is
not referred to in the Notice of Meeting or this proxy statement.
Regulations of the Securities and Exchange Commission permit the
proxies solicited pursuant to this Proxy Statement to confer
discretionary authority with respect to matters of which the
Company did not know a reasonable time before the meeting.
Accordingly, the proxy holders may use their discretionary
authority to vote with respect to any such matter pursuant to the
proxy solicited hereby.
The persons designated by the Board of Directors as proxy
holders in the accompanying form of proxy are Marvin J. Winkler
and William H. Watts, officers of the Company. The cost of
solicitation of proxies will be borne by the Company.
The presence, in person or by proxy, of the holders of a
majority of the votes eligible to be cast by the holders of the
outstanding shares of Common Stock entitled to vote (5,182,038
votes) is necessary to constitute a quorum at the Annual Meeting.
The affirmative vote of a majority of the total votes represented
at the Annual Meeting, in person or by proxy, by holders of
outstanding shares of Common Stock is required to amend the
Restated Articles of Incorporation to increase the number of
authorized shares of Common Stock from 20,000,000 shares to
40,000,000; to amend the Company's 1985 Stock Option Plan to
increase the number of shares issuable thereunder from 1,160,000
to 1,910,000; and to issue the 3,000,000 warrants to Walsh
Greenwood & Co. to purchase the Company's Common Stock. A
plurality of the vote is necessary to elect the Board of
Directors' nominees. Abstentions and broker non-votes are
counted as present for determination of a quorum but are not
counted as affirmative or negative votes on any item to be voted
upon and are not counted in determining the number of shares
voted on any item.
The Board of Directors has been informed that the group
comprised of FS Signal Associates, L.P. and related parties (as
described in the "Security Ownership of Certain Beneficial Owners
and Management" Table) intends to vote all its shares for
electing the Board of Directors' nominees for director, for
amending the Restated Articles of Incorporation to increase the
number of authorized shares of Common Stock from 20,000,000
shares to 40,000,000, for amending the Company's 1985 Stock
Option Plan to increase the number of shares issuable thereunder
from 1,160,000 to 1,910,000, and for issuing the 3,000,000
warrants to purchase the Company's Common Stock to Walsh
Greenwood & Co. The Board of Directors also has been informed
that the group comprised of Walsh Greenwood & Co. and related
parties (as described in the "Security Ownership of Certain
Beneficial Owners and Management" Table) intends to vote all its
shares for electing the Board of Directors' nominees for
director, for amending the Restated Articles of Incorporation to
increase the number of authorized shares of Common Stock from
20,000,000 shares to 40,000,000, for amending the Company's 1985
Stock Option Plan to increase the number of shares issuable
thereunder from 1,160,000 to 1,910,000, and for issuing the
3,000,000 warrants to purchase the Company's Common Stock to
Walsh Greenwood & Co. Accordingly, it is anticipated that the
Board of Directors' nominees for director will be elected, the
amendments to the Restated Articles of Incorporation increasing
the number of authorized shares of Common Stock from 20,000,000
shares to 40,000,000 shares, the amendment to the Company's 1985
Stock Option Plan increasing the number of shares issuable
thereunder from 1,160,000 to 1,910,000 and the issuance of
3,000,000 warrants to purchase shares of the Company's Common
Stock to Walsh Greenwood & Co. will all be approved.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
<TABLE>
The following table sets forth certain information regarding
beneficial ownership of the Company's equity securities as of
March 24, 1995 by each shareholder that the Company knows to own
beneficially more than 5% of the shares of the Company's Common
Stock, director of the Company, nominee for director, Named
Executive (as defined herein) and by the directors and executive
officers of the Company as a group.
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent
Beneficial Owner Title of Class Ownership(1) of Class
- ------------------- -------------- ----------------- --------
<S> <C> <C> <C>
FS Signal Associates, L.P.; Common Stock 8,274,282 63.6%
FS Signal Associates II, L.P.; $.01 par value
FS Signal, Inc.; and
Kevin S. Penn. Series A 327.087 100%
499 Park Avenue Preferred Stock
New York, New York 10022 (2) $100,000 stated
value
Series C 139.709 64.2%
Preferred Stock
$100,000 stated
value
Kevin S. Penn Common Stock 8,274,282 63.6%
499 Park Avenue $.01 par value
New York, New York 10022 (2)
Series A 327.087 100%
Preferred Stock
$100,000 stated
value
Series C 139.709 64.2%
Preferred Stock
$100,000 stated
value
FS Signal Associates, L.P. Common Stock 3,715,983 38.3%
c/o Kenneth Musen $.01 par value
157 Church Street, Box 426
New Haven, Connecticut 06502 (2)(3) Series C 130.334 59.9%
Preferred Stock
$100,000 stated
value
FS Signal Associates II, L.P. Common Stock 4,498,299 36.6%
c/o Kenneth Musen $.01 par value
157 Church Street, Box 426
New Haven, Connecticut 06502 (2)(4) Series A 327.087 100%
Preferred Stock
$100,000 stated
value
Series C 9.375 4.3%
Preferred Stock
$100,000 stated
value
Walsh Greenwood & Co., Stephen Common Stock 4,396,049 39.8%
Walsh, Paul R. Greenwood, WG $.01 par value
Partners, L.P., and WG Trading
Company Limited Partnership, Series C 147.969 35.8%
as a group Preferred Stock
One East Putnam Avenue $100,000 par
Greenwich, Connecticut 06830(5) value
Walsh Greenwood & Co. Common Stock 4,396,049 39.8%
One East Putnam Avenue $.01 par value
Greenwich, Connecticut 06830 (5)6)
Series C 77.969 35.8%
Preferred Stock
$100,000 par
value
WG Partners, L. P. Common Stock 2,700,149 26.1%
One East Putnam Avenue $.01 par value
Greenwich, Connecticut 06830 (5)6)
WG Trading Company Common Stock 1,152,100 10.4%
Limited Partnership $.01 par value
One East Putnam Avenue
Greenwich, Connecticut 06830 (5)6) Series C 70
Preferred Stock
$100,000 stated
value
Jacob I. Feigenbaum Common Stock -- --
$.01 par value
Guido Goldman (7) Common Stock 50,000 *
$.01 par value
Paul R. Greenwood (5)(6) Common Stock 4,123,949 42.8%
$.01 par value
B. Lance Sauerteig (8) Common Stock 10,000 *
$.01 par value
Stephen Walsh (5)(6) Common Stock 4,123,949 42.8%
$.01 par value
Marvin J. Winkler Common Stock -- --
$.01 par value
Leslie W. Levy Common Stock -- --
$.01 par value
Glenn M. Grandin Common Stock -- --
$.01 par value
Robert J. Powell Common Stock -- --
$.01 par value
Daniel J. Cox Common Stock -- --
$.01 par value
All directors and executive Common Stock -- --
officers as a group (total $.01 par value
of 11 persons)(10)
<FN>
<F1>
* Less than 1%
</FN>
</TABLE>
NOTES TO TABLE OF BENEFICIAL OWNERSHIP
(1) As of March 24, 1995, the Company had issued and outstanding
10,364,076 shares of Common Stock, 327.087 shares of Series
A Preferred Stock, and 217.678 shares of Series C Preferred
Stock. In general, a person is deemed to be a "beneficial
owner" of a security if that person has or shares "voting
power," which includes the power to vote or direct the
voting of such security, or "investment power," which
includes the power to dispose of or to direct the
disposition of such security; or if a person has the right
to acquire either voting power or investment power over such
security through the exercise of an option or the conversion
of another security within 60 days. More than one person
may be a beneficial owner of the same security, and a person
may be deemed to be a beneficial owner of securities as to
which he has no personal economic interest or which he may
not vote. In the case of persons who hold options or
warrants to purchase shares of Common Stock which are
exercisable either immediately or within 60 days of March
24, 1995, the shares of Common Stock represented thereby
have been treated as outstanding for purposes of calculating
the ownership totals and percentages (and the percent of
voting power) for only the persons holding such options and
warrants, and have not otherwise been treated as outstanding
shares.
(2) FS Signal Associates, L.P. ("FS Signal"); FS Signal
Associates II, L.P. ("FS Signal II"); FS Signal, Inc.
