SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995 or
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-2782
SIGNAL APPAREL COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Indiana 62-0641635
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200A Manufacturers Road, Chattanooga, Tennessee 37405
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 756-8146
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 3, 1995
-------- ----------------------------
Common Stock 10,077,826 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SIGNAL APPAREL COMPANY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
March 31, Dec. 31,
1995 1994
--------- ---------
(Unaudited)
Assets
Current Assets:
Cash $ 1,061 $ 303
Accounts receivable, net 7,921 6,713
Inventories 29,245 33,350
Prepaid expenses and other 1,578 1,135
--------- ---------
Total current assets 39,805 41,501
Property, plant and equipment, net 15,883 16,810
Goodwill, net 10,680 10,786
Other assets 298 351
--------- ---------
Total assets $ 66,666 $ 69,448
========= =========
Liabilities and Shareholders'
Equity (Deficit)
Current Liabilities:
Accounts payable and accrued liabilities $ 17,470 $ 20,019
Current portion of long-term debt 1,155 1,144
Discretionary overadvances from
senior lender 7,677 10,849
--------- ---------
Total current liabilities 26,302 32,012
--------- ---------
Long-term debt (less current portion):
Senior obligations 28,252 30,217
Senior subordinated note payable to
related party 7,198 --
Subordinated note payable to related
party 5,434 5,434
--------- ---------
Total long-term debt 40,884 35,651
--------- ---------
Multiemployer pension plan withdrawal
liability 1,001 1,084
--------- ---------
Shareholders' Equity (Deficit):
Common stock 102 102
Preferred stock at liquidation preference
plus cumulative undeclared dividends 76,202 73,202
Additional paid-in capital 69,817 69,721
Accumulated deficit (146,525) (141,207)
Treasury shares (at cost) (1,117) (1,117)
--------- ---------
Total shareholders' equity (deficit) (1,521) 701
--------- ---------
Total liabilities and
shareholders' equity (deficit) $ 66,666 $ 69,448
========= =========
See accompanying notes to consolidated condensed financial
statements.
SIGNAL APPAREL COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
March 31, March 31,
1995 1994
-------- --------
Net sales $ 26,217 $ 27,477
Cost of sales 20,472 22,169
-------- --------
Gross profit 5,745 5,308
Royalty expense 1,347 899
Selling, general and administrative
expenses 7,858 6,166
Interest expense 1,603 593
Other expenses, net 255 439
-------- --------
Loss before income taxes (5,318) (2,789)
Income taxes -- --
-------- --------
Net loss (5,318) (2,789)
Less preferred stock dividends -- 2,121
-------- --------
Net loss applicable to common stock $ (5,318) $ (4,910)
======== ========
Net loss per common share $ (0.53) $ (0.55)
======== ========
Weighted average common shares
outstanding 10,068 8,964
======== ========
See accompanying notes to consolidated condensed financial
statements.
SIGNAL APPAREL COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31, March 31,
1995 1994
--------- ---------
Operating Activities:
Net loss $ (5,318) $ (2,789)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,112 1,272
(Gain) loss on disposal of equipment 38 (2)
Changes in operating assets
and liabilities:
Increase in accounts receivable (1,209) (5,442)
Decrease in inventories 4,106 378
Increase in prepaid expenses
and other assets (389) (155)
Increase (decrease) in accounts
payable and accrued liabilities (2,549) 1,609
--------- ---------
Net cash used in operating
activities (4,209) (5,129)
--------- ---------
Investing Activities:
Purchases of property, plant and (44) (618)
equipment
Proceeds from the sale of property,
plant and equipment 6 1
--------- ---------
Net cash used in
investing activities (38) (617)
--------- ---------
Financing Activities:
Borrowings from senior lender 16,613 25,409
Payments to senior lender (21,548) (28,799)
Proceeds from subordinated note
payable to related party 7,000 3,000
Proceeds from other borrowings 333 --
Principal payments on borrowings (490) (270)
Proceeds from sale of preferred stock 3,000 7,000
Proceeds from exercise of stock options 97 --
--------- ---------
Net cash provided by
financing activities 5,005 6,340
--------- ---------
Increase in cash 758 594
Cash at beginning of period 303 444
--------- ---------
Cash at end of period $ 1,061 $ 1,038
========= =========
See accompanying notes to consolidated condensed financial
statements.
Part I Item 1. (cont'd)
SIGNAL APPAREL COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying consolidated condensed financial statements
have been prepared on a basis consistent with that of the
consolidated financial statements for the year ended December
31, 1994. The accompanying financial statements include all
adjustments (consisting only of normal recurring accruals)
which are, in the opinion of the Company, necessary to present
fairly the financial position of the Company as of March 31,
1995 and December 31, 1994 and its results of operations and
cash flows for the three months ended March 31, 1995 and March
31, 1994. These consolidated condensed financial statements
should be read in conjunction with the Company's audited
financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended
December 31, 1994.
2. The results of operations for the three months ended March 31,
1995 are not necessarily indicative of the results to be
expected for the full year.
3. Inventories consisted of the following:
March 31, December 31,
1995 1994
---- ----
(Dollars in thousands)
Raw materials and supplies $ 4,710 $ 2,319
Work in process 5,353 5,639
Finished goods 19,182 25,392
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$29,245 $ 33,350
======== ========
4. A principal shareholder, Walsh Greenwood, made an equity
investment in the Company of $3.0 million in January 1995 for
which they received 30 shares of Series C Preferred Stock.
The holders of Series A and Series C Preferred Stock agreed to
a moratorium on the required dividends related to the shares
effective January 1, 1995. At March 31, 1995, the Company has
accrued cumulative, undeclared dividends of $6,874,700 for
Series A Preferred Stock and $4,850,400 for Series C Preferred
Stock.
5. Pursuant to the terms of various license agreements, the
Company is obligated to pay future minimum royalties of
approximately $9.7 million. The Company has outstanding
letters of credit totaling approximately $2.6 million relative
to its obligations pursuant to these license agreements.
6. On November 22, 1994, the Company acquired all of the
outstanding stock of American Marketing Works, Inc., (AMW).
The following unaudited pro forma summary presents the
consolidated results of operations for the three months ended
March 31, 1994 as if the acquisition of AMW had occurred on
January 1, 1994.
Dollars in Thousands
(except per share data) 1994
----
Net Sales $ 36,369
Net Loss (6,885)
Net Loss Per Common Share ($ .68)
The pro forma financial information presented has been
prepared for comparative purposes only and is not necessarily
indicative of the results of operations that would have
resulted had the acquisition of AMW occurred at the beginning
of the period indicated or the future results of operations of
the combined companies.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Net sales of $26.2 million for the quarter ended March 31, 1995
represent a decrease of $1.3 million from the $27.5 million in net
sales for the corresponding period of 1994. This decrease is
comprised of a $2.7 million reduction in active sportswear, a $2.2
million reduction in women's fashion knitwear and a $2.7 million
reduction in Signal Artwear screenprinted products offset by a $6.3
million increase due to the inclusion of American Marketing Works,
Inc. (AMW) sales in 1995.
Sales of active sportswear products were $8.1 million for the
quarter ended March 31, 1995 versus $10.8 million for the
corresponding period of 1994. Of the $2.7 million reduction,
$1.6 million is a result of reduced sales to a large customer. The
reduced sales of active sportswear is primarily due to a reduction
in unit volume. Sales of closeout active sportswear products
increased $1.5 million while first quality sales decreased $4.3
million.
Sales of women's fashion knitwear decreased 40% to $3.1 million for
the quarter ended March 31, 1995 as compared to $5.2 million for
the corresponding period of 1994. The sales reduction was
primarily due to competition from garments selling at lower retail
prices. Decreases in unit volume accounted for 60% of the sales
reduction while decreases in the average selling price accounted
for 40% of the decrease. The decrease in average selling price was
due to a combination of product mix and unit selling price changes.
Signal Artwear's sales were $8.4 million for the quarter ended
March 31, 1995 versus $11.1 million for the corresponding period in
1994. Of the $2.7 million reduction, $2.6 million is a result of
reduced sales to two large customers. Sales of licensed products
under two cartoon themes accounted for a $2.1 million reduction.
The reduced sales of Signal Artwear screenprinted products is
primarily due to a reduction in unit volume slightly offset by an
increased average selling price due to product mix changes.
Closeout sales increased $.4 million while first quality sales
decreased $3.1 million.
Gross profit was $5.7 million (21.9% of sales) for the quarter
ended March 31, 1995 compared to $5.3 million (19.3% of sales) for
the corresponding period in 1994. The $.4 million improvement is
the result of improved margin on first quality sales ($.2 million)
and capitalization of variances ($.2 million).
Royalty expense related to licensed product sales was 5% of sales
for the quarter ended March 31, 1995 compared to 3% for the
corresponding period of 1994. This increase was primarily caused
by the inclusion of AMW, which has higher royalty rates, in the
1995 financial statements. Selling, general and administrative
(SG&A) expenses were 30% and 22% of sales for the quarters ended
March 31, 1995 and 1994, respectively. Actual SG&A expense
increased $1.7 million which was the result of AMW SG&A expenses of
$2.6 million being included in 1995 offset by SG&A expense
reductions at other divisions and corporate.
FINANCIAL CONDITION
Working capital at March 31, 1995 increased $4.0 million or 42%
over year-end 1994. The increase in working capital was primarily
due to an increase in accounts receivable ($1.2 million), a
decrease in accounts payable and accrued liabilities ($2.5 million)
and a decrease in the discretionary overadvances with the senior
lender ($3.2 million), which were partially offset by lower
inventories ($4.1 million).
Accounts receivable increased $1.2 million or 18% over year-end
1994. Due to the seasonality of the business, trade accounts
receivable normally peak from February to May and August to October
and are lower in the other months as cash is collected and as
shipments decrease. A significant portion of accounts receivable
due from customers is carried at the risk of the factor and is not
reflected in the accompanying balance sheets.
Inventories decreased $4.1 million or 12% compared to year-end
1994. Inventories decreased as a result of the sale of excess and
closeout inventory. The Company expects inventory to continue at
present levels except for seasonal fluctuations.
Total current liabilities decreased $5.7 million or 18% over year-
end 1994 primarily due to the decrease in accounts payable and
accrued liabilities of $2.5 million and the discretionary
overadvances with the senior lender of $3.2 million. Accounts
payable and accrued liabilities decreased as a result of more
timely payments to vendors.
Cash used in operations was $4.2 million during the first three
months of 1995 compared to $5.1 million used in operating
activities during the same period in 1994. The net loss of $5.3
million, increases in accounts receivable of $1.2 million and
decreases in accounts payable and accrued liabilities of $2.5
million were the primary uses of funds in the first three months of
1995. These items were partially offset by depreciation and
amortization ($1.1 million), and significantly lower inventory
levels ($4.1 million).
Cash used in investing activities was for purchases of property and
equipment. Commitments to purchase equipment totaled approximately
$.1 million at March 31, 1995. During 1995, the Company
anticipates capital expenditures of approximately $.8 million.
Cash provided by financing activities was $5.0 million in 1995. In
January 1995, Walsh Greenwood, a principal shareholder, made an
equity investment in the Company of $3.0 million for which they
received 30 shares of Series C Preferred Stock. On March 31, 1995,
the Company executed a credit agreement with Walsh Greenwood and
affiliates. The related promissory note has a face amount of the
lesser of $15.0 million or the unpaid draws and an effective rate
of 25%. The Company may draw funds as needed in increments of $1.0
million. As of March 31, 1995, the Company had drawn $7.0 million
under this credit agreement. Subsequent to quarter-end, the
Company drew an additional $5.0 million. Hence, the currently
available funds against this credit agreement total $3.0 million.
The credit agreement prohibits the payment of cash dividends to any
class of stock, except required dividends on the Company's
Preferred Stock.
In conjunction with the credit agreement described above, Walsh
Greenwood received warrants to purchase 1,500,000 shares of Common
Stock at an exercise price of $2.25 per share, expiring in three
years. Such warrants will vest as funds are drawn. Additionally,
Walsh Greenwood received a second warrant to purchase 1,500,000
shares with an exercise price at a 25% discount to the 20 day
average trading price in December 1996. These warrants vest upon
issuance of warrants and are exercisable for a period of three
years commencing on January 1, 1997. The warrants will be adjusted
for dilution caused by certain dilutive transactions. The issuance
of the warrants is subject to shareholder approval.
The Company has the right after repayment of this credit agreement
and other senior notes of $6.5 million to redeem the outstanding
Preferred Stock with the Company's Common Stock, such shares being
valued at $7.00 per share for the purpose of such redemption. Such
redemption must take place before June 30, 1998.
Effective April 1, 1995, Marvin and Sherri Winkler and MW Holdings
agreed to convert their outstanding promissory notes totaling
approximately $2.4 million into 1,000,000 shares of the Company's
Common Stock.
The revolving advance account decreased $5.0 million from $28.9
million at year-end 1994 to $23.9 million at March 31, 1995.
Committed credit lines with the Company's senior lender aggregated
a maximum of $40.0 million at March 31, 1995. At quarter-end,
approximately $7.7 million was overadvanced under its revolving
advance account, which is classified as short-term in the
consolidated balance sheets at March 31, 1995 (see later paragraphs
for a discussion of overadvance arrangements totalling $9.0
million).
In August 1994, in response to the Company's liquidity needs, two
principal shareholders, FS Signal Associates II and Walsh
Greenwood, pledged collateral of $4.0 million to the senior lender
in connection with such lender's agreement to lend, on a
discretionary basis, funds up to $4.0 million in excess of the
borrowing base. The Company may reduce the outstanding debt under
this special overadvance only after repayment of its mid-month
overadvance facility and any other overadvance facilities. In
November 1994, the senior lender agreed to provide a discretionary
over-formula accommodation not to exceed $5.0 million and a mid-
month overadvance of $2.0 million. During the first quarter of
1995, the senior lender reduced the $11.0 million in overadvances
described above to $9.0 million.
Interest expense for the quarter ended March 31, 1995 was $1.6
million compared to $.6 million for the same period in 1994. Total
outstanding debt averaged $59.1 million and $28.5 million for the
first three months of 1995 and 1994, respectively, with average
interest rates of 10.9% and 7.9%. Average outstanding debt
increased primarily due to the senior notes of $6.5 million related
to the acquisition of AMW and the draw of $7.0 million against the
credit agreement with Walsh Greenwood.
The Company also uses letters of credit to support foreign and some
domestic sourcing of inventory and certain other obligations.
Outstanding letters of credit were $2.6 million at March 31, 1995
(excluding collateral of $2.0 million pledged to the senior lender
in the form of a standby letter of credit).
Total shareholders' deficit increased $2.2 million compared to
year-end 1994. The Company sustained losses of $5.3 million for
the first three months of 1995 which were partially offset by a
$3.0 million investment in Preferred Stock by a principal
shareholder in January 1995. In connection with a shareholder
agreement, the holders of Series A and Series C Preferred Stock
agreed to a moratorium on the required dividends related to these
shares effective January 1, 1995. At March 31, 1995, the Company
has accrued cumulative, undeclared dividends of $6,874,700 for
Series A Preferred Stock and $4,850,400 for Series C Preferred
Stock.
LIQUIDITY AND CAPITAL RESOURCES
As a result of continued losses, the Company has been unable to
fund its cash needs through cash generated by operations over the
last year and during the first quarter of 1995. The Company's
liquidity shortfalls from operations were resolved through several
transactions with related parties and the Company's senior lender.
In January 1994, the Company issued a subordinated promissory note
of $3.0 million to a principal shareholder, FS Signal Associates I.
The senior lender provided discretionary overadvances of $11.0
million during 1994 and reduced the overadvances to $9.0 million
during the first quarter of 1995. In addition, the senior lender
waived all loan covenant violations at December 31, 1994 and
amended the covenants for 1995. As long as sales continue at
present levels, as projected, the Company expects to comply with
the senior lender's amended covenants. In January 1995, the
Company sold $3.0 million in Series C Preferred Stock to a
principal shareholder, Walsh Greenwood and affiliated entities.
During the first quarter of 1995, the Company was advanced $7.0
million under the terms of a $15.0 million credit agreement with a
related party, Walsh Greenwood. Subsequent to quarter-end, the
Company was advanced $5.0 million under this credit agreement.
The Company's continued existence is dependent upon its ability to
substantially improve its operating results during 1995. The
Company's estimates of its cash needs are based upon, among other
things, projections of its sales and profit margins. There can be
no assurance that sales and profit margins for the Company will
meet projected levels, and if sales and profit margins fall
significantly short of projected levels, the Company's ability to
continue as a going concern may be jeopardized. The board of
directors elected a new president and chief financial officer
during February 1995 to effect an improvement in operations and
liquidity. Since year-end, the Company has taken actions to
improve its operations and liquidity. On March 31, 1995, the
Company closed on the $15.0 million (net of discount) credit
agreement. Such funds will be utilized for working capital
purposes. The Company instituted an extensive cost reduction
program that is expected to substantially reduce general and
administrative expenses and the Company is considering the sale of
certain assets. In addition, the Company sold excess and closeout
inventory of approximately $4.0 million (net of reserves) since
year-end and implemented an inventory control program in order to
eliminate the manufacture of excess goods.
The Company believes the execution of the above steps will provide
sufficient liquidity for it to continue as a going concern in its
present form. Accordingly, the consolidated financial statements
do not include any adjustments relating to recoverability and
classification of recorded asset amounts or the amount and
classification of liabilities or any other adjustments that might
become necessary should the Company be unable to continue as a
going concern in its present form. However, there can be no
assurances that all of these steps, if successfully completed, can
return the Company's operations to profitability.
Part II. OTHER INFORMATION
Items 1-5
Not Required
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Employment Agreement with Marvin Winkler dated
as of April 1, 1995.
(10.2) Warrant Certificate dated April 1, 1995 to
purchase 1,000,000 shares of the Company's Common Stock
issued to Marvin Winkler in connection with his
employment contract.
(10.3) Registration Rights Agreement dated May 10, 1995
by and between the Company and Marvin Winkler, Sherri
Winkler and MW Holdings, Inc.
(10.4) Agreement dated May 10, 1995 by and between the
Company and Sherri Winkler and MW Holdings, Inc.
(10.5) Employment Agreement with Leon Ruchlamer dated
as of March 27, 1995.
(10.6) Employment Agreement with William Watts dated as
of March 15, 1995.
(10.7) Agreement dated April 24, 1995 between the
Company and MC Properties I, L.P.
(10.8) Agreement dated as of March 31, 1995 among AMW,
Shirt Shed, the Company, certain lenders and Greyrock
Capital Group, Inc. amending the Amended and Restated
Credit Agreement dated as of February 16, 1993 between
AMW, certain lenders and Greyrock.
(10.9) Settlement Agreement dated as of March 1, 1995
with Glenn Grandin.
(10.10) Settlement Agreement dated as of April 13, 1995
with Daniel Cox.
(27.1) Financial Data Schedule.
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SIGNAL APPAREL COMPANY, INC.
