SIGNAL APPAREL COMPANY, INC.
200-A Manufacturers Road
Chattanooga, Tennessee 37405
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1996
Notice is hereby given that the Annual Meeting of
Shareholders of Signal Apparel Company, Inc. (the "Company") will
be held at 200-A Manufacturers Road, Chattanooga, Tennessee, on
May 28, 1996, at 10:00 a.m. for the following purposes:
1. To elect seven directors; and
2. To transact such other business as may properly
come before the meeting or any adjournments thereof.
The Board of Directors has fixed March 29, 1996, as the
record date for the determination of shareholders entitled to
vote at the Annual Meeting and to receive notice thereof.
Shareholders are cordially invited to attend the meeting in
person. IF YOU CANNOT ATTEND, PLEASE RECORD YOUR VOTE AND SIGN
AND DATE THE ACCOMPANYING PROXY WHICH IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS AND RETURN IT IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
Robert J. Powell
Secretary
Chattanooga, Tennessee
April 29, 1996
SIGNAL APPAREL COMPANY, INC.
200-A Manufacturers Road
Chattanooga, Tennessee 37405
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1996
This Proxy Statement, which is to be mailed on or about
April 29, 1996, is furnished to shareholders on behalf of the
Board of Directors for solicitation of proxies for use at the
Annual Meeting of Shareholders of Signal Apparel Company, Inc.
(the "Company") to be held on May 28, 1996, at 10:00 a.m., and at
all adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. Any proxy
given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by giving written
notice to the Secretary of the Company.
The cost of this solicitation will be paid by the Company.
In addition to solicitation by mail, certain officers, directors
and other employees of the Company, who will receive no
additional compensation for their services, may solicit proxies
by telephone, telegraph or personal call. The Company has
engaged Corporate Communications, Inc. to distribute soliciting
material to shareholders of record and to solicit brokers and
other persons holding shares beneficially owned by others to
procure from such beneficial owners consents to the execution of
proxies. In addition to a fee of approximately $4,000 to be paid
to Corporate Communications, Inc., the Company will reimburse
brokers and others for their expense in sending proxy material to
beneficial owners.
On March 29, 1996, the outstanding securities of the Company
consisted of 11,387,826 shares of Common Stock, par value $.01
per share; 327.087 shares of Series A Preferred Stock, stated
value $100,000 per share; and 317.678 shares of Series C
Preferred Stock, stated value $100,000 per share. Each
outstanding share of the Common Stock is entitled to one vote per
share on each matter to be brought before the Annual Meeting.
Neither the Series A Preferred Stock nor the Series C Preferred
Stock is entitled to vote on any matter scheduled to be brought
before the Annual Meeting.
Shares represented at the Annual Meeting by properly
executed proxies will be voted in accordance with the
instructions indicated in the proxies unless such proxies have
previously been revoked. If no instructions are indicated, such
shares will be voted FOR electing the Board of Directors' seven
nominees for director.
Any proxy given pursuant to this solicitation may be revoked
at any time by the shareholder giving it, insofar as it has not
been exercised, by delivering to the Secretary of the Company a
written notice of revocation bearing a later date than the proxy
or by submission of a later-dated, properly executed proxy.
Attendance at the Annual Meeting will not, in and of itself,
constitute a revocation of a proxy. Any written notice revoking
a proxy should be sent to Signal Apparel Company, Inc., 200-A
Manufacturers Road, Chattanooga, Tennessee 37405, Attention:
Robert J. Powell, Secretary.
The Board of Directors expects all nominees named below to
be available for election. In case any nominee is not available,
the proxy holders may vote for a substitute. The Company knows
of no specific matter to be brought before the meeting that is
not referred to in the Notice of Meeting or this proxy statement.
Regulations of the Securities and Exchange Commission permit the
proxies solicited pursuant to this Proxy Statement to confer
discretionary authority with respect to matters of which the
Company did not know a reasonable time before the meeting.
Accordingly, the proxy holders may use their discretionary
authority to vote with respect to any such matter pursuant to the
proxy solicited hereby.
The persons designated by the Board of Directors as proxy
holders in the accompanying form of proxy are Bruce E. Krebs and
William H. Watts, officers of the Company. The cost of
solicitation of proxies will be borne by the Company.
The presence, in person or by proxy, of the holders of a
majority of the votes eligible to be cast by the holders of the
outstanding shares of Common Stock entitled to vote is necessary
to constitute a quorum at the Annual Meeting. Directors are
elected by a plurality of the votes cast by the shares entitled
to vote in the election at which a quorum is present.
Abstentions and broker non-votes are counted as present for
determination of a quorum but are not counted as affirmative or
negative votes on any item to be voted upon and are not counted
in determining the number of shares voted on any item.
<TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of the Company's equity securities as of
March 29, 1996, by each shareholder that the Company knows to own
beneficially more than 5% of the issued and outstanding shares of
the Company's Common Stock, director of the Company, nominee for
director, Named Executive (as defined herein) and by the
directors and Named Executives of the Company as a group.