("FSSI"); and Kevin S. Penn ("Penn") have filed a report, as
a group, on Schedule 13D disclosing their various
relationships. Such persons may be deemed to be a group for
purposes of the beneficial ownership of the securities
disclosed in the table, although they disclaim membership in
a group. The 8,274,282 shares of Common Stock include (i)
2,980,983 shares of Common Stock held directly by FS Signal
I; (ii) 1,185,779 shares of Common Stock held directly by FS
Signal II; (iii) warrants held directly by FS Signal to
acquire 735,000 shares of Common Stock; (iv) warrants held
directly by FS Signal II to acquire 3,312,500 shares of
Common Stock; and (v) warrants held directly by Penn to
acquire 300,000 shares of Common Stock. The 327.087 shares
of Series A Preferred Stock are held directly by FS Signal
II. The 139.709 shares of Series C Preferred Stock include
(i) 130.334 shares of Series C Preferred Stock held directly
by FS Signal and (ii) 9.375 shares of Series C Preferred
Stock held directly by FS Signal II. The reporting persons
may be deemed to be members of a group, and, accordingly,
could each be deemed to have beneficial ownership (by virtue
of Rule 13(d)1-5(b)(1)) of all shares of Common Stock,
Series A Preferred Stock and Series C Preferred Stock held
directly by the various members of the group. Except as
disclosed herein, no other entity or person that may be
deemed to be a member of the group holds direct beneficial
ownership of any Common Stock, Series A Preferred Stock or
Series C Preferred Stock. Penn is the President of FSSI,
which is the general partner of both FS Signal and FS Signal
II. Both FS Signal and FS Signal II are limited
partnerships. Pursuant to both the bylaws of FSSI and an
understanding of the limited partners of FS Signal and FS
Signal, II, Penn, as President of FSSI, has the sole voting
and investment power over the securities held by both
limited partnerships.
(3) FS Signal Associates, L. P. ("FS Signal"), a Connecticut
limited partnership, owns directly (i) 2,980,983 shares of
Common Stock; (ii) warrants to acquire 735,000 shares of
Common Stock; and (iii) 130.334 shares of Series C Preferred
Stock. Kevin S. Penn, in his capacity of President of FS
Signal, Inc., the general partner of FS Signal, may be
deemed to own beneficially all shares of Common Stock and
Series C Preferred Stock held by FS Signal, L.P.
(4) FS Signal Associates II, L.P. ("FS Signal II"), a
Connecticut limited partnership owns directly (i) 1,185,799
shares of Common Stock; (ii) warrants to acquire 3,312,500
shares of Common Stock; (iii) 327.087 shares of Series A
Preferred Stock; and (iv) 9.375 shares of Series C Preferred
Stock. Kevin S. Penn, in his capacity as the President of
FS Signal, Inc., the general partner of FS Signal II, may be
deemed to own beneficially all shares of Common Stock,
Series A Preferred Stock and Series C Preferred Stock held
by FS Signal II.
(5) Walsh Greenwood & Co. ("Walsh Greenwood"); Walsh Greenwood's
sole general partners, Stephen Walsh ("Walsh") and Paul R.
Greenwood ("Greenwood"); WG Partners, L.P. ("WG Partners");
and WG Trading Company Limited Partnership ("WG Trading")
have filed a report, as a group, on Schedule 13D disclosing
their various relationships. Such persons may be deemed to
be a group for purposes of the beneficial ownership of the
securities disclosed in the table, although they disclaim
membership in a group. The 4,123,949 shares of Common Stock
include (i) 2,700,149 shares of Common Stock owned directly
by WG Partners; (ii) 477,100 shares of Common Stock owned
directly by WG Trading; (iii) 271,700 shares of Common Stock
held directly by Walsh Greenwood; and (iv) a warrant to
acquire 675,000 shares of Common Stock held by WG Trading.
77.969 shares of Series C Preferred Stock are held directly
by Walsh Greenwood and the other 70 shares of Series C
Preferred Stock are held directly by WG Trading.
(6) Walsh Greenwood has the sole power to vote and dispose of
271,700 shares of Common Stock (all of which shares are held
by Walsh Greenwood on behalf of certain managed accounts and
as to which Walsh Greenwood has the power to vote and
dispose of but does not have a pecuniary interest therein)
and 77.969 shares of Series C Preferred Stock which it owns
directly. WG Trading has (i) the sole power to vote and
dispose of the 477,100 shares of Common Stock it owns
directly; (ii) a warrant to acquire 675,000 shares of Common
Stock, which is exercisable by its general partners, Walsh
and Greenwood; and (iii) 70 shares of Series C Preferred
Stock which it owns directly. WG Partners has the sole
power to vote and dispose of the 2,700,149 shares of Common
Stock owned by it directly, which power is exercisable by
its sole general partner, Walsh Greenwood. Both Walsh and
Greenwood, in their individual capacities as general
partners of both Walsh Greenwood and WG Trading, may be
deemed to share the power to vote and direct the disposition
of the shares of Common Stock beneficially owned by Walsh
Greenwood, WG Trading and WG Partners.
(7) Guido Goldman does not hold directly any shares of stock.
Although he is a general partner of FS Signal I and FS
Signal II, the provisions of the partnership agreements of
FS Signal I and FS Signal II cause him to be deemed not to
have beneficial ownership of any shares of the Company's
stock otherwise held by FS Signal I and FS Signal II. He is
a trustee of the Goldman Trusts, which collectively hold
directly 15,000 shares of Common Stock, and he is one of
four directors of the ASDA Foundation, which holds directly
10,000 shares of Common Stock. Pursuant to a general power
of attorney, Goldman may be deemed to hold beneficial
ownership of the 25,000 shares of Common Stock held by Alain
de Gunzburg.
(8) B. Lance Sauerteig holds direct ownership of 5,000 shares of
Common Stock and holds indirect beneficial ownership of (i)
3,000 shares of Common Stock owned by his three minor
children and (ii) 2,000 shares of Common Stock owned by his
wife.
(9) These figures include shares for which indirect beneficial
ownership may be attributed to certain directors of the
Company, as discussed in Notes (5) through (8) above. The
figures include warrants to purchase 4,722,500 shares of
Common Stock. Such warrants have been treated as
outstanding shares of Common Stock for calculations of share
ownership and voting power for the group of directors,
nominees and officers, as well as for any individuals who
hold such options or warrants. See note (1) above.
PROPOSAL NUMBER I
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation provide for
a board of directors consisting of not less than five nor more
than ten persons, with the exact number to be set by the Board of
Directors. The Board of Directors has set the number of
directors at six. All Directors are elected to serve a one year
term, or until their successors are elected and qualified. The
persons named in the enclosed form of proxy will vote for the
election of the six nominees named below, unless such authority
is withheld on the enclosed form of proxy. In the event any of
the nominees should become unavailable to serve as a director,
the proxy will be voted by the persons named therein in
accordance with their judgment.
<TABLE>
The following is a listing of the names, ages, positions
held with the Company and business experience during the past
five years of all nominees for director:
<CAPTION>
Year First
Business Experience Became A
Name and Address Age and Directorships Director
- ---------------- --- ------------------- ----------
<S> <C> <C> <C>
Jacob I. Feigenbaum 47 President and owner of Sea Q. America, 1994
c/o Sea Q. America August 1994 - present. President of
1411 Broadway, Suite 1185 Robby Len Swimwear Division of
New York, NY 10018 Apparel America, 1980-1994.
Guido Goldman 57 Chairman of First Spring Corporation, a 1990
499 Park Avenue private asset management company.
New York, NY 10022 Director of the Minda de Gunzburg
Center for European Studies at
Harvard University.
Paul R. Greenwood 48 Managing General Partner of Walsh, 1990
One East Putnam Avenue Greenwood & Co., a broker-dealer
Greenwich, CT 06830 engaged in effecting transactions in
securities for others and for its own
account.
B. Lance Sauerteig 48 Retired; President and a director of 1990
130 Edgehill Road First Spring Corporation, a private
New Haven, CT 06511 asset management company, until 1994.
Of counsel to the law firm of Bergman,
Horowitz & Reynolds.
Stephen Walsh 49 General Partner of Walsh, Greenwood & 1990
3333 New Hyde Park Road Co., broker-dealer engaged in
North Hills, NY 11040 effecting transactions in securities
for others and for its own account.
Marvin J. Winkler 40 Chief Executive Officer and Chairman 1994
200-A Manufacturers Road of the Board of American Marketing
Chattanooga, TN 37405 Works, Inc., until 1994.
<FN>
<F2>
The information set forth above with respect to the principal
occupation or employment of each nominee during the past five
years has been furnished to the Company by the respective
nominee.
</FN>
<FN>
<F3>
The Board of Directors held five meetings in 1994.