------------------------------
(Registrant)
Date: May 15, 1995 /s/ Leon Ruchlamer
---------------- ------------------------------
Leon Ruchlamer
President
Date: May 15, 1995 /s/ William H. Watts
---------------- ------------------------------
William H. Watts
Chief Financial Officer
SIGNAL APPAREL COMPANY, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
EXHIBIT INDEX
Exhibit No.
per Item 601 Sequential
of Reg. S-K Description of Exhibit Page No.
- ------------ ---------------------- ----------
(10.1) Employment Agreement with Marvin
Winkler dated as of April 1, 1995.
(10.2) Warrant Certificate dated April 1,
1995 to purchase 1,000,000 shares of
the Company's Common Stock issued to
Marvin Winkler in connection with his
employment contract.
(10.3) Registration Rights Agreement dated
May 10, 1995 by and between the
Company and Marvin Winkler, Sherri
Winkler and MW Holdings, Inc.
(10.4) Agreement dated May 10, 1995 by and
between the Company and Sherri Winkler
and MW Holdings, Inc.
(10.5) Employment Agreement with Leon
Ruchlamer dated as of March 27, 1995.
(10.6) Employment Agreement with William
Watts dated as of March 15, 1995.
(10.7) Agreement dated April 24, 1995 between
the Company and MC Properties I, L.P.
(10.8) Agreement dated as of March 31, 1995
among AMW, Shirt Shed, the Company,
certain lenders and Greyrock Capital
Group, Inc. amending the Amended and
Restated Credit Agreement dated as of
February 16, 1993 between AMW, certain
lenders and Greyrock.
(10.9) Settlement Agreement dated as of March
1, 1995 with Glenn Grandin.
(10.10) Settlement Agreement dated as of April
13, 1995 with Daniel Cox.
(27.1) Financial Data Schedule.
MARVIN WINKLER
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 1st day of April, 1995, by and
between SIGNAL APPAREL COMPANY, INC., an Indiana corporation
("SIGNAL"), and MARVIN WINKLER ("EMPLOYEE").
W I T N E S S E T H:
WHEREAS, Signal has determined that it is in its best interest
that Signal retain the services of Employee as Chairman of the
Board and Chief Executive Officer of Signal; and
WHEREAS, Employee has agreed that upon the execution of this
Agreement by the parties hereto, he shall assume the
responsibilities of Chairman of the Board and Chief Executive
Officer of Signal, subject to the terms and conditions contained
herein.
.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD.
Signal hereby agrees to employ Employee, and Employee
hereby agrees to become employed by Signal for a period of three
(3) years, commencing, subject to the fulfillment of the condition
described in Section 12 hereof, on April 1, 1995 (the "COMMENCEMENT
DATE") and ending on March 31, 1998 (the "INITIAL TERM"). At the
end of the Initial Term and each successive one year period
thereafter, this Agreement shall be automatically extended for
additional terms of one year (each a "RENEWAL TERM"), unless
either party delivers written notice of termination not less than
90 days prior to the end of the Initial Term (with respect to the
first Renewal Term) or the end of the then current Renewal Term,
as the case may be. Notwithstanding the foregoing, Employee's
employment may be terminated prior to the end of the Initial Term
or any Renewal
Term in accordance with Section 3. The Initial Term and all
Renewal Terms are collectively referred to herein as the
"EMPLOYMENT PERIOD."
2. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES.
(i) During the Employment Period, Employee shall
be employed as Chairman of the Board and Chief Executive Officer of
Signal with the authority, duties and responsibilities assigned to
Employee by the Board of Directors of Signal, which shall be
reasonably comparable to, but need not be the same as, those held,
exercised or assigned to a similarly situated Chief Executive
Officer in the apparel industry as of the date of this Employment
Agreement; provided, however, that any commitments, expenditures or
investments shall require the prior approval of each of the Chief
Executive Officer, the President and the Chief Financial Officer.
(ii) During the Employment Period (excluding any
periods of vacation and sick leave to which Employee is entitled),
Employee agrees that he will devote reasonable attention and time
during normal business hours to the business and affairs of Signal
and perform his duties hereunder to the best of his ability and
in a diligent and proper manner and that he will not, during the
term of this Employment Agreement, actively or inactively,
directly or indirectly, enter into the employment of or render
services to or hold any other investment or other interest in or
otherwise become associated with any other person, business,
partnership, association, corporation or other entity except that
Employee shall have the right to make (i) investments in public
companies (not to exceed 4.9% of the issued and outstanding
capital stock of any one such public company), (ii) passive
investments unrelated to the business of Signal where Employee's
sole obligation is to invest monies and where after such
investment, Employee would not spend any time in connection
therewith, (iii) those investments set forth in EXHIBIT A
attached hereto and (iv) other investments with the prior
approval of Signal's Board of Directors, provided, however,
that none of the foregoing investments shall interfere
with Employee's duties above.
(b) COMPENSATION AND BENEFITS.
(i) BASE SALARY. During the Employment Period,
Employee shall be paid a base salary of $370,000.00 per year
("ANNUAL BASE SALARY"), installments of which shall be paid at
least as frequently as monthly until such time as Annual Base
Salary may be increased in accordance with the desires of the Board
of Directors of Signal.
(ii) ANNUAL BONUS - In addition to the Annual Base
Salary, Employee shall receive a bonus in an amount based upon
certain specified performance criteria to be agreed upon by Signal
and Employee ("ANNUAL BONUS"); provided, however, that any bonus
award shall be determined by the Board of Directors. Any subjective
determination of performance will be made solely by the Board of
Directors. Employee shall also be entitled to participate in any
bonus plans adopted by the Board of Directors of Signal.
(iii) EMPLOYEE BENEFITS. In addition to
Annual Base Salary, Annual Bonus and any other bonuses which may be
earned during the Employment Period as hereinabove provided,
Employee shall be entitled to the benefits set forth on EXHIBIT B
hereto.
(iv) WARRANTS. Upon execution hereof, Signal
shall execute and deliver to Employee a warrant certificate which
grants to Employee the right to purchase One Million (1,000,000)
shares of Signal's Common Stock ("COMMON STOCK") in accordance
with the terms and conditions thereof ("WARRANT CERTIFICATE").
The Warrant Certificate shall provide for the period within which
warrants issued thereunder may be exercised beginning the
respective dates on which such warrants vest and terminating
two years after vesting. Warrants issued thereunder shall vest
monthly over a two year period commencing the effective date
hereof on a pro rata basis.
(v) CONVERSION OF PURCHASE NOTES. Signal hereby
grants to Employee, MW Holdings, L.P. and Sherri Winkler and
Employee hereby exercises (and agrees to cause Sherri Winkler and
MW Holdings, L.P. to immediately exercise) the right to convert the
preferred stock of Signal received upon conversion of the Purchase
Notes ( as defined in that certain Stock Purchase Agreement dated
October 5, 1994 among Signal, Employee, Sherri Winkler, MW
Holdings,L.P. and other parties named therein ) into One Million
(1,000,000) shares of Common Stock.. Holders of Common Stock
issued pursuant to Section 2(b)(iv) hereof and this Section 2(b)(v)
shall be entitled to registration rights as set forth in a
registration rights agreement, in the form attached hereto as
EXHIBIT C.
(vi) EXPENSES. During the Employment Period,
Employee shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by Employee in the performance of his
duties as Chairman of the Board and Chief Executive Officer
(including reasonable lodging and first class travel incurred in
connection with the performance of his duties hereunder), such
reimbursement to be made against the submission by Employee of
signed, itemized expense reports in accordance with the travel and
business expense reimbursement policies as in effect at any time
applicable to executives of Signal.
(vii) HOUSING ALLOWANCE. Signal shall pay to
Employee a six (6) month housing allowance of $5,000 per month,
provided that any payments made in respect thereof prior to the
Commencement Date shall be credited against such allowance.
(viii) VACATION. During the Employment Period,
Employee shall be entitled to eight (8) weeks of paid vacation per
year in accordance with the practices of Signal.
3. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY.
Employee's employment shall terminate automatically
upon Employee's death during the Employment Period. If during the
Employment Period, Employee should suffer from Disability (pursuant
to the definition of "Disability" set forth below), Signal may give
Employee written notice in accordance with Section 9(b) of this
Agreement of an intention to terminate Employee's employment. In
such event, Employee's employment with Signal shall terminate
effective on the 30th day after receipt of such notice by Employee
(the "DISABILITY EFFECTIVE DATE"); provided that within the 30 days
after such receipt, Employee shall not have returned to full-time
performance of Employee's duties. For purposes of this Agreement,
"DISABILITY" means the absence of Employee from his duties with the
Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is
determined to be total and permanent, as defined in Signal's
disability plan, by a physician selected by Signal or its insurers
and who is acceptable to Employee or to Employee's legal
representative (such agreement as to acceptability not to be
withheld unreasonably).
(b) CAUSE.
Signal may terminate Employee's employment during
the Employment Period for "Cause ". For purposes of this
Agreement, "Cause" means
(i) an act or acts of personal dishonesty, fraud,
embezzlement or similar activities on the part of Employee;
(ii) a willful breach of Sections 2(a), 7 or 8
of this Employment Agreement;
(iii) a conviction of, or the entering of a guilty
or no contest plea to, any felony;
(iv) a conviction of, or the entering of a guilty
or no contest plea to , any crime involving moral turpitude on
his part; or
(v) a failure to cease or correct a material failure
to discharge his duties and responsibilities hereunder within 30
days following written notice of such failure, which notice shall
state with reasonable particularity the specific acts or
omissions constituting such failure; provided, however, the Board
of Directors of Signal (the "BOARD") shall not terminate
employment under this Employment Agreement or remove Employee
pursuant to this subsection 3(b)(v) unless the Board of Directors
of Signal (acting unanimously without the designee(s) of
Employee) shall have notified Employee and given him an
opportunity to explain such failure to the Board and the Board
(acting unanimously without the designee(s) of Employee) shall
have reasonably and in good faith concluded, after any such
presentation Employee may make, that it is unlikely that Employee
will be able to properly resume and discharge his duties and
obligations hereunder.
(c) GOOD REASON.
Employee's employment may be terminated during the
Employment Period by Employee, at his election, for Good Reason.
For purposes of this Agreement, "Good Reason" means:
(i) the assignment to Employee of duties
inconsistent with Employee's position, authority, duties or
responsibilities as contemplated by Section 2(a) of this Agreement,
or any other action by Signal which results in a material
diminution in such position, authority, duties or responsibilities
below that established under Section 2(a)(i) of this Agreement,
unless consented to in writing by Employee; provided, however, that
the parties hereby acknowledge that, in order for Signal to
continue to operate its business in the future as a going concern,
additional funding may be required and any failure to obtain such
funding shall not be grounds for a termination for Good Reason.
(ii) any failure by Signal to comply with any of
the provisions of Section 2(b) of this Agreement, unless consented
to in writing by Employee; provided, however, neither (A) the
failure of Employee to agree to any performance standards used to
determine the computation of Annual Bonuses, nor (B) any failure
not occurring in bad faith shall be deemed to be a failure to
comply with the provisions of Section 2(b) of this Agreement;
(iii) any purported termination by Signal of
Employee's employment prior to the expiration of the Employment
Period otherwise than as expressly permitted by this Agreement; or
(vi) failure by Signal to comply with and satisfy
Section 10(c) of this Agreement.
(d) NOTICE OF TERMINATION.
Any termination by Signal for Cause or by Employee
for Good Reason shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "NOTICE OF
TERMINATION" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Employee's employment under
the provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
fifteen days after the giving of such notice). The failure by
Employee or by Signal, as the case may be, to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing
of Cause or Good Reason, as the case may be, shall not waive any
right of Signal or Employee hereunder or preclude Signal or
Employee from asserting such fact or circumstance in any subsequent
action to enforce their respective rights hereunder.
(e) DATE OF TERMINATION.
"DATE OF TERMINATION" means the date of receipt of
the Notice of Termination or any later date specified therein, as
the case may be; provided, however, (i) if Employee's employment is
terminated by Signal for Cause, the Date of Termination shall be
the earlier of the date on which Signal gives Employee actual
notice of such termination or the date of receipt of the Notice of
Termination, and (ii) if Employee's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of Employee or the Disability Effective Date, as the
case may be.
4. OBLIGATION OF SIGNAL UPON TERMINATION.
(a) DEATH.
If Employee's employment is terminated by reason of
Employee's death during the Employment Period, this Agreement shall
terminate, other than the payment of the following obligations of
Signal, without further obligations of Employee's legal
representatives under this Agreement:
(i) the portion of Annual Base Salary accrued
through the Date of Termination to the extent not theretofore paid,
and
(ii) any compensation previously deferred by
Employee (together with any accrued interest thereon) and not yet
paid by Signal and any accrued vacation pay not yet paid by Signal.
The amounts described in paragraphs (i) and (ii)
are hereafter referred to as "ACCRUED OBLIGATIONS". All Accrued
Obligations shall be paid to Employee's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of
Termination.
(b) DISABILITY.
If Employee's employment is terminated by reason of
Employee's Disability during the Employment Period, this Agreement
shall terminate without further obligations to Employee, other than
for Accrued Obligations. All Accrued Obligations shall be paid to
Employee in a lump sum in cash within 30 days of the Date of
Termination, and warrants issued pursuant to warrant certificates
and any stock options previously granted to Employee under stock
option plans and/or stock option agreements shall be exercisable
only in accordance with the respective terms and conditions
thereof. Anything in this Agreement to the contrary
notwithstanding, Employee shall be entitled after the Disability
Effective Date to receive disability and other benefits as in
effect with respect to executive officers of Signal and their
families.
(c) CAUSE; OTHER THAN FOR GOOD REASON.
If Employee's employment shall be terminated for
Cause during the Employment Period, this Agreement shall terminate
without further obligations to Employee other than the obligation
to pay to Employee his Annual Base Salary and vacation accrued
through the Date of Termination plus the amount of any compensation
previously deferred by Employee, in each case to the extent
theretofore unpaid. If Employee terminates employment during the
Employment Period other than for Good Reason, this Agreement shall
terminate without further obligations to Employee,
other than for Accrued Obligations. In such case, all Accrued
Obligations shall be paid to Employee in a lump sum in cash within
30 days of the Date of Termination.
(d) GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY
If, during the Employment Period, Signal should
terminate Employee's employment other than for Cause or Disability,
or if Employee should terminate employment under this Agreement for
Good Reason:
(i) Signal shall pay to Employee the following
amounts as liquidated damages for all claims and no other amounts:
A. all Accrued Obligations in a lump sum in cash
within 30 days after the Date of Termination; and
B. an amount equal to one year of the Annual Base
Salary in effect on the Date of Termination payable in monthly
installments; provided, however, that such amount may , at the
election of Employee, be paid in a lump sum if Signal is at such
time operating at a profit as indicated by its Net Income (Loss) in
its most recent audited financial statements (and interim
statements do not indicate that it is likely that Signal will incur
a Net Loss for such then-current fiscal year); and further
provided that such lump sum payment will not have a material
detrimental effect on Signal's working capital.
(ii) For one year following the Date of
Termination, Signal shall continue all benefits to Employee and/or
Employee's family provided on the Date of Termination, which shall
at least equal those described in EXHIBIT B.
5. RIGHT TO PURCHASE EMPLOYEE'S STOCK
(a) In the event that the employment of Employee with
Signal is terminated by (i) Signal under Section 3(b) or (ii)
Employee voluntarily leaves the employ of Signal without
Good Reason during the Initial Term, Signal (or its designee)
shall have the right, but not the obligation, for a period of
thirty (30) days following the Date of Termination, to purchase
all but not less than all of the shares of Common Stock issued
pursuant to (A) Section 2(b)(v) hereof and (B) the exercise of
warrants under the Warrant Certificate, which right shall be
exercised by Signal or its designee by written notice to
Employee. The per share purchase price for such Stock shall, in
each instance, be the greater of (i) the per share value of the
consideration exchanged or paid, as the case may be, for such
shares and (ii) the average of the daily market closing prices of
the 30 consecutive trading days immediately preceding the Date of
Termination.
(b) In the event Signal, or its designee, elects to
purchase Common Stock as provided above, the respective parties
shall close the purchase and sale of such Common Stock on the
30th day (or next business day if the 30th day is not a business
day) after the date of written notice to Employee from Signal at
10:00 a.m. at the then principal offices of Signal. At the
closing, Signal, (or its designee), will pay the purchase price
for the Common Stock by bank or certified check or wire transfer
of immediately available funds in full, and Employee shall
deliver the certificates for all of the Common Stock, duly
endorsed with payment of all stock transfer taxes, if any, and
free and clear of any and all claims, liens or encumbrances.
6. SETTLEMENT OF DISPUTES.
Any dispute between the parties relating solely to the
employment of Employee hereunder (other than injunctive relief),
shall be submitted to binding arbitration in accordance with the
following provisions :
(a) Within ten (10) days after notice of submitting
the applicable issue to arbitration (the "ARBITRATION NOTICE") is
given by a party (the "INITIAL PERIOD"), each party shall
designate up to three arbitrators in priority from one to three,
who are currently available for arbitration of disputes in New
York, New York, as a potential arbitrator. Any arbitrator
designated by both parties shall be selected as the arbitrator
pursuant to this subsection. If both
parties designate more than one arbitrator, then the arbitrator
with the highest common priority shall be selected. In the event
that no arbitrator has been designated by both parties, within
ten (10) days after the expiration of the Initial Period, each
party will designate three additional arbitrators. In the event
that the parties are unable to agree upon an arbitrator within
twenty (20) days after delivery of the Arbitration Notice, the
parties agree to accept an arbitrator selected by the American
Arbitration Association. If a party fails to submit a list of
arbitrators within any ten (10) day designation period, the
arbitration shall be conducted solely by the arbitrator with the
highest priority designated by the other party.
(b) The party which loses such arbitration shall pay all
legal fees and expenses which both parties may reasonably incur
as a result of any arbitration, but in no event shall any party
be required to pay legal fees and expenses of the other party in
any arbitration in an amount exceeding $20,000; provided,
however, that if there is no clear-cut loser in any such
arbitration, the allocation of the parties' reasonable legal fees
and expenses shall (subject to such $20,000 limitation) be
determined by the arbitrator.
(c) The parties agree to request that the arbitrator
appointed pursuant to the procedure agreed upon above shall, as
soon as reasonably practicable after his or her appointment, and
after consultation with the parties, set an arbitration date of
no later than thirty days after his or her appointment. If that
arbitrator is unable to conduct the arbitration during such
thirty day period then the parties shall select a new arbitrator
in accordance with Section 6(a).
(d) The arbitration shall be conducted pursuant to the
rules of the American Arbitration Association, as then in effect;
provided, however, that no discovery shall be allowed, except to
the extent ordered by the arbitrator. The parties agree that a
final order from the arbitrator relating to any arbitration shall
be rendered on or before the tenth day after submission of each
side's arguments, unless circumstances not within the control of
either party make rendering of such an order by this date
impossible.