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Title of Class Beneficial Ownership(1) Percent of Class
- ------------------------------------ -------------- ----------------------- ----------------
<S> <S> <C> <C>
FS Signal Associates, L.P.; FS Signal Common Stock 8,514,282 54.1%
Associates II, L.P.; FS Signal, Inc.; $.01 par value
and Kevin S. Penn, as a group
65 E. 55th St., 32nd Floor Series A 327.087 100%
New York, New York 10022(2) Preferred Stock
$100,000 stated
value
Series C 139.709 44%
Preferred Stock
$100,000 stated
value
Kevin S. Penn Common Stock 8,514,282 54.1%
65 E. 55th St., 32nd Floor $.01 par value
New York, New York 10022(2)
Series A 327.087 100%
Preferred Stock
$100,000 stated
value
Series C 139.709 44%
Preferred Stock
$100,000 stated
value
FS Signal, Inc. Common Stock 8,214,282 53.2%
65 E. 55th St., 32nd Floor $.01 par value
New York, New York 10022(2)(3)
Series A 327.087 100%
Preferred Stock
$100,000 stated
value
Series C 139.709 44%
Preferred Stock
$100,000 stated
value
FS Signal Associates, L.P. Common Stock 3,715,983 30.7%
c/o Kenneth Musen $.01 par value
157 Church Street, Box 426
New Haven, Connecticut 06502(2)(4) Series C 130.334 41%
Preferred Stock
$100,000 stated
value
FS Signal Associates II, L.P. Common Stock 4,498,299 30.6%
c/o Kenneth Musen $.01 par value
157 Church Street, Box 426
New Haven, Connecticut 06502(2)(5) Series A 327.087 100%
Preferred Stock
$100,000 stated
value
Series C 9.375 3%
Preferred Stock
$100,000 stated
value
Walsh Greenwood & Co; Stephen Common Stock 7,415,549 51.6%
Walsh; Paul R. Greenwood; WG $.01 par value
Partners, L.P.; and WG Trading
Company Limited Partnership, as a Series C 177.969 56%
group Preferred Stock
One East Putnam Avenue $100,000 stated
Greenwich, Connecticut 06830(6) value
Walsh Greenwood & Co. Common Stock 3,963,449 34.8%
One East Putnam Avenue $.01 par value
Greenwich, Connecticut 06830(6)(7)
WG Partners, L.P. Common Stock 2,700,149 23.7%
One East Putnam Avenue $.01 par value
Greenwich, Connecticut 06830(6)(7)
WG Trading Company Common Stock 3,452,100 24%
Limited Partnership $.01 par value
One East Putnam Avenue
Greenwich, Connecticut 06830(6)(7) Series C 177.969 56%
Preferred Stock
$100,000 stated
value
Kidd, Kamm Equity Partners, L.P. Common Stock 1,400,000 12.3%
Three Pickwick Plaza $.01 par value
Greenwich, Connecticut 06830
Jacob I. Feigenbaum Common Stock -- --
$.01 par value
Paul R. Greenwood(6)(7) Common Stock 7,415,549 51.6%
$.01 par value
Series C 177.969 56%
Preferred Stock
$100,000 stated
value
Bruce E. Krebs Common Stock -- --
$.01 par value
Gregory B. Murphy Common Stock -- --
$.01 par value
Leon Ruchlameer(8) Common Stock 100,000 (11)
$.01 par value
Stephen Walsh(6)(7) Common Stock 7,415,549 51.6%
$.01 par value
Series C 177.969 56%
Preferred Stock
$100,000 stated
value
William H. Watts(8) Common Stock 100,000 (11)
$.01 par value
Marvin J. Winkler Common Stock 1,000,000 8.8%
$.01 par value
Leslie W. Levy(9) Common Stock 17,778 (11)
$.01 par value
Robert J. Powell(8) Common Stock 125,000 1.1%
$.01 par value
All directors and executive Common Stock 7,758,327 52.8%
officers as a group (10) $.01 par value
<FN>
<F1>
(1) As of March 29, 1996, the Company had issued and outstanding
11,387,826 shares of Common Stock, 327.087 shares of Series
A Preferred Stock and 317.678 shares of Series C Preferred
Stock. In general, a person is deemed to be a "beneficial
owner" of a security if that person has or shares "voting
power," which includes the power to vote or direct the
voting of such security, or "investment power," which
includes the power to dispose of or to direct the
disposition of such security, or if a person has the right
to acquire either voting power or investment power over such
security through the exercise of an option or the conversion
of another security within 60 days. More than one person
may be a beneficial owner of the same security, and a person
may be deemed to be a beneficial owner of securities as to
which he has no personal economic interest or which he may
not vote. In the case of persons who hold options or
warrants to purchase shares of Common Stock that are
exercisable either immediately or within 60 days of March
29, 1996, the shares of Common Stock represented thereby
have been treated as outstanding for purposes of calculating
the ownership totals and percentages (and the percentage of
voting power) for only the persons holding such options and
warrants, and have not otherwise been treated as outstanding
shares.
<F2>
(2) FS Signal Associates, L.P. ("FS Signal"); FS Signal
Associates II, L.P. ("FS Signal II"); FS Signal, Inc.
("FSSI"); and Kevin S. Penn ("Penn") have filed a report, as
a group, on Schedule 13D disclosing their various
relationships. Such persons may be deemed to be a group for
purposes of the beneficial ownership of the securities
disclosed in the table, although they disclaim membership in
a group. The 8,514,282 shares of Common Stock include (i)
2,980,983 shares of Common Stock held directly by FS Signal;
(ii) 1,185,799 shares of Common Stock held directly by FS
Signal II; (iii) warrants held directly by FS Signal to
acquire 735,000 shares of Common Stock; (iv) warrants held
directly by FS Signal II to acquire 3,312,500 shares of
Common Stock; and (v) warrants held directly by Penn to
acquire 300,000 shares of Common Stock. The 327.087 shares
of Series A Preferred Stock are held directly by FS Signal
II. The 139.709 shares of Series C Preferred Stock include
(i) 130.334 shares of Series C Preferred Stock held directly
by FS Signal and (ii) 9.375 shares of Series C Preferred
Stock held directly by FS Signal II. The reporting persons
may be deemed to be members of a group and, accordingly,
could each be deemed to have beneficial ownership (by virtue
of Rule 13(d)1-5(b)(1)) of all shares of Common Stock,
Series A Preferred Stock and Series C Preferred Stock held
directly by the various members of the group. Except as
disclosed herein, no other entity or person that may be
deemed to be a member of the group holds direct beneficial
ownership of any Common Stock, Series A Preferred Stock or
Series C Preferred Stock. Penn is the President of FSSI,
which is the general partner of both FS Signal and FS Signal
II. Both FS Signal and FS Signal II are limited
partnerships. Pursuant to both the bylaws of FSSI and an
understanding among the limited partners of FS Signal and FS
Signal II, Penn, as President of FSSI, has the sole voting
and investment power over the securities held by both
limited partnerships.
<F3>
(3) As the general partner of both FS Signal Associates, L.P.
("FS Signal") and FS Signal Associates II, L.P. ("FS Signal
II"), FS Signal, Inc. ("FSSI") may be deemed to be the
beneficial owner of (i) 2,980,983 shares of Common Stock
held directly by FS Signal; (ii) 1,185,799 shares of Common
Stock held directly by FS Signal II; (iii) warrants held
directly by FS Signal to acquire 735,000 shares of Common
Stock; (iv) warrants held directly by FS Signal II to
acquire 3,312,500 shares of Common Stock; (v) 327.087 shares
of Series A Preferred Stock held directly by FS Signal II;
(vi) 130.334 shares of Series C Preferred Stock held
directly by FS Signal; and (vii) 9.375 shares of Series C
Preferred Stock held directly by FS Signal II. Kevin S.
Penn ("Penn") is the President of FSSI. Pursuant to both
the bylaws of FSSI and an understanding among the limited
partners of FS Signal and FS Signal II, Penn, as President
of FSSI, has the sole voting and investment power over the
securities held by both limited partnerships.
<F4>
(4) FS Signal Associates, L.P. ("FS Signal"), a Connecticut
limited partnership, owns directly (i) 2,980,983 shares of
Common Stock; (ii) warrants to acquire 735,000 shares of
Common Stock; and (iii) 130.334 shares of Series C Preferred
Stock. Kevin S. Penn, in his capacity as President of FS
Signal, Inc., the general partner of FS Signal, may be
deemed to own beneficially all shares of Common Stock and
Series C Preferred Stock held by FS Signal.
<F5>
(5) FS Signal Associates II, L.P. ("FS Signal II"), a
Connecticut limited partnership, owns directly (i) 1,185,799
shares of Common Stock; (ii) warrants to acquire 3,312,500
shares of Common Stock; (iii) 327.087 shares of Series A
Preferred Stock; and (iv) 9.375 shares of Series C Preferred
Stock. Kevin S. Penn, in his capacity as the President of
FS Signal, Inc., the general partner of FS Signal II, may be
deemed to own beneficially all shares of Common Stock,
Series A Preferred Stock and Series C Preferred Stock held
by FS Signal II.