</FN>
</TABLE>
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. This committee recommends, for appointment by
the Board of Directors, a firm of independent certified public
accountants to serve as auditors for the Company; makes
recommendations to the Board of Directors with respect to the
scope of the annual audit; approves the services which the
auditors may render to the Company without impairing the
auditors' independence; approves the auditors' fees; and may
undertake investigations of any matter of a financial nature and
make recommendations to the Board of Directors with respect
thereto. This committee meets at least once each year with the
auditors to review the results of the audit and to review all
recommendations made by the auditors with respect to the
accounting methods used and the system of internal control
followed by the Company and advises the Board of Directors with
respect thereto. The independent auditors have direct access to
the members of this committee on any matter at any time. This
committee met twice in 1994. The only present member of this
committee is Mr. Feigenbaum. The Board of Directors plans to add
two members to this committee.
COMPENSATION COMMITTEE. This committee recommends to the Board
of Directors the amount of compensation and the terms and
conditions of employment of each officer of the Company, as well
as approving all employment contracts and agreements for
executive officers. This committee administers the 1985 Stock
Option Plan and makes recommendations to the Board of Directors
with respect to employee benefits plans. The committee met once
in 1994. Present members of this committee are Messrs.
Feigenbaum, Greenwood and Winkler.
The Board has no standing nominating committee. Individual
directors and management recommend to the full Board qualified
candidates for election as directors and officers of the Company.
The Board will consider nominees for director recommended by
shareholders. Such recommendations may be submitted in writing
to the Secretary of the Company.
EXECUTIVE OFFICERS
The following is a list of the names, ages, positions with the
Company and business experience during the past five years of the
executive officers of the Company:
Name Age Office and Business Experience
- ---- --- ------------------------------
Daniel J. Cox 51 Vice-President of Sales and
Marketing since March 1994; Chief
Operating Officer, Toth Design and
Advertising, 1991-1994.
Leslie W. Levy 56 Vice President of the Company and
President of Heritage Sportswear
Division of the Company since 1977.
Robert J. Powell 46 Vice President/International and
Licensing and General Counsel since
September 1992. Secretary since
January 1, 1993. Vice President of
International and Domestic
Licensing of Champion Products,
Inc. from May 1990 to September
1992. General Counsel and
Secretary of Champion Products,
Inc. from June 1987 to September
1992.
Leon Ruchlamer President since January 1995.
William H. Watts 54 Executive Vice-President/Chief
Financial Officer since January
1995; Consultant for Michelle St.
John International Design and
Charles Komar & Sons, March 1994 to
January 1995; Vice-President/Chief
Financial Officer, Land's Sea,
1990-1994.
Marvin J. Winkler 40 Chief Executive Officer and
Chairman of the Board since
November 1994. CEO and Chairman of
the Board, American Marketing
Works, Inc. until November 1994.
Officers are elected annually and serve at the pleasure of the
Board of Directors.
There is no family relationship between any of the above
executive officers, directors and nominees for director.
Section 16(a) of the Securities Exchange Act of 1934 and
regulations of the Securities and Exchange Commission thereunder
require the Company's executive officers and directors and
persons who own more than ten percent of the Company's Common
Stock, as well as certain affiliates of such persons, to file
initial reports of ownership and monthly transaction reports
covering any changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Executive
officers, directors and persons owning more than ten percent of
the Company's Common Stock are required by Securities and
Exchange Commission regulations to furnish the Company with
copies of all such reports they file. Based solely on its review
of the copies of such reports received by it and written
representations that no other reports were required for those
persons, the Company believes that during 1994 all filing
requirements applicable to its executive officers, directors and
owners of more then ten percent of the Company's Common Stock
were complied with.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Board of Directors of the Company has a Compensation
Committee consisting of four members chosen to serve one-year
terms at the first Board meeting following the Annual Meeting.
The Committee has two regular meetings each year, and meets on an
as needed basis at other times during the year. The Committee's
responsibilities include recommending to the Board of Directors
the amount of compensation and terms of employment of each
officer of the Company. The Committee approves all employment
contracts and agreements for each executive officer of the
Company. Additionally, the Committee administers the Company's
1985 Stock Option Plan and makes recommendations to the Board of
Directors with respect to the Company's other benefits and all
employee benefit plans applicable to the Company's executive
officers. The following is the report of the Committee:
COMPENSATION POLICY
GENERALLY. The Company makes an effort to offer competitive
compensation packages, which allows the Company to attract and
retain highly-qualified individuals with the skills necessary to
manage the Company successfully through its transition from a
producer of commodity products to a company that is marketing and
brand oriented. The Committee believes the long-term strategic
goals of the Company can be accomplished only if the Company
employs management with experience and skills relevant to the
changing nature of the Company's products, sales and marketing
efforts. A substantial portion of each executive officer's total
compensation is incentive-based in order to motivate the
Company's executive officers in the performance of their duties
and to encourage a sharp and continuing focus on Company
profitability.
Compensation packages offered to the Company's senior management
are thought to be competitive within the domestic apparel
industry and have not been tied directly to short-term results of
operations. The Committee believes the compensation packages for
its senior management are competitive with compensation packages
for executives of other public domestic apparel companies.
The Company has not yet established a policy with respect to
qualifying compensation paid to its executive officers for
deductibility under Section 162(m) of the Internal Revenue Code.
No executive officer of the Company is currently paid applicable
employee remuneration (as defined by Section 162(m)) in excess of
one million dollars in any fiscal year.
1994. Following the engagement of Grisanti, Galef & Goldress,
Inc. ("Grisanti"), management consultants, in July 1993, the
Committee received recommendations from Grisanti concerning
compensation of its executive officers which, following
discussion and evaluation of such recommendations, were adopted
by the Compensation Committee. A plan to implement a 15% wage
reduction (beginning September 30, 1993 and ending October 31,
1994) for the Company's executive officers (and to implement
temporary wage reductions in lesser amounts for all other
officers earning in excess of $50,000 per annum) was adopted (the
"Management Incentive Plan"). Pursuant to the terms of the
Management Incentive Plan, each participating officer, including
the Company's executive officers, may receive, in addition to his
salary, up to 200% of the amount of the wage reduction,
contingent upon the Company's achieving positive earnings before
taxes during the three-year period ending October 1, 1996.
One-half of such earnings, accumulated from October 1, 1993 until
October 1, 1996, became available to pay back the wage reduction
on an annual basis beginning in November 1994 and will end in
November 1996. Any payout under the Management Incentive Plan
is, accordingly, completely contingent upon achievement of
pre-tax earnings. As part of the Management Incentive Plan,
during 1994, no executive officer (other than Mr. Powell and Mr.
Grandin) participated in the Company's annual bonus program
described below.
The overall compensation of each of the Company's executive
officers consists of four principal elements:
- - Base Salary
Executive officers' base salaries are reviewed annually by the
Compensation Committee. In the case of all executive officers,
their base salary is their principal element of compensation. In
an effort to ensure that the Company can obtain the talent it
needs to effectuate its long-term strategies, the base salary of
all executive officers has been set at a level which is thought
to be competitive within the group of public businesses
identified as similar to the Company. The businesses with which
the Company compares itself are included within those that
comprise the Value Line Apparel Industry Group. Based on
information available to the Company, the Committee believes that
the overall compensation of its executive officers, taken in the
aggregate, places them in the median range of the compensation
scale of similarly situated executive officers in the industry.
Factors considered in establishing base salaries include the
requisite skill and experience required in a particular position,
the range of duties and responsibilities attributable to that
position, the individual's prior experience and compensation, the
compensation of similarly situated individuals in the apparel
industry and the overall past and expected future contributions
of the individual. Generally, in establishing such salaries, the
greatest weight is given to ensuring that a competitive salary
level is established. Overall, the process is subjective, with
no precise, mathematical weight given to the enumerated factors.
Base salaries did not increase in 1994.
- - Annual Bonus
1994. During 1994, the Company suspended operation of its annual
discretionary bonus plan. The only incentive-based compensation
available to its executive officers directly related to
performance in 1994 (other than in the case of Mr. Levy) will be
earned pursuant to the Management Incentive Plan described above.
The Committee intends to review the terms of the annual
discretionary bonus plan during 1995 to determine whether to
modify it or to continue it in its present form.
GENERALLY. If the plan is continued in its present form, each
executive officer would be eligible for payment of an annual
incentive bonus equal to a maximum of 40% of his Base Salary (as
defined in the plan). In each case, the award of up to one-half
the discretionary bonus is based upon the Committee's assessment
of the performance of the Company or pertinent divisional
performance for those executives with divisional responsibilities
and the remaining half is based upon the executive's individual
performance.