(e) The decision of the arbitrator shall be binding upon
all parties and no appeal may be taken therefrom; provided,
however, that no decision by such arbitrator shall include the
award of punitive damages. The decision of the arbitrator shall
be enforced and honored by the parties
hereto without the necessity of confirmation by a court, but the
parties hereto expressly reserve the right to seek such
confirmation in accordance with the laws of the State of
Tennessee.
(f) This arbitration shall be conducted in New York, New
York.
7. CONFIDENTIAL INFORMATION.
Employee shall hold in a fiduciary capacity for the
benefit of Signal all secret or confidential information, knowledge
or data relating to Signal and its subsidiaries which shall be
obtained by Employee during Employee's employment by Signal which
shall not be or become public knowledge (other than by acts by
Employee or representatives of Employee in violation of this
Agreement). After termination of Employee's employment with
Signal, Employee shall not, without the prior written consent of
Signal, communicate or divulge any such information, knowledge or
data to anyone other than Signal and those designated by it.
8. COVENANT NOT TO COMPETE.
(a) In consideration of the execution of this Agreement and
the compensation to be paid to Employee hereunder, Employee agrees
that while he is an employee and for a period of one (1) year from
the date upon which Employee's employment with Signal has been
terminated by Signal without Cause, or by Employee for Good Reason,
he will not directly or indirectly engage or invest in, or counsel,
or advise, or be employed by any business enterprise engaged in the
manufacture and/or distribution of items competing with the product
lines of Signal ("COMPETITIVE BUSINESS") provided that, and so long
as, Signal meets its obligations under Section 4(d) hereof. It is
understood and agreed that Sherri Winkler's direct or indirect
participation in the ownership and/or management of Ocean Pacific
Apparel Corp. shall not be deemed to violate the terms of this
covenant not-to-compete.
Notwithstanding the foregoing, Employee may own, beneficially or
legally, or a combination of both, up to four and nine-tenths per
cent (4.9%) of any publicly held Competitive Business.
(b) Employee further agrees that he will not (i) at
any time during or within two years after the termination of his
employment with Signal, however caused, solicit, interfere with,
employ, endeavor to entice away from Signal, or any subsidiary or
affiliate of Signal, any supplier or employee and (ii) so long
as the covenant-not-to-compete described in Section 8(a) is in
effect, solicit, interfere with or endeavor to entice away any
customer of Signal. It is further understood and agreed that
Sherri Winkler's direct or indirect participation in the ownership
and/or management of Ocean Pacific Apparel Corp. shall not be
deemed to violate the terms of this nonsolicitation provision.
9. PAYMENT OF OUTSTANDING OBLIGATIONS.
(a) Signal shall pay to Employee $120,000 ,
constituting the unpaid portion of all commissions payable to
Employee for sales completed prior to the purchase of American
Marketing Works, Inc. by Signal, as follows :
(i) $10,000 shall be paid on the date this
Agreement is executed, and
(ii) installments of $10,000 per month shall be
paid on the first business day of each month commencing May 1,
1995 and ending on March 1, 1996.
(b) Signal shall pay to Employee, Sherri Winkler and
MW Holdings, L.P. $ 66,927.67 in the aggregate, which the
parties hereto agree shall constitute all of the unpaid interest
owing on the Purchase Notes as of the date of this Agreement, in
eleven equal monthly installments of $5575 on the first business
day of each month commencing on May 1, 1995 and ending on March
1, 1996 and one installment of $5602.67 on April 1, 1996.
Notwithstanding anything contained herein to the contrary, the
payment obligations described in this Section 9 shall survive any
termination of Employee's employment or the expiration of the
Employment Period.
10. EQUITABLE RELIEF.
Employee acknowledges that the services to be rendered
under the provisions of this Employment Agreement are of a
special, unique and extraordinary character and it would be
difficult or impossible to replace such services and that by
reason thereof Employee agrees and consents that if he violates
the provisions of Sections 2, 7 and 8 of this Employment
Agreement, Signal, in addition to any other rights and remedies
available under this Employment Agreement or otherwise, shall be
entitled to an injunction to be issued by any tribunal of
competent jurisdiction restricting Employee from committing or
continuing any violation of this Employment Agreement. Signal
shall not be required to post a bond or other security in
connection with seeking or obtaining any such injunction.
11. SUCCESSORS.
(a) This Agreement is personal to Employee and without
the prior written consent of Signal shall not be assignable by
Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon Signal and its successors and assigns.
(c) Signal will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of Signal to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that Signal would be required to
perform it if no such succession had taken place. As used in this
Agreement, "SIGNAL" shall mean Signal Apparel Company, Inc. and any
successor to its business and/or assets.
12. OCEAN PACIFIC LICENSE AGREEMENT. Notwithstanding anything
contained herein to the contrary, this Agreement shall not become
effective and the Commencement Date shall not have occurred until
Signal and Ocean Pacific Apparel Corp. shall have entered into a
license agreement which expires in April 1997 and is satisfactory
to Signal.
13. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Tennessee, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party; overnight courier; registered or certified mail,
return receipt requested, postage prepaid; or facsimile
transmission addressed as follows:
IF TO EMPLOYEE:
Marvin Winkler
428 Gentlemen's Ridge
Signal Mountain, TN 37377
Telecopier No.: (615) 886-2083
with a copy to:
Jeffer, Mangels, Butler & Marmaro
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067
Attention: Ron R. Goldie, Esq.
Telecopier No.: (310) 203-0567
IF TO SIGNAL:
Signal Apparel Company, Inc.
200 Manufacturer's Road
Chattanooga, TN 37405
Attn: William Watts
Telecopier No.: (615) 752-2040
with a copy to:
Witt, Gaither & Whitaker, P.C.
1100 American National Bank Bldg.
Chattanooga, Tennessee 37402
Attention: John F. Henry, Jr.
Telecopier No.: (615) 266-4138
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) Signal may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(e) Employee's or Signal's failure to insist upon
strict compliance with any provision hereof shall not be deemed to
be a waiver of such provision or any other provision thereof. Any
waiver of any provision of this Agreement shall be valid only if
set forth in an instrument in writing signed on behalf of the
party making the waiver. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar) nor shall
much waiver constitute a continuing waiver unless otherwise
expressly provided.
(f) Each of the parties hereto shall execute and
deliver any and all additional papers, documents and other
assurances and shall do any and all acts and things reasonably
necessary in connection with the performance of their obligations
hereunder to carry out the intent of the parties hereto.
(g) This Agreement contains the entire understanding of
Signal and Employee with respect to the subject matter hereof, and
may not be assigned by either party hereto without the prior
written consent of the other party.
IN WITNESS WHEREOF, Employee has hereunto set his hand and
Signal has caused these presents to be executed in their names on
their behalf, all as of the day and year first above written.
/s/ Marvin Winkler
Marvin Winkler
SIGNAL APPAREL COMPANY, INC.
Attest:/s/ Pamela J. Gentry By:/s/ William H. Watts
Assistant Secretary Its: Chief Financial Officer
LIST OF OMITTED EXHIBITS
EXHIBIT A INVESTMENTS
EXHIBIT B LIST OF EMPLOYEE BENEFITS
EXHIBIT C REGISTRATION RIGHTS AGREEMENT
The Company hereby agrees to furnish a copy of any such omitted
exhibit supplementally upon request of the Commission's Staff.
WARRANT CERTIFICATE
THESE WARRANTS AND ANY SHARES ACQUIRED UPON THE EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE WARRANTS AND SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT AND LAWS. THESE WARRANTS AND SUCH SHARES MAY NOT BE
TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS WARRANT
CERTIFICATE, AND NO TRANSFER OF THESE WARRANTS OR SUCH SHARES SHALL
BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH.
WARRANT CERTIFICATE
To Purchase Shares of Common Stock of
SIGNAL APPAREL COMPANY, INC.
1,000,000 Warrants
THIS CERTIFIES THAT, for good and valuable consideration, the
receipt of which is hereby acknowledged, MARVIN WINKLER or his
registered assigns (the "HOLDER"), is the registered owner of the
number of Warrants specified above, each of which Warrants entitles
the Holder, subject to the conditions and limitations hereinafter
set forth, to purchase from SIGNAL APPAREL COMPANY, INC. a
corporation organized and existing under the laws of the State of
Indiana(the "COMPANY"), one share of the Company's Common Stock,
$.01 par value (the "COMMON STOCK"), at a purchase price of $2.00
per share (the "EXERCISE PRICE"). The Warrants shall not be
terminable by the Company. The shares of Common Stock issuable
upon exercise of the Warrants (and any other or additional shares,
securities or property that may hereafter be issuable upon exercise
of the Warrants) are sometimes referred to herein as the "WARRANT
SHARES", and the number of shares so issuable are sometimes
referred to as the "AGGREGATE NUMBER" as such number may be
increased or decreased, as more fully set forth herein.
The Warrants shall be void and all rights represented hereby
shall cease on the Expiration Date (as defined in Section 10).
The Warrants represented hereby are issued on April 1, 1995
(the "ISSUANCE DATE") (such Warrants, or such lesser number thereof
as shall from time to time remain unexercised, being herein
collectively called the "WARRANTS"). The Warrants are being issued
pursuant to an Employment Agreement, dated as of April 1, 1995
between the Company and Holder (the "EMPLOYMENT AGREEMENT").
Certain terms used in this Warrant Certificate are defined in
Section 10 hereof. Terms and expressions in this Warrant
Certificate having a defined or generally accepted meaning under
the securities laws of the United States of America shall have the
same meaning in this Warrant Certificate, unless the express
contrary intention appears.
The Warrants are subject to the following provisions, terms
and conditions:
1. EXERCISE; ISSUE OF CERTIFICATES; PAYMENT FOR SHARES.
The rights represented by this Warrant Certificate may be exercised
by the Holder hereof, in whole or in part (but not as to fractional
shares of Common Stock), to purchase a total of up to 1,000,000
shares, vesting (i) in the amount of 166,668 on April 1, 1995; (ii)
at the rate of 41,667 shares per month on the first day of each
month from and including May 1, 1995 through November 1, 1996 and
(ii) in the amount of 41,659 on December 1, 1996 (subject to the
adjustments described in Section 4 hereof) (the "VESTING
SCHEDULE"), by the surrender of this Warrant Certificate (with the
Exercise Form annexed hereto as Schedule 1 properly completed and
executed) to the Company at its principal office specified in
Section 16, or its then current address, and upon payment to the
Company of the Exercise Price for the Warrant Shares being
purchased by cash or check or bank draft in New York Clearing House
funds. Holder may, at Holder's option, pay the Exercise Price in
the form of unencumbered shares of Common Stock freely transferable
to Signal by delivering such shares along with this Warrant
Certificate and a properly completed and executed Exercise Form.
Such delivered shares shall, for payment purposes hereunder, be
deemed to have a value equal to the average closing market price of
Common Stock for the five (5) trading days immediately prior to
their delivery. The shares so purchased shall be and will be deemed
to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which this
Warrant Certificate shall have been surrendered and payment made
for such shares as aforesaid. Certificates for the Warrant Shares
so purchased shall be delivered to the Holder within a reasonable
time, not exceeding ten (10) days, after this Warrant Certificate
shall have been so exercised, and unless the Warrants have expired,
a new Warrant Certificate representing the number of shares, if
any, with respect to which this Warrant Certificate shall not then
have been exercised shall also be delivered to the Holder hereof
within such time. Such certificate or certificates shall be deemed
to have been issued and any Person so designated to be named
therein shall be deemed for all purposes to have become a holder of
record of such Warrant Shares as of the close of business on the
date on which this Warrant Certificate shall have been surrendered
and payment of the Exercise Price made as aforesaid. The Warrant
Shares initially issued upon the exercise hereof shall be Common
Stock. The foregoing right of exercise will vest in accordance the
Vesting Schedule and will expire at the close of business on the
Expiration Date (as defined in Section 10 hereof).
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES; LISTING.
The Company covenants and agrees that: (a) all Warrant Shares
will, upon issuance, be original-issue shares (and not treasury
stock) fully paid and nonassessable and free from all taxes,
claims, liens, charges and other encumbrances with respect to the
issuance thereof; (b) without limiting the generality of the
foregoing, it will from time to time take all such action as may be
required to assure that the par value per share of Common Stock
shall at all times be less than or equal to the Exercise Price; (c)
during the period within which the rights represented by this
Warrant Certificate may be exercised, the Company will at all times
have authorized and reserved for the purpose of issue or transfer
upon exercise of the Warrants a sufficient number of original-issue
shares of its Common Stock to provide for the exercise of all the
Warrants or, if an insufficient number of such shares are available
under the Company's Restated Articles of Incorporation, as amended,
will request approval from the Company's shareholders for an
increase in the number of authorized shares; (d) upon the exercise
of the Warrants represented by this Warrant Certificate, it will,
at its expense, promptly notify each securities exchange on which
any Common Stock is at the time listed of such issuance and
maintain a listing of all shares of Common Stock from time to time
issuable upon the exercise of the Warrants to the extent such
shares can be listed.
3. REGISTRATION RIGHTS. Holders of Common Stock issued upon
exercise of warrants issued hereunder shall be entitled to
registration rights as set forth in a registration rights
agreement, in the form attached hereto as EXHIBIT A.
4. ADJUSTMENTS TO AGGREGATE NUMBER.
Under certain conditions, the Aggregate Number is subject to
adjustment as set forth herein.
The Aggregate Number shall be subject to adjustment from time
to time as follows and thereafter, as adjusted, shall be deemed to
be the Aggregate Number hereunder.
(a) In case at any time or from time to time the Company
shall:
(i) take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend
payable in, or other distribution of, Common Stock,
(ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock,
then the Aggregate Number in effect immediately prior thereto shall
be adjusted so that Holder shall thereafter be entitled to receive,
upon exercise thereof, the number of shares of Common Stock that
Holder would have owned or have been entitled to receive after the
occurrence of such event had such Warrants been exercised
immediately prior to the occurrence of such event.
(b) In case at any time or from time to time the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other
distribution (collectively, a "DISTRIBUTION") of:
(i) cash (other than dividends payable out of earnings
or any surplus legally available for the payment of dividends
under the laws of the state of incorporation of the Company),
(ii) any evidences of its indebtedness (other than
Convertible Securities), any shares of its capital stock
(other than additional shares of Common Stock or Convertible
Securities) or any other securities or property of any nature
whatsoever (other than cash), or
(iii) any options or warrants or other rights to
subscribe for or purchase any of the following: any evidences
of its indebtedness (other than Convertible Securities), any
shares of its capital stock (other than additional shares of
Common Stock or Convertible Securities) or any other
securities or property of any nature whatsoever,
then Holder shall be entitled to receive upon the exercise thereof
at any time on or after the taking of such record the number of
shares of Common Stock to be received upon exercise of such
Warrants determined as stated herein and, in addition and without
further payment, the cash, stock, securities, other property,
options, warrants and/or other rights to which such Holder or
Holders would have been entitled by way of the Distribution and
subsequent dividends and distributions if Holder (x) had exercised
such Warrants immediately prior to such Distribution, and (y) had
retained the Distribution in respect of the Common Stock and all
subsequent dividends and distributions of any nature whatsoever in
respect of any stock or securities paid as dividends and
distributions and originating directly or indirectly from such
Common Stock. A reclassification of the Common Stock into shares
of Common Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the
meaning of this paragraph (b) and, if the outstanding shares of
Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, such
event shall be deemed a subdivision or combination, as the case may
be, of the outstanding shares of Common Stock within the meaning of
paragraph (a) of this Section 4.
(c) In case at any time or from time to time the Company
shall (except as hereinafter provided) issue or sell any additional
shares of Common Stock for a consideration per share less than the
Prevailing Market Price, then the Aggregate Number in effect
immediately prior thereto shall be adjusted so that the Aggregate
Number thereafter shall be determined by multiplying the Aggregate
Number immediately prior to such action by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such additional
shares of Common Stock plus the number of such additional shares of
Common Stock so issued and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares of Common Stock plus the
number of shares of Common Stock which the aggregate consideration
for the total number of such additional shares of Common Stock so
issued would purchase at a price equal to the Prevailing Market
Price. The provisions of this paragraph (c) shall not apply to any
issuance of additional shares of Common Stock for which an
adjustment is provided under Section 4(a). No adjustment of the
Aggregate Number shall be made under this paragraph (c) upon the
issuance of any additional shares of Common Stock which are issued
pursuant to (1) the exercise of any of the Warrants or of any other
warrant or option to purchase Common Stock outstanding as of the
date of this Warrant Certificate,(2) the exercise of any of the
warrants issued to Walsh Greenwood & Co. in connection with the
loan under that certain Credit Agreement dated March 31, 1995 among
the Company, The Shirt Shed, Inc., American Marketing Works, Inc.
and Walsh Greenwood & Co. or (3) the exercise of stock options to
purchase shares of Common Stock pursuant to any stock options
granted to employees of the Company or its subsidiaries pursuant to
the Company's 1985 Stock Option Plan, as amended (collectively,
(1), (2)and (3), the "OPTIONS").
(d) In case at any time or from time to time the Company
shall (except as hereinafter provided) take a record of the holders
of its Common Stock for the purpose of entitling them to receive a
distribution of, or shall in any manner issue or sell, any warrants
or other rights to subscribe for or purchase (x) any share of
Common Stock or (y) any Convertible Securities, whether or not the
rights to subscribe, purchase, exchange or convert thereunder are
immediately exercisable, and the consideration per share for which
additional shares of Common Stock may at any time thereafter be
issuable pursuant to such warrants or other rights or pursuant to
the terms of such Convertible Securities shall be less than the
Prevailing Market Price, then the Aggregate Number in effect
immediately prior thereto shall be adjusted so that the Aggregate
Number thereafter shall be determined by multiplying the Aggregate
Number immediately prior to such action by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such warrants or
other rights plus the maximum number of additional shares of Common
Stock issuable pursuant to all such warrants or rights and/or
necessary to effect the conversion or exchange of all such
Convertible Securities and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to
the issuance of such warrants or other rights plus the number of
shares of Common Stock which the aggregate consideration for such
maximum number of additional shares of Common Stock would purchase
at a price equal to the Prevailing Market Price. For purposes of
this paragraph (d), the aggregate consideration for such maximum
number of additional shares of Common Stock shall be deemed to be
the minimum consideration received and receivable by the Company
for the issuance of such additional shares of Common Stock pursuant
to the terms of such warrants or other rights or such Convertible
Securities. No adjustment of the Aggregate Number shall be made
under this paragraph (d) upon the issuance of the Options.