<F6>
(6) Walsh Greenwood & Co. ("Walsh Greenwood"); Walsh Greenwood's
sole general partners, Stephen Walsh ("Walsh") and Paul R.
Greenwood ("Greenwood"); WG Partners, L.P. ("WG Partners");
and WG Trading Company Limited Partnership ("WG Trading")
have filed a report, as a group, on Schedule 13D disclosing
their various relationships. Such persons may be deemed to
be a group for purposes of the beneficial ownership of the
securities disclosed in the table, although they disclaim
membership in a group. The 7,415,549 shares of Common Stock
include (i) 2,700,149 shares of Common Stock owned directly
by WG Partners; (ii) 477,100 shares of Common Stock owned
directly by WG Trading; (iii) 1,263,300 shares of Common
Stock held directly by Walsh Greenwood; and (iv) warrants to
acquire a total of 2,975,000 shares of Common Stock held by
WG Trading. All 177.969 shares of Series C Preferred Stock
are held directly by WG Trading.
<F7>
(7) Walsh Greenwood has the sole power to vote and dispose of
1,263,300 shares of Common Stock (all of which shares are
held by Walsh Greenwood on behalf of certain managed
accounts and as to which Walsh Greenwood has the power to
vote and dispose of but does not have a pecuniary interest
therein). WG Trading has (i) the sole power to vote and
dispose of the 477,100 shares of Common Stock it owns
directly; (ii) the sole power to dispose of the warrants to
acquire a total of 2,975,000 shares of Common Stock, which
warrants are exercisable by WG Trading's general partners,
Walsh and Greenwood; and (iii) the sole power to vote and
dispose of the 177.969 shares of Series C Preferred Stock
that it owns directly. WG Partners has the sole power to
vote and dispose of the 2,700,149 shares of Common Stock
owned by it directly, which power is exercisable by its sole
general partner, Walsh Greenwood. Both Walsh and Greenwood,
in their individual capacities as general partners of both
Walsh Greenwood and WG Trading, may be deemed to share the
power to vote and direct the disposition of the shares of
Common Stock and Series C Preferred Stock beneficially owned
by Walsh Greenwood, WG Trading and WG Partners.
<F8>
(8) This figure represents options that are immediately
exercisable which were issued pursuant to the Company's 1985
Stock Option Plan.
<F9>
(9) This figure includes options that are immediately
exercisable to acquire 15,000 shares of Common Stock which
were issued pursuant to the Company's 1985 Stock Option
Plan.
<F10>
(10) This figure includes shares for which indirect beneficial
ownership may be attributed to certain directors of the
Company, as discussed in Notes (6) and (7) above. The
figure includes warrants to acquire 2,975,000 shares of
Common Stock and options to acquire 340,000 shares of Common
Stock. All such warrants and options are immediately
exercisable and, consequently, have been treated as
outstanding shares of Common Stock for calculations of share
ownership and voting power for the group of directors and
executive officers. See Note (1) above.
<F11>
(11) Less than 1%.
</FN>
</TABLE>
PROPOSAL NUMBER I
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation provide for
a board of directors consisting of not less than five nor more
than ten persons, with the exact number to be set by the Board of
Directors. The Board of Directors has set the number of
directors at seven. All directors are elected to serve a one
year term, or until their respective successor is elected and
qualified. The persons named in the enclosed form of proxy will
vote for the election of the seven nominees named below, unless
such authority is withheld on the enclosed form of proxy. In the
event any of the nominees should become unavailable to serve as a
director, the proxy will be voted by the persons named therein in
accordance with their best judgment.
<TABLE>
The following is a list of the names, ages, positions held
with the Company and business experience during the past five
years of all nominees for director:
<CAPTION>
Year First
Became A
Name and Address Age Business Experience and Directorships Director
- ------------------------ --- ------------------------------------- ----------
<S> <C> <S> <C>
Jacob I. Feigenbaum 48 President of Miracle Suit by Swim Shaper 1994
c/o Miracle Suit since February 1996; President and owner
1411 Broadway, 30th Floor of Sea Q. America, August 1994 to 1996;
New York, NY 10018 President of Robby Len Swimwear
division of Apparel America, 1980 to 1994.
Paul R. Greenwood 49 Managing General Partner of Walsh, 1990
One East Putnam Avenue Greenwood & Co., a broker-dealer
Greenwich, CT 06830 engaged in effecting transactions in
securities for others and for its own
account.
Bruce E. Krebs 48 President and Chief Operating Officer 1995
200-A Manufacturers Road since August 1995; President of H.H.
Chattanooga, TN 37405 Cutler Company, 1994 to August 1995;
President of Cutler Sports Apparel, 1990
to 1994.
Gregory B. Murphy 47 President and Chief Executive Officer of 1991
250 North Street Kraft Foods, Inc. since May 1988
White Plains, NY 10625
Leon Ruchlamer 67 Vice Chairman of the Board of Directors 1995
200-A Manufacturers Road of the Company since August 1995;
Chattanooga, TN 37405 President of the Company, February 1995
to August 1995; Consultant within
apparel and textile industry, 1992 to
January 1995; Various positions with
Gitano, Inc., a clothing and fabric
manufacturer, until 1992.
Stephen Walsh 51 General Partner of Walsh, Greenwood & 1990
3333 New Hyde Park Road Co., broker-dealer engaged in effecting
North Hills, NY 11040 transactions in securities for others and
for its own account.
William H. Watts 55 Executive Vice President and Chief 1995
200-A Manufacturers Road Financial Officer since February 1995;
Chattanooga, TN 37405 Consultant for Michelle St. John
International Design and Charles Komar
& Sons, March 1994 to January 1995;
Vice President/Chief Financial Officer
of Land'n Sea, Inc., 1990 to 1994.
</TABLE>
The information set forth above with respect to the
principal occupation or employment of each nominee during the
past five years has been furnished to the Company by the
respective nominee.
Pursuant to an agreement among the Company and certain
shareholders (Walsh Greenwood & Co., WG Trading Company Limited
Partnership, FS Signal Associates, L.P. and FS Signal Associates
II, L.P.), FS Signal Associates, L.P. and FS Signal Associates
II, L.P., collectively, have the right beginning this year and
ending in 2001 to nominate two directors to be included in the
slate of nominees.
The Board of Directors held 11 meetings in 1995.
COMMITTEES OF THE BOARD
Audit Committee. This committee recommends, for appointment by
the Board of Directors, a firm of independent certified public
accountants to serve as auditors for the Company; makes
recommendations to the Board of Directors with respect to the
scope of the annual audit; approves the services which the
auditors may render to the Company without impairing the
auditors' independence; approves the auditors' fees; and may
undertake investigations of any financial matter and make
recommendations to the Board of Directors with respect thereto.