Specifically, 50% of the annual bonus would be based upon the
pre-tax earnings goals of the Company as established in the
Company's approved annual operating plan and 50% would be based
upon individual performance objectives mutually agreed upon by
the Company and the executive officer. For 1994, 20% of Mr.
Levy's bonus was based upon individual performance and the
remaining 80% was directly linked to pre-determined divisional
performance goals rather than to overall corporate goals. Mr.
Levy has been treated differently than the Company's other
executive officers because his division has a history of
profitable operations. Individual goals are both financial and
nonfinancial and will contribute significantly to overall Company
performance if achieved. The amount of the annual bonus is
determined, if earned, at the conclusion of the Company's fiscal
year following a review of Company, division and individual
performance.
The Committee's discretion includes both whether and the extent
to which any bonus is awarded. Other than Mr. Levy, no bonuses
were awarded in 1994.
The bonus element of each executive officer's compensation is set
at a level that the Committee believes is necessary to compensate
executive officers for the achievement of short-term goals
forming part of the Company's overall strategic objectives.
Short-term sales, profit and performance goals for each division
and for the Company as a whole are developed annually and in
advance by the Company's management and then reviewed by the
Company's Board of Directors. Performance is monitored against
established goals throughout the year.
- - Stock Options
GENERALLY. To establish a link between compensation and
management's performance in creating value for shareholders,
evidenced by increases in the Company's stock price, the
Committee has recommended and implemented a stock option plan
(the "1985 Stock Option Plan"). The Committee is responsible for
administering the 1985 Stock Option Plan, which provides for
options to purchase the Company's Common Stock generally issued
at market value on the date of grant. Accordingly, the value of
such options to the Company's participating executive officers
will depend directly on increases in the price of the Company's
securities. Because the Committee believes such compensation
should result from long-term increases in value, such options
generally do not vest until one year from the date of grant; and,
to serve as incentive for such executives to continue in the
Company's service through the implementation of its plans, such
options are typically divested upon termination of employment.
As noted below, options granted pursuant to the 1985 Stock Option
Plan and in connection with the Management Incentive Plan vest
pro rata over a four year period.
The Compensation Committee has exclusive discretion to (i) select
the persons to whom options will be granted and to determine the
type, amount and terms of each option; (ii) modify, within
certain limits, the terms of any option which has been granted,
including replacement or exchange of options without the consent
of the option holder under certain circumstances; (iii) determine
the time when options will be granted; and (iv) make all other
determinations which it deems necessary or desirable in the
interpretation and administration of the 1985 Stock Option Plan.
The Compensation Committee has the authority to administer,
construe and interpret the 1985 Stock Option Plan, and its
decisions are final, binding and conclusive.
In determining the size of option awards, the Committee considers
the amount of options currently held by an officer and the
results achieved by each officer relative to that officer's
assigned responsibilities.
1994. Pursuant to the Committee's recommendations, only Messrs.
Grandin and Powell were awarded stock options. The Company
awarded each of them 50,000 options. 25,000 of such options
awarded to each Mr. Grandin and Mr. Powell vest pro rata over a
four year period from the date of grant. Because the value of
such options granted at a market exercise price is tied directly
to the underlying price of the Company's Common Stock, and
because vesting occurs over a four year period, the Committee
believes that such options will serve as a strong incentive to
the executive officers to remain employed by the Company and to
contribute to the success of its operations. The other 25,000 of
the stock options awarded to each Mr. Grandin and Mr. Powell vest
ratably in one-fourth increments when the Company achieves
positive pre-tax earnings; that is, for each year the Company has
positive pre-tax earnings, 6,250 of these warrants vest. All
50,000 options awarded to each of them expire four years from the
date of grant and have an exercise price of $4.00 per share, the
market price on the date of grant.
- - Performance Evaluation
GENERALLY. The Committee meets with the CEO to evaluate the
performance of the other executive officers and meets in the
absence of the CEO to evaluate his performance. The Committee
reports its executive evaluations to the other outside members of
the Board. During the engagement of Grisanti, as interim
management, the Committee met with and received information from
Messrs. Katz and Davis.
- - Chief Executive Officer.
In November 1994, Marvin Winkler was named Chief Executive
Officer and Chairman of the Board. Mr. Winkler was serving in
the same capacities (as well as President) for American Marketing
Works, Inc. ("AMW") when it was acquired by the Company in
November 1994. The Committee believes that Mr. Winkler's
previous leadership in the area of AMW's strategic relationships
with its customers, suppliers and peers in the apparel marketing
industry will contribute significantly to the Company's financial
performance and to the Company's successful transformation from a
producer of commodity products to a company that is marketing and
brand oriented. The Committee therefore believes that a
significant compensation package for Mr. Winkler is appropriate
and supports the Company's objective of ensuring continued
services of key personnel who can contribute to the creation of
long-term shareholder value. While the Company and Mr. Winkler
negotiate an employment contract, the Company is paying him a
salary commensurate the base salary he received at AMW.
Pursuant to the Management Agreement with Grisanti, Mr. Davis was
compensated directly by Grisanti and not by the Company while he
served as CEO until November 1994. The aggregate cash
compensation paid to Grisanti by the Company of $80,000 per
month, plus reimbursement of reasonable out-of-pocket expenses,
was established by negotiations between Grisanti and the Board
of Directors, and was not contingent upon any specific measure of
corporate performance. Effective September 1994, this amount was
reduced to $40,000 per month. Such compensation, together with a
warrant issued to Grisanti to purchase 200,000 shares (later
reduced to 100,000) of the Company's Common Stock, served as
indirect compensation for the services of Mr. Davis, in the
capacity of Chairman of the Board and Chief Executive Officer,
and of Mr. Katz, in the capacity of President, until the
cessation of their services in November 1994.
Although, Mr. Winkler serves as a member of the Committee, he did
not participate in any of the Committee's decisions related to
the determination of his own compensation.
Jacob I. Feigenbaum
Paul R. Greenwood
Marvin J. Winkler
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jacob Feigenbaum, Paul R. Greenwood and Marvin Winkler are the
current members of the Board's Compensation Committee. Gregory
B. Murphy, B. Lance Sauerteig and Stephen Walsh served on the
Compensation during parts of 1994.
On April 1, 1994 the Company issued a warrant to purchase 300,000
shares of the Company's Common Stock to FS Signal Associates I
(now FS Signal Associates, L.P.) in connection with FS Signal
Associates I's loan of $3,000,000 to the Company. The warrants
have an exercise price of $7.06 per share and were exercisable
upon issuance. FS Signal Associates I (now FS Signal Associates,
L.P.) is a shareholder of the Company; at the time B. Lance
Sauerteig was its managing general partner and a member of the
Compensation Committee and is currently a director of the
Company; and Guido Goldman was a general partner of FS Signal
Associates I at the time.
On June 21, 1994, the Company issued Walsh Greenwood & Co.
("Walsh Greenwood") 70 shares of the Company's Series C Preferred
Stock. The Company had agreed to issue said shares in exchange
for the $7,000,000 investment made in the Company by Walsh
Greenwood on February 9, 1994. The Company originally had agreed
to issue Walsh Greenwood 70 shares of Series B Preferred Stock in
exchange for the investment by Walsh Greenwood. However, there
were not enough authorized shares of Series B Preferred Stock
that were not issued and outstanding to issue the 70 shares.
Accordingly, the Company and the holders of the Series B
Preferred Stock -- Walsh Greenwood, FS Signal Associates I (now
FS Signal Associates, L.P.) and FS Signal Associates I (now FS
Signal Associates II, L.P.) -- entered into an agreement in which
the holders of the Series B Preferred Stock exchanged all their
respective shares of Series B Preferred Stock for the same number
of shares of Series C Preferred Stock. (There is substantially
more authorized shares of Series C Preferred Stock than Series B
Preferred Stock.) The Series C Preferred Stock is identical to
the Series B Preferred Stock, except that the Series C Preferred
Stock is junior to the Series B Preferred Stock. The Company
also agreed not to issue any shares of the Series B Preferred
Stock without consent of the Walsh Greenwood, FS Signal
Associates I (now FS Signal Associates, L.P.) and FS Signal
Associates II (now FS Signal Associates II, L.P.) Mr. Walsh and
Mr. Greenwood both members of the compensation committee at the
time of the transaction and directors of the Company, are the
managing general partner and general partner, respectively, of
Walsh Greenwood.