(e) In case at any time or from time to time the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in
any manner issue or sell, Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately
exercisable, and the consideration per share for the additional
shares of Common Stock which may at any time thereafter be issuable
pursuant to the terms of such Convertible Securities shall be less
than the Prevailing Market Price, then the Aggregate Number in
effect immediately prior thereto shall be adjusted so that the
Aggregate Number thereafter shall be determined by multiplying the
Aggregate Number immediately prior to such action by a fraction,
the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such
Convertible Securities plus the maximum number of additional shares
of Common Stock necessary to effect the conversion or exchange of
all such Convertible Securities and the denominator of which shall
be the number of shares of Common Stock outstanding immediately
prior to the taking of such action plus the number of shares of
Common Stock which the aggregate consideration for such maximum
number of additional shares of Common Stock would purchase at a
price equal to the Prevailing Market Price. For purposes of this
paragraph (e), (x) the aggregate consideration for such maximum
number of additional shares of Common Stock shall be deemed to be
the minimum consideration received and receivable by the Company
for the issuance of such additional shares of Common Stock pursuant
to the terms of such Convertible Securities. No adjustment of the
Aggregate Number shall be made under this paragraph (e) upon the
issuance of any Convertible Securities which are issued pursuant to
the exercise of any warrants or other subscription or purchase
rights if an adjustment shall previously have been made or if no
such adjustment shall have been required upon the issuance of such
warrants or other rights pursuant to paragraph (d) of this Section
4.
(f) If, at any time after any adjustment of the Aggregate
Number shall have been made pursuant to paragraph (d) or (e) of
this Section 4 on the basis of the issuance of warrants or other
rights or the issuance of Convertible Securities, or after any new
adjustments of the Aggregate Number shall have been made pursuant
to this paragraph (f),
(i) such warrants or rights or the right of conversion
or exchange in such Convertible Securities shall expire, and
all or a portion of such warrants or rights, or the right of
conversion or exchange in respect of all or a portion of such
Convertible Securities, as the case may be, shall not have
been exercised, and/or
(ii) the consideration per share for which shares of
Common Stock are issuable pursuant to such warrants or rights
or the terms of such Convertible Securities shall be
irrevocably increased solely by virtue of provisions therein
contained for an automatic increase in such consideration per
share upon the arrival of a specified date or the happening of
a specified event, or such warrants or rights shall have been
exercised or such convertible Securities converted at a price
in excess of the minimum consideration used in the calculation
of the adjustment to the Aggregate Number,
such previous adjustment shall be rescinded and annulled and the
additional shares of Common Stock which were deemed to have been
issued by virtue of the computation made in connection with such
adjustment shall no longer be deemed to have been issued by virtue
of such computation. Thereupon, a recomputation shall be made of
the effect of such warrants or rights or Convertible Securities
increase in consideration per share on the basis of:
(x) eliminating the number of shares of Common
Stock subject to such warrants or rights or such right
of conversion or exchange which no longer may be
purchased, and
(y) treating any such warrants or rights or any
such Convertible Securities which then remain
outstanding as having been granted or issued immediately
after the time of such irrevocable increase of the
consideration per share for which shares of Common Stock
are issuable under such warrants or rights or
Convertible Securities;
and, if and to the extent called for by the foregoing provisions of
this paragraph (f) on the basis aforesaid, a new adjustment of the
Aggregate Number shall be made, and such new adjustment shall
supersede the previous adjustments rescinded and annulled.
Notwithstanding the foregoing, such new adjustment shall have no
effect on shares of Common Stock purchased pursuant to an exercise
hereof prior to the date of the new adjustment.
(g) The following provisions shall be applicable to the
making of adjustments of the Aggregate Number hereinbefore provided
for in this Section 4:
(i) The sale or other disposition of any issued share
of Common Stock owned or held by or for the account of the
Company shall be deemed an issuance thereof for the purposes
of this Section 4.
(ii) To the extent that any additional shares of Common
Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any additional shares of
Common Stock or any Convertible Securities (x) are issued for
cash consideration, the consideration received by the Company
therefor shall be deemed to be the amount of the cash received
by the Company therefor, (y) are offered by the Company for
subscription, the consideration received by the Company shall
be deemed to be the subscription price or (z) if a part or all
of the consideration received or receivable by the Company
consists of property other than cash, the value of such
consideration shall be the fair market value of such property
as determined in good faith by the Board of Directors.
(iii) The adjustments required by the preceding
paragraphs of this Section 4 shall be made whenever and as
often as any specified event requiring an adjustment shall
occur. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on
the date of its occurrence.
(iv) In computing adjustments under this Section 4
fractional interests in Common Stock shall be taken into
account to the nearest one-thousandth (.001) of a share and
shall be aggregated until they equal one whole share.
(v) If the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase
rights to stockholders thereof, but abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase
rights, then no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled[; provided,
however, that such rescission shall have no effect on shares
of Common Stock purchased pursuant to an exercise hereof prior
to the date of the rescission].
(h) If any event occurs as to which the other provisions of
this Section 4 are not strictly applicable but the lack of any
provision for the exercise of the rights of Holder would not
fairly protect the purchase rights of Holder in accordance with the
essential intent and principles of such provisions, or, if strictly
applicable, would not fairly protect the conversion rights of
Holder in accordance with the essential intent and principles of
such provisions, then the Company shall appoint a firm of
independent certified public accountants in the United States
(which may be the regular auditors of the Company) of recognized
national standing in the United States satisfactory to Holder,
which shall give their opinion acting as an expert and not as an
arbitrator as to the adjustments, if any, necessary to preserve,
without dilution, on a basis consistent with the essential intent
and principles established in the other provisions of this Section
4, the exercise rights of the Holders of Warrants. Upon receipt of
such opinion, the Company shall forthwith make the adjustments
described therein. In the event of an adjustment in the Aggregate
Number pursuant to Section 4 hereof, the Exercise Price shall be
adjusted accordingly as appropriate to cause the aggregate cost for
exercising the Warrants issued hereunder to remain the same.
(i) Within forty-five (45) days after the end of each fiscal
quarter during which an event occurred that resulted in an
adjustment pursuant to this Section 4, and at any time upon the
request of Holder, the Company shall cause to be promptly mailed to
Holder by first-class mail, postage prepaid, notice of each
adjustment or adjustments to the Aggregate Number effected since
the date of the last such notice and a certificate of the Company's
Chief Financial Officer or, in the case of any such notice
delivered within forty-five (45) days after the end of a fiscal
year, a firm of independent public accountants in the United States
selected by the Company and acceptable to Holder (who may be the
regular accountants employed by the Company), in each case, setting
forth the Aggregate Number after such adjustment, a brief statement
of the facts requiring such adjustment and the computation by which
such adjustment was made. The fees and expenses of such accountants
shall be paid by the Company.
(j) The occurrence of a single event shall not trigger an
adjustment of the Aggregate Number under more than one paragraph of
this Section 4.
(k) If at any time or form time to time there shall be a
reorganization, merger or consolidation of the Company with or
into another corporation, or the sale of all or substantially all
of the Company's properties and assets to any other person, the
Holder shall thereafter be entitled to purchase (and it shall be
a condition to the consummation of any such reorganization,
merger, consolidation or sale, that appropriate provision be made
so that the Holders shall thereafter be entitled to purchase),
upon exercise of the Warrants, the kind and amount of shares of
stock or other securities or property of the Company, or of the
successor corporation resulting from such merger, consolidation
or sale, to which a holder of Common Stock issuable upon exercise
hereof would have been entitled in such capital reorganization,
merger, consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the Holder after the
reorganization, merger, consolidation or sale to the end that the
provisions of this Section 4 (including adjustment of the
Aggregate Number and the Exercise Price) shall be applicable
after that event in as nearly equivalent a manner as may be
practicable.
(l) The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such action
as may be necessary or appropriate in order to protect the
exercise rights of the Holders against impairment.
5. TAXES ON CONVERSION. The issuance of certificates for
Warrant Shares upon the exercise of the Warrants shall be made
without charge to Holder exercising any such Warrant for any issue
or stamp tax in respect of the issuance of such certificates, and
such certificates shall be issued in the respective names of, or in
such names as may be directed by, Holder; provided, however, that
the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that of
Holder, and the Company shall not be required to issue or deliver
such certificates unless or until the Person or Persons requesting
the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
6. LIMITATION OF LIABILITY. No provision hereof in the
absence of the exercise of the Warrants by Holder and no
enumeration herein of the rights or privileges of Holder shall give
rise to any liability on the part of Holder for the Exercise Price
of the Warrant Shares or as a stockholder of the Company, whether
such liability is asserted by the Company or by any creditor of the
Company.
7. CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of any Warrant or of any shares
of Common Stock issued or issuable upon the exercise of any warrant
in any manner that interferes with the timely exercise of the
Warrants.
8. AVAILABILITY OF INFORMATION. The Company will use its
best efforts to comply with the reporting requirements of the
United States Securities Exchange Act of 1934, as amended, if
applicable, and will use its best efforts to comply with all other
public information reporting requirements of the Commission
(including rules and regulations promulgated by the Commission
under the Securities Act) from time to time in effect and relating
to the availability of an exemption from the Securities Act for the
sale of any Warrant Shares. The Company will also cooperate with
Holder in supplying such information as may be necessary for Holder
to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale
of any Warrant Shares. The Company will deliver to Holder,
promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made
available generally by the Company to its shareholders, and copies
of all regular and periodic reports and all registration statements
and prospectuses filed by the Company with any securities exchange
or with the Commission.
9. RESTRICTIONS ON TRANSFER.
9.1 RESTRICTIVE LEGENDS. Each certificate for any Warrant
Shares issued upon the exercise of any Warrant, and each stock
certificate issued upon the transfer of any such Warrant Shares
(except as otherwise permitted by this Section 9) shall be stamped
or otherwise imprinted with a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF
ANY STATE. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER SUCH ACT AND LAWS."
Each Warrant Certificate issued in substitution for any
Warrant Certificate pursuant to Section 12, 13 or 14 and each
Warrant Certificate issued upon the transfer of any Warrant (except
as otherwise permitted by this Section 9) shall be stamped or
otherwise imprinted with a legend in substantially the following
form:
"THESE WARRANTS AND ANY SHARES ACQUIRED UPON THE
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE WARRANTS
AND SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SUCH ACT AND LAWS. THESE WARRANTS AND SUCH SHARES
MAY NOT BE TRANSFERRED EXCEPT UPON THE CONDITIONS
SPECIFIED IN THIS WARRANT CERTIFICATE, AND NO TRANSFER
OF THESE WARRANTS OR SUCH SHARES SHALL BE VALID OR
EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH."
9.2 TERMINATION OF RESTRICTIONS. The restrictions imposed by
this Section 9 upon the transferability of Warrants and Warrant
Shares shall cease and terminate as to any particular Warrants or
Warrant Shares, (a) as to Warrant Shares, when such securities
shall have been effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering
such securities, or (b) when in the reasonable opinion of counsel
for Holder such restrictions are no longer required in order to
comply with the Securities Act. Whenever such restrictions shall
terminate as to any Warrants or Warrant Shares, Holder shall be
entitled to receive from the Company, without expense, new
certificates of like tenor not bearing the restrictive legends set
forth in Section 9.1.
10. DEFINITIONS. As used in this Warrant Certificate, unless
the context otherwise requires, the following terms have the
following respective meanings:
AGGREGATE NUMBER: as set forth in the first paragraph of
this Warrant Certificate and as subsequently varied pursuant
to Section 4.
BUSINESS DAY: any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are
authorized or required by law to close.
COMMISSION: the United States Securities and Exchange
Commission and any other similar or successor agency of the
United States federal government administering the United
States Securities Act or the Securities Exchange Act of 1934,
as amended.
COMMON STOCK: the shares of Common Stock, $.01 par
value per share, of the Company, currently provided for in the
Restated Articles of Incorporation of the Company, as amended,
and any other capital stock of the Company into which such
shares of Common Stock may be converted or reclassified or
that may be issued in respect of, in exchange for, or in
substitution of, such Common Stock by reason of any stock
splits, stock dividends, distributions, mergers,
consolidations or like events.
COMPANY: Signal Apparel Company, Inc., an Indiana
corporation, and its successors and assigns.
CONVERTIBLE SECURITIES: securities which by their terms
are convertible into or exchangeable for Common Stock.
DEMAND REGISTRATION: as set forth in Section 3.1(a)
hereof.
DISTRIBUTION: shall have the meaning specified in
Section 4(b).
EXERCISE PRICE: as set forth in the first paragraph of
this Warrant Certificate.
EXPIRATION DATE: this Warrant Certificate will expire
and the Warrants issued hereby will become null and void on
the six (6) month anniversary of the Date of Termination (as
defined in the Employment Agreement).
ISSUANCE DATE: April 1, 1995.
HOLDER: as set forth in the first paragraph of this
Warrant Certificate.
KKEP AGREEMENT: as set forth in Section 3.1(a) hereof.
OPTIONS: as set forth in Section 4(c) hereof.
PERSON: an individual, corporation, partnership, trust
or unincorporated organization, or a government or any agency
or political subdivision thereof.
PREVAILING MARKET PRICE: The average of the daily
closing prices of 30 consecutive trading days immediately
preceding the day in question after appropriate adjustment for
stock dividends, subdivisions, combinations or
reclassifications occurring within said 30-day period. The
closing price for each day shall be the average of the closing
bid and asked prices as furnished by a New York Stock Exchange
member firm or National Association of Securities Dealers,
Inc. member firm, selected from time to time by the
Corporation for that purpose, or, in the event that the Common
Stock is listed or admitted to trading on one or more national
securities exchanges (or as a NASDAQ National Market System
security), the last sale price on the NASDAQ system or on the
principal national securities exchange on which the Common
Stock is listed or admitted to trading or, in case no reported
sale takes place on such day, the average of the reported
closing bid and asked prices on the NASDAQ system or such
principal exchange.
REGISTRABLE SECURITIES: as set forth in Section 3.1(a)
hereof.
SECURITIES ACT: the United States Securities Act of
1933, as amended (or any successor statute).
WARRANTS: as set forth in the third paragraph of this
Warrant Certificate.
WARRANT SHARES: as set forth in the first paragraph of
this Warrant Certificate.
11. ACQUISITION OF WARRANTS. Holder represents that he is
acquiring the Warrants represented by this Warrant Certificate and,
upon any exercise of such Warrants, will acquire Common Stock
hereunder for his own account for the purpose of investment, and
not with a view to the public distribution thereof within the
meaning of the Securities Act, subject to any requirement of law
that the disposition thereof shall at all times be within the
control of Holder. Holder further represents and acknowledges that
he is an "Accredited Investor" within the meaning of Regulation D
under the Securities Act.
12. WARRANTS TRANSFERABLE. These Warrants are issued as
unregistered Warrants. Subject to the provisions of Section 9, the
transfer of any Warrant and all rights hereunder, in whole or in
part, is registrable at the office of agency of the Company
referred to in Section 1 hereof by Holder in person or by duly
authorized attorney, upon surrender of this Warrant Certificate
with the properly completed Form of Assignment in the form annexed
hereto as Schedule 2. The transfer of any Warrant or any rights
thereunder may be effected only by the surrender of such Warrant at
the office or agency of the Company and until due presentment for
registration of transfer on such books, the Company may treat the
registered Holder hereof as the owner for all purposes, and the
Company shall not be affected by notice to the contrary. No
transfer shall be effective until this Warrant Certificate has been
surrendered to the Company as provided herein and the replacement
Warrant Certificate issued to the transferee has been duly executed
by the Company. Only Warrants which shall have vested in accordance
with Section 1 shall be transferable, and the replacement Warrant
Certificate(s) shall indicate that such Warrants are fully vested.
13. WARRANT CERTIFICATES EXCHANGEABLE FOR DIFFERENT
DENOMINATIONS. This Warrant Certificate is exchangeable, upon the
surrender hereof by Holder at such office or agency of the Company,
for a new Warrant Certificate of like tenor representing in the
aggregate the right to purchase the number of shares that may be
purchased hereunder, each of such new Warrant Certificates to
represent the right to purchase such number of shares as shall be
designated by Holder at the time of such surrender. Such Warrant
Certificate shall not be valid until duly executed by the Company.
14. REPLACEMENT OF WARRANT CERTIFICATES. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant Certificate and, in the
case of any such loss, theft or destruction, upon delivery of an
indemnity bond (or, in the case of the original holder hereof or
any substantial financial institution to which any Warrants
represented by this Warrant Certificate may be transferred, an
unsecured indemnity agreement) reasonably satisfactory in form and
amount to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant Certificate, the Company
at its expense will execute and deliver, in lieu thereof, a new
Warrant Certificate of like tenor. Such Warrant Certificate shall
not be valid until duly executed by the Company.
15. CERTIFICATE RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF
WARRANTS. The rights and obligations of the Company contained in
Sections 1, 4, 5 and 6 hereof shall survive until the exercise of
all of the Warrants or the Expiration Date, whichever is earlier.
16. NOTICES. All notices, requests and other communications
required or permitted to be given or delivered to e Holder shall be
in writing, and shall be delivered or shall be sent by airmail, if
overseas, certified or registered mail postage prepaid and
addressed, to Holder at 428 Gentlemen's Ridge, Signal Mountain,
Tennessee 37377 with a copy to Jeffer, Mangels, Butler & Marmaro,
2121 Avenue of the Stars, Tenth Floor, Los Angeles, California
90067, Attention : Ron Goldie,Esq., or at such other address as
shall have been furnished to the Company by notice from Holder.
All notices, requests and other communications required or
permitted to be given or delivered to the Company shall be in
writing, and shall be delivered, or shall be sent by certified or
registered mail, postage prepaid and addressed to the office of the
Company, (return receipt requested) P.O. Box 4296, Manufacturer's
Road, Chattanooga, Tennessee 37405, Attention: Treasurer, with a
copy to Witt, Gaither & Whitaker, P.C., 1100 American National Bank
Building, Chattanooga, Tennessee 37402-2608, Attention: John F.
Henry, Jr., Esquire, or at such other address as shall have been
furnished to Holder by notice from the Company. Any such notice,
request or other communication may be sent by telegram or telex,
but shall in such case be subsequently confirmed by a writing
delivered or sent by certified or registered mail as provided
above. All notices shall be deemed to have been given either at
the time of the delivery thereof to (or the receipt by, in the case
of a telegram or telex) any officer or employee of the person
entitled to receive such notice at the address of such person for
purposes of this Section 16, or, if mailed, at the completion of
the third full day following the time of such mailing thereof to
such address, as the case may be.
17. AMENDMENTS. Neither this Warrant Certificate nor any
term or provision may be changed, waived, discharged, or terminated
orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or
termination is sought.
19. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws thereunder.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed by its duly authorized officer and this
Warrant Certificate to be dated April 1, 1995.
SIGNAL APPAREL COMPANY, INC.
By /s/ William H. Watts
_________________________
LIST OF OMITTED SCHEDULES AND EXHIBITS
SCHEDULE 1 EXERCISE FORM
SCHEDULE 2 FORM OF TRANSFER
EXHIBIT A REGISTRATION RIGHTS AGREEMENT
The Company hereby agrees to furnish a copy of any such omitted schedule or
exhibit supplementally upon request of the Commission's Staff.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made
and entered into as of May 10, 1995 by and between SIGNAL
APPAREL COMPANY, INC., an Indiana corporation (the "COMPANY"),
and MARVIN WINKLER, SHERRI WINKLER and MW HOLDINGS, L.P. or their
registered assigns (collectively, the "HOLDER") pursuant to the
Marvin Winkler Employment Agreement, dated April 1, 1995 (the
"EMPLOYMENT AGREEMENT"), between the Company and Marvin Winkler
and the Warrant Certificate of even date therewith issued by the
Company to Marvin Winkler relating to 1,000,000 shares of Common
Stock (the "WARRANT CERTIFICATE").