This committee meets at least once each year with the auditors to
review the results of the audit and to review all recommendations
made by the auditors with respect to the accounting methods used
and the system of internal control followed by the Company and
advises the Board of Directors with respect thereto. The
independent auditors have direct access to the members of this
committee on any matter at any time. This committee met twice in
1995. Present members of this committee are Mssrs. Feigenbaum
and Murphy. The Board of Directors plans to add one member to
this committee.
Compensation Committee. This committee recommends to the Board
of Directors the amount of compensation and the terms and
conditions of employment of each officer of the Company, as well
as approves all employment contracts and agreements for executive
officers. This committee administers the 1985 Stock Option Plan
and makes recommendations to the Board of Directors with respect
to employee benefit plans. The Committee met three times in
1995. Present members of this committee are Messrs. Feigenbaum,
Greenwood, Murphy and Krebs. As President of the Company, Mr.
Krebs is a member ex-officio of the Committee.
Executive Committee. This committee has and may exercise, except
as otherwise provided by statute or by the Restated Articles of
Incorporation, all the powers and authority of the Board of
Directors. The Committee did not meet in 1995. Present members
of this committee are Messrs. Greenwood and Walsh.
The Board has no standing nominating committee. Individual
directors and management recommend to the full Board qualified
candidates for election as directors and officers of the Company.
The Board will consider nominees for director recommended by
shareholders. Such recommendations may be submitted in writing
to the Secretary of the Company.
EXECUTIVE OFFICERS
The following is a list of the names, ages, positions with the
Company and business experience during the past five years of the
executive officers of the Company:
Name Age Office and Business Experience
---- --- -------------------------------
Bruce E. Krebs 48 President and Chief Operating
Officer since August 1995;
President of H.H. Cutler Company,
1994 to August 1995; President of
Cutler Sports Apparel, 1990 to
1994.
Gary LaBelle 51 Vice President of Operations since
August 1995; Vice President of
Operations, H.H. Cutler Company,
October 1992 to August 1995; Vice
President of Operations, Lilli
Group, March 1991 to October 1992;
Vice President of Operations, Izod
LaCoste, January 1988 to March
1991.
Leslie W. Levy 58 Vice President of the Company and
President of the Heritage
Sportswear business unit of the
Company since 1977.
Robert J. Powell 47 Vice President/International and
Licensing and General Counsel
since September 1992; Secretary
since January 1993; Vice President
of International and Domestic
Licensing of Champion Products,
Inc., May 1990 to September 1992;
General Counsel and Secretary of
Champion Products, Inc., June 1987
to September 1992.
Leon Ruchlamer 67 Vice Chairman of the Board of
Directors of the Company since
August 1995; President of the
Company, February 1995 to August
1995; Consultant within apparel
and textile industry, 1992 to
January 1995; Various positions
with Gitano, Inc., a clothing and
fabric manufacturer, until 1992.
William H. Watts 55 Executive Vice President and Chief
Financial Officer since February
1995; Consultant for Michelle St.
John International Design and
Charles Komar & Sons, March 1994
to January 1995; Vice
President/Chief Financial Officer
of Land'n Sea, Inc., 1990 to 1994.
Officers are elected annually and serve at the pleasure of the
Board of Directors.
There is no family relationship between any of the above
executive officers, directors and nominees for director.
Compliance with Section 16(a) of the Securities Exchange Act of
1934
Section 16(a) of the Securities Exchange Act of 1934 and
regulations of the Securities and Exchange Commission thereunder
require the Company's executive officers and directors and
persons who own more than ten percent of the Company's Common
Stock, as well as certain affiliates of such persons, to file
initial reports of ownership and monthly transaction reports
covering any changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Executive
officers, directors and persons owning more than ten percent of
the Company's Common Stock are required by Securities and
Exchange Commission regulations to furnish the Company with
copies of all such reports they file. Based solely on its review
of the copies of such reports received by it and written
representations that no other reports were required for those
persons, the Company believes that during 1995 all filing
requirements applicable to its executive officers, directors and
owners of more then ten percent of the Company's Common Stock
were complied with except for one late filing each by Bruce
Krebs, President and Chief Operating Officer; Leon Ruchlamer,
vice chairman and a director; William Watts, executive vice
president, chief financial officer and a director; and Robert
Powell, secretary and a vice president. Furthermore, Paul
Greenwood, a director and a beneficial owner of more than ten
percent of the Company's Common Stock, Stephen Walsh, a director
and a beneficial owner of more than ten percent of the Company's
Common Stock, Walsh Greenwood & Co., a beneficial owner of more
than ten percent of the Company's Common Stock, WG Trading
Company Limited Partnership, a beneficial owner of more than ten
percent of the Company's Common Stock, and WG Partners, a
beneficial owner of more than ten percent of the Company's Common
Stock, each had three late filings of transactions.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Board of Directors of the Company has a Compensation
Committee consisting of four members. Three non-employee
directors are chosen to serve one-year terms at the first Board
meeting following the Annual Meeting, and the fourth member is,
pursuant to the Company's Bylaws, the President of the Company.
The Committee has two regular meetings each year and meets on an
as needed basis at other times during the year. The Committee's
responsibilities include recommending to the Board of Directors
the amount of compensation and terms of employment of each
officer of the Company. The Committee approves all employment
contracts and agreements for each executive officer of the
Company. Additionally, the Committee administers the Company's
1985 Stock Option Plan and makes recommendations to the Board of
Directors with respect to the Company's other benefits and all
employee benefit plans applicable to the Company's executive
officers. The following is the report of the Committee:
Compensation Policy
The Company makes an effort to offer competitive compensation
packages that allow the Company to attract and retain highly
qualified individuals. The Committee believes the long-term
strategic goals of the Company can be accomplished only if the
Company employs management with experience and skills relevant to
the changing nature of the Company's products, sales and
marketing efforts. A substantial portion of each executive
officer's total compensation is incentive-based in order to
motivate the Company's executive officers in the performance of
their duties and to encourage a continued focus on Company
profitability. For those executive officers responsible for
particular business units, the financial and non-financial
results of their business units are also considered.
Compensation packages offered to the Company's senior management
are thought to be competitive within the domestic apparel
industry and have not been tied directly to short-term results of
operations. The Committee believes the compensation packages for
its senior management are competitive with compensation packages
for executives of other public domestic apparel companies. The
Committee meets with the President to evaluate the performance of
the other executive officers and meets in the absence of the
President to evaluate his performance. The Committee reports its
executive evaluations to the other outside members of the Board.
The overall compensation of each of the Company's executive
officers consists of three principal elements:
Base Salary
Executive officers' base salaries are reviewed annually by the
Compensation Committee. In the case of all executive officers,
their base salary is their principal element of compensation. In
an effort to ensure that the Company can obtain the talent it
needs to effectuate its long-term strategies, the base salary of
all executive officers has been set at a level that is thought to
be competitive within the group of public businesses identified
as similar to the Company. Among the businesses with which the
Company compares itself are those included within the companies
that comprise the Value Line Apparel Industry Group. Based on
information available to the Company, the Committee believes that
the overall compensation of its executive officers, taken in the
aggregate, places them in the median range of the compensation
scale of similarly situated executive officers in the industry.