Pursuant to the Company's November 1994 acquisition of American
Marketing Works, Inc. ("AMW"), of which Mr. Winkler was CEO,
chairman and a shareholder, the Company agreed to purchase and
acquire (i) a $1,560,000 subordinated promissory note issued by
the predecessor of AMW to MW Holdings, C.P. ("MWH") and (ii) a
$1,000,000 subordinated promissory note issued by the predecessor
of AMW to Marvin Winkler and his wife (collectively, the
"Subordinated Notes"). Mr. Winkler is the president of the
general partner of MWH, and he is a beneficial owner of
partnership interests in MWH. Previous to the acquisition of
AMW, Mr. Winkler was not a director of the Company nor affiliated
in any way with the Company.
In connection with the terms of the acquisition of AMW, the
Subordinated Notes were amended and restated in principal amounts
equal to the then outstanding principal plus accrued and unpaid
interest on each of the Subordinated Notes as of November 22,
1994 (totaling $1,635,400 and $798,333.33, respectively) (said
amended and restated notes, collectively, the "Purchase Notes").
Each of the Purchase Notes bears interest at a rate of 11% per
annum (payable monthly) and will mature on November 22, 1999.
The Purchase Notes are subject to a separate Put/Call Agreement
dated November 22, 1994 among the Company, MWH and Mr. Winkler
and his wife, pursuant to which: (i) MWH and Mr. Winkler and his
wife have the right, exercisable at any time prior to the earlier
of the maturity of the Purchase Notes or any call of the Purchase
Notes by the Company, to require the Company to purchase either
of the respective Purchase Notes in exchange for a number of
shares of the Company's Series D Preferred Stock, $100,000 stated
value per share (the "Series D Preferred Stock") equal in stated
value to the then outstanding principal plus accrued and unpaid
interest with respect to such note; and (ii) the Company has the
right, exercisable at any time (A) after any acceleration of the
bank debt of either the Company or AMW by the lender pursuant to
the terms of such debt and (B) prior to the first to occur of (x)
an exercise of the above-described put option by either MWH or
Mr. Winkler and his wife with respect to each Purchase Note or
(y) the maturity of each such note, to require each of MWH and
Mr. Winkler and his wife to sell their respective Purchase Notes
to the Company in exchange for a number of shares of the
Company's Series D Preferred Stock determined as described above.
The Series D Preferred Stock: (i) is junior to all other series
of outstanding preferred stock of the Company; (ii) bears a
cumulative dividend at an annual rate equal to ten percent (10%)
of the stated value of such stock, compounded quarterly; and
(iii) is required to be redeemed by the Company on November 22,
1999 at a redemption price equal to the stated value per share
for such stock plus accrued and unpaid dividends, subject to the
rights of the holders of the Company's other outstanding series
of preferred stock which are senior to the Series D Preferred
Stock.
On December 31, 1994, Chattanooga Acquisitions Corp. ("CAC")
entered into an acquisition agreement with Ocean Pacific Apparel
Corporation ("OP"), which owns various licenses. Mr. Winkler is
the sole shareholder of CAC. Mr. Winkler entered into the
acquisition with the understanding that the transaction, if
deemed favorable by the Company's directors, would be assigned to
the Company. The Company has until August 1995 to make its
decision.
On March __, 1995 the Company agreed to enter into a credit
agreement with Walsh Greenwood (the "Credit Agreement"). Under
the Credit Agreement, Walsh Greenwood & Co. has offered to lend
to the Company up to $15,000,000 for a three-year term pursuant
to a Credit Agreement to be negotiated, the terms of which,
however, will include: (1) a maximum borrowing of $15 million,
which amount reflects a discount of 21.76% from the actual
$19,175,000 face amount of the secured promissory note
representing the credit extended by Walsh Greenwood and which
shall be drawn in increments of $1 million upon notice received
two business days prior to each draw; (2) the issuance to Walsh
Greenwood of warrants to purchase 1,500,000 shares of the
Company's Common Stock at $2.25 per share, which warrants will
vest on the basis of one hundred thousand warrants for each $1
million drawn and which will be exercisable for three years from
vesting, such warrants to contain antidilution provisions no more
favorable than the equivalent provisions in the currently
outstanding warrants issued to principal shareholders of the
Company; (3) the issuance to Walsh Greenwood of warrants to
purchase 1,500,000 shares of the Company's Common Stock at a 25%
discount to the 20 day average trade price in December 1996,
which warrants will vest immediately upon the commitment by Walsh
Greenwood of the full amount of the credit and which will be
exercisable for three years beginning January 1, 1997, such
warrants to contain antidilution provisions no more favorable
than the equivalent provisions in the currently outstanding
warrants issued to principal shareholders of the Company; (4) all
warrants issued will have registration rights no more favorable
than the equivalent provisions in the currently outstanding
warrants issued to principal shareholders of the Company, except
that such rights shall include three demand registrations; (5)
interest upon the outstanding balance of the credit at the rate
of 15% per annum payable on December 31, 1995 and quarterly
thereafter; (6) all borrowings will be secured by a security
interest in all assets of the Company currently pledged to its
senior lenders, subordinate to the security interests of such
lenders, and secured by a first lien upon the stock of Ocean
Pacific Apparel Corp. ("OP") if the Company decides to acquire
OP; (7) all borrowings shall be used only for working capital and
shall not be used to repay any principal of any bank debt; and
(8) Walsh Greenwood will not transfer any interest granted under
the Credit Agreement without the Company's consent.
As additional conditions to the foregoing extension of credit
Walsh Greenwood has required that the Company obtain agreement
from the holders of its preferred stock (1) that they will
forgive all accumulated preferred dividends and will forego all
future dividends until the principal and interest of all the
borrowing under the Credit Agreement has been paid in full and
(2) that they will grant the Company the right, after repayment
of a $6,750,000 NationsBank loan and the borrowing from Walsh
Greenwood, to redeem the outstanding shares of preferred stock
with shares of its Common Stock valued for such purpose at $8.00
per share, which right of redemption will extend until June 30,
1998. The Credit Agreement is contingent upon approval of the
shareholders of the Company to the issuance of up to 3,000,000
shares of the Company's Common Stock issuable under the 3,000,000
warrants to Walsh Greenwood.
EXECUTIVE COMPENSATION INFORMATION
<TABLE>
Set forth below is a summary of the annual and long-term
compensation paid by the Company for each of the last three
fiscal years to: (i) Marvin A. Davis, the Company's Chief
Executive Officer until November 25, 1994; (ii) Marvin J.
Winkler, the Company's Chief Executive Officer since November 25,
1994, pursuant to the engagement of Grisanti; and (iii) the
Company's other four most highly compensated executive officers
serving as of December 31, 1994 (the "Named Executives").
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Securities
Name and Underlying LTIP All Other
Principal Other Annual Options/ Payouts Compensation
Position Year Salary($) Bonus($) Compensation($) SARs(#) ($) ($)(7)
- -------- ---- --------- -------- --------------- ------- --- ------
<S> <C> <C> <C> <C> <C> <S> <C>
Marvin J. Winkler, 1994 34,375 -- -- -- -- --
Chief Executive
Officer (since
November 1994)
Marvin A. Davis, 1994 (1) -- (1) -- -- --
Chief Executive 1993 -- -- --
Officer (until
November 1994)
Daniel J. Cox, 1994 168,637 25,000(2) 28,868(3) 50,000(4) -- 1,598
Vice President
Sales & Marketing
Leslie W. Levy, 1994 128,690 11,600 -- -- -- 8,204
Vice President and 1993 139,000 11,600 -- 30,000 -- 6,461
President Heritage 1992 137,000 37,000 -- -- -- 3,540
Sportswear
Robert J. Powell, 1994 125,375 -- -- 50,000 -- 3,700
Secretary 1993 125,000 -- 27,100 75,000 -- 1,085
1992 34,000 -- -- 25,000 -- --
Glenn M. Grandin, 1994 124,250 -- 19,688(6) 50,000 -- 3,315
Chief Financial 1993 133,000 -- 56,722 65,000 -- 2,556
Officer (5) 1992 34,000 -- -- 15,000 -- 6,799
</TABLE>
NOTES TO TABLE OF SUMMARY COMPENSATION TABLE
(1) Mr. Davis received no direct compensation from the Company.