The parties hereby agree as follows:
1. DEFINITIONS. Capitalized terms used herein without
definition shall have their respective meanings set forth in the
Employment Agreement or Warrant Certificate. As used in this
Agreement, the following terms shall have the following meanings:
ADVICE: See Section 4(m) hereof.
AFFILIATE: "Affiliate" means, with respect to any
specified person, (i) any other person directly or indirectly
controlling or controlled by, or under direct or indirect common
control with, such specified person or (ii) any executive officer
or director of such other person. For purposes of this
definition, the term "control" (including the terms
"controlling," "controlled by," and "under common control with")
of a person means the possession, direct or indirect, of the
power (whether or not exercised) to direct or cause the direction
of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise.
BUSINESS DAY: Each Monday, Tuesday, Wednesday,
Thursday and Friday that is not a day on which banking
institutions in New York, New York are authorized or obligated by
law or executive order to close.
COMMON STOCK: The shares of common stock, $0.01 par
value per share, of the Company.
EFFECTIVE DATE: The date on which the Employment
Agreement becomes effective.
EMPLOYMENT AGREEMENT: As such term is defined in the
first paragraph of this Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
EXPIRATION DATE: The fifth anniversary of the
Effective Date; provided, however, that in the event that the
Company delays the filing of the Registration Statement pursuant
to the terms hereof, the Expiration Date shall be extended by the
same number of days that the Company defers the filing of the
Registration Statement.
HOLDER'S COUNSEL : Jeffer, Mangels, Butler & Marmaro,
or such other legal counsel for Holder reasonably acceptable to
the Company.
LOSSES: See Section 6(a) hereof.
PERSON: An individual, partnership, corporation, trust
or unincorporated organization, or government or agency or
political subdivision thereof.
PROSPECTUS: The prospectus included in any
Registration Statement (including, without limitation, a
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement
in reliance upon Rule 430A promulgated under the Securities Act),
as amended or supplemented by any prospectus supplement,
including, without limitation, with respect to the terms of the
offering of any portion of the Shares covered by such
Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated
by reference in such Prospectus.
REGISTRABLE SECURITIES: See Section 2(a) hereof.
REGISTRATION EXPENSES: See Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of
the Company which covers any of the Shares pursuant to the
provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all
material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
RULE 144: Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC.
RULE 144A: Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
SHARES: (a) The Common Stock now owned by Holder or
subsequently acquired pursuant to exercise of the Warrants,
together with (b) any shares of Common Stock distributed to
Holder in respect of the Shares as a result of any stock split,
stock dividend or other reclassification or recapitalization of
the Company and (c) any shares of capital stock or other
securities resulting from any stock split or reverse split, stock
dividend, reclassification of the capital stock of the Company,
consolidation or reorganization of the Company, and any shares or
other securities of the Company or any successor company which
may be received by the Holder or its successors or assigns by
virtue of its or their ownership of Shares, until, in the case of
any such Common Stock, (i) it is effectively registered under the
Securities Act and disposed of in accordance with the
Registration Statement covering it, (ii) it is saleable by the
holder thereof pursuant to Rule 144(k) or (iii) it is sold to the
public pursuant to Rule 144.
SUBSIDIARIES: The Company's significant subsidiaries
as determined by Rule 1-02 of Regulation S-X.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
WARRANTS: Warrants issued under the Warrant
Certificate.
2. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. On any two occasions prior
to the Expiration Date, following the receipt of a written
registration request (a "DEMAND NOTICE") (which request shall
specify the intended method of disposition by Holder) signed by
Holder to register Shares under the Securities Act (provided that
such request covers an aggregate of at least 500,000 Shares), the
Company shall file with the Commission and use its best efforts to
cause to become effective as promptly as practicable a registration
statement covering at least all of the Shares requested to be
registered by Holder, all to the extent requisite to permit the
disposition in the United States by Holder of the Shares so
registered ("DEMAND REGISTRATION"); provided, however, that the
Company shall not be obligated to effect a Demand Registration (i)
prior to the date which is 90 calendar days after the closing date
of any previous United States public offering of the Company's
securities, (ii) if the Company has given notice to Holder that the
Company expects to file a registration statement within 30 days or
while the Company has a public offering in registration, (iii) at
any time or in any manner which is in conflict with the rights
granted to holders of registrable securities pursuant to
that certain Registration Rights Agreement dated as of November 22,
1994 by and between the Company and Kidd, Kamm Equity Partners,
L.P., as nominee (the "KKEP AGREEMENT"), unless the holders of such
rights have explicitly waived any such conflict in writing, or (iv)
if two Demand Registrations with respect to all or a portion of the
Shares have previously been requested. Should the Company refuse to
effect a Demand Registration pursuant to subsections (i), (ii) or
(iii) above, such request shall not be considered an exercise of
the right to demand registration granted by this Section. If other
selling shareholders or the Company shall also propose to include
shares of Common Stock in a Demand Registration, and if the number
of includable shares shall exceed the total number of shares of
Common Stock proposed to be registered by such other selling
shareholders and/or the Company and Shares proposed to be
registered (all such securities proposed to be registered in a
registration subject to this Section 2 are sometimes referred to
herein as the "REGISTRABLE SECURITIES"), the Registrable Securities
shall be included in the Demand Registration in the following
priority: first, the Registrable Securities held by Holder, and
second, the Registrable Securities proposed to be registered by the
Company or other selling shareholders, allocated among them in such
manner as they shall determine. If Holder shall have requested a
Demand Registration and the Company shall have thereafter withdrawn
such registration statement as allowed by this Agreement, in
addition to such other rights and remedies that the Holder may be
entitled to, Holder shall not be deemed to have made a request for
registration under this Section 2(a). Holder agrees to exercise
all Warrants for which it has demanded registration of Shares
issuable thereunder on the effective date of such registration.
(b) PIGGY BACK REGISTRATION RIGHTS. (i) If at any time
prior to the Expiration Date, the Company proposes to file a
registration statement with the Commission (other than in
connection with a rights offering to shareholders, an exchange
offer, a registration statement on Form S-8 or Form S-4 or any
successor to such forms (relating to employee benefit plans, an
acquisition of another entity or a merger), in connection with a
dividend reinvestment plan, the conversion of any convertible
securities, or a stand-by underwriting with respect to the call of
a warrant, option, right or convertible securities for redemption)
with respect to shares of Common Stock, then the Company shall in
each case give written notice (the "COMPANY NOTICE") of such
proposed filing to Holder at least fifteen (15) calendar days
before the anticipated filing date of such registration statement.
Such notice shall offer to Holder the opportunity to include in
such registration statement such number of Shares as Holder may
request. Holder shall notify the Company of its desire to register
Shares pursuant this Section 2(b) within ten (10) days following
receipt of the Company Notice. The Company shall not be required
to honor any such request (A) if, in the opinion of counsel to the
Company reasonably acceptable to Holder, registration under the
Securities Act is not required for the transfer of the Shares in
the manner proposed by Holder; (B) to register in the aggregate
fewer than 100,000 Shares held by Holder (provided that if such
Shares have been excluded from registration pursuant to Section
2(b)(ii) hereof, the Company shall honor any such request to
register fewer than 100,000 Shares so long as the number of Shares
subject to such request constitutes all of the remaining Shares then
held by Holder); (C) if two registrations under this Section 2(b)
with respect to all or a portion of the Shares have previously been
requested and none of the Shares requested to be included in the
second such registration have been excluded pursuant to Section
2(b)(ii) hereof or (D) if such request is in conflict with the
rights granted to holders of registrable securities pursuant to the
KKEP Agreement, unless the holders of such rights have explicitly
waived any such conflict in writing. The Company shall permit, or
shall use its best efforts to cause the managing underwriter of a
proposed offering to permit, Holder to include Shares in the
proposed offering on the same terms and conditions as applicable to
the shares of Common Stock offered by the Company and/or for the
account of any person other than the Company, as the case may be.
If Holder shall have requested a registration of the Shares under
this Section 2(b) and the Company shall have thereafter withdrawn
such registration statement, in addition to such other rights and
remedies that the Holder may be entitled to, Holder shall not be
deemed to have made a request for registration under this Section
2(b) as a result thereof.
(ii) Notwithstanding the foregoing, if any such managing
underwriter shall advise the Company in writing that, in its
opinion, the distribution of all or a portion of the Shares
requested to be included pursuant to Section 2(b)(i) in the
registration concurrently with the shares of Common Stock being
registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account,
then such Shares shall be excluded from the registration. If other
shareholders of the Company are entitled to piggy back registration
rights and the number of includable shares exceeds the total number
of shares that may be registered, the shares shall be included in
the registration in proportion to the number of Shares proposed to
be sold by Holder and the number of Registrable Securities proposed
to be registered by such other selling shareholders.
(c) The Company shall not be required to undergo any
special audit to effect any Registration Statement under this
Section 2, and if such a special audit would be required in order
to file or effect a Registration Statement hereunder, the Company
shall be entitled to delay the filing or effectiveness of such
Registration Statement until a reasonable period of time
following the completion of the Company's regular audit in the
ordinary course of the Company's activities.
(d) The Company shall be entitled to (A) postpone the
filing of a Registration Statement required to be prepared and
filed by it under Section 2(a) hereof or (B) withdraw any
Registration Statement which has been prepared and filed by it
following a request by Holder under Section 2(a) hereof (but
which has not yet been declared effective), for a period of up to
one hundred eighty (180) days from the Postponement Date (as
defined below) if, in either case, the Company reasonably and in
good faith determines that such registration would interfere in
any material respect with any financing or any material
acquisition or disposition by the Company or any subsidiary
thereof of the capital stock or substantially all of the assets
of any other Person (other than in the ordinary course of business),
any tender offer or any merger, consolidation, corporate reorganization
or restructuring or other similar transaction material to the
Company and its subsidiaries as a whole. The Company shall be
entitled to postpone or withdraw any Registration Statement under
which Holder requests registration of Shares pursuant to Section
2(b) hereof (y) without restriction with respect to a filing
relating only to shares offered by the Company and (z) subject
only to restrictions expressly agreed upon by the Company and
other selling shareholders in an offering for the account of such
selling shareholders. The Company shall send written notice of
each exercise of its postponement or withdrawal rights under this
Section 2(c) (any such notice a "POSTPONEMENT NOTICE") to Holder
specifying, in reasonable detail, the reason therefor (the date
such Postponement Notice is sent is referred to herein as the
"POSTPONEMENT DATE"). The Company shall make every reasonable
effort to have a Registration Statement subject to Section 2(a)
hereof which is the subject of a Postponement Notice pursuant to
this Section 2(d) filed and declared effective on or before the
180th calendar day immediately following any Postponement Date
hereunder; provided that, the Company shall not suspend the
Registration Statement for more than 180 consecutive days in any
twelve month period.
(e) Notwithstanding any other provision of this Agreement
to the contrary, a registration requested pursuant to this
Section 2 shall not be deemed to have been effected unless (i) it
has been declared effective by the SEC and the Company keeps such
Registration Statement effective for a continuous period of six
(6) months after the effective date thereof or such shorter
period which will terminate when all Registrable Securities
covered by such Registration Statement have been sold; PROVIDED
HOWEVER, that a Registration Statement which does not become
effective after the Company has filed such Registration Statement
solely by reason of the refusal to proceed of the Holder, in
connection with a registration under Section 2(a), or holders of
a majority of the Registrable Securities included therein, in
connection with a registration under Section 2(b), shall be
deemed to have been effected by the Company unless the Holder or
holders, as the case may be, shall have elected to pay all of the
Company's out-of-pocket expenses in connection with such
Registration Statement and (ii) all of the conditions to closing
specified in the purchase agreement or underwriting agreement, if
any, entered into in connection with such registration have been
satisfied, other than conditions which have not been satisfied by
reason of an act or omission by the Holder.
3. HOLDBACK AGREEMENTS.
(a) To the extent not inconsistent with applicable law,
Holder agrees with the Company and, in the case of an
underwritten public offering with the managing underwriters, not
to effect any public sale or distribution of the issue being
registered or a similar security of the Company, or any
securities convertible into or exchangeable or exercisable for
such securities, including a sale pursuant to Rule 144 under the
Securities Act, during the 14-day period prior to, or during the
first 90 days (or, in the case of an underwritten public
offering, such other longer period reasonably requested
by the managing underwriters) during which such Registration
Statement referred to in Section 2 hereof is effective (except as
part of such registration) if and to the extent requested by the
Company in the case of a non-underwritten public offering or if
and to the extent requested by the managing underwriter(s) in the
case of an underwritten public offering.
(b) The Company agrees not to effect any public sale or
distribution on its own behalf of any shares of Common Stock or
any securities convertible into or exchangeable or exercisable
for shares of Common Stock (other than any such sale or
distribution of shares of Common Stock in connection with (i)
any established employee benefit plan of the Company or (ii) any
merger or consolidation by the Company or any subsidiary thereof
or the acquisition by the Company or a subsidiary thereof of the
capital stock or substantially all of the assets of any other
Person), during the 14 day period prior to, or during the first
90 days (or, in the case of an underwritten public offering, such
other longer period reasonably requested by the managing
underwriters) during which a Registration Statement referred to
in Section 2(a) hereof is effective.
4. REGISTRATION PROCEDURES. In connection with the
Company's registration obligations under Section 2 hereof, the
Company shall effect such registrations to permit the sale of
Shares in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as
expeditiously as possible:
(a) Prepare and file with the SEC a Registration
Statement or Registration Statements on any appropriate form
under the Securities Act available for the sale of Shares in
accordance with the intended method or methods of distribution
thereof, and use its best efforts to cause each such Registration
Statement to become effective and remain effective as provided
herein; provided that, in connection with a registration pursuant
to Section 2(a) hereof, before filing any such Registration
Statement or Prospectus or any amendments or supplements thereto
(other than documents that would be incorporated or deemed to be
incorporated therein by reference and that the Company is
required by applicable securities laws or stock exchange
requirements to file) the Company shall furnish to Holder and to
the managing underwriters of such offering, if any, copies of all
such documents proposed to be filed, which documents will be
subject to the review of Holder and such underwriters, and the
Company shall not file any such Registration Statement or
amendment thereto or any Prospectus or any supplement thereto
(other than such documents which, upon filing, would be
incorporated or deemed to be incorporated by reference therein
and that the Company is required by applicable securities laws or
stock exchange requirements to file) to which Holder or the
managing underwriter, if any, shall reasonably object within two
full Business Days.
(b) Prepare and file with the SEC such amendments and
post- effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement continuously
effective following the applicable Effective Date; cause the related
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth
in such Registration Statement as so amended or such Prospectus
as so supplemented.
(c) Notify Holder and the managing underwriters, if
any, promptly, and (if requested by any such person) confirm such
notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any
request by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration
Statement for amendments or supplements to a Registration
Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the
effectiveness of a Registration Statement or of the initiation of
any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Shares for sale in any jurisdiction or of the initiation or
threatening of any proceeding for such purpose, (v) of the
happening of any event which makes any statement made in such
Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference
untrue in any material respect or which requires the making of
any changes in the Registration Statement or Prospectus so that,
in the case of the Registration Statement, it will not contain
any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (vi) of the
Company's reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate.
(d) Use every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a
Registration Statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Shares for sale in any jurisdiction, at the earliest possible
moment.
(e) Subject to the last paragraph of this Section 4,
if reasonably requested by the managing underwriters, if any, the
Company shall (i) promptly incorporate in a Prospectus supplement
or post-effective amendment such information as the managing
underwriters, if any, and the Company agree should be included
therein as required by applicable law, (ii) make all required
filings of such Prospectus supplement or such post-effective
amendment as soon as practicable after the Company has re-
ceived notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment, and (iii) supplement or
make amendments to any Registration Statement consistent with
clause (i) or (ii) above; provided, that the Company shall not be
required to take any actions under this Section 4(e) that are
not, in the opinion of counsel for the Company, necessary or
advisable to comply with applicable law.
(f) Furnish to Holder and each managing underwriter,
if any, without charge, at least one conformed copy of the
Registration Statement or Statements and any post-effective
amendment thereto, including financial statements but excluding
schedules, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits (unless
requested in writing by Holder or underwriter).
(g) Deliver to Holder and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses
relating to such Shares (including each preliminary prospectus)
and any amendment or supplement thereto as such persons may
reasonably request; and the Company hereby consents to the use of
such Prospectus or each amendment or supplement thereto by Holder
and the underwriters, if any, in connection with the offering and
sale of the Shares covered by such Prospectus or any amendment or
supplement thereto.
(h) Prior to any public offering of the Shares, to
register or qualify or cooperate with Holder and the
underwriters, if any, in connection with the registration or
qualification (or exemption from such registration or
qualification) of Shares for offer and sale under the securities
or Blue Sky laws of such jurisdictions within the United States
as any seller or underwriter reasonably requests in writing; keep
each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Shares covered by the applicable
Registration Statement; PROVIDED, that the Company will not be
required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any
action that would subject it to general service of process in
suits or to taxation in any such jurisdiction where it is not
then so subject.
(i) In connection with a registration of Shares under
Section 2(a) hereof, use its best efforts to cause the Shares
covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or
authorities within the United States, except as may be required
solely as a consequence of the nature of Holder, in which case
the Company will cooperate in all reasonable respects with the
filing of such Registration Statement and the granting of such
approvals, as may be necessary to enable Holder or the
underwriters, if any, to consummate the disposition of such
Shares.
(j) Upon the occurrence of any event contemplated by
Section 4(c)(v) or 4(c)(vi) above, prepare a supplement or post-
effective amendment to each Registration Statement or a supplement
to the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of the Shares being sold thereunder,
such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) In connection with a registration of Shares under
Section 2(a) hereof, enter into such agreements (including, in
the event of an underwritten offering, an underwriting agreement
in form, scope and substance as is customary in underwritten
offerings and reasonably acceptable to the Company and its
counsel) and take all such other actions in connection therewith
(including, in the event of an underwritten offering, those
reasonably requested by the managing underwriters, if any, or
Holder) in order to expedite or facilitate the disposition of
such Shares and in such connection, whether or not an
underwriting agreement is entered into and if the registration is
an underwritten registration, (i) make such representations, and
warranties, subject to the Company's ability to do so, to Holder
and the underwriters, if any, with respect to the business of the
Company and its subsidiaries, the Registration Statement,
Prospectus and documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and reasonably acceptable
to the Company and its counsel, and to confirm the same if and
when requested; (ii) use its reasonable efforts to obtain
opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and
Holder's Counsel ) addressed to Holder and each of the
underwriters, if any, covering the matters customarily covered in
opinions requested in underwritten offerings and such other
matters as may be reasonably requested by Holder's Counsel and
underwriters; (iii) use its reasonable efforts to obtain "cold
comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary,
any other certified public accountants of any subsidiary of the
Company or any business acquired or to be acquired by the
Company, for which financial statements and financial data is, or
is required to be, included in the Registration Statement),
addressed to Holder and each of the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings; and (iv) deliver such documents and
certificates as may be reasonably requested by Holder's Counsel
and the managing underwriters, if any, to evidence the continued
validity of the representations and warranties of the Company and
its subsidiaries made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company. The above shall be done at each closing under such
underwriting or similar agreement as and to the extent required
thereunder.