Factors considered in establishing base salaries include the
requisite skill and experience required in a particular position,
the range of duties and responsibilities attributable to that
position, the individual's prior experience and compensation, the
compensation of similarly situated individuals in the apparel
industry and the overall past and expected future contributions
of the individual. Generally, in establishing such salaries, the
greatest weight is given to ensuring that a competitive salary
level is established. Overall, the process is subjective, with
no precise, mathematical weight given to the enumerated factors.
Annual Bonus
The Company operates an annual discretionary bonus plan, the
terms of which vary in accordance with the participant's
position with the Company. The amount of the annual bonus is
determined, if earned, at the conclusion of the Company's fiscal
year following a review of Company, business unit and individual
performance, and is generally based on pre-tax earnings. For
most executive officers, the terms of the plan, or a variation
thereof, have been written into their respective employment
contracts.
The Committee's discretion includes both whether and the extent
to which any bonus is awarded. The bonus element of each
executive officer's compensation is set at a level that the
Committee believes is necessary to compensate executive officers
for the achievement of short-term goals forming part of the
Company's overall strategic objectives. Short-term sales, profit
and performance goals for each business unit and for the Company
as a whole are developed annually and in advance by the Company's
management and then reviewed by the Company's Board of Directors.
Performance is monitored against established goals throughout the
year.
No bonuses were awarded for 1995.
Stock Options
To establish a link between compensation and management's
performance in creating value for shareholders, evidenced by
increases in the Company's stock price, the Company has
implemented a stock option plan (the "1985 Stock Option Plan").
The Committee is responsible for administering the 1985 Stock
Option Plan, which provides for options to purchase the Company's
Common Stock generally issued at market value on the date of
grant. Accordingly, the value of such options to the Company's
participating executive officers will depend directly on
increases in the price of the Company's securities. Because the
Committee believes such compensation should result from long-term
increases in value, such options do not vest at a minimum until
one year from the date of grant; and, to serve as an incentive
for such executives to continue in the Company's service through
the implementation of its plans, such options are typically
divested upon termination of employment.
The Compensation Committee has exclusive discretion to (i) select
the persons to whom options will be granted and to determine the
type, amount and terms of each option; (ii) modify, within
certain limits, the terms of any option which has been granted,
including replacement or exchange of options without the consent
of the option holder under certain circumstances; (iii) determine
the time when options will be granted; and (iv) make all other
determinations that it deems necessary or desirable in the
interpretation and administration of the 1985 Stock Option Plan.
The Compensation Committee has the authority to administer,
construe and interpret the 1985 Stock Option Plan, and its
decisions are final, binding and conclusive.
In determining the size and vesting of option awards, the
Committee considers the amount of options currently held by an
officer, the results achieved by each officer relative to that
officer's assigned responsibilities and the overall performance
of the Company. A total of 505,000 stock options were awarded
during 1995 under the 1985 Stock Option Plan. Of this total,
350,000 stock options were awarded to executive officers.
Chief Executive Officer/Chief Operating Officer.
The compensation of the Chief Executive Officer and/or Chief
Operating Officer consists of the same components as for other
executive officers, namely base salary, annual bonus and stock
options.
In August 1995, the Company named Bruce E. Krebs President and
Chief Operating Officer. Since Mr. Winkler's resignation as Chief
Executive Officer of the Company on November 5, 1995, Mr. Krebs,
who, as the Company's highest ranking executive office and as
President and Chief Operating Officer, performs substantially the
same duties as those that Mr. Winkler performed as "Chief
Executive Officer," has been considered the Company's chief
executive officer. Prior to being named President and Chief
Operating Officer at the Company, Mr. Krebs had worked nearly
thirty years for a company specializing in activewear and
licensed apparel for all channels of retail distribution. The
Committee believes that Mr. Krebs' extensive experience in the
licensing industry and successful background in domestic and
international retail sales development will provide critical
assistance to the Company's financial turnaround and to its
successful transformation to a company that is marketing and
brand oriented. Accordingly, the Committee believes that a
significant compensation package for Mr. Krebs is appropriate and
supports the Company's objective of ensuring continued services
of key personnel who can contribute to the creation of long-term
shareholder value.
Mr. Winkler served as the Chief Executive Officer of the Company
until his November 5, 1995, resignation from that position. Mr.
Winkler had been the Chief Executive Officer of American
Marketing Works, Inc. ("AMW") at the time it was acquired by the
Company. At the time of his resignation, Mr. Winkler's
employment contract with the Company had not yet become
effective; accordingly, the Company theretofore had been paying
him a salary commensurate with the base salary he received at
AMW.
Although Mr. Krebs serves as a member of the Committee, he did
not participate in any of the Committee's decisions related to
the determination of his compensation.
Jacob I. Feigenbaum
Paul R. Greenwood
Bruce E. Krebs, ex-officio
Greg B. Murphy
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jacob I. Feigenbaum, Paul R. Greenwood, Bruce E. Krebs and
Gregory B. Murphy are the current members of the Board's
Compensation Committee. Mr. Krebs is President and Chief
Operating Officer of the Company.
In January 1995, Walsh Greenwood & Co. ("Walsh Greenwood")
purchased 30 shares of the Company's Series C Preferred Stock in
exchange for a three million dollar investment in the Company;
the Series C Preferred Stock has a stated value of $100,000 per
share. Effective December 1, 1995, Walsh Greenwood transferred
all 30 shares to WG Trading Company Limited Partnership.
Effective March 31, 1995, the Company entered into a credit
agreement with Walsh Greenwood (the "Credit Agreement"). Under
the Credit Agreement, Walsh Greenwood lent the Company
$15,000,000 for a three-year term. The terms of the Credit
Agreement include: (i) a maximum borrowing of $15,000,000; (ii)
the issuance to Walsh Greenwood of warrants to purchase 1,500,000
shares of the Company's Common Stock at $2.25 per share, which
warrants vested on the basis of 100,000 warrants for each
$1,000,000 drawn and which are exercisable for three years from
vesting (the "Fixed Rate Warrants"); (iii) the issuance to Walsh
Greenwood of warrants to purchase 1,500,000 shares of the
Company's Common Stock at a 25% discount to the 20 day average
trade price in December 1996, which warrants vested upon the
commitment by Walsh Greenwood of the full amount of the credit
and which are exercisable for three years beginning January 1,
1997 (the "Discount Rate Warrants"); (iv) all warrants issued
have antidilution provisions and registration rights no more
favorable than the equivalent provisions in other outstanding
warrants issued to principal shareholders of the Company, except
that the registration rights shall include three demand
registrations; (v) stated interest upon the outstanding balance
of the credit at the rate of 25% per annum; (vi) all borrowings
are secured by a security interest in all assets of the Company
currently pledged to two other lenders, subordinate to the
security interests of such lenders; and (vii) all borrowings
could be used only for working capital and could not be used to
repay any principal of any bank debt.