Mr. Davis' services as Chief Executive Officer were provided
to the Company in accordance with the provisions of a
management consulting agreement with Grisanti, Galef &
Goldress, Inc. ("Grisanti"). Pursuant to the terms of the
agreement, which was terminated in November 1994, Grisanti
provided the services of Mr. Davis as Chief Executive
Officer and Mr. Katz as President. Grisanti was compensated
$80,000 per month for such services. Grisanti had also been
issued warrants to acquire up to 200,000 shares of the
Company's Common Stock at an exercise price of $7.06 per
share. Effective September 1, 1994, the monthly
compensation was reduced to $40,000 per month, Marvin Davis
resigned from the Board and said warrants were amended to
reduce the number of warrants to 100,000 and to provide that
all such warrants vest and become exercisable immediately.
Mr. Katz was not been named in the table. As discussed
above, the services of Mr. Katz, as President, were provided
by Grisanti, in consideration for which Grisanti is
compensated as described above. Mr. Katz did not receive
any salary, bonus or other compensation directly from the
Company.
(2) The $25,000 bonus awarded to Mr. Cox is a signing bonus.
Pursuant to the terms of his employment contract, Mr. Cox is
entitled to an annual bonus of at least $25,000. AS of the
date hereof, such bonus amount has not been determined..
(3) This amount includes $18,869 for relocation expenses and a
$9,308 automobile allowance.
(4) A warrant to purchase 50,000 shares at $5.50 per share (the
market price on the date of grant) was granted to Mr. Cox as
an inducement to secure his employment with the Company.
(5) Glenn Grandin resigned effective February 1, 1995.
(6) This amount includes $12,000 for temporary living expenses
and a $7,092 automobile allowance.
(7) These amounts include the portion of life insurance premiums
paid by the Company and represents term life insurance on
Messrs. Cox, Levy, Powell and Grandin. In 1994, these
amounts were $1,598, $5,295, $1,136 and $428 respectively.
All other amounts represents Company matching contributions
to a 401(k) plan maintained by the Company for the accounts
of Messrs. Levy, Powell and Grandin. In 1994, these
contributions were $2,806, $2,564 and $2,887, respectively.
<TABLE>
The following table provides information about options held
by (i) Marvin A. Davis, the Company's Chief Executive
Officer until November 25, 1994 pursuant to the management
agreement with Grisanti; (ii) Marvin Winkler, the Company's
Chief Executive Officer since November 25, 1994; and (iii)
the other Named Executives. The 1985 Stock Option Plan does
not provide for the granting of stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End(#) at FY-End($)(1)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized($) Unexercisable Unexercisable
- ---- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Marvin J. Winkler -- -- -- --
Marvin A. Davis -- -- (2) (2)
Daniel J. Cox -- -- -0- ex. --
50,000 unex. 118,750
Leslie W. Levy -- -- 7,500 ex. 6,113
22,500 unex. 18,338
Robert J. Powell -- -- 37,500 ex. 30,563
87,500 unex. 170,313
Glenn M. Grandin -- -- 27,500 ex. 22,413
87,500 unex. 224,313
</TABLE>
NOTES TO TABLE AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
(1) Value of unexercised in-the-money options based on a
fair market value of a share of the Company's Common
Stock of $7.875, as of December 31, 1994.
(2) Mr. Davis served as Chief Executive Officer of the
Company pursuant to a management consulting agreement
between the Company and Grisanti. Pursuant to the
terms of the agreement, as amended, Grisanti has been
issued a warrant to acquire 100,000 shares of the
Company's Common Stock at an exercise price of $7.06.
As of fiscal year end all warrants were exercisable.
The value of the unexercised in-the-money options on
December 31, 1994 was $81,500.
The table below sets forth certain information concerning
grants of options during the year ended December 31, 1994 to the
Company's Named Executives. The plan does not provide for the
granting of stock appreciation rights.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual
Grants
------
% of Total Potential Realizable
Options/ Value at Assumed
SARs Annual Rates of Stock
Granted to Price Appreciation for
Options/ Employees Exercise or Option Term
SARs in Fiscal Base Price Expiration -----------
Name Granted(#) Year ($/Sh) Date 5%($)(4) 10%($)(4)
- ---- ---------- ---- ------ ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Marvin J. -- -- -- -- -- --
Winkler
Marvin A. -- -- -- -- -- --
Davis
Daniel J. 50,000(1) 33.3 5.50 3/14/04 173,000 438,500
Cox
Leslie W. -- -- -- -- -- --
Levy
Robert J. 25,000(2) 33.3 4.00 11/25/04 63,000 159,250
Powell 25,000(3) 4.00 11/25/04 63,000 159,250
Glenn M. 25,000(2) 33.3 4.00 11/25/04 63,000 159,250
Grandin 25,000(3) 4.00 11/25/04 63,000 159,250
</TABLE>
(1) Mr. Cox was issued a warrant to purchase 50,000 shares
of Common Stock to induce him to accept employment with
the Company.
(2) These options, granted under the Company's 1985 Stock
Option Plan, vest and become exercisable in equal
amounts over a four year period from date of grant,
which was 11/25/94. All options that have not vested
are canceled in the event the optionee's employment
with the Company is terminated for any reason.
(3) These options, granted under the Company's 1985 Stock
Option Plan, vest at the rate of 6,250, (up to a
maximum of 25,000 overall) per year for each year the
Company has positive pre-tax earnings.
(4) The assumed rate of appreciation for the Company's
Common Stock at 5% and 10% would result in a stock
price of $6.52 and $10.37 per share, respectively, for
the options with a $4.00/share exercise price and a
stock price of $8.96 and $14.27 per share,
respectively, for the options with a $5.50 share
exercise price.
Shareholder Return Performance Presentation
Set forth below is a line graph comparing the year
percentage change in the cumulative total shareholder return on
the Corporation's Common Stock against the total return of the S
& P composite 500 Stock Index and the Value Line Apparel Industry
Group for the five year period ending December 31, 1994.
[to be supplied]
EMPLOYMENT AGREEMENTS
Robert J. Powell was employed September 1992 as Vice
President/International and Licensing and, effective January 1,
1993, as Secretary of the Company pursuant to an employment
agreement with a four year term. Mr. Powell's annual base salary
is set at $130,000, with the right to participate in the
Company's bonus plan and receive an annual bonus of up to 40% of
his annual base salary. In order to participate in the
Management Incentive Plan, Mr. Powell agreed to an amendment to
his employment agreement, pursuant to which he agreed, among
other things, to a 15% reduction in his annual base salary from
September 1, 1993 until October 31, 1994. The Company agreed to
cancel the outstanding options held by Mr. Powell to acquire
25,000 shares of Common Stock at a price of $15.63 per share and
reissue such options at an exercise price of $7.06 per share, the
market price of the Common Stock at the time the amendment to his
employment agreement was negotiated. The reissued options vested
and became exercisable on August 13, 1994, one year from their
date of grant. Pursuant to that same amendment, Mr. Powell's
employment agreement was extended for an additional year term.
Additionally, Mr. Powell is entitled to participate in all other
incentive bonus, stock option, savings and retirement programs
and benefit programs maintained for the Company's executive
officers from time to time. In the event of Mr. Powell's death,
his legal representative shall receive payment of all accrued
salary and benefits, the equivalent of an additional six months'
base salary and a prorated portion of any bonus payable. In the
event Mr. Powell should terminate the agreement for Good Reason,
as defined therein, or if the Company should terminate the
agreement other than for Cause or Disability, as defined therein,
Mr. Powell would be entitled to (i) all accrued obligations; (ii)
payment of an amount equal to the sum of his then current base
salary and most recent bonus times the greater of the remaining
years of the agreement or two years; and (iii) payment of a
lump-sum amount equal to what he would have received under the
various retirement programs had the agreement continued for the
full term. Mr. Powell is bound by a covenant not to compete that
survives termination of the agreement for one year, except in the
event of a termination by the Company that constitutes a breach
of the agreement. Upon termination, previously granted stock
options become immediately exercisable. Mr. Powell's employment
agreement provides further that it shall be binding on any
successor to the Company, whether by merger or otherwise.