(l) If necessary in connection with a disposition of
Shares pursuant to a Registration Statement, make available for
inspection by a representative of Holder, any underwriter participating
in any disposition of Registrable Securities, if any, and any
attorney or accountant retained by Holder or underwriter, financial
and other records, pertinent corporate documents and properties of
the Company and its Subsidiaries, and cause the executive officers,
directors and employees of the Company and its Subsidiaries to supply
all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such
disposition; PROVIDED, that any records, information or documents
that are designated by the Company in writing as confidential at
the time of delivery of such records, information or documents
shall be kept confidential by such persons unless (i) such
records, information or documents are in the public domain or
otherwise publicly available, (ii) disclosure of such records,
information or documents is required by court or administrative
order after the exhaustion of appeals therefrom or (iii)
disclosure of such records, information or documents, in the
written opinion of counsel (reasonably acceptable to the Company)
to such person, is otherwise required by law (including, without
limitation, pursuant to the requirements of the Securities Act),
which opinion shall be delivered to the Company at least five
days prior to the date on which such disclosure is sought, and
PROVIDED FURTHER that any information obtained pursuant to this
provision shall only be used in connection with the transaction
for which such information was obtained and such information (and
all copies thereof) shall be returned to the Company at the
conclusion of such transaction.
(m) Comply with all applicable rules and regulations
of the SEC and make generally available to its security holders
earning statements (which need not be audited) satisfying the
provisions of Section 11 (a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities
Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter
in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering, and (ii)
if not sold to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company
commencing after the effective date of a Registration Statement,
which statements shall cover said 12-month periods.
(n) Cooperate with the Holder and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends; and enable such
Registrable Securities to be in such denominations and registered
in such names as the managing underwriters may request at least
two business days prior to any sale of Registrable Securities to
the underwriters.
(o) Cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange
on which similar securities issued by the Company are then listed
if requested by the Holder or the managing underwriters, if any,
provided that the applicable listing requirements are satisfied.
(p) Provide a CUSIP number for all Registrable
Securities, not later than the effective date of the applicable
Registration Statement.
Notwithstanding anything in this Agreement to the
contrary, Holder shall not be entitled to sell any Shares
pursuant to a Registration Statement or to receive a Prospectus
relating thereto unless Holder (A) has at such time a current
intent to sell such Shares, and at the request of the Company
confirms such intent in writing, and (B) has furnished the
Company promptly after the Company's request, such information
regarding Holder and the distribution of such Shares as the
Company may from time to time request. The Company may refuse to
register Shares in the event Holder does not furnish such
information provided above. Holder agrees promptly to furnish to
the Company all information required to be disclosed in order to
make the information previously furnished to the Company by
Holder not misleading.
Holder agrees that, upon receipt of any notice from the
Company of (A) the happening of any event of the kind described
in Section 4(c)(ii), 4(c)(iii), 4(c)(iv), 4(c)(v) or 4(c)(vi)
hereof or (B) that, in the judgment of the Company's Board of
Directors, it is advisable to suspend use of the Prospectus for a
discrete period of time due to pending corporate developments,
public filings with the SEC or similar events, Holder will
forthwith discontinue disposition of such Shares covered by such
Registration Statement or Prospectus until Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated
by Section 4(j) hereof, or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable
Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus. The
Company shall use its best efforts to insure that the use of the
Prospectus may be resumed as soon as practicable.
Notwithstanding the foregoing, the Company shall not suspend the
Registration Statement for more than one hundred eighty
consecutive days in any twelve month period.
In the event the Company shall give any such notice,
the Company shall extend the period during which such
Registration Statement shall be maintained effective pursuant to
this Agreement by the number of days during the period from and
including the date of the giving of such notice to and including
the date when each selling holder of Registration Statement shall
have received the copies of the supplemented or amended
Prospectus contemplated by Section 4(j) hereof or the Advice
contemplated by the preceding paragraph.
5. Registration Expenses.
(a) All fees and expenses incident to the Company's
performance of or compliance with this Agreement shall be borne
by the Company whether or not any of the Registration Statements
become effective; provided, however, that in the event
that a Registration Statement filed by the Company hereunder does
not become effective solely by reason of the refusal to proceed
of (i) Holder, in connection with a registration of Shares under
Section 2(a) hereof, or (ii) of holders of a majority of the
Registrable Securities included therein in connection a
registration of Shares under Section 2(b) hereof, the Company
shall be deemed to have fully satisfied its obligations to Holder
under this Agreement unless Holder or holders of Registrable
Securities, as the case may be, shall have elected to pay the
Company's out-of-pocket expenses in connection with such
Registration Statement. Such fees and expenses shall include,
without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (x) with
respect to filings required to be made with the New York Stock
Exchange or such other securities exchange on which Common Stock
is listed and (y) of compliance with federal securities or state
Blue Sky laws (including, without limitation, fees and
disbursements of Holder's Counsel, if any, in connection with
Blue Sky qualifications of the Registrable Securities, and
determination of the eligibility of the Shares for investment
under the laws of such jurisdictions as the managing
underwriters, if any, or Holder or holders of a majority of the
Registrable Securities being sold, as the case may be, may
designate, subject to the limitation on such jurisdictions
contained in Section 4(h) hereof), (ii) printing expenses
(including, without limitation, expenses of printing certificates
for Registrable Securities in a form eligible for deposit with
The Depository Trust Company and of printing prospectuses if the
printing of prospectuses is reasonably requested by Holder's
Counsel or the holders of a majority of the Registrable
Securities, as the case may be, included in any Registration
Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, [and of
Holder's Counsel up to the maximum amount of $35,000 (but
excluding any travel costs unless such travel costs are incurred
in connection with travel requested by the Company) ]in
connection with a registration of Shares under Section 2(a)
hereof (v) fees and disbursements of all independent certified
public accountants referred to in Section 4(k)(iii) hereof
(including the expenses of any special audit, if any, and "cold
comfort" letters required by or incident to such performance),
and (vi) Securities Act liability insurance obtained by the
Company in its sole discretion. In addition, the Company shall
pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange on which
similar securities issued by the Company are then listed and
rating agency fees and the fees and expenses of any person,
including special experts, retained by the Company.
Notwithstanding the provisions of this Section 5, Holder shall
pay all registration expenses in respect of Shares to the extent
that the Company is prohibited by applicable Blue Sky laws from
paying such expenses for or on behalf of Holder.
(b) The following costs and expenses shall be borne by
Holder: (i) all discounts, commissions and fees of underwriters,
selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Shares and all
legal expenses of any such Persons, (ii) all transfer taxes, if
any, applicable to the distribution of the Shares, and (iii) all
other expenses which do not fall within the enumeration contained
in Section 5(a) hereof of expenses to be paid by the Company in
connection with the Company's performance under this Agreement;
all of which expenses the selling holders of any Registrable
Securities shall be required to bear PRO RATA on the basis of
the total number of Registrable Securities being
registered by such holders.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company
shall, without limitation as to time, indemnify and hold
harmless, to the fullest extent permitted by law, Holder, and
each person who controls Holder, from and against all losses,
liabilities, claims, damages and expenses (including but not
limited to reasonable attorney fees and any and all reasonable
expenses whatsoever incurred in investigating, preparing or
defending against litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of
any claim or litigation) (collectively, "LOSSES"), arising out of
or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus
or form of Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are based
solely upon information furnished in writing to the Company by
Holder expressly for use therein; PROVIDED, that the Company
shall not be liable to any Holder to the extent that any such
Losses arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if either (A) (i) Holder failed to
send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale by such Holder to
the person asserting the claim from which such Losses arise and
(ii) the Prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or
(B) (x) such untrue statement or alleged untrue statement,
omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and (y) having previously been
furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, Holder thereafter fails
to deliver such Prospectus as so amended or supplemented, with or
prior to the delivery of written confirmation of the sale of
Shares to the person asserting the claim from which such Losses
arise. The Company shall also indemnify each underwriter and
each person who controls such person (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange
Act) to the same extent as provided above with respect to the
indemnification of Holder.
(b) INDEMNIFICATION BY HOLDER. In connection with any
Registration Statement in which Holder is participating, Holder
shall furnish to the Company in writing such information as the
Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees to indemnify, to
the fullest extent permitted by law, the Company, its directors
and officers and each other person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20(a) of
the Exchange Act), from and against all Losses arising out of or
based upon any untrue statement of a material fact contained in
any Registration Statement, Prospectus or preliminary prospectus
or arising out of or based upon any omission of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent,
that such untrue statement or omission is contained in any
information so furnished in writing by Holder to the Company
expressly for use in such Registration Statement or Prospectus.
In no event (except in the case of Losses due to one or more acts
of fraud committed by Holder) shall the aggregate liability of
the Holder for indemnity hereunder be greater than the dollar
amount of the net proceeds received by the Holder upon the sale
of Registrable Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities
from underwriters participating in the distribution to the same
extent as provided above with respect to information so furnished
in writing by such persons expressly for use in any Prospectus or
Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any
person shall be entitled to indemnity hereunder (an "INDEMNIFIED
PARTY"), such indemnified party shall give prompt notice to the
party from which such indemnity is sought (the "INDEMNIFYING
PARTY") of any claim or of the commencement of any proceeding
with respect to which such indemnified party seeks
indemnification or contribution pursuant hereto; PROVIDED, that
the failure to so notify the indemnifying party shall not relieve
the indemnifying party from any obligation or liability except to
the extent that the indemnifying party has been prejudiced
materially by such failure. All such fees and expenses
(including any fees and expenses incurred in connection with
investigating or preparing to defend such action or proceeding)
shall be paid to the indemnified party on a monthly basis
following written notice thereof to the indemnifying party
(notwithstanding the absence of judicial determination as to the
propriety and enforceability of the indemnifying party's
obligation to reimburse the indemnified party for such expense
and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction). In
case any such action is brought against an indemnified party the
indemnifying party shall be entitled to participate therein and
it may elect by written notice delivered to the indemnified party
within a reasonable period of time after receiving the aforesaid
Notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnifying party shall not
be entitled to assume the defense thereof, if in the reasonable
judgment of the indemnified party, based upon advice of its
counsel, a conflict of interest may exist between the indemnified
party and the indemnifying party with respect to such claims.
(d) CONTRIBUTION. If the indemnification provided for
in this Section 6 is unavailable to an indemnified party under
Section 6(a) or 6(b) hereof in respect of any Losses or is
insufficient to hold such indemnified party harmless, then each appli-
cable indemnifying party, in lieu of indemnifying such
indemnified party, shall, jointly and severally, contribute to
the amount paid or payable by such indemnified party as a result
of such Losses, in such proportion as is appropriate to reflect
the relative fault of the indemnifying party or indemnifying
parties, on the one hand, and such indemnified party, on the
other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other
relevant equitable considerations. In no event (except in the
case of Losses due to one or more acts of fraud committed by
Holder) shall the Holder be required to contribute, in the
aggregate, an amount greater than the dollar amount of the net
proceeds received by the Holder with respect to the sale of the
Registrable Securities giving rise to the contribution
obligation. The relative fault of such indemnifying party or
indemnifying parties, on the one hand, and such indemnified
party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made
by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to
include any reasonable legal or other reasonable fees or expenses
incurred by such party in connection with any proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were
determined by PRO RATA allocation or by any other method or
allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
7. RULE 144A INFORMATION REQUIREMENTS. For so long as any
Shares are "restricted securities" under Rule 144, the Company
agrees to (i) file the reports required to be filed by it under
the Securities Act and the Exchange Act, and (ii) at such time as
the Company is not subject to section 13 or 15(d) of the Exchange
Act, provide, upon request of Holder, such information as is
described in Rule 144A(d)(4) as may be necessary to enable such
holder to transfer Shares pursuant to Rule 144A. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities under any
section of the Exchange Act.
8. MISCELLANEOUS.
(a) EXEMPTIONS TO REGISTRATION. The Company agrees to
use its best efforts to qualify for exemptions to the
registration requirements of the Securities Act, including but
not limited to Regulation S or Section 3(a)(10) of the Securities
Act such that the filing of a registration statement and the delivery
of a prospectus upon sale of the Shares shall not be required. If the
Company is able to qualify for any such exemption, the Company
may, at the option of Holder, assist such Holder (to the extent
necessary) in effecting the sale of the Shares pursuant to such
exemptions.
(b) REMEDIES. In the event of a breach by the Company
of its obligations under this Agreement, Holder, in addition to
being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agrees that, in the event of
any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(c) NO CONFLICTING AGREEMENTS. The Company has not,
as of the date hereof, and shall not, on or after the date of
this Agreement, enter into any agreement with respect to its
securities which materially conflicts with the rights granted to
the Holder.
(d) AMENDMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless
the Company has obtained the written consent of Holder.
Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates
exclusively to the rights of holders of Registrable Securities
whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the
rights of other holders of Registrable Securities may be given by
holders of at least a majority of the Registrable Securities
being sold by such holders; provided, that the provisions of this
sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding
sentence.
(e) NOTICES. All notices and other communications
provided for or permitted hereunder shall be made in writing and
shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier or (iii) one
business day after being deposited with a reputable next-day
courier, postage prepaid, to the parties as follows:
(x) if to Holder, to Marvin Winkler, 428
Gentlemen's Ridge, Signal Mountain, Tennessee 37377,
Telecopier No.: (615)886-2083, or to such other address
or addresses as Holder may subsequently furnish to the
Company in writing in accordance herewith; with a
required copy to: Jeffer, Mangels, Butler & Marmaro,
2121 Avenue of the Stars, Tenth Floor, Los Angeles,
California 90067, Attention: Ron R. Goldie, Esq.,
Telecopier No.: (310)203-0567.
(y) if to the Company, to Signal Apparel Company,
Inc., 200 Manufacturers Road, Chattanooga, Tennessee
37405, Attention: Robert J. Powell, Esq., Vice
President, General Counsel and Secretary or to such
other address as the Company may have furnished to the
other parties in writing in accordance herewith, with a
required copy to Witt, Gaither & Whitaker, P.C., 1100
American National Bank Building, Chattanooga, Tennessee
37402, Attention: John F. Henry, Jr., Esq.
(f) APPROVAL OF HOLDERS. Whenever the consent or
approval of holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by
the Company or its affiliates (as such term is defined in Rule
405 under the Securities Act) (other than the subsequent holders
of Registrable Securities if such subsequent holders are deemed
to be such affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the holders of such
required percentage.
(g) SUCCESSORS AND ASSIGNS. Any person who purchases
any Shares from Holder shall be deemed, for purposes of this
Agreement, to be an assignee of Holder. This Agreement shall
inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the
benefit of and be binding upon each holder of any Shares;
provided, however, that this Agreement and the rights, remedies,
obligations and liabilities arising hereunder or by reason hereof
shall be assignable by each such holder only to purchasers of
Shares (pursuant to a transfer that complies with the Securities
Act) that agree in writing with the Company to be bound by the
terms, provisions and conditions of this Agreement as if such
purchasers were signatories hereto.
(h) COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be original and all of which taken together shall constitute one
and the same agreement.
(i) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TENNESSEE, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF TENNESSEE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
(k) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall
use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such which may be hereafter
declared invalid, void or unenforceable.
(l) ENTIRE AGREEMENT. This Agreement is intended by
the parties as a final expression of their agreement and is
intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of
the subject matter contained herein and the registration rights
granted by the Company with respect to the Common Stock of the
Company issued pursuant to the Employment Agreement and the
Warrant Certificate. Except as provided in the Employment
Agreement or Warrant Certificate, there are no restrictions,
promises, warranties or undertakings, other than those set forth
or referred to herein, with respect to the registration rights
granted by the Company with respect to the Common Stock of the
Company. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such
registration rights.
(m) ATTORNEYS' FEES AND COSTS. In any action or
proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the
prevailing party, as determined by the court, shall be entitled
to recover reasonable attorneys' fees and costs in addition to
any other available remedy.
(n) FURTHER ASSURANCES. Each of the parties hereto
shall use all reasonable efforts to take, or cause to be taken,
all appropriate action, do or cause to be done all things
reasonably necessary, proper or advisable under applicable law,
and execute and deliver such documents and other papers as may be
required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate and make effective
the transactions contemplated hereby.
(o) TERMINATION. This Agreement and the obligations
of the parties hereunder shall terminate on the Expiration Date,
except for any liabilities or obligations under Sections 5 or 6
or the provisos of Section 4(l) above, which shall remain in
effect in accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SIGNAL APPAREL COMPANY, INC.
By:/s/ William H. Watts
Name: William H. Watts
Title: Chief Financial Officer
MW HOLDINGS, L.P.
BY: MW EQUITIES, INC., GENERAL PARTNER
By: /s/ Marvin Winkler
MARVIN WINKLER, PRESIDENT
/s/ MARVIN WINKLER
/s/ SHERRI WINKLER
Sherri Winkler
MW Holdings, LP
418 Gentlemen's Ridge
Signal Mtn., TN 37377
RE: PURCHASE NOTES
Dear Sherri and MW Holdings:
It is my understanding that you and Signal have agreed to
convert the Purchase Notes (as defined in that certain Stock
Purchase Agreement dated October 5, 1994 among Signal, Marvin
Winkler, Sherri Winkler, MW Holdings, L.P. and other parties
therein) into preferred stock of Signal, and to convert such
preferred stock into one million shares of common stock of
Signal. By signing this letter where indicated below you hereby
agree that such exercise shall occur upon the commencement of the
effective date of Marvin Winkler's Employment Agreement with
Signal.
/s/ William Watts
William Watts
Chief Financial Officer
Accepted this 10th day of May, 1995, by:
/s/ Sherri Winkler
Sherri Winkler
MW Holdings, L.P.
By: MW Equities, Inc.
/s/ Marvin Winkler
Marvin Winkler
President
SIGNAL APPAREL COMPANY, INC.
P. O. Box 4296
200-A Manufacturers Road
Chattanooga, Tennessee 37405
(615) 756-8146
CORPORATE OFFICE
March 27, 1995
Mr. Leon Ruchlamer
Signal Apparel Company, Inc.
Dear Leon:
This letter is to confirm the agreement between Signal Apparel
Company, Inc. and you relative to your appointment as an executive
officer of Signal. The terms of our agreement are as follows:
1. A base salary as follows:
Year 1 - $12,600/month
Year 2 - $14,600/month
Year 3 - $16,600/month
2. You will be eligible to receive an annual bonus based upon
your personal performance as well as the performance of Signal
Apparel. For each year of this Agreement that the Company
makes an annual profit on EBIT basis, you will receive a bonus
as follows:
Year 1 - $80,000 bonus
Year 2 - $120,000 bonus
Year 3 - $120,000 bonus
If earned, this bonus will be paid in a lump sum following the
conclusion of the applicable fiscal year.