As additional conditions to the foregoing extension of credit,
Walsh Greenwood required that the Company obtain agreement from
the holders of its preferred stock (i) that they forgo accrual of
all future dividends from January 1, 1995, until the principal
and interest of all the borrowing under the Credit Agreement has
been paid in full and (ii) that they grant the Company the right,
after repayment of a $6,500,000 NationsBank loan and the
borrowing from Walsh Greenwood, to redeem the outstanding shares
of preferred stock with shares of its Common Stock valued for
such purpose at $7.00 per share, which right of redemption will
extend until June 30, 1998.
Effective August 10, 1995, Walsh Greenwood and the Company agreed
to increase the principal amount available under the Credit
Agreement to $20 million in exchange for an additional 500,000
Fixed Rate Warrants and 500,000 Discount Rate Warrants. As of
the date hereof, all Fixed Rate Warrants and all Discount Rate
Warrants have vested, and all Fixed Rate Warrants are presently
exercisable. Effective December 1, 1995, the Credit Agreement,
all Fixed Rate Warrants and all Discount Rate Warrants were
assigned to WG Trading Company Limited Partnership. Stephen
Walsh, a director of the Company, and Paul Greenwood, a director
of the Company and a member of the Compensation Committee, are
the general partners of both Walsh Greenwood and WG Trading
Company Limited Partnership.
EXECUTIVE COMPENSATION INFORMATION
Set forth below is a summary of the annual and long-term
compensation paid by the Company for each of the last three
fiscal years to: (i) Marvin J. Winkler, the Company's Chief
Executive Officer until November 5, 1995; (ii) Bruce E. Krebs,
the Company's President and Chief Operating Officer since August
10, 1995, and (iii) the Company's other four most highly
compensated executive officers serving as of December 31, 1995
(the "Named Executives"). Since Mr. Winkler's resignation from
the Company on November 5, 1995, Mr. Krebs, who, as the Company's
highest ranking executive office and as President and Chief
Operating Officer, performs substantially the same duties as
those that Mr. Winkler performed as "Chief Executive Officer,"
has been considered the Company's chief executive officer.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Securities
Name and Underlying LTIP All Other
Principal Other Annual Options/ Payouts Compensation
Position Year Salary($) Bonus($) Compensation($) SARs(#) ($) ($)(4)
- --------- ---- --------- -------- --------------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Marvin J. Winkler, 1995 337,083 -- 131,991(1) -- -- 22,493
Chief Executive 1994 34,375 -- -- -- -- --
Officer (until
November 1995)
Bruce E. Krebs, 1995 125,154 -- 64,379(2) 100,000 -- 370
President & Chief
Operating Officer
(since August
1995)
Leon Ruchlamer, 1995 203,400 -- -- 100,000 -- 6,220
Vice Chairman of
the Board (since
August 1995);
President
(February 1995 to
August 1995)
Robert J. 1995 191,125 -- -- -- -- 5,595
Powell 1994 125,375 -- -- 50,000 -- 3,700
Vice President 1993 125,000 -- 27,100 75,000 -- 1,085
and Secretary
Leslie W. Levy, 1995 145,000 -- -- -- -- 8,872
Vice President 1994 128,690 30,000 -- -- -- 8,204
and President 1993 139,000 11,600 -- 30,000 -- 6,461
Heritage
Sportswear
William Watts, 1995 168,370 -- 55,543(3) 100,000 -- 1,610
Executive Vice
President & Chief
Financial Officer
<FN>
<F1>
(1) $60,000 of this amount was for moving and temporary living
expenses and reimbursements; $70,000 of this amount
constitutes the unpaid portion of all commissions owed to
Mr. Winkler for sales completed prior to the purchase of AMW
by the Company that the Company had agreed to pay to Winkler
pursuant to his accepting employment with the Company.
<F2>
(2) All of this amount was for moving and temporary living
expenses and reimbursements.
<F3>
(3) $53,762 of this amount was for moving and temporary living
expenses and reimbursements.
<F4>
(4) These amounts include the portion of life insurance premiums
paid by the Company that represents term life insurance on
Messrs. Winkler, Krebs, Ruchlamer, Powell, Levy and Watts.
In 1995, these amounts were $22,493, $370, $6,220, $1,601,
$5,372 and $1,610, respectively. All other amounts
represent Company matching contributions to a 401(k) plan
maintained by the Company for the accounts of Messrs. Powell
and Levy. In 1995, these amounts were $3,994 and $3,500,
respectively.
</FN>
</TABLE>
<TABLE>
The following table provides information about options held by
the Named Executives. The 1985 Stock Option Plan does not
provide for the granting of stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at at
FY-End(#) FY-END($)(1)
Shares
Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
- ---- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Marvin J. Winkler -- -- -- --
Bruce E. Krebs -- -- 0 exer./ --
100,000 unexer. 168,750
Leon Ruchlamer -- -- 0 exer./ --
100,000 unexer. 325,000
Robert J. Powell -- -- 125,000 exer./ 176,751
0 unexer. --
Leslie W. Levy -- -- 15,000 exer./ 2,850
15,000 unexer. 2,850
William H. Watts -- -- 0 exer./ --
100,000 unexer. 325,000
<FN>
<F1>
(1) Value of unexercised in-the-money options based on a fair market value of a
share of the Company's Common Stock of $7.25 as of December 31, 1995.
</FN>
</TABLE>
<TABLE>
The table below sets forth certain information concerning
grants of options during the year ended December 31, 1995, to the
Company's Named Executives. The plan does not provide for the
granting of stock appreciation rights.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual
Grants
----------
% of Total
Options/
SARs Potential Realizable Value
Granted to at Assumed Annual Rate of Stock
Options/ Employees Exercise or Price Appreciation for Option Term
SARs in Fiscal Base Price Expiration ----------------------------------
Name Granted(#) Year ($/Sh) Date 0%($) 5%($)(2) 10%($)(2)
- ---- ---------- ------- --------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Marvin J. Winkler -- -- -- -- -- -- --
Bruce E. Krebs 100,000(1) 19.8 5.5625 8/09/05 0 349,750 886,750
Leon Ruchlamer 100,000(1) 19.8 4.00 2/28/05 375,000 862,000 1,610,000
Robert J. Powell -- -- -- -- -- -- --
Leslie W. Levy -- -- -- -- -- -- --
William H. Watts 100,000(1) 19.8 4.00 2/28/05 375,000 862,000 1,610,000
<FN>
<F1>
(1) All such stock options were issued to the Named Executive to induce that
Named Executive to accept employment with the Company. The stock options
granted to Mr. Krebs were issued at market price on the day of grant,
while the stock options granted to Messrs. Ruchlamer and Watts were issued
at an exercise price that was $3.75 below the market price on the day of
grant.
<F2>
(2) The assumed rate of appreciation for the Company's Common Stock at 5% and
10% would result in a stock price of $12.62 and $20.10 per share,
respectively, for the stock options with a $4.00 per share exercise
price, which were issued when the market price of the stock was $7.75 per
share, and a stock price of $9.06 and $14.43 per share, respectively, for
the stock options with a $5.5625 per share exercise price, which were
issued when the market price of the stock was $5.5625 per share.