Glenn M. Grandin was employed by the Company from October 1992
until February 1995, when his services as Senior Vice President
and Chief Financial Officer were terminated. Pursuant to the
terms of his employment agreement, Mr. Grandin was paid an annual
base salary of $140,000 with an annual bonus of up to 40% of his
annual base salary. In order to participate in the Management
Incentive Plan, Mr. Grandin agreed to an amendment to his
employment agreement, pursuant to which he agreed, among other
things, to a 15% reduction in his annual base salary from
September 1, 1993 until October 31, 1994. As with Mr. Powell,
Mr. Grandin's outstanding options were canceled and new options,
vesting one year from the date of grant, at the current market
price of $7.06 per share, were reissued. In addition to bonus
and base salary, Mr. Grandin's employment agreement provides that
Mr. Grandin is entitled to receive such other incentive, welfare
and retirement plan benefits as are generally made available by
the Company to its executive officers and is entitled to
participate in the 1985 Stock Option Plan. Upon termination of
employment by reason of death or disability, Mr. Grandin would
have been entitled to accrued base salary plus six months' annual
base salary and a pro rata portion of his annual bonus. The
terms of the agreement provide that in the event Mr. Grandin were
to terminate the agreement for Good Reason, as defined therein,
or the Company were to terminate the agreement other than for
Cause or Disability, as defined therein, Mr. Grandin would be
entitled to (i) all accrued obligations; (ii) payment of an
amount equal to the sum of his then current base salary and most
recent bonus times the greater of the remaining years of the
agreement or two years; and (iii) payment of a lump-sum amount
equal to what he would have received under the various retirement
programs had the agreement continued for the full term. The
agreement also provides that Mr. Grandin is bound by a covenant
not to compete which survives termination of the agreement for
one year, except in the event of a termination by the Company
which constitutes a breach of the agreement. Additionally, the
employment agreement provides that it will be binding on any
successor to the Company, whether by merger or otherwise. As
stated above, Mr. Grandin's services were terminated in February
1995. Pursuant to a settlement reached by Mr. Grandin and the
Company, Mr. Grandin was paid $100,000 as severance pay, and both
parties mutually released each other from their respective
obligations under Mr. Grandin's employment.
Daniel J. Cox was employed March 1994 as Executive Vice President
of Sales and Marketing of the Company. Mr. Cox's base salary is
$210,000 per year, with a minimum 10% increase at the end of one
year. Mr. Cox is entitled to a Performance Bonus. The amount of
the Performance Bonus may be up to 50% of his base salary.
One-half of the bonus amount is based upon quantifiable factors
agreed upon between the Company and Mr. Cox; the other half of
the bonus amount is at the discretion of the Board of Directors.
His employment agreement states that his minimum bonus for 1994
would be $25,000. In addition to his Performance Bonus, Mr.
Cox's employment contract provides for a sign-on bonus of
$25,000, a warrant for 50,000 shares of the Company's Common
Stock and reimbursement for relocation expenses. In the event
Mr. Cox's employment is terminated, he will be entitled to a
severance package that consists of full salary at the
then-current amount plus company-provided benefits for twelve
months. Additionally, Mr. Cox is entitled to the service
severance package if any of the following occur: (1) a change in
ownership of the Company;; (2) a change in Mr. Cox's position
title or responsibilities or reporting relationship; or (3) a
change in compensation that results in a reduction in salary or,
through a reduction in bonus potential, a reduction of total
compensation. No severance package will be awarded if Mr. Cox is
terminated for cause (as defined therein).
Marvin J. Winkler was employed November 1994 as Chief Executive
Officer and Chairman of the Board of the Company. In November
1994, the Company acquired all the stock of American Marketing
Works, Inc. ("AMW"), of which Mr. Winkler served as Chief
Executive Officer and Chairman of the Board. The Company is
honoring the tone of his employment contract with AMW with regard
to salary, benefits and termination, while the Company and Mr.
Winkler negotiate an employment agreement. Under the terms of
his employment agreement with AMW which was entered into in
February 1993, Mr. Winkler's base salary is $325,000 per year
with a 10% increase thereof each year. The agreement terminates
December 31, 1995. In the event of Mr. Winkler's death, Mr.
Winkler's estate is entitled to receive the ratable portion of
his base salary for a period of six months. In the event of Mr.
Winkler's disability (as defined therein), the Company shall have
the right to terminate him, provided that Mr. Winkler receive the
ratable portion of his base salary for 30 days after such
termination date. If Mr. Winkler's employment is terminated for
cause (as defined therein) or in the event he voluntarily leaves
the employment of the Company, he is not entitled to any further
monies.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company are paid an annual
fee of $7,500 plus $500 for each board or committee meeting
attended. In August 1994, the Board elected to waive such fee
until the Board decides the Company's results have returned to an
appropriate level.
PROPOSAL 2
INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors of the Company has adopted a resolution
recommending to the shareholders the adoption of an amendment to
the Restated Articles of Incorporation of the Company to increase
the authorized number of shares of Common Stock, $0.01 par value,
from 20,000,000 to 40,000,000.
The Company's Restated Articles of Incorporation provides that
the authorized capital of the Company is 21,600,000 shares
consisting of 20,000,000 shares of Common Stock, $0.01 par value
and 1,600,000 shares of Preferred Stock, no par value. The Board
has determined that it is in the best interests of the Company to
have additional shares of Common Stock authorized and available
for issuance for possible future financing transactions, asset
purchases, stock dividends or splits, issuances under the
Company's 1985 Stock Option Plan, and for other general corporate
purposes.
The Company currently has the possibility of purchasing all the
outstanding stock of Ocean Pacific Apparel Company ("OP") through
the assignment of a purchase agreement entered into between
Chattanooga Acquisition Corp. ("CAC") and the shareholders of OP.
The assignment would give the Company the choice of paying the OP
shareholders $13 million cash for their shares or swapping their
shares for 2,600,000 shares of the Company's Common Stock in
exchange for their shares. If the Company decides to both accept
the assignment and issue shares of its Common Stock to the OP
shareholders in exchange for all the outstanding shares of OP,
further authorization for the issuance of said shares by a vote
of the Company's shareholders will be solicited prior to such
issuance.
The Company, as of March 24, 1995, had 10,364,076 shares of
Common Stock outstanding, and the Company has also reserved an
additional 8,923,137 shares from its authorized but unissued
common shares for outstanding stock options and warrants. The
authorization of the amendment to the Restated Articles of
Incorporation will have no effect upon the rights of the existing
shareholders.
If approved by the shareholders, the initial paragraph of Article
Fourth of the Company's Restated Articles of Incorporation will
be amended to read as follows:
FOURTH: The total number of shares of capital stock of
all classifications which the Corporation shall have
authority to issue is Forty-One Million Six Hundred Thousand
(41,600,000) shares, divided into two classes, as follows:
Forty Million (40,000,000) shares of Common Stock having a
par value of $.01 per share, One Million Six Hundred
Thousand (1,600,000) shares of Preferred Stock having no par
value.
PROPOSAL 3
AMENDMENT TO THE COMPANY'S 1985
STOCK OPTION PLAN INCREASING THE NUMBER
OF SHARES ISSUABLE THEREUNDER FROM 1,160,000 TO 1,910,000
The Company's 1985 Stock Option Plan, as amended (the
"Plan"), reserves for issurance a total of 1,160,000 shares of
Common Stock pursuant to options granted under the Plan. Based
on the compensation committee's recommendation, the Board of
Directors has approved creating a pool of up to 450,000 stock
options to be issuable under the Plan. The Board has not
determined an exact number, if any, of options to be issued to
each eligible employee under the Plan. After the creation of
such pool, only approximately 200,000 shares will be available
for issuance under the Plan. To provide additional flexibility
to the Company's Board of Directors and the Compensation
Committee thereof in granting options for use as compensation,
the Board of Directors has approved and recommended to
shareholders for their approval, a resolution to increase the
number of shares subject to the Plan by 750,000 shares to a total
of 1,910,000 shares.
The Plan is administered by the Compensation Committee of
the Board of Directors. The Compensation Committee has exclusive
discretion: (i) to select the persons to whom options will be
granted and to determine the type, amount and terms of each
option; (ii) to modify, within certain limits, the terms of any
option which has been granted, including replacement or exchange
of options and relinquishment of one option for another option
without the consent of option holders under certain
circumstances; (iii) to determine the time when options will be
granted; and (iv) to make all other determinations which it deems
necessary or desirable in the interpretation and administration
of the Plan. The Compensation Committee has the authority to
administer, construe and interpret the Plan, and its decisions
are final, binding and conclusive.
The number of shares subject to options granted under the
Plan is subject to adjustment by the Compensation Committee in
the event of a stock split, stock dividend, combination,
subdivision or exchange of shares, recapitalization, merger,
consolidation, reorganization or other extraordinary or unusual
event. If any Common Stock issued under the Plan and subject to
repurchase or forfeiture rights is reacquired by the Company
pursuant to such rights, or if any option is canceled,
terminates, or expires unexercised, the Common Stock which would
otherwise have been issuable pursuant thereto will be available
for issuance pursuant to new options.