3. You will be granted a stock option to purchase 100,000 shares
of Signal's common stock at an option price of $4.00 per share
in accordance with the terms and conditions of Signal's
Employee Stock Option Plan. All of these options will be
eligible for exercise one year from the date of grant
conditional upon you remaining an employee of Signal through
this period.
At the present time, there are insufficient shares remaining
under the Stock Option Plan to cover this grant, and
therefore, this grant is conditional upon additional shares
being authorized for the Plan by the Company's shareholders at
the upcoming annual meeting;
4. This Agreement will be for a period of three years commencing
January 1, 1995 and ending December 31, 1997. Should your
employment with the Company be terminated during this period
for reasons other than good cause, you will be entitled to
severance pay at your then current level of pay for the lesser
of one year or the remaining term of this Agreement. For
purposes of this Agreement, "good cause" shall include:
1. A court conviction involving an act or acts of personal
dishonesty taken by you and intended to result in your
personal enrichment at the expense of the Company.
2. The conviction of a felony involving moral turpitude.
Any severance payment due pursuant to this provision will be
made in a lump sum within thirty days of your termination by
the Company.
5. During your employment by the Company, you will hold the
position of President of the Company.
6. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee, without
reference to the principals of conflict of laws;
7. This Agreement may not be amended or modified in any manner
other than by a written agreement executed by the parties
hereto.
If the above is an accurate statement of our agreement, please sign
where indicated below and return a copy of this Agreement to the
Company.
Sincerely,
/s/ Marvin Winkler
Marvin Winkler
Chairman of the Board &
Chief Executive Officer
MW/ps
AGREED:
/s/ Leon Ruchlamer
- --------------------------
Leon Ruchlamer
c:\bob\agreement\leon.c27
SIGNAL APPAREL COMPANY, INC.
P. O. Box 4296
200-A Manufacturers Road
Chattanooga, Tennessee 37405
(615) 756-8146
CORPORATE OFFICE
March 15, 1995
Mr. William H. Watts
Signal Apparel Company, Inc.
Dear Bill:
This letter is to confirm the agreement between Signal Apparel
Company, Inc. and you relative to your appointment as an executive
officer of Signal. The terms of our agreement are as follows:
1. An annual base salary of $175,000.00;
2. You will be eligible to receive an annual bonus, payable in a
lump sum following fiscal year end, based upon your personal
performance as well as the performance of Signal Apparel. For
1995, this bonus will be discretionary and will be determined
by the Company at the conclusion of the 1995 fiscal year based
upon the Company's overall performance and your contribution
to that performance. For years subsequent to 1995, your level
of eligible bonus participation and the criteria for earning
that level of bonus will be determined by the Company at the
commencement of each fiscal year.
3. You will receive a $50,000 allocation to cover all expenses
relative to your relocation to the Company's corporate offices
in Chattanooga, Tennessee. Any relocation expenses in excess
of this amount will be borne by you, and any amount of this
allocation exceeding your relocation expenses may be retained
by you.
4. You will be granted a stock option to purchase 100,000 shares
of Signal's common stock at an option price of $4.00 per share
in accordance with the terms and conditions of Signal's
Employee Stock Option Plan. All of these options will be
eligible for exercise one year from the date of grant
conditional upon you remaining an employee of Signal through
this period.
<PAGE>
At the present time, there are insufficient shares remaining
under the Stock Option Plan to cover this grant, and
therefore, this grant is conditional upon additional shares
being authorized for the Plan by the Company's shareholders at
the upcoming annual meeting;
5. This Agreement will be for a period of three years commencing
January 1, 1995 and ending December 31, 1997. Should your
employment with the Company be terminated during this period
for reasons other than good cause, you will be entitled to
severance pay at your then current level of pay for the lesser
of one year or the remaining term of this Agreement. For
purposes of this Agreement, "good cause" shall include:
1. A court conviction involving an act or acts of personal
dishonesty taken by you and intended to result in your
personal enrichment at the expense of the Company;
2. Repeated material failures by you to perform the duties
which are assigned to you, which failures are not
remedied in a reasonable amount of time after receipt of
written notice from the Company.
3. The conviction of a felony involving moral turpitude.
Any severance payment due pursuant to this provision will be
made in a lump sum within thirty days of your termination by
the Company.
6. During your employment by the Company, you will hold the
position of Executive Vice President with overall
responsibility for the Financial and MIS departments of Signal
and with such other duties that may be assigned to you from
time to time by your superior;
7. During your employment by the Company, you will be assigned to
the corporate offices of the Company;
8. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee, without
reference to the principals of conflict of laws;
9. This Agreement may not be amended or modified in any manner
other than by a written agreement executed by the parties
hereto.
If the above is an accurate statement of our agreement, please sign
where indicated below and return a copy of this Agreement to the
Company.
Sincerely,
\s\ Marvin Winkler
Marvin Winkler
Chairman of the Board &
Chief Executive Officer
MW/ps
AGREED:
/s/ William H. Watts
- -------------------------
Bill Watts
c:\bob\agreemen\watts.c15
SIGNAL APPAREL COMPANY, INC.
P. O. BOX 4296
200-A MANUFACTURERS ROAD
CHATTANOOGA, TENNESSEE 37405
(615) 756-8146
CORPORATE OFFICE
April 24, 1995
Mr. Fletcher Bright
Fletcher Bright Company
1300 First Tennessee National Bank Bldg.
Chattanooga, TN 37402
Dear Fletcher:
This letter is to confirm the agreement between Signal Apparel
Company, Inc. and MC Properties I, L.P. relative to the outstanding
indebtedness of Signal to MC Properties.
As per our discussion, we have agreed as follows:
1. Signal will pay MC Properties I the sum of $42,927.52
representing the monthly rental and related charges for office
space in the Market Court office building through January 15,
1995. This amount will be paid in two equal installments of
$21,463.76 with the first payment being due on April 24, 1995
and the second payment being due no later than May 15, 1995.
2. With respect to the outstanding Promissory Note between MC
Properties I and Signal in the amount of $358,722.00, the
Company has agreed to issue shares of Signal Common Stock
equivalent to $179,361.00 in value in full satisfaction of
said note, subject to the approval of the Company's Board of
Directors. The Company has also agreed to use its best
efforts to arrange for the registration of these shares with
the Securities and Exchange Commission no later than June 30,
1995 as part of the registration of other Signal securities
which the Company is obligated to effect by that date. MC
Properties I agrees that it and its affiliates will cooperate
with the Company in the preparation of such registration by
promptly providing the Company with any information concerning
MC Properties I and its holdings of Signal Common Stock which,
in the opinion of the Company's counsel, is necessary or
desirable for including in said registration statement.
3. It is agreed that the price per share for the determination of
the number of shares to be issued to MC Properties I will be
determined by the closing price of the Company's stock at a
date approximately two weeks before filing of the above
registration agreement which date will be mutually agreed upon
between Signal and MC Properties I. The appropriate number of
shares will be issued as soon as practicable following such
date.
4. Until such time as said shares are registered pursuant to
Paragraph 2, the Shares issued and delivered pursuant to this
Agreement shall be issued in reliance upon an exemption from
registration under the Securities Act of 1933, as amended (the
"Securities Act"), by compliance with Regulation D and the
rules promulgated thereunder. The certificates evidencing the
Shares shall bear legends reciting the foregoing and resulting
restrictions upon the ability of MC Properties I to transfer
the Shares. MC Properties I represents and warrants that it
is acquiring said shares for its own account, for investment
purposes only and not with a view to the sale or distribution
thereof in violation of any applicable federal or state
securities laws; provided that, nothing contained in this
Paragraph shall prevent MC Properties I from transferring the
Shares in compliance with the provisions of this Agreement.
MC Properties I acknowledges that the Shares, at the time of
issuance thereof, will not be registered under the Securities
Act of 1933, an amended (the "Act") or under the securities
laws of any state, and may not be sold or otherwise
transferred except in compliance with the applicable
registration requirements of such Act and laws or in reliance
upon an available exemption from registration thereunder.
5. In the event that the Company fails to effect the registration
of the securities to be issued to MC Properties I by the above
date, then, other than as set forth in Paragraph 1., this
entire transaction will unwind, and the Lease Termination
Agreement and Promissory Note will govern the payment of sums
owed to MC Properties I.
6. MC Properties I acknowledges that its representatives have met
with representatives of Signal and have had the opportunity to
discuss the financial condition and operations of Signal MC
Properties I further acknowledges the receipt of Signal's
Annual Report on Form 10-K for the year ended 12/31/94. MC
Properties I agrees that it has entered into this Agreement in
reliance upon its won judgment and not in reliance upon any
statements or representations made by Signal.
7. Conditional upon Signal's fulfillment of the terms of this
Agreement, MC Properties I on behalf of itself and all
affiliated entities, releases and forever discharges Signal
and all of its affiliates from all past, present or future
claims, demands, obligations, causes of action, damages,
costs, loss, and expenses (including reasonable attorneys
fees) of any nature whatsoever whether based in tort, contract
or other theory of recovery, which MC Properties I now has, or
which may hereinafter accrue from any dealings, agreements,
claims, or other business transactions between MC Properties
I and Signal, including, without limitation, any known or
unknown claims, arising directly or indirectly from that lease
dated November 1, 1992, as amended, between MC Properties I
and Signal, the Lease Termination Agreement between Signal and
MC Properties, and/or the Promissory Note between Signal and
MC Properties I in the amount of $358,722.00. This release on
the part of MC Properties I shall be a fully binding and
complete settlement between Signal and MC Properties, its
successors and assigns, excepting only the executory
provisions of this Agreement.
If the above is an accurate reflection of our agreement, please
arrange for the signature of this Agreement on behalf of MC
Properties I where indicated below.
Again, we certainly appreciate your cooperation in working with
Signal in this matter, and we look forward to receiving a signed
copy of this Agreement shortly.
Sincerely, AGREED:
/s/ William H. Watts /s/ Fletcher Bright
- ------------------------ -------------------------
William H. Watts MC PROPERTIES I, L.P.
WHW/ps
c:\bob\agreemen\bright.d24
AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT NO. 1 TO TRANCHE A AND TRANCHE B NOTES
AMENDMENT NO. 1 TO SIGNAL AGREEMENT
AGREEMENT dated as of March 31, 1995 among AMERICAN
MARKETING WORKS, INC. (together with its successors, "AMW",
Signal Apparel Company Inc. (together with its successors,
"Signal") , The Shirt Shed, Inc. (together with its successors,
"Shirt Shed"), the LENDERS listed on the signature pages hereof
(the "Lenders") and GREYROCK CAPITAL GROUP INC. (as successor to
U S WEST Financial Services, Inc.), as Agent (the "Agent")
amending the Credit Agreement, the Tranche A Note and Tranche B
Note and the Signal Agreement referred to below.
W I T N E S S E T H:
WHEREAS, AMW, the Lenders and the Agent have heretofore
entered into an Amended and Restated Credit Agreement dated as of
February 16, 1993 (the "Credit Agreement") and Signal and the
Agent have heretofore entered into a Guaranty and Security
Agreement dated as of November 22, 1994 (the "Signal Agreement");
WHEREAS, AMW has issued a Tranche A Note and a Tranche
B Note to evidence the Tranche A Loans and Tranche B Loans
outstanding under the Credit Agreement; and
WHEREAS, the parties hereto desire to amend the
Credit Agreement, the Tranche A Note, the Tranche B Note and
<PAGE>
the Signal Agreement in order to extend the maturity date of the
Loans under the Credit Agreement to December 31, 1996 and to make
certain other mutually satisfactory changes;
NOW, THEREFORE, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise
specifically defined herein, each term used herein which is
defined in the Credit Agreement shall have the meaning assigned
to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" or "this
Note" and each other similar reference contained in the Credit
Agreement, the Tranche A Note, the Tranche B Note or the Signal
Agreement shall from and after the date hereof refer to the
Credit Agreement, the Tranche A Note, the Tranche B Note or the
Signal Agreement as amended hereby.
SECTION 2. EXTENSION OF MATURITY DATE OF TRANCHE A
LOANS AND TRANCHE B LOANS.
(a) TRANCHE A LOANS. The final scheduled maturity
date of the Tranche A Loans is hereby extended to December 31,
1996 from June 30, 1995 and the references to "June 30, 1995"
appearing in Section 2.04(a) of the Credit Agreement and in the
first paragraph of the Tranche A Note are hereby amended to read
"December 31, 1996".
(b) TRANCHE B LOANS. The final scheduled maturity
date of the Tranche B Loans is hereby extended to December 31,
1996 from June 30, 1995 and the references to "June 30, 1995"
appearing in Section 3.04(a) of the Credit Agreement and in the
first paragraph of the Tranche B Note are hereby amended to read
"December 31, 1996".
SECTION 3. SALE OF HERITAGE DIVISION OF SIGNAL. The
Lenders hereby waive the provisions of Section 5(I) of the Signal
Agreement to the extent required to permit the sale by Signal of
its "Heritage" division to a bona-fide third party purchaser for
fair market value, subject, however, to receipt by the Agent
pursuant to Section 2.4 of the Intercreditor Agreement dated
November 22, 1994 between BNY Financial Corporation ("BNY
Financial") and the Agent of notice that BNY Financial has
unconditionally consented to such sale and confirming that BNY
Financial has not received a security interest in any Replacement
Collateral (as defined in such Section 2.4) as an inducement to
grant such consent.
In order to induce the Lenders to grant the foregoing
waiver, and the other waivers herein provided for and to make the
other modifications to the Credit Agreement herein provided for,
Signal, AMW and Shirt Shed agree with the Lenders and the Agent
as follows (it being understood that failure to comply with such
agreements will render the foregoing waiver of no force or effect
after the first date of such failure to comply):
(a) The proceeds of any sale of the Heritage division
shall be delivered to BNY Financial to be applied, or held
for application, as provided in the letter agreement among
Signal, AMW, Shirt Shed, Greyrock and BNY Financial dated
March 31, 1995 (the "Heritage Side-Letter", a copy of which
is attached hereto) and Signal, AMW and Shirt Shed will
otherwise comply with their obligations under the Heritage
Side-Letter.
(b) Signal, AMW and Shirt Shed shall not permit the
aggregate amount of advances outstanding under the Factoring
Agreement (as defined in the Heritage Side-Letter) to at any
time exceed the sum of (i) the aggregate amount of the
"Formula Amount" under the Factoring Agreement at such time,
PLUS (ii) advances in excess of such aggregate "Formula
Amount" in an aggregate amount outstanding of no more than
$5,000,000 (except for the mid-month advances or up to
$2,000,000 permitted from time to time by BNY Financial
which must be repaid in full for at least one week in every
month) LESS (iii) the aggregate amount of any Excess
Proceeds (as defined in the Heritage Side-Letter) which at
such time has not been applied to repay the Loans under the
Credit Agreement.
(c) Signal shall cause any Excess Proceeds which have
not been applied to repay the Loans under the Credit
Agreement and which BNY Finance is not entitled to hold as
Additional collateral pursuant to the Heritage Side Letter
to be immediately applied to repay the Loans under the
Credit Agreement, and if Signal shall receive any such
Excess Proceeds it shall hold them in trust subject to
Greyrock's security interest therein pending application
thereof to repay such Loans.
(d) Walsh Greenwood & Co. shall have confirmed in
writing to the Agent that Excess Proceeds shall be applied
to pay amounts outstanding under the Credit Agreement
(whether or not then due) until all such amounts are paid in
full before any Excess Proceeds are applied to pay any
amounts outstanding under the Walsh Greenwood Credit
Agreement.
In furtherance of the foregoing, Signal hereby assigns its right
to receive any proceeds from the sale of the Heritage division to
the Agent to the extent such proceeds are not applied to repay
amounts outstanding under the Factoring Agreements or held by BNY
Financial as collateral to secure amounts outstanding under the
Factoring Agreements and hereby irrevocably authorizes and
directs BNY Financial to pay any such assigned proceeds directly
to the Agent for application to the Loans under the Credit
Agreement. Signal confirms that such assigned proceeds and its
rights to receive such assigned proceeds are (to the extent that
they constitute the "Collateral" under the Signal Agreement) subject
to the security interest previously granted to the secured parties
named in the Signal Agreement and that such rights and proceeds are
not subject to any Liens other than Permitted Liens (as defined in
the Signal Agreement, and specifically including Liens securing
obligations under the Walsh Greenwood Credit Agreement permitted
by clause (c) of Section 4 below).
SECTION 4. WALSH GREENWOOD CREDIT AGREEMENT. The
Lenders hereby waive the provisions of the Credit Agreement to
the extent necessary to permit the execution, delivery and
performance by AMW of the Credit Agreement (the "Walsh Greenwood
Credit Agreement") dated as of March 31, 1995 among Signal, AMW,
Shirt Shed and Walsh Greenwood & Co., as lender.
In order to induce the Lenders to grant the foregoing
waiver, and the other waivers herein provided for and to make the
other modifications to the Credit Agreement herein provided for,
Signal, AMW and Shirt Shed each agree with the Agent and the
Lenders as follows (it being understood that failure to comply
with such agreements will render the foregoing waiver of no force
and effect after the first date of such failure to comply):
(a) Signal, Shirt Shed and AMW shall not agree to any
amendment of the Walsh Greenwood Credit Agreement that could
adversely affect the rights and remedies of the Lenders
without the prior written consent of the Required Lenders.
(b) Without the prior written consent of the Required
Lenders, none of Signal, Shirt Shed or AMW will pay, repay,
prepay, redeem, purchase, acquire or make any other payment
in respect of any Debt outstanding under the Walsh Greenwood
Credit Agreement except as specifically permitted by Article
III of the Intercreditor Agreement dated as of March 31,
1995 among Greyrock, BNY Financial, Walsh Greenwood, Signal,
AMW and Shirt Shed.
(c) Except as expressly provided in Section 3 of the
Walsh Greenwood Credit Agreement, none of Signal, AMW or
Shirt Shed shall create or permit to exist any Lien securing
their respective obligations under the Walsh Greenwood
Credit Agreement.
(d) Unless otherwise agreed by the Required Lenders,
a total of $15,000,000 shall be borrowed under the Walsh
Greenwood Credit Agreement no later than June 30, 1995.
SECTION 5. REQUIRED PREPAYMENTS OF TRANCHE A AND
TRANCHE B LOANS. In the event that any Excess Proceeds are
applied to prepay the Loans under the Credit Agreement
pursuant to Section 3 (c) above, AMW shall, on each regularly
scheduled interest payment date for each Note, pay an amount
equal to the amount of interest that would have been payable with
respect to such Note on such date if no such prepayment pursuant
to Section 3(c) (or any prepayment pursuant to the next sentence
of this Section 5) had been made. Such amount shall be applied,
FIRST to pay all accrued and unpaid interest with respect to such
Note (such interest to be calculated taking into account prior
prepayments of principal of such Note), SECOND to prepay the
outstanding principal amount of the Tranche A Note until the
Tranche A Note is paid in full, and THIRD to prepay the
outstanding principal amount of the Tranche B Note until the
Tranche B Note is paid in full.