</FN>
</TABLE>
<TABLE>
Shareholder Return Performance Presentation
Set forth below is a line graph (information presented in
tabular form in electronic submission) comparing the yearly
percentage change in the cumulative total shareholder return of
the Company's Common Stock against the total return of the S & P
composite 500 Stock Index and the Value Line Apparel Industry
Group for the five year period ending December 31, 1995.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(1)
SIGNAL APPAREL COMPANY, INC., STANDARD & POORS
500 AND THE VALUE LINE TEXTILES INDEX
(Performance Results Through 12/31/95)(2)
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Signal Apparel $100.00 $189.29 $139.29 $ 70.24 $ 75.00 $ 69.05
S & P 500 $100.00 $130.55 $140.72 $154.91 $157.39 $216.42
Value Line
Apparel Index $100.00 $175.16 $215.29 $161.90 $149.46 $159.99
<FN>
<F1>
(1) Cumulative total return assumes reinvestment of dividends.
<F2>
(2) Assumes $100 invested at the close of trading 12/90 in Signal Apparel common
stock, S & P 500 and Value Line's Apparel Index.
</FN>
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 5, 1995, the Company entered into an agreement with
Marvin Winkler, Sherri Winkler and M.W. Holdings, L.P (the
"Winkler Parties"). Pursuant to the agreement, the Company (1)
agreed to pay the Winkler Parties $44,600 for interest owing to
the Winkler Parties on two subordinate notes the Company assumed
when it purchased all the outstanding stock of AMW (the Winkler
Parties were shareholders of AMW at the time of the acquisition
of AMW by the Company) and (2) granted to the Winkler Parties,
and the Winkler Parties exercised, the right to convert the
preferred stock of Signal that the Winkler Parties had received
upon conversion of the aforementioned subordinate notes into one
million shares of Common Stock (the subordinated notes had a
combined outstanding balance of approximately $2.43 million at
the time of conversion). The Company also agreed to use its best
efforts to include such shares in the next registration statement
under the Securities Act of 1933 that the Company files, and, if
such registration does not occur by November 1996, the Company
must pay to Mr. Winkler interest at the rate of 7% per annum on
the value of the unregistered shares (half of said interest to be
paid in cash, half to paid in shares of Common Stock) until such
shares are registered or disposed by Mr. Winkler. Marvin Winkler
was CEO and a Director of the Company at the time of this
agreement and became a beneficial owner of more than five percent
of the Company's outstanding Common Stock as a result of this
agreement.
Employment Agreements
Bruce E. Krebs was employed August 1995, as President and Chief
Operating Officer pursuant to an employment agreement with a
three year term. Pursuant to the terms of his employment
agreement, Mr. Krebs' annual base salary is $300,000. He is
eligible to receive an annual bonus equal to 10% of the Company's
pre-tax earnings up to $5 million and 5% of the Company's pre-tax
earnings in excess of $5 million. As an inducement to
employment, the Company granted Mr. Krebs options to purchase
100,000 shares of Common Stock with an exercise price per share
of $5.56 (the market price on the date of grant), exercisable one
year from the date of grant and governed by the Company's 1985
Stock Option Plan. In the event that Mr. Kreb's employment is
terminated for cause or in the event of Mr. Kreb's death or
disability, he or his legal representative shall receive payment
of all accrued compensation and any reimbursements due. In the
event the Company terminates Mr. Krebs' employment without cause,
he is entitled to a severance payment equal to one year's salary
and any pro-rated bonus payment due. In the event of a merger,
consolidation, buyout or reorganization of the Company, Mr. Krebs
has the option of terminating his employment with the Company and
receiving a severance payment equal to one year's salary and any
pro-rated bonus payment due. Mr. Krebs is bound by a covenant
not to compete that survives termination of the agreement for one
year.
Leon Ruchlamer was employed as President from February 1995 until
August 1995, when Mr. Krebs was named President. Mr. Ruchlamer
was named Vice Chairman of the Board of Directors in August 1995.
His employment agreement has a three year term, commencing
January 1, 1995. Pursuant to the terms of his employment
agreement, Mr. Ruchlamer's annual base salary is $151,200 for
1995, $175,200 for 1996 and $199,200 for 1997. Mr. Ruchlamer's
agreement was amended to provide that he be paid $30,000 per
month for the months of October, November and December 1995;
effective January 1, 1996, his salary returned to the original
terms of his agreement. He is eligible to receive an annual bonus
if the Company makes an annual profit on an EBIT basis. His
bonus is based upon his personal performance and the Company's
performance on a whole. Subject to the profitability of the
Company, Mr. Ruchlamer was eligible for an $80,000 bonus in 1995
and will be eligible for a $120,000 annual bonus in both 1996 and
1997. As an inducement to employment, the Company granted Mr.
Ruchlamer options to purchase 100,000 shares of Common Stock with
an exercise price per share of $4.00 ($3.75 below the market
price on the date of grant), exercisable one year from the date
of grant and governed by the Company's 1985 Stock Option Plan. In
the event that Mr. Ruchlamer's employment is terminated for
reasons other than for good cause, Mr. Ruchlamer shall receive a
severance payment equal to one year's salary or, if there is less
than one year remaining on his employment agreement, the salary
due for the remaining term of his employment agreement.
William H. Watts was employed February 1995 as Chief Financial
Officer and Executive Vice President pursuant to an employment
agreement with a three year term. Pursuant to the terms of his
employment agreement, Mr. Watts' annual base salary is $175,000.
He is eligible to receive an annual bonus based upon his personal
performance and the Company's performance. For 1995, the bonus
was discretionary; for 1996 and 1997, the Company will determine
at the commencement of each year the level of eligible bonus
participation and the performance criteria for that level of
bonus. As an inducement to employment, the Company gave Mr. Watts
a $50,000 allowance to cover the expenses of his relocation to
the Company's corporate offices and granted him options to
purchase 100,000 shares of Common Stock with an exercise price
per share of $4.00 ($3.75 below the market price on the date of
grant), exercisable one year from the date of grant and governed
by the Company's 1985 Stock Option Plan. In the event that Mr.
Watts' employment is terminated for reasons other than for good
cause, Mr. Watts shall receive a severance payment equal to one
year's salary or, if there is less than one year remaining on his
employment agreement, the salary due for the remaining term of
his employment agreement.
Gary LaBelle was employed August 1995 as Vice President of
Operations pursuant to an employment agreement with a three year
term. Pursuant to the terms of his employment agreement, Mr.
LaBelle's annual base salary is $165,000. He is eligible to
receive an annual bonus based upon the pre-tax earnings of the
Company for each year. The bonus is to be paid in cash and stock
options issued pursuant to the Company's 1985 Stock Option Plan.