Options may be granted having an exercise price less than,
equal to, or greater than the fair market value of the underlying
Common Stock on the date of grant, provided, however, that the
exercise price must be at least one-third of the market price of
such stock as of the date of grant. In the case of Incentive
Stock Options, however, the option price may not be less than
100% of the fair market value on the date of grant. No
outstanding options have been granted at less than the fair
market value of the underlying Common Stock on the date of grant.
Options granted pursuant to the Plan are not transferable
during the lifetime of the optionee and will generally expire not
later than ten years after the date on which they are granted.
Options become exercisable at such times and in such installments
as the Compensation Committee shall determine. Payment of the
option price must be made in full at the time of exercise in
cash, by tendering shares of Common Stock having a fair market
value equal to the option price, by a combination of cash and
shares or by any other means that the Compensation Committee
deems appropriate (including the relinquishment of rights in one
or more outstanding options).
Generally, no option may be exercised unless the holder has
been, at all times during the period from the date of grant
through the date of exercise, employed by or performing services
for the Company; however, the Compensation Committee may provide
for certain limited exceptions to the foregoing requirement.
The Board of Directors may amend the Plan at any time and
from time to time for any purpose consistent with the goals of
the Plan, but no such amendment shall be effective unless and
until the same is approved by the shareholders if such amendment
would materially modify the eligibility requirements for
receiving stock options; increase the total number of shares
subject to the Plan; reduce the minimum option price per share;
extend the period of granting options; or materially increase in
any other way the benefits accruing the optionees.
As discussed elsewhere, a significant element of the
compensation of the Chief Executive Officer and the other
executive officers of the Company is comprised of options issued
pursuant to the Plan. The Board believes that participation in
stock option plans is an essential element in maintaining
competitive compensation packages. After the creation of the
aforementioned pool, only approximately 200,000 shares will be
available for issuance pursuant to the Plan. Accordingly, the
Board has approved and recommends increasing the number of shares
of Common Stock subject to the Plan by 750,000 to 1,910,000.
PROPOSAL 4
APPROVAL OF THE ISSUANCE OF 3,000,000
WARRANTS TO BE ISSUED TO
WALSH GREENWOOD & CO.
The Board of Directors has approved, and recommends to the
Shareholders for their approval, the issuance of two warrants to
Walsh Greenwood & Co. ("Walsh Greenwood"), each warrant to
purchase 1,500,000 shares of the Company's Common Stock, in
connection with a proposed Credit Agreement between the Company
and Walsh Greenwood.
Pursuant to the Credit Agreement entered into between Walsh
Greenwood and the Company, the Company has agreed, among other
things, to issue two warrants, to Walsh Greenwood in exchange for
Walsh Greenwood's loan of up to $15,000,000 to the Company. One
warrant (1) would allow Walsh Greenwood to purchase up to
1,500,000 shares of the Company's Common Stock at $2.50 per
share, (2) would vest on the basis of 100,000 warrants for each
$1,000,000 draw and (3) would expire three years from vesting.
The other warrant (1) would allow Walsh Greenwood to purchase up
to 1,500,000 shares of the Company's Common Stock a 25% discount
to the 20-day average trade price in December 1996; (2) would
vest immediately upon Walsh Greenwood's commitment to give the
loan; and (3) would be exercisable from January 1, 1997 until
December 31, 1999. The Board of Directors believes this
transaction is necessary and in the best interest of the Company.
The New York Stock Exchange rules require shareholder approval
when a listed company plans to issue additional shares of Common
Stock, or securities exercisable into Common Stock (e.g.,
warrants), if the number of shares to be issued is greater than
or equal to 20% of the number of shares of Common Stock
outstanding before the issuance of the stock. As of March 24,
1995, there were 10,364,076 shares of Common Stock outstanding.
Accordingly, shareholder approval is required for the proposed
issuance of the warrants to purchase 3,000,000 shares of Common
Stock to Walsh Greenwood.
As described above, all the 3,000,000 warrants will be issued
with a below market exercise price, which will cause the Company
to take a charge against earnings per share (the charge being the
difference between the market price of the Company's Common Stock
and the exercise price of the warrants) and will result in a
dilutive effect on the Company's reported earning per share for
Common Stock shareholders on a fully diluted basis, the effect of
which will be reflected in the Company's Financial Statements.
Furthermore, the warrants, if exercised, will result in each
Common shareholder (except Walsh Greenwood) having a lower
percentage of voting power.
Mr. Walsh and Mr. Greenwood, both directors of the Company, are
the managing general partner and a general partner, respectively,
of Walsh Greenwood.
OTHER MATTERS
The Company does not intend to bring before the meeting any
matters other than those hereinbefore set forth, and has no
present knowledge that any other matters will be or may be
brought before the meeting by others. However, if any other
matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of proxy to vote the proxy
in accordance with their judgment.
Representatives of the firm of Arthur Andersen are expected
to be present at the 1995 Annual Meeting. The representatives
will have the opportunity to make a statement at the meeting if
they desire to do so and are expected to be available to respond
to appropriate questions from shareholders.
1995 SHAREHOLDERS' PROPOSALS
In order for shareholder proposals for the 1996 Annual
Meeting of Shareholders to be eligible for inclusion in the
Company's Proxy Statement, they must be received by the Company
at its principal office in Chattanooga, Tennessee, prior to
December 10, 1995.
INCORPORATION BY REFERENCE
Accompanying this Proxy Statement is the Company's Annual Report.
The Section in the Annual Report entitled, "Management's
Discussions and Analysis of Financial Conditions and Results of
Operations" is specifically incorporated by reference into this
Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT J. POWELL
Secretary
Chattanooga, Tennessee
April 10, 1995
PROXY
This Proxy is Solicited on Behalf of the Board of Directors
SIGNAL APPAREL COMPANY, INC.
Annual Meeting of Shareholders
May 11, 1995
The undersigned hereby appoints Marvin J. Winkler and William
H. Watts, and each of them, proxies, with full power of substitution,
to act and to vote the shares of common stock which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held at
200-A Manufacturers Road, Chattanooga, Tennessee 37405, at 10 A.M.,
E.D.T., on May 11, 1995, and any adjournment or adjournments thereof,
as follows:
1. Election of Directors
___FOR all nominees _____WITHHOLD ALL AUTHORITY
(Except as indicated to vote for all nominees
to the contrary below) listed below
Jacob L. Feigenbaum; Guido Goldman, Paul R. Greenwood;
B. Lance Sauerteig; Stephen Walsh; Marvin J. Winkler
(Instruction: To withhold authority to vote for any
individual, write that nominee's name in the space
provided below.)
_____________________________________________________________
2. To amend the Company's Restated Articles of Incorporation
to increase the number of authorized shares of Common Stock
from 20,000,000 shares to 40,000,000 shares;
_____FOR _____AGAINST _____ABSTAIN
3. To amend the Company's 1985 Stock Option Plan to increase the
number of shares of the Company's Common Stock issuable
thereunder from 1,160,000 shares to 1,910,000;
_____FOR _____AGAINST _____ABSTAIN
4. To approve the issuance of warrants to purchase 3,000,000
shares of the Company's Common Stock to Walsh Greenwood &
Co. in connection with the Credit Agreement between the
Company and Walsh Greenwood & Co.; and
_____FOR _____AGAINST _____ABSTAIN
5. To transact such other business as may properly come before
the meeting or any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1, 2, 3, AND 4.
THE BOARD IS NOT AWARE OF ANY OTHER MATTER TO BE BROUGHT BEFORE
THE ANNUAL MEETING FOR A VOTE OF SHAREHOLDERS. IF, HOWEVER,
OTHER MATTERS ARE PROPERLY PRESENTED, THE PROXIES WILL VOTE
IN ACCORDANCE WITH THEIR BEST JUDGMENT.
The undersigned hereby acknowledges receipt of the Notice
of Annual Meeting of Shareholders, dated April 10, 1995, and
the Proxy Statement furnished therewith.
Dated this _____ day of _______________, 1995.
________________________________________(Seal)
Note: Signature should agree with name on stock certificate as
printed thereon. Executors, administrators, trustees and other
fiduciaries and persons signing on behalf of corporations or
partnerships, should so indicate when signing.
Please sign, date and return this Proxy in the accompanying
prepaid self-address envelope. Thank you.