SECTION 6. CONDITIONS TO EFFECTIVENESS. The
effectiveness of this Agreement is subject to the satisfaction of
the following conditions:
(a) receipt by the Agent of counterparts hereof,
signed by each of the parties hereto;
(b) receipt by the Agent of the Walsh Greenwood Credit
Agreement signed by each of the parties thereto and of such other
evidence as the Agent shall have requested confirming that
$11,000,000 has been borrowed by Signal thereunder;
(c) receipt by the Agent of counterparts of the
amendments to the First Spring Pledge Agreement and the WG
Trading Guaranty (each as defined in Schedule 1.01 to the Credit
Agreement) in the forms attached hereto as Exhibits A and B,
respectively;
(d) receipt by the Agent of certificates (together
with undated stock powers executed in blank) representing all
issued and outstanding shares of pledged stock required to be
delivered to the Agent to be held in pledge under the First
Spring Pledge Agreement;
(e) receipt by the Agent of all fees and other amounts
due and payable under the Credit Agreement (including fees and
expenses payable pursuant to Section 9.03 of the Credit
Agreement) of which AMW has received notice; and
(f) receipt by the Agent of such other documents as it
may reasonably request relating to the existence of AMW, Shirt
Shed or Signal, the corporate or other authority for and the
validity of this Agreement and any other matters relevant hereto,
all in form and substance satisfactory to the Agent in its sole
good faith discretion.
SECTION 7. NO OTHER WAIVERS. Other than as
specifically provided herein, this Agreement shall not operate as
a waiver of any right, remedy, power or privilege of the Lenders
or the Agent under the Credit Agreement or of any other term or
condition of the Financing Documents and no failure or delay by
the Lenders or the Agent in exercising any right, remedy, power
or privilege under any Financing Document shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
SECTION 8. GOVERNING LAW. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
SECTION 9. COUNTERPARTS; EFFECTIVENESS. This Agreement
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall
become effective as of the date hereof when all of the conditions
set forth in Section 7 shall have been satisfied or waived with
the consent of all Lenders.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
AMERICAN MARKETING WORKS, INC.
By:/s/ William H. Watts
Title: Chief Financial Officer
SIGNAL APPAREL COMPANY, INC.
By:/s/ Willaim H. Watts
Title: Chief Financial Officer
THE SHIRT SHED, INC.
By:/s/ William H. Watts
Title: Chief Financial Officer
Greyrock Capital Group, Inc.
By:/s/ Ron Cohn
Title: Authorized Signatory
LIST OF OMITTED EXHIBITS
EXHIBIT A AMENDMENT NO. 1 TO FIRST SPRING PLEDGE AGREEMENT
EXHIBIT B AMENDMENT NO. 1 TO WG TRADING GUARANTY AGREEMENT
HERITAGE SIDE LETTER
The Company hereby agrees to furnish a copy of any such omitted
exhibit supplementally upon request of the Commission's Staff.
MUTUAL RELEASE AND AGREEMENT
THIS AGREEMENT is made by and between Glenn M.
Grandin (hereinafter referred to as "Grandin"), and Signal
Apparel Company, Inc. (hereinafter referred to as "Signal").
In consideration of the covenants contained
herein, the payment of $100,000.00 from Signal to Grandin and
for other good and valuable consideration exchanged by and
between the parties, the sufficiency of which is hereby
acknowledged, the parties hereby mutually covenant and agree as
follows:
1. The "Effective Date" of this Agreement is
the date upon which said document is fully executed,
2. Signal agrees to pay Grandin the sum of One
Hundred Thousand Dollars ($100,000,00), less applicable
deductions, (net amount $68,047.28) simultaneously with the
execution of this Agreement, the receipt of which is hereby
acknowledged by Grandin.
3. Signal agrees to pay to Grandin's counsel,
Baker, Donelson, Bearman & Caldwell, the sum of One Thousand
Dollars ($1,000,00) simultaneously with the execution of this
Agreement, the receipt of which is hereby acknowledged.
4. Grandin hereby releases and forever
discharges Signal and its officers, directors, shareholders,
agents, subsidiaries, representatives and affiliates of and from
any and all claims, debts, demands, causes of action, agreements,
obligations, damages, liabilities and expenses (including
attorneys' fees and costs) of any nature whatsoever, in contract
or in tort whether or not now known, suspected or claimed,
arising in the past, present or future, directly or indirectly
under that certain agreement entitled Glenn M. Grandin Employment
Agreement, dated October 5, 1992, as amended by the Amendment to
Employment Agreement dated April 1, 1994 (hereinafter
collectively referred to as the "Employment Agreement") or in
connection with Grandin's employment relationship with Signal or
the termination of that relationship or pursuant to the Fair
Labor Standards Act, the Civil Rights Acts of 1866, 1964 and
1991, the Americans With Disabilities Act, the Tennessee fair
employment practices laws, the Employee Retirement Income
Security Act or any other federal, state or local law or
regulation.
5. Signal hereby releases Grandin of and from
any and all claims, debts, demands, causes of action, agreements,
obligations, damages and liabilities of any nature whatsoever and
expenses including attorneys' fees and expenses, in contract or
in tort, whether or not now known, suspected or claimed, arising
out of Grandin's performance of his duties as an employee of
Signal and agrees to defend, indemnify and hold Grandin harmless
against any claims made against him relating to the performance
of his duties as an employee of Signal to the fullest extent
permitted by the company's bylaws in effect on the Effective
Date.
6. In the event that Grandin is required by
order of any court to return any portion of the monetary
payments made to him by Signal under Paragraph 2 hereof, or to
pay any such sums to a trustee or into court as a part of a
bankruptcy proceeding at any time after the Effective Date of
this Agreement, the releases granted in Paragraphs 4 and 5 of
this Agreement shall be rendered null and void of no effect
whatsoever. In such event, Grandin shall be free to pursue any
claims which he may have against Signal. Any portion of any
payments contemplated under Paragraph 2 which Grandin is not
required to return shall be treated as a set off against
Grandin's claims against Signal.
7. Neither this Agreement nor the releases
granted hereunder shall abrogate or affect in any way Grandin's
rights to continue his participation in Signal's 401K Plan,
Signal's medical plan or Stock Option Plan to the extent Grandin
has any vested rights in such plans. Signal acknowledges that,
pursuant to the terms of the Employment Agreement as amended and
pursuant to prior grants, Grandin has fully vested Incentive
Stock Options to purchase 51,664 shares of Signal's common stock
at a price of $7.06 per share (hereinafter referred to as "ISO
Options") and has fully vested Non-Incentive Stock options to
purchase an additional 13,336 shares of Signal's common stock at
a price of $7.06 per share (hereinafter referred to as "Non-ISO
Options"). The ISO Options are exercisable at Grandin's
election at any time within three (3) months after Grandin's
termination date from Signal, February 1, 1995. The Non-ISO
Options are exercisable at Grandin's election at any time within
one (1) year after Grandin's termination date from Signal. Signal
warrants that a registration statement with respect to all such
shares has been filed with the Securities and Exchange Commission
and that no further registration statements need to be filed by
Grandin in connection with the purchase and resale of said
shares. All other stock options held by Grandin are canceled as
of February 1, 1995.
8. Signal agrees to provide Grandin with a
copy of its directors' and officers' liability insurance policy
on or before the Effective Date of this Agreement. Signal
further agrees that it will continue for a period of at least
one (1) year from the Effective Date to maintain directors' and
officers' liability insurance substantially similar to that
found in said policy.
9. It is understood and agreed that at no
time during the negotiations for this Agreement nor at the time
of its execution was Grandin an officer, director or employee of
Signal, nor was he a person in control of Signal, nor is he a
relative of any officer, director or person in control of Signal.
10. It is understood and agreed that this
Agreement is being executed in settlement and compromise of
disputed claims between the parties, and the consideration paid
are accepted hereunder is not to be construed as an admission of
liability by any party.
11. This Agreement has been thoroughly
reviewed and negotiated by all parties and/or their counsel and
therefore, the language of this Agreement should not be construed
strictly for or against any party hereto.
12. This Mutual Release and Settlement Agreement
and the releases and covenants contained herein shall be binding
upon and inure to the benefit of the predecessors, successors and
assigns of each of the parties and any other person, heir, firm
or corporation, now or hereinafter successor or predecessor, in
any manner to each of the parties.
13. The representatives executing this Agreement
on behalf of Signal represent and warrant that they are duly
authorized to execute this Agreement on behalf of Signal.
14. This Agreement is to be governed by and
construed according to the laws of the State of Tennessee.
15. No amendment or modification of this
Agreement shall be deemed effective unless made in writing,
signed by the parties hereto.
IN WITNESS WHEREOF, Grandin and Signal execute
this agreement to be effective as of the 1 day of March, 1995.
/s/ Glenn M. Grandin
----------------------------
Glenn M. Grandin
SIGNAL APPAREL COMPANY, INC.
By: /s/ Robert J. Powell
-------------------------
Vice President
MUTUAL RELEASE AND SETTLEMENT AGREEMENT
THIS AGREEMENT is made by and between Daniel Cox
(hereinafter referred to as "Cox"), and Signal Apparel Company,
Inc. (hereinafter referred to as "Signal").
WHEREAS, prior to March 24, 1995, Cox was employed by Signal
in the position of executive vice president of marketing and
sales and was within the protected-age category under state age
discrimination laws:
WHEREAS, effective March 17, 1995, Cox resigned his position
as an officer of Signal, contending that the terms and conditions
of his employment had been altered by Signal in a discriminatory
manner based upon his age, and his employment with Signal was
terminated by mutual agreement of the parties effective March 24,
1995;
WHEREAS, Cox has instituted litigation against the company
alleging age discrimination under state law in the case styled
DANIEL COX V. SIGNAL APPAREL COMPANY, INC., in the Circuit Court
of Hamilton County, Tennessee, No. 95-CV-749 (the "Litigation"),
seeking recovery of monetary damages;
WHEREAS, Cox and Signal desire to fully settle and
compromise all matters in dispute between them.
NOW, THEREFORE, in consideration of the aforementioned
premises, and other good and valuable consideration, the receipt
and sufficiency of which is acknowledged, the parties agree as
follows:
1. The "Effective Date" of this Agreement is the date upon
which said document is fully executed.
2. No later than April 22, 1995, Signal agrees to pay to
Cox the sum of $38,500 as full settlement and satisfaction of
Cox's claims for future salary and as consideration for the
termination of the employment contract between Cox and Signal
dated March 4, 1994 (the "Employment Agreement"). Said sum shall
be subject to federal withholding taxes.
3. Signal agrees to pay to Cox the sum of $25,000
representing the guaranteed bonus which Cox earned for the fiscal
year 1994. Said sum shall be subject to federal withholding
taxes and shall be paid within three (3) business days of the
execution of this Agreement.
4. Signal shall pay to Cox the sum of $13,125,
representing 15 days' of unused vacation which accrued to Cox
prior to his termination. Said sum shall be subject to federal
withholding taxes and shall be paid (delete: simultaneously with;
add: within three business days of) (/s/ W.H.W.) the execution of
this Agreement.
5. Signal agrees to pay Cox the additional sum of $21,389
per month for a nine-month period, beginning May, 1995, as
compensation to Cox for the alleged humiliation, embarrassment,
pain and suffering associated with the alleged diminution of
Cox's duties and responsibilities at the company due to his age.
As a settlement of personal injury claims, the monthly payments
shall not be treated as taxable income subject to withholding and
will be paid in gross to Cox. Said payments shall be due on or
before the 22nd day of each month, beginning May 22, 1995 and
ending on January 22, 1996. In the event Signal fails to make
any payment called for under this Agreement within twenty (20)
days of the date upon which it is due, all future payments
contemplated under this paragraph shall be accelerated and shall
become immediately due and payable to Cox without further demand.
Any payments due under this paragraph which are not made within
twenty days after they are due shall bear interest at the rate of
10% per annum until paid.
6. Cox agrees to indemnify, defend, and hold Signal
harmless for any and all liability that Signal incurs for
interest and penalties to any and all taxing authorities, arising
from Signal not withholding the aforesaid taxes on the payments
described in PARAGRAPH 5.
7. Signal agrees to continue the benefits which Cox
received as of March 24, 1995, for a period ending on January 22,
1996. Said benefits, include, but are not limited to, health,
life and disability insurance, pension benefits, payment of all
costs, including lease obligations, insurance, gas and reasonable
maintenance costs of the company vehicle which Signal currently
leases for Cox's use. Neither this Agreement nor the releases
granted hereunder shall abrogate or affect in any way Cox's
rights to continue his participation in Signal's 401-K Plan,
medical plan or stock option (as set forth below).
8. Signal acknowledges that Cox had previously been
granted Incentive Stock Options to purchase 50,000 shares of
Signal common stock at the price of $5.50 per share. As of the
date of his termination, Signal and Cox agree that Cox was fully
vested in options to purchase 12,500 shares of Signal's common
stock at a price of $5.50 per share, subject to the approval of
Signal's Compensation Committee, which approval the company will
use its best efforts to obtain. In the event that such approval
is not obtained within ten (10) days of the date of this
Agreement, Cox shall, at his sole discretion, have the right to
declare this Agreement null and void and return both parties to
their original positions. These options are exercisable at Cox's
election at anytime on or before June 24, 1995. Signal warrants
that a registration statement with respect to all such shares has
been filed with the Securities Exchange Commission and that no
further registration statements need to be filed by Cox in
connection with the purchase and resale of said shares. All
other stock options held by Cox are canceled as of the Effective
Date of this Agreement.
9. Each party to this Agreement will be responsible for
their legal fees and expenses.
10. Subject to PARAGRAPH 10 below, Cox hereby releases and
forever discharges Signal and its officers, directors,
shareholders, agents, subsidiaries, representatives and
affiliates of and from any and all claims, debts, demands, causes
of action, obligations, damages and liabilities and expenses
(including attorneys' fees and expenses) of any nature
whatsoever, in contract or in tort, whether or not now known,
suspected or claimed, arising in the past, present or future,
specifically including, but not limited to, those claims asserted
in the Litigation and all claims under the Employment Agreement
or in connection with Cox's employment relationship with Signal
or the termination of that relationship or pursuant to the Fair
Labor Standards Act, the Civil Rights Acts of 1866, 1964 and
1961, the Americans With Disabilities Act, the Tennessee fair
employment practices laws, ERISA or any other federal, state or
local law or regulation.
11. Employee further acknowledges that he has been given at
least twenty-five (25) days to review and consider this
Agreement. In further consideration for the Agreement by Signal
to provide Cox with the severance package and benefits outlined
above, the sufficiency of which Cox acknowledges, Cox, on behalf
of himself, his successors, and assigns, releases and forever
discharges Signal and its subsidiaries, parent and affiliated
companies and their respective assigns from any and all claims or
causes of action relating to or arising out of the Cox's
employment by Signal or the termination of that employment which
arises under the Age Discrimination in Employment Act, as
amended. Cox further acknowledges that he may revoke acceptance
to the waiver of claims under the Age Discrimination in
Employment Act, by notifying Signal of such revocation within
seven (7) days of the execution of this Agreement.
12. Signal hereby releases Cox of and from any and all
claims, debts, demands, causes of action, obligations, damages
and liabilities of any nature whatsoever, in contract or in tort,
whether or not now known, suspected or claimed, arising out of
Cox's performance of his duties as an officer and employee of
Signal and agrees to defend, indemnify and hold Cox harmless
against any claims made against him relating to the performance
of his duties as an officer and employee of Signal.
13. In the event that Cox is required by order of any court
to return any portion of the monetary payments made to him by
Signal under PARAGRAPH 2 through 7 hereof, or to pay any such
sums to a trustee or into court as part of a bankruptcy
proceeding at any time after the Effective Date of this
Agreement, the releases granted in PARAGRAPHS 10, 11 and 12 of
this Agreement shall be rendered null and void and of no effect
whatsoever. In such event, Cox shall be free to pursue any
claims which he may have against Signal. Any portion of any
payments contemplated under PARAGRAPHS 2 through 7 which Cox is
not required to return shall be treated as a set off against
Cox's claims against Signal.
14. Signal agrees to provide Cox with a copy of its
directors and officers' liability insurance policy on or before
the Effective Date of this Agreement. Signal further agrees that
it will continue for a period of at least one (1) year from the
Effective Date to maintain directors and officers' liability
insurance substantially similar to that found in said policy.
15. It is understood and agreed that at no time during the
negotiations for this Agreement nor at time of its execution was
granted an officer, director or employee of Signal, nor was he a
person in control of Signal, nor is he a relative of any officer,
director or person in control of Signal.
16. It is understood and agreed that this Agreement is
being executed in settlement and compromise of disputed claims
between the parties, and the consideration paid and accepted
hereunder is not to be construed as an admission of liability by
any party.
17. This Agreement has been thoroughly reviewed and
negotiated by all parties and/or their counsel and therefor, the
language of this Agreement should not be strictly construed for
or against any party hereto.
18. This Mutual Release and Settlement Agreement and the
releases and covenants contained herein shall be binding upon and
inure to the benefit of the predecessors, successors and assigns
in each of the parties and any other person, heir, firm or
corporation, now or hereinafter successor or predecessor, in any
manner to each of the parties. The parties specifically agree
that should Cox die before all payments contemplated under this
Agreement have been made, his daughter, Heather Elizabeth Cox,
will be entitled to assume all his rights under this Agreement,
including rights to any future payments due hereunder.
19. The representatives executing this Agreement on behalf
of Signal represent and warrant that they are duly authorized to
execute this Agreement on behalf of Signal.
20. This Agreement is to be governed by and construed
according to the laws of the State of Tennessee and will
supersede all prior written or oral agreements or understandings
between Signal and Cox.
21. No amendment or modification of this Agreement shall be
deemed effective unless made in writing, signed by the parties
hereto.
IN WITNESS WHEREOF, Cox and Signal execute this Agreement to
be effective as of the 13 day of April , 1995.
------ ---------
/s/ Daniel Cox
---------------------------
Daniel Cox
SIGNAL APPAREL COMPANY, INC.
By: /s/ William H. Watts
------------------------
Its: Exec. V. P.
-----------------------
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,061
<SECURITIES> 0
<RECEIVABLES> 10,606
<ALLOWANCES> 2,685
<INVENTORY> 29,245
<CURRENT-ASSETS> 39,805
<PP&E> 51,393
<DEPRECIATION> 35,510
<TOTAL-ASSETS> 66,666
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<BONDS> 1,158
<COMMON> 102
0
76,202
<OTHER-SE> (77,825)
<TOTAL-LIABILITY-AND-EQUITY> 66,666
<SALES> 26,217
<TOTAL-REVENUES> 26,217
<CGS> 20,472
<TOTAL-COSTS> 20,472
<OTHER-EXPENSES> 255
<LOSS-PROVISION> 222
<INTEREST-EXPENSE> 1,603
<INCOME-PRETAX> (5,318)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,318)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,318)
<EPS-PRIMARY> (.53)
<EPS-DILUTED> (.53)
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