The cash component is equal to 1% of Mr. LaBelle's annual salary
for each $100,000 of pre-tax earnings of the Company and is
capped at 50% of Mr. LaBelle's annual salary. The stock option
component is determined by a formula under which Mr. LaBelle is
awarded the option to purchase 10 shares of the Company's Common
Stock for each $1,000 of pre-tax earnings, subject to a cap of
50,000 option shares per year. The total bonus is subject to a
cap of $5 million pre-tax earnings. As an inducement to
employment, the Company granted Mr. LaBelle options to purchase
50,000 shares of Common Stock with an exercise price per share of
$5.56 (the market price the date of grant), exercisable one year
from the date of grant and governed by the Company's 1985 Stock
Option Plan. In the event that Mr. LaBelle's employment is
terminated for cause or in the event of Mr. LaBelle's death or
disability, he or his legal representative shall receive payment
of all accrued compensation and any reimbursements due. In the
event the Company terminates Mr. LaBelle's employment without
cause, he is entitled to a severance payment equal to one year's
salary and any pro-rated bonus payment due. In the event of a
merger, consolidation, buyout or reorganization of the Company,
Mr. LaBelle shall have the option of terminating his employment
with the Company and receiving a severance payment equal to one
year's salary and any pro-rated bonus payment due. Mr. LaBelle
is bound by a covenant not to compete that survives termination
of the agreement for one year.
Robert J. Powell was employed September 1992 as Vice
President/International and Licensing and, effective January
1993, as Secretary of the Company. Pursuant to the terms of his
employment agreement, as amended, Mr. Powell's annual base salary
is not to be less than $185,000, with the right to participate in
the Company's bonus plan and receive an annual bonus of up to 40%
of his annual base salary. In order to participate in the
Management Incentive Plan, which was in effect 1993-94, Mr.
Powell agreed to an amendment to his employment agreement,
pursuant to which he agreed, among other things, to a 15%
reduction in his annual base salary from September 1, 1993 until
October 31, 1994 (in 1995, the amount of this reduction was paid
to Mr. Powell in a lump sum payment). The Company agreed (i) to
cancel the outstanding options held by Mr. Powell to acquire
25,000 shares of Common Stock at a price of $15.63 per share and
reissue such options at an exercise price of $7.06 per share and
(ii) to issue 50,000 additional stock options in accordance with
the 1985 Stock Option Plan at an exercise price of $7.06 per
share. The exercise prices for all such options issued pursuant
to the amendment -- $7.06 per share -- was the market price of
the Common Stock at the time the amendment to his employment
agreement was negotiated. The reissued options vested and became
exercisable on August 13, 1994, one year from their date of
grant. Additionally, Mr. Powell is entitled to participate in
all other incentive bonus, stock option, savings and retirement
programs and benefit programs maintained for the Company's
executive officers from time to time. In the event of Mr.
Powell's death, his legal representative shall receive payment of
all accrued salary and benefits, the equivalent of an additional
six months' base salary and a prorated portion of any bonus
payable. In the event Mr. Powell should terminate the agreement
for Good Reason, as defined therein, or if the Company should
terminate the agreement other than for Cause or Disability, as
defined therein, Mr. Powell would be entitled to (i) all accrued
obligations; (ii) payment of an amount equal to the sum of his
then current base salary and most recent bonus times the greater
of the remaining years of the agreement or two years; and (iii)
payment of a lump-sum amount equal to what he would have received
under the various retirement programs had the agreement continued
for the full term. In a subsequent amendment to his employment
agreement and in consideration for Mr. Powell receiving an
increase in his base salary to $185,000 from $140,000, Mr. Powell
agreed that the amount of his base salary increase would be
deducted from any obligations of the Company pursuant to the
foregoing formula. Mr. Powell is bound by a covenant not to
compete that survives termination of the agreement for one year,
except in the event of a termination by the Company that
constitutes a breach of the agreement. Upon termination,
previously granted stock options become immediately exercisable.
Mr. Powell's employment agreement provides further that it shall
be binding on any successor to the Company, whether by merger or
otherwise. His present employment agreement expires in September
1997.
Directors' Compensation
Directors who are not employees of the Company are paid (i)
$4,000 for each Board meeting attended in person up to a maximum
of $20,000 per year and (ii) $500 for each Board committee
meeting attended in person or telephonically.
OTHER MATTERS
The Company does not intend to bring before the meeting any
matters other than those hereinbefore set forth, and has no
present knowledge that any other matters will be or may be
brought before the meeting by others. However, if any other
matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of proxy to vote the proxy
in accordance with their judgment.
Representatives of the firm of Arthur Andersen LLP are
expected to be present at the 1996 Annual Meeting. The
representatives will have the opportunity to make a statement at
the meeting if they desire to do so and are expected to be
available to respond to appropriate questions from shareholders.
1997 SHAREHOLDERS' PROPOSALS
In order for shareholder proposals for the 1997 Annual
Meeting of Shareholders to be eligible for inclusion in the
Company's Proxy Statement, proposals must be received by the
Company at its principal office in Chattanooga, Tennessee, prior
to December 26, 1996.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT J. POWELL
Secretary
PROXY
SIGNAL APPAREL COMPANY, INC.
200-A Manufacturers Road
P. O. Box 4296
Chattanooga, Tennessee 37405
This Proxy is Solicited on Behalf of the Board of Directors
Annual Meeting of Shareholders, May 28, 1996
The undersigned hereby appoints Bruce E. Krebs and William
H. Watts, and each of them, proxies, with full power of
substitution, to act and to vote the shares of common stock which
the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held at 200-A Manufacturers Road, Chattanooga,
Tennessee 37405, at 10 A.M., E.D.T., on May 28, 1996, and any
adjournment or adjournments thereof, as follows:
1. Election of Directors:
___FOR all nominees ___WITHHOLD ALL AUTHORITY
Except as indicated to vote for all nominees
to the contrary below) listed below
Jacob I. Feigenbaum; Paul R. Greenwood; Bruce E.
Krebs; Gregory B. Murphy; Leon Ruchlamer; Stephen
Walsh; William H. Watts.
(Instruction: To withhold authority to vote for any
individual, write that nominee's name in the space provided
below.)
____________________________________________________________
2. To transact such other business as may properly
come before the meeting or any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSAL 1. THE BOARD IS
NOT AWARE OF ANY OTHER MATTER TO BE BROUGHT BEFORE THE ANNUAL
MEETING FOR A VOTE OF SHAREHOLDERS. IF, HOWEVER, OTHER MATTERS
ARE PROPERLY PRESENTED, THE PROXIES WILL VOTE IN ACCORDANCE WITH
THEIR BEST JUDGMENT.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders, dated April 29, 1996, and the
Proxy Statement furnished therewith.
Dated this ____ day of ________, 1996.
___________________________ (Seal)
Note: Signature should agree with name on stock certificate as
printed thereon. Executors, administrators, trustees and other
fiduciaries and persons signing on behalf of corporations or
partnerships, should so indicate when signing.
Please sign, date and return this Proxy in the accompanying
prepaid self-addressed envelope. Thank you.
Chattanooga, Tennessee
April 29, 1996